Last week we talked about how to retire in your thirties. Twenty-three ways to be exact, and trust me, there are many more. That post was overwhelmingly popular. People enjoyed it and had tons of comments, but let’s face it, the target audience wasn’t everyone. I mean, to retire in your thirties, you can’t already be forty! Instead of yapping about how to retire, today let’s focus on stopping leaks. This post is for EVERYONE!
What is a leak? Metaphorically speaking, it’s a hole in your pocket. Or a hole in your bank account, wallet, or anyplace else you keep your hard-earned money. I know what you are thinking, and you are wrong. I am not going to tell you to stop having fun, lock yourself in your room and live like a hermit. That’s just not living. In my last post, I stressed investing over saving, cutting costs and investing the savings. Today, I just want you to stop leaking. So, here are 9 common leaks and how to plug them. You don’t want your oil pan leaking oil all over the driveway, and I don’t want your pocket leaking money into the bank accounts of rich corporations. Come on, grab some duct tape and let’s plug those leaks. Just implementing a few saved us a whopping $500 a month!
1. Save receipts, track spending and net worth. Wait, this isn’t a leak, this site must have gotten hacked! You are right, this is definitely not a leak, but it’s stronger than duct tape. This is a water, errr, money tight seal. Every purchase, EVERY purchase, stick the receipt in your pocket. When you get home, put the receipt in a box or a bag or an envelope, whatever. Bought something online? Print the receipt. Don’t have a printer, screen shot it and email it to yourself and print it at work. It’s a hassle, right? I know. So now you’ll think before you buy. At the end of the month, go through the receipts. Write down what was necessary and was, let’s say, silly. Pretty soon, you’ll not want to put a “bad” receipt in your box, because no one likes to disappoint themselves. Try it. I promise you’ll cut your spending without missing a thing.
Ok, so you’ve kept your receipts and it’s the end of the month, now it’s time to reconcile. Make a spreadsheet. I love spreadsheets. Columns are your spending categories: Amazon, electric, bookstore, Starbucks, car, home, etcetera. Track and see just how much you spent on Starbucks or at the bookstore. And don’t just make a “Food” column. Separate it: fast food, take out, restaurant, grocery (food only). Separate your grocery receipt into different categories. That tabloid you picked up at the check-out counter is not going into the food spend column. Lastly, net worth. We want this to INCREASE every month. All your assets (what you own) minus all your liabilities (what you owe). Budgeting alone won’t help you determine this. It requires having a personal balance sheet to keep an eye on your finances and compare things you own to your liabilities. Nobody likes to live a life of debt, but sometimes, financial circumstances almost make it impossible to live debt-free. You can still turn things around by increasing your revenue streams and paying off your debts.
2. Don’t go inside a gas station. There’s really no need. If you need gas, pull up to the pump, insert card, fill, and go. Gas stations/convenience stores are complete money suckers. Look at the name: CONVENIENT STORE. You are paying for the convenience. Do you really need to spend $3 on a Gatorade or get a candy bar or a bag of chips? No, you really don’t. Next thing you know, your kid wants something, and his friend that you are taking to soccer practice wants something, and before you know it you’ve spent $20. Just get the gas and go.
3. Brand name shopping. I am not talking about clothes… I’ll give you a pass on those. Why? Because to tell you the truth, name brand clothes fit better, and I would be a hypocrite if I told you to be frugal on clothing—however, socks are socks, so let’s not spend $13 per pair. I am talking about medicine, shampoo, and the like. Look at the ingredients on the store brand of Nyquil vs actual Nyquil. Exact same, but about $4 more. Same with Vitamin C drops, bandaids, and almost everything else. Let’s not pay for the box and the name. Shampoo is shampoo. What?! Ok girls, it’s really not. I know some are better than others, but please compare ingredients. Just because it costs more doesn’t mean that it’s better. Same goes for creams, aloe vera, and sun block. Be a smart shopper, you can do it!
4. Fees. I hate fees, and I don’t pay them. Negotiate any fees. The biggest ones I see are ATM and banking fees. If your bank charges you a fee to give them your money to keep, find a new bank. If your bank tries to charge you a fee for anything at all, find a new bank. I’ll give you a peep into my world. A few months ago, I received a rather large sum of money, around $45,000. I invested in a real estate fund several years ago that paid me quarterly, but the fund decided to sell all its assets, and my share was around $45,000. They deposited this into the same account that they had been using to deposit my dividend into, a Chase checking account. I opened this account in 1999. It was my very first bank account. I primarily bank with Capital One, but still used this Chase account. However, I did not want to leave $45,000 in my checking account. The easiest way for me to move it was to drive to the bank, withdraw, and take it to my Capital One account which was linked to savings, Stash, money markets, and the like. I did just that. I drove to Chase bank, walked in, filled out the withdraw slip and the following is the conversation that took place:
Teller: You want a cashier’s check in the amount of $45,000?
Teller: Ok Mr. Moss, there is an $8 charge for a cashier’s check.
Me: I am not interested in paying $8 to get my money, so I will take cash.
Teller: You want $45,000 in cash??
Me: Or a cashier’s check, or money order, either way.
Teller: There is an $8 fee for a cashier’s check.
Me: Yeah, I am not going to pay that, so I’ll take cash.
Teller: Let me get my manager
Manager: Good afternoon Mr. Moss, how can I help you?
Me: I need to withdraw $45,000.
Manager: There is an $8 fee for a cashier’s check.
Me: Yes, I know, but I am not going to pay that fee, so I will take cash.
Manager: Well, that’s a lot of cash, and we may not have it on hand.
Me: Ok, then I’ll take a cashier’s check.
Manager: Well, there is an $8 convenience fee for the cashier’s check.
Me: Alright, then I will just close the account. I believe I have around $49,000. I will just close the account and take whatever payment you can give me.
Manager: Okay Mr. Moss, let me get you to a personal banker.
**I waited for about 30 minutes. Normally, I would just pay the $8 and close my account, but today I had absolutely nothing to do and I was having a bit of fun with this. Plus, now you get a good story!
Banker: I am sorry you want to close your account Mr. Moss, why?
Me: Well, I came here just wanting to withdraw $45,000, but apparently you want to charge me a fee to do so. I am not keen on paying fees to access my money, so I would rather just close my account.
Banker: I see. Well, your balance is $49,000. How would you like that?
Me: Cashier’s check is fine. Cash is fine. Or a combination of the two.
Banker: There is an $8 convenience for a cashier’s check.
Me: Yes. I know. So, I guess I will take all cash.
Banker: We need a couple days of notice for that much cash usually.
Me: Well, what I do know is that the FDIC requires you to give me free access to my funds up to $250,000. So, I will take cash or a check or gold bars or anything else. And since I do not care how I receive my funds, the convenience of a cashier’s check is now for you, so I am not paying an $8 fee for your convenience. And now, you have lost a customer of 19 years because you wouldn’t waive an $8 fee or give me cash, which you are required to do in the first place.
A few moments later I received ten thousand dollars in cash and a cashier’s check for the remaining balance. I did not pay the $8. The teller, who was not happy, asked if I needed anything else. I said, “as a matter fact I do, could you give me $100 worth of $5 bills and $100 worth of $10 bills, thank you, I need change for a poker game later today.”
The moral of the story is this: have a voice and stand your ground. Don’t just pay a fee because someone tells you to. Had I wanted a cashier’s check instead of cash, I would have paid the $8. In this case, I didn’t care. I understand that places want to make money, but they can make it off someone else! Also, never pay an ATM fee. In today’s world, there is no need. I’ve owned ATM machines and I’m telling you, DO NOT PAY to get your own money!
5. Eat more at home, and never fast food. This is hard, I know. Well, I don’t really know. Ever since college, I’ve hated fast food. Not because it’s bad for you and signals, “I give up,” but because the process is just terrible. Most of the time they got my order wrong, I never cared for the taste, so I just stopped. Fast food used to have one redeeming quality, it was cheap. Not so much today. You can almost go to a sit-down restaurant for the price of fast food, seriously, so do that instead. However, to really plug that money leak and keep cash in your pocket, go to the grocery store. A fully cooked rotisserie chicken is $6! That’ll feed the whole family, and it’s convenient. Add some veggies and you’ve spent less than $10 for a meal for four. Yeah, that’s way cheaper (and better) than McDonalds. And the variety! Steaks, hamburger, ribs, veggies, fruits…you’ve been to the supermarket, so get actual food! Go home, cook it, and enjoy some family time. And then, put that receipt in your box. You can eat for a week for what it costs to go out twice. Oh, and instead of making a separate entry, I’ll include it here: don’t drink your money. I am not talking about having a beer or wine or whatever, remember, this isn’t about pinching every single cent and investing to retire. No, this is about plugging up some leaks. Get water at the restaurant, it is free! $2.95 for a soda is ridiculous, it adds up. Also, Starbucks in the morning…don’t go to Starbucks. I referenced this in my last post, $6 a day at Starbucks is over $100 per month! $100 on coffee that is FREE at work, come on!
6. Leave your credit card behind. I am not telling you to ditch your credit cards. I love them. They give me miles to travel, points redeemable for purchases, and other great benefits. However, there is a steadfast rule to follow: PAY THEM OFF EVERY MONTH. Interest doesn’t leak, it hemorrhages and then kills. So, use your credit card for groceries, gas, electric bill, any other utilities that you can pay with a card, do it! But be careful, don’t use a credit card if the merchant charges you extra, that’s just silly. Ok, so why leave my card behind, what do you mean? When you go to a fair, or a concert, or ball game, or any place that is designed to have add-on expenses, leave your card at home. Withdraw the cash that you are willing to spend at this event, and when it’s gone, it’s gone. Having a piece of plastic in your wallet that you can use to make impulse purchase requires discipline. Do you really need that giant foam finger? No. So, withdraw $150 for your night out, and then you’ll skip the foam finger in lieu of something a bit better.
7. Cut the cord. This is a feature in almost every money post. Why? Because it is the truth! Americans spend silly money on television. There are too many options available for you to spend $150 a month on 200 stations of cable when all you watch is Game of Thrones and football. Ditch it. Netflix, Hulu, Sling, whatever! My wife and I love Jeopardy. We watch it on YouTube. I do not miss cable/satellite at all. And guess what, neither will you.
No, don’t drive from Kroger to Target to save 38 cents on a package of corn, that’s just crazy-talk. Shop your cell phone and car insurance. Chances are, you are overpaying. Cell phone bills are the third biggest expense for American families. The top two are housing and cars. Can you believe that?! Verizon and ATT have a huge market share and they are also the most expensive. There is too much competition to pay what they charge. I’ll be honest, I have Verizon. Currently, we have our planned stalled at the moment because we are out of the country, and to be honest, I have no desire to turn it back on. I do not need to talk on the phone, I text and email. However, a lot of people need a phone. Don’t ditch your phone, they are here to stay. Just shop the rates and the plans; do you really need unlimited data when every single place has Wifi? Also, XYZ Cellular may be oodles cheaper and provide just as good of service as the big companies. Same with car insurance. Every year, shop around. It’s a pain, I know. It seems that companies always have introductory offers for new customers, yet they have no loyalty plans in place to keep their current customers. Use the system against them and save that money; put it into a single premium immediate annuity and you can use your savings now for your future happiness. Plug those leaks!
9. Cancel unused subscriptions, especially your gym membership. I know what you are thinking, but I use my gym membership. Do you, really? How much is a day pass, $10? And you pay $60 a month? Do you go more than 6 times? If so, keep it. If not, ditch it. It doesn’t matter that you have already wasted $400 and never been, that money is gone. Let’s stop the bleeding and plug up that leak! The same is true with magazine subscriptions, clothing box subscriptions, luxury watch memberships, whatever. Remember, the receipt is going in the box.
How much can you really save by plugging some of these leaks? Notice that I said, “some.” I want you to live. I want you to have fun, I just want you to be smart about it and not pay for things that you aren’t going to miss. My wife and I used to spend a lot of money, and to be honest, I used to spend a lot more before I met her. I had a saying, “I have two of everything I want that cost $20.” Meaning, $20 meant nothing. It does! It so does. After some analyzing, some budgeting, and some leak plugging, here is what my wife and I were able to save (or cut) in one month.
We cancelled cable, $150 per month. Since we already had Netflix and Amazon Prime, we realized 100% of the savings. One of my favorite things to do was, “go get something to eat.” Sometimes we would eat out three meals a day. So dumb! Now we limit ourselves to one or two dinners a week, and maybe a brunch on the weekend. We could cut more, and probably will, now that we have seen how easy (and enjoyable) it is here in Italy. We replaced all that eating out with cooking at home and having leftovers from a night out. Cooking at home is kind of like a (free) date night, and teamwork. It’s quite fun, actually. I still can’t reel my wife in on the drinking the free water instead of soda at restaurants, sigh. To be honest with you, I prefer water or tea and have never liked soda, so it’s not hard for me. This is a toughie to calculate, as meals vary, but let’s say that we eliminated five dinners out per month at $50 each. $250 saved and replaced with about $50 of groceries. Net savings: $200. This was just eating out. Remember when I said, “don’t drink your money?” Yeah, I love coffee, I do. Starbucks is a great promoter, they really are. They have convinced people, including myself, to pay $5-$7 for a fancy coffee drink. I stopped, cold turkey. No, not coffee, that’s ludicrous, I quit Starbucks. At least $6 at 20 times per month. Thanks for the extra hundred dollar bill in my pocket! We also cancelled our completely unused gym membership, $50 per month. A summary: $150 cable, $200 food, $120 Starbucks, $50 gym. Three things, only three things saved us over $500 every single month. $500. Guys (and gals), that’s a car payment, a fancy car car payment. We saved a CAR by eliminating three things. Think of what you can do if you put all 9 band-aids to work!
10. Number 10? Wait, the title is 9 leaks, not 10. Okay, you get a bonus. Make a goal.
This was #1 on my 23 Ways to Retire in Your Thirties. However, it is last on this list. Not because it isn’t important, it is, but it fits here. You’ve plugged up your leaks, well some of them, maybe all of them, and now what? Set a goal for this extra money. Beef up your savings or investment accounts, save for vacation, pay cash for your next car, whatever. Just give it a purpose, else you have no incentive to plug those leaks. I would rather you drink the coffee at work and be able to go on a tropical getaway with all the money you saved, money that you would’ve give to the convenience store, Starbucks, and McDonalds. I think we can all agree, sipping on a rum cocktail in the Dominican beats having an energy drink and moon-pie on the way to soccer practice. And I’ve never even been to the Dominican, heavy sigh.