Tag: personal finance

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Finding 50 – Play the Savings Game

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blog-image-2016-01-19In my last blog post I mentioned my belief that most of us can find $50 a month for saving, paying off debt or investing depending on what your current goals are.

But how do I save fifty dollars when I can’t even pay my electric bill?  Or my car insurance?  Or rent?

The problem is that most of us never even try.   Better yet, try is all we ever do.  Trying tends to let us agree without any sort of commitment.  Taking action gets us to the finish line.

It might help to think of Finding $50 as a game.  (Tweet this)

Since we are thinking in terms of a game, it is helpful to think in terms of levels to beat.  For our purposes, I think the 7 Baby Steps used in Ramsey Solutions’s Financial Peace University will do the trick.

The 7 Baby Steps of Financial Peace University

  1. Save $1,000 as a starter Emergency Fund
  2. Pay off all non-mortgage debt using the Debt Snowball
  3. Build up you Emergency Fund to cover 3-6 months expenses
  4. Start investing 15% of your income for retirement using tax deferred programs
  5. Save for college
  6. Pay of your mortgage
  7. Build wealth and have fun giving some away

 

The following are areas you might be able to find savings, and if you end up finding $50 in one of these categories alone, keep going!  You’re on your way to winning the game!

Housing

If your rent is more than 1/4 of your monthly income, and your income is not likely to increase much in the next year or so, you might consider moving to a smaller or less desirable place for a time.  Or find a responsible roommate who can share the costs.

This can be the best way to find $50 or more, but it usually takes time to accomplish as housing either has a lease that needs to be ended, or if you own a place you have to deal with the time and effort of selling.

If you own your home but can’t make your mortgage payment each month, you may want to look seriously at selling your property sooner than later.  Falling behind on your mortgage can lead to foreclosure and losing everything you put into it.

Cable/entertainment

Almost anyone who currently has cable can find $50 a month or more just cancelling their cable.  You can stream Netflix for $12 a month and hit your local library for books and DVDs that won’t cost you anything.

Side benefit:  No cable means no commercials telling you to buy unnecessary things every 10-15 minutes.  Believe me, get rid of cable for a year and see how much the urge to buy stuff subsides.

Phones

If you have a smartphone consider switching to a prepaid tracphone to control your phone expenses.  If you have a mobile phone and a home phone, consider getting rid of your home phone.  This is usually a $40 a month bill just to have it turned on with no long distance or caller ID.

Many times you can save simply by shopping for a new service provider or reevaluating your plan needs – some of you may be paying for way more than you ever use.

Internet

If you can’t pay electric, your internet is going to be useless when your electric is shut off, so lose the Internet for a while and pay the electric and use the wifi available at your library, local coffee shop, or other location.  Obviously no internet will mean Netflix won’t work at home, but reading more might actually improve your ability to earn more, as long as you read a few non fiction books.

Given that the internet is relatively inexpensive and is used for education, blogging, online businesses, and on and on, I understand that this may be the item of last resort to cut.  It would be very challenging for me to do everything I do without it.

 

Remember:  None of these things are bad things or wrong things, just areas where we might be able to save a bit extra just by paying attention.

 

Sell some stuff

Even the poorest of us probably have more stuff than we need or use regularly.  Stuff that has been handed down or that we picked up somewhere because we thought we might use it someday.

Getting rid of stuff is also cathartic in the sense that it lifts off all the weight of responsibility for taking care of these things or the guilt for never having used them as you intended.

When you are out of debt and making more money, you can always go and buy more stuff, although you may not want to at that point.  You might find you enjoy having free space and less clutter.

This one is gonna ruffle some feathers.  SELL THE CAR.

Car payments are one of the biggest offenders in the battle over our finances.  Leasing a car is even worse.   The average car payment is somewhere in the $350-450 a month range.  That’s ridiculous!  What if you didn’t have that car payment every month?  That’s a lot more than $50 right there.

Some of you are already driving an old beater car with no car payment and so this option doesn’t help you.  However, I would like to congratulate you on resisting the urge to get into a car that is more than you can afford.

Just to be clear, if you have to finance your car, you can’t afford the car.  You can afford the monthly payment, but not the car.  Sell the car, buy a good used car for a few thousand that will get you through the next year and pay yourself the car payment you were making to the bank for the next 12 months.  If your car payment was $350 per month, you would have $4200 after 12 months that you could use to fix the car, buy a slightly nicer car or pay off some other debt.

 Check out this great video on a better plan to pay for you car.

 

If you have a car payment you will never convince me that you can’t find $50 a month.  You’re driving it and throwing and extra $50 out the window at the same time (cars depreciate in value rapidly after the first year, so it’s almost like throwing the cash out the window as you drive).

Groceries and eating out

Again this is an area where people spend way more than they realize, and often pay more than they should for many items.  Track all your food and grocery related spending for the next month and total it up.  Take that amount, subtract $50 and put the rest into a cash envelope for food and groceries.  Then  use that envelope for any food or grocery purchases.  Once it is gone it’s gone, so spend wisely.

Bulk shopping is also an area to save, but not in the way you might think.  Bulk shopping is unnecessary for most of us for most things and ends up with us wasting a lot, especially with food.  Buy what you need for the week and plan your meals ahead.  At most take advantage of two for one specials for the items you use or consume the most.

Avoid the temptation to hit the drive through; 5 trips to McDonalds or Burger King for one person can easily approach $50.  If you are a coffee drinker, and you tend to get your fix from Dunkin’ Donuts or Starbucks a couple times per week, start bringing your coffee from home and save around $25-30 per month.

 Vacation and Travel

This is a tough one, but if you can’t pay your bills, you probably can’t afford to go on vacation.  I’m not suggesting you don’t deserve a few days off, but try staying home and taking some day trips to local parks or museums instead of flying 6 hours away to some resort.  You can always do that later when you have saved up and can pay for it in cash.  Otherwise your vacation will follow you home and haunt you in your credit card statements for years.

 Get a Second (or Third) Part-time Job

First, this is not suggested as a permanent fix, but a temporary solution to help you get to the next level.  Part-time jobs offer more flexibility than full-time jobs, and if you work hard and are dependable to show up when scheduled, you will find many employers willing to work with you on this.

While this might be really exhausting for a time, the side benefit is that you are not only earning extra money, you are gaining new experiences and making new connections that will help you advance in your job searches in the future.  The idea here is to eventually find a single job that pays close to what your 2-3 jobs are paying now.

Conclusion

I hope this has been a helpful approach.  The main thing is to try.  If you don’t find $50 this month, don’t quit.  Do it again next month.  Just keep doing it.  And if you have suggestions or comments on any of this, I would love to see your comments below.

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The Secret Motive Behind Good Personal Finances

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blog-image-2015-12-25I didn’t plan it this way, but it seems only appropriate that my final post in this series on personal finances is posted on Christmas Day.

Why?

Because it is about giving, and for those of us who are Christians, Christmas Day represents the greatest gift ever given – Emmanuel, God with us in the person Jesus Christ.

You may not believe in God, or if you do, you may not see him as a benevolent God, a giving God.  It may always seem like He is taking something away.  I would suggest to you that the only thing God takes away from us is our sin.  It is the process through which this happens that is uncomfortable and sometimes painful.  Then again, sore muscles are a necessary result of a good workout.

So what does this have to do with personal finances?

God is a giver, so we, being designed in His image, are designed to be givers.

Or, for those of you who may hold different beliefs or come from different religious backgrounds, perhaps this will be a more approachable truth:

Humans are at their best when they have learned to give well.  (Tweet this)

What Does Giving Well Look Like?

There are stages for every area of our lives that have a learning or growth curve.   Giving is no exception.

  • We give to make ourselves feel good.

At this stage we give primarily because it makes us feel good.  This is not bad or wrong, just merely the early stages of learning to give.  The down side of this stage is that if your sole purpose for giving is to make yourself feel good, you will ultimately withhold giving anything, because no one seems to appreciate the gifts with the appropriate level of recognition.

  • We give to make others feel good, which makes us feel good in return.

In this stage, we start to shift our focus to making others feel good, but we still look for our own warm, fuzzy feeling as proof that we’ve “done good.”

  • We give because we are compelled to help, even if it requires a sacrifice.

This stage sees us giving out of empathy – we are compelled to help by identifying with the needs of others.  The big change at this level, is that we are willing to sacrifice some of our own need to feel good, as well as time, money, or items that we otherwise would have used for ourselves.

  • We give because we recognize that what we have was never ours to begin with; holding on to it only brings us misery, whereas giving brings joy.

At this stage, giving is done with joy from the gifts we have been given.  At this stage the giver is detached from material possessions, not in a destructive way (i.e. it is not suggested that one toss their family out into the street to give their house to the homeless) , but in a way that allows an effortless ability to share and give with seeming abandon.  This comes from the knowledge that what we have was never ours to begin with.  It was entrusted to us, but we were never owners.  We trust that our needs will be met.

There is no wrong stage here – just a place we start and a place which we strive to attain.  Some stages may take longer than others, and some of us may stay longer in a stage than someone else.  it doesn’t matter – as long as you are giving.

The Secret Motive

I’m sure you figured it out by now.  The Secret Motive to good personal finances is Giving.  Learn to give and your relationship to money will change.  Learn to give well and you will learn to avoid anything that gets in the way of your ability to give, like piles of debt.

Whether or not you agree with me, see eye to eye with me, or believe something else entirely, it’s okay.

Just keep giving.

 

 

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Put Your Money on a Schedule and Give it a Job Description

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blog-image-budgets-failPlanning is not second nature for all of us, and neither is making a budget, basically a plan for your money. They are really disciplines or habits that must be developed through practice.  Habits and disciplines can’t become ingrained without regular repetition.

The main reason budgets fail is we think we only need to do them once. (Click to Tweet!)

Put Your Money to Work For You

Think of your money as an employee at a company.  What happens to employees who show up late all the time or constantly make excuses for why they can’t come to work?  They usually lose their jobs.

Now think of a budget as a work schedule and job description – it is what tells your employee (your money) when to be at work and what to do.

I realize this is not a perfect analogy, but it is one that most of us can relate to.  When I worked for the government I had to be at work by 8:10 am Monday through Friday.  In order to do that, I had to be up by 6:40 am.  I do not naturally get up at 6:40 am.  Therefore I had to discipline myself through repetition to get up on time in order to get to work on time.

Without a set schedule, I didn’t have a reason to create the discipline.  Without adhering to my schedule, I probably would not have been as effective an employee, and, let’s face it, would eventually have been fired.

It’s the same with money.  Without a schedule and job description, your money doesn’t know when to come and go, and definitely doesn’t know why. (Click to Tweet!)

Try writing down every purchase you make in the next week in a small notebook.  You will probably be amazed at what you discover about your spending habits.  You are most likely spending more money than you thought.  You have an employee without a schedule, who doesn’t know what their job is, so they are just running amok wreaking havoc in your life.

Use a budget to give your money (your employee) a schedule so it actually shows up to work for you, and a job description, so it knows what it is expected to do when it shows up.

Doing a Budget every month is key, and as with all habits, it becomes easier the more you do it.

 

Resources for Creating & Maintaining Budgets

The Truth About Budgeting, article on daveramsey.com

EveryDollar from Ramsey Solutions

Basic: Budget and manual expense entry (Free) / Plus: Link financial institutions to pull in expenses automatically ($99/yr)
everydollar.com

This is the online budget tool created by Ramsey Solutions, and requires an annual fee for automated features provided for free by other services like Mint.com, but before you dismiss it because of the cost, realize that this online tool is not going to bombard you with ads for credit cards, mortgage rates, car loans, bigger better deals, etc.  It also follows the concepts outlined in Dave Ramsey’s Financial Peace University course, so you know exactly what you are getting.  (And while they do take Visa and MasterCard DEBIT cards, they do not take CREDIT cards of any brand).

Mint.com from Intuit (think Quicken, Quickbooks and QuickenLoans)

Free, but comes with targeted ads for financial products and services
mint.com

If you can ignore the targeted ads it pushes to you, Mint can be a very useful tool for budgeting and tracking expenses, and includes numerous charts and features to help you analyze your spending.  It also has a fairly smart algorithm for categorizing your expenditures, making it a little easier to see where you are spending your money.  It can tend to have issues staying connected to your accounts, so it requires a minor amount of maintenance and patience in that respect.

Budget forms from Ramsey Solutions

Downloadable Forms with Instructions

For those of you who aren’t as willing to budget online, Ramsey Solutions provides some great forms with step by step instructions to get you started doing your budget the old fashioned way.  On paper.

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No One is a Financial Island

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blog-image-financial-islandSome people just have all the luck and skill and become rich all by themselves.  Feels that way sometimes, right?  Well, there’s nothing further from the truth.

No one becomes wealthy in a vacuum, by themselves, or on a deserted island.  Click to Tweet this!

Think about that image for a second.

An island.  By yourself.  Think Tom Hanks in Cast Away.

Just as no one has become wealthy completely on their own, none of us can become financially secure on our own.   Whether formal advisory boards, like many wealthy people have, or more personal relationships with friends and family from whom we seek advice, we all need help from other people in our financial  struggles and successes.

The Good News  

You probably already have someone in your life who can or already does serve in this capacity.  They are the person who holds you accountable for your financial decisions.  They are the ones who call you out when you miss a utility payment because you just had to have the newest iPhone.

They are called an accountability partner.

The Bad News

You are going to experience some painful reality-slaps.  You must listen to what your accountability partner is telling you, and be honest with yourself about what they reveal.  If your accountability partner never makes you uncomfortable, never ruffles a few feathers, then they aren’t doing the job.

Married Couples

Guess who your accountability partner is.   It’s your spouse.  (I didn’t say they had to be perfect or financial whizzes).

One of the leading causes for divorce in the U.S. is disagreement over finances.  One of the other leading causes is lack of communication.

Guess what – regular (say monthly) financial discussions could not only save your marriage, but is likely to improve it overall.  Regular financial discussions are communication.  If lack of communication leads to divorce, then any increase in communication is likely to prevent it.

Never having been married, I don’t have much practical advice to offer on how to communicate better with your spouse, other than this:

If you want to have more communication, you need to make time for more communication.  Together. (Click to Tweet this!)

If you are having trouble communicating with your spouse in general, seek some help.  This could be simply spending time talking with a more experienced married couple or more formally meeting with a marriage counselor.

Singles

So, what do you do if you are single, meaning no spouse and not living with a significant other?  (For purposes of this discussion, your significant other would take the place of spouse in the married couples section above).

Who do you pick as an accountability partner?  Scratch that – how do you know who to pick?

Great questions.

How do I know who to pick?

The person you pick needs to have certain qualities.  Some essential qualities are listed here to help you get started, but feel free to add your own.

  • They are trustworthy
  • They have unquestionable integrity
  • They are comfortable saying “No”
  • They will never stop challenging you to try
  • They will encourage you even when you fail or experience set backs

Who do I pick?

Now that you know the qualities of the person you are looking for, it is time to make a list of all the people in your circle of friends and family.  It can be helpful if you use index cards, writing one name on each card (disclosure: this idea is borrowed from Jon Acuff’s latest book, “Do Over“).

Follow the steps below to process these names, and keep in mind that this is not a good vs. bad exercise, you are merely narrowing down the people whom you would trust the most with your finances (you do the same thing when you pick who you want to go with on vacation):

  • Write one name per card
  • Just write the name and move on to the next card
  • Take the pile and one by one place each into one of two piles, potential accountability partners and not
  • Be honest with yourself, and trust your first instinct
  • Take the potential pile and use the qualities list from the first exercise to check off the matching qualities (using a numbered list with check marks is fine)
  • Refine your pile by keeping only those with the highest number of matching qualities.
  • Which one would you most want to be your accountability partner?
  • Call them and ask them if they would consider this role in your life

 

Wrap Up

Plans fail for lack of counsel, but with many advisers they succeed. (Proverbs 15:22)
(Tweet this!)

Guess what?  None of us are limited to only one accountability partner.  Married couples can and should reach out to other couples and other good counsel to round out their “advisory board.”  Singles should look to friends, family, and even others in their stack of potential names and ask for advice.

The proverb quoted above states with many advisers we succeed, but left to our own devices our plans will certainly fail.

In order to succeed in our personal finances, we need the help of others.

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Save more money, stop spending so much, get rid of debt, and build wealth

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So, how do I save more money, stop spending so much, get rid of debt, and build wealth?

First, you have to work.  Hard.

You can’t go anywhere if you’re not in motion in the first place.

Second, you’re going to need some help

  • If you’re married or otherwise in a committed relationship, make a plan with your spouse/significant other and work together to see your plan through.  Doing this the right way might even improve your overall relationship!
  • If you’re single like me, find someone who is willing to work with you and be honest with you.  This person is often called an accountability partner.

 Third, you need to have a plan (often called a budget).

Think of it as a fence with a gate – keeping your sheep from straying away, but allowing them to come and go as you allow them to.

 Fourth, you’ve got to rev up the intensity.

Rocky didn’t win because he sat around wishing himself into shape – he trained.  And he trained hard.  Get yourself a theme song if that helps 🙂

Fifth, allow some room in your plan to have some fun and blow off some steam.

All work and no play makes Jack a dull boy.  Allowing yourself a little fun will also remind you why you are doing this in the first place…so you can do more fun things later.

 Sixth, consider giving more as a goal to inspire you along the way.

Giving more can really change people’s lives in some really cool ways.  Guess what?  Giving more will definitely change your life in some really cool ways as well!

I’ll cover each of these in more detail in future posts, so stay tuned!

For more really great information right now on saving money, paying off debt, and building wealth check out Ramsey Solutions and if you are really serious, consider taking a Financial Peace University class near you.