Suze Orman has some words of wisdom. She cites how everyone can save an extra $5000 per year by trimming lots of little expenses all year long. There are a few that work for me, such as stretching out the length of time between expensive haircuts, or saving the change from every purchase and then putting that money in the bank.
What I think Suze is missing is that her ideas require a certain level of discipline to accomplish. It’s the same discipline that’s needed to save money in the first place. What I think she should have people focus on is the commitment to saving with these ideas more than the ideas themselves. It’s like every other New Years resolution people make (including myself). You start out hot and heavy and then lose interest. Ever been to a health club in January and February? Brutal. I feel like I pay my membership for the other 10 months of the year because it almost isn’t worth going during January and February due to the crowds. By March, it’s starting to thin out a bit. I think it’s nearly the same with financial resolutions.
In my humble opinion, people need to really sit down and take a hard look at where they are at with their finances. The really emotional sitdown that answers questions like:
-Do I like the pressure of meeting my bills each month?
-What would it be like not to feel like I’m sinking my financial ship?
-How would it feel to have a little money in the bank. Not to spend, but to have as a cusion, backup, and emotional safety net?
-How many items have I bought in the last year that I no longer even use?
-What if I could actually make money in my bank account instead of just paying fees in my accounts?
-What example am I setting for my children? Are they going to have these same feelings later in life as they learn their financial knowledge from my bad example?
-Does all this stuff really make me that much happier?
-Would my relationships be better without the stress and tension of money issues?
-How much money would I save in interest if I could just get ahead of my debt and then start paying cash? (people spend thousands of real dollars on interest charges each year)
-Who will take care of me when I am old and sick if I don’t have any money in the bank?
-Where will I live and how will I afford my food and medicine if I don’t save money for my old age?
-What will the government social security and medicare entitlements look like by the time I retire? Will they help me?
The harsh reality is that the only “known” person that will help you in your old age is YOU. I guess that’s the good news and the bad news. It’s good news if you trust yourself to plan a little now for your old and sick self. It’s bad news if you are living your financial life for today and not thinking about yourself in the future.
So, the bottom line is, while thinking about ways to lower your expenses to free up money for savings is good, you need to do something right now. Stand up and declare that you are going to take care of yourself financially today AND plan a little for your future. It’s that one conscious decision that can get you started. Once you make that decision, taking the simple step to start an automatic savings each month is easy. Go online. Check out etrade.com, or Ameritrade.com or sharebuilder.com or schwab.com. Any of them will work. Some have lower fees than others. Don’t spend a bunch of time trying to navigate their site. Just look at their site long enough to find the phone number to call. Call them and tell them that you want to open a ROTH IRA account and set up an automatic investment. Tell them that you need help doing this and would like their assistance. If they won’t do it, or they have high fees, call the next one.
Once you get an account set up and have them help you set up an automatic monthly or semi-monthly automatic savings plan, you are off and running. As the money starts to build in this new account. Call them back. Tell them that you want to set up an automatic index mutual fund purchase that coincides with your automatic savings you are already doing. All this will do is move the money from a low interest money market fund that they automatically put it in and invest it in mutual funds for you. Tell them that you want a “no load” index fund with a low expense ratio.
That’s all it takes to start. Then I would recommend surfing the many personal finance blogs out there to find other ideas.