How to control your spending?

It was shaping up to be a financially prudent month. Until you checked the bank statements. A few “dangs”. A handful of “ugh, forgot about that ones”. And some “what was I thinkings?”. Oh, and that was before viewing those 2 other credit card statements. Sadly they all added up to make your month fiscally regrettable. Wouldn’t it be handy to have a list of spending considerations to apply before giving your credit cards a workout? A pre-spending checklist. A kind of monetary mom to control your spending.

In fact, there is! Here are some ideas to control your spending with minimal effort or sacrifice:

Shop mindfully – lead us not into temptation

The science of shopping has developed immensely. Every aspect of retail is fine-tuned to make you spend. The lights, colors, music, product placement and last-chance urgency are all there to fill your cart. Store sensors are monitoring where you move, what you buy and where your eyes look. MRI testing reveals what merchandising and messaging lights up our internal “buy buttons”. Heading to the mall with no real needs is like swimming with the sharks. While wearing a meat swimsuit.

Instead, shop mindfully. Shop when you actually need something. Bring a list to the mall or to your laptop of exactly what you are looking for. Double-check that you don’t already have the thing at home – hidden under the couch, in the attic or in your closet.

Set a cooling off period – desperate needs become vague wants

Marketers do everything possible to create passion for their products and drive urgency into your buying process. If the item isn’t an urgent necessity, give yourself a little cooling off period to regroup. Consult with some friends to get their thoughts. See if your Dad thinks it’s a good idea. Set a calendar reminder to see how important the item still is in a couple of weeks. This is often referred to as “the thirty day rule”. In Quora, someone asked me if there is a shorter version of the 30 day rule. Weird question. I suggested the 15 day rule. While you are waiting the 30 or 15 days, spend some time glancing through your credit card bills and account balances to temper your spending desires.

Can you share or borrow one to control your spending?

If the thing you need is large, heavy, expensive or will be rarely used, think about buying it with a neighbor and sharing the cost, maintenance and maybe even the storage. I did this for years with a snowblower. My next door neighbor, Peter and I split the cost, shared the maintenance and took turns plowing each other’s driveway. Way better than us each buying a machine and plowing solo. This idea works well for power washers, table saws, Spiderman costumes, chainsaws, prom dresses and dinosaur cake molds. Less effective for linens, stuffed toys, floss or pajamas.

Can you rent one?

Hello gas powered post hole diggers, drywall hoists and wedding dresses. And believe it or not, even caskets, camping geargoats and luggage. The cost savings can be considerable – e.g. caskets rent for about $750 vs $5,000 to $20,000 to buy. Renting seldom used items can also free up a lot of storage space. How often do you use all of the gear that lines your garage? Renting things you might have bought can be a good way to control your spending.

Can you get a used one?

If you kind of need the item around all the time (like kids, dishes or pets) borrowing or renting likely won’t do. You may need your very own. There are tons of marketplaces to do that. Reverb for musical instruments, Poshmark and Tradesy for used fashions and Craigslist, eBay, Offerup, Facebook Marketplace and Letgo for everything else. Most of my guitars I bought used, typically in mint condition and saving more than half. Or allowing twice as many guitars.

Get the best product

For products, Amazon reviews are great even if you don’t buy from Amazon. Their process limits the reviews to actual purchasers and the large numbers help with accuracy. One of the all-time research bargains is ConsumerReports.org. Sign up for an online membership for $30/year. Completely unbiased reviews of everything from snow tires to sun screen, tractors and strollers. Makes sure you have a product you enjoy, saves on repair costs and the hassle of replacing it before its time.

Make sure you aren’t overpaying

Once you figure out that you really want, but also need, a thing, do your research. On home renovations, there are lots of ways to save. Shopping around is a powerful use of your time. It works on just about everything. A couple of weeks back, I realized that CashflowCookbook.com was running too slow. A local company offered to speed it up for $3,000. A quick online post introduced me to a highly-rated Australian company whose specialty is speeding up WordPress websites. Boom! Their premium offering is all of $495. They did a stellar job and left me with an extra $2,500 in the bank. On the consumer side, there are dozens of sites that focus on comparison shopping on your behalf. Here is the amazing results of my car insurance shopping project. Lots of comparison sites for anything else you need to buy. Check out Google shopping, PriceGrabber and shopping.com.

How do you control your spending? Share your tips in the comments below.

Photo credit Ellie Burgin on Pexels

Bad money habits are standard equipment for most of us. Not your fault. Great news is that they can be easily upgraded to good ones. And all the details are coming, I promise. But let me back up.

Last week, I ordered a chick pea and kale wrap for dinner. I know, I know. A bit rabbit-ish. Then came the option of fries or salad. Isn’t that one a bit obvious? Who would order the healthiest thing on the menu and then pair it with a basket of fries? Salad it was. And just a glass of ice water to drink.

To the outsider, the dinner looks a bit Spartan — pretty bland fare to say the least. Especially when you look at the rest of the menu. Bacon wrapped scallops, rib steaks, baskets brimming with onion rings and a double meat lasagna. Did I lose a bet? Was I being punished for something?

No. Just some habits at work.

The habit epiphany

Way back before songs were 3 minutes long, I would order whatever looked the tastiest. And with the blessing of youth, my waistline stayed intact. My body did its best to process whatever I shoveled in, forage for usable nutrients and keep me moving along. It all worked well. As the years slid by, I noticed a decline in my doctor’s enthusiasm as he pondered the results of my annual physical. A few changes were in order.

Bit of a wakeup call that got me thinking about eating healthier. Food became more about what my body needed and less about what looked tasty. Breakfasts became almond milk, high fiber cereal and berries. Lunches were big salads with minimal dressing and dinners were any kind of healthy, low fat, nutrient-packed fare. A good snack was a protein shake and some celery sticks. Everything washed down with lots of water.

In short, it was awful.

But I stuck with it. Over time it became my new habit. Sodas became way too sweet. Greasy food was just too, well, greasy. I began to crave the healthy stuff. All it took was a first step and a bit of time. Could this be a path to fixing bad money habits? Wait for the rest of the epiphanies.

Turns out bad habits have a vulnerability.

If it works for diet, might it work for other things?

I grew up a non-runner. Tried it a few times, just not me. Felt awkward and clumsy. Even a mile or two was painful.  Maybe my legs too short? Was I too heavy for my height? And please give me a break with all of this talk of runner’s high. After a few hundred yards, every step sucked. I hated that I couldn’t get a running habit in place.

So the logical step was to sign up for the New York City Marathon. A way to force my hand, er, feet. I got a training schedule and clicked off a mile. Then worked up to two. Stayed with it as I lumbered through every yard. After a month of steady running, my body adapted. It shed a few pounds. My mind wandered away from wanting to quit with every step. It started to feel, well, natural. Fun even. I felt strong and alive. No natural ability, no gift in my gait. Just some kindling of determination to get the fire started. Forcing the habit until it became, well, a habit. And the habit stuck. One marathon grew to three and running was my silent therapy for decades.

I discovered bad habits have 3 vulnerabilities:

  1. A realization that they aren’t ordained
  2. A start with the tiniest step in the new direction
  3. A pattern of more steps in that same direction

All habits are changeable.

Does this work for every kind of habit?

I think it does. I have tried it on all kinds of things as I went from:

  • non-swimmer to a triathlete
  • mathaphobe to a professional engineer
  • tone deaf music lover to playing guitar in a bar
  • nervous show-and-teller to professional speaker
  • double double to black coffee
  • Complete slob to organized
  • Cow’s milk to almond milk
  • Chronic procrastinator to progress obsessed
  • Hater of Brussels Sprouts to, well, ok so its not foolproof

Not a medal winner on any of these, but I got myself in the game. All with no special skills, gifts or superpowers. Just enough willpower to lace up my runners, get in the pool, add a bit less sugar or learn that first chord. Then do it all again for just one day. And the day after that, but not worrying about that until that day arrives.

Then the benefits start to kick in. The fun of things getting done. The energy boost. The deep refreshing sleeps, The calmer mood. The utter joy of someone recognizing the song I’m playing. Fun new habits. The old habits gone. Now unthinkable.

Bad money habits get shown the door

Think about bad money habits. What are the big ones?

  • A mess of overdue paper bills that taunt your psyche
  • The love of shopping even as your wallet moans in protest
  • The stress of living paycheck to paycheck
  • A crushing debt load that extinguishes the hope of your savings

These are all fixable. Each needs a bit of time to get started and a then some followup time. And yes, we all have the time. The average American spends 28 hours a week watching TV. Skip a couple of episodes and you can learn how to get your bills automated and back in shape. Or re-shop your car insurance to save thousands.

For the shopping, grab your last credit card bill and look over a couple of months of purchases. Regret any of them? Did the fun of the shop morph into the agony of the bill? Maybe review your last couple of statements prior to your next Amazon click. Resolve to shop more mindfully. Give new purchase ideas a month to season. Did they lose some urgency? Savor the sparse statements and the room to clear some debt or invest for your future.

For the make-it-to-the-next-paycheck stress and heavy debt loads, look for ways to free up some cash. There are $13,000 worth of monthly savings ideas in Cashflow Cookbook. And thousands more in my blog. Very likely that one or more of them can help you free up money with minimal sacrifice to pay down debt and ease your money worries. Pick an idea, optimize an expense, pay a debt or add to your investments. Then make another small step. Then add the next tweak.

What financial habit will you start with?

It’s time to banish your bad money habits. Pick a gateway habit to get started. Watch the results. Then move on to the harder stuff. Let yourself get hooked on the benefits.  As an example, maybe it is bringing your lunch to work 3 days a week. Saves an easy $35 a week or about $150 a month. Why not apply that to pay down your car loan faster? Clear out some credit cards. Or invest that at 7% over 30 years and add another $180,000 to your retirement account. And that is just one small habit. That one starts by just making the first lunch. You got this.

Looking for a way to reduce loan interest?

In a perfect world, we would just pay cash for everything. But sometimes you just need a loan. Maybe you need cash for your business, or Elon wants you to invest on the ground floor of his new company. Perhaps you just need funds for a car or other asset. The compounding effect of borrowed loot is nasty, so it makes sense to look for a way to reduce loan interest.

One obvious approach is to do a bit of haggling. On a mortgage or a car loan you might be able to shave off a quarter or a half a percent of interest. Worth a try. Or you could try shopping the loan between some different lenders, banks or credit unions. For mortgages, working with a licensed mortgage broker can get you a better deal than your own shopping. Sometimes attractive financing can be had from the people trying to sell you the asset – like the Ford dealer at month end, in a blizzard, in January, during a recession. All of these are worthwhile, but for the really big savings, you’ll want to dig into another approach. And it’s one that I didn’t really understand until just recently, even after buying 9 houses and about a dozen cars over the last 40 years or so. How much did I overpay on those loans and mortgages? Ugh.

The power of your credit rating

Sure, we’ve all heard of credit ratings – those numbers that tell lenders how likely we aren’t to pay things back. They run on a scale from 500 to 850. But how much do you really know about them? I don’t think I ever knew my number or what it meant until my recent move to the USA. Back in the old country, I had lots of credit cards and an awesome limit. In other words, a great opportunity to collect points for fabulous cash and prizes. But when I tried to open a Best Buy credit card here in Ohio, my application was rejected. Whoa! What! Bit of a blow to the ego. Turns out credit records don’t cross borders. I was starting from scratch like a new graduate, but with grey locks, wrinkles and a middle aged body. The worst of both worlds. So I was forced to begin with a bank credit card of $300. Wait for it…secured by $300 that I had to keep on deposit! And those cards don’t earn points. Humbling!

After a few months of carefully paying off my junior card, my credit rating went from 520 to 750. Not bad. Soon I will be able to remove my card training wheels and liberate my $300. Now, new credit card offerings arrive almost daily. And now some of them have points. I’m back!

Good to have credit cards with normal limits, but I got curious and started to learn more about credit ratings.

Credit ratings to the rescue to reduce loan interest

Turns out that your credit rating makes a difference on your loan interest rate. Like a very large and massive difference. Over at myFICO they have a nifty calculator to show just how big a difference your credit score makes on your loan interest.

reduce loan interest
Improving credit score can reduce loan interest

As an example, considering someone buying a new F150 pickup truck for $50,000 on a 60 month loan. How much would the payments be? It depends. Looking at the myFICO calculator, they could be as high as $1,209 a month or as low as $909 a month. The total interest cost over the 60 months could be $22,552. Or as little as $4,567. Hard to believe. But true! It all depends on your credit score. Turns out having a great credit score is a key way to reduce loan interest.

The high payment and interest figures are for a borrower with a credit score of 500-589. Could be someone new to the country (been there), or someone who missed some payments or is carrying a lot of debt. The low payment and interest numbers would be experienced by someone with a strong credit score of 720-850.

Sounds like it is worthwhile to learn about credit scores.

Credit scores are set by the 3 major reporting agencies: TransUnion, Experian and Equifax. Each of them receive information from lenders about your payment history and credit limits as well as public information about you, such as bankruptcies. They then score your file and make that information available to other lenders and/or sell it to companies who want to present you with things you don’t need (like all of those pre-approved credit card offers that line your iguana’s cage.)

You can get your credit score for free at annual credit report or sometimes from the credit companies themselves. Experian, as an example provides your score if you set up an account with them. Each of them offers more advanced services which they enthusiastically sell you at every chance they get. Your bank may also be willing to provide your score as well. To reduce loan interest you’ll want to find ways to improve your credit score.

My credit score isn’t great. How do I improve it?

There are several factors that the credit companies use to evaluate your score including:

  • Your payment history
  • Credit use
  • How long you’ve had your credit
  • Credit mix (do you have different kinds of credit such as credit cards, mortgage and car loans)
  • Application for new credit (new cards, mortgages, car loans etc)

To improve your credit rating, you need to improve some or all of these factors. Pay the balances in full when they are due, stay under 30% of your total credit limit, cancel cards that you aren’t using, and don’t apply for new credit unless you actually need to. Also check your credit report for errors and get them fixed. Sometimes they will show you as having cards that are long gone, as an example.


Credit scores are easy to ignore. According to a recent GoBankingRates survey, about 40% of Americans don’t know their credit score. It follows that many people don’t realize the effect that it can have on an opportunity to reduce loan interest. Take the time to learn your score and improve it. This is important if you are thinking about a loan, but even important when you aren’t. Good to be ready should you need access to some extra cash for an emergency or a worthy cause.

I should also mention that rushing out to buy a brand new truck with a loan isn’t likely to be the best financial decision. Especially if you’ll only be using it to carry your lunch and not heavy gear like the dudes in the picture. Buy the vehicle that you need for 90% of your driving. Rent something else for the rest. And a 2 year old used vehicle can represent great value. Learn more about how to buy the perfect car.

And of course, the $17,985 in reduced interest could be put to very good use. Over 40 years, invested at 7% it could grow to a tidy $287,760. Not a bad addition to your retirement account. For $13,000 of monthly savings ideas, check out the book.

What tricks do you have to reduce loan costs? Let me know in the comments.

Photo credit Said Al-Olayan

How cool would it be to get free iPhones for life?

Dream with me for a minute. Imagine brand new free iPhones every other year. And hey, if we are dreaming anyway, how about a free cell phone plan to go along with it? Pretty sweet. Since everyone likes free stuff, let’s add in $200 gift certificates from Starbucks, Lululemon, Starbucks and Chipotle. Even better. But is this really possible? And why would these companies give all of this away for free? More important, how can you get in on the deal?

Most personal finance writers would shoot down the idea of new iPhones every other year, fancy coffees, dining out and premium sportswear. I would too, if you actually had to pay for all of it. But what if there were a way to actually get it all paid for…every year…for life?

So what is the scheme and who actually pays for the free iPhones?

Over at Apple there are 147,000 employees. They are all working hard, dusting store fixtures, selling iPads, explaining nuances of iCloud and making all the boxes open slooowwwly. Meanwhile at Chipotle, people are opening stores, scrubbing grills and being incredibly patient while customers fuss over their exact burrito toppings. The Amazon folks are scampering around filling orders and whipping reindeer to get everything to your house on time (kidding on that last one). What are we doing while they are working so hard? Well, frankly not much. And therein lies the elegance of this approach to get free iPhones and other stuff.

As they are busy with all this ceaseless toil, they are growing their companies. Improving sales numbers, opening new stores and making their companies more money. The brands become more valuable and their success continues to snowball. The great products and experience keep the results coming and and their stock prices continue to grow. That stock price growth is what we can use to get their products for free.

Converting stock growth to free stuff

Ok. So far we have companies with products we want. Employees working like the Dickens. Stock prices rising. So how do we cash in and get all the free iPhones and the other cool stuff?

Imagine that we set aside $7,000 five years ago and bought $1,000 worth stock of each of 7 cool companies whose products and services we like. Let’s lay it all out in a table:

free iPhones
An initial investment made 5 years ago

On the left is the company, their stock ticker in blue and an initial investment in yellow. $1,000 per company. Adding up the growth of the stock over the last 5 years, including dividends give us today’s value in green. Finally, the purple column shows the average annual return for each of these stocks. Wow! An average annual return for the group of 34.39%. They are all great companies with big competitive advantages. Will they keep growing like that? I have no idea. And neither does anyone else.  But stay with me!

So our initial investment of $7,000 has grown to over $30,000. Not bad. There are lots of things that we could do with that cash. Usually, my counsel is to keep it invested, especially in an IRA or a 401(k). (TFSA or RSP for you Canadians). But this time, let’s assume that your debts are under control and you have a good start on your retirement savings.

Time for a little fun with our cash

Rather than spend the money in a lump, or invest it for the long term, what if we just pull out each year’s gains after that initial 5 year growth period and spend it on fun stuff. What could we buy and how long could we keep this up? Let’s take a look:

free iPhonesSo we will start with a new iPhone every other year for $1,000, or about $500 per year. Let’s add a cell plan and let it gorge on unlimited 5G data. Tasty. Tuck in a standard Netflix subscription. That adds up to $1,508. Then let’s spend $200 on gift cards from each of Starbucks, Lululemon, Amazon and Chipotle. That all ads up to $2,308 of fun stuff every year. Some nice lifestyle additions. Why those numbers?

They sum to $2,308 or about 7.5% of the value of our stocks. If our stocks grow at about 7.5% a year, we would be able to spend that much and not actually deplete our $30,691. In fact, we could enjoy free iPhones, cell plans, Netflix subscriptions and all those gift cards forever. $2,300 worth of stuff forever, all from a one time investment of $7,000.

But wait, it wasn’t free. We still had to invest $7,000 and wait 5 years.

Actually, you can get that initial investment for free. Or very close to free. Some careful re-shopping of regular bills can easily emancipate the cash for that kind of investment. All with minimal effort. Have a look at easy ways to reduce regular bills like energy costs, home renovations, housing costs, prescription drugs and even vodka expenditures. Want another $13,000 of monthly savings ideas? Check out Cashflow Cookbook.

What about the business of waiting 5 years for that initial investment to grow? Let me answer that with a story. When I was about 27, I started working on an MBA part time. People would often say “Part time? Are you kidding me? That will take you 4 years. You won’t be done until you are 31.” My answer was that I will be 31 eventually. I can either be 31 with an MBA, or without one. Life goes on, tuck away the money, go about your business and check your balance in 5 years. Hopefully you will have a fun account that spits out free iPhones and other goodies for life.

You can, of course set this up with whatever brands you like and nothing says you have to spend the growth and dividend money on the same companies you invest in. The investments are spread across 7 stocks which provides some level of diversification.

We got some free iPhones and some powerful learnings

A few things get reinforced with this example:

  • Compound growth really is the 8th wonder. It can even keep you in iPhones.
  • Great companies have brand power that fuels their growth and investment returns
  • A group of strong stocks can provide an ongoing stream of money to fund a lifetime of expenses
  • This is really a miniature version of the power of long term investing for retirement
  • Invest for the long haul. Markets tend to rise over the long haul, but may rise or fall in the near term

Some caveats

Readers should always do their own research on any investment. This example was for illustrative purposes only and does not constitute investment advice. The author holds positions in Amazon and Apple. Investment results are unpredictable and past results may not be reflective of future performance.

What companies and products would you add to the list? Let me know in the comments below.

Photo credit Douglas Bagg at Unsplash