How Not to Let Your Family Squeeze

Money can be a complex thing. No, I’m not necessarily talking about the stock market or the emergence of cryptocurrencies. I’m talking about how every financial decision you make affects all the others. It sounds like a simple enough theory, but when it comes time to putting it into action, it’s often difficult to see through.

I see many clients who come in clearly stating their goals: they want to retire, they want to start their own business or pay for the children’s college education. They want to be financially independent. Yet, when we look at what they’re doing with their finances, we find that their actions may be working against their goals. That daily Starbucks habit has a different cost when you calculate how much you’ve spent in a given month that could have been used towards other expenses. For those who are constantly leasing new vehicles, those payments that never end take on a different perspective when you consider how they could have been applied to a down payment for a house.

We see it now with millennials struggling under immense student loan debt. While much of their income is funneled towards basic needs and paying down debt, little is left for necessary things like amassing an emergency fund and saving for retirement, let alone other milestones like purchasing a home. Putting off funding these other items can have a serious detrimental effect down the road. Furthermore, while millennials have grown to be the largest generations purchasing homes1, this major decision has prompted additional complications like borrowing from retirement to afford a down payment or underestimating ongoing maintenance cost. In fact, based on a survey by Bank of the West, 68 percent of millennial homeowners now have regrets about buying their home2 because every decision made truly impacted everything else.

Things can get especially tricky when decisions are being made by more than one person. Couples can have household goals, but if they’re not united in working towards them, these goals can often get sidelined. Perhaps they’re trying to save for a house, but one of them isn’t sticking to their plan. Maybe they’ve been diligently saving for retirement when one wants to take a major withdrawal to start their own business. Sometimes it can be as simple as not even bothering to discuss the household’s financial goals. Very often, if you’re not working together, you’re working against one another.

Please understand, I’m all for enjoying your hard-earned money. Sometimes, though, difficult choices have to be made. Perhaps it’s deciding to put off that trip with friends to pay off your credit card, or eating out less to build up your emergency fund. I remember being in that predicament when my family first moved into our home – we lived without furniture in two of the rooms! You see, the key to your personal financial success isn’t typically making more money. It’s really about being aware of your financial behavior and of how your daily financial decisions impact your long-term fiscal future.

1. https://www.housingwire.com/articles/42748-millennials-lead-all-other-generations-in-buying-homes

2. https://www.cnbc.com/2018/07/18/most-millennials-regret-buying-home.html

Ok now that you’ve recovered from falling off your chair after reading the tile of this blog, let me explain.

Inflation is one of the biggest challenges in achieving, and maintaining, financial independence. The low inflation we have experienced for decades has made many of us lazy when it comes to spending.  Now is the time to put some great habits into place that will reduce your spending now and will help even more when inflation get’s back to historical norms.

Here are some tips:

1.  The days of clipping coupons seems to be a thing of the past.  Time to resurrect this time-tested way to save money.  Now it’s done electronically.  Click here for a great article on coupon apps.
2. Bargain shop.  The meat department is the best place to shop for deals.  Supermarkets would rather greatly reduce the price on meat than throw it away.  I’ve seen bargains at 50% off.  And not to worry, the meat is still good.
3. Dump the name brands.  I am a big name-brand guy however that is changing.  You can save 30-50% on certain items by going with the store brand such as Kroger at Ralphs.  Just today we saved 30% on peanut butter and couldn’t tell the difference.
4. Use those credit card miles.  If you fly Southwest use their Chase Rewards Card.  This year alone I flew two of us to Hawaii roundtrip and flew myself to NY and used my miles.  Pretty much all carriers have credit cards they use for miles.
5. If you shop at Ralphs use their Ralph’s Reward Card.  They have a great app that shows you year to date savings.  We have saved $500 so far this year.  You also get fuel points that you can used at Shell Stations.  I’ve saved as much as $.50 per gallon!
6. This one is real hard for me but try to walk out of restaurants with a doggie bag.  I’m the type of person that if something is real good, I’ll clean my plate (thanks mom!).  But with portion sizes so big you should have no problem making two meals out of one.  Your wallet and belly with thank you!

These are just a few habits to help get you through this time of high inflation that could help your plan when inflation gets back to “normal”.