In preparation for the release of the audiobook version of Live Well, Grow Wealth, I'll be sharing excerpts each week on this blog.
Today's excerpt is from Chapter One, Live Within Your Means. I suggest categorizing your expenses as absolutely necessary, necessary but reducible, discretionary but important, and totally unnecessary. This post defines totally unnecessary expenses.
To build your confidence and produce instant results, start with the low-hanging fruit. If you're paying late fees or excess interest because you didn't make a payment on time, you need a better system for managing your bills. Not only does it hurt your credit rating, making it more expensive or more difficult for you to borrow money in the future or even find employment, you're wasting money that could be better spent on something you need or enjoy.
Most creditors allow you to set up automatic payment arrangements, to deduct the balance you owe from a checking account or charge it to a credit card on the due date, so you'll never have to worry about late payments. If you do enroll in auto-pay, make sure you keep enough money in the specified account to cover these payments so you won't be assessed a returned check fee or other penalty—another unnecessary expense. Perhaps an email reminder from the creditor will work better for you. Or maybe you set up a special folder, kept in a prominent place, for organizing bills. Be familiar with the due dates, so if a bill gets lost or misplaced, or an email reminder is accidentally deleted or ignored, you can contact the company or go online and make your payment on time. If you're planning to be out of town when your statement is scheduled to arrive, contact the creditor, have someone handle the payment for you, or set up an online payment to occur just before the due date. Whatever your system, just make sure you use one that works, so your bills are always paid on time, your checking account is never overdrawn, and you never charge over your limit. If your outgo numbers are so skewed that you have to negotiate with your financial institution to balance your budget, then do it.
Traffic tickets, parking violations, library fines,
etc., are all categorized as unnecessary expenses that add no value to your
life. Not much you can do about them once incurred, but you can learn from your
mistakes and try not to repeat them. If the traffic ticket is a first offense,
investigate the possibility of attending traffic school or doing community
service to have it removed from your driving record; otherwise, you'll keep
paying for it through higher insurance rates.
My husband takes issue with my listing "library
fines" as an unnecessary expense. If he's unable to renew a book he has
not yet finished, he'll keep it a few extra days and pay the fine. He considers
it renting a book he wants to read but doesn't want to buy. University students
have been known to check out textbooks and keep them for an entire semester;
the overdue fine is most likely much less than purchasing the book, even used.
A similar case could be made for incurring a parking
ticket to keep from being late to an important job interview. It's your list;
if you're honest with yourself, you'll be able to identify expenses that can be
trimmed or avoided without compromising your values.
Some people put vices, such as smoking or gambling, in
this "unnecessary expense" category. If you did that, maybe the habit
doesn't give you enough pleasure to justify the cost. Think of the money you
can save by giving it up, and work toward that goal. Motivate yourself by
setting aside the money you would have spent (for example, for a pack of
cigarettes or a lottery ticket) and watching it grow.
To learn more, read Live Well, Grow Wealth by Sharon Marchisello.
