Get your priorities in life straight: Part 2: Money

Read Part 1 if you haven’t already.

I was blessed by having parents who taught me good money management skills. They never lived above their means. They never took out loans and instead bought everything with cash. To this day they still do not own a credit card.

So many times I meet people who live paycheck by paycheck. They own a fancy car and have to have the most expensive clothes. In return they are in debt.

I have had no issue in the past with staying out of debt. I have no problem spending below my means which allows me to save money. My problem was that I was WASTING money in ways that were not so obvious.

When I had my revelation last November that I needed to change my life, I knew that wasting money was something that I needed to fix.

I do not consider purchasing a $5 beer at a club a waste of money, I consider it the cost for entertainment. I have fun at these clubs and I meet women there. I was not going to give up going to clubs or drinking beer. I was going to give up throwing away money on things that I got nothing from.

Here are just six things that I have changed:

  • I joined Ebates, Mr. Rebates and Cashbaq. Whenever I bought anything online, such as a computer part, shirt or a plane ticket, I first logged into these three sites and compared which one offered the most cash back for that store. I then made the purchase by clicking through their site. I saved $100 this year on purchases I would have made any way. (click here for more information on these cash back sites)
  • I moved my $10,000+ out of a checking account that made .75% interest into a online savings account that got 5%. This is important because inflation is 2-4% per year so since the interest rate in the checking account wasn’t at or above inflation I was losing money. This amounted to saving almost $500/yr.
  • I started accessing my long term investments at least once a month. I have stocks, mutual funds, a Roth IRA and a 401k plan that change in value daily. It was advantageous for me to move funds and stocks around based on the outlook of the economy. It is hard to estimate what I will save by doing this.
  • I bought an aluminum can crusher and started saving my cans rather than giving them to the garbage man. Aluminum is at about 75 cents a pound. It may only amount to $50 a year but I wouldn’t throw out a $50 bill once a year, why should I throw out $50 worth of cans a year?
  • I joined and eBay and sold everything I owned that I would not use within the next year and would be able to buy back for the price I sold it for anytime I wanted. I had DVDs, video games and CDs that I hadn’t touched in five years. In that five years the value of the DVDs had decreased and they would only decrease more with the next generation of technology. In the past year I sold $1000 worth of merchandise and in turn made $50 from interest on that money. Beyond that, I now have less clutter in my apartment.
  • I got a credit card with cash back rewards. I got at least 1% cash back on all my purchases and along with that I got to hold on to my money for at least an extra 20 days so I could collect interest with it longer. Credit cards are a good thing if you can pay them off right away. I probably saved $500/yr by doing this.

Just with the five examples above that have an immediate effect, I saved over $2000 this past year. That might not sound like much but it actually is a lot.

For example, lets say you gross $50,000/yr at your job. After taxes, medicare, social security, insurance, etc. you will probably take home about $30,000. You will then probably spend $20,000 year just to survive and live during that year by paying rent, maintaining your car, insurance, food, gas, etc.

That leaves you with $10,000 for entertainment or that you can save. That $2000 sure looks bigger than it did a few moments ago, doesn’t it!

I’m not saying sell your car and ride your bicycle around town. I’m saying take your $5000 that you saved up and buy a used mid-size or compact car rather than putting that money down on a $50,000 new Escalade that you can’t afford the payments on.

I’m not saying live off ramen noodles and macaroni and cheese. I’m saying buy your steaks with a reward credit card and hold on to your money longer and get some cash back on the purchase.

It only makes sense.

My next priority is friends and family

(Every Thursday for the next few weeks I will add another part to this article about prioritizing your life)