Out of sight is out of mind. Sometimes this is a bad thing (like when you misplace the Mother’s Day card you bought and forget to mail it until Memorial Day). Sometimes this is a good thing (like when you don’t have any junk food in the house and you are forced to eat carrots instead).
Knowing that out of sight is out of mind can be a useful tool. For example, at the beginning of each semester many students receive a large refund of student loan money to use for living expenses for the whole semester. Getting that money out of your normal cash flow will make it easier to make it last the whole semester. One option some students use is to immediately pay rent ahead through the end of the year. Another option (and the one I prefer) is to build a monthly budget (taking into account the amount of money you have) and only allow yourself to use that much each month. Put most of it into a savings account. Preferably a savings account for which you don’t have an ATM card and transferring funds takes a couple of days—making it harder to cheat and withdraw funds early.
You should set up a designated “pay day” when your month’s funds transfer to your more accessible checking account so you have money for rent, food, laundry, and other living expenses. The key to this working is simple: DO NOT PAY YOURSELF EARLY! If you do, you may find yourself subsisting on Ramen and hot dogs during finals. Because money is a finite thing. Unexpected windfalls rarely happen. If you run out of funds and don’t have more coming for several weeks, you’ll be uncomfortable for a while.
Out of sight is out of mind. So put your case books in plain view and stash your money away where it’s harder to get to.
The government has reopened! But my heart goes out to the many people who went more than a month without pay. Yes…they are going to be paid now, even if they were furloughed during the partial shutdown. But that doesn’t take the sting out of not having the money when expected.
I, like so many, live paycheck to paycheck. I have a tiny bit of savings, a really tiny stock portfolio, and a retirement fund. I do not have the recommended three-to-six months of expenses tucked away in an emergency fund. If I were to have to go without pay for a month I would be up the proverbial creek without the requisite paddle. I suppose it could be worse. My parents would probably be able to float me a loan. Or I could borrow against my retirement savings. I have credit cards I could use. But none of these ideas appeals to me. I’m 51 years old. I’m supposed to have a strong understanding of money. Yet here I am without emergency savings. I’m flying without a safety net, mostly because I never thought about the fact that I might someday fall.
The government shutdown has really brought the importance of a contingency plan to the forefront. What would you do if you found yourself without anticipated income for a month. Would you be able to keep yourself afloat? Do you have somewhere to turn for short-term help? It’s always good to have a backup plan in place. We never want to think about the worst case scenario. But it could happen. And you should prepare for it just in case.
Sometimes procrastination can be expensive. I discovered recently that I had become complacent about some things in my finances.
I told you last week that I had bought a new (to me) car and had used financing available through the dealership that was not my best deal. I knew when I bought the car that I was going to refinance the loan at a lower rate with my credit union. But I bought the car in May and didn’t get around to handling the refinance until November. Now that it’s done, I’m paying $8 more per month, but for 6 months less than it would have been had I not refinanced. Ultimately this is saving me more than $900 in interest. If I had done it sooner it would have been a lot more. But I procrastinated.
My husband used to drive for Uber. If you’ve ever been picked up by a really big guy in a little black Prius, that was him. But he decided to give up the driving business after spring semester. I should have called my insurance company immediately to let them know that our vehicle usage had changed. But I procrastinated. I finally reached out to my insurance company last week, and now I’m going to be paying about $30 per month less for my car insurance. Procrastination cost me $150.
I’ve long been a fan of online savings accounts. The interest rates are always a lot higher because they don’t have the overhead expenses that bricks and mortar banks do. I jumped onto the online banking train nearly 15 years ago with ING. A couple of years ago ING folded and all of a sudden my accounts were with Capital One 360. I’ve never loved Capital One, but I didn’t really think about it at the time. No banks were paying much in interest at the time, so I just rolled with it. But savings rates have been creeping up for the last year or so. I decided to take a look to see where things were with Capital One 360 and was surprised to see things were not so great. Their rates are comparable to other online banks, but only if you carry a balance of $10,000 or more. Since I don’t have anywhere near that, I was only earning about half of what I could have been on my meager savings. So I started shopping. Now I have a brand new online savings account with Ally Bank (one of three options I decided were worthwhile—Discover and Amex also have great rates and good reviews). I’ll be earning almost twice the interest I was before, and I no longer have to deal with a bank I never wanted to choose in the first place.
Finances are definitely a participation sport. You have to put in some effort to get the best results. If you don’t….you end up missing out. Procrastination can be expensive. Have you been putting the necessary work into your money? If not, it’s time to think about it!
Back in September I wrote about my great cable TV experiment. I cancelled my cable and now do all of my television viewing through Internet streaming. Four months later, I still don’t miss cable at all. I’ve found that I read more. I listen to music more. I go to bed earlier at night (and reap the benefits of a decent night’s sleep!). I don’t just “tune out” in front of the TV anymore. Yes…I still vegetate on the couch from time to time. I’ve been binge watching Parks and Recreation and Scrubs for the last couple of months. But I definitely spend a lot less time staring at the screen.
I’m not surprised. I expected all of these results from my cable cancellation. But there is one specific side-effect of cutting the cord that has been a very pleasant surprise for me. My electric bill has gone down. Significantly—about $10 per month! I always knew that my four (yes…FOUR) cable boxes were sucking vampire power while they weren’t really in use. But I had no idea how much. It seems cable boxes (especially DVRs) are among the worst vampires around, using more energy than most appliances. A new agreement is going to make sure future cable boxes are more efficient. But in the meantime, you may want to consider plugging those set top boxes into a power strip that you can flip on and off. Or just cut the cord altogether, like I did. 😉