I get a lot of questions about money being a finance teacher. Even more than that I get so many parents who say that they wish they took my class is high school or they tell me they wish they could take it now. Personal Finance is one of the most important classes in High School and shockingly it is still not a mandatory class. That is a topic for another day because I want to give you 6 ways to save money, eliminate debt, and lower or avoid monthly payments. I have listed my Top 10 and cited an ongoing example to make it easy to read. Best wishes and Good Luck.
#1. Change your behavior. Sounds easy? Not even a little bit. Those trips to get coffee at Starbucks can add up very quickly. So can the fast food monster. We have to learn to say no to the majority of our urges. We need to learn to make ourselves feel guilty about the money we are about to spend. Some of you are saying, I can’t live without my coffee. I get that. I drink 3-5 cups a day. I purchase only one cup and it costs me $1.00. Even that adds up to $260 a year I cannot get back. Some companies coffee is 5 times that. Don’t you believe that $1,000 can go to a better future for you and your family?
#2. Cable TV, Netflix, Hulu, Amazon. Know this from the start. I am not being paid to advertise for anyone. I have learned what I have learned through trial and error throughout my life. I once had a Satellite provider that was charging me $120 per month and it was the same, tired, boring, repetitive programming over and over again. One month I called a family meeting and told my family I was turning off cable. My children nearly passed out. 3 months later and my children can’t even remember that we once had Satellite/Cable television. We still watch our shows on Hulu and Netflix makes the kids happy. Amazon provides streaming movies and shows as well. Not only am I saving $1,440.00 per year but my electric bill has gone down as well, an average of $40.00 per month for another $480.00 per year. You cannot believe how much this money has improved our lifestyle and our saving and investment accounts.
#3. If it has a large monthly payment it is time to get rid of it. So many debt consolidation companies will say well you should pay off the low balances first. It isn’t the balance that is killing you. It is the Car Payment, or the High interest loan or credit card, or medical bill payments. The average car loan on a new car is $479.00 per month according to Edmunds.com which is equivalent to $5,748 dollars a year. Use that extra money you are saving from shutting off, Cable or Direct, or Dish to pay off the loan in 2-3 months. Your total Savings just went up to $7,668 per year or $639 per month.
#4. Pay the Medical Bills. Monthly payments on medical bills can take forever. $25.00 may not seem like a lot of money but paying that same amount to 4 different ones can really hurt. $100.00 a month can feed, and diaper, and wipe an infant. Medical debt is quickly becoming a measure of a person’s solvency. These collections can hurt your credit worthiness. Getting rid of these payments saves you another $1,200 per year! Making your grand total $8,868.
#5. Stop eating out. That weekly Pizza or Chinese Food can really add up. A family can eat out for around $30.00 per family at cheap places like Pizza Hut or Papa Johns. A family can eat at home for less than $10.00. Who has time right? A pressure cooker is a great investment. So is the crock pot. So is preparing food before the work week starts and just heating dinner up throughout the week. Assuming you only do it once a week you will save yourself $120.00 per month or $1,440 per year. That will put you way over $10,000 in annual savings or $850 per month.
#6. Clean up that credit report. Credit report cleanup varies so much. Negotiate the removal and payment of collection accounts. They will haunt you for 7-10 years. Bring your balances on your credit cards below 30% of the total value of credit. That is a safe and comfortable position that will help improve your score. I would still recommend you pay them off and make them disappear forever because it is very easy to fall into an old habit. If they aren’t available, you will be better off.
#7. Stop the Student Loan Madness. Having $150,000 in student loans I know darn well how the weight feels and there is no end in sight. You have to get them under control and start paying them down. Interest is accruing. Get them out of whatever status they are in and into repayment. It is time to start getting rid of them. Make a decent payment every month and invest your money wisely as discussed below and you will pay that loan off in no time at all.
#8. You have more than $10,000 dollars a year in savings. You don’t need to use credit anymore. Cut up the cards, get rid of them forever and stop the bleeding. This will never happen again if you can maintain the appropriate behavior. Teach others and make a difference in someone else’s life. We have been doing it wrong for far to long and the trend has to be broken.
#9. What’s Next? Save and Invest. Put away 3-6 months worth of monthly expenses for Emergencies. If you do this you will never need a credit card for “Emergencies”. Invest in some mutual funds. Several as a matter of fact. If you can yield 10% over a five year period you will be amazed with how much money you could have. The average mutual fund only requires $2,500 to get started. If you start with $2,500 and add $850.00 per month for the next 5 years you will have obtained $72,525. Not many emergencies that couldn’t handle. If you keep saving and considering you started the investment next year. You will be a millionaire in the year 2040.
#10. Stop Paying Others Interest. Pay Yourself Interest Instead. Invest. Invest. Invest. Give to others in need whether it is financial assistance or what I have given you find a way to pay it forward each and every day.