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Recently, I had a lengthy conservation with a good friend of mine who had a ton of basic personal finance questions contained within. I thought it might be interesting to start an irregular “Your Money 101″ series to answer and explain some of his questions.

The majority of people out there make broad statements like debt is bad period. Over the last couple of years, I’ve come to learn that not all debt is bad and that’s the truth. There are many cases where debt can actually be a good thing. Yes you heard me. 🙂

Here are some examples of situation where debt is actually good:

Debt with very low interest rate or no interest. Any time you can get debt with an interest rate below 4%, it’s a good deal. If nothing else, you can literally take that money, put it in a high-interest savings account, and turn a profit.

Debt that allows you to acquire an asset that won’t immediately start depreciating. This means that when you go into debt, you’re acquiring something that will hold its value. This usually means buying a home; even real estate at times doesn’t fall in this category, as it can be quite unstable.

The reason people claim that debt is bad is because in the vast majority of situations, it is bad. Why? For starters, you are a huge risk. Think about it for a moment: how often does “something” come up and you “have” to spend more money? Ever had an unexpected life event occur and drain all your funds? Ever wished you could change jobs – or even taken the leap and done it? These are all examples of risk that you introduce into life little mixes.

In a nutshell, the only debt that’s worthwhile is debt to own a home and debt which you can directly use to earn more. Otherwise, it simply isn’t worth the risk.

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Yesterday I wrote a post on how powerful your piggy bank can be just by collecting the extra change in your pocket at the end of each day, and I thought it would be fun to write a post on the different ways to trick yourself, to get around obstacles, to boost your accounts, without it hurting.

For a lot of people in Dominica improving their finances improves their happiness – in general. I know lots of people who are happy only when they’ve money to spend. So I though it would be important to share stuff that’s worked for me.

I’m in the best financial shape in my life, despite having one source of regular income which is my job. Thanks to my penny-pinching program 🙂 I’ve eliminated all my debts and I now able to save as much as I can.

Here’s what works for me — please note that, I’m not saying they’ll work for everybody. Share your tips and tricks in the comments!

Use more cash. Instead of charging things to credit cards or debit cards. In the past three years it’s much easier to own a credit card(s) – in fact banks now are literally begging you to apply for a card. Using cash for non-bill spending such as eating out, gas, groceries makes the spending more real, and there’s an added advantage of knowing when you’re out of cash, instead of spending more than you own.

Small monthly savings transfers. I got this idea from my grandma, who automatically deducts $20 a week from her check to savings. I decided that I could live with $100/month without really feeling it — it’s a relatively small transfer that I barely notice, and I save about $1200 a year.

Stay home. Going out makes you more likely to spend unnecessarily. You eat at restaurants or go out drinking with your friends every weekend. It’s hard to avoid spending when you’re on the road. Instead, stay home, and find free entertainment. It’s also a great way to get closer with your family.

Cook at home. I know, it seems more difficult than eating out. But it doesn’t have to be hard. Throw together a quick stir-fry with some vegetables and either boneless chicken or (my favorite) mince meat. Not only is this much cheaper than eating out, but it’s healthier.

Exercise. Staying healthy is the best way to avoid costly medical bills later.

Pay savings and debt first. When you sit down to pay your bills, make the first bills you pay be your savings transfer and your debt payments. If not, if you pay them last … you’ll often end up shortchanging them. But if you pay them first, make sure you can still pay your rent or mortgage, utilities, groceries and gas …

Find happiness in life, not spending. Many times I meet people buying lots stuff because they think (subconsciously perhaps) that it will bring them happiness. They just HAVE to have the latest gadget or shoes or cars. It’s so fun! And yet, you buy that stuff, and you’re only happy for a day or two at most. Then you just need to buy more. It’s a never-ending story. Instead, learn to love life. Find joy in nature and the people around you. Do something you love, be it exercising or reading. There’s so much in life to make us happy, there’s no need to find it in spending.

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I have a small cardboard box (piggy bank or cash-tin) that sits on my kitchen counter. Inside it is my pocket change from the last several months.

It seems like such a simple idea, but it can be quite powerful if you keep up with it. At the end of each day, I take that change and put it in the box, where it remains for a while. I usually let it build up for about 3-4 months period, which is when I usually stop by my bank branch anyway to do business. The day before I just count all my pocket change, bag them in the amounts specific by the bank and just deposit into my account. The last time I counted all my pocket change, I made a deposit for EC$87.25 into my savings account. From there, I usually transfer it into a high yield savings account that will earn interest on my accumulated change.

Every little bit helps and it takes almost no effort at all. On an average day, I have about 90 cents in pocket change; I used to have much more, but I started using up all the quarters to pay the bus to and from home. But with 90 cents everyday that means I usually have around twenty seven dollars in the jar at the end of each month, which often feels like “free money.”

It’s a simple and nearly effortless way to build up your personal savings.

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