Fail-Proof Financial Advice
My dad loved to share words of wisdom and pieces of advice, especially when it came to how I saved (or didn’t save) money. I usually just rolled my eyes and groaned, “Okay, Dad.” But now, in this down economy, it’s time to reconsider the financial advice our fathers gave us as we were growing up. “A penny saved is a penny earned” might sound trite, but in financially tight times, those old dad-isms will help eliminate debt and build savings.
Don’t confuse saving with not spending. After a successful day at the mall, I would boast that I saved 25% on the cutest pair of shoes. My dad would explain that I didn’t save 25%. Instead, I spent 75% of the price. Saving would have been not buying the shoes at all. And that’s when I would roll my eyes. But he was right: Purchasing sale items isn’t always the best route—especially if you’re buying something simply because it’s on sale, not because you really need it. Instead, wait for something you truly want to go on sale.
Plan for large purchases. My friend Ashley’s dad encouraged her to save for specific purchases. If there’s an expensive item that you want—say, the Coach Lexington watch—you get out an envelope and write the cost ($398) on the outside of the envelope. Whenever you have a few extra dollars, put the cash in the envelope, write down the amount, and subtract it from the total. Her dad’s system is a simple way to prevent impulse purchases that typically get charged to your credit card or to save for annual expenses like holiday shopping.
Who cares what looks good? Value is what matters. Why lease a new BMW when you can pay cash for a used Saturn? Lane Conway, a 25-year-old economist in Washington, D.C., said she was always encouraged to buy what she could afford, not what was splashy or trendy. On a daily basis, instead of stopping at Starbucks on your way to work, consider getting your caffeine fix at a less costly coffee shop like Dunkin’ Donuts (or, better yet, make your coffee at home).
It’s never too early to save for the future. Dads sure do worry about their daughter’s financial futures. And rightfully so. Studies consistently show that women are not saving enough for retirement. Maybe it seems too far in the future, but investing in your future now—whether it’s a 401(k) through your employer or a simple savings account—will ensure that you have the funds you need down the road. And, if you have a little extra money, first pay off any outstanding credit card debt, then put your money to work. Invest in a mutual fund or CD and you will accrue interest on your hard-earned cash. Plus, now is the right time to invest! While the economy is down, investments are less expensive, which allows you to invest wisely, then sit back and watch your money grow.
Always carry a little cash, just in case of an emergency. Carry a small amount of cash with you, as our concerned fathers always reminded us, just in case. Practically, though, if you have a few bucks in your wallet at all times, you’ll be less likely to charge that cup of coffee. When you hit the ATM to withdraw some cash, try to find an ATM that won’t assess your account with a fee. If one isn’t available, take out more money than you actually need, put a little in your wallet, and stash the rest at home. That way, once you’ve used up the cash in your wallet, you can replenish it without having to pay the ATM fee twice.