“Common sense just isn’t that common anymore.” You’ve probably heard that phrase uttered before. Maybe your initial response was to “OK Boomer” it away with disregard. When it comes to money, though, it’s shocking how often people fail to apply even a tiny amount of common sense to their decisions.
You might know a friend or family member who is terrible with money. You probably think to yourself, “how can they continue to make costly decision after costly decision?” Unfortunately, what is common sense for some folks is essentially gibberish to others. There are dozens of easy ways to get tripped up financially. Even those who consider themselves “financially informed” can fall victim. So here’s some common sense money advice that everyone should follow, regardless of their financial situation.
Restaurants Are Not a Source of Food
Okay, technically speaking restaurants are a source of food. That’s literally their sole purpose. However, you should not rely on them to regularly feed you. It’s a subtle difference. The reasoning should be obvious (this is an article about common sense money tips, after all).
While any restaurant, good or bad, will satisfy your hunger, it will also satisfy its own bottom line with heavy pricing mark ups. That $13 burger and fries combo could have been made at home for about $2.50. That plate of pasta costs about five times as much at the local Italian place than at home, in your kitchen.
Restaurants are a nice treat. We’re not saying you should avoid them entirely. But do yourself a favor and make it a habit to prepare meals at home. You can also take a cooking class. You’ll probably recover the fee within a matter of months, now that you’re making delicious meals in your own kitchen instead of paying someone else to constantly feed you.
Gambling Won’t Make You Wealthy
If your retirement plans are hinged on “winning the lottery” or “playing in the World Series of Poker,” you need a wake up call. You should never gamble your way to wealth. The odds are stacked astronomically high against you. While it’s technically possible that you will hit incredibly long odds (the Powerball jackpot is a 1 in 292.2 million shot), the reality is that you won’t.
Gambling is a form of entertainment. You shouldn’t consider it anything else. Every single game you can play, from lotteries or bingo to slots and card games, is rigged against you. “The house always wins” isn’t just a cliche catchphrase from the movies. There’s no such thing as luck. You’re not “due for a win.” The simple fact is that 99.999% of people who gamble regularly lose money. Join them if you want, but don’t expect a different outcome.
You Can’t Always Afford Things You Can Technically Buy
Here’s a personal anecdote from my own life. About a year ago, I was in the market for a new vehicle. I have three children, so there’s lots of activities and summer camping trips to Northern Ontario. I was looking for a minivan, but obviously worried about the cost. My previous car had been paid off, and now I was trying to figure out where I was going to come up with a monthly car payment as a single parent.
The salesman tried to sell me on a brand new Dodge Caravan. The monthly payments were reasonable enough. However, things ground to a halt when I did a little math. If I agreed to the proposed eight-year term, this van would cost me almost $40,000 between principal and interest. In the end, I bought a two-year old Caravan with low mileage for $16,000. After agreeing to a six-year finance term, the total cost of principal and interest was only about $19,000.
So what’s my point? I could technically have bought either vehicle. My credit is pretty good, and the monthly payments weren’t vastly different because of the extra years on the new van term. However, in the end, I realized that buying a gently used version of the same car would ultimately save me over $20,000. Don’t fall for longer finance terms or stretching your credit too thin, because you probably can’t afford it.
Windfalls Are Not For Buying Toys
Most people experience a sudden windfall a few times over the course of their lives. Maybe you received a particularly large bonus from work, won a 50/50 draw at a pro sports game, or received a decent chunk of money from an inheritance. Congratulations! However, all too often these kinds of financial boosts are squandered.
The best course of action is to spend this money immediately on any debt you have. Whether it’s high-interest credit card debt, or a lump sum payment towards your mortgage. Are you debt free? Then invest it. Don’t buy a fancy new sports car, a 100″ 8K television, or a new speed boat. You need to use any windfall as a means to buy yourself closer to financial freedom, not to buy a new toy to play with.
There’s one exception. If you do somehow manage to be the lucky idiot who wins the $100 million Powerball jackpot, then go ahead and ignore this advice. Quit your job, buy a Ferrari, stick a bunch in investments, and enjoy your new life. For more common amounts of money ($100,000 or less), you can’t act like you’re suddenly rich. Because you’re not.
Envy is Expensive
In the old days, we would call this “keeping up with the Jones’.” These days, it’s more appropriate to call it social media envy. It’s hard to avoid. Every day, you see your feeds filled with extravagant weddings, expensive vacations, shiny new cars, and other highlights from friends, acquaintances, or influencers. The pressure to be living a life that’s filled with the same luxury and adventure can be overwhelming.
Here’s the thing, though. You don’t know the financial situation of any of those people. They might be paying off that tropical wedding for the next 20 years. Or maybe their new Mercedes was a gift from their loaded parents. There’s absolutely no reason you should dent your financial well-being to try to “keep up” with others. A bunch of likes on Instagram is not going to pay a sudden influx of new bills.
Don’t Pay to Store Things
Renting a storage unit may have seemed like a great idea at the time. You were running out of space. For anywhere between $40 or $100 a month, your extra stuff sits safely in a heated, secure location until you need it. At first glace, it seems like a solid solution.
Here’s the problem, though.
You’ll pay that monthly fee month after month. In some cases, year and year. For the most part, you’ll probably never even step foot in your storage unit once you’ve moved your extra crap into it. You’re wasting money on two different fronts here. First, you’re paying an average of $1,000 a year just for the space. Secondly, you’re letting potential assets (even relatively invaluable ones) do nothing for you. You’re not using that spare fridge, extra bed frame, or old golf clubs. You’re not selling them either. What exactly is the point?
If you need a storage unit, that’s a sign that you have too much stuff. Do yourself a favor and simply get rid of it all. Sell off anything that can fetch a decent price on Craigslist or Kijiji. Anything that barely has a value, try giving away. Anything left, just throw it out. If you really end up needing something you had stored at some point in the future (which is highly unlikely), just buy it again with the funds you made selling everything.
Don’t Buy Things You Don’t Really Need
Do you really need the newest iPhone every year? Do you really need that $55 concert T-shirt that will hang in your closet forever? Honestly, do you really need half the crap you spend your money on? The answer is probably no.
If you’re struggling to budget, pay off debt, or save for the future, then it’s time to buckle down. And. Stop. Spending. Period. Take a long, hard look at where your money goes every month. Expenses like rent, groceries, utilities are obvious. You need those. Did you need that new pair of shoes, though? Or did you just think you looked cute in them? Did you really need to upgrade from an Xbox One to an Xbox One X?
We, as a society, spend so much money on things we really don’t need. It wouldn’t be a huge problem, except more and more Americans are struggling with debt and living paycheck-to-paycheck. If you’re one of those people who considers “going shopping” a fun way to kill a Saturday afternoon, you need to find a new hobby. Going to the store should be a utilitarian mission to obtain the things you need, not to peruse extra things you might merely want.
This one should be obvious. Then again, all the things in this article should be obvious. Yes, you should shop around for all purchases, big and small. Compare prices on a new TV, a new car, a new couch, or a new toaster. Not doing an appropriate amount of research on purchases will cost you thousands of unnecessary dollars over a lifetime.
You shouldn’t only shop around for prices on physical goods. You should also do it for things like lawn care, car/life/home insurance, and extras like cable or mobility bills. Lastly, be sure to shop around for your financial products too. Not all credit cards or bank accounts are created equal. Some charge higher fees. Some have better rewards. Shop around for better mortgage rates to save yourself a ton on interest. Do the same for investment companies or funds, to maximize your retirement funds. Just because you’ve banked with one company for decades doesn’t mean you shouldn’t switch if you get a better deal. The bank isn’t loyal to you if you end up in financial trouble, so don’t worry about being loyal to them!
The sooner you start saving money for retirement, the more it will be worth when you’re ready to start working. You might even be able to retire early, if you can put enough money away in your working years.
We know that saving money isn’t easy. Everyday living costs like rent and groceries continue to rise, especially in larger cities. When it comes to saving, though, every little bit counts. Financial experts will tell you that the best plan is to start saving at least 5% of every paycheck once you’re finished being a student. Yes, that means you should start saving for your retirement in your early-to-mid 20s. Those extra years of gaining interest will pay off big time by the time you’re 60.
If you didn’t start saving early, don’t fret. You missed the best time to start, but the second-best time to is right now. The sooner you start, the better off your golden years will be. If you wait until your mid-40s to start a retirement fund, you’ll probably run into financial troubles when you’re ready to leave the workforce.
Don’t Follow the Crowd
While you never want to be late on the newest trend, it can be especially costly when investing. If you’re at a party and hear some of your friends talking about how they cashed in big on a new stock, you might be inclined to go home and buy some up. But you’re too late. The surge in price has already happened, and you’ve missed the boat.
Another great example was Bitcoin. People heard about it surging up to $19,000 per coin and jumped on board. The sky was the limit, right? Too bad it plunged back to $7,000 per coin within a couple months. The point is that you can’t follow the crowd or chase previous trends. Yes, it can be frustrating to always think that you barely missed out on a decent score. However, you’ll just lose money in the long run.
Automatic Payments Are Your Friends
It’s a new digital age. If you’re still receiving bills in the mail and sending in checks, you’re doing it wrong. When it comes to recurring bills that you’re always going to pay, just set them to do so automatically. That way, they’ll never be late and you’ll never incur penalties or fees. We’re talking real obvious things like your rent/mortgage, utilities, and credit card payments.
If you can manage things responsibly, have everything automatically paid with a high-rewards credit card. Then make sure you pay off the balance every month and reap the free goodies. Just make sure to keep an eye on your credit card statement, in case of those automatic payments suddenly jumps up unexpectedly. The good news is that most credit card companies will go to bat for you if do see a suspicious charge pop up.
Stock Up When Things Are Cheap
While this doesn’t apply to perishable food items, it’s still useful advice for plenty of things you regularly use. Paper towels, dry pasta, bottled water, canned goods, diapers, and plenty of other household items should be bought in bulk if the price drops low enough. Yes, you’ll have to pay more up-front. However, by the time you get to the end of your stock, your “per item cost” will be dramatically lower than normal.
Take paper towels, for example. Let’s say a regular package of six rolls costs $8.00. When you do the math, that works out to $1.33 per roll. Maybe you can buy an economy pack of 12 rolls for $14.00. That’s a good start, as the price per roll just dropped to $1.17. You just gave yourself a 14% discount.
Take it one step further, and wait for those economy packs to go on sale. Maybe they are marked down to $12 (that’s $1.00 per roll) or buy one, get one half off (around $0.85 per roll). You might think “hey, I don’t really need 24 rolls of paper towel all at once.” But you are guaranteed to use them eventually.
Using this strategy will reduce your costs on all kinds of items you buy regularly. Start keeping an eye out for the average cost of things. Then buy extra whenever the price dips at least 10% lower.
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