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Financial Worries

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Who doesn’t have financial worries? Maybe a few, but it seems no matter how much I earn, I’m always able to raise the bar on my standard of living such that I can quite easily spend everything I make and then some. I wonder if anyone ever has enough?  If the number of Ponzi schemes are any indication, then it seems not.

When I was a University student, I lived on 2-minute noodles and frozen peas.  I couldn’t afford to buy a cup of tea or a muffin, so I took tea bags and snacks to University.  I remember the days fondly; it was a fun time in my life.  I was striving for a better life, and I dreamed of what life would be like when I landed my first real job.

As graduation got closer I made a pact with myself.  I vowed that when I got a real job, paying what I hoped would be big money, I would live the same as I did at that moment.  I wanted to save most of the salary to pay off my whopping $30,000 student loan, lickety-split. Then I’d save to buy a house and all the things life could offer.

After graduating, I landed one of those big jobs as a pharmaceutical rep with a company car and an expense account.  Well, let me tell you, those fantasies of living as I had in University when out the window faster than I could dream….and I can dream BIG and FAST!

Overnight, I got the big paycheck and, of course, I needed the clothes to go with it.  Next, I needed the handbag to go with the clothes and, of course, the wine and the dinners and the list went on and on and on.

Do you want to hazard a guess as to what happened to my big savings plans?  If you said it went right out the window, you’d be 100% accurate.  I went from broke to super broke almost overnight.

As a starving student, my lifestyle fit my budget.  As a salaried employee, I lived the life of having money, but all I really had was a bunch of debt.  In my mind, my great mind, I had a real paycheck, so I could buy the things I wanted.  I had actually qualified for my first shiny credit card, so I figured I could afford it.  Wrong!

Giving a new graduate a credit card is like letting a four year old loose in the candy store with no parental supervision.  The child will buy every piece of candy available even though he or she could never possibly eat it all.  And if they did, they would be ghastly ill.

It’s the same for an adult who has lived in near poverty for something like 7 years.  Give them a credit card with a spending limit way beyond reasonable, and they will max it out almost immediately.  At least I did.

Irresponsible, yes absolutely!  Guilt!  I found myself maxed out the first month.  I won’t talk about how long it took me to pay off those student loans and the credit card bill.  It was many years. However, one of the great things about life is when you screw up, it’s a learning opportunity….and learn I did. Paying those loans down and eventually off was not fun, but I learned a few very valuable lessons along the way.

Instant gratification isn’t always as good as you think it will be. The real kicker is in having to pay for the moment for months or years to come!  I still struggle with the concept of see what you want and then wait for one month or even 24-hours before purchasing it.  Ya right, I’m an impulse buyer and I know it.

I recently purchased an i-phone 5 without any thought.  Do I need it, NO! My friends will tell you 9 times out of 10 I don’t even answer my phone, so why the heck did I impulse buy?  Answer: because I could, I had a credit card and I had a no brainer moment.  I got excited, and those emotions carried me away.  Before I knew it, I was the proud owner of a fancy i-phone with a snazzy cover.

Am I satisfied with my purchase?  Yes.  Was it worth it?  No. Do I regret the purchase?  Not sure.  I do, however, regret parting with $825 for a phone when a very short while later my friends told me that Samsung is a better product for about half the price. Clearly, I didn’t do my homework. What can I say, I’m still learning!

Designer clothes are a waste of money.  Sure, you feel good knowing you’re wearing a pair of $350 pants that, assuming you hung them up overnight, require no ironing.  That was the selling point for me; I hate ironing!

A good friend of mine taught me the 1 dollar a use principle.  It goes like this: only buy something if you know you’ll get a dollar a use of it.  So, if you buy an 80 dollar pair of shoes, you’ll need to wear them at least 80 times to justify the purchase.  Thanks Michael, this mantra has saved me thousands of dollars in silly purchases!  Good thing my new phone will last many years.

Going out for lunch or dinner is great fun, but it will leave you with a big hole in your wallet.  That’s assuming you paid in cash, not a credit card. Eating out, especially in nice restaurants, more than periodically will put you in the poor house and may impact on your health status.

The high prices and the high salt and fat content of restaurant meals all lend weight to limiting the frequency of this activity.  Instead, take a packed lunch or go for a walk with a friend.  Better yet, do both.  If this isn’t your style, have a friend around for dinner and cook their favorite meal.

Shopping without a grocery list or when hungry will be sure to result in you arriving home with a lot of delicious treats.  Treats that may not fit into your weekly meal plan or that you may not have put on your shopping list at all.

I love shopping when I’m hungry, I come home with all kinds of goodies I wouldn’t normally purchase either because of their expense or because they’re high in fat, sugar and salt.  I guarantee my grocery bill will be at least 20 dollars more if I’m hungry or have no shopping list.  Doesn’t sound like much, but multiply it by 52 weeks, and you have a $1000 lost savings opportunity.

A visit to Starbucks for a coffee is a great way to drop an easy 5-7 dollars per visit, and that’s if you’re alone.  I love their yogurt with granola and an Americano coffee.  When I lived in the New York there was a coffee shop on every corner, and it was easy to drop 20+ dollars a day on nothing other than coffee, water, juice and a muffin.  Ouch!!

Instead of spending that money every day, I bought a coffee maker and enjoyed a quiet freshly brewed coffee in my own home.  When I slept late, I took my coffee to work in a stainless steel insulated coffee cup.  I happily walked by those shops knowing I’d just saved 5 dollars.  How much do you spend a week on coffee or other drinks you buy on the go?

Gifts for friends or throwing birthday bashes are always fun, but unless you set a spending limit, these can get out of control. I love buying presents and having parties, but that doesn’t mean I should go into debt.  It’s the thought that counts, not the dollar value.

Credit cards have high interest rates and banks give you a high credit limit knowing you will likely overspend and be unable to pay it off at the end of the month.  Interest payments can be as high as 18% or higher.  If you only pay the minimum payment, it will take you a long time to pay off the original purchase and you may pay equivalent to the original purchase price in interest.  Ouch! That’s how banks get rich.

After the i-Phone purchase, I don’t carry a credit card in my wallet anymore.  Sure, I have one for travel purposes and for purchasing big ticket items, but my credit card is better left at home.  Call me weak, lacking will power, call me what you will, but if my card isn’t with me, I’m less likely to impulse buy.

My alternate to a credit card is cash or a debit card; generally speaking I buy everything with cash and use my debit card only at an ATM.  Paying for purchases with cash means I lose out on air miles, but it also means that I don’t spend beyond my means and I don’t have credit card debt. For me, having no credit card debt means a better night’s sleep.

In summary, Life is about moderation.  I don’t apply any of these concepts rigidly, as is evidenced by my phone purchase. However, when applied broadly, over the course of the years these have amounted to significant savings that I wouldn’t have otherwise had.

Regular savings are the key to financial independence.  I’m not there yet, but I’m on my way.  I don’t keep my monthly savings in my checking account. Truth be told, I don’t even keep them at the same bank as my credit or checking account.

Instead, on pay day I transfer the amount of money I want to save for the month to an ING account.  By doing this, I have secured my savings and am forced to live on less than I make.

Every day you make choices that impact your pocket book and your health.  There are no bad choices, it just depends on what you want from life.

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