“Keep your overhead low and don’t be greedy.” This is the best financial advice I have ever received.
It’s so simple and succinct: Keep your expenses under control. Don’t put yourself under a mountain of debt. Nothing obliterates a decent income faster than too much house, too much car and too many credit cards. If you go that route, no matter how much money you make, you’ll always feel like you can’t get ahead. The second part of the advice is not to get greedy. Greed makes you stupid, making bad decisions all the way around with the promise of high returns with little risk. Don’t rely on get-rich-quick schemes or pie-in-the sky investments. Do earnest research and understand what you are investing in.
Part of being a fully functional Brick Sandwich is having control over your finances. With that in mind, here are some basics:
- Consumer Debt: Having credit card debt is, well…insane. Period. You cannot hope to ever be financially independent if you are still paying for dinners, vacations, clothes and anything else you bought in the past – especially things that depreciate in value. My philosophy is simple: If you don’t have the cash for something, you can’t afford it. If you can’t afford it, then you don’t buy it. I have nothing against credit cards. They can be a great way to keep track of your expenses or even earn rewards – IF you pay them off each month. The problem is most people don’t. They make the minimum payment. Then they charge some more stuff. Make more minimum payments. Before you know it, you have a five-figure balance and have minimum payments that resemble a car note. Now you’re on a treadmill – the more debt you pile on, the faster it goes, until you can’t keep up and you fall off. Figure out what you owe. After that, figure out which card you’re going to attack first. Some folks pay off by interest rate; others in order of balance. It doesn’t matter which method you use, just pay them off.
Savings. After your debt is taken care of, this is the next step. Have at least six months of expenses. If you have nothing saved now, start with that and build from there. Just save it consistently. Before you know it, you’ll have a few hundred. More time will pass, and you’ll have a couple thousand, and so on. Even it it's $20 a month. Just save something. It’s a great feeling to know that somewhere in the world you have a little shield between yourself and the things that can go wrong in your world. Treat savings like any other bill - not optional. - Budget. You have to know what you have coming in and what is going out. This is simple math: addition and subtraction. You add up all of your expenses and subtract it from your net income. If you have more going out than you have coming in, that’s a problem. Your two choices? Spend less or make more. Simple and uncomplicated. Personally, I don’t subscribe to intricate forms or software that would have you assign your expenses to categories. I’m not saying they can’t be helpful, but sometimes they’re intimidating; a pencil, piece of paper and a calculator will do just fine. Another simple way of thinking about your budget is to use percentages. With your net pay, save 10%, use 20% for debt payments (if you have any) and live on the remaining 70%. If you don’t have any consumer debt to speak of, good for you! Then save 20% and live on the rest.
Educate yourself. Learn something about the financial markets. Learn what a bond, stock and mutual fund is. Find out the interest rates of your savings account and your credit cards. There are tons of great websites out there to help you figure things out (http://www.getrichslowly.org/, http://www.manvsdebt.com/, http://www.investopedia.com/). This stuff isn’t intuitive; no one is expecting you to come out of the womb knowing corporate from municipal bonds or the difference between NASDAQ and the NYSE. But that doesn’t mean you can’t learn and get a basic understanding. If you have a retirement account at work, take a look at what you are invested in. If you don’t have a retirement plan at work, take control of your destiny and open an IRA. - Get organized. It costs you tons of money when you are disorganized. Do you end up buying the same thing over and over because you can’t find what you already bought? Do you have 3 bottles of ketchup and 5 bottles of mustard because you aren’t taking time to check your inventory before you go grocery shopping? Do you end up spending extra money because you’ve waited until the last minute? A little effort and planning up front can save you a lot of money at the back end, like with car maintenance and Christmas shopping.
When you decide that you don’t want to take care of your financial life, no worries: it won’t take care of you. You’re setting yourself up to be on the bag lady track. Picture yourself at 65 or 70 years old unable (or unwilling) to work, trying to live off of social security (if it even exists) or your very meager savings. You’ve worked for 30 or 40 years and you have nothing at all to show for it. Does this sound like your dream retirement/old age? No, I didn’t think so. No woman alive aspires to be an old lady eating cat food because that’s all she can afford. Most of us are looking forward to a life of leisure; filled with doing only the things we want.
Having no debt and a healthy savings account are not things that happen by accident. They are the result of conscious decisions and very often, strategic sacrifice. By not taking action, you are deciding by default. If you fail to plan, you plan to fail. You deserve peace and tranquility your life. That isn’t possible if your financial house is a complete mess.
