The state of my money and my life

Money

We are doing pretty well, better than we ever have, but we could do better. We make more than we ever have, and we save more than we ever have, but we spend more than we ever have too. We still have debt, and we need to work on that.

Life

Things have been different around here lately. I've been a SAHM for 9 months now, and it hasn't been at all what I expected. I am both more at peace with my choices and more worried than I have ever been in my life.

I spend most days trying to come up with ways to keep the baby busy, struggling to keep the house clean, and sneaking in as much bloggy time as I can. I still clip coupons and shop sales. I have a routine for hitting the drug store deals. That's about all I have a routine for, LOL.

I don't have much figured out just yet, but I'm working on it, and I'm going to try to share what I have figured out in the hopes that we can all learn together.

Thanks for stopping by.

Life turnarounds

In the past few months, my life has taken a few major turnarounds. I already wrote about my husband graduating and us moving halfway across the country (again). Since then, I have undergone the following changes

• I had a long term sub job for the past three months, which just ended last week with the end of the school year.
  
  
• We bought a house and will be closing in August.
  
  
• I am expecting a baby in September.
  

So... life is a little different than it was a year ago this time. I'm excited and scared and a little overwhelmed and only just now ready to start unpacking the implications that his has for my money - and a little bit for my life. Jobs and babies and houses and moving, these are things that can take up all of your attention, and often rightfully so. So right now, before the next storm hits, I need to take some time to reflect and to plan. I'm hoping to do some of that here, and if any of it interests you please chime in.

Money Mission for Monday: Start Over

As you may have figured out, I've been busy lately. And while I've been out earning a ton of money, and my balance sheet should be much better than it was, I honestly have no idea how I'm doing financially. And so I'm giving you the same mission I'm giving myself this week: wherever you are, however you're doing, take a few minutes and start over.

Take stock

Figure out how much money you have and how much debt you have. This may mean going through your files and checking several account statements. If you don't know how much money you have, there's no way you can set goals for it.

Also, take a few minutes and go over your check book register, bank statement, and credit card statement to figure out what you spent in the past month. This will give you a good idea of how much you should budget for this month, as well as giving you the chance to start to notice any leaks in your purse.

Make a plan

October starts in two days, which is a great time to start over from a budgeting perspective. Based on what you spent last month, develop a loose budget for next month. Even if you always make a budget, try starting from scratch this month. You may find a different perspective or technique helps you find new ways to cut.

Set at least one goal for what you want to do with your money this month, this year, or this decade. Start working toward it, even if it's just in little steps.


This is a much bigger mission than most, but it's also got a lot of bang for its buck. By starting over, evaluating, and making a plan you'll start to feel more in control of your own money even before you make any changes in your life.

My Goals and Priorities for summer

1. RECOVER. Rest and heal my mind, body, and spirit from the tortures I put them through the past few months. No matter what else I accomplish, I want to finally take some time for me and feel better, to invite more quiet into my life and more space in my brain.

2. Break even. Just like last summer, my goal is to make enough money to cover all of my share of household expenses. Extra money to put toward debt would be great, but only if it doesn't interfere with priority #1.

3. Have an adventure. I've been so busy, and so narrowly focused, for the past couple of years that I've forgotten to be young and have fun. This summer hubby and I want to take a (relatively inexpensive) vacation, without too much excessive planning. :)

4. Clean out my apartment. I really want to have less stuff. I'm going to start sorting, ebaying, recycling, freecycling, and donating as much as possible this summer. I'm going to start with my stockpile of health and beauty products purchased for free or pennies. Donating to the food bank always ups my mood, as does clearing stuff out of the apartment.

5. Get fit. Between Wii Fit and my apartment complex's fitness room and pool, I have no excuse for not getting in shape this summer. I would like to lose a few pounds, but mostly I would like to feel stronger, stand taller, and Fight the blues.

6. Write. I want to get into the habit of writing every day again. It doesn't matter so much where I write or what I write, I think that will work itself out in the end, I just want to make sure that I write every single day.

Financial frustrations

My husband and I have done a lot of great things this year, as far as our finances go. For the first time, I started putting money in my 405(b) at work and have managed to consistently max out my match. We opened a brokerage account and have been dutifully investing $100 every month into a good value mutual fund which we intend to keep for at least 5 years (probably more). I set up a direct draft from my checking account into my ING account - which is my emergency/summer fund - of $150 a month.

I know all this. I know I have money stashed and money automatically going to fund my goals and needs. I know that we're doing a lot better than we were doing last year. So why do I feel like we can't make any progress?

For the past few months, I've been working my butt off. I was working my second job, I was doing surveys and dealbarbie offers, I was unplugging small appliances throughout my house. I've been making my own bread, cooking more and more meals from scratch, clipping coupons and matching deals. Every month, I think to myself "Look at all the extra money I will have at the end of the month to put toward our debt!" And then every month, we get to the end of the month and. . . I don't.

This month, I got my last part time job check for a while, and it was a big one. At least, I thought to myself, this money can go straight to our loans. (I never include the extra checks in our normal budget, so they are a bonus when they come.) Then my husband came home from work and set, nervously, that he really thinks his car needs new tires. I sighed and handed him the check. Oh well.

I know that this is silly. If he needed new tires and I hadn't worked extra, we would have had to tap into savings. I know that by working hard, I am helping our financial situation. It just seems like . . . we never get anywhere. But maybe until hubby finishes school, I have to be content with treading water and maybe occasionally taking small strokes forward. Sigh.

Taxes and such

A few weeks ago, I read an article about the proposed tax stimulus package. Apparently, my husband must have read the same article because he came home that day and said "Hey, did you know we're getting $1200?"

"Yeah," I answered, "What are we going to spend it on??!?"

"Uh," he said (because I've brainwashed him so well), "I figured it would just go into savings...."

"But.... I thought we were supposed to stimulate the economy...."

At which point we both started laughing hysterically.


****

Then there's my regular taxes. As it turns out, we actually owe some money this year, a sizable chunk. Job #2 picked up a ton this year, and I didn't think to adjust my withholdings at job #1.

Well, the check is written and in the mail because we had the money in savings. And in some ways, I know cognitively that it's better to owe a little than to get a huge refund, but it's just . . . a let down. We're not as far ahead as I thought we were. I know it will be okay, and knowing that $1200 is coming helps, but it's just time to reshuffle again.

Financial Escape Plan

As I've said before, I really do love my job. Despite that, though, I have days when it's hard, when it feels like it's just too much, when it's emotionally draining and exhausting and just takes so much out of me. There are things I would like to do, creative things and fun things and domestic things, that at the end of the day I just don't feel capable of doing.

These are the days when I start plotting my escape.

I know that at this point in my life it makes no sense to quit my job. I'm in a lot of debt, my husband is still in school, and honestly if I quit my job I would have very little to make me feel fulfilled. But sometimes it's nice to fantasize about all the things that I could do if I didn't work full time.

So on those evenings I devise a financial escape plan. I sit down with a notepad, a calculator, or sometimes a spreadsheet, and I figure out exactly how much money I would need to survive for one month. I figure out ways I could generate extra income, through part time work and ventures, and I try to make those things as close as possible. Then I figure out how much more money I would need to spend a few blissful jobless months and how long it would take me to save up that much money.

What do I take away from these exercises? Well, besides a strange nerdy kind of satisfaction and sense of calm, I do develop a greater understanding of some truths about my financial situation. For one, I will never come close to financial freedom until I can knock out all the debt, so that is a serious priority. Also, when I can see a goal, like 2 months with nothing to do but bake banana bread, do yoga, and sleep late, my idea of how much money I can cut on entertainment changes significantly. And finally, that the better job I can do at generating alternate income, the easier it will be for me to eventually switch to part time work.

Of course this is a long way off, but for now, a girl can dream.

The End of My Frugal Rope

(Originally posted at my now defunct writing up blog on 6/24/06. Apparently these things come in cycles)

Lately I feel like I'm at the end of my frugal rope. (A frugal rope, as I envision it, would probably be made of a series of plastic grocery bags, twisted up and braided together. But I digress.) When I first started being frugal and recognizing places that I could cut back, save money, and live in a more simple and deliberate way, it was very gratifying. I could see the impact of my big changes, could quantify the money savings, could feel the difference as the space opened up in my life.

The longer I live this lifestyle, though, and the more like habit these actions become, the less visible the impact. There are no more big changes to make, no more egregious factors in my life, and that means that there are far fewer victories to be made. I read blogs and message boards where people write "I saved $20 this week by not buying lattes!" For me, this is not a savings. I never buy lattes. I don't get to count that.

I'm afraid that I'm at the point when most people get frustrated and give up. My expenses have leveled off and there is no more big excitement or glamour involved in reducing bills. The changes I have yet to make are much smaller, and are the kinds of things that in the past I have considered trivial, but they're the only changes I have left to make.

It's not so much that I need to cut my lifestyle more because we still don't make enough money to cover out bills; I want to cut deeper to find more money to put towards loans. Most of all, though, I want that excitement back of finding something to cut. Without that sense of victory and success, it's hard to continue to live this way forever.

In order to stay motivated, I'm trying to come up with little games for myself. Every day, I try to stretch one more day before having to run the dishwasher. I'm experimenting to see how I can reduce dryer time by hanging heavier items, running the washer's spin cycle an extra time, and keeping the machine free of lint. (I know I'd do even better by hanging all of my clothes, but I'm still trying to find a productive way to do that in this tiny apartment.) I'm trying to turn my water heater off during the day, to see if that reduces my energy bills at all.

Right now, any victory would be enough to keep me at it.

Married Money

I've officially been married for over a year now, and I'm finally getting this joint money thing under control. It hasn't been easy, and we've had our share of unexpected fights about it (it's amazing when I talk to my single and engaged friends and they tell me that they have never fought with their significant others, how I always want to point, laugh, and loudly yell "Bah!"), but we're finally getting into a place where we have a plan and a system.

The technical

We have a joint checking account. Rather than hashing out whose checking account we were going to keep, we dumped both of ours and opened a new one. It made more sense to us because we were moving to a new town anyway, and it helped to diminish the "mine" feelings.

On the other hand, we each kept our own oldest credit card. We simply added each other as authorized users. We did this because of the conventional wisdom about credit score and length of credit history. However, after a few months of trying to balance "yours, mine, ours" credit, we decided on a single card to use for all of our regular needs. We use the other when only when a promotion or offer makes the cash back better than the primary card.

We set up our investments to automatically deduct from our checking account, so that we don't have to think about it.

The practical

I am a budgeting nerd, and my husband is not. Therefore, it makes sense for me to write up the budgets every month. However, if I made the budget by myself, my husband just ignored it and there went our savings goal for the month. So, we developed the system of me making the budget and my husband having the right to review and edit it. This way he doesn't need to worry about the technical stuff that bores him, but he gets to assert his own priorities in the process by adjusting things up or down.

I physically pay the bills and balance the checkbook because again, that's my personal orientation. We discussed it and it makes the most sense.

Hubby on the other hand gets a real kick out of researching investments, so he is in charge of our portfolio. He chose our mutual fund, and he checks the balance every day. Personally, I'd rather not see it.

The emotional

Unfortunately, we do not always agree on how money should be spent. He really likes having toys, whereas I really really want to rid myself of clutter. I'm committed to getting out of debt, but that's not something he cares about nearly as much. We agreed never to spend more than $100 on something without asking each other first, but it's difficult for me to always say no.

We've argued and cried and hashed it out again and again. Sometimes we can come to a compromise, sometimes we just have to accept each other's decisions (and remind ourselves how much we love each other). I'm sure we need to work on this part even more as we go on, but we're getting to a better place, and that's necessary if we ever want to grow our money.

How to achieve your goals, priorities and dreams by defining them

Before we get started, let's get some definitions out of the way:

goal

2 : the end toward which effort is directed : AIM

priority

2 : a preferential rating; especially : one that allocates rights to goods and services usually in limited supply (that project has top priority)
3 : something given or meriting attention before competing alternatives

dream

2 : an experience of waking life having the characteristics of a dream: as a : a visionary creation of the imagination : DAYDREAM b : a state of mind marked by abstraction or release from reality : REVERIE c : an object seen in a dreamlike state : VISION
3 : something notable for its beauty, excellence, or enjoyable quality
4 a : a strongly desired goal or purpose (a dream of becoming president) b : something that fully satisfies a wish : (IDEAL a meal that was a gourmet's dream)

Courtesy Merriam Webster

I've been thinking a lot about goals, priorities and dreams lately. Financial Dominance wrote last week about how it's important to define investment goals, and I completely agree with that. I've been wondering what the goals are for our own investments, I've been wondering about my own career goals, and I've been wondering how all of these things fit into my dreams. How can I define my goals, dreams, and priorities if I don't know what those things are? Where do I begin? Where does it all fit together?

It's really a little overwhelming. As I pondered on this, journaled about, agonized about it, and had a few panic attacks, I came up with a way to think about this that would make all the pieces fit together.

Dreams, the most overarching of the concerns, are also the hardest to define. They have to do with the perfect state, with how things would look if you had everything you wanted. The best way to figure out what your dreams are is to sit in a quiet room and see what you think of. Write, draw, or talk about what your life would be like if you were perfectly happy. This is your dream life, so you can have whatever you want, whether it's a Manhatten apartment or a country cottage, wealth and fame or peace and quiet. What would your perfect state look like?

Goals have to do with the end result, what you want to have in the end. These need to be defined and measurable. "Be rich" is not a goal. "Save $3 million by retirement" is a goal. What measurable end results do I want to see? I wrote down about three of these: "Pay off all debt." "Save $3 million in retirement funds." "Save 20,000 for a house down payment." These goals are pretty far out still, but they give me something to work toward. Your goals will be based on moving toward your dream, but will be realistic and concrete steps along the way.

As far as money is concerned, priorities have to do with how you would allocate something in limited supply (whether it be time or money). If I could do only one thing with money, what would it be? If I could do a second thing with money, what would it be? I took out a notepad and just started listing. My priorities had to do with what is important to me on a day to day basis (food, visiting family, etc) and with what I need to do to achieve my goals. I made this list longer than the amount of money I have each month; if I'm short on money, where can I stop? If I have extra money, where can I go forward to?

Once I've done this, I feel much calmer. I know that I'm making positive decisions with my money that will get me toward the perfect life for me, and I notice what I've been spending my time and money on that don't add value to my life.

More ways to help charities

In my post about Free and easy ways to help charities, I promised to write about higher impact ways to help charity. . . and that was over a month ago. So without further ado or delay....

Make something

If you have a hobby or a talent that involves making something, then this might be an inexpensive way to help other people. If you like to knit or crochet, make blankets, scarves or hats for a homeless shelter in your area. One organization that you can work with for this is Warming families. If you prefer quilting and sewing, consider making a blanket for an abused or abandoned child through The Linus Project. You could even make some muffins, cookies and cakes and host your own bake sale to fight hunger in America through The Great American Bake Sale.

Think you don't have any talents? You're wrong. Be creative. In one of her books, Natalie Goldberg talks about how she was asked to do something for a charity carnival and did the only thing she knew how to do, write poetry. She hosted a spontaneous writing booth and raised money for the charity that way.

Write a letter or sign a petition

If there is a cause that is important to you, one of the best ways to effect change is to sign a petition or write a letter to your local newspaper or your congressman. There are literally hundreds (maybe thousands) of different petitions available on The Petition Site where all you have to do is click and sign, or you can take it up a notch and add your own petition. You can get even higher impact by writing to your congressmen or the president. You can find contact information for your senators and representatives.

Volunteer

This is definitely an inexpensive way to help charities, but it doesn't necessarily need to be easy. Call or stop by local organizations that deal with issues you consider important and see if they take volunteers. You can volunteer on a regular basis or go in for one afternoon to help sort food or file papers. If you are interested in volunteering but don't know where to start, check out Volunteer Match or Online Volunteering

Give a portion of profits

This sounds like it costs money, but it can actually be a win-win. If you donate a committed amount of money from all your online earnings (from your blogs, for example, or your ebay auctions), it may help you to make more money in the long run because people will bid up your auctions or revisit your site a bit more because they respect what you're doing. This may sound like a rather mercenary way to look at it, but the way I see it, if you're upfront about what you're doing, then you benefit, the charity benefits and your readers or customers feel good about things. Everybody wins.

What your budget says about your values

I think it's very true that we put our money where our hearts are, and that what we choose to spend money on says a lot about us. As I made my August budget, I really tried to think about what my spending says about me, and whether my spending is in line with my values and priorities. So, without further ado, my budget items from greatest to least (I've omitted actual numbers).

1. Rent - I'm okay with this one. Shelter is one of the four essential necessities, and while our apartment certainly goes beyond a basic roof over our heads, I'm okay with it being the top line item in our budget. It would be possible for us to cut this a little by moving to a less nice place, but there are a variety of reasons (proximity, amenities, etc) that we chose this in the first place, and moving to a new place would bring us much less happiness. While I understand that rent is not an investment in any equity, it's the right decision for us now, so again, here my budget and values are okay.

2. Car loan - Ouch. Do I really value my car this much? No, not really, and I certainly don't value car car debt. I'm pretty sure it was a mistake to buy it, but I'm still not sure it's a good idea to sell it now. I'll have it paid off in about 10 months, and then I'll hopefully drive it for another 6-7 years or until the wheels fall off (and use the payment toward retirement). This is one that I think for now I'm just going to suck up and deal with, although it is a break between my budget and my values.

3. Groceries - Yeah, I'm okay with this. We really love food. I could probably cut this back a bit more, but in some ways I feel that good quality food is not the place to skimp.

4. Student loans - Well we definitely value education, and the increased income that will (hopefully) eventually come from it, but again we don't value debt which is why I'm glad we're not taking out any more. I would love to see these gone, and I'm going to throw my might behind getting out of student loan debt in the next year.

5. Gasoline - This is another place where my budget definitely does not fit with my values, but I'm not sure what else to do about it. I already drive an efficient car, keep it maintained and relatively empty, combine errands, and walk whenever viable, but the gas budget keeps creeping up. Frustrating.

6. Restaurants - I must admit, eating out really does make me very happy, but I don't like that this item is so high in my budget. I wonder if keeping more high quality tempting food in the house would make eating out less appealing.

7. Investing - I'm actually really proud of the money we've put aside for investing every month. I feel like it's going to do something very important for our future and our family's future.

8. Cell phones/cable/internet - These are all things that I regularly use and that I feel I get sufficient value from for what I pay for them.

What's missing:

Charitable giving - This is something that used to be very important to me, and I wonder whether my money obsession got the better of me let this get away from me. I definitely want to start reworking my budgets to allow for more of this.

So, that's what my budget says about my values. What does your budget say about yours?

Retire with $3 million by driving paid for cars

Can you imagine how much there is to gain from driving a paid for car? Ever since I started investing, I’ve been thinking about what the possible returns are, and how worthwhile it is to focus my intention on investing in quality mutual funds inside tax sheltered accounts. Since my car will be paid off by next summer, I decided to run the numbers and see what would happen if I did nothing else other than putting my $420 a month car payment directly into a mutual fund Roth IRA.

According to this calculator, if I invest $4000 a year (the maximum contribution in a Roth, and noticeably less than $420 a month) into a mutual fund with a 12% rate of return inside a tax free Roth IRA, when I turn 65 I will $3,064,000.

If I continue to earn 12%, I can draw the interest of $360,000 (tax free!) every year and never touch the principal. Can I live on $360,000 a year? I think so.
But what if I’m wrong? What if something happens, and the market doesn’t do as well? If I only earn 8%, then when I retire at 65, I will have about $1 million, and I will be able to draw $80,000 a year. A little less exciting, but still probably quite reasonable.

And all this is by doing nothing but putting my car payment into a Roth. I could do that without our income ever going up, which it almost certainly will once hubby finishes grad school (well, it better anyway!). I could do that without sacrificing any lifestyle we have now. In fact, since $4000 a year is less than $420 a month, I would actually have a little more disposable income each month. And truthfully, chances are I will have at least some kind of a teacher pension by then, and at least one if not both of us will have some kind of a 401(k) of 403(b) with an employer match.

Now of course there are some other issues here. I will, eventually, need another car (although, if I get my way that’s at least 6 or 7 years out). We are eventually going to buy a house. But again, our income will go up and we just have to decide not to do either of those things until we can afford to without stopping that Roth contribution.

Money and happiness

I've been thinking a lot lately about what it is that makes me happy, what is worth working for, what life it is that I'm looking for. Yesterday, I wrote about how much I enjoy quiet, and how a media fast and a good book can make me feel at peace.

The more I think about, the more I realize that it's not abour the money.

There are some things I want that money certainly can buy me. I want to travel, I want to take a cruise, I want a house, I want to be able to afford to work part time. But then there are the things that I want that money can't buy, and the more I think about it, the more I realize how much those are the things that I want, the things that will make me really happy.

In You Don't Have to Be Rich: Comfort, Happiness, and Financial Security on Your Own Terms, which I just finished reading last week, Jean Chatzky writes about how after a certain point, money doesn't actually make people happier. People are most likely to be happy when their lives are organized, their relationships are strong, and their careers are in line with their values; money can help or hurt, but usually doesn't have as big an impact as one would think. It is, instead, the misconception that our happiness is tied to money that leads to most of our unhappiness. In her words:

"So what do we do? We go after the money. We chase it like there's no tomorrow. And as we do that, we lose time that we could spend having a leisurely dinner or taking a long walk with the love of our life; we lose time we could spend hitting the StairMaster or making a sandwich rather than driving through a fast-food joint for a grease-fest; we lose time we could spend taking classes that might lead us to a career we'd truly enjoy."

And the more I think about my own life, the more I realize that the things I'm giving up while I'm chasing the money are really things that are more important to me. Chatzky suggests that the things most likely to correlate with happiness are things which don't cost any money at all: dancing and volunteering. So what do I want, what makes me happy?

I want to exercise several times a week. I love the calm and release that comes after a long walk or a short run, and I love the feeling of getting stronger.

I want to spend more time with my husband and really enjoy his company more, to fully focus on him.

I want to spend more time with my friends, to be able to have a cup of tea with a girl friend in the middle of the afternoon and have a nice long chat.

I want to lay in the sun with a good book more often.

I want more quiet in my life.

And yeah, dancing and volunteering sound pretty darn good.

And so I pose this question, dear reader. What do you want that money can't (necessarily) buy? I'm most interested in what it is that pfbloggers think, but even if you're not one, please join the conversation. Leave a comment below, or write a post on your own blog and I'll link to you. What brings you happiness? What do you want?

See Tehnyit's list here

Break Even Week 4 Update

I am so close.

This week, I made exactly $420. Exactly my break even number. If I had stayed strictly to my budget, this would have been the first week I’d broken even. Bud I didn’t.

This week, as I said yesterday I overspent my grocery budget. I overspent my entertainment budget a little too because we went out to dinner Thursday night (on serious travel burnout) and then again for our typical Saturday night dinner with friends. The interesting thing for me is that even though we went out twice, we were only $10 over our entertainment budget, when in past weeks we’ve done a lot worse than that. Maybe it was coming back from being away, maybe it was because we’d been to restaurants with our parents so much, but I realized Thursday night that we can have nice dinners we really like and giant sweet teas at the deli for only $15 for the two of us. And we like the deli. We really like it there, we love their tea, the food is always more than sufficient (and for $15 we got huge “I spent 11 hours on a plane and have only eaten one meal today” dinners). $15 for dinner makes us really happy. So why are we spending so much more than that?

I also made a lot more money this week than I have. Since my weeks run Thursday to Wednesday, this week included a marketing workshop I did for my employer, which paid significantly more than usual. I also had a rebate come in and some other things. I’m including my interest to my ING account which paid out, since the end of the month fell within this week.

Payouts are also coming in from things long since done. I got a $25 payout from Helium today, which I requested about a month ago and which I’ve been earning since January. I also got a very unexpected $3 payout from Daytipper from a tip I submitted at least 6 months ago and never expected to be compensated for.

I still need to do better though. I started a second class today, and have another one starting next weekend, so I’m going to go from working 6 hours a week at my part time job to about 18. More and more, the realization is coming that I’m just going to have to work for my money, but again 18 hours is something I can easily live with and I’m very grateful that it’s available.

I applied for a couple of online keyword writing jobs this week as well, and I am going to try to spend more time writing for Associated Content. Hopefully, if I get enough things going, pretty soon I will start to see some actual progress (and maybe even catch up a bit).

$420 Break even number
+$10 Entertaiment overbudget
+$70 Grocery overbudget
-$370 Teaching/tutoring
-$5 Essay Grading
-$10 Rebate
-$7 ING interest
-$.07 Paypal Dividends
-$25 Helium
-$3 Daytipper
Deficit $80
Total for summer: $799 deficit

The Chocolate Croissant Effect

You read a lot these days about the latte effect, and in theory I completely agree. The idea is that it’s easy to waste a lot of money on small things and that, over time, that money could add up to be enough to make a major difference in your life. If you eliminate a latte every day, then by the time you are 60 you will have a significant chunk of money saved up and in retirement.

It’s a great idea. Small changes really are the way to go because they are psychologically easier and they are sustainable. However, despite all this, I’m about to say something which is the complete opposite.
I call it the chocolate croissant effect.

A few summers ago, I was working an extra job to try to save up some extra money before I moved across the country. I didn’t need the money. I was just trying to work hard to get ahead and improve my life.

Downstairs from the place where I worked was a little bakery. It smelled good, it looked pretty, and it was one of the warmest and friendliest places I had seen. One day I forgot to bring coffee from home, and just NEEDED some (yes, I have a problem), so I stopped into the bakery for a small coffee, and I saw them.
Next to the register, on a plate, with a sign next to them, there was a plate of chocolate croissants. Ooey, gooey, fresh from the oven chocolate croissants. For $1 each.

Oh goodness.

I didn’t need a chocolate croissant. If I didn’t buy a chocolate croissant every day for a year, I’d have an extra $365. I wasn’t working an extra job so that I could afford chocolate croissants. But, oh boy did I want one. So, just that once, I bought a chocolate croissant. It was delicious. It really was just as good as it looked.

For the rest of that summer, I knew that the chocolate croissants were there. I didn’t get one every day, and I certainly didn’t spend $365 on them, but when I really wanted a chocolate croissant I got one. When I didn’t buy a chocolate croissant, I was fully aware that I was not buying one and was very proud of the money I was saving. When I did buy one, I took my time and thoroughly enjoyed it, instead of letting myself feel guilty about spending the money.

The truth is, I was still getting ahead. I was making between $60-$120 extra dollars a day by being there, and if a $1 chocolate croissant once in a while was all it took to make me feel good about it, then it was well worth the expense.

No More Junk Mail

I know Earth Day is over, but that doesn't mean we need to stop conserving. One way to painlessly reduce your environmental footprint is to eliminate your junk mail. The Center for a New American Dream offers this reference page on how to stop soliciters from sending you mail.

Environmental benefits: less paper, less fuel in shipment

Psychological benefits: less clutter!

I also try to send a nice letter to any charity to whom I've donated asking them not to send me donation solicitations by mail. I explain that I do plan to donate again, but I will do so online as my budget allows. Not only is it bad for the environment for them to send me stuff, it also costs THEM money which I would rather them be spending on programs. Sometimes these letters work. Sometimes they don't. Once again, though, small changes add up.

Please post a comment if you've cut off your junk mail!

Scarcity and Waste

How do you drive your car when the fuel light is on? Personally, I turn off the air conditioning, slow down, coast to red lights and – depending on how far away the nearest refueling station is – even turn off my car when I’m stopped at red lights. What if I drove this way all the time? What if I rinsed out dish detergent bottles or turned ketchup bottles upside down, even if there was another bottle in the cabinet?

It seems that having a sense of scarcity causes us to conserve more than we do when we consider ourselves to be in a state of abundance. When we have plenty of something, we tend to be more careless and wasteful with it. It’s good to keep your gas tank above one quarter full, and it’s good to maintain a well stocked pantry of food and health and beauty items, but can these actions cause us to be wasteful? If I have 5 bottles of shampoo that I paid no more than fifty cents each for, I’m much more likely to be okay with some spilling down the drain or with using more than I need to wash my hair. In truth, though, this is a mistake. A stockpile or a pantry is there so that you don’t need to buy full priced items later, not so that you can use more than you need to. Waste is waste, no matter how much you spent on it and no matter how much of it that you have, but no matter how frugal you are, sometimes it is hard to get your mind around that.

Perhaps it is helpful to consider your goods in a larger context. In a global sense, everything is scarce. Our economy is based on scarcity. Increasingly, we, as a planet, have a scarcity of gasoline and plastics, we have a scarcity of food, a scarcity of clean and healthy water. No matter how easily the water flows from your faucet, no matter how much gas you have in your tank, no matter how much food you have in your freezer, these are still not expendable items. Wasting them is a loss to you and to the world. It’s really a shame.

So next time you come to end of a box or bottle, pretend it’s your last. When you’re on your way to work, pretend you’re almost out of gas. Enjoy the abundance in your life, but remember the scarcity in the world, and be frugal.

Exercise and personal finance

When you are short on money and time, one of the first things that tends to go is taking care of yourself. You drop your gym membership, you take on an extra job, you spend all of your extra time searching and scrounging for money. You eat processed food out of a bag on your way from one job to another. You sleep less, relax less, and stress more.

This puts you in a very precarious position as far as your finances are concerned.
When you feel deprived, drained, and miserable, you are more likely to burn out or to make poor choices that cause you to mess up your personal finances and lose out on more money in the end. One solution to many of these problems is to find a way to incorporate exercise into your routine. Now, that doesn’t mean you need to join a gym, hire a personal trainer, or spend hours and hours of your day running. A simple ten minute routine consisting of a walk, some pushups or some stretching will accomplish many of these goals, and you will hardly miss that amount of time.

1. Exercise relieves stress.

You may prefer to “relax” by watching TV, stuffing your face, or surfing the web during the few free minutes you can find in your day, but the truth is in the long run these activities just make you more stressed. Exercise actively relieves stress, thus making you much less likely to burn out or engage in “retail therapy.” Bonus: you can’t call the home shopping network when you’re running on a treadmill.

2. Exercise gives you more energy.

At first, it may seem to you like exercise is just making you more tired, but in the long run, you will find that exercise gives you more energy, thus making you more able and willing to take on extra hours at work or do some freelancing at night. It also makes your sleep more restful, so you will feel good after fewer hours of sleep, thus saving you even more time.

3. Exercise boosts your self-confidence.

Confidence is extremely important in personal finance, particularly if you are considering starting your own business, but even if you are only managing your own money and household. You will not feel as deprived or helpless, thus you will be more able to make good choices about your money.

4. Exercise makes you eat less junk.

When you have committed to an exercise plan, you will be much less willing to put bad food into your body, so you will be less likely to eat at fast food places or to buy expensive junkfood. This not only makes you healthier, it saves you money as whole natural foods tend to cost you less money in the short and long term.

5. Exercise makes you healthier.

Between the short term cost of lost wages, and the long term cost of increased health care expenses, your health is your most important investment. Exercise will keep you healthier, thus saving and probably making you more money over the course of your life than just about anything else you can do.