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Think Before You Spend: 5 Questions To Ask Yourself Before You Buy

Think Before You Spend: 5 Questions To Ask Yourself Before You Buy

A few years ago, when I first started attending university and working, I often felt the need to spend money on things I didn’t really need. I always felt like I had to keep up with everyone else, which meant buying brand named items and trendy fashion pieces. All of us feel this need for impulse purchases or little splurges from time to time but does this pattern mean we just spend years paying off debt when we could be living debt free?

According to Joshua Becker, author of the blog Becoming Minimalist, the average American home size has doubled in the past 50 years. 

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Becker notes that 10% of households rent offsite storage, and that 25% of homeowners with two-car garages can’t park cars in them. 76% of Americans are living paycheck to paycheck. The average US household credit card debt stands at $15,191.

People are working longer hours everyday and missing precious time with their families in order to pay back the accumulated debt from buying too much stuff. In order to combat this sometimes vicious spending cycle, I have put together some questions that will help you think before you spend:

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1. Do you really need it or are you just buying it because it’s on sale?

I know what you’re thinking: I really do need another black sweater! But, wait a moment, think before you spend. If you already have something functional in your closet, then you really don’t need another one. Sales are there for us to grab bargains on things we really need so if there isn’t something like that right in front of you then step away from the clearance rack. A bargain is not a bargain if the item is never going to be used.

2. Can you get it for less?

Something I continually ask myself before buying anything at the shopping centre is whether it is possible for me to get the same thing somewhere else for less money. Many times it is a lot cheaper to find the same or similar items online and sometimes even overseas depending on shipping costs. If you don’t need the item new, check out eBay and thrift stores to find a similar item at a lower price.

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3. Can you afford it?

This is a big one for many people, especially those who are wanting to keep up with the rat race. Sure, having a brand new designer car is wonderful but are you buying the item just because you want to look a certain way or is it something you need? If you need to go into more debt in order to buy the item, it might be time to let it go and work on saving up for it. If you really want the item, you’ll be happy to wait for it.

4. Is it an impulse buy?

So you had a bad day at work and that $1000 handbag you’ve been eyeing off is looking pretty nice right now. We all fall into the trap of impulse buying or emotional shopping. Impulse buys are the worst kind as there is usually little thinking behind the purchase and a lot of guilt following it. Rather than just buying something when you’re feeling bad, think before you spend and be sure to sleep on it. Alternatively you can add it to the calendar 30 days from now, and if you still want the item after 30 days then go for it.

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5. Can you get it for free?

There are lots of websites where you can find people to trade or swap items with you or who give away items for free. Before splashing out on a brand new printer for your office check out websites like Craigslist.com to see if there is a free or cheaper alternative. There are also yard sales or sales at the rubbish tip where you may be lucky and find a bargain. If all else fails, check out Facebook groups in your area for selling items or ask a friend or family member if they are looking to offload some items.

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Last Updated on June 6, 2019

The Average Retirement Savings and How to Save Wisely

The Average Retirement Savings and How to Save Wisely

Are you on track for retirement?

If not, don’t worry, I’m not sure either. I save each month and hope for the best.

Fortunately, I’m at an age where most people don’t save so I’m ahead of the curve.

But, what if you aren’t in your 20s? What if you’re near retirement and are looking to gauge where you stand?

If so, keep reading. Here’s how to prepare for retirement and save wisely during the process.

What Does the Average American Have Saved for Retirement?

Saving for retirement is tricky.

Tell someone straight out of college to save $10k a year for retirement and it’ll be next to impossible.

Make the same request to someone decades older and they’d be more likely to be able to save this amount. But, a 20-year old college student can be “financially ahead” of someone saving more than them. Why?

Age matters in your financial journey. The younger you are, the more time you have to save and put compound interest to work. As you get older and have more saving power, you’d have less time to put compound interest to work.

Here are the average savings Americans hold by age bracket:

20’s – $16,000

During this stage, most people are paying loans and moving up the corporate ladder. Your best bet during this stage is to focus on eliminating debt and increasing your income. Don’t focus only on getting a high-paying job neither.

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Instead, focus on learning via Podcasts, reading books, and taking specialized courses. Doing this will make you more valuable and give you more career options.

30’s – $45,000

At this stage, you’ve hopefully escaped your entry-level salary and work at a career you enjoy. Your earning power has increased but you now have more obligations. For example, marriage, kids, and a mortgage.

Set a plan to pay off all your debt and focus on eliminating unnecessary expenses. Leverage financial tools like Personal Capital to ensure you’re on track for retirement.

40’s – $63,000

This is the stage where you’re at the prime of your career. Top financial institutions recommend you have at least 2 to 4 times your salary saved up. If you’re falling behind, start maxing out your 401K and Roth IRA accounts.

50’s – $115,000

During your fifties, you’re close to retirement but still, have time to save. You may be helping your kids pay college tuition and other expenses. Since you’re at the peak of your earning power, max out all your retirement accounts.

60’s – $172,000

By this point, you should have about eight times your salary saved up. If not, you’ll depend primarily on social security benefits averaging $1400 per month. Max out all your retirement options as much as possible before retiring.

Ways to Save Money on a Tight Budget

The sad reality is that most Americans aren’t saving enough for retirement.

Even high-earning power isn’t enough to secure one’s financial future. You need to have the discipline to save for retirement while time is in your favor. Don’t wait for you to have a high salary to save, start with having a small budget.

First, get a clear picture of where you stand. Write down a list of “needs” and “wants.” For example, Netflix and Amazon Prime are “wants” and a “cell-phone” is a need.

Use tools like Personal Capital to analyze your spending patterns. Personal Capital allows you to add all your financial data in one place–making it a powerful option to gauge where you stand.

Once you know all your expenses, organize them from highest to lowest expense. When you can’t cut more expenses, call your service providers to negotiate a lower price. If you’re not good at negotiating, use services like Trimm to lower your monthly expenses.

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How to Save Money Each Month

By this point, you know the average amount of money you should have saved for retirement based on your age.

But, breaking this down into monthly goals can be challenging. Here are some rule of thumbs to follow:

Aim to contribute 10%–15% of your salary each paycheck. Review your progress each week.

Why so often? The reality is that life gets in our way and you will have many financial setbacks. Your goal isn’t to be perfect but to get back on track instead.

Reviewing your finances weekly lets you know where you stand with your retirement. This doesn’t have to be a long process either. All it takes is login in Personal Capital to view your net worth and check how much you have saved for retirement.

Turn saving into a game and aim to save more each month. It will get challenging but you’ll get creative and find more ways to save.

Top Money Saving Challenge Tips

To prepare for your financial future and not be another statistic you need to be different.

How?

By adopting new habits that’ll help you become a saving machine. Here are some ways you can save more:

Automatically Contribute Towards Retirement

If you’re working for a company, you can automatically contribute towards your 401k. If you’re not currently contributing more than 10%, make this your goal. Contribute 1% more today and automatically increase this amount a year from now.

Odds are that you’re not going to be negatively affected by contributing 1% more. Many times we spend our money on things we don’t need. Contributing more towards retirement is a great way to secure your financial future.

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Use the Right Tools to Know Where You Stand

Once you’re contributing more towards your retirement accounts, gauge your progress. Make use of finance tracking apps to help you view the big picture of your retirement.

When I’d first signed up for the app Personal Capital, I didn’t know I had a negative net worth. Despite saving thousands of dollars, my debt brought my net worth to the negative. Knowing this motivated me to save more and spend less.

Now, I have a positive net worth. But, it was because I was able to view the big picture using the app. Find out what your net worth is using a finance tracking app and you may surprise yourself.

Bring in Experts to View Your Blind Spots

If you have too little or too much money saved, you should consider hiring financial experts.

Why?

You may need someone to hold you accountable to help you reach your financial goals. Or, you may need help managing your money as effective as possible.

Regardless of the reason, getting help may help improve your financial situation.

Before you hire an expert, find out which areas you need help the most. For example, if you’re constantly overspending, find a debt counselor. If you’re struggling with choosing the best investment options, hire a financial advisor.

Speed up Your Retirement Contribution

After learning how to manage your money well, the next best thing is to earn a higher income.

You’re capped at how much you can save but not much you can earn. Even if your employer isn’t giving you a promotion, you can still take charge of your financial future. How?

By starting a side-business.

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This will be something you’d work on after you’ve finished your day job. Once you start earning income from your side-business, you’ll be financially better off.

The best part is the more work you put into your side-business,[1] the more potential it has to earn more money.

So start a side-business in an area you’re familiar with. For example, if you enjoy writing, do freelance writing for small e-commerce businesses.

Once you’re earning a higher income, you can contribute more towards your retirement. Don’t wait for the right opportunity to secure your financial future, create one.

Reach Financial Freedom with Confidence

What if you were able to retire tomorrow with no problem, all because you’d have enough money saved up and little to no debt left to pay off? How would you feel?

My guess is that you’d feel happy and relieved.

Most Americans are falling behind their retirement goals for many reasons. They’re not prepared, they carry bad money-habits and are thinking short-term.

For you to retire successfully, you need to work backward and adopt better habits. Contribute more towards your 401K and focus on growing your income.

If you do, you’ll save money and pay debt faster.

Don’t beat yourself up if you’re behind your retirement goals. Take the first step today towards a brighter financial future. Isn’t retirement worth the hard work and sacrifice to be at peace?

Featured photo credit: Huy Phan via unsplash.com

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