Who’s not always looking for ways to improve their financial status?
While we might not all share the same goals, I think we can all agree that saving money — as well as spending it wisely — is important. Period. As for me, I’m battling some financial “demons”, if we may call it, and tend to spend too much on groceries and online shopping. The good things in life are expensive and hard to resist! Argh!
So when I came across Life Pro Tips on Reddit and saw that users shared actually good and practical advice on handling money, I just needed to take notes. I’m sure you will find these helpful, too!
On Debt and Credit
1. Organise your debt by interest rate.
According to this one user, it is best to pay only the minimum to all accounts except for the one with the highest interest rate. For that one, you should pay as much as you can. While there are different styles and techniques in paying multiple debts, this one is effective in reducing the amount of your total debt and, at the same time, save money on interest payments.
The user also adds: “In addition, as soon as one account is completely paid off, add the entire amount you were paying to the next account with the highest percentage. Look at it as extra money to pay bills, not extra money to spend.”
2. Use your tax return to make a dent on any debt that you have.
Another user advises that when you get your tax return, instead of using it to splurge on items or even to buy food, it is best to use it to put it toward an interest-bearing debt. You can treat your tax return as a bonus, but it is far better to use it to “free up money every month” than using it in a one-time shopping spree.
Also, it helps if you know how much tax return you can claim. Do your research and ask around!
3. Do not co-sign on a loan for anyone.
Not even your friends and not even your family, not even your children — as rule of thumb, just do not co-sign on a loan for anyone. Consider this especially if someone who is prone to staying in debt asks you for a favour. It’s better to turn them down right away instead of finding yourself in a mess in the future.
As one commenter says, she co-signed on a lease for her daughter. Later on, she found herself owing the lessor $1000, a debt by her daughter’s ex-boyfriend and one roommate. They got away scot-free.
1. If you borrow money from someone, pay them back as soon as you can.
I used to think it goes without saying that if you owe someone, you should pay them back as soon as you have spare money. But some people do take advantage of your kindness, and these people often include your family and closest friends (are you seeing a trend yet?). I know a lot of people who owe their friends five-year-old debts and don’t bother paying — or just even putting a dent on the debt — because they’re friends.
More than the cash, it’s your reputation and integrity that is on the line. People often lose respect for people who don’t keep their word, so don’t be that person. Even if you can’t pay the full amount yet, make the effort to make small payments to reduce your debt! You never know how much they need that money, too.
2. On the flip side, if you lend money to friends or family, be prepared to lose either your money or the relationship.
We already talked about friends and family often taking advantage of our kindness. Unfortunately, this is true to most situations and even if you trust your friends and family 101%, it can still happen to you. As much as possible, avoid lending them money. If it cannot be avoided, be prepared for these two possibilities if you ask them to pay: one, they will never pay; and/or two, they will avoid you like you have the plague.
So if you have to lend your family and friends money, unless you lucked out on relationships, say good bye to either your money or the friendship.
On Spending Money
1. Do you find it difficult to stop spending money on impulse purchases? Count how many hours you worked to earn that amount of money.
This is a fairly good reminder from a user. When you buy things, remember that you’re not buying it using money but the hours of your life — hours you can’t take back!
But that’s not just it. Because what you’re buying was not accounted in your original budget, it’s not as simple as saying the cost of an item is two hours’ worth of salary. As another user commented, “what you’re buying isn’t worth 2 hours of your time if you make 15$ an hour and it’s 30$. It’s what you make per hour, minus what you have to spend to survive. If your rent, groceries, bills etc. take up 80% of your paycheck by the end of the month, it’s “your wage” x 20%. Then what you’re buying / that number.” In simpler terms, you also need to take into consideration what you usually spend or your cost of living. Use the amount after that to calculate how many hours of your life you are throwing away for an impulse spend.
2. Curb your impulse to spend by doing a placebo spend.
If you’re anything like me, shopping is one of your weaknesses. A long time ago, I used to binge eat whenever I get stressed or anxious. It certainly wasn’t healthy for my health, so I changed the food binge into shopping sprees. Shopping releases happy hormones for me, but it certainly wasn’t healthy for my finances!
So when I chanced upon this gem of an advice, to do a “placebo spend,” I just have to share it. For those of you who spend for the sake of spending, the user gives good tips like pre-paying your phone bill or filling up your gas tank. You can also get yourself a gift card from a store you shop at often. At least, your money went somewhere and you scratched the spending itch.
There are many good pieces of advice within the thread, too. If you’re the one who just loves looking at things and online shopping (like me!), go ahead and online window-shop and add stuff to your wish list. It gives you the same thrill without the commitment. If you get off by clicking on “Add to cart,” you can do that, too — just don’t check out.
Another commenter adds that for people who just like bringing stuff home (just like me again!), consider going to the library. Check out books and movies without spending a single penny! This prevents you from hoarding things, too.
3. Think first before you sign a gym contract.
January is that time of the year when gyms and fitness centres get filled to the brim. Most of these are people with New Year’s commitments, but only a small number actually sticks to the resolution. If you are one of the people who are committed to having a better physique for the new year, make sure you are 200% dedicated. Think first and don’t get intimidated by gyms who force memberships upon its users. Consider all the possibilities because gym contracts are expensive!
Also, if you do end up signing a contract (and 200% dedicated in following through), make sure you read the fine print.
4. Ask yourself the right questions. For example, “will I still use this in a month?”
Save for essentials (groceries and toiletries) and important seasonal items (like a Christmas tree, as one commenter cleverly pointed out), when you want to buy something, ask yourself this: will you still use it in a month? Trends come and go, and one moment you’re into one thing, the next day you’re not.
Do you really need that fidget spinner everyone’s talking about? Everyone’s getting a fidget spinner when this article was being written, so if you’re reading this at a time when it’s no longer a thing (hello, future!), it just proves the point.
5. Meal plan when you’re hungry; grocery shop when you’re full.
In the world of budgeting, we know the drill: over-budget and under-spend. In the corporate world, we’re told to under-promise and over-deliver. Now, this principle apparently applies to meal planning, too! A user gives this advice: meal plan when you are hungry and grocery shop when you are full. And it just makes total sense.
When you meal plan hungry, you get to consider everything that you and your family needs. Even when you include non-essentials like dessert and the occasional junk food, everything in your meal plan now has its place in your budget. Thus, there will be no unexpected items that will throw you off.
To make sure that you will absolutely stick to your meal plan and your budget, grocery shop when you’re full. This way, you’re only interested in buying the things on your list.
6. Check for bad reviews of the item that you’re wanting to buy.
This is personally what I do. I have had my share of buyer’s remorse in the past, but I got wiser and learned not to depend on positive reviews only. In fact, I now read positive reviews with a sceptical eye. Are these reviews honest? On the other hand, negative reviews are, quite often, 100% honest (at least, according to my experience).
If the item that you’re wanting to buy is on Amazon, for example, check out the negative reviews. More often than not, these reveal a consistent flaw in the item, thus saving you money and grief. This has saved me countless of times from buying bags with zippers that stop working in a month, cleansers that make you break out like crazy, and gadgets from companies with bad customer service. Thank you, internet.
On Personal Decisions
1. Don’t be so tight that you forget to raise the quality of your life.
We all know what the phrase, “tightening the budget,” means. It doesn’t exactly cause you to think of pretty things and comfort and anything remotely similar to luxury. But this one user begs to differ. He claims that when you tighten your budget, you should also commit to simultaneously raising the quality of your life. How do you do this without spending money?
The user suggests taking advantage of everything that is free or cheap, such as going to libraries, museums, art galleries, national parks, tidying up your home, building friendships, cooking good food, even playing music and wearing only clothes you know are flattering on you. Some things I might add: enrol yourself in free courses, learn a new craft or hobby, keep a garden, or volunteer! This way, you make the experience enlightening and fresh, instead of depriving.
2. Even after a promotion or a raise, try to stick to your old budget.
When a person gets a raise, the most predictable thing that he will do is to live according to his new wage. Just how often does this happen? Almost every single time. Our resources increase so we think it’s just logical to also up our lifestyle (a different thing from the one described in the previous number). We suddenly choose more expensive grocery items, buy more clothes, eat out more often… And then there’s nothing left to save. We try to think this is because our ‘new’ salary is just enough, but weren’t we doing just as fine when we were receiving a lower pay?
This phenomenon is so common that it’s weird to imagine someone maintaining a low maintenance life after earning more. However, as this user points out, if we stick to our old budget even after a pay raise and just keep the difference, we’ll be surprised at the amount we can save.
3. Save money when you can, not when you have to.
Another piece of advice that we all need to remember comes from this user, who thinks we need to save money when we can and not when we have to. More often than not, when we are in a secure position, such as a double-income household, a dependable job with steady salary, saving money is the last thing on our minds. If there is no need to save, then why do it?
But the truth is that nothing is ever secure. A double-income household becomes single-income or, in worse cases, no-income. You can get laid off in a minute, or a steady salary can become irregular and unsure. Then you find yourself in a position wishing you had savings to cushion the fall. Remember: saving when you have to is the worst time to save, so if you’re still in a pleasant position, start saving now.
4. Track your spending.
One of the most common pieces of advice in the world of personal finance is this: track your expenses. In most cases, it works because through it, you get to see how much you’re spending on necessities and how much you’re just throwing away.
This is especially crucial, as the user says, if you find yourself living paycheck to paycheck every single month. How often do you wonder where your salary went? As another commenter points out, even if you just spend $10 – $15 on lunch every day, that adds up to about $305- $457 a month, and that is a lot for many people. Sometimes, little adjustments in your spending can catapult you from broke to comfortable.
5. A new perspective on saving money: track the money you did not spend.
Apart from tracking your spending, if you’re the type of person who needs a virtual pat on the back each time you resist the urge to impulse buy, then try this new thing.
A user suggests tracking the money you did not spend. What does this mean? According to the user, each time you resist the urge to buy something or decide that you can do without something, no matter how much it costs, list it down. For example, I was lusting over a bag that costs $150. I could have afforded it, but I ultimately decided against buying it because I already had a bag. I will then list down $150 as money I did not spend. Total the amount and see how much you save by simply not buying things!
6. Set a recurring monthly transfer of 10% of your paycheck to your savings account.
Sometimes, we just don’t have the time to save. And I’m not taking that against you — I am a victim of my own schedule as well! Here’s a tip from a wise Reddit user: just set up automatic transfer between the account where you receive your pay and your savings account (yes, keep your payroll account and your savings account separate!). You can start from 10% of your salary. At first, you might feel the loss but if you think of this as a necessary deduction like bills and taxes, you’ll soon forget about it.
After you get used to 10% and if your situation permits, try to raise it to 20%! Also, do your research and don’t let your savings rot away. Ask around for valid financial advice regarding where you can invest your money in. Your future self will thank you.