Old or young, it’s never too late or too early to prepare for the future, or just to practice healthy financial habits – to have more while spending less.
Deacon Hayes and his wife were drowning in debt. They set out to learn how successful people handled their money and discovered they were doing it all wrong. Eighteen months later, Hayes and his wife had paid off $52,000 in debt. This prompted him to start the website WellKeptWallet.com to share his experience and some tricks of the trade.
Deacon Hayes took a moment out of running Well Kept Wallet to answer a few of our questions and share some of his experiences.
First of all, could you introduce Well Kept Wallet, for readers who haven’t visited before? What is your main goal, and what separates you from other financial advice blogs out there?
Well Kept Wallet is a website dedicated to helping people achieve their financial goals in life. What sets us apart is our story and the practical advice that comes with it. We were able to pay off a large amount of debt in a short period of time, and I share exactly how we were able to do that with our readers.
You were able to pay off $52,000 in 18 months, which is incredibly quick. How were you able to do it? How much was your lifestyle affected at that time?
It really came down to two things: We cut our expenses drastically and we increased our income. The first thing we did to figure out what expenses to cut was to put our entire financial picture on one piece of paper. We were able to see where there were leaks in our finances as well as ways that we could make extra money. It was a lot of work over that 18 months, but it was definitely worth it.
There was a recent post on Well Kept Wallet about a “zero sum budget.” What is a zero sum budget, and how can it be used to help you save?
A Zero Sum Budget basically allots every penny of your income, which essentially leaves you with zero money in hand at the end of the month. This way, every dollar is spoken for and it will help you keep from overspending.
A lot of our readers are worried about outliving their retirement plans, where they would no longer be able to afford to live on their set income. What are some things that people should be doing to prepare for this phase of their life? Have you noticed any trends to suggest if this inflation will continue at the rate it has been, since the ’80s? Will it increase? Decrease?
People should be investing at least 10 percent of their income on a monthly basis into tax favored accounts. If they started investing later in life, then they need to increase that percentage. They should also be diversified into multiple asset classes when it comes to investing. I have seen a number of people who have the majority of their nest egg in their company’s stock, and that is a disaster waiting to happen. As far as inflation, it is hard to tell what the future holds. The reality is, if you invest in equities, your money will grow with inflation as those companies provide goods and services that will rise when inflation rises.
You also wrote a blog post about personal finance apps for smartphones. What are a few tools you absolutely couldn’t live without, for sticking to a budget? How can technology be useful for getting your finances in order?
I use the Mint app on a weekly basis. My wife has it on her iPad and I have in on my cell phone. Every time that I make a purchase, she can see it and vice versa. It is a great free resource for staying on a budget, and I highly recommend it. Other than that, I also have used an app called ShopSavvy, which allows you to scan the barcodes of products to let you know if you can find it cheaper online. For instance, I was in the pet store looking for a dog crate. I scanned the barcode in the store and it notified me that I could purchase it for less online.
How has Well Kept Wallet kept you on the saving path, and how important is it to be accountable and stay focused? What are a couple of ways people can do that?
Well Kept Wallet has been huge in helping me stay accountable. When you have people that are reading what you write, there is a level of accountability that you can’t find anywhere else. However, if people don’t have a blog to help them stay on track, they should find someone that they trust and that is good with money to hold them accountable. They should meet on a monthly basis and be open and honest about their finances.
There was a really excellent guest post written on Well Kept Wallet about investing for retirement. Could you touch on some of these points, like the difference between defined benefit and defined contribution, and tell us some benefits and drawbacks of the different investment packages, like stocks, bonds, and mutual funds? What are some things people should keep in mind when looking at their IRAs and 401(k)s, and how should somebody decide what is right for them?
A defined benefit plan is where one will receive a specific amount of money at retirement each month, like a pension, where a defined contribution plan is where you contribute a certain amount of money each month (think 401(k)). When it comes to different types of investments, they each have unique characteristics. Bonds are generally lower risk but also generate a lower return. Individual stocks can have the potential for higher returns; however, there can also be a higher risk associated with them. Mutual funds are a great investment vehicle because you can buy multiple companies in one transaction. This can reduce risk because your eggs are not all in one basket. When determining how one should invest, they should factor in two main considerations: risk tolerance and time horizon. If you are not much of a risk taker, then bonds and mutual funds may be a good option for you. If you are young, however, and you have 30-40 years to invest, then perhaps you will invest differently because risk is not as much of an issue. In addition, make sure to look for funds that have a low expense ratio and at least a 10-year track record with solid returns.
You’ve interviewed financial experts for Well Kept Wallet. What kind of expert advice did you get for preparing for retirement?
The most important piece of advice I have received is to have a long-term perspective. The stock market will fluctuate, but if we are not going to touch that money for 20 to 30 years, what does it matter what the stock market did this week? We need to keep a long-term view on investing so that we don’t let our emotions dictate our investment strategy.
You talk about saving, cutting expenses, and selling things you don’t need as ways of reducing debt. What are a few of your personal favorite ways to do each of these? How much could people hope to save over the course of a year?
People are often amazed at how much they will save if they are just intentional about their finances. I usually can help people save $300-$500 per month when I look over their budget. Some key areas that people can usually cut back are groceries, eating out, and entertainment. When I go grocery shopping, I try to buy clearance meat as it is a fraction of the price; you just have to make sure to cook it right away. When it comes to eating out, we like to go places where my wife and I can eat for under $25 like Chili’s or Applebee’s. When it comes to entertainment, we like to go to matinee movies as they are about 30% cheaper than if we went during the prime time.
Finally, any parting words of advice, motivation, or things you’d like people to know?
You need to understand the “why” behind what you are doing. If you are getting ready for retirement, you should know what you want to do during retirement, and that will be a strong reason to plan for it. If you want to get out of debt, you need to know why you want to get out of debt. For some people, it is to have peace of mind. For others, it is to have extra money each month to work with. Whatever your reason is, make sure to keep it at the forefront of your mind so that you will stay motivated to achieve your financial goals in life.
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