Monday, April 30, 2018

Questions About Drying Laundry, Blogging, Birthday Parties, Job Offers, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Is it time to retire?
2. Money for parties at work
3. Boyfriend kicked me out
4. Great job offer… but scared
5. Dental plans for self-employed
6. Laundry drying strategy
7. Cheap children’s birthday parties
8. Finding people dedicated to saving
9. Starting a free blog
10. Exit interview questions
11. Ending credit card dependence
12. Different writers

My latest frugal experiment is to try to figure out a low-cost balm to use after shaving. For many years, I have applied a small amount of Nivea after-shave balm to my cheeks. A single bottle lasts for a long time, so I don’t think it’s a big expense, but I was curious as to whether I could make something myself for less expense.

Turns out… I can’t. I have tried a few different recipes and mixes and I haven’t found anything that doesn’t either sting like crazy or smell like alcohol.

Although I like to experiment with frugal solutions, sometimes I just can’t find anything that really works better than what I was already doing.

On with the questions.

Q1: Is it time to retire?

I’m 58 and can retire in 2 years. My husband is 59 and can leave now with full retirement (he has to retire in 2.5 years). We have about $800,000 in deferred comp savings plans and will both have pensions when we retire. We have no debt but anticipate replacing 20+ year old vehicles soon and might buy/build a home that fits our needs as we age and use current home as a rental to cover the new home’s mortgage. We’re both in decent health now but anticipate health issues in the next 10 years with high health costs due to family histories. How do we know when it’s okay to retire? We’ve lived well below our income and thought we’d feel confident about retirement. And while we’re far ahead of the norm for retirement savings, we don’t really know if now is the time. What do we need to know/have in place before we walk away from high stress jobs that pay really well.
– Erica

If I were you, I would take advantage of your health insurance and go to each of your doctors and request a very thorough physical, as much as you can get, to assess your current health and the likelihood of major health problems in the next decade or so.

Then, I’d use that assessment to figure out the next step. If you’re very healthy, then I would consider making the leap to be much more safe.

The thing to remember is that you will have Medicare when you retire, and you can buy Medicare supplemental insurance. Your key should be to avoid periods of minimal insurance unless you are strongly assured of your health.

Q2: Money for parties at work

How do (or I guess did) you handle money for parties at work? Like when someone is having a baby and they throw a little baby shower for her at work and ask everyone to contribute $20 for a big gift like last week at work when everyone chipped in for a breast pump machine? Or when they have a retirement party and want everyone to chip in? Or when someone has their kid do a fund raiser? Do you just say no all the time? What about the social backlash? Worth it?
– Emma

I viewed such expenses as the cost of being in an office environment, unfortunately. There are a ton of little expenses like this that come from working in an office – the cost of commuting, (often) the cost of parking, the cost of eating out for lunch with coworkers, the cost of matching office dress code, and so on. I consider little expenses like these to be part of that.

If I were you, I’d budget and plan for such expenses, viewing them as part of professional networking. In the end, that’s really what you’re doing – you’re maintaining relationships at work at a cheap cost, so that Jim from human resources or Nancy from accounting doesn’t think you are a jerk and will work easily with you in the future and won’t spread negative gossip about you.

This is one financial perk of working at home – you don’t have to deal with any of those costs any more.

Q3: Boyfriend kicked me out

I am 26/F and work as a waitress. My boyfriend and I had a big fight before work last week and he said we were through and I thought he was just blowing off steam but I came home and the locks were changed. I got the police and landlord to let me in to gather up my personal belongings but he still have a lot of stuff that is shared and I am living out of my car. I do not make enough to afford an apartment and I have no living relatives to stay with and no friends good enough that I could move in. What do I do?
– Katie

Unless you have some clear documentation of what is yours and can demonstrate that ownership, it’s probably a lost cause to reclaim it at this point. You can make a list of shared items and request that he turn over enough to equal out the value, but if he won’t, your only recourse is to get a judge’s order, which will likely have legal costs especially if you don’t have clear documentation.

As for what to do next, you should consider looking for waitressing work in a lower cost of living area, perhaps one that’s closer to friends where you could “couch surf” for a while as you pick things up and figure out what’s next. This might involve moving to another city, but it sounds like you have no ties where you’re at, so it’s not a big deal.

If I were in your shoes, I’d try to get a few shared items from your ex, sell off what you can’t easily fit in your car, then head to another town where you know people and the cost of living is more palatable.

Q4: Great job offer… but scared

I am 26 years old and live in a house that I rent cheaply from my parents. I started working at my current job shortly after graduation and make about $38K per year. I took it because the experience is tremendous in my field.

My boss has been actively helping me find a better job (yes he’s that kind of guy) and he got me an interview with [a large engineering firm]. I figured I had zero chance but they gave me a job offer. $80K starting, killer benefits, great opportunity to move up from there. My boss says I should negotiate a bit for salary and then take it.

The thing is, i don’t want to take it. I do not know anyone in that city or anywhere close to there. The job seems exciting but really intimidating. I have no family or social structure there. I am afraid my life would become nothing but work and I will burn out and hate my life.

I feel like I want you to talk me into taking this job but I don’t know what to do.
– Steve

OK, ignoring all of the factors outside of the job (not knowing anyone in the city, basically), is this a job you’d be happy with? In other words, if you could magically do this job where you live now, would you take that job?

If it’s a “yes,” then you need to at least give this job a shot. Go there, give it a year, and see how everything works out. If you’re really worried about it failing, talk to your current boss and see whether you can work out a situation where you come back to something like your old job if it doesn’t work out.

When you take this job, go in there with a plan. First of all, take maximum financial advantage of it – contribute to the retirement plan, get every drop of matching, etc. Live in a small apartment. More importantly, make it your goal to find people that you’ll enjoy hanging out with that will become a social circle or “family” for you. Start by hitting and seeing if you can find any groups in that city that might match your interest. Try to make a big healthy list, then check them all out shortly after getting there. Keep going to the ones that click (or seem like they might click) and don’t sweat the others. If you’re religious, definitely join an appropriate group for that.

Do everything you can to start building an independent social circle and life for yourself in this new city. Make it a daily – or at least several times a week – requirement that you’re building a new life for yourself in this city. Put everything you can into not feeling alone and feeling like there’s more to life than just going to work in this city.

If, after a year, it doesn’t work out, well, take advantage of that parachute and return home.

If you don’t do this, you will always wonder “what if,” and that kind of regret isn’t something you need to have for the rest of your life.

Q5: Dental plans for self-employed

We are self-employed. Do you have any suggestions for what to do for when we need to take a trip to the dentist? Are dental plans a good idea?
– Ava

I’m going to be honest: most dental plans are very limited on what they cover and how much of it that they cover to be worthwhile for most people if they’re paying out of pocket. They usually only step in for disastrous coverage unless you have a very expensive plan.

If I were you, I would “self insure” for dental work. I’d settle into an annual checkup routine paid out of pocket, and then I’d triple that annual cost for both of you and divide it by 12. I would automatically put aside that much for “dental insurance” so that you can pay for dental care out of pocket. Just keep up with routine maintenance on your teeth (brushing, flossing, annual checkups) and you’ll usually be fine. On average, this is far more cost efficient than a dental insurance package out of pocket.

Ava had a second question.

Q6: Laundry drying strategy

Also, I like hanging laundry out to dry if weather permits. Do you know if line-drying laundry instead of using the dryer is significantly cheaper?
– Ava

The energy cost of a dryer load is somewhere around $0.60, although it varies with the age of the dryer and the size of the load and the efficiency of the dryer.

Having said that, there are a couple of additional factors to consider.

One, tumble dryers are hard on clothes and are likely to damage them far more than line drying. In other words, if you line dry, your clothes will last longer. That lint trap in the dryer is little bits of your clothing, after all.

Two, dryers eventually fail and then you have to pay for a replacement. Let’s say you can get 10 years of daily use out of a $500 dryer. The replacement cost of that dryer is somewhere around $0.15 per load in additional cost. That cost disappears with line drying.

Given those factors, you’re likely saving a dollar or two for every load you hang out on the line, or more if you’re hanging out some fairly pricy garments.

Q7: Cheap children’s birthday parties

What are some good ideas for cheap birthday parties for kids? I have a four year old and a two year old and soon birthdays are going to be more than just having grandma over for cupcakes and a couple of presents. Our oldest has already received a couple of invites for parties at the park and she will want something similar when she turns five. How can one keep this cheap but let her have fun with her friends?
– Olivia

One word: sleepover.

Most of our children’s birthday parties have been in the form of sleepovers with a few of their friends. They’ll have several friends come over to spend the night and we basically have a fun dinner of their choosing (often it’s homemade pizza) and then we let them plan out what else that they want to do (a few simple activities or else just free play). We fill up the family area in the basement with sleeping bags and let them watch movies or play video games until late in the night. It’s a super inexpensive party but our children love it.

If we do something more extravagant than that, it is considered one of their birthday gifts and they receive noticeably fewer gifts. We generally only give a few gifts for their birthday anyway, as we tend to lean toward a small number of “good” gifts than a lot of lesser ones, and if they do something besides a normal sleepover, it’s considered at least one of their gifts. Occasionally our children will choose a more expensive activity, but usually they prefer a sleepover.

Sleepovers are fantastic. If you do something like homemade pizza and a simple activity or two, the cost is pretty minimal and the children all seem to have fun. We recently had a sleepover for our youngest child’s birthday in which we just had pizza for supper, a couple of really simple activities, and then let the children just play together and stay up late, and every single child had so much fun that they literally didn’t want to go home the next morning. It’s inexpensive and every single child seems to enjoy it. So, that’s my recommendation for cheap children’s birthday parties.

Q8: Finding people dedicated to saving

How do you find other people who earn a high income and are dedicated to saving a large portion of their income? I make $80K per year and save about 50% of my income. I would like to find friends on a similar career path who don’t spend all of their money.
– David

The best success I’ve ever had at finding people with a similar financial perspective as my own is by going to free cultural events in my area, particularly ones that give windows to socializing.

Book clubs are great, especially ones run by the library so you can just check out the books. Presentations and speeches at local universities and libraries are great. Meetup groups are great. Civic organizations can be great, though they vary a lot in my experience.

Basically, if it’s a social event that doesn’t involve spending money and offers at least some direction toward self-improvement, you’re probably going to find like-minded people there. It’s never a guarantee, of course, but the people in the room are much more likely to be of a “saver” mindset than you’ll find elsewhere.

Q9: Starting a free blog

Where and how can I start a free blog?
– Nancy

I would recommend starting with either or Blogger.

WordPress is a much better tool for blogging. It’s just more robust in terms of actually writing posts and designing your blog than Blogger is, and you’ll find support to be much better, too.

So why use Blogger? is fairly difficult to monetize, especially when you’re starting. In other words, unless you’re fairly popular, you won’t make any income with a blog. (It’s worth noting that WordPress is also a software package; is just a site that lets you have a free blog using the WordPress software. If you later on decide to host the site yourself, then you have much more freedom when it comes to ads.)

Blogger is a solid tool (not as robust as but it does have the advantage of allowing you to do all kinds of things to monetize your site. It is worth noting that you won’t make much money at first no matter what – it takes a long time to build an audience and they won’t just magically appear.

My recommendation? Use, don’t worry at all about making money at first and focus entirely on building an audience, and then figure out what to do when you do have a healthy number of readers.

Q10: Exit interview questions

I recently turned in my resignation at work, telling my boss I would work as long as needed up until June 15. They’re using me the full time which is fine and they’re putting me on a lot of documentation tasks which is fine. My boss keeps asking me why I quit (better job, contacted by headhunter and got the new job quickly) and I know it will be asked in my exit interview. Do I have to say anything?
– Alan

Your goal with an exit interview should be to leave on a positive note with references and connections to the company intact. You should not be burning bridges on your way out the door no matter what went on there.

I don’t think you need to keep it a secret that you had a great offer from another organization unless there is some hidden legal issue that you’re not mentioning. Most companies will respect that.

I would encourage you to not worry about the exit interview and to be honest but positive during it. Don’t go scorched earth negative if the interviewer asks for criticism of the company – try to state both positive and negatives about your time there. Going strongly negative doesn’t benefit you or the company.

Q11: Ending credit card dependence

I am 26/M married with two kids. I pay for everything by credit card and sometimes overspend what we have and that means we now have about $12K in CC debt. Need to stop overspending with the card. Using only cash makes sense but seems awkward. Using only debit card makes sense but afraid of identity theft and having my bank account cleaned out. Solution?
– David

Cash is inconvenient, but it’s the best solution here. It forces you to stay within your means and it’s impossible to have your identity stolen with cash transactions. Just simply hit an ATM or visit a bank location before you shop for groceries or other needs.

Your goal here should be to train yourself on how to live within your means so that you’re not just racking up expenses on your credit card. For you, that means starting by being very careful about unnecessary expenses for a while until you get a firm grip on how money flows into and out of your checking account. You’re far better off letting a balance build up in that checking account than having it drain to empty every pay period.

You may eventually return to using a credit card, but for now, you should stick to cash and learn the lessons that cash can teach you.

Q12: Different writers

I was disappointed reading TSD’s email this morning. The use of the term mansplaning is offensive, even though the author mentions that it’s not about mansplaning… I knows this article wasn’t written by Trent, and it’s your business to run. But I might not be the only one.
– Troy

I receive an email like this about once a week, so I wanted to step in here and clarify a bit about how The Simple Dollar works.

I (Trent) started The Simple Dollar as a solo project in 2006. For the first several years, all articles on the site were written by me. By the end of 2011, the burden of running the site solo (with a couple of virtual assistants) was more than I wanted to deal with (in particular, Thanksgiving 2011 was a disaster, with a hacker attacking the site and thus directly attacking my family’s livelihood). So, I sold the site to its current owners, who retained me to write for the site for a very long period of time. I am under indefinite contract to write for The Simple Dollar with them, meaning I’ll probably keep writing until I decide not to (which, hopefully, means we’ve reached financial independence).

Now, the company that currently owns the site gives me a ton of free reign to write what I want to, as long as I write consistently. They just say, “You need to write 6 articles per week” and have a certain word count (so that I don’t write two sentence articles and call it good enough). Other than that, they give me almost no suggestion or direction in terms of what I write about aside from occasionally sending me links or suggested books to read in a “here’s something you may want to write about” or an idea for a post, but I’ve never been required to write about any of them.

However, TSD is a business, and having all of the site’s writing come from one person is a risk to that business. If I were to get hit by a truck and I were the only writer for the site, they’d be in a pickle. So, the site has a roster of other writers who post articles with some regularity. You can usually tell who wrote what because the author’s identity is identified at the top of the article (on the website) or the bottom (in the email newsletter). If it doesn’t have an identification, it’s usually written by me (Trent). The site owners simply need to have other writers ready to go in case I can no longer (or choose to no longer) write – it covers their risk.

Obviously, I’m not going to 100% perfectly agree with other writers, nor are they going to perfectly agree with me. We’re going to have different tones and different word choices and different experiences and different ideas. I write with a Midwestern earnest tone that has definitely earned me some good-natured teasing from other writers in the past. I generally write without irony or “snark” (though I definitely can use irony and “snark” if I so choose) and try to be as genuine as possible in what I write. Other writers may do things differently, both in tone and in terms of what they write about.

Rest assured, regardless of your feelings about other writers, I will be writing six articles a week for the site for the foreseeable future. I write a “reader mailbag” on Mondays and regular articles on Tuesday through Saturday, one per day. Though I know that many readers have tuned in to The Simple Dollar since it was a solo site and are mainly here for my articles, I hope that you’ll find things you like by the other writers as well.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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How to Use a Windfall to Supercharge Your 401(k)

There are a number of different reasons why you might suddenly find yourself with some extra money:

  • Tax refund
  • Bonus
  • Cash gift
  • Employee stock vesting (which you should often quickly sell out of)
  • Inheritance

There are a lot of good things you could do that with money, and using it to turbocharge your retirement savings is certainly on that list. After all, your savings rate is the single most important part of your investment plan and anything you can do to increase it is worth some consideration.

And while you can’t directly contribute cash to your 401(k) – since contributions have to come out of your paycheck – there is a way to use that windfall to increase your 401(k) contributions without impacting your monthly budget. Here’s how to do it.

Meet Chloe

To show how this works, we’ll use Chloe as our example.

Chloe makes $60,000 per year and contributes 5% of her income to her 401(k). Since she’s paid twice per month, she ends up contributing $125 per paycheck. That’s $3,000 per year, which means that she has plenty of room to increase her contributions before she hits the $18,500 annual limit for 2018.

Chloe also has an incredibly generous grandparent who just gave her $4,000 for her birthday. Since she already has an emergency fund and her other short-term goals are on track, she wants to put this money away for retirement.

She could contribute it to an IRA, but she’s lucky enough to have a good 401(k) with even better, lower-cost investment options than what she could access on her own. So she’d like to put the money there if she can.

Here are the four steps she takes to do just that.

Step #1: Put the Windfall in a Separate Savings Account

First, she puts the money in a separate savings account. She wants it to be easily accessible, but she doesn’t want it mixed in with her day-to-day spending money or even her other savings that might be used in the near future for other goals.

Keeping it separate allows her to know that it will definitely be there when she needs it.

Step #2: Increase Her 401(k) Contributions

Chloe has 16 more paychecks the rest of the year and a $4,000 windfall, which means that she can contribute an additional $250 per paycheck. Including her current $125 contribution, that’s a total of $375 per paycheck for the rest of the year.

Given that her per-paycheck income is $2,500 – calculated as $60,000 divided by 24 – she needs to increase her 401(k) contribution to 15%. With that increased rate, she’ll end up contributing exactly $4,000 extra over the rest of the year.

Quick note: One thing to keep in mind here is that you need to stay within the annual 401(k) contribution limit, which is $18,500 for 2018 (or $24,500 if you’re age 50+). If Chloe had received a $20,000 gift instead of a $4,000 gift, she wouldn’t be able to use the entire gift this year since it would have put her over that limit.

Step #3: Calculate the Difference in Net Pay on Her Next Paycheck

With that change in place, Chloe is now contributing an extra $250 to her 401(k) every time she’s paid. But that doesn’t mean that she’s receiving $250 less than she used to.

Since 401(k) contributions are tax-deductible, that extra $250 will reduce her tax withholding, leading to a smaller difference in net pay.

Assuming that Chloe is in the 22% tax bracket, her net pay would only decrease by $195 per paycheck. Or to say it another way, Chloe will have $390 less than she used to have for her other monthly needs because of the increased contribution.

Step #4: Withdraw That Amount from Her Savings Account Each Time She’s Paid

This is where Chloe finally gets to use that $4,000.

Every time Chloe is paid from now until the end of the year, she can move $195 from her separate savings account to her main checking account. She can even set up automatic transactions between those accounts so that she never has to think about it past the initial setup.

With that in place, Chloe has ensured that she has the exact same amount of money to spend each month as she did before she increased her 401(k) contributions. She has indirectly transferred the $4,000 gift into her 401(k) without affecting her monthly budget at all.

Bonus Step #5: Figure out What to Do with the Extra Money

If you’re following along closely, you’ve probably already noticed that Chloe will have some money leftover in that separate savings account at the end of the year.

$195 over 16 paychecks adds up to $3,120, which means that she’ll still have an extra $880, which represents the tax savings from those 401(k) contributions.

At this point, she can do whatever she’d like with that extra money. She could keep her 401(k) contributions higher for a little longer. She could pay off debt. She could plan a vacation. Or she could put it towards another goal.

Get Creative with Your Windfall

In some ways, using a windfall to increase your 401(k) contributions is the best of all worlds. You get to turbocharge your retirement savings AND you receive a tax break that can help you make progress toward other goals at the same time.

It’s a win-win, and all it takes is a little creativity and some simple logistics.

Matt Becker, CFP® is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families.

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Sunday, April 29, 2018

Money Doesn’t Always Answer to Math

Recently, I got sucked into a random Facebook thread that blew my mind — and not in a good way. The thread, which was started by a journalist in a business-related group I belong to, implored people to share how they planned to spend their tax refund this year. This shouldn’t have been controversial, but it escalated quickly once a few financial planners chimed in.

One in particular shamed the female journalist for even bringing up a tax refund. Financially educated people should never “give an interest-free loan to the government,” he said, adding that people in that particular group should “know better.”

I laughed out loud because, first off, the journalist wasn’t asking for advice on tax refunds; she was asking for personal stories to share in an article she was writing. But, she was a woman, and the amount of mansplaining done by male financial advisors I deal with seems nearly endless. Any time certain financial advisor types see an opportunity to interject with their “my way or the highway” advice, they often take it, even if they have to go off the rails (and off topic) to make their point.

The second reason this thread made me laugh is that the advisor in question recommended that people “adjust their W-4s at work.” This was funny to me since, well, the Facebook group this thread was posted in is mostly made up of entrepreneurs who are self-employed and paying quarterly estimated taxes. Many, if not most, haven’t filled out a W-4 in a long, long time.

When Getting a Tax Refund Makes Sense

But, this post isn’t about mansplaining or financial advisors; it’s about all those times in our lives where the math doesn’t really matter. Getting a tax refund is one of those instances in my eyes. There are dozens of reasons people choose to overpay their taxes to get a refund, many of which I understand.

Let’s say you actually like getting a tax refund and use it for something special every year. Maybe it’s your vacation fund or the cash you use to fix up your yard every spring. Because taxes are withheld from your paycheck or paid quarterly in most cases, a lot of people see their tax situation as a form of forced savings. If they pay in a little extra, they get some back when they file. Is that really the end of the world?

The financial planner that rattled on with their advice seemed to think so. He said you should take your extra money and put it in a high interest savings account instead — even though rates are only around 1% APY right now. According to the IRS, the average tax refund for the 2017 tax year was $2,763, or enough to earn you close to $28 in interest for the year. Awesome. 

For some people, forced savings isn’t the issue; they just hate owing money. I fall into that camp, although I tend to owe a little bit every year.

When you’re not a W-4 employee and you have a highly fluctuating income, it can be difficult to even know what to pay, let alone get close to even. For the 2017 tax year, I owed $4,500 in federal taxes and got $5,500 back from the state. I consider that a wild success.

What If Math Isn’t Always the Answer?

Math is amazing, and it can be used to guide many of the most important financial decisions we’ll face. Still, I wish more people would realize that math isn’t the end-all-be-all. There are plenty of instances where the mathematically advantageous approach doesn’t win out with people because some other factor is more important.

For example, let’s consider the endless argument over whether or not you should prepay your mortgage. While a ton of financial professionals would advise against prepaying your mortgage if your interest rate is low and you qualify to save on taxes via the mortgage interest deduction, there are just as many that say prepaying your mortgage is smart if all of your other financial ducks are in a row.

Of course, plenty of consumers don’t care what financial experts say and prepay their mortgage anyway. Their reasons span from hating debt to earning a guaranteed rate of return based on their current interest rate. Prepaying your mortgage may not be the optimal financial strategy, but that hardly means it’s a bad one. It’s just another decision we have to make as we navigate our financial lives and decide what’s right for us.

Another example is the debt snowball approach to debt repayment. While it makes more mathematical sense to pay down your highest-interest balance first, throwing all your extra money toward your smallest balance can help you build the momentum needed to follow through on what can be a long and difficult process.

There are plenty of other decisions we need to make to get ahead financially and forge a fruitful retirement, and many of them aren’t so black and white, either. For example, not all consumers share the same appetite for risk when it comes to investing. For that reason, some choose aggressive portfolios while others play it safe regardless of what the math purportedly says.

And what about leverage? If given the chance, some people will borrow money for anything from cars to furniture if their interest rate is low enough. But, other people avoid debt like the plague, even if that means forgoing a 0% same-as-cash offer. Those who hate debt don’t care as much about their “lost returns” in the stock market or elsewhere as they do about retaining their debt-free status, and that’s perfectly okay.

Then, there’s budgeting and spending. Some folks prefer the zero-sum budgeting method where they track almost every dollar they spend, but not every personality jives with that approach. That’s why others choose something more flexible like the 50/30/20 budget, which allows them to spend whatever they want as long as they stay within their spending “buckets.”

Then, there are people who set specific financial goals and don’t bother budgeting as long as they are saving as much as they want for the future. If that works for them and they’re saving as much as they need, then shouldn’t that be okay?

I think it should, provided you’re making mostly good decisions regarding your future and financial health. Prepaying your mortgage is a downright awful idea if you aren’t saving money for retirement as a result, for example. You can’t use your house to pay for retirement if you still need to live in it.

And, avoiding all risks associated with investing can be risky in itself since, as we mentioned, interest earned in high interest savings accounts and other safe investments is paltry right now. If you settle for incredibly low returns and forsake the stock market altogether, the money you save will be worth less and less over time thanks to inflation.

How do you know whether you’re on the right track or not? Meeting with a fee-only financial planner can be truly helpful provided you have the strength to stick to your guns when it comes to controversial financial decisions such as avoiding debt and prepaying your home loan. While they may not like all your decisions, they can show you the pros and cons and help you create a comprehensive financial plan that will meet your needs in the end.

You can also sign up for a robo-advisor like Personal Capital or Betterment. These services offer tools that can help you create the ideal retirement and track your net worth, and they won’t judge you over whether or not you prepay your mortgage, either.

The Bottom Line

If you’re someone who approaches money differently for any reason, don’t let financial professionals or anyone else shame you into their way of thinking. Our financial lives aren’t always as cut and dry as people wish they were, which is why some strategies work better for some people than others.

Ultimately, you have to do what’s best for you — and what keeps you sane. If you hate debt and want to avoid it at all costs, there’s no reason you should change course because somebody says you should. If you want to prepay your mortgage and get it over with, do it. And, if you want to overpay your taxes to get a refund each spring, don’t let anyone stop you.

Math can be used to guide your decisions, but it’s not the only answer. If you feel so strongly about your beliefs that you’re willing to buck the system, it’s okay to do things your own way. As long as you have a long-term financial plan that will help you cover your retirement needs in the end, that’s all that matters.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at

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Saturday, April 28, 2018

The Folly of Wanting More When You’re Not Using What You Already Have

You buy a book, but there are already a bunch of unread books on your shelf.

You buy a computer game, but there are already a bunch of unplayed and barely-played games in your Steam library.

You buy a new cosmetic product, but there are already a bunch of unused and barely-used cosmetic products in your bathroom drawers and closet.

You buy a new Bluray, but there are already a bunch of unwatched Blurays on your media shelf.

You buy a new cell phone, but the cell phone you have works perfectly fine and does everything you want it to do.

You buy a new video game, but there are already a bunch of unplayed or barely played games in your entertainment center.

You buy a new item for your preferred hobby, whatever it might be, but you already have a bunch of items just like it that you’ve barely used.

In the lives of many people – I’d say most Americans, in my experience and in reading about overall trends – this is a common phenomenon. I know it’s a phenomenon in my own life, particularly when it comes to books and board games.

We want more – and often spend money on more – when we’re not even using what we already have.

Why is this? Why do we want more when we already have plenty? Why do we want new when we already have plenty?

In the end, it’s all about desire. Desire is all about wanting what we don’t have. We already have the things in our closet and on our shelves, so they don’t elicit any desire. On the other hand, we do desire the things that aren’t on our shelves and aren’t in our closet, simply because we don’t have them.

Obviously, desire that is constantly fulfilled causes financial problems. You spend all of your money on new experiences and things, and eventually you need space to store all of those things. The constant desire for more wears down your wallet.

The thing is, desire is a fleeting mistress. Desire is like an itch on your back – you scratch it and it feels good, but then you often feel an itch somewhere else very quickly thereafter. On the other hand, if you don’t scratch that itch at all, it will drive you crazy with distraction… but not for long. If you pay it little mind, it usually fades away, particularly if you know deep down that you can scratch it whenever you like if you choose to do so.

This realization actually gives us a lot of helpful advice on how to quell the beast of desire and keep it from devouring our financial future. Here are ten strategies that I use to dampen the desire for more when I already have plenty.

Work on your self-awareness. In other words, recognize and acknowledge that you have desires and then reflect on why you have them and whether they’re meaningful.

The goal here is to try to step back from subconscious acting on desires, where we buy things and do things nearly on instinctive autopilot rather than thinking about what we’re doing and the impact those actions might have.

There are a lot of ways to improve self-awareness. One simple way is to use your downtime to think about the reasons why you behaved the way you did in a recent moment, whether that was the right way to behave, and whether there was a better course of action. You can do this while driving somewhere or waiting at the doctor’s office or any time in which you have a free moment.

Many people practice that kind of self-awareness and reflection in the form of journaling, where they sit down and evaluate situations in their life and other things in their mind in a similar fashion. Why do they feel this way? Why did they react this way? Why did they choose this course of action? What would have been the best way to act?

Over time, that kind of self-awareness can actually shape your subconscious instincts so that you end up making better decisions in the moment, so that you’re not driven primarily by the momentary desire of wanting something.

Schedule blocks of time to actually use the things that you have. I love to read and I love to play board games. Over time, that has somewhat channeled itself into collecting books and board games; there’s always something new to desire!

Part of the reason for that desire, though, is that I don’t have the time I once had to get lost in a book or to play a six hour long board game. As that time has slipped away while the desire to participate in that hobby remains, I’ve filled it by buying board games and books that I intend to read/play “someday.”

The reality is that the desire of collecting when you have a busy life is really just a cover for the desire to have time for those hobbies, and the solution to that problem is to intentionally block off time for those hobbies.

What I often do is that I’ll spend many evenings doing household tasks until I’m ready to fall in bed rather than watching television, or I’ll turn off distractions to get a ton of tasks done. That way, I can feel good blocking off several hours on the weekend to play a big epic board game, or I can feel good blocking off an hour or two on a weekday evening to get lost in a book without worries.

In other words, I make participation in the hobbies I care about into a high priority. This tends to keep my focus more on doing things rather than acquiring things. If I’m going to have a desire, I’d rather that desire be oriented toward doing rather than buying.

Practice conscious regular rotation of the contents of your closet and collections. Whenever I start feeling a great itch to buy a new game or a new book, I spend some time going through my current collections. I’ll re-shelve my board games or go through my bookshelves and pull off everything I really want to read or play. I’ll create a new Kindle category and go through my full Kindle library, putting books into that category that match it. I’ll go through my closet and rearrange the contents.

Almost every time, I’ll find some games I want to play or books I want to read and I become very motivated to engage with those things. The desire to experience those things becomes front and center, pushing the desire for more stuff to the background. I want to play this game I’ve forgotten about, so my desire to pick up a new one has faded!

The goal of all of this is to uncover things that you currently have that may have slipped your mind, so that your desire to acquire something new is transferred instead to a desire to explore this item you’ve uncovered.

Use the 30 day rule. If you’re completely focused on acquiring some new thing, simply agree to do a “check” on that desire. Put the item down for thirty days. If you still want it thirty days from now, then buy it.

This is really a check against the fleeting nature of desire. Quite often, the thing we desire very strongly this week will fade next week and disappear the week after that. If you examine that desire from the vantage point of a month, it will seem unexciting or perhaps even silly.

I usually write down desired items in a pocket notebook, so that I have this sense in my head that I “took action” on that desire. I did something. This often takes the edge off of that desire and it starts fading. Almost always, a month later, I have no interest in that thing that I was desiring and I can easily just forget about it.

Redirect into a different area of life. If you find that your desires are constantly pushing you to consider purchasing the same kind of thing over and over – books, board games, and so on – then consider redirecting your focus into other areas of life.

For starters, consciously choose to spend less time reading and watching media related to that area of interest. If you read a website related to this point of interest every day, then delete that from your bookmarks. If you follow a bunch of social media pages that stoke your acquisition fires, stop following most of them.

Instead, seek out other areas of interest in your life. Different hobbies. Different passions. Redirect your energy and focus elsewhere.

For example…

Intentionally build a focus on more fundamental desires that lead to self-improvement, such as your physical health. If you need something to focus on as a redirection from that expensive hobby that’s full of desires, try focusing instead on some aspect of improving yourself for a while. Make your diet front and center, or make your physical fitness front and center, or some area of learning front and center, or make your relationships front and center, or make your mental health front and center.

In other words, focus intentionally on things that are oriented almost entirely around taking action that will improve your life. For a long period, improving our personal finances received this kind of laser focus for us and it’s still an area of focus. I find that whenever my focus is on making my life better, my desire for purchases declines sharply, because most areas of genuine self-improvement do not involve spending money.

That’s because, in the end, improving yourself really means using what you already have. You’re using your body. You’re using your mental faculties. You’re using your mind. You’re using your social network. You’re not investing your desire in things you don’t own.

Here’s another approach to that same idea…

Intentionally build a focus on collecting “achievements” rather than things. For example, rather than focusing on buying books or the size of your book collection, focus on building a list of books you’ve actually read. Rather than building a huge collection of Blurays that you’ll barely watch, focus instead on building a long list of films you’ve watched, whether it’s from your collection or Netflix or borrowing them from the library or whatever.

Do things. Read books. Watch films. Play games. Go on hikes (and keep track of the trails and parks you’ve done). Do whatever it is that you’re passionate about, but rather than focusing on possessing the stuff involved, focus on making a big list of the things you’ve achieved within that hobby.

I love to track the games I’ve played and the books I’ve read and the trails I’ve hiked on and the geocaches I’ve discovered. When I pair that up with the earlier strategy of consciously devoting time to my interests, I can actually contribute significantly to these lists, and that keeps my desires channeled toward doing rather than acquiring, which is much less expensive.

Here’s yet another way to channel your focus…

Intentionally build a focus on desires that help improve the world. In other words, rather than aiming your desires at acquiring things for yourself or pleasuring yourself, aim your desires toward improving the world and follow that desire with action.

Consider what frustrates you and disappoints you regarding the world right now. Is it climate change? Is it extreme poverty? Is it the lack of a cancer cure? Is it simply hungry children in your neighborhood? What element of the world sears you to the core that you wish you could change?

Now, what can you do with your time to help bring about change in that area? Even if it’s just throwing a single starfish back into the ocean rather than clearing the beach, you can make a difference with your actions, your energy, and your time. Take direct action to fix these things, or else make a nuisance of yourself to the people in power regarding this issue.

If you care about something deeply, channel your energy into making that change happen. You can do this.

Use negative visualization to take an edge off of the less urgent desires. Negative visualization is a powerful tactic that helps you really put a check on a constant desire for more and amps up your appreciation for what you already have.

Just do this simple thing. Make a list of the three things you care about most in the world. Someone you love deeply. Something you love doing. Your favorite regular aspect of your life. Now, imagine, one by one, what your life would be like without those things. What would my life be like without Sarah? What would my life be like without a hike in a park on a nice sunny day? What would my life be like without the ability to read a great book?

My life would be a much emptier place. The more I reflect on what that life would be like, the more I come to realize that I actually have an incredible life abundance already. It’s a pretty good life – what exactly do I need more for?

This type of negative visualization is a great reality check for those times when the desire for more gets way out of hand.

Put a sensible, pre-planned cap on your desire spending. In the end, even after all of those tactics, there will still be times when you desire some object or some experience that costs money. It’s human nature. Those tactics will help knock that desire down quite a bit, but it won’t disappear.

That’s why it makes sense to have a monthly budget with some breathing room in it, with some money intentionally budgeted and set aside to allow you to fulfill some of your desires. I call it my “free spending” allowance – I can spend it on whatever I want. If I come to the end of it, then I know I’ve given in to a lot of desires lately and I can wait until next month. If I’m careful with it, it lasts for a good month or more.

You can make up your own rules for what comes out of that budget, but I recommend that you include things like eating out, experiences out of the home, and entertainment and hobby purchases in that “free spending” segment of your budget.

Final Thoughts

If you’re reading this, it’s extremely likely that you already have a plentiful life. You likely have lots of relationships, some interests that you enjoy, and lots of little things in life that keep you lifted up.

In the end, the real key to avoiding a desire for more and a neglect of the many things you have is to simply be intentional with your focus. When you find yourself desiring something, put that desire down and spend some time considering the abundance you already have in your life.

Do you really need more? Does it really gain you anything that’s really worth the desire and the cost? Probably not.

Good luck.

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Friday, April 27, 2018

Money Free Days

One of our family’s favorite ways to spend money is to have money free weekends. We simply aim to go through an entire weekend without spending money, relying solely on the food already in our cupboard and refrigerator for our food needs and the things we already have on hand for our entertainment needs.

Over the last several months, I’ve come to realize that “money free days” are actually a really big part of our financial strategy. There are simply a lot of days where I don’t spend a dime, neither does Sarah, nor do any of our children.

We don’t go out to eat. We don’t stop for a quick treat. We don’t buy anything online. We don’t spend money on entertainment. We don’t buy food. We don’t buy anything. No money leaves our home.

So, starting in January, I started tracking those “money free days.” I just made up a little spreadsheet that was just a list of days, and each day where I didn’t believe we spent any money, I made a little “X.” It turns out that more than half of our days are money free days.

Here are a few observations about this:

Money free days are mostly achieved through self control regarding splurges and unnecessary spending. Our necessary and planned spending usually occurs in large batches on single days, like grocery day when I’ll also often fill up the car with gas, or bill pay day. Most other days do not have any planned spending at all, so a “money free day” usually happens because we didn’t splurge or buy anything unnecessary. A “money free day” is usually just a “self control day.”

Money free days really add up. If we spent just $10 per day on those money free days this year instead of $0, we would have spent $630 at last count. That $630 is enough to make a huge difference in the finances of most people. It covers a couple of car payments or pays off a credit card. If you have 50% “money free days” over the course of a year, that’s 182 money free days, and at $10 a pop, that’s $1,820.

Money free days work because we make a lot of our own meals. On money free days, we make our own meals at home from stuff we already have on hand. We don’t go to restaurants or get takeout or get delivery or make a last-minute run to the store. Instead, we’ve planned ahead with a well-considered meal plan.

Money free days also work because we have a lot of free things we enjoy doing and sources of entertainment and fun already on hand. We don’t need to go out and spend money to have an enjoyable day or evening. Here’s a list of 103 things we do on money free weekends, for example, and those tactics just scratch the surface.

Having a “money free day” becomes a nice little goal that feels like a nice accomplishment at the end of the day. At the end of a money free day, it really can feel like you’ve taken a real step forward in your financial life. Not only have you conserved money for the day, you’ve reinforced to yourself that you don’t need to spend money to have a joyous life. You can go to bed feeling good.

Yet, a money free day isn’t actually unpleasant. It’s usually a pretty normal day. We just don’t buy anything. We’ll have family meals together, work on hobbies together, take care of household projects, work, go to school, and so on.

When you start tracking “money free days” and get a streak of them going, you really want to keep it going. I’ve found that when I get three or four Xs in a row in my spreadsheet, I want to continue that streak and add another day to it. It’s an unconscious drive, but a powerful one. It’s a technique I’ve described in the past that can show up again and again.

“Money free days” cause you to spread out treats and thus appreciate them more. If you try to do three or four money free days a week, those are days that you’re not indulging in perks that might become utterly routine. You’re not stopping for a quick bite. You’re not grabbing a cup of super sweet coffee. You’re not stopping in at your favorite shop. Instead, you’re spreading out those perks. They’re not an everyday thing any more. Instead, they become more infrequent, and thus more special and more appreciated. That type of appreciation has value – the anticipation is fun and the less frequent indulgence makes it feel more pleasurable, too.

How can you turn this idea of “money free days” into something useful for you?

One thing you can do is turn it into a 30 day challenge. A thirty day challenge means that for a single thirty day period (I almost always just use a calendar month), you strive to make some significant change in your life or do something frequently. I often track this by using a calendar page, marking each successful day with an X – you can print calendar pages quite easily. Set a goal for that 30 day challenge – maybe it’s 20 Xs. At the start of each day, look at the calendar and reflect on your challenge. At the end of each day, look at that calendar and add a big fat X on that date if you succeed. See if you can get to 20 Xs before the end of the month.

Another good tactic is to reflect on things you’d like to do or get done with the things you already have on hand. What hobbies have you allowed to idle? What things do you have stowed away in your closet that you’ve neglected? What unread books do you have? Have you gone on a bike ride lately? Have you played soccer at the park lately? Gone for a long walk or a jog? Have you cooked up some of the things stowed away in the back of the freezer? Do some brainstorming about the dangling threads in your life, pleasurable or otherwise, and then intentionally spend days (or whole weekends) tugging on those threads.

I actually like using some of my money-free days to tackle big day-long projects. I’ll do things like doing a meal prep day or taking on a home repair project using things I already have on hand, or play an epic board game with my family. If I have all of my supplies on hand, this easily becomes a money free day.

Another good strategy is to plan a social event at your home. Have a dinner party or a movie night or a board game night. Plan it out several days in advance, get all of the stuff you need, and invite people over for the event. Getting ready for it will probably eat a lot of your day, then the event itself will fill your late afternoon and evening with free fun.

I find that doing anything free with friends tends to be a lot of fun, whether it’s going on a hike or having a dinner party or playing soccer at the park or going to a community concert. The simple act of doing something with someone is fun, and it turns out that lots of people are very amenable to social activities where there’s no cost to them. A lot of my friends might balk at the cost of a night on the town but love to come over for a game night or a movie night or to work on a project of some kind together.

A final tip: meal planning really, really helps with this. Having a meal planning and grocery buying plan in place makes money free days really easy because you already have the food you need on hand to prepare meals for the day (and for a lot of other days). If you have a strong meal planning system, you can often go for a week and a half or more without going to the grocery store, which eliminates one common source of spending. This entire process really cuts down on your food spending overall and paves the way for money free days, which inherently represent lower spending in other areas (such as hobbies). I often plan ahead with filling up the car with gas in this way, too, as I’ll often get gas at the same time as I shop for groceries.

This is just a fun little practice to help you to realize that it really is pretty easy to go through a day without spending money, and the more days you practice this pattern, the more normal it’ll seem and the more money you’ll save.

Good luck.

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Thursday, April 26, 2018

When ‘Going Cheap’ Is a Bad Idea

I usually go “cheap” when I’m spending money on things for myself or for my family. I aim for very low cost and healthy foods – I aim for spending less than $100 a week on food and household items for my family of five while still having healthy meals for all. I buy store brand versions of a lot of things. I rarely splurge on expensive items. I only buy clothes when they’re on sale, usually when clothing stock is getting rotated out at the end of the season.

Having said that, over the years, I have found that there are some things that I don’t skimp on.

“What stuff don’t you skimp on?” you might ask. “When is it a bad idea to go cheap?”

Don’t worry, I’ll get there and provide a list of items that I don’t skimp on for you, but first, I want to offer up my general rule on things you shouldn’t skimp on:

If you use an item every day AND you can identify specific features that make a significant difference for you, then you shouldn’t skimp on those items.

That list of items is going to be somewhat different for everyone, because we all live different lives and use different items in different ways. However, there are some things that we do all have in common, such as eating, sleeping, and walking, and my list touches on all of those things.

The thing to always consider is whether or not a good version of an item will meet a genuine need for you and make a significant difference in your life. Something might seem “cool,” but does it really help?

One feature I always consider when it comes to daily use items is reliability. Is it going to last for years and years and years? That’s what I want, and I’m willing to pay more for that. I will pay more than five times the cost for something that will last five years versus something that will only last for a year so I don’t have to deal with the cycle of breaking down and replacement each year.

So, that being said, here are things that I don’t “go cheap” on.

Shoes: If shoes hurt my feet, I’m not going to wear them with any regularity. If shoes feel comfortable, particularly after long days of walking, not only will I wear them all the time, I tend to latch onto those models and keep buying that same model for as long as they’re made.

I generally have four pairs of shoes, one pair of sandals (for the summer), and one pair of boots (for the winter). I have a pair of “everyday” shoes, a pair of “hiking/outdoor/likely to get muddy” shoes, a pair of “dress” shoes, and a pair of “gym” shoes. I replace these shoes when they’re either starting to fall apart (at which point I try to get the same exact model as before) or if I’m feeling foot pain (at which point I get a different model). For the most part, I stick with the same models over and over and over and over again until they stop being made or the company changes their construction. For the most part, these shoes last a couple of years each at least. I have a preferred model for each type and I always watch for steep sales on them because if I find such sales, I’ll buy a few pairs and stick them in the closet.

If my feet are hurting because of my shoes and it’s not due to breaking in a new pair of old standby shoes (I do exclude days where I do an exceptionally large amount of walking compared to my normal amount of walking), then I get different shoes. I don’t accept sore feet. I don’t accept the idea that I should dread going for a walk because of foot pain.
Foot pain due to cheap shoes is not acceptable; I will spend more on shoes to avoid foot pain, and I will stick with models that work. I prefer shoe models that will last for a long time and I seek out a good bang for the buck regarding construction quality and price.

In summary, when it comes to shoes, being able to wear them for a long period of time and on long walks in varied terrain without foot discomfort is something I’m willing to pay extra for.

Mattresses and pillows: This is a similar argument to shoes. I won’t tolerate a nightly mattress or pillow that causes consistent back pain or any other form of discomfort. If I am experiencing neck or back pain due to my sleep, then I rotate the mattress as a first response and also carefully evaluate my pillow. If the pain continues, I’ll replace my pillow immediately. If it still continues, I’ll replace that mattress.

I’ll stick with a pillow until it appears to be the cause of neck or back pain. The same is true for a mattress – I’ll stick with it until it appears to be the source of neck or back pain after rotation. When it’s clear that something is causing me to be in pain upon waking or causing significant discomfort during the day, then it is going, no questions asked.

For replacing a pillow, I have a consistent pillow that works well for me for about a year before becoming too flat and causing some minor neck issues and upper back pain (this is the one I prefer). Mattress replacement is trickier simply because of the difficult marketing of the mattress industry which does all it can to make things unclear, but we tend to get lots of years out of a mattress. I usually just take note of what mattresses I sleep on while traveling that cause me to wake up over several nights with no back pain and I look for those models. (I am very much in the “firm” mattress camp.)

In the end, for me, when it comes to mattresses and pillows, a good night of sleep without discomfort or pain in the morning is something I’m willing to pay well for.

Basic kitchen equipment: One thing I do almost every day is prepare at least one, and often two or three, meals in my kitchen. This often involves cooking things on the stovetop, chopping up vegetables, and so on.

For any tasks that I do that frequently in the kitchen, I want tools that just work – tools with a long lifespan that can take a beating, tools that don’t require endless maintenance, tools that just do their job.

For me, the core kitchen tools are a good chef’s knife (the Victorinox Fibrox is perfectly fine; I use a Global I received as a gift, but the Fibrox is where it’s at for quality versus cost), a good paring knife (again, Victorinox is perfect for my needs), a cutting board, a saucepan, a skillet (a cast iron one is best, one you’ve seasoned until the surface is basically nonstick), a pot of reasonable size (a Lodge 6 quart enameled cast iron works for almost anything you might do with one), a small spatula, and a larger one for flipping things in the skillet. With those tools, I can prepare most of the dishes that my family enjoys. Those things must work. Those things must do their job with minimal maintenance.

There are other things that I use frequently, such as a rice cooker, but I don’t mind buying the Goodwill versions of those if I need to replace one.

The core things I use in the kitchen need to be well made, to do their jobs well with minimal maintenance, and to last for a long time. I don’t want to waste time with things that aren’t working well any more when I’m trying to assemble a simple meal quickly for my family. This stuff needs to work. In summary, for me, with the daily use items in my kitchen, reliability and low maintenance are the killer features that I will pay more for.

Heavy-use appliances: I don’t go on the cheap end for appliances we use every day – the dishwasher, the stove, the microwave, the refrigerator, the washer, the dryer. For those large purposes, I tend to study Consumer Reports and go for their “best buy” recommendations, which is usually one that’s near the top of their rankings with a reasonable price. I tend to favor ones that indicate better reliability rather than more features, as I generally only care about the core features of that item. I want my washing machine to wash clothes reliably with just a few settings and ideally while conserving water and energy, for example. I don’t need a touch screen or other whiz-bang features.

This generally means that I’m looking for a middle-of-the-road appliance in terms of price when I’m buying. I usually know exactly what model I’m looking for and I shop around to find that exact model at the best price, and I look for ways to get further discounts on that model. Basically, I’m doing what I can to get a highly reliable but not necessarily feature-laden appliance at a good price. I will pay more than the low end for that. In summary, for the appliances I use every day, reliability is a key feature that I am willing to pay more for.

House guest preparation: When someone is a guest in my home, I don’t skimp on them in the way that I would on myself. The guest bathroom gets good soaps and toilet paper and the like. The guest bedroom is made up as nicely as possible, usually with highly regarded overnight toiletries for their use (usually higher-priced stuff than what I use myself). When guests come over for meals, I serve them genuinely high quality food, generally due to my own extra effort. I don’t serve cheap wine or cheap beverages unless I really know the person (some of my closest friends are quite happy with a bottle of “three buck Chuck” on the table, but when the social connection is more fragile, I will serve something else).

Yes, this means I spend more when I’m preparing for a guest in our home, but I view that cost as a social cost for the people I respect and for the relationships I value. My guests might ask me what kind of shampoo I use, for example, and they’ll often find that it’s a store brand, whereas I have the best shampoo (from Consumer Reports) available for them in the guest bathroom. So, for me, while I don’t use items for guests every day, I value very highly the comfort that guests feel in my home.

Garbage bags: This is one household product where I do not buy the store brand. I have bought ForceFlex bags in bulk for years and they have done incredibly well for our use, as they tolerate being filled to the brim and often handle very heavy items without breaking or tearing. We have only extremely rare issues with the bags no matter what we do to them. In the past, when we have used store brand bags, they often tore no matter what was in them if the bags were over half full.

It is worth paying a little more to reduce the chance of a kitchen trash blowout from 10% of the time to 0.1% of the time. The time invested in trash bag blowout cleanups isn’t time I want to ever invest, so I will pay more to avoid it. It is an extra cost that is at least partially recouped by the fact that I feel fine filling our current bags to the absolute brim, whereas with store brand bags I would barely fill them past halfway to avoid blowouts, and sometimes double-bag them if something heavy was in there. That added greatly to the cost of store brand trash bags. So, for me, trash bags are something I use every day, and the key feature that’s worth paying more is avoiding trash bag blowouts.

Writing tools: I am a writer and a prodigious note taker, and I also write in a journal nearly every day. I am very particular about my writing tools, and I get so much value out of reliable ones that it’s well worth the extra cost.

I virtually always write with a pen, and I want one that just works but isn’t expensive enough to freak me out if I lose it. For me, that’s either a Pilot G-2 or a Uniball Ultra-Micro gel pen (they come in a few different models, but they’re all fine). I keep a staple-bound pocket notebook on me at all times, one with a sturdy cover that doesn’t fall apart at a moment’s notice (the brand varies, but I don’t buy the cheap spiral-bound ones). I also have a number of larger notebooks and journals that I fill to the brim (I really like Leuchtturm 1917 and Baron Fig notebooks and journals). I will happily make do with composition notebooks from the dollar store in a pinch, however, but I prefer notebooks and journals that are really well made and can handle a beating and a lot of leafing-through without falling apart.

Again, the cost per day of use of this stuff remains really low, but it is higher than buying super-cheap pens and spiral-bound notebooks. Neither one of those hold up: the pens often leak, and the notebooks often fall apart.

For me, writing tools (pen and paper) are daily use items, and it’s worth spending a little more to get reliable pens that always write and don’t leak, and reliable notebooks that hold together while being filled to the brim and leafed through later.

Car and tire maintenance: While we don’t go high end for cars (we tend to buy entry-level late model used cars from reliable manufacturers like Honda and Toyota), what we don’t skimp on is auto maintenance and tire maintenance. I fill up the tires at the gas station to the maximum recommended pressure frequently and replace them when we get even remotely close to thin treads. I also stick strictly to the recommended maintenance schedule and have a trusted mechanic do everything (unless it’s just an oil change, which I can do myself).

Those moves simply add to the reliability of the car. It’s not going to blow a tire. It’s not going to skid around on a winter day. It’s going to start when I go out there and start it. It’s not going to have lights go on unless there’s a real breakdown problem. Issues aren’t going to jump out of the blue.

For us, a car that runs is a daily requirement, and I ensure that by keeping up with tire maintenance and auto maintenance. It might cost a little more right now, but it avoids a lot of issues down the road in all sorts of ways and it also extends the life of the vehicle.

Health and dental checkups: In our family, we follow a pretty standard protocol for health checkups. Adults under the age of 65 get one about every two years; children, once a year. Dental checkups tend to happen every six months to a year depending on our dental health. We follow the schedule more or less like clockwork.

Why? Health surprises, when caught early, are usually pretty easy to treat in terms of both cost and life impact. Health surprises not discovered until later can be a complete disaster to treat in terms of both cost and life impact. It’s just that simple.

Our health is something we depend on every day, and without it, quality of life can decline rapidly. A body that runs well is a daily requirement, and this is ensured to the best of our ability by getting regular medical and dental checkups. It’s also aided by being active and eating a healthy diet, of course.

Final Thoughts

These examples cover most of the areas in my life where I don’t “go cheap.” In each case, the same core principle rings true: If it’s something I use daily AND it’s something that I can identify as providing necessary value beyond the minimum expense option, I’ll go for the better option. Good shoes and a pillow and a mattress keep a lot of pain at bay. Good kitchen tools makes meal preparation for my family easy. Auto maintenance keeps our cars running well for a long time. Medical checkups (and a good diet) do the same for our bodies.

In the end, almost all of these things come down to preserving the basics of life: our health, our closest relationships, our sense of well being. If those things are in place and well secured, it’s easy to have a good life. Going cheap on those core things is a bad idea.

Good luck!

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When Does It Make Sense to File for Bankruptcy?

Bankruptcy should be avoided whenever possible, but there are times when people who are overwhelmed with debt have no viable alternative but to seek bankruptcy relief.

Bankruptcy laws are designed to ease the financial pressure on people who can’t pay their bills. While filing for bankruptcy can erase unsecured debts, prevent foreclosures, and stop debt collection activity, it has some drawbacks, said debt resolution attorney Leslie Tayne. Going through bankruptcy can affect your credit report for up to 10 years, making it difficult to qualify for a mortgage, a car loan, or other lines of credit, Tayne said.

For most individuals, there are two types of bankruptcy: liquidation (Chapter 7) and reorganization (Chapter 13). “There are other chapters of bankruptcy, but for most consumers, these are the two available options,” Tayne said. Depending on individual circumstances, most of your debts may be discharged or reorganized to create a manageable repayment plan.

A last resort

Deciding when to file for bankruptcy can be a difficult judgment call. It depends, in part, on your tolerance for living with the stress of being deeply in debt.

Experts generally agree that bankruptcy should be entered into as a last resort. You should consider it “when you can no longer afford basic necessities and all other options have been explored and exhausted,” advised Tayne.

Attorney Jen Grondahl Lee said the time to file for bankruptcy is “when you are so stressed from your finances that you cannot see the light at the end of the tunnel.” And attorney Parisa Fishback said bankruptcy may be appropriate if you have property that’s in danger of going into foreclosure, or if you’re thinking of taking money out of a retirement account in order to pay an unsecured debt.

Before you decide to seek bankruptcy protection, consider taking the following steps:

  • Get a handle on your finances. First, add up your assets, including your savings accounts, the value of your home and your automobile, your retirement funds, and any investments you have. Next, tally your liabilities, including all bills and obligations. These include outstanding loans and credit card debt. If your liabilities are far greater than your assets, it may be time to consult an attorney about bankruptcy. Understanding your assets and liabilities “will put you in the best position to make a decision on bankruptcy,” said New Jersey attorney Paul J. Riviere.
  • Try to negotiate with your creditors. Many creditors would rather make a deal than see you file for bankruptcy. That’s because some or all of the money you owe them could be discharged in court. You may be able to convince your creditors to forgive part of your debt or agree to a more manageable repayment plan. Consider contacting a nonprofit credit counseling agency that’s accustomed to working with lenders and credit card companies.
  • Make sure you’ve exhausted all alternatives. Borrowing money from relatives to repay your debts or selling property to raise money may be preferable to bankruptcy, depending on your circumstances.
  • Prepare for the job of starting over financially. This means changing your spending and bill-paying habits in order to make sure you never again find yourself in this situation. For example, if your financial problems were caused by credit card debt, you should be willing to stop relying on credit cards for your day-to-day needs. This will be easier if you commit to building an emergency fund you can use for unexpected expenses, such as car repairs.

Make peace with your bankruptcy

Once you’ve made the decision to declare bankruptcy, don’t waste time feeling guilty or dwelling on the damage that has been done to your credit report. Your credit score can start to recover in just a few years, so learn from the past and focus on the future.

Having a bankruptcy on your record means you likely will have to pay higher interest rates for loans, because you’ll be considered a greater credit risk. Although it can take up to 10 years for a bankruptcy to fall off of your credit report, the impact will diminish over time.

Florida consumer protection attorney Donald E. Petersen said it can take two to three years for your creditworthiness to recover enough to allow you to obtain a home loan on favorable terms. Be aware that there are predatory lenders who work with people with damaged credit in order to charge higher interest rates. Consider putting off major purchases that require borrowing until your credit rating improves.

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Wednesday, April 25, 2018

“Financial Success Only Works for Other People”

One of the most interesting things that occurs with The Simple Dollar is the sharing that goes on with the site and with the email newsletter (some readers receive the articles from the site in email form). People share articles to others on social media or by forwarding an email, and sometimes those people will share it, and so on, and eventually an article makes it into the hands of someone who feels the need to tell me how wrong I am about the relatively simple math of frugality and financial success.

Usually, the response I’ll get (via email or social media) boils down to one core idea: “Sure, what you talk about might work for someone who is rich, but it doesn’t work for most Americans.” I hear that again and again and again and again.

So, let’s start with some reality from my own financial journey.

When Sarah and I started our financial turnaround, we lived in a tiny two bedroom apartment that was about 600 square feet. Our combined salary was about the average American household income, but we held somewhere in the high five figures in student loan debt, over $10,000 in credit card debt, and two car loans. We also had a baby that we were raising in that tiny little apartment.

I don’t think you could make a good case that we were in the top half of Americans in terms of our financial state. We were about average in terms of salary, but boy did we have a lot of debt.

Over the next year and a half, we paid off all of that debt. I wrote about that journey in the early days of The Simple Dollar; I started the site well into that debt repayment process and I started the site to share the things we were learning along the way.

We then bought a house and had two more children and I had a career change. Within four more years, we paid off that house, too. We were completely debt free and owning our own home within five and a half years of starting our financial journey.

We didn’t do this with exorbitant wealth. We had exactly two years where our combined income bubbled over $100,000 a year during that entire process, and during both of those years I practically killed myself with work to get there.

So, how did we do it, then?

We did it with self-control and frugality. We recognized that every dollar we were spending needed to be bringing some real lasting value into our life. A lot of the things that we were spending money on – and that most Americans spend money on – bring short bursts of joy and then fade quickly into being forgotten entirely. They might be really tempting short-term pleasures, but they’re just short-term pleasures.

This is still mostly true for us: unless we’re pretty sure that something is going to be providing a ton of positive value for us for the dollar and it won’t be something we forget in a day or two, we’re going to try as hard as we can to spend minimal money on it – ideally, none. Yes, we have to buy food, but most meals are just forgettable fuel for the body, so we go for cheap healthy meals – think rice and beans and eggs and simple stir frys and oatmeal and lots of vegetables and things like that – that are nothing more than healthy fuel for the body. Yes, we buy things for entertainment, but we’re extremely careful about getting the most bang for our dollar in terms of long-term value and we often borrow things from the library, go to community events, go on hikes, and do other such things that have zero or very minimal cost. Yes, we buy household supplies, but when we do, we buy store brand and usually in bulk.

The hard truth is this: spending money does not lead to more happiness. I’ll repeat that: spending money does not lead to more happiness. Yes, you have to cover some basic expenses, but those expenses, once you peel back the unnecessary layers, are pretty cheap. The rest? It’s unnecessary, and spending that money does not lead to more happiness.

But what about splurges? What about fun? If you’re thinking like that, you’re not getting the message. Spending money does not lead to more happiness. Happiness comes from the things that you’re doing, and that rarely requires you to spend money. There are tons and tons of fun things to do that don’t involve shelling out money. Spending money might give you access to more, but it comes with a cost that we no longer wanted to pay.

Yes, we do spend money freely on entertainment and hobbies, and we do plan a nice family vacation each summer. We budget and plan for those things, though. There’s a reasonable cap on that spending and when we hit that cap, that’s the end of it until the next month.

We did it by keeping our eyes on our goals. So, we started living well beneath our income level. Why? We had other goals.

The biggest one was that we wanted to be completely, 100% free of debt. We did not want big monthly debt payments to be steering our lives for the next thirty years. We didn’t want to be making big monthly rent payments, either. We didn’t want the stress of it. We didn’t want our choices to be restricted by it. We didn’t want our children’s choices to be restricted by it, either. So, our goal was to be debt free and to own our home free and clear.

After that, we had a number of dreams – a home in the country, financial independence, international travel – but those were secondary to our big goal of complete debt freedom. Almost everything we did had that central goal in mind. (Now, our main goal is financial independence – a state where we can live off of our savings without having to work.)

Achieving this goal became the center of our focus in many areas of our life. It was certainly our financial center, and our professional goals often lined up with this as well. To a somewhat lesser extent, it shaped our social, spiritual, and intellectual lives, too.

We achieved that first big goal in about five and a half years, all told. We’re now working on the independence goal.

We did it with a plan built around consistent and logical financial choices. Our plan for being free from debt was very logical and clear and it told us what we should be doing at every step.

First, we built up a cash emergency fund equal to about a month’s worth of living expenses. This was to help us ensure that emergencies that life sometimes deals out didn’t interfere with our plans. If our emergency fund was low, refilling it was always the number one priority.

Second, we started paying off our debts, starting with the one with the highest interest rate. We made minimum payments on all of our debts, then we made the biggest extra payment we could on our highest interest debt. Rinse and repeat, month after month. We had a lot of fun tracking that progress and watching our debts melt away.

When we bought a home, that mortgage went into the debt pile at the bottom of the list because the interest rate was pretty low. We rather quickly reached a point where we were making triple (or even bigger) house payments. Within four and a half years of getting that mortgage, it was fully paid off.

Now, we’re saving for financial independence. We’re fully funding our Roth IRAs each year. Sarah is stocking up in her work 403(b) plan. We have a healthy amount of money in a taxable investment account because we usually save more than we can stow away in retirement accounts. We also have well-funded 529 plans for our children.

It all comes back to the plan. We’re never unclear on what our immediate financial tasks are. It’s never in doubt what we should be doing with our money and, in fact, we automate a lot of it, with contributions going automatically into the accounts where we want them.

We did it together. All along the way, Sarah and I did it together. We have been on the same page with every one of our financial goals. We’ve been on the same page with every step on the path. If anything, Sarah is more frugal than I am and more adamant about our goals than I am and more celebratory and joyful about our efforts than I am, believe it or not.

Our accounts have both of our names on them. Our possessions have both of our names on them. We’ve both made tons of choices over the last several years to help bring us to this point. Our choices aren’t just about what would make us happy right at this moment, but what would bring the most lasting joy and pleasure to our family over time, while avoiding any addition of stress.

The thing is, we do all of this without being “rich.” We’re not rich in the least. We earn a little bit more than the average American household, but not astoundingly so, and we’re still well within being able to contribute to Roth IRAs and the like. We have three children at home with all of the expenses that entails. We’re not high income couple with no children – we’re about as “normal” as an American family gets.

You don’t have to be “rich” to find financial success, period. You just have to have priorities in your choices. If you prioritize spending your money on name brands without having even considered the store brands, if you prioritize constant “treats” for yourself that are forgotten within a day, if you prioritize eating out regularly (yep, even if it’s fast food), if you engage in regular “retail therapy,” then it is your choices that are keeping you from financial success, period.

Financial success doesn’t just work for “other people.” Financial success works for most Americans (not all, but most) provided they make the choice to try to make it work.

Good luck.

The post “Financial Success Only Works for Other People” appeared first on The Simple Dollar.

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