Monday, February 23, 2009

Save Yourself Some Cash

I have always been a big proponent of financial freedom. The only way to be financially free is to owe as little money as possible. This way you can poke "the man" in the eye with your thumb when he tries to play games with you. If you are beholden to a bunch of debt, you can NEVER be truly free.

Everyone likes stuff, we all like stuff and we all like the stuff other people have. The first way to become financially free is to stop needing stuff. There is a huge difference betweeen needing and wanting. Many times we confuse the two. You need things to stay alive, you want things...well...just because you do. It is as simple as that. You need someplace to live, you need food & water, you need clothes, you need transportation. Everything else is optional if you think about it.

Let's face it we are a nation of consumers and it has been that way for quite some time. We are like druggies we can't just stop we have to be weened off off our drug otherwise we are doomed to fail.

How do we do this?

To start reevaluate everything you spend money on and start with the really simple stuff...like that magazine subscription you never actually READ - cancel that. Actually subscriptions are the best place in general to start paring down. Get rid of magazines, memberships and subscriptions. I used to a be member of a bunch of stuff and had a ton of magazine subscriptions.

I have a total of three subscriptions now:
NRA Member - Gets me American Rifleman magazine
Subscription to Popular Mechanics
Netflix 2 at a time unlimited subscription.

That is it....

Get rid of ALL your credit cards except one. The wife and I each have a debit card and an American Express, that is it. We pay the entire balance of the American Express off EVERY month without fail.

If you own a home pay the equivalent of 1 extra payment a year by paying a little extra each month. For example if your payment is $1200 bucks send $1300. That extra $100 dollars adds up to one extra payment a year. That will shave 7 YEARS off your mortgage and could potentially save you tens of thousands of dollars in interest.

Start an emergency fund and have the money come out of your check automatically. This is not the cash on hand type of emergency fund but the 3-6 months livings expense because I lost my job type emergency fund. Start with as much as you can and have it go into a separate bank account from the rest of your money and DON'T TOUCH IT. Let it continue to build until it is the equivalent of 3-6 months worth of bills. This will be your insurance policy against job lost and could prevent you from entering the downward spiral many people experience when they have a sustained period of unemployment.

Once that is fully funded start your, the car needs a new transmission and I am screwed emergency fund. I typically keep this in the same account as my other emergency fund but seperate the two logically. If I need $20,000 to have 3-6 months living expenses everything over that is the everyday emergency fund. In other words don't let that account drop below your set amount, but certainly tap it if you have the need. If you don't have to touch it all the better, you will be in a good position when a true emergency arises.

This all could take time and in the cases of emergency funds years to reach...the key is you'll never reach the goal if you don't START!

...that is all.

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8 comments:

  1. I couldnt say all that better myself! Good job!

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  2. Cutting out all the stuff that you don't need is great advice. Now if only I could convince the Mrs' =P

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  3. Except for buying a house (it's paid off now) I haven't paid a penny of interest since 1972. I took out a loan to purchase a new 1970 Chevy truck; I was young and foolish. :-)
    TJ

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  4. Good advice. I live way below my means, my total
    expenses are less than 50% of my income. I've never owned a new car, I have very little debt. I normally pay cash for cars. I can go out and drop $200 on a fancy dinner and not worry about it, but hate eating out.

    I do occasionally hit the local ALL YOU CAN EAT Chinese buffet, but that's about it. I have one credit card but can pay it off anytime I want, the balance is so small.

    I shop at Aldi's in the next town and save at least 50% on my food bill. I can easily afford to pay twice what I pay for food. But why ? I drive 18 miles and save 50% !!!

    My gas bill was $54 last month (not a budget plan). Last month was one of the coldest February's on record here. My electric was $29.

    The funny things is I could also easily cut about $300 a month more out of my budget. But I ain't no monk. Got to have some fun.

    There is a lot to be said about living beyond your means. The freedom being one big advantage.

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  5. At least once a year, go through all of your neccessary bills and find ways to reduce them. For instance, call your phone provider and ask if they have a cheaper rate. Call your car and home insurance company and see if they will reduce your monthly bill because you have had no claims. I managed to save $300.00 across all of my monthly bills by doing this in January. That's real money.

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  6. Just wanted to comment on the Amex.. I've had nothing both an AMex and debit card for almost 10 years. Today, I tried to buy a $632 cistern with delivery and was denied. I called AMEX adn was told that even though I am a great and loyal customer (they have been soliciting me to upgrade to platinum), I am limited to a $450 purchase. The reason...because i havent charged anything over $450 in the last six months, I'm not allowed to charge anything higher. But I can prepay if I need to order something online. I was livid!!! so, my advice, get a card with a real limit. I thought all I needed was an AMex and now I have to get another card so I can make online purchases over $450 or risk using my debit card.

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  7. oh, to clarify the post above... no, I wasnt late and pay my bills at the end of every month. I just don't buy much on credit, as I usually pay cash and rarely have something delivered.

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