Every now and again, I will remember a flash of something from a long ago college class and I will realize that maybe I did absorb a bit more from my college experience than I originally thought I did. Often, when I think about money matters, I remember taking Personal Finance during my junior year, an “Easy A” elective course at Virginia Tech that attempted to instill a sense of personal responsibility in young college students regarding their financial decisions. I distinctly remember the professor saying, “If you only take one thing away from this course, it is that you should always pay yourself first.”
What does it mean to “pay yourself first?” We are talking about savings, of course. Bills will always exist. We need to pay for our homes, our cars, utility bills, and the food we consume on a daily basis. But what fluctuates is how much we have left over for emergencies, or extras such as entertainment, or even simply that designer cup of coffee. Sometimes, after all the big, standard bills are paid, there isn’t much left for your future financial self.
If you get in the habit of allotting money towards savings, an emergency fund, and retirement, you won’t have to worry as much about the future and how it will be financed. Having money available for unexpected bills such as a major car repair, provides essential peace of mind and keeps things running smoothly on all fronts if a large chunk of money has to be diverted suddenly to something unforeseen.
In addition, you could also use savings for a distant financial goal such as a fun vacation or a big purchase such as a new piece of electronic equipment.
One of the best ways to accumulate savings is to “Set it, and forget it.” Try to set up direct deposit type transactions that take place before the money even lands in your checking account. These can be into an account set aside as an emergency fund, pure savings, to a retirement account, etc., and this can be done as a set amount or a percentage, something particularly helpful if your income fluctuates monthly or quarterly.
Also, always try to find the best deal possible on purchases, especially large ones. Sometimes just a quick Internet search for the item you want plus the word ‘coupon’ or ‘discount’ can help you find better prices, or even hidden benefits like free shipping or a percentage off a first time order. These little tweaks can make a big difference over time.
There is a difference, however, in being smart about your finances (financially fit), and being cheap (too frugal). First of all, you have to do what works for you and your household. Everyone has a threshold of time and effort they are willing to put out personally in order to save money. It is also important to build some fun and indulgence into your life. I recently read an article about a British woman who went an entire year without spending anything outside of food, shelter, and basic utility and insurance bills. She managed to save a very large amount in that one year, and was able to adjust her lifestyle to incorporate lots of free activities. In addition, she lived in a big city with free museums and was extremely outdoorsy (her vacation that year consisted of ‘wild camping’ on public beaches). Definitely not for everyone…
There are ways to take a much shorter spending holiday, however, and it could be fun to see if you could go a day, a week, or even two weeks without spending anything above and beyond the bare necessities. It might be eye opening to realize how many times a week you run through a drive-through line for a drink or a snack, or to see if you could go awhile without washing your car or getting that regular mani-pedi. Why would you want to do this? Maybe it is opportunity to start (or add to) your emergency fund. Or possibly it is time to start saving for that far off vacation. Perhaps you just want to reduce the amount of stress in your household over money. Whatever your reason, be creative and have fun with this challenge. Our region has a unique natural beauty. This could be an opportunity to explore one of our outstanding public parks, or clean out the pantry by finally making a new meal with some of the forgotten ingredients you purchased long ago. Hopefully you will find it to be fun, and not as hard as expected. Let’s make 2017 be the year that we all get in the best financial shape possible!