I have never earned a lot, but I always had the money -- both for essential things and some random spending on things I like. Travels, for instance. Pursuing a location independent lifestyle, hobbies and a lifestyle business, rather than a soul-crushing corporate career.
Now before I move to practicalities, I'd like to make an important disclaimer. This post is targeted at people with mid-income, struggling with optimizing their saving and spending habits, rather than those crumbled under the weight of student loans or crippling credit card debt. I'm sorry, I have never been in your shoes, so I can't give you proper advice.
Right. Now back to the money matters for those who are doing pretty fine, but would love to do it even better!
1. Cut Down On Things You Hate To Pay, Rather Than Those You Like
Among the most common personal finance tips you often see is stop spending money on "guilty pleasures" like Lattes from Starbucks, fancy car washes, or regular manicures. You constantly get nagged for spending money on those, which eventually makes you feel bad and question your savings willpower and give up before you have even started.
The truth is that you don't need to cut down on things you love in order to have more money.
Instead, let's take a look on the things you don't like paying for, but have to. Car insurance, for instance. It drains a hefty sum out of your bank account on a regular basis.
We tend to shop for our insurance once and forget about it for years. But the market realties change fast.
Don't be lazy and shop around a bit. Learn everything about your current plan and what coverage options you have. Next, get on the phone and dial up some of the biggest insurance companies in your area. Than, it's all up to asking the right questions:
-Do you offer discounts for a long-term membership?
-How much will I save by pre-paying the entire year upfront?
-Do you offer discounts for low-risk occupations (e.g. engineers)?
-Can you tell me about the deductible changes I could make to save money?
And the last but not least, here's a tricky question that may not work each time, but is still worth asking: "Company X is offering to insure me for $XXX less" followed by dramatic silence.
Next, when was the last time you analyzed your cell phone plan? Probably ages ago, right?
Here's one truth you need to know about these companies: they waste thousands in marketing budgets, meaning it's cheaper for them to retain an existing customer than to acquire a new one. Take that to your favor and start negotiating.
Again, do your research first. See what's the main competitors are offering, jot down all the prices, benefits, discounts, and other freebies and make the call.
Just like with the insurance company, ask the right type of questions mentioning that their services have now become too expensive for you and you consider switching to competitor X. Don't be afraid to go "all in" and ask the representative to forward your call to the cancelation department. You can continue to negotiate with these folks and even walk away for a short time without having your account cancelled or interrupted.
The same strategy perfectly applies to cutting down bank fees and costs and negotiating better plans with other business subscription services.
Master the art of negotiation and don't be afraid to apply it in real life.
2. Find a Side Income Source
To sum it up, my idea about financial stability revolves around the concept that instead of merely cutting down dramatically on your expenditures, also learn to earn enough for the lifestyle you'd like to have.
Take advantage of any worthy moneymaking opportunity that comes your way.
Got a spare room or leaving for along vacation? Rent out your place on Airbnb to cover the bills.
Going on a long trip? Grab a buddy via BlaBlaCar to split the gas bill. Or side hustle with Lyft or Uber to earn some bucks on top.
Got extra savings money? Start investing by setting up a Roth IRA (unless you already have one) or invest in precious metals - a time-proven strategy that never fails.
Are you a cooking maven? Invite guests for your fab dining parties through EatWith.
Last, but not least -- you can always get a side job to help you earn some extra cash and potentially replace your full income. There's plenty of online and offline gigs requiring zero to mild prior training. The freelance world is booming, and it's a high time to take advantage of it!
Starting an online business and automatizing it to the point till it becomes more of a passive income is a no-brainer other. You don't need a lot of money as the numerous case studies from The $100 Startup book prove. You don't need to keep a stock of goods if you choose drop shipping as your strategy. You can automate most of your business operations, outsource the rest, and choose to focus only on tasks that appeal to you with the modern tools and apps.
3. Do Not Buy a House as an Investment
As Ramit Sethi pointed out in his recent article buying a house is "a dumb, dumb propaganda from the multi-billion-dollar lobby of the National Association of Shitty Realtors Who Lie To Take Your Money."
Let's take a closer look on the idea of "owning a house." The Millennial generation I also happen to be part of does not rush into buying real estate, and I believe there are enough good reasons for that.
If there's one thing the crash of 2008 should have taught us, it is that homeownership is no longer a good investment. Sure, these days things are looking more economically stable, and your neighborhood is pretty nice, but Detroit city center was once an attractive place to live in as well. Economic downturns also mean high chances of loosing your job and getting buried by the mortgage you still need to pay.
Mortgage interest rates are another tricky thing to consider as you win only if your house steadily increases in value over the years. If not, well, you have just paid one and a half to two times the original price. Mortgage interest deductions have an "iffy" future, so I would not count much on those.
If you just want to own a house because you like the idea of having one -- go for it. Just make sure it is the house you can afford to have. If you want to get one for the sake of investment - don't do it.