Saturday, November 25, 2017

Creating a Better Option When You Don’t Like the Choices

My oldest son is reaching an interesting age where he’s asking me a ton of questions about adult life, mostly when it’s just the two of us.

The other day, he came home from school with a ton of questions about my career. In our area, it’s fairly atypical for parents to work from home – in fact, one of his teachers apparently thought I was a full time “stay at home parent” because I worked from home with a healthy amount of time flexibility – so he had a lot of interesting questions about it.

How did I find this job? What exactly do I do all day? The questions went on and on.

He was particularly interested in my own career decision several years ago, when I decided to become an independent content creator and walked away from a “normal” job in an office. It was a radically different option than the other choices on my career path at the time – even he observed that. How was that radically different option even available to me? Why did I choose it?

I gave him an honest answer: I wanted to have an option like that, so I put in a ton of work to add that better option to my list of choices. I was simply not happy with the list of options available to me at that time, so I did everything I could to add another option to my list of choices.

That experience taught me an incredibly valuable lesson about life: sometimes, the options available to you are all pretty bad and you do have to take the “least bad” option, but the story doesn’t have to end there. Quite often, you can add more options to your list of choices and then make that decision again, choosing something even better.

Let me show you what I mean by spelling out some of my career options.

At the time in my career when Sarah and I first learned that we were about to become parents, I really had three main options in terms of employment with a healthy income. I could stay at my current job which offered a one year contract that was being renewed each year. I could apply for one of a handful of jobs in my relatively narrow niche of expertise that were available from local corporations at the time. I could also apply for a long term government position that matched my skill set.

Each option had some pros and cons.

I really loved the working environment of my annual renewed contract. My boss there was one of my career and life mentors and he was one of the kindest, most generous, and most insightful people I’ve ever been around. The schedule was fairly flexible, but not overly so. However, it was an annual renewing contract that never offered any sort of assurance beyond the next several months, as the whole thing relied on grants from funding agencies. It was a great day-to-day job, but with no stability and relatively little time flexibility.

The corporate jobs offered the most pay among the options, but the work schedules were completely set in stone and didn’t afford me much family time. The work was interesting, but I knew from the other people working in those labs that there was a lot of expected overtime hours and that I would also be doing a fair amount of travel, too. In short, these would be solid day-to-day jobs with stability, but with a lot of travel and a lot of overtime and no time flexibility.

The third option was a government job. It paid the least of the three options, but it did have some schedule flexibility especially compared to the corporate options. It was also the most stable of the three, as it was a permanent job. It only required a small amount of travel. What did it have against it, then? Bureaucracy and tons of it. While I’d be doing interesting work, a lot of it would be shrouded in mountains of forms and meetings and paperwork.

To be honest, I wasn’t really happy with those three options at all. I wanted a job with a super flexible schedule and at least some degree of stability so that I wouldn’t be scared that I’d be slapped with a pink slip all the time. I wanted a job with little bureaucracy and a lot of creative freedom. I wanted a job where extra effort would be eventually rewarded with financial returns.

All of those opportunities failed on at least a few of those counts.

Eventually, I decided to take on the third option, but it wasn’t a particularly joyful choice. The truth is that I wanted more options than those three.

So, what did I do? I created more options.

I spent the next several years looking for possibilities that matched what I wanted from a job – great scheduling possibilities, rewards for hard work, low bureaucracy, interesting creative work – and then putting myself in a position so that when such an opportunity presented itself I could immediately jump on board. Just a few years later, I was ready when things did click into place – I had built everything I needed to take advantage of it, and so I made that leap.

The entire experience taught me one thing: if life hands you a set of choices that you don’t like, build another choice. Choose the option before you that gives you the best chance to change your life and your situation enough so that you can revisit the decision and choose something much better later on.

Does it sound like wishful thinking? It’s not. It’s a technique I’ve used over and over again over the last several years, with my career path being just one example.

Here’s exactly how you can do this as well.

Clearly Identify the Option You Want

So, you’re trying to figure out which option you want to choose among several. None of them are exactly what you want, but they all have some elements of what you want.

Maybe it’s a career juncture. Maybe it’s a cell phone plan. Maybe it’s something as simple as planning out a family vacation for next summer.

Whatever it is, you have several good options, but no great options.

What do you do?

The first step is to figure out exactly what would make a great option. What is it that you’re looking for that could exist in the real world?

Let’s jump back to my career options, for example. Expecting a job with the best pay, the most flexibility, the least travel requirements, the least bureaucracy, and the most interesting intellectual challenge is simply not realistic. Instead, what I wanted was a job that was great in the one or two key areas I cared about the most and simply solid in the other areas.

In other words, I wanted a job that was very flexible in terms of time requirements, that was at least good in terms of creative challenge and rewarding consistent effort, and that was solid in terms of low bureaucracy, low travel, and solid pay. I sat down and considered what features really meant the most to me and which ones did not. I simply outlined an option that was exactly what I wanted but wasn’t completely unrealistic compared to the other options.

One great way to do that is to pull out your favorite piece from three or so of the other options. Look at the three other options you find most palatable and identify what you like best about each one. Generally, an option that has all three of those things is within the realm of possibility.

For example, my ideal cell phone plan would be one that offers several lines with robust data and strong signals in the central Iowa area at a very low price. When I develop that plan, I’m taking elements of the best options available from traditional carriers like Verizon and U.S. Cellular and pay-as-you-go carriers.

Think of this as being similar to a pros-and-cons list, except you’re just extracting the key “pros” from each option.

The key is to keep things within the realm of reality. You aren’t going to find things for free. You aren’t going to find jobs that pay you millions of dollars (though you may find door openings that eventually lead there). What you’re looking for are options that combine some of the best elements of the options already available to you to create a true best option for you.

Come Up with a Plan to Put That Option on the Table

So, you’ve identified a great option that you want in your life, whether it’s a great job or a great cell phone plan or something else entirely. Now, what exactly needs to be done to put that option on the table and make it available to you?

That “best option” isn’t going to create itself. You have to work to make that option available to you.

How do you do that? There are a lot of tools available at your disposal to add that desired option to your list of choices. The key is to put together a set of strategies and tactics that make the desired option available to you.

Here are eleven such tools that you might use to make the option you want available in your life, no matter what the choice.

Ask. If you know exactly what you want, ask for it. If you’re shopping around for a cell phone plan, spell out exactly what you’re looking for and ask for it. The worst thing that can happen is that they’ll say no, at which point you’re no worse off than you are right now. (Hint: the “fantasy” that someone might say yes someday isn’t worth much of anything.)

Improve your skill set. What skills are needed for that job you’d love to have that matches exactly what you want? Work on getting those skills, either in your current job or outside of it (through external projects or furthering your education).

Shop around with purpose. If you have exactly the package in mind that you want, start shopping around for exactly that package. See whether anyone makes that package available for the right price. If you find something close, that’s the time to ask.

Don’t apologize for asking. If you apologize when asking, you make it easier for the person to simply tell you no because you’re essentially telling them you’re asking for something you think you don’t really deserve. If you ask, don’t apologize. You deserve the good outcome.

Improve your professional network. Having a strong professional network in your field means that you likely have connections to lots of organizations in your field, making it much easier to get your foot in the door for the kind of position you want. Get involved in social media in a professional way. Attend meetings, particularly local face-to-face meetings, and participate. Build strong one-on-one connections with people by sharing contact information, following up, and giving of yourself, particularly in ways that are easy for you and valuable for the other person.

Figure out how to make the gain mutually beneficial. If you’re trying to get the best option for yourself, make sure to consider what the other people involved with that option would get out of it. How can you tweak that option so that it’s beneficial for the other parties involved?

Improve your public professional profile. Another great method for getting your foot in the door with the professional outcome you desire is to raise your public profile in your professional community. Get yourself out there. Share your knowledge and ideas. Participate in professional groups. Go to conferences and conventions – and, if you can, present there.

Improve your health. If your body is limiting you from taking on the option you most desire, work on that. Commit yourself to a better diet and/or a better exercise routine in the coming months and improve your health to the point where that desired option is feasible.

Negotiate. If you have a opportunity on the table that’s close to what you want but not quite there, negotiate. You’ll often find that there’s quite a bit of room for negotiation when you’re close to an agreement on something that benefits you both. Again, it never hurts to ask.

Start a side gig. If you can’t find the options you want, start building your own option. Block off time to start consulting work or building your own side business doing the things you’re passionate about. Don’t worry about making money from this, especially at first; if you make good things, money will come.

Be frugal. If your ideal option has a significant startup cost, the best way to put that option on the table is to build up some money in savings, and the only way to make that happen in the short term is to cut your spending so that you’re spending less than you earn and putting aside the difference for the future.

Execute That Plan

You’ve come up with an outcome that you want and a plan to get there. The final step is simply executing that plan. You have to actually go through the steps in your plan to make it so.

Here are some thoughts on how to make that work, especially when time and money are tight.

View the things you have now as leverage. Almost everything in life can help you move from where you are to where you want to be.

Your job, right now, is leverage toward the job that you want. How can you use the advantages and opportunities of the job you have right now to get the job you want? Use your job to give you the professional advantages you need.

Your paycheck, right now, is leverage toward the things that you want. How can you use the excess from your paycheck to get what you want from life? Use your paycheck to give yourself the money you need.

Your spare time is leverage toward the things that you want. How can you use the extra time in your life to get what you want from life? Use your spare time to give yourself the time you need.

Look at everything in this kind of light. How can you take this thing you have and use it to lift you toward the option you want? When you start finding ways to eke out spare time or extra money, you start heading down the path to having the option you want.

Recognize that a lesser option in the short term isn’t a bad thing, as long as there is light at the end of the tunnel. Not having the job you want right now is okay as long as it’s helping you move toward the job you want. Not having the cell phone contract you want right now is okay as long as you’re putting things in place to get what you want down the road.

In other words, if you have to make a temporary choice, choose the one that does the best job of pushing you to where you really want to be in several months or a year. Not only does this help you pave the path to where you want to be, it also gives you a clear light at the end of the tunnel.

Discipline equals freedom. If you want to have better options in your life, you’ve got to recognize that they won’t just be given to you. It takes continuous effort to alter your life so that the better options you want are present, and it takes discipline to put forth that continuous effort.

You want a great job? It takes the discipline needed to get a degree in your spare time or to spend an hour or two a day learning new things or working on extra projects.

You want a healthier and more attractive body? It takes the discipline needed to eat fewer calories and to exercise your body.

You want better social options? It takes the discipline needed to consistently put yourself in situations to build new positive relationships and friendships.

Those things aren’t automatic. They aren’t given to you. They require your continuous effort. The discipline you give to those things adds up to a greater freedom in your life in terms of wider options.

Final Thoughts

No matter what the choice is in life, if you don’t like the options available to you, create a new option. The tools to do so are at your disposal for almost every major decision in life.

The question really is whether or not you’ll put forth the effort to take advantage of those tools and build the option you want in life.

From the simplest things like cell phone contract options to much bigger things like job choices and relationships, the options on the table don’t have to be the end of your choices. You have the power to add more options. It’s up to you.

Good luck.

The post Creating a Better Option When You Don’t Like the Choices appeared first on The Simple Dollar.

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Friday, November 24, 2017

Balancing Frugality and Caring Dog Ownership

A couple of years ago, our family made the collective decision to get a family dog. I wasn’t particularly sold on the idea, but my wife and all of our children clamored to have a dog at home, so I agreed.

During the process of finding a dog and the subsequent process of owning and caring for one, I learned quite a few things about both responsible dog ownership and frugal dog ownership and how to make the two overlap. The thing is, much like a child, you can sink a ton of money into a pet, but the truth is that most of that money isn’t all that necessary.

Here are nine key lessons I learned about balancing caring dog ownership and frugality.

Do some serious homework first. This is the first step and, in my opinion, it’s the most important step. Know what your needs are and why you’re getting a dog. Identify breeds that match your needs.

We decided early on that we wanted a low-allergen dog that didn’t shed and was friendly around older children (we weren’t concerned about issues with younger children). We also preferred a smaller dog for space-related reasons and to keep food costs relatively low.

This led us to identifying a number of breeds and mixes that would be ideal for our family and we used that as the basis before we even started looking for a dog. We knew what we wanted and we did homework to identify breeds that matched what we wanted.

Get a rescue dog. One big factor in our search was that we preferred to get a rescue dog from a situation that wouldn’t cause violent behavior. For example, many rescue dogs aren’t necessarily directly abused (which can cause violent behavior) but are simply neglected, which can sometimes simply mean that they may have minor attachment issues. Rescue dogs are also typically pretty inexpensive, which means that a rescue dog is not only a caring choice but a frugal one.

After a few months of contacting animal rescue services in our area and explaining what we were looking for, we were matched with a wonderful little Yorkie Maltese mix that checked all of our boxes. He’s small (so he doesn’t eat much), he was rescued from a situation where he was almost permanently kenneled but not abused, and he’s friendly and energetic with older children and adults who know how to interact well with him.

Choose a non-destructive dog and preferably one that’s already potty trained. One important option to consider is to choose a dog that’s relatively calm and doesn’t have destructive tendencies. A dog that routinely destroys shoes and furniture will be an expensive pet to keep around, so look into this before adding a dog to your family.

According to this survey, chihuahuas, dachshunds, boxers, dalmatians, and bulldogs are the most destructive breeds, whereas Staffordshire bull terriers, West Highland terriers, Yorkshire terriers, spaniels, and whippets are among the least destructive. We chose a Yorkie mix and it turns out that this is very true – he has damaged very little of our property over the past two years.

When you’re considering getting a dog, ask about the dog’s tendencies towards things like chewing up shoes and damaging furniture, as well as the status of their potty training. Having a dog that leaves shoes alone and is already trained will save you a ton of money and headaches.

Learn how to groom the dog yourself. Many people choose to simply take their dog to a pet groomer to have basic grooming services done, but most such tasks can be done at home in an environment that’s not only as low-stress as possible for your dog, but is also an environment that saves a lot of money for you. Note, of course, that dogs typically don’t enjoy grooming, but it keeps them healthy and smelling good.

You’ll want to look up the specifics of dog grooming for your breed, but some common dog grooming tasks include trimming claws, brushing teeth (particularly the fangs), cleaning ears, trimming hair, and bathing. None of these tasks are too difficult and they don’t require many tools, either. They just require some time with your dog.

Visit the vet annually and keep up with vaccinations and preventative medications. Think of this as being like getting an oil change for your car. If you skip the regular oil change for your car, things will be fine for a while, but your car will break down eventually and it will cost you far more money and angst than if you had just kept up with the maintenance schedule.

Get into the routine of scheduling an annual vet visit (ours is in October, close to our dog’s birthday). Get on board with the annual vaccinations for your dog and also follow your vet’s recommendation when it comes to preventative medicines. The cost of doing this is far less than the cost of caring for your pet should that pet be stricken with many common pet illnesses like kennel cough or heart worm.

Talk to your vet about dog food, but shop around. I’m not going to make specific recommendations about feeding your dog because the best choice varies greatly from breed to breed and even from individual dog to individual dog (depending on tooth health, food tolerances, and so on).

What I will say is that you should follow your vet’s suggestions regarding feeding and then take those suggestions and shop around carefully for dog food that matches what your vet suggests as closely as possible.

Remember: there are a lot of salespeople in the dog food industry who will use emotional tugs to try to get you to buy incredibly expensive foods. The more you learn and know from actual trusted sources (and not salespeople and anonymous folks on the internet), the better off you are.

Exchange pet sitting and pet walking. Pet sitting and pet walking can be a pretty significant cost for a pet owner, so if you can find neighbors or friends who are also pet owners who will share and divide those tasks with you, take advantage of it.

Talk to pet-owning friends about sharing pet care when you’re each on short (or even long) trips. This will keep the pet in the house of a trusted friend and save a great deal of money along the way.

The same is true for tasks like pet walking. If your friend works somewhat different hours than you, perhaps your friend can walk your dog once a day and you can walk your friend’s dog once a day, saving you both from hiring a pet walker or some other such service.

Make sure your dog gets lots of exercise. One of the best ways to ensure sustained health in your dog is to make sure he or she is getting plenty of exercise. Don’t leave your dog in a kennel constantly. Take your dog on plenty of walks and find places where he or she can run and get adequate exercise as often as possible.

This can be difficult in some situations, I know, but there are few things better for the long term health and happiness of your dog than opportunities to run free and get some real exercise. A dog kept inside all day might be a loyal companion, but for that dog’s best physical and mental health, some outdoor exercise is essential – and free.

Time is the most valuable ingredient. The most valuable thing you can give to your dog isn’t some amazing gourmet food or a spacious kennel or expensive dog grooming. It’s time. Time spent with your dog just cuddling or playing or petting or simply sitting together is incredibly beneficial for both of you, emotionally, physically, mentally, and otherwise. Do it often!

Not only that, such play will help you identify any issues with the health of your dog when such issues are minor and still treatable at a very low cost. If you play with your dog and spend a lot of time around him or her, you’ll naturally notice these little changes.

Even though I was very apprehensive about getting a dog, I’ve found Dexter to be a great little companion. He spends a lot of days when I’m working at home curled up at my feet. He’s always excited to go on a walk with me. He’s also great at alerting me when the kids are almost home, as he spies them getting off the bus and begins to emit this wonderful little yelp of joy because the true highlight of his day is romping with them when they first get home. I’m glad he joined our family, and thanks to these strategies, the financial impact has been much lower than expected.

The post Balancing Frugality and Caring Dog Ownership appeared first on The Simple Dollar.

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Thursday, November 23, 2017

The Value of Thanks … and the Value of Action

As all of my American readers know and many international readers know as well, today is the day that many American families celebrate the Thanksgiving holiday. For those abroad, Thanksgiving is a national holiday in the United States centered around giving thanks for the blessings of the year and of the harvest and is typically celebrated with family and friends gathering for a large meal with what is considered traditional harvest foods, including a variety of vegetables and usually with a cooked turkey as a centerpiece (though the specifics can vary quite a bit).

For my family, Thanksgiving centers around family. A rather large number of my extended family members gather at one of our homes for a large dinner and plenty of conversation, along with watching parades and football n television. The dinner is usually pretty traditional Thanksgiving fare – turkey, harvest vegetables, and wine are usually on the menu – but it’s usually a day-long affair with a lot of family together under one roof. We usually replicate a similar event with my wife’s extended family a day or two later.

I love the holiday. I use it as an excuse to have a nice one-on-one conversation with almost everyone in my extended family, to play several games of cards with my father and my brothers (this is somewhat of a traditional thing – it happens every year, as the four of us gather around a table and play a few games of cards together), and to eat a big slice of pumpkin pie (which is my highlight food-wise).

Of course, a big part of Thanksgiving is “thanks.” The holiday’s core meaning is about giving thanks for the blessings of the year, and it’s a perfect day to reflect on those blessings.

For example…

Nine Things I’m Thankful For This Year

I’m thankful for the love and support of my wonderful wife, Sarah. Her steadiness, warmth, and humor have guided me through so much in life.

I’m thankful for the continued growth of my three children. They are all blossoming into wonderful young people and it is my pleasure to have a front row seat to the whole thing (and to play a role in it, too).

I’m thankful for my health. My ability to wake up in the morning and do the things I want to do without any significant pain is a pretty nice blessing.

I’m thankful for the hobbies that I enjoy and the people I’ve met through those hobbies.

I’m thankful for financial stability and not having to worry about keeping the bills paid.

I’m thankful for having a career that gives me the chance to think deeply about a variety of issues and express myself creatively while still having great time flexibility.

I’m thankful for the people in my wider social network who bring so much joy into my life in so many different ways.

I’m thankful for beautiful weather and beautiful scenery, whether in the warmth of summer or the cold of winter.

I’m thankful for being part of a supportive community, where I have helped others and been given help more times than I can count.

(I could easily name more, but let’s stop here for now.)

Being Thankful on Thanksgiving Is Just the Start

Thanksgiving is a wonderful time to stop and reflect on the things that you’re thankful for. Making a list like the one above for your own life is a really great way to spend some time today.

The thing is, when you do make a list of the things you’re thankful for like that, what you’re essentially doing is “gratitude journaling.” It’s really no different than that.

Gratitude journaling is a daily practice where a person essentially lists a few things that they’re grateful for in their own life. It’s a wonderful daily practice that I picked up on a couple of years ago and have found to be a wonderful addition to my own life.

Why do this every day, you might ask? It’s simple. Having a lot of gratitude leads to contentment with your life. Contentment means that the fires of your endless desire for more things in life is substantially cooled.

Let me make this clear: being content with your life doesn’t mean that you no longer want things. It simply means that you no longer want more in the areas of your life in which you already have abundance, and in the modern world, most of us have lives that are mostly filled with abundance.

Contentment doesn’t mean that you skip the gym if you want to improve your physical shape. It means that your desire to buy yet another addition to an already overstuffed collection burns out.

Contentment means that you recognize that you have a pretty good life as it is, so the fire for spending all of your money on the short term goes away and it becomes much more worthwhile to save for the long term.

In short, for financial goals and for feeling good about yourself and your life in the general sense, contentment is invaluable. It takes away the desire to spend money in order to feel “good enough” because you’re already good enough. For me, being content enables me to channel my desire for a better life into narrower and more sensible areas, and it also channels my desire to protect this wonderful life that I have.

So, today, simply make a list of things you’re thankful for. Just a few. But don’t stop with today. Do it tomorrow as well, and the day after that, and the day after that.

The reason? Such a practice cultivates a sense of contentment and abundance in life, which makes it far easier to use one’s energy to grow in a purposeful and meaningful way. It makes it far easier to be frugal, as a lot of pettier wants and desires vanish, and it makes it far easier to channel desires into a small number of more meaningful areas which can bring about actual change instead of dissatisfaction with life.

Dare I say it? It’s the power of Thanksgiving.

Thankfulness Through Action

It doesn’t end there, though.

Several months ago, for personal curiosity’s sake, I pulled out my gratitude journal – a notebook where I list a few things each day I’m grateful for – and started to count them.

What I was really looking for were some big patterns. What things did I really find that I was grateful for most often?

I was grateful for my immediate family – my wife and my kids – the most, followed by the outdoors. I found that my physical health and my hobbies formed a pretty clear second tier, along with my extended family and friends. My financial state and my career were pretty high, too.

What I began to realize as I went through the entries and did a rough mental count is that the things that showed up quite often were really the most important things in my life. They were the things that meant the most to me, and they were the things that I would miss the most if they went away.

This led to the next question: what can I be doing to preserve and enhance those things that I care about the most?

In other words, the things I am most thankful and grateful for in my life led me to rethinking a lot of my long term and short term goals. If those are the things that really make my life worth living, what am I doing to preserve them and to enhance them?

I am consistently grateful for my marriage. What am I doing to strengthen my marriage and keep it a focus in my life?

I am consistently grateful for my children. What am I doing to be a better parent?

I am consistently grateful for the beauty of nature. What am I doing to spend more time outdoors and keep it beautiful?

I am consistently grateful for my health. What am I doing to stay healthy, both for myself and my family?

I am consistently grateful for my hobbies. What am I doing to ensure that I have blocks of time for the activities that are meaningful to me?

I am consistently grateful for my career and work. What am I doing to produce better and more meaningful work, both for myself and for readers?

I am consistently grateful for our financial stability. What am I doing to ensure and grow that stability so that it lasts for a very long time?

I am consistently grateful for my extended family and friends. What am I doing to preserve and build those relationships?

Those questions lead me directly to personal goals, both short term and long term goals.

What am I doing to strengthen my marriage and keep it a focus in my life? I make sure to set aside time to have at least one meaningful conversation with Sarah each day and some degree of physical contact. I try to touch on what makes her feel loved each day. This is both a daily goal and a long term goal.

What am I doing to be a better parent? I stop work – period – when they’re about to arrive home from school. Rather than just handing out rules and discipline, I try to take the time to explain to them why particular rules exist and why they have consequences. I read with them every day. I aim to have a meaningful conversation with each child at least every other day.

What am I doing to spend more time outdoors and keep it beautiful? An outdoor walk is part of my daily routine. About once a week, I take a trash bag with me and pick up anything that shouldn’t be there on my route and drop the trash in the large trash container at the park as I go by it near the end of my walk. I go on at least one hike in a state park each week, weather permitting.

What am I doing to stay healthy, both for myself and my family? This is something that’s a real challenge for me. Right now, my focus is on mastering a relatively low calorie diet, which means that I’m trying to master an internal “guidance system” that knows when I’ve eaten enough calories in the day. It’s harder than it sounds. I’ve taken up taekwondo and am committed to a strong progression through the belt ranks.

What am I doing to ensure that I have blocks of time for the activities that are meaningful to me? The biggest thing I’m doing for this is revising my entire professional workflow. I think there are some inefficient parts to the way I’ve been doing things for a long time and I’m trying to iron those out, but it’s challenging. This enables me to have more free time, from which I block out part of each Sunday solely for hobbies.

What am I doing to produce better and more meaningful work, both for myself and for readers? That ties into the above answer. I’m trying to re-orchestrate my entire professional workflow to create more meaningful work in a little less time than before by taking in the lessons of the last several years.

What am I doing to ensure and grow our financial stability so that it lasts for a very long time? For me, the best strategy is to keep an eye on my unnecessary purchases. Using money to fulfill wants usually ends up with unfulfilling purchases that take me away from financial goals, so simply finding ways to be vigilant against it is valuable. Strategies like budgeting for non-essentials works really well here.

What am I doing to preserve and build relationships with extended family and friends? I actually keep track of the last time I had meaningful contact with a lot of extended family members and non-local friends, and I use that to make sure I’m keeping in touch with them regularly. If I haven’t touched base with someone in a couple of weeks, I make sure to do so and then reset that date.

Those questions – and a few similar ones – lead me straight into meaningful areas of thinking about my life, and giving those areas some thought leads me straight into meaningful goals in my life.

Transforming Thought into Action

The final step here, of course, is to actually take action on all of those things that you’re thankful for. You’ve taken the step to track your thankfulness and gratitudes each day. You’ve figured out which ones pop up time and time again. You’ve figured out meaningful action to ensure that those things you are grateful for are preserved and built upon.

The final step, then, is action. You know what you can do today to ensure that the things you are most thankful for are built upon and preserved. Are you going to do it?

I usually have a really healthy handful of goals going on all at the same time. Some of them are listed above. What I’ve found is that if I take those goals each day and literally transfer the next step for each of them to my to-do list for the day, I usually get those steps done. (I usually block out calendar time for those that need to be done in a contiguous block.)

Yes, I often have a really long to-do list each day, but here’s the thing: when I know that things to be done are connected to things that I’m truly thankful for in life, then that task really doesn’t seem so bad. Often, it seems joyful, especially upon completion. I find it easier to motivate myself to do something if I see the connection between that task and the thing I’m thankful for in my life.

For example, right now we’re struggling a bit with my youngest child as he figures out some of the finer points of personal boundaries. He likes to hug people and he’s still figuring out the right time and the wrong time to hug. Talking to him about these things isn’t easy – it’s not a fun task. It’s also one that needs to be touched upon regularly to keep it fresh in his mind.

However, when I reflect on the idea that my son is something I am truly thankful for in my life, it becomes easier. I can tie that task directly to that feeling of thanks and gratitude I have for what he brings into my life, so it becomes easier to sit down with him and have a talk about it.

Another example: I’m often tempted to buy things that I don’t really need, and I have a monthly “free spending” budget that I use to buy hobby related things and other incidental things. One thing I can do daily is to review my “free spending” account to make sure I’m not overspending without thinking about it, something I’ve been doing to ensure I keep my financial destiny where I want it to be.

Thanksgiving Is the Start

Today, as you take a moment to give thanks for all of the blessings in your life, let that not be the end of things, but the start.

Start by giving thanks tomorrow, too, and the day after, and the day after. Start a little gratitude journal in a notebook somewhere and write down a few things each day that you’re grateful for. That simple act will help drive a sense of abundance and contentment and even joy in your life.

From there, carry it forward into action. Look at that gratitude journal and see what patterns you notice. Look for the things that you’re truly thankful for over and over again, and ask yourself what you can do to preserve and protect and enhance those things over the long term.

Take that long term goal and turn it into daily action. What can you do today to make that long term goal happen? Add that task to your list of things to do today.

Those things that you add to your to-do list that are directly borne from your sense of gratitude and thanks for the abundance of your life are things that will be both deeply meaningful for you in the moment because you see that connection, but will also build into some of the most powerful things you’ll ever do.

Let the value of thanks lead your life. Let it lead you to better financial choices, better professional choices, better personal choices. You’ll be glad you did.

Good luck.

The post The Value of Thanks … and the Value of Action appeared first on The Simple Dollar.

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Wednesday, November 22, 2017

Saving Enough for Retirement When Money Is Tight

One of the biggest financial challenges for everyone during their professional years is saving for retirement. The idea of needing to save hundreds of thousands of dollars – or even millions of dollars – for a goal that seems incredibly far off in the future feels simultaneously distant and incredibly intimidating, highly important but not at all urgent, like a mountain on the horizon.

It’s not even a question – most Americans must save for retirement. Social Security provides only a hand-to-mouth existence and very few companies or organizations today offer a pension plan (if you have one, you’re lucky, and I truly hope that the pension is secure).

Like it or not, the last thirty years or so have seen the responsibility for retirement income swing almost entirely in the direction of individuals having to be fully responsible for saving money early in life in order to be able to have a great retirement late in life. The traditional “work thirty years for a company and retire with a great pension” has become “work a few years for a company that might have a retirement savings plan of some kind, then move to another company, then move to another company.”

If you want a life with options in retirement, you have to save for it. There’s no two ways about it.

At the same time, finances for many Americans are tight. As I’ve mentioned many times on The Simple Dollar, 78% of Americans live paycheck to paycheck and more than 10% of Americans making $100,000 or more a year can’t make ends meet. Money is tight for a lot of people.

In other words, the important long term goal of saving for retirement looms on the horizon for pretty much everyone, but the immediate realities of life push as hard as possible away from saving for retirement.

How does a person navigate this apparent conflict? With money so tight, what can a person do to squeeze out space for retirement savings? Here are some strategies that actually work.

Make Automatic Contributions

Here’s the neat part about automatic contributions to retirement: they never show up in your checking account (or, if they do, they show up for a day or so and then disappear). The money is just automatically moved for you. The only change that you really notice is that there’s just a bit less money in your checking account.

Well, isn’t that “bit less money” a problem? What actually happens for most people is that they simply make unconscious changes to spend a little less than before. When you check their account balance and find a little less money in it, you won’t choose to go without important things – rather, you’ll choose to go without minor spur of the moment things.

In other words, your retirement savings will be funded by things like not going into a convenience store when gassing up or not buying a spur of the moment extra book at a bookstore – the kinds of forgettable purchases that we all make when we have some extra money. Those purchases really add up.

How do you automate your contributions? If you have a workplace retirement savings plan, it’s pretty easy – just fill out a form to have contributions taken automatically from your check straight into your retirement account. If you’re managing your own account – say, a Roth IRA – just log onto the website for your account and set up an automatic transfer from your checking account that lines up well with your paydays.

In any case, the money will either never grace your checking account at all or only be in there for a moment. The magical part? You’ll barely notice it at all. It’s easy to think that you’ll definitely notice the change, but the truth is that the difference will be noticed in the form of buying fewer quickly-forgotten spur of the moment items.

Get Every Dime of Matching

One of the most efficient ways to save for retirement is to gobble up every single dime of employer matching if your employer offers it.

Many companies and most public employers offer some form of matching of your retirement contributions. They usually take the form of matching you dollar for dollar up to a certain amount of contributions. For example, some employers will match your contributions up to 5% of your salary, so if you put 5% of your salary away in your retirement plan, they’ll kick in 5%, too. That instantly doubles your money.

Gobble up every dollar of matching. It’s free money, or, at the very least, a part of your salary that will go unclaimed if you don’t take it. Do not leave it sitting on the table (unless you enjoy throwing money away, that is).

Let’s say you make $1,000 per paycheck. If your employer offers full matching of the first 5% of your contributions, start contributing 5%. Your pay goes down to $950, but you’re actually adding $100 per paycheck to your retirement savings. That’s well worth a 5% drop in your pay.

Start Young! (Meaning Start Now!)

The longer you wait to start saving for retirement, the more you’re going to have to save each and every pay period to make it to a decent retirement.

That might be obvious at first glance, but it’s actually even more intense than that. See, the earlier in your life that you contribute to retirement, the more years your contributions have to grow in value.

For example, let’s say you put money into retirement that’s going to grow at 7% a year until you’re 65.

If you put in $100 a month starting at age 25, your total contributions will be $48,000 over the course of those forty years ($100 times 12 times 40).

On the other hand, if you put in $200 a month starting at age 45, your total contributions will also be $48,000 when you reach age 65 ($200 times 12 times 20).

The difference comes in the investment returns.

If you start with $100 per month at age 25, your retirement account will be worth $247,946.81 (given the 7% annual return mentioned above).

On the other hand, if you start with $200 per month at age 45, your retirement account will only be worth $101,832.80 (again, given the 7% return mentioned above).

In both cases, the total contribution by the account holder is $48,000, but by starting earlier, the contributions end up working a lot harder for you, resulting in far more money saved up for retirement.

What does that mean? Start now. Start at the absolute first second you can. The longer the money sits there, the better off you’ll be.

Hands down, the single best decision I made during my twenties in terms of my finances is to contribute to my retirement plans, enough to get full matching from my employer. Because of that, my retirement accounts are already multiples of my current salary and I barely have to contribute any more throughout my adult life to have enough to retire at around age 65 or 70. Anything else I contribute just allows me to retire even earlier or add a bit of panache.

What if you’re older? Start. Now. Every month you wait, the harder the path becomes to a good retirement. You need every possible year between now and retirement for your savings to grow, so start today.

Remember – The Perfect Is the Enemy of the Good

It’s really easy to convince yourself that you can never possibly save “enough,” so why bother? It’s a calculus that many people make.

Here’s the thing: the perfect is always the enemy of the good. Having something saved for retirement is better than having nothing at all.

Even if you just contribute a little, even if you start late, even if you don’t have employer matching, anything you save is going to help. Having $5,000 is better than having nothing. Having $500 is better than having nothing.

People often talk about how much money they should have for retirement and those kinds of numbers seem overwhelming, but the truth is that those numbers present an optimum, perfect case. That’s what you’d need to save in order to have a life with a ton of financial flexibility while retiring early in your sixties.

Don’t worry about the “perfect” picture. Don’t give up because you feel like it’s impossible to achieve that kind of “perfection.” Worry instead about making your own picture a little better.

The perfect is always the enemy of the good. Shoot for good. Don’t worry about perfect.

Good luck.

The post Saving Enough for Retirement When Money Is Tight appeared first on The Simple Dollar.

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Tuesday, November 21, 2017

Frugality, Productivity, and the Local Maximum

Bear with me a little bit as I go down a (hopefully interesting) side path.

A few days ago, I read an interesting article by Cory Doctorow entitled How to Do Everything: Lifehacking Considered Harmful, on the issue of how most productivity strategies such as having an organized to-do list helps you find the most productive way of doing the urgent things in your life but doesn’t really help you step back and take a bigger look at things.

Doctorow uses his own life as a colorful example. Once he reached a point where his time was essentially filled, if he wanted to add something new, he could essentially only replace things. If something new came in, something else had to go away. So, in order for that to be a net positive, the new thing had to serve more purpose in his life than his old thing.

Eventually, he reached a point where everything he did with his time served double or triple duty. If something wasn’t providing fulfillment in multiple spheres of his life, it wasn’t an effective use of his time.

That sounds great at first glance, but here’s the problem: It commits you to remaining the exact person you are with little room for genuine growth or new challenges. The areas of your life that you happen to focus on now become so burdened with commitments that those areas become stronger while other areas simply atrophy and wither away.

There is simply no breathing room to step back and look at new things. There is simply no room to relax and reboot. Over a longer period of time, you eventually wind up with a huge set of commitments that you may not be fully happy with, and then you’ll find yourself miserable.

Essentially what Doctorow is describing is a local maximum, something hinted it in a great comment to the article by Arne Brix.

Here’s a simple way to think of a local maximum. Think of the greatest day in the last three years of your life. What was the absolute best day you had in that timeframe? That day is the “local maximum” of the last three years. It is not the best day of your whole life, most likely, but only the best day of the last three years.

The thing is, Doctorow is also describing a local maximum, just in a bit of a different way. He’s identifying the most effective way for him to get the most out of the areas of his life that he cares about right now (or at least over the last couple of years). That isn’t necessarily the areas of his life that he cares about the most over the course of his life.

Right now, for example, an area of my life that is of the utmost importance is my role of being a parent. It’s arguably at the very top of the heap these days. When I try to maximize the productivity of my life and choose what things I take on, my role as parent looms very large over those choices. I commit to things that enhance my role as a parent, like being a youth soccer coach or leading a youth group or planning a birthday party or choosing a career that provides the time flexibility I need to support my children’s growth as best as I can.

Those choices, however, just push me toward a local maximum. While the choices push me toward the things I care the most about as the parent of three school-aged children, they don’t necessarily push me toward the things that I’ll care about as much over the full scope of my life.

Frugality and the Local Maximum

So, let’s bring this idea of the “local maximum” back to personal finance.

As we’ve discussed before, frugality is the most useful personal finance tool in the moment. It really does help you find your “local maximum” in terms of spending, because it’s all about considering how to get the maximum value out of every dollar in hand.

Frugality is concerned primarily with your current paycheck and, to a smaller extent, your next several paychecks. The choice to buy store brands reduces your current expenses and gives your current paycheck more breathing room, for example. The choice to buy in bulk reduces your overall expenses over the next several paychecks. Shopping around for a better cell phone plan reduces your expenses for the next year or two.

All of those things are great frugality strategies, but they essentially only solve the “local maximum” problem. They help you to find the most efficient way to spend the money you have now, but on its own, frugality does not help you find your “lifetime maximum.”

The thing is, quite often, people just need to find that local maximum for a while when it comes to their finances. They’re in a tight spot and they need to know how to get through the next few months, and frugality is really the most efficient method for getting there. Knowing how to shop effectively, knowing how to control your own impulses, knowing how to find free and low cost local resources – all of those tools are really effective at getting people through the next few months. They’re all about maximizing your dollars right now, and that’s what many people care about.

Stepping Out to the Global Maximum

What we’ve established is that productivity strategies like a smart to-do list and frugality strategies like buying store brands both focus intensely on that local maximum. On their own, they don’t really help you find a global maximum.

(To be clear, a “global maximum” in this context is finding the best solution over the course of your whole life or at least a very large portion of it.)

So, how do you find a global maximum?

First of all, you take advantage of the benefits of finding your “local maximum.”

With regards to productivity, you use things like a to-do list and an effective calendar and smart scheduling and paying attention to your focus and energy levels in order to give yourself some amount of free time. The purpose isn’t to squeeze in some extra activity, but to give you an afternoon or a day each week where you have time to unwind and relax and step back and think about things in a broader context.

With regards to frugality, you use things like buying store brands and buying in bulk and making your own meals and shopping around for a better cell phone deal in order to have some money left over at the end of the month, which you then use to build an emergency fund and eliminate debts.

What do both of these things have in common? Rather than just using the benefits of frugality and of productivity to commit to even more things and buy even more stuff, you use those benefits to escape your local maximum and start to find your global maximum.

If you stick with productivity strategies, you start to give yourself a lot of free time to think about your life in a bigger way and to try out new things and explore new interests. You have a window to start tapping into new areas without sacrificing where you’re at now, and that enables you to start moving your life in a new direction as older commitments wind down.

If you stick with frugality strategies, you start to build up a healthy emergency fund and you start to pay off debts. That means that, over time, you have smaller and smaller debt payments and life emergencies don’t push you to the financial edge any more. Eventually, you have a nice emergency fund and your high interest debts are gone and you can start looking at building big things for your future, like saving for a house or switching careers or launching a small business or investing for retirement.

Of course, you can also use productivity and frugality to find an even better local maximum.

You can use productivity to find enough breathing room to take on another commitment right now or add another routine that amplifies something you care about right now. Productivity might find you the margin you need to, say, agree to serve on a committee or to commit to a family dinner at the dinner table five nights a week.

You can use frugality to find enough breathing room to keep surviving week to week financially. Switching to buying store brands and other little tricks can help you simply get to your next paycheck when the going is tough. Frugality can also help you add another bill to the stack. If you can find a way to save $10 a month, you can subscribe to Netflix!

In other words, frugality and productivity are tools; they can either help you find a local maximum or a global maximum. They can either help you pile more on your plate or help you find a different plate entirely.

The question is, how will you use those tools?

Piling On or Getting Out?

We can talk on and on and on about the specifics of frugality and the specifics of productivity, but the question comes down to how you are using those tools to alter your life.

Productivity can be used to pile more on your plate via adding more commitments, or it can be used to find a different global maximum by freeing up a window for long term thinking and trying new things.

Frugality can be used to pile more on your plate by simply helping you stumble to your next paycheck or afford another service, or it can be used to find a different global maximum by helping you start the process of building an emergency fund and eliminating debt and, eventually, investing.

You have those tools in your hand. What are you going to use them for?

It’s really easy for me to point toward the “getting out” solution. It’s easy for me to suggest that the best route is always to use those resources to move you toward the best possible life in the long term, the “global maximum.”

Use frugality to pay off debt. Use frugality to build an emergency fund. Start a debt snowball with that ground you’re gaining and pay off debt faster and faster. Soon, you have a whole new world of options before you and things like switching careers or having kids no longer seem financially impossible.

Use productivity to give yourself a weekend day to explore new projects and think about the big picture. Dabble in new things until you find something deeply meaningful, then start to dig into it. Gradually change your commitments to constantly allow yourself to incorporate new things, but keep that window of future thinking and exploration open.

Those are clearly the best long term solutions as they almost purely point toward the global maximum – the best possible life you might have in the long run.

However, the hard truth is that using those tools for the long term doesn’t really help you get through the moment. You’re essentially choosing to use a tool that would make life a little better right now and using it in a way that doesn’t make life immediately better, but instead helps out at some nebulous point way down the road.

Using frugality to pay down debts leaves you with a very tight financial life today without that extra perk of Netflix.

Using productivity to give yourself a Sunday full of free time for reflection and trying new things leaves you with an incredibly crazy Monday through Saturday.

In other words, when you chase a global maximum, you actually have to move away from a local maximum, and that’s hard.

In order to really commit to the best long term life, you have to have a less than optimal short term life.

Making the Choice

At some point, you have to make a choice between those two options.

The “default” choice for most people is the local maximum. It’s why you hear stories of people with insanely full schedules. It’s why 78% of Americans live paycheck to paycheck.

The thing is, a lot of those people are using frugal strategies and productivity strategies in many parts of their life. They’re just using those strategies to load as much as possible on their plate right now.

Rather than using frugality to pay off debts, they’re using frugality in one part of their life to pay for an expensive car lease or for a subscription to HBO.

Rather than using productivity to give themselves breathing room, they’re using productivity to be able to commit to more things at work and in their family life.

We’re wired to think this way. We’re wired to prefer the short term by default. The lives of our ancestors were short and brutal – they had to choose the short term to survive. The local maximum was the route to survival.

That isn’t true any more.

It’s only through being aware that we’re going to unconsciously choose the short term, recognizing it in ourselves, and consciously choosing to do things that point us to a better life that we’re able to choose the global maximum.

Choosing the best day or week is easy and automatic. Using tools like productivity and frugality to get there is the easiest strategy, too.

Choosing the best life is hard. Using tools like productivity and frugality when they’re not making today or this week or this month great is very hard.

So, what’s the solution?

Three Strategies for ‘Global Maximum’ Thinking

The big focus in my life over the last year or two has been to give as much of my attention as possible to the global maximums in my life. What things do I really want to have in my life over the long term?

I want to have a long lasting marriage, not just survive the week. I want to have children who are moral and independent adults, not just pressing through the weekend with them. I want to have a healthy body and a healthy mind and great relationships and a healthy interior life, not just crawl out of bed each day crunching through more or less the same thing for the rest of my life.

By default, though, I’m always looking for the best day and the best week, not the best decade or the best life. What can I do to change that?

I’ve really found three big things that really push my life to a global maximum.

One, I automate as much of the routine of my life as I possibly can. I save money automatically. I pay my bills automatically. I invest automatically. Most of my to-do list each day is automatically generated (based on long-term goals – we’ll get to that in a minute). In short, I take a lot of the day-to-day decisions that I could mess up out of my hands.

Doesn’t that make for a boring life? Not really. I still have tons of decisions to make, but rather than choosing between a short term option and a long term option, I’m usually just choosing between two short term options. I’ve already made my short term versus long term choices as much as I possibly can.

Two, I’ve started using my Sundays solely for building the best possible long term life. I use the day for four key things: reflection, trying new things, planning out the week ahead, and pure leisure.

I spend at least an hour or so thinking about my life in the long term. I usually do this in the morning before anyone else is awake. I think about my long term goals and whether or not I really did anything to move forward on them this week, and what I could do better next week.

I spend some time planning the week ahead. I make a meal plan and a grocery list (grocery shopping usually happens later on Sunday or on Monday around here). I make up most of my to-do lists for the whole week. I plan out my writing for the week. Some of this is almost automatic, as a lot of my long term goals just generate things for my to-do list and calendar, like a commitment to walk every day and a commitment to exercise and so on.

I spend some time doing something new. Usually, this is done with a friend or a family member. It could be anything, but it has to be something I haven’t done before but have always thought about. It is a conscious effort to keep pushing the boundaries of my life.

Finally, I spend a lot of Sunday on pure leisure time, even if there are things left undone at home. I’ll forget that basket of dirty laundry and I’ll go play board games or curl up with a book. The point of pure rest is to simply give my mind a chance to unwind a little, and I find that if I give myself a big block of this, everything goes better during the week.

How do I find time for this? Well, the rest of my week is pretty clearly planned out. On Monday through Saturday, I mostly just follow my calendar and to-do list and I don’t really make a whole lot of major decisions on those days. I just get things done, and those things just happen to have a long term orientation.

Three, I consciously choose to enjoy the things I have rather than the things I don’t. If I have a desire to play a board game, I look at the board games I have. If I have a desire to read a book, I look first at my own bookshelf and then at the online catalog of my library. If I’m hungry for a meal or a snack, I see what’s already in the refrigerator or pantry.

If I have fifteen minutes of free time, I don’t wish that I had two hours. Instead, I try to enjoy those fifteen minutes. If I’m exhausted, I don’t wish that I had more energy. I go get some rest (because I recognize I’m going to be useless and very unproductive if I push on).

I find that, again and again, my worst mistakes are made when I don’t appreciate what I have in terms of every aspect of my life – money, relationships, time, energy, physical environment, and so on. I may not have a “local maximum” in every area of my life, but I have a pretty good one, and by taking advantage of the goodness that I have rather than constantly obsessing over what I don’t, I end up giving myself more than enough space to seek out an even better life.

Final Thoughts

When you make decisions about how to use your money or your time, ask yourself this simple question: is this helping me find a local maximum or a global maximum? Is this the short term choice or the long term one?

Just try out that habit today. I’m not telling you which one to choose, but just to think about as many choices as possible in that light and see what they reveal in your life.

What you’ll find is that if you start thinking that way a little, and you start making a few choices differently, and if you start putting aside just a little bit of your money and time and energy toward finding a global maximum instead of a local one, you end up very slowly marching toward a truly better life, one where you’re not just working for the weekend.

Good luck.

The post Frugality, Productivity, and the Local Maximum appeared first on The Simple Dollar.

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Which Debts Should I Pay Off First to Raise My Credit Score?

There’s no doubt that any progress toward eliminating your debts is a smart move, both for your credit reports and your wallet. However, it’s even smarter to pay off your debts in the right order. Knowing which debts to target first, and which debts to leave for later, could potentially save you a lot of money, get you out of debt faster, and boost your credit score, too.

Should you pay off your student loan first, or tackle your credit card balances? What about your mortgage, auto loan, or personal loans? While there’s no “wrong” way to pay off your debt, there are definitely some strategies that might help you to improve your credit scores sooner rather than later.

Start With Your Credit Cards

Generally speaking, it’s best to start with your credit card accounts when you’re ready to begin paying down your debt. Not only are these debts likely the most expensive you’ll ever carry, with interest rates in the high teens or higher, but carrying large balances on your cards will also have a negative impact on your credit scores.

Credit scoring models like FICO and VantageScore are designed to pay attention to the debt-to-limit ratios on your credit card accounts. This relationship between the credit card balances displayed on your credit reports and your account limits is formally known as your revolving utilization ratio.

When your revolving utilization ratio climbs because your balances start getting too close to your limits, you’ll generally end up with a lower credit score. In fact, 30% of your credit score points are based on that debt-to-credit-limit ratio.

As a result, when you begin to pay down your credit card balances, lowering your revolving utilization ratios, your credit scores will generally begin to climb. That fact, plus the high APRs, typically make credit card balances the perfect place to start when you’re ready to begin paying down debt: It’s a one-two financial punch that can simultaneously raise your credit score and save you big bucks on interest payments.

Start With the Smallest Balances

So you should probably begin your debt elimination journey with your credit card accounts. But which credit card should you pay off first?

You probably want to work your way up from the bottom. First, make a list of all of your outstanding credit card debts, from the smallest balance to the largest:

  • ABC Bank: $500 balance
  • QRS Bank: $4,000 balance
  • XYZ Bank: $5,500 balance

By paying off the smallest balance first (ABC Bank in the example above), you’ll accomplish two important things: First, you’ll reduce your number of total accounts with balances. Second, you’ll bring the revolving utilization ratio on an individual account down to 0%. Credit scoring models will generally reward you for both of these actions.

Once you’ve paid off the smallest balance, you can move on to the next largest balance and repeat the process. This actually dovetails with the “Debt Snowball” approach to debt elimination, helping you build and maintain momentum with small victories in the critical early stages of debt reduction.

Just remember to continue making at least the minimum payment on all of your accounts to avoid late fees and potential credit score damage.

What About Installment Loans?

Most of the non-credit card accounts appearing on your credit reports will probably be installment accounts. These debts feature a fixed payment scheduled over a specific period of time. Mortgages, auto loans, and most personal and student loans fall into this category.

Because installment loans are not as indicative of future risk as credit card accounts, credit scoring models don’t pay as much attention to the balances on these types of accounts. The initial impact of installment debt on your credit scores is not going to be significant. As a result, paying off such debts probably is not going to have a positive impact on your credit scores either.

Of course, it can still be a sound financial move to pay off installment debts (especially if you’ve already tackled your credit card balances). But you should have realistic expectations about how big an impact paying off installment debt may have on your credit scores — which won’t be much, if any.

Related Reading:

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 Which Debts Should I Pay Off First to Raise My Credit Score? appeared first on The Simple Dollar.

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Monday, November 20, 2017

6 Cyber Monday Shopping Tricks

How you can save more and worry less during the e-commerce blitz.

In case you haven’t checked a calendar recently, Black Friday (Nov. 24) and Cyber Monday (Nov. 27) are coming — soon! Last year, consumers spent $3.45 billion online during Cyber Monday, making it the biggest day of U.S. e-commerce ever! And between Black Friday and Cyber Monday, we’re poised to spend even more this year with Americans dropping an average of $743 each.

So, how can you capitalize on the Cyber Monday sales to check off your Holiday 2017 list? We’ve rounded up some of the best tips and tricks to help you save money!

Trick No. 1: Skip store credit cards

Store credit cards have a lot of flashy upfront perks and incentives to lure you in (save 20% on your purchase today!). However, they have notoriously high APRs — an average of 24.99%, one study found!

If you don’t pay off the entire card by the next statement, you’ll be stuck paying more in interest than you intended. In most cases, you’ll be better off with one of the best cash back credit cards, which you can use at many stores to save money year-round.

Trick No. 2: Develop a credit card holiday shopping strategy

When shopping online you’ll need to use a credit card, but not all cards are created equal. Depending on what you’re shopping for, you’ll need to develop a strategy.

  • Mostly shopping at large retailers, such as Walmart, Amazon.com, Target, or Best Buy? Then one of the best cash back credit cards could earn you 5% cash back.
  • Planning to spend the estimated $743 average? Consider the , one of the best signup bonus credit cards, which delivers a $150 bonus when you spend $500 in purchases in your first 3 months as a cardholder.
  • Worried about having enough time to pay everything off? Some of the best low-interest credit cards can give you up to a year to pay things off, or get up to 18 months of introductory 0% APR with one of the best balance transfer credit cards.

Trick No. 3: Make a list, check it twice

It’s easy to get carried away with the “add to cart” button online, but making a list of the items you intend to buy, stores they can be found at, estimated prices, discount codes and more will help you stay on budget and not be lured by promos and sales throughout the day. Also include any promo codes that are released in advance so you’re not scrambling while trying to check out. Using the notes or reminder function on your smartphone is a way to store everything. There’s also a number of shopping apps or browser extensions that can help you save money.

Items tend to go fast during Cyber Monday, so having a Plan B is helpful. List all of the stores the item can be found at and also if the store will price match a lower offer somewhere else. Additionally, you’ll want to know the exact specs and details about the products you’re looking at to ensure you’re getting a quality item. Just because a big screen TV is discounted to $300 doesn’t mean it’s worth it if it has poor resolution that will hurt your eyes while watching.

Trick No. 4: Sign up for newsletters and create accounts

Many companies will release information about their Cyber Monday sale in advance to loyal customers so get on the newsletter now. If they allow you to combine promo codes you may be able to save even more as a first-time newsletter subscriber. It’s not uncommon for businesses to offer a welcome discount (such as 10% off your first online order) for signing up. Set up your store accounts in advance as well so you’re not trying to create a login and password and enter your address while checking out.

Trick No. 5: Check the shipping and return policy

Ideally, you’ll shop at companies that offer free shipping and returns so you can easily receive your items and return anything that doesn’t work out without any extra costs. In many cases, though, you’ll need to spend a minimum amount to qualify for free shipping. If your total falls short of that minimum, do the math first — if shipping will cost you $15, then it’s not worth it to buy a $25 item that you don’t actually want or need.

Trick No. 6: Protect your ID and credit card information

Why is protecting your identity included in this list of savings tips? Because if you fall victim to identity fraud, you could be on the hook for hundreds of dollars (or more) in financial damage. If the Equifax data breach taught us anything this year, it’s that you can never be too safe when it comes to protecting your personal information.

Especially when it comes to online shopping, you’ll want to ensure you’re taking steps to minimize risk. Some things you can do:

  • Make sure the URL has https:// with an “s” on the end for secure.
  • Go to retailer websites directly instead of clicking ads, which could have malware.
  • Double check retailer URL spellings. It’s not uncommon for hackers to set up fake websites that are similar to the real thing, but with a misspelled URL.
  • Use a credit card instead of a debit card since they have stronger fraud protections should you have to dispute a charge.
  • Check your statements thoroughly to ensure there are no fraudulent charges.

If you like a good deal, but don’t want to fight the crowds during Black Friday, then Cyber Monday may be the best day to tackle your holiday 2017 list. When you shop strategically, Cyber Monday can be a great way to get all your shopping done at once from the comfort of your couch while saving money.

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Are Your Investment Accounts Safe From Hacking?

In the wake of the recent Equifax scandal, you might understandably be jittery about the safety of your money and your personal financial information.

A lot has been written about what you can do to prevent hackers from opening new accounts and new lines of credit in your name. But a lot less has been written about protecting the money you’ve already saved and invested.

Specifically, how safe is the money inside your retirement accounts? How is that money protected from hackers? And what can you do to make sure these accounts are secure?

These are big, important questions given that you’ll have to rely on this money to support you in retirement. And in this article we’ll answer those questions so that you know exactly what to do to keep your retirement accounts safe.

How Safe Are Your Retirement Accounts?

Here’s the good news: Your retirement accounts are generally pretty difficult for hackers to access, especially when you haven’t yet reached retirement age.

A 401(k) or other employer retirement account is particularly unlikely to get hacked. Here’s why:

  1. Many 401(k) plans do not allow in-service withdrawals, meaning it’s next-to-impossible for anyone, including you, to get money out while you’re still working there.
  2. Even if in-service withdrawals or loans are allowed, there’s a lot of paperwork that needs to be filled out and verified before any money can be taken out.
  3. Even if you’re no longer working for the company, there are a number of waivers you would have to sign in order to withdraw the money before eligible retirement age.
  4. Even if you’re no longer working for the company AND you are of eligible retirement age, many custodians require you to sign forms verifying your age and acknowledging the tax implications of your withdrawal.

All of which is to say that there are many hurdles that have to be cleared before any money can be withdrawn from your 401(k), and it’s unlikely that a hacker would even be willing to try, let alone succeed.

IRAs are slightly less protected simply because there’s no restriction on in-service withdrawals like there is with a 401(k). But most of the other same hurdles apply, such as waivers for withdrawals before retirement age and verification of age and tax implications once you do reach retirement age.

And regular investment accounts are slightly more vulnerable since there are no age restrictions around accessing the money. But even then, Jeff Snodgrass, a financial planner and the founder of Mindful Wealth in Du Quoin, Ill., urges people not to worry.

“If you’re at a reputable custodian,” Snodgrass says, “they’re bending over backwards to protect you. The custodian is usually the strongest link in the equation.”

The bottom line is that the money in your retirement accounts is difficult to access, particularly before eligible retirement age. It’s not impossible, and below we’ll talk about some steps you should take to make it even harder on potential hackers. But by and large your retirement money is fairly safe.

Financial Advisors Can Pose a Risk

Ironically, the two financial planners I spoke with both noted that advisors can actually pose the biggest risk to your retirement money.

Snodgrass recounted three separate occasions in which his client’s email had been hacked, and the hackers had emailed him requesting a withdrawal. Luckily he called his clients to verify the withdrawals before proceeding — but if he hadn’t, the clients would have been liable for their losses.

“You need an advisor who understands that they are the weakest link,” Snodgrass says. “If your email is hacked and the hacker asks your advisor to make a withdrawal, the custodian is not liable because it counts as an authorized transaction.”

Snodgrass recommends protecting yourself by documenting with your advisor, in writing, that you will never request certain types of transactions by email. You can also request that your advisor verify any withdrawal requests over the phone before completing the transaction.

Neal Frankle, CFP®, the editor of WealthPilgrim.com, argues that you’re much more likely to be scammed by a broker than you are to have money stolen out of your retirement accounts.

“The much greater threat is falling for some story by some charlatan who sells you on some pyramid scheme,” Frankle says. “Brokers will convince you to invest in their project, get you to convert your funds, and then the money is gone.”

Frankle says that you can protect yourself from such scams by only ever investing in traded securities – like public mutual funds, ETFs, stocks, and bonds – and by never writing a check directly to your broker. Checks should only ever be made out to your custodian, where the money will be deposited.

Can You Get Reimbursed If You Are Hacked?

What if the unlikely happens – if your retirement accounts are hacked, and your money is stolen? Are you able to recover the money you lost?

The short answer is “yes, probably,” but the long answer is a little more complicated.

Most retirement and investment accounts are covered by SIPC insurance, which will reimburse you up to $500,000 if your brokerage firm fails. And while this protection is valuable, it explicitly DOES NOT protect you against theft or fraud.

However, most brokerage firms do have policies stating that they will reimburse you for any amounts lost to “unauthorized activity” as long as you take some basic precautionary steps. These steps vary from firm to firm, but generally include the following:

  • Creating strong passwords and security questions
  • Keeping your login and account information private
  • Keeping contact information up to date
  • Monitoring your accounts, statements, and transaction confirmations on a regular basis
  • Notifying the brokerage firm promptly of any suspicious activity
  • Cooperating with the brokerage firm during any investigation of suspicious activity

For example, you can see Vanguard’s policy here, Schwab’s policy here, and TD Ameritrade’s policy here. You should also be able to look up your current custodian’s “fraud policy” by Googling it.

Long story short, while it’s unlikely that your investment accounts will ever be hacked to begin with, if they are hacked you’ll likely be reimbursed as long as you notify the brokerage firm quickly and cooperate as they look into the issue.

Steps You Can Take to Protect Yourself

While there are already a number of hurdles any hacker would have to clear before being able to access your retirement accounts, there are a few steps you can take to make it even harder for them.

You can start with the above list of steps generally requested by brokerage firms. That is, creating a strong password, not sharing sensitive personal information, regularly monitoring your accounts, and notifying your brokerage firm immediately if you notice anything that looks suspicious.

Snodgrass notes that your password alone is one of the best ways you can protect yourself, and he encourages people to use password managing software as well.

“The best password is a long password,” Snodgrass says. “And password software is absolutely essential. There’s no good way to maintain unique, long passwords for all the places that you’re asked to do it on your own.”

As far as keeping tabs on your account activity, Frankle notes that retirement account statements can be baffling even for the smartest of us and he encourages people to ask for help.

“It’s not your fault if you don’t understand your statement,” Frankle says. “Don’t be intimidated about getting someone at the brokerage firm to explain it to you. You need to make sure you understand your statements and you have every right to ask for help.

For an extra layer of protection, Frankle also recommends asking your broker to call you to confirm every single withdrawal request as an extra layer of protection. He says that not every custodian will be able to accommodate this, but many will and it never hurts to ask.

Beyond that, both Snodgrass and Frankle repeated multiple times that people should generally not worry about the safety of their retirement accounts.

“I haven’t ever seen it happen where a clients’ retirement account is hacked,” Frankle says. “It’s just not likely.”

The Bottom Line: Your Retirement Accounts Are Safe

When it comes down to it, your retirement accounts aren’t 100% hack-proof, but they’re about as safe as it gets.

Really, the biggest threat to your money is your own behavior. As long as you use strong passwords, keep your account information private, monitor your accounts on a regular basis, and avoid shady financial advisors, your retirement money is relatively safe and sound.

Matt Becker, CFP® is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families. His free book, The New Family Financial Road Map, guides parents through the all most important financial decisions that come with starting a family.

Related Reading: 

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Sunday, November 19, 2017

Last-Minute Rewards Cards to Snag for Holiday Spending

With the holiday shopping season ready to wreak havoc on your budget, it’s only natural to look for new or different ways to save. Chances are, you’re gearing up for Black Friday and Cyber Monday while simultaneously watching out for special promotions and last-minute deals. By the time all is said and done, we can only hope that most of us will check off our holiday wish lists without going too far over budget.

Still, there’s a limit to how much you can save with doorbusters and Black Friday deals. If you’re looking for some less obvious ways to save that you can stack on top of sales and promotions, it can pay to consider which rewards cards offer the most bang for your buck.

This year especially, a handful of cards are offering stellar deals that can pair nicely with where you plan to do your holiday shopping. Here are a few cards you should definitely sign up for now – before shopping season hits high gear.

Discover it® Cashback Match™

While the is a solid cash-back card you can use in any season, this year’s holiday bonus categories can help you rack up more rewards than usual. But first, let’s talk about how this card works.

Once you sign up, you’ll earn a flat 5% back on the first $1,500 you spend in categories that rotate every quarter, plus 1% back on all other purchases. The kicker is, Discover has promised to double the rewards you earn during your first 12 months.

What’s especially fruitful this year is the fact that the October through December 2017 bonus category just happens to be Amazon.com and Target stores. If you plan to do a lot of your shopping online or at Target, then you can see what a huge deal this is.

Obviously, it helps that the Discover it® Cashback Match™ doesn’t charge an annual fee. You also get a free FICO score on your monthly statement and U.S.-based customer service.

On the redemption side, cashing in points with this card is a piece of cake. Not only can you redeem points for statement credits that will erase holiday purchases, but you can redeem for gift cards and some merchandise, too.

Here are some more details to consider before you sign up:

Discover it® Cashback Match™

Chase Freedom®

Depending on your shopping habits, the is another card that might help you rack up more rewards this holiday season. This card works similarly to the Discover it® in that it offers 5% back on your first $1,500 in categories that rotate every quarter, plus 1% back on all other purchases.

In the last quarter of 2017, the Chase Freedom® is doling out 5% back on purchases made at Walmart, Walmart.com, and department stores. Obviously, this might be huge if you plan to do your holiday shopping at department stores or Walmart.

It’s worth noting which department stores are actually included in this promotion, however. It includes popular stores like JC Penney, Kohl’s, Macy’s, Nordstrom, and Sears, among others. (The full list can be found here.)

In addition to offering a different set of bonus categories from the Discover it®, the Chase Freedom® offers an array of cardmember benefits as well. Once you sign up, you’ll get perks like purchase protection, extended warranties, auto rental collision damage waiver, roadside assistance, trip cancellation/interruption insurance, lost luggage reimbursement, and travel accident insurance.

As an added bonus, the Chase Freedom® offers a signup bonus after you meet a minimum spending requirement. And once you earn your rewards, you can use them in several different ways. Use them to book travel through the Chase portal, redeem them for cash-back or gift cards, or use them to shop on Amazon.com, for instance.

Also keep in mind that, if you have a premier Chase travel card like the , you can transfer your points to that account, and redeem them as more valuable Ultimate Rewards Points.

Chase Freedom®

Blue Cash Preferred® Card from American Express

Last but not least, don’t forget about the – especially if you expect to host a big holiday dinner. This card doles out an amazing 6% back on your first $6,000 spent at U.S. supermarkets each year (and 1% thereafter), 3% back at U.S. gas stations and select U.S. department stores, and 1% back on all other purchases.

If you expect to prepare a feast — or to pick up gift cards for the holidays at your local grocery store — this card could help you earn a huge rate of return. That doesn’t even include the fact that many grocery stores also have gas rewards programs you can pair with this offer.

This card does charge a $95 annual fee, but it offers a large signup bonus that offsets the fee in the first year. Not only that, but if you do spend $6,000 at U.S. supermarkets throughout your first year — what amounts to a pretty average $500 a month on groceries — you would earn $360 in rewards for those purchases alone.

On the redemption side, you can redeem your points for statement credits, gift cards, or merchandise.

Blue Cash Preferred® Card from American Express

The Bottom Line

Before you hit the stores hot and heavy this holiday season, make sure you’re using a rewards card that can work in your favor. By signing up for one on this list, you can easily earn at least 5% back on some of your holiday gifts.

At the same time, it’s crucial to make sure you can afford to pay your holiday gifts off as soon as you charge them. With most rewards cards carrying an average APR of around 15%, pursuing rewards while simultaneously carrying a balance is a losing proposition. Remember, the best holiday shopping season is one where you emerge debt-free.

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

Related Articles:

Which rewards cards are you using for holiday shopping this year? Why? Please share in the comments below!

The post Last-Minute Rewards Cards to Snag for Holiday Spending appeared first on The Simple Dollar.

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