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Saturday, February 4, 2017

The ‘Buy It For Life’ Compendium, Volume 2

About two years ago, I published a lengthy compendium of “buy it for life” product suggestions, because I’m regularly asked such in the reader mailbag.

What this article contains are updated entries about most of the items in the original article, as well as my notes about new “buy it for life” items that I’ve been asked about in the last few years. If you have the original article saved somewhere, you can completely replace it with this one.

What’s ‘Buy It for Life’?

Before we dive in, it makes sense to define what exactly “buy it for life” means. In its simplest form, it means that you’re buying an item where reliability and lifespan are the most important factors. These items just work and they keep working.

Why do this? For starters, it’s not wasteful. You’re not going to be throwing away items constantly because they failed for some reason. It also means you’ll have very reliable items, so you can place a lot of trust on those items always working. You’ll also avoid having to go through many replacement cycles for your items, meaning that the more expensive purchase now will save you multiple purchases – and the time spent on each purchase – down the line.

However, price is also a factor here, too. It’s usually expected that a truly “buy it for life” item will be more expensive than a random item off the shelf. After all, you should find yourself using this item for a very long time, whereas if you bought a cheaper version, you would have to replace it frequently. However, there are times where truly “buy it for life” items are so expensive that they don’t make sense. In that case, the best low-cost solution is usually the superior option, because even if you buy several replacements for that item over the rest of your life, it’s still going to be drastically cheaper than the ultra-expensive “buy it for life” option.

It’s also worth noting that these suggestions here are my recommendations, made up of a mix of my own experience and the experience of people that I trust who may have expertise with that specific item. There may be better recommendations, but I stand by these as very good recommendations at the very least.

One final note: this isn’t intended as an encouragement to go out and spend a lot of money right now. Instead, this is a reference article, intended to be turned to when you need to buy one of the items listed and you’re interested in buying a long lasting version of the item.

The Big List

Here are the items covered in this article. You can click on each one to visit the individual section about that item.

Baby Items
Backpacks
Belts
Blenders
Boots
Duffel Bags
Electronics
Gloves
Holiday Lights
Jeans
Kitchen Knives
Microwave Ovens
Multitools
Pens
Pocket Knives
Pots and Pans
Skillets
Slow Cookers
Socks
Spatulas
Thermos
Underwear
Watches
Water Bottles
Winter Clothing

Baby Items

Baby items generally aren’t considered a “buy it for life” item because, frankly, children don’t remain babies for very long. They rapidly outgrow clothes and other items that they use in the first year or two of life and then don’t need them again. The closest thing to a “buy it for life” item for a baby would be something you purchase for use with your first child with the intent of reusing it with future children. Also, buy it for life baby items tend to make very nice baby shower gifts and baby shower requests, too.

One of the biggest expenses you’ll have with a baby is diapers. We used cloth diapers with all three of our children (our third was almost exclusively cloth diapered – we were figuring out a system with the first two) and we found that once you had a routine down, they were actually pretty easy to deal with and very inexpensive.

Finding a good cloth diaper that will last through three children is a trick, but we found that BumGenius diapers were up to the task. We used them on all three of our kids and discovered that they worked very well from just after birth to up to about 12 to 15 months depending on the baby size. Considering we used them three times a week on our babies over the course of a year and they lasted through three children, this means we got roughly 450 uses out of each one, meaning that the cost per use was less than a nickel. That utterly blows away disposable diapers, but you have to commit to doing it. We found that simply having a closed hamper exclusively for the cloth diapers was the best solution and we alternated the responsibility of washing them (it wasn’t bad at all until they were eating mostly solid foods).

My wife was committed to breastfeeding from day one and we found that the Medela Pump-In-Style worked wonderfully through all three kids. For bottles, we used Playtex VentAire BPA-Free bottles and they also lasted through three children without any problems. Our baby clothes and blankets and such were mostly gifted, handed down, or purchased secondhand.

Backpacks

I have used a North Face Recon backpack as a “portable office” for a little more than 10 years now and it’s still practically new. I use it to tote a laptop, a water bottle, multiple notebooks and pens, several books, a magazine or two, a tablet computer, and lots of little odds and ends with me whenever I work outside the house, which is usually a few times a week, and it’s lasted perfectly for more than 10 years. I can’t really offer any more high praise than that. I feel like this is the best “bang for the buck” backpack that will last for a very long time.

Two additional strong recommendations from friends:

1. A friend of mine has used a Tom Bihn Brain Bag as a daily portable office (much like I use mine) for “close to 20 years now” and he reports that it is still in very good shape and he believes it will last for at least another 10 years. He is a college professor and has used this to take many, many, many books to many, many, many places and reports using it close to daily. I have seen this bag up close and I would say that it is a better bag than my own, but you’re definitely paying for that extra cost.

2. For a bag suited more for a “day hike,” another friend recommends the GoRuck GR1 (be aware, their site auto-plays a video with some instrumental rock music on my browser). He goes on lots of day hikes – far more than I do – and carries meals, water, and first aid supplies in this thing. It’s gone through what must be many thousands of national park trails and forests over the last several years and he reports that it looks essentially new. He also reports that he’s used it for weekend trips as a mini-suitcase and also taken his laptop and other materials when working outside of his office, so it works as a briefcase/portable office, too.

Belts

I addressed long lasting belts in a recent reader mailbag, so I’ll just share here what I wrote there:

“The belts that cost hundreds […] are usually crafted to look incredible but aren’t necessarily long lasting, either. […] I’ve only really found three belt companies that build good long-lasting belts that didn’t charge hundreds, as you mention.

Anson Belt makes a belt that’s microadjustable and doesn’t have the holes in it like other belts. I’ve personally used these and found that there’s a lot less wear and tear on the leather without the fastening and unfastening mechanism on most belts, which accounts for their relatively long lifespan.

Orion belts are made with absurdly thick leather and also reduce the force applied to the fastener and to the belt hole by having dual holes and fasteners on most models.

Saddleback makes a more traditional single hole leather belt, but they treat their leather in such a way that it’s very tough. My experience has been that the belt is so tough that it’s almost rigid for a long while after you first start wearing it, but it really lasts.

All of these belts do a great job of being much more long lasting than a typical department store belt for different reasons and all clock in at or below the $100 threshold.”

I should also add that Anson also makes a very nice canvas belt for those who would prefer not to purchase a leather belt.

Blenders

Blenders typically fail in one of two ways. Either the blender jar breaks – in which case, you can just replace the jar if the jar model is still available – or the motor fails. Thus, in my eyes, there are two things to look for in a long-lasting blender: a very sturdy blender jar and a warranty on the motor. (Blending items together well is a bonus, too, but I find that most blenders do a reasonable job once you’re out of the lowest-of-the-low-end models).

For those factors, two blender manufacturers stand out: Blendtec and Vitamix. Both make very well constructed blenders with very strong jars and both companies issue a long-lasting and thorough warranty with their product.

I personally own a Blendtec Total Blender and have used it for six years now with absolutely no problems and it looks practically new. I’ve used it somewhere around 1,000 times by my estimation and it still blends through anything I throw in there without any problems or challenges. I’ve dropped the jar on the floor multiple times and there isn’t a scratch on it, either. That would be my recommendation for a “buy it for life” blender.

Boots

Several friends and readers have suggested that boots tend to wear out very rapidly and that if you wear them with any frequency for work, you should get inexpensive boots, wear them until they fall apart, and replace them, because higher-end boots won’t last enough longer to be worth the additional cost.

Two friends and two readers do have a consensus on a better boot model, however. They all recommend Red Wing boots. One friend specifically recommended the Men’s DynaForce Six Inch with a steel toe, claiming to have used it in construction for several years of near-daily wear on construction sites and is now on his second pair of them. That’s a good enough recommendation for me.

Duffel Bags

I used to travel a great deal and often relied on duffel bags for those trips. My complaint about less expensive duffel bags was always the same: the zippers would fail. Cheap plastic zippers means that your bag will almost always fail in short order.

That being said, I have owned a large duffel bag from Best American Duffel for several years now and used it for many road trips and other travel purposes and, as with many other items, it functions and looks like it did when it was new. The zipper is metal, large, and incredibly sturdy and the bag is made out of very strong material and shows no danger of coming apart at all at any of the seams.

Electronics

I’m going to repeat what I said in the earlier article, because it still holds up as completely true:

“It is basically impossible to buy electronics for life. It’s not a matter of having the “newest and greatest” thing all the time. The issue is actually complexity.

Electronics are complex devices. There are many, many points of potential failure in an electronic device. Even if you buy a very expensive device, if even one resistor or capacitor fails unexpectedly (out of many inside a device), it can cause your device to fail.

I try to buy electronics with a seven- to 10-year lifespan. If I can get seven full years out of an electronic item, I’m pretty happy with that. Naturally, I’ll keep using it until it ceases to function.

That’s far, far from “buy it for life,” but it reflects the reality of home electronics.”

Gloves

Here, I’m talking about gloves that are used for regular outdoor work and for long stretches in the outdoors in very cold temperatures, not gloves a person who rarely works outside or is primarily an indoor worker might use in the winter months. For those situations, most inexpensive gloves are fine.

For a person who frequently uses gloves for work, particularly in cold weather, Ringer Roughneck gloves come extremely highly recommended from many different sources. A close friend of mine who spends a lot of time chopping firewood for his home and his business in very cold conditions swears by them.

Another option, of course, is to just buy mass quantities of cheap gloves from a farm supply store, where you can buy adequate gloves that will last for a surprisingly long time at a very low price.

Holiday Lights

Unfortunately, residential-grade winter holiday lights are not meant to last. They’re typically used for a few seasons and then the bulbs begin to fail. You can replace them with a few replacements that often come with strands, but often some of the internal wiring begins to fail as well and you need to replace them entirely. If you’re lucky, a strand will last you for five to 10 years. We’ve had strands fail in as little as two years.

There are commercial grade outdoor strand lights that will last for many, many years, but the cost is prohibitive for home use. They will last and last and last, but they require careful use and will still likely be far more expensive than a homeowner will want to invest in their holiday lighting patterns.

Your best bet is to buy low-energy LED lights at your local store and replace them as needed.

Jeans

Most jeans that you buy at the store have already been pre-treated for appearance. That treatment sadly also has another side effect – it reduces the lifespan of the denim, making the material weaker and more prone to tears and long-term wear.

My recommendation is to buy jeans with minimum pre-treatment. Don’t buy faded or worn or stonewashed jeans as those treatments damage the denim and reduce the lifespan.

As for a specific brand, I trust Consumer Reports, which runs tests on denim jeans regularly and usually concludes that Levi’s have the longest-lasting material, but they’re often sold at a premium. I would buy Levi’s if you consistently wear the same waist size, but I’d mostly just look for minimally treated jeans otherwise.

Kitchen Knives

Many people are tempted to buy large sets of knives for their kitchen and invest in very expensive knives. My alternative suggestion is to instead buy just a couple of good “bang for the buck” knives, which will last for a very long time if you treat the blade well at all, and only upgrade those knives if you find a need for exceptional sharpness.

For your kitchen, then, I’d suggest buying just a Victorinox 3.25″ paring knife, a Victorinox Fibrox 8″ chef’s knife, and a Victorinox 8″ bread knife. Those three knives will handle almost any task you’ll throw at them in a home kitchen and will last for years and years. They are constantly recommended as great “bang for the buck” kitchen knives in almost every food magazine and blog out there and I can personally vouch for these knives having very long lifespans.

There are better knives that hold an edge for a bit longer because of their metal composition, but they won’t necessarily last longer – they’ll just last a bit longer between honings and sharpenings. For that benefit, you’ll find yourself paying several times as much. The biggest difference between the sharpness of blades in the home kitchen, honestly, is how well the person in the kitchen hones the knife, which is a great skill for everyone to learn.

Microwave Ovens

Consumer microwaves – the kind that you’d buy at your local department store or on Amazon – are designed for only occasional use. The models tend to vary frequently and you can find a wide spectrum of reports on various models of consumer microwaves. Basically, if you’re buying one for home use, I’d generally just suggest getting a lower-end one or follow the “bang for the buck” suggestion in the most recent issue of Consumer Reports.

If you really want a “buy it for life” microwave, however, look into commercial microwaves, the kind that they have in restaurant kitchens. They tend to cook at a very high wattage, much higher than typical consumer microwaves, and you’re probably going to have to learn how to use it and how to time things down to the second with it. However, it will last you a very long time. Commercial microwaves, like this Sharp microwave which I’ve actually used before, tend to be relatively low on feature count and often feature analog dials, but they’ll last for 30 years before failing and they’ll cook your food quickly. They’re reliable beasts. You’ll just be paying several times more for it and it’ll come with what seems like a relatively small feature set.

Multitools

In general, the products from Leatherman are excellent multitools. I’ve owned a Leatherman Wave for about 15 years now and it still works wonderfully; it has all of the tools I need. I have friends that swear by their Leatherman Wingman, too. Honestly, which model you choose comes down to the tool assortment you want on it. I generally recommend a small one if you plan to carry it in your pocket and a bigger one if it’s destined for your drawer.

Many people recommend Swiss Army items by Victorinox as well. They’re solid items, but I generally find the tools in a comparable Leatherman to be a bit higher quality for a bit higher price.

Pens

If you’re looking at a pen as an aesthetic object, then you really should purchase a refillable pen that matches your aesthetic. Almost every quality pen company makes a lot of great pens that will last for a very long time with reliable and high quality cartridges or ink filling mechanisms.

That being said, I’m assuming that people who are looking for pens that will be reliable and last are looking for inexpensive, borderline disposable pens that won’t clog up, won’t leak, and will work consistently until the ink is gone at a low price. There are a lot of very cheap pens out there that fail in a variety of ways, from Bics to Papermates, so what’s a reliable inexpensive pen?

My two choices are the Uniball Signo 207, which will set you back about $0.75 per pen, or the Pilot G2, which will set you back about the same amount. Both write exquisitely well, both come in a variety of line widths, both never seem to leak on me, and both never seem to clog up on me, either. I usually get every little last bit of ink out of both types of pens without any problems, they write as soon as I put pen on the page without clogging or requiring scribbling to get it started, and there’s never an issue with a pen exploding in a pocket or something.

Pocket Knives

This is a difficult category because people tend to look for different things in pocket knives. My primary interest here isn’t aesthetics, but reliability and craftsmanship. What kind of pocketknife is going to hold a blade for a long time, require minimal care to still be a quality knife, and last for a very long time in your pocket?

I asked some of my friends about this and they came back with a variety of answers, many of them going into the thousands of dollars. So, instead, I asked them whether they could point to a less expensive pocketknife that would have those traits, ideally under $100. The most popular recommendation by far was the Spyderco Manix 2.

It’s not flashy, but it’s extremely well regarded as being a spectacularly well-made and reliable knife for its price.

Pots and Pans

If I’m combining my own personal experiences along with the input I received from friends and others on reliable pots and pans, there’s really only one thing I would suggest, and that’s to avoid anything with a Teflon coating. Almost universally, people suggested that Teflon coating means that it will eventually get a nick in it and then it will start peeling and then you have an unusable pan. It works well for a little while, and then it really, really doesn’t.

The best pots and pans, in my experience, are made with enameled cast iron. The Lodge enameled cast iron items have worked wonderfully in my experience and have a very good reputation. They’ll work wonderfully for making soups, casseroles, and things along those lines. I personally own a couple Le Creuset enameled cast iron items that were bought at a “going out of business” sale. They’re very similar to the Lodge ones but feel even more sturdy (if that’s possible) and come with a 101-year warranty… but they’re far more expensive.

Skillets

My advice here is very similar to my advice for pots and pans: cast iron. However, in this case, your best approach is to buy non-enameled cast iron and thoroughly season it yourself.

By default, I recommend the Lodge brand of cast iron skillets, like this one. Find one that’s the right size for you – a smaller one if you’re single or don’t have any kids, a larger one for a family – and then take the time to season it properly. It takes some time, but when a cast iron skillet forms a good patina, the surface is basically as good as Teflon and you don’t have to worry about the surface chipping off and poisoning you.

Slow Cookers

I have never met a manual slow cooker that didn’t basically have an endless lifespan. By manual, of course, I mean one with a manual dial on the front and not a digital touchpad – I’ve seen one with touchscreens go bad before, as that seems to be the component that fails the most often.

My honest suggestion for someone looking for a reliable slow cooker is to go to a thrift store, look for one with just a manual dial, and buy that one. Take it home, test it out while you’re around the house a few times to make sure it works right, and you’re god to go.

If you’re looking to buy one, I’d suggest this three-quart manual dial Crock Pot. Again, I suggest one without a touchscreen or an LED panel because those are the parts that tend to fail the most often.

Socks

This is a tough category for me to make personal recommendations in, as I have very large feet (size 16ish) and sock options are a bit tough when you get to large sizes. So, for this category, I largely trust what my friends have to say, and my friends almost universally recommend Darn Tough Socks in terms of socks that are comfortable and last for a very long time.

Their socks offer a lifetime guarantee and according to my friends they remain comfortable over a very long period. I have tried pairs of their socks but they were all just a bit small for my feet and were very tight so I was really unable to give them a fair shake. I usually just buy loads of socks of an inexpensive brand that actually fit my giant wide feet and wear them until they fall apart.

Spatulas

This might seem like an odd category, but it’s been asked of me before!

I’ve tried several different spatulas over the years and the best one I’ve ever used in terms of being long lasting is a bamboo one that I purchased for a dollar at a dollar store. I later found a very similar one for about $4 at a cooking supply store and bought it immediately.

It’s a very simple spatula made from bamboo, but it seems to be practically indestructible. It absorbs a beating, stirs and scrapes things incredibly well, and just lasts and lasts and lasts.

This bamboo spatula is very similar to the one I have, except this one is almost $5. Only big time wealthy spatula buyers might consider spending as much as $4.75 on a spatula, but if you’re willing to fork over a whole Lincoln for one, that’s my “buy it for life” recommendation.

Thermos

I will hands-down recommend this Zojirushi stainless mug for taking out a hot beverage or a hot soup on a cold day. I’ve never seen anything like it.

I took this out about eight years ago full of hot chocolate on an extremely cold day – about -20 F when I left the house. I left this in the front seat of my truck for about two and a half hours. I came back to my truck, opened the Zojirushi, and the hot chocolate was still so hot that I almost burnt my lip.

It has survived being dropped several feet, tumbling around in the back of a truck many times, tumbling around in the back of a SUV many times, being forgotten for what must have been weeks, being dropped down an elevated trail and rolling down a hillside, and it still looks practically new and keeps things ludicrously hot. I swear by this thing.

Underwear

Underwear, by their nature, are not a “buy it for life” item. No matter how well made they are, they eventually wear out. It’s inevitable. They’re stretched and pulled on and off and beat around constantly and washed frequently. So, for underwear, I tend to just shoot for a comfortable pair that’s going to last for at least a while, offering some thickness and reliable construction.

My preferred brand of “bang for the buck” men’s underwear is the C9 brand sold at Target, often labeled as “C9 by Champion.” They’re comfortable, they seem to last a long while, and the price is definitely right.

Watches

Almost any analog watch that you buy will last for many, many years. I have a cheap analog watch that I bought in a pinch in college for $15 or so that’s still going just fine today, for example. It’s rare that a watch just gives out on you.

The reality is that watches are like jewelry – you’re generally paying for aesthetics or you’re paying for features that aren’t necessarily compatible with extreme long-lasting resilience.

If you’re buying a watch from a “bang for the buck” in terms of lifespan, buy one from your local department store. If you’re buying a watch for aesthetics… that’s your own call.

Water Bottles

There are a number of extremely reliable water bottle manufacturers, all of which make bottles that will last for a very long time. Bottles made by Nalgene, Camelbak, and Klean Kanteen will all last you for a lot of years and I’ve personally witnessed bottles from all three companies survive some very rough bumps without a scratch. They all come with great warranties, too.

I’d suggest going to an outdoor supply store, such as your local REI, and inspecting a number of bottles by those companies yourself.

Winter Clothing

In the past, I’ve recommended visiting your local Carhartt store. I have a Carhartt arctic winter coat that has lasted for 15 years, including many trips out into the woods and into rough situations, and it’s still going strong. I have not heard any stories of quality dropoff, but I personally haven’t purchased a winter coat in 15 years.

I have several friends who swear by winter garments from Land’s End and Duluth Trading, in terms of long lasting apparel, though I do not have any experience with either brand. My wife, in particular, likes Land’s End items.

In general, however, my recommendation for winter clothing is to simply wear lots of layers of ordinary stuff rather than buying a lot of special winter clothes. I often just wear a t-shirt under a long-sleeved t-shirt under a sweatshirt under a winter coat when I know I’m going to be outside for a while, with underwear under sweatpants under jeans on my bottom. Layers keep you warm and then you really only have to worry about the aesthetics of the outer layer.

Do You Want to Know More?

If you have a specific item that doesn’t appear here for which you’d like a “buy it for life” recommendation, send it to me! Visit my Facebook page and send me a message there. I’ll get to the item in a future reader mailbag and it may also show up in a future volume of this “buy it for life” compendium.

The post The ‘Buy It For Life’ Compendium, Volume 2 appeared first on The Simple Dollar.

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Friday, February 3, 2017

What Kind of Retirement Is Right For You?

I had a great lunch today with an old friend of mine. We used to work together and he was a couple of decades older than I was, so today he’s actually starting to see retirement on the short term horizon.

He was interested in what my life was like as a self-employed person who made a living on a mix of side gigs and contracts, and I shared some of my thoughts on that, but when we got down to the real meat of the conversation, it seemed like he was mostly trying to figure out what the next stage of his life is going to look like.

He’s between five and ten years away from a traditional retirement. He seems to love his job. His primary interest away from work is to go to live sporting events, particularly high school and college sporting events near him (there aren’t exactly a ton of professional sports options in Iowa).

I asked him what his typical day was like and most days seemed to either be a cycle of going to work and coming home to do household chores, going to work and then going to sporting events, or else filling weekend days with household chores and sporting events.

“But… what else do you do?” I asked him. I wasn’t intending to be rude. Rather, I was being frank with an old friend. I was trying to help him figure out what he might do with a lot of additional hours that he’ll have in retirement.

The thing is, he drew a blank on that question. He talked about reading websites and maybe reading a book every once in a while and watching television… and that was about it.

My response? I told him that if he’s actually happy with his life routine right now, with a mix of work responsibilities and workplace respect that he’s earned over the years and those workplace relationships, and his main hobby of watching live sports fits right alongside that, there’s no reason whatsoever for him to retire until he has to.

The funny thing? He thought about it for about a minute or so and then slowly brightened up.

For him, retirement did not seem like a blessing at all. It seemed like this empty hole of time and space where he’d basically sit around for the last two or three decades of his life doing nothing interesting and then eventually dying. He saw his workplace relationships, which he values a lot, withering away and dying. He saw himself walking away from a place where he was valued and had a lot of respect into a life where that respect didn’t exist.

I couldn’t help but be reminded of the movie About Schmidt starring Jack Nicholson, a recent retiree who is struggling with retirement. He spends the first portion of the movie walking through the paces of his life but feeling very empty; the film captures that sense really well.

It was really obvious that much of what Warren Schmidt cared about was the respect and value he had in the workplace, the relationships he had there, and the work he did. It was a very key part of who he was and what he enjoyed about life. Sure, like anyone else, he didn’t love every aspect of his job, but it gave him a lot more than he realized.

That’s not a bad thing at all. Every single person needs to find the place and the things that makes them feel whole, that makes them feel valued, that makes them feel engaged. Many people find that in the workplace.

On the other hand, there’s me. I have more things I’d like to do in my life than I’ll ever have time to do in my entire lifetime. Writing books. Reading books. Hiking trips. Charitable work. Tabletop game design. Gardening. Fishing. Political involvement. Travel. Trying new things. So many, many things.

For me, as much as I enjoy my work, I also very much look forward to a point in my life where I can wake up and know that my day will consist of all of those things and that I’ll have adequate time to actually do those things with any degree of regularity.

My friend and I derive our personal joy and happiness from different places. Much of his joy comes from his job and his one main hobby/interest. If you take away one of those things, then there’s a void in his life that is left unfilled. Yes, he could seek out ways to fill it, but why should he if he already has a life that he finds fulfilling? He has relationships that he values, people that value him, and things to do that bring joy and fulfillment to him, and what else does one want in life?

My joy comes from having a huge variety of interests and passions, far more than I currently have time for. I am happy with what I do now with my time, but if an element goes away, I will quickly fill that void with other things.

To put it simply, there is much stronger motivation for me to save for retirement and retire early if possible than there is for my friend to do the same. There is no strong reason for my friend to retire early or even to retire “on time.” It makes more sense for him to work as long as possible and retain all of the aspects of his life that he values.

The goal of retirement savings and retirement planning isn’t necessarily to retire. It’s to have lots of options available to you when you reach retirement age. Sticking with your current career should be just one option among many. When it’s the best option, as it seems to be with my friend, then your retirement savings is simply a backup plan. When it’s only one option among many and some of the others sound mighty nice, as it is with me, then your retirement savings is very, very important.

Where are you on that scale?

Are you the type of person who has built up a great career with a ton of great relationships? Have you found a place in your career where you have respect, personal fulfillment, and lots of good people around you? Do you wonder what you’d actually do to fill your days after your career is over? If that’s you, it’s still worth saving for retirement, but you may want to expect to work a little longer than the typical retirement age and you should view it as more of a backup plan. You won’t be saving for quite as many years in retirement and you have more years to save for it. Retirement savings isn’t as aggressively important for you.

Or maybe you’re the type of person who’s bursting at the seams to try new things and new ideas in retirement. You have a long, long list of things you want to achieve once you reach a point where you no longer have to work for income. Your days in retirement seem absolutely exciting because of all of the things you’re going to do. You don’t necessarily hate your job, but you definitely work to live, not live to work. You, my friend, are the kind of person who should be saving as aggressively as possible for retirement so that you can retire as early as humanly possible with the resources you need to enjoy retirement to the fullest. Retiring early doesn’t mean four decades of drudgery, it means four decades of wide open possibility.

Those two different attitudes point directly toward different approaches for retirement. One involves aggressive saving, maxing out 401(k) and IRA contributions, and searching for loopholes and angles to squeeze every last drop out of retirement savings. The other is more focused on using retirement as a fallback and is more focused on a debt-free lifestyle in order to improve one’s financial flexibility while still working.

Neither one is absolutely right, and neither one is absolutely wrong. Instead, they’re both examples of how different approaches to life can push people toward different approaches to their finances and retirement planning.

That’s why it’s called “personal” finance. Different people have different desires, goals, ambitions, and attitudes, and it would not make sense for everyone to follow the same cookie cutter path.

The best approach to personal finance for everyone is to start by figuring out what you want out of life and make choices to maximize those things that you want. For some, it might point you toward rapid retirement savings. For others, it might orient around saving for a house. For still others, complete debt freedom might be the best route. There is no answer that’s always right. The only principle I can point to that’s consistently strong for almost everyone is to spend less than you earn because the future is always uncertain, and do something worthwhile with the difference between what you bring in and what you spend. Pay off debts, save for goals, whatever it might be.

Good luck.

The post What Kind of Retirement Is Right For You? appeared first on The Simple Dollar.

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Thursday, February 2, 2017

31 Days to Financial Independence (Day 25): Investing and Saving for Other Goals

“31 Days to Financial Independence” is an ongoing series that appears every Thursday on The Simple Dollar. You might want to start this series from the beginning!

Last time, we took a look at saving and investing for educational needs, which pairs up nicely with our earlier look at saving for retirement. Retirement and college savings are two of the biggest goals that people have in terms of saving and investing for the future.

But they’re far from the only goals.

People save money for lots of reasons. They save for a down payment for a house. They save for a down payment for a car – or to buy a car entirely in cash – because those moves will save a ton on interest for a car loan. They save to go on a really nice vacation. They save up to launch a side project or a small business.

Typically, savings goals outside of retirement and education tend to be smaller goals – $100,000 or less, though still pretty large for most Americans. They tend to have a shorter term focus, meaning that the intent is to use the savings in the next few years. Also, there is rarely any sort of tax-advantaged opportunities for saving or investing for those goals.

Because of those differences, you need to use some different approaches for saving for smaller goals than you need to use for the big retirement and education goals. Let’s take a look at those approaches.

First and foremost, you need to establish an approximate timeframe for your goal. When exactly do you intend to buy a new car? When do you intend to move forward with that house purchase? When do you plan on going on that vacation to Norway?

You don’t need to be perfect here. You merely need to figure out a good rough ballpark estimate so that you have some basis upon which to make decisions about how to best save for and achieve that goal.

Setting a target date for your goal helps you to articulate not only how you will invest for that goal, but also the rate at which you need to save for that goal.

There’s another piece of the equation you’ll need, too.

You also need to establish an approximate dollar target for your goal. How much of a down payment will you need for that house? How much will that trip to Norway actually cost you? How much will that van purchase you’re considering actually set you back?

This will take a bit of research, of course, but without it, it’s basically impossible to put a real savings plan in place. You need to know how much you’re saving. The reason? Along with the timeline, you can use those numbers to figure out exactly how much you need to save each month.

Let’s say, for example, that you’re planning on traveling with your spouse and three children to London during the summer of 2019 for a week, which will include a day trip to Paris. (I’m just using this as *ahem* an example.) Your budget for that trip is $12,000. Between now and then, you have 30 months to save. Because you have both a budget and a timeline, you can quickly divide the two numbers and discover that you need to save $400 a month to be able to pay for the trip in cash.

Or, let’s say you’ve decided to buy a home in three years and you need a $50,000 down payment. You have 36 months to save for it, so you need to put away about $1,400 a month to get there.

There’s another reason why having a timeframe and a dollar amount is useful, too.

Your timeframe dictates where you should put your money while saving up. Let’s talk a little about Investing 101 here. When you choose to put your money somewhere for the future, the method you use to store that money needs to be in alignment with your goals.

To keep things as simple as possible, let’s talk about investments in terms of risk and reward. Most people recognize that the higher the risk of an investment, the higher the potential reward. One very common way this plays out with investments is in the form of volatility. A volatile investment is one that varies widely from year to year in terms of the returns you earn from it.

Typically, with most mainstream investments, what you really get is a higher average annual return in exchange for higher volatility. It’s a particular flavor of that risk-reward balance.

Let’s look at a regular bank account first. A bank account has extremely low volatility. It’s virtually certain to hold its value and slowly earn interest at whatever rate the bank offers, right? The catch is that the rate of return is really low, too. You only earn 1%, but you’re earning that 1% consistently and you have essentially no risk of losing your balance.

On the other side of that coin, let’s look at a stock market investment. One typical way that people invest in the stock market is via an index fund like the Vanguard Total Stock Market Index. They open an account with Vanguard, buy shares of that fund, and just sit on it. The Vanguard Total Stock Market Index basically owns shares in everything in the stock market, and thus when you buy a share in that index, you’re effectively buying a tiny, tiny fraction of a share in every single publicly traded company in the United States. What that means is that when you hear about the “stock market” going up or down on the news, that’s almost exactly what the Vanguard Total Stock Market Index is doing. You’re basically investing in the “stock market” as a whole.

An investment like that is way more volatile. Over the course of a lot of years, the return settles down to an average of somewhere around 7% to 10% depending on how you calculate it, but that average comes with a ton of volatility. That 7% average over a decade might include years with a 16% return and a 21% return and another year with a 41% loss.

The problem with that is that in order to get that 7% average, you have to be invested for a while. It’s usually suggested that you be invested for a decade or more at least. If you invest for fewer years than that, things can go bad. Very bad.

Let’s say, for example, that the stock market had a ten year run that looked like this: 11.74%, 1.38%, 13.52%, 32.15%, 15.89%, 2.10%, 14.82%, 25.94%, -36.55%, and 5.48%. In seven out of those ten years, you’re going to be doing better in the stock market than in a savings account; in two more of those years, you’re roughly matching a savings account. The tenth year is a complete disaster.

What if you’re invested for three years? Given that stretch of numbers above – which, incidentally, is the annual return of the S&P 500 index for the last decade – most of the three year averages are pretty good… except for the three that include that disastrous -36.55% year, in which you’re still likely losing money.

It’s only when you include most of or all of those years that you have a consistent average that’s higher than what you’d get from a savings account. If you invest only for a small number of years, you might have a really good return… or you might lose a significant portion of your investment, and with fewer years, it gets more and more risky.

Thus, the best strategy for a short term investment, particularly with a timeline under ten years, is to put it somewhere safe and secure. This becomes more and more true the shorter your timeline is.

So, what do you do?

Exercise #25 – Building a Plan for Saving for Other Goals and Executing It

The first step is to figure out exactly what you’re saving for. You probably have a goal in mind, but if you’re going to achieve that goal, you need to pin it down a little more firmly, and that means making some plans.

First of all, what exactly is your goal? You need to make it as specific as you can so that you can come up with some realistic numbers upon which to base your plans. Do some homework on whatever your goal is and get a grasp on how much you’re going to need to have to make it a reality. This may involve making a preliminary budget. At the same time, settle on a timeline for your goal. Know when you’re going to do it.

The purpose here is to make your goal as clear as possible so that you can turn it into a statement of “I need to have X dollars in Y months.” You need to do the thinking and planning in your own life for your own situation to figure out what X and Y are for your own particular goal.

Once you’ve figured out the amount and the timeline, make an investment decision based upon the time until you need the money.

If it’s less than five years, I wouldn’t consider anything other than a very low-risk low-reward investment, like a combination of a savings account or money market account and certificates of deposit. You can shop around various banks for the best rate, but you want that in a steady and secure FDIC insured bank account.

If the timeline is substantially more than ten years, such that you’ll have a healthy portion of your savings already in place when you still have ten years left to go, I’d consider the stock market in the form of an index fund, as described above.

If your timeline is somewhere in between, you can consider a mix of options, but I’d still lean toward something very secure, like a savings account and certificates of deposit at the bank.

What about other investment options, like real estate? In general, such other options offer the same risks and rewards as stock investments and they really only pay off over a longer period of time. If you’re looking at a longer-term investment and want to diversify as much as possible, things like real estate and bonds can be good choices, but, again, they’re not necessarily great options if you’re looking at the short term.

Once you’ve figured out the type of investment you want, figure out a sensible place to actually put your money. Shop around for a reputable bank that offers good interest rates on their savings accounts, good certificate of deposit rates, and online banking that allows you to set up automatic transfers. Ally Bank is a good option here. If you’re looking at stocks or other investments, shop around for a broker or investment house that can handle exactly what you need with minimal fuss. I use Vanguard directly for these things.

Once you’ve done that, set up a repeating automatic transfer that will move enough money into that new account each month so that you’ll achieve your goal. You can set it up however you’d like, but make sure that you’re putting in enough so that you’ll achieve your goal. For example, if you need to save $10,000 in two years, you should be putting in about $400 a month.

You can schedule the transfer weekly if that’s more convenient for you. In the above example, $100 a week would definitely get you to your goal.

What’s the benefit of doing this automatically? If you do it automatically like this, savings becomes a priority for you. You’re committing to paying yourself first; you have to account for the money going into savings because it’s going to happen, no matter what. Without an automated savings plan, you’re relying on your own decision-making process to put that money away month after month, and while you might be really committed to it now, almost all goals eventually hit an “enthusiasm valley” where short-term matters begin to feel more important than that big goal.

At this point, you have a goal, a timeline, a plan for saving that money, an account, and an automatic system in place for saving that money. What else do you need? You need to make sure that the money’s actually there each month.

Once a month (or once a week), the amount of money you’re saving is going to automatically move out of your checking account and move into your separate savings account for your goal. You have to be prepared for that in terms of your day to day spending. If you’re automatically saving $200 a month, that means your normal household budget has to be able to survive and thrive on $200 a month less than before.

Likely, that means turning back to the core of all personal finance principles, spending less than you earn. A large portion of this series, starting on the seventh entry and continuing until the sixteenth entry, focus on tactics for cutting back on your spending, while the eighteenth through the twenty-first entries focus on improving your income. Those two factors together are how you spend less and earn more.

To make that savings goal work, you need to be consistently spending that much less, earning that much more, or some combination of the two in a given month. Without that change in your personal finance habits, you’re going to run into some real difficulty making savings goals work.

So, your final step in this process goes right back to the beginning. You need to make sure that there’s enough of a “gap” between your spending and your earning that this savings goal isn’t creating a problem for you.

Personal finance is like a never ending wheel. You adopt goals and need to make financial changes to your life to achieve those goals, and then as you achieve goals and experience lifestyle changes, your goals change again, as does your methods for getting there. You keep moving back and forth between goals and methods, but as time goes on, the goals and the methods change and change again.

It’s up to you to stay on top of it.

The remainder of this series will focus on a number of standalone topics. Next time, we’ll take a look at insurance options.

The post 31 Days to Financial Independence (Day 25): Investing and Saving for Other Goals appeared first on The Simple Dollar.

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How to Find the Perfect (Frugal) Valentine’s Gift

When it comes to holidays that place unreasonable expectations on our wallets, Valentine’s Day has got to be the worst. Every time early February rolls around, we’re expected to throw our budgets out the window to show our love.

If you really adore your husband, you’ll buy him a $5,000 watch or a new car with a bow on it, right? Love your wife? Upgrade her engagement ring to include the diamonds she deserves. At least, that’s the story all the television commercials and magazine ads are selling.

Obviously, most of us don’t fall for all the hype. Instead of buying four-figure gifts, we opt for presents that make sense with our budgets and financial goals. But, even then, our options aren’t always that great. Flowers, candy, and cheesy Valentine’s teddy bears may be budget-friendly, but they’re overplayed, folks.

So, when it comes to Valentine’s Day, what’s a guy or girl in love to do?

Giving Gifts According to Love Language

Part of the problem with Valentine’s gifts in particular is that popular gifts tend to be overly generic, lacking in meaning, or “one-size-fits-all,” according to Dr. Farrah Hauke, a psychologist in Scottsdale, Ariz. If you pick up a box of chocolates or a teddy bear without checking to see if your partner even enjoys such gifts, you’re not setting yourself up for success, she says.

That’s not to say that “generic” Valentine’s gifts are wrong. Hauke notes that which type of gifts are meaningful will really depend on the couple. A bouquet of roses might seem too cliche for one couple, but could be extremely romantic to another couple based on their shared memories or experiences.

This is why communication is key, Hauke says. “Don’t expect your loved one to read your mind about any aspect of your relationship,” she says.

To find the gift that’s most meaningful to your spouse or partner, Hauke suggests figuring out their “love language.” This is a term used to describe the way your spouse or partner shows or receives affection. For some people, it may be through words of affirmation or physical touch; others express love through acts of service and devotion or quality time.

“Based on which love language your loved one speaks, try to give a gift that comes from the heart and is special to them,” Hauke says. For some people, that might be a relaxing night at home with some stimulating conversation. For others, it might be a romantic dinner at a restaurant.

“Turn the focus on your loved one and tune out the millions of distractions,” says Hauke. “Try focusing on the meaning of Valentine’s Day and what makes your relationship special.”

Five Tips to Finding the Perfect Frugal Gift

If you’re like me, you probably hate the idea of spending hundreds of dollars on a Hallmark holiday. Fortunately, there are plenty of ways to show your loved one you care without breaking the bank. Here are some tips that can help:

#1: Consider gifts that money can’t buy.

While you can “buy” your partner a gift if you want, there are plenty of ways to show you care that don’t cost a dime. As Hauke says, try to focus on your partner’s “love language” — not yours, but theirs — to find the perfect gift.

“For some, the best gift that can be given is quality time. For others, it’s loving touch or an act of service as simple as unloading the dishwasher,” she says.

If you want to make your spouse or partner happy this year, try thinking of what would make them feel special or appreciated. How does your partner like to express affection? Gifts that fall into this category, and especially acts of service or words of affirmation, are often free.

#2: Brainstorm gift ideas that relate to your shared memories as a couple.

As Hauke mentioned, it’s perfectly okay to give cheesy or popular Valentine’s gifts if they’re also meaningful. If your spouse or partner loves flowers, for example, or if you brought her flowers on your very first date a million years ago, buying a bouquet makes romantic sense.

Either way, try to come up with a gift that brings your partner into a romantic frame of mind and celebrates your relationship. Consider framing your favorite vacation photo, or giving a gift that relates to your spouse’s favorite movie, clothing brand, or store.

#3: Make something.

You don’t have to spend money to give your spouse or partner a Valentine’s gift if you can come up with something to make yourself. If your partner usually does all the cooking, for example, you could prepare a special, romantic dinner at home. Just make sure it’s something he or she likes. (And if you don’t know, ask!)

Even if you’re not crafty, you can still order an inexpensive “homemade” gift. Put your wedding photo on a pillow or set of coasters on a website like Shutterfly.com or Collage.com, or order a photo book with your favorite pictures and memories.

#4: Choose experiences.

If your spouse or partner is someone who hates clutter, consider giving an experience gift instead of another trinket. Study after study has shown that experiences bring more lasting happiness than things.

It doesn’t have to be anything pricey like skydiving — something as simple as a trip to their favorite park could work, although you could go for concert tickets or a visit to his or her favorite museum instead. Make sure you go with them on the experiences so you can both enjoy it — and remember it — together.

#5: Give them time away.

If it’s hard for your spouse or partner to get away for “adult time,” giving them a few days – or even a few hours – off might be the best gift ever. Even a full day of shopping or the chance to sleep in late and watch movies alone can be therapeutic when you’re overworked or watching kids all day long.

Or, if your partner’s the type who works too hard and feels guilty about taking a vacation day, contact his or her boss and see if you can arrange a surprise day or even a half-day off of work in advance. You could surprise them at the office and spend the rest of the afternoon strolling through the city.

If your spouse’s “love language” is relaxation, giving them some free time is the best way to win their hearts this Valentine’s Day.

Final Thoughts

If you’re frugal or just tired of shopping for the perfect gift, Valentine’s Day poses a specific set of challenges. You may not want to fall for all the Valentine’s hype, but you shouldn’t ignore the holiday either if you expect to keep the romance alive.

To find the perfect frugal gift, the best thing you can do is figure out what your spouse or partner really wants. Unfortunately, this isn’t as simple as popping into a drug store on your way home to pick up a teddy bear or box of generic chocolates. To find a gift that will leave your spouse swooning, it needs to be special and unique.

According to Hauke, the best way to find the perfect Valentine’s gift is simple. “Ask them what makes them feel loved,” she says.

What’s your favorite frugal Valentine’s Day gift of all time? What do you plan to get your spouse or partner this year?

Related:

The post How to Find the Perfect (Frugal) Valentine’s Gift appeared first on The Simple Dollar.

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Wednesday, February 1, 2017

Don’t Worry about the Destination. Focus on the Journey.

In 2017, I’ve chosen to take on a number of personal challenges. I’m trying to lose weight, with a goal of achieving the same weight I had the day I graduated from high school. I’m trying to slowly read and study a set of very challenging books. I’m taking a series of online classes, too. I’m also working on a Youtube channel and a book manuscript. Whew!

In the past, I’ve addressed a lot of personal challenges, some with success and some without. This site is the result of my own successes at achieving personal finance objectives, but I’ve not always had success at other things. I’ve succeeded and I’ve failed in my life many, many times.

If there’s one thing I’ve learned about success in the various areas of my life, it’s this: your success isn’t determined by the big audacious goals, but by how hard you hammer away at that goal today. Nothing else really matters besides today.

If you have big financial dreams, but today you’re choosing to spend money needlessly and without a plan, you’re very likely not going to achieve those big dreams.

If you have big career goals, but today you’re goofing off at work and not doing anything to further your ambitions, you’re very likely not going to achieve those big career goals.

If you have visions of losing a lot of weight, but today you’re eating two giant meals and not planning at all for it, you’re almost assuredly not going to achieve those weight loss visions.

It’s the journey that really matters, not the destination. Yes, it’s fun to visualize that destination and think about what your life will be like when you achieve something big like that, but it’s nothing more than a little motivation. Your actual success and failure is determined by your actions today – whether or not you are actively, day in and day out, like clockwork, putting in personal effort to achieve that goal.

The catch? That repetitive daily challenge is hard.

When I first started turning my financial life around, making more frugal decisions each day was hard.

When I started building The Simple Dollar as a business, it was hard to make myself sit down each and every day and put my nose to the grindstone and get it done.

In other areas, I simply didn’t – or couldn’t – make myself do it every day. I tried many times to lose weight – it always failed. I tried launching many businesses – they almost universally failed. I’ve tried with countless failed projects over the years.

So, is the secret just focusing day in and day out on what needs to be done today to advance the project? That’s the core of it, yes, but it’s not the real secret.

The real secret is figuring out how to find the joy in the journey.

When I was struggling on my personal finance journey, I found a lot of joy in watching my net worth rise. I calculated it constantly. I also found joy in finding new ways to cut down on spending, so I was constantly trying new low-cost and free strategies. I still do this, in fact, many years after my initial turnaround. It became something of a game for me, and it’s still a game. I discovered that I really enjoyed meal planning and strategizing my grocery shopping, too.

I found something in the experience of financial recovery that I enjoyed, and I maximized that joy.

When I was struggling to build the readership for The Simple Dollar, I found a lot of joy in trying to find new ways to build up links to the site. Each day, I made it a challenge to find new ways to get people to link to the site and to get as many links to it as possible. I would actually count links and I made it into a daily goal, a game of sorts, to get the most links I possibly could. It was fun to discover new places online to share content, write articles that directly answered questions for people, and then share that article on there with them. It was fun to find other like-minded bloggers with similar or smaller audiences and then swap links with them.

I found something in the experience of building an online business that I enjoyed, and I maximized that joy.

Right now, I’m finding a lot of joy in figuring out what the calorie counts are in various foods and figuring out how meals and snacks fit together. I’m figuring out what low calorie foods I actually enjoy. I’m trying new foods all the time, too. My goal is to find sustainable dietary practices at a lower calorie count.

Thus far, I’m enjoying this journey. I enjoy trying new foods. I enjoy figuring out which foods are a good “nutritional bargain.” This is the part that’s fun for me, so I’m maximizing it.

In each one of those cases, the goal isn’t to just break things down into what I can focus on today, but to find specific elements of the journey that I really enjoy and maximize them in my life.

So let’s turn the tables on you. If you’re reading this article, it’s very likely that you’re on some kind of financial journey.

The first question is what are you doing today to bring you closer to success on that journey? Focus on things you can be doing today to help you spend less or to improve your career options or to pay down debt. What are those consistent things that you need to be doing?

Many of them are likely to be frugally minded, like finding ways to spend less. Others might be oriented toward improving your career options, perhaps through taking a class or learning about a topic or working on an independent project of some kind. You might get really into calculations and spreadsheets, like calculating your net worth regularly.

Whatever it is, find that element that really clicks with you (or at least the one that seems the most tolerable) and maximize the value you get from that.

I can’t say what it is that might really click with you, but as I mentioned above, I really enjoy finding ways to squeeze a few more dollars out of an ordinary routine without making that routine unpleasant. For me personally, that’s something I enjoy, so I actually spend more time on frugality than I probably need to. It’s a fun personal challenge to find a novel way to spend a little less on household supplies, for example.

At the same time, minimize the elements that you don’t enjoy about the routine. If there are elements that are difficult or less enjoyable for you, find ways to devote minimal time and effort and direct that time and effort to other tasks.

For example, what I find rather dull is investments. I don’t really like investment research much at all. I can do it, but if I did that every day, I’d quickly begin to loathe it. Even though I could probably earn a little more money by being very attentive about investing, I’ve instead chosen a very passive “set it and forget it” approach to investing. I set up automatic investment contributions and just let them go and do their own thing. I rarely look at them or even think about them, honestly, other than being aware that they’re present and they’re growing.

So, what was my blueprint for financial success?

I focused on frugality at first. I really enjoyed discovering new strategies for cutting a little more from my normal everyday spending, and I still do. This became – and still is – a daily focus for me.

I discovered that I enjoyed building side gigs more than I enjoyed trying to bolster my main career. One of those side gigs grew into The Simple Dollar.

I found that I really enjoyed calculating my net worth regularly and watching my upward progress over time. Not only did I find it enlightening, I found it incredibly motivating, too.

I didn’t enjoy thinking about investment strategy, so I studied investments enough to discover passive strategies that offered solid results and went with that. I buy broad-based index funds automatically in my retirement account and elsewhere and rarely even look at them. It’s enough to know that they’re there. I’d rather find a little more money to invest in other avenues of my life than spend time and effort “perfecting” my investment strategy.

I did these things every single day, and I focused on the parts that really clicked for me: discovering new frugal strategies, focusing on the positive progress of my net worth, and building a side gig to earn more money. I backed off of elements I didn’t enjoy as much, such as studying investments and building my main career at the time.

The end result was incredible financial success. I found a day-to-day pattern of positive activities that I was excited about or could at least tolerate. It did not feel like misery to me at all, and because of that, I was able to find success.

That’s my advice to you. If you want a big change in your life, you’ve got to focus on it every day, but if every day your efforts are miserable, you’re going to eventually quit. Instead, look at your daily actions and try to find ways that make it as enjoyable as possible for you while still producing positive results. Doing so will make it much easier to stick with the change over the long haul and eventually give you the results you want, even if it’s not the “perfect” path for getting there.

Remember, perfect is the enemy of the good, so don’t be afraid to skip the “perfect” path and choose the “good” path if it makes sticking with your changes much easier and even enjoyable.

Good luck!

The post Don’t Worry about the Destination. Focus on the Journey. appeared first on The Simple Dollar.

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Tuesday, January 31, 2017

A Financial Cleanse?

An old dear friend of mine has an absolute fascination with the idea of “cleanses.” She’s constantly trying out juice cleanses and organic fruit cleanses and other such things, with the idea of clearing her body and mind of “toxins.”

I’ll be the first to admit that I doubt the usefulness of juice cleanses and other such strategies for improving one’s health, as the human body is already a pretty effective cleanser of almost anything we put into our bodies. The idea of purging “toxins” by drinking a bunch of fruit juice is not something I’m personally into. Having said that, there is a lot of benefit in terms of making good health choices for yourself. You can drop excess weight, which has a ton of health benefits, and you can make lots of choices to improve your heart health and so on.

The idea of “cleansing” yourself (in the form of better blood sugar numbers, lower triglycerides, lower blood pressure, and so on) by making better dietary and exercise choices and even better mental practices such as prayer and meditation is something that is backed up by medical science. So, although I’m not on board with the idea of purging “toxins,” I’m strongly on board with the idea of treating your body well by running it through its paces and ensuring you’re putting healthy things in it.

Here’s the thing, though: the idea of a “cleanse” applies really well to other areas of your life beyond your physical body. A period of de-stressing, meditation, prayer, time spent outside, and intentional relaxation can do wonders for your mental health, providing something of a “mental cleanse.” You can do the same with the contents of your closet, removing all kinds of stuff and “cleansing” your possessions.

Naturally, the same idea works with your finances. You can give your finances a “cleanse” as well, getting rid of unnecessary things and practices that are clogging things up and keeping you from reaching your goals.

Here are five cleansing practices you can put into practice right away that will improve and simplify your financial life.

Cleansing Your Wasteful Spending: Live Off of a Small Pool of Money for a Week (or a Month)

One financial trap that many people find themselves falling into is losing track of where all of their money is going. Money slips between their fingers in drips and dribbles, quarters and ones and fives and tens, and before you know it, it adds up to a lot of money. But where did it go? It’s often unclear, because many of those little drips and drops of money are completely forgotten.

It’s not that different than a diet, really. Many people who diet wonder why they’re not losing weight, but it’s because they eat little forgettable snacks throughout the day that, individually, don’t add many calories to a daily caloric intake, but over the course of a day add up to quite a lot of calories. Then, even if you’re careful at meal time, you’re still often eating plenty of calories and the weight isn’t disappearing.

It’s those little forgotten “treats” that undo your forward progress, and it’s time to cleanse them.

Here’s what you do. At the start of the week – say, on Monday morning – withdraw a certain amount of cash from the ATM. Choose an amount that won’t leave you starving, but won’t give you so much money that you won’t have to make any choices. You can do with that cash whatever you like, but it must pay for your food and for any gas beyond what you need to commute to work. If you get any “treats,” it comes out of that cash. If you want to buy anything online, you have to put that much cash back into your checking account (because you’re likely using a credit card or cash). See how far that money takes you.

A few things will happen.

One, you’ll begin to really notice all of the little ways you spend money. You might buy lunch with the swipe of a card normally, but if you do it with cash, you’ll notice the supply of cash dwindling. You might stop for a morning coffee… but then your cash supply for the week dwindles. All of those expenses become more real when you see them sucking money out of your supplies.

Two, you start to make some choices. You might decide to skip out on eating lunch out of the office today and take leftovers instead so that you’ll still have $20 to go out this weekend. You might decide to stop your coffee shop treats for the week and drink the office coffee instead because it’s really not that much of a difference. You might order water at the restaurant. You might decide to eat dinner at home on Wednesday night instead of grabbing some takeout.

Three, some of those choices will be easy and others will be hard. Maybe eating at home is easy. Maybe taking your lunch each day is hard. Maybe skipping out on your morning coffee on the way to work is easier than you thought. It’s different for everyone. Pay attention to what’s really easy to skip and what isn’t.

At the end of the week, reflect on those experiences. Which choices were easy? Stick with those choices going forward, because those are examples of ways where your spending wasn’t generating much value for you. Which choices were hard? You might want to restore some of those.

In the end, what you’ll find is that you’ve eliminated some forgettable expenses and kept the ones that matter. Repeat this cleanse every once in a while and try to stick with the results of it for smarter use of your money.

Cleansing Your Credit Cards: Cut Down and Consolidate Your Plastic

Roughly 38% of American households carry some form of credit card debt, and in those households, the average credit card debt is over $16,000, according to survey data from ValuePenguin. That’s an astounding number. Furthermore, the average credit card holder has 3.7 credit cards to his or her name.

Those statistics paint a risk-filled picture of the average American’s use of personal credit. Holding four credit cards presents an elevated risk for identity theft, as your account information is (typically) held by four different card issuers. That means four different databases (at least) within which your information can be compromised and your card number can be stolen.

It also paints a picture of debt. The average credit card interest rate hovers around 15%, so $16,000 in credit card debt generates $2,400 in interest payments annually. That’s money that simply vanishes.

$2,400 a year disappearing into the ether, along with a heightened risk of identity theft? That’s something to clean up.

First, get started by learning how to live without credit cards. Rely on using your debit card only instead of using credit for your purchases. If you can’t afford something using just your checking account, then you have to start making choices about what’s important. Cleanse your spending habits, in other words.

Second, start consolidating your credit card debt by transferring your balances with the highest interest rates to other cards. See which of your cards offer low balance transfer offers and take advantage of them. Do everything you can to reduce the interest rates on your cards. Then, take advantage of those lower interest rates to actually start paying off your balances.

Finally, close out some of your credit cards. Hold onto the oldest card, as it’s important for establishing the length of your credit history, but close out all of the others aside from the one you use the most. Stick with the one with the best bonus program for your needs and strive to reach a point where you’re paying off your card in full every month.

Cut down your credit card debt. Cut down your number of credit cards, too. Together, they’ll provide a real boon for your financial future by reducing the amount of money you lose to interest while also reducing the chances of identity theft and the potential damage that could be done by an account intrusion.

Cleansing Your Food-Buying Habits: Adopt Once-a-Week Grocery Shopping

In our busy lives, it’s very easy to fall into a routine of eating takeout for every meal or haphazardly shopping for a few groceries at Whole Foods on your way home. Rather than putting a focus on food shopping, you instead use it to fill in the blanks in your busy life, buying restaurant items and groceries as needed rather than with any sort of coherent plan.

Here’s the thing, though: having a coherent plan will not only save you a bundle, it will also save you time over the long run, believe it or not.

Try this approach instead.

First, identify a discount grocer near you. Look for an Aldi, a Fareway, a Save-A-Lot, or a Price Rite – those are discount grocers popular in different regions of the country.

During the next day or two, figure out a few recipes that you can easily prepare at home. Choose really easy recipes, ones that are hard to mess up, like pasta and sauce, soups, or simple fajitas (basically any meats and vegetables you like wrapped in a tortilla). When you’re considering such meals, take a look at the flyer from the discount grocer you selected and see what items they have on sale for those simple recipes, and then base those meal choices around those on-sale food items. For example, you might try to make a sweet potato chili if sweet potatoes are on sale, or you might choose a particular pasta sauce if it’s on sale.

Once you’ve figured out four or five easy meals that line up well with the flyer, make a grocery list. Simply make a list of everything you need to buy to pull off all of those meals. You can store it however you like – I like to either use a pocket notebook or to simply store it in Evernote or Paprika (I use Paprika if I’m doing more complex recipes; Evernote if I’m doing really simple stuff; and my pocket notebook if my phone is out of juice or close to it). Plan to make large batches of these meals, enough so that you have leftovers.

On your way home from work one night, stop at that discount grocer and buy all of the stuff on your list. Head home, unpack all of it, and then make the easiest meal you listed. Pasta with sauce and a small salad can be done in twelve minutes, for example, and it’s about as easy as can be. Prepare enough so that you’ll have a meal or two left over, and when you’re done, put the extra meal in a storage container of some kind. Take it to work for lunch the next day.

Basically just repeat this plan four or five nights out of the week. Make a simple meal, make enough for leftovers, take the leftovers to work for lunch sometime in the next day or two.

What you’re going to find is that your food costs shrink rapidly if you follow this plan, and you’ll also find that it’s a lot easier to just go home and make a really easy supper if you know what you’re going to make and have the stuff on hand for it. You can also adopt a strategy of using a slow cooker for things like soups, as you can put most non-pasta soup ingredients in the slow cooker before you leave for work, turn it on low, and come home to soup that’s ready to eat (or to have pasta tossed in to cook for another half an hour or so).

The thing is, you’re still going to be eating good, tasty stuff. You can be pretty picky about your ingredients and still save a lot of money if you make a meal plan, use a grocery list, and use a discount grocer as your primary source for groceries. It just requires a different food routine than you’re used to.

Cleansing Your Possessions: Do a “Closet Cleanse”

Almost all of us have a closet or two that’s stacked completely full of stuff. Extra clothes, items from abandoned hobbies, papers, things that you saved from college and should really toss but are still there for sentimental reasons… it’s amazing what can wind up in a closet.

One of the best ways to clean up your life and help your finances is to purge those closets and get rid of some items. Not only will it make your living space feel a lot less congested, you can often get a nice financial return on the items you’re selling.

Again, this cleanse is a simple one, though it’ll take some time to implement all of it.

Just choose a weekend afternoon where you can put aside a few hours of free time, then pull everything out of that closet. Once you have it out, go through each individual item and decide whether or not you really need to keep this item. Will you use it again realistically in the next year or so? If it represents a memory, is it really a memory that requires saving a physical object? Are you really ever going to return to this hobby? Are you really ever going to wear this item again?

Be honest with yourself. Don’t keep stuff because you have good intentions. Only keep stuff if you’re truly and honestly going to use it going forward.

Ideally, what happens is that you put a few items back in the closet, but most of it doesn’t get returned. At that point, it’s time to sell off some stuff.

Many individual items are perhaps sold easiest on Craigslist to local buyers. Other items, such as DVD or CD or perhaps even book collections, are best sold on the Amazon Marketplace using Fulfillment by Amazon. You may find it best to donate some items as well to places like your local clothing pantry or Goodwill store. Some better clothing items might sell at a consignment shop. There’s always the option of a yard sale for all of the remaining items, too.

The goal here is to obtain some value for the items that you’re no longer keeping. I tend to view items that just sit in storage as having almost no value whatsoever, so any value that you recoup from them is not only a financial benefit to you directly, but also frees up space in your home and also makes it easier to move in the future. It’s truly a “cleansing.”

Cleansing Your Debt: Make a Debt Repayment Plan and Stick To It

Many Americans find themselves with all kinds of debt, not just credit card debt. Many people face, car loans, student loans, mortgages, personal loans, and debts of other kinds on top of their credit card debts, and those debts can add up to a real problem that restricts your financial and lifestyle choices.

If you have hundreds or even thousands of dollars a month in debt payments, your choices become restricted. You have to have a good paying job or else you’re going to quickly find yourself not only with disastrous credit and with creditors hounding you, but also in potential legal trouble as well. Some types of debts, such as many student loans, never go away, even if you file bankruptcy.

It restricts your day to day financial choices. It restricts where you can live. It restricts your career choices. It simply clogs up your life.

It’s time to clean it out.

You can start by making a simple debt repayment plan. Just make a list of all of your debts and order them by the annual interest rate, with the debt featuring the highest rate at the top of the list (it’s probably a credit card).

Take steps to consolidate some of those loans, if possible. Look into student loan consolidation that locks in your loans at a low interest rate. Look into zero interest credit card balance transfers. This might result in a reorganization of the list, and that’s perfectly fine.

Each month, make a minimum payment on all of the debts on your list, then do everything in your power to not only avoid adding to any of the debts, but make the biggest possible extra payment you can to the debt on top of the list. Make that balance drop through the floor. Hopefully, sooner rather than later, you’ll pay off that top loan! Cross it off and start hammering the loan that’s now on top of the list.

Use the other “cleansing” strategies on this list for help. Take the money you’re saving from your food buying cleanse and apply it to this debt repayment plan. Take the money you made from selling off your closet contents and use it to hammer the top debt, too.

What you’ll find, sooner rather than later, is that this cleanse rewards you in terms of lower stress and in terms of a much greater range of life and career possibilities.

Final Thoughts

I may not believe in “toxins” or food cleanses, but there is a great deal of value in stepping back, reassessing areas of your life, and making moves to improve what you take in, what you keep, and what decisions you make. Improving those areas is all about “cleansing” your life, leaving you in a better state than when you started.

Good luck!

The post A Financial Cleanse? appeared first on The Simple Dollar.

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Four Habits of People With Great Credit

Are you trying to earn and maintain excellent credit — as in a score greater than 800? Do you want to live with the peace of mind that comes from knowing your credit can no longer hold you back from the things you want to provide for yourself and your family?

If so, then studying and copying the behaviors of people with great credit is a fantastic place to start. Here are four habits common among the top credit achievers.

1. They Never Miss a Payment

According to the creators of the FICO credit scoring system, 95% to 96% of the highest credit score achievers have zero delinquencies (a.k.a. late payments) on their credit reports.

People with great credit scores have clean credit reports, it’s that simple. Both the FICO and VantageScore scoring systems will hammer you if you mismanage your credit obligations to the point where your credit reports become polluted with derogatory information.

While this may seem rather obvious, it’s important to understand exactly what having a clean report entails. Clean credit reports are free from negative or derogatory information of any kind. Many consumers incorrectly believe that an occasional late payment here or there is no big deal. However, those with great credit almost always develop the habit of viewing late payments as completely off limits.

Other derogatory items that people with the best credit scores tend to avoid include collection accounts, charge-offs, settlements, bankruptcies, judgments, and tax liens.

If you already have derogatory information on your credit reports, the good news is it has an expiration date. Most derogatory items must be removed from your credit reports after seven to 10 years, per the Fair Credit Reporting Act. Additionally, as negative information becomes older, it will have a diminished impact upon your credit scores.

2. They Carry Low Credit Card Balances

The highest credit score achievers have an average balance-to-credit-limit percentage of 7% on their credit cards, according to FICO. That means for every $10,000 of credit limits, they’re only using $700 in the form of a balance.

There are two ways to maintain a really low usage percentage, or what’s more formally called revolving credit utilization: You can truly keep your balances low, or you can maintain really high credit limits.

Or, if you’re smart, you’ll do a combination of both. And, if you want to win across the board, you’ll maintain low balances, high credit limits, and no more than one or two cards with a balance at any given time.

3. They Only Apply for Credit Sparingly

According to FICO, the highest credit score achievers have not had any hard credit inquiries, indicating credit applications, in the last nine months. They also have not opened any new accounts within the last 15 months.

People with great credit do not allow their credit reports to be pulled often, but instead apply for credit sparingly and only when they actually need it.

Having said that, you never should be afraid to check your own credit reports, since doing so cannot damage your credit scores. This is true for both the FICO and VantageScore scoring platforms.

4. They’ve Used Credit for a Long Time

The average age of the accounts on the credit reports of the highest credit score achievers is 128 months, according to FICO — or more than 10 and a half years.

It is no secret that higher credit scores are awarded to consumers who have longer credit histories. People with great credit typically have older, more seasoned credit reports – a long history of using credit responsibly. This also means that they have a habit of not opening new lines of credit too frequently, as each new line of credit lowers the overall average age of their accounts.

This is a harder habit to emulate, of course, as you cannot control time. But it does show the benefit of beginning your relationship with credit early on if possible. And as your credit reports get older, your credit scores, both FICO and VantageScore, will improve because of nothing more than time passing.

Related Articles: 

John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.

The post Four Habits of People With Great Credit appeared first on The Simple Dollar.

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