How A Reliable Car Can Save You Money in the Long Run

How a Reliable Car Saves You Money: At Peace With Money

Earlier this year, we said goodbye to a dear old friend – our Ferrari red ’92 Volvo station wagon. We bought it just after we had our first daughter, and since then, it has been with us through thick and thin. That is, until it got T-boned. All told, we owned and regularly used the car for over 20 years.

Having a good reliable car helped us save money in the long run. Because we were able to keep it so long, we eventually completely paid it off. We also saved big on the maintenance of our car. Volvos are known for their long-lasting engines, and ours was no exception to the rule. Though it did require repairs, it was not a finicky car the way others can be (we’re looking at you, Mercedes-Benz). We did our research before we purchased this car to make sure we didn’t buy something that would be too needy. We ended up saving a lot of money over time because we had to deal with fewer repairs. We’re also lucky to have an in-house mechanic; my husband did many of the repair jobs that were needed, which saved us still more money.

Ultimately, we got more than our money’s worth out of this car. My husband drove it to work, we drove the kids and their friends around in it, took it on many a road trip, let our kids drive it in their teenage years, and moved our oldest daughter to and from college many times. We wouldn’t have been able to keep it so long if it hadn’t been so reliable!

My advice is: do your research and buy a car that won’t need a lot of repairs! This article from Consumer Reports is a good place to start, but don’t stop there. Do more research, compare sources, and make sure your car purchase is a thoughtful one. If there’s anything I learned from owning the Volvo, it’s that your car choice can make a big difference in your finances. If you’d like more advice on purchasing a car, check out my other article about avoiding “car-shopping-brain” and making a purposeful choice.

I hope this advice inspires you to make a thoughtful car purchase, or simply appreciate your car. And next time you see someone driving a Volvo station wagon, admire their money savvy!

Angela

Image Sources: Court Prather, Clem Onojeghuo

How To Pay Yourself First

How To Pay Yourself First: At Peace With MoneyI use the hashtag #PayYourselfFirst all the time, but what does it really mean to pay yourself first? It’s a core aspect of Profit First philosophy. It’s also an important part of how I organize my own personal finances. I want to make sure all my readers know how to pay themselves first, in their business and personal finances, so let’s dive in.

Keep What You Earn

“Paying yourself first” is about having a system in place to make sure that you get to keep a portion of your earnings. In my last post on automation, I talked about David Bach’s book, The Automatic Millionaire. Bach includes the concept of paying yourself first in this book and applies it to personal finances. He suggests setting aside savings right off the top of every paycheck, even before breaking it down for living expenses. Users of this system do quite literally pay themselves first! In his system, the money goes to retirement savings accounts, but the system can be adjusted in both business and personal finances to fit your own needs.  Taking a cut for yourself from each paycheck is and important but easily forgotten practice.

Beyond Corporate

So, how does this apply to solopreneurs? If you’re working outside the corporate world, you’re probably working without health and retirement benefits. This is all the more reason to set up a system to take care of these needs. Setting aside money to address health and retirement costs is important for many people, but especially so if your main source of funding for both is your own business. 

How to Pay Yourself First: At Peace With Money

I always say I want to help my clients work with the Profit First system to align their business profits with their life goals, and I assume one of those goals is to support yourself in your health and retirement! Every financial aspect of your business can be set up with this in mind. Your products should be priced appropriately so that you earn something for yourself, rather than just simply covering costs. A part of that money should be invested into your future and your healthcare fund. This is the Profit First system at its core. This is what I want to help solopreneurs work towards with their businesses.

Take a look at your personal and business money systems and ask yourself, do you pay yourself first? Are you setting aside money to support and reward yourself? If you’re interested in more on this topic, I highly suggest downloading the first 5 chapters of the Profit First book through my website.

 

Angela

Image Sources:  Alisa Anton, zixuan Fu

Young and Thrifty: Creating a Spending Plan

How to Create a Spending Plan: At Peace With Money

Creating a spending plan, also sometimes known as a budget, can be a very important tool for getting a handle on your finances no matter where you are in life. In my last Young and Thrifty post, we briefly touched on budgeting as a way to encourage saving habits. Today, I want to look more closely at 3 different types of spending plans. Maybe you’ll find one that works for you! But first, the budgeting basics:

Analyze Your Expenses

The first step to creating almost any spending plan is to analyze your expenses. Figure out what your fixed expenses are, like rent or mortgage payments, transportation costs, food, etc. These types of expenses are things you really need that tend to cost the same amount every month. After you’ve confirmed what your fixed expenses are, you can analyze the rest of your spending habits and determine which of your expenses are flexible, and not as necessary as your fixed necessities.

Once you’ve evaluated your finances in this way, you can start to take charge of your spending using various strategies.

Categories

The most common budgeting strategy is to divide your expenses into specific categories and assigning designated not to exceed amounts for each category. For example: “Food, $200/month, gas, $150/month, etc.” Doing this can help you establish your monthly living expenses and also help you understand how much you spend on each category. If you wish to cut down on your spending in a particular area, this may be a useful strategy for you.

Set Amount for Flexible Expenses

Another strategy that is helpful when you’re really focused on saving is setting aside a set amount of money for all expenses that lie outside of your fixed necessities. When my oldest daughter was setting a budget while saving for her road trip, she set aside $100 a month for all expenses that weren’t fixed necessities. This might be tight for some, but setting an amount in this way is a very simple budgeting tactic that can encourage you to make your spending more intentional.

Rewards

A third tactic that can help you create a spending plan you’ll stick to is to set aside rewards for yourself. For example, if you have $500 to spend on a certain monthly expense, and you manage to only use $480, you can use that extra $20 to reward yourself. This can be applied to your overall monthly expenses or within certain categories. One of my daughters has found this strategy very motivating and usually ends up using her reward money on ice cream.

Resources

There are two digital resources I can recommend for anyone looking to create a spending plan. Mint and You Need A Budget are both digital budgeting software systems that will help you set up and track your monthly budget. From my personal experience, I enjoy Mint, and my family uses their free version. Amber Dugger really appreciates YNAB and uses it with her clients.Creating a Spending Plan: At Peace With Money

Though this article mentions only a few strategies, budgeting and spending plans can be as simple or complex as you need them to be. I encourage you to do more research if you’re interested. I recommend this article from Practical Money Skills and this podcast from Jen Hemphill as two helpful resources. In a later post, I will be putting together a list of some of my favorite resources for financial self-education.

I hope you find these spending strategies useful. Stay thrifty!

Angela

Images:Camille Orgel, Unknown

Young and Thrifty: A Guide to Saving

A Guide to Saving for Young People: At Peace With MoneyRecently I’ve received some questions about financial advice for young people. I think the most important piece of advice I can give is this: save your money. It’s simple, but it can be difficult to get in the saving habit. That’s why I recommend developing a savings plan. There are three parts to a good savings plan: percentage, motivation, and banking.

Savings Percentage

In order to save money, it’s important to decide what portion of your money you want to regularly save. You can decide this in a variety of ways. If you’re in a situation where you don’t need most of your income for fixed expenses, the amount you can save becomes much more flexible. For example, when my younger daughter started working at our local pizza place, she decided she would save her paycheck and spend her tips.

Many sources recommend saving about 10% of your income monthly. If you have a fixed income, this can be calculated easily. With variable income, you can simply tally up what you’ve made and calculate the percentage each month. Use the other 90% of your income to live off of and cover your expenses. 

If you want to make things more  organized or complex, you can work on budgeting out your expenses. I’ll talk about different budgeting strategies in a later post.

Motivation

Having financial goals is important! Make sure you know what you’re saving for. Are you looking to purchase a car? Moving out? A  fund that will enable you to leave your job in case of  sexual harassment or unfair treatment? Having an intention for your savings is important because it helps keep you motivated. The more specific it is, the easier it is to focus on. For example, when my older daughter decided she wanted to take a 3 month road trip, she calculated how much she needed to save, got a job at a shoe store, and the next few months saving almost all of her income. She even lived on her friend’s couch for two months to save on rent. In the end, she saved all the money she needed and then some. That’s the power of motivation! 

Banking

Use a bank that earns you high interest on your savings and doesn’t charge fees. Doing some research to find a good bank will help you figure out where to put your money and watch it grow quickly. You can also read my tips for avoiding bank fees here

Some banks allow you to automatically transfer money to a savings account each month. Setting up that automation can make saving even easier. When you don’t even have to think about it, it’s much more likely to get done. 

A Guide to Saving for Young People: At Peace With MoneySaving is the best piece of financial advice I can give to young people. Getting in the habit of saving your money opens up a lot of choices, something that’s important and helpful in any young person’s life!

This post was written in response to some requests I’ve received for financial advice for young people. To answer these questions, I’ve created a series called Young and Thrifty. Check the tag Young and Thrifty to see other articles in the series. 


Angela

Image Sources: Jeremy Cai,  Sharon McCutcheon