The ABCs of Saving Money will appear occasionally throughout 2010.

Envelopes

The Envelope System is one of those things that is often (always?) mentioned when you first start talking about trying to save money. I’m not a big fan of it, but others swear it works. By budgeting each paycheck, and separating the different categories of the budget into cold, hard cash that you then tuck into the appropriate envelope, proponents of cash swear that the system helps them live on a budget.

There are lots of ways to adapt the envelope system to meet your needs. Some people use cash for everything except for the big bills, like rent or mortgages, for which paying cash would be too much of a hassle. Others use envelopes for a limited range of budget categories- choosing only to pay for their groceries, for example, in cash. My mother puts every $5 bill she comes across in envelopes that she uses to save for different goals- a new computer, paying the cleaning lacy and so on.

I don’t like using cash because I find that I spend much more when I have cash in my wallet then if I limited myself to paying just by direct debit card.

The Elephant in the Room

The elephant in the room is that thing that no one wants to talk about…debt, or credit cards, or how much you earn or you paid for something. Money is a touchy subject, one that few people feel comfortable talking about openly- unless it’s to brag. Remember however, that appearances aren’t always what they seem. People may be bragging about their latest vacation or about the great deal they just scored but without talking about what’s underneath: a less than stellar retirement fund, or credit card debt. I read a great quote the other day, that went something like this:

Beware of trying to keep up with the Joneses- they just might be trying to keep up with you.

Easy money

If it comes too easily, if it seems to good to be true- then it probably is. I think that the only way ‘easy money’ really is easy money, is when it comes from doing something you love. Otherwise, those get rich quick schemes, the instant internet fortune that comes with blogging- well, it’s probably not going to happen!

Eating in or out (or In ‘n Out)

I’m a big fan of eating out. I like trying new food, I enjoy the experience of eating at a nice restaurant or the burger joint down the street and I’m also lazy. Cooking every night can be a lot of work! But there are ways to make eating out more frugal: eating out for lunch, instead of dinner, going out by yourself (I sometimes squelch the eating out craving by having a lunch out with colleagues), making sure that you use coupons if possible, only ordering the main dish (if you’re ordering Chinese, for example, then make the rice at home) and so on.

What’s the E in the ABCs of Saving Money for you?

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The series The ABCs of Saving Money will appear occasionally throughout 2010.

Day-to-Day

Your day-to-day decisions have a huge impact on saving money. When you get discouraged (another d-word!), think about all the frugal things you do. But resist the temptation to spend more, because you’ve saved money on something- that 50% off sale price isn’t really money saved unless (and until) you actually put the money into a savings account.

Debt

Depending on who you listen to, all debt is bad or some debt (like mortgages or student loans) is good. I tend to think that debt that is furthering your future goals is OK, as long as it’s not overwhelming. But even if you have ‘bad’ debt, that is high-interest, open-ended, consumer debt like credit cards or car loans, make sure that you still put money away every month. It might not be a lot, and the amount certainly won’t be the same as when the debt does get paid off, but $25 saved every month is $300 at the end of the year.

Dedication

Staying dedicated to a goal over the longterm requires motivation and staying power. This isn’t always easy, especially if you’re fighting to learn new habits. I know that I can be dedicated to the concept of a goal, ie saving money for financial security, to be able to move back to the US one day, to be a responsible adult…but the reality of the situation is such that putting it into practice on a day to day basis isn’t always easy or intuitive.

To fight against this, I put saving money onto automatic pilot. Sure, there are lots of times that I manually transfer money into my savings account, but I also have three different ways that money gets transfered automatically.

• reimbursements from our health insurance go directly into our savings account
• we have a monthly sum that gets transfered into a special French, longterm savings account
• I have another monthly sum that automatically gets transfered into the savings account

By putting our savings on automatic pilot, I know that every month at least something gets saved without me having to think about it.

Dirt

Gardening can be a great way to save money. Even if you don’t have a green thumb, a simple project like growing your own sprouts (expensive to buy, cheap to grow) can reap financial rewards. I don’t have a garden, but I do have two good size balconies, which would be large enough to have a container garden (if I had the time and ability to grow plants instead of killing them). David at the Good Human had a good post on ways for apartment dwellers to have a garden- make sure to check it out.

Donations

I love donating things and I love getting donations as well. Donations (of goods, services or money) will often earn you tax reductions and things donated to you (through something like Freecycle), will save you from having to spend money to aquire something. Again, as always, remember that that penny saved isn’t really saved until it hits the savings account!

What’s the D in the ABCs of Saving Money for you?

Read the other posts in the ABCs of Saving Money series.

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Cash

One of my problems with cash is that when I have it in my wallet, it gets spent, and quickly. It’s easier to spend small amounts when you have cash (€1.05 for a baguette here, €3.50 for a sandwich there) and because there is no electronic record kept like with a debit card payment, I have a hard time seeing where it went. I know that for many people, paying in cash makes saving money easier, but it just doesn’t work for me.

Clutter

Being organized makes it easier to save money. If you stock up on a good deal, but then forget where you put those bars of soap, you will have to buy more and sooner. Physical clutter makes it harder to keep track of things like bills, creating stress and anxiety. And we all know that when you’re feeling stressed and anxious, it’s hard to keep up good habits- like not treating shopping as the cure to all emotional woes!

Credit Cards v Charge Cards

There are differing opinions in the personal finance community as to the usefullness of credit cards. The first implies that credit cards are the root of all evil and should be avoided at all costs. The second camp believes that they are a useful tool and serve their purpose well, when used wisely (and paid off immediately). I agree with both.

I think that if you have the wrong sort of habits (ie a certain lack of self-control), then credit cards will just get you into trouble. I fall into this camp. On the other hand, credit cards can be very useful for reward schemes. My father travels a lot for business and by using his credit cards for most purchases, he maximizes the reward points enough to have (a certain number of) free plane tickets each year.

I use charge cards for everything. The money is taken directly out of my bank account and I have an electronic (and paper) record of the transaction. This is what I have found to work best for me.

Coupons

I don’t use coupons very often, as France does not have a strong coupon culture. Even when I lived in the US I didn’t use them much, because most store brands and farmers’ markets don’t accept them. That said, shopping with coupons is a very successful way for many people to save lots of money.

Carless

One of the things that I love about living in our new apartment is that we are much closer to the center of town, the tramline and my oldest son’s school (hopefully, where my next two children will go as well). While we still own two cars, I am able to go many more places on foot or by public transportation. This saves on gas (now at about $6.75 per gallon, if my calculations are correct) and wear and tear on my car. I don’t forsee selling my car in the near future as it’s a good little car (10 years old, with only about 50,000 miles on it), but I’d love to be able to use it even less.

What’s the C in the ABCs of Saving Money for you?

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Bank accounts

How many bank accounts do you have? Do they cost you money or save you money? (Do you even know the monthly charges? I don’t.)

My husband and I have had separate bank accounts for a long time, but it in fact costs us quite a lot of money to do so. It was a choice made from lethargy as we never bothered to combine our accounts after we got married. We are now in the process of consolidating our accounts and changing banks, not only because we are trying to save money on monthly fees and service charges but also because of some really bad customer service at our former bank.

Budget

This is of course a biggie in the personal finance world. If you don’t have a budget, you should. If you’re scared of putting one together, you shouldn’t be. Knowing where your money is going is half the battle and it will help you feel more in control and better able to tackle the rest of your personal finance issues.

Beans

Beans are an essential component to a frugal diet, which is one of the reasons that you’ll see them on so many lists of ways to live frugally or how to save money. Not only do they taste good, but they are good for you. Either use them with meat (chili, kefta balls) or on their own (five bean soup, three bean salad). Dry beans are very, very cheap and store for a long time.

Balance

I’m not the kind of person who can swear off things forever. It’s why I have such a hard time sticking to a diet- I don’t want to never again eat french fries or have cream in my coffee! It’s equally try to sticking to a financial diet. Knowing this about myself makes balance an important b-word for me as I think about saving money. I try to remember and stick to my longterm goals, while still satisfying my short-term cravings!

What’s the B in the ABCs of Saving Money for you?

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The ABCs of Saving Money was originally going to be an all-in-one post, like my post The ABCs of Frugality: 26 Frugal Concepts. But as I tossed the idea around, and asked others, especially on Twitter, I realized there were too many good concepts to cram them all into one, looong, post. So I decided to break them up! The ABCs of Saving Money will appear throughout 2010.

A is for…

Automatic transfers of money make savings a snap. If the money leaves your bank account before you even notice it’s there, than your savings will grow with little effort. Don’t think that if things are tight, very tight, it’s not worth it- saving just $10 a month is still better than saving nothing at all.

Advertising. How much do you watch? And your kids? You might think that you don’t watch any or very little, but ads are everywhere. Heck, there are even ads on Almost Frugal! I know that when I watch TV or read glossy ads I want more stuff and will even be on the road to buying more stuff, without giving it a second thought. Instead, I try really hard to watch what I (and my kids) watch, what sites we access and the magazines we read, not only for the content but also to limit the exposure to the ads we see. If I do want to learn more about a certain product, I ask expert friends or go looking for the information myself. Strange talk for a marketing consultant, isn’t it?

Accepting your weaknesses and analyzing your strengths. I know I have a hard time with impulse spending, especially when it comes to cute shoes, stuff at Ikea and books. So I stay away from shoe stores, book stores and Ikea as much as possible. When I do need to go into one of those places, I go with a list, a budget and a plan, having done my homework and knowing how much money I have to spend. More importantly, I also give myself permission to come back later if I really want something- which I almost never do.

What’s the A in the ABCs of Saving Money for you?

Read the other posts in the ABCs of Saving Money series.

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