Strategies To Make A Huge Difference In Your Finances – Episode 272

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[00:04] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler. Welcome back to another episode of the Prosperity Podcast. Today we’re going to be speaking about the easiest changes that make the biggest financial differences in your life. We know we’re not telling you to stop going to the coffee shop and get your coffee. So let’s jump into this. Kim, are you with me? I am. You mean you don’t want to give up your five and six dollar lattes? No one wants to give those up. Come on. Yeah. So true. And you know, everybody has their thing. Like you will never catch me at Starbucks for selling my coffee.

[00:57] Second of all, I wouldn’t choose to do that, but I have my things too. He’s got their thing that they spend a little bit of money on here and there. And that’s totally fine. Like you said, that’s not really where the difference gets made. But I think you found an article that had some suggestions. Yeah, I surely did. And let’s start out with those suggestions. So the first one at the top of the list of all of these was that you need to set up automatic payments and automatic transfers. What do you think about that? Oh, I love that. That’s so true. So first of all, you don’t want to spend time paying your bills. So online banking is awesome and that should be something that’s normal for everybody.

[01:42] I know in the millennial world, it absolutely is. And those of us that are not in that world are starting to get the hang of it. So all of your bills should be paid automatically to the degree that they can. And one of your bills should be, in fact, the first of your bills should be to pay yourself. So that is something that you want to automate as well. And the easiest way to do that at the beginning is just to move money from a checking account to a savings account. You can have it at the same bank or not, but that movement of money will do a lot of things for you in terms of build a habit, provide you peace of mind, get momentum going, etc. And then you don’t think about it. And then of course, ideally, you also don’t touch that.

[02:26] But you know, maybe even you have two savings accounts. One is the long term savings that you absolutely positively try not to touch. And then maybe another one is the short term savings that you use for Christmas gifts or a ticket to a wedding that you know is going to be coming up or that kind of thing where you could save a little bit every month for those shorter term goals because we want to have fun with our money. We don’t want it to be all about long term savings and all about spending our money today for the things that are necessary. That is so true. I have and I’m going to lay in exactly what I do for my kids. And you know, my kids are younger. They’re 12, 10 and 6. But here’s what we do.

[03:08] We have a 20% savings account that is long term savings that they just never touch. And so every dollar that comes in, 20 cents goes in there. Then they have a 20% savings account, which is for their short to midterm savings. And again, 20 cents of every dollar goes in there. And then they have a 10% that goes to charity. So 50% of their money is gone before they ever touch it. So one, it makes them work harder for the money. But two, now they’ve got a lot of savings. That other 50% do whatever you want. Absolutely. And that’s really my recommendation for budgeting. You know, so many people ask about, well, should I budget? And you certainly can. But my preference is to save first and then spend the rest.

[03:55] And that doesn’t always work, but it sure can. And especially if you are somebody that’s just gotten into your first job or at least your first serious job that’s actually starting to earn some decent money, you are used to living on so little money. And so this is such an easy time. And then if you get a bonus or you get a raise or something like that, absolutely, 50% of that revenue should be saved. And that’s boring. And it’s not investing. It’s not sexy and it’s not fun to talk about. But it is what works. It’s what’s going to get you the fastest results, the quickest. It is so true. OK, so let’s go to point number two on the list. And here it is. Review all your monthly subscriptions and cancel any you have doubts about.

[04:48] What do you think of that? That’s a great idea. I actually just looked at some business things recently and I don’t know how much we were paying for them. I don’t think it was a lot. But we had some obligations in our business that were just monthly expenses that were absolutely not necessary anymore. In fact, they should have been canceled three or four years ago. I was actually kind of embarrassed that I spotted them. And so that exercise is a good thing to go through at any time. You know, it’s interesting. I was talking with some online marketers this morning and they said that one of the hardest online products to sell is anything that is habit related, like creating a habit, sustaining a habit, those types of things, changing a habit.

[05:37] And so something that I want to encourage people to think about is to try to focus on adding a habit of all the habit things to do. That’s the easiest one. Changing a habit is the hardest one. So if you think about savings as adding a habit and you focus on what you can do rather than the other way around, which is taking away things like, oh, my gosh, I can’t go to Starbucks because I have to save. Don’t think about it that way. Go ahead and go to Starbucks and find those savings to add the habit of savings as a verb. And then the action, of course, will then necessitate the noun like a savings account. Those things are, again, what is going to get you the fastest results, the quickest. Oh, that is really good. I like that.

[06:25] OK, point number three in this article is before you sign anything for which you’ll be paying a periodic monthly amount, multiply the amount by 60 and ask yourself in five years, will I be happy that I spent that much money on this? That’s a great thing. So, yes, our technology suppliers are reducing the cost of the technology, but potentially increasing or even just keeping level the monthly commitment to maintain it. And if we look back long term, you know, something like a cell phone. I mean, my cell phone bill is so much lower than it used to be. And yet still, it can add up to a very large number. So any time, first of all, paying things monthly is not the most efficient way to do it. Most of the time, sometimes there’s nothing we can do about it.

[07:18] But, for example, car insurance should be paid annually or at least semi-annually. And so you’ll want to do that math as well, just to make sure. And that’s also something else to think about is whatever you’re buying, make sure you’ve got the whole picture. So like with the home, you need the maintenance with the car. You need the insurance, etc. I remember looking for a car one time and it just popped into my head to check for the insurance on it. And it was so much more expensive because it was considered a sports car, whereas the car I’d had wasn’t. And so I chose not to do it at that time because of that change. So any anything that you’re doing on an ongoing basis like that. Now, there is one comment I want to make,

[07:58] and that’s investing in your health, because we absolutely are going to start to live to 100 and then 110 and then 120 and possibly even 130 without any issues. So investing in your health is an important thing to do. And then I would throw out to be very, very careful with that. Like, for example, I remember one time adding up the cost that I spent getting my nails done, and it was disgusting. And I immediately stopped that habit. Now, a lot of people are going to say, no, that’s my Starbucks. Like, that’s the thing I want to do. Great. Go for it. But it is something that I think everybody should look at very carefully for themselves, because you don’t want to be spending money in that way on something that is important to everybody else.

[08:45] You want to make sure that you’re spending money in that way on a monthly basis. What we’re talking about on things only that are important to you. Oh, that makes good sense. You know, and I’m in the same category as you. I’m not a coffee drinker. I’m not the Starbucks person. So I don’t you know, I don’t enjoy those things. But I could see getting your nails or getting a massage or doing things. Hey, go for it for me. It’s working out, going to the gym and happily I’ll pay for that because I get healthier. So no problem. Yes. Figuring out your own importance and your own values is then going to enable you to spend money based on those things that are important to you and your values. Much more effective.

[09:25] Definitely. So next point on the list is one that I sort of agree with and I sort of don’t. And I think both of us may be in that same category. And that is stop eating out. So what do you think, Kim? Well, it is an interesting one. And I am not going to agree with stop eating out. But again, I think people need to be very careful and conscious of what eating out does. So, first of all, eating out is a potential health issue because service portions are so large and things are not always cooked the most effective way for our health. So we need to be conscious of that. There are absolutely times that eating out can be a very special thing and it should be done, you know, a form of celebration

[10:13] or sometimes just necessity for sanity in a busy family’s life. I remember one mom told me that her husband traveled quite a bit and she sometimes felt like it was more effective to go to a restaurant and eat out because she was able to help the kids with their homework while the food was being prepared. And they were careful with what they ordered and they brought home leftovers and used it for lunch the next day and, you know, did that kind of thing. And she was able to pay full attention to her children and their homework while that was going on instead of trying to fix dinner. And that’s such a challenging hour for families. You know, kids are coming and going from sports practice and dance and band and everything else.

[11:00] And then, you know, food is not an easy thing. I’m not a cook at all, but holy cow, whenever I see somebody in the kitchen and the meals that they prepare and what it takes to do it, that is a seriously mentally committed job. And obviously, physically, too, you can’t be chopping things with a knife and paying attention to Suzy’s math problems. So I think there’s a lot of good to going out to eat. But then I think also it just becomes a habit and, oh, let’s just order in or go out or whatever. And you don’t get the good aspects of it. So it’s something, again, that people need to make a decision on and be aware of how much money per month they are spending on eating out versus grocery versus, you know, the protein shake in the car

[11:48] or whatever else you’re doing so that they can make conscious decisions about it rather than just letting it happen. Yeah, absolutely. You one of the key pieces of the language that you used, and we’re going to turn this into like a prosperity tip, is to have and thinking. So you notice you used you said the mother figured out how to do this so that it provided a better experience for kids and she could help them with their homework and fully focus. So I from my takeaway is that if you have a purpose behind it, so if you want to go out and eat and you want to further your career, maybe you should invite someone that is further along the path or a person that you could network with. And that way you get food and a better relationship.

[12:34] Or for you and Todd, I don’t I personally don’t think Todd would say, no way. I’m not doing away with dinners. He loves food. And so you look at it and say, we’re going to have a good time, a good meal, and we’re going to better our relationship. Well, it’s funny that you use that and word. I don’t know if I’ve shared this with you before, but Todd and I like to operate in a house of both. And so clearly the word both and the word and are saying the same things. And so if we’re having a discussion about this or that, we ask ourselves, how can we do both? And the answer is sometimes you can’t, but you’re never going to get there if you don’t ask. And so the house of both enables us to just have a perspective,

[13:18] a lens through which we’re looking at things with that and mentality. And it’s one of the things we love about whole life insurance. Is it becomes an and account. You get your savings account and you get to do investing or whatever else it is that you want to do. And there are a lot of things in life that are very much and accounts. And there are a lot of things in life that are very much or accounts. In other words, if you put money in your 401k, you can either do that or you can invest directly in real estate. So we always like to be looking for both or and. And I think you’re taking that beyond just the financial level is a great addition. Wonderful. So the fifth part of this article in this piece,

[14:01] that’s a financial tip that will make a difference is this every raise you get, divert half of it towards savings, retirement, whatever that may be, starting at your very first paycheck. What do you think of that? Absolutely. Raises and bonuses are the easy things with which to save. And I think more and more jobs are becoming base salary with bonus option available, which is awesome, because it really should help families save or individuals save because you do definitely get into a habit with your own monthly money. And then when that raise comes along, yeah. And now, of course, a big portion of it’s going to go to taxes. You know, when we were talking about your kids earlier, we didn’t really address that issue.

[14:51] But if you also really focus on the savings ability, then you’ll get so much further down the road without having a major impact on your lifestyle. And so, first of all, being conscious of taxes is important. Not that there’s a lot that can be done right now these days. They’ve pretty much removed most of the tax benefits that we could get on an annual basis. But there are a few things. And again, it’s one of the reasons that we like the whole life insurance, because that cash value grows without taxes. And it’s also one of the reasons that we like some of our alternative investments, because you can get some actual tax deductions still, which is very hard to do in most other areas of people’s financial lives.

[15:34] I do need to say that most of those are for accredited investors only. But if that fits your role, feel free to shoot us an email because you might want to learn about it a little bit. Very true. And, you know, I think one of the other pieces to that last part of the article of when you get a raise or bonus is that lifestyle creep will just come in and obliterate you and lifestyle creep is, you know, if all of a sudden you make more money, you might want a nicer car. You’re going to get a bigger house. You take more vacations. People forget that what you what it took you to get where you are is going to take you something different to get where you want to go. Absolutely. And lifestyle creep is what causes us

[16:17] to never be able to save because we’re just always bumping up the lifestyle to go with the income that’s there. And then it’s also what causes sometimes some really challenging time if you end up having to go backwards. And so it is an interesting thing to watch families. And again, those that do a good job of savings can sustain lifestyles a lot more healthily and mentally healthy. I’m speaking of and also literally financially. Because they have savings, whereas people that don’t, it’s a very sharp drop off that can occur if a job gets lost or an investment doesn’t come through. Well, wonderful, Kim. We covered five strategies that people can use to make a huge difference in their finances.

[17:07] If they want to dive a little bit deeper and read one of your books, what’s one that you suggest that complements this article? That’s a great question. So if you’re talking about getting results fast, I think that’s a challenge. I mean, I’m just going to be blunt about that because true financial results are not going to happen fast. So you can make some changes that have a big impact quickly. But really just learning to look at things from a long term perspective is really important. And yet we don’t want to be overly focused on the long term being retirement. So because of that, I’m going to say Busting the Retirement Lies is the best book to take a peek at because what most people do for their savings

[17:57] is put money in retirement oriented plans, 401Ks, IRAs, 403Bs, profit sharing, those kinds of things. And that’s not always the most efficient thing to do. So taking a look at Busting Retirement Lies book, there’s an audio version as well, will really help you analyze that scenario numerically, first of all, because it uses Truth Concepts calculators to do so. But second of all, really inspire you to take a look at some of the people that are profiled in the book that are continuing to work, which is a great millennial perspective because I know all of Robbie’s friends that were graduating from college were already of the thought that retirement, no, that’s not something I want to do. I want to find work that I love and do it forever.

[18:42] And that I think is a much better mental outlook. I totally agree it is. So for listeners, thank you for spending another episode with us. We’ve got over 200 episodes. I hope that you guys are subscribing or following on your favorite podcast player. You can also reach out to Kim personally for any questions at hello at partnersforprosperity.com. Cool. Make sure you hit that subscribe button so you can get the next episode and check out all the other ones. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.