Financial butt-kicker. Mindful happiness-seeker. Improving blogger. The Centsei is the author of The Centsei (https://thecentsei.com), a blog devoted to financial independence and lifelong happiness.
They say that the only thing that men lie about more than their height is the size of their… cell phone bill! (This is a family-friendly blog, folks!) As much as I’d love to write an article about the secrets turning you into the next Tacko Fall, we’ll have to stick to the surprisingly-not-so-boring topic of saving you over $200 per month on your cell phone bill.
My cell phone story goes back to when I was 16. I know this will shock our younger readers, but many of us did survive with nothing more than a Tamagotchi in our hands at all times. My parents had just divorced, so between that, after school clubs, and learning to drive, it made sense to have a way for either parent to contact me. We decided on the classic Nokia phone that I would share with my younger brother for an extra $40 per month on our family plan. You read that right; my brother and I shared a cell phone. It can be done! I can literally feel the look of disbelief through some of your screens, but this was the way of the early 2000’s.
(Laugh if you want, but these things were indestructible and had a battery life measured in weeks, not hours)
Sharing wasn’t an option once I went off to college, so I got my own phone for the next few years at the small cost of another $40 per month. We also switched to Verizon since the coverage was better in the areas where our split family were living. When I graduated from school, I began paying for my potion of the cell phone plan along with rent for the period of time that I lived at home. Avoiding the temptation to switch to a smart phone, I stayed on this family plan after I moved out and the cost remained about the same, maybe creeping up to $50 per month with the occasional two hundred dollars for a new flip phone.
The bill began to change a bit when I moved in with Lady Centsei. She had a smartphone on a family plan with her mother and brother, and it made sense for me to bring my measly flip phone to that plan, despite not using the data. However, I switched jobs in 2015 and they offered me $50 per month if I upgraded to a smartphone and agreed to have work e-mail on the phone. Coincidentally, this was less than the cost of adding another “smartphone line” to our plan, so when a promotion came around for Lady Centsei and I to get “free” new phones by changing carriers to Sprint and signing for two years for about $120 for the four lines, we jumped. TheCentsei had joined the smartphone generation.
It won’t surprise you to hear that our bill crept up and up over the years, with a notable spike coming again in 2018 when Lady Centsei’s mother and brother wanted to upgrade their phones too. The plan was in their name, and they agreed to cover the extra charges. Those extra charges soon became EXTRA CHARGES ($210 per month). It all came to a shocking climax in July 2019 when our bill came to $277.46 between the four of us. Trust me, here is a screenshot of the transaction that I use in my tracking and budgeting tool, Mint!
$277 was my metaphorical cellular rock-bottom. While it was true that Lady Centsei and I were responsible for less than half of the bill, there was no question that something had to change.
Enter, Xfinity Mobile. I’d learned about this service on another financial blogger’s website, as it starts at just $12 per month, though the “catch” is that you have to be subscribed to one of Xfinity’s internet packages. However, as luck would have it, Xfinity’s is the only high-speed internet provider in our area, so we’d already met the criteria. Furthermore, our 2-year contract was a month or two from expiring, meaning this might be the perfect time to strike a deal with them to bundle the services.
And so, I did. After spending just 5 minutes on the phone with them and committing to a new 2-year internet contract, they agreed to lower our internet bill from $75 per month (which is what it was set to go up to at the end of our agreement) to $50 per month if we bundled the $30 per month Xfinity Mobile “3 shared gig” service and agreed to a 2-year term for the internet (the mobile service has no contract). What’s more, the internet service had peak speeds 3x as fast as my old service, and Xfinity Mobile runs on Verizon’s towers which has much better coverage than Sprint in some areas near me.
The math wizards among you will see how this works out. I was set to pay $75 per month for internet alone. After the phone call, I’d be paying $80 per month for faster internet and better coverage cell phone service. In effect, my cell phone service costs me just $5 per month.
This $5 per month new plan with Xfinity Mobile compared to my $277 per month old plan entirely with Sprint means a savings of over 98%: $272 per month.
Rare is the day when life hands you a financial opportunity like this. Saving $270 per month could represent over $300,000 in retirement, compounded for 30 years at a standard 7% return.
The savings could, perhaps, be even greater, taking into account the rate of increase that I expected with Sprint compared to Xfinity Mobile. Sprint had already increased our bill to over double from what we were paying originally. I don’t expect such drastic increases with Xfinity. However, even if they did increase the price to an unacceptable level, all plans are month-to-month, so I’d have the flexibility to leave without incurring termination fees.
Here are the many “pros” with Xfinity Mobile:
1) Cost. Xfinity Mobile has the lowest cost cell phone service by a landslide. Like me, you could literally save 90% by switching.
2) Coverage. The service runs on Verizon’s towers, which has the best service in just about every part of the United States (Verizon itself is the most expensive).
3) Data Speed and Call Quality. Faster data in most locations. Better call quality (clarity and low call drops) than any other provider I’ve used. More reliable.
4) Month-To-Month Contract. Switching is low risk because you won’t be locked-in for years.
5) Customer Service. Customer service has been quick to answer my calls with a live person and work to resolve issues.
6) Number Of Devices. You can have 1 to 5 devices (cell phones) on the plan for the same cost; there is no “per line” cost and no cost to add a device!
There are a few important “possible cons” to consider as well:
1) You need to retain an Xfinity internet service for the duration of the mobile service. Personally, I think this is how Xfinity is able to offer such a low rate on the service; it makes customers like me “sticky” and less likely to leave. This wasn’t an issue for me because I was using the service anyway, but it might be more difficult if you are locked into a contract with your ISP. Note that most, but not all, Xfinity internet plans do require a contract as well.
2) You may incur an early termination fee with your existing cell carrier. Your phone must be “unlocked” which most carriers won’t do if you still have time on you contract. Admittedly, I did pay to get out of my contract, so my 98% savings only reflects my “going forward” savings. I believe the fee was $600 for our two phones, but given that I’m saving $250 per month, this fee was offset within 3 months of switching.
3) The phones with which it is compatible is a bit more limited than some other providers. This fact, too, was no burden for us, since my 5-year old iPhone 6 and my wife’s 3-year old iPhone 7 are indeed compatible. To name a few brands, iPhone’s 6 or higher, Galaxy 8 or higher, and Pixel 4 and higher should work. The phone must be fully unlocked (GSM unlocked won’t work). You can easily check on their website. Xfinity also has phones for sale at market price.
4) Not ideal for large families who each use tons of data and need new phones every year. The lowest cost plans do not come with unlimited data, only unlimited calling and texting, so if you are a high data user, your savings will be lower. We chose the 3GB data plan for $30 per month, since we’d only been averaging about 2 GB per month over the last two years. There are currently plans of 1 GB per month for $12, 3 GB for $30, and 10 GB for $60, and you can switch at any time. Extra gigs are $12, so it’s best to just be a bit conservative in your estimates. You can switch your data allotment each month if you’re consistently over or under. Data you use on WiFi doesn’t count, so just keep your phones connected to any home or secure WiFi, and your usage will be low. After all, you don’t really need to be streaming cat videos on YouTube in the middle of the woods anyway! The unlimited data plan is $45 per line per month, but you can “mix and match” if you have one person who uses a lot of data, so everyone else can rely on shared data. If you have 6 family members who each “need” unlimited non-WiFi data and who get new phones every year, there may be lower cost plans elsewhere.
5) Switching is always a pain, no matter what. There’s no easy way to switch carriers, especially if you have multiple lines in a complex agreement, as we did with Sprint. My mother-in-law had to pay off her phone; we had to pay the termination fee; Sprint did not “unlock” our phones as promptly as they promised; the sales rep that assisted us made a keying error that was hard to correct; it was around the holidays… the list goes on. Much of this wasn’t Xfinity’s fault, but be prepared to spend a few hours on the phone with your old carrier and Xfinity if you have a complex setup.
NOTE: “Centsable” products and services, like Xfinity Mobile, are those that I recommend from time to time to help you on your journey to financial independence and lifelong happiness. You can trust that any recommendations are things that I can (or do) use myself. I will always disclose pros, cons, and any paid endorsements (of which I currently have none).
If everyone in your family needs a new phone every year and uses a mountain of non-WiFi data, Xfinity Mobile might not be for you. Nonetheless, it could be a financial life saver for anyone who’s currently paying too much for their cell service.
To my readers: Stay safe, stay Healthy, and stay Centsable!
Indeed, the Coronavirus is no joke and should
be treated as any other bad outbreak of the flu or other infectious
disease. DO wash your hands with soapy
hot water several times per day; DO cover your nose and mouth when you sneeze
or cough; DO take extra precautions when going to a public place, especially if
you are more vulnerable to disease; DO avoid unnecessary travel to countries or
regions with a significant outbreak; DO call your doctor if you have severe or
prolonged flu symptoms. DON’T touch your
eyes/nose/mouth, especially if you encounter someone with flu symptoms; DON’T
wear a mask if you’re not sick; DON’T go to work or public places if you have a
fever or symptoms; DON’T panic. This
last one, of course, is particularly important, since this is neither
the first corona virus, nor
the most severe flu outbreak, in the last century.
Returning to the idea of the next recession (this isn’t a public health blog, as thrilling as that sounds), it has been widely reported that last week’s stock market woes were caused by fear that the virus would be more widespread and sustained than originally expected. However, although the Coronavirus certainly may have been a “trigger” of a sell-off (an economic term for “the straw that broke the camel’s back”), it is true that certain fundamentals of the economy have been weak for the last year or two.
1) Corporate debt is
at an all-time high. We’ve seen a
few major bankruptcies for household-name businesses like Payless ShoeSource, Forever
21, and Sears/Kmart all due to crippling debt.
2) Consumer debt is
reaching new highs in certain categories. Student loans debt has doubled
since 2010, all while wage growth for those repaying the loans has gone up
only marginally. Auto loan delinquencies
have now reached
a 19-year-high, especially in the atrocious 7-year loan category, and are
now at levels that exceed the Great Recession.
3) The global
political climate has grown more uncertain.
Issues like Brexit, instability with Iran, and tariff wars with China create
instability that makes investors panic and negatively impact the U.S. and the
global economy.
4) The yield curve inverted in 2019. This means that short-term interest rates are larger than long-term interest rates, which means that investors see more uncertainty in the near future. Experts say this has happened prior to each of the last seven recessions. NOTE: The curve inverted, then “un-inverted,” and may be re-inverting again. Stay tuned.
5) Income inequality
has increased. The rich have gotten
much richer and the poor stayed about the same… or, at best, have gotten just a
little bit less poor. Income inequality
is sometimes
considered a precursor to a recession because it means that a financial
disruption among relatively fewer people can have a more significant economic
impact. To understand this at a smaller
level, imagine you have a family of ten.
If you have just one working adult who then loses their job, the entire
family is in trouble. If, however, you
have two, three, or more working adults, then one losing their job doesn’t have
the same impact, even if the total family income is the same.
6) The economy might
be “due” for a recession. On
average, there has been a recession every 7 years for the last 100+ years. Sometimes the economy grows for just 2-3
years before a recession; sometimes it grows for 9-10. The fact that the U.S. has been growing for
12 years and not seen a recession since 2008 is unprecedented. Economists expected (hoped) that because the
Great Recession was so bad, it would be followed by a period of longer-than
average growth. It has, but I don’t
think anyone would have expected 12 years of steady growth is most areas.
For any readers unfamiliar with the word “recession,” the
term basically means a decline in economic activity in a given area, such as
the United States. Many governments define
a recession as two or more consecutive quarters of declining gross domestic
product (GDP). Another way of saying this is that a recession six months where
the economy isn’t growing. In practice,
recessions often include (a) increases in unemployment, (b) involuntary
declines in personal spending, (c) lower production for businesses, in the form
of lower sales growth and/or profits, and (d) a loss in consumer and corporate
confidence.
Recessions are bad, but they are also very normal. As the economy grows (“expansion”), consumers
and businesses make more money. As they
make more money, they spend more money and take on more debt. This spending and debt cause prices and wages
to rise (“inflation”), often at a faster rate than the underlying growth. Eventually, this process reaches a peak, and
people are no longer able to afford as many goods and services they were
before. As a result, the economy begins
to shrink (“recession”), and consumers and businesses make less money and
default on their debt. This set-back
causes prices and wages to fall (“deflation”), again, often at a faster rate
than the underlying economic decline.
Eventually, the process reaches a trough and starts over again, once
prices have fallen low enough for people to afford things again.
Source: Financeandcareer.com
The expansion and recession process is partially
self-correcting, though governments may intervene to assist the process
along. When the economy is good, they
may raise interest rates in an effort to prevent inflation from getting too
high. When the economy is poor, they may
lower interest rates to encourage spending.
Governments “should” generate surpluses during strong times and spend
these surpluses in the form of stimuli during weak times… though the reality is
that politicians historically have spent more than they’ve taken in all the time. Perhaps we can learn from their mistakes!
As you can see, the overall average slowly increases over
time. This is a good thing. It’s just a shame it tends to take on a
roller-coaster-like pattern in the process.
The world is not coming to an
end.
Do I personally think a recession is coming though?
Well, yes. I think a
recession is likely within the next year or so, if it’s not already here. The economy has grown very well for the last
12 years. The stock market has recovered
rapidly; unemployment has been extremely low; consumer confidence has been high
for a long time; and businesses have been highly productive for over a
decade. This implies (to me) that we are
at or near a peak, and a downward correction is probable.
Unfortunately, I’m fresh out of crystal balls, so predicting
the exact timing of the recession is anyone’s guess. On the one hand, the 6 factors I listed above
are real concerns and could collectively trigger the next recession, even
though none of them would on their own.
On the other hand, because our growth has been slow and steady and because
unemployment and inflation have remained low, it makes sense for our current
period of growth to continue. However, I
also think that the next recession won’t be as bad thanks to what we learned
from the last one. We haven’t even seen
a downturn for one quarter, much less two, so in the words of Yoda:
What does this all mean to us?
As consumers and everyday people, there are some takeaways
from this. Recessions are normal but
unpredictable, so there are some steps you can take to position yourself when
one does come:
• The single best thing you can do is to remain prepared for
a recession but not let the fear of it take over your life.
• Prepare by making sure you have an emergency fund of 3-6
months of your core necessary spending (it isn’t a coincidence that most recessions
last about 6 months). If 3-6 months
isn’t realistic, it’s even more important to start, say, with one month. Doing so could save you from going into debt
immediately if you were to lose your job.
• Cut back on non-essential spending, and pay down your debt
aggressively.
• Come up with a plan if you or your partner were to lose
their job for a period of time and what the impact would be on your family
financially and emotionally. Be sure to
consider even the worst-case scenarios of needing to find new housing.
• Make sure you are insured against things that could have a
major impact on you financially, like your health or home.
• Consider reducing any riskier investments you have for
some more conservative ones, and don’t take on any major new risks that you
can’t afford to lose.
• Ensure you have some cash or liquid assets to cover any
transitions you need to make during a recession, like finding a new job or
moving to a less expensive area.
• Begin the process of diversifying your income sources with
a side gig. Start
with a few ideas here. Apps and
websites nowadays let you sell any of your skills, whether its driving,
cleaning, tutoring, or playing dungeons and dragons!
• Assess your current work situation with your employer if
you can. Some employers are more open to
discussing the company’s future with their employees. You may also be able to tell whether things
appear to be slowing down a bit too much.
• Keep learning new skills and make your services valuable
in the workplace. The least productive
employees relative to their salaries are often the first let go. If you can make yourself invaluable to your
employer, you’ll better be able to weather the storm. Keep mastering hard things and taking on
tasks that others shy away from.
Should you be worried about all this?
No. In fact, the most
important thing is to stay calm to avoid giving room for fear to drive your
decisions instead or rational thinking. Remain
calm, work hard, keep saving, and find peace in knowing that any economic
downturns
will be temporary. Don’t try to time the
market or alter your long-term goals. Definitelydon’t stop contributing to your retirement fund.
The stock market may have lost 12% last week, but this is
because the market wildly overreacts to current events. The fundamental economy is not 12% weaker, just like it was not 30% stronger at the end of
2019. Just because the market and news
react far too strongly to current events does not mean that you should. Be prepared
for the worst in the short-term, but expect
the best in the long-term.
Here’s some data to back this up. One of my favorite financial YouTube
channels, Next Level Life, did a fantastic analysis on what happens immediately
after a day where the stock market loses 3% or more in one day. We had several of these last week, and there
have been over 300 since the 1920’s.
The left column tells us that after a major day of losses (sometimes
called a “Black Swan Event” because of their extremely low probability), the
stock market will, on average, regain 0.41% within one week, will be
completely recovered within one quarter, and will gain 9.2% within one year
(more than 3x the amount lost)! Sure,
there are some extremes in both directions – as shown by the Min and Max
columns – but a single even like we had last week is not enough to predict a
recession.
The coronavirus may indeed be one of these Black Swan Events
and may cause global productivity to dip a bit.
If it is prolonged or particularly severe, it may cause the economy to
contract because consumers and businesses will cut back their spending and
investment. Then again, it may be just a
temporary hiccup and the market could return to normal in no time.
For some perspective, here are a some of the largest
single-day losses in stock market history.
Some were followed by periods of significant market downturn (Great
Depression, Great Recession); some were followed by periods of market upturn
(the Mini-Crash of 1997). The
coronavirus drop of 4% last Thursday doesn’t even crack the top 25 single-day
market drops in the last 100 years.
True, we’re only looking at single days here rather than weeks or
months, but last week was far from the worst in history.
The point is, nobody can predict the market. Those that try often end up buying high and
selling low, the opposite of what you should do. Unless you get improbably lucky, you will
always be financially better off by buying and holding for long periods of time
rather than trying to predict every turn of the market. The old saying remains true:
“Time in the market beats timing the market”
What you and should control, however, is your level of
preparedness for significant events. You
can control your non-essential spending, your taking reasonable precautions for
your health, your commitment to an emergency fund, and your willingness to
continuously improve your professional skills.
These things are recession-proof.
Remember, recessions hurt the most for those who are
unprepared. If you can weather the storm
without acquiring debt, you could come out on the other side in a great
position. If you do acquire debt out of
necessity, remember, you can and
will pay it off. After a recession,
stock prices are low, home prices are low, and opportunity for new investment
is high. However, if you can’t manage
your finances now, the recession will likely set you back for a while, with
fewer opportunities on the other side.
Mel Brooks tries to adopt a Centsei-quality beard in History Of The World: Part 1
We began this blog with an examination of the single most important idea of personal finance and lifelong happiness. A few posts later, we mentioned one hundred tips to improve your finances and quality of life. Today, we outline the 10 Commandments Of Personal Finance. And no, you don’t even have to change religions!
COMMANDMENT I. Thou cannot manage what thou does not measure
Translation: Budgeting and tracking is essential to your financial success.
The bodybuilder, trying to deadlift a new personal best. The corporate executive, trying to profitably integrate a new product. The dieter, trying to lose those last few pounds. The athlete, trying to improve a batting average or free throw percentage. The guitarist, trying to perfect a new song. The gamer, trying to beat the original Super Mario Bros in the fastest time ever. And finally, the Centsees (i.e. you), trying to better manage their personal finances.
What do all of these masters of their craft have in common? They all rigorously measure their performance. Personal finance is a skill that can be taught, and no skill can be improved without a willingness to objectively measure one’s performance.
Start by measuring your net worth. Add up all your assets with real value (cash, savings, car, retirement, property, stocks) and subtract your liabilities (credit card debt, mortgage, student loans, IOU’s, back taxes, other loans). Here’s an easy tool to calculate it using Excel that takes just a few minutes. Write the number down, update at least once per year, and keep track of it over time.
Is the number less than zero? Don’t worry; this number just tells you that it would be best to aggressively cut back on your spending and pay down your debt. Is that number greater than zero? Nice start; set a specific attainable goal – whether it’s $10,000 or $1,000,000 – and focus on increasing your assets and minimizing your debt. Most importantly, is your net worth number increasing month to month or decreasing? You’ll only be able to tell through measurement. Tools like Mint (free), Personal Capital (Free), or YouNeedABudget “YNAB” can help track and illustrate your progress, and they will be cover in depth in future posts.
Take this principle and apply it throughout your finances. How much do you spend each month? What percentage of your income do you save? How much do you spend on essentials vs non-essentials? How close are you to being able to cover your necessary expenses off your savings indefinitely (“financial independence”)? What is your next financial goal and how quickly can you meet it? The methodology is the same with each: Assess where you are; set a goal; and track your progress each month. Sure it takes a little effort, but don’t postpone it. Just like the bodybuilder, the executive, and the guitarist, measurement is the key to financial management.
COMMANDMENT II. Thou shalt spend less than thou earns by minimizing the difficult choices
Translation: By limiting the number of decisions you need to make (via automation), you can spend less than you earn all the time without even thinking about it.
At its core, personal finance is about spending less than you earn. “Wow, great insight, Centsei!” The trick is knowing how to get there.
We’ve recently examined how to make more money and how to spend less, but to make doing so even easier, the trick is minimizing the number of difficult decisions you need to make.
It is a very “difficult decision” to set aside your “leftover money” at the end of the month for savings and long-term goals. You only have to make this decision once if you automate your savings. Set aside a portion of your paycheck to retirement, healthcare (including an HSA or other savings account to cover your deductibles and out of pocket), tax withholding, emergency fund, mortgage/rent payment, and even an account devoted to paying down your debts. Most payroll companies allow you to split your paycheck between various accounts, so consider going so if you haven’t already. If your payroll company can’t do it, your bank can, as almost every bank allows you to make weekly or monthly recurring transfers for free to accounts of your choice. It doesn’t take long to set this up, so do this before sending a dime to your checking account… and don’t touch the money. This “save first automatically” mentality will virtually ensure that you’re never hit with an unexpected expense. For example, Lady Centsei and I each have over six different accounts that we devote our paychecks to (retirement, heath insurance, HSA’s, mortgage, emergency, and taxes) before we see any of it. This one-time setup has made our financial goals a lot easier to attain.
The same is true when it comes to spending. Your decision should always be between spending on the best option and not spending at all. Saving should always be the second option. Change your environment to match your goal. If you have a financial “trigger” that causes you to spend, eliminate that trigger from your life so there is no longer a decision to be made. For example, if you have a partying group of friends who cause you to spend frivolously, change your environment to one that limits the time with them and eliminates the decision of whether to splurge with them. Harness your inner Centsei!
This philosophy can help you in other areas of your life that may or may not connect to personal finance. Going to the grocery store with a shopping list and sticking to it (“no decisions”) will help you buy more healthful foods and spend less money. Having a trusted friend assist you through a personal situation or choice can help you be more objective and waste less emotional energy. Creating a specific schedule for your hobbies and routines can help you be more productive and waste less time. Quantify your options, reduce irrelevant factors, and focus on the long term, and you will find yourself making more satisfying decisions just about everywhere.
COMMANDMENT III. Remember to keep holy thy recurring expenses, for none is insignificant
Translation: Letting your recurring expenses add up can devastate your finances.
If I asked the average person how much a coffee run in the drive-thru cost, what would you say? Most would say maybe $3 per day. Maybe $5. The average American earned $27.16 per hour in 2018, it’s no wonder that small dollar expenses like this seem trivial.
However, the question was how much that coffee really cost. A financially astute person might say the coffee cost $100 per month (let’s assume $3 every day or $5 per workday) or $1,200 per year, in after tax income. The Centsei, nonetheless, would tell you that this recurring expense would truly cost you $250,000 over a 40-year working life (7% annual return).
($100 per month, invested rather than consumed, could be worth a fortune when you retire, as shown here)
Check every transaction in your bank and credit card statements every month. Cancel any recurring transactions that did not bring you joy. Did your cable TV subscription bring you joy? How about that wine of the month? That unused membership? The insurance protection on your phone or chair? The overpriced club? That coffee/lunch each day? Beware, because these transactions could hit you once a day, once a month, or even once per year, so it’s even more important to keep a close eye on them.
Don’t become complacent and let “a few dollars here and there” every day or every month become a drain on your finances. Cancel any recurring expenses that aren’t truly “holy” and bring you great joy!
COMMANDMENT IV. Honor and respect thy body
Translation: Taking care of your body is taking care of your finances. And vice versa.
I think it was Buddha that said that “To keep the body in good health is a duty… otherwise we shall not be able to keep our mind strong and clear,” but since 50% of quotes are made up and the other 50% are misattributed, we’ll just give him credit on this one and move along.
There is no question that your physical and financial health can go hand and hand. Those who take care of their body are better able to take care of their pocketbook, and vice versa. There’s very little point in pursuing financial independence if you’ve sacrificed your body in the process. And by “body” I don’t mean just mean trying to look like Brad Pitt or Jessica Alba; I mean the impact that things like stress, overworking, addiction, and fatigue can have on both your body and your mind.
You’ll never regret time spent taking care of your health, and its impact on your happiness and bank account is immeasurable.
V. Blessed art thy savings; Cursed art thy debts
Translation: Saving for your future and freeing yourself from debt will allow you to live a happier and more fulfilling life.
Let’s begin this exercise by listing all the things you may have gone into debt for in your lifetime: A mortgage on a house? A new car? A business? An education? An unexpected health expense? A shiny new phone or gadget? Put these the debt itself next to the “thing” that it bought. Now list which of those things you value the most today, starting with the most important and ending with the least important (what you most regret).
I’ll best most people put things like an education (for a subject in a high-demand field) and house near the top, the business and healthcare in the middle, and the junk they bought with their credit card or personal loan near the bottom (if they can even remember a fraction of everything). This ties into one of our recurring themes of this blog regarding debt: Never go into debt for something that loses value over time.
A house and an education won’t lose value over time. A brand new car will. A restaurant meal, a movie ticket, or a night out at the bar will – immediately. If you can’t afford it in cash and if it’s going to become worthless over time, never ever go into debt to buy it.
Take a moment to think of a few things that you saved for and were able to pay for without debt. Take another moment to consider the things you didn’t save for but instead purchased with debt. Which ones brought you more joy? Which brought you anxiety?
Things you save for diligently almost always bring you more long-term happiness than those you buy impulsively.
VI. Improve thy good habits and remove thy bad habits, one at a time
Translation: Improve your behaviors by building a routine that become a habit. Focus on one small, easily achievable task at a time, and watch the benefits start to add up.
As I’ve mentioned before, I used to hate exercising. Ugh. There was always an excuse: too hot, too cold, too rainy, too far away (the gym), too painful, too tired. I was young and in good health and couldn’t find a way to get into the habit.
I started studying why this is and learned some very effective ways of building good habits that stick. It begins by making something a “routine” – a behavior that you have to think about, but that you do at the same time every day or week until it feels normal. For me, that was the routine of walking for as long as I could at lunch. Make the routine as easy and manageable as possible, then increase the time/effort you put into the routine slowly until you have more sustained benefits. In time, this routine becomes a “habit” – something that you do without even thinking about it. I now don’t even think about whether to go for a walk every day, I just do it, and my body feels weird without the walk.
This methodology can apply to any area of your life where you feel like you’re not at your best. Start by switching your routine, do it until it feels normal, and improve upon it until it becomes a habit. Try one of the following, then add another:
—Walk 10 minutes a day at the same time, then gradually make it 30 minutes per day.
—Stop buying just one type of “guilty pleasure” food at the grocery store, then gradually eliminate the rest.
—Drink one large glass of water in the morning, then gradually drink one every hour for eight hours.
—Throw one cigarette away from the pack you smoke each day, then two, then all of them. (NOTE: Addictions may require specialized action, so make a plan with your doctor)
—Give up a time-waster like social media site first thing in the morning, then until noon, then all day (but never stop reading the Centsei!).
—Do a 15-minute jog in place once per week, then gradually make it a daily routine or add in a 15-minute weight routine.
Focusing on one at a time is absolutely the way to go. One minor change to your routine is infinitely more likely to become a habit than multiple major changes. For me, I tried to go from no exercise to “three days a week for an hour at the gym” and my body quickly punished me for it until I lost motivation. I started by just walking, added an easy weight routine after a few months, added one day per week at the gym after that (same day of the week at the same time), and am now up to two days per week – while not giving up the walks or weights. Find ways to give yourself a positive feedback loop, and the habit will stick even harder. It’s magical!
Interested in learning even more? Check out The Power Of Habitat your local library!
VII. Thou shalt not covet thy neighbor’s goods, for there is no greater “status” than financial independence
Translation: Humans are programmed to seek status among their peers and often do so by spending money on status symbols. Break free from these social cues. The only status that matters is financial freedom.
We’ve all been there. A classmate gets a sweet new iPhone and shows it off to everyone. A friend gets a brand-new wardrobe with all the latest fashion. A neighbor remodels their kitchen with high-end appliances. An acquaintance gets “fancy” hair extensions, jewelry, or watches. A family member takes a weeks-long vacation to some exotic destination. A coworker buys a new car with fancy rims and leather interior. It can be difficult to see other people buying nice things (seemingly) with ease and equally difficult to avoid the temptation to one-up them.
The fact is, however, the average person is really bad with money. Half of Americans (about 61%) don’t have enough cash to cover a $1,000 emergency. About a third don’t have a dime saved for retirement. The average household has $8,000 in credit card debt, and 35% have some sort of collections reported on their credit history. If that weren’t enough, more people are more concerned about paying for their next vacation than they are saving for retirement. An astounding 20% of people making $100,000 per year are living paycheck to paycheck, according to a recent article. Yikes!
Yet, these are the same people showing off their iPhone, flaunting their wardrobe, and flashing their new car. The next time you feel that twinge of jealousy, remember that it’s much more likely that the person in question is spending beyond his means and has next to nothing in savings. As that last article shows, people are poor financial decision-makers at all income levels, but this doesn’t mean you have to be as well.
Material possessions are no sign of status. The only status worth having is ownership of your time and the freedom to do only the things you find meaningful. This status is only truly accomplished when you’ve achieved financial stability and the peace of mind of being able to pay the bills and any unexpected expenses without taking on debt. Such stability puts you on a path towards saving enough to cover all your core expenses for the rest of your life, of what I and many others call “financial independence.” It isn’t something out of a self-help book; it is a very real position that you can put yourself in by keeping your spending low and your savings high.
This isn’t to say that you can’t enjoy a night out, a new suit, or a fancy gadget from time to time. Rather, avoid all spending done to keep up with your peers. Spend your money based on what you value, not what your peers value.
Be patient, keep saving, and imagine your fancy-car-coworker’s reaction when you no longer have to work by age 50 (or sooner)… and he’s still decades away.
VIII. Learn from thy past, appreciate thy present, and plan for thy future
Translation: Learn from the past, but don’t dwell on it. Live in the present, but don’t lose yourself in it. Plan the future, but don’t depend on it.
Ancient philosophers and modern thinkers (including bloggers!) each seem to have different thoughts on the extent to which humans should focus on the past present and future. Let’s look at some examples.
Historians look deeply at the past and try to connect it to current events. This is a useful exercise, as history can repeat itself, though not an easy one, as the world often evolves at a faster rate than textbooks.
Buddhists focus on the present and finding peace in the current moment. This, too, has great value, as we often lose sight of the present and don’t always appreciate the many things that make the current moments in our lives so special. However, too much emphasis on the present can cause us to lose sight of major problems right in front of us or behind us, so it does pay to reflect on non-current moments too.
Economists concentrate on predicting the future using data and analytics. These predictions can have great value in helping people, businesses, and governments plan the correct course of action, but there is a reason they call it “the dismal science” – they’re often wrong.
Here at TheCentsei, we recommend a balance in all these things from the perspective of your finances and happiness. Keep learning new things and sharpening your skills. Take the time to examine the past to figure out what went well and what didn’t… but don’t beat yourself up if things weren’t perfect, just do it differently in the future. Continuous learning is the ally of success.
Source: makeameme.org
IX. Thou shalt not hold thy financial goals in vein
Translation: Goals give our behavior meaning and keep us on the right track.
As you may recall, I moved back home after graduating from school in 2009 with a mountain of student debt and no job. Being in your 20’s and living in your mother’s basement (or the first floor, in my case) can take its toll on your ego, and I knew it was on me to improve my situation. So from the very beginning, I set myself on the path of paying off my student loans and finding a place to live in 18 months. This was my goal.
I settled for a temp job that became a full time “intro level” job 3 months later because they were pleased with my performance (well, and I forced my company’s hand because I’d continued to job search and got another offer). For the next year or more, I saved 70% of my after tax income, paid off my student loans, and saved enough for a down payment on an apartment and a car. The remaining 30% was spent paying my mother rent and for gas/insurance on my old jalopy. Virtually no nights out at the bar, no vacations, no video games, no new clothes, no status symbols. I knew exactly how much I had to save each month to make my goal a reality. This was my behavior.
In the end, the goal took 20 months to achieve, not 18, but it kept me entirely focused and genuinely happy about my life at the time. Saving was legitimately fun because I could see the goal at the end of the tunnel, and I felt progress every month. I spent more time with my friends, my family, and our new dog doing things that were not financially draining. What might have seemed like an unfortunate situation to others proved to be a blessing.
The point here is just that having a goal brings value to our behavior. The slight “let down” I might feel by sacrificing a night out at the bar is “made up” by a factor of 10 when I stepped into that apartment debt-free with a bright future on the horizon. With no goal, I likely would have drained my bank account by pouncing on each opportunity to spending money without thought for the future.
From time to time, write down your financial goals and create an attainable plan for how exactly you can achieve it. Do you want to pay off your debt? Buy a home? Go back to school for a degree? Start a business? Retire early? From there, pick one and go get it!
Estimate how much this goal will cost and how quickly you’d like to achieve it. Figure out how much you have and how much you need to make it happen. Think about what (if any) sacrifices you’ll might to make to get there in a time frame that works for you. Consider all options and set out on the one that suits you the best. You’ll find it so much easier to pass on other spending when you have a goal in mind.
Once you complete the first goal, get started on the next.
Personal finance is as much about behavior as it is about numbers. Giving your money a purpose gives your behavior a meaning. With a purpose and a plan, you can accomplish anything.
X. Thou can
Translation: Nothing is more important to your financial success than a positive mindset.
You must believe that you can succeed. It can be easy to give up trying to master your finances and decide it’s too complicated. The only way to get past that is to believe in yourself. At that moment, you will begin to begin to prosper.
This blog is about how to live richly without spending a lot of money and how to become wealthy both in mind, spirit, and wallet without sacrificing your integrity.
The requirement to get there isn’t being a math wizard, finance major, millionaire, or trust fund baby. Indeed, personal finance doesn’t require a large salary, a prestigious education, or even a perfect past.
“It’s never too late to be what you might have been.”
– George Eliot
“The man who moves a mountain begins by carrying away small stones.”
– Confucius
“Optimism is the faith that leads to achievement.”
– Helen Keller
Rather, the only requirement is the mindset that you can do it! The rest is just learning how money (and your own brain) works and applying that knowledge to your situation to establish the right behavior. Anyone who believes in themselves can begin making improvements in their life.
Study, after study, after study, after study shows the power of positive thinking. Having the so called can-do attitude and willing to keep improving your skills not only affects your finances, but also bolsters your happiness and lengthens your life!
No, I’m no cultist or motivational speaker. Yes, I am a scientist that believes in data, especially when it reflects my own experiences.
In my previous post, I began examining the prior decade and the lessons it brought on finances and happiness. Through rose-colored glasses, I tried to summarize the things that had gone well, with the hope that sharing my story brought value to you, the readers.
Today, however, we take off those glasses and put on… well… whatever the opposite color of rose is, once again with the hope that there is value in a lookback on the mistakes of the 2010’s to avoid these missteps in the future.
No oversight seems so prevalent that those that I made surrounding my health and the many ways in which I could have taken better care of my body. I’m blessed not to be overweight or have any significant chronic health problem, and my “numbers” always come back as pretty good at the doctor’s office. As a result, I let a few aspects of my health slip. Let’s look at three examples.
(1) At my first job, there was a free soda fountain, so I spent over 6 years drinking at least one soda per day. Sure, sometimes it was diet, but there’s no question that I was probably getting 5-10% of my daily calories from it on work days, justifying it to myself as a “free” reward to myself because I was working hard and not gaining weight. I’ve begun to reverse this in the last 3-4 years, now drinking exclusively water at work and not buying/drinking any sugary drinks at home. Now the challenge is making sure I actually stick to it and drink enough water.
(2) I’d often spend weeks without going to the gym or getting any significant physical exercise in the early 2010’s. With an hour-long commute and increasing work responsibilities, I convinced myself that I was “too tired” and that I’d get to fitness “soon” (which, of course, kept being postponed. I coached a teen basketball team one summer, and when they needed another body to fill in for a scrimmage, I was completely gassed after 10 minutes and felt sore for days. It was embarrassing to be a 24-year old coach who was outpaced by 14-year-old girls and boys! We also had a challenge at work in 2014 during which we had to count our steps for 8 weeks and calculate the average, with a company goal of 10,000 per day. Much to my dismay, I discovered that I was only getting about 3,500 per day on a normal day in the office (and I was still the highest among my coworkers… which doesn’t speak well about the average person!). I even had a gym at work for two years but didn’t develop a regular schedule and lost the habit when I changed jobs. Not good. I’m happy to say that I’ve made real progress on this one in the last few years as well. I got a fitness tracker, and although I was skeptical at first, it has honestly motivated me to move more. I’ll take a brisk walk at lunch, move around every hour at work, and jog in place when I watch TV. I’ve averaged about 8,500 steps – more than double – and these walks are now something I look forward to every afternoon. I’ve also been joining Lady Centsei at the gym once a week and am working towards twice per week. Getting up and getting ready together keeps my motivation high. Small incremental changes are making a world of difference. That little bit of accountability goes a long way.
(3) I love salt. My goodness, just the thought of potato chips, French fries, and crackers is enough to make my mouth water. I’d go to the grocery store, see the snack food isle, and light up like a kid in a candy store. My roommates and I would keep almost a dozen bags of chips in the kitchen at any given time; I’d go out with my coworkers once a week for pizza; I’d add salt to more foods than really need it. This one, however, did show up in the numbers, as my blood pressure went from excellent to just average. I knew I had to make a change here before it became a problem. We now only buy snack foods when we host parties, and I’ve stopped adding salt to foods that really don’t need it. Hopefully the 2020’s show more improvement here.
There is no question that far too often, I used good numbers at the doctor’s office as a mental excuse to not improve my health further and to not correct some easily reversible bad habits. A passing grade, however, is not the same as a good grade, and I knew all along that I could have done so much better. Let’s call this “Centsless Decision #1.”
I also wish I’d been more aggressive towards retirement investing at the very beginning of my career. The stock market was in complete shambles in 2009/2010 when I first started, and I knew that it was an excellent time to invest (“buy low”). My company had a 5% match on the 401k, so I put 5% of my paycheck away towards the 401k, patting myself on the back for being so “forward-thinking” and “maxing out” the benefit. And there was a nugget of truth to this. After all, almost half of people have absolutely nothing saved for retirement, and a staggering number of people who are offered a match (free money) don’t take it. At the time, it never dawned on me that I could have saved a much much larger percentage. If I’d saved 50% of my income and made the maximum contribution to retirement for just one year in 2009/2010 ($16,000 to my 401k and $5,000 to my IRA), that $21,000 would be worth over $60,000 today and over $450,000 when I retire.
Chart 1 ($21,000 invested in 2009 for 10 years would have a rate of return of 11%)
Chart 2 ($60,000 invested in 2019 invested for 30 years [when I’m in my early 60’s], assuming a 7% rate of return)
That’s all without contributing anything else. Let’s not even get into the idea of if I’d saved even 20%+ of my income towards retirement – like I do now – every year since 2009. I thought the 5% plus match was good enough, so I should focus on paying off my student loans, buying a car, and moving out of my mom’s house. None of those are bad things, but I’d just never heard of anyone stashing away 40% of their paycheck or more for retirement. The concept of financial independence and saving large percentages of one’s income was foreign to me at the time, so I missed out on a very lucrative time to invest for my future. Centsless Decision #2.
Next on the list is a story that goes to show the potential downfalls of not following my own advice. It was late 2014, and we’d just closed on our house. We knew we were going to need to fix the shower, since the prior owner had the shower head only five and a half feet about the tub, and I am over six feet. The original need for the project was a very practical one. We weren’t experienced with home improvement and contractors, and did not do enough research on the expected cost. We did not get three quotes on the work (Part 3 #1) and instead went with the first contractor that offered to do the job start to finish. We didn’t give enough time to think about each incremental expense, each of which were expensive (Part 3 #3). We got a bit too wrapped up in the aesthetic of the project and lost sight of the original priority (Part 1 #3), which was just a higher showerhead. What started as a simple tub/shower replacement turned into an entire bathroom remodel at twice the total cost. To top it all off, the contractors went over budget and over on time (shocker…), and we didn’t make “that” phone call (Part 3 #5) to hold them accountable to their agreement. In fairness the new bathroom does look nice, brings us utility, and did add some value to the house (some value; you should never expect a 100% return on investment from a home remodel project, however). Nonetheless, the house project ended up costing us thousands more than we would have paid if we’d been more patient, gotten more quotes, and researched more thoroughly, especially for something this big. Centsless Decision #3.
Another habit I wish I could have fixed was one that many working people fall victim to: buying lunch. I fell into the trap early in my working career of buying lunch about three or four days per week rather than bringing it. I tried not to spend much, only spending about $7-8 on days I went out, but this was about three times the cost of preparing lunch at home, which I estimate to be about $2.50. $5 per day really adds up, even three times per week. How much, you ask?
Chart 3 ($5 per day, three times per week, invested for a 40-year working career, assuming a 7% rate of return)
$183,737, or almost 4 years of expenses for the average American. You could also read this number as “4 years onto the number of years until financial independence and retirement.” Those $5 daily habits can be detrimental to your finances, whether its lunch, coffee, alcohol, or something else. A restaurant is not the same thing as a kitchen. Some people spend $10-15+ per day on lunch, and they do so 5 days per week. That would be worth $500,000 in retirement! And that’s only the financial impact, not even considering that most restaurant meals are less healthful than those from home. I let a $5 daily habit become routine, and if it goes unchecked, it could add years onto my working life. Centsless Decision #4.
Finally, I also look back on the 2010’s knowing that I could have done more to help my community and make the world a slightly better place. Far too often, I found myself focused on myself and my immediate social circle, without taking as much time as I could have to help those have been less fortunate. This isn’t to say that I’ve done nothing or have been completely selfish: I played in a community band for a few years, volunteered for professional and/or career events at a local high school, helped several family members and friends in need, and donated a percentage of my income to charities. However, none of these things have had the kind of consistent, impactful change that I could have made with a more in depth commitment. Though none are profound, I do have some skills (teaching, finances, music, or maybe even blogging nowadays!), and there could be some very real social benefit to sharing those with others more often than I have so far. There was always some excuse, like being too busy or not being totally passionate about the work, but I certainly always found time and money for other things. It’s not that regret investing this time and money in my education, experiences, or family/friends, but I do wish I’d made the effort to more significantly benefit other people or groups outside my immediate circle to help make the world a slightly better place. Centsless Decision #5.
It’s with this last “Centless Decision” in mind in particular that I’m starting to shape some of my goals for the 2020’s and beyond. I’m hardly full of grandeur, but perhaps *I* can actually leave the world a little better place than I found it. I’d love to do so through some of the themes of this blog. I hope this is a starting point. Over the last decade (coincidentally), I’ve spent thousands of hours learning about personal finance and tens of thousands of hours at work learning about the financial system. After all, this is something I have time for and is completely passionate about. It’s (metaphorically) a crime that we don’t teach people about money when they’re young, and it’s (literally) a crime that so many fall victim to predatory institutions. This effect is particularly true for lower income folks and immigrants. It’s easy to say “they should have known better,” but quite another thing to get out there and help people. My dream is to start a non-profit devoted to free financial literacy for teenagers and adults, with a focus on helping English Language Learners as well as lobbying for financial education reform in schools.
While this non-profit is my long-term goal, it doesn’t mean I can’t start now, so I have. If it’s not too much to ask, I could use your help, too. Please consider sharing this blog with anyone you know that could benefit from its contents, and feel free to write to me if you have a question or need advice.
Wow, that digressed a bit! Let’s get back on track and wrap things up with a summary of ways in which the last ten years could have gone even better.
The 2010’s were a great decade, so here’s to the another (mostly) Centsable one!
If you have your own Centsless Decision from the 2010’s, I’ll again hope you’ll consider sharing them in the comments!
As we begin the new decade, it seemed worthwhile (albeit
cliché) to revisit highlights of the 2010’s.
I find looking back on the past can be a valuable tool so long as I do
so while I’m still looking forward, not dwelling on “what if.” While the decade has not been without its
challenges, there’s no question that the good memories will far outweigh the
bad.
Ten years ago, I was at what mathematicians might call an “inflection
point” in my life, where the potential for change was large. I had just graduated college and felt that
I’d done everything “right” (worked hard in school, gained experience during
the summers, earning money at a part-time job).
However, I was facing the reality that 2009 economy was at a
generational low-point, and I was utterly unprepared for what lie ahead. After receiving 125 job application
rejections in the prior 12 months, I had just $100 in my bank account, a
5-figure negative net worth due to
student loan debt, no girlfriend, and just one unglamorous job interview lined
up with a temp agency. “Being an adult, sticks!”
Nevertheless, I did have one thing– the mindset that I could change my life
for the better. That single
interview I mentioned landed me a temporary job offer with a bank involved in
the payments industry. Although I knew
absolutely nothing about payments, I knew that if I had a chance to prove
myself as a temp, learn as much as I could, and become an asset to the
department, I might be able to land something full-time later. Earning something is way better than earning nothing, especially with the first student
loan payments due by the end of the year… so wanting to make the most of my situation, I accepted the offer. Let’s call this a (good) ‘Centsable’ Decision
#1.”
I also moved back home rather than renting an apartment. I paid my mother rent, helped with housework (though with her new beagle mix to entertain me, very little of the housework felt like chores), and paid for my own expenses. This move certainly came with some “costs” – a 50-minute commute, and what little pride I could swallow when my coworkers asked me where I lived – but the benefits were significant. My student load debt suddenly felt surmountable with this arrangement. In addition to spending more time with my mom and the dog, I saved nearly 70% of my after-tax income because my rent/living costs were less than a third of what I would have paid living on my own. Within 20 months, I managed to completely pay off my student loans and pay for my new car (a bare-bones Mazda 3 with excellent gas mileage) in cash. I then moved into a 3-bedroom apartment with two of my closest friends who had graduated in 2010, landing the best unit in the complex and securing an extra parking spot by dressing professionally and making a good impression when we interviewed with the landlord. The commute was also vastly improved. All in all, by the end of 2011, I was student-debt free, living with two of my closest friends at a reasonable rent, and owned my car outright – all thanks to the decision to live modestly at home for a year or two. There is no shame in living at home if you help around the house, find a job, save everything you can, and construct a plan to move out. Centsable Decision #2. At the risk of straying from the point of the story… yes, here’s a picture of the dog.
Although I felt like I was doing well at the temp job, I
needed to keep my options open and pursue full-time work elsewhere if I things
with the bank didn’t work out. I
interviewed for a job in Florida with the insurance company where I’d interned,
as well as a nearby financial services company where they’d begun hiring new
staff. The financial services company
ended up making me an offer with benefits that sounded pretty darn good, so I
called my boss at the bank, thanked him for being supportive of my work as a
temp, and said I’d been offered another position so was planning to wind down
the temp work. My boss looked concerned,
almost panicked. “You haven’t formally
accepted yet, have you?” he said, without my even prompting. “What would it take to keep you here?” You can imagine my astonishment. It’s still late 2009, and in the matter of an
hour, I’d gone from no full-time job offers to two. Though I wasn’t prepared for a counter, I
named a salary a bit higher than my first offer, since I was indeed very happy
working for the bank and he truly had been a great boss. “Give me 24 hours,” he said, and indeed he
came back with a written offer the next day.
None of this would have happened if I had worked hard, nor if I’d
dismissed the bank as a just “temp job.”
Lesson learned. The best negotiating position you can be in
is one where you have options and are willing to seek alternatives. Centsable Decision #3.
At work, I took on as many projects as I could manage in a reasonable workweek, wanting to strike that delicate balance of excelling without subjecting myself to burnout. One of those projects caught the eye of an executive at the bank helping to get promoted, and another project caught the eye of a former manager who would later offer me a more senior level job at a new company. About two years after that, I was approached about another more senior role at a new company, where I’ve worked and have been very happy for the last three years. The more unique your skills, the more robust your professional connections/network, and the more irreplaceable you are, the higher your earning potential will be. Experts back up this idea (source, source, source, source), so I’ve been mindful of this throughout my career. Centsable Decision #4.
Consider this in your own career. Taking on projects that build one-of-a-kind
skills within your industry and capturing the attention of the right people can
be a very good way to become more valuable to your company and increase your
income. Is there an important task no
one is solving? Is there new technology
that you can master to improve things in your function? Is your industry going in a direction that
you can help with? Can you take a class
outside of work to gain the knowledge you need to get to the next level? If so, take that task head-on, do an
outstanding job, and keep exceeding everyone expectations. You’ll earn that promotion.
Of course, this philosophy works best when the work
environment is equitable and positive, which is not always the case. If you feel inequity at work, reflect
honestly to see if there’s anything you can do to improve. In some cases, it’s an issue with the person’s
attitude – i.e. they think their work life is a Dilbert comic strip and that
everyone else is incompetent but them.
In other cases, however, it’s a genuine issue with the person’s
superiors – in which case, that’s a telling sign that you need to find a new
job asap. Other outside factors can come
into play too, like layoffs, acquisitions, or changes in the demand for your
products or services altogether. It can
be extremely challenging to keep your professional skills “sharp” and
transferable if the need arises, especially if you’re happy with your job. Still, the best thing you can to maximize
your income is to keep learning new things.
As the 2010’s progressed, I was faced with the reality that although things were going reasonably well financially and professionally, none of that had transferred over to my life romantically. Up to that point, I had been pretty close-minded. I was opposed to dating anyone who worked remotely closely to me at work… and opposed to meeting people at bars… and opposed to online dating (for some reason)… and I was only meeting a small number of new people through friends. After seeing lots of success stories from online dating and no life-altering failures, I decided to give it a whirl. I created my profile with help from my brother (he had met his wonderful now-wife online), asked my female friends to go through my pictures and pick out the winners (I was completely hopeless in choosing), and spent over 50 hours crafting my profile, questions, and interests. If I was going to do this dating thing, I wanted to, you know… try! As luck (or fate) would have it, the second person I met up with in person seemed like the real deal. Seriously. She was charismatic, compassionate, brilliant, mature, open, honest, funny, interesting, and stunningly beautiful… on top of being financially prudent as much as one could tell early on! However, every time I had the slightest thought of “there’s no way I could have met the right person this soon” or the fleeting notion “you don’t deserve this,” the more I’d see that our goals, values, and trajectory were aligned. She was the most wonderful person I’d ever met, and this was the most important relationship I’d ever formed. I poured everything into keeping the relationship healthy. We’d later get married, and I’m not ashamed to say these years have been the happiest of my life. Have there been obstacles and challenges? Of course, but our respect, honesty, and empathy for one another has kept the relationship as strong as ever entering its eighth year. It still amazes me that just the second person I went out with after I started dating ended up being my life partner. When life hands you the “goose that lays the golden egg,” recognize it, be grateful for it, and devote everything to preserve it. Centsable Decision #5 (and no doubt the most important).
Lady Centsei and I sacrificed a lot in our first few years together, focusing on earning two incomes, paying off both of our debts completely, and beginning to save for a house. We opted for lower-cost-but-still-nice apartments over expensive-luxury-in-the-city apartments; we planned our meals to minimize food waste; we took just one vacation to see family and stayed with them the entire time to save money and enjoy more quality time; we paid a penny of credit card interest; we shopped around diligently for the best products and the best price; we went without cable TV, new phones, fancy appliances, and expensive subscription services. The net result was that we’d paid off our debts and saved up for down payment on a house in 2014, just two years after the market had completely bottomed out in our area in late 2011, meaning that we were buying near the bottom of the market in terms of pricing. Our bank told us that “we could afford” a home twice as expensive as the one we bought (according to the bank’s formulas – which expect you to throw virtually everything into a mortgage payment). After visiting 50 houses to compare the cost benefit, we instead opted for a modest two bedroom condo in an up-and-coming area that had fallen significantly in price due to the seller leaving the country (interestingly, it was the second property we looked at after it had come down significantly in price – I guess second time is the charm in my life!). Despite this savings goal, we made sure not to ignore our retirement/401K and nearly maxed them out every year. If we’d spending all our income and taken on more debt – without saving – as some people do in their 20’s, we never would have been able to afford our home. Centsable Decision #6.
As important as all this has been, we have not felt like we’ve wasted our 20’s being “too frugal” or going to some of the extremes that you read or hear about. We’ve stayed in touch with our friends from high school and college, as well as developed new ones in adulthood. What were once “my” or “her” friends are now “our” friends. We’ve visited my family (my father lives 1,000 miles away) and her family (who primarily lives 3,000 miles away abroad) every year. We’ve prioritized time with our family, including our parents and siblings. We host parties every month or two at home, which is many many times more enjoyable and less expensive than crawling bars for a high. We’ll occasionally splurge on things that offer us true longer-term value, like a nice computer or quality work clothes. I treated Lady Centsei to a cruise for her 30th, and she treated me to a vacation to the U.K. for my 30th and Greece for my 32nd (she found an amazing deal that still blows my mind). There’s very little that I would have wanted to do in the 2010’s that I didn’t get to do (I truly can’t think of anything at the moment) and it only took being frugal in the right places. Very rarely have we ever bought an expensive “thing” that will lose value over time. No expensive cars, no expensive clothing, no expensive jewelry, no expensive gambling, no “posh” lifestyles, no expensive habits like smoking or drinking. Every time I think about a purchase, I try to think of it in terms of “would I rather spend $X on this now, or would I rather have 7 times that amount when I retire? (Assuming 7% return and 30 years).” When it comes to experiences and friendship, try to prioritize the present since these two are invaluable. When it comes to things and status, I’ll prioritize the future – as the right choice today can become many more choices in my future. As I’ve said before, there is no greater status than financial independence. You may notice a theme with how we spend our money. We value experiences and friendships, not “things” and status, and our spending habits reflect this. Centsable Decision #7.
Centsable Decisions for the 2010’s:
1) Believing that you can improve your circumstances in life is the first step towards doing it.
2) Doing expectations-exceeding work and constantly learning new things will make you a desirable employee; being desirable will give you options; having options will put you in the best negotiating position for your career.
3) There is no shame in making financial sacrifices early (like living at home) if you have a plan and work towards realizing it.
4) Developing unique marketable skills, strong professional connections, and becoming irreplaceable at work are the keys to a higher earning potential.
5) When life hands you something truly invaluable (especially a life partner), be eternally grateful and devote your entire being to preserving it.
6) Minimizing both debt and unnecessary spending are critical to helping you. accomplish your larger financial goals.
7) Value experiences and friendships, not “things” and status.
“Well, isn’t this just the perfect story little story, Centsei! What, you didn’t make any mistakes?! Tell me about all your failures”
All in good time, my friends. And by that, I mean “next post!”
On a final note, I started this blog in the decade of 2010 with the goal of sharing what I’ve learned and what I’ve experienced with others. I don’t mind sharing aspects of my life, and I hope someone somewhere finds some value from it. Longer term, I’d like to add my experiences to the many communities of people who are on the path to financial independence and lifelong happiness.
If you have your own Centsable Decision from the 2010’s,
share them in the comments below!
On the fifth day of Christmas, my Centsei gave to me:
♪ 5-Minute Tips! ♪
If you have enough money, to spend the $40,000 that it would take to buy your true love all the gifts outlined in the carol with no impact on your financial future, then you probably don’t need this article, the final installment in TheCentsei’s Money Hacks. For the rest of us, however, every dollar counts, and every minute counts even more. With the holidays behind us, the new year is the right opportunity to make headway on our journey to financial independence and lifelong happiness.
If you’re looking for a 2020 resolution, consider taking just 5 minutes per day to complete (or start) one item out of the 100 we’ve covered, and watch as these short simple tasks become permanent lifelong habits. Thinking about change is easier than changing your thinking, but as we’ve said from the beginning, you can.
1) Check your annual credit report. Once per year, you can check your credit reports for free, and ensure that the credit bureaus have accurate information on your account. Click this link, enter your personal information, request one or all three reports, answer the security questions, and review the activity. Do the reports show you as having a late or delinquent payment that you actually paid off? Are all your credit accounts present and correct? Is there an account you don’t recognize or potential fraud? Ensuring the data on your credit reports is correct is the quickest, easiest, and cheapest way to improve your credit score, qualify for the best interest rates, and help protect your identity. The above link is the only free, legitimate credit service that you’ll ever need.
2) Fix a mistake on your credit report. If you find a mistake while reviewing your annual credit report, fix it as soon as possible. Mistakes could include items belonging to people with similar names, errors in payments you made (or didn’t make), accounts that were not correctly closed by the lender, clerical errors in your address, loans or payments applied to the wrong account, double counting, and identity theft. Start by calling the credit bureaus to report each error. State the facts and request confirmation of the correction in writing. You may also need to call the original lender. Fixing a significant mistake, admittedly, may take more than 5 minutes, but fixing any mistake is worth your time, large or small. 26% of people have errors on their report, and the typical impact on their credit score is 10-50, which could cost them $100’s per year and tens of $1,000’s over your lifetime. This is especially important if you’re planning a large purchase, like a car or home, in the next couple of years.
3)Ask nicely. If you haven’t read How To Win Friends And Influence People, I highly recommend it. The ability to treat people well and take a genuine interest in their point of view is arguably the most powerful social tool you can develop. Whether you’re asking for a raise or trying to get out of a fee that was really your fault, you’re exponentially more likely to succeed if you’re polite and empathize with the perspective of the person with whom you’re speaking. “I work in customer service too, and I know this was partially my fault, but I absolutely love your product/service and a one-time courtesy like this would mean the world!” Works like a charm (no pun intended), and has saved me a small fortune. If someone can help you, your kind words go a thousand times further than your threats.
4)Switch to a less expensive brand. Some name-brands offer a legitimately higher quality product than the generic. Most do not. Whether it’s something big like your car or clothing, or something smaller like your toothpaste or bottled water, your time is well spent by researching alternatives and balancing cost vs quality more effectively. Spending money on a brand for status reasons is completely wasteful. Remember, there is no greater status on Earth than financial freedom.
5)Dispute an unauthorized credit card charge. Unfortunately, these crop up at least once per year for most people. Review your statement and call the number on the back of the card to dispute anything you didn’t authorize. Check all your transactions, especially the recurring ones, which can set you back years financially. Some merchants offer you a “free” trial, then begin charging you if you forget to cancel. Don’t rely on your bank; check your statements regularly, and promptly call about any strange charges or any good/service you didn’t receive.
6)Subscribe to a high-quality financial podcast. I recommend The Mad Fientist but any podcast that advocates for financial independence and not some get-rich-quick nonsense could be helpful. Subscribe now and replace one of your weekly TV shows with financial education. Have a podcast you like? Please share it under comments!
7)Order a free in-home energy assessment. Many local/state/national governments offer a free in-home energy assessment. See what is available to you and order it. They often give you free products (we got 20 LED bulbs and a free programmable thermostat), and they may even subsidize larger expenses like a water heater, furnace, insulation, windows, or electrical panel. A few examples include Mass Save, The Pennsylvania Public Utility Commission (PUC) Act 129, NYSERDA, EUMMOT’s in Texas, and the California Energy Savings Assistance Program (ESA). Do a search for your state (or country outside of the U.S.) followed by “energy efficiency program” to learn more.
8)Learn a common skill. Many everyday skills can be learned in minutes on your phone or computer. DIY videos are your friend. Here are a few things you can quickly learn: changing a tire, jumping a car, sharpening a knife, fixing an outlet, painting a room, ironing a shirt, using a drill or saw, putting out a fire, removing a stain, safely removing a tick, performing the Heimlich, and doing hands-only CPR. Try to learn one per week, and save money when you next use it.
9)Repair a household item. Similar the above. Sewing a button, patching a hose, unclogging a sink or toilet, or replacing a faucet washer are tricks that everyone should learn over time. When something breaks, spend a few minutes trying to learn how to fix it yourself. Many household projects are not age, gender, time, or strength prohibitive – only knowledge (or confidence) prohibitive. Don’t let these stand in your way. Of course you should call a pro for the most complicated projects, but learn how to do the easier repairs yourself. Last month, I saved $200-300 on a plumber because I learned how to fix a garbage disposal and unclog my kitchen sink. Quick caveat: Make sure the issue is one you can fix, and call an expert if it’s truly beyond your abilities.
10)Clean (or replace) your car’s air filter. Any driver can do this, and a clean filter can improve your gas mileage by up to 5%. Learn how to do this for your home furnace too!
11)Research commuting options. Finding a better commuting option could save you time and aggravation at the same time. Cars, gas, insurance, tolls, accidents, and parking (which can run $75 in the heart of the metro area where I live) can be a huge drain on your wallet. Consider biking, public transit, carpooling, or occasionally working remotely if you can. These options are sometimes faster and often cheaper than your car. Do some research.
12)Sign up for a (free) accounting or tax class. Of all the classes I took in college, the accounting course was arguably the single most valuable. It pays (literally) to learn about how taxes, banking, compound interest, and financial statements work. For intro courses, the math is simple and approachable for all skill levels. More importantly, the benefit over your lifetime will be huge.
13)Unsubscribe from e-mail ads. How many times have you gotten that email for an Amazon item you don’t need that is on sale? Or a tasty deal at Chipotle? Or an irresistible-looking special on pizza? I found myself falling victim to all three. The enticing ads was taking a toll on both my wallet and health, so I now unsubscribe from junk e-mails immediately, so as to not even see them in my junk folder. Takes 5 seconds, not minutes, and saves you from the temptation of money-consuming advertisements.
14)Unsubscribe from catalogs or junk mail. This is more difficult than unsubscribing from e-mail, but companies like DMAChoice or CatalogChoice can help and are easy to use. You may need to call the sender directly or visit their website, but it’s worth the time. It’s also a good way of going green at no cost.
15)Get on the do not call list. Unfortunately, criminals and robots will still find ways of getting your number, but at least the law-abiding advertisers will not call you. Countries outside the U.S. may have a similar service.
16)InstallAd Block. All browsers. All devices. All the time. Make your internet experience better and avoid the flashy nuisance that is online advertising.
17)Mute the commercials. Credit to my old roommate for this tip. While it’s always better to cut the cord entirely, muting the commercials can help you avoid the psychological tricks that advertisers use inescapably. I’ll give you permission to leave them on during the Super Bowl though!
18)Register to vote. Most voters don’t give a second thought about registration until election day, and by then, the officials can be overwhelmed, or the deadline may have passed entirely. Even if it feels as though your vote may not make a big difference at the federal level, it can make a massive difference at the local level, where property taxes, schools, zoning, rent, and safety laws/ordinances are often decided by a few votes from the small percentage of voters that turn out. These can affect your finances and your community quality of life. Don’t be part of the politically passive population of non-voters when so much good can be accomplished with just a little involvement.
19)Subscribe to your favorite blogger! Shameless? Not at all! Aside from yours truly, be sure to check out Mr. Money Mustache, The Mad Fientist, and Living Stingy if you’re looking for some of the best bloggers in personal finance.
20)Re-read any of these articles. But this time, stop reading when you find an idea that’s good for you, and get it done! Then, do the same thing tomorrow. Even if you just pick just one item on this list to do per day… and actually do it… you’ll be stunned at how quickly your finances improve and your road to lifelong happiness broadens.
I hope you enjoyed the series and make a resolution in 2020 to tackle those that are the most important to you.
Do you have a favorite hack? What is the most amount of money you’ve saved in 5 minutes or less? Did I miss a tip you’d like to share? Share your thoughts in the comments section below!
As I was preparing this article, the fourth installment in our series of money tips, I was listening to a new TED Talk in the background on why it’s so hard to make healthy decisions. Sometimes, the problem lies in a lack of nutritional education. More commonly, however, we know what we are supposed to do – eat fruits and vegetables, exercise regularly, sleep 7-8 hours per day, stop smoking and drinking, etc. – yet we fall short in nearly all of these areas.
Similarly, some people prescribe poor financial behavior to “not knowing better” and believe education alone can solve our money problems. However, far too often, we do know the right financial behaviors but cannot translate that knowledge into action.
We’ll talk about habits from a variety of perspectives throughout this blog, but it’s valuable to acknowledge that your brain is biologically programmed to act the way you have in the past. That’s why habits can feel like they are so hard to change.
Fear not. It is entirely possible to build new habits that override these predispositions. What once were your bad habits can be transformed to good habits, one step at a time.
The connection between a healthy body and a healthy wallet is indisputable. Just a few simple adjustments could begin to improve your life for the better in just 5 minutes.
1) Take the first step towards breaking a bad habit. A bad can take months to break, but you can take the first step today. Always wanted to quit smoking? Throw out every cigarette currently in your house and car. Start exercising? Go for a quick walk, even if it’s just 5 minutes. Stop impulse shopping? Remove a trigger (app, bookmark, e-mail list, auto-login, physical mailing) that results in your shopping. Repeat these every day and watch the bad habit start to disappear.
2) Reinforce a good habit. Research suggests that while we may never truly “break” a habit, we can replace a bad habit with a good one. Positive reinforcement like this is scientifically proven to improve not only your children’s behavior, but also your own, much better than punishment. Psychologists call these “feedback loops,” and you can use them to your advantage. Create your own positive feedback loops, and measure, compare, adjust, and reward them to keep the good habits strong. For example, are you normally good about drinking enough water but worried that the tempting new Starbucks next door could hurt your motivation? Measure. Compare. Adjust. Reward. Get an appropriate sized bottle for the day marked with 8 lines for each hour (measure). Check the clock every hour and compare where you are at on your bottle (compare). If you’re a little behind, take a minute to get to the marker (adjust). When you’ve finished your bottle, treat yourself to a quick break (reward).
3) Schedule a doctor’s appointment. If you’ve been putting off a medical issue – whether it’s as routine as a physical or a significant as a growth or pain – schedule that appointment today. According to the CDC, chronic diseases that are avoidable through preventive care services account for 75 percent of the nation’s healthcare spending and lower economic output in the US by $260 billion dollars a year. In other words, the nominal cost of the appointment will more than pay for itself financially, not even including the intangible benefits of improving your health or avoiding a disaster. On a personal note, a relative of mine put off a colonoscopy for a few years longer than recommended, and they found cancer when he finally had the exam. Please, please do not put this off.
4) Design a realistic exercise schedule for the month. The financial benefits of exercise, not to mention the health ones, are profound. The easiest way to get into exercising regularly is to build it into your routine and stick with it until it becomes a habit. It takes very little time to design a schedule for the entire month. Two years ago, I started walking for 30 minutes every day during lunch. It was hard at first, but now I genuinely look forward to it every day. After that became routine, I started going to the gym with Lady Centsei once or twice per week, which helped keep me accountable. And I hate exercising! If you don’t know where to start, start with even a few minutes per week and build from there. You do have the time if you prioritize, and it’s best to start small. “Plan your routine… until it becomes routine!”
5) Pack your lunch. Packing your own lunch is healthier, faster, and cheaper than going out every day. This one may not even take 5 minutes if you just plan to double or triple a weekly dinner recipe and store the leftovers in lunch-size containers. You’ll save at least $5 per day, which could be $150,000 in retirement and take years off your working life.
6) Talk to your partner or spouse about finances. Financial issues and lack of communication are two of the leading causes of problems for spouses and partners. You can address both at once by having a quick weekly or monthly sit down to check on your finances. Plan your budget, discuss your goals, track your spending, listen to concerns, and talk through mistakes. Avoid the temptation to make it competition and realize that your relationship is a partnership, the most important one in your life. Think about things as “we” and “ours” and you will be successful. You might think this will be stressful or awkward, but not nearly as stressful as fighting about money! Make it fun with a glass of wine, some fancy charts (well, *I* think that’s fun), some positive partner reinforcement… and maybe another glass of wine if things are rough!
7) Remove a physical temptation. We all have things that tempt us towards bad or unhealthy behavior. That candy jar at your desk; that sweet cable TV package; that rewards credit card; that pack of cigarettes; that secret junk food shelf; that expansive alcohol shelf; that phone number of a toxic “friend” or ex. Free yourself and get rid of it today.
8) Delete a time-wasting app or distraction… permanently. Similar to the above. Quick story: A few years back, I downloaded 2048, a simple but highly-addictive puzzle game about numbers. It was love at first swipe. I logged almost 50 hours in the three months that it was on my phone before I fully realized its impact on my time. After less than a week of very mild separation anxiety, I was completely over it and never even regretted not getting that 16384 square (so close!). How much time to you spend on “that” app on your phone or tablet? Too much. Replace it with a better habit.
9) Take a walk. Taking a 5-minute walk a few times per day is an excellent way to reduce stress, regain focus, and get exercise. I try to walk 5 minutes every hour during the work day and find it great for my productivity (and step goal).
10) Brush and floss your teeth. Only 70% of people brush twice a day. Less than 30% of people floss every day, and 8% never floss. The financial impact is real. Don’t put it off. Those who don’t brush twice per day? 33% increased risk of tooth decay (read: thousands of dollars in dentist bills). Those who don’t floss? 40% increase risk of gum disease (linked to heart disease, rheumatoid arthritis, diabetes, and premature births). The reason your “gums hurt” when you floss is because you don’t floss, and bacteria has taken over your mouth. Mouthwash is not a substitute. It might hurt the first time, but it will improve in less than a week.
11) Close one (or all) of your social media accounts. Unless you use social media exclusively to follow your favorite bloggers (or for work), permanently deleting your social media accounts is the way to go. According to Statista, people spend 153 minutes (over 2.5 hours) per day on social media. And that number is increasing over time. You could accomplish everything on this list in a week (and likely be able to retire 10+ years earlier) if you replace social media time with time spent doing things on these lists to improve your financial and physical health. Social media’s effect on your wallet is compounded not only by the wasted time but also the constant advertisements and poor social cues. Other than TheCentsei Twitter account (which I limit to a few minutes per week), I recently uninstalled all social media apps, deleted the bookmarks in my browsers, turned off the auto-sign in, and disabled all e-mail notifications. I truly haven’t missed it for a second. Free yourself.
12) Drink more water. The health benefits are truly countless, but those who drink enough water snack less, burn more calories, and have significantly lower medical costs. The best option in most parts of the U.S. is tap water, which is 2,000x cheaper than bottled water and 5,000-10,000x cheaper than juice, soda, or alcohol – not to mention the health benefits. Bottoms up!
13) Do a 5-minute exercise. The benefits between “a little exercise” vs “no exercise” are many times greater than “tons of exercise” vs “a little exercise.” It doesn’t really matter what either, if you’re doing your best. You do have 5 minutes per day. With time, maybe that 5 minutes becomes 30, and your life can be transformed. One study showed that older people who exercise 30 minutes per day 5 days per week save an average of $2,500 in heart disease related expenses alone. That’s like getting paid over $20 per hour to exercise! Whether you’re on your own, with a friend, or in a class, the best exercise is the kind you do.
14) Meditate. One of the greatest life-changing habits I developed in the last few years was that of doing a few minutes of guided meditation before bed. I fall asleep faster, wake up more rested, and keep my stress tangibly lower. Better still, the apps and YouTube videos to get you started are free.
15) Go to the library. The day I rediscovered libraries was a happy one indeed. Physical books, audio books, music, movies, and museum/event passes are available for free. Don’t miss out. I feel so much better about going to the library than buying junk that I’ll maybe use once, so the impact on wellness is very real too.
16) Contact or join a volunteer program. There are few downsides to filling your time with meaningful work. Nonetheless, there’s also truth in the Avenue Q lyrics that “when you help others, you can’t help helping yourself!” Tongue-and-cheek aside, building your social network and your skill sets through volunteerism, while at the same time improving your community, is a genuine win-win.
17) Call, text, e-mail, or write a note to someone you care about. While this may not seem like a money-saver, the fact remains that friendships are essential for your long-term happiness, and maintaining adult friendships takes serious work. Real friends, not social media friends or followers. A study of 300,000 people showed that people with strong social ties outlive those with the weakest by 22%, regardless of age or health status. Stay in touch with your past professional contacts as well; most people find a job with assistance from someone in their network.
18) Make a low-cost gift for a loved one. Give your labor or craftsmanship, all while improving your connection to people you care about. If you like to draw, sew, write, craft, repair, babysit, tinker, or brew, consider including a homemade gift or the gift of your time in place of something costly. It will mean more to the other person too.
19) Declutter. Just a few minutes of decluttering per week is priceless for your mental health but also produces tangible savings. You avoid replacements costs when know what you have, where it is, and what condition it’s in. You also avoid paying for storage space, additions to your house, and cleaning expenses.
20) Practice a new language. 5 minutes a few times per day can be enough to master a new language. Download a free app or find a language buddy to help – both can help great a positive feedback loop! In addition to just being a great skill and improving your overall emotional health, a Columbia University study showed that being multilingual had a positive effect on earnings (specifically for Spanish/English bilingualism in the United States).
Before you click away from the third installment of our
5-part series (in which we examine 100 ways to improve your finances that can
be done in 5 minutes or less) under the guise of “I’m broke and can’t possibly
spend less than I do”… let’s start with the single greatest equation in
personal finance, with a little assistance from our friend Penny.
“Hold on… WHAT!?!?”
You read that correctly. Saving $1 per day (or $30 per month), invested for 30 years at a 7% real rate of return (the market average), will earn you $36,500 in retirement. Coincidentally, this is about the same amount of money that the average person spends per year here in the U.S. If you have more than 30 years to go to retirement or if you live in less expensive parts of the country world, the effect is even greater.
Sure, the effect diminishes if you are closer to retirement, but you can see why Einstein called compound interest the 8th wonder of the world.
1) Get 3 quotes before every purchase. No exceptions. I cannot recommend this enough. Holiday shopping? Search Amazon, Google Shopping, Target, and Wal-Mart at a minimum. Financing a home? Get formal quotes from three banks, at least one national and one local. Travel? Kayak, Expedia, airline or hotel directly. New apartment? Internet service? Car dealership? Insurance? Doctor? Get prices from at least three providers. There are no purchases for which this wouldn’t apply, especially in a world where information is available in-store at your fingertips. If the expense is large (house), recurrent (cell phone), or both, I estimate I save 15-25% each time I do this, and in some cases, I’ve saved over 75%.
2) Master the 30-second rule to avoid small impulse purchases. Have you ever been in the supermarket checkout and thought: “Boy, those Skittles look sooooooo good right now!” How about in the mall: “Look at those new shoes!” In your living room: “Oh man, I could really go for a new video game!” Stimulus. Response. Stimulus. Response. The best way to avoid these smaller impulse purchases is via what I and others call the “30-second rule.” Stop and think about the purchase for a full 30 seconds. In that time, ask yourself some questions: Does this purchase provide genuine fulfillment to your life no filled by something you already own? Is there a better more effective alternative? Will I be proud that I spent this money at this time next year? In 30 seconds, your impulse towards less-worthwhile purchases will often vanish.
3) Master the 24-hour rule for larger purchases. Like the 30-second rule, when you’re considering a larger purchase (define your own idea of “large:” $20, $50, $100), wait 24 hours before making the purchase. Doing so will give you time both for the impulse to fade and for you to complete researching alternatives. If 24 hours pass and the need is still there, you’ll be able to make the purchase with more confidence and less regret.
4) Remove a non-essential recurring payment or subscription. Recurring payments are the death of middle-class finances. Did you sign up for magazines years ago that are sitting in unread stacks in the bathroom? Agreed to donate monthly to a charity you’re not passionate about? Haven’t been the gym in weeks? Kept your Hulu subscription even though you only watch it once or twice per month before you’re fed up with the ads? Chances are good that there is at least one non-essential charge to your bank account or credit card that you could easily do without. Take a moment and just cancel it. Remember, you can always add it back if you change your mind.
5) Make “that” phone call. You hate the phone. I hate the phone. And most of the world hates the phone. As a result, we often put off making a phone call to a business or person that could potentially save us money. Stop putting it off and just make the call. • Call your internet/cable provider to negotiate a lower rate (I just did this and saved $25 per month just by asking). • Call your bank to see if they are willing to waive a late fee (did this too and was refunded the full $35). • Call your cell phone company or a new one to improve or change your service (this too… you get my point). • Call landlord to lower your rent or improve your apartment. • Call your repair person to fix that inefficient heater. • Call your credit card to get a lower rate. • Call your town/county assessor to discuss your tax bill. • Call the doctor to cut your bill. • Call to your lender or a new lender to see about a refinance. • Call the credit bureau to get an error fixed. • Call your card issuer to report a fraudulent transaction. Sometimes your efforts won’t work, but keep in mind that if you are giving them money for a service, you hold all the cards (no pun intended).
6) Shop for a new cell phone plan. At least yearly, take the time to shop for a new cell phone plan. Providers are notorious for slowly increasing prices, preying on your complacency while your bill skyrockets. Competitors could offer new customer deals worth exploring. Many smaller providers even use the same towers as the big providers, so you’ll get the same service for less. Paying a termination fee to get out of a contract could be worth it. I’m in the process of switching now and expect to save well over $100 per month!
7) Check your tire pressure. Do this one today. I’m ashamed to admit that I hadn’t done this for almost a year, and I had one tire that was almost 10 PSI lower than recommended. After inflating it, I increased my mileage by 10% and cut my gas bill by $100 per year. Checking and refilling combined took less than 5 minutes. Your car will be safer too. Build a routine by doing it the first day of the month.
8) Compare local gas prices. Once per week or month, check out gas prices near your home, office, or other places you frequent. Compare online using a trusted app or site like GasBuddy. A minute of your time could easily save a dollar or two at the pump. Just be careful if the station charges extra for using your card.
9) Get a new insurance quote. The average person sticks with their insurance company for 10 years. Do not be part of this statistic. Set a reminder to start shopping for insurance 30-60 days before your policy expires every year for every insurance that you carry: auto, home, health, life, etc. Like the commercials say, you can get a new quote in just minutes and potentially save $100’s. Research all options, not just the name-brand ones. I’ve switched my car insurance company 3 times, my health insurance 4 times, and my homeowner’s insurance twice… in the last 6 years alone. The savings have been in the thousands, and making the switch took just minutes each time.
10) Review your insurance coverage. You should also review your coverage to make sure you’re not paying for insurance you don’t need. Are you overinsured (too much insurance)? Underinsured? Have you reviewed all options (high vs low deductible)? Are you paying for junk coverage, like hotel stays or car rentals? Have you been keeping track of your annual medical expenditures so you can do the math on which option is better? As a rule of thumb, you should only purchase insurance for items that you absolutely cannot afford to replace in cash. Medical insurance? Yes. Liability on your car? Yes. Collision on your car? Only if you don’t yet have an emergency fund. Cell phone? Armchair? Your computer mouse? No, no, NO!
11) Go to the grocery store with a list. And… go when you’re not hungry. And… stick to the list religiously to avoid impulses. Shopping lists aren’t just to prevent forgetting something you need; they’re for avoiding things you don’t! You will buy more food and less healthful food if you shop without a list, especially if you’re hungry or make “exceptions” from the list for items marketed well by the store. Science backs me up, as does my own history. Making a list takes no time and can easily shave 10% off your bill in wasted food. This one will even save you time in the store. We keep a list of groceries in the kitchen so we can add what we need as we notice it and just bring that list to the store.
12) Seasonalize/self-insulate your home, and program your thermostat. Whether you’re of House Stark, House Targaryen, or House Centsee, winter is here! You can easily save 10-20% on your heating bill by taking steps like: locking your windows, changing your HVAC filters, scheduling furnace maintenance, covering your windows and doors with plastic sheeting, sealing doorways, insulating your attic or pipes. Each requires no specials skills and can be done quickly. Seasonalizing helps the A/C bill in the summer as well. When you program your thermostat, remember that 68°F during the day and 64°F (18-20°C) is warm enough for the winter, and 76-8°F (25°C) is ideal for the summer. Save another 15% of your bill by programming it up/down 10°F while you’re away at work or school and return to normal when you get home. Many let you control the temperature via an app as well. If you don’t have a programmable thermostat, get one. It might be free (as it was for me), and it pays for itself in a matter of months (free or not).
13) Install a smart switch and/or surge protector to reduce energy use. Phantom energy, or energy that is drawn from devices that are plugged in but not turned on, is a little overhyped by some but is a noteworthy cost (5-10%) of your energy bill. A smart switch or surge protector can be an easy way to truly turn these devices off when they’re not in use.
14) Buy LEDs (or CFLs) and toss out those incandescent light bulbs. Imagine there were a product that lasted 5-20 times longer than a regular light bulb and used 75% less energy (cost) to operate. Imagine no more; these products exist, and they’re called LED (light emitting diode) light bulbs. LED’s are maybe a $1-1.50 per bulb (or, once again, free), but it can save you a fortune in the long-term. Sources confirm that each fixture using incandescent bulbs cost $201 over a 23-year span and LED’s cost just $38 (includes upfront cost and ongoing cost of electricity). Multiply this by the average number of light bulbs per household (about 45), and reap thousands in savings.
15) Make your own coffee. Few things get more hate in the world of personal finance than coffee. But a quick look at Penny’s equation at the start of the article will tell you why. $5 per workday plus tip compared to about $0.25 at home could mean $100,000+ in retirement and/or years off your working life. No, the drive-thru is neither quicker, nor tastier, nor cheaper. Learn how to brew your own high-quality coffee, and save vast amounts of time and money.
16) Do a quick online coupon code or rebate search before your purchase. Coupon codes are a great way to save on a purchase that you would have made anyway. I’ve gotten hundreds back from eBates over the years via a convenience browser plug-in for legitimate essentials that I was already buying from the lowest-cost online retailer (after getting three quotes). Dosh is another option. However, you should never let coupons dictate your spending or cause you to make a purchase you weren’t going to make.
17) Get a quote to refinance any high interest debt.*** Yes, that’s three asterisks, because there are three ways that refinancing debt usually goes: • The first way is that you refinance your high interest debt (ex. credit card) into a lower interest loan (ex. short term loan with a qualified bank) with a similar repayment length and low closings costs, cut up the credit cards, make tangible changes to your spending habits that got you into debt in the first place, save thousands in interest over the term of the loan, and free yourself from debt. • The second way is that you refinance your high interest debt into a slightly lower interest loan but with a much longer repayment term (ex. 30 years) and/or high closing costs and/or balance transfer (i.e. robbing Peter to pay… Peter), don’t cut up the credit cards, maintain your poor habits, say to yourself “Whoopie! I now have thousands available on my credit limit! Time for a shopping spree! I promise I’ll be better… tomorrow!”, pay tens of thousands more in interest because you chose to add to your debt load, and perpetuate the debt indefinitely. • The third way is that you “refinance” your high interest debt into a shady loan with an even shadier lender (ex. payday loan, buy here pay here loan, snowball loan, non-bank financial institution loan) using the shadiest (borderline criminal) credit “recovery” or “counseling” service with outrageous fees. I don’t need to tell you how the rest of this story goes other than that it ends in court and financial desolation. Seriously, if you take away just a few things from this blog, please remember to NEVER use a service like this. • • • Guess which one of these I recommend!?!? • • • Refinancing can be a good way to save on interest, but if you don’t change the behavior that got you into debt in the first place, refinancing will just make things worse.
18) Ask for a discount. Retailers and service providers are desperate for your business and often happy to make a deal if you ask. Supermarkets often have coupons under the counter or at customer service if you’re willing to ask. Merchants might be willing to offer a discount if you’re willing to pay in cash, especially for larger purchases. Cash-based service providers are always negotiable. Internationally, haggling is frequently the norm, and tourists miss out on significant savings. I’ve saved hundreds over the years just by asking. Don’t be shy.
19) Research low-cost ways in your neighborhood to have fun. Cities and towns often have free public events every week. Parks, libraries, walking trails, lakes, pools, fairs, markets, events, concerts, and festivals in nearly every nearby municipality. Check out how yours communicates about upcoming events and save money on a date night or a family trip.
20) Start an in-depth price comparison of local grocery stores. There are now over 50,000 items in a grocery store, but most people buy less than 50 of them on a regular basis. With so few items to compare, it’s worth doing a comparison of the items you usually buy at 3-4 grocery stores nearby. Take 5 minutes to do this each of the next 3-4 times you shop, by buying the same items you always do and comparing the results on a spreadsheet. Grocery stores deliberately make their pricing schemes complex, so be objective and follow the numbers. If one store regularly has better prices on 80% of what you buy, there’s your answer. Don’t be lured in by a sale or (God forbid) the brand of the grocery store that appeal to status-seekers. The local discount grocer sells the same products at better prices than the upscale “poshmart” (ahem, “Whole Foods”).
The second installment in our 5-part series (in which we examine 100 ways to improve your finances that can be done in 5 minutes or less) has perhaps the most eye-catching title of the bunch:
That’s right. While
there are certainly some very time-consuming ways to increase your income, like
going to college or breaking the world
record fingernail length, the tips here can be completed or at least
started in just 5 minutes. And no, none
will require even an ounce of luck, like having Bob Barker tell you that “You’re
the next contestant on The Price Is Right!”
Is Bob Barker still alive?
Do people still watch game shows?
Anyway, without any further ado!
1) Keep learning. This one should arguably be #1 on all the lists. Showing that you care about continuing your development shows your manager that you are eager to contribute to the company. To get you started, there is a wealth of quality online material and courseware at little to no cost. Sign up in minutes for free courses using edX, Coursera, Duolingo (Google phones, Apple phones), or an industry-specific program to develop professional skills. If a full class is too much, watch a TED talk instead of TV or social media. Think about what skills you need to advance your career, and start learning them today. You may not see the benefit immediately, but incremental efforts pay off over time. Developing your skill-set is perhaps the most important factor to improving your salary in the long-term. Don’t let your talents become outdated; keep learning!
2) Research all your company benefits. You’re likely aware of the big ones like health insurance (including HSA’s), dental insurance, and retirement/401k/403b accounts and matching (You absolutely must do this if you haven’t… a whopping 1 in 5 employees ignore this truly free money). However, don’t overlook that your company may have some lesser-known benefits. Mine offers free passes to local attractions, a discount on a cell phone service, free disability insurance, free life insurance, and even a free fitness tracker through the health insurance plan, but you have to opt in. Ask your manager or HR for a full list of these benefits and take a moment to enroll.
3) Sell your skills or labor. Are you a proofreader? Translator? Transcriber? Writer? Driver? Mechanic? Cleaner? Handy person? Ironer? Web designer? Resume expert? Personal trainer? Dishwasher? Babysitter? Dog walker? Graphic designer? Entertainer? Tutor? Teacher? Gamer? Dungeons and Dragons expert? Friend? There are hundreds of websites for selling these skills, and most let you sign up and start offering your services in minutes.
4) Rent out your belongings. Services like Turo, Spot, and Fat Llama let you list items for rent like your car, parking spot, clothing, lawn mower, camera, bike, scooter, and wedding dress. Each transaction only takes a few minutes, and the cash you earn is a better bargain than your unused stuff collecting dust.
5) Rent unused space in your home. Most people think of Airbnb as a way to rent out an unoccupied house only, but you can easily rent out as little as an unused bedroom. You don’t have to do it all the time, just when demand might be high for your area. For example, Lady Centsei and I live near a university, and renting out a room for parents’ weekend or graduation could be hugely profitable, and we’d only need to deal with guests for a few nights per year. If the idea of people in your house is too uncomfortable, some sites will let you rent out space on your lawn or driveway too. Signing up is quick and easy.
6) Sign up for an online side gig. I haven’t used these personally, but a family friend who is a full-time student makes an average of $10 per hour on Amazon’s MTurk and another makes about the same doing online surveys. It’s not much, but this can be a nice supplement if you have a flexible schedule and a bit of extra time. A note of caution: use a reputable service, and don’t burn yourself out.
7) Sell unused household items on eBay/Craigslist/Amazon. Textbooks, video games, and electronics have decent returns on the second-hand marketplace, and let’s be honest, I know you have some extras sitting around your house. Price your items fairly and ignore pesky time-wasting buyers. If the goods need to be delivered in person, meet in a safe, public location. Only accept cash, bank-certified checks, or PayPal/AmazonPay to avoid getting scammed.
8) Sell a collection. Coins, POGs, video games, basketball cards, Pokémon cards, key chains, shot glasses, even unopened bars of soap from hotels… all junk I’ve collected over the years. However, maybe only one or two of these bring me real joy, and the rest was just a fad that came and went. If the collection has legitimate resale value to other hoarders collectors, sell it. I sold a dozen video games this way for no more than a few hours’ work and made over $500 from games I hadn’t played in decades. If it has no resale value, take a picture of it “for the memory” and donate it (tax advantages may apply) or trash it (for the peace of mind). Selling your jewelry, art, antiques, rare books, or sports memorabilia could not only generate enough money to pay off some debt, but also prevent your wasting additional money on the collection down the road.
9) Sell or donate your old clothes. A few times per year, Lady Centsei and I have a party where we go through and donate our old clothes, or sell the ones that are still in good shape. We pick up an old box and each go through our closets at light speed. An old but great rule of thumb is that if you haven’t worn it in the last year, then you won’t wear it in the next year. Donate it!
10) Return “that” thing. Another task we’re all guilty of putting off until it’s too late. We buy something we don’t need, saying “oh, I’ll just return that.” The window goes by and now you’re out some hard-earned dollars. Set aside a specific time each week to return everything you need to. Most companies make this easy. Pick a specific time each week/month to do returns. Every dollar that you get from a return is like earning $1.25-1.50 in income before taxes.
11) Ask for a raise. Public speaking, heights, the dentist, and asking for a raise all scare people more than death itself! Fear not. It is very normal to ask, and if you’ve been doing great work for a year or more, do not wait until its “time” for a raise. Today is the time to ask. Research similar roles for your experience level, make a list of your largest accomplishments, and find some time when your manager is in a good mood. Schedule a meeting and start the conversation by showing appreciation for your role and your increased responsibilities, and follow up by saying that you’d like to talk about increasing your salary to best reflect the value you bring to the company. If you have a specific figure or percentage, discuss it, but read the situation and offer a range if appropriate. Do not mention anything about your personal finances or bring up anything threatening or negative in the negotiation. Be open to other ways of increasing your compensation too, such as a bonus, added vacation time, or a more flexible schedule. If you still get a “no,” know that this may mean “not yet.” Your boss is human and may consider your accomplishments during regularly scheduled raises as well. However, it’s also possible that you may need to leave in order to find get a better salary, and that’s OK. Your skillset and work ethic will follow you anywhere.
12) Get started on a work project that will earn you a raise. Most of the progress I’ve made as a professional can be attributed to a handful of projects that propelled my career. I identified a task that needed to be done, volunteered to complete it in a time frame that I knew was realistic, went above and beyond the expectations, and was “noticed” by the right individuals upon the project’s completion. I stood out among my coworkers and reaped the rewards when it came time for raises, bonus, and promotions. Down the road, these projects helped me land jobs at other companies, as they were the best way to ensure my resume showcased my abilities. Your “project” doesn’t have to be at work, it could be a new hobby that you enjoy that helps you develop a special skillset. Data science, computer programming, people management, app/web development, artificial intelligence, and public speaking (conquer your fear!) are all high-demand skills that can be taught and mastered through projects.
13) Update your resume. As your network grows and as the economy weakens, very few people can ever have 100% job security. Take a few minutes to update your resume every 6 months (when you change your clocks) with even just a line or two of major recent accomplishments or proficiencies. If an opportunity does arise either at your current job or elsewhere, you’ll be prepared.
14) Update your LinkedIn/professional profile. Social media can be a time waster, and I see plenty of people get sucked down the rabbit hole of professional websites like LinkedIn using it as they would any other social media platform. Don’t. Rather, update your professional profile every 3 months with relevant information and remove anything outdated. You might get contacted by a prospective customer, business partner, or other opportunity worth pursuing.
15) Rebalance your retirement portfolio. Here’s a rule of thumb that I fully endorse: Your retirement portfolio should have stocks (riskier) investments equal to 100 minus your age, with the rest in low secure (low-risk) investments. In other words, a 30-year-old should have 70% stocks and 30% low-risk bonds. For a 75-year-old, 25% stocks. Once a year, take a few minutes to look at your IRA and 401k accounts, and make a few adjustments if you’re way off. Many brokerages and 401k administrators are offering something like a “Target Retirement 2050 Fund” that basically automatically does this for you. If the expense ratios are good, these can be a great focus for less experienced investors. Don’t do this every day, and definitely don’t panic and start selling when a recession hits.
16) Find a new bank. Changing banks can be a hassle, but so can excessive fees and low interest rates. There’s no one-size-fits-all approach here, so just prioritize what features are most important to you. High savings rates (yes!)? Low fees? Good online features? Quality products and services? Nearby locations? A brand (NO!)? Shop around for banks once per year, and be honest if yours is meeting your needs. If you can manage it, there’s nothing wrong with having more than one if, for example, one has an excellent savings account and one has an excellent checking account.
17) Open a high-yield savings account. If you’re earning any less than 1.70% in today’s market on your savings account, you’re missing out on free money. Do a Google search for “High Yield Savings Accounts” at both national banks and local ones, and take a few minutes to open an account. If you do, $1,000 in your savings account is almost $20 in interest per year in today’s rates. Tell me that’s not worth 5 minutes!
18) Open a brokerage/stock account. If you have 3-6 months savings in an emergency fund, and if you’ve maxed out your retirement accounts, and if you’ve paid off all high interest debt, then it might be wise to open an account with Fidelity or Vanguard to invest your excess savings in the stock market. Do not day trade stocks. Do not panic when the market fluctuates. Don’t pick fad stocks that your heard about on TV. Instead, invest in index funds that have low expense ratios and an acceptable risk profile for your age and risk tolerance. Invest for the long term and diversify your investments. “It’s about time in the market, not timing the market.”
19) Lend your money via a Peer to Peer lender. P2P lending is higher risk (and again, I do not give advice on this website), but this is a low-effort way to possibly generate higher returns. You lend money to qualified buyers at rates higher than your savings account; they borrow money at rates lower than their credit cards. You may want to consider this as a small percentage of your high-risk investments. Signing up and connecting an account can be done in minutes. Do your homework.
20) Ask for help from your friends and family. You’re not alone, and your trusted and knowledgeable social circle can be a great resource: looking over a resume, getting a lead for a new job, finding money-saving places or ideas, making resolutions, and so on (not all friends will give Centsei-approved advice). Think very carefully about asking your closest connections for a loan directly, however, as financial obligations and dependency can quickly complicate even the closest relationships.
Welcome to the first article of the Top 100 Money Hacks series, where each tip takes five minutes or less.
Our days are crowded: Sleep (when
we can manage it), shower, eat breakfast, get ready, commute, work all day,
commute home again, eat, wind down, sleep.
Repeat. With these “essentials”
seeming to take 20+ hours of a 24-hour day, it’s no wonder we don’t drink
enough water or get a fraction of the exercise we should, much less manage our
finances.
But we do have the time.
Believe it or not, nearly every
method of improving your finances takes just 5 minutes. Most can be completed in 5 minutes, while others can at least be started in 5 minutes and give you the
power to combat the inertia of a task that feels too big begin.
You’ve got this! In the time that it takes you to wait for
your coffee, sit through a round or two of commercials, or check social media,
you could be making yourself a millionaire.
In this 5-part weekly series, we
will be examining 100 ways to improve your finances that can be done in 5
minutes or less.
Start simple by just doing one task today. Try another tomorrow. And, if you make a habit of regularly checking off items on this list, your future self will thank you!
Let’s start with Part 1: Budgeting, or “how to allocate the money you have and plan for the future”
1) Make a simple budget. You cannot manage what you do not measure. Making and monitoring a real budget is perhaps the most vital step to your financial well-being. I’m a big fan of the 50/20/30 rule: devote 50% of your income to essentials, 20% to saving, and 30% to discretionary/fun. This savings figure, 20%, is the amount of money you should be saving for retirement and longer-term goals. Doing so will put you profoundly ahead of your peers on the road to financial independence. 67% of people don’t budget at all. For example, if you’re making $60k, calculate $60,000 x 2 ÷ 10 = $12,000 per year… or $1,000 per month.
Let’s make this even easier:
2) Update your budget regularly. Once your simple budget is made, get in the habit of comparing it to your actual expenses and improving it over time. You can even begin to develop a yearly budget to account for expenses that occur less than once per month. There is no such thing as an unexpected expense, and you should plan for these less-frequent one-time expenses (a medical bill, a car repair, a tax expense, a fine, an appliance repair) in your budget over time. Every single dollar should have a designated purpose at the beginning of the month, and no expense should be truly unexpected. Using the above example, the individual devoted $1,000 per month to retirement savings and has $4,000 remaining per month. Calculate the absolute essentials out, including taxes, rent, utilities, food, and healthcare. Allocate a percentage to your emergency fund, if you don’t have one. Devote the next portion to paying down your higher interest debt, if you have any. Assign the next allotment to longer-term savings goals, like retirement savings, a house, a car, or investments. Whatever percentage you have left over can be your discretionary/fun money. Stick to your goals, and be careful not to let this slip away as your finances improve. Don’t think you can get away with spending and “saving whatever’s left over at the end of the month;” there won’t be anything left! Save first.
3) Prioritize your financial goals. Too often, we think about our financial goals in an abstract way. “Pay off my student loans.” “Buy a house.” “Retire early.” Yet, few have written down these goals on paper or a spreadsheet and calculated precisely what it would take to make this happen. Take some time every month to prioritize your financial goals, rather than hoping you’ll find money at the end of the month to devote to them. Take concrete steps, one at a time, towards achieving these goals.
4) Sign up for a budgeting tool. Tools like Mint (free), Clarity Money (Free), Personal Capital (Free), or YouNeedABudget “YNAB” (Free trail w/monthly fee later) often let you connect your bank accounts, retirement accounts, credit cards, and other financial accounts in a single place. You can set goals, classify expenses, and calculate your net worth instantly. Check and update it weekly (or daily) to better keep track of your money. They can also give you spend alerts when you’ve gone over budget or if a bill is due soon. I use Mint and love it.
5) Calculate your net worth. Whether you use Mint/YNAB or figure it all out by hand, calculating your net worth every month (or more) frequently is essential. Net worth = Assets – Liabilities. Assets are everything significant that you own: your house, your car, your retirement accounts, your investments, any “payables” owed to you by friends, family, or businesses, and anything else that has significant resale value (no, your 50” television and custom rims don’t count). Liabilities are everything you owe: your student loans, your credit card debt, your mortgage, your car loans, and anything you owe to family, friends, or lenders. Take a few minutes to create a chart and see how this number changes over time. Your net worth is the single best barometer of your financial health.
6) Automate one aspect of your savings. Again, the best way to save money is to automate it so you never have to “decide” to save or spend. Most payroll companies let you deposit to multiple accounts, so make one of these your emergency fund, your retirement fund, or your long-term goal fund. Most banks let you make a recurring payment like this as well. Start by having this 20% taken out of your paycheck each week and automatically submitted to savings (ex. your IRA or your company’s 401k plan) before you pay for anything else. I call this the “save first, essentials second” mentality.
7) Create an IRA or other investment account. An IRA or Individual Retirement Account is one of the greatest vehicles for savings and can have outstanding tax benefits. Half of Americans and nearly 90% of people across the globe don’t have a single dollar invested. All it takes is 5 minutes and $100 or less to start saving for retirement. I recommend Vanguard and Fidelity. The key is to find a company that has options with no minimums and zero/ultra-low expense ratios. If you don’t have an account, don’t be intimidated and don’t worry about the specifics just yet. You can do it. Just sign up for an account, link a bank account, make an initial contribution to a zero/low cost index fund (VTI or FZIPX), and set up an auto-contribution if you can. Don’t rely on your pension; don’t rely on social security; rely on yourself.
8) Contribute to your IRA. In just a few minutes per month, you can easily set up a one-time or recurring contribution to your IRA. You can set this up either directly through your broker or even with your payroll to automate your savings (see #6!). In 2019, you can contribute up to $6,000, so if this is your goal, make a monthly contribution of $500 or about $120 per week.
9) Set essential bills to auto-pay. Assuming you always leave a reasonable balance in your checking account, which I would recommend, it makes sense to set your truly essential bills to auto-pay each month so you don’t get hit with late fees. For example, setting utilities, rent/mortgage, insurance, and minimum credit card payment to auto-pay could save you money on fees long term. Make sure you don’t use auto-pay as an excuse to spend more.
10) Plan out the timing of purchases during the year. Being patient and planning ahead can save you 20% or more or many major purchases. The best time book travel? January, February, and August. Fitness equipment? January and February. Holiday decorations? After the holidays. Gym memberships? June and July. Cars? August and September when the dealers need the prior year’s models off the lot. Halloween candy? After Halloween. Wedding dresses (wait… plural?…)? December when they need to make room for new year’s designs. Best days to book travel? Tuesdays, Wednesday, and Saturdays. Budget these expenses into a your yearly budget and enjoy the savings (or should that be “SAVING???”).
11) Review your monthly bank statements. Taking a few minutes to go through your bank statements is an excellent financial habit to develop. Even if you only identify one or two fraudulent transactions or unnecessary recurring expenses and correct them, your time was well worth it. Reconcile this with your budget to see how you did each month.
12) Review your monthly credit card statement. Similar to the above, look for fraud, bogus fees, or unnecessary transactions on your card statements and fix any findings. Don’t neglect this.
13) Adjust your tax withholding. I’m not a tax adviser, but you should review your tax withholding if any of the following apply: you get married, you have a child, you had a substantial refund last year, you had a substantial tax liability last year, or your income is changing significantly from expectations. You may need to claim more “allowances” if you’re withholding too much for taxes or claim fewer allowances if you’re not withholding enough for taxes. If you’re self-employed, a business owner, or a 1099 contractor, you may need to ensure that you’re sending the right quarterly estimated installments to the IRS. If you’re not from the U.S., check your local and federal responsibilities to make sure you’re not over or under paying.
14) Make a meal plan for the week. Budgeting = Planning. With a simple meal plan, you’ll waste less food, eat healthier, save time, stay orderly, and avoid using a restaurant as your kitchen. This small task pays for itself time-wise and budget-wise many times over.
15) Make an inventory sheet for your refrigerator or freezer. Americans waste about 40% of their food, and most other developed countries aren’t much better. Waste often starts with simply not knowing what is in your kitchen, and taking 5 minutes per week to track you inventory has been proven to reduce waste significantly. You spend at least this amount of time throwing out moldy leftovers and going back to the grocery store anyway. Start with this or purchase an inexpensive reusable like this.
16) Prepare snacks for the car or office. Save yourself a trip to the drive through or vending machine by preparing or purchasing healthier snacks, in bulk, for times when you need a quick snack. Doing so can cut your empty calories by 50% and your costs by 75% over the alternatives.
17) Take the first step towards estate planning. Budgeting is a life-long endeavor. For a larger estate, you will want to contact an estate attorney from the beginning. For the smaller simpler estates, you can create a simple will yourself or at least begin to summarize your assets and wishes until you do have the time to work with an attorney. In a document like a will, be sure to include the basics like stating your full legal name and address and age, testifying that you are of sound mind and not under duress, naming an executor, identifying you heirs with no ambiguity, including witnesses, and getting the document notarized. The more work you put in yourself, the more you’ll save in legal fees (and the more trouble you might prevent between your heirs).
18) Write down and evaluate today’s expenses. When you’re first getting started with your budget, make a nightly habit of writing down everything you spent money on that day, including automated payments, and consider one simple thing: Did each purchase bring you joy? This exercise shouldn’t make you feel guilty, but you should reflect upon what spending is actually necessary and begin to take steps towards forming better habits. Be willing to change your behavior when you realize what’s really important to you. As this process becomes familiar, you can start doing this monthly for the larger purchases only.
19) Write down how you spent your time for the day. Budgeting is as much about allocating your time as it is your money. Writing down your time spent each day is a great habit that I’ve been trying to develop more thoroughly myself. Take a few minutes to write down, in 15-minute increments, exactly what you did that day. Use a digital template if it’s easier. Be as honest and specific as possible. You’ll likely find that you waste a bit more time that you realize, and you can slowly work to better manage your time throughout the day.
20) Set a reminder. Set a reminder on your phone or calendar to do anything on these “100 Tips” posts, whether it’s something to do multiple times per day (walking, drinking water) or once per year (annualcreditreport.com, shopping your internet/cell plan).
