Tips on how I became financially independent
We didn’t have much growing up.
My mother taught me how to be cheap and to “live within your means”. She could
get blood from a turnip. She always said to know the difference between “what
you need and what you want”. My father was a Methodist minister and my mother
was a stay at home mom. In the mid to late 1970’s, my dad earned approximately
13K a year in “small town Texas” (adjusted for inflation, this is about the
same as 55-60K now). Clearly, minister pay isn’t much, but we always had what
we needed. We also had nice Christmases and vacations every summer, simply
because my mother was incredibly frugal. As a family of four, we didn’t have to
go “without“ anything we really needed. I truly learned from her example.
Inflation Calculator; https://data.bls.gov/cgi-bin/cpicalc.pl
The following is what has worked
for me over the years:
Know the difference between what you “need” and what you “want”.
This is huge. By figuring out the difference between “need and want”, and
living within your means, you should be able to build up “reserves” over time. This
does not mean you need to “do without”, it just means to buy what you need.
Assuming this is effective, you will have money for what you want, when you want
it later on. This is up to the individual to figure out what works by deciding
what you “need” versus what you “want”, but I see “need” as being connected
with the basic necessities such as shelter, clothing and food. Determining
“need versus want” is also a matter of setting priorities. I have employed this method over the years,
and it has proven to pay off.
The book “Your Money or
Your Life”. The book
“Your Money or Your Life” by Vicki Robin has been a significant factor in my
money management. I read this book in 1999 and have tracked every penny
of my finances since. In brief, this book talks about how to figure out your
earning power, how to minimalize expenses, to document all expenses and how to
do some investing. I highly recommend this book. If you follow all the steps in
it, it will significantly help you with finances (or “financial independence”).
Here is a summary of the book and the process;
https://yourmoneyoryourlife.com/book-summary/
https://yourmoneyoryourlife.com/book-summary/
Please note, I am not promoting
or pitching this book. I am simply stating that in my experience, it was
effective for me.
Document ALL of your expenses. This way you know where your money
goes, and you can see where to cut back. I have MS Excel spreadsheets going
back to 2004, and before that I had hand written logs. Tracking all expenses as well as income works. You have to
physically document everything in order to see where your money goes. Many
think they know where their money goes, but you really don’t unless you
document it. Documenting everything is a
way to hold yourself accountable for your spending. It makes your spending
habits visible and provides clarity of where your money goes.
This may be considered extra
work, but it has paid off for me over the years. I was able to save more after
I started documenting and tracking all expenses. (I have sample Excel spreadsheets I can
share, for the asking). There are other sources available to assist in this area. Mint.com is a free source
for budgeting. Nerd Wallet offers free budgeting and financial advice also. There
are other app or websites that will track your finances for you, but they
charge a fee which defeats the purpose, in my opinion.
Shop in second hand stores. I never (or rarely) pay retail for
anything. Most retail is overpriced. There are usually ways around this. Shopping
in thrift stores is a way to save lots of money while accommodating your needs,
such as clothing or other used items. Do you really need that new pair of jeans
from the department store at full price? Ask yourself why…. You can get something
similar from a thrift store for
a fraction of the price (or the same exact product cheaper, if you are willing
to look for it). Consignment stores are
also a way to resell your items and buy or swap.
Coupons, sales, look for deals. If you are looking for an expensive
item, do a little research in order to find the best price. This may require
effort or waiting on a price drop, but this can save significant money too.
There are some grocery store
chains (such as or similar to) “Sack N Save”, “Food 4 Less” or “Grocery Outlet”
that are discounted. These types of stores have inconsistent stock, you don’t always
know what they may carry, but what they have is deeply discounted. Sign up for
grocery store membership cards. These cards offer membership deals and sales, also
a worthwhile effort.
Wholesale clubs such as “Costco” are also cost effective.
There is a membership fee, but with their “cash rewards”, it pays for itself.
Buying in bulk is also a money saver.
Email newsletter from brands you like, they will usually
send you deals or coupons over email.
Grocery store systems and their membership cards involve
going to their website and checking off their sale items. When they scan these
items at the checkout, the discount is automatic.
Additionally, Groupon.com has deals on almost anything
you might want, item, service or restaurant.
Watch eating out! Eating out adds up quick. For
example, if you eat out for lunch at work every day at say $10 a day (minimal),
that is $50 a week and $200 a month. Even with a family of four, it is easy to
spend $100 at a restaurant. Even eating out once a week, this adds up to $400
in a month. It is easy to lose track of these expenses if it isn’t documented
and you don’t see it. This is an obvious area to cut back and save money. It is
much cheaper to “brownbag” and take your lunch to work. Going on a day trip
with the family? Consider packing lunches and having a picnic. You can save a
lot of money when you are aware of these extra expenses. Buying groceries are
always the cheapest option.
Use up what you have. It is inefficient and wasteful to discard
things a year or two after you bought them simply because it is outdated or a
newer model is available. Use your stuff until it wears out. This can apply to almost anything…. clothes, cars, cell phones,
furniture, among other items. The longer things last, the less you have to
replace them and the more money you save.
Pay off the balance on your credit card every month. Never let credit
card debt add up. This is how
credit card companies make money, which is from interest that builds up on
existing balances. This is also how people get into deep debt. Credit card companies don’t need to make more
money off the typical consumer then they should. They don’t need the extra
money, you do!
On a related topic, when making a big purchase, it is
better to pay it all off up front if you can. If you make payments, you pay
interest. It is cheaper to pay all at once. It may seem painful, but then you
are not making monthly payments and paying the extra interest. If you find a 12-month
interest free offer on a product, pay it off before interest is due.
Frequent Flyer Miles. Do you fly to travel? Get a credit
card that awards miles. Frequent flyer miles may take a while to save up, so
this requires patience. However, if you are going to spend the money anyway,
you may as well put it on a credit card that will earn you miles, so you can
fly free later.
Other Travel Tips:
Use vrbo.com or airbnb.com to find vacation rentals and get
accommodations with a kitchen. Use those
supermarket discount programs to select discounted items online for the local
store before you travel there. Make food
for breakfast, lunch and dinner and maybe splurge on one or two dinner meals
during your trip. Check out
restaurant.com for discounted dinner meals.
Choose day of discount ticket theater shows. Rent a car from a local company branch
instead of the airport location for a cheaper rental.
This is my blog about to travel to Hawaii on a budget,
but it could be applied to anywhere.
Cut cable. We stream everything on a streaming
device. Another option is just to use a HD antenna and only view local
channels. This will save a lot of money over time. Paying for Internet access
with perhaps a Netflix or Hulu subscription is way cheaper than the inflated
cost of a monthly cable or satellite dish bill.
In fact, check over any subscriptions you may have and
decide if you really need them. If you have subscriptions you never use, cancel
them.
Be mindful of cell phone bills too. Look for a bundle (family)
deal or preferably an unlimited data deal. This is cheaper than the extra
charges on a bill when you go over your data limit.
Avoid stupid tax. “Stupid tax” consists of fines, fees,
tickets or other extra charges that are avoidable. I have paid my fair share of
these, but they don’t have to happen. These can be late fees, overdraft fees,
parking tickets, speeding tickets…. all needless expenses.
Credit card companies and banks make money from those
that don’t pay attention or forget to pay on time. You need this money more
than they do. If you discover such a fee on your account, give them a call and
ask them to waive it. A lot of times they will simply for the asking.
Part of my daily routine, is checking my financial
accounts every morning, in order to keep an eye on transactions, as well as to
keep the banks and credit card companies honest.
Another tip is to use technology to remind you
about tasks such as when a bill is due, such as a smart phone or other reminder.
For example, there are street sweepers on my street every 2nd and 4th
Mondays and Tuesdays. If cars are parked on the side of the street sweepers is
on a particular day, parking enforcement does not hesitate to issue parking
tickets. I set up reminders on my Google calendar to move my car for street
sweepers. This has saved me a lot of money in pointless parking tickets,
because otherwise, I would forget to move my car.
Never buy a new car. If you need a car, always invest in a used car.
New cars depreciate significantly after they leave the lot. Drive your car
until the wheels fall off. It may need occasional repairs, but these repairs
are cheaper than buying a new car every two or three years. When shopping for a
used car, be sure it is a quality car. Something that is well built and will
run for years. Honda makes sturdy cars, which is worth looking into. My brother
had a Honda for 20 years, and my wife has a Honda now that is 20 years old and
still in great shape. I am not trying to promote any certain brand of car;
however, I am suggesting to do research and invest in a car that will last.
Edit, January 2022: We downsized. Since Liz works from home and I am retired, I sold my car in February 2021. Now we have only one gas tank to fill, one registration and one car to insure. Less overhead. We have managed just fine with one car.
Investing. The original version of the book “Your
Money or Your Life” speaks of investments, but they are long term investments,
such 30-year Treasury Bonds. Bank CD’s (certificate of deposit) are another
option. Interest rates come and go, however, so this is another area that
requires research. Mutual funds and government bonds aren’t as good currently
as they were in years past, but times change as do interest rates. Home ownership and real estate is a great
investment. Paying rent to someone else
is paying THEIR mortgage. Buying property is investing in yourself. I recommend looking into first time buyer’s
programs.
Unexpected things happen.
I understand at times
unexpected things happen that cost money.
That’s why it is important to save up reserves so these unexpected things
don’t make you go broke. However, I
have to touch on insurance here. Insurance
can be expensive, but when you need it, you need it. Car insurance is required
by law. Home and health insurance are also necessary. Pet or renters insurance
as well. I recommend you shop around. Find insurance that is reasonable, as
well as having good coverage (all companies say
they do, which isn’t so). This may take some research, but is necessary.
Military / Veteran options: Being retired from the USN, I have to
add a military /veteran section. For
those that are active duty or veterans, you have additional money saving
options. Take advantage of your Commissary and NEX. Use your MWR services! USAA
insurance and banking services veterans and active duty military too. These are
great ways to save money. Veterans, use your VA! Take advantage of VA loans,
the GI Bill and healthcare! If you are a veteran with a disability, look into
applying for VA disability. This is tax free money. If you are a veteran and
have not applied to the VA for these services, do it! You earned it and it is
for you. Take advantage of it! These services will save you more money!
Summary:
How would your life change if your financial situation was under
control?
Even further, how would your life change if you didn’t have to work?
These are significant questions to ponder…..
I have been very fortunate.
Sprinkle in a touch of discipline, patience and perhaps a little luck and I
have never been strapped for money.
I have managed on very little but lived
within my means. The above documentation, research and monitoring
finance methods may be extra work, but it has significantly paid off for me. I
am retired from the US Navy and have not needed to start another career since
retiring because of how I have managed my money over time. Yes, I have a
pension, which helps. But by cutting corners everywhere I can, as well as some
investments, it has added up to savings over the years. Being frugal adds to my savings. The savings turn
into investments. The investments earn you “passive income”, which is your
money working for you. I have found the efforts of this to be worthwhile. Simply
put, you get out of your financial situation what you put into it. The
extra effort I put into financial management means I don’t need a job,
which is a great tradeoff, and is the overall point.
This is my blog about to travel
to Hawaii on a budget.
I also have a YouTube channel
where I post travel / beach videos! Check it out!
My freelance website:
http://www.libertycallproductions.com/
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| A photo from one of my many travels. This is Lanikai Beach on Oahu, Hawaii. July 2016. |
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