The Life You’ve Always Wanted?

August 8, 2010 10 Comments

We all have our ideas of what the “perfect life” would be like but often the images in our mind are a far cry from the reality we are living.  If you were able to travel back in time and ask a younger version of yourself if this is the future they’d choose for themselves, what would their answer be?  Twenty years ago, could you have envisioned the life you have today?  Is it everything you’d imagined or have your dreams evaporated into thin air?

Chances are, the life you are living today is nothing like the life you expected to have.  You sold your ideals for a dollar bill.  Why?  “Because that’s just what adults do.” We have to make a living to pay the bills.  There’s food to buy and television to watch.  How are we supposed to save the world when we’re up to our eyeballs in debt?  The mortgage isn’t going to pay for itself, is it?

“It is what it is.” There’s no time for dreams.  Dreams don’t pay the bills or put food on the table.  Our younger selves didn’t understand what it meant to be adults.  We have obligations now and we’ve built our lives around some idea of what it means to be a “responsible adult” in today’s world.  What we ended up with is a career that steals our time and energy, a mortgage that drains our income and debt from all the Stuff we bought to furnish and decorate our home.  We have many thousands of dollars in Student Loans and a couple of cars to pay for.  Oh yeah, and the credit cards…

It looks like being an adult isn’t all that we’ve been led to believe.  All of our lives we’ve been told that adults are “responsible”, implying that it’s somehow more virtuous to fall in line and follow the leader than it is to follow our youthful ambitions.  The “responsible” thing to do is find a job, get married and have children, buy a house and a couple of cars, then keep your nose to the grindstone until it’s finally time to retire.  When that day does come, we hope that our health will last long enough to enjoy the life of our dreams; the life we’ve been waiting our whole life to live.

And what has it all amounted to?  A garage full of Stuff we never really needed in the first place, kids that seem to resent our very existence unless we’re buying them something, a spouse that we barely seem to know anymore and a huge house we aren’t able to enjoy because we are at the office earning a paycheck to pay the mortgage.

Sure, we have all the Stuff we could ever imagine.  We drive nice cars and wear nice clothes.  Our home is decorated like a magazine cover and on the weekends we are able to relax with a cold beer in the backyard.  On the surface things seem wonderful.  A little deeper though and things don’t look as good anymore.

What are we sacrificing to create this image of the “perfect” life?  Our time, our energy, our sanity?  If the average person starts working fresh out of college at the age of 22 and retires at 67, that’s 45 years of life sold for a dollar bill.  We’re trading our life to fill our garage with junk, for a heap of metal to take us to a job so that we can pay for that same heap of metal.

What if there were a different way?  What if you didn’t have to spend your entire life working?  Would you do it?  If you knew that in 10 years you could be financially able to walk away from your job with enough money to pay for all your expenses, would you have the ambition to make it happen?

There is a way, it is possible!  The only problem – of course there’s a problem – is that to get there, you have to minimize your spending and save.  “But that’s Un-American!” Our entire lives we’ve been told to “get out there and boost the economy.”  After the attacks on September 11 we were told to go shopping as a way to stand up against terrorism.  Does that mean we’re supporting terrorism by saving money?  Of course not!

What I’m talking about isn’t a new concept.  It isn’t impossible.  It’s been done before and it’ll be done again.  And not just by a few outliers but by many thousands of people.  Will you be one of them???

What’s the secret?

Live Frugally: Cut your expenses to the bone.  Anything that doesn’t offer real value to your life is out.  That might mean going without a contracted cell phone, cable television, TiVo or Netflix.  Find alternatives or other ways to occupy your time.  It may seem impossible now but you can live without these things.

Get Out of Debt: You can’t be financially independent when you’re in debt.  Get out, get out, get out! By adopting a frugal lifestyle, the extra money you’re able to save can be applied towards eliminating your debt.  After you’ve saved up enough money to cover six months of living expenses, every penny should be thrown at your debt.

Save: Once you’ve paid off the last of your debt it’s time to save like never before.  It may take you a few years, maybe even ten or 15, to save enough money to become financially independent but that’s better than 45 years!

Invest: This is where the magic is!  With the money you’ve saved, you can invest it into conservative investment vehicles which will pay you interest in fixed intervals over a specific length of time.  If you’ve saved and invested enough, this interest will cover all of your monthly expenses.  Now your money is working for you, not the other way around!

If you’d like to learn more about the process outlined above, I recommend checking out the book Your Money or Your Life by Vicki Robin and Joe Dominguez.

Filed under Book Reviews, Budgeting, Career, Consumerism, Debt, Employment, Family, Freedom, Frugality, Goals, Investing, Lifestyle Engineering, Money, Opportunity, Potential, Preparation, Prioritizing, Retirement, Savings, Spending

Feeling a Little Like John Kerry

June 10, 2010 2 Comments

I’m the type of person that when I make up my mind, I stick to the plan.  Lately, though, this hasn’t been the case.  I’ve struggled to stick to spending plans, failed to keep a balanced budget and have been indecisive about whether to save money or pay down debt.  Cue the Swift Boat Veterans!

Even more than you’re probably sick of hearing about my struggle with my spending and the battle to balance savings and debt repayment, I’m sick of struggling to reach a solution to the problems.  It is frustrating to continually fail at reaching my spending goals and even more troubling to realize that what had been a surplus at the beginning of the year has become a deficit.

Exposing these challenges fills me with fear and discomfort.  It is a lot more fun to share the accomplishments, the highlights of life and inspirational stories.  It isn’t as enjoyable to broadcast my weaknesses and uncertainties and I don’t like sharing my insecurities and self-doubt.  I don’t like it but I want you to know that I struggle with the same challenges as anyone and I want you to realize that doing the right thing isn’t always the easiest.

It is a battle always in perpetuity.

I will continue to struggle and fight these battles so that when I come out at the end of all of this, I will have the comfort of knowing that I have fought to do the right thing the entire time.  In the process surely I will make mistakes and maybe even fail.  I will be wrong and do stupid things at times.  I will satisfy my impulses one day and regret the decision the next.

Despite all of this, there is an end to the war and it isn’t over until I have won.  It isn’t over until I have defeated my enemy; debt.  It isn’t over until I am consistently reaching my savings and retirement goals.  This battle cannot be lost until I choose to give up and accept defeat and as much as I may vacillate from time to time, I will persist and I will win.

We must fight the battles in our lives that are worthy of fighting and realize that defeat only happens if we make that choice.

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Check out Pop Economics’ Carnival of Personal Finance #261 which featured this Hundred Goals’ article!!!

Filed under Budgeting, Debt, Goals, Life, Money, Preparation, Prioritizing, Random Thoughts, Savings, Spending, Success

Eating Ourselves into Debt

June 6, 2010 1 Comment

With all the ventures we have been pursuing in our lives, no doubt a lot has changed in the past few months.  Some of us have had children, moved into a new home, started a new job or lost an old one.  Maybe we are on the cusp of a new beginning, starting our own company or thinking of marriage.  No matter where we are in our lives, even if it seems as though life has been pretty dull lately, now is a great time to take another look at our budget.

“I don’t have a budget.”  Then today is your lucky day!  It is time to take control of your finances and create one.  You get to tell your money where it will be spent.  There will be no more uncertainty of where your money is going.  It is the dawn of a new era in your finances!

I created a budget at the beginning of the year based on actual and expected expenses.  When I made my budget I was running a surplus.  I budgeted for debt repayment and savings and still had money left over to use for pocket cash.  I used the extra money to help pay for some of the expenses of my travels around the world and a candy bar here or there when I wanted one.

Since setting up my budget, my life has remained relatively unchanged.  I didn’t move, no babies were born, marriage is still somewhere beyond the horizon.  Everything seemed to be headed in the right direction, yet, despite the appearance of a stable financial situation, when I re-evaluated my budget recently, something was amiss.  I found myself with a monthly deficit.  In a year’s time, the balance in my bank account would drop hundreds of dollars even though I was doing everything I should have been doing according to my budget.

What had changed?

When I revised my budget, I replaced the expected expenses of the original budget with actual expenditures over the last few months.  In addition to some recently added expenses, our actual grocery expenses were much higher than I had budgeted for at the beginning of the year.  This comes as no surprise considering how challenging it has been to bring this expense down in recent months.

Earlier this year we were eating meals that were cheap and unhealthy.  Processed food was all too common and fresh vegetables were pretty much absent from our diet.  When we prepared meals at home most of the ingredients came from a box, can, carton or bag.  Cheaper?  Yes.  Healthy?  Not at all.

We wanted to dramatically change our diet so we donated all of our processed food from our cupboards to the local church and restocked our shelves with foods that were healthy.  Fresh fruits, vegetables, fresh meat.  The recipes we used called for ingredients we had never heard of.  Strange and exotic spices began filling our cupboards and our grocery bill climbed.

Even as our spending grew, our budget didn’t change to reflect the increased costs.  We were making smarter decisions about what we ate but ignored the cost.  The money we were spending in restaurants was declining now that we were cooking meals at home and we weren’t eating out as often, however, the drop in restaurant spending didn’t make up for the inflated expense of the groceries.

How do I plan to turn the deficit back into a surplus?

Grocery spending (and restaurant spending) is what got me into this mess in the first place and will be the first category that will be cut.  I will not be buying macaroni and cheese to make these cuts.  The reduction in spending will boil down to meal planning.  Now that we have many of the basic ingredients for our new diet, I expect the costs associated with our diet to begin to decline.

I will create a zero-based budget, which means every penny will be accounted for somewhere on my budget.  No more surplus money floating around.  I will create individual accounts for specific goals such as my Emergency Fund and  Travel expenses.  My debt repayment goal will remain unchanged for the time being, though once my budget is balanced and flowing correctly, I hope to increase the monthly payment by an additional $100.  Each month I will transfer the budgeted amount into those accounts.

I have also added another category to my budget; Entertainment.  When there was extra money every month, it was easy to spend $30 to $40 on a date with Erin.  Now that I am spending more money than I bring in, it is time to tighten the belt and adjust accordingly.

That’s the plan!  Cut spending, begin a zero-based budget, no more slush fund and new budget categories for Travel and Entertainment expenses.

How often do you check your budget?  Once a month is probably better than twice a year!

Filed under Balanced Diet, Budgeting, Food, Money, Spending

Personal Finance Update

February 14, 2010 3 Comments

At the beginning of the year I wrote an article titled Attention to Detail: Finances where I discussed my financial situation as being weak.  Having focused almost entirely on debt elimination, I have left myself in a position where my goal of becoming debt free is able to be undermined in an instant.

While I was paying off debt, my savings account was ignored and I emptied my Emergency Fund in order to pay off the last of my Auto Loan.  While all of my effort has been for the greater good, I have been living from week to week as a result.  To find balance in my finances, I made the following declaration:

“I will establish a savings plan to compliment my debt repayment plan.  In doing so, I will create a balance in my finances which will help accomplish both goals simultaneously.”

By the time February arrived I still hadn’t been proactive in finding a balanced approach to my finances.  Instead, I was focusing exclusively on rebuilding my savings account.  I managed to put away $650 in that time, however, my debt repayment plan was pushed aside and largely ignored.  I even procrastinated on personal financial obligations in order to boost my Emergency Fund.

While I succeeded in creating a small financial cushion, my other goals slipped through the cracks and I lost an entire month of repayment.  Instead of further perpetuating this imbalance in my finances, I made a promise to create a budget that would balance my savings goals with my debt repayment goals.  I am happy to say that today, that goal is accomplished.

I have a budget that allows both savings and debt repayment.  The only disappointment in this budget is that working at both goals simultaneously slows down progress on each.  I had hopes of being able to pay off about $15,000 of Student Loan debt in the next year and a half.  This was highly ambitious to begin with and now seems even more unrealistic.  Regardless, I will do all that I can to pay down my debt as quickly as my financial situation allows.

In addition to creating a budget, I have created accounts specifically for the expenses outlined in my budget including Household Expenses (Rent, Utilities), Variable Expenses (Cable, Internet, Cell Phone and Food), Auto Insurance and Emergency Fund.

It is a start, and while there are flaws, it is a beginning towards a more stable and balanced approach to my finances.

Filed under Budgeting, Debt, Savings

The Last of My Debt: Student Loans

December 5, 2009 6 Comments

Contractually I am under no obligation to begin repaying my Student Loan debt.  I could care less about contracts.  I want this debt gone and I want it gone as quickly as possible.  That means I must create a plan.

My Student Loan balance is currently at $29,241.94, not including accrued interest which is $1,735.50 for a grand total of $30,977.44.  Owing this much money does not make me feel good and I have a burning need to eliminate this debt.  The good news is that now that I have paid off my car loan, I have an extra $328 a month to apply towards my Student Loans without making any changes to my lifestyle.

The problem with only paying $328 a month means that I won’t be out of debt until 10 years from today.  That is too long.  The thought of paying down debt for the next ten years is overwhelming.  I don’t want to hand my paycheck over to some faceless company for “the rest of my life.”  Instead of feeling overwhelmed, I have decided to focus my attention on the “most important” portion of the loan, the $15,102.94 in Unsubsidized loans at 6.8% interest.  I hope to be able to eliminate this debt by the time I graduate in May 2011.  That gives me 18 months and a challenging, yet possible, goal to work towards for a short period of time.

In order to accomplish this task, I have to come up with $839 a month.  That is going to be hard but I hope it will not be impossible.  The budget that I have drafted up allows $619.50 a month for debt repayment.  My budget currently includes saving 10% of my Gross Income for my Emergency Fund because I drained that account in order to pay off my car.  Now it is time to build that back up to a reasonable amount.  I probably won’t reach my goal of saving $5,000 since I’d rather put my money towards debt repayment.  I’ll boost my EF to an amount that will equal 3 months of living expenses after which I will begin using the money that had been going into savings for debt repayment.

During this period of debt reduction I will adjust my budget on occasion to allow for discretionary spending such as travel expenses and unexpected costs such as clothing.  I know that this is not an ideal situation in terms of “proper” budgeting however, since I rarely buy clothing (I finally broke down and bought a new pair of jeans after the butt on my favorite pair of jeans literally fell apart) and I don’t usually plan very far in the advance for travel, these expenses are too random to plan for effectively in the long term.  Still, by the end of 18 months, I want the Unsubsidized Loans gone and that is my goal.

This begins today and to prove that I’m serious, I sold one of my most prized possessions, my 5-string bass guitar and the amplifier that went with it.  Once I put the check in the bank, that money is going directly to paying off my Student Loans.  I sacrifice today so that I won’t have to sacrifice later.  Selling that guitar was one of the most difficult things I have had to do.  I focused on the emotions attached to it, how hard I worked washing dishes for $5 an hour in order to earn enough money to pay for it and how much I loved playing it back in the day.  The reality of the situation was that I hadn’t played it in years and having it sitting in the closet wasn’t doing me any good.

Debt sucks!

Filed under Budgeting, Debt, Education, Goal Updates, Money, Preparation

Ten Commandments of Goals & Money

November 28, 2009 2 Comments

"Ten" by koDesign @ Flickr

“Accomplish Your Goals While Managing Your Finances.”

At times, the two seem to be at odds with one another.  How can a person manage their finances when goals are oftentimes lofty dreams of indulgence?  A waver in one direction has an immediate impact upon the other.  The secret to is to find balance.

For the past year I have been toeing this line in my own life.  I have managed to pay off the last of my credit card debt and paid my car loan off more than a year early.  At the same time I spent a month traveling North America, spent a night under the stars of a clear California sky and climbed Mount Saint Helens.  This experience has brought me to some conclusions.  I’ve singled out the ten most important things to consider when you begin your journey towards accomplishing your own life goals.

The Ten Commandments of Goals & Money:

1) Know Thyself: Any successful journey in life requires some degree of foresight and planning.  Your future is no different.  Take time to consider what your values are and where your passions lie.  Create a list of goals and search for a common theme.  Use this as a compass to help orient yourself in the direction you want your life to take.

2) Happiness Is NOT “Out There”: Our focus frequently rests upon what we do not have or those things that are not ideal in our lives.  We set goals as a way to better our lives, not realizing that our focus on improvement is the reason we are dissatisfied with our lives today.  We trick ourselves into believing that happiness can be found in a pay raise or that a boob job will make us beautiful.  This isn’t the truth.  Happiness cannot be found “out there”, it comes from within.

3) Follow Your Heart: Too often we ignore what is in our hearts, opting instead to think with our head.  While our brains have great capacity for extraordinary intellectual achievement, sometimes they hinder our spirit.  Listen to your heart.

4) Money IS Important: Money does not equal happiness but money is important.  Without it, our focus would change from accomplishing goals to struggling to survive.  It is important to be fiscally responsible and to find a balance between today and tomorrow.  Seek harmony in your finances.

5) Know Your Priorities & Align Your Actions: There is a difference between saying and doing.  It is easy to say you value something.  It is not so easy to express your values through action.  It is crucial that we align our values with our actions if we hope to live a life which is in harmony with our priorities.  In doing so we are able to live guilt free, knowing that we are doing what we believe is the right thing.  At the end of the day we can rest our head upon our pillow with a clear conscious.

6) Modify Your Internal Dialogue: We are too hard on ourselves.  Instead of building ourselves up, we break ourselves down.  We focus on our flaws, the things that we need to improve upon.  We ignore our talents, our individuality.  Learn to love your imperfections, they are what make you unique.

7) Debt is Slavery: We may not be pulling a plow across the earth like our ancestors but we are no less of a slave to our debts, however, we are our own masters.  Whenever you feel it is time to break free from the binding chains of debt, you are in control to make that decision.  The more debt you accumulate and each dollar you waste is another day of slavery.  It doesn’t need to be that way…break free.

8) Stop Making Excuses: If you think about something long enough or hard enough, you can be certain that you will always find a reason not to do something.  Making excuses is not productive.  Stop.

9) The First Step is Always the Most Difficult: The hardest thing about going for a jog is putting on the shoes.  After that, things tend to fall into place.  The same can be said for most aspects of life.  Overcoming inertia is difficult and may require a leap of faith, a request for assistance or admitting you don’t have all of the answers.  This simple act may be the catalyst to major change in your life.

10) Knowledge is Power: The other day I was reading a blog post and read the following:

Uncertainty is caused by a lack of knowledge.  Hesitation is the product of fear.

This simple thought struck a chord and as I thought more about it, Fear controls so many aspects of our day-to-day lives.  We hesitate out of fear and fear what is unknown.  By educating ourselves we remove the unknown variables.  We eliminate the uncertainty.  The more we know, the more confident we become as an individual.  Knowledge is power.

Filed under Budgeting, Confidence, Debt, Education, Goals, Life, Motivation, Opportunity, Passion, Potential, Preparation, Prioritizing, Savings, Spending, Success

Fiscal Tendencies of the Poor

July 30, 2009 1 Comment

It would seem that the body gradually becomes accustomed to living on the fat of the land in good times and going hungry in bad times. Indeed, hunger destroys any resolution for reasonable budgeting in better times to come by holding up to the eyes of its tormented victim an eternal mirage of good living and raising this dream to such a pitch of longing that a pathological desire puts an end to all restraint as soon as wages and earnings make it at all possible. The consequence is that once the man obtains work he irresponsibly forgets all ideas of order and discipline, and begins to live luxuriously for the pleasures of the moment. This upsets even the small weekly budget, as even here any intelligent apportionment is lacking; in the beginning it suffices for five days instead of seven, later only for three, finally scarcely for one day, and in the end it is drunk up in the very first night.

Often he has a wife and children at home. Sometimes they, too, are infected by this life, especially when the man is good to them on the whole and actually loves them in his own way. Then the weekly wage is used up by the whole family in two or three days; they eat and drink as long as the money holds out and the last days they go hungry. Then the wife drags herself out into the neighborhood, borrows a little, runs up little debts at the food store, and in this way strives to get through the hard last days of the week. At noon they all sit together before their meager and sometimes empty bowls, waiting for the next payday, speaking of it, making plans, and, in their hunger, dreaming of the happiness to come.

I grew up in a poor household.  We never had much money for anything beyond the basic necessities.  If there were ever a time when there would be extra money around, instead of saving it for the future, it was squandered on pleasures of the moment; an extra large meal or a toy for myself or my brother.  Instead of working to rise above living paycheck to paycheck, our constant struggle was ensured by this way of living.

As I grew older I continued the lessons I had learned as a small boy.  Any money left over at the end of the week was meant to be enjoyed.  I worked so hard to earn it, I should have some for my own pleasure.  What I wasn’t able to realize was that I was perpetuating my financial struggle, just as had been the case during my childhood.  Instead of saving my extra few dollars to help with next months rent I was spending it on all of the things I didn’t have during my childhood; Garbage Pail Kid cards, He-Man action figures, nice clothes.

I never gave any consideration to why I spent my money in this self-defeating way until I was talking to a friend of mine who also grew up poor & did exactly the same thing as I did.  Once he had earned a paycheck, instead of saving what remained, it was off to the store to buy squirt guns, electronics & CDs, clothes; everything he never had as a child.

This effect of poverty isn’t contained only to myself or my friend.  The quote above comes from 1925 from none other than Adolf Hitler in his book Mein Kampf.  His words eloquently describe exactly the pattern & cycle of spending which I was raised in and continued into my early 20′s. 

When people speak or think of Adolf Hitler, many don’t remember him beyond the evil of his deeds.  They don’t remember the young, ambitious youth who struggled to become an artist.  Many have heard of his book, Mein Kampf, but have never taken the time to peruse its pages.  While not having read the book in its entirety, I spent some time reading it as a teenager while I struggled to understand what could cause a man to be so filled with hatred.

Even as a teenager, this quote struck me as being incredibly insightful.  I highlighted this entire passage.  At the time I knew these words meant something, they resonated within me.  I showed the highlighted words to my mom & received little comment.  Whether the silence came from the thought of her child reading Hitler or the reality I had just bestowed upon her, I am uncertain.

Having turned a financial corner in my own life, this quotation reminds me of the reality which I grew up in & am now working so hard to prevent in the future.  Wisdom comes from many places, including from some of the most evil of men.

Filed under Budgeting, Money, Savings, Spending

Creating a Budget

July 14, 2009 1 Comment

"LOW BUDGET" by auntsmack4u @ FlickrApartment hunting is never fun.  A month ago we spent a day searching through newspapers looking for apartments.  We made several phone calls expressing our interest in a variety of places; single bedroom apartments, houses with a room for rent, even ads looking for roommates.  All of our calls generated only a couple of call backs & we were able to schedule one viewing.  As we left town there was a bit of disappointment & frustration.  The apartment we looked at was even smaller than the one we live in now & it cost more.  How were we going to find a place where we would be happy yet be able to afford?

We decided to try finding an apartment again yesterday, this time looking at the surrounding communities as well.  We began making calls and leaving messages.  Those who answered the phone were unable to offer us a viewing for a few days or had already rented the apartments out.  There were two single bedroom apartments listed in the newspaper which I was interested in simply because they were the best deal, only slightly more expensive than what we are paying now.  I called & left a message.

A few minutes later the phone rang.  It was the person with the cheap apartment.  I asked if we could meet in a half an hour.  No problem.  The apartment was in the next town so we hit the road with high hopes of finding something similar to the apartment we have now.  When we arrived I became skeptical.  The door to the apartment opened into a decent sized kitchen & dining area.  I was willing to live with the orange counter tops, but when I turned the corner into the next room I found myself looking at the end of the tour, a small bedroom.

There was no living room & despite being larger than the bathroom we have now, we were turned off by how dirty things were.  We thanked the man for his time, explaining we were looking for something slightly bigger which would be able to hold our furniture.  Before leaving town we drove around looking for yards with rental signs.  We found two, which I called both, receiving no answer from either but again leaving a message.

When we returned to the other town we did some more driving around.  We found an apartment complex and I called the number posted on the sign.  Immediately I received an answer & we could come see an apartment whenever we wanted, right now was fine.  We parked our car and met the manager at the door.  After exchanging some pleasantries we got down to business.  She showed us a couple of two bedroom apartments & they were exactly what we were looking for.  They had an open floor plan, a nice kitchen, full bathroom & plenty of closet space.

The only problem was the price.  The apartment we live in now is a steal.  While it is small, it fits our needs almost exactly.  Even in the town we live in now this apartment is a great find so moving to a college town where the cost of living is higher is disappointing.  I feel as though I’ll never be able to find a deal like this again.  Most of the places in the paper were costing a couple of hundred dollars more than we pay now, either with some or no utilities included.  The apartment we wanted was even more than that, double what we pay currently.

My girlfriend & I took some time to discuss whether or not we would be able to afford the apartment & after a bit of discussion we decided to take the apartment.  We figured that the cheaper apartments would not meet our needs & the ones which were slightly less expensive would probably cost us nearly as much once we included the cost of utilities which were included in the cost of the rent at this apartment.

We came to the conclusion that we could afford it but we would need to create a budget in order to ensure that we had money to cover all of our expenses.  Right now I operate on a pretty loose budget.  All of my monthly bills are fixed so I can run a budget in my head easily.  With a change to my expenses as significant as our new rent I will have to re-evaluate those expenses and figure out exactly how much money I need each month.

A lot of people refuse to use a budget.  They feel as though it is restricting, like they can’t spend their money how they please.  As you begin to utilize a budget this may in fact be the case.  A budget tells you were your money needs to go instead of you trying to figure out how you will pay the next bill when it arrives.  Planning out your expenses will require a shift in thinking but as you work through the months you will begin to see that you have money left over at the end of the week.

Once you have enough money in your account as a cushion against unexpected events a budget will no longer feel like a burdeon.  Now you control your money instead of being controlled by it.  Instead of feeling guilty about going out with friends or having a lingering fear of how you will pay your cell phone bill, you will know that you have more than enough money to pay all of your bills & still be able to enjoy yourself.

A budget doesn’t need to be sophisticated.  All you need to know is what your expenses are compared to your income.  Gather all of your bills (rent/mortgage, utilities, car payment, cell phone bill) and compute the monthly cost of these items.  Now figure out your net income by looking at your previous month of paycheck stubs.  If you have an income which is unstable you may have to spend some more time figuring out an average monthly income.

If your expenses don’t exceed your income but you never seem to have any money, you will need to dig deeper to explore the reason for your lack of funds.  Maybe you spend a lot of money going out to eat.  Are you shopping for clothes on a regular basis?  With a budget you will designate a specific amount of money which is to be spent on these items in a given month.  As you get your finances under control you can begin to allocate more money to these funds though I suggest keeping it to a minimum for a while as you begin to straighten your finances out & build your savings. 

A budget allows you to analyze the way your money flows out of your possession.  Without much consideration we find ourselves purchasing a latte each morning before work or a soda at lunch.  We see these as trivial amounts of money but as we track our spending we are able to realize that over time these things add up.  What could we do with the $25 a week we spend on beverages?  If you had $1,300 (the cost of those beverages over a year) how would you spend it?

A budget doesn’t tell you how to spend your money, it simply helps you direct your cash more responsibly.  As you track your expenses you will begin to see patterns, ways you can cut costs so that you can apply that money towards something you really care about.  You will be able to meet your obligations without having that feeling in the pit of your stomach each time you open your mailbox or are at a store looking at a widget for your collection.  As you spend more time working with your budget & following it, the more freedom you will feel with your money.  Your savings will grow (because you budgeted to pay yourself first), and when the bill comes you won’t even have to wait until payday to pay it.

Filed under Budgeting

It Was Love at First Sight

July 11, 2009 1 Comment

toshiba-nb205-n310-white-open_angle-700

I used to be proud of my media collection.  As I continue to seek a simpler (clutter-free) lifestyle, I no longer enjoy blatantly displaying my collection of DVDs & CDs for the world to see.  I thought a small case to hold the discs which could be tucked away in a drawer out of sight would be a nice solution.  I found exactly what I was looking for at Best Buy & purchased two of them; one for CDs which I would store in my car where I listen to most of my music & the other for what remains of my DVD collection.

Before leaving the store I couldn’t help but to wander over to the computer department.  My computer had finally made its last stand a while ago and I have been using my girlfriend’s laptop for all of my computing needs ever since.  At first I wasn’t bothered by having to share a computer but as school approaches & I continue to write, a computer of my own would be nice.

Even though it would be nice, I have been putting off such a major purchase for financial reasons.  As inconvenient as sharing technology can be at times, it wasn’t enough to convince me to spend many hundreds of dollars on a new computer.

That is when I saw it, a NetBook.

I was drawn to the NetBook for a variety of reasons, the first being price.  At less than $400, these are much closer to a price I am actually willing to pay for a computer.  It is true that they don’t have all of the capabilities of an actual laptop, but they are able to handle everything I need them to do; surf the Internet & blog.  When school starts I can use it for homework & typing papers.

Another thing I really like about it is the size.  While a laptop isn’t very big, a NetBook is practically half the size making it much easier to haul around.  It only weighs a couple of pounds and could fit easily into a backpack.  If I am commuting to school via bicycle (which I hope to be a possibility), the less I have to carry the better.

What really surprised me the most was the battery life which can last up to 9 hours!  The laptop we are using now is lucky to last an hour.  With such a short battery life, it isn’t very portable.  With the NetBook I could take it to all of my classes & not have to worry about the battery dying halfway through the day.

I left the store without making any purchases but by the next day I found myself still thinking about how nice it would be to have one and how affordable they are.  I decided I would return to Best Buy to buy the NetBook.  I browsed the selection, comparing models & prices.  I finally made up my mind, choosing a Toshiba Mini NB205-N311.  

After asking the sales clerk a few questions to help clear up some lingering questions, I asked him to please get one for me.  A couple of minutes later he returned with the news that they were all sold out.  We checked some other stores in the area but they were all sold out also.  I would be leaving the store without a NetBook.

Even though I wasn’t able to get a NetBook, now I have some more time to consider the purchase and do some more research.  It will also give me some more time to save up some money.  I haven’t budgeted for a new computer & while I have extra money in savings, it will make it (mentally) easier to make the purchase if I set aside some money specifically for this purchase.  

Filed under Budgeting, Spending

Money Advice From the Homeless

June 8, 2009 3 Comments

"Homeless in Sugamo 2" by jamesfischer @ FlickrIn today’s world people make a fortune by selling the idea that money management is complex and requires assistance from a highly trained professional.  I strongly disagree with this bit of advice, especially when it comes from someone making money as a result of our ignorance.

Personal finance hinges on many common sense principles & practices, so simple in fact,  that they form the foundation for even the most unfortunate of people, the homeless.

What lesson can we learn from the homeless?  It is quite possibly the most relevant personal finance topic ever discussed, yet one we all struggle with daily.  I am currently reading Scratch Beginnings, a book about a young man who has struck out on his own with only the clothes on his back & $25 in his pocket in search of the American Dream.  His mission is to climb out of poverty within one year.  His first money lesson is this:

Delaying gratification.  In my mind, I had to be prepared to put my wants aside indefinitely as I fought to attain basic needs.  I didn’t yet have the means to provide my own food, shelter, clothing, or an automobile.  Nothing.  So the more money I spent on booze or cigarettes or snacks or the latest pair of shoes that nobody else on the block had yet, the farther I would be from accomplishing my initial goals.  To me, money that wasn’t saved or going toward other worthy means was money wasted.

Which didn’t mean I was setting myself up to be a robot that worked hard all day and penny-pinched my entire paycheck.  No, no.  An occasional stop at KFC or trip to the movies wasn’t going to break the bank as long as I understood that I was on a mission.  I knew where I wanted to be, and I wanted to get there as soon as possible.

Despite the simplicity of personal finance, time and again we fail at implementing these lessons into our lives.  We struggle to pay our bills on time and are buried in credit card debt.  As consumers, delaying gratification is the one money management skill we lack.  When we want something, we want it now and will sacrifice so much in order to get it, including our financial security.  If you don’t believe me check out your credit card statement.  What is your balance?  If I had to guess, it isn’t zero.  If someone who has nothing knows enough to embrace this money principle in order to climb his way out of poverty, shouldn’t you consider this in your own finances also?

The author also brings up another important point.  Even though he is at the very bottom rung of society, living in a homeless shelter without a real job he knows enough to find ways to enjoy life.  He also makes a point of keeping these rewards small and infrequent, something many people fail to do.  We reward ourselves regularly for making it through another day, another week, for completing a task or doing a job well done. 

The problem isn’t in the rewards as much as it is in the frequency of these rewards.  Most times we will reward ourselves in small ways such as a CD or DVD, maybe a dinner out at a nice restaurant or a drink at the pub.  None of these things is overly expensive, but we are buying them so often that the small expenses begin to add up to a large cost.  Not only is the cost becoming a problem, but these things no longer feel like rewards as much as it has become a regular part of our routine.

Maybe we can learn something from the money skills of a homeless person instead of feeling a sense of fear over the “complexities” of personal finance.

Filed under Attitude, Budgeting, Goals, Life, Money, Prioritizing

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