Money360 offers a month-long plan for fixing your finances. All you need is an open mind and an hour each day.
If you’ve been following along with this series and have been participating in the expense evaluations of the last week, you’re probably feeling pretty good about your financial direction. Now we come to the part that is the hardest for people to give up – and the one that makes most people relapse: entertainment and hobbies. In other words, all of the consumer joys you have in life, from television to gadgets to video games to clothes shopping.
I’m going to say something shocking here: if you really want to commit to this plan long term, you should not give up most of these things. They bring a lot of day to day joy into one’s life and the guilt that they bring is due to excess, not due to the spending itself. The key is not to trim out all the lattes you drink, but instead trim back a few lattes a month. That way, you can still get the simple pleasure of enjoying a latte, but you also get the pleasure of skipping one every once in a while with the realization that you’re skipping it for good reasons. It turns something that can be a big negative (and thus makes it very easy to quit and give up on) into something that is a net positive.
With that being said, take some time today and go through your more frivolous expenses in a given month. You can start by digging out your last month worth of credit card and checking statements and highlighting everything you bought for pure entertainment, simple pleasure, or for a hobby. This might take a little while, but it’s worth the effort.
Once you’ve highlighted all of them, go back and make some approximate groupings. For example, group all of your coffee shop visits together, or all of your book purchases together, or all of your music purchases together. Use groupings that make sense to you; if you try too hard to use what someone else thinks should be grouped together, it will have no meaning for you.
Now, go through these groupings one at a time and ask yourself whether it would detriment your life to trim back spending in this area. Let’s say you buy a grande latte each morning at the coffee shop. Maybe you could cut this back to four times a week, with two of them being regular lattes? That way, you could still enjoy your big latte on Monday morning and Friday morning and still have some on Tuesday and Wednesday, and just drive into work with a smile on Thursdays knowing you’re working for a great future. You might also pledge to go to the library and mill around every other time instead of going to the bookstore or the music shop. Remember, if cutting back at all makes you feel really unhappy, then don’t cut back.
These little changes are the ones that quietly make a big difference; if you try to make a big change, it will be no different than a New Year’s resolution where you decide to diet and spend the first week eating salads. By the end of January, you’ll be knocking back the proverbial poundcake and it will have all been for naught. The key is to find those places where you can cut off some fat without damaging the meat.
Tomorrow, we’ll look at credit cards, their fees, and what we can do to reduce them.
Ready? Let’s continue on to the next day.