Money Management 101 for Single Parents Going it Alone

1. Determine What You Owe

As the head of the household, it’s up to you to make sure that your entire family’s needs are being met. In order to do that, you need to be extremely diligent when it comes to money management basics. This is not something that will happen by accident. Instead, you must plan for it and work toward it.

The first step is to set up your “office.” Gather all of your bills, a calculator, a pencil, and your checkbook.

I would also recommend that you grab an old binder that you can use to keep track of your financial data and a shoebox for storing paid bills.

Now you’re ready to begin:

  • Go through all of your bills, and pay anything that is due within the next week.
  • If you have bills coming due that you cannot pay, notify the company and ask them to set up a payment plan with you.
  • Print a copy of the chart “Paying Down My Debts” or make your own.
  • On the chart, list all of your debts, including any car loans, student loans, and credit card debt.
  • In addition, list the total balance left to be paid on all of these debts, and the percentage rate you are paying.
  • For now, leave the fourth column of the chart blank, and store it in your “Financial Data” binder.

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2. Eliminate Joint Debt

Before we create a plan for paying down your debt, it’s important to consider some special circumstances that may apply to you as a single parent. I asked LaToya Irby, Credit/Debt Management Expert, to share her expertise on handling joint debt:

Wolf: Let’s say a single mom still shares a credit card with her ex. What should she do?

Irby: Ideally, she would want her ex to transfer his portion of any joint balances onto his own credit card. That way, everyone is paying for their own debt.

Wolf: What about leaving both names on the account, and agreeing to pay part of the amount due? Is that ever advisable?

Irby: No. If you’ve made an agreement with your ex to split the debt payments on accounts that include your name, and your ex-misses a payment, it’s going to hurt your credit. If the ex-fails to pay altogether, the creditors and collectors will come after you. Not even a divorce decree can change the terms of a joint credit card agreement. In the credit card issuer’s eyes, you’re just as much responsible for post-divorce accounts as before.

Wolf: What about situations when a couple’s divorce decree mandates that one individual must pay off the joint credit card debt, but that person fails to do it?

Irby: You can always file contempt of court papers against him/her, but in the meantime, your credit score suffers. So I suggest paying off the debt to save your credit. If you can’t afford to pay the debt, at least make minimum payments to keep a positive payment history on your credit report.

Wolf: What about other accounts, such as utilities and cell phones?

Irby: The safest thing to do, if you have a service in your ex’s name, is to turn off the account and reestablish service in your name.

 

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3. Find Money to Pay Down Debt

Another thing we have to do before creating a plan to pay down your existing debt is to find money in your budget each month. To assist in this step, I contacted Erin Huffstetler, Frugal Living Expert.

Wolf: How much money do you think the average person can uncover just by being more intentional about spending and budgeting?

Huffstetler: The average person could easily uncover an extra $250 a month—and probably much more.

Wolf: What are the top 5 areas that you think people should look to first when they’re trying to cut their expenses?

Huffstetler:

  • Food spending (both groceries and eating out)
  • TV-related expenses (cable/satellite services, certainly; but also movie subscriptions and rentals)
  • Phone services (particularly extras like call waiting, caller id, long distance, and cell phones)
  • Insurance premiums
  • Miscellaneous spending (all those small amounts spent on coffee, vending machine snacks, and other indulgences)

Wolf: How can single parents, specifically, stretch their child support dollars and reduce child-related expenses?

Huffstetler: For single parents looking to stretch their child support dollars, creativity is the key. Look to children’s consignment shops and thrift stores to buy your kids’ clothes instead of department stores; sign them up for Parks and Rec-run activities instead of privately-run activities (which will always cost more); and don’t feel like you have to make up for being a single parent by buying them extra things—it’s you they need, not stuff.

 

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4. Pay Off Your Debt

The next step is creating a schedule for paying down your debt:

  1. Pay off the debts that charge you the highest interest first.Bob Hammond, author of Life Without Debt, recommends that you pay off the debts that are charging you the highest interest first since borrowing from those creditors is costing you the most money. “Concentrate on paying off the high-cost debts as soon as possible,” Hammond advises. LaToya Irby, Credit/Debt Management Expert, agrees. “Highest interest rate debts cost the most money, especially when those debts have high balances. So you’ll save money on interest charges when you pay off those high-interest rate debts first.”However, there are exceptions to this general rule. Irby notes, “If you’re likely to get discouraged because it’s taking a long time to pay off that high-interest rate debt, you can start with the lowest balance debt. Getting some small debts paid off will motivate you to keep going.”
  2. Pay more than the minimum payment. Aim for paying more than the suggested minimum payment, in order to pay off your debts as quickly as possible.Miriam Caldwell, Money in Your 20’s Expert, shares this advice:
    • Choose one debt to focus on.
    • Increase your payment on that debt by as much as you can.
    • Once you have paid off that debt, move all that you are paying on it to the next debt you want to pay off.
    • You’ll be surprised at how quickly you can get out of debt with this plan!
  3. Meanwhile, continue to pay the minimum balance due on all of your other debts.Record what you intend to pay toward each debt on the debt chart you made in Step 1.

 

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5. Budget Your Monthly Expenses

Now that you know where you stand financially, and you’ve created a plan for paying down your debts, it’s time to make sure that you’re making any other necessary adjustments so that you can keep up with your plan. And this means creating a budget.

I know this can be intimidating, but I’m going to make a suggestion for you: Sign up for Mint.com. It’s a free financial software program available on the Internet, and it will basically do your budgeting for you. It will create a visual pie chart showing how much you’re spending each month on housing, gas, food, entertainment, and more. This way, if it turns out that you’re spending a lot more on food than you really should, you can begin to make the necessary adjustments to get your spending under control.

If you would prefer to create your budget the traditional way, allotting a certain amount of money to each spending category, I’ve created an online budget calculator you can use, which includes categories for child support and other details specific to your life as a single parent.

Finally, in taking a look at where your money really goes each month, it’s important to know approximately how much money you “should” be spending in each category. Generally speaking, your net spendable income (after taxes) should be allocated as follows*:

  • Housing: 30%
  • Food: 12%
  • Auto: 14%
  • Insurance: 5%
  • Debt: 5%
  • Entertainment: 7%
  • Clothing: 6%
  • Savings: 5%
  • Medical/Dental: 4%
  • Miscellaneous: 7%
  • Child Care: 5%
  • Investments: 5%

 

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6. Set Financial Goals

Now that you’ve worked out a plan to pay down your debt, and you’ve created a budget, it’s time to determine your needs moving forward.

Specifically, as a single parent, you need to ask yourself some questions, such as:

  • Do you need to file for child support?
  • Do you need to get a higher-paying job?
  • Is it time to think about going back to school?
  • Do you need to consider moving into a home/rental that would reduce your overall monthly payments?
  • Are there alternatives, such as taking on another job or splitting expenses with another single parent family, that you need to consider at this point?

One of the things that I want you to know is that the ball is in your court. You determine where this goes from here on out. But unfortunately, you can’t do that if you’re ignoring your financial health, right?

So the fact that you’ve come this far in the process of getting a handle on your finances tells me that you’re determined to make the changes you need to make in order to provide for your family’s future.

So go ahead and ask yourself these questions. So much of single parenting is learning to roll with the punches and be creative in the face of adversity. If, indeed, you need to make some pretty major changes, now is the time to do it. Don’t incur any more debt where you are. Be resourceful, follow through, and do what you need to do to turn your financial situation around.

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7. Increase Your Net Worth

The next step is to determine your net worth and begin adding to it.

Determine Your Net Worth:

Your net worth is what you own minus what you owe. Programs such as Mint.com, Quicken, and Microsoft Money will calculate your net worth for you, automatically.

You can also determine your net worth simply by adding up all that you own, including all of your investments, the equity you may have paid into your home, the value of your car, and any other assets you possess; and subtracting what you owe in remaining debts.

Set Up a Savings Account:

Once you know where you stand, you’ll be ready to set up a savings account. You can do this through your regular bank, or begin investing in a mutual fund that pays interest.

Even if you can only afford to set aside $25 or $50 per month, it will begin to add up.

Before you know it, you’ll have an emergency savings plan in place, to protect you in the event that your car breaks down, or your home needs a major repair.

In addition, this regular savings will help you increase your net worth over time.

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8. Become Even More Frugal

Unfortunately, all of the work you’ve already done in steps 1-7 will have little lasting value if you don’t change your attitude toward money. Now is the time to become even more frugal and learn to live within your means.

Practice Discipline:

Stop imagining that more money is going to pour in tomorrow—through finally collecting on unpaid child support, winning the lottery, or getting a promotion. If those things happen, great! You’ll be even better off. But living as if they’re going to happen is causing you to spend money you don’t have.

Instead, force yourself to make purchases with cash only. Do not continue to pay outrageous interest payments toward credit cards for purchases you don’t absolutely need. You can get by without that new furniture, right? What else could you skip, in the interest of spending only what you have right now in the bank?

Try These Ideas:

  • Check Freecycle before you make another major purchase. Someone else may be giving away the very thing you’d like to buy!
  • When you’re getting ready to buy something specific, look for it on eBay first. I buy a lot of my clothes, new-with-tags, through online auctions!
  • Forget trying to keep up with “The Jones’s.” You already know your value; don’t get caught up trying to “prove” your worth to others by having “just the right” house, car, or appearance.
  • Do not use shopping, ever, to appease your emotions.
  • Finally, when you do go to make a big purchase, step back and give yourself a few days–or even a week–to think about it. There’s no reason to suffer through buyer’s remorse and try to justify to yourself purchases that you really can’t afford. Think it over carefully and make those purchases, when necessary, with cash.

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9. Schedule Your Own Weekly Financial Check-In

Grab your calendar and schedule a weekly financial update meeting with yourself. This is an extremely important step in managing your personal finances, and it’s one that you need to continue each and every week. During your “meeting” time:

  • Pay any bills that are due.
  • If your bank statement has arrived, take the time to balance your checkbook.
  • Check the balances of your checking and savings accounts.
  • Update your debt list to incorporate any recent payments.
  • This is also a good time to write out your grocery shopping list and check what’s on sale at your local grocery store this week (either using the store’s Web site or the sales circular that comes in the newspaper).
  • Finally, also make note of any upcoming expenses you need to anticipate and plan for.

An attitude of gratitude and finances.

 

 

References:
Irby, LaToya. Email interview. 24 Oct. 2008, 
Huffstetler, Erin. Email interview. 24 Oct. 2008. 
Sources:
Caldwell, Miriam. Email interview. 27 Oct. 2008, Hammond, Bob. “Debt Free Key: 10 Steps for Coping With Credit Problems.” Life Without Debt. Franklin Lakes, NJ: Career Press, 1995. 31-32, Irby, LaToya. Email interview. 24 Oct. 2008. 
“Spending Plan Online Calculator.” Crown Financial Ministries. 11 Oct. 2008.

Written By: Jennifer Wolf

Source: thebalance

 

 

 

Living Near a Lottery Winner Has a Surprising Downside

Stephen Stickler/Getty Images

When people win the lottery, their less-lucky neighbors often drive themselves into financial ruin trying to keep up, according to a provocative new study from the Federal Reserve Bank of Philadelphia. The more money the lottery winner gets, the worse off their neighbors become, the research suggests.

The paper’s authors — Sumit Agarwal of the National University of Singapore, Vyacheslav Mikhed of the Philadelphia Fed, and Barry Scholnick of the University of Alberta — looked at lottery winners and their neighbors in Canada. They found that for every $1,000 Canadian dollars ($720) a person won, the likelihood of a neighbor declaring bankruptcy increased by 2.4 percent.

The researchers also found that big purchases meant to signal wealth, which economists call “conspicuous consumption,” are behind the money troubles of people whose neighbors win the lottery.

The scenario goes something like this: Your newly rich neighbor buys a new car or two, and a motorcycle, and then a boat. She remodels her house. Every day, there are new deliveries and construction trucks passing your house, reminding you of just how banal yourown perfectly average driveway looks. You don’t really have the money for a new car, but yours is so outdated, especially sitting next to your neighbor’s fancy new Tesla. The next thing you know, you’re burning up your credit card in an effort to keep up.

This paper isn’t just a warning in case the person down the street wins the jackpot, though. It’s a study that takes income inequality to its extreme conclusion and asks what happens to people who get left behind. And at a time when the divide between the economy’s haves and have-nots is widening, it’s worth considering what kind of effect the growing class of rich people is having on all of us.

We aren’t supposed to think about growing wealth as a zero-sum game in which one person’s gain is another’s loss. The basic theory of capitalism is that a rising tide lifts all boats, and when someone gets a big windfall, the markets give them an incentive to invest that money into other projects that will also make money, so the whole economy grows together.

This research, however, shows that really stark income or wealth inequality can have the opposite effect on households: It can drive poorer neighbors into debt. Thus, income inequality begets yet more income inequality. The question is, when does that become a cycle that cannot be stopped?

Written by Shane Ferro of Huffington Post

(Source: Huffington Post)

 

How Being an Introvert Can Make You Rich

© Akira Sakamoto/ANYONE/Getty Images
© Akira Sakamoto/ANYONE/Getty Images

In her book “Introvert Power: Why Your Inner Life Is Your Hidden Strength,” psychologist Dr. Laurie Helgoe writes:

“Introversion, when embraced, is a wellspring of riches.”

Although Dr. Helgoe’s book is primarily about helping people accept and use their introverted personalities to achieve success, this particular phrase in her book inspires yet another possibility: Introverts’ nature can help them achieve a literal “wellspring of riches.”

To put it another way, an introvert personality can absolutely make you wealthy. Just look at Bill Gates. Bestselling author of  “Quiet: The Power of Introverts in a World That Can’t Stop Talking” and introvert expert Susan Cain said that the Microsoft co-founder is an introvert, reports The Huffington Post. And, his net worth is nearly $80 billion, according to Forbes.

So you see, being an introvert has its perks — especially when it comes to achieving financial success.

Introverts Vs. Extroverts: Key Differences

According to the Myers-Briggs personality test, the introvert personality gains energy from within and not from external sources. For this reason, many people mistake introverts for being shy, but that’s not necessarily true of all introverts. There are many introverts who are comfortable speaking in large groups and being leaders at work. There are even introverts who make a living in the performing arts and as college professors. The only difference is that they need time to themselves after a long day to recharge.

Energy levels and preferred lengths of face-to-face interaction aren’t the only notable or even the most interesting differences between extroverts and introverts. In fact, it’s the more subtle and unique layers of introverts that make them especially well-suited to build long-term wealth. Below are some examples:

Introverts Are Less Impulsive

Many introverts can identify with the following statement, according to MyersBriggs.org: “I take time to reflect so that I have a clear idea of what I’ll be doing when I decide to act.” Introverts are known for being disciplined and careful decision makers, two traits that are perfect for long-term wealth building. As author and money expert Robert Kiyosaki said, “It’s not how much money you make, but how much money you keep” that makes you wealthy.

Dr. Maryam Jahdi, a resident physician in the department of psychiatry and behavioral health at Ohio State University, said introverts are not impulsive because their “behavior is guided more by consequences and less by rewards.” And one study, as reported by LiveScience.com, backs up Jahdi’s statement; it found that introverts “tend to delay rewards” instead of jumping on “immediate gratification.”

Conversely, a 2013 study by Cornell University professor Richard Depue and graduate student Yu Fu found that extroverts actually have a different brain chemistry than introverts. They release more dopamine than introverts when they experience rewards, like accomplishing a monetary goal or eating delicious food. “In extroverts, this dopamine response to rewards is more robust so they experience more frequent activation of strong positive emotions,” Depue reportedly said.

A more recent study entitled “The Bergen Shopping Addiction Scale” published in September by the journal Frontiers in Psychology states, “Extroversion has been positively associated with shopping addiction, suggesting extroverts may be using shopping to uphold their social status and sustain their social attractiveness, such as buying a new outfit and accessories for every occasion.” For these reasons, it might be more challenging for some extroverts to control spending and have enough financial discipline to build wealth for the future.

Introverts Make Smart Investment Decisions

When it comes to investing, Dr. Jahdi said, “Being an introvert could influence becoming wealthy in the future because a lot of financial decisions are based on avoiding bad decisions, negative consequences and missed opportunities. Whereas an extrovert is more guided by immediate rewards to reinforce positive feelings — the feelings you get when you make a fun purchase, as opposed to waiting several years to see a good return on investment.”

Overall, successful investing demands careful contemplation, and introverted thinking by its very nature couldn’t conceive of acting rashly without researching something as serious as investing. Meanwhile, some extroverts tend to be thrill-seekers and impulsive, which means they might be “prone to making unduly risky investment decisions, while the quiet introvert might have more solid, research-based instincts,” reports Reuters.

According to a recent U.S. News interview with Cain, “introverts like to process slowly and deeply before they speak or act, and are comfortable with delayed gratification.” She also explained to Reuters this is the reason why legendary investor Warren Buffett is so successful. Cain said Buffett is “a classic example of an introvert taking careful, well-calibrated risks.”

Introverts Excel in the Workplace

In addition to being careful spenders and thoughtful investors, introverts also excel in the workplace, which can help them make more money and land promotions. Although they might not be the most outspoken or social employees, introverts can apply what author and global speaker Jennifer Kahnweiler calls the 4P’s — preparation, presence, push and practice — to become leaders in the workplace.

Introverts are also thoughtful and conscientious. Marti Olsen Laney, author of “The Introvert Advantage” told CNN that introverts have leadership qualities that set them apart from extroverts. “You really see a pattern of being conscientious, wanting to do a good job, being creative, good at problem solving,” she said.

According to a recent study at the University of Michigan Retirement Research Center, “Individuals who are at the 85th percentile of conscientiousness earn about $1,500 more per year than the average American, which amounts to about $96,000 more in lifetime earnings and $158,000 more in lifetime savings.”

Finding Meaning in It All

Researchers have enjoyed studying the differences between introverts and extroverts for quite some time. While extroverts have quite literally enjoyed their time in the spotlight and as leaders, recent research and publications show that this really is the time for introverts to shine. If you’re an introvert, you’re more than capable of utilizing you unique gifts and skills to achieve financial wealth and success.

Written by Car Alford of GoBankingRates

(Source: GoBankingRates)

The 10 Commandments of Wealth and Happiness

© Stuart Dee/Stockbyte/Getty Images
© Stuart Dee/Stockbyte/Getty Images

I’m now financially independent. I didn’t get this way overnight, nor did I do it by selling books or advice. I did it the same way you can: one paycheck at a time over many years.

One of my young staffers recently asked if I could condense everything I’ve learned into 10 simple ideas that would serve as a guide to those starting out, starting over, or maybe beginning to realize they’re not where they’d like to be. While certainly a challenge, it’s a worthy one. So here goes: the 10 commandments of achieving financial independence and being happier while you do it.

1. LIVE LIKE YOU’RE GOING TO DIE TOMORROW, BUT INVEST LIKE YOU’RE GOING TO LIVE FOREVER

The ease of making money in stocks, real estate, or other risk-based assets is inversely proportional to your time horizon. In other words, making money over long periods of time is easy – making money overnight is the flip of a coin.

Money is like a tree: Plant it properly, care for it occasionally, but not obsessively, then wait.

Stare at a newly planted tree for 24 hours and you’ll be convinced it’s not growing. Fixate on your investments the same way, and you could miss out on a game-changer.

The biggest winner in my IRA is Apple. I don’t remember exactly when I bought it, but I’m guessing it was in 2002 or 2003. My split adjusted price is around $1/share: As I write this, Apple’s trading at around $126/share. Had I been listening to CNBC or some other outlet promoting constant trading, I almost certainly wouldn’t still own it.

The lesson? Enjoy your life to the fullest every day – live like you’re going to die tomorrow. But since you’re probably not going to die tomorrow, plant part of your money in quality stocks, real estate or other investments; then hold onto them. Don’t ignore your investments entirely – sometimes fundamental things change indicating it’s time to move on – but don’t act rashly. Patience pays.

2. LISTEN TO YOUR OWN VOICE ABOVE ALL OTHERS

My job as a consumer reporter has included listening to countless sad stories about nice people being separated from their money by people who weren’t so nice. While these stories run the gamut from real estate deals to working from home, they all start the same way: with a promise of something that seems too good to be true.

And they all end the same way: It was to good to be true.

If someone promises they can make you 3,000 percent in the stock market, they’re either a fool for sharing that information or a liar. Why would you send money to either one? When you hear someone promising a simple solution to a complex problem, stop listening to them and start listening to your own inner voice. You know there’s no pill that’s going to make you skinny. You know the government’s not handing out free money for your small business. You know you can’t buy a house for $300. Stop listening to infomercials and start listening to yourself.

3. COVET BAD ECONOMIC TIMES

Wealth is realized when the economy is booming, but that’s not when it’s created. Wealth is created when times are bad, unemployment is high, problems are massive, everybody’s freaking out, and there’s nothing but economic misery on the horizon.

Would you rather buy a house for $400,000, or $200,000? Would you rather invest in stocks when the Dow is at 12,000 or 7,000?

Nobody wants their fellow citizens to be out of work. But the cyclical nature of our economy all but assures this will periodically happen. If you still have a job, this is the time you’ve been saving for. Stop listening to all the Chicken Littles in the media_ The sky isn’t falling. Get busy – put your cash to work and create some wealth.

4. WORK AS LITTLE AS POSSIBLE

A friend of mine, Liz Pulliam Weston, once wrote a great story called Pretend You Won the Lottery. She asked her Facebook fans to describe what they would do if they won the lottery. From that article:

Most of the responses had a lot in common. People overwhelmingly wanted to:

◦Pay off all their debts.

◦Help their families.

◦Donate more to charity.

◦Pursue their passions, including travel.

Note these goals are largely achievable without winning the lottery. And that was her point: Listing what you’d like to do if money is no object puts you in touch with the way you’d really like to spend your life.

My philosophy takes this concept a step further: When it comes to work, you should try to do something that you regard as so fulfilling that you’d do it even if it didn’t pay anything. In other words, the word “work” implies doing something you have to do, not something you want to do. You should never “work.”

If you’re going to spend a huge part of your life working, don’t fill that time with what makes you the most money. Fill it with what makes you the most fulfilled.

5. DON’T CREATE DEBT

I’m always getting questions about debt. “Should I borrow for this, that, or the other?” “What’s an acceptable debt level?” “Is there such a thing as good debt?”

There’s way too much analysis and mystery around something that isn’t at all mysterious. Paying interest is nothing more than giving someone else your money in exchange for temporarily using theirs. Rule of thumb: To have as much money as possible, avoid giving yours to other people.

Don’t ever borrow money because you want something you can’t afford. Borrow money in only two circumstances: when your back is against the wall, or when what you’re buying will increase in value by more than what you’re paying in interest.

Debt also affects you on a level that can’t be defined in dollars. When you owe money, in a very real way you’re a slave to that lender until you pay it back. When you don’t, you’re much more the master of your own destiny.

There are two ways to achieve financial freedom: Have so much money you can’t possibly spend it all (something exceedingly difficult to do) or don’t owe anybody anything. Granted, since you still have to eat and put a roof over your head, living debt-free doesn’t offer the same level of freedom as having massive money. But living debt-free isn’t a matter of luck or even hard work. It’s a simple choice, available to everyone.

6. BE FRUGAL – BUT NOT MISERLY

The key to accumulating more savings isn’t to spend less – it’s to spend less without sacrificing your quality of life. If going out to dinner with your significant other is something you enjoy, not doing it may create a happier bank balance, but an unhappier you: a trade-off that is neither worthwhile nor sustainable. Eating an appetizer at home, then splitting an entree at the restaurant, however, maintains your quality of life and fattens your bank account.

Finding ways to save is important, but avoiding deprivation is just as important.

Diets suck. Whether they’re food-related or money-related, if they leave you feeling deprived and unhappy, they’re not going to work. But there’s a difference between food diets and dollar diets: It’s hard to lose weight without depriving yourself of the foods you love, but it’s easy to reduce spending without depriving yourself of the things you love.

Cottage cheese isn’t a suitable substitute for steak, but a used car is a perfectly acceptable substitute for a new one. And the list goes on: watching TV online rather than paying for cable, buying generics when they’re just as good as name brands, using house-swapping to get free lodging, downloading books from the library instead of Amazon. No matter what you love, from physical possessions to travel, there are ways to save without reducing your quality of life.

7. REGARD POSSESSIONS NOT IN TERMS OF MONEY, BUT TIME

You go to the mall and spend $150 on clothes. But what you spent isn’t just $150. If you earn $150 a day, you just spent a day of your life.

Almost every resource you have, from physical possessions to money, is renewable. The amount of time you have on this planet, however, is finite. Once used, it can never be replaced. So when you spend money – especially if you earned that money by doing something you had to do instead of what you wanted to do – you’re spending your life.

This doesn’t mean you should never spend money. If those clothes are all that important to you, by all means, buy them. But if it’s really not going to make you that much happier, don’t. Think of it this way: If you can live on $150 a day, every time you forgo spending $150, you get one day closer to financial independence.

8. ALWAYS CONSIDER OPPORTUNITY COST

This is related to the commandment above. Opportunity cost is an accounting term that describes the cost of missing out on alternative uses for money.

For example, when I said above that not spending $150 on clothes puts you $150 closer to independence, that was a gross understatement. Because when you save $150, investing those savings gives you the opportunity to have more savings. If you’re earning 10 percent, $150 invested for 20 years will ultimately make you $1,000 richer. If you can live on $150 a day, ignoring inflation, you can now retire nearly a week sooner, not just a day.

One of the exercises in my book, Life or Debt, is to go around your house and identify things you bought but probably didn’t want or need. A quick way to do this is to find things you haven’t touched in months. These were probably impulse buys. Add up the cost of these things, multiply them by 7, and you’ll arrive at the amount of money you could have had if you’d invested that money at 10 percent for 20 years rather than wasting it.

And when you do this, consider the stuff in your closet, the stuff in your garage, the rooms of your house that you heat and cool but don’t use, the new cars you’ve bought when used would have worked. The truth is that most of us have already blown the opportunity to achieve financial independence much sooner. Maybe now’s the time to stop.

9. DON’T PUT OFF TILL TOMORROW WHAT YOU CAN SAVE TODAY

Shortly after I began my television career in 1988, I went on set with a pack of smokes, a can of soda, and a candy bar. I explained that these things represented the kind of money most of us throw away every day without thinking about it; at the time, about $5. But compound $5 daily at 10 percent for 30 years, and you’ll end up with about $340,000. That’s why learning to save a few bucks here and there and investing it is so important.

Fortunes are rarely made by investing big bucks, nor are they often made late in life. Wealth most often comes from starting small and early.

There are limited ways to get rich. You can inherit, marry well, build a valuable business, successfully capitalize on exceptional talent, get exceedingly lucky – or spend less than you make and consistently invest your savings over time. Even if you’re on the road to any of the former, why not do the latter?

10. ENVY IS YOUR ENEMY

You can either look rich or be rich, but you probably won’t live long enough to accomplish both. I’ve lived both ways, and trust me: Being rich is way better than using debt to appear rich.

Most of us will admit that, when on the verge of making a purchase, we’re often thinking of what our friends will say when they see it. Normal human behavior? Sure, but it’s not in your best interest, or theirs. Making your friends jealous isn’t nice and feeling envy for other people’s possessions is silly. Possessions have never made anyone happy, nor will they.

Decide what really makes you happy, then spend – or not – accordingly. When your friends make an impressive addition to their collection of material possessions, be happy for them.

One of the stupidest expressions ever coined was: “The one who dies with the most toys wins.” When you’re on your death bed, you won’t be thinking about the things you had – you’ll be thinking about the times you had.

Written by Stacy Johnson of Money Talks News

(Source: Money Talks News)