Finance

This world is a have it now type of world.  Whether it is a 5 minute ab workout or a 7-minute video that promises a drop-shipping business that can make you millions. Each ad is focused on getting you started and the sooner the better. The world rarely wants you to wait…they want you to take action and they want you to take action now!

We are big believers in taking action. Action can help you achieve true financial freedom faster. The daily marketing barrage isn’t pitching financial wellness, it is usually pitching an expense.  Take, for example, a recent ad that came through our feed:

On the surface this seems like a great offer.  A $349 driver for $37.42 for 12 months. It’s being offered to you at 0% APR.  See how the above works at https://club14golf.com/pages/how-it-works.  

For many that would consider themselves budget conscious this is a great alternative. Using a credit card could be extremely expensive. You would be wasting money on rates that can range from 8%-21%+.  

Making the analogy to a credit card purchase would be a pretty fair deal. We want you to look beyond the deal. Our goal is to get you focused on the best possible financial future. In order to do this you can’t look at an offer only in a convenient light.  

Before you dive in on the latest of payment plans (Klarna, Affirm, etc.) we invite you to consider asking yourself the following questions:

• Do I really “need” this item today?
• Is this something I have been wanting for more than 24 hours?
• Have I tried to save for this item in the past and not achieved that goal?
• Is the amount of $X ($37.42 in the above) currently available in my budget?
• Have I set up any auto-recurring investments of at least $X (i.e. $37.42) for the defined payment period?

Your likely initial reaction is “why are the twins being so hard on me?”.  After all these payment solution providers are getting their costs covered by the vendor which gives you the benefit of a 0% APR purchase….so why not do it? 

You might still decide to make the purchase because it’s a cost effective acquisition. The challenge really is to answer each of the above questions.  We want you to answer them truthfully and honestly. Your future self is counting on it.

The products being offered with payments generally aren’t critical needs, they are “nice to have” items such as clothes, sports equipment, etc.  From our POV people take the payments because the overall cost being spread out over payments makes it incredibly affordable.  

The challenge to consider though is “how many payments have I committed to?”   This is perhaps the main reason to avoid taking the free payment option. If you keep adding payments that are debited from your checking account then pretty soon you could be in a position where your payments are $300+. 

Even if they are all at 0% interest does that $X fit into your existing budget? If it does fit into your existing budget what are you doing with those funds now?

With payment solution firms being incorporated into many different online stores we would challenge you to save on your own for an item instead of taking the payment option. Saving up for an item will challenge your mindset to see if you really still want the device 12+ months later and if you don’t then you can put that extra savings into the Stock Market or in your Mutual Fund(s).

Twins Rules for Financial Success

As with all of our content here we want to encourage you to follow three core rules :

• Have an Emergency Fund/Squirrel Funds
• Invest for the Long Term
• Invest Automatically & Consistently

It starts with a free 2 month trial and it ends with “how many services am I signed up for?”.

The chains of habit are too weak to be felt until they are too strong to be broken. By Samuel Johnson

Companies make it easy to sign-up for a service. Many have subscription fees that are so low you barely think about it. They might be marketed as “less than $1 a day” or “Not even 50 cents a day”. 

The service might have a show that everyone at work is talking about or maybe they unlock one feature that you just have to have. Today we explore entertainment services and how they might be impacting your future savings goals.

Before we get too far rest assured we will not make you unsubscribe from all of your services. What we are going to ask you today is to understand how much you are spending on these services. After you know the number then you can determine if your future self will thank you or wish that you had cancelled.

Entertainment Services That Many Have and The Costs…They Really do Add Up

Let’s look at some common services that many have and see what the monthly cost is going to be. For each service we outline the basic entry price to be a part of the platform as well as the upgraded version.

If there were multiple versions, such as with Netflix, we chose the highest price plan available as the upgraded version. For plans like Amazon price we converted the annual payment into a monthly to make the comparison easier.

At first glance all of the numbers are relatively small. In some cases you can’t get a fast food meal for what the monthly subscription fee costs. This is exactly how these companies make their services attractive. 

Today isn’t about reducing costs to a minimum it’s about understanding how much these services cost. In a survey conducted by Statista nearly 70% of Americans don’t have $1,000 in savings. When you don’t have an emergency fund every cost matters and it’s important to look at all expenses.

Before we go too much farther look at the chart and see where you are on the savings chart.

Do you have money saved if you were out of work for 1,3, or 6 months?

Write that number down. Even if that number is zero that’s ok just write it down and let’s take a look at the cost of these services from a different perspective.

Before you consider investing we recommend having money saved for an emergency. In the next section we are going to look at the value of these services should you decide to invest.

Putting Some of Your Entertainment Funds Into Investing

You might be saying to yourself “Nobody has all of those services”. It’s quite easy to see how someone, maybe someone you know, could easily spend $61 a month on streaming services.

As we do around here it’s not about giving up on technology or refusing to ever go out to coffee. It’s about choices and understanding the impact of the choices.

Let’s use the example of two individuals and see how this works itself out. 

Tommy decides that he wants all the services we listed and he wants the premium version of each. He decides that it’s “only $61” so he buys all of them.

Billy decided that, while he likes entertainment, he really likes Disney+ and bought the upgraded version because it had additional content he enjoyed. He also loves his music and so he decided to purchase Spotify premium. He decides he is going to invest the difference.

In the first year, as we can see from the chart above, Tommy ends up with $0 in investment dollars and Billy has $456. Tommy isn’t concerned as he is having a good time watching lots of movies.

Billy decides to put his investing dollars into an S&P Index fund and he has forecasted an 8% annual return (well below the historic 10%) however he knows times are changing. Billy is investing $38 a month and in 36 months has $1,541. He now has savings greater than man in America.

It’s all about choices. Billy gets to enjoy his streaming. He also has additional investments years later. In Billy’s view he has the best of both worlds. He has investment dollars and entertainment dollars.

What Choices Are You Going to Make?

The choices you make with your hard earned dollars can have a lasting impact. We encourage you to look at the services that you subscribe to and if you are getting the true value of these services.

Take Action Today

Today we want you to ask yourself a few questions:

• Are you investing regularly?
• Are the services you subscribe to preventing you from investing?
• Have you thought about what the future version of you would say about the choices you are making today?

We always want to remind you to:

• Invest Consistently
• Develop Your Squirrel Funds
• Manage your fear and you WILL succeed

All too often articles on savings come down to giving something up…but what if we told you that you could keep enjoying what you are doing but if you made a few small adjustments that you could actually enjoy a greater amount of savings?  You might be trying to find $50 in your budget or maybe you would like to find even more.  

Read on to find out a few key ways to save that can help you monthly.

Tip #1: Pick Up Your Own Food…like Pizza

With the world going more and more to convenience and micro transactions in the form of services such as GrubHub, Postmates, etc. it is easy to get lost and think this is just the way it is.  Of course we are never ones to argue that there is a time value of money factor, but have you looked at what your convenience is costing you monthly?

For example in my family Friday night is the night we commonly enjoy ordering food and most often that means it is pizza night.  While we have ordered from local establishments we also order from the national chains (i.e. Domino’s, Pizza Hut, etc.).  Take for example when you order from Dominos in my neighborhood you can expect to pay the following:

• Delivery fee: $4.99 (not a tip)
• Tip: $5-$7 (definitely need to tip the driver)

That means that each week if I ordered pizza for delivery then I would be spending about an additional $10 a week or $40 a month.  You might think “well that isn’t that much” but the reality is that the Dominos is only a few minutes from my house and often I can stop to get the pizza prior to going home.  While the amount is small on a per order basis it can really eat into money that you could use to save additionally or even use for additional opportunities to eat out.

Tip #2: Use Your Credit Card Points System

When you first started on your path to financial freedom it is possible you had credit card debt and now you might even avoid credit cards to avoid going back in debt.  While credit card debt can be crippling, effectively using a credit card can be a way to gain extra dollars for savings each year.

Take for example a simple rewards card from Bank of America.  You can earn points as you spend and with one card program you could earn the following:

• 1,000 points = $10
• 1-1.5 points per dollar of spend

Consider for a moment that you put common expenses such as gas, eating out and groceries on your credit card each month and pay it off (to avoid paying interest charges) and you could easily be spending $1,000 a month.  That means you can get an extra $10 a month or $120 a year back for expenses you are already incurring.

Tip #3: Costco Gas

In the Los Angeles area the line for Costco gas is traditionally long.  I have to admit that this is not a tip either one of us follow; however, because the savings possibility is there we felt it necessary to share.  Costco purchases their gas efficiently and passes those savings on to its members.  Costco gas can be .20 to .25 cheaper per gallon.  Consider the following potential savings:

• (18 gallons * .20) = $3.60
• $3.60 * 4 weeks = $14.40

With an average commute, at least in Southern California, filling up weekly is certainly a reality and if you can get your gas at Costo you can save some money each month.  Even if you aren’t inspired by saving $14+ a month consider that filling up at Costco could pay for one of your monthly subscription services (i.e. Netflix) to allow you to enjoy some guilt free entertainment.

Tip #4: Recycling Can Really Add Up

You might be recycling weekly along with your trash services, but what if we told you that your recycling can provide you additional savings?  Yes it is a bit of a hassle to gather the recycling, but the reality is that you are paying for the recycling rebate when you make the purchase which means the act of recycling is getting a bit of a rebate.

For us we use recycling as a way to help our kids learn a bit about savings by depositing the recycling checks into their savings account(s).  We gather the recycling (generally every 4-6 weeks) and take it to the recycling center.  Our kids get to see that we have gathered it over the given time period and we show them the check from the recycling center.  On a good period of recycling it can be $30 and when you do that over the course of a year that can be $270-$350  If you don’t have kids then you can use it for your own savings program.

Tip #5: Grocery Store Member Program

Since we all need to buy food you might as well save a little while doing it.  Yes we get it that being part of a rewards program means they are tracking your spending behaviors but it can add up to some serious savings on each shopping trip. Take for example a favorite chip of Joe and I (Fritos).  At my local Vons if you are buying a 9.25oz bag of Fritos then you can save $1.49 on the purchase (see below).  While this might sound small saving $1-$2 on any given item can certainly add up on each shopping trip.

There are many ways to save and help you to achieve your best financial future.  Saving often comes down to looking at common expenses and determining if there is a way to accomplish that goal in a manner that has greater financial efficiency.  These ideas are just the start of your path to greater savings; look at your common expenses today and determine if you can get to your goals with a few minor changes.

Whether you get paid weekly, every two weeks, or even monthly, what do you do when your check comes in?  Or dig even deeper, what are you feeling when that check goes into your account?

It is important to have an understanding of how you are feeling when money comes into your account because in general society doesn’t glamourize healthy financial preparedness.  After all, many songs extol the glamor of payday by suggesting one could go to the club, buy countless rounds of drinks or even more dramatic versions are promoted.

Consider the following range of emotions that you could be feeling when you get paid:

• Relief
• Anxious
• Excitement

Of course there certainly could be many more emotions, but even looking at this small list which one would you most want to be in?  Consider a few thoughts on why you might be in each position:

• Relief: You could be feeling relieved because the money came in “just in time” to cover expenses or because your account was dangerously low on funds.  Relief, when it comes to a check deposit, is generally felt because there is a challenge with spending and each new check helps you stay just ahead of that problem.  Consider building up a reserve fund or analyzing your spending for the past two months to see if you could make improvements to avoid getting too low on funds.
• Anxious:  You might be feeling anxious because you are unsure of what to do when your check comes in.  Your account balances could be just fine, you are paying your bills, moving a little to savings, but you have a feeling that you just aren’t doing enough when each check arrives.  The anxiety can lead to doubt which makes you feel uneasy for a few days until you get into your traditional habits but the feeling returns when the next check arrives.  To help alleviate the feeling of anxiety we would encourage you to look at your financial goals and how you can get closer to them with each check.  Goals can range from items such as a nice road bike to larger items such as saving for a down payment on a house or buying a car.  We encourage a mix of smaller and bigger goals so you can feel the progress which helps to alleviate the anxiety.
• Excitement: You might be feeling excited because you are eager to go spending or (if you are a listener or a reader with us) because you have a solid financial plan in place that is helping you to build your best financial future possible.  Now, when we say “financial plan” we aren’t referring simply to retirement…we are referring to your total approach to finances.  We have found that those who are excited when they receive a check are most satisfied because their plan includes an approach to debt reduction, savings for specific goals, savings for retirement, and allocating funds specifically for fun.  The objective of a plan is certainly not just “how much money can I make/have?” it should be for you to enjoy your life with a great financial foundation.

If you are reading this and haven’t even thought about how you feel when your check comes in that is ok too as now this gives you a framework to start evaluating your emotions as money comes into your life.  The more you understand how you feel about money, the greater opportunity you have to put it to work for you to help you achieve your best financial life.