By Shaun Somers
The other day I had a discussion with a teenager that I work with, and I thought it just had so many applications that I would need to share it. Several of us were having a conversation about cell phones and the best deals to be had. This is how the discussion went (or something very similar):
Him: “I know the best place to get a cell phone. You get data, unlimited texting, unlimited evenings and 300 minutes, all free! Only $45 per month.”
Me: “All that ‘free’ stuff for five hundred bucks a year? Uh, great deal I suppose.”
Him (disbelieving): “That doesn’t add up to $500 per year!”
Me (doing more accurate mental math): “You’re right, really it’s $540”.
While as adults we can calculate that $45/month is over $500, it’s surprisingly easy to forget when we’re making decisions about our personal finances. There is a reason why cell phone companies and just about everyone else advertises their monthly rate and not the total cost for a year. When we think in terms of payments, the smaller numbers trick our brains into seeming affordable. Just like the famous “latte factor” of author David Bach; anyone can afford five dollars a day for something, but added over a year it adds to $1825, which is a significant amount of money for almost everyone.
When it comes to personal finance, December can be a stressful time of year. With all of the cost associated with the holidays, a family’s cashflow is often stretched to the max. For far too many families these days, the budget is actually stretched beyond the max; for them Christmas means adding to the debt load.
Something that I suggest to counteract this Christmas cash crunch a year from now is to get yourself into a cell phone contract. What’s that, you don’t need one? Good. Pretending you have a big cell phone contract is much better than actually having one. Get yourself into the habit of saving money. Treat saving money as just another bill that has to be paid and will come out of your bank account on a pre-arranged date. Monthly payments do seem smaller, so set yourself up an automatic savings program somewhere you can do so without paying fees. (In Canada I recommend ING Direct or President’s Choice Financial).
This is a fantastic way to save up for Christmas. Of course, it also works for Emergency Funds, Home Maintenance funds, and Car Replacement funds. Do you find yourself lack money every month to set aside for expenses and savings like these? Give one of our Financial Coaches a call at 1-877-58-PEACE, or contact us by email on RKLFinancial.com. We can help you find $45 (or much more) to save each month. And by next December it will add up to $540 – and 2012’s Christmas can be all in cash!