Money Tricks for Personal Finance
A word to the wise:
How do banks make their money? Banks make money by charging interest on loans, payment for their services and fees. We try our best to find ways around these costs, however, some fees just can’t be waived. So how can we use banks as model for our own financing? Create a fee system for your financing to make yourself richer in the long run.
Okay, I’ll be honest, these tricks were not developed by Warren Buffet or any other money mastermind. These tricks were developed in my head and I’ve used them ever since. That’s not to say no one has ever done them before, but simply that I was never taught these by anyone else.
Personal finance takes a lot of discipline and self-control. Because of this, banks are able to collect fees when you miss a payment, and when you need a loan they reap the rewards of the interest you pay. The first thing anyone should do is gain control of their finances. Once you’ve gained some sort of control, you can then begin using these tricks!
If you haven’t already, check out our previously article about Financial Control.
Let me be clear, I believe that an emergency fund should be only for emergencies. However, because we are all human and our self-control isn’t perfect we sometimes dip into our savings.
I knew I would do this at some point so I made myself this rule:
Every time I take from my emergency fund, for anything other than an emergency, I must immediately pay it back and add an additional $25.
For example, last week I went to Ikea and found some great stuff for my new apartment. The problem was it cost more money than I currently had.
My first option was to use my credit card and pay it off when my paycheck came in two day later.
My second option was to take money from my emergency savings account and pay myself back in two days with an additional $25.
Saving up an emergency fund can be a very long process. By charging myself a $25 fee every time I use it, I was able to accelerate the savings timeline. The faster we save an emergency fund, the quick we will reach total financial control!
Starbucks reward system:
If you’ve ever been to Starbucks you will quickly realize two things. First, the coffee and atmosphere is great! Second, the prices are sky high!
One of my favourite ways to relax and enjoy some free time is to grab a Starbucks Coffee and wander the isles of Chapters. If I’m feeling motivated enough, I bring my laptop and get some writing and research done for an hour or two as well.
The problem is, I am a sucker for the Caramel Macchiato. It is by no means a healthy drink, but it is delicious. Unfortunately, it is also extremely expensive (about $4.25 Canadian).
My Starbucks reward system has nothing to do with the actual company, but rather a personal savings idea:
On weekends I will treat myself to a fancy Caramel Macchiato. However, during the week if I go for a coffee I will choose to buy the Freshly Brewed Coffee for $1.90. The $2.35 I save, I transfer into my “Vacation Fund” savings account.
$2.35 savings doesn’t seem like a lot, but it adds up! Let’s say I drink 2 a week with a savings of $4.70. Multiply that by 52 weeks in a year and you have a savings of $245!
Because I like to travel at least once per year, having $245 dollars extra in my vacation fund is a huge benefit to me.
Maybe I’ll use that money to have a coffee in Paris one day!
Mileage and Expenses at work:
Mileage is great. If you work at a job that requires you to drive and are able to collect mileage payments, utilizing that money properly can have big benefits.
The idea behind mileage is that because you are driving for work they will pay your gas cost as well as the wear and tear of your vehicle. For example, If I travel 300 km for work, they will reimburse me roughly 50% of the kilometers driven. So, after traveling 300 km, I will be reimbursed $150.
Rather than going out and blowing that money, I will break it up into 4 parts:
- $40 to fill my gas tank back up to full.
- $10 put into my “gifts” savings account.
- $50 put into my “emergency fund” savings account.
- $50 towards debt payments.
Some people will see $150 extra on their paycheck and will choose to blow it on a night out with friends. Because I use the 50/20/30 rule, I already have money designated for a night out with friends.
Instead, I use this extra cash to not only pay for gas, but also: reduce my student debt, increase my emergency fund in case I have an unexpected car issue or money problem, and also put money towards future gifts (which will make Christmas shopping much less stressful!).
A little mental trick. Money you’ve already been without can be immediately saved after reimbursement.
On occasion I’ve had to purchase something for work and had to wait two weeks for my next paycheck to be reimbursed. The way I see it, if I am able to go two weeks without the money, there’s no reason I can’t go without the money even longer.
Once I am reimbursed, I immediately transfer the money onto my debt, into a savings account or into an investment.
When Plans Fall Through:
I’ll give you two examples for this one.
Example 1 – Let’s say you go out once a week to the bar with friends. The night consists of pre-drinks at a friend’s house before heading to the bar and than a taxi ride home at the end of the night. Maybe you even grab a slice a pizza on the way home. Your night cost a total of $60-80 on average.
Saturday comes around and it turns out all your friends are busy and you don’t end up going out on the town. Because of this, you now have $60-80 sitting in your bank account that normally would have been spent.
Because you already expected to spend the money, there’s no harm in transferring it into a savings account or putting it towards your debt payments.
Example 2 – You’ve finally plucked up the courage to ask someone on a date. Unfortunately, last minute they bail on the date!
The feeling sucks, but on the bright side you probably saved a lot of money by not going out. The dinner you had planned would have cost you $80!
To cheer yourself up, go buy an ice-cream for $5 and put the remaining $75 into your vacation fund. The person who ditched you just helped you save up for the euro-trip you’ve always wanted to take!