Money Hacks

Social capital is as real as financial capital, and sometimes more valuable. 

You generate social capital when you help your neighbor repair a fence, or have your Sunday School class over for a barbeque, or join a bowling league. Any time you participate in the community, you are generating social capital, both for yourself, and for the other people involved. We don’t need to sacrifice our own interests to generate social capital. It’s not a zero-sum game. 

True wealth doesn’t come from cash, but from our relationships with the people around us.

Money is an abstract concept. It really represents time and labor, and those are hard to visualize. By finding something concrete to use as a measure of value instead, it’s easier to visualize how much something is really worth to you. Re-frame the a potential purchase in terms of something you already value.

I’ve already spent several months coveting a Mini Cooper. When I was recently tempted to purchase an expensive new digital camera, I looked at it in terms of how much Mini it would cost me — 6%! — to get a better idea of the sacrifice I’d have to make to buy it. It made the idea more concrete. In a way, the Mini Cooper has become a sort of personal currency.

Ignore the proverbial Joneses.

One of the most dangerous paths to clutter (and to overspending) is the urge to own the same things your friends do. Peer pressure can be powerful. I’ve come to realize that lifestyles are not a competition. What does it matter what others buy?

I’m content with what I have — more Stuff is not going to make me more happy.

For some, the first step toward controlling spending is to cut up your credit cards and move to a cash-only system.  

If this is too extreme, make a commitment to yourself not to use them for impulse purchases or for entertainment, and to always pay the balance in full every month. Leave credit cards at home if you might be tempted to spend too much.  The important thing is to be honest with yourself, and to use credit cards in a way that helps your finances instead of hurting them. If you can’t do this, you’re better off without them. 

You can use services like OptOutPrescreen.com and GreenDimes to eliminate unsolicited credit card offers.

Some goals, such as retirement, are too far away to get excited about. Short-term goals aren’t enough to build the savings habit. This is the value of medium-term goals: they’re close enough to be motivating, but are also difficult enough that they require ongoing effort.

Consider saving for a trip to London or Hawaii next year. Or saving for a new car. I’ve found that saving for goals 18 months to five years in the future has been a great way for me to get excited about saving.

Research suggests senior citizens, people in crisis (e.g., coping with a death or debt), college students, small business owners, minorities, and immigrants are especially at risk of being victimized. Avoid making big-ticket purchases during times of duress.

This point cannot be emphasized enough.

Salespeople will often attempt to create artificial stress because they know it makes you more likely to buy. That guy who knocks on your door offering to sell you the last frozen chicken in his truck at a discount? He’s creating artificial pressure to get you to buy.

We live in a consumer culture. We’re constantly bombarded by advertising, advertising that is cleverly designed to get us to buy the latest Thneed (or Zizzer-Zoof Seeds). It’s easy to become swept away by desire. We’re manipulated into desire by marketing.

It’s not something to feel guilty about, but it is something to strive to overcome.

We all have dreams, but most of us make excuses for not pursuing them. Often these excuses aren’t overt. It’s more a matter of inertia, of just ignoring the dreams, of maintaining the comfortable status quo. But you can break out of your comfort zone to get more out of life through the simple power of yes.

Learn to say “yes” to the things that make you uncomfortable or frighten you. Step outside your comfort zone. I’ve been doing this for nearly two years now, and it’s changed my life.

I’m still scared to do all sorts of things, but by saying “yes”, I’ve learned that things are never as bad as I think they’re going to be. I have a lot more fun now.

Lifestyle inflation can rob you of riches. When you get a raise, don’t adjust your standard of living to match. Try to live as you have been living.

It’s been said that if you can live like a college student until you’re 40, you can retire to enjoy the rest of your life. That may be a stretch, but the point is apt. Too many of us adjust our expectations as our salaries increase.

Instead of using your raises to buy more Stuff, use an automatic payment system to direct wage increases into your emergency savings or retirement accounts.

“I have $500 extra in my checkbook,” my wife told me the other night.

“What do you mean?” I asked.

She explained that for the past 2-1/2 years, she’s been rounding every transaction up to the next dollar. If she spends $49.74 at the grocery store, she enters this in her checkbook as $50. If she spends $21.23 on gas, she enters it as $22. As a result, she saves an average of 50 cents every time she performs a financial transaction. She’s made roughly 1000 transactions since she started this, and now has $500 more in the account than her checkbook register shows.

When she reconciles her accounts, she merely double-checks to make sure all transactions are present — she doesn’t actually reconcile totals.

I’m not sure I could ever do this — it would make me tense — but my wife finds great satisfaction in having this buffer.

Dayana Yochim at Yahoo! Finance writes that you should forget making a list of financial New Years Resolutions.

Make things even simpler: How about instituting just one new money habit for ‘07? My suggestion is this: Save money every day.

By making “save money every day” your vow, you bring mindfulness to your spending. Mindfulness is the practice of being aware your thoughts and actions. This may seem obvious, but it can be a powerful tool.

How often do you grab a pack of gum or a candy bar or a magazine while in line at the grocery store? Is this a conscious act? Is it an actual decision? Or is it a reflex? Yochim writes that three habits will help you save money every day:

1. Make more conscious cash decisions.
2. Keep the bigger picture in constant view.
3. Always shop with a list.

Make “save money every day” your resolution for the coming year!

[Yahoo! Finance: Forget resolutions: pick one good money habit in 2007]