saving money Archives
Above a certain baseline the correlation between money and happiness grows weak. Yet we easily fall into the habit of spending too much and getting too little return on our investment. I was once laid off from a failing startup and went through considerable stress over how I could possibly enjoy life while I got by on unemployment insurance and hunted for a new job. It took a wise friend walking me out to a beautiful park in the middle of a warm weekday to point out to me that I had now had access to all kinds of free or cheap pleasures that were exactly what I’d been substituting for while putting in my long days at the startup. Don’t tie your perception of relaxation or satisfaction to the act of spending money; they aren’t the same thing at all.
What do you shell out money for every month? Sure, rent or mortgage, utilities, food, but what about non-essentials? Take a look at your routine expenses and the time you spend enjoying the results of them. How many hours do you watch those extra cable channels? What's does that mean you pay per hour? Do you still plan to be spending that much time that way or are there other things you'd do if the temptation wasn't there? Do you read the paper every day? Is it worth the subscription? What about the magazines you get? And that gym membership? Are there free exercise methods you'd use just as often? Food spoiling in the fridge before you eat it? It doesn't matter if it's a small expense; if it's not giving you enough benefit, then stop spending that money. Save it or spend it on something that matters to you more.
As you focus on what you want and don't want in your life, there are probably some things you'd like to save up some money for. It can be hard to do that, though, if you find that you never seem to have extra at the end of the week. Keep your eyes on the prize. Take a look at what you have to spend each month (rent, bills, payments to reduce debt, groceries) and what that leaves you for flexible expenses. Assign yourself an amount that you get to spend each week (or fortnight or month) on optional things.
Take two index cards. Tape the cards together on the long edge. On the inside left, write the list of things you want to be saving up for and the amount that will take. On the right, put the amount you have assigned yourself as available for optional things. Every non-essential purchase should be entered and deducted on the right. Before making a non-essential purchase you'll see your wishlist and think about whether it's really worth it. You'll also get a clearer picture of where your money goes. For example, here’s what the right side might look like:
- latte & croissant $5 $ 95.00
- mocha $3 $ 92.00
- new TMBG album $17.50 $ 74.50
- latte & croissant $5 $ 69.50
- mocha $3 $ 66.50
- pizza & beer with pals $20 $ 46.50
- latte & croissant $5 $ 41.50
If one of the things on the wishlist side was “espresso machine $200,” it’s pretty obvious that it won’t take that long to save up for it by not going out for coffee drinks (or recoup the cost by buying it now). If the other thing on the wishlist is an exercise bike, knocking off the croissants will not only help save up, but will also make it less necessary.
When you need to conquer debt as well as save up for new expenses, try taking your charge cards out of your wallet and securing them at home. Wait 24 or more hours before making non-essential purchases. Start paying more than the minimum due on the bill and get yourself out of living in a credit crunch. Mediocre mochas may be a bad way to spend your money, but they are guaranteed to bring you more enjoyment than bank finance charges. Knock out those really needless expenses first, then improve your imperfect ones.
Beware of false savings. In my time I've had memberships to huge warehouse stores. Costco is the archetype for this, but there are other similar places where one gets ‘great deals’ by buying in larger quantities. I always find, after the initial glut of buying lots of things for relatively less money, that I'm overall spending more than I would shopping at neighborhood stores – even non-chain ones – and ending up with more than I can use or things I don't really need. What's even sillier about it is that I wind up buying not quite what I wanted – different brands, other flavors, higher calories – because the selection is more limited. Take a good hard look at your shopping habits and the kind of eating habits they're leading to. Try taking a month off from the big box stores. Shop locally, get more fresh fruit and vegetables, pick out ingredients to cook with or make a sandwich for tomorrow's lunch instead of a frozen entree. Visit the farmers' market and find the nearest good bakery to your house. At the end of the month see how you feel, what you're eating and what you've spent. Chances are pretty good that the delicious organic produce that's giving you loads more energy has been easily paid for by not having unexpectedly bought a boxed set of DVDs for a show you liked when you were twelve, a five-attachment cordless drill you still haven’t used, and a pair of ill-fitting orange sneakers with totally cool treads.
It’s not just about wasting money; you can also overspend your health. Go read the can or bottle of the beverages you're drinking today. Here's a good example of the kind of thing some of you might find:
Carbonated water, caramel color, aspartame, phosphoric acid, potassium benzoate, natural flavors, citric acid, caffeine.
What do those ingredients do to your body? Are you draining yourself or fueling yourself? Drink more water and start cutting out the sugary (or fake sugary) caffeine bombs. If you're relying on the bump from your drinks to get you through the day, you're masking a bigger problem and making your body pay the price.
Enjoy what you've got. Maybe tonight's a good night to stay home, make some dinner from ingredients you already have or eat up some leftovers, watch that movie that's been sitting around, read a book off that stack you keep intending to get to, or play a favorite old game that's been gathering dust. Without spending, you can both have a really nice time and remind yourself of what is good about your life.
When you do spend, target it towards what brings you the greatest returns. Hate cleaning, but love to cook? Hire a maid service, enjoy the freedom from some chores you hate, and offset the cost by eating out less and making more great meals in your nice clean kitchen. Love city life, especially the dining out, but hate your long commutes from the suburbs? Move to a little apartment or condo in a great neighborhood nearer to work and ditch the car. You can make much more enjoyable use of the hundreds of dollars you’ve been spending on gas, car payments, insurance, maintenance, parking, tickets, etc. With a magic wand, what would you eliminate – housework, driving in traffic – from your life and what would you add – culinary adventures, convenient nightlife? Don’t assume it’s impossible. Start brainstorming about all the ways you can trade the bad for the good.
You've probably figured out some things you really want, changes that will increase your everyday happiness. If you saved money, these would become easier options for you. So, how to save?
To increase your savings, set up an automatic transfer from your checking to your savings account to take place the day after you get paid – and if you haven't done it already, set up direct deposit of your paycheck. Streamline the process of your money going to work for you. If your company has a 401k retirement program, look into whether they match funds; it's the most simple way to give yourself a raise.
Already automatically transferring money to savings or retirement funds every paycheck? Good. It's time to take a look and see how you can do more. Those tips I’ve mentioned about cancelling a service you don't really use (hello, gym membership or cable TV you never enjoy or magazine you don't read) can free up some cash here. Apply it first to high interest debt or if you've conquered that – go you! – then increase the amount heading into retirement savings and into an emergency fund to get you through rough surprises.
Even if you're living paycheck to paycheck find a way to pull out $10 every check and automatically put it into savings. Figure out the things that would save you the most money – moving to a new apartment closer to work, perhaps – or which would help increase your cash flow – a good outfit for interviews and some nicely printed resumes, maybe – and do that as soon as these special savings allow.
Take a look at where your money is going. Are you going deeper into debt or paying it off? How's your tax withholding? If you had to pay out a huge amount at tax time and your income hasn't changed much, then maybe you should increase the withholding to spare yourself the scramble for the money. Got a huge return? How about lowering that withholding and setting up an automatic transfer of that cash difference in each check into a retirement account – you won't feel the difference throughout the year and your money will be earning you interest instead of the government.
Balance your checkbook and credit card statements every month. Not only will it keep you aware of any trends in the flow of your money, it will also mean that you can catch bank errors or identity theft while there's time to do something about it. My financial security rule of thumb: if you are carrying debt with over 6% interest, you should stop using your charge cards and cut optional expenses to the point where you can make significant payments on it every month. Try paying 10% of the current balance owed this month if you can and then keep paying at least that dollar amount each following month. That will rid you of that debt within a year.
As with so many things, the key to improvement is to change the inflows and outflows. Bring in more money and spend less.
Work toward getting a raise. Make sure you’re getting the most matching funds from your employer towards retirement. Cut expenses for things you aren’t rewarded by. Sell the three most valuable things that you own that you don't want to own anymore – eBay, Craig's List, going to an appraiser, yard sale, whatever works best. Turn them into money, then take 10-20% of it to use for something fun, like dinner out, and use the rest to discard some debt.
Enjoy more free stuff. Visit the library. Take advantage of the great resources entertainment resources online, from the ebooks in the Internet Archive’s Open Library to free songs offered by bands on their websites.
Pay less for what you do spend money on. About to go shopping? Think about whether all of it really needs to be brand new. Sure, you don't want hand-me-down underwear or food, but a winter coat? A dining table? A breadmaker? Get familiar with your local resources. What kind of things do the different thrift stores have? Are you in a Craig’s List area? Does your community have something like a ‘pay-and-take’ where unwanted goods can be exchanged? Don't forget to ask your friends and family! Maybe someone has exactly what you need languishing in a closet and will give it to you, sell it cheap, or swap. Comparison shop between new furniture and antiques. My Ikea office cabinet and my beautiful 1920's armoire weren't very different in price, but the latter gets much more active use in its place of honor in the living room. Whatever you settle on, remember that you have a lot of options beyond what gets advertised.
Scratch the going out itch cheaper. Want to visit that pricy restaurant but it's outside your budget? Don't go for a full meal. Have a serving of something decent and cheap and then go out for just appetizers at the posh spot. What's even better about this is you can enjoy them at the bar in many places and avoid the wait for a table.
Vacations often come with lots of hassles, especially if there's an airport involved. Why not save that money, stay at home or close to it, and spend it on fun stuff? Get a massage, go to a movie, buy 20 new-to-you albums at the used record store. Plan a getaway soon that involves as little driving as possible. Let go of your normal routine and obligations and putter around your favorite neighborhood. I find the restorative effect is magnified tremendously by doing this on a day you'd normally be at work – just be sure to leave your mobile phone at home so none of those silly people working can distract you from your vacation.
Anytime you’re at home you can also take advantage of the opportunity to hunt for buried treasure in your own place. Pull out those old boardgames you haven’t played forever and have a Battle of the Games to decide which ones stay and which ones go to charity. Re-read old books. Watch old movies again. Extract some of the remaining pleasure from what you already have invested in. When something runs dry, send it on to a new home, but you’ll be pleasantly surprised to discover how much you have that still can give you a free evening of fun.
One thing to note about saving up for a better life is that this does not need to be an ever upward climb; simply figure out what really makes you most happy and relaxed and continually reposition your world a little closer to getting more of that without falling into debt. For most people it turns out not to be yachts and diamonds, just a job they like, while living in a place they love, and getting to spend time with people they enjoy. That's not as expensive as you might think, so take another little step closer to it today. Do what you actually enjoy and strive for your own dreams, not what someone else – especially not some advertiser – tells you you should want.
May I suggest you try exposing yourself to chance and new discoveries by not buying any new music that costs over $3 an album unless you buy it directly from the band?
Find the clearance shelf at your local indie record store (Streetlight on Market's is in the upstairs back right corner & prices are $1 or $1.95). Check out yard sales & thrift stores.
Sign up for LaLa and turn the stuff that didn't work out into what you know you want.
Are you automatically transferring money to savings or retirement funds every paycheck?
If so, good. It's time to take a look and see how you can do more. Those tips I mentioned about cancelling a service you don't really use (hello gym membership or cable tv you never enjoy or magazine you don't read!) can free up a little cash here. Apply it first to high interest debt or, if you've conquered that - go you!, then increase the amount heading into retirement savings. Don't count on social security; might be there, but, I'm just sayin', governments change...
Even if you're living paycheck to paycheck find a way to pull out $10 and automatically put it into savings. Figure out the things that would save you the most money - moving to a new apartment closer to work, perhaps - or which would help increase your cash flow - a good outfit for interviews and some nicely printed resumes, perhaps - and do that as soon as these special savings allow.
One thing to note is that this does not need to be an ever upward climb; just think about what really makes you most happy and relaxed and continually reposition your world a little closer to getting more of that.
For most people it turns out not to be yachts and diamonds; just a job they like, while living in a place they love, and getting to spend time with people they enjoy. That's not as expensive as you might think, so take another little step closer to it today.
Want to visit that pricy restaurant but it's outside your budget? Don't go for a full meal.
Have a serving of something decent and cheap and then go out for just appetizers at the posh spot. What's even better about this is you can have them at the bar in many places and avoid the wait for a table.
Maybe tonight's a good night to stay home, make some dinner from ingredients you already have or eat up some leftovers, watch that movie that's been sitting around or read a book off that stack you keep intending to get to or play a favorite old game that's been gathering dust.
Without spending, you can have a really nice time and remind yourself of what is good about your life.
"Automatic Minimum Payment"
Check with the companies behind all your monthly bills and see if there's a way for you to have the minimum payment always charged to your bank account or credit card automatically. This will save you from late fees.
Also, while you've got them on the phone, see if you can get your bills by email. This saves paper and gives you the earliest possible warning if a bill amount is in error.
If you aren't already automatically transferring $25 or more out of every paycheck into some kind of savings account, start now!
If you are already, and you aren't living hand-to-mouth, increase the amount set aside by 10%.
This is especially good if your employer has some option that allows you to have the money come out before taxes (e.g. into a retirement account). Some employers will even match these funds. Mmm, free money.
I also set up a separate automatic transfer to a retirement account with another funds management provider, Pax World, because a) I like they way they invest better than the matched fund choices at work and b) diversifying your savings is a good thing.
Bottom line: it's easier to save if you don't have to think about it and it just happens automatically.
Discard the idea that your phone company (or companies if you have a land line and mobile service) and credit card providers will let you know when you are eligible for a better rate.
At least once a year, call them up and ask if they can give you a better rate.
It's particularly helpful if you can tell them the lower rate that a competitor is offering (which you can often find with a bit of internet research if your junk mail doesn't announce it). They will almost invariably be able to match that rate.
Carrying credit card debt? Been a customer of that bank for a year or more?
Give them a call and ask if you now qualify for a lower rate. If you can cite other rates you've been offered recently this may help.
They may also offer to give you a very low rate if you transfer other debt to them - sometimes you get blank checks in the mail for this. Always check to make sure the rate isn't for a shorter term than it will take you to pay off the money and that it doesn't then switch to a higher rate then you are paying now.
My personal philosophy is to stick mostly with the bank that gives the best service (for me, Wells Fargo Visa, who I've been using since 1989) and who put the least advertising in their bills (unlike those cheeseballs at Direct Merchant Bank with their damn Lillian Vernon catalog-like ads printed on flaps attached to the dang envelopes. No, I do not need a cheap plastic rain guage). I will occasionally make forays out to other banks to take advantage of special offers, but now that I've been a customer for so long and have a good history, Wells Fargo will often match deals. Never hurts to ask.