Money Crashers Personal Finance is one of the top personal finance blogs on the web, and a go-to source for real-world savings advice. We talked to David Bakke, one of their regular contributors, to see how he handles money in his own life. Here's what he had to say:
What's the first thing that you can remember buying with your own money?
The first thing I remember buying as a child is baseball cards. I have always had a love for baseball, and when my weekly allowance wasn't enough, I started my own business doing yard work so I could buy more. So I guess I have always had a kind of entrepreneurial spirit about me when it comes to pursuing side business ideas.
What was your first car? Who paid for it?
A 1980 Chevy Station wagon. It was more like a tank, but I loved the freedom it provided me. I bought it from my parents for $1,000. They financed a loan with the caveat that it would be interest free if paid off in less than six months. I took on a second part time job and paid it off just in time to avoid interest.
How old were you when you got your first credit card?
I was 18 years old, walking across campus in my first year of college. They had one of those teaser offers going on for college students. The marketers of such programs were dead on. I became quite a profitable vehicle for them very early on in my life.
Is there a particular financial lesson that you learned the hard way?
I was far too young to handle the responsibilities of credit card ownership, and before I knew it, I had amassed over $30,000 in credit card debt. In a lot of respects, I think that credit card ownership at such a young age should have some mandates attached to it. Maybe not necessarily an age requirement, but possibly a parent's permission. I just think that most teens do not have the wherewithal to understand the long-term consequences of credit card debt. I certainly did not have this level of maturity, and I didn't even understand what hurts and affects your credit score, and exactly why the score is so important.
What's something that you're willing to splurge on?
I am always willing to splurge on new toys for my son. He isn't spoiled, but I never had much in the way of toys as a kid, so this has always been a soft spot for me. I work hard for my money, and I worked very hard to get to the point of a debt-free life. Therefore, I don't feel guilty about this at all. I also make sure that, at the same time, I'm utilizing some of the best strategies for teaching kids to save money so that my son doesn't make the same mistakes I did.
What are you saving for right now? How are you saving for it?
I am currently saving for my transition to full-time self-employment. I had thought that I already knew every way there was to save, but I've had to dig deeper recently. I've re-evaluated daily spending activities and found ways to cut more of it out of my budget. Also, since I'll soon be spending a lot more time around the house, I've focused on ways to reduce my utility bill. For example, I've decided that I will set my thermostat to 66 in the winter and as high as 78 in the summer. While it might be a bit uncomfortable, by dressing warmly in the winter and shedding layers in the summer, I can manage just fine while saving an immense amount of money. I've also learned some of the basic tenets of extreme couponing, which has been great for saving hundreds of dollars on my monthly grocery purchases.
Are there any areas of your finances that still need improvement?
Retirement. I used to think that the strategy of “save as much as you can, whenever you can” was an effective one, but it's not. You need to have a strategy complete with goals and benchmarks in order to effectively save for retirement. Therefore, I've recently upped my contribution to my individual 401k plan to 5% of income, and when I transition to self-employment, I'll set up a self-employed 401k plan with the same contribution percentage, if not more. I also have target dates for significant contributions to my Roth IRA spaced throughout the coming year. The end goal is to max out my contribution for this and each ensuing year. This has become especially important for me as I finally took the time to understand the tax benefits of a Roth IRA over a 401k.
What's your favorite thing about saving money?
The ability to get by on less. No longer do I have to chase the mighty dollar to live a more comfortable lifestyle. I have eliminated all unnecessary wants from my life, and put these funds towards things I enjoy the most. When you think about it, there is so much more temptation to purchase wants in the society we live in today. Smart phones, flat screen TVs, and iPads are luring. So it's really a challenge. But if you think about how much enjoyment you can get from the things you really love in life, whether it be international travel or a hobby, foregoing these gadgets should not be a hard thing to do.
Name something that you hate to spend money on.
Fees. I pay no fees with my bank account. I always try to find credit cards without foreign transaction fees. I'll go to extremes to avoid airline checked baggage fees. I negotiate out of any and all activation and set-up fees for any new contracts and or services in my life, such as switching cell phone or Internet providers.
Are there any money-saving tips that you've tried that were a complete flop?
I had a real bad experience with problems when looking for a roommate to save money on rent. For the most part, they did not pay their bills on time, they were not as clean as I was, and I found that I really cherish my privacy and time alone. If you can't make something “fit” in your personal life, it doesn't matter how much money you are saving. It just isn't worth it.
When was the last time you used a coupon? What was it for?
Today. I used to think that grocery coupons were a waste of time until I realized how much you can really save. I shaved $27 off of a $90 grocery bill just by clipping coupons. But it wasn't just by clipping coupons alone. I time my coupon use with double coupon days at my grocer to increase savings. I also store coupons for future use, and time them with other advertised specials as I see them.
What's the craziest thing you do to save money?
I take my garbage to work with me after receiving permission from my employer. I've never paid for trash pickup. By taking it every day, it's simple and convenient. I also make regular trips to the recycling center, so the actual garbage that I have around the house is minimal, which has been great for reducing clutter.
Keep Up With About Frugal Living:
