Posted by Ryan on July 9th, 2008 in Spending and Saving

No matter how hard people try (or don’t bother trying) to save money, some people are just not programmed to be savers, and for good reason. We deserve to spend the money we work so hard for in order to enjoy the finer things in life.

But you can still do enjoy life without having to sacrifice an enjoyable, comfortable retirement while sacrificing all of your earnings. Here are 6 ways you can start saving more money on accident:

1. Make it Automatic: Invest in your company’s 401k plan or have a certain amount of money from each of your paychecks automatically swept to a separate high-yield savings account. This takes the mental willpower out of the picture.
2. Buy Generic: Generic, store brand products and pharmaceutical drugs are indistinguishable. Why pay more for the name brand on the label when you can get the exact same thing for half the price?
3. Review Your Spending: When you save your receipts and review your spending, you are more conscious of how much you have actually spent, and therefore are more likely to stay within a budget (see Less Tracking, More Spending).
4. Be Efficient: With the price of gas these days, going out of the way to get your errands done can be costly. Plan your chores for the week out so you can take advantage of getting more done on in your daily commute.
5. Pay on Time: Not only will paying your bills on time eliminate late fees, but our credit score will also increase. You’ll be happy you did the next time you apply for an auto loan or mortgage.
6. Save the Spare Change: Where does all of your spare change go? Revert to your childhood savings plan and start a piggy bank. Put it somewhere convenient so when you empty your pockets you can easily throw your change in a jar. You’ll be amazed how quickly those dimes and quarters add up.

Millionaire Money Habit: If you can’t seem to get yourself to save money, take the emotion out of it by making your savings and investing plan automatic. By paying yourself first you will hardly notice the money missing.

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Posted by Ryan on July 7th, 2008 in Credit and Debt

Those who have a substantial savings may be blessed with the luxury of choosing to pay cash for a big purchase or to get a loan to finance the purchase. If you have a million dollars on hand, for instance, and want to buy a new car, real estate, or finance your child’s college tuition, which is the better move? Should you pay in cash and be completely free and clear on your purchase, or is it smarter to get a loan?

In addition to managing money wisely, what allows people to become wealthy is their ability to use other people’s money and move their cash quickly in and out of investments. So the first criteria that needs to be considered is if the purchase is an asset that will appreciate, or if it is a liability that will depreciate in value.
If the purchase is an asset, you first have to consider how long your money will be tied up in the purchase. Ideally you want to be able to pull your money back out of the purchase as quickly as possible so you can take advantage of other investment options that present themselves. By maintaining a high velocity with your money, you won’t have to worry about your cash being parked in something you can’t access quickly while you watch opportunities pass you by.

The second thing to consider is your buying power with your cash and how that compares to loan rates and tax advantages. If you are looking at purchasing a $200,000 summer home with cash, you have to consider the following:

• Tax deductions from paying mortgage interest.
• Can you earn a greater return on investment if you finance the purchase and place your cash in another investment vehicle?
• You can pay $200,000 cash for your home, or make a $200,000 down payment on a piece of $1 million commercial real estate that will pay you month after month in rental income.

While there may be some convenience to owning free and clear, it is the leverage of other people’s money and the ability to have cash on hand to participate in investment opportunities that allow you to build great wealth. If, however, your cash is just going to sit in a savings account not earning anything, you may think about paying in full for your purchase or the interest rate on your loan will just eat away at your savings.

Millionaire Money Habit: When it comes to building wealth, debt actually helps you create and build wealth. Use your money and loan options wisely, and you can allow your net worth to explode.

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Posted by Ryan on July 4th, 2008 in Spending and Saving

As technology evolves at a faster rate, the need for instant gratification seems to elevate in unison. As a result, America exponentially increases its over-consumption and the general population dives deeper into debt. People are actually using the value of their homes to leverage more buying power.

It’s insanity that, in general, people continually pay for things they can’t afford and don’t actually need, with complete disregard for managing their personal finances. Wouldn’t it be better to have a nice, early retirement with an enormous amount of wealth than to satisfy an immediate, impulsive desire?

Why not take that desire for material possessions a catalyst for change? The undeniable feeling to want something for personal satisfaction can create a driving, unstoppable force - whether that be positive or negative. When channeled correctly, desire can allow someone to achieve extraordinary accomplishments. In fact, it was desire that we discussed as The One, Essential Trait of Every Self-Made Millionaire.

If you postpone impulse buying and the need for instant gratification, many things will happen. For one, you may later realize you are not as interested in that thing you thought you wanted so badly. Sleep on it, and if you continue to feel that this purchase is something that would really make you happy, put it on your wish list as a reward for reaching a major goal. This will push you to work harder to reach your goals, and you will have more appreciation for the reward. It is no longer an impulse buy but a representation of something you worked hard for and deserve.

Millionaire Money Habit: Keeping up with the Jones’ is a dangerous thing that can drive you into debt and impede your overall wealth accumulation strategy. Before making any major decisions, whether it is a purchasing decision, an investment decision or any other personal decision, sleep on it and remove yourself from an environment that can impact your ability to think clearly.

Set spending boundaries, create rewards to propel you to accomplish more, and resist the temptation for perpetual instant gratification. As a result you will get more out of life and find more success in your wealth accumulation strategy.

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