Best way to save money I find is to just be an antisocial hermit. Where I'm from socialising is basically synonymous with "getting drunk".
This can not only be expensive in itself but alcohol has a profound effect on your ability to make sound financial judgements.
Once you've factored in a few rounds at trendy bars, taxis , takeaway or a restaurant curry and maybe a club cover charge; "A few drinks after work" has turned into a £100 hole in your monthly balance sheet.
Though for a few people I know "addiction to Apple products" is becoming a close 2nd.
You need to have some fun once in a while. If that is what you like to do for fun, £100 per month for entertainment doesn't seem unreasonable on even some of the smallest of budgets.
I've been able to save a rather impressive amount of money by just diverting a portion of my paycheck to an investment account. I never see the money in my checking account, so I never have the money to spend.
Paying yourself out of available funds is hard; there's always something else you could be spending the money on, and it requires a conscious choice and willpower.
By contrast, paying yourself before the money even turns into available funds is easy because there's no choice involved except initial setup.
If you are intrigued by the thought of changing your financial behavior, I can heartily recommend the following as followups to this article:
1) "Your Money or Your Life" (http://www.amazon.com/Your-Money-Life-Transforming-Relations...) - Don't recall if this was mentioned in any of the recommended book threads, but it's definitely a good one. Gets you thinking about what your job really costs and what your time is worth to you.
2) http://www.mrmoneymustache.com/ - Truly rethink the value proposition of, well, just about everything in your life. Did you know you can afford another $15,900 worth of house for every mile you live closer to work?
Can HNers recommend a good personal finance management software solution?
I'd like something that connects to my bank account and allows me to keep track of incoming vs outgoing money.
Ideally, I'd like to tag every outgoing dollar as belonging to one of several labels, things like "groceries", "rent", etc.
I'm sure something like this must exist - anyone have a decent recommendation?
I found that the automated solutions never kept me on track, so I started tracking every penny with Ledger[1], a command line accounting program. I've written extensively about how I use it and the software I've written around it at my blog[2]
I used to use GNUCash religiously, but it was a lot of busy work. I'm sure if I put more thought into it, I could have automated just about everything (it imports from a lot of formats and can be extended with scheme). The "tagging" came in the form of every transaction coming from one account and going to another "account" which were really categories like rent and groceries.
I've been reading a book called The Millionaire Next Door (http://www.amazon.com/The-Millionaire-Next-Door-ebook/dp/B00...) and it talks about how people get rich and stay rich, and it has more to do with not-spending money than it does making lots of money.
This is a good article. One thing I've noticed is that ever since I started eating all my meals at the office cafeteria (not free, but sold at cost), my meal expenses have fallen by a factor of five. Especially in NYC it's very easy to blow $100 on dinner and $1000+ a month on eating out, without even going anywhere particularly fancy.
Obviously it's good to have some sense of how much such things cost over time, but if you have to worry about small pleasures like a daily cup of coffee, you're in pretty dire straits... and I know that when I've so poor, I had no problem realizing how things add up, because it was smacking me in the face constantly...
This, incidentally is one reason I like cash (over debit cards or whatever). I like to palpably feel my money going away if I spend it, and have a physical sense of how much I have available... it really helps keep me aware of the flow of money.
THE most important thing to securing your financial health is getting control of a monthly budget for variable expenses like groceries, lunch, dinner, Starbucks, drinks, gas, shopping, entertainment, etc. The more-specific the better. Then work on whittling that budget down or trying to be under as much as possible.
Absolutely agree with this. In fact, something worth trying out that's worked for me is getting a no thrills prepaid debit card with minimal to no fees.
I fund my card from my main checking account with a pre-allocated amount of allowance money that I've budgeted. Whatever I don't use that month rolls over to the following month.
I find that when I have 'my money' (vs the money I need for bills and such...) I end up saving much more. Especially so when the money on the card is low and more comparable to my daily low cost expenses such as the ones you've listed.
I just did this two weeks ago in mint. It's crazy to see how packing your own lunch and skipping coffee every morning can add up to hundreds of extra dollars saved every month.
- Loss aversion
- Failure to account for inflation in saving & spending planning
- Lifestyle inflation
- Failure to understand the power of compound interest
- Failure to understand impact of sunk costs on your potential financial outcomes
So basically, spending too much money and not keeping a budget are the two behaviors discussed here. Thanks for the obscure financial tips, bro. Definitely wouldn't have heard them any given week on Good Morning America.
The article seemed common sense. I've enjoyed reading the other comments here more and found the links useful. Does anyone have good reading material on your long term financial health? (Longer term than budget and save?)
A part of the problem is that many consider hedonism / frugality to be the one true way of life and socialization.
They think that if they don't act like all the others, they'll be socially rejected. But it ain't so. As long as you have high self-esteem nobody can make you feel "inferior".
Another part of the problem, and it has been brought up recently, is that most people cannot really save enough to make a difference. They don't have enough to really diversify their wealth so they figure out: "oh crap, then I can as well spend it, it's not going to be worth anything in a few years anyway because of inflation".
Note that "saving your wealth" and "saving your money" are two entirely different things. The government is busy confiscating your savings thanks to inflation.
I'd suggest "acting dead, trading up and living the middle class":
I don't buy all the crap that most people do buy. I do still fork $$$$ for stuff like an Aeron chair but overall I do save money compared to most because I don't need many things, neither does my SO (which used to be a high-maintenance girl but then "saw the light"). But then I don't want the government to confiscate it. So what do I do?
I buy an old sportcar that I put in a garage (and sometimes take it out for a spin), I buy physical gold, I diversify paper money over several currencies, etc.
I do that because I don't have enough to buy cash another property and don't want to be rped in the by taking credits.
But going out paying overpriced drinks with fake friends and going to fancy restaurant just to say that I go to fancy restaurants? No way. I didn't regress at the pre-anal stage where I need to fetishize food. And I much prefer to "impress" people with good looking old exotic cars than with ephemeral restaurants bills ; )
So that's it! I'd been wondering why I spend all that money on great meals... now I understand it is simply because I regressed at the pre-anal stage where I need to fetishize food!
Something that had a huge positive impact on me financially was getting Quicken. Simply tracking my expenses and the flow of money changed the way I spent.
For one thing, I realized that I wasn't spending too much money eating out (as I'd thought) and so I ate out more.
A lot of silly / pointless spending just disappeared simply by tracking it.
While quicken sucked, and I eventually stopped using it, the habits I developed then have remained.
Another thing that helped a lot was paying myself first. I'd have my paycheck split up on deposit into a savings and checking account. The amount in checking was the spending for household, and the amount in savings had specific purposes. Later I had it set up to also automatically move money into investments.
You get used to just living on the money in your checking account, and the rest accumulates without any actions.
I've generally lived pretty frugal-- which makes it easier to finance doing a startup.
But I've never been deprived. I live in "luxury" because I go see a movie in the theater each week and buy the things that are important to me (and the stuff that really isn't, I just stopped buying.)
A third thing that really helped was reading personal finance books. I found them really interesting and easy to read. The millionaire next door, the wealthy barber, etc. I really liked Timothy' Vicks books on Warren Buffett, and Buffettology.
These, of course, are the gateway drugs to things like Options as a Strategic Investment by McMillion -- a thousand pages on options, and I read most of them!
Also, realizing what my "daily latte" was really worth. Not the $5 at starbucks. Back when I had that habit, it amounted to $5x4 times a week *50 weeks a year = $1,000 in Apple stock bought (When I had the habit in 2007) at $135/share (Close Jan 2, 2008) is now worth $3,740.
$3,740 in Apple stock now is worth more than the pleasure of 4 lattes a week back in 2007. I'd make that trade all day long.
[+] [-] jiggy2011|13 years ago|reply
This can not only be expensive in itself but alcohol has a profound effect on your ability to make sound financial judgements.
Once you've factored in a few rounds at trendy bars, taxis , takeaway or a restaurant curry and maybe a club cover charge; "A few drinks after work" has turned into a £100 hole in your monthly balance sheet.
Though for a few people I know "addiction to Apple products" is becoming a close 2nd.
[+] [-] randomdata|13 years ago|reply
[+] [-] mfringel|13 years ago|reply
I've been able to save a rather impressive amount of money by just diverting a portion of my paycheck to an investment account. I never see the money in my checking account, so I never have the money to spend.
Paying yourself out of available funds is hard; there's always something else you could be spending the money on, and it requires a conscious choice and willpower.
By contrast, paying yourself before the money even turns into available funds is easy because there's no choice involved except initial setup.
[+] [-] npsimons|13 years ago|reply
1) "Your Money or Your Life" (http://www.amazon.com/Your-Money-Life-Transforming-Relations...) - Don't recall if this was mentioned in any of the recommended book threads, but it's definitely a good one. Gets you thinking about what your job really costs and what your time is worth to you.
2) http://www.mrmoneymustache.com/ - Truly rethink the value proposition of, well, just about everything in your life. Did you know you can afford another $15,900 worth of house for every mile you live closer to work?
[+] [-] jdludlow|13 years ago|reply
Obviously not a universal truth, but applied to money and/or time it's something that I try to keep in the back of my mind.
[+] [-] abstractbill|13 years ago|reply
"Everyone buys things that depreciate in value. Rich people can also afford to buy some things that appreciate in value."
[+] [-] afterburner|13 years ago|reply
[+] [-] jilebedev|13 years ago|reply
[+] [-] zrail|13 years ago|reply
[1]: http://www.ledger-cli.org
[2]: http://bugsplat.info/ledger.html
[+] [-] npsimons|13 years ago|reply
[+] [-] j_s|13 years ago|reply
You Need A Budget 4
http://store.steampowered.com/app/227320/
[+] [-] oneplusone|13 years ago|reply
[+] [-] merinid|13 years ago|reply
[+] [-] merinid|13 years ago|reply
[deleted]
[+] [-] marknutter|13 years ago|reply
[+] [-] rayiner|13 years ago|reply
[+] [-] snogglethorpe|13 years ago|reply
This, incidentally is one reason I like cash (over debit cards or whatever). I like to palpably feel my money going away if I spend it, and have a physical sense of how much I have available... it really helps keep me aware of the flow of money.
[+] [-] jsmcallister|13 years ago|reply
[+] [-] pz3|13 years ago|reply
I fund my card from my main checking account with a pre-allocated amount of allowance money that I've budgeted. Whatever I don't use that month rolls over to the following month.
I find that when I have 'my money' (vs the money I need for bills and such...) I end up saving much more. Especially so when the money on the card is low and more comparable to my daily low cost expenses such as the ones you've listed.
[+] [-] cglace|13 years ago|reply
[+] [-] calgaryeng|13 years ago|reply
[+] [-] sk5t|13 years ago|reply
[+] [-] languagehacker|13 years ago|reply
[+] [-] Kurtz79|13 years ago|reply
I'm very conservative on what I spend, often not making a purchase, even if I could definitely afford it.
[+] [-] hexis|13 years ago|reply
[+] [-] rezrovs|13 years ago|reply
[+] [-] shanellem|13 years ago|reply
[+] [-] heather_anne|13 years ago|reply
[+] [-] ohwp|13 years ago|reply
I went from 40 to 32 hours in the past years on different jobs when I got a raise. Sometimes I prefer free time over money.
[+] [-] seivan|13 years ago|reply
The rest, I can handle.
[+] [-] martinced|13 years ago|reply
They think that if they don't act like all the others, they'll be socially rejected. But it ain't so. As long as you have high self-esteem nobody can make you feel "inferior".
Another part of the problem, and it has been brought up recently, is that most people cannot really save enough to make a difference. They don't have enough to really diversify their wealth so they figure out: "oh crap, then I can as well spend it, it's not going to be worth anything in a few years anyway because of inflation".
Note that "saving your wealth" and "saving your money" are two entirely different things. The government is busy confiscating your savings thanks to inflation.
I'd suggest "acting dead, trading up and living the middle class":
http://www.ribbonfarm.com/2011/12/08/acting-dead-trading-up-...
I don't buy all the crap that most people do buy. I do still fork $$$$ for stuff like an Aeron chair but overall I do save money compared to most because I don't need many things, neither does my SO (which used to be a high-maintenance girl but then "saw the light"). But then I don't want the government to confiscate it. So what do I do?
I buy an old sportcar that I put in a garage (and sometimes take it out for a spin), I buy physical gold, I diversify paper money over several currencies, etc.
I do that because I don't have enough to buy cash another property and don't want to be rped in the by taking credits.
But going out paying overpriced drinks with fake friends and going to fancy restaurant just to say that I go to fancy restaurants? No way. I didn't regress at the pre-anal stage where I need to fetishize food. And I much prefer to "impress" people with good looking old exotic cars than with ephemeral restaurants bills ; )
[+] [-] veidr|13 years ago|reply
[+] [-] mfringel|13 years ago|reply
[+] [-] nirvana|13 years ago|reply
For one thing, I realized that I wasn't spending too much money eating out (as I'd thought) and so I ate out more.
A lot of silly / pointless spending just disappeared simply by tracking it.
While quicken sucked, and I eventually stopped using it, the habits I developed then have remained.
Another thing that helped a lot was paying myself first. I'd have my paycheck split up on deposit into a savings and checking account. The amount in checking was the spending for household, and the amount in savings had specific purposes. Later I had it set up to also automatically move money into investments.
You get used to just living on the money in your checking account, and the rest accumulates without any actions.
I've generally lived pretty frugal-- which makes it easier to finance doing a startup.
But I've never been deprived. I live in "luxury" because I go see a movie in the theater each week and buy the things that are important to me (and the stuff that really isn't, I just stopped buying.)
A third thing that really helped was reading personal finance books. I found them really interesting and easy to read. The millionaire next door, the wealthy barber, etc. I really liked Timothy' Vicks books on Warren Buffett, and Buffettology.
These, of course, are the gateway drugs to things like Options as a Strategic Investment by McMillion -- a thousand pages on options, and I read most of them!
Ultimately, though, mises.org and "Economics in one lesson" by henry hazlitt gave me enlightenment. The latter can be downloaded free here: http://www.fee.org/library/detail/economics-in-one-lesson-pd...
Also, realizing what my "daily latte" was really worth. Not the $5 at starbucks. Back when I had that habit, it amounted to $5x4 times a week *50 weeks a year = $1,000 in Apple stock bought (When I had the habit in 2007) at $135/share (Close Jan 2, 2008) is now worth $3,740.
$3,740 in Apple stock now is worth more than the pleasure of 4 lattes a week back in 2007. I'd make that trade all day long.
[+] [-] gtt|13 years ago|reply
[+] [-] Buzaga|13 years ago|reply
The definition of manic has nothing to do with this article, for a start...
[+] [-] michaelochurch|13 years ago|reply
[+] [-] jyu|13 years ago|reply