In continuing celebration of Financial Literacy Month, my GRS contributions throughout April are covering basic techniques to raise your financial awareness. We've previously touched on the topics of debt and income. Today we'll tackle two of my favorite tips for ensuring conscious spending.
Purge your subscriptions
Subscriptions, even small ones, can sneak up on you. Every time you sign up for another recurring payment, you're locking in a portion of your income. You're tying up a specific segment of your budget.
Of course, some subscriptions are beneficial or desired. I'm not claiming all subscriptions should be avoided; however, it's important that we understand the nature of subscriptions. By nature, subscriptions make you less aware of the recurring purchase. Rather than reevaluate a purchase every month, a subscription ensures that you're charged regularly and obtain access to a benefit. Whether or not you're actually getting a benefit is another story.
In continuing celebration of Financial Literacy Month, my GRS contributions throughout April are covering basic techniques to raise your financial awareness. Last week we covered a few methods of getting to know your debt. This week we're going to attack the income side of the equation.
When it comes to income, there are two situations that can benefit immediately from increased awareness:
- An individual who earns a decent living, but is squandering their money.
- An individual who is not earning up to their current value (let alone their potential).
There are variety of causes for each of these scenarios. Lifestyle inflation could be causing a high-income earner to live paycheck-to-paycheck, a timid person may feel anxiety over negotiating a raise (even if well-deserved), or fear of failure may keep an entrepreneur from launching a much-needed product or service.
As you all know, April is Financial Literacy Month. To celebrate, my weekly contributions throughout the month will cover basic techniques to raise your financial awareness. In my opinion, raising awareness is the first step to tackling financial literacy!
When initially dealing with the problem of debt, many people suggest creating a list of each and every individual debt. I wholeheartedly agree. Creating a list of each and everything you owe is the best place to start dealing with a debt problem.
When creating a master list or your debt, you're striving to accomplish two things:
Technology is a double-edged sword: It has the power to revolutionize our productivity and allow us to achieve feats previously thought to be impossible; but it also has the ability to drain our focus and squander our attention.
As a blogger, I'm usually a strong proponent of gadgets that plug in and turn on. These type of tools allow me to make a living from anywhere I want. But, like many who stare at a computer all day, I struggle with turning all the fancy gadgets off.
It's incredibly easy for me to work, play, entertain, and socialize all in front of my computer... or a television... or my new iPhone. Even my two-year-old daughter is obsessed with cell phones now. I don't blame her — they blink, make sounds, and mommy and daddy use them all the time! Continue reading...
Courtney and I are big fans of what we call "mental filters". These are simple little tips and tricks that we can use to increase our financial awareness. (J.D. likes to call these tips and tricks money hacks.)
For example, I've talked before about how we taped a picture of our daughter to our credit cards while we were paying down our debt. Many people I know use some sort of 30-day rule to curb their impulse desires, especially those which contribute to clutter.
Both of these techniques are examples of deliberately installing a barrier between yourself and a routine action. Many of us do this in various aspects of our lives to help raise consciousness, but this technique can be particularly powerful in our finances.<
When I was 14 years old, I opened my very first checking account at Bank One. That's where my Dad banked and so that's where he drove me when I asked to open an account. Over the years, I continued to give them my business.
By 16, I had opened another checking account (don't ask me why) and a new savings account, too. At 20, I started my journey into credit cards with... yep, a brand new Chase credit card. (Note: Chase ate Bank One in 2004.)
At 21, I opened my first Chase business checking account and, at 22, I funded $1000 into my new Chase investment account. When my wife and I married the following year, we canceled her National City account to combine our finances with... Chase.
While I generally check my free credit report every 4 months or so, the last time I checked my credit score was November 2008. At that time, it was right at 740. Earlier this week, I checked my credit score again. I was pleasantly surprised to find out it was 730+!
Why would I be pleasantly surprised that my credit score has dropped between 5-10 points over the last 16 months? Because that's when we stopped playing the credit game.
In early November 2008, Courtney and I not only canceled our credit cards, but also paid off our only non-student installment loan. The following month, we decided to take it a step further and close our final remaining credit card.
Each of us have specific items or activities for which we are more than willing to pay a premium. In fact, deciding what we are and aren't willing to spend money on is one of the core issues in personal finance.
A willingness to pay extra for everything would quickly bury most of us in debt. At the same time, willingness to pay for nothing will burn out even the most frugal among us. When allocating our spending, we will likely each have a couple of financial vices that surface.
What is a "Financial Vice"?
Wikipedia defines a vice as "a practice or a habit considered immoral, depraved, and/or degrading in the associated society." This definition may be a little intense for our own purposes. However, if we equate the "associated society" with the personal finance community, an interesting concept emerges.
In the second part of this series, I discussed two mistakes I made when jumping into real estate investing. Despite running a successful property management company and knowing how the business worked:
- I bought a negative cash flow property without an emergency fund
- I got emotionally involved
In the conclusion of this series, I want to share three additional mistakes I made, and give my final thoughts on my experience. Let's jump right in.
This is part two of a three-part series on how he stumbled into real estate investing at age 23. Be sure to read part one here.
When we last left off, I'd just walked away from my first real estate closing with an eight-unit apartment building and $1000 cash in my hand. I was riding high. Unfortunately, the reality of the situation hadn't sunk in. Over the next year, my low-income, eight-unit apartment building was going to take me on the most wild roller coaster ride of my life.
Instead of providing a chronological list of events (which may be entertaining, but of little use), I want to share the mistakes I made and the biggest lessons I learned throughout the process. In this second installment, I'll share the first two mistakes (of what could be dozens). Neither of these first took long for me to realize.