Tag Archives: credit card spending

Are You Going Out For Lunch Today?

If so, you’re not alone. According to a Visa survey released yesterday, 60% of us eat out once a week or more. The highest percentage is in Ontario while the Western Provinces tends to eat out the least.

Eating out is convenient, it’s faster than making lunch and – well, we can get kind of lazy. But convenience comes at a price. On average our eating-out meal is just under $9 a pop. Not that big a deal if it’s once or twice, and a lot more for a family of four. At $9 it adds up quickly, and even quicker for the 61% of people whose average is up to $13 at a time.

Who cares? That depends on the state of your finances. It’s certainly ironic that this survey was done by a credit card company. When we pay by credit card, no matter what it is, we spend an average of 12 to 18% more than paying cash. McDonalds has an almost 50% increase in per person sales on credit cards, and vending machines who take them increase their sales 178%.

For anyone who is in debt, these little $10 lunches here there, and all the time, are some of the biggest killers to getting out of debt. There isn’t one magic bullet to changing your finances around, it’s all the $10 and $20 buck stuff like a leaky faucet. If you’re broke or on a budget you shouldn’t see the inside of a restaurant, unless you work there – period. Eating out is 75% ambiance and 25% food costs! There’s nothing wrong with that, but broke people can’t afford it.

If you want to turn your finances around, you need to do a budget. You’ll need to put in writing at the beginning of the month what money you’re spending on what category. Once the budget is set, the only way to spend extra money is to take it out of another category. It’ll give you total control of your money, and you’d be amazed at what you’ll discover about your spending. I’ll guarantee that anyone who does a budget for two months will find at least a couple hundred dollars in savings!

When it comes to eating out – go for it. But it has to be in the food budget. When the food budget is done – you’re done! With the food category, the most effective way is to take the cash budgeted for food for the next two weeks and put it into an envelope. That cash, and only that cash, is used for food. It’ll be very powerful to see that money shrink and shrink – but you’ll actually see it. Paying some of it on credit card, using a debit card for lunch here and there, or buying the odd thing with cash means you’ll have no idea of what it all adds up to. But an envelope with the cash for the next two weeks is powerful and visual – and it works, and you’d be amazed at the money you’ll save.

Living on a cash food budget takes discipline. Plus, your broke friends at work will make fun of you when you don’t go out for lunch with them all the time – that’s why THEY are broke and will continue to be. Anyone who is trying to get ahead, also on a budget, or debt free, will be your biggest cheerleader. But there are more broke people than debt-free people, so get ready for them to pick on you.

One last thing we talked about three weeks ago: If you want to save some money in the kitchen, stick to a budget, and/or reduce waste, there are two new web sites that are kind of cool. Both are set up for you to enter the ingredients you have in the house and will ‘translate’ them into figuring out what you can make for dinner with what you have! The two sites are www.saymmm.com and www.supercook.com

The Money’s All Spent – Now What?

Now that it’s the week after Christmas I’m reminded of an old Irish Rover Song called: Wasn’t that a party, and then talks about the hangover.

That’s kind of like our financial lives, having just spent over $22 billion on Christmas, mostly with borrowed money, and including lots of presents for ourselves. I know, I know, we work hard, it’s our money, we deserve something, it was on sale, we really needed it, etc. Well, if we were to be honest with ourselves, that’s all nonsense. Broke people can’t afford to buy stuff, and it’s almost always a “want” and not a “need.” That’s how we get to spending over $4.2 billion on impulse purchases in a year, according to one Canadian study. And, to be honest, that number is way low, because it’s the last thing we’ll admit to.

Yes, we work hard, and yes it’s our money. But do you want to keep working hard forever? Freedom 77 doesn’t have the same ring to it as that old commercial campaign of Freedom 55, does it? At some point in time, we do have to get away from the spending party and focus on paying off the hangover and saving something for someday down the road. Intellectually, we know that, but when are we actually going to get around to it is the big question that will change your entire financial life.

Right now, let’s be honest: We spend more time planning our vacation than we do our financial situation. Make 2012 the year that you’ll actually turn that around. Here are a couple of suggestions that are small enough where you’ll do it, but big enough to have a significant impact. Why small steps? Because our sub-conscious mind will revolt against huge goals that seem impossible to reach.

You’re not going to lose 60 lbs, but you can lose a pound a week. You won’t run the marathon this summer, but you can go for a 15 minute walk each day. You also won’t be debt free by February, but you can start on that journey with one step at a time.

Resolve to say no: Whether it’s to yourself when it comes to spending, to your kids, people at work, or anywhere else. It’s the one word that’ll change your financial life.

Take your credit cards out of your wallet: At least for January, leave the cards at home. If you have an emergency, you’re one call away from getting help. But going to the mall or charging this or that isn’t an emergency – honestly.

Set a cash limit: Pick an amount below which you’ll always always pay by cash or debit. The higher the limit, the better – if you make it $50, gas, small grocery purchases, lunch, etc., will all be paid cash. That alone will drastically reduce the charges on your credit card. When we use a credit card we spend 12 to 18% more – period. Whether you pay it in full or not, it’s still a ton of extra spending that isn’t helping.

Stop being financially stupid for 2012: You know exactly what that means. They are different things for all of us, but make the New Year one where you’ll stop doing the top two things that get you further in debt, or don’t grow your savings.

And finally, here’s a great post from Facebook this morning that kind of says it all: Do something today that your future self will thank you for.

The Panic Shopping Just Before Christmas

Four more shopping days until Christmas, so you know what that means, right? Any semblance of reasonableness, budgeting, and comparison shopping is done and over with. Now, it’s mostly panic. And retailers know that. Christmas week is not the week for any great deals.

The average person spends $104 when they go to a mall. That has to be way higher when we have a long list of presents still to buy and not a lot of time. I don’t know if it’s too late to get you to your bank machine and draw out the cash for the rest of your shopping. I hope you’ll do it, because we spend about 18% more when we pay by credit card and, this is purely my guess, another 25 to 50% more in panic mode. If you have the cash on the counter, you’ll literally feel the pain of parting with that money and you WILL reduce what you spend.

Of course, part two is the old stand-by of gift cards. For two years, their sales have been pretty stagnant, but this year, sales are way up and will be over $30 billion in North America.

I’m sitting here looking at a $20 bill. I don’t see an expiry date and it doesn’t say anywhere on the bill that I have to use it at a certain store. It’s nice to know that this $20 is good anywhere, and anytime. That’s not the case for gift cards.

I am not a fan of gift cards unless they are at a discount, such as $80 for a $100 gift card or buy one for $25 get another for $5 free. Give the cash with a note of what you’d hoped they’d use it for and not the gift card. Remember that over 8% of gift cards are never used, so that’s $240 million down the drain, and gift cards are no good if the retailer goes out of business.

I’m fine with those from Wal Mart or Tim Horton, Starbucks or Amazon, but the smaller the retailer, the bigger the risk they won’t be around to honour the gift card. They have your cash and you have nothing.

Conversely, if you do get a gift card, use it right away for the full amount. If there’s a balance left, keep it on the fridge and use a felt marker to note what’s left so it doesn’t go to waste, or give it to someone else in line at the check out, if it’s a small amount left.