Category: Change your Thinking

Not too long ago I had a bad toothache. At first, I thought it was just sensitivity. I’ve had that in the past and using special toothpaste for several months took care of it. When cold drinks no longer caused that little shock, I pronounced myself cured and switched back to whatever was on sale. Now it seemed it was back. I purchased some of the special toothpaste but over the course of several days, the problem worsened. Now it was not just cold or hot that brought on that flash of pain, it was just about anything including breathing. The little shocks had become a constant throb accompanied by feelings of an occasional high voltage electrocution.

The dentist wrote me a pain and penicillin scripts and referred me to the endodontist. That was Thursday and the earliest the specialist could see me was Tuesday. The pain pills made me sick and after spending most of Friday laid out I decided I could tough it out on Advil.

It was in that condition that I googled “toothache cures”. If you ever have the feeling that your life sucks, read some of the posts to the forums for toothache home remedies. I knew all I had to do was make it from Friday to Tuesday and the Advil was doing a good job of making my pain tolerable.  Many of these poor people were suffering with toothache pain with no end in sight. The difference between them and me was that I had the $2400 set aside to handle this.

We guard our emergency fund vigorously. We have built up sinking funds to cover most expected expenses that used to be emergencies for us. Things like home or car repair, taxes, insurance and medical expenses. We tend to be very careful and conservative with what we spend from these funds but when you or someone you love is in pain it’s really easy to write that check.

We could easily spend $200 a month more eating out, or eating in for that matter. It would not take me long to run through $200 at the sporting goods store or the bike shop or Target. By NOT doing those things for a year, we were able to save the $2400 necessary to fix my tooth.

I never want to be the one typing this at 2 in the morning:

I’ve had a toothache for a while, I have a gap between my molars with a black hole right at the root. I haven’t been able to get any sleep and have tried about everything. Here’s some things I did that helped though damped a wash cloth, microwaved in 30 seconds and put it in a ziplock baggy and rested it against my face, the hotness seemed to help soothe the pain, it didn’t get rid of it but helped a little. I took one Benadryl before bed and it seemed to lessen the pain. I gargled antiseptic mouthwash for about 30 seconds. My eyes also hurt along with my tooth.

and I’m willing to make some small sacrifices now to ensure that I never will. Are you?

We recently examined how much you should spend on groceries and found that there is a large variation in what the same size families spend in a month.  The USDA tracks food cost by family size on four different plans; Thrifty, Low Cost, Moderate and Liberal. Their current estimate for the thrifty plan for a 19-50 year old male is low 176.00 a month. So how did Andrew Hyde eat on $36 a month while attending college?

Andrew gives us his how to in How to Live (Comfortably) on $36 A Month for Food.  Here are some of his meal tips:

Breakfasts: Oats with raisins or a banana works out to be about $.12 a serving.  Milk or soy brings it up to about $.20.  Lipton tea bags cost $.02 a piece.  If you are on the run the oatmeal packets (the flavored ones) run around $.15 a piece.  Eggs can run as low as .09, so a 3 egg omelet with peppers and cheese goes for $.38.   I used to see English muffins go for $1 a pack of 8 on Sundays.

Lunch: Sandwiches are the cheapest route.  PB+J can be priced at $.25, so doing two plus a banana ($.10) makes a pretty filling lunch for $.60.  Leftovers from dinner are also an option.  Rice cakes and cheese was a favorite.  Bagels, fruit and salads are staples.  Lunch was always my wild card.  Leftovers were the norm.

Dinner: Rice and beans extravaganza is my favorite meal (still to this day I make it once a week).  Rice can be found in 10lb bags for $5 at a specialty store.  You can soak your own beans, add ground beef (a pound of 85% can be as low as $1.25) cheese and an avocado.  You can make 3 dinners for around $.44 a serving.  A big pot of soup can be ultra cheap (chicken broth, veggies, spices) with bread.  Homemade bread can be time consuming, but can bring costs down to around $.80 a loaf.

Salads are cheap, buy from the bins and bag your own.  Spaghetti can cost out to $1.50 with enough for three meals.   Repeating meals saves money because you can share ingredients.   Also, if you are really hurting to make due, ask your friends to cook for you.  Bring what you can and help clean up.

So maybe you have no desire to eat that cheap, but what if you could save $200 a month on groceries while still being happy with you food choices? How much sooner could you reach your financial goals?

Follow these three rules to control your food spending:

Rule #1 Make a Plan

Trying to decide what’s for dinner at 6:30 when everyone is tired and hungry is a sure prescription for wreaking the budget. If your family is like mine, you are going to end up bringing in a pizza or going out to fast or quick service restaurant or getting something from the deli. There are two ways to do this:

1. Make a Weekly Menu plan every week (or cheat like we do and get one from E-Mealz). E-Mealz is a very inexpensive service (1.25 a week) that provides a store specific meal plan for the week. You can choose from family plans or low-fat or vegetarian. You get a meal plan using mostly on-sale items for that store for the week and a shopping list.
2. Do a Meal Rotation –This is a simple way to know what’s for dinner. I would not recommend it long term but it works especially if you have a houseful of kids or picky eaters. When I was young, we did a meal rotation for several months. My dad had moved to another state for a new job, my mom was finishing her degree and had to stay put until her graduation. Alone with school demands and four kids to care for, meal planning got very simple. Spaghetti on Wednesday, pizza on Friday – as kids we loved it.

Rule #2 Make it at Home

Generally the more processed and prepared a food item is, the more it costs. If you don’t cook – learn how. Go to the library or try one of these simple cookbooks How to Cook Everything or Better Homes and Garden New Cookbook (get the ring bound edition). If you don’t have time to cook, get a crock-pot. You can pick one up at a Garage Sale or Thrift Shop if your budget is tight. We frequently use recipes from Fix-It and Forget-It Recipes for Entertaining: Slow Cooker Favorites for All the Year Round when we have company. Use your grocery budget on staples, not processed food.

Rule #3 Treat Eating Out as a treat

When we started cutting our expenses, eating out for convenience was the first big change we made. Now we eat out only when we will really enjoy it. I get better meals at home than I do at most casual restaurants for a lot less money, fewer calories and without the hassle. We have not given up our social life; we simply have friends over instead of going out.

How do you control your food budget?

Housing, Transportation and Food are the biggest budget items for most families.  The good news is if you need to cut costs either to pay off debt or to increase your savings you can make big gains by carefully examining your behavior in these areas.

J.D Roth at Get Rich Slowly recently asked his readers how much they spent on food. 326 of his readers commented and their responses were very interesting. This of course was not a scientific survey, the respondents are readers (who comment) of a blog about personal finance – not a random sample of families. I’m sure some included non food items they purchase at the grocery store (cleaning and paper supplies, beer and wine, pet food) while others did not. Some live in expensive urban areas, some overseas, some have gardens that help.

This is a graph of those responses. Of interest is the huge variation within a family size. Families of two reported spending from $200 to over $1000 a month while families of four spent between $400 and $900. One family of five reported a monthly grocery budget of $250!

The USDA tracks monthly food costs across four plans; thrifty, low-cost, moderate and liberal for American families. That data is plotted for comparison purposes for families of 2 and 4 members using the June 2011 report.

The take away here is that food budgets are very elastic. If you make a concentrated effort to control yours, you may  find a nice little stack of cash to throw at that debt snowball or your savings.

I often talk about trying to be intentional with my money; but how do you really do that?

Unintentional

Most people I talk to think that if they pretty much do the right thing everything will work out. If they are in school, the thought is stay out of trouble; go to class, do really well in the classes you care about and ok in the rest and you will be fine. In the work force, many trust that showing up on time and doing a good job will lead them up a ladder of promotions. This same mindset carries over to sports, relationships, and money. This “just let it happen” attitude often leads to mediocre outcomes. If you want an ok education, a so-so job, average relationships and normal finances just try to do what is expected of you; there is a good chance you will succeed. If you are lucky enough to have an extraordinary talent, you may even get exceptional results with this thinking, but you will not be as successful as you could have been.

Being unintentional with your money is “normal”. It is exactly what the average American family does. Almost universally, we want to be out of debt, we want to have savings; we want to help our kids pay for college. But, we don’t make decisions that lead to these goals. We go to work, get paid and then pay our bills. If there is money left at the end of the month, we might go out to eat or buy a new TV or maybe even put some in our saving account, but we do it all without a clear plan.

When we buy a new car with credit, we may be actively deciding we want that particular new car but that decision is not likely to be in line with our goals and dreams. We are just letting the “normal” American life happen.

Intentional

Carefully choosing what to do and what not to do in alignment with our overall dreams and goals is at the core of being intentional. To make these choices you must have a clue of both where you are and where you want to end up.

Are you intentional with your money? If you are, you probably know the answers to these questions.

• What is your total household take home pay?
• What debt do you have?
• What are your total monthly expenses?
• How much do you save each month?
• What is your net worth now and what do you predict it will be 5 years from now?

On a small scale, being intentional with your money means:

• Always have an active financial goal – consider using the baby steps.
• Make a written schedule to help you focus on actually accomplishing each step.
• Actively choose not to be de-railed by friends, family, or old habits.

On a larger scale, being intentional with your money might mean:

• Skipping the nights out, turning up the ac, not buying new clothes and cutting back in  a 100 other little ways in order to get out of debt so that your family can have more security or
• Choosing a state school and working through college to avoid student loan debt so that you can be comfortable on a teacher’s salary or
• Working a job you don’t really love in order to stack up cash so you can quit and travel

Being perfectly intentional requires that you ask yourself with every purchase or financial choice: Will this lead me closer to my goals? Of course, we’re not perfect but the more we practice the better we get.

I recently read a blog post where the author was a bit smug about all the smart financial things he was doing and how these intelligent decisions had protected him and his family through this recession.  I am glad to hear it; smart financial choices do protect us through a downturn. Having some savings and avoiding unnecessary risks can make us look smart but sometimes the truth is we just got lucky.

Here in Florida, lots of people did some really risky real estate deals before the crash. Many everyday working families decided that they could be successful real estate speculators. When reading the definition of speculator, they missed the risk part; higher-than-average risk in return for a higher-than-average profit potential. Most of those that you thought made a “bundle” during the boom really didn’t. They may have made out on some deals, but most of them were still “in” when the market fell. The ones who found a chair when the music stopped were for the most part, no smarter or better informed then the rest; they just got lucky.

That’s the thing with risk; sometimes you are going to win, sometimes you are going to lose. You have to be sure that you can afford to take the loss before you play.

There is an implied inference that those that really got hurt had it coming. While this kind of thinking may make you feel less vulnerable, it’s simply untrue. Many who were leading conservative financial lives have been greatly affected, through no fault of their own, by the drastic change in the real estate market.  Others, who were normally conservative people, did act outside their normal comfort zone. They were seduced by the tales of their neighbors and friends turning huge profits.

Overgeneralization is an irrational thought process that we must guard against. Whenever we observe a few people winning at something (like flipping houses), we find it easy to conclude that everyone is making a fortune and we better rush to get ours. There are two major flaws in this thinking. The first flaw is our observation is incomplete. We hear the success stories but not the failures because that is what our friends want to talk about: the times they hit it big. Secondly, we without sufficient investigation, conclude that if their deal made money, then our deal will also. Yikes, even in a boom market, profit is not guaranteed.

I was not speculating through the boom or bust but I am not so smug as to say it was because I was so smart. I know it could have very easily been me.

What has you stuck? Too much house? A job you hate? Smothering debt that is very slowly and painfully suffocating you?

The worst part of being stuck is the soul-sucking hopelessness. The feeling that no matter what you do it will always be this way. Every escape plan you try to make fails before you start. You can’t sell the house, its underwater, you can’t quit the job, you have bills to pay, you can’t make any headway on the debt because it takes every penny you make to keep things current.

I am here to tell you, you can get unstuck; there is cause for hope.

Surrender

Accept the reality of where you are. When we are in a bad place our natural tendency is to put our heads down and watch our feet shuffle. We are afraid to measure the true depth and width of the swamp. Quit fighting the feelings and accept that you are afraid, worried and overwhelmed. Measure the swamp. Calmly and clearly, state the problem.

Fly

Get the 1000’ view. The ability to seeing the big picture is vital. If you could imagine it’s someone else’s problem, what would it look like?  Find someone who has made it through the same swamp, how did they do it? Reach out.

Be Bold

Be willing to accept pain to get unstuck. Go back and review the things you “can’t” do. Chances are it is one of those things that you will need to do to be free.

When the solution is a three-year plan, we irrationally avoid starting because it seems so hard. Yet, in our avoidance, we endure three more years of pain without progress.

Start

The good news is as soon as you start working a plan, the hopelessness turns to hope and that makes all the difference in the world.

I believe you have misinterpreted what your well-meaning parents told you when you were three. You cannot have it all. You have to choose and every choice you make has a consequence.

For quite some time, my friends and family have accused me of being the fun police, it is not that I hate fun it’s just I do not think they (or you) should finance their fun. Do you want to go on vacation? Save your money and go. Go wherever you want, go exotic or mundane; do whatever you want, have a ball—just don’t borrow money to do it.

I have also started to develop this reputation of being a doomsayer. I predict you will die and if you have dependents, I think you need a term life policy. I also predict that someday you will quit, retire, or be fired from your current job. You need to have a transition plan in place.

The truth is I am neither pessimistic nor universally frugal. The truth is I now try and make every choice intentionally, measuring the benefit of the choice against it’s cost. I now try and consider the worst case scenarios for decisions, as opposed to the old way of thinking that bad things won’t happen to me. This doesn’t make me a pessimist, it makes me a realist.

I  spend on the things I care about (within my means) while relentlessly beating down the expenses that don’t bring me comfort or joy.

I conserve my gas budget by riding my bike, sharing rides and bunching my errands just so I can spend a ridiculous amount of money on gas for our 454 hp ski boat.

I do not eat out much, but that allows me to very happily to triple our grocery budget when we have boys in the house.

I have some expensive toys (like the aforementioned boat) but our cars are old, we don’t take expensive vacations and we don’t have cable.

We didn’t always live this way. There was a time that when I wanted something I bought it with little or no attention paid to the consequence of that choice. This is exactly how most of us find ourselves stuck. Stuck in a job we don’t want, stuck in a city we hate, stuck in relationships that don’t work. Debt robs us of our freedom and for what? Most of the time we can’t even remember.

There is nothing wrong with wanting something, even something frivolous or expensive. There is nothing wrong with occasionally (within in your means) giving into those desires. The danger lies in indulging every want.

 

Sometimes $1000 will rock your world and once you get your mind right, it is not that hard to come by.

Get over yourself

On the face of it, many of the ways to get a fast grand or a steady $1000 extra a month, will not make you the envy of the neighborhood. If you are living an average middle class life, your friends and neighbors might think it strange that you swap your suit for a pizza delivery guy shirt at 7 pm everyday or that you get up at 3 am to deliver papers. Get over it. The sooner the better. If you need to supplement your income to pay down debt, keep you afloat until you land your “real job” or stack up cash for an upcoming need, set aside your silly pride.

Realize its not forever

The idea here is get cash coming in quick. We don’t need to find a job that will lead to a lucrative career; we need something we can start NOW.

Many “Cash Now” opportunities are not advertised. They are off the books, word of mouth gigs. Can you cut grass, babysit, paint, tutor or clean? Drive, walk dogs or sew? Pick something you can do well. Print up some flyers and get after it. Check craigslist, the local paper, ask your friends and neighbors. Cut your hair, tuck in your shirt and answer the phone when people call – you’re ahead of 95% of the odd jobbers out there already.

Part-Time Job

If you just need $1000 this month, an odd job or a gig might be all you are looking for. With a gig, there is no obligation on your part or your customers to continue past the completion of the agreed upon task. If you need additional money for a longer stretch of time, there are many part-time opportunities out there – from Waiting Tables to UPS package sorter, Bartender, Delivery Driver – check out SnagAJob for some ideas.

Sell Something

Look around, what can you unload? You do not need to make your $1000 in one sale, 200 $5 sales at your big garage sale will get you there. If you are not actively using something and it has value – sell it!

Start

To get this thing started you need to do something. Quit looking for the prefect work from home, make a million on line, opportunity and get your hands dirty. The goal is to make an extra $1000 in the next 30 days.

What have you done to bring in the cash?

Normally, I share with you articles or blog posts that I find informative or that say something I have tried to say in a new and better way. Today, I am sharing a blog post that I really disagreed with.

The author doesn’t really tell us a lot about herself other than “This is a tale of our journey about climbing out of debt by tightening our money belt, letting go of the idealities of a consumeristic society, and finding what it means to live a great frugal life.” Well good for her, I can have no argument with that.

The post I disagree with is Adult Children Living at Home – 5 Reasons to Live with your Parents Longer.

Here are some of Money Funk’s reasons for staying in your parent’s home and why they make me crazy:

Can you really afford a home that offers all the amenities and features you have come to rely upon?

HUGE RED FLAG If you have this attitude or are have encouraged this attitude in  your children;  STOP and think while there is still time. This attitude of entitlement may be the single most common denominator in people who fail to win with their money.  It is no surprise that your parents can (after 20+ years of work) afford to live better than you can. You are not entitled to what they have. Do I really expect you as a young adult to live in a tiny dumpy apartment and drive an old crappy car? If that is what you can afford on your starter salary, then not only do I expect that, I expect you to do it joyfully. Take great pride in your ability to do it – all by yourself.

Maintain relationships with your parents and anybody else (siblings, extended family) living in the home.

Independence does not need to weaken relationships. Healthy parent-child relations do grow and the day an adult child’s becomes completely self–reliant is a remarkable milestone in this evolution. Not living in the same home is no reason for a loss of intimacy. Many adult children speak to their parents frequently. They are as interested and involved in their parents lives as their parents’ are in theirs.

Focus on advancing your career or education

I am good with the education thing. For many college age kids living away from home in a dorm is an important component of the maturation process. However, for some kids living at home while attending college is a better fit for their personality or financial situation.

The idea of staying in your parents home so you can focus on advancing your career is a bit harder for me to embrace. My thinking is the minute you are making enough money to be self reliant, you should want to stand on your own. Someday you will need to manage your career AND do your own laundry. You might as well start today.

Is it ever ok to move back home?

Of course it is. Family is all about being there for each other. In times of illness or job loss or transition, it is comforting to know you can always go home.  I love my parents.  I know I could always go home and they would do everything in their power to make things right so that I could be independent again.  I love my son and he is always welcome in our home. Someday, I may need his help in a big way or he may need mine. As independent adults, I know we are both willing and able to handle the responsibility that comes from loving someone.

Maybe it is time to have the discussion in your house. When is it ok for adult children to move home?

When we think of ways to improve our financial situation, we know we can earn more or spend less. But are both approaches equal? Although on the surface it would seem so; on closer examination it is clear there is a large disparity between the two.

Exiting the consumer rat race has a far bigger impact on your ability to achieve financial freedom than does increasing your earnings.

The reason for this is twofold:

1) Earnings are taxed; heavily.

2) Earning increases influence your wealth only while you are earning. Once you quit or retire the affect stops. Learning to be happily frugal has benefits that extend for the rest of your life.

Allan Roth’s article, Financial Wealth – It’s Time not Money explores this concept.  Roth gives the following example of a 50 year old that can reduce spending by $10,000 for the rest of her life or increase earnings for the balance of her career.

A 50-year-old woman can make $10,000 a year more and will retire in 15 years, which translates to $150,000. But if a third goes to taxes, she is only left with an additional $100,000. On the other hand, if she spends $10,000 a year less and has a 33 year life expectancy, that translates to $330,000 in savings.

A dollar saved is $3.30 earned

So in the above example, lowering annual expenditures by $10,000 had about a 3.3 fold benefit over earning $10,000 more. That means a dollar saved is worth far more than a dollar earned – in the above example it equaled approximately $3.30.

Many of us try to out-earn our past or present spending habits. This seems particularly true of high earners. The problem is the more we earn the more we spend. If you are currently earning at least average wages, focus the majority of your early efforts on reducing your expenses in order to win.

Plugging the hole in your bucket before filling it with earnings is so much more effective than the alternative.