As you know, I usually stick to fashion/beauty related topics but I’m going out of my comfort zone to write about something that’s much more important.
Over the last couple of years, you may have noticed that I haven’t been blogging as much. There are a few reasons for that. 1. I now work full-time at a marketing agency so there’s not as much time. 2. I decided that saving money is more important to me than constantly posting new clothes. 3. I feel that it’s dishonest to do a lot of sale roundup/shopping type posts when I myself do very little shopping and no longer believe in buying things that I don’t need or love. Instead, I rent all of my clothes with Rent the Runway Unlimited. You can read about that here.
I’ll start by sharing that I have always been pretty good (or probably better than most) at saving. I’ve never had a dollar of credit card debt. From a young age, I would often prefer to save instead of spend. Money I received from family members for my Sweet 16, 18th birthday, etc. is mostly still in bank account. I was influenced by a Financial Literacy course I took in high school and by seeing too many friends become overwhelmed by debt.
Last year, the significance of saving became truly clear after I read Vicki Robin’s book, Your Money or Your Life. If you get nothing else from reading this post or want to stop here, I highly recommend reading this book. The information it contains is more important than anything I learned in school. Its lessons have the potential to be life changing. It’s the most important $15 you will ever spend.
Here are a couple of lessons that I’ve found are vital to saving more than you spend:
1. Don’t put other people’s feelings before your own financial interest.
As a millennial, it can be especially intimidating to turn down friends in favor of a frugal night in. Trust me. I know this. Often when I first tell a friend that I can’t get dinner because I’m saving money, they feel bad and offer to treat me. I then have to explain that I’m not broke, I just enjoy saving money.
I only eat (or drink) out one to two times per week. I usually stick to just once. The only exception is if I’m on vacation. If I already have one dinner or brunch or night of drinks planned, I turn down the rest. I don’t feel bad about it. I realized that whenever I regretted spending money, it was almost always because I was worried about what others thought. I didn’t want to disappoint friends so I went to an overpriced brunch etc.
I only spend if it’s something that’s important to me. Getting my nails done brings me true joy so I still do that – although I have cut back to an appointment every three weeks instead of two. I like going to restaurants but I’ve actually come to appreciate the experience more when I do so sparingly. If someone in your life doesn’t respect your financial choices, then they are not your true friend. There are plenty of free and low-cost ways to spend time together.
2. Reward yourself by saving instead of spending.
One of the main lessons in Robin’s book is that from the day we’re born, we’re trained to use spending as a reward. Take the challenge to not “treat yourself” to a dinner or shopping spree when you get a promotion at work or if you’re feeling down. It’s a process that takes time. Figure out what’s truly important to you and what’s not, then take small steps to reduce. Eventually, the thrill of financial independence will outweigh your desire to buy stuff.
Here’s a great article that I recently read about why 25% of families making more than $150,000 a year live paycheck to paycheck. Debt plagues even the highest earners because they are either trying to impress others (see lesson 1 above) or because they use spending as a reward mechanism for years of schooling or long hours.
If you’re not using an online bank, you’re throwing away free money.
Interest rates for savings accounts at online banks are at an all time high. I have been with Ally bank for a few years now and I have zero complaints. Ally offers the highest interest rates for both checking and savings accounts. The savings rate is 2% and if another online bank raises their rate, Ally raises theirs to match.
If you’re still with a traditional bank like Chase, you are doing yourself a disservice. Traditional banks have interest rates around 0.01%. That means that if you save $1,000 at Chase bank, you would make $1. At Ally, you would make $20. That’s an incredible difference and obviously the results are more staggering the more you save.
- It’s FREE money and there’s no excuse to not switch.
- Ally is FDIC insured.
- They reimburse you for ATM fees so you can use any ATM for free.
- They have a great app where you can mobile deposit checks.
- Their customer service line is great.
I do have just $300 in a Chase bank account (the minimum to not incur fees) because I have some outstanding savings bonds that I need to cash in. So if you’re not convinced or you still need access to a physical branch, you can keep your old bank account open for a while. I even convinced my mom to switch over. Ally does not pay me for referrals but I wish they did.
Set your investments on autopilot.
Ok, I have another book recommendation. Everything you need to know about investing can be found in this book: A Random Walk Down Wall Street. You don’t need to hire a professional. You just need to read this book.
Before you start thinking about investing, you need to save save save. The amount of money you save will ultimately be the most important factor. After you have a minimum of six months of living expenses in your Ally bank account, it’s time to start investing.
I use Wealthfront for all my investing with the exception of my Roth IRA retirement account – which I won’t get into here. Wealthfront is a robo-investment platform and therefore has extremely low fees. There’s no way to consistently beat the market unless you are extremely lucky. My book recommendation above lays out indisputable evidence that proves this. There’s no get rich quick scheme in the stock market. But there is a way to get rich slowly but surely.
You should be investing for the long long term. Unless your name is Warren Buffet, there are two very important factors necessary to generate a future income stream from your investments:
- Stay the course. Don’t take money out when the market goes up or down. From Malkiel’s book: “95% of the significant market gains over a thirty-year period came on 90 of the roughly 7,500 trading days. If you happen to miss those 90 days, just over 1 percent of the total, the generous long-run stock-market returns of the period would have been wiped out.” Still think that long-term investing isn’t for you?
- Minimize taxes, fees, and trading charges. You can do this by using a low-cost service like Wealthfront and by following rule #1. A 1% fee or a nominal trading charge may not feel like a big deal right now but over the long-term, they add up and seriously cut into your gains. Frequent trading and withdrawals also lead to more taxes.
Random Money Saving Tips
- Walk more. There are two benefits to walking – it’s free and it’s good for you. I always walk if I’m going somewhere that is less than 2 miles away (unless it’s late at night and unsafe).
- Have loyalty when it comes to travel. It’s less important which airline or hotel chain you choose and more important that you choose one and stick to it. I have the Starwood Amex card which earns me hotel points that can be used at the largest hotel chain in the world. They can also be converted into American Airlines miles so that’s the airlines that I stick with. Over the long-term, you’ll want all your points/miles in one place.
- Try cooking. You might just enjoy it! I eat mostly organic and (I like to think) pretty healthfully. Organic ingredients aren’t that much more expensive, especially if you buy things like organic brown rice in bulk. What is way more expensive is buying prepared foods – hello Whole Foods salad bar. You don’t need to buy a $15 salad to eat healthy. You don’t need an expensive gym membership to work out. I love this blog for easy, cheap, and healthy recipes. I live alone but always cook large quantities of a recipe because it saves time (leftovers) and money.
In conclusion, the first thing you need to do is read this book: Your Money or Your Life. Then, before you spend, consider who you’re spending for – yourself? Or for fear of disappointing someone else? Be brave.
I tried to sum up everything I’ve learned about money in one blog post. I know that I left a lot out. Feel free to leave a comment below or send me an email with any questions. I would love to help.
*This post contains some affiliate links but all of the services mentioned have helped me greatly in my journey to financial independence.
