Realize your Problem
Always short of money? Does your paycheck seems to melt away every month? Does your checking account balance hovers around zero? If so, read this post. I’ll show you how to fix the problem.
First let me give you the bad news: knowing how to keep your money will not make you rich. Savings alone will not do it. However, not knowing how to keep your money will make you poor for sure.
There are two main ways people are shedding money:
- You consciously spend as much as you earn. In plain language, you spend like a drunken sailor. The best defense strategy is: don’t pay so much (see below).
- You unconsciously bleed money through the “leaky bucket” effect (recurrent payments and subscriptions). Read further to learn how to fix it.
Take Specific Actions to Keep Your Money
The idea is to reduce expenditures without suffering, without reducing your lifestyle noticeably. The actions are ordered from the easiest to more difficult.
1. Don’t pay so much
I know: it’s easier said than done. So here are some ideas on how to save. Remember, the goal is to spend less without compromising functionality and not just to buy cheaper inferior products.
- Buy less frequently. For example, there is no need to buy a new laptop or a phone every two years. I still have my trusty iPhone 6 and I do not feel like I am losing anything by keeping it. (It even has some features that are missing from the later models.) Another example: buying a new car every couple of years is a sure sign of a wastrel. If your car had a fender-bender, don’t run to a dealer for a new one. Instead, fix the old one.
- Pay less. E.g. don’t buy the latest model. The latest model usually has the same functionality as the last one, despite the hype. That applies to many products, from cars to smartphones to skis. I am a lifelong skier, but I never bought the latest pair of skis. Ever! Always a (discounted) model from the previous year. Over time, this strategy saved me thousands of dollars.
- Buy used. Both my laptops are older models (which I prefer), purchased used (Apple refurbished) at a steep discount.
- Buy at seasonal discounts or at discount outlets. It is self explanatory, but requires some planning ahead.
Address the “leaky bucket”
What sucks out your hard earned cash is not big ticket items, it’s the subscriptions i.e. small regular payments/monthly payments. Some of them may be small,
and seemingly inconsequential, but they add up very quickly. to drain your funds balance
If you always short of money
If you never seem to have cash in your pocket (or in your bank), look first at your recurrent expenses. It’s very simple: look at your monthly bank and credit card statements and see where the money goes. Some are necessary and unavoidable (rent, utilities), but many can be
cancelled /trimmed . I did this exercise a few years ago and, to my surprise, was able to trim my expenses by about $500. Imagine my shock: I saw myself a frugal man, but was instead a wastrel.
The typical drainers are subscriptions to magazines and services, memberships, cellphone/cable/internet (do you really need all these Gigabytes and channels?). Many of them can be trimmed without seriously affecting your lifestyle.
do not overlook annual installments/charges/subscriptions. they too are part of the “leaky bucket” money drain. The big culprit here are the software subscriptions (VPN, antivirus, etc.) Substitute with free or single-payment alternatives.
Address loan and credit card payments.
the goal is to reduce balances, to zero if possible. The median credit card balance in the US is about $2,500 so it’s possible but not easy.
expensive installment loans: sell the item
Car and rent/mortgage
that’s a tough one! The best advice is to keep yourself healthy (that is a subject for another post)
Review your insurance.
it’s a competitive market, almost everybody can reduce their insurance payments
Do not overpay your taxes
Set your withholding so you get a small refund on the tax day. (The ideal is zero, but it’s hard to be so precise.) People who enjoy getting big tax refunds simply can’t count. what they do is They extend zero percent loan to the goverment, while paying 15-20% for their loans.
After you Succeeded
After implementing these strategies, you should have a slow but steady trickle of dollars to your bank account. What do you do with the extra money? I suggest you use it to make your finances more resilient. In the current volatile economy you need some assurance that your money does not vanish. This assurance is as important part of the “keep your money” strategy as paying down debt balances.
1. Do not spend it all.
Keep some money in the bank as a buffer for an unexpected expense. According to a survey, fifty seven percent of Americans don’t have $500 in cash for emergencies. Do not be one of those people!
2. Keep some ready cash for emergencies.
You also need to have some actual cash as your food and gas money in case ATMs stop working. Cannot happen? Look at Venezuela.
3. Buy a few gold or silver coins.
You need some insurance that your money does not not “evaporate” in a crisis. Precious metals provide such insurance (with some caveats). A one-ounce silver coin costs now about $30 – same as a tank of gas – so don’t tell me you can’t afford it.
However, there are many pitfalls in gold and silver investing – you must educate yourself. A good resource like Mike Maloney‘s book “Guide To Investing in Gold & Silver” is essential for beginners.
If you have any other ideas or opinions on this subject, please leave a comment.