Even the mention of words like frugality and thrift send some people over the edge because, for them, those words conjure up thoughts of poverty and deprivation. They assume that cutting costs is tantamount to diving into dumpsters to find one’s next meal. No wonder so many people prefer a life of debilitating debt to one of frugality.

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Let me set the record straight. Please.

There is nothing undignified about spending less than you earn. That’s called living below your means, and it’s a fabulous way to live!

When you spend less than you earn, you have money to save—imagine that! And to give some away, too.

When you spend less than you earn, you are not dependent on credit to get by. It is a very good thing.

So, you may be wondering, how can you move from overspending to spending less, without giving up your quality of life? It starts with prioritizing everything according to how important it is to your life. Then only spend on things at the top of the list, ruthlessly cutting your spending on the things that don’t matter.

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Let’s say that tomorrow morning you wake up to discover that overnight—gulp!—your car was destroyed beyond repair. You’re not covered and you’re devastated.

You can’t live without a car. But you have no money—not a nickel in savings. So what do you do? If you’re like most people in that situation, you head to the only dealer in town who’s offering $0 down financing and a monthly payment that somehow you’ll figure out how to afford.

Salesman handing over the keys to the car of your dreams

Realistically, what payment can you afford if you pull the plug on cable TV, stop eating out, and basically cut out all frivolous spending? $200? $300 $600? 

Okay, back to reality. Your car isn’t destroyed, and you’ll keep driving it for a while. But remember the amount you said you believe you could afford each month if you really put your mind to it? Let’s say it’s $300. Keep reading. 

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The Bank of You

Open a savings account somewhere convenient and begin immediately to make $300 monthly payments into that savings account. Just as if you were in that terrible scenario mentioned above. Every month. Make the sacrifices now, cut the spending now. Be strict with yourself—rigid and unbending! No late payments, no slacking. 

In the meantime, and as you are making these big new payments to yourself, continue driving the car you have now for at least one more year, even if it is a real clunker. You can endure anything for a short time when you have a plan for it to end.

Soon, you will begin earning interest —Ally.com currently 2.20% APY—on the growing balance instead of paying interest on a conventional auto loan. 

At the end of one year—12 payments to yourself—you will have accumulated $3,600 cash plus interest. Not bad! 

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I once flew in a chartered jet, not exactly like a rockstar, but I did feel quite pampered. The flight was awesome, but I have to admit to momentarily freaking out when the pilot unbuckled, stood up, left his pilot seat, and came back to chat with his three passengers over snacks and sodas.

While he sat with us for more than an hour, it took only a few minutes for me to relax, enjoy the company and the ride.

Relying on autopilot in both flying and finances is quite an amazing thing.

 

woman-laptop-setting-up-automatic-payment-online bill-pay

 

Creditors, especially banks and credit-card issuers, are unbelievably sensitive to whether you pay your bills on time. So is your credit score. One slip-up could cost you dearly if that means you lose your low- or no-interest rate, or a late payment results in a big late fee.

Late payments are reported to the credit bureaus and that can mean a serious blow to your credit score, which may result in higher insurance premiums now and higher interest rates on your next mortgage. If you’re thinking “domino effect,” you are exactly right.  Bottom line: Do not pay late!

An excellent way to make sure you always pay on time is to automate (sometimes referred to as  auto bill-pay) even when you’re on vacation, sick, or for some other reason suffer from brain freeze.

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Paying off credit-card debt is an uphill battle. If the majority of your minimum monthly payment is going toward interest, that makes the climb even more difficult.

Getting out from under double-digit interest rates with a zero-interest balance transfer can make a big difference provided you understand the risks.

Woman dealing with credit-card debt and in despair

 

Dear Mary: May I ask your advice?  I have a credit-card balance of $4,500 at 18 percent interest. My FICO score is 700. I’ve been paying just the minimum monthly payment for too many years but I am determined to pay this off in the coming 12 months.

Would it be wise for me to transfer this to a new CHASE Slate credit card that offers zero-percent interest with no fees for 15 months? Or should I keep what I have, bite the bullet and just pay it off over the next year? Mary Beth

Dear Mary Beth: Let’s look at the numbers. If you keep what you have and pay off the $4,500 at 18 percent interest over 12 months, you will make 12 payments of $412.56 each, for a total of about $4,950, of which $450 will be interest.

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For years (and years), I lived under a dark cloud of worry that I would end up financially destitute—a bag lady, all alone living under a bridge.

A study conducted by Harris Interactive for Allianz Insurance Group reveals that I’m not the only one. In fact, most of us have felt that way, not because we’re broke, but because we don’t have confidence when it comes to managing our money. That makes us timid, worried and financially insecure.

 

We don’t have to accept financial insecurity as some kind of life sentence. And that constant and gnawing fear of becoming destitute? Forget it! We can do something about this.

Financial confidence is a choice. It’s a matter of changing bad habits and choosing to learn simple financial principles. Then by consciously applying them over and over again, those principles will become automatic responses—financial habits.

Happy senior woman with laptop experiencing best money year ever

Are you ready to make 2019 your best money year ever? Here are four simple things you can do starting today to improve your financial confidence—and take control of your money.

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Saving money is a curious term with two meanings: 1) To spend less, as in “I buy things on sale to save money,” and 2) To physically place money where it is safe from being spent, as in “I save money in my secret savings place.” 

overhead-close-up-photo-of-a-woman-putting-money-into-her-purse

Okay, that’s fine. But here’s the problem. It’s easy to trick ourselves into thinking that 1) and 2) are the same. They are not unless of course, you stop by the bank to actually deposit the difference between what you would have spent had the stuff not been on sale, right into your savings account or wherever it is that you stash cash.

Actually, that is one clever way to boost your savings this year. Here are eight more:

1 Tax yourself

This year assess yourself a specific “tax” each time you make an ATM withdrawal. It might be $5 or $10, you decide. Whatever the amount, make sure you become a tough tax collector AND that you carry through and put the tax you collected into your safe savings place. No slacking, no IOUs.

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Want a simple, pain-free plan to increase your savings this year? CPA, author, and blogger Mike Piper says to save 1 percent more. “Increase your savings contributions by 1 percent of your gross income,” suggests Piper.

It might be difficult to imagine how such a small change could make any difference at all, but according to Piper, this strategy can work wonders, especially if you are young. I could not agree more.

Yellow piggy bank and calculator with 2019 year on window

Anything you can do to become a consistent saver is going to come back to bless you in many ways in the future. A personal program of consistent savings does more than increasing your bank account. It changes your attitude. It quiets your insatiable desires and moves you away from the edge where it is easy to worry and panic.

Money in the bank changes everything. Read more

You hear it all the time, but do you know what it means to live below your means? Have you figured out how to do that?

To live below your means is to choose a lifestyle you can pay for with the money you have and still have some left over. 

hand with a calculator. money saving concept.

Living below your means in this high-pressure, credit-based, gotta-have-it-all-right-now culture is not exactly easy.

It takes skill and determination to go against the tide and buck a system that encourages spending all we have now plus what we hope we’ll get in the future. Read more