This isn’t a typical post for me, so if you’re not interested in the subject, come back next post and I’ll have something nice and snarky for you.
Ok, there’s still a little snark in this one…
Let me start my saying, I’m not a financial planner and I’m by no means an expert on this subject. This is purely based on my experience.
I think about retirement. A lot. I’d love to make my own schedule, go to the gym when I want, and run races at travel destinations. I try to prepare for my future as well as I can with the money that I make. I don’t want to be in debt and I don’t want to pinch pennies once I am retired. I don’t need to live in a castle, but I would like to maintain my current lifestyle.
First, I’ll start with the obvious advice: Open a Roth IRA or a 401K – or both. Both are great ways to save for retirement. Roth IRA contributions are pre-taxed, so you’re not taxed when you take the money out. 401k contributions are usually matched up to a certain percentage by employers, which means free money. (I have both.)
Just make sure you don’t take that money out prematurely, or you’ll pay hefty fees. You’ll want all that money to buy frivolous things once your old and wrinkly and can’t get a date.
Pay Off Credit Cards
Make payments over the monthly minimum and don’t charge new things. Credit card companies tell you how long it will take to pay off your debt on your monthly statement. If seeing, “it will take you 15 years to pay off this credit card by making the minimum payment” isn’t enough to make you want to pay over that minimum when you know your card is just an accumulation of late night pizzas, porn, and music from iTunes, I don’t know what is.
If you know who that is, shame on you.
Pay Off Your Car
Pay more than the monthly payment. Even if you can only afford to pay $10 or $20 more each month, you will pay the car off early and in turn pay less interest. The last car I bought, I paid off 9 months early making more than the minimum payment. Now that sweet set of wheels is allll mine.
When I first moved to Orlando, I had a $318 car payment that I was having a hard time paying (not the car I paid off 9 months early). I got a credit card offer in the mail from my bank with lower interest than what I was paying on my car loan. So, I called my bank and asked for a specific limit on the card. After a “no” on their part and a little begging on my part, I got the card with the limit I wanted. I paid off my car loan with my new credit card – and in turn my payments were over $200 less a month and I saved a ton on interest.
Open a Savings Account…and Don’t Touch It
When I started my savings account 9 years ago, I was making 27k a year, had a car payment, and was living with my best friend. I didn’t have a lot of extra money. In fact, I was just making all my monthly bills, so my bf and I became connoisseurs of all the “ladies nights” in Orlando so we could drink for free.
I knew I could save $20 a paycheck. Not a lot, but it’s all I could part with and it was something rather than nothing. So, I split up my direct deposit into two accounts. $20 went into my savings account and the rest went to checking for bills. Because the $20 went directly into savings, I didn’t “see” it, so I didn’t miss it. Even if you can only save $20 a check, you are saving over $500 a year.
Each time I get a raise, I raise the amount of money that goes into my savings. I was living without it before, so I don’t technically need it. Usually I split the raise and keep half for spending and the other half goes to savings.
Buy With No Interest
If your credit is good enough to be able to open more credit, buy items with no interest. It builds your credit and allows to you pay off big items over time. BUT, keep these things in mind:
- Have a plan: Figure out how much you need to pay each month to have it paid off by the time the interest kicks in.
- Make monthly payments: Just because you don’t need to make payments doesn’t mean you shouldn’t. Credit cards that offer no interest anticipate that you will forget about the charge so they can slam you with interest later. Keep making those payments. Every month.
- Make sure you can afford it: If you calculate the monthly payment of a new flat screen TV is $300 a month and you can’t afford that each month until it’s paid off…don’t buy it.
- Buy only 1 thing at a time: You want that flat screen TV and a new living room set. Buy one and wait on the other until the first item is paid off. You don’t want to be buried in payments.
Hubs and I buy everything we can on no interest – our electronics, our furniture, our flooring. We buy one thing and pay it off before the interest kicks in. Then we buy the next item we want. Right now, I’m paying off the new flooring in our house. But we have items we want lined up after that.
Go Manual with Your Checking
If you can’t do any of the things I mentioned above, you can do this. I learned this trick from my old roommate, Danielle. Once she told me about this, I was mesmerized by her wisdom, and have done it ever since.
I have kept a manual checkbook for about 7 years now. When I charge something on my debit card, I deduct the money from my checkbook but round the total up. So, if I spend $12.71 on a hot dog at the mall, I deduct $13.00 in my check book, which means I “saved” .29 cents. I do this with everything I buy with my debit card and every bill I pay with a check. I also round down with my paycheck. If I get a check for $105.00, then I add $100 to my check book. I see the money written in my check book as the only money I can spend.
After the first 7 or 8 months of doing this, I had $700 more in my account than what was written in my checkbook. So, I was able to “save” all that money without doing anything. Like this:
Every 6-8 months, I use my “check book money” to pay off my credit card or pay for insurance. Also, it works great as overdraft protection. Or vacation money. Or money to blow on new hats.
Now, I just need to become an expert on making money.
Do you have any money saving tricks? (Besides the making it disappear trick.)