First, and not the most important: You might learn something, some specific little tip or trick, that might save you money. Just maybe, there might be something here that is directly applicable to your life and your circumstances.
Second, and more important: You might change your way of thinking about spending and saving money. That might allow you to come up with your own ways of using your limited resources (e.g., money, time) more efficiently. That’s what it’s really about: using what you’ve got more efficiently, doing more with less, so you can save more.
Third, and most important: Personal finance blogs, books, radio shows, and the like can inspire you. There’s an old saying, one version of which goes like this:
Your thoughts become your words;
Your words become your actions;
Your actions become your habits;
Your habits become your character;
Your character becomes your destiny.
Another version is:
The thought manifests as the word;
The word manifests as the deed;
The deed develops into habit;
And habit hardens into character.
Start with the first part: Your thoughts. You can exercise a great deal of control over your thoughts. One way is by controlling what you put into your mind. Read books about personal finance, money management, saving, and investing and your thoughts will turn to those subjects. Read blogs about the same topics. Listen to radio programs about saving and investing. Be inspired.
The gas company has been installing new gas meters on my street and because of some miscommunication (probably someone in my house not paying attention to a note that was left on our door), we’ve had no gas for the past couple days. That means no cooking on the stove and no hot water. Coincidentally, we weren’t doing any stove cooking these past couple days, so we only noticed the no-gas situation when the water in the shower stopped being hot. A call to the gas company got everything sorted out. My house didn’t actually need a new meter, so the gas will be turned on and we will be able to cook and shower as normal starting tonight.
But a couple days without gas-heated water made me think: It’s really not too bad to shower with only cold water in the summertime. (Obviously, it would be a different thing in January. I’m very glad the gas company is replacing the meters in the summer and not during the winter.) The water is a little cooler than I’d like, but I got used to it. It might even be good for a body to get cooled off a little more than is comfortable.
So, the thought struck me: Regularly showering with cold water (in the summer) might save some money. Not much, considering the summer gas bill is less than $25 per month. Aside from showering, we still cook with gas and use hot water for clothes washing and doing the dishes. So, at most, maybe half of the bill goes for hot-water showering. You have to ask yourself: $12 for hot water used for showering … or $12 towards being mortgage-free. It’s a question worth thinking about. Even if the answer is “hot showers”, it’s good to always be working at finding ways to save money.
I won’t mention the website by name, but let’s just say there’s now another website business that allows you to pay big $$$ for convenience.
What their ads say is the problem: You’re at home, relaxin’, and you don’t have any chips! There isn’t any candy in the house! No soda! No ice cream! You’re out of chocolate!
The real problem: You didn’t buy those things at the grocery store … or better yet, the big buy-in-large-quantities warehouse club.
The convenience you can pay for, if you’re foolish enough, is the service of ordering your chips and soda online and getting them delivered to your door shortly later. The price you pay is far higher than what you would pay at a convenience store or vending machine, which is already far higher than you would pay at a grocery store or warehouse club.
What’s the difference?
From the delivery service:
$1.39 for a 1.5 ounce chocolate bar
$1.49 for a 2.0 ounce bag of chips
At the convenience store or vending machine:
$1.25 for a 1.5 ounce chocolate bar
$1.25 for a 2.0 ounce bag of chips
At the warehouse:
$0.60 for a 1.5 ounce chocolate bar ($18.00 for 30)
$0.25 for a 1.0 ounce bag of chips (or $0.50 for 2.0 ounces, $13.00 for 54)
The delivery convenience costs 2 to 3 times as much. If you buy just a small amount, then there’s an additional delivery fee. Buy a large amount (at those prices!?) and the delivery is free.
What does it take to save money?
Planning ahead. If you want to eat snacks, buy them ahead of time before you get the nighttime munchies.
Discipline. If you don’t buy them ahead of time, don’t give in to temptation. Force yourself to do without. That’s how you train yourself to remember to buy things ahead of time.
Self control. When you have a large quantity of snacks, make them last. Don’t let yourself eat them all at once.
Popcorn — the kind you buy in bulk and make yourself — is a very economical snack. Less than 40¢ per serving (and I mean a man-sized serving) for the popcorn kernels and quality popping oil.
But to do it right, you need a good stove-top popcorn popper. I have a popcorn popper like the one in the picture. Stainless steel, with a very study handle to turn the paddles that move the kernels. (And note that the handle is directly connected to the paddles, no gears to wear out and break.) It cost about $80, but it’s a piece of quality cookware.
Over the past few decades I’ve had at least 3 or 4 popcorn poppers: the hot-air popper, the motorized electric popper, some microwave contraption, and probably some other thing. Nothing tastes as good as popcorn made on top of the stove. Anything electric will eventually break. Plastic is junk. There’s no need to pay for something that uses electricity to make heat when you already have a stove.
This stainless steel popper will probably still be in working order decades from now. Despite its relatively high cost, it saves money because it will last longer than other poppers and it makes the popcorn that tastes better and costs less than microwave popcorn (and much, much less than bagged popcorn or potato chips).
I’m sure it could be explained away as the workings of my subjective mind. Just my imagination. But it sure seems like my luck is better when I have money in the bank, ready money, cash on hand — as opposed to living paycheck to paycheck. I don’t just mean that having ready cash allows me to take advantage of opportunities that present themselves (“luck is what happens when preparation meets opportunity”, as Seneca the Younger tells us). I mean that I seem to be unlucky in the sense that bad things happen when I don’t have much money, but someone those bad things seem less likely when I do.
Take, for instance, a car repair (that I can’t do myself).
At times when I haven’t had any money in my savings account and was spending everything that was coming in for rent, food, gas, and the other essentials … that’s when my car wouldn’t start one day and after getting it towed to the garage I’d hear that it needed over 1,000 dollar’s worth of repairs to make it go again.
But, if I’ve got plenty of money in my savings account (I mean, at the same credit union where I keep my checking account — not my retirement savings) and I find money left over each month after I pay all the bills … if the car won’t start then … the news from the garage is that the car only needs some $100 part and it will be good as new. And that’s when I’m glad that I have all the money for any repair that might be needed.
It’s as if Fortuna smiles on me if I’ve saved money for those emergencies, but she punishes me when I have nothing saved.
At one time or another most children will say, “I want to be rich” or something similar. When you hear children say that, you can plant a small seed in their minds by asking them a couple questions. Say something like:
I can tell if you will be rich or not by the way you answer a couple questions. But remember, even if you give the wrong answer, you can always change your answer if you change your way of thinking. Would you like to try to answer the first question? Good. Here it is: What is money’s purpose? What is money for?
The child will probably answer that money is to buy things. You can then check to see if they mean things like toys, clothes, houses, vacations, etc. If they say that’s what they mean, then you say, I’m sorry, you probably won’t be rich.
The child will then want to know the right answer. With proper seriousness, you say:
Money is not for buying things. The purpose of money is to make more money. If you always remember that and act accordingly, then you will have plenty of money to buy things. But always remember, money is for making more money. That’s the kind of thinking that will make it possible for you to become rich.
I don’t buy things from vending machines anyway, so what should I care if people who use a credit card get charged more? Vending machine prices are the worst kind of retail markup. Far better to avoid the convenience and eat and drink things brought from home. But if you really want to pay for it, you can pay an extra 10 cents — that’s like an additional 6% — for using a credit card.
A couple years ago the U.S. Treasury Department started a program called MyRA (My RA,
sounds like “IRA”). It’s a savings account that allows anyone to save small amounts of money in a retirement account that pays interest similar to U.S. Treasury bonds. (It’s basically the government securities fund that’s part of the TSP retirement savings program for government employees.)
The MyRA account is much like a Roth IRA: you can deposit only after-tax earnings into the MyRA, so there are limited tax benefits for putting money in; however, all accumulated earnings can be taken out free of taxes (if the withdrawals are made under certain conditions, such as the account owner being over a certain age — this is a retirement account, after all).
Several news articles have criticized the MyRA program on the grounds that it can’t completely solve the nation’s retirement savings problem. One criticism is that there are no investment options to allow accounts to be invested in stocks or corporate bonds. The interest rates on U.S. government bonds are only slightly higher than what is available on passbook savings accounts at banks. Another criticism is the maximum account value, above which you are not allowed to make additional deposits. This maximum is so low ($15,000) that the MyRA by itself won’t make much of a difference in a retired person’s financial affairs.
However, I think those criticisms are more than offset by the MyRA program’s advantages. First, the minimum amount required to open an account or make a deposit is very low. Like, $2, I think. That’s obviously lower than the required minimums at commercial banks and much lower than what’s needed to open an account at mutual fund companies. Similarly, there are no fees charged to open or maintain an account. What bank is going to open a savings account for someone with an initial deposit of $10 and then allow that person to make $20 monthly deposits — and without charging any fees?
If you have the minimum amount required to open an account at a mutual fund company (which is $1,000 at the very lowest and more likely $2,000 or $3,000) then I highly recommend you go directly to the Vanguard website and open an account right now.
For everyone who can’t easily gather up $3,000 to start their retirement savings accounts (e.g., most people who earn less than our country’s average earnings, a group that includes many young people), MyRA is an easy and safe way to get started. $50 a month, maybe a bit more now and then, will grow to over $2,000 in 4 years. That balance can then be transferred to a private Roth IRA at Vanguard or any other investment company. This is the real purpose of the MyRA — to help people get started and allow them to save a sum that can be transitioned to “real” investments. Once there, of course, it can be invested in stock or bond mutual funds where it will earn returns that will make a real difference in retirement.
That’s the beauty of the MyRA. It gives everyone the opportunity to start saving and investing.
Many years ago I purchased a pair of men’s oxfords, which I guess are the standard shoe to wear in a professional office. At the time, it was a fairly major purchase for me, but I got lucky and found a particular style that was being discontinued by the manufacturer and was on sale on Amazon for 50% off. And, as a bonus for applying for and being approved for an Amazon credit card, I got an additional $30 discount. So the shoes only cost me about $15 or $20. Knowing that replacing them would cost at least $100, I wanted to take good care of them. So I decided I would keep them at the office under my desk. One day, it must have been over 10 years ago, I wore a pair of men’s moccasins to the way to work, carrying my new oxfords in a bag.
I have kept those oxfords at work ever since, wearing them at least a couple days a week — and they have never been outdoors. Their soles have never touched anything other than carpet and tile. They’ve never been exposed to dirt, dust, rain, snow, or mud. I wear my mocs on the commute, going thru a pair about every year, and change into my oxfords at work, although some days I wear my mocs all day. When I do change shoes at work, it’s always very pleasant to get out of the mocs I wore on the commute and into the cool, dry oxfords that have been waiting overnight. Then, at the end of the day, the mocs are rested and nice to put on when I take off the oxfords and place them back into their under-desk home.
I even bought some shoe polish to keep in my desk and I use it to give my oxfords a fresh shine once or twice a year.
It now looks possible that these oxfords will last until I retire. One pair of dress shoes, 25 years. I reckon that’s saved me several hundred dollars, compared with the alternative of wearing my good dress shoes on my back-and-forth commute every work day.
Timeless Financial Advice for Everyone.
By Mark Hiatton
January 18, 2001
Twenty-five years ago, I sold radio advertising and had a client who seemed to have it all. Owned two of the town’s best restaurants, drove a Porsche and a BMW, the hot cars then, was always taking a week or two off to go skiing or something and was only one year older than me. I’d spent a lot of time with the guy–he wasn’t a great brain, terribly clever or witty. But he knew how to handle money.
After calling on him for a couple of years, I figured I knew him well enough to ask him how he did it. I expected to hear he was deeply into commodities trading, or had an uncle who worked on Wall Street, a wealthy family or something like that, but he said it was really very simple. Once a year, he read The Richest Man in Babylon, and the rest of the year, he tried to apply it in his daily life.
Well, you know how it is with people who Get Relgion. I wasn’t in a place where I could accept that something so simple as reading a hundred and fifty pages of Ye Olde Storey could actually turn my financial life around, but I bought a copy. And about a year later on a rainy Saturday, I started reading it and couldn’t put down. I know that’s a phrase you see repeated in countless Amazon.com reviews, but it was true. The characters from the book reached out across thousands of years and grabbed me by the lapels and shook some sense into me.
I have tried to re-read the book at least once per year, every year since then. Something else: I’ve tried to give away two copies per year, to people I know and love who I feel can benefit from not making the same mistakes I made in my mispent youth.
There aren’t any magic formulas in this book. There is nothing about options or day trading or investing new whatever the latest new technology is. It’s almost math-free. Kind of ironic, when you turn the pages of the average business best seller and try to figure out the charts and graphs and algebra.
This is a book that ought to be used in our schools. It’s written in a wonderful old-world style and the characters are real heroes, grapling with many of the same issues we struggle with today–they’re just doing it without cable-TV and the internet. You want a new Lexus? These folks talk about how hard it is to survive without one of the newest-model chariots. It’s the same thing, really.
Do yourself, your spouse, your children, your neighbors a favor. Buy a few copies of this one. Keep one for yourself, and give away the rest. Mark yours up. Underline it. Make notes in the margins. Try to re-read it whenever you feel yourself being tempted to pop for ADSL or new cellular phone or a ski trip or the latest and greatest widget.
Read a single financial book, and you get a few good ideas. Read two and you get a few more. Read several and you start to get very little new information. I’ve read dozens of titles, from Andrew Tobias to Martin Zweig. But I’d recommend you start right here. If you never read another book on money, you will have a very sound basis for a very good life, after spending a day in ancient Babylon and watching how they learned to handle money thousands of years ago. This is the money book to buy if you’re only buying one.