I was definitely blessed to grow up in a home where my parents taught us about money. As a child, I was a definite saver. I loved stashing money away in random places and to this day...I still find a dollar tucked here or there in trinkets from my childhood. I was probably in Junior High when my Dad got really into the book, "Rich Dad, Poor Dad." That's when the serious financial discussions started. We played the cashflow game, talked about working for yourself and making your money work for you. When I got my first job, he encouraged me to save and to open a checking account. I still remember talking over dinner about the importance of having a checking account of my own. We wrote down questions I should ask the bank and after dinner, I called Tiffany at Zion's Bank...yes I still remember her name.
Once I started making somewhat regular money working random jobs I had as a teenager, my Dad enticed me to save further by promising to match whatever money I would put into a Roth IRA. How does one pass up on an offer like that? I remember counting my money and examining how much I could put in such a long term saving account.
As I continued to get older, Dad became increasingly open with me about he and Mom's financial situation. He taught me by through sharing his own personal experiences, their personal experiences, and helped educate me on things like assets and liabilities, the cost of buying a house, debt, cars, healthcare and insurance. Throughout high school we'd go on walks sometimes in the evenings. On these walks...we'd talk about all sorts of things...often about the businesses I wanted to open, and at times finances. Sometimes I'd ask him to teach me about a topic like deductibles, health insurance, premiums, and interest.
Fast forward about 15 years down the road...I've been able to avoid debt except my mortgage. I've been able to save consistently in a Roth IRA and 401K, and I have been able to make adequate decisions about my money because of the things my Dad taught me. Finances have been (since Junior High) and continue to be an open-for-discussion subject. We are very transparent about both our situations. I consider this to be a significant blessing. Particularly in light of some of the decisions I have seen friends and acquaintances make over the years.
This year, I decided I wanted to get serious about paying off my house. I've always been serious about it and have played with mortgage calculators a bit too much. I've also always paid extra principle on my house.
I just finished listening to Dave Ramsey's Total Money Makeover. I'm probably never going to be an ultra-serious Ramsian follower and sell everything I own, but I am going to be more intentional about my spending. So, as a part of that, I've made some ah-ha's about my own personal spending habits and how I intend to do it...
1) Make it automatic. Automate so you don't have to make the decision every single month. Why set yourself up for such a temptation. For me, one way I do this is that, every year when I get a raise, I up the amount I'm paying on my house by the percentage of the raise. That way, that money automatically goes away with my monthly mortgage payment as additional principle. I never change how I live because I "make more money." When the house is paid off, I'll put that extra money into retirement. Another way I do this is that I don't factor what I make from one of my two jobs into any of my finances. I call it my "blessing job." I have used the money from this job to travel and to save an emergency fund. Every month, I move this money to a separate, less accessible but still accessible bank account where I am able to work on reaching other financial goals. This is how I saved for a downpayment, for trips I have taken overseas, and again, for my emergency fund. Every one should have an emergency fund which could ultimately support you for 6 months.
2) Balance retirement funding and house-down payment planning early. I wish I would have taken better advantage of the time I lived at home and made real money. Since graduating, I have saved about 25% into retirement. I think I could have pushed it even harder...but I don't regret what I did and also saving for a downpayment on a house. Don't forget about saving for retirement early. Compound interest is your friend! It's never too young to invest for retirement.
3) Fund an HSA. It took my Dad and I a little while to see eye to eye on this one. I work to fully fund my HSA every single year. This is like a retirement health insurance account. The money stays with me, it's invested so its money working for me. I can access it whenever I need it and it will continue to be with me into retirement. Whenever I can afford it, I don't use this account to pay for my healthcare needs, I just pay out of pocket and leave this money working for me.
4) Don't use the "credit" part of a credit card. While I've never (intentionally, only accidentally once) carried a balance on a credit card, it's important to pay off credit cards every single month and to not pay interest. Credit card interest is HIGH! It's not worth it! Why would you pay $25 dollars for that $1.00 Diet Coke from McDonald's. You wouldn't throw your money away like that so don't do it to credit card companies. It's important to always know where you are in your spending. I have all sorts of alerts set up on my credit card to notify me when it goes above certain limits to keep my spending in check. I also keep the spending limit low. Don't think you have more money than you do. That's a slippery slope. Also, don't fall for gimmicks. Last week I walked into the bank and the teller started telling me about this "awesome opportunity" to have all my debt consolidated into one place for this great interest rate. She went on to tell me how it was such a great opportunity for all the "kids my age" to get out of debt and to pay less interest, blah blah blah. If I'd been more brave, I'd have really told her what I was thinking...I held back. First, I was offended that she assumed I was in a "debt crisis" as she had put it. Second, I was disappointed in her spending habits...she worked at a bank for goodness sake. And Third, I felt bad for anyone who fell pray to her trap. Interest isn't your friend. Low interest. High interest. It's all bad. It's taking your money and you get nothing in return. Don't fall for the gimmicks.
5) Pay with Cash. This is a newer one for me. I haven't been much of a cash carrier but I do recognize my weakness in being willing to spend more because I can put it on a credit card. I'm not going to fall pray to that lie anymore. There is something about counting the cash and letting it slip through your fingers that makes you realize that every dollar you spend, needs to be an intentional dollar. One of the biggest ways I've recognized this change with myself is in my need to buy a Diet Coke. There was a time, I was buying 4 Large Fizz Drinks' a week. Now it cost me $2.97 each time so that's roughly $12.00/week. That's $624.00 a year! Then I went to McDonald's, it was cheaper so I probably bought more like 6 a week so that was $312 a year! I cut it in half. Well now, I'm going ultra cheap and buying cans and only drinking 1 can/day. 1 can is $0.25 so drinking it 6 days/week would be $78.00 a year! That's $534 dollars a year that I'm saving by not buying fancy soda, in 2 years of saving that's like an extra house payment which would slowly reduce the length of my mortgage. If I was "gazelle intense" as Dave puts it, I'd probably cut other things too like eating out with friends, etc. However, I want to balance living now with living financially free in the future. Eating out with friends is so much of my social culture right now. I try to be judicious with it. One way I do so is that I make it a point to not eat out alone or out of convenience. I make more freezer meals so its easier to come home and fix something to eat. I meal plan so I grocery shop once a week rather than needing to stop in for a few things throughout the week as I know I'll always find something else that I need. Paying with cash makes me more aware that when I shop, I'm still accountable to my budget.
6) I Plan Free Activities. I love to go on walks. I love to cross stitch and I love to read. These are all free or relatively free. I can walk anytime, anywhere. 1 roll of Aida cloth, thread, and free internet patterns can go a long way. I love to read and have rekindled my relationship with the local library. I still buy books, but only the books I absolutely love. I keep a list of the free activities or projects I already have so that when I have a moment of weakness or indecision...I can remember what my options are and what my long term goals are. I keep a to-do list for projects I want to work on around my house. When you know what your options are, it definitely helps you make a more informed decision in a moment of weakness.
6) I Give More. I think it's important to reflect on what spending brings you happiness. I love a good new book or a journal or school supplies a little too much. It brings me happiness. But I also love doing things for those around me and helping out with humanitarian efforts. This is something I'm working on more and more but I know the principle of giving is true. When we give, then we open our hearts to receiving in even more powerful ways.
{Please forgive this financially opinionated post. I have felt such the need to share some of the valuable things that I've learned in hopes that it might benefit someone else. I also wanted a better record of what it is I have done and am doing for my posterity to read someday.}
