If you aren’t reading Get Rich Slowly everyday, you should be. J.D. is one of the best and most consistent personal finance bloggers I’ve ever read. His latest post, How to Fight the Urge to Splurge, lists several ways to avoid the temptations to spend money that surround us all every day.
Some people are great about keeping up with a budget. I’ve heard of people who categorize and track every expense down to the penny. They know exactly where all of their money is going.
This is great if you’re that kind of person. Unfortunately, I just can’t live that way. If budgeting doesn’t work for you. Maybe my way will suit you better.
I should probably warn you that my method might sound a little harsh at first, but it’s what I’ve been doing for quite a while now and it seems to be working.
There are only three steps:
- Invest for the future
- Pay for the past
- Live on what’s left
It’s that simple. Let’s break down each step and see what I mean.
Invest for the future
Read any good personal finance book and you’ll learn about paying yourself first. Part of your money should be automatically going into a savings account before you even see it.
This can be a 401k at work, or even a regular savings account. Don’t worry too much about where it’s going now, just make sure that you’re putting a little money back for the future every time you get paid.
Pay for the past
I’m assuming since you’re at this site that you have a little bit of credit card debt to pay off. Your next step should be to pay your credit card bills.
Some people like to focus on the card with the lowest balance, others like to focus on the highest interest rate, and still other people pay a little extra on each account.
I’ll talk about the pros and cons of each of these methods in a future post. For now, just make sure you’re paying at least the minimum on each account and you’re not late.
Live on what’s left
This is where most people have problems. “Pay yourself first” is second only to “spend less than you earn” in terms of financial advice. That’s what this step is all about.
Once you’ve put back a little money and paid all of your bills, you can spend what’s left. If you can’t survive until your next paycheck, you’ll either have to find a way to live on less or eliminate some bills.
I never said this was going to be easy, but it will teach you to live within your means. As time goes on and you pay off a few bills, it gets easier. Before you know it, you’ll forget all about budgeting.
Yesterday’s post was inspired by the Lists Group Writing Project at ProBlogger.net. Darren asked for “list posts” from his readers and he received 301 of them.
As a service to my readers, I decided to go through his list and pick out any posts that I thought might be relevant. Here they are in order by time submitted:
- 10 Ways to Immediatly Start Saving Money
- The 10 Best Money Moves You Can Make
- Your Very, Very Best Money Saving Tips
- Fifteen easy ways to save fifteen bucks
- Top 10+ ways to save money and help the environment
- How To Organize Your Debts
- 5 Secrets to Fabulous Financials
- The 10 Things We did to Erase Almost $9,000 in Credit Card Debt in Less Than 6 Months
- 10 Easy Ways To Save Money In Restaurants
- 7 Personal Finance Tips
There are a few sites there that I’ve never seen before. I would say this was a very successful experiment and I’m glad that I participated. Hopefully you can pick up a few financial tips from these sites.
Sometimes it seems like eating together is the only social activity we experience any more. The weekend trip to some restaurant is almost a ritual among friends and family.
Just because you’re trying to cut back and pay off your bills doesn’t mean you have to give this up. Here are my favorite ways to save money when eating out in restaurants.
1. Stay Home
This tip is guaranteed to save you 100% when eating out — just stay home. Cooking is a skill that takes lots of practice. Hopefully you’re good enough at cooking already that you can still eat your mistakes. If not, keep practicing and you’ll get there.
We cook everything from traditional southern meals to Italian and Chinese in my house. Our home cooked meals are just as good as restaurant food, not to mention healthier and a lot cheaper.
The next time your friends call and want to dine out at some fancy restaurant, try inviting them over for a dinner party. After cooking a few meals for my friends, I now have people offering to buy the groceries if I’ll cook again.
2. Drink Water
An easy way to usually save around 10% on your restaurant meal is by drinking water. Around here the average soft drink or tea in a restaurant is at least $1.00 or more. Don’t even get me started on the cost of alcoholic drinks.
3. Try Lunch
Many restaurants have less expensive menus at lunch time. Some of our favorite places serve the same dishes at lunch time and dinner time — they just offer a smaller portion, and price, at lunch time.
4. Ask About The Special
Another easy way to save is by ordering the special of the day. There are some restaurants that we only visit on certain days of the week when our favorite dish is available at a reduced price.
5. Try Ordering a la carte
Don’t pay for the things you don’t want. If the restaurant lets you order individual items, take advantage of it. Order just what you want and save a little money.
For example, we love Mexican tacos. Our favorite taqueria has a taco dinner with three tacos and a side of beans and rice for $5.50, or you can order indivual tacos for $1.25 each. Skip the beans and rice and save $1.75.
6. Skip The Appetizers
Appetizers in restaurants are a lot like drinks. They’re another one of those little things that can really increase your total bill. If you must have an appetizer, find someone to share it. Or if it’s something you really like, maybe you could have the appetizer instead of an entree.
7. Skip Dessert
This rule goes together with the previous rule — always skip either the dessert or the appetizer. Hopefully you can skip both, but always skip at least one. I don’t even remember the last time I had an entire dessert to myself. We’ve been sharing desserts in my family forever.
8. Share
Restaurant portions are completely out of control these days. Even if you don’t care about money, it’s probably a good idea to share your meal with someone else just to keep your weight under control. Sharing an entree will save you 50% on your total bill.
9. Shop Around
Another trick we use sometimes is buying the meal at one place and dessert at another place. Eat in a nice restaurant if you want. Then instead of ordering the $5.00 cheesecake, go to the local ice cream place and spend $1.50 on a scoop in a cone.
10. Let Someone Else Pay
Another way to guarantee 100% savings, let someone else pay for it. As I’ve said before, I often do work in exchange for gift certificates to local restaurants.
Also, if your parents or other relatives offer to take you out to eat, take advantage of it. I hardly ever turn down an offer of a free meal.
What Works For Us
In my family we rarely eat out unless someone invites us. When we do eat in a restaurant, we usually just order two entrees with water. If there’s an appetizer that we really like or the entrees are too much for one person to eat we’ll split an appetizer and an entree.
We also try to take home the leftovers for another meal. The cost of restaurant food isn’t so bad if you can spread it out over more than one meal.
This is a very timely post for me, since I’ve been sick for over a week now. Luckily I didn’t miss any work this time, but it has happened before. Bad things happen to good people. It’s important that you prepare now.
The most common excuse for carrying credit cards is “What about emergencies!” I’ve already shared my thoughts on this once, but it bears repeating. Your debt is an emergeny and using credit cards only makes it worse.
I think it’s important to first define exactly what an emergency really is. Once you’ve done that it will be easier to find ways to deal with those emergencies without resorting to credit cards.
There are basically only three things that a person needs to survive — health, transportation, and shelter. In other words, you need to be able to work, have a way to get to work, and have a place to go when you get off work. Beyond that, most things are more wants than needs.
A new car is not an emergency. Neither is a new CD or DVD. New clothes or shoes are not emergencies, unless your current clothes are so worn out you can’t wear them to work.
As long as you’re in debt, you need to ask yourself “Will buying this help me pay off my debt?” If the answer is no, then you probably don’t really need it right now and you certainly don’t need to charge it.
Here are a few ways to deal with real emergencies without having to resort to more debt.
Insurance
Problems with your health definitely classify as emergencies. If you don’t already have health insurance, you need to find a way to work it into your expenses as soon as possible.
Next, look into life insurance and disability insurance. Term life insurance is very affordable. Don’t leave behind a lot of bills for your family to take care of if the worst should happen to you.
Disability insurance is needed in case you’re ever unable to work. It will help pay your bills when you’re not able to pay them yourself.
Also, if you’re renting look into renters insurance. It’s usually reasonably affordable and will protect your possesions from things like fire or theft.
No one thinks insurance is very important until they need it.
Savings
You need to have some money in the bank for things that aren’t covered by insurance. If you’re in a car accident, your insurance will pay to have it repaired. If your car just breaks down, you’re out of luck.
Think of this money as a “cushion” between you and the rest of the world. Sometimes you will fall down, but this should be enought to keep you from hurting yourself.
Everyone always wants to know how much they should have in an emergency savings account. The trouble is different people have different needs. Anything is better than nothing. So if you don’t have a savings account, now is a good time to set one up.
I would try to save at least one month’s worth of bills as quickly as possible. This should be enough to keep you going no matter what happens.
I talked a few days ago about my favorite online savings account. Go back and read that post if you need some help setting up an account.
Barter
I saved my favorite way of dealing with emergencies for last. If you have a useful skill to offer someone, then bring it up when it comes time to pay your bill.
I’ve bartered with everyone from accountants to mechanics. They provide a service for me and I return the favor. In my case I work on computers, but I know other people who trade services like carpentry, painting, and even house cleaning.
I’ve also worked on people’s computers in exchange for food. I’ve been paid with everything from fresh vegetables to fresh fish. I’ve also had a few people prepare meals for me.
My family always jokes about washing the dishes at a restaurant to pay the bill. I’ve never actually done that before, but if I was hungry and broke I might ask the owner if that was an option.
The most important thing to remember is this: Now that you’ve committed yourself to getting out of debt, make sure that nothing can stop you. Obstacles will arise so be prepared to overcome them without bringing on more debt. Never charge again.
I always thought that credit cards were created by the devil to empty our wallets and ruin our lives. It turns out I was wrong.
There’s a great post today on Get Rich Slowly, that talks about a PBS documentary from 2004 called Secret History of the Credit Card.
I’m not sure how I missed this when it first came up, but thankfully you can now watch the entire program online for free.
They also have a page called eight things a credit card user should know that lists several important things to think about if you’re still using plastic.
This program is definitely worth an hour of your time.
I paid off a credit card tonight. I didn’t transfer part of the balance to another card and then pay off the rest. I paid it all off. In cash.
I just completed the online bill payment for almost $900 and it felt great. It has taken me months to get the balance down this low, but it was worth it. This means one less bill to pay for the rest of my life.
Once you’re committed to paying off your debt, it’s important to keep the end result in mind. Sometimes it seems like it will never happen, but I can promise you it will.
Think about how long it took to run up the balance on the card. It may take even longer to pay it off since the bank has interest on their side, but you will get it paid off.
As long as you never charge again, you’re in control. As you start paying down the balance, the bank might try to tempt you with things like a higher limit or special interest rates, but don’t give in.
Higher limits only lead to higher payments and special interest rates always end. There’s nothing that any bank can do to change my mind. No matter how enticing they try to make it sound, the only real purpose of a credit card is to make the bank rich.
The only real “no hassle” credit card is one with a zero balance. It makes me very happy to know that Capital One will never be able to hassle me again.
Now if you’ll excuse me, I’m going to go celebrate…
How many times did your heart beat last year? Chances are you don’t know the answer to this question. Why not? Because you don’t have to think about it. Your heart keeps on beating whether you remember to do it or not.
How much money did you invest last year? I’ll bet you can answer this one without hesitation. If you’re like most people then the answer is zero. Why? Because you never think about investing money.
I know some people are probably screaming right now — “That’s not true! I think about investing all the time, I just don’t have any money to invest!”
I’m afraid we’ll have to agree to disagree on this one. Everyone has a little extra money. We all buy frivolous things from time to time. Little things like magazines and movie rentals that we could do without.
If you really want to get out of debt and regain your financial freedom, then I want you to do something right now. Set up a savings plan that you don’t have to think about.
Don’t wait until a better time, because that time will never come. People waste their entire lives looking forward to what’s going to happen tomorrow instead of taking advantage of what’s happening today.
For an easy to set up savings account that you won’t have to think about, I recommend ING DIRECT.
I started my account with $25 per month. You can start with even less if you want. ING DIRECT makes it easy to schedule transfers from your current bank account. Decide how much you can invest every month, then set up a transfer for the day after you get paid.
I’ll even sweeten the deal for you if you’re serious about saving. I have 10 referrals in my account right now. If you’re able to open your account with $250, ING DIRECT will give you a $25 bonus. Leave a comment if you’re interested and I’ll e-mail you a referral.
Spend a few minutes getting this set up then you can forget about saving.
I almost broke my own first rule of debt elimination last weekend. It happened at the Apple Store. A shiny new MacBook was just screaming “Buy Me!”
I went through all of my usual excuses:
- “I’m getting a raise soon that will cover the increased payment.” … maybe.
- “I’ll be using it to make money.” … like I’m doing with my current computer.
- “I’ll sell my old computer to cover some of the cost.” … but not all of it.
I was actually there for new speakers. I could afford to pay cash for the speakers, but obviously not the MacBook. But it was just so shiny and the screen was so wide, I couldn’t resist.
I kept looking at the MacBooks while the store employee was getting my speakers from the back. Just as they were bringing out the speakers, I convinced myself to get the MacBook. I walked up to the employee and said: “I’ve changed my mind. I want the MacBook.”
He smiled and said: “Oh, we’re out of MacBooks right now. We should get more in sometime this week. Would you like me to put your name on the list?”
Thankfully that was the jolt that I needed to get my brain to start working again. I declined his list, paid cash for my speakers, and left the store.
Once you decide to never charge again, you need to be very careful about placing yourself in dangerous situations. Everything is perfect in the Apple Store — the lighting, the music, the atmosphere. Everything is designed to make you buy a new computer.
I’m sure I would’ve loved the computer, but every month when I looked at my credit card statement I would’ve been disappointed with myself for buying it. It’s so much better to save up the money and buy things guilt free.
I will buy a MacBook, but it won’t be on a credit card. If you’re willing to live with an increased monthly credit card payment, why not just put that much extra in a savings account every month instead? Then when you’ve saved enough, buy the item guilt free.
Beware of places where you are likely to charge. If you have to go to one of these places, make sure you leave your credit card at home. Better yet, don’t take your credit card anywhere. “Don’t leave home without it” is for suckers.
This is the last part of the plan. So far you’ve committed yourself to never charging again, and you’ve calculated your monthly income and expenses.
Now let’s talk about ways to increase your income. For most people this is a pretty hard thing to do. You’re probably already working at the best job you can get.
You could take on a second job, but that would mean basically no free time. Besides, most jobs that you could do in the evening and on weekends don’t pay very well.
What you really need to do is to find a way to make money without having to work for someone else. This is the American dream, the key to your financial freedom.
I figured out several ways to make money by brainstorming and writing things down on three lists:
- What makes you happy?
- What are you good at?
- What will people pay you to do?
Get out some paper and spend some time adding things to these lists. What you’re looking for are things that appear on all three. I’ve put a lot of thought into each of these, and it’s had a big impact on my life.
Here are some examples of thing from my lists:
- I’m good at working on computers and people will pay me to do it, but it doesn’t make me happy. I used to work on computers quite a bit because I needed the money, but I was usually miserable doing it. That’s actually one of the reasons I started looking for other ways to make money.
- Playing guitar makes me happy and people would pay me to play, but I’m not very good at it. I know if I really needed to I could spend some time practicing and probably get paid to play in clubs, but for now I’ll stick to other ways.
- I’ve always enjoyed writing. When I was in school, several of my teachers told me I was pretty good at it. I know that if I write good content people will continue to come to this website and I will make a little extra money.
Try to find things that make you happy and will help you earn some extra money. If you aren’t happy with what you’re doing you’ll have a hard time sticking with it.
Everyone has skills and hobbies. Turn the things you enjoy into sources for more money. If that means working on an existing skill or learning something new, then get busy. Read a book, enroll in a class, do whatever it takes.
Just be sure that whatever you try isn’t going to bring on more debt. You want to maximize your income while minimizing your expenses.