When you speak with a financial advisor about your debt, most will recommend that it be paid off in a specific order: the highest interest rate to lowest interest rate. This obviously makes sense, as the debt which you are paying back the most on will be gone as quickly as possible. Assume you are in the following debt:

• Student loan of $15 000 at 6% interest
• Credit card debt of $9 000 at 19% interest
• Line of credit with a $2 000 balance at 11% interest
• Car loan of $6 000 at 5% interest.

Yes, you would be saving the most money by paying the credit card, then the line of credit, then the student loan and finally the car loan. This system works wonders with the people who have the self-discipline to stick to such a system and eliminates the debt as quickly as possible.

However, a large number of people don’t have the self-discipline to pay off this debt in this manner simply due to the fact that when you’re paying off a large debt, it looks like you’re making virtually no progress. The credit card debt in the above example is the debt at the highest interest rate, which would be best to pay off first, mathematically.

However, when you look at the numbers, $9 000 and $7 000 are still two enormous numbers. Psychologically, paying off the credit cards first is the most difficult as progress is much more difficult to physically get a grasp of.

This is when the system recommended by Dave Ramsey in the book The Total Money Makeover comes in: he recommends organizing the debt, not according to interest rate but according to total balance:

• $2 000 line of credit at 11%
• $6 000 car loan at 5%
• $9 000 credit card debt at 19%
• $15 000 student loan at 6%

Dave’s recommendation is to pay the minimum payments on all of the debts, but to put every extra dollar you can gather towards the smallest debt, the line of credit. Once the line of credit is paid off, move onto the car loan. Mentally, you’ll feel as though you’re making much more progress than you would if you were paying the credit card debt off first. This method of debt elimination is known as the snowball method.

You will end up paying more interest if you do this method as opposed to the traditional method to eliminate your debt. However, if you’re the type of person who is likely to give up paying your debt entirely if you can’t physically see results, this is definitely a better option. You may pay slightly more, but you will end up paying off your debt entirely, which is the end goal.

Popularity: 16% [?]

I’ve seen quite a few people make quite a few financial mistakes over the years, and heard of others as well. Part of saving money involves not making awful financial decisions which will cost you more in the long run. Here are five of these decisions that I strongly advise you stay away from at whatever cost:

• Payday loans. These are absolutely one of the worst financial choices you can make as once you’re in it’s incredibly difficult to get out of the loop. They charge outrageous fees that will cripple you the first time you use the service and force you to go back. From there, it’s an endless circle. If you’re stuck for cash for a few days, ask a friend or a relative for a temporary loan, use a credit card (with the full intent of paying it off of course) or try selling some books or CDs at a pawn shop for a few bucks. Anything except payday loan places

• Not having emergency funds. I couldn’t count the number of people I know with absolutely no form of emergency funds. If you get sick and can’t work, if you’re in an accident, if your car breaks down and you need to fix it, these are all things that emergency expenses are supposed to cover: the unexpected, which does happen! You need to be prepared for it, and not having emergency funds is a great way to spiral yourself into credit card debt and financial suicide.

• Paying off your debt with retirement savings. You’ll not only face penalties for doing this, but you’ll lose all growth potential that money had in the first place. If you start spending that money there’s a good chance you’ll continue to spend that money until your retirement savings are all but gone. Always do your best to keep your retirement savings for just that purpose: retirement.

• Credit card debt. This one is pretty obvious: when you’re paying up to 30% APR on credit cards, only a few years can result in you paying double what you initially did for a certain item. Try getting 0% APR cards and paying them off as quickly as possible, using this article as a guide to avoid being penalized.

• Using a HELOC to try and get rid of debt. At first glance, this may seem to be a good option: using the equity in your house to bring your debts down to a manageable level. However, you haven’t considered that while that HELOC may only be at 7% instead of 20%, the loan is over 30 years. You’ll normally end up paying more in interest over those 30 years than you would if you just did your best to pay the credit cards off within a year or two.

Stay away from all of these options. There’s no good to come of using any of them and they’ll do you more financial harm than good in the long run. A lot of them are common sense, but they do bear mentioning: if you’re in the situation where you’re doing any of the aforementioned, you need to do your best to get out of that situation for financial freedom.

Popularity: 87% [?]

If you’ve got children, one of the most important things to teach them is money management. As I mentioned in the about me section, I started learning about the stock market from looking at the charts in the Globe and Mail when I was seven years old. However, I was introduced to money from a very young age, and feel that’s a lot of the reason why I take such care of my finances. Here are some of the lessons I was taught as a child and that gave me the financial basis which has resulted in my financial independence:

When I was six and in the second grade, quite possibly one of the few things the disaster of a teacher that I had taught us was debits and credits. We had to buy and sell fake items with fake money, and then list them as debits and credits in a little book we had. It taught us to trade and the importance of keeping a positive balance, as if we ran out of money we couldn’t get any more goodies without selling something. This was such a simple exercise, and yet it taught us at six years old to take care of our money.

One thing that my mom did which I found to be really helpful was make me buy stuff at the grocery store myself. If I wanted to get a chocolate bar, she would give me a 2 dollar bill (remember those?) and I would wait until she was finished and run the transaction through as my own. Handing the teller money and having her give me back change when I was little helped teach me about spending money in exchange for an item I wanted.

I opened a savings account when I was 12 years old. Having a debit card was a big thing at that age, and it encouraged me to save my money so that the balance in my account would grow. If there was one thing I could add, it’s that I would allow children to access online banking, as it gives them another outlet to see just by how much their balance has increased and make them feel more like an “adult” who gets to look at their money on the internet.

Let kids make spending mistakes. If they make their mistakes young, the effects won’t be as severe as if they make their first mistakes when they’re older.

I was always taught that debt was bad, and that credit cards are ALWAYS to be used in emergencies only. Stressing that credit is bad and saving/investing is good is one of the most important lessons you can teach kids before they get let loose in the world. Otherwise, there’s a good chance they’ll find themselves unable to pay $3 000 in credit card debt. You can’t baby them forever, and making sure they know what they’re doing financially from a young age is a great way to ensure your children remain financially responsible for the rest of their lives.

Popularity: 31% [?]

I’m sure I don’t need to mention to anyone how huge gas bills these days are. However, with a little bit of science and a little bit of ingenuity, you can reduce that bill significantly.

1. Reduce your braking. This is one of the most efficient ways to reduce gas usage, as braking is horribly inefficient. Keep a fair distance away from other cars to avoid sudden braking, and try to coast into red lights rather than braking sharply.
2. Turn off your engine when you’re going to be idle for more than a few seconds. Having the engine running when you’re not moving is like leaving your lights on when you’re not home, but exponentially more expensive.
3. Remove everything from the back of your car that’s not essential. If you have an emergency kit, spare tire, anything of the sort can and should obviously stay, but if you keep your hockey equipment in the back permanently, take it out. The heavier your car, the more gas has to be used to haul it around.
4. Check your tire pressure. If it’s too low, you’re not getting efficient mileage, and it’s likely costing you tons of money in extra gas. At least air is still free!
5. Always maintain your speed as much as possible. When you’re accelerating or slowing down, your engine has to work harder and use more gas. This (and number 1) are the two reasons why highway mileage is often so much better than city mileage. The science behind this one works like this: mass x acceleration = work. If you decrease acceleration, you decrease the work that has to be done.
6. If you’re looking to get a new car, buy a fuel-efficient one. You can get them for relatively cheap, and considering how much you’ll save in gas, it’ll make the car even cheaper. In Canada, you can also get government rebates for buying fuel efficient cars. Natural Resources Canada lists among their top cars in fuel efficiency for 2008 the Honda Accord, Toyota Prius, the Mazda 5 and the Toyota Yaris.
7. In the summer, walk. When the weather is nice outside you’ll feel better by walking to the corner store instead of driving. Of course given geography this isn’t an option for some people, but if you are able to, try to walk instead of using your car. That’s a saving of 100%.

Following these simple tips can help tremendously reduce your gas bill over time. You should be able to implement these tips with relative simplicity.

Popularity: 15% [?]

There are a huge number of advantages to getting to know your bank tellers (and other bank staff) and it’s something I would recommend to you, especially if you’re living a frugal lifestyle due to being in debt or not having a hugely positive net worth.

One fact that most people seem to not realise is that tellers are the equivalent of customer service representatives at call centers. They can actually refund small amounts of cash for you. If you know the tellers at your bank (ie. Visit once a week or so) and you accidentally get an NSF charge, for example, you can have that refunded by sweet talking them much more easily if they have seen you around.

If bank staff know you, they will also be much more likely to not hold your cheques. This is when it’s good to be friendly with one of the financial service representatives. They can authorize the tellers to not put a hold on a cheque. The main reason banks hold cheques is because they don’t know you and they don’t know how trustworthy you are. Coming into the bank regularly and showing that you’re a devoted customer of your bank will lean the employees in your favour. Every day I see customers who come in regularly and should have everything held being able to cash cheques for over $1000. These are the customers who get their fees refunded if they want to order cheques, make a bank draft or change foreign currency. They just need to ask nicely and there’s usually a good chance they get what they want.

Going into the bank once per week to pay bills or make a withdrawal is a good idea. If you bank someplace with longer hours, try going early in the morning or between 4 and 5pm. Those tend to be the quietest hours and you won’t waste much time standing in line. Depending on how often you need your banks services, you can save hundreds of dollars per year by doing this.

Popularity: 11% [?]

One of the biggest price gouges I see in the grocery store is the price of snacks these days. Regardless of whether you prefer some healthy brain food for that pre-exam all-nighter or something salty while you’re watching this week’s episode of House, if you buy servings of snacks for a single night at the grocery store, you’re likely to get ripped off.

For healthier foods like blueberries, in the mid-winter the prices are absolutely atrocious and getting a good deal requires a little bit of planning ahead. Right now at my local grocery store it costs $3.99 for a tiny little plastic container of about half a cup of blueberries. If you snack on fruits even semi-regularly, you need to plan ahead when they’re in season. When I lived in BC, the town across the river from us was a big farming town and there were a number of fruit farms. My family would buy about 100 pounds of blueberries and then put them in ziploc bags in the freezer, where they lasted until the next summer. Even if you don’t have that fresh supply, you can get fruits relatively cheap at markets in most areas when they’re in season. This keeps you from having to spend a fortune mid-winter. Right now, a pound of blueberries costs about $8. In the summer you can usually get them for under $2 per pound. If you eat 50 pounds of blueberries in the winter, this planning ahead will save you over $300. Another alternative to spending this money in the winter is to purchase cheaper fruits: apples, pears, bananas and similar fruits are normally still found at relatively normal prices this time of year.

If you prefer something slightly more heart-attack inducing and filled with preservatives, you’re in luck! The prices on single portions of these items are still awful, but it’s much easier to save some money when making these purchases. Assume you like to eat a normal sized bag of chips every other day, just as a snack. These small bags typically cost around $1, usually a little bit more, for about 40 grams. Now this isn’t too much, but consider the price for a large bag of almost 300 grams of chips: $3.99. Yes, you’re paying four times what you did for the other bag, but you’re getting 7 and a half times more chips. All you need to do is split them into ziploc bags like with the blueberries when you get home to avoid splurging, and you’ve saved yourself some money. This works in a similar fashion with most snack foods: single sized portions are usually almost as expensive as the bulk sized bags of many different foods. Just remember that you can always split bulk food into smaller portions, so it makes sense to buy big, even when you live alone.

Regardless of your food preferences, you can always save money when buying snack. Grocery stores depend on these high-margin items, so use every advantage you can find to make sure you get the best possible price.

Popularity: 8% [?]