I am going to start this off by saying that I am completely aware that talking about money can be a sensitive subject. It is something we do not even discuss with our closest friends, sometimes even our family members. Yet I think that we can all agree that it is something that needs to be talked about, because the situation is getting worse, not better.
Recent statistics show some alarming trends. Gobankingrates.com interviewed 5,000 people and found that 58% of people had less than $1,000 in savings, with 32% of them reporting that they actually had no money in their savings account. This means that one out of every three people they polled are living paycheck to paycheck. This blew me away.
What if your car breaks down? Something breaks in your house? You have an unexpected doctors visit? Heaven forbid, you lose your job? Or any of the other hundreds of little financial headaches that can come your way throughout the course of a day? In most cases, a person in this situation will charge it to a credit card, incurring more debt, more interest fees, as well as putting them deeper into a financial hole.
I was completely guilty of this very thing. I thought very little about my future financial stability and lived in the now. Use a credit card? Why not. Lease a car? Sure, I can make the minimum payment every month. But what most people don’t see and take into account (and I didn’t either) is the interest money you end up having to pay on the back end, which, in most cases, adds up into the thousands of dollars.
Luckily for me, I had someone come into my life and help me get my finances on track, or else I have no idea what sort of mess I would be in now. Three tips that he shared with me I would like to share with you today, so that if you are in a similar situation as I was 3 years ago, they might be able to help you not only get your finances on track, but also help you stash away money in your savings account, so that you don’t end up a statistic.
1. Use a cash envelope system
Now if you happen to have read any books by Dave Ramsey, then you will know he is a big proponent of this. In essence, what you do is set aside money for certain categories in envelopes, rather than using your debit card for all of your transactions. So for my wife and I, we have envelopes for groceries, date night (once and week), and no judgement money (though we’d both tell you, there is judgment silently passed). Each week, we allot a certain amount of money that we have predetermined will go in each envelope. Once that money is gone, IT IS GONE!
No taking from your grocery budget for your eating out budget. However much you decide to put in is what you get for the week. Just seeing the money dwindle from the envelope creates a consciousness about whether spending money on certain things is worth it or not. Try this for a month, and watch how much extra money you have to put towards savings.
2. Cut out unnecessary spending
In truth, this can be subjective. Because what I think is necessary and what you think is necessary can be two completely different things. That being said, you know your finances far better than I do. So I ask, are there certain bills/debts in your life that you can scale back on? Maybe you pay a higher cell phone bill than you need to, or maybe you don’t need 750 channels to choose from, because chances are you can’t watch that much television anyways.
The one that gets people in trouble the most though is eating out. Most statistics you see says that the average American family spends $250 a month eating outside the home. I know that my wife and I were closer to $400. That’s insane! Just look at the amount of money you could save if you simply took the time to prep meals at home, not to mention how much healthier you would be and how much better you would feel.
3. Delaying gratification
Nobody likes talking about this very much, because in all honesty, the reason we buy things we can’t afford is to impress people, most of which we don’t even like. Why? Isn’t your financial future more important than someone else’s opinion? Trust me, I want a Range Rover just as much as the next person, but am I willing to have a payment of $500/month to have it? Absolutely not. Factor in that close to half will go towards interest, and you quickly realize that the car company has made a sweet profit off you.
Now here is where I might upset some people, but I must ask. Do you need to have a mortgage? When I ask this question, this is the typical response I get. Well if my rent is the same as a mortgage payment, why not just buy a house, at least then I’ll have an asset that’s making money. Let’s dissect that a little further. First off, renters insurance is a whole heck of a lot cheaper that homeowners insurance, because you don’t have to insure the actual building. Two, if anything breaks in a rental, you call the landlord. If anything breaks in your home, guess what, it’s on you. Which I’m sure any homeowners out there know, can get very expensive very quickly. Lastly, unless you’re Nostradamus and can predict the housing market, you have no idea if your house is going to make you money in the future or not. In essence, you are making a gamble that it will.
Trust me, I understand that renting can at times have it’s own set of hassles. We rent, and we have to deal with these hassles on a fairly regular basis, but such is life. I simply don’t believe that you should rob from your future to pay for the present.
Hopefully, these tips were able to add value to you, and give you some ideas as to how to you can get your finances back on track, and start that process towards a healthier financial future. Below I will put some links to various books that have helped us throughout our financial journey, in hopes that they might help you as well. As always, please comment below and let us know any tips or advice you have learned that have helped you in your financial journey. Happy saving all!
“The Latte Factor” by David Bach
“More Than Enough” by Dave Ramsey
“The 30-Day Money Cleanse” by Ashley Feinstein Gerstley