Financial Smarts for 20 and 30-somethings
Jun 26 '01
The Bottom Line Be sensible but realistic.
I'm not a minimalist. I'm a pretty average 27-year old guy. I live in a small-medium sized city with an average cost of living. I try to watch my spending habits, but sometimes I not only throw caution to the wind, I take caution, hold it down and choke the life out of it. here are some tips I've picked up along the way.
1. Credit cards. If you are carrying a balance on your credit card(s), your first priority is to STOP USING THEM and pay them off, highest interest rate card first. Clean out your savings to do so. "Not my savings!" you say. Well, think about this. If you have $1,000 in an ordinary savings account earning 3-4 percent interest, and $1,000 in credit card debt growing at 18 percent interest, then you're hurting yourself. Your debt is growing faster than your asset, the savings account. empty the savings account, pay off the credit card debt, and it's like making an 18 percent return on your investment. then you can start saving. here's another trick I heard about. Drop your credit card in a bowl of water and stick it in the freezer. If you want to buy something on credit, take the bowl out and let it thaw (no cheating in the microwave, or in the hot sun). If you still want the item when the card is thawed out, then get it. Chances are, the impulse will have passed. If you choose to cancel a card or two, don't close every single account you have (you can, however, threaten to close your account -- if you've been a good customer, they usually cut your interest rate to keep you, or at least cut the annual fee). Keep a couple open, this will keep your credit history healthy. Lenders like to see that you have some credit (just not too much).
2. Grocery shopping. If you're like me, you have to eat. I've found the most cost-efficient way to shop is to make a menu for the next 7-10 days and then hit the store for the necessary items. This does two things -- eliminates the what to eat for dinner dilemma, and keeps you from buying unnecessary items at the grocery store. Plus, it's healthier than eating out, which invariably happens when you don't know what to do for dinner. Also, never go on an empty stomach. You won't be able to control yourself. Stick with store brands. Almost always cheaper and just as good, even with the national brand's coupons. (Except cereal, I always buy the national brand -- the store brand never seems to taste as good). Join the preferred shopper club (usually some keychain card they ring through when you check out), and you'll save a few bucks a week.
3. Cars. Buy used. You can get a low-mileage car for thousands cheaper, even after you factor in the low interest rates that new car dealers advertise. Resist that urge to buy new. I recently bagged the idea of buying a new car at the last minute (I even had my current car listed for sale in the paper). ask yourself if you really need to buy a car at all. If your car is paid off, and is reliable, you are in great shape. Gas -- unless your owner's manual says otherwise, use regular. 10-15 cents cheaper per gallon. It adds up. especially if you have a medium to long commute. Service -- oil/filter change every 3500 miles. you'll never worry about your car.
4. Lunch. If you're like me, you have to work. Take your lunch from home. Lunch in a decent-sized city will cost you 7-10 bucks, easy. Lunch from home will cost, on average, a couple of bucks. Again, this is healthier. This can add up to 25-50 dollars saved per week. I try to bring my lunch 4 times a week, and one day I can eat out.
5. Entertainment. Buy paperback books. Try Half.com, where you can get books (including the cost of shipping) for half the price of new books. Movies. Go to the 2nd-run theater for a buck or two. Or if you have to go to the movies when it comes out, skip the snack counter and try to go to a matinee. usually 2-3 bucks cheaper per ticket. Boozing it up. Hey we all need a drink now and again. Go to happy hour. Or if going out late night, have a few at home before heading out. that way you'll buy less when you're out an about. If you're meeting friends out, eat dinner at home. then there'll be less temptation to order an expensive dinner or appetizer.
6. Clothing. For those (men) who work in the white-collar world, Land's End has decent dress shirts for less than $30 each. Outlets are a good way to go also. You can get Brooks Brothers shirts for $30 and under. J. Crew has good ties for $20-25 each (my old roommate will drop 90-100 bucks on a tie -- that's a single tie -- without thinking about it). New suits can be had at EBay for 50-75 bucks. With suits, however, you get what you pay for. tough to save money here. Casual clothes, shorts, shirts, khakis, etc. Old Navy always seems to have good prices.
7. Exercise. Gym memberships are expensive. Always some joining fee + $50/month. Forget that. Invest in some freeweights, some running shoes (replace every 500 miles of wear or so), and even a basic bike (can be had for $300). For about a hundred bucks a year, you can have all the necessary gear for a lifetime of exercise (new shoes, bike upkeep, etc.). A gym will cost you $500-600 per year, every year, and that's for a single person.
8. Banking. Join a credit union if you can. No fees of any kind. This can save you a hundred dollars a year or more. Plus they have better rates on loans than typical banks.
9. Smoking. I won't get into the health aspects of this, but holy moly, has this habit gotten expensive. If you're a casual smoker, like I once was, try and cut back. As little as a pack per 7-10 days can add up to 150 bucks a year.
10. Sodas. I need a Mountain Dew every morning. it's 50 cents from the machine, but if you keep your eyes open at Target, K-Mart, Wal-Mart, etc. you can find a case of soda for four bucks. That's 16 cents a can. that's 84 bucks saved a year. Thunk about what $84 could buy.
11. Cable TV. I'm a sportscenter nut. so I have basic. I got HBO for the Sopranos, but when that ended, I cut it off. That's 12 bucks a month. Skip the movie channels, they're rarely worth the cost. I had four HBO channels for three months, and I saw maybe one movie from start to finish. If you can get by without cable, more power to you. that's 360 bucks a year saved.
12. Pets. Got'em? don't skimp on the food. You can eat store brand. Fido needs the best grub there is. Iams and the other premium foods will help maintain health and keep the doctor away. Stuffed animals torn up? used needle and thread and sew them back together. Lacrosse balls are great as well. Solid rubber, virtually indestructible, and dogs love to play with them.
13. Magazines. Cancel the ones you don't read. It's like throwing money away. I'm in the process of letting a few subscriptions run out, and just in time -- I have a stack of magazines a foot high that I wouldn't be able to read in a year.
14. Don't deprive yourself of every little pleasure of life. This isn't a competition to see who's the most frugal. If you've got a little guilty pleasure here and there, by all means, enjoy it.
These are simple steps to cut spending without going overboard on the cheapskate train. You'll find more money available every month, so when you do see that item you have to have, or want to go to a nice steakhouse, or whatever, you'll be able to and not feel guilty about it. And with the extra dough in your checking account, you'll be able to pay cash and not charge it.
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Epinions.com ID:
wahoo95
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Location: Virginia
Reviews written: 21
Trusted by: 1 member
About Me:
20-something lawyer
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