Financial guru Dave Ramsey once observed, “80% of personal finance is behavior,” as opposed to mastering arcane money knowledge. The principles of building for the future are really pretty simple. Set your goals, determine what you need to achieve those objectives, establish a savings/investment strategy, and – here’s the toughest part – stick to that plan. Disciplined behavior is really the linchpin that holds everything together.
With a bit of that discipline, and a sharp eye, you can probably make several small lifestyle changes that will turbo-charge your savings effort. Here are a few suggestions to get you started. Remember, for these changes to pay off, you need to truly embrace them for the long-term.
Pay yourself first.
You can’t spend what you never see. Go to your company’s payroll department immediately and arrange to have 10% of your net paycheck direct deposited into a savings account or brokerage account. If your employer can’t do that, your bank certainly has a mechanism to accomplish the same objective. Remember: these savings should be in addition to making the maximum contribution to the company 401k.
Ease up on the coffee runs.
Make Starbucks a special occasion thing, say, every other Friday morning. While the coffee shop boom was fueled by a demand for high-quality java, you can now make top-notch coffee at home for the fraction of the average $3.25 per visit to a national coffee shop. Buy a small coffee grinder and a bag of brand name whole bean coffee, and you’ll get close to Starbuck’s quality for well under a buck a cup. Of course, networking and socializing are part of coffee shop culture. No need to forego those important get-togethers. Just remember (discipline), you don’t need to spend $5 or $10 while catching up with your buds.
Bring the party home.
Speaking of socializing, there’s no law or etiquette rule that requires you to meet up with friends at the hippest restaurant in town. That’s cool now and again, but why not stay in touch, and save everybody money, by holding regular potluck dinners? Your crew can take turns hosting, everybody brings a dish, and its BYOB. Boom! A relaxed good time without the credit card receipt hangover.
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Cut (or trim) the cable.
Take a long, hard look at what you are paying to watch TV. Do you really need cable or DirectTV? Maybe so, if you are a serious sports or news junkie. Otherwise, consider dropping cable for a mix of digital on-demand services – Netflix, Hulu, HBOToGo, Amazon Video -- that meets your particular needs. A Netflix streaming subscription ($10 per month) and four new-release movie rentals from Amazon ($24) adds up to a lot less than even a modest cable subscription.
If you must have cable for live sports and/or news, make sure you aren’t paying for more service than you need. Lower your service level if you have channels you never watch. Even if you are happy with your current plan, call your provider and see if you can wrangle a rate reduction. Cable providers are finally feeling the heat of competition. You might be surprised at what they offer.
DIY or shop it.
What chores have you outsourced? Are you paying $20 for a car wash? How much does the lawn guy charge? Yes, your time is valuable, but when you realize you could be “earning” $40 an hour cutting your own grass or washing the car, it’s worth considering. If you do need help with a one-time repair or project (clearing out the basement or cleaning the gutters) take a look at chore outsourcing websites like TaskRabbit. Yes, it might be easier to hire the handyman whose Google ad shows up first, but (discipline) a little effort can reap big savings.
How much will each of these ideas save you? Not a fortune, for sure. Remember, the real power is in the cumulative effect. Saving just $15 at the coffee shop per week adds up to $780 per year. Saving a $100 a month on dinner with friends is $1200 per year. That’s almost $2,000 per year that could be applied to your long-term savings.
There is money just lying there on the streets of your life. All you need to pocket that dough is, yep, a little discipline.