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5 Ways to Change Your Spending Habits
If you keep doing what you’ve always done, you’re going to keep getting what you you’ve always gotten. One of the hardest things about getting out of debt is changing your habits. You need to break your habits if you’re going to get yourself to a new place, financially.
How can you do that? Habits aren’t easy to break. Ask any smoker, junkie, or overeater what it takes. There are a lot of systems to break or establish habits, but they don’t all work for everyone.
Here are my suggestions:
- Commit to just 30 days. I’m a big fan of doing new things for 30 days. If you can do it for a month, you can do it forever, no matter what “it” is. For just one month, don’t buy anything. I don’t mean avoid buying groceries or toiletries and I certainly don’t mean to stock up on new crap the day before your 30 day spending fast or rush out for a shopping spree on day 31. Just don’t buy anything for a month, no exceptions but the things necessary to stay alive and healthy. No movies, no games, no cars, no toys, and no expensive meals. Just 1 month.
- Switch methods. If you pay for everything with a credit card, restrict yourself to just cash. If you pay cash for everything, switch to a credit card. Breaking your long-established habits is a way to get used to spending consciously: taking the time to think about what you are doing, instead of just spending mindlessly.
- Identify your spending triggers. I can’t go into a book store and come out empty handed. So, I avoid bookstores. My wife has problems with clothing stores. A friend can’t walk out of a music store without some body piercing equipment. What are your triggers? What makes you spend money without thinking? Figure out what those things are and then avoid them like the plague…or the clap.
- Quit buying things for pleasure. Buying things makes us feel good. It sends a rush of endorphins through our bodies. The more we get that rush, the more we crave that rush, so the more we do to get it. You need to stop that. Before you buy something, ask yourself if it’s something you actually need, or if you just want a pick-me-up.
- Avoid shopping online. E-commerce sites make it far too easy to buy things at a moment’s notice. You don’t have to think about what you are doing or if you actually need whatever you are buying. You just buy. The best way too avoid them is to delete your credit card information from any site that save the information and delete the sites from your bookmarks. Whatever you can do to slow down the buying process will make it easier to avoid buying things, which can soon be stretched into NOT buying things at all.
Habits—especially bad habits—are hard to break. There is an entire self-help niche dedicated to breaking habits. Hypnotists, shrinks, and others base their careers on helping others get out of the grip of their bad habits, or conning them into thinking it is easy to do with some magic system. How do you avoid or break bad habits?
5 Pain-Free Ways to Save Your Money
Everyone needs an emergency fund. More than that, you will eventually need retirement savings, a new car, a big-screen TV, or maybe just a new kidney. Whatever the reason, one day, have a comfortable savings account will make your life easier.
But, Jason, you say, it’s hard to save money! How can I start saving when I can’t make ends meet? I’ve got rent, 9 kids, and a DVD addiction that won’t quit. My mortgage is underwater, my Mercedes still has 8 years on the loan, and the Shoe-of-the-Month Club only carries Christian Louboutin’s. What can I do?
Well, I’ll reply, since I am Jason and you asked for me by name, you need to find a way to make it happen. I’d never recommend someone give up their diamond-studded kicks, but something’s gotta give. In the meantime, there are some ways you can save money without feeling the sting of delayed gratification.
1. Save your raise. When you get your next raise, pretend you didn’t. Set up an automatic transfer to stick that new 5% straight into a savings account. Don’t give yourself an opportunity to spend it.
2. Find it, hide it. When your Aunt Gertrude dies and leaves your her extensive collection of California Raisins figurines, sell them and save the money. If you find a $20 bill on the ground, throw it right into your savings account. When your 30th lottery ticket of the week gives you a $10 prize, save it! Don’t waste found money on luxuries. Use it to build your future.
3. Let it lapse. Do you have magazine subscriptions you never read? Or a gym membership you haven’t used since last winter? Panty-of-the-Month? Crack dealer who delivers? Stop paying them! Let those wasted services fall to the wayside and put the money to better use. I don’t mean flipping QVC products on eBay, either. Save the money.
4. Jar of 1s. Roughly once a week, I dig through my pockets and my money clip looking for one dollar bills. Any that I find go in a box to be forgotten. I use that box as walking-around money for our annual vacation, but it could easily get repurposed as a temporary holding tank for money I haven’t gotten to the bank, yet.
5. Round it up. Do you balance your checkbook? If you don’t, start. If you do, start doing it wrong. Round up all of your entries to the nearest dollar. $1.10 gets recorded as $2. $25.75 goes in as $26. If you use your checkbook or debit card 100 times a month, that’s going to be close to $75 saved with absolutely no effort. It even makes recording your spending easier.
There you have it, 5 easy ways to save money that won’t cause you a moment’s pain.
Do you have any tricks to help you save money?
First 3 Things to Do in the New Year
- Image by iowa_spirit_walker via Flickr
With the new year looming, it’s the perfect time to review the things that may not have gone as well as planned in the current year, and plan ahead for the coming year, to make sure things go well from now on.
To get a good start in the new year, you should focus on three things.
1. Budget.
A good budget is the basis of every successful financial plan. If you don’t have a budget, you have now way of knowing how much money you have to spend on your necessities or you luxuries. Do you really want to guess about whether or not you can afford to get your car fixed, or braces for your kid? I’ve gone over all of the essentials to make a budget before. Now is the perfect time to review that series and make sure your own budget is functional and ready for the new year.
At the same time, spend some time thinking about how your what has gone wrong with your budget over the previous year. In my case, when we got back from vacation in August, our mindset had changed a bit about spending money, and we got out of the habit of staying strictly on budget. By the time we got back on track, it was Christmas and our plans got shot, again. If it weren’t for my side hustles–money that I don’t track in the budget because the money isn’t consistent, yet–we would have had some serious problems this fall. Where have you gone wrong, and what could you do to improve next year?
2. Credit Cards and New Debt.
In the new year, if you haven’t already done so, make sure you throw your credit cards away. The most basic law of debt reduction is, “If you don’t stop using debt, you’ll never be out of debt.” That’s why you need to set up your budget first. Make sure that your expenses are less than your income, so you can make ends meet without having to charge the difference.
How has your debt use worked out over the last year? Have you used it at all, or have you eliminated the desire to pay interest? What have you used your credit cards for? How much of that could you have done without?
3. Estate Planning.
Now is the time to make sure that all affairs are in order, if the worst should happen. If you die, what happens to your money? Your kids? I’ve gone over everything you need in an estate plan before, so I won’t beat that horse again. You owe it to your family to make sure they are taken care of if something should happen to you. At a bare minimum, write a will and get it notarized.
Have you putting off writing your will? You know you need one, but it’s a morbid thought, so it’s easy to put off, right? Get over it. If you love your family, you’ll do better and get your affairs together next year.
That’s a good financial start for 2011. What are you missing in your financial life?
Money Problems – Day 8: Insurance
Today, I am continuing the series, Money Problems: 30 Days to Perfect Finances. The series will consist of 30 things you can do in one setting to perfect your finances. It’s not a system to magically make your debt disappear. Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.
I’m not running the series in 30 consecutive days. That’s not my schedule. Also, I think that talking about the same thing for 30 days straight will bore both of us. Instead, it will run roughly once a week. To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.
On this, Day 8, we’re going to talk about insurance.
What is insurance? Insurance is, quite simply a bet with your insurance company. You give them money on the assumption that something bad is going to happen to whatever you are insuring. After all, if you pay $10,000 for a life insurance policy and fail to die, the insurance company wins.
A more traditional definition would be something along the line of giving money to your insurance company so they will pay for any bad things that happen to your stuff. How do they make money paying to fix or replace anything that breaks, dies, or spontaneously combusts? Actuary tables. Huh? The insurance company sets a price for to insure—for example—your car. That price is based on the statistical likelihood of you mucking it up, based on your age, your gender, your driving history, and even the type of car you are insuring. What happens if a meteor falls on your car? That would shoot the actuary table to bits, but it doesn’t matter. They spread the risk across all of their customers and—statistically—the price is right.
What kinds of insurance should you get?
Homeowner’s Insurance
For most people, their home is, by far, the largest single purchase they will ever make. If your home is destroyed, by fire, tornado, or angry leprechauns, it’s gone, unless you have it insured. Without insurance, that $100, or 200, or 500 thousand dollars will be lost, and that’s not even counting the contents of your home.
Homeowner’s insurance can be expensive. One way to keep the cost down is to raise your deductible. If you’ve got a $1500 emergency fund, you can afford to have a $1000 deductible. That’s the part of your claim that the insurance company won’t cover. It also means that if you have less than $1000 worth of damage, the insurance company won’t pay anything.
You can get optional riders on your homeowner’s insurance, if you have special circumstances. You can get additional coverage for jewelry, firearms, computer equipment, furs, among other things. You base policy will cover some of this, but if you have a lot of any of that, you should look into the extra coverage.
Auto Insurance
Car insurance is required in most states. That’s because the kind caretakers in our governments, don’t want anyone able to hit you car without being able to pay for the damage they caused. To my mind, I think it would be more effective to just make whacking someone’s car without paying for it a felony. If someone is a careful driver or has the money to self-insure, more power to them.
Auto insurance comes with options like separate glass coverage, collision, total coverage (comprehensive), or just liability. Liability insurance is what you put on cheap, crappy cars. It will only pay for the damage you do to someone else.
Rental
I’ve never had rental insurance. The last time I rented, I could fit everything I owned in the back of a pickup truck with a small trailer, and it could all be replaced for $100. Heck, I had the couch I was conceived on. Err. Ignore that bit.
Almost everything you can get homeowner’s insurance to cover will also cover renter’s insurance, except for the building. It’s not your building, so it’s not your job to replace it.
Life Insurance
If you care about your family, you need life insurance. This is the money that will be used to replace your income if you die. I am insured to about 5 times my annual salary. If that money gets used to pay off the last of the debt, it will be enough to supplement my wife’s income and support my family almost until the kids are in college. You should be sure to have enough to cover any family debt, and bridge the gap between your surviving family’s income and their expenses. At a minimum. Better, you’ll have enough to pay for college and a comfortable living.
Life insurance comes in two varieties: whole and term. Whole life…sucks. It’s expensive and overrated. The sales-weasels pushing it will tell you that it builds value over time, but it’s usually only about 2%. It’s a lousy investment. You’re far better off to get a term life policy and sock the price difference in a mutual fund that’s earning a 5-6% return.
Term life is insurance that is only good for 5, 10, or 20 years, then the policy evaporates. If you live, the money was wasted at the end of the term. The fact that it’s a bad bet makes it far more affordable than whole life. It doesn’t pretend to be an investment; it’s just insurance. Pure and simple
Personal Liability Umbrella
An umbrella policy is lawsuit insurance. If someone trips and hurts themselves in your yard, and decides to sue, this will pay your legal bills. If you get sued for almost anything that was not deliberate(by you!) or business related, this policy can be used to cover the bill.
If you call your insurance company to get an umbrella policy, they will force you to raise the limits on your homeowner’s and auto insurance. Generally, those limits will be raised to $500,000, and the umbrella coverage will be there to pick up any costs beyond the new limit.
A little-known secret about umbrella policies: They set the practical limit of a lawsuit against you. Most ambulance chasers know better than to sue you for 10 million dollars if you only have a policy to cover 1 million. They will never see the other 9 million, so why bother? They’ll go for what they know they can get.
The flipside to that is that you should not talk about your umbrella policy. Having a million dollars in insurance is a sign of “deep pockets”. It’s a sign that it’s worthwhile to sue you. You don’t want to look extra sue-able, so keep it quiet.
Insurance is a great way to protect yourself if something bad happens. Today, you should take a look at your policies and see where you may have gaps in coverage, or where you may be paying too much.
Make Extra Money Part 2: Niche Selection
If you want to make money, help someone get healthy, wealthy or laid.
This section was quick.
Seriously, those three topics have been making people rich since the invention of rich. Knowing that isn’t enough. If you want to make some money in the health niche, are you going to help people lose weight, add muscle, relieve stress, or reduce the symptoms of some unpleasant medical condition? Those are called “sub-niches”. (Side question: Viagra is a sub-niche of which topic?)
Still not enough.
If you’re going to offer a product to help lose weight, does it revolve around diet, exercise, or both? For medical conditions, is it a way to soothe eczema, instructions for a diabetic diet, a cure for boils, or help with acne? Those are micro-niches.
That’s where you want to be. The “make money” niche is far too broad for anyone to effectively compete. The “make money online” sub-niche is still crazy. When you get to the “make money buying and selling websites” micro-niche, you’re in a territory that leaves room for competition, without costing thousands of dollars to get involved.
Remember that: The more narrowly you define your niche market, the easier it is to compete. You can take that too far. The “lose weight by eating nothing but onions, alfalfa, and imitation caramel sauce” micro-niche is probably too narrowly defined to have a market worth pursuing. You need a micro-niche with buyers, preferably a lot of them.
Now the hard part.
How do you find a niche with a lot of potential customers? Big companies pay millions of dollars every year to do that kind of market research.
Naturally, I recommend you spend millions of dollars on market research.
No?
Here’s the part where I make this entire series worth every penny you’ve paid. Times 10.
Steal the research.
My favorite source of niche market research to steal is http://www.dummies.com/. Click the link and notice all of the wonderful niches at the top of the page. Jon Wiley & Sons, Inc. spends millions of dollars to know what topics will be good sellers. They’ve been doing this a long time. Trust their work.
You don’t have to concentrate on the topics I’ve helpfully highlighted, but they will make it easier for you. Other niches can be profitable, too.
Golf is a great example. Golfers spend money to play the game. You don’t become a golfer without having some discretionary money to spend on it. I’d recommend against consumer electronics. There is a lot of competition for anything popular, and most of that is available for free. If you choose to promote some high-end gear using your Amazon affiliate link, you’re still only looking at a 3% commission.
I like to stick to topics that people “need” an answer for, and can find that answer in ebook form, since I will be promoting a specific product.
With that in mind, pick a topic, then click one of the links to the actual titles for sale. The “best selling titles” links are a gold mine. You can jump straight to the dummies store, if you’d like.
Of the topics above, here’s how I would narrow it down:
1. Business and Careers. The bestsellers here are Quickbooks and home buying. I’m not interested in either topic, so I’ll go into “More titles”. Here, the “urgent” niches look like job hunting and dealing with horrible coworkers. I’m also going to throw “writing copy” into the list because it’s something I have a hard time with.
2. Health and Fitness. My first thought was to do a site on diabetic cooking, but the cooking niche is too competitive. Childhood obesity, detox diets and back pain remedies strike me as worth pursuing. I’m leaning towards back pain, because I have a bad back. When you’ve thrown your back out, you’ve got nothing to do but lie on the couch and look for ways to make the pain stop. That’s urgency.
3. Personal Finance. The topics that look like good bets are foreclosures and bankruptcies. These are topics that can cost thousands of dollars if you get them wrong. I hate to promote a bankruptcy, but some people are out of choices. Foreclosure defense seems like a good choice. Losing your home comes with a sense of urgency, and helping people stay in their home makes me feel good.
4. Relationships and Family. Of these topics, divorce is probably a good seller. Dating advice definitely is. I’m not going to detail either one of those niches here. Divorce is depressing and sex, while fun, isn’t a topic I’m going to get into here. I try to be family friendly, most of the time. Weddings are great topic. Brides are planning to spend money and there’s no shortage of resources to promote.
So, the niches I’ve chosen are:
- Back pain
- Bankruptcy
- Conflict resolution at work
- Detox diets
- Fat kids
- Foreclosure avoidance
- Job hunting
- Weddings
- Writing copy
I won’t be building 9 niche sites in this series. From here, I’m going to explore effective keywords/search terms and good products to support. There’s no guarantee I’ll find a good product with an affiliate program for a niche I’ve chosen that has keywords that are both highly searched and low competition, so I’m giving myself alternatives.
For those of you following along at home, take some time to find 5-10 niches you’d be willing to promote.
The important things to consider are:
1. Does it make me feel dirty to promote it?
2. Will there be customers willing to spend money on it?
3. Will those customers have an urgent need to solve a problem?
I’ve built sites that ignore #3, and they don’t perform nearly as well as those that consider it. When I do niche sites, I promote a specific product. It’s pure affiliate marketing, so customers willing to spend money are necessarily my target audience.
