Rick Rolling Your Way to Riches

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This may date me. But when I was growing up I actually listened to records.

Starting with tale spinners records of Cyrano de Bergerac, and Puss n’ Boots, moving onto a long love affair with all with my parents Beatles albums, and culminating with my very first purchased 45 (Talking In Your Sleep by The Romantics) records were not just hipster trophies, or antiques. They were how you listened to music.

Nostalgia aside, the reason I bring this up is that at the time there was a ubiquitous con called the Columbia Record Of The Month Club.

The premise was that you would be sent a new album every month at a discounted price. There was no contract. You would be billed monthly. And you could cancel at any time.

So why was this a con?

Because people don’t function that way. The truth is that money automatically billed to a credit card often escapes our attention.

So everyone’s record collection who fell for this trap would include a bunch of artists who they never would’ve bought in the first place. And this pile of useless records would get pretty high before it entered far enough into the consciousness of the victim for him to cancel his account.

So what does this have to do with early retirement?

Well one of the tricks to saving more money is to con yourself into doing so. The idea here is to be your own Columbia Record Of The Month Club on the behalf of austerity.

And saving money and getting out of debt are two sides of the same record. Both involve shrinking your cost-of-living by any means necessary.

So if you have high interest debt, or would like to save more of your income in order to retire sooner, one terrific trick is automatic paycheck deductions.

If your paycheck is automatically deposited into your checking account already, the idea is to divert some portion of your check into either a savings account or (even better) into a separate checking account. ***

And you can either slowly increase the amount of money diverted from each paycheck, or you can take the “rip off the Band-Aid” approach and start off with a goodly sum.

The amazing thing is that as the amount of money in your checking account shrinks, so will your urge to spend it.

And if you don’t really see the money that’s being diverted away, the whole endeavor becomes like the old Columbia record of the month club. It’s not perceptible but the savings are happening.

Now to be sure, the less money you make the more difficult it is to trim.

And I’m no authority on austerity.

gourmet-coffee-foam-3Save More Money or the Panda Gets It

But luckily there are other advocates out there who can give you specific ideas for dramatically decreasing your cost-of-living.

My favorite is Mr. Money Mustache. His prescription involves much less driving, a more efficient lifestyle, less energy consumption, and a do-it-yourself ethic.

He reports that he lives a very cushy lifestyle spending about $25,000 a year.

And the positive flipside of making less money, is that small changes in spending translate into huge increases in your savings percentage. This is how foregoing your daily Starbucks for a homemade espresso can yield you years more of retirement.  (Just ask the Panda.)

*** If you are considering opening another checking account for this purpose, keep your eye out for sign-up bonuses. Banks will often give you up to $200 for opening a new checking account -subject to some minimum balance.  More money to pay down your debt/kick up your savings!

(You see, there are some areas where the travel hacking mentality and the early retirement mentality overlap.)

Take-home point: It’s a great idea to use automatic deposits to divert a percentage of your income towards savings/paying down debt.

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