Money Matters 101

In the never ending pursuit to live a comfortable lifestyle, I’ve been asked countless times how I save money. This question seems easy — just don’t spend it. However, there’s more to it and it’s not as simple as it seems.

For starters, there’s a difference from what you need from what you want. I want a new MacBook Pro and I want a new Rolex, but I don’t need it. Needs are possessions and services deemed essential. A few good examples are car insurance, my medication, and a cell phone. These things are absolutely necessary for my life and is a requirement for going about my daily life. I already have a MacBook and a fancy watch I never wear except on the most special of occasions. Buying something newer is just wanting what’s new and fresh.

I feel the urgency to want something and anticipating it is the main problem with out of control spending or being frivolous with my funds. If left uncontrolled, you run the risk of making it a habit to always want what you do not need.

The cost of the MacBook I want is about $4000. This figure is high because my last computer was fully maxed out when I ordered it. Take the cost of that computer or whatever it is you want and see how many hours you have to work in order to buy it. Remember your time is valuable and is a cost associated with trading your working hours with the cost of purchasing items. Do I still want it? No.

Tracking your spending is absolutely required. I’ve used Mint to log every transaction made on my credit card for almost a decade. I have close to ten years of history to show me my spending habits and if my previous months are above or below my average spending. Charts and data are your friend. Without it, the number in your bank account feels less like money and you can’t picture what dollars look like in your hand.

Speaking of banks, your typical bank offers less than 1% interest. Letting it sit idle in the course of a year means your $100 loses $3 at the end of the year. Inflation is the enemy. If you can’t beat it, you’re losing money by not making it work for you.

Go open up an online savings account and skip the one your local Chase, Wells Fargo or Bank of America offers. The fees are higher, the minimums are lengthy, and they absolutely are designed to keep trapped in a cycle of fees and penalties. Ally Bank is one of the most popular online banks, but even your local credit union might have competitive rates and accounts to fit your needs.

If you rather invest, here’s the blunt reality: do it now. The longer you wait to invest, the less you’re going to have when you retire. Every month, I invest a significant portion of my income into various stocks, mutual funds, and investments. You tend to have people tell you this, “I would but I can lose it all. It’s too risky.” While only somewhat true, money invested into an index that tracks the overall stock market is more likely to make you money in the next 30 years than you’ll lose. It’s not a matter of what you buy into but how often you keep investing. Thanks to the market crash this year from the coronavirus, I’m up 12 to 20% depending on which portfolio I look at.

If you don’t have 3-6 months of expenses saved up, do it now. The pandemic should be a harsh lesson for anyone who is unable to make ends meet. Granted there are multiple reasons why some live paycheck to paycheck, but expect other viruses to occur in the future. That is the truth. If you spend every dollar you make and don’t at least make an effort to save, you’re doing yourself a great disservice and these bad habits will boil over when you’re older.

The fact is you have to try. Discipline yourself to keep track of your finances and don’t go over budget. If you’re banking on the government to come save you, you’re delusional and in for a world of hardship when this repeats. Life isn’t all about money, but when the going gets tough or you have some unexpected expense happen, you’ll be thankful you can just take care of it without issue than keeping yourself at night wondering how you’re going to make it.

Later world.

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