How many of you can remember your grandmother quietly slipping her change into a quart jar or the cookie jar up on the top shelf? Or do you recall the saying to “be safe, just keep your money under the mattress?” As children, many of us were encouraged to save our birthday or Christmas money in the ever so close piggy bank! As we got older, some of us were accompanied to the local bank to meet the manager and open our very own savings account. These activities reflected the values, concerns, and possibly a little distrust of banks (money under the mattress) that our elders had regarding the need to save and put money away for a rainy day.
Over time the piggy banks were forgotten, and the new umbrellas of many for the rainy days ahead became the numerous plastic cards that they carry in their wallets. How many credit cards do you think the average American has? According to Experian, the average was four and declined slightly beginning in 2020. The report also details this by state and age. All the credit bureaus that track this information say that there is not a magic number of credit cards to have. As you would expect, it is all relative to how wisely one uses these options.
After two years of economic challenges, loss of jobs, and changes to work norms, it is no wonder that many are decreasing the use of credit and possibly reverting to the cookie jar or envelope methods to manage savings and expenses.
As I joined in the search for better ways to improve my family’s economic outlook, I read an article published on New York Times bestselling author Ramit Sethi’s website, “I Will Teach You To Be Rich.” Who could skip over a title like that? The article talks about the core principles of following what he calls the “CEO approach.”
C stands for cutting costs. Difficult to do in times of rising inflation but necessary if we are to improve our own financial health. And who among us does not want to be in a better financial position?
E relates to earning more. While finding a higher- paying job or asking for a raise may seem unrealistic in today’s times, the thought of maximizing a 401K or IRA can actually increase your paycheck. You can use online calculators to estimate the effect of how changing contributions by 1% impacts take-home pay.
O is to optimize spending. I really like the suggestion to delay online or in-store purchases for 24 hours to ensure you really need or want to buy the item. Another hint is to discipline yourself to match the amount you will spend by putting that same amount into savings (maybe that cookie jar?). These two ideas can help you see the value of your proposed spending, and it adds to your savings as well.
I have always been a collector of change. Our summer vacations usually included an unbudgeted event or two, and I always had a large amount of change that I would diligently count before our trips. The plan was to use those funds to cover the unexpected fun adventures we encountered. To be honest, the coins usually accompanied us on the road trips and returned with us untouched. What would Disneyland or Six Flags do when we went to pay with a bag full of coins? So, I would continue to collect and add to the “fun savings” collection. Those coins went in a large plastic bag that was tucked away and never touched. My mistake was not taking the change fund to the bank and converting it to paper money, and putting it in my wallet.
Recently the value of small change became real for me. My friend owns a restaurant, and his bank began charging him for changing dollars into change. In fact, businesses all over town were posting signs asking for exact cash amounts or card purchases due to the shortage of coins. (Or perhaps more accurately, the fees they were being asked to pay for change.) I sold my change more than once over the past year or so and see that even today, it is piling up again. I did follow one piece of the CEO’s advice - I took the money from selling my coins and put it into our savings account.
What are your money management ideas? Do you have a cookie jar, a side job? Have you cut out subscriptions or negotiated with companies to reduce your monthly payments? Doing just one thing can put you on course to be the CEO of your finances. We cannot change the nation’s economic policies, but we can take control of our own.
The CEO Approach
- C - Cutting Costs
- E - Earning More
- O - Optimize Spending