Everyday money habits add up over time. The way you spend money determines how much debt you incur or how much savings you accumulate throughout your life.
Spending and saving are habits that snowball, one way or the other. In a lot of ways, how you spend and save parallels how people diet and splurge throughout their lives.
Thinking about: the corporations call us consumers for a reason. Shoppers consume money the way eaters consume food. The only difference is, when you eat too much, you become obese. When you spend too much, your bank account shrinks.
Give Yourself an Allowance
Don’t look at the amount you make as the amount you’ll spend. Set a budget and give yourself an allowance. You might think this is kids’ stuff, but budgeting your expenses is how you save money.
I’m convinced a lot of problems people have in adulthood is they never grow up. By that, I mean they have parents who give them an allowance, tell them to eat their vegetables, and set a curfew. When we become adults, we now get to decide how much we spend, what we eat, and how late we stay up at night.
So many of us lack the maturity or discipline to see that our parents were right, so we spend too much, eat too much, and don’t get enough sleep because we either worry too much about overindulgence or don’t worry enough (and stay out all night overindulging). Within a few years, we’re 20 to 30 pounds fatter, deeply in debt, and deal with chronic exhaustion. The point being, Mom and Dad were right.
Give yourself an allowance and don’t spend over that amount–ever. Put the difference in the bank and let it draw interest.
Don’t Carry Excess Money
People carry excess cash for an emergency which never comes. With all those dollars burning a hole in their pocket, they end up spending the cash here or there on things they don’t need. Don’t carry more than you need; you can make a run to the ATM if you need it.
Speaking of which, don’t make excessive trips to the ATM machine. These are wonderful inventions, but the Automated Teller Machine is a good way to waste cash. Limit the number of times you head to the ATM and keep a running count of your trips. If you don’t, a lot of invisible money will go out of your account.
Keep Records of What You Spend
Balance your check book. Keep track of how much you spend on gas, groceries, and utility bills. Perhaps even more importantly, keep track of how much you spend out of pocket. This is like weighing yourself every day; it’s going to keep your mind on what you’re doing and force you to “be honest with yourself”. Don’t delude yourself about your spending, and don’t ignore the problem.
Really Save Money on Sales
When you buy something on sale, actually set the different aside and put it into savings. It’s not really savings if you walk around the corner and buy something else with what you just saved. Every time you go into a department store or clothing store to buy clothes and you save on some discount, put the money you saved in the bank. Every time you save with extreme couponing at the grocery store, take those coupon savings and put them in your IRA.
That’s the only way all that bargain hunting and discount shopping is going to turn into real savings. Think about it and you’ll admit I’m right.
Tear Up Your Needless Credit Cards
Keep a credit card for convenience. Use it to maintain your credit rating, but never carry over a balance from one month to the next. Paying interest on debt is the biggest money eater you could ever imagine. When you look at this from a rational point of view, you would never do this. Somehow it seems reasonable in our culture to charge for things we don’t have the money to buy.
Getting into credit card debt is the surest way to ruin your finances. If you can’t afford to pay it today, you probably won’t be able to save the cash to pay it off tomorrow. As time goes by and the debts mount, you’ll have to devote more and more of your income to paying off the interest. Once you get where you don’t pay down the principle–only the interest–you’re dead meat financially.
You need to have a handful of lines of credit to maintain your rating. I’m not suggesting you get rid of every card you have, or even the cards you don’t use often. What I’m suggesting is you must make your VISA and MasterCard work for you, and not the other way around. If you cannot avoid the temptation to run up needless, senseless debt, tear up added temptations.
Stop Playing the Lottery
The state lottery is the worst form of gambling you could possibly try. They say lotteries are a tax on the naive or a tax on people who can’t ad. I find that a little harsh, but it does point to the truth: lotto gambling is throwing away money. The payout rates are in the 55% to 60% range, where it’s illegal for a non-governmental gambling operation to have payouts below about 80%.
Because of competition, most casinos don’t offer games below a payout rate of about 93%, while blackjack and video poker pay out at about 99%. That means for every $100 you spend, you get back $99. For every $100 spent on the lottery, the people as a whole get back about $55. Since most of that $55 is going to one person, astronomical odds say you are throwing money down the garbage unit.
I once did the math on winning the lottery. You would have to play twice a week for about 3,500,000 years before you would expect to win once on the Mega Millions or Powerball lotteries. The slogans say “people win every day”, but that overlooks the mass of people playing these games. Don’t delude yourself into thinking you’re going to be “The One”. It might happen, but it’s the worst bet ever that it’s going to happen.
Saving Cash Comes from Everyday Spending Habits
Saving money comes down to spending less than you earn. Going into debt boils down to spending more than you earn. Income has to be greater than output or else you’re going to be in debt all your life. Start learning the proper spending habits and you’ll be healthier, happier, and wiser.