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TT #16: Money Matters

30 Apr 2008

Nothing fun or fluffy this week. Just something that’s been on my mind a lot because I’m helping some of the new hires on my floor with their finances so they can buy their first homes: people who can’t handle money. I know DINKs (dual income, no kids) who bring in six figures per year and yet are up to their eyeballs in debt. I know people in their thirties with good jobs who complain about still living at home with their parents because they can’t afford rent or the down payment on a mortgage because they have no savings.

I’m not a CPA, CA, CMA, CGA, or even an accountant. You don’t need a designation or a degree to properly handle your money. A little common sense is plenty. Okay, and resolve. A lot of resolve. (And it helped that I was born in a second-world country and very much understand the value of money.)

(By the way, the following is ranty and a little preachy, so read on at your own risk.)

Money Matters

Number 1
Make a REASONABLE budget. Do NOT just slash everything and think you’ll stick to it. If you exceed your unrealistic budget within the first month, it’s only going to depress you.

Number 2
Before whipping out your credit card, ask yourself how many hours you have to work to pay for it. So, do you really need those $200 yoga pants? (Yes, I really do have a male buddy who paid $200 for yoga pants.) Or how about weekly $300 spa treatments? Or the monthly $175 trips to the hairdresser? Or that $80 video game you’ll play once and toss aside? You’d be amazed at how many things you can do without.

Number 3
Know where your money goes. Keep track of EVERYTHING, even those little things you don’t think are worth the time. Add up all those little purchases (e.g. $4 cappucino everyday = $1460/year). You can’t cut back on your spending if you don’t know where you’re spending it.

Number 4
Here’s an old-fashioned concept: SAVE for the big items. Do you really want to pay 18% interest for a TV? By the time you save up for it, the price could go down! Or a better model will be available for the amount you have set aside. And if you pay in cash, you can negotiate a better price. I got the car dealer to knock off $1500 off my Honda Civic because I had all the cash up front.

Number 5
Do not compare yourself to the Jones. Just because they have a Beemer doesn’t mean you have to have one, too. They could be drowning in debt to be the envy of the neighborhood. My boyfriend’s father’s business partner is worth half a billion dollars and the man drives a beat up old Ford truck. (Of course, he says it’s more to repel the opportunists.)

Number 6
Find alternatives. Do you need to spend $10 buying lunch everyday? Or can you spend a few minutes every night after dinner packing some left overs for the next day? Do you need to see every movie in the theaters? Or can you wait for it to be available for rental?

Number 7
Have bills debited directly from your checking account. The full amount of my credit cards bills, utilities, condo fees, and property taxes are taken out of my account automatically each month so I (1) never have a late payment and (2) will never pay penalties or interest fees.

Number 8
Be selectively cheap. Some expensive items (e.g. cookware) will be a better bargain in the long run because they don’t need to be replaced as often.

Number 9
If you get a tax refund or a raise or a bonus, use it to pay off your debt. Don’t splurge on something you don’t need. My tax refunds go towards my mortgage. When I get a raise, I don’t increase my budget for entertainment, I increase my mortgage payments by the same amount. I know Americans can write off their mortgage interest expense, but wouldn’t it be nicer to be debt-free and not have to worry about losing your home if you lose your job?

Number 10
Have an emergency fund. Life happens and you need to prepare for it. Have an automatic savings account debit 5% to 10% of your salary from your checking account every pay day. Do the same for your RRSPs (Canada) or IRAs (United States) so you don’t scramble to find money to contribute to your retirement fund in February and March every year.

Number 11
Tell your friends up front you’re cheap or living on a budget. That way, if you’re over your restaurant budget for the month, you can tell them you won’t be joining them for dinner and they’ll understand. If they don’t understand, maybe it’s time to find new friends.

Number 12
Have a goal. It’ll give you direction and something to celebrate when you reach it. I’m paying off my mortgage by February 1, 2011 and the thought of it makes me giddy.

Number 13
Use a credit card that gives you cash back. Points are generally useless because most people end up not using them. I use my credit cards any place that will take them because I get 1% back–and I always have a use for cash.

Bonus
Donate to charity. It makes you feel better and you can write it off. If you’re really smart, you’ll donate appreciated stocks.

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14 Comments leave one →
  1. azteclady permalink
    30 Apr 2008 1:13 PM

    I don’t think these are either ranty nor preachy–I wish more chronological/legal adults had a clue about money myself.

    Seriously, way too many things we spend money on that are not just unnecessary luxuries, but downright pissing it away.

    On the friends who can’t take it if you turn down an expensive night out? Good riddance indeed, says I!

  2. 30 Apr 2008 4:10 PM

    Way to logical and sensible for me.

    SJR
    The Pink Flamingo

  3. 30 Apr 2008 4:13 PM

    Those aren’t preachy — they’re very sensible. Of course, if people all saved for what they wanted and only bought what they could afford, the nation’s economy would collapse. That’s why so much effort is made to persuade us to buy things we don’t need at prices we can’t afford.

  4. 30 Apr 2008 4:28 PM

    Preach it. I so agree with you. Instant gratification seems to be everyone’s mantra these days. You are right on the money. Excellent. Have a great TT. 🙂

  5. 30 Apr 2008 5:08 PM

    No. 3 is so important! I have begun doing that with my time, and it has been an eye-opener.

  6. 30 Apr 2008 6:25 PM

    Very good. I’m sure there are many people out there who you have helped with this. Happy TT

  7. 30 Apr 2008 6:53 PM

    I live with a banker. He would ditto your advice, and he says plenty of people need it!

  8. 30 Apr 2008 8:00 PM

    Be selectively cheap! I love that ! lol Sound advice.
    Happy T13!

  9. 30 Apr 2008 8:24 PM

    Awesome, awesome! I use expensr.com to track my budget and all bills and money I spend. It’s been eye opening and helped me understand budgeting more. Happy TT!

  10. 30 Apr 2008 8:30 PM

    Well done, well said. I wish I would have listened to this advice years ago.

    If we continue on our course we will be debt free in twelve months. Liberating!!

    My friends don’t get #11 and yet they are paying more a month to keep show horses than I pay for rent and want to tell me how broke they are. Givemeabreak!!

    Our goal is to move to our “dream location” and then buy a home. It looks like it is a realistic goal!! Yippee!!

  11. 30 Apr 2008 9:41 PM

    Great advice Ann. I think for writers, particularly, you have to keep an eye on your money. Good for you for having that conquered! 🙂 I’m a big fan of Quicken -and daily check ins.

    Happy TT

  12. 1 May 2008 7:19 AM

    if people all saved for what they wanted and only bought what they could afford, the nation’s economy would collapse. That’s why so much effort is made to persuade us to buy things we don’t need at prices we can’t afford.

    True, but the current situation in the US was caused by people borrowing more than they could afford. It’s a vicious circle.

  13. 1 May 2008 11:00 AM

    Good Job, my TT is at 13 Secret Muslim Tee-Shirt Slogans

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