Talane’s Top Ten Tips for Creating a Reserve of Money
Respect your money. Put your bills in order neatly into a good-looking wallet or purse. One friend, upon first arriving in New York City was taught this trick by a very wealthy businessman. He said you have to treat your money with respect and a tidy, well-ordered wallet is the first indication that you take your money and financial life seriously. On the flip side, another friend of mine was very irresponsible with money, constantly bouncing checks and forgetting to pay her bills. Sure enough, bills and coins were crumpled and scattered throughout her handbag. Although she now makes a good living, she is still struggling with credit card debt. Disrespect repels money. What does your wallet say about you?
Pay off your personal debts and your credit card debts. Debt drains your energy more than you realize. (For specific and excellent instructions on how to do this, read Jerrold Mundis’s book, How to Get out of Debt, Stay out of Debt, and Live Prosperously.) If you have credit card debt, cut up all cards except for one, and put that in a pan of water and put it in the freezer. If you have an emergency, it will be there, but you’ll have to take the time to defrost it first.
Eliminate all those sneaky, unnecessary expenses, like the annual credit card fee for $25.00. If you think it isn’t a big deal, think again. If you are 35 today and live until 85 that $25 a year saved at 8% interest will be $14,344. Wow! Look for those little expenses that add up at a shocking rate, like the daily cup of java for $3. You could buy your own top of the line espresso maker; bring it to the office and save $500-600 in a year.
Start automatic savings of 10% of your income now or max out your 401K at work, especially if you have any debt. Set up an automatic savings plan with your bank so that you can’t get your hands on the money. Contact your bank to automatically put a specified amount in a savings account for you (almost all banks do this as a free service.) If you truly can’t save 10%, start with 5% and work up to 10%. Hint: most people spend 10% less than normal when they pay with cash instead of a credit card. Something about having to fork over cash makes you think twice about what you are buying. Put your credit cards in deep freeze and pay cash and there is your 10%.
Hide an extra $40– $100 emergency cash in your wallet and/or car just in case of an emergency. Make sure it isn’t in view or you might spend it!
Put six months living expenses in a savings account—this is the beginning of your financial reserve. Work up to having one to two years living expenses.
Meet with a certified financial planner to create a financial plan. Find one that works on a flat fee basis as opposed to one who takes a commission on product sales. (Mine is Sheila Walker Hartwell in New York City (hartwellplanning.com). Do this before you think you need to. You don’t have to be wealthy to have a financial plan. The plan will help you become wealthy!
Stretch the limits of luxury.Do something once a week that feels very luxurious. Get a massage, facial or manicure/pedicure. Go horseback riding. Hire a housekeeper—whatever it is that makes you think, “This is how the rich live!” (Of course, make sure it fits in your spending plan; i.e., you might need to get your massages at a steep discount from a school where the students need to book in hours of practice.)
Make extra principal payments on your mortgage. (If your financial planner agrees!) Many people can pay off their mortgage seven years earlier by making just one extra principal payment a year. Likewise, most people don’t stay in their homes for more than seven years. Don’t get a 30 year mortgage if you really need a 15 year (or less) mortgage.
Take full advantage of your company’s matching 401K plan. I’m amazed at how many people don’t take advantage of this. Many companies will match the amount you put into your pension plan. If they will match up to 4% then put in the full 4% to instantly double your money.
Bonus tip: educate yourself about finances—there is a lot to learn.This is about respecting your money and protecting yourself. To shift your thinking from a poor mentality to a rich one, read Rich Dad, Poor Dad by Robert Kiyosaki. Always invest 5-10% of your income/revenues in yourself (e.g., coaching, training and development) because you are your best asset! The world is changing so fast that if you aren’t changing with it, you’ll soon be left in the dust.