Money matters. You know it. I know it. Now what are you going to do about it?
You can do what I did and read a boatload of blog posts on money matters. Like this one I wrote a while back. Or you can just keep reading this post. Because I’m going to give you a ton of ideas on how to manage (ie. make, save, grow) money. Ideas that have worked well for our family.
You may not be able to execute all the action items, but if you pick a few, accomplish them, and then pick a few more, progress will happen.
Money Matters Action Item #1: Decide to improve your (possibly frightening ) financial situation.
Every life change—weight loss, smoking cessation, leaving a toxic relationship—starts with the decision to change your behavior.
My decision happened after my mother passed away.
When Mom left me some money, I didn’t want to simply park it in a local bank earning a puny .09% interest. I wanted it to grow. So her bequest to me became my motivator.
For others, it may be due to divorce. As a participant, trained “Listener,” and now Communications Director with the nonprofit Libera, I can’t tell you how many times I’ve heard women say,
“Now that I’m divorced, I have no idea what to do with my money. My husband always handled our finances.”
Money Matters Action Item #2: Enroll in a financial literacy course.
I am extremely thankful Tony Bear and I went through Dave Ramsey’s course, “Financial Peace,” years ago. Thanks to Dave’s teachings, Tony and I eliminated all of our outstanding debt except for our home mortgage, a decade ago. Then last year, we paid off the house, too. Woo hoo!
There are plenty of other options for finance classes. My oldest brother always liked Crown.org.
Money Matters Action Item #3: Track your spending.
In this blog post on journaling, I reviewed the benefits of keeping a spending journal. A notebook detailing your expenditures points out your purchasing patterns, including problem areas. So does a checkbook, if you still use one. When Tony and I were going through “Financial Peace,” he peeked at our check register and said, “You need to get books from the library instead of Amazon.” Ouch! And, fair!
A spending journal not only reveals your financial missteps, it can also prevent them. More than once, the thought of having to record an extravagant impulse purchase prevented me from buying something I didn’t need.
Money Matters Action Item #4: Utilize the “Envelope System” for your monthly expenses.
This may be the most useful concept we learned during “Financial Peace.” During the course, Ramsey teaches you to use your checking account for one reason only: to pay bills. Therefore, no more ATM withdrawals, no more Sam’s Club binges with your debit card. With each paycheck, you deposit the amount of money you need to pay (via check or online automation) your bills during that pay period. The remainder of your check you’ll ask for in cash.
The cash then goes into “envelopes.” The envelopes can be literal paper envelopes. Or as one clever “Financial Peace” alum recommended to me, you can use an accordion-type coupon organizer (or three) to organize your money. You can also manage your envelope system digitally with apps like these.
Create your various spending categories based on the notes you make while tracking your financial activity. Things like: food, gas, clothing, entertainment, gifts, etc..
If you’d like a list of our envelope categories, email me here.
Going forward, when you shop at the grocery store, you’ll use money from your food envelope. If you see a movie, you’ll pay for your ticket out of the entertainment envelope.
What happens if a specific envelope is empty? You don’t eat. Kidding. Or you don’t go to the movies. Not kidding. Or, you “Rob Peter (another envelope) to pay Paul.” If you do this, make sure you tuck an IOU note in the empty envelope to repay when you can.
Within weeks of implementing the envelope system:
We no longer felt like we were living paycheck-to-paycheck.
Thank you, Jesus!
Money Matters Action Item #5: Decrease debt.
Here are a number of ways you can pay debt down.
- Implement Dave Ramsey’s Debt Snowball Method. We did it. It works.
- Pay off credit cards every month. Knowing you have to pay off your balance each month can keep you from overspending. Note: We use cash from our envelope system to pay our credit card balance—ie. You’ll pay for your new jeans from the “clothing” envelope. You’ll pay for your supper at Applebees from the “entertainment” envelope.
- And of course, make sure you’re using the best possible credit card(s). Here’s a guide.
- When possible, pay extra principle on mortgages and car loans. Actually, any loans.
Money Matters Action Item #6: Involve your kids.
Another way to live more within your means—and model this behavior to your children—is to set limits on the amount of money you spend on birthday and Christmas gifts. To read more on this topic, read this blog post.
Money Matters Action Item #7: Be intentional with your money.
Here’s a list of relatively easy ways to save money.
- Cancel your cable: Tony recently cancelled our Direct TV. Know what we’ll save each month? $164. Egad! And, glory! On Facebook I crowd-sourced options for TV viewing and we may pick up YouTube TV at $50-ish/month.
- To save even more money, purchase your own cable modem so you can stop paying monthly rental fees ($150+/year). My friend Jay says this modem is the one he bought.
- Decrease the number of meals you eat out: Restaurant meals are expensive (and fattening). Go down to once a week. Better yet, once a month.
- Plan your meals in advance and stick to the grocery list. This certainly will decrease your food bill, not to mention your exclamations of:
“What the heck is for supper tonight?”
- Grow your own herbs: One bunch of fresh herbs typically costs $1.99-2.99. We save considerable cash by growing our own herbs right outside our back door.
- Grow your own berries: Almost all of our suppers include some kind of berry, but berries aren’t always cheap. That’s why I put blackberry, strawberry, and raspberry beds in our back yard.
- Follow the 24-hour rule: So many purchases are impulse buys. If you see something pricey you LOVE online or at the mall (if you still go to the mall), make yourself wait 24-hours before you buy. Sometimes the urge magically goes away.
- Go to the movies on Tuesday. Many theaters greatly reduce the cost of their tickets, and likewise, the concessions, on Tuesday, their slowest night.
- Borrow, don’t buy: This rule applies for books, special event clothing (You can borrow from a friend or from RentTheRunway.com.), and occasionally-used appliances like hedgetrimmers.
- Second-hand shops are a great way to avoid paying full price on clothing.
- If you pay out-of-pocket for prescriptions like we do, go to goodrx.com and register for a discount card. Using GoodRX, we have saved hundreds of dollars.
- Inspect your next credit card statement closely for incorrect charges. If you find any, immediately dispute them with your credit card company. Also look for memberships (ie. gym) or subscriptions (ie. magazines, cosmetic boxes) that you no longer use or love. Cancel them.
FYI: We are now moving from the save-money realm to the grow-money realm.
Money Matters Action Item #8: Max out employer-matched retirement plans.
Some employers match 3-6% of employee contributions to retirement plans. If your job offers this, absolutely opt for the maximum amount that will be matched. Since this is basically, FREE MONEY.
Money Matters Action Item #9: Open a savings account with a decent interest rate.
The average bank in America is paying .09% on funds held in a savings account. Consequently, there are far better places to keep your money. Ramit Sethi—I love his book I Will Teach You to Be Rich*— recommends these online banks.
Money Matters Action Item #10: Automate your savings.
Aim to squirrel away at least 10% of your income. Once you have a savings account with a decent APY (annual percentage yield), set up automatic transfers—from your checking account to savings account—once a month, or every time you get paid.
Chances are, if you can’t see the money, you won’t spend it.
To get a jumpstart on saving, participate in this 52-Week Saving Challenge my financial whiz friend, Jay Cooke, shared with me.
Money Matters Action Item #11: Check out this investment chart.
Once I saw this chart, everything changed.
Realizing we had some catching up to do, I not only automated money transfers from our checking account to our online savings account, I also automated deposits into our investment account.
Money Matters Action Item #12: Find more money to invest.
Ramit Sethi says it’s far easier to make (more) money than it is to save money. Because:
Living monastically is not easy, and it’s not fun.
To make more money, consider a side-hustle. Might one of these be an option? Once a week could be doable.
- Car detailing
- House cleaning
- Serving at a restaurant
- Yard work
- Teaching music lessons
- Driving an Uber
- Making elderberry syrup
Money Matters Action Item #13: Don’t waste your windfalls.
If you get an inheritance, a bonus at work, or a refund on your taxes, resist the urge to
kiss it goodbye spend it on a fabulous meal or weekend getaway. Instead, blow 10% of it with enthusiastic abandon, and deposit the rest into savings or your investment account (see below).
Money Matters Action Item #14: Invest. Wisely.
Financial whiz Sethi recommends the following investment options:
Roth IRAs: Ramit says after you “crush your debt,” and after you max-out your employer-matched 401k plan, you should consider depositing money into a Roth IRA. Not everyone agrees Roths are the best way to go, hence, do the research for yourself and decide whether you want to take this route or not.
Index Funds: After seeing the above chart in Sethi’s book, I followed Sethi’s super simple directions and set up an account with Vanguard. I then took their investment-risk quiz and invested in an index fund that reflected our investment personality.
Regarding index funds, Sethi says this: “Index funds are like cheating…You get more while paying less. Your money grows faster than doing it yourself or using professional managers. The fees are also crazy low, so low that you won’t even notice them.”
Money Matters Action Item #15: Consider establishing an “Emergency Fund.”
If you go through the “Financial Peace” course, setting up an “emergency fund” will be the first action Dave wants you to take in case you suddenly encounter a catastrophic expense. An emergency fund will keep you from cleaning out your savings account or putting a large charge on your credit card.
Money Matters Action Item #16: Consider Health Savings Accounts
My cents-savvy friend Jay highly recommends HSA’s if your employer offers them. Jay says, “They have triple tax savings, the money is YOURS no matter if you leave the company or not, and you can continue to save in your HSA over the years to have a nice nest egg to spend on (ever increasing) healthcare costs as you age.”
Money Matters Action Item #17: If you plan on buying a car.
One of the things I decided to do with some of the money my mother left me is buy a new car. For the first time in 30 years. I followed Ramit Sethi’s system and ended up with a super sweet ride at a fantastic price. Read the story here.
Money Matters Disclosure
Finally, I am not a financial professional. I don’t even play one on TV. The ideas presented here are to get you to start thinking about your financial future. Check out books from the library. Read blog posts on the topic: Dave Ramsey’s or Ramit Sethi’s. Find a financial planner with a great reputation.
Do whatever it takes to get your bucks in a row sooner than later. Because money matters.
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