Personal Finance and Common Sense

I love this photo. The phrase painted on the side ‘Think before you speak. Read before you think.’ is common sense all the way. When applying that common sense statement to personal finance, it would probably something like read: ‘Think before you spend. Pause before you think.’ Sometimes we just need a moment of breathing to center ourselves before evaluating decisions and spending.

Not Rocket Science

Personal finance is not rocket science. Let me say that again. Personal finance is not rocket science. Instead, it is a series of decisions we make with a large dose of common sense acting as an advisor. Success with your money is really all about making good, small decisions consistently. For the average person, we don’t have $1 million that we just received from selling a business. (I am sure none of us would refuse to try living with that scenario, though!). Instead, our decisions look like spending $40-50+ on eating out one night as a family because we are tired vs. the $10-15 it takes to cook a meal. These types of money decisions aren’t sexy, nor are they convenient. However, saving $30 by eating at home is huge!

Common sense, so far, right?

Common Sense Applied

If you took that $30 for one meal and did that 4 times a month, you saved $120 that month! That is $120 you can save or apply to debt! Let’s say you choose to apply it toward debt and you have a credit card with an awful percentage rate of 29.99%. The $120 you saved that month multiplied by 29.99% is $35.99 which is more than you saved by cooking one meal at home! Your $120 essentially becomes $155.99 because you aren’t paying interest next month on the principle payment you just made. Even if the future interest savings doesn’t entice you, the extra $120 payment you can made toward your debt is more than significant. It is the next step to financial freedom, security, and being free to do what you want.

Something I am guilty of is the $6 every morning/every other morning I spend on a coffee and donut when driving to work. Not only is the donut not healthy for me, but the $6 every morning is not something I need to spend. Lets say I don’t do this next month and I was averaging 15 coffee stops a month. That savings is $90 a month! Plus my health is better for it! Now, if you make your coffee at home let’s subtract that expense out for a month of coffee. For me, that’s about $0.50 a cup so $7.50 a month for my 15 cups of coffee a month. This leaves $82.50 each month for me to apply toward savings or paying down debt.

Light Bulb Moment

Here is where I had my light bulb moment…

Just combining both of those savings each month, that’s $202.50 (or $2,430 a year) to use for savings or debt reduction. Those numbers aren’t going to pay off a $5,000 credit card this year, but it brings you closer to having it paid off with every extra payment you make! Also, if you are in more of a dire situation where you just need to keep the lights on, $202.50 a month should do it.

Common sense isn’t sexy, but it is what will help you make your financial goals achievable and will give you more control over how you live your life. And that, my friends, is priceless!