Spending Tips

April 29, 2011

Last week, I talked about the Rules of Money, and where there is money there is SPENDING. We couldn’t get through Financial Literacy Month without talking about how we spend our hard earned cash. If you want to do well financially, there is a sure-fire way to do it. Spend your money wisely. Remember, one of my Money Rules says it all: It really isn’t about how much you make, but what you do with it that counts.

In my book about personal money management, Money Smart, I share the 10 Rules of Spending Wisely. Yesterday, I shared the first of three Spending Rules, and here is the next rule that will help you get the most from the money you spend.

Spending Rule: Always Look at the Annual Cost

To understand the real impact of your spending choices, always look at the cost over a year, not just at the cost today. Let’s say you spend $4.50 for a fancy coffee, or $10 to eat lunch out five days a week. Those seem like small expenses, but the annual costs are $1,125 and $2,500, respectively. That’s $1,875 and $4,165 before taxes; $142,000 and $318,000 in thirty years at a 6% investment return. This is what you are actually trading away with those small purchases. Remember to also look at how much sooner you can stop working, or spend time at something you’d enjoy more. This doesn’t necessarily mean you shouldn’t spend that money. It’s your life and your choices (or financial trades). Just be sure you take the time to calculate the annual cost and fully understand the true size of the trade involved in your purchase.

by Ted Hunter

April 28, 2011

In my book about personal money management, Money Smart, I share the 10 Rules of Spending Wisely. Over the next few days I will share three of the rules for getting the most from the money you spend.

Spending Rule: Know Your Priorities and Stick to Them

A great way to make this rule a reality is to take a couple of minutes and make a simple list of every immediate smaller purchase you want or need to make. I’m talking everything except normal weekly food purchases. New underwear, dishwashing liquid, toothpaste—you name it. Add to this list any larger purchases that are now at the top of your priority list (a new couch, TV, etc). Then just keep updating this little list whenever there’s something to add or delete and whenever your priority sequence has changed. Doing this, I almost never have to make a special trip because I ran out of something. Most importantly, I know what I want and what my priorities are when I walk into any store.

When you are out shopping and see something you want to buy other than normal food or household supplies, and it’s not on your list, don’t buy it! You especially need to avoid such impulse purchases when the item is more than $25. If you still want the item after you’ve left the store, sleep on it. If you still want to buy it when you wake up, and it involves a significant amount of money, look at your priority list and decide what you’re willing to trade to get it. If you like the trade, then fine, go buy it.

Now that you have your list, you know what you are about to buy and what you will be purchasing fairly soon. When you’re out shopping and feel like it, take a look at the various offerings for your next purchase(s). Think about the exact item you’ll buy when the time comes. I have come to love what this pre-shopping does for me. I end up buying so much smarter and being so much happier with my purchases. This simple strategy also greatly reduces buying again too soon because I bought what I really wanted.

by Ted Hunter

April 21, 2011

April is Financial Literacy Month and in the past two blogs I’ve talked about defining financial literacy and how to begin. Now I would like to talk a little bit about the rules. There are nine rules to the game of money that I describe in my book, M oney Smart. They are absolutely critical to your success with money and its role in your life. Follow them and you will quickly see a positive change when it comes to money. Break them often enough and you will almost certainly insure that money ends up subtracting from your happiness rather than adding to it. So let’s talk about the first of three of the nine Rules of Money that I will share over the next few days:

Money Rule: It Isn’t How Much You Make, But What You Do With It That Counts
There are two roads to success with money. The first is to make more money; the second is to spend more wisely. Most people focus on the first road while downplaying or outright ignoring the importance of spending wisely. However, study after study shows that for most people the overwhelming majority of financial success in their lives comes from being smart about how they spend their money. I am not suggesting that you don’t try to make more money or that you live like a pauper. I’m just asking you to recognize which purchases or expenses will really end up adding to your happiness in the long run, and which will not. I’m asking you to be reflective about your spending and make smart spending choices. If you do that and spend your money wisely, it will pretty much insure you will end up being financially successful. If you make a lot more money in the future, that’s great, but the second road, spending wisely, is pretty much a sure thing if you work at it.

by Ted Hunter

March 29, 2011

If you’re like most Americans, simplifying your life may well be a treasure-trove of opportunity just sitting there waiting for you. I first learned this truth back in the late 1980s when I lived out of a suitcase for over a year. What a wonderful surprise that turned out to be, as it opened my eyes to how much of what I had accumulated and surrounded myself with were things I did not need. That, in turn, caused me to re-evaluate how I had been spending the hours of my days, of my life.

How many things do you own that you don’t really use? What do you do every day, week, and month that you’d rather not do? Do you live far from your job and commute hours each day, leaving you tired and with too little time for your family or for yourself? Look at the things you do out of habit and the things you’ve been convinced to do by others. Is each thing you do, each thing you own, really worth the time or money you are trading for it, really adding to the quality of your life?

If you’re like most people, you probably can benefit greatly from simplifying your life. Time and again you will find that less is actually more, and the rewards of simplicity outweigh the rewards from whatever you were doing or owning before. You’ll discover that simplifying doesn’t necessarily mean doing without, but living a less stressful, more balanced life. It means having more time for the things that really do end up making you happier. And it sure won’t hurt that you’ll probably end up with a lot more money by doing so.

So, take a few minutes to think about who you are and what you have been doing. How complicated has your life become over the years? Take a moment to think about simplicity and how to incorporate that simplicity into your life. When you do, you just might discover that living simply could gain you a world of abundance you never knew was available.

by Ted Hunter

March 23, 2011

The earthquake, and the Tsunami that followed, in Japan were terrible and unfortunate events. As I see the images on TV and the internet, I ask myself what I can do. How can I help? Anyone who has read Money Smart knows I believe in giving back. I am a firm believer in giving and volunteering, not only of your money but your time. We have become a global community and it is important for us personally and globally to reach out and try to help.

Whenever you do chose to donate, however, be sure to make it count. Do some research online on the charity you choose. It pays to do a little bit of homework to insure that most of the donation is going to be used to help the cause, rather than go to fees and administration, and to be sure that it is going specifically to the cause of your choice rather than to the organization’s efforts in general.

Avoid giving money in response to a telephone solicitation. It is typically a solicitation company employee calling rather than someone who works for the charity. Commonly over 50% of a donation goes to the solicitation company rather than the charity it represents.

So give back whenever you can. Make that donation and make it count.

by Ted Hunter

March 22, 2011

I recently came across a blog post that offered such valuable advice I simply have to comment on it here. Thanks to the folks over at brokeprofessionals.com for sharing the story about a parent being duped into overpaying an exorbitant amount of money for insurance—a policy sold to them by a “friend.” This situation happens all too often, I’m afraid, but their story offers an opportunity for you to learn how to avoid falling into a similar trap. If nothing else, the Broke Professionals anecdote underscores a very important and often overlooked truth: No one cares more about your money than you do.

In order to safeguard yourself from scams and overpaying, follow a few simple steps. Do your homework. Research who you’re going to hire. Then, when you’re speaking with the candidate ask for references and a track record of their success. Even if the person you’re considering is a “friend,” acquaintance, or a “good guy”—you still need to protect yourself and your money.

Though I’m sorry this unfortunate incident happened, I hope that others can learn from it. Remember, no one is ever going to work as hard for your money or keep your best financial interests in mind than you are.

Newer Posts

Older Posts

The Rules of Spending Wisely: Financial Literacy Essentials (2 of 3)

The Rules of Spending Wisely: Financial Literacy Essentials (1 of 3)

The Rules of Money, A Road Map to Financial Literacy (1 of 3)

Simplify Your Life for Less Stress and More Money

Make Your Donation Count: Helping the Japanese Relief Effort

When “Friendship” Costs You Money