Recently, in a meeting with clients, we realized their car loan would be paid off in two months.
I rang the
and said “That’s terrific and now I recommend you…” and they finished my sentence shouting in unison, “capture those dollars!”
I guess they’ve heard me say that before….probably many times! It’s my standard response to increased cash flow.
Why am I so fixated on capturing dollars? Because unless you win the lottery or inherit a big pile of money* you must spend less than you earn in order to build wealth.
*Note: I don’t recommend playing the lottery and inheritances don’t always materialize….
Capturing dollars can keep them from getting sucked into what I like to call the VORTEX OF SPENDING.
It is very easy for dollars to get sucked into this vortex, never to be seen again.
When you pay off a loan or reduce some other recurring expense, be intentional about what happens to those dollars going forward.
In the case of paying off a car loan, you might opt to divert those dollars to a new savings account earmarked for the next car.
At Capital One, to name just one such bank, you can set up multiple accounts. A lot of people, myself included, like having different pots of money with various “jobs”.
You can set up monthly auto-transfers to move the amount that was the car payment into the “Next Car” savings account. Currently Capital One is paying 3.3% interest on their savings accounts.
Paying off loans or reducing recurring expenses is one source of dollars to be captured.
Another source can be your regular paycheck. Many of my working clients get paid every 2 weeks. That means there are two months a year with three paychecks instead of two.
A few of my clients get paid weekly and that means there are four months a year when they have five paychecks instead of four.
These ‘extra paychecks’ can be an opportunity to capture dollars.
Some of my clients use these extra paychecks to fund their vacation account.
Whenever you get a raise consider whether some or all of those dollars can be diverted into your employer retirement plan (such as a 401k) and/or a Health Savings Account. Doing this every time you get a raise can really add up over the years!
If it’s been a while since you reviewed your expenses, take some time this weekend to scour your bill paying account and credit card statements. Try to find some dollars to be captured.
If you get paid every two weeks or every week, look at the calendar and make a note of which months have the extra checks.
Happycapturing and beware of the vortex of spending!