Shannon Maloney rejoins Paula and Jon this week to discuss savings tips. It's important to save for retirement, but that's extremely difficult when you're living paycheck to paycheck.
If you're still feeling the pain from holiday spending, you'll love Shannon's first tip. Buy a gift card every month for the whole year. When Christmas arrives, you can either use them or gift them, without taking a huge hit to your wallet.
We also talk about credit cards. Treat them as cash; only spend what you can pay off in full every month. Yes, there are perks like travel rewards, but if you accumulate interest on your cards, that will far outweigh any benefits. When spending, think about "needs" vs. "wants."
Paying your mortgage bi-weekly instead of monthly, will create two extra payments a year so you can get the balance down faster.
Paula and Shannon talk about thrift stores. Many times you can find tags-on clothing . This has benefitted everyone from Paula to Shannon's teenage daughters.
Check out GoodRx to save on prescriptions. Also talk with your pharmacist about generics.
Bottled water, coffee, speeding and parking tickets - there are so many areas where you can save a lot of money with some due diligence.
To reach out to Shannon and get her list of tips, email her at Shannon@SRPretire.com.
For bigger picture financial help, you can email Paula Christine: paula@paulachristine.com, or visit her website: https://paulachristine.com/
Disclaimer: Investment advisory services are offered through Strategic Retirement Partners, an SEC registered investment advisor. All the opinions and comments made on this podcast today are the opinions of Shannon Maloney and not the opinions of Strategic Retirement Partners.
Paula: Welcome to Beyond the Paycheck. I'm Paula Christine. Last week we talked with Shannon Maloney about 401ks and the importance of saving in your 401k. And when we were talking, we talked about the fact that 64% of the population is living paycheck to paycheck. And Shannon had mentioned to me prior to that she had worked on some tips that she shares with employees when she meets with them to do their 401k. So I've asked Shannon back this week to talk about some of those tips. So welcome
Shannon: Shannon. Thank you, Paula. Glad to be back here today.
Paula: So let's start off with one of the documents that you sent me. You have a tip list about some of the things that you can do when money is tight. So you wanna pick a couple of those and we can talk about 'em?
Shannon: Absolutely. One of my absolute favorites, and I've been doing this for years and years, and I always share this with participants and the light bulb goes off. But we just got through the holiday season, and the holiday season is always a wonderful time, and then January comes crashing down on us. And one of the things to prevent that holiday letdown is to buy one gift card a month, whichever amount that you so choose.
So that come holiday time, you have the choice of either spending the gift card or giving the gift cards. And come January, you will not have a worry. If you did a hundred dollars a month, that's $1,200. You've already gotten saved. so that you can spend it on the holidays by doing the gift card a month.
It has really come in very handy. We also have gift cards on hand for birthday gifts that come out of the woodwork or an appreciation gift or something like that. And we are not as stressed in January anymore like we used to be.
Paula: Yeah. I do a different version of that myself. That is a great idea. But I just put a hundred dollars a month in a savings account. That I call my Christmas account.
Shannon: The Christmas club, yup.
Paula: Okay, so what else?
Shannon: If you are not paying off your credit cards every month, it can really start to feel overwhelming. One of the things that we always recommend that you do is to round up. So if your minimum payment happens to be $38, try to do $50. If it happens to be $89, try to do a hundred dollars. That little bit of extra money will go a long way, and the goal is to get to the point where you're not carrying a credit card. Credit cards are not bad in and of themselves. They're bad when you have a balance and they're terrible right now because the Fed raised interest rates.
You know how many times last year? Seven or eight times last year, Paula? If you look at the very fine print on your credit card statement, you are gonna see that you are paying more in interest. So that $50 pair of boots that you bought on sale at Kohl's for Christmas could end up costing you $300, $400, $500 if you don't pay it off immediately.
So this is just one of those ways to start to make a little dent in that credit card debt if you have it. And most Americans have credit card debt.
Paula: Yeah, I use my credit card, but I make sure that I'm able to pay it off at the end of each month. And the reason I use a credit card is one, it's great for tracking your spending. So then I can make sure that I'm staying on track with my budget. And two, I use the credit card points for travel.
Shannon: And that's such a great, yes.
Paula: So there are great advantages for credit cards, but you just have to make sure that you can pay 'em off, which goes into that need versus want, if you see those $50 boots at Kohl's, do you really need them? Or is it something that you want? And if you have to put it on a credit card that you know you're not gonna be able to pay off at the end. , it's not likely you need those boots.
Shannon: And is that little bit of a jolt of, hey, I just got some new boots. Aren't these great going to last? Or, the next month, are you gonna be depressed because you have a bigger credit card bill?
So it's definitely something you have to look at. And I agree credit cards are not bad. There are definitely some perks with the airline miles and the money back, and also other things that you can use with your credit cards. So they're not bad in themselves. We just need to make sure that we are paying them off so that we are using it as cash.
And plus credit card companies hate those of us who paid off every month, they don't make any money off of us.
Paula: Too bad.
Shannon: One of the other things that I think is really important for those people who have a mortgage, and it's a really easy tip, is to set up your mortgage to be paid biweekly. Not bimonthly, but biweekly, which is every two weeks, which is an automatic extra two payments a year on your mortgage, which is gonna help you decrease your mortgage faster, and it doesn't hurt.
It doesn't really change your payment structure, but you get that quicker payment off, so you're paying off the interest faster and you're actually dipping into the principal faster. and that matters when our mortgages are so high right now, you definitely get to pay it off quicker and it should be all of our goal to pay off our mortgages, but it's difficult.
This is a way that you just have it set up with your mortgage company that you want it paid biweekly instead of monthly, and you're gonna pay off your mortgage faster and it's not really going to impact you that much. You probably won't even notice it.
Paula: Now I'm looking at your list. So I see number three, which is shop secondhand at a thrift store, and I do that a lot. I just had some girlfriends over the other day and we walked by the thrift store. . When we got back to my condo, I said, okay, look, I bought this dress for $12 and this skirt for $5. And they're like, oh my God.
Shannon: Yeah, it's the best kept secret. And half the time when you go to a thrift store, you're gonna find things with the tag still on them and nobody will know the wiser. It's the ultimate form of recycling is going to thrift stores. And you can make it fun. The kids today, I will tell you, my 14 year old daughter, her favorite thing in the world to do is to go thrifting with her friends.
Paula: What are some other tips that you have?
Shannon: One of the other things for those of us who are getting older is to save on medications. We've all heard about GoodRx. It really and truly works. Even if you have prescription insurance, you won't believe the savings sometimes to find out what other options there are that can save you money. Because all too often when we go to the drugstore, we feel trapped and that we can only get what they prescribe for us, and we don't realize that there may be a discount on that particular drug through GoodRx. So highly recommend that you download it and also ask your doctor. Sometimes there are different pharmacies that will carry things for free that are included antibiotics and of course generic drugs. This is a place where you will not believe how much you can save because medicines cost us so much money.
My daughter has a severe tree nut allergy, and we were part of the victims of the $700 EpiPen, and you just have to be willing to go outside of the box and try new. things. And GoodRx is one of those things to do because medication can cost a lot more than we anticipate.
Paula: So one of the other things that you sent me talked about getting your spending on track. Why don't you talk a few minutes about that?
Shannon: So I think this is a question that I get all the time when I'm talking to employees and that is, Shannon, this sounds great, but how do I find the money to actually contribute to my retirement plan? So this is really where it started from. There's really four steps, and we say that they're easy steps, but they're not really easy because you actually have to put some work behind it because again, Paula goes to that B word, the budgeting word, and the very first thing you have to do when you're looking at this is you have to figure out what are your fixed expenses.
And outlining a budget is the first step towards figuring out your finances. But you have to make a list of what are you spending your money on, and that may take you one or two months to get a handle on every little penny that you're spending, that's going out the door. Then you have to decide which of those expenses are fixed that you cannot get rid of, like your utilities, your gas, your food, your housing, all those kinds of fixed expenses, right?
Then there are those things that come out that are nicer, things that you can use, more flexible spending on. And on those kinds of things, we use the old-fashioned cash and envelope system. I didn't create this. This was created or really and truly has been talked a lot about by Dave Ramsey. But it is really and truly putting those incidental things into an envelope full of cash.
So you say, this one's for groceries, this one's for car gas, this is for et cetera, et cetera, et cetera. Once the envelope is out of cash, you are done spending for the month, and that is really hard for people to get their hands on. But it's really important that you do that first step of figuring out what you're spending your expenses on to figure out what are the categories you need to create and how much per envelope.
How much are you spending on food when you're eating out? That adds up really quickly.
Paula: Oh, trust me, I just had to get control of my budget. A couple weeks ago. I put together a webinar on budgeting for groceries, so if anybody wants that, send me an email and I will send that over to you. But I had to do that because I sat down and I went, why?
Where's all my money going? One of my largest expenses next to my rent was when I was spending on groceries, eating out, takeout. So I had to sit back and look and I had to look at the last three months of where I was spending and it really was going out because by the time I had glass of wine or two and a meal, I was spending, $50 to $70. And if I was doing that once or twice a week, it was getting to be expensive.
Shannon: Yeah, it adds up really fast.
Paula: I know. And I took my grandsons to McDonald's. Cuz they're young and they like to go to McDonalds. I think for three of them to eat and I just ate a double cheeseburger, was well over $25.
Shannon: It's crazy. And when you're doing the system with that cash envelopes, Paula, it's not to deprive yourself. You need to have some fun, but you need to check yourself, sometimes, that needs/wants. I have two young teenage girls, right? And they have their money and I my money, and whenever we go out shopping, they're like, can you buy me this?
Can you buy me that? And I ask, are you gonna buy it with your money? And nine times outta 10, they put it back if they're gonna have to spend their money. And it's a good checkpoint for yourself too. Can I spend my cash on this or will I have money at the end of the month?
Paula: If you're not living on a budget, it's something that you really need to start doing now.
And if you go to my website, paulachristine.com, you can actually download my budget worksheet. and it has step by step on how you can start building your budget. And it also includes even a tracking system inside of it.
Shannon: Such a great tool because you know you need to track for three months, right? And see which envelopes you had money in at the end of the month. See how you're doing on your fixed expenses, see how you're doing on your savings, and even if you stopped for the next six months. You'll still have that habit in your mind and you can start again. There's no perfection here, but we're working on progress and I think that's why it's so important to use the tools that you offer Paula, to make it easier for people to do something that's uncomfortable.
Nobody likes to budget. No one wants to live off of a fixed amount of money. But we all need to so that we can have less financial stress. 64% of us are living paycheck to paycheck. 59% of us have tremendous financial stress in our lives. That's not keeping us healthy or happy.
Paula: When we achieve financial freedom, it's like a huge weight has been lifted off your shoulders. And I'm not saying financial freedom means you're rich. It just means that your life isn't driven by money because you have that under control.
Shannon: Absolutely. And I just wanted to share a couple things that we found that a lot of people were wasting their money on when they went through this exercise, Paula. First one is pretty easy. Bottled water, right? $1.50, five days a week.
Paula: Okay, go ahead. I do that one.
Shannon: Yeah. Okay. A dollar 50 bottle of water five days a week. That's $360 a year, in water. That we used to get out of our faucet. You don't need to.
Streaming services. How many of us got into the streaming service game with Covid?
We all did, right? I looked at my bill. We were paying for Netflix, Disney Plus, and something called Hulu, which I have never seen and nobody is watching TV and nobody can find anything on tv. Remember when we used to call that cable? That was in the access of $40 a month for three services that we won't really using.
Paula: I have no cable, I have streaming services. So I think it depends. I do know if you have cable, just cutting the cable bill can save a hundred dollars a month at most times.
Shannon: I just talked to you about water, right? So you don't drink coffee, but you know that I do drink coffee and I love my coffee, but it used to cost a quarter.
Right now it costs over $5 for a normal cup of coffee, which is a 16 ounce cup of coffee at Starbucks. . That can add up. How much do you think, if you had it every day of the work week, so five days a week for a year, how much do you think that might add up to?
Paula: You can just tell me.
Shannon: $1,300 a year. That's much better to pay off a credit card, put it into your retirement plan, go into a vacation fund. All of those kinds of things would be so much better off if you did that, than spending $5 you still need to have one or two cups of coffee a week. That's fine. Yes. You need to reward yourself.
Paula: Yeah, I agree with that. I don't think you can cut yourself off.
Jon: I make my own coffee at home every morning, and I've probably saved thousands of dollars since I started doing it.
Paula: You never buy a cup of coffee out?
Jon: Once, maybe once every couple weeks.
Shannon: And it's a treat then because it's not something that you're expecting when you do it every day.
Give it up for Lent, give it up for something. See it's a habit. See what happens. And then that cup of coffee will taste that much better if you have it every so often instead of every day. One of the other tricks you and I do this, Paula, when we go out to eat, is instead of ordering an entree, you and I'll just order one or two appetizers and share them.
They're big enough for us for a full meal. And then you can usually take leftovers home, but you don't need to get an entree and appetizer a dessert and. because our food portions are so large today.
Paula: When I go out to eat, I'll order an entree and then I'll take half of it home. So at least I know I'm getting two meals out of it. Because you're right, our portions are huge. And we don't need to eat all that food.
Shannon: We don't. Just a little trick. One of the other places that we in Michigan, forget a little bit about that can add up really quickly. Are parking and speeding. We love to speed here in Michigan.
Paula: Not me.
Shannon: I know. Not me either. Mr. Police officer. $150 or more for a speeding ticket. It's really not worth it, and you're spending way too much in gas and don't park illegally because those parking tickets add up as well.
Jon: Not to mention, those speeding tickets will hit your insurance and they're spending even more money at that point.
Shannon: Yeah, 10 to 15%. Jon, you can raise your insurance rates by having tickets.
Paula: I know I'm not commenting on this subject because I got a speeding ticket about two months ago.
Shannon: Are you really saving time? Leave yourself some extra time. Don't get a speeding ticket. Paying to park or park where you can actually don't have to get a parking meter, but don't get tickets. It's wasted money.
Paula: God, I feel like, okay, so I did the water, I did tickets. What was the other one? .
Shannon: The other one, my husband fell victim to this because he's never found a coupon he didn't love. And he was, loving all these deal websites with Groupon and et cetera. and what we realized after tracking it for about three months was he was getting these Groupons and we weren't using them.
So it really and truly ended up costing us money versus saving us money and. It's easy to misjudge your motivation to go and try some of those new things that seem so great when it's being advertised. And then when you actually go, do really wanna go jump out of a bungee cord. Nah, I really don't wanna do that.
Paula: That goes with coupons too, when you're going to the grocery store, it's great that you can get, buy three and get a dollar off, but if you don't really need the three of them. It doesn't make sense to spend the extra money just to get that dollar right.
Shannon: Or go to Costco. They love to put multiple things in a box, and my kids routinely only like one of them. So it doesn't save me any money to go and buy the mixed chips at Costco if they only eat one kind of them.
Paula: Agree. Some great tips.
Shannon: Yeah. And those are just some of the things that we've been able to share with our fellow Americans when they're struggling and trying to figure out how to put some money away to take care of themselves, where is there money that you know in the couch cushions?
And don't ever hesitate about putting money in that old coin jar cuz that money can add up pretty quickly if you save your nickels and dimes and quarters. And it's always nice to have a full jar to take back and go ahead and put it through Coin Space or whenever it is at the grocery store and you'll walk out with, $50, $200 sometimes.
And that's nice to come out of the grocery store with money instead of just leaving it there.
Paula: Yeah. Great tip, Shannon, I really appreciate you being with us today.
Shannon: Thank you so much, Paula. It's so nice to be able to share them and share them with your audience.
Paula: You talked about before we got on here that you eventually wanna put all those in a book. But do you have them available if someone wanted to shoot you an email and you could shoot them one back?
Shannon: Absolutely. They can reach me at ShannonM@srpretire.com.
Paula: Great. Again, Shannon, great tips. I really appreciate you as always, and if anybody wants to get a hold of me or take one of my courses you can reach me at paula@paulachristine.com or my website at PaulaChristine.com. Thanks again, Shannon.
Shannon: Thank you so much, Paula.
Paula: Investment advisory services are offered through Strategic Retirement Partners, an SEC registered Investment Advisor.