Surprising habits of the super rich

By: Andrew Woodward

When I was younger I was living under an illusion that shaped what I thought I wanted in life.

But I've realised I've been lied to.

Rich people might look like they live extravagant lives, always dressed in expensive clothes and travelling in style ... but the people we're looking at as "rich" are more likely "rich and famous",

and getting some of these things loaned to them for the cameras.

In reality, most rich people are actually quite frugal.

And if we want financial freedom, we should emulate this frugality.

Frugal isn't exciting

Sometimes, being frugal is referred to as being tight with your money and therefore comes

with a heap of negative connotations. Who wants to be known as the tight one in the group, right?

But the opposite of frugal is described as wasteful.

When it comes to money, being wasteful is reflected in lavish spending and hyper-consumption.

The problem we have, and the basis of the illusion that we have been living under,

is that being frugal isn't exciting.

It is a lot easier and more fun for social media and television to promote flashy lifestyles.

We are led to believe that if you have money, you spend lavishly,

and if you don't show it, you don't have it.

The more we make, the more we want to spend.

It's the instant gratification gene kicking in again.

Well, it turns out the reality of the rich person is a completely different picture.

Live below your means

In my time studying and researching smart rich people, one of the most striking lessons I learned

is that they all live by one mantra: Live below your means.

The rich understand that it is difficult to support a high-consumption lifestyle and

become a millionaire, or to achieve financial freedom.

So to manage their spending, to achieve living below their means,

the rich all have this rather surprising habit.

Not only do they live below their means, they do it by being frugal in a smart way.

When it comes to lifestyle spending, they are not like what you see on television or social media.

Instead they are more likely buying second-hand cars instead of new, or they are buying clothes from the same shops that you and I do, and not from “Rodeo Drive.”

You see, the lavish lifestyle can only be maintained while you are earning the big money. If you aren't taking steps to build for your future, then eventually the lavish lifestyle has to end.

There are many examples of people who have suffered this outcome. It's been argued that

Michael Jackson, a known hyper-spender, passed away virtually broke.

The reality of rich habits

Now I don't want to paint a picture that getting rich is simple.

In fact, that is part of the problem for most people.

They see the actors, music and sports stars who come into large amounts of money quickly,

live the rich lifestyle and think that is how success with money is achieved.

It is also why get-rich-quick schemes are so successful in taking your money.

People are looking for the quick result.

However, the reality is that the true rich people, the ones who start out just like you and me,

they know they have to work on their habits.

It's like a runner that is fit — they run to stay fit even though they don't look like they need to.

They have developed discipline and understand that they have to keep it up to remain in

good condition.

Becoming rich and achieving financial freedom is about traditional values of hard work,

discipline and, at times, sacrifice.

Living below your means in modern society is very hard.

The desire to keep up with your friends and the pull of instant gratification

are temptations that are difficult to resist.

What I have learned the hard way, is that the smart and efficient path to

financial freedom is:

to live below your means,

to be a little frugal when it comes to your lifestyle and

to make these your habits.

Next time you are out, have a look around you. That person who looks just like you could very well be a multi-millionaire enjoying the financially free lifestyle that you are striving to achieve.

Andrew Woodward is a mindshift.money accredited money coach based in Sydney who teaches people to take control of their money and invest for their future, simply and efficiently. 

Become a Better Spender in 20 Minutes or Less

Amanda Steinberg, founder of DailyWorth and author of

Worth It: Your Life, Your Money, Your Terms, - overcome overspending.

By Amanda Steinberg

Spending can be joyful when it's done intentionally, but you need a strategy for the moments when you're operating on autopilot. Being a money manager means going to Target prepared! I'm not talking about austerity. I'm not against spending, or the thrill of buying. I just want you to explore your habits in more depth. When you spend with intention, I hope you'll buy less and save more.

Let's have some fun, shall we? I have a challenge for you.

This experiment isn't designed to reactivate your money story. When you hit those rough patches—and you will—observe, breathe, and keep going. Don't indulge the drama. By the end of the exercise, you will have a very good idea of where all that money goes and how to make mindful changes to your spending.

Ready to play? 

Challenge: What Did You Buy in the Past Three Days?

From memory first, think about where you've been the last three days. Did you drive anywhere or take the train? Were you at work, with kids, friends, or family? Did you eat at home or at a restaurant?

Write down what you bought and how much it cost (exclude fixed expenses like bills). Don't get lost in the rabbit hole of analysis. Include food, groceries, transportation, a pack of gum, emergency mascara, new sunglasses because you left yours on the train, iTunes or Amazon purchases.

Now, log in to your accounts and see how close you are to what you wrote down from memory. What have you learned about how much you spend and why?

It's enlightening to see where your money goes. When you write down what you spend, you start to see how often you spend on impulse. Who are you as a spender? That's what we're investigating. It's a key exercise that gives you deeper insights into your own habits and mind-set around spending.

Remember, Money Smart Ones don't judge. 

They just observe. 

Humans have known for thousands of years that material gain does not create happiness. 

Austerity doesn't, either. 

Padded savings accounts? Ecstasy. I swear. 

Get Your Finances Back on Track

  By Michelle Singletary

 Financial columnist Michelle Singletary maps out a financial rescue plan for Make Me a Ten! makeover candidate, Tisa McGhee, a single mother of two who has lost her job and watched her debts pile up. Here's what you can do if you're in a similar position.

In the Short Term

1. Stick to a budget. I started by giving Tisa a blank financial worksheet to fill out. By looking at the full financial picture, I saw some expenses she could cut. First, she's paying $220 a month for cell phones for herself and her daughters. She should stick with the cheapest plan—no downloading ring tones, surfing the Internet, or texting for the girls. Second, she has to cut back on restaurant meals, one of the most common ways people waste money. Third, she needs to spend less on transportation. Ideally, 6 to 15 percent of your net income should go to transportation costs (including your car payment, gas, and insurance); Tisa is spending more than 18 percent. I also advised her to make a list of top priorities and, every time she's tempted to buy something, pull out that list and look at it.

2. Stay on top of the mortgage. Part of Tisa's trouble is her adjustable-rate mortgage. When housing prices were rising, a homeowner could refinance when interest rates went up. But once home prices began to fall, that was no longer an option for many borrowers. While Tisa's interest rate was rising, the value of her home was dropping—from $302,000 to about $230,000 by last November, according to an estimate by Zillow.com. Thanks to her emergency fund, she was able to keep up with the higher mortgage payments until August 2008. But then she stopped paying, and the lender began foreclosure proceedings. She eventually sought help through the Obama administration's Making Home Affordable program (MakingHomeAffordable.gov), which allows strapped borrowers to refinance or modify their mortgages. Tisa's lender offered to lower her monthly payment from $3,180 to $1,747; she began making the new payments last July but stopped because her lender never sent her the proper paperwork. I suggested Tisa turn to NeighborWorks America (NW.org), a nonprofit that helps consumers avoid foreclosure, and the agency intervened. If you are having trouble paying your mortgage, you can also contact a free counselor approved by the U.S. Department of Housing and Urban Development (find one through HopeNow.com).

3. Stop making extra debt payments (for while she is unemployed…) Tisa has been trying to dig herself out of debt by paying more than the minimum on her credit cards. Normally that would be smart. But because she is unemployed, I advised her to preserve as much cash as possible, making basic expenses—food, housing, utilities, and transportation—her highest priority.

4. Get financial counseling. Tisa needs to work one-on-one with a credit counselor. Counselors with the National Foundation for Credit Counseling can provide free or lowcost debt help. To find a counselor, go to DebtAdvice.org. Look for accredited counselors who have independent certification and training in budgeting, consumer credit, and debt management.

In the Long Term

1. Stop using shopping as therapy. Emotional spending causes a lot of people to end up in serious debt. Seventy-nine percent of women go on spending sprees to cheer themselves up, according to a 2009 study released by the University of Hertfordshire, in England. Forty percent of the women surveyed named "depression" as a reason to go shopping.

2. Save to buy a used car. Tisa, who has spent almost $30,000 over the past six years on two leased cars, needs to eke out some money to pay cash for a used car when her current lease is up. Yes, you can lease a car for less each month than it would cost you to buy the same vehicle, but at the end of that lease, you have no car. In the long term, buying a car and keeping it for years saves more money.

3. Aggressively pay down debt. After Tisa starts working full-time again, she needs to follow what I call the Debt Dash Plan: List your debts, starting with the smallest. Take all the extra money you can find in your budget and apply it to that debt, and make only the minimum payments on your other debts. When you pay off the first debt, move on to the one with the next lowest balance, and so on. This strategy works because people get an emotional boost from eliminating one of their debts quickly, which motivates them to stick to their debt repayment plan.

4. Pay down student loans. Once Tisa is back on her feet financially, she must start paying off her student loans, because the interest is killing her. An income-based repayment plan for her federal loans will cap her monthly payment at an affordable amount based on income and family size. (For information about this plan, go to Ibrinfo.org) Her lender will determine her eligibility and how much she must pay each month. (But, in exchange for lower monthly payments, she may end up paying more interest than under a standard ten-year repayment plan.)

5. Build the consulting business. Tisa has already started her business, Mc3 Consulting Inc., which teaches nonprofits how to improve their services and internal operations. "Mc3 Consulting is the seed I am planting for my girls," she says. "I want them to see their mother be successful and show them that we can turn this situation around. I want them to learn from my mistakes." Tisa has a good business plan and great contacts, but until she has enough contracts to cover all her expenses and debt, she needs to pursue and stay in a full-time job. She should continue to seek advice, especially to steer clear of tax problems. One place to start is score (Score.org), a nonprofit association of working and retired executives and business owners who donate their time to advising entrepreneurs. Tisa has been financially solid before, and she can do it again. She needs to set a budget, get rid of her debts, and keep spending in check. Recognizing her issues is a big part of the battle. "A combination of factors led me to where I am today," she said, "but I can't regret those things. They're helping me become the woman I hope to be someday."

Michelle Singletary is the author of The Power to Prosper: 21 Days to Financial Freedom. For more information visit MichelleSingletary.com

One Woman Paid Off $68,000 Debt in 3yrs

On Farnoosh Torabi's personal finance podcast So Money, blogger Melanie Lockert discusses the key strategies that helped her pay off a total of $81,000 in student-loan debt. Here are the key takeaways from her journey to zero debt.

As told to Farnoosh Torabi

Photo: Veronica Grech/Getty Images

I borrowed a total of $81,000 in student loan debt—$23,000 of that was from my undergraduate degree from California State University, Long Beach, and then $58,000 of that was from New York University for graduate school. By the time I graduated from NYU in May 2011, I still had $68,000 dollars left to pay—after making payments for five years.

I struggled to find work in New York. I went on interview after interview after interview. (I have a pretty useless degree in something called "performance studies.") Six months after graduation, I came to the conclusion that I couldn’t live in New York and pay my student loans without a full-time job. So I moved to Portland, Oregon to be with my partner.

Once I realized that debt was holding me back from my goals and dreams, I realized I had to make some change. The move cut my rent in half. The worst of times came right after I moved to Portland, Oregon. I struggled. I was able to secure a temp job at $10 an hour as an admin assistant, which brought in about $800 a month. At the suggestion of a friend, I went on food stamps to help cover the bills. It was a really, really tough moment to graduate from NYU (my dream school) with my master’s degree, and then to move to a city I didn’t really want to be in and find myself on food stamps, which I never thought would ever happen.

I felt so overwhelmed. I still had close to $70,000 in debt. There was so much anxiety, guilt and shame: I went to a fancy private school and got a not-so-practical degree.

You reach that moment where you realize that you have to commit to getting out of debt, and the only person than can do that is you. Something that I talk about in my book is that getting out of debt is very similar to the five stages of grief. I went through denial. I went through anger. I went through bargaining, depression and acceptance. And for a long time, I was angry at the system. I was angry that my parents couldn't pay for me. I was depressed about my situation, and thought I was the only one. Going through this whole cycle led me to acceptance, and realizing that nobody could help me get out of debt but me.

In January 2013, I started my blog DearDebt.com. It was really a lifesaver for me because I needed something to turn my negative energy into a positive. In my first post on Jan. 3, 2013, I wrote: "I am going to pay off this debt in four years. I don't know how because I'm making $12 an hour at a temp job but I’m going to do it." And ever since I made that declaration, my life has changed in a lot of ways, and I was able to get out of debt. In three years from that point rather than four, because of all of the things that happened: changing my mindset, side hustling, starting the blog and all of these opportunities that followed.

Find a Support System

Even though I probably had three readers at that time, I was committed to finding a community of people that were also getting out of debt. I wanted to create a safe space to talk about it. Other debt fighters found the blog, and we created a community of supporting each other. Every single month, I would write my "debt check in"—how much I paid off this month, my struggles [and] successes. People would root me on, and I would root them on, and it became this community effort of supporting each other to get out of debt.

Make More Money When You Can't Cut Back Anymore

I shared a studio apartment with my boyfriend. I didn't have a car, pets, a gym membership, and I barely went out—nothing. Aside from moving back home with my parents, there was really no more I could cut back. I hit a plateau. I was making $10 to $12 an hour at that point, and my payments were about a $1,000 a month. I did not want to only pay the interest on my debt, and so I knew I had to earn more money, and that’s when I started side hustling.

I pet-sat. I was also an event assistant, so I worked a lot of birthday parties, Hanukkah parties, New Year's Eve parties. People are looking for help during the holidays; I got paid several hundred dollars just assisting people on Thanksgiving or Christmas, and I didn’t get to spend time with my family. I worked as a coat checker. One of the weirdest gigs I did was [selling] water bottles at a rave from 10 p.m. to 6 a.m. at a warehouse in Portland. I also became a brand ambassador. If you go to a sporting event or a concert, and people are handing out free swag, and that’s pretty much what I did. Those gigs can be $18 to $25 an hour.

I was working every single day at that point. I would scour Craigslist and Task Rabbit for any gig that could pay me. I struggled for so long to find a "real job." But once I swallowed my pride and said, "how can I make money in any way possible," I saw how many opportunities are actually out there when you're not just looking at things in the traditional way.

Connect with This Money Mantra

My number one money mantra is...Treat money with respect.

I think for so long, I thought of money as this evil thing. I thought, I would never be rich, I'd never make a lot of money and so I didn’t really care for it. Once I started treating money with respect, I started getting out of debt. Treating money with respect has earned me more money, and so I can use it as a tool to have a better life—that's one of the most important things: Using money to have experiences, to live the life you want, and to spend on your values.

Listen to Farnoosh Torabi's full interview with Melanie Lockert. 
Farnoosh Torabi is a personal finance expert, the author of When She Makes More, 

and the host of CNBC's Follow the Leader and the award-winning podcast So Money. 

Read more: http://www.oprah.com/inspiration/how-one-woman-paid-off-68000-of-debt-in-3-years#ixzz4tZLtaKT1

15 Ways to Save More Money Each Month

Every time you put one of these tips into practice, it’s crucial to put away what you’ve saved.

In a matter of months, you could have a nice little rainy day fund set aside.

O - By Trae Bodge  Jul 15, 2018 (South Africanised and edited for clarity by Judy Bray)

Turn Old Bills Into Savings

It’s a relief when you finally pay off a loan or a long-running credit card bill, right? Rather than spending that money, Stefanie O'Connell, millennial money expert and author of The Broke and Beautiful Life, suggested turning those funds into savings. “If you just made the last R300 monthly payment on your loan, start sending that R300 per month to your savings account,” she says. “You can use this strategy with smaller things too, like the magazine subscription you just cancelled.

Unsubscribe

Are you paying for things, like gym memberships or smartphone apps that you don’t use? Justin Howell, a saving and investing advisor, suggests cleaning house.  “Find your subscriptions and eliminate the ones you can do without.  This could potentially save you some big bucks this year.”

Negotiate

With monthly subscriptions, memberships or other ongoing commitments, like software or apps you pay for every month, that you want to keep, Bobbi Rebell CFP® and host of the Financial Grownup podcast suggest that there may be an opportunity to negotiate a better rate. “[If] companies know you like the service and if all it takes is the right price to lure you back, that is worth the effort for them,” she says. She also suggests letting the subscription lapse, if you can, as the company may offer you some great deals to woo you back.

Bargaining

You may look for coupons and cashback opportunities as you shop, but have you tried negotiating? Michael Wheeler, who teaches a negotiations course for Harvard Business School’s digital learning initiative, says that you can sometimes score a lower price by doing so. “Start by asking for a discount in plain, clear language," he says. If you get a no, be persistent, and ask again in a friendly tone. You might be (happily) surprised at the result.  (Ask for a pensioner’s discount where applicable, a cash discount, etc)

Price Tracking

Your favourite store is known for its great prices, but that doesn’t mean you’re getting the lowest price every time you check out. Exercising a little patience can ensure that you’re getting the best deal your usual store has to offer. David Mercer founder of SME Pals, a blog dedicated to helping people turn their business ideas into profitable startups, suggests using a price tracker.   “Stores have many thousands of sellers behind the scenes who change their prices all the time as they compete with each other,” he says. “Combine coupons, when available, to squeeze the very lowest prices out of where you shop on a regular basis.”

Get Price Alerts

Gabriella Santaniello, founder of A-Line Partners, an independent retail research firm says “If the price of my desired item decreases in price, they send a price alert email.  Now that many designers have become smarter, this trick applies just as much to apparel as it does to household goods.” If you have other favorite retailers, Santaniello also recommends signing up for their email lists, joining rewards programs, and downloading its app for discounts and exclusive bonuses.

Earn While You Shop

Liz Eischen of the Kitchen Table Finances blog, has saved a bundle using rewards for shopping with retailers like (in South Africa - Pick ‘n Pay, Clicks, Dischem etc) “This has helped me save money by being more mindful of what I am purchasing,” Eischen says. “I take a few minutes before shopping to explore the current offers and identify items I can earn cash back on. These savings go directly into my savings account.”

Brown Bag Lunch

You can save a couple thousand Rands a year by bringing your lunch to work.  “The average deli meat and cheese sandwich, a bag of chips, a cookie, and iced tea costs around R…. a day. That is close to R……….. a year! By making a nearly identical lunch at home, you will spend much less.” She also says that planning your weekly menu around what’s on sale at the grocery store could save you at least 35 percent off your bill. Remember to join your store's loyalty program, and use coupons.

Enjoy the Convenience

Store pickup and grocery delivery may seem like a luxury, but it can actually save you money and precious time. “By having the groceries come to you or by picking them up at the store, you avoid the impulse purchases that can easily add 20 percent or more to your grocery bill,” says Kimberly Foss, CFP®, and bestselling author of Wealthy by Design: A 5-Step Plan for Financial Security. “In addition to the money you’ll save, the time you gain may be the biggest savings of all.”

Compare Your Prescriptions

Avoid overpaying for your prescriptions. Joe Sanginiti, CEO of FamilyWize, a prescription savings program, suggests opting for generic drugs over brand name. “Generics are equally effective and cost much less,” he says. “According to the FDA, the average cost of a generic drug is 80-85 percent lower than its brand name counterpart.” He also suggests shopping around, as prices may vary between pharmacies.

Bottle Your Own Water

If you’ve fallen into the habit of buying bottled water, you know it can add up. Instead of buying water, small business owner, Zaida Khaze, carries filtered water in her favorite stainless steel water bottles. “I estimate saving lots of (Rands) per month because I use filtered water versus bottled water bought in cases of 24,” she said. “The savings is even higher if I buy water at any event, where the price is much higher.” (Our tap water is drinkable.  Fill your empty water bottles for later use.)

Eat In

Eating out regularly is very expensive. Stan Smith, CEO of SaveDaily, a private label platform that enables ‘everyday saving’ to all, suggests starting out by trying to eat out at least one fewer time per week or month – or quarter. “Depending on how much you eat out, this can add up to many Rands per period in savings,” he says. “Do that for just a while and you have that much more in your pocket – or in your savings account.” Smith recommends that when you do go out, skip the alcoholic beverages.  Limit yourself to one drink if you typically order more.  (Order tap water, ice and lemon – huge savings.  And your body will thank you for sparing it the sugary drink.)

Declutter

As you’re doing your spring cleaning, gather all your lightly used household items and sell them to make some extra cash that you can send to your savings account. “It has never been easier to sell your surplus stuff.  It can be a simple and quick way to turn that rug you no longer need or those end tables that no longer match your décor into extra savings,” says Foss.  (We have gumtree or local library or community notice board)

Get Fit

Access your fitness content from DVDs, YouTube, or low-cost apps instead of paying for that pricey gym membership. Don't want to give up all those machines and great classes? Showering at the gym is kind of a pain, but it can be a money-saver. “If you're a dedicated fitness junkie, take your clothes for the day with you, get ready for work at the gym, and head straight to the office from there," says Tara Falcone, CFP®. "Doing so a four to five days per week can reduce your water/sewer and electricity costs.”

Avoid Fees

You can pay heavily for using the wrong ATM! ATM and other banking fees can really add up, depending on what bank you belong to. “You can avoid paying outrageous ATM fees by always using your own bank’s ATM or, even better, some online banks allow you to use any ATM in the world for free," says Alexandra Horigan, money expert for an online bank. "This is particularly great for frequent travelers who never know where they’ll be taking cash out next.” Horigan also recommends switching to a bank that doesn’t make money from “failure fees,” which result from overdrafts or paying your credit card bill late.

Added to the above list - by Judy Bray (072-341-2396 – judy@saintgroup.com) :

Use It Up, Wear It Out, Make It Do, Do Without

As much as you can, live by this.  Use up make-up.  Wear out clothes.  Make your furniture, car, linen, crockery, curtains do some more months/years.  Eat one less candy bar or cold-drink per week/month, and then less another.  Do without whatever you can do without spending money on.

Live Well - On An Absence Of Expense

Do your own housework.  Clean your own car.  Do your own gardening.  Buy second-hand.  Get plants from your friends who are thinning their garden.  Exchange baby-sitting.  Take care of your own children.  Make your own popcorn.  Watch a movie at home.  Mend and dye your clothes.  Paint your own walls and windows.  Have a “StayAtHome and DayTrips” holiday instead of staying at a hotel or bed and breakfast.  Have you tried camping?  

Correlate, Reduce, Simplify

Require as many things in your home as possible to do double or triple duty.  Take your own shopping bags.  Instead of a special spoon rest, use a side plate.  Stretch your mind.

Join the Library

Instead of buying books, courses, magazines, movies and music, borrow from the local library. Learn from the best in the world.  Borrow books and magazines from your friends and neighbours.  Return what you borrow – in the same, or better, condition than you received it.

Do Your Own And Your Family’s Hair/Nails/Makeup/Flowers

Learn – go to the (barber) with them and watch… Learn from a book/video.  Get basic equipment.  Simplify your hairstyle.  Learn to do your own hair/nails etc.  Learn to cut your children’s hair.  Trade with an amateur friend or neighbour who is talented.

Shop Efficiently

Use a shopping list.  Never shop when you are hungry, afraid, frustrated, angry, or sad or in a hurry.  Shop intelligently - less frequently (unless you are hand-carrying your shopping home.)

Think Twice – Or More

Do I need this?... Who says I really need this?...  Is this an investment that will yield income/ savings, or will it soon be gone?  How many (pairs of shoes) do I need?  How many (sets of linen) do I really need?  Will this matter in 2 or 5 years’ time?  Am I spending money I don’t have, to impress… who? people I don’t even know?!  Am I bluffed by advertising?   Is my income by working really benefitting our family?  What if I stayed home, therefore paid less tax and travel; cared for our home, clothes, garden and children, wore less expensive “work” clothes, made our own meals, tutored our children, and saved money by “doing-it ourselves,”?  A penny saved is a penny earning me interest…  Can I work part-time to “have a foot in the door” “in case…” and earn a little extra too?  In that way I’ll be more flexible time too.  How can we live on one income, even if we have two?  What if I (he/she) get sick, disabled or die?  

   

Here’s The Tricky Part…

“You don’t want to live poor to die rich… but - you also don’t want to live rich and retire poor.”  Manage your money, or your money will sly-ly manage you – Good Servant, Bad Master.

Personal finances are your sacred stewardship.  “O be wise.  What can I say more?”  (Jacob 6:12)

Avoid These Mistakes!

Since the earliest days in the history of The Church of Jesus Christ of Latter-day Saints, personal and family finances have been topics the Lord and His prophets have frequently addressed. Who can forget the Lord’s terse counsel to Martin Harris, an early Church member who generously mortgaged his farm in order to finance the initial printing of the Book of Mormon: “Pay the debt thou has contracted with the printer. Release thyself from bondage” (Doctrine & Covenants 19:35). Indeed, a substantial number of sections in the Doctrine & Covenants contain revelations from the Lord that relate principally or in part to financial matters. In these scriptures and in the nearly two centuries of teachings of modern prophets from the Prophet Joseph Smith to President Thomas S. Monson, we have been cautioned about the dangers of excessive debt and the blessings of living within our means.

At a time when concerns about family finances are widely believed to be a leading cause of marital discord and divorce, our efforts to manage our finances wisely are perhaps more important than ever. During my adult life in the Church, I have observed a number of common financial mistakes individuals and families make that, if avoided, will lead to greater peace and financial security.

Mistake #1: A 30-Year Mortgage (Bond)

With few exceptions, a home is the most valuable asset most of us will purchase in our lifetime. However, too many Latter-day Saint families in the United States purchase a home that stretches them financially beyond what is needed or what is wise. Although 30-year mortgages have grown in popularity because of the lower monthly payment they offer, I believe 30-year mortgages are a financial mistake for most families. Thirty years is too long to be in “bondage!” With a 15-year fixed mortgage, you can pay off a house in half the amount of time and save tens of thousands of dollars in interest. Making prepayments on a 30-year mortgage will reduce interest costs and allow you pay off the loan in fewer than 30 years, but if our goal is to avoid excessive debt and pay off debt as quickly as possible, a 15-year mortgage is a better financial choice. In short, if you cannot afford to finance a home using a 15-year mortgage instead of a 30-year mortgage, I believe it’s a good sign you’re purchasing a more expensive home than what is in your best financial interest.

Mistake #2: Eternal Car Payments

Life is better without a car payment. Too many people treat a monthly car payment like it is a permanent fixture in a family budget. Almost as soon as they pay off one car, they trade it in and take on a new car loan that requires another five years of monthly payments. Said simply, cars can very easily become a big waste of money. There is nothing wrong with wanting to drive a safe and comfortable car, but avoiding excessive and perpetual spending on cars, and driving cars long enough to be free from car payments for extended periods of time are smart financial moves.

Mistake #3: Worrying More about Storage than Financial Reserves

The prophets have taught that having at least some food storage on hand is an important way of living providently and fostering self-reliance. That is good counsel, and many families have been blessed during times of hardship by being able to rely on their supplies of food storage. However, I am often surprised that many families with a great zeal for food storage give comparatively much less thought and effort to building a financial reserve to assist in the event of an unexpected hardship. While food storage is important, we cannot use cans of food to pay our debts or our bills if we fall on hard times. Having a financial reserve of at least 3 months of expenses saved up and getting out of debt as quickly as possibly can bring as much peace of mind as having cans of food storage in our homes. Both of these forms of provident living deserve our attention and effort.

Mistake #4: Paying the Lord Last

I am convinced that the law of tithing is a gift from the Lord. Paying an honest, full tithe teaches us so many valuable lessons and brings so many blessings. As Elder Jeffrey R. Holland once taught, paying tithing is “a declaration that possession of material goods and the accumulation of worldly wealth are not the uppermost goals of [our] existence” (Jeffrey R. Holland, “Like a Watered Garden,” Ensign, November 2001). Over the years, several prophets have emphasized that tithing is not a principle of finance; it is a principle of faith. I believe it is a financial mistake to pay our other bills and expenses first, waiting to see if there is enough left over to pay tithing and other offerings. Instead, we will have greater peace of mind and the promise of additional blessings from heaven (Malachi 3:10-11) if we pay tithes and offerings first, trusting that the Lord will ensure our other needs are met one way or another.

Mistake #5: Waiting Too Long to Let Children Practice Tithing and Saving

We can help our children gain testimonies of the blessings of provident living by giving them opportunities to practice paying tithing and putting money into savings at an early age. Too many Latter-day Saint parents wait until their children are old enough to earn money outside the home before they teach and emphasize tithing and savings. This is a mistake because we lose the chance to teach these principles when our children are most impressionable. Using some form of allowance will allow even very young children to gain testimonies of the power of paying a full tithing and putting at least 10% of their money away in long-term savings. They can also learn the necessity of saving up money over a period of time to earn enough to pay for the things they want to have. Thus, even a very small allowance can become an investment you make that teaches your children these valuable lessons early.

Mistake #6: Not Saving Enough, and Not Saving Automatically

Savings rates for the average American household are abysmally small compared to many other developed countries around the world. Put simply, we spend too much and save too little. Too many families live at or above their means, leaving little or no room for setting savings aside.

As a good rule of thumb, pay the Lord 10% in tithing, and pay yourself at least 10% in long-term savings.

In other words, learn to live off of no more than 80% of your take-home pay. If your employer sponsors a 401(k) or other pre-tax savings plan, take advantage of it by maximizing your contributions—especially if your employer offers matching contributions. In addition, make your other savings automatic. Set up recurring transfers that automatically move money out of your checking account on payday and into long-term investments. For retirement savings, use inexpensive, diversified index funds. I try to remember that having the financial freedom to serve missions with my wife and spend our retirement years the way we envision depends critically on our choices now to save generously for later in life.

Mistake #7: Carrying a Balance on Credit Cards / Excessive Consumer Debt

In David Copperfield, Charles Dickens wrote “Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”  The difference between happiness and misery is having an income slightly, or more, above your debts versus having an income slightly, or more, below your decreasing debts. It is a terrible mistake, and burden, for any LDS family to carry a balance on a credit card and pay the accompanying interest. It is also unwise to have a large number of credit cards (one or two should be enough). Likewise, consumer debt – debt you pay off (credit card not paid in full every month, clothing, holiday travel, expensive celebrations and trips, food, home furnishings, electronics, eating out - etc) should be avoided as much as absolutely possible.  Live within your income.

As President J. Reuben Clark famously taught in 1938: 

“Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you” (Conference Report, Apr. 1938, 103).

Nate Sharp is an associate professor in the Mays Business School at Texas A&M University, where he teaches and researches financial reporting. He grew up in Holladay, Utah, served a full-time mission for the Church in the Korea Seoul West mission, and later graduated from Brigham Young University and the University of Texas at Austin. He married Holly Carroll in 2003, and they are the proud parents of five beautiful children.

-edited for increased clarity for South Africans by Judy Bray

Counsel from Judy Bray – Learn to live well enough.  Learn to live with an absence of expense.  Learn to live increasingly well – increasingly well within your income.  Learn to save more and more - monthly.  (Discover the magic of compound interest working FOR you rather than against you.)  Counsel with those financially wiser than you.  Learn from them.  Make your own choices.