Do you know what makes us wealthy? Sure, things like hard work and a good job come to mind. But did you know that many people who make a lot of money are not wealthy? And many people who don’t make a lot of money are wealthy. I had a boss once who was making six digits and was broke between paychecks. Making a lot of money does not create wealth – knowing what to do – or not do – with your money is what creates wealth. I was talking with my doctor recently, and I told him I was retiring early. He said, but you could make more if you work longer, and I said yes, but how much is enough? I said this to someone who easily makes 10x what I am earning. I have enough. Sure, I’d like a fancier car, a summer home, an RV. But at what cost? I make do with what I have and it is more than enough.
I have not handled money perfectly all of my life. Sometimes I splurge. Currently, I am working on downsizing, and I am remembering the thought process I had when I purchased that “cute knick knack that will go with my blue and white collection.” Or that fancy pair of slacks that I only wore once because they are not practical, which someone at Goodwill will now enjoy. They say we have three stages in life: wanting stuff, buying it, then getting rid of it. I’m in the latter stage. But I have been pretty frugal over the years. I’ve never paid full price for anything, I always buy on sale. Other than a student loan, which is large, I’ll admit, but it gave me the career I dreamed of, I have no debt. (And the income based student loan payments are low). Not having debt is is freeing, it allowed me to semi-retire early. I can work part time now and choose my own hours. If you make wise financial decisions more times than not, you can also earn your freedom from the grind.
Wealth is built by one simple action: spend less than you earn. Knowing that this is easier said than done, here are some tips about how to start building wealth. Yes, these are small steps, but these small steps create good habits that add up to big savings.
- Shop with a friend. Many stores have buy-one-get-one-free deals. Recently I went shopping with a friend, and we filled our cart entirely with buy-one-get-one-free items. Then we each took an item and split the bill in half. The result? We each had 3 bags full of groceries, including a rump roast, and we only paid $16 each. If you go to a big box store, you can purchase items together and split them in half. When you are ready to purchase something, ask your friend to ask you if you really need the item you are going to buy. How is it going to change your life? Will it add more value than the reduction in your checking account?
- Know how much things should cost. Not all items purchased in bulk at big box stores are cheaper than items that can be bought elsewhere in smaller amounts. But some of them are. You have to know the difference. Look at grocery store sales circulars to get a grasp of how much things cost. Stores tend to have a pattern; one may put their chicken breast on sale on a rotation of every 3 weeks, another may always have cheap bread or ice cream. Once you get a handle on how often things are on sale and the prices that different stores charge, you will know where the bargains are. This doesn’t mean you will be going to several different grocery stores in one week. You can buy the things on sale in one store one week, and other items on sale in another store the next.
- Measure prices by weight. Often one product comes in different sizes. A 16 oz size might cost $1.00, and an 8 oz size might cost .60, so you save money if you buy the larger size. But that is not always the case, sometimes smaller can be cheaper. Also, consider that if you will not use the entire contents of a large box, even if the small box costs a few pennies more, it may be worth it if you are going to end up throwing out half of the large box because it expired before you used it all.
- Beware – not all “on sale” signs are bargains. Cat food that was regularly priced at .45 per can in one store was advertised in that same store on sale for “10 for $6.” Another store offers a weekly special – if you buy two items, you get 5 items free. But the 2 items you buy are always overpriced. Carefully consider whether you will even use the 5 free items that come with the deal. Always do the math. Your smart phone has a calculator, use it.
- Limit the amount of times you shop. The more you go to the grocery store, the more times you will be tempted to purchase impulse items. Instead, study store circulars before you shop and know in advance what you will buy. Stock up on your meat and nonperishable items once a month, and then once a week shop only for fresh vegetables, bread and milk — go to the vegetable and dairy departments only, don’t venture into the other aisles. If going into the store for your fresh food in the middle of the month offers too much temptation to spend money on other things, then why not go to your local bakeries or farmers’ markets for your perishables instead? You’ll be buying fresher and healthier food while supporting local businesses and farmers at the same time. Click here for a link providing a list of some of the farmers markets in the Greater New Orleans area.
- Use your store’s loyalty cards to the max. There are many benefits. One is that the store tracks your purchases, so they will usually provide you with an in-store coupon for items you actually buy. Many will reward you with a coupon every time you have spent over a certain amount. Some stores partner with other businesses and offer discounts on gasoline or other products. However, again, do the math. 5 cents per gallon savings sounds great, but for me that’s a total of 50 cents per fill-up. Is the item linked with this deal 50 cents cheaper?
- Keep tabs on spending. I have a credit card that earns cash back. I use it often, and I do pay it off every month. It is easy to not notice how many purchases I make, and sometimes the bill is a lot higher than it should be. If this happens a lot, write down what you are spending, and remind yourself that this money will be coming out of your checking account at the end of the month. And DO pay your credit card bill off every month. If this is becoming difficult to do, stop using it and use cash.
- Get out of Debt. You may think this is easier said than done, but it is doable. Stop charging and starting paying off your bills – one bill at a time. After the first bill is paid off, you will feel so good! Then you can use the money you were paying on that bill to pay down the next bill. It’s called snowballing. Being free from debt provides you with so much freedom — the freedom to retire early, the freedom to take a lesser-paying job that you would enjoy more, the freedom to be generous and give to good causes, the freedom to travel…and you will have much less stress in your life.
- Find ways to cut back that work for you. I still have not finished using a case of paper towels I received as a gift for joining Costco 6 years ago. Whenever I can, I use dish towels. I use cloth napkins instead of paper napkins. I reuse the plastic bags from the grocery store that I put my produce in. I use grocery bags as trash bags. I stock up on things when they are on sale for a good price, so I rarely run out of things, which would cause me to run out and buy the product at full price or to make a trip to the store where I, of course would purchase more than that one thing. Take stock of your streaming services and annual memberships. Do you watch the streaming channels you pay for often enough to justify the cost? Try having them one at a time – perhaps Hulu one year and Netflix the next, and so on. Are you paying for a gym membership? Do you go enough to justify it?
- Remember, every penny saved is a penny that can be used to increase your wealth.
These are just a few small ideas we can apply to our everyday lives. Can you think of more money-savers?