Debt-Free Forever (15 page)

You’re standing in the bookstore holding a $25 copy of a book you’ve been dying to read when the woman next to you says, “I saw it just down the street for $18.” Would you head off to the store that’s 15 minutes away to save $7 off the price of that book?

I would. The walk would be good for me, and I just can’t pass up a good book.

Okay, let’s say you’ve done your research and you can get exactly the new computer you want for $1,289. Off you head to the store. As you are standing in line to buy your new computer, the man beside you turns to you and says, “That exact
computer is on sale down the street for $1,282.” Would you take the 15-minute walk to save $7?

If you said “yes” to my example of the book that was $25, down to $18, but said “no” to the computer alternative, my next question is “why?”

After all, $7 is $7, whether it represents a 28% savings or a less-than-1% savings, it’s still $7 and gets you $7 closer to your goal, whatever that may be. If you’re focusing on the percentage you’re saving, you lose track of the value of the dollars themselves. It’s all very nice to save 50%, but a buck is a buck, whichever way you cut it. And getting $1, $10, $100, $1,000, or $10,000 closer to your dream of owning your own home, being debt-free, or taking that family vacation is the point, so the relative savings isn’t important. Counting every dollar is!

One of the challenges I give some of the families I work with is to find a way to swap bad habits for good ones. It’s a great challenge because it makes people both think and act. And since they’re usually fighting Gremlins on the bad-habit front, they’re grateful when I make ‘em stop.

Swapping bad habits for good ones works because if you just take away something, you feel a loss and the loss is all you can think about. But if you substitute something else for what you’re eliminating, then you’ve moved from “loss” to “change.”

If your socializing is costing a ton of money because you meet in bars, over dinner in restaurants, or at expensive outings, you can substitute a less-expensive, equally as satisfying social encounter. Instead of meeting in the pub on
Friday night, have a Friday game night with your friends. Each week you decide what your next week’s location, game, and food theme will be, and then you all chip in. If it’s taco night, someone brings the cheese, someone else the veggies, someone else the salsa and shells. That’s no more expensive (except for the gas) than having dinner at home. You still enjoy a social experience but without the big spend.

A great motivation for swapping bad habits with good ones comes from figuring out what you’re saving a week by eliminating your bad habit. If you’ve decided to eliminate coffee on the road by substituting homemade coffee and you’re saving $20 a week, multiply that $20 by 52 (weeks in the year) to see how much you’ll save in a year. Find an online savings calculator, plug in your annual savings, a reasonable interest rate (say 3%), and the number of years until you retire. If you’re saving $80 a month and you’re 30 years old, eliminating that one bad habit will mean more than $60,000 in your pocket.

Smoking a pack of cigarettes a day eats up $3,650 a year, which is more than enough to provide your kids help for university or college. Sipping three bottles of moderately priced wine a week swallows $2,500, which is a pretty decent retirement savings deposit. Ordering in pizza a couple of times a week so you don’t have to cook after you finally get home from hockey or dance or karate with the kids will gobble $1,700 of your income, which is a good start to a fabulous family vacation. It’s easy to spend money on the conveniences and pleasures of life without giving it a second thought. Give it a second
thought! Do the math and see what it’s actually costing you in terms of the dreams you would be able to make come true.

You don’t have to give up your pleasures completely. If you’re buying a fancy coffee a couple times a day and dropping $4.75 a pop, that’s $2,280 a year. Switch your caffeine dealer or sip smaller and send the rest to your emergency fund, which likely could use a boost. Lunches out are another way unconscious spending eats up money. A lunch entrée can run to $15. Add in a cold beverage and a cup of tea with the caramel praline cheesecake and you’re shelling out $30 with tax and tip. Do that three times a week and watch $4,500 a year go down the toilet, literally. Cut back to a once-a-week lunch out and not only will the outing be special because it’s less frequent, you’ll bank more than $3,000 a year.

GAIL’S TIPS

Your money is
your
money and you can spend it any way you please. But if you’re spending on credit, you’re not spending your money, you’re spending some other guy’s money, and you’re paying a whack of interest for the privilege. Shifting your mindset from Buy Now Pay Later to Plan Now Pay Cash is the difference between being a self-indulgent child and a responsible adult. Children may have a hard time deferring their immediate gratification, but as a grown-up you should have mastered this skill by now.

Finding the money to make planned spending a part of your money management isn’t as hard as most people think. It’s a matter of looking at where your money is going now and deciding whether that’s still working for you. If not, you can change what you’re doing.

Most people spend more on their insurance than they should. Insurance is yucky, after all, and having put it in place it’s easier to just keep paying whatever you agreed to and not think about it too much. Want to save some money? Most insurers offer a multi-vehicle discount, which can add up to
10% off both cars. Switch your home policy to the same insurer and save another 5%. Ask about age, low mileage, anti-theft, occupational and auto club discounts, all of which could save you money. And raise your deductibles to $1,000. Potential overall savings? About 35%, which could translate into $1,260 a year.

Are you still paying your mortgage monthly? Really? Where have you been?
Everyone
knows that by simply switching to an accelerated weekly payment you can save buckets of money. On a $300,000 mortgage at 8% amortized over 25 years, your savings would be more than $90,000 over the life of the mortgage. Wow! So easy.

How many hours a day do you spend watching TV? The average is about four hours, but most active people with busy lives get to the tube less frequently. If you’re not a couch potato, then the $100 a month you’re spending on the Ultimate Cable Package is a waste. Never mind having the whole world at your clicker-tips. Buy only what you watch. Spend half as much and you’ll have another $600 in savings.

Carrying a balance on your credit cards? About half of us do. And, sadly, many of us are unconscious enough not to know what it’s costing us. Time to get those statements out to see what we’re paying. More than 9.9%? With your terrific credit history, you should be getting a better deal. Throw your weight around to have your interest rate lowered. Failing that, get a cheaper card and transfer your balance. A $5,000 balance at 18.9% costs $945 a year in interest. Get the rate down to 9.9% and cut costs by almost half. Better yet, get a teaser rate of 2.5% and save $820 a year. That’s got to be worth a call.

When was the last time you looked at your cell phone plan to see whether it’s still working for you? If you’re on the road and don’t have the right long-distance package, those long-distance charges can add up fast. Ditto if you go over your limit on minutes. With the cell phone industry in upheaval, and everyone fighting for their piece of the pie, you can negotiate hard to get lots of costs—texting, voicemail, caller ID—waived completely. Do the kids have phones too? Save $16 a phone on four phones and you just stuck $768 back in your pocket.

I could go on and on and on about all the ways to save. But you know what, that’s your job. If you want to find the money to achieve a goal, go back over your budget and cut back. Be creative. Think outside the box. Do some research online for ideas to get you started. All you have to do is Google “ways to save money” and you’ll be buried in ideas. Read through them and see which ones will work for you.

Pick one category of your budget and do some research on how you could save money. When you come up with the amount you think you can save, plug the amount you would save monthly into an online savings calculator and figure out how much you would save in 5 years, 10 years, 25 years by changing just one thing. If that’s not motivation enough to swap a bad habit for a good one, then maybe it’s simply that you’re not yet ready to change.

Who doesn’t love a good sale? But when bargain hunting, coupon clipping, or mastering the deal becomes the objective, you and your budget are likely headed for big trouble. I can’t tell
you the number of people who have said, “But it was such a deal!” Really? A deal? Hmm.

If you’re spending money you don’t have—if you’re putting it on credit and paying interest on it—it’s not a deal. If you’re buying something you don’t need, it’s not a deal. If it takes you three weeks, three months, or until the end of time to put what you bought to use, it’s not a deal.

A deal is buying the snowsuit your child is going to wear next winter on sale this winter at 70% off. A deal is picking up a new book you’re dying to read for half-price. A deal is getting something you really need or want at a significant savings and being able to pay for it in cash.

There are some places that are known for having “deals,” and people take the value they’re getting for granted without actually checking the prices. Dumb! And there are people who will go to extremes to get a deal, lining up for hours to browse—and ultimately buy—in stores where they wouldn’t normally shop. What’s up with that?

In a culture that worships shopping, it’s only natural that the “bargain” be the Holy Grail. But if you find yourself being suckered into buying stuff just because “it’s a great deal,” you’re definitely not as smart as you think you are. If you’ve saved so much money with all your bargain shopping, show it to me.

If you can’t show it to me sitting in your retirement plan, in an educational savings plan for your kids, or in your emergency fund, you’re deluding yourself. You need to find something constructive to do with your time. Bargain hunting isn’t doing it for you.

Write the five questions below on an index card and stick it in your wallet so that the next time you find yourself sidling
up to the cash register with a bargain in hand, you can ask yourself the following:

• Do I need it?

• Where will the money come from to pay for it?

• What will I do with it?

• What would happen if I waited?

• What else am I willing to give up so I can take this home?

I grew up listening to adages like “Money doesn’t make you happy.” When I was married to my first husband and trying to figure out where I was going to get the money to go to work the following week, I figured all that stuff I heard was a load of B.S. Over time, I’ve worked hard, traded in husbands, and discovered that money—more and more money—doesn’t make you happier. Yes, too little money can make you miserable, but once you have enough to meet your needs, more money doesn’t increase your sense of well being.