So you THINK you saved money

We hear it all the time.

“I got a great deal on that car it was 20% off the regular price.”

“These things never go on sale”

“these were so cheap I bought two of these”

Now everybody loves a deal and nobody want to pay too much for something, myself included. But the issue comes when you end up buying a product because it is on sale. We’ve all been there. “this is so cheap, I can’t let this deal go.” You can ask yourself some questions to determine if it makes sense to purchase this product. Do I need this product? A simple question. But there is power in this question. First; what is your definition of need?

I want to share a situation that I got caught up in the other day. I am usually good at avoiding these things but I got caught and now I am stuck with the bill. Door to door markets visited my home from the cable/internet provider. They first asked where I had my cable service. I explained that I didn’t need cable services at anywhere from $60-$100 per month. There are much more productive things I can do with my time than watching television and the once per month I would like to watch something or when we reward the kids with a show there is Netflix at $10/month.

He then attacked the cell phone option. We do pay for two cellphones in our household but we are satisfied. He then offered a free tablet with its own SIM card and 2 GB of data outside the home. I explained that we already had 2 tablets and we didn’t need a third. But then he mentioned only $7/month. He got in my head. Wow, $7/month for a free tablet with its own number and 2 GB of data. He also mentioned that as part of this deal it would also increase our monthly home data to the unlimited package.

Man…what a deal!  In a moment of weakness, I signed up to a 24-month commitment!

But here is the thing. I DON’T NEED ANOTHER TABLET! We have two already. I don’t even use them. Sure, the ones we have are slightly cracked from the kids dropping them, it would be nice to have a shiny new one. But really, they work fine and will likely work fine for a few more years.

But what about the extra 2 GB of data when we bring our tablet with us? The truth is we never take the tablet out of the home. We have cell phones on data plans with more than enough data.

Yes but, we were able to move our monthly data package at home to unlimited! So, what? We rarely if ever go over our monthly allotment of 200 GB.

So, they got us. $7/moth for 24 months. $168 for something we don’t need. Not to mention the return we would have made on that $168. We could pay down our mortgage or invest those funds to generate a return.

You know what is even more tragic? And even funny really? (If it didn’t cost me $168) I can’t even find it at this moment to take a photo and include it in this post. I suspect I will find it eventually, otherwise I will take a photo of the old one and include that instead.

Now back to the question; How much did you save? Well the answer goes like this. If you didn’t need the item in the first place you saved nothing. In fact, you spent money that could be allocated to other things like buying your freedom. And if you purchased an item you did need for less than you usually do, congratulations but if you didn’t actually put that money towards paying down debt or into some sort of investment vehicle you haven’t actually saved anything. You have only re-allocated it to spend on some other item. Let’s be smarter with our spending and resist the pull of big company marketing.

Beware the Creep!

I am a father who prides myself in being an expert manager of money and a financial role model for my kids. I am an expert at saving money, building wealth and I feel pretty good about myself.  I know that I am getting ahead each month, each week and each day by making a whole bunch of small but correct decisions with my money. When we have a solid foundation to build on it becomes easy to increase our wealth and make decisions that direct us toward our goal of being financially independent.

But overconfidence can be the start of a downwards spiral. When complacency sets in that’s when things start to go the wrong direction. We feel that because we have put some good habits in place and we have done so well with reorganizing our affairs we can let our foot off the gas a bit. A few extra dollars spent here a few more there. We don’t really need it but we’ve done so well and we’re way ahead anyways. That’s when spending creep sets in. I’m not saying we can’t splurge on something now again but “beware the creep”

Hold on. What’s that on my credit card statement?

Examples I have found of spending creep in our household spending recently are;

One off spin classes, when we own many bikes-go for a bike ride

Yoga, how can they charge $15-$20 for a 75-minute class?

On demand movies, when we have a Netflix subscription-watch one of the thousands on Netflix

I-tunes songs, when we can listen for free on YouTube

Coffee out when we can make it at home for pennies a cup

I-tunes cloud storage…??????? Do we really have that much we need to store?

Annual photo software subscriptions

The above are some of the small ones that drive me nuts as I see no need for them. But common spending that adds up more quickly are as follows;

Eating out fast food

Work lunches out

Bottles of wine and six packs of beer

Toys (we are fairly good at this) Its’ usually the grandparents

Costco, they have damn good deals on clothing

Little by little these things creep back into our regular routine. Each one by itself is no big deal we think. Of course, we’ve all seen the example of a $2 coffee per day measured over a week $14, a month $60 a year $720, 5 years $3600 or $7200 over 10 years. In addition, if we had invested this money instead of spent it the savings would compound even further. Then we add the coffee on top of the yoga, on top of the fast food on top of the…you get the picture. Pretty soon we are wondering how we are going to find enough to pay the credit card statement.

That is why doing a budget regularly is so critical. It allows you to find all these little things and weed them out before there becomes more of them eating away at your cash flow, you net worth and ultimately your freedom. And, of course support your kids by acting as a role model and instilling these habits at a young age when they are more malleable.