Beyond Paycheck to Paycheck

at December 24, 2008 in Balance, Cash Flow and Saving Strategies. 0 Comments

We received over a foot of snow last Sunday. This was on top of another foot that had finished falling less than 24 hours previously. Needless to say, it was a day that the entire family (save for my shoveling excursions) stayed inside. It could have been boring.

It wasn’t.

In fact, at the end of the day, my wife and I agreed that we would remember one thing that we had done together far longer than we’d remember the crazy snowstorm or our last dinner out with just the two of us (which has been so long I think I’ve already forgotten it).

You: What did you guys do?

We made a memory, by making dinner together. All of us.

You: Isn’t your youngest kid an infant?

Technically, yes. We made her supervisor and she monitored the situation from her high chair. But my wife, older daughter, and I made dinner, assembly line fashion with calming but festive music playing in the background.

You: iPod sound system?

No, a boombox from 1991 that still works. See, the stereo is meaningless. So was the fact that dinner’s ingredients cost less than $20 and fed us all (thanks to leftovers) for two nights. The memory was from the camaraderie and the genuine closeness of enjoyable family time, not family money.

It was the second time something like that happened in a week.

You: Something like what?

That, by spending less, I was getting far more value.

Last week, my wife and I went out to lunch. We met in the middle of the day and had lunch together.

You: I don’t need a definition of “lunch.”

True, for most people, meeting someone for lunch is routine. However, my wife and I both run small businesses so we don’t often have the time. But we decided to make the time last Thursday.

I could tell you that our little lunch rendez vous was so enjoyable because we meet for lunch very often. That would be true. I could say, as I did above, that the reason we don’t meet very often is because we’re both very busy. But the truth is that we don’t go out to lunch not only because of our schedules, but also because eating out is an easily avoidable expense. Therefore, we almost always bring our lunches.

But we had such a nice time. So, I think I’m going to suggest to the Mrs. that we meet for lunch more often.

You: Increasing your spending.

For sure, but not be nearly as much as the value we received from a $10, combined, lunch.

You: That’s really cheap.

True. We also had a coupon so it won’t be that inexpensive each time. But again, it wasn’t the cost we were focused on. It was each other. When you’re focused on spending time, not spending money, you get a lot more value for your dollar.

Extra bonus: you live in balance.

What do you do for top value?

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Traffic and Spending Together on the Ones

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at November 21, 2008 in Cash Flow and Saving Strategies. 0 Comments

After a week in Hawaii and a couple of days in Los Angeles, I am glad to be home in NH, even though the temperature is about 55 degrees colder here.

You: Tired?

Exhausted. Two red-eyes in three days is quite enough. Nonetheless, I have some sleep-deprived observations from my trip to share.

I’ll start with LA.

“Los Angeles,” when translated from Spanish means “The land of heavenly traffic if heaven were one million degrees.” Seriously, the traffic there is simply ridiculous. Many southern Californians realize this, although, I have found, not all. More and more residents simply deny that traffic is as bad as it is and/or simply have gotten so used to it that they don’t realize how much worse it is in southern California than anywhere else.

Partially, that attitude is healthy because there isn’t much one can do about the traffic anyway. But it’s also partially nuts because there are people spending hours a day in their car - and many of them aren’t actually moving - I have observed this. The opening scene from “Office Space” is not pure fiction.

I was in my rental car before 6AM (there’s that red-eye reference again) for the drive from LAX to Santa Monica and I hit heavy traffic. I visit a radio station for an interview 10 miles away and leave at noon for a 1PM meeting - cutting it very close thanks to . . . traffic. I could go on and on about how it took me 10 minutes to make a left turn at 7:30 PM, but I won’t.

You: What’s this got to do with personal finance?

Plenty. I see many people get in the same rut of traffic with their spending. Denial is a powerful force, but so is acceptance. Denial that they are part of the problem and acceptance that they, therefore, must struggle.

For example, one of the people who attended my seminar the first night at the LA ING DIRECT cafe came up to me privately and explained that her income was about 40% of what it was several years ago. In the interim, she had basically depleted her lifetime of savings. She didn’t want to touch her retirement account, but was afraid she might. “What should I do?” she asked.

I knew she knew the answer. But she didn’t want to say it, because knowing and not doing is plain stubborn. No one likes to consider themselves stubborn. Feeling powerless to change the situation, in a way, is perversely more tolerable - we don’t have to look inward. But that is the wrong answer.

“You know the answer,” I told her. You have a firm handle on your finances and you are aware of what you are doing. You can’t live on a $100,000 salary if you are confident you are going to make $40,000 for the next part of your career.

She disclosed she had until very recently two cars in her one-person family.

[Now I am thinking this is part of aforementioned traffic problem, but I don't say this to her.]

The necessity of reducing her spending was hard for her to accept, but short of increasing her income, which she was confident she was unable to do, this is her new reality. People have grown to accept that they must leave early enough to get around the traffic in order make it to work on time, why is it that they won’t accept that they must spend little enough to be able to save? Unless you have a helicopter, you’re not going to get around the traffic. And if you have a helicopter, you’re hopefully got a lot saved already. But even you could be living paycheck to paycheck.

How do we get people past denial faster? And is traffic really lighter in LA at 4AM?

"financial education"

Pay less for the same

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at October 27, 2008 in Cash Flow and Saving Strategies. 2 Comments

I visited my brother over the weekend. He gave me another example of how to live fiscally responsibly without being cheap.

You: Why is “living fiscally responsibly, not cheaply” such an obsession for you?

While obsession seems like a strong word, the concept is critical because it is sustainable.

You: You mean from an environmental perspective?

No. A successful saving strategy is one in which the individual stays with it. In talking with thousands of regular people throughout the country every year, I’ve concluded that saving strategies are only sustainable (and thereby effective) if there is either little pain or no pain associated with the actual implementation of the strategy.

An easy-to-remember example is adjusting your cell phone plan to the right package instead of paying for a ton of minutes and features you don’t use (or, in the other extreme, ensuring you don’t pay any expensive overages). You still get to use your phone in the exact same way as you do now, yet at a lower price than you may currently be paying. Note: your cell phone company isn’t going to call to tell you that there’s an easy way to lower your monthly bill. You’ve got to do the work, but once you invest 10 or 15 minutes of time, the savings you get reoccur every month. Cell phone bill reductions are an example of sustainable savings because the pain - measured as the time and what you have to give up - is nominal and non-existent respectively.

My brother’s example was for XM radio.

You: That’s a luxury.

I happen to agree, but millions of others don’t feel that way.

You: Paying for radio? C’mon!

I’m not going to defend it, as I don’t have it myself. However, I’ll ask you to consider the fact that you, in all likelihood, have at least basic cable for your TV. Technically, you could have free TV through antennae (at least for a few more months) but you choose to pay for it.

You: Okay but –

I know, I’m not there yet either. But here’s the point. My brother became convinced he wanted XM radio after one of those free trials.

You: That’s why the companies do free trials.

I know. But rather than just pay the stated rate when he decided he wanted to continue with XM, he did some research online and found that there just might be a lower rate plan available if he said the magic phrase.

You: Bosco?

No. Not Ovaltine either. But my brother said the magic phrase to the right person and, presto, he’s now paying a lot less than the rate most frequently advertised. Same satellite radio, yet a different and lower price. Given that he wants XM, he’s being fiscally responsible. The exercise cost him just a few minutes of time and yet the monthly savings are forever.

You: Still, it’s satellite radio, a luxury.

For you and I: yes. For others, no. But I bet you could think of other examples of things or services that you want or need that others may be paying different amounts than you are. Care to give an example? Be as specific or general as you wish.

"financial education"

More ways to save

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at September 12, 2008 in Carnivals and Saving Strategies. 3 Comments

It’s been a very busy week traveling the country teaching Life Lessons of Personal Finance. Just now, I just had the opportunity to read this week’s Carnival of Personal Finance which, as always, has lots of fun postings. While it was great to see that the host, BankerGirl, loved my analogy between football and savings, it’s always a challenge for me to pick just one other article to recommend to you.

But I got it done.

Read Squawkfox’s 50 Ways to Save $1,000 a Year. There’s a lot of great ideas and many of them will allow you to live fiscally responsibily without being cheap. As you know, that’s always an important consideration because they are not the same thing. Just the other day, I listed five ways in which I am fiscally responsible and five other ways I am not cheap. It’s a fun little exercise you might wish to challenge yourself with.

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How saving is like football

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at September 3, 2008 in Ranting and Saving Strategies. 0 Comments

In honor of the kick-off of the NFL season, here are five ways that saving is like football:

1. Rooting for a loser and choosing to save are decisions that aren’t about today.

They’re about loyalty to your principles, enabling you to enjoy the future even more — whether that be a Super Bowl Championship (finally!) or the achievement of genuine financial independence.

2. Never throw good money in after bad.

The front-office of a lousy (but wise) football team makes moves that are explicitly not designed to maximize this year’s performance. Rather, they look to remove higher-priced experienced players and gain inexpensive young players who are more likely to be around when the team is good enough to compete with the best in the league. Smart savers don’t buy dessert at a restaurant where the main course didn’t live up to expectations hoping the experience improves. Instead, they go get ice cream elsewhere. In doing so, they probably save a few bucks and, at the same time, get a new venue.

3. Don’t play a game you know you can’t win.

Lousy football teams don’t even play the game the same way that contending football teams do. Poor teams know they can’t compete straight-up, so they’re more likely to attempt trick plays and gimmicks. When you have friends who have a lot more financial resources (or at least they appear to), don’t readily and repetitively agree to meet them for dinner at a really expensive place of their choosing. Instead, play a different game. Meet for dessert, a movie, or invite them over to your place.

4. Focus on value received, not on dollars spent.

The best teams in the league often don’t have the highest payrolls. Instead, they get the most value from the dollars they spend on player salaries. This means that some players knowingly take less than they could get elsewhere (For example, in the case of the New England Patriots last year: Tom Brady and Randy Moss.), while other players choose to leave these competitive teams to pursue the biggest contract possible. When you save, you make several conscious decisions each day to maximize the value you receive from every dollar you spend. That’s not being cheap, it’s being fiscally responsible.

5. It sucks to be new.

Expansion teams nearly almost finish last. The odds are completely against them, as their teams are almost entirely comprised of other team’s cast-offs. Yet, for the players who would otherwise not be in the league but for the increased number of roster spots and the fans who root for the new team in their city, excitement is everywhere. Likewise, when you get your first real job and start to make some real money, you are - and should be - thrilled. But when it comes to how much money you’ll actually have at the beginning, it sucks. But it’s not forever. Just ask the Jacksonville Jaguars, who made it to the AFC Conference Championships in only their second year.

Now if we could only get someone to scream every Friday night at 9PM Eastern: Are you ready for some saving?

# # #

How else is football like saving?

"financial education"

Five ways to be (or not to be) fiscally responsible

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at August 27, 2008 in Balance, Cash Flow and Saving Strategies. 2 Comments

While it’s important to be fiscally responsible, it’s also critical to not be cheap. Life is too short to feel like you’re constantly depriving yourself. Instead, live in balance. By following the top 10 saving strategies, you won’t need to budget for everyday expenses (Strategy # 10) and you can spend with comfort on the items you truly enjoy (Strategy # 8). As I approach my 250th post on this blog, I thought it was an appropriate time to share 10 examples of how I, personally, am fiscally responsible without being cheap.

This list is a little different from most top 10 lists in that it’s really two top-five lists: The top 5 ways I am fiscally responsible (and perhaps, to others cheap) and the top five ways I am cheap (and to others, perhaps, completely reckless with my spending). You can be the judge.

To me, it’s all about balance.

Top Five Ways I’m Fiscally Responsible

1. I reuse sandwich bags.

We recycle practically everything possible in this house, including sandwich bags. Sure, it’s mostly for the envionment, but we spend a lot less on sandwich bags (not to mention freezer bags and printer paper) than we otherwise would.

2. We have just one car.

My wife and I now have more kids (two) and, therefore, car seats (also two) than cars (one). While this wouldn’t work for everyone, it could for many people who currently think otherwise. Do I have to rent a car every so often to make it work? Indeed. Does the occasional rental car expense come close to the cost of owning a second car? No way. We have no payment, no insurance, no maintenance, and no gas on a second car.

3. The car we do have has been around a while.

The one car we do own, a Saturn, is 7 years old. That’s as old as our first car was before it died. So in 14 years we’ve had just two cars. Leasing can make sense if you’re going to acquire a new car every three years, but if you can allow yourself to keep a car longer, a funny thing happens: you’ll have extended periods of time where you have a car but don’t have a car payment. When that occurs, you can easily and automatically begin to save more. A lot more.

4. We genuinely enjoy cheap thrills.

There are many weekend days when we spend virtually no money. Just this past weekend, we went to the public pool (a huge thrill for my girls) and brought a picnic lunch. Cost: $2 total admission plus some small amount for the groceries. Later on in the weekend, we went to the beach and took a zillion pictures of the girls. It was sunset and the results (and the emotions) were spectacular. Total cost: $0, although I’ll confess it will be 12-cents or so a picture to print them later. Spending time with friends (their homes or ours) is another minimal cost and usually winds up being among the highlights of any weekend.

5. We drink store-brand soda.

When it comes to soda (or, as my midwestern friends say, “pop”), I don’t care if it’s a Pepsi product, a Coke product, or a store-brand. I refuse to pay more than $0.99 for a 2-liter bottle of soda. I just can’t do it. So, when the store brand ginger ale is 77 cents, I buy that, not the $1.33 7-Up. I wouldn’t call store-brand soda a thrill and it doesn’t make a big dent in the grocery bill, but when you’re buying 45 cent strawberries, you’ve got to do something to balance out.

Now, the flip slide.

Five Ways I’m Not Cheap

1. I spend a lot on experiences that others wouldn’t want to do even if they were paid to do them.

Like paying airfare for a trip to Detroit and the expense of a rental car for the drive to Ann Arbor just to see a 3.5-hr long University of Michigan football game. Since I moved from Michigan in 1996, I’ve done this every year except two (and some years (read: pre-kids) up to five times a season). The cost varies for the weekend, but $500 is a reasonable average - and the only reason it’s not a lot higher is because I can usually crash with friends who still live in the area. The weekend is an absolute thrill so, to me, it’s worth every penny. However, this would be an absolute waste of money for most other people to spend just 48 hours in Ann Arbor - especially, for example, to Penn State fans.

2. I don’t camp.

On vacation, you can save a lot of money by camping instead of staying at a hotel. That’s a non-starter in my family. I’ve gone camping once in my life (with a bunch of b-schoolers in Utah during a week of non-stop rain). I came home and announced that the experience was the most fun I ever had that I never wanted to do again. It costs more to stay in a hotel but, for us, doing so dramatically increases the value and the effectiveness of the “re-charge,” making the additional expense totally worth it.

3. I drink Tropicana orange juice.

Yup, that’s what the guy who wrote Beyond Paycheck to Paycheck drinks nearly every morning. “Liquid gold!” a friend of mine once called it. I realize that the OJ flies in the face of the 77-cent soda decision, but it works for me. I don’t drink coffee (I’m allergic to caffeine) and this is my in-the-home splurge. (But if we’re out at a restaurant for breakfast, it’s water, thank you).

4. Outerwear matters in New Hampshire (and Michigan, Boston, Chicago, and New Jersey).

Although my monthly clothing spending approaches zero, I own one pair of Timberland boots, an L.L. Bean raincoat, and a phenomenal winter coat. None of them were cheap. The boots I purchased before the aforementioned trek to Utah in 1998, the raincoat in 2001, and the winter coat way back in 1996. The boots still make hiking (the ultimate cheap thrill) even more enjoyable and the raincoat has saved me at many a rainy Saturday in Ann Arbor. When I went shopping for the winter coat at Filene’s in Boston, I told the clerk that I walked to work and that I wasn’t into style. Rather, I simply wanted the warmest coat they sold. She showed me the coat. I put it on. Within seconds, I started to sweat the coat was so warm. It cost what it cost. Twelve years later and it still keeps me toasty. Worth every penny, especially when you amortize it over many very cold winters.

5. A diamond really is forever.

I knew that diamonds lacked intrinsic value even before I handed over a sum of money that exceeded the value of my car. But the engagement ring for my wife wasn’t a financial decision. I wasn’t talked up by the jeweler either. I didn’t buy it at TIffany’s, I bought it in Boston’s diamond district. I figured I was only going to purchase a ring once in my life and, more importantly, I knew my girlfriend (soon to be wife of 10 years and mother of my two children) would wear it everyday. Every single day. For the rest of her life. So I splurged. Call me crazy. But I still smile when I see it on her finger. It was (and still is) totally worth it.

# # #

So what do you think? Cheap? Fiscally responsible? Care to share an example of each from your life (or that of someone you know?)

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What’s the best way to get to work, financially?

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at August 22, 2008 in Saving Strategies. 0 Comments

Like it or not, your commute is one of the most important parts of your day. A really bad one in the morning can set your whole day off in the wrong direction the same way an otherwise good, productive day at the office can still be sabotaged (and ruin your evening) by an accident in the left-hand lane that causes your commute time to double. While now my commute is typically less than half a mile (except when I’m on the road), I’ve had my share of different commuting methods during my career:

Train
Subway
Car
Foot
Bike
Boat
Airplane

You: You commuted by airplane?

Indeed. For nearly two years I lived in Chicago and worked in New Jersey.

You: How do you have any credibility to talk about saving strategies? Doing that seems moronic.

From a lifestyle standpoint or a monetary one?

You: Honestly? Kind of both.

I can’t totally argue with the lifestyle impact, but I had to live in Chicago because my wife was still a student there and then my company agreed to pay the expenses of getting me back and forth to NJ.

You: Gotcha.

Although most people don’t have 800+ mile trips to work, many of our commutes do provide us choices. Our decisions impact how quickly we get to work, how much it costs to get there, how tired we are when we arrive, and, quite often, our mood. In yesterday’s Wall Street Journal, Neal Templin discusses his decision (as well as that of thousands of NJ residents) to take the PATH train (a subway) instead of a ferry across the Hudson River into New York City.

Although the name of his column is “Cheapskate,” I’m not sure this decision alone renders him a cheapskate. After all, he might (although I doubt it) spend frivorously on his lunches, which would make his commuting decision relatively unimportant.

Rather than cheap, I’d prefer to think of Mr. Templin as simply prioritizing his spending.

You: How do you know he just doesn’t like boats? Maybe he had a bad sea-sickness experience?

It’s a river, not an ocean.

The ferry costs $5 to ride one-way, whereas the PATH charges $1.75. Needless to say, choosing one over the other makes a big financial difference at the end of the year. If you’re looking to be frugal, the PATH is the choice to make.

You: Is that what you would do?

Yes, I’d probably take the train most days. But certainly not everyday. On some of the really nice weather days I’d ride the ferry, both for the change of pace and as an occasional reward. But that’s only because I love being outside and the thought of being on a boat after a day in Manhattan would seem quite liberating.

But, to be clear, I have no problem with those who choose to ride the more expensive ferry everyday either.

You: Why not?

It’s a choice. It’s the same reason Your Problem Isn’t Starbucks. In the grand scheme of things, a $5 ferry ride is a minor expense. Sure, it’s a recurring minor expense which is why it deserves much more analysis and thought than buying salt at the supermarket, but this isn’t a house or car purchase decision either. No one finances their ferry fare.

If it gives you much greater satisfaction to ride the ferry, than do so. Just recognize that it’s a choice. That money (the difference in fare) is coming from somewhere. On the other hand, if you don’t so much mind riding the PATH (or taking a comparatively less expensive but realistic commuting option in your life), then go that way.

Ultimately, if you choose to spend only on the things you value highly, it’s amazing what you can afford – even if it might be something that folks who ride the ferry everyday - wouldn’t (or couldn’t) — spend money on.

# # #

What kind of commuting decisions do you make, implicitly, everyday. What are the financial implications? Happy with your choices? Your decision?

"financial education"

What will it take to get you in this big screen TV today?

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at August 18, 2008 in Carnivals, Debt management, General Financial Planning and Saving Strategies. 0 Comments

This week’s Carnival of Personal Finance by Everyday Finance once again features the best blog postings of the week. (Well, at least those related to personal finance anyway.) In addition to my article about how to Spend less eating healthy food, I once again am thrilled to make my one article per carnival recommendation.

Written by Not Made of Money, Stop Buying Stuff with the Payments Mentality is a must-read for anyone who has ever negotiated a new car purchase by focusing exclusively on the amount of the monthly payment or has thought to himself, “Yeah, $75 a month for that TV . . .I can manage that” without in either case knowing what the true total cost of the car/TV was. While Not Made of Money doesn’t go into the detailed perils of financing concerns (like a discussion of interest rates charged), it’s still a critical read because it challenges a common misconception that if you can afford the monthly payment you can afford the purchase.

Not so.

"financial education"

Going to school? Save on textbooks

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at August 15, 2008 in Saving Strategies. 2 Comments

The Wall Street Journal recently published a story about saving on college textbooks that should be required reading for -

You: Pun intended?

Got me, but if you or someone you know are heading back to school this fall and are sick of paying a ton of money for often boring, yet required, reading be sure take a look at the story. Highlighted strategies include:

Electronic textbooks
Price comparison sites
Textbook rentals (who would have thought?)
Open source textbooks (can’t wait until these becomes the standard!)

When I was in college, textbooks were really expensive. Seems to me the Internet should have evened the playing field somewhat, giving new life to used and reusable books. Yet, many professors (who write these books) and their publishers have bundled software or notes packages. In fact, the premise of the WSJ article discussed a bill that all but (finally!) prohibits the behavior. So there is hope for the little folks!

What strategies have you used or seen used to cut down on the expense of required reading?

"financial education"

Spend less eating healthy food

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