We all have heard the term “There’s too much month at the end of my money!” and that is the case for many people now more than ever. So what do we do to hunker down during tough financial times without having to sacrifice lifestyle too much? Don’t fall victim to the following seven items!
1) Buying name brands for everyday items
We have been conditioned by clever advertising to prefer the big brand names. If you pay close attention, you’ll notice a significant difference in price on items such as toilet paper, paper towels, and soap. Aspirin, Ibuprofen, and other off the shelf medicine generics all have the same ingredients as the well known brands – all at a much lower cost. Generic cereals and boxed goods can generate nice savings as well.
2) Failure to pay yourself first
Everyone knows they need to save more. The problem is the thinking behind it…usually people try to save after they have paid all their bills. What happens is the money that could be saved gets spent on lattes, movie rentals, baseball tickets, etc. Many people feel they need to save a large amount of money as well. Just having $50 automatically withdrawn from your checking account on the 1st of each month for 30 years into a Roth IRA will turn into $50,476.88 of tax free income during retirement (assuming 6% interest).
3) Not knowing exactly how much you spend on food
Try this exercise – add up the cost of every item you buy at a gas station, Starbucks, your lunches at work, for one week. You will be totally surprised by how fast those items accumulate. You can significantly reduce these costs by making your own coffee (a bag of Starbucks ground or whole bean is $7), buying gum and snacks in bulk and carrying them with you, and packing your lunch for work.
4) Paying the minimum balance on credit cards
Did you know…a credit card balance of $19,000 with 15.15% interest generates $2,878.50 of interest PER YEAR? How long do you think it will take to pay off that balance by making $150/month installments? What could you do with that money you are paying to the banks?
5) Spending your tax returns
It is very tempting to use our returns to go out and buy that flat screen T.V. or take a family vacation. If you are carrying any debt load, use this money to pay down that debt first. You have to consider the long term ramifications of compounding interest. No debts? Use part or all of your return to make a deposit into your retirement account!
6) Infrequent checkbook balancing and using your debit card too much
Automatic drafts, online banking, and debit cards are wonderful things if used properly. What has happened is many people don’t have a paper ledger and reconcile it to their statement anymore. If you use your debit card at the gas pump, it shows up as $1 for several days, then turns into the actual amount – forget one of those a month and suddenly you are down $40! Quite a few of us (myself included) don’t carry cash anymore and have no problem putting $5 on the debit card – forget a few of these each month and your balance is off by another $20. Give yourself a $20 bill at the beginning of each month for your small expenses. Once it’s gone, don’t use the debit card! Start keeping the paper ledger in your checkbook, even if you are not writing checks. This will keep you accountable to every penny, plus you will always know exactly how much you have!
7) Failure to prioritize spending
This could be the most costly error. Make sure that you put the necessities first, and by the way, satellite T.V. is not a necessity! Once you know exactly how much the rent or mortgage, car payment, food, gas, electric, phone, and debt bills are, then make room convenience and fun stuff!
Follow these rules and you’ll be amazed at how much you can make your income stretch. You will also be setting yourself up to be prepared in case of an emergency and enjoy a more comfortable future.
There are also additional ways to free up income out of your current budget to pay down debts, pay less taxes, and put away for retirement.
For a free, no-obligation consultation contact The Net Worth Doctor.
Jason Hornung – The Net Worth Doctor
http://www.thenetworthdoctor.com/
Jason@thenetworthdoctor.com
1-866-514-8884 Toll Free
520-514-8884 Southern Arizona Local
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