CHARLOTTE, N.C. — Although there are signs that inflation is easing up, a recent Gallup poll found that many Americans are still worried about the economy and having enough money to make ends meet.
Mark Henry, the CEO of Alloy Wealth, says frugality is one way to achieve financial security and peace of mind. The first step is building a safety net, so you’re ready for a sudden car problem or burst water pipe.
“It prepares you for the unexpected in life,” Henry said. “Everybody knows this person. It seems like they go from one emergency to the next. What I found is, the more you’re prepared for the emergencies, the less they actually happen.”
Henry says your top priority should be to have an emergency fund. And while it might feel counterintuitive to save money before paying off credit card debt, Henry says it will give you more flexibility.
“Build the emergency fund first, then attack the credit cards,” Henry said. “If you’ve done the emergency fund first, now the credit card’s paid off, you can go to the emergency fund, handle the emergency and then refill it without going into debt.”
Henry recommends putting three-to-six months’ worth of complete living expenses in cash in a high-yield savings account with no restrictions on withdrawals. That way you can easily access your money in an emergency.
If you want to see where is your money going, Henry said the first place to check is your automatic withdrawals. It’s convenient for basic expenses, but those tiny debits can add up when it comes to extras.
“I love auto pay. I love having bills that I know I have to pay — power bills and things like that — automatically withdrawn,” Henry said. “But what about all the other stuff, the streaming services? You have 12 of them, you haven’t turned on one of them in six months. You don’t need it.”
Another good tip, according to Henry, is to not carry a balance on your credit cards. Instead, use rewards programs to your benefit.
“If you can, and you know you can pay it off every month and you’re only putting things on there like groceries, I put them all on my credit card,” he said. “You have to research, but I have one that gives me five times the points on groceries.”
If you’re struggling to pay it off, Henry says it’s best to avoid using a credit card. But don’t close it, because that can lower your credit score.
So what can someone do if they cut down on unnecessary expenses and still don’t have wiggle room? What’s left?
“If we still don’t have room in the spending plan for doing the emergency funding stuff, let’s talk about what job we’re going to get next,” Henry said. “Can we deliver pizza at night? Can we DoorDash? Can we Uber? What are we going to do to create extra cash flow to develop a proper spending plan in our lives?”
Henry said the goal is to have better financial stability, which lowers stress and helps people be better prepared for emergencies. It also helps create better investment opportunities to make our money grow.
