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Classic Money Habits That Last A Lifetime

by Shawanda Greene

Classic CarLike dreadlocks, tattoos, and bitchin’ about taxes, some stuff never gets old. It works all the time.

No matter your marital status, religion, sexual orientation or sexual appetite, these techniques will not lose their effectiveness.

I’ve identified 15 money habits you can use now or in the future. Since I don’t want to breeze through each of them, I’m posting three habits over the next five posts.

What we got here is a series, folks.

Now let’s see if I can put an unforgettable spin on classic money habits that’ll last a lifetime.

Create a Spending Plan

Aargh! You see what you made me do?

You’re complaining so hard about calling your income-minus-expenses a budget, you got me using this pointless euphemism. Have it your way, but we both know a spending plan ain’t nuttin’ but a budget.

Clearly laying out the money coming in and the money going out tells you where you are.

Line by line, you see the opportunities.

First, you capture the income:

  • Salaries and wages
  • Side income
  • Child support
  • Alimony
  • Scholarships, grants, fellowships,
  • Interest, dividends, and other passive income
  • Social Security and pension payments
  • Every other way you can extract money from the universe

Then, document your expenses.

  • Food
  • Taxes (income, property, and otherwise)
  • Housing
  • Electricity, water, and other utilities
  • Transportation
  • Healthcare
  • Insurance (health, life, disability, auto, renter’s, etc.)
  • Clothing
  • Entertainment
  • Retirement investing
  • Every other dollar the universe demands of you

Creating a spending plan is like turning a light on a room full of roaches in the middle of the night.

The analogy is a little disturbing, but the roaches were already there. You just exposed them. You can turn the light off and go back to bed, OR you can deal with the infestation.

All you need to do now is figure out which income sources to increase and which expenses to decrease.

Pay Yourself First

Ah, you knew it was coming.

Once you’ve done a budget (I can’t keep up this charade), you should know how much you can reasonably save.

Personally, I’d like you to save at least 20% of your after tax income. I know that’s not realistic for everyone, so if you can’t do 20%, do 15% or 10% or 5%. Just do what you can!

You know how Uncle Sam directs your employer to take his cut of your paycheck before you get it?

Uncle Sam does that because he knows you’re unlikely to pay him what’s due if you get your impulsive, little paws on his money first.

He’s right. And if you don’t copy his collection strategy, you won’t save anything for yourself.

Paying yourself first is really easy. Have your savings taken out of your paycheck before it’s deposited into your bank account.

Generally, you can have your net paycheck split between at least two bank accounts. Your savings goes into a savings account. The rest of your paycheck goes into a checking account.

If that isn’t an option, set up automatic transfers from your checking to your savings account a couple days after your scheduled payday.

Live (Well) Below Your Means

When it comes to money, I’m pretty conservative. I despise debt, and I hate long contracts.

In order to even have the option to live below your means, i.e., spend less than you make, you gotta be nimble.

Keep a nice, comfortable gap between what you earn and what you spend. Not only will you build greater financial wealth, but you’re better able to respond to life’s changing circumstances.

People with high, hard to replace incomes are particularly vulnerable to the result of not living well below their means.

My friend, Chrissy, is totally miserable at her job, but she’s paid handsomely for her services.

Occasionally, we talk about her desire to buy a home in the metro D.C. area. The thing is, prices of single family homes around these parts are so high they border on the verge of disgusting.

I beg Chrissy to not buy a house until she deals with her employment situation. How could a home possibly bring her any joy when she’s stuck working with people she despises in order to support the mortgage payments?

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{ 8 comments… read them below or add one }

ctreit February 15, 2012 at 11:40 AM

I hope you prevail with Chrissy. When you spend the majority of your waking hours at work and commuting to and from work, I also think it is very important that you enjoy these hours.

Reply

Shawanda February 23, 2012 at 5:38 PM

I hope so too. I had another friend make a similar mistake. She didn't quite hate her job, but she was grossly overpaid for it. The founder and president of the company she worked for was a fraud who led a Ponzi scheme. The company was shut down, she lost her job and spent well over a year unemployed. I don't think she ever found another job that paid what she was being paid at her previous employer.

Reply

Shay K February 16, 2012 at 12:09 PM

That's my question of the day: How do you transition into work that you love when that could mean taking a serious pay cut? I live well below my means, but I'm really more concerned about not being able to save the way I would like to.

Reply

Shawanda February 23, 2012 at 5:45 PM

You could do the work you love during your free time until you build up enough income to replace the income generated from your day job. This often requires a LOT of work and will likely take longer than dedicating 100% of your working hours to your passion. But if working 80 hours a week is unappealing to you, you'll probably take a serious pay cut when you swap the work you hated that paid the bills with the work you love that pays hardly anything. I see the decline in income as temporary. Ultimately, I expect the income from my "dream job" to greatly surpass that of my old job.

Reply

Ella February 27, 2012 at 4:51 AM

The live below your means advice is so important! I wish I ah learned to save money earlier….

Reply

Shy February 29, 2012 at 9:37 PM

Hi, Shawanda. Thanks for sharing this. I also aim for financial freedom and achieving this goal is a great struggle but I know that everything is worth it in the end. I always allocate for my savings first before I work on my expenses.

Reply

Mae February 29, 2012 at 10:26 PM

How wonderful it would be if we grow old and have enough money to enjoy life. I give importance to the value of savings. And as much as I can, I look for more ways to earn. I don't just depend on one source of income.

Reply

Margaret April 3, 2012 at 7:44 PM

Good financial management is essential to achieve financial freedom. It has been hard for me to discipline my spending but I have taken financial literacy courses to help me out.

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