Moneysaving Habits Anyone Can Learn

Why do some people get so much more out of their money than others? These “money masters” do not just spend less, save more and invest more wisely than everyone else. They tend to have a wide range of money habits that most people lack.

Best-selling financial author and widely syndicated newspaper columnist Eric Tyson has identified the most important of these habits. Ways you can become a money master…

  • Learn to do more things for yourself. Most people hire someone to do the things that they cannot—or don’t want to—do themselves. Money masters are more likely to hire someone to teach them how to do some of these things, particularly tasks that must be done many times over the years. Time invested in expanding do-it-yourself skills can lead to huge savings. Examples: If you do not know how to cook well, you can eat out a lot and buy prepared foods to take home…or you can take cooking classes and eat well for far less money for the rest of your life. If you don’t know how to fix a leaky faucet, you can hire a plumber each time—or you can call a handy friend and ask for a lesson…or buy a do-it-yourself book or instructional CD, and learn how to do it yourself.
  • In some cases, these skills even can become hobbies. Key: Don’t try to do something that you would hate to do or that would take so long to learn that it wouldn’t be cost-efficient.

  • Remain behind the curve on consumer technology. Prices for high-tech products typically drop sharply in the years following their introduction. Money-smart people wait until this occurs before buying. They pay a fraction of the amount that the “early adopters” paid and get more reliable technology that has been debugged and improved since its introduction. Money masters don’t care about keeping up with the latest product trends. They understand that new products cannot be considered necessities if we all survived without them previously.
  • Limit the risks that come with home ownership. Insurance is only one way to contain the risks of home ownership. Money masters avoid buying homes in areas prone to natural disasters—earthquakes, hurricanes, mudslides, wildfires or floods. Such disasters often are not covered by standard homeowner’s insurance, and the insurance that does cover them can be enormously expensive. Money masters also consider maintenance costs before purchasing older homes, which can be expensive to maintain, heat and cool. A distinctive old home might have strong emotional appeal, but for money masters, buying a home is foremost a financial decision.
  • Once they have bought their homes, money masters quickly fix incipient problems—such as exterior trim that’s starting to crack or rot—before they become big, expensive problems.

  • Resist buying a car just because you have fallen in love with it. The fast, luxurious and distinctive cars that people adore are inevitably expensive to buy, insure and maintain. Cars are a poor place to spend more than necessary because they quickly decline in value. Money masters select cars that provide reliable, affordable transportation. The only added elements money masters favor are safety features, such as antilock brakes and stability (anti-rollover) systems.
  • Do not save as much as possible, and don’t be afraid to take some financial risks. Perhaps the most common myth about money all-stars is that they save every dollar and avoid all financial risks. In truth, people who always put saving for tomorrow ahead of enjoying life today tend to be lonely, unhappy and consumed by fears that their money will disappear. These fears also prevent most supersavers from investing in volatile but profitable investments, such as stocks—they can’t stand to watch their assets decline, even temporarily. That doesn’t mean money masters waste money or disregard risk. They save, but they also spend within reason on the things that make them happy…and they invest in some reasonably risky investments.
  • Only occasionally check in on investments. Tracking investments every day can lead to overtrading and the resulting hefty transaction costs. It also increases the risk of panic selling when investments tumble. And it makes you worry constantly—the daily tracking of investments even has been linked to depression.
  • Some of the most successful investors I know check in on their carefully selected mutual funds as little as once a year. They understand that day-to-day fluctuations in share prices are irrelevant for long-term investors.

  • Pass on a portion of your wealth to the next generation before you die. When inheritances are received as lump sums after death, the money often is wasted. So while they are still alive, smart retirees who have more money than they need pass on some of it to heirs. This gives the benefactors a chance to suggest how the money should be used and monitor the recipients’ results.
  • Example: “Here’s $5,000 to invest in stocks for our grandkids’ education.” The giver can provide specific financial instruction with the gift…explain how smart investors manage money…supply subscriptions to financial publications…or provide financial how-to books.

    Giving money early also can make sense from a tax perspective. Consult your financial adviser for details.