Having financial freedom is important to solos given their often-single status. Amy Gibb, aka Money Amy, returns to talk about tactics to help you save money – something especially important given recent economic events.

Listen to Episode #124 here


 

How To Save Money

In this episode, Amy Gibb, AKA Money Amy, returns to talk about tactics to help you save money, something especially important for solos given they’re often single status and the challenge exacerbated by economic events. Amy is a Certified Financial Planner. As the President of Money Sense, she advises individuals and businesses, and she does it well. I hope you find the episode helpful. Let’s get started.

Welcome back, Amy. Does your family know that thousands of people around the world know you as Money Amy?

I don’t think so. Although my kids have a saying, “All you do is tell people to spend less and save more.” That’s the distillation of my profession, but I say, “I’ll accept that.”

That’s valuable work. There’s not enough of that message in the world. This is a perfect segue. Sometimes I plan episodes long in advance. They’re on my list, and I do a lot of prepping and searching for guests. Some are more impromptu. They come to me, and this is the ladder. This idea came to me after watching the news. It is a bad time. It never feels like a good time money-wise for most people, but with the economic downturn and rising inflation, especially for things like food, groceries, staples, and gasoline. We’re seeing housing costs in some parts of the country are absurd.

That’s an acute stimulus that has prompted this idea of, “Let’s revisit a topic about money.” There’s also the issue that solos, as I define them, are seeking autonomy. They tend to be more self-reliant than the average single person. They’re not looking to find a partner in order to solve their problems, financial or otherwise. They’re looking to solve their own problems, and that independence opens up a world of possibilities for them.

Saving money is a big step to independence. Financial independence helps create independence more generally. I’ve seen some data that’s terrifying about Americans, particularly those who rely on credit cards and credit card debt to maintain the lifestyle they’ve grown accustomed to. That is scary and a real problem. You can only kick the can down the road for so long. Frankly, I don’t want any of my readers to be old and poor.

It’s a bad place to be.

Young and poor, fine. I was young and poor, but old and poor is terrible. It’s time now to tighten your belt. I have financial and housing security. Thankfully, you’ve helped me get that and maintain that, which I’m grateful for, but I haven’t for much of my life. From my childhood to my mid-30s, I was paycheck to paycheck.

As a lot of people are.

I learned all the things and ways to save money. I did all of them. I’ve forgotten most of them.

I love the peanut butter and jelly sandwich story.

I figured out I ate 300 peanut butter and jelly sandwiches one summer between my junior and senior year in college. They gave me the calories I needed, given the budget.

That is good nutrition.

By the standards of that day, yes. Let’s jump on in. We’re going to talk about some tactics to help people save money. I want to sketch this out for the reader. We’re going to talk about debts and servicing debts. We’re going to talk about consumerism more generally and what are some alternative ways to solve problems without buying things, and how might you buy things in a cheaper manner. I want to talk about social pressures around spending money that is very real.

Lastly, we’re going to flip it and end with a little reminder that this is only half the equation. There’s the income side of the equation and a little bit of a call to action. Before we get to debts and servicing debts, can you share your big picture view of saving money? What are the foundational things, habits, and things that people should be considering?

It’s awareness. Awareness is 90% of it. It’s understanding what you make, what things cost, and where you spend money. A lot of people don’t have any idea.

Whenever I’m making a financial decision and call you, you always say, “What’s your burn rate? How much are you spending every month?”

It’s awareness. It’s the old adage, “Always spend less than you make.” Especially when you’re in that growing phase of your life, whether you’re buying a house, buying a car, being successful in your career, having partners, having children, or any of those things, you tend to spend more often than you make. There are a few exceptions, but mostly not. You have to spend less than you make, save for the long-term, and reduce debt.

It’s a simple idea but difficult to implement. Most people know what they make. That’s pretty easy.

You would be surprised because there’s the gross amount, and there’s the net amount. I always ask people this when I meet with them. I’m like, “What’s your gross paycheck? What’s your net paycheck? Talk to me about all the deductions from your paycheck. What are they? How much? What are they for?” I would say 60% to 70% of people don’t know. They know what goes in their checking account. It’s an awareness. You don’t have to take a final on it, but you should look at your pay stub. For every line item on there, you should have an idea of what that is and why it is.

We’re going to return to that a little bit because one of those line items is going to be potentially 401(k)-style investments, IRAs, etc., that your employer may offer you. You’re old school. You get out a sheet of paper sometimes to write these things down, but you can use Excel or Word document. You don’t need fancy software.

You can do it on your phone. Often, software gets in the way of you doing it because it’s complicated. You don’t want to learn it, and you won’t do it. A piece of paper, phone, Excel, or whatever is your venue, do it there.

Whenever I meet with Money Amy, I always get a sheet of paper with a list of things to do. It’s somewhere between 3 and 13 items. I always do everything on your list.

You are an overachiever, and I appreciate that.

Let’s imagine that you’re giving a person a list. It sounds like, “Line number one on the list is,” to figure out your inflows and outflows. Does a person need an afternoon to do this or a few hours?

It’s anywhere from 30 minutes to 2 hours.

Now, you’re getting out pay stubs, credit card bills, and checking accounts, and you’re figuring this stuff out.

Give yourself a break. It doesn’t have to be perfect. Some people won’t start because it’s different every month. There are so many dollar amounts. There are lots of cents. I’d start with the big picture. Hit the big ones.

There are your regular bills.

Those are rent, mortgage, and health insurance.

There are the shocks like a vacation, a broken-down car, or water heater that goes and so on. You’re looking backward to understand how to look forward. That’s pretty clear. People know they should do that, but they never. It’s painful, especially when there’s a big difference in the number. That’s a big thing. What are any other big things that come to mind?

As part of that, get to know what your debts are. Understand how much you owe, the total amount, the monthly payment, the interest rate, and whether the interest rate can change or it’s fixed. As we talk about us being in this uncertain time, your debts are one of the things that you’re very vulnerable to. It’s a little out of your control except for paying down credit cards and stuff. Get control of your debts by understanding what they are.

I’m going to pause that for one moment. I’m going to add another line before that, and that is to set some goals. A very simple goal is not to spend more than you’re making. The next one is to get on the other side of it so you can start to pay off debts and build an emergency fund. Those are the three overall goals to have. Let’s talk about these debts. What do you mean by having control?

Once again, the first part of control is knowing what they are. Know your mortgages, car payments, how much you owe on your house, the monthly amount, and the interest rate. It’s the same with the car. What’s the total, monthly payment, and interest rate? Credit cards and student loans, capture it all. Add up the total that you owe and your monthly payments. Have a reality check on that because as we’re moving towards spending less than we make, a lot of people, a big piece of their expenditures are these debts. Especially with credit cards, as those increase and interest rates increase, that amount becomes larger and larger every month.

Let’s do a little quick lesson on fixed versus adjustable interest rates. Some people know about this because of the 2008 financial crisis, but not everyone knows about the difference between these two.

A fixed-rate is an interest rate quoted to you on a debt that stays the same during the entire length of the debt. For a car payment, they quoted you 5%. It’s always going to be 5% as long as you pay on time and don’t default.

Your monthly payment will always be the same. That is known. You have agreed to that, and you understand that you’re going to be making those payments for 5 years at $356 a month at 5% interest. In theory, if you keep the car and don’t trade it in, the car will be paid in full at the end of the five years if you don’t pay an advance. That’s pretty common. I have not seen a variable interest rate on the car yet. I have seen 7 and 8-year car loans, which are absurd but not variable. Mortgages, we see a lot of adjustable-rate mortgages on houses and some fixed. Student loans are generally fixed unless you refinance them. Credit cards are variable, and most people don’t understand that.

It’s when interest rates go up, as they have been.

You’re going to see your interest rates on your credit cards go up.

Your minimum payment goes up. If you continue even to pay your minimum payments, you’re going to be kicking this can down the road paying extra money for money you’ve already spent.

They did have a change in the Consumer Law. It was led over the last few years where all credit cards have to have an amortization that will pay off that amount within five years. It used to be twenty years and that caused people problems. The problem is people add new items to their credit card debt. In a sense, if they keep their behaviors the same, they will never pay off their credit card.

At this moment, even for some people, this is already feeling a lot. I want to offer a suggestion. We had an episode where I made a case for a fee-based financial planner, someone like yourself. Some of my readers have reached out to you.

I’ve met some of your wonderful readers from all over the country. They are very interesting and pragmatic people.

Amy may or may not be taking more clients. This is not a sales pitch, but find someone competent who you can pay by the hour to help you make some of these decisions and so on, especially if you find them intimidating, emotional, or a little bit overwhelming.

Make sure you’re clear about what you want and need. Make sure you’re clear about what it’s going to cost and how they make money in their practice. Sometimes, you will have friends and family. If you trust them and feel comfortable that maybe they have done this themselves, that will walk you through this.

I do this regularly for my sister. When something’s above my pay grade, I bring you in, and we do a three-way call. That was a little public service announcement because these things can be complex. People don’t have a lot of financial literacy. They don’t know where to begin. You want to get on the right side of this. You want fixed rates as much as possible. You also want to be paying down debt, but not all debt is created equal.

That is correct. Make a list, whatever it is, like your mortgage, car, student loan, and your three credit cards. Make a list of how much you owe, the monthly payment, and the interest rate. As you’re paying down, hopefully, you have $100, $200, or $400 a month to allocate towards debt reduction. Pay the debt with the highest interest rate and the lowest balance first because that will make a huge difference in your month. Let’s say you have a credit card that’s 21%. It’s $2,000, and the payment is $200 a month. If you can allocate money towards that, all of a sudden, within 1 to 5 months, your run rate is $200 less.

You can take that $200 and turn it to the next one.

It’s magical, and I’ve seen people make this a game for themselves. They write the number up on the wall and put it on their phone, reminding them. Every time you have an accomplishment, celebrate in a non-monetary way. You should acknowledge yourself for making any kind of positive changes in your life. You should always acknowledge yourself.

The next line item would be to write out all of these debts, the interest rates, the balances, and the monthly payment.

Pay the minimum on everything else. If you have the choice, it’s whatever the scheduled amount is and then on the one that’s the highest interest rate, lowest balance, go after that first. You’ll start seeing changes faster and faster. If you got a 30-year mortgage and pay another $100 a month, you won’t get any gratification in the short run for that. The financial strategy is you want to get rid of the highest interest rates first.

That’s excellent, and I like the fact that you’re going to experience victories.

It is pretty quick. As you move through that, it is striking how fast you experienced the victories. There are good debts and bad debts. Theoretically, a mortgage is a good debt because, in theory, you’re buying real estate, and in over 30 years, you’re going to pay it off. Otherwise, people keep refinancing and starting back at 30 years. If your mortgage is scheduled to pay off when you’re 92, I’m not sure that’s a great strategy.

You’re going to be a poor old person.

You’re never going to get out from underneath it. In theory, mortgages are good debt. If you’re smart about it, student loans can be good debt but do not pay the minimum. I know we’re in a phase where they’re not charging interest and not making payments on federal student loans, but that’s going to end. As soon as it ends, get your big boy pants on and start paying those suckers down.

For a lot of people who make over $50,000 or $60,000 a year, it’s not deductible interest anyway. Student loans or mortgages may be good debt. Credit card debt is silly debt unless it’s a true emergency. Car debt also keeps those periods of time short. Maybe get a five-year loan so you have flexibility, but you pay that off in three years.

If you can’t pay your car off in three years, you bought too expensive a car for your budget. Maybe you get a five-year loan. It’s the same interest rate as a three-year, and you use that as an emergency, such that if you’re unemployed and you can’t pay $700 a month in the car loan, maybe you drop it down to $300 until you’re re-employed, but you get your car paid off as fast as you can.

Let’s turn our attention to the buying of things because some of these debts that we’re talking about have to do with purchases that people are making.

It’s credit cards, a lot of times.

We’re speaking from an American perspective. Not everybody who reads is American, but this is a very consumeristic culture that has some benefits in terms of innovation, opportunity, and so on, but there’s a lot of normalization of spending money on things.

Keep up with your friends and your neighbors. I remember we were living in a house, and the lady across the street had bought a new van. My husband went on this phase where he had to get a new car. We ended up with a new van for no good reason. It happens to everyone. You have to separate yourself from other people, what they buy, and the pressures of society. That’s probably 25% of the reason we buy things. The other part is when we’re having a bad day, for a lot of people, buying things makes them feel better. You have to be aware of the drug that is consumerism and understand how you behave in that situation and why you do certain things.

Your instincts are right. There’s research on this. When people are sad, they tend to try to fill the void by buying things. That’s not getting at the real problem for why you’re sad. Thankfully, there are other good ways to deal with the sadness that doesn’t involve opening up your wallet.

Self-awareness is important. We set a goal of spending less than we make and reducing our debt. Now, we have to say, “What causes our credit card balances to go up?” We buy things. There are certain things where maybe you need a pair of new running shoes because your other running shoes have the bottoms all worn off. You run, and it’s a healthy thing. You make a decision to do that, and it’s a good decision, but do you need another electronic device? Do you need another shirt? Do you need another Gidget to put on your shelf? Maybe not.

Here’s another one. Let’s suppose you’re going to take up running. There’s a tendency, especially if you’re reading a running magazine or you go onto YouTube, or whatever it is to get the advice to start a new running regime, the next thing you’re doing is you’re rolling out buying the shorts, the weather gear, the fancy shoes, and all that stuff. You run for a couple of weeks, and you’re like, “I don’t like running. It hurts my knees. I want to do yoga.” Now, you’re buying the $50 yoga mat and the subscription for the gym and all those kinds of things, “I don’t like yoga that much.” Now, you’ve spent $500 on three fitness activities, but none of them worked right for you. Let’s take it slow.

I always say delay. Delay is your friend in most things, not everything. Not the fire. Whether it’s, “I’m bored. I might as well go out to eat,” you maybe wait an hour or a day. “I’m going to take up running and buy everything for running.” Use your old shoes. Go out and run half a mile. Do it for a week, then delay it another week. Keep doing it for another week, delay another week, then buy only the shoes. I do this to myself all the time. You build any kind of delays into your spending patterns, and 3/4 of the time, it passes. Delay is your friend almost with most things as far as buying things.

This is increasingly difficult because now you can shop 24 hours a day. It used to be you had to go to Dick’s Sporting Goods, and they’re not open at 10:00 at night when you’re hatching this new plan. One of the things that I would add to this idea of delay is to put it in your cart, save it for later, and then give it a week.

You maybe don’t open the app. Any tool that works for your personality to delay is useful.

I had this belief that social issues and consumerism are two different things, but they’re blending together, so we should treat them as one. Part of the reason that people buy fancy shoes or windbreakers is because of other people. They want to look good on the trail. They want to be seen as the person who has it going on.

We covered this in the How To Do Things Alone episode. It’s a friendly reminder that no one cares about you. They’re not noticing. They’re not that impressed because all they’re doing is thinking about their own fancy windbreaker and shoes on the trail. It’s a pleasant reminder that you care about this more than anyone else. I appreciate your desire to optimize, but what’s going to matter more is your lungs and heart than your Nikes.

Also, your long-term financial health. It’s not important, but nobody cares.

At least the strangers of the world certainly don’t. I like this idea of delay. This seems especially important for bigger purchases. We’ve mentioned some big ones like cars and then small ones like sneakers. There are two schools of thought. There’s the, “Don’t go to Starbucks every day because that $5 latte adds up over the course of a year.” Also, there’s, “Don’t buy the luxury car.” Which way do you fall on that continuum?

I would say both. Don’t go to Starbucks every day. If you were going every day, I always say, split the difference. Go every other day. It’s important that you don’t feel like you don’t get to have anything that you want or anything fun, but if you split the difference or delay, that’s important.

I agree with you. You got to live your life a little bit. You got to find ways to enjoy yourself because to put yourself in such a frugal state is unpleasant but so as being old and poor. You’re balancing somewhere between those two.

I’ve always said your older self is going to come back and yell at your younger self for making them live under a bridge eating cat food. You have to be aware of you don’t get to magically disappear from the planet at the age of 42. It is likely you will live to 90. You can balance the two between your needs now and taking care of yourself when you’re older. Split the difference every other time.

If you want a luxury car, you can do that. Save in advance and pay cash because all those behaviors you’re doing to save cash over 2 to 5 years for a luxury car are good behaviors anyway. At some level, you can afford it. I’m not opposed to people buying what they can afford. That is a broad category. Maybe you don’t have furniture. Maybe you live in a studio apartment. Maybe you don’t go on vacation, but you want a luxury car. You spend less on other things, save in advance, save for your retirement, pay down your debts, and you can afford a luxury car. You choose what’s most important. Don’t let other people choose for you.

Things have been a little weird with cars, but in general, you can get a three-year pre-owned car that still has a warranty that’s every bit as good as a new car. That can save you thousands of dollars. Know that you don’t have to have the new car smell and recognize you’re going to adapt to having this fancy car eventually and sometimes pretty quickly.

You have choices. You can shop around. You can shop used. You buy from friends. I had visualized buying this Subaru Forester for years. I had a picture of it on my refrigerator. Finally, I had the opportunity to buy a used Forester. It is great and well cared for it. It made my day for a fair price.

I know the person who sold that to you. I don’t know if you remember this, but we bartered with that car a bit. That’s worth talking about. Amy bought my car.

It’s still running now.

I took good care of that car. I was happy to sell it to a friend. Part of the payment was your advice to me. You saved cash. You paid for it with your time for part of it. At that time, I was using your services quite often. I was spinning up a business, etc. What advice do you give your clients about bartering and negotiating to ask for discounts, especially for these big items?

Certainly, you should always ask for a discount in a very proper and professional way. My husband and I are self-employed, so we are somewhat sensitive to people always asking for a discount, but if it’s done in good faith, it’s fine. Talk to your friends. Your friend may have a friend that has a car for sale that’s exactly what you want. People enjoy selling a good car to a good person for the right price. It’s the same with houses. It is fine to talk to people about what you’re looking for, ask for a discount, and find out the best way to buy.

We bought a car. We were negotiating with the dealer, and they said at the end of the month, they have to make their numbers. If you come in on the last day of the month and are willing to go through the whole process, generally, you get a better deal. You can ask people. You might get three different answers, but you can ask what’s the best time to buy this product, what’s the best way to buy this, and how can I do this. It’s knowing that half the people are going to figure out a way they can make the biggest profit. Take it with a grain of salt. Ask advice. It’s fine to think carefully about how to buy things.

This goes to your point about delaying and planning. When you decide to make a spontaneous purchase, now you’re in a situation where you’re at the mercy of the market. For people who decided that they were going to buy a car when car prices were up 30%, it’s a painful situation to be in. If you can ride out these situations, you can spend more time searching. The research in marketing about search is it pays off.

Spend the extra time searching using resources that help you search, like PriceGrabber and things like that. There are lots and lots of these things, but you need the time to be able to do that. You’ve given some pretty firm advice for people who are in a bad place. You’re like, “You might need to get rid of your car. Sell your car.” Cars are worth leaning into a tiny bit more because, speaking of costs, when you look at your monthly and yearly expenditures, there are a lot of costs associated with a car beyond the sticker price.

If you think about it, it becomes obvious, but most of us don’t think about it. Your car depreciates in value between $2,000 and $5,000 a year. It’s a couple of hundred dollars a month, and you lose value regardless. It’s your car insurance. It’s repaired. It’s your registration and its parking and housing. Sometimes we get a place to stay that has a parking spot or a garage. How much does that cost to own your car?

You and I have talked about it that, at some level, taking an Uber a couple of times a week is cheaper than owning a car. You can buy another car. It’s been traumatic these past years about supply and demand and all that, but that will pass. If, for some reason, you’re in a bind, you got too much credit card debt, your job is uncertain, you’re feeling squeezed, you’re starting to get to the point that you might start paying late on credit cards, car loans, rent or mortgage, you can sell that car, and it will be okay.

If you’re already living on a razor-thin margin, and then gas prices go up a dollar a gallon outside of your control, that’s right. If we step back and talk about big things, some people reading ought to make big changes. They should consider moving to a different city or from the suburbs in this big place they’re living in, which demands the car to a more walkable place into a studio.

I’ve lived in cities where a parking spot is $175 a month in a building. It’s a building in a place where it’s super walkable. To know that you can have a car someday again if you like it and want it, you’d be surprised how well you can adapt to walking, biking, Uber, bus, train, carpool, etc. Some of these decisions may shake up your life if you get very serious about getting out of debt.

I wouldn’t wait until other people are making decisions for you. If you default on your car and it gets repossessed, or you don’t pay your rent and get evicted, or you pay late and start getting bad credit, all of a sudden, all these outside forces are going to control your decisions. It will be more expensive, and you’re losing control. Always act before you get to that point. We’re always hoping that things will turn, “I’ll wait another week or month.”

People are optimistic.

Being an optimist is a great thing but think about you wanting to control your life and your situation. Act sooner than later if it’s starting to get too tight for you.

If anyone’s still reading now, they’re probably sufficiently motivated. Let’s go into some more tactics. You had mentioned to me offline about shopping around for your regular services.

I also consult with businesses. One of the hallmarks in business, as you should always do and also personally, is every year or twice a year, shop your services.

What does that mean?

You call your cell phone company. You find out what you’re paying, your other choices, and how you can get a discount. You call your cable company, gym membership, car insurance, renter’s insurance, or landlord. You think about every place you spend money, truly. You call everyone once a year. You put it on the calendar. Maybe it’s January 15th. Maybe it’s your birthday. It’s something, and you shop them all. You would be amazed how you can save money.

This has to go on this list. For the person who’s writing this stuff down, this is a must-do. It’s a long list of things, like internet providers, cable, insurance, and memberships. Nowadays, there are all these subscriptions. You might have Disney+, HBO Max, and Netflix. That stuff starts to add up. You’re spending $40 a month across 12 months. How much are you watching these things? Are there other better things you could be doing or even outright canceling?

They add up. $9.99 a month is $120 a year after tax. It is shocking. If you have 5 of these services and they’re all $20 a month, that’s $1,200 a year. It is amazing how fast those little items add up.

We’re talking about singles. The average single is not sharing these expenses with other people. One of the benefits of being partnered up is you pay one price for the internet, which is for two people or a family. You bear a greater burden as a single person, especially if you’re living alone for one subscription.

I would say the benefit is you don’t have to negotiate.

I get that. You watch whatever Netflix show you want to watch.

You can cancel it, and you don’t have someone whining at you because you canceled the Sporting Goods channel.

These are monthly expenses. Let’s talk about some daily expenses. Starbucks is the exemplar. It’s the one that comes to mind all the time. There are good alternatives for coffee than a $5 latte every day. Even if you do it yourself at home, you can cut that price in half or even less, 2/3 or 1/3. Let’s talk about the necessities, and that is eating. I once ate 300 peanut butter and jelly sandwiches one summer. It’s a lot of peanut butter and jelly sandwiches. I don’t want people living on peanut butter and jelly sandwiches. I want them to eat more nutritious foods. I want them to eat fruits and vegetables. I want them to have diversity in their diets and so on, but food costs.

It’s amazing. I was shocked the last time I went to the grocery store.

It’s not just the cost of buying a basket in the supermarket, but now restaurants, Uber Eats, Grubhub, Postmates, etc. What are people supposed to do? We’re talking about how to save money. How do you save money while still nourishing yourself?

Healthy food and fresh food are important. If you want to distill it down to that, you go to the grocery store. You buy exactly what you need, fresh, the best fruits and vegetables, the highest quality meats, and only what you need. That’s the distillation.

You don’t want to waste anything.

Food waste is a big problem in this country. Maybe it’s a little more inconvenient going to the store twice a week rather than once a week, but maybe you only buy what you need for the next three days. You know exactly what you need, and you only buy that. That’s one idea. It is food waste. Those other things like Uber Eat, the meals in the box, and going out to eat, you might think of as a choice.

Rather, you could call them a luxury purchase.

It’s like meals in the box. I watch it on TV. It always sounds like a good idea, and then I call up. I find out how much it costs per serving. Other than going out to eat, maybe it’s a little cheaper, but it’s not a great deal. It’s the convenience and the luxury. I get that. Either cut it out or reduce it. Once again, not every night, but every other week. Instead of eating out every day at work if you’re going into the office, you eat out once or twice a week. You take your lunch to work. You don’t have to give up everything, but reduce.

I went into a phase where I was irritated at how much groceries cost, so I tried to figure out how long I could eat what was in my house. It wasn’t pretty, but it is amazing how much stuff is in the back of your cupboard, freezer, and refrigerator, and if you supplement fresh fruits and vegetables and look to see what’s in there. If you’re not going to eat it, donate it. Get rid of it. Be very clear. It’s about food waste. It’s about buying exactly what’s good for you for that short period of time and avoiding food waste.

I want to do a callback to an episode on Solo Cooking, which I thought was quite inspirational. A lot of singles lean heavily on Uber Eats, restaurants, and so on because cooking for one is expensive and time-consuming. We can’t get around this notion of time versus money. If you want to save money, you have to spend time. I don’t think there’s mathematically any other way to do it. You’re going to have to spend the time on the call with your cable company. You’re going to have to spend your time searching extra.

You’re going to have to spend the time doing meal prep, bringing your lunch in, and so on. Rich people have time problems, and poor people have money problems. You have to substitute in that way. I like the idea of working your way through your cupboard. If you can’t find it in yourself to eat it tonight, you should donate it to someone who is even hungrier than you. That’s a nice way to think about it. You can buy in bulk and save a little bit of money.

You can buy things on sale that are part of your staple. This is ridiculous that I brought this up, but I eat healthily. It’s very difficult to find a healthy salad dressing. I have a salad every day, and I want to dress it lightly. I have eaten salads without salad dressing. I have a friend who makes fun of me for that. She thinks I’m a robot. I found this very healthy, tasty salad dressing, and now when it goes on sale, I buy fifteen bottles of it and save $50.

Some of it is psychological because it’s like, “Now, I can enjoy the salad more knowing that I didn’t spend an absurd amount of money on the dressing.” In the Solo Cooking episode, you can make a healthy, tasty salad dressing out of basic ingredients. That’s the next level of that, but it takes time to do that. We’ve talked a little bit about fitness gear, but there’s clothing also. What is your advice about clothing yourself?

Everybody’s different. Everybody has different value systems. I have had clients that have been very wealthy and still can’t have everything. You can’t have everything. If clothing is important to you, be very clear on what you’re spending. You don’t need a whole closet. If you buy a few things that are important to you, even if they’re expensive and you wear them once a week and take good care of them, that’s fine. Avoid the whole closet.

What I see is people buy a whole closet of expensive clothes, most of which they never wear again. Pick and choose. If clothing isn’t your gig, find things that are interchangeable, durable, can machine wash, feel comfortable in, or can wear to work or out. Buy a couple of them and wear them. Buy a few things every six months or every year, but the clothing thing is a problem. It’s the same thing with my cupboards. Go through your closet and get rid of things you’re not going to wear.

If you have not worn something in more than a year, you should donate it to someone who needs to wear clothes.

You can be clearer about what’s in your closet, “I have three pairs of black shoes. I have four pairs of black pants. I have enough.” If you go through and you get rid of what you’re not going to wear and need another XYZ, and you’re clear, you’re going to wear it.

My opinion about this is sometimes, if you’re not wearing something, think about why you’re not wearing it. Maybe it needs to be tailored. You’ve lost a few pounds. It doesn’t fit quite right. Can you get it tailored? Now, you don’t have to replace it. You can continue to use it.

Therefore, if it’s quality clothing, it’s worth having it tailored.

I’m a big believer in buying classics. Buy things that look good on you, the right color, and fit well. You don’t have to buy the most expensive thing, but buy something that’s good enough and is going to be able to last. Things that are dry clean only start to add up. To dry clean a pair of pants is an absurd cost. I can’t stand the idea of being able to do so.

I do a lot of my own ironing and keeping things clean and not wrinkled and so on so I can minimize the amount of times I need to send something to a dry cleaner because that starts to add up very quickly. I agree with you on that. The more you chase the fashion, the more you’ll have to buy because the whole system is set up for you to redo your wardrobe every season to keep up.

Once again, nobody cares, but it is fine to want to dress nicely and maybe chase fashion with accessories rather than main pieces.

My own personal experience with this is I started wearing hats. It is not a trivial investment. It might be $100 or $120 to get a nice hat. Now, I can take a normal outfit like sneaks, chinos, or a sweater and put a hat on. When I take the hat off, I look like anybody else. The most important thing is to feel comfortable with what you’re wearing, get stuff that fits, and get it in the right color that works with your complexion. We talked about this in the Clothing The Solo episode. I agree with you. There might be a little bit of upfront costs for some of this stuff. I have shirts and clothes I’ve had for a dozen years because you take care of them.

If you’re in a pinch spot where you’re feeling tight and working hard on getting rid of credit card debt, delay. We might want something new. We might want it tailored. We might want it dry cleaned. Wait 1 or 2 months. Work on those most important things, which are taking care of your finances and continuing to pay down credit card debt before buying a new outfit.

If you delay long enough, you can get everything on sale at the end of the season rather than at the beginning of the season when everything’s priced up. Let’s talk about the social stuff because it’s inescapable. Human beings are status-seeking creatures. We care about where we fit in the hierarchy. One major area of status is wealth.

The classic form of status is socioeconomic status, “Where did you go to school? What do you do for a living? How much money do you make?” The irony is people judge how much money you make by what you spend your money on. You have more wealth than a lot of what seemed to be wealthy people because you follow your own advice. There’s also pressure to spend more generally. What are some of these issues?

What I see and experience in my own life is you go out with friends, and they want to go away for the weekend, go to a show, and go out to dinner. Everyone expects everyone to spend in the same zone, “We’re going to get orchestra tickets. We’re going to go away for the weekend to Aspen. We’re going to go out to dinner at this great place and have 3 or 4 drinks and a main course.” It adds up.

I have friends that are recovering alcoholics, and you go out and don’t drink alcohol. There’s always going to be someone that makes a comment that you don’t have an alcoholic beverage. At some level, you have to decide what you’re comfortable with and how you’re comfortable, but you should never ever spend money that is not important to you to spend, doesn’t reflect your values, and isn’t good for you. You should never do that. If you have friends and social friends that push you to do that, you either need to have conversations with them or think about adjusting your social group.

This is big, and it might be one of the prickliest of these topics that we were talking about because this has to do with your social network and your team. The classic of this is you don’t drink, the bill comes, and there goes your credit card in. You’re subsidizing the person who’s had three cocktails. If you want to save money, stop drinking at restaurants. Find yourself at a restaurant that’s already beyond your budget. You’re ordering the chicken, and someone else is ordering the lobster. I’ve been there. You’re dreading the check arriving.

Everyone’s been there.

For a large part of my life, I wasn’t a drinker, and that happened to coincide with when I was at my poorest. It was painful. Back in the day, when you didn’t do credit cards, there was always a person who just wouldn’t put in enough money. I was always the guy who was like, “We need to tip this server. He worked hard to serve this table of twelve people.” It’s the pressure, and it’s painful to put yourself through this. It sounds like you’re saying, one is to make the decision beforehand to sit some of this stuff out. Say, “I’ll meet you afterward. I’ll meet you before for a drink, but I’m not going to do the dinner.” That’s one.

Rather, decide what you’re comfortable with and own your truth. You ask for a separate check and order an appetizer and soda water. Anyone that would call you on that, you handle it the way best for you, but you would just say, “I haven’t budgeted for this. This doesn’t fit into my finances now. I choose not to spend the money.”

This is hard for people to do, but that is the correct advice.

You start owning your own truth, and it’s a compliment to yourself. It’s not something to be ashamed of.

I believe that the people you surround yourself with ought to support you. They should love you in the way that you love them. They should want you to be successful in the way that you want them to be successful. There is this notion of compersion of anti-jealousy that you want to support each other, but that requires some vulnerable conversations. This came up in a previous episode about the Singles As Exhausted Gift Givers.

Buying dresses for weddings, gifts, and traveling to destination weddings and gifts or baby showers, all of which go out. If you never get married and have kids, none of it comes back. This is not hundreds of dollars, but for some people, thousands of dollars. This prompts the need for a very vulnerable conversation with a friend that just says, “This is not in my budget. I love you, and I would love to support you, but I can’t afford to do it.”

A friend who loves you and cares about you would say, “I want to see you. We can find some other way to do this to make this happen.” In the same way, if you’re an alcoholic and have a whole bunch of alcoholic friends, you might need to make new friends. If you have a whole bunch of friends who spend lots and lots of money and they can’t accept the fact that you can’t, you might need to find some new friends.

The irony is that 70% of those people that are spending excessively cannot afford it. It’s not that you’re poor, and they’re wealthy. You’re probably in the same situation. They just haven’t figured it out yet. I always say, when they’re older and poor, invite them to dinner, but don’t let them move in because it is going to be an ongoing challenge for the next generation that people that haven’t taken care of themselves during their lifetime are going to run out of money when they’re old.

They’re going to turn to you if you’ve taken care of business.

You love them, invite them to dinner, and send them on their way.

Do you ever suggest people partner up, like in an accountability partner? Having a financial planner is the partner you’re paying for, but maybe you’re looking to save money.

It works well for people. I tend to be very independent and private. I have some friends with that we talk about the dirty little secret. I paid off my mortgage. We have shared that dirty little secret with each other, but we can’t tell most of our friends.

It’s because you’re bragging if you do that.

The other thing is accountability. Make sure it’s someone completely supportive of you and someone that generally has the same value system who will be very excited for you when you share some of these things. I have some friends with whom we share these little things we can’t share with other people because other people will either feel like you’re being mean or bragging, “You’re lucky that this happened to you.”

You want people who are anti-jealous and who are going to support you.

It’s great if you can find someone that’s a good partner.

I keep calling back to episodes. It’s funny how so many of them are relevant here. I have an episode on having a relationship sponsor. You might have someone in your life who may advise you and counsel you for romantic relationships, especially if you have a history of making bad decisions. You can imagine the same thing. You have someone who has good judgment, loves you, and shares similar values. You say, “I’m thinking about purchasing X.”

I always say call before you do it. Call your friend. Find someone and share with them your goals, “My goal is to get my high-interest credit cards paid off and then continue to make progress. Could I call you occasionally when I have a judgment question or need support?” Call them before you buy the thing. Sometimes they have good ideas as we talked about, “How do you bargain for it? How do you shop services? How do you get a better deal?” Those are great people to call.

If you don’t have those people, there are forums you can get on Reddit. There are other places. We have a Slack channel for the Solo community. You can sign up for it at PeterMcGraw.org/solo. You can go to that community, “I’m in this puzzle. I’m in this problem. I’m thinking about doing this. What do you think?” You’re going to find a lot of very warm, thoughtful people who will support you and generally have very good advice. That’s helpful.

When I have a big decision, I have you and my therapist. I have two phone calls. What’s interesting is you function as both because we’ve known each other for many years. You helped me decide on a house, and it became so clear when you talked to me about it because you reflected back on my values. You also were able to say, “Yes, you can afford this. This is not too much of a stretch. I approve.” I got the Money Amy stamp of approval.

You always think deeply.

The data on this stuff is clear. The stuff you buy doesn’t make you happy. If anything, it might make you unhappy. Trying to keep up with the people across the street or friends is a bad recipe because you’re keeping up with them, and you never are going to be satisfied. The last thing about the social stuff is dating and socializing more generally, but especially dating.

I had a conversation with a young man who is 26 and dating straight. It’s very easy to fall into this heteronormative courtship, impress the girl, woo the lady, have fancy dinners, go out for drinks, and all that stuff. He was talking about some of his struggles with this. He lives very healthily. He’s not a drinker, and he’s eating healthy and so on. He’s still building a career and doesn’t have a lot of liquidity. I said to him, “I’ve got some old guy advice for you if you want it.” He’s like, “Absolutely.”

I said, “You’re a good-looking man. You’re a kind person. You’re thoughtful. You have a lot to offer, and vulnerability is sexy. If you find someone you like and say to her, ‘I like you. I’d like to spend time with you, but I don’t have the budget for the fancy meals. There are a lot of other things that we can do. We can go to the museum. We can go for walks. We can go for hikes. We can meet for lunch. We can do these things and just know that the amount of money I’m spending does not reflect how I feel about you. If you need those other things, if you need those luxury things, unfortunately, I’m not the right guy for you.'”

That’s an incredibly vulnerable thing to do, and it goes completely against your instincts in terms of what you’ve been told. I said, “If she likes you, she’ll say ‘fine.’ If she cares more about the dollars than your soul, she’ll say, ‘Fine,’ but not follow up with you.” This is a new idea that he had never considered like, “You tell the truth.” Having those conversations become important because it could start flowing very quickly, especially for someone you don’t know, splurging for a big dinner on the first date to impress someone you might not, twenty minutes into the dinner, need or want to impress anymore.

As you said before, it’s time. The flip side to spending money is often spending time, so you make a picnic. You buy a bottle of wine at the liquor store that’s on sale instead of buying a bottle of wine at a restaurant and do a picnic. You invest energy into planning things that are fun to do and that don’t have to be a lot of money. Don’t show up with your $250 new running shoes on the first date.

There is that little issue, but you just are straightforward. The buying of gifts and the treating of people, you don’t have to do that to have relationships and friends. Once you set a new culture with your friends about not buying each other Christmas gifts and birthday gifts, you say, “Can we do it differently this year? Let’s choose names or get together for a picnic, and the same is with dating. Since I haven’t done that for a long time, I don’t know all the cultural stuff.”

A picnic is a brilliant idea. I’ll give you a quick example of this. I have a friend who reads. When we were both living in Boulder, coincidentally, we both met the same woman, and both asked her out. Within maybe a day or two of each other, we took her out on a date. I took her to lunch at a restaurant downtown, and we had a lovely time. This guy took her on a picnic down by the Creek and read her poetry. He spent a third of the amount of money and twice the amount of time. Guess who she was more excited about.

The poetry guy.

Yes, and it already hurts that he’s already way better looking than me and that he’s pulling out all the stuff. It’s a nice reminder that you’re going to even stand out going to a museum and paying $10 to get in versus going to dinner and paying ten times that amount.

You have to be true to yourself. The reality is you can’t sustain it anyway. If you like this person, you don’t want to spend so much money that is not sustainable. All of a sudden, you’re in a relationship you can’t sustain financially.

Here’s the last thing. Let’s flip this around. We have been focused mostly on the savings side, the out, and the expenses. Let’s talk about income.

I’m excited about the power of the workforce in this country at all levels, from your dishwasher that’s now making $20 an hour to people in the middle of their careers with lots of opportunities. Who knows what this new uncertainty is with the inflation and the interest rates, the war in Ukraine, and the uptick in COVID? There’s a huge disruption in the market. Whatever you’re making, depending on your situation, you have the opportunity to ask for a raise, ask for a bonus, look for a different job, pick up another side gig and make more money in your skillset.

That’s scary to do for people who are scared to ask for a raise. They’re scared to look because, “What if my employer finds out I’m looking?” If you’re providing value, you have nothing to worry about. You’re never going to get fired or chastised for seeking a better opportunity.

It’s a new culture. In the old days, if they found out that you did that, it would be a pariah. If you change jobs more often than every ten years, it is a big deal. Now, they’re just hoping you stay for a year.

The other issue that comes to mind is people often spend a lot of money to make money. They buy clothes for work, and they commute. They do all these things. The rise of remote work, for example, if you’re remote now asking to remain remote, at least part of the time, suddenly decreases your expenses.

Commuting, eating out, clothing, dry cleaning, and all that. It’s a huge deal.

I would say this. Don’t be afraid to ask for a raise. Don’t be afraid to look for other work.

I would say all people should always be looking for work. You should have your resume updated. You should be talking to your referral sources and your network. You should always be available to talk about another job.

The best time to find a job is when you have a job. The last thing is that one of the reasons you want to save money and be more liquid is because it allows you to put money into investments and start saving for your future.

In addition to working for a living, paying for your expenses, and having money in a checking account, you need to build net worth and assets over your lifetime because not only will these allow you to do things during your younger years, but they will allow you to live when you’re no longer working on those assets.

The concept of building wealth, you can do so in so many ways now. We had a conversation about the concept of Bitcoin and all these different new investment things, like pre-tax in a retirement account, after tax and other investments, in real estate, in Roth IRAs, in small companies and businesses, all those kinds of things. There are a lot of different ways to build wealth. The goal would be to be able to build wealth over your lifetime, use it during your lifetime, and take care of yourself when you’re older.

The idea essentially is to buy equities and low-cost mutual funds. Now, there are people all around the world working to make you money while you sleep. This is going to be essential, especially in a world where you probably don’t have a pension and certainly a world where Social Security is not going to be nearly enough to live on. To start investing in your future early and often can set you up for independence often at a surprisingly young age or at the very least at an age where you’re no longer able to work. The best place to start is your employer probably maybe has a pre-tax investment opportunity.

401(k), SAP, 403(b), and the focus on those are the match. Your big focus on looking at those is how much they will match. Once you become qualified, how much they will match, and how much you can afford. The reality is, let’s say they match 3%. It’s a great deal. You put 3%, and that’s a 100% return on your money. It’s magic.

The reality is 3%, and their 3% is not enough. Your goal should always be 10% of your gross income in retirement. We’ve talked about paying down debt and all these things. We’ve looked at different things where I’ve looked at people that waited until they paid off their debt to start saving for retirement or save for retirement before they started paying off debt. You should do it all at the same time. It’s overwhelming, but you need to do that.

An item to put on your to-do list is to look at investment opportunities through my work or, more generally, through the government.

IRAs and Roths.

This might be a situation where you might want a fee-based planner to give you a hand because the selection of these funds and so on is not a trivial matter. In general, what you’re looking for are these low-cost passively traded index funds that are broadly diverse.

Through your work, somebody will do that in advising for free on the investment side of the thing. Individually, an index fund or an age-based investment fund, low-cost, and not too complicated works.

This is going to sound harsh, but if you don’t invest in these things as an American who doesn’t have a job with a pension, which is a very small minor people, you’re going to have to work until you die. It’s that simple. If you don’t invest in these things, you’re going to have to work until you die.

You have to generate a lot of assets to be able to live independently in old age.

It’s a sad reality.

Don’t get discouraged. Believe in yourself. Take little steps. You don’t have to do everything perfectly. I always tell clients, “I’m going to give you thirteen things on your to-do list.” If you do three, you get an A-plus. If you could do a couple of the things we talked about, like where you spend your money, get to know what your debts look like, and make one action towards paying down debt and reducing expenses, you pat yourself on the back. You come again in a month in a week and try to do something else. Take action. If you take no action, you’ve made a decision not to take action. Take some action for yourself.

This is a process that’s not going to take days or weeks. It’s going to take months or years. Recognize that and know that it will be worth it in the end.

Acknowledge the progress you make with each step you take.

Amy, it’s great to see you.

It’s great to see you too.

Thank you for coming to the show.

It’s great to be here.

Cheers.

 

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About Amy Gibb

SOLO 124 | Saving MoneyAmy Gibb is a Certified Financial Planner. As the President of Money Sense, she advises individuals and businesses.

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