Saturday, May 13, 2017

Using Meditation or Prayer to Help Achieve Financial, Professional, and Personal Goals

It’s not a secret to long time readers of The Simple Dollar that meditation is one of my daily practices. I spend at least 10 minutes each morning meditating, usually by simply focusing on my breathing. I often meditate for another 10 minutes later in the day, as well.

The benefits of this practice, in terms of achieving my financial, professional, and personal goals, have been profound, enough so that I want to discuss my own practice at length and try to show you how it helps me. I have written a few shorter articles in the past on this topic, but I’ve come to realize how absolutely vital this practice has been for me and I felt it was time to really devote a deep article to the idea.

I was unsure how to organize this article, so I started by listing a bunch of questions I would have had several years ago after reading those first few questions, and then I realized by answering all of them, I actually had a pretty good organization of what I wanted to say. So, let’s get started.

What’s the difference between meditation and prayer? Let’s start with this one, because I know it’ll come up in the minds of many readers. I basically view prayer as a subset of meditation. Meditation is a very broad term that includes a ton of specific practices; as Wikipedia nicely describes it, “Meditation is a practice where an individual trains the mind or induces a mode of consciousness, either to realize some benefit or for the mind to simply acknowledge its content without becoming identified with that content, or as an end in itself.”

I view prayer as simply meditation with a connection to some kind of higher power. In other words, prayer is meditation, but meditation is not necessarily prayer, at least in my eyes (though I may be using a very wide definition of meditation). (Similarly, I view being “in the flow” – a state in which you’re so engrossed with whatever you’re doing that you lose track of time and of your physical state – as being a form of meditation.) In general, I use the more general term “meditation” to describe my morning practices, simply because I think that the same general form works whether it involves reflection on a higher power or not. I don’t wish for this article to get bogged down in theology, because the practice itself is helpful regardless of your theological bent. I have learned principles of meditation from devout religious practitioners of many different faiths and from agnostics and atheists, too.

What benefits have I gained from meditation? Obviously, I wouldn’t spend 20 minutes at a minimum per day on something if I didn’t feel like it had a ton of benefits for my life. Here are the things that meditation brings to the table for me.

I feel calmer in almost every situation than I once did. I don’t get stressed out nearly as much by small things and I never feel like I’m losing control or shut down when things are really stressful. I find myself much more accepting of things I cannot control and I’m able to quickly move on to figuring out what I can do about the things I can control.

I rarely have bursts of anger. This is tied to the sense of being calmer, but it’s worth noting that I rarely get angry any more. In the past, I would often get angry with myself (almost never with others) and fall down a rabbit hole of self-blame for things that weren’t going the way I wanted in my life. Now? I understand that sometimes things don’t go quite as I planned.

I deal with crises much more easily. Perhaps this is because I am no longer subject to such strong emotional swings as I am without meditation, but I find that when a crisis occurs and I’ve been stringing together daily meditations for a long while, I simply handle it better. I don’t get upset. I don’t get angry. I simply start thinking about good solutions to this sudden problem.

When I keep up with focused meditation, I find it much easier to focus and get “into the zone” with projects I’m working on. This is something that seems to build on itself. I make it a goal to do some focused meditation for 10 minutes every morning – just locking onto my breathing and trying to focus on nothing else. When I do that every morning for a while, I begin to find it way easier to focus on my work. I find that it’s harder to distract my mind from the big task at hand and that means I get more work done. I can almost directly measure a connection between how much writing I have in the “bank” (so that I can travel and do other stuff without writing) and how much I’ve been meditating as of late.

I feel more content with my life as it is right now. When I meditate regularly, I simply feel more content with the state of things in my life. This doesn’t mean that I lack the will to improve things, just that I don’t feel unhappy with how things currently are. I rarely feel like I don’t have “enough” of anything in my life when I’m meditating regularly, whereas when I don’t meditate I tend to feel like there are a lot of things that I don’t have and I feel worse about things.

I find it easier to resist temptation. This is something of an offshoot of general contentment about my life, I think, but I simply don’t feel as tempted to spend money on stuff or on experiences when I’m meditating regularly. Sure, I feel happier with the way my life is at the moment, but there’s also the underlying factor of feeling as though I don’t really need unimportant things and that I’m better off using the money for long-term goals.

I sleep better at night. I honestly don’t know if this is due to being somewhat more productive and simply making me more tired, or whether it’s directly due to the meditation practice itself, but when I’m keeping up with meditation I tend to sleep much better at night. I find that I just hit this huge wall of exhaustion at a certain point and my whole body and mind is telling me to just go to bed. When I’m not meditating, I tend to drift more toward bedtime, with my energy level gradually declining as the hours wear on, and when I’m in bed, my sleep is a bit more restless.

I know that meditation provides these benefits because I see those benefits start to diminish whenever I get too busy and let meditation drop from my routine. It becomes harder to focus on the task at hand and it becomes harder to get “in the zone.” I’m guided much more easily by temptation. I don’t sleep quite as well. I find that my emotions begin to feel more and more urgent and pressing and I listen to them and follow them more and more. I don’t feel as calm or as in control of things.

I feel less anxious. I often have this sense of anxiety hanging over almost everything that I do in life. When I meditate with consistency, that sense of anxiety gently declines. I don’t bounce my feet constantly or feel as nervous about everything.

Those effects, combined together, almost always cause worse outcomes in many different dimensions of my personal, financial, and professional life.

I should point out that these aren’t completely personality changing. Instead, I would describe these changes as being a solid, notable improvement in those areas, but I’m not just magically transformed into this much better person. I personally like the way that Dan Harris explains the effect of meditation with just the title of his book, 10% Happier. That sums it up. It’s like a 10% or 20% difference, but it’s a difference in a lot of different areas of my life and collectively those differences add up to a lot.

What meditation practice do I use? My actual meditation practices are extremely simple. Anyone could do this.

All you need is a chair and about 10 minutes of relative quiet. I find it helpful to have my phone nearby, as it has a timer app on it.

I set the timer for 10 minutes and settle in. Sometimes, I’ll put on headphones and listen to ambient sounds, like this or this, especially if the environment has a lot of distracting noise.

All I do is focus on my breathing. I focus on the sensation of breathing in… and then breathing out… and then breathing in… and then breathing out. That’s it.

Naturally, I find my mind wandering sometimes during this practice. That’s completely okay and normal. Whenever I notice it, I just calmly refocus on my breathing. Breathing in… then breathing out… then breathing in… then breathing out… you get the idea.

At first, it was hard to even do this for 10 seconds, but over time, with repeated practice, I can go through most of the 10-minute period with only a few mental wanderings. It’s something that definitely comes with practice.

Some people use variations on this technique. They’ll take a word or a phrase and just repeat it in their head, in much the same way I focus on my breathing. If their focus goes away from the word or phrase, they bring it back. I find that this is basically prayer – your phrase could be the Lord’s Prayer, for example, or a similar short prayer.

I usually do this pretty early in the morning, often before anyone else in our house wakes up. I find that if I do it early, it’s much easier to focus; I get more scatterbrained in the afternoon and evening, it seems, and it’s much harder than it is earlier in the day.

I find that this isn’t really something that you can do while multi-tasking unless you have a task that is so repetitive that it only requires one or two infinitely repeated motions. In other words, you might be able to do this while jogging or while doing an extremely repetitive task that requires literally no active thought, but I simply find it most effective when I’m resting in a chair somewhere.

Here’s the thing – if you’re expecting a single meditation session to bring about some profound changes in your life, you’ll be disappointed. It won’t happen. The benefits are subtle, and they really only start to appear with frequent repetitions of meditation. You won’t get up from a single round of meditation and find yourself able to deeply focus on your work and have an amazing newfound level of calmness. It’s more subtle, and it slowly builds over time.

Over the years, I’ve come to view it as a kind of exercise for my mental well-being, just like running and lifting weights are exercises for physical well-being. Just like running and lifting weights don’t really show a ton of outward benefit from just one session, neither does meditation. Just like how the benefits of running and lifting weights are present but subtle if you exercise daily but only for a few minutes, the benefits of meditation are present but subtle if you meditate daily for a few minutes.

How does this relate to financial, professional, and personal goals? The effects of meditation are enormous when it comes to achieving goals of all kinds. Let me explain what I mean.

Let’s say you give into twenty poor spending choices a month that cost you an average of $20 each and meditation offers, say, a 20% improvement in that department. You drop four poor spending decisions and save $80 a month. This is completely realistic in terms of what the benefits of meditation can bring to you. For me personally, I can see the impact in terms of my bank statements when I’m meditating regularly and when I’m not.

Let’s say that you’re able to get into the “flow state” twice a week while working normally and those are far and away your most productive periods of the week. Thanks to meditation, you now can reliably do this three times. That’s a significant jump in your work productivity, one that’s going to have a measurable impact on your career. For me personally, when I’m not meditating regularly, I can basically fulfill my basic writing responsibilities in a given week and fall into a “flow state” perhaps twice. When I am meditating regularly, I almost always find myself “banking” writing for the future because I’m simply more productive with my time and I fall into a “flow state” three or four times in a week.

Let’s say that you’re able to feel a little bit less anxious. This leads to you simply feeling a little bit better all of the time. You don’t feel as constantly stressed out or overwhelmed by the tasks at hand. You have fewer “meltdowns.” You’re just able to deal with things more.

Let’s say that you’re able to be a little bit more focused on the task at hand at any given moment. Maybe this adds up to just a sliver of less anxiety and maybe fifteen minutes of additional focus at home on a given day. That time can shore up interpersonal relationships. That time can get things done around the house.

The benefits of meditation are subtle, but they pop up everywhere. They just keep popping up in virtually every aspect of life, from your work life to your personal life, from your financial life to your spiritual life. None of them are radical changes. They’re all small and subtle. But, together, they add up to something far more than the sum of its parts, and they all come back to that simple 10-minute meditation.

All I can really recommend to you is to give it a shot. Allow yourself to spend 10-minutes a day for the next few weeks trying this out. Make it part of your morning routine. Do it when you’re parked in the parking lot at work, or do it when you first wake up in the morning, or do it when you’re standing in the shower as water pours over you. Try to give it at least five minutes – I recommend ten.

Don’t expect enormous life changes. Instead, look for the subtle improvements. You might just find more than you think.

Good luck!

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Friday, May 12, 2017

To My Nephew on His High School Graduation

Dear Nephew,

After 13 years spent in school, you’ve finally earned a high school diploma, which is basically a ticket for your first steps into the real world. The choices you’ve made up to this point have mostly been under the shelter of your parents and your school district, which have brought you to the threshold of adulthood. From here, you’re essentially on your own.

I’m going to be the last person to tell you what to do next.

The world isn’t going to give you much of anything. Yes, you probably won’t starve to death, and you’re lucky enough to have a family that will probably ensure you always have a roof over your shoulders. However, the world isn’t going to hand you the stuff you want. You’re not going to be given respect or dignity. You’ve got to go out there and work for those things, and almost anything else you might want.

Look around you at the people who have something in their lives that they’ve built over many years. A good family. A good career. A strong standing in the community. Those things weren’t given to them. They weren’t effortless. Those things were built over a lot of years of consistent effort. People didn’t just get up one morning and find that the world was handing them a career or handing them a leadership role in the community or handing them a great family. Nope, those things were built on the back of making many good choices for many years.

Right now, you’re sitting at the point in your life where you start making those choices for yourself. Are you going to choose things that build a life that you’re happy to be living? You make those choices every single day.

You’re going to fail sometimes. What matters is whether you lay on the ground blaming others or whether you pick yourself up, fix what went wrong with you, and keep trucking forward. The reality is that the world doesn’t really care what you rail about when you fall on the ground. You can blame everyone and everything for those moments of failure and the world does not care. What the world actually cares about is whether you can handle a bad event and keep moving forward, ideally with some sort of self-improvement based on what you learned from that failure.

It’s going to seem massively unfair sometimes. You’re going to feel utterly disrespected sometimes. You’re going to feel utterly unappreciated sometimes. Sometimes, you’re just going to screw everything up and make some awful choices. The question is, when the bad results of those choices come around, who are you going to blame, and what are you going to do about it? Blaming others is a waste of time. Blaming yourself is much better, but only in the sense of recognizing things you can actually fix about yourself and fixing it. The best thing you can do? Skip the blame entirely. Look at yourself, ask what you can do to keep yourself from falling over that same rock in the future, and make that happen, then keep rolling forward.

Every time you get paid, put some of it aside for a future where you can’t work or your job doesn’t pay enough to help you tackle a major life problem. If you’re lucky, that future never comes and it becomes a future where you don’t have to work. This needs to come off the top. Live on what remains. How much should it be? Take off as much as you possibly can. A fifth of your take-home pay is a good place to start.

What should you do with it? Put it in a savings account until you have about a month’s worth of living expenses in there, then open up a Roth IRA and start putting it in there. You can put $5,500 per year into that Roth. If you manage to put that much into the Roth in a year, put the rest aside for other investments and buy a rental house in a few years with the goal of renting out that house to people. Use the money you make from that rental to keep saving for more rentals. You might figure out a better plan for the money in the future, but that’s a good game plan to start with.

Why? Well, you’re going to get knocked down sometimes by life, as I stated above. If you’re going to pick yourself back up and keep going, you’re going to need some resources – probably money. When times are good, make sure you have money for when times are bad.

Treat every job as your ticket to a better job. If you go to work just to get paid and go home and not do anything else, you’re losing a ton of the financial value from whatever your job happens to be. You have to be at work anyway – get as much value out of that job as you can.

This does not mean that you need to go in there and work yourself to death on things that don’t produce any value for you. You should absolutely do your job responsibilities well, but along the way, you should be using your spare time and energy and whatever resources are available to you to prepare yourself for your next job.

For example, if you have downtime at work, don’t just stand or sit around. Take a peek at the job requirements for whatever job you want to have next – the one that pays you more or is more enjoyable or whatever – and start making sure you have those requirements in the bag. Build strong positive relationships with people who are on that career path.

Any time you spend just twiddling your thumbs at work just guarantees that you’ll be stuck at the same point in your career path for the rest of your life. If you want something more than an entry-level job that doesn’t pay very much, don’t just joke around at the water cooler or check Snapchat and play games on your phone, because someone else will take that promotion or that new job instead of you. Why? That someone else actually did something to get that better job.

If you don’t have a clear reason to go to college and you’re going to be taking out extensive student loans for it, go to trade school. So many people are encouraging you to go to college right now. If you don’t know why you’re going, don’t go. Seriously. Instead, go to a trade school to learn a trade so you can earn some money until you figure out why you would want to go to college.

The argument that you should go to college to “figure yourself out” made sense in an era where the cost of college wasn’t prohibitive and you weren’t completely buried by an avalanche of debt in doing so. If you can’t afford college without a ton of student loans, don’t go unless you have a very clear idea of why you’re going and what you want to do there.

Trade school is a far better alternative. You can go to school for a pretty short period of time and learn to become a plumber or an electrician or a carpenter, trades that will almost always have significant employment value. People will always need to build things, and if you have the skill to take on a specific challenging part of building something, you’ll get paid. It might not be your life’s ambition, but it’s an inexpensive and quick route to a job that pays well and you can use that pay to start off with a decent job and not a lot of debt. If you decide college is right for you later, you can use some of the money you’ve saved to finance it.

I’m not saying college is bad, not at all. I’m simply saying that the financial cost of college is so high that unless you’re walking in there with a clear purpose, you’re probably not getting enough value out of that investment.

If there’s a decent chance you will look back in five years on the thing you’re about to do and regret it, don’t do it. This is the one piece of “keep your nose clean” advice I’ll offer you. It is really, really tempting to do a lot of crazy stuff in your late teens and twenties. I’ll be the last person to tell you not to do any of it.

I will say this, though: if you’re about to do something that has obvious risk, stop for one second and ask yourself whether you might regret this in five years or ten years. If there’s even a little risk that you’re going to look back on this as a moment where you screwed everything up, it’s not worth it. Find something else to do. It’s not as if this world is lacking in interesting and fun things to do.

You have a great life ahead of you. Have fun with it, and good luck.

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Thursday, May 11, 2017

Financial Planning for a Digital Nomad Life

A few weeks ago, Sarah and I had a pretty frank discussion about what we would be doing right now if we didn’t have children. She has, at various times, expressed some interest in teaching English as a foreign language in other countries and I, being a writer who submits all of my work electronically, could effectively work anywhere.

We could effectively be nomads, in other words. Sarah could work almost anywhere where English is a desired subject. I could work almost anywhere where there is a reasonable internet connection as the work I do is essentially location independent. We could easily move on an annual basis, if not more frequently, if we so chose. We could settle in one area for six months or a year or two years, then move on.

The modern world has made this kind of nomadic life much more available to a much wider group of people. Anyone who deals in information and has a broad skill set can effectively be a digital nomad, for example, and when you mix that in with other career paths that offer some freedom and flexibility for travel (such as being a teacher of English as a foreign language), you open the barn doors wide to a life in which you’re not truly settled in any one place for your entire adult life.

That type of life creates an entirely different set of financial challenges than what most Americans face. The lifestyle offers some very clear benefits – the sheer joy of exploring the world – with some interesting restrictions, such as a lack of a permanent home and serious constraints on possessions. It’s a balancing act, and one I want to explore a little bit today.

I spent some of the time between that conversation with my wife and the writing of this article getting ahold of a few people I know who are effectively nomads. They tend to move around frequently and have jobs or businesses that enable them to continue working with a relatively high income as they do it. I asked them for the best “money tricks” they’ve figured out, and this is a compilation of those things. I intentionally excluded ideas that really only work in specific areas and specific career paths, instead sticking with stuff that works for most people who would attempt such a lifestyle.

First of all, let’s look at some of the financial benefits of being a nomad, digital or otherwise.

Minimal investment in physical goods: In order to be prepared to move constantly, nomads rarely accumulate a significant amount of stuff. If you know that you might move from Raleigh, N.C., to Kyoto, Japan, one year and then move to Barcelona, Spain, the next year and then move to Lima, Peru, the next year, you’re not going to want to deal with hauling a lot of possessions around the world.

Thus, most nomads tend to try to live out of one or two suitcases and a carry-on bag. They don’t accumulate many clothes or many possessions. That means that they don’t have to invest much of their money into nonperishables. They have no reason to own a television, for example; if they decide they want one, they’re likely to rent it, because there is a huge personal drawback to owning one, or they’ll figure out another solution to watching the programming they want to watch.

Small apartments: If you don’t have a lot of possessions, you don’t need a ton of space, so a small apartment works quite well for a digital nomad. If all of your possessions fit in a couple of suitcases, why exactly do you need thousands of square feet (or even hundreds)?

If you’re using small living spaces, then it’s likely that you’re paying very little in rent, too. You’re in a position where it’s almost impossible for buying a home to make sense, because the overhead of even a small house – insurance, property taxes, and so on, let alone the maintenance and other such costs – is going to be far more expensive than that of a small apartment.

Access to low cost of living areas: If you can work from anywhere, you can thus choose to live in places that have a low cost of living. For example, I can very easily work in most small towns in America, especially those that have internet access at the library. I could work in many cities around the world, in particular ones in countries with a lower cost of living than the United States.

By being an actual resident of those places, a nomad wouldn’t be facing “tourist” costs, for the most part. They could move in and avoid the tourist areas, paying much lower costs by doing what the locals do because, well, a nomad is effectively a temporary “local.”

At the same time, being a digital nomad has a bunch of drawbacks as well.

Internet access is an absolute requirement: A digital nomad submits his or her work via the internet and almost always uses a ton of digital tools to create that work, most of which use the internet in some capacity. Thus, in order to maintain a career, you have to always have access to the internet, and that means you’re often paying for it (like at a coffee shop where you are expected to buy the product they sell) or doing a ton of footwork to find free access (like at a library).

If you’re regularly working in coffee shops or restaurants, the cost of internet access is going to really add up.

Work is slow and it’s tough to “grow” a career: Unless you’re able to work really efficiently in constantly changing environments at different times with different noise levels and different internet connection qualities and different cell phone signal qualities, often without things like scanners or printers at easy convenience, you’re going to find that your productivity is much lower than if you have a true permanent (or semi-permanent) home office or desk job where all of those things are strongly established. These factors cut into your daily productivity, which makes it harder to grow a career or a business (though you can definitely maintain one).

Travel costs are high: Even if you’re settling in a new area for a year at a time, you’re still moving once a year. That means finding and paying deposits on a new apartment and perhaps new utilities. If you’re traveling internationally, that means paying for visas and other travel-related costs. If you’re staying for longer periods, then you’re not really a nomad any more and you’re settling in. If you have reasons to ever travel back home, that’s going to also add to your travel costs – it turns out that family ties are quite expensive when you live on the other side of the country or of the world.

If you travel internationally, money management can be tricky: You’re going to have to learn about transferring money from country to country and what the rules are for banking within another country. Typically, you won’t be able to just keep using the same bank you always have and the same accounts you always have, and moving money across the border can be challenging.

Given these factors, here are some strategies for financial planning for people who are digital nomads or are considering becoming digital nomads.

Build a career or a business that allows you to be location-independent.

If you don’t have this as a ground floor, you’re not going to be able to be a nomad unless you’re willing to accept entry-level work wherever you go. What the internet provides, really, is the possibility of a job that pays well without location dependence, which is what makes a nomadic lifestyle really work today. Without that kind of established career or business, you’re going to be relying on entry-level work wherever you go, which provides no financial security at all. You can do that, of course, but it’s not going to provide you with a viable long-term financial future. When you’re older and much less able to get around, what will you have?

Building a business or a career that gives you location independence and enough income to spend significantly less than you earn gives you a great deal of freedom. You don’t have the weight of an uncertain future around your neck while doing this because, eventually, you’ll be able to rely on the money you’ve saved and no longer need to work, which is a destination that eventually everyone reaches as they age. You also have the financial flexibility you need to get up and move when it feels right to do so.

How do you do this? Well, you need to either move into a career path that allows for total telecommuting or build a business that gives you the same freedom. In terms of careers, many IT and computer programming jobs allow this, as do many different sales jobs and some jobs in the medical and health related fields. Some design jobs allow this, too. As for businesses, things like running a YouTube channel or blogging or podcasting can allow for being a digital nomad, but it’s going to take a lot of work to build these things before it’s sustainable. If you have a career to piggyback on, you may find that a consulting business can work well for being a nomad, too.

Establish a ‘home country’ where you intend to live when you’re finished.

This is the country where you should have your primary savings, particularly retirement savings. It’s the place you’ll go to when your years of being a nomad come to a close. This also gives you a basis by which to study the laws and understand how funds can be transferred into and out of that country. You’ll mostly want to be sending money into that country. You’ll likely want to retain citizenship there and also want to understand the travel restrictions for citizens living abroad.

So, let’s say you choose the United States, but you’re now thinking of living in Thailand for a year. You’ll then need to study travel and banking relationships between Thailand and the United States. How long can you stay there? What documentation will you need? How easy is it to transfer money from Thailand to the United States? How will taxes work?

One big advantage of having a singular “home country” is that most of the knowledge you pick up is transferable. Many of the relationships that one nation has with other nations are the same between all of those other nations, so you’ll quickly learn how to be a U.S. citizen abroad or a Canadian citizen abroad or whatever you may choose.

You may find that a different home country suits your needs later on in your travels, depending on the relationships that you build, and that’s fine, but that’s a bridge you can cross later on.

Keep most of your accounts in that home country, along with things like insurance.

In general, you’ll want to do all of your financial planning within your home country. You’ll want to find out how insurance coverage works when you’re abroad, particularly health insurance. For example, if you’re a U.S. citizen living in Thailand, what are your health care options?

You’ll definitely want to have retirement accounts in the country you intend to wind up in, because it will make your retirement years much easier. You don’t have to worry about the nuance of moving retirement accounts across borders, because you’ll likely be hit with a large amount of taxes when you attempt to do so. Even if you choose to reside abroad for a very long time, it may still make sense to leave the accounts in your “home country,” whichever it may be.

If at all possible, keep your actual pay within that country as well and only transfer out your living expenses as needed. If you can get paid in your home country, put money into retirement in that country, keep your primary banking in that country, and only transfer funds into your current living area as needed, it keeps everything much simpler.

Open local accounts as necessary for your work, but close them out when you leave.

In terms of paying the bills and covering expenses where you happen to be living, nothing beats the convenience of local banking options. Just open an account at a local financial institution, transfer money in from your “real” bank in your home country to live off of, and then empty out and close that account when you’re leaving the area. It’s that simple.

This allows you to keep all of your primary financial accounts in your home country where you have a strong understanding of the rules and minimizes your financial dealings in a country where you may not know all of the rules. If the local economy runs into trouble or you find yourself dealing with some other issues in that area, you’ll find it’s much better to have all of your assets somewhere else. You can leave easily and never return.

I highly recommend choosing large international banks for your local banking services. The large multinational banks are stable and are very friendly to moves abroad. You may even find that you can maintain a “local” account with them as you move around.

Establish a tight budget for yourself that ensures you spend far less than you earn in a typical month and save the difference.

If you’re choosing a digital nomad’s lifestyle, you’re going to want to keep your day-to-day expenses very low, and that means living by a tight budget. Know what you’re spending on housing, on food, on utilities, on local working expenses (like internet access and cell phones), on entertainment, on local exploration, and stick to it. Put a strong cap on all of your variable areas of spending (like entertainment) so that you have a firm grip on the money you’re transferring in and don’t need to “top it off” with extra funding.

That way, you can pretty much automate all of your finances. You can set things up so that you’re paid automatically into your primary checking account, and from that checking account you’re putting money aside for taxes, putting money aside for retirement, and transferring money to yourself locally for day-to-day use. Your budget is automatic and thus it becomes really easy.

It is a good idea to maintain a local “buffer” – an emergency fund – that provides enough money for you to survive for a few days and get a plane ticket out of the area if an emergency occurs. You don’t want to be caught empty handed in a true emergency where your job or your business is collapsing or the local economy is collapsing or a disaster is imminent. Cash is king, so make sure you have a pool of cash always available.

Borrow things instead of buying them.

If you’re only living in a place for a short while, it makes little sense to buy things to keep permanently. Instead, you should focus on borrowing things and renting things. Rent a furnished place to live, or else buy inexpensive furnishings locally that you can quickly resell when you leave. If you need tools, find ways to borrow or rent them locally. Use libraries and other lending institutions.

You’re far better off paying a little to borrow something than paying a lot to own something that you can’t take with you. Basically, view everything that’s not in your suitcase as something you won’t own a year from now and make decisions accordingly.

Know all of the local rules for emergencies and health care as soon as you arrive.

What exactly do you need to do if you have a health care situation? Who do you call? How will you pay for it? You should research this before you ever leave and one of your first tasks upon arrival is to make sure you’ve done everything you can to make these things as smooth as possible. Not doing this can result in a gigantic bill simply because you didn’t know the local rules.

Have a very clear backup plan for your career and your life.

The world changes. Sometimes, what seems like a brilliant idea one year can turn out to be a disastrous one the next year.

No matter how well a digital nomad life seems to be going, make sure that you always have an “escape plan.” What happens if your business collapses? What happens if you lose your job? What happens if you need to go back home to care for an ailing loved one? What if you fall in love? What happens if you get completely bored with your work and lifestyle (trust me, even the most exciting things can become boring as your personality changes, and vice versa)?

You should have a very clear backup plan for each of these situations, particularly the ones where your job or career or business stagnates or fails. You do not want to find yourself sitting halfway around the world with no exit plan if a pink slip suddenly arrives or if you find that your business is losing its primary revenue stream.

What does that plan look like? It should include a plan for getting back to a stable base in your “home country” and then devising the next step in your career.

Coming up with this plan will probably point you toward things you should be doing now to keep some lifelines afloat. You should be maintaining a professional network and a personal network all over the world. You should be keeping your skills sharp as they relate to your field of choice. You probably want to make sure that your name is staying out there in relation to your field, too, so that you have some things to point to if you need to find new employment or revenue streams.

Never forget one key thing: Financial independence frees you from all of the job worries.

The big thing to keep in mind, if you find that you love this kind of life, is true financial independence – meaning having enough money saved and invested so that you can continue to live your life off of only part of the returns on those investments (so the investments will still keep growing and keep up with inflation). Then you can become a true nomad, spending all of your time exploring the various places you’re living and learning about the local cultures.

It’s that attraction that usually convinces people to switch to a nomadic lifestyle, and financial independence means that not only can you continue being a nomad, but you free yourself up from another lifeline that’s holding you back from the freedom to explore.

What does that mean in terms of financial planning? Live. Cheap. That should underline everything you do as a nomad. Live in low-cost areas. Don’t spend much money. Bank everything you can. Head toward financial independence as quickly as possible. If you can do that, the world is your oyster.

Good luck.

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Master Your Mind, Master Your Money

If you ever feel like you don’t have the first idea how to make money, or that you’re not good enough to make money, or that you don’t deserve to make a lot of money, then success coach Jen Sincero’s new book, “You Are a Badass at Making Money: Master the Mindset of Wealth,” might be just what you need.

“A lot of people don’t feel that [money is] available to them the way it is for other people somehow,” says Sincero in a phone interview from her home in Santa Fe, New Mexico. “You see somebody with a mansion and a yacht and you feel like they’re a different species,” she says.

“The reason I wrote this book all about mindset is because our minds dictate our actions,” Sincero says. “I think a lot of times in our culture we really focus on actions to take. You know, you’ve got to apply for this job, you’ve got to work hard, you’ve got to put yourself out there, and all that stuff.”

Not to demote action from its importance, Sincero says, but some mental groundwork usually needs to happen first.

“If you don’t believe that it’s OK to be rich, or if you don’t believe that you can do it, or if you believe that you’re going to lose all your friends and family if you get rich, your actions are going to be very different than if you’re completely gung-ho and 100% invested in it.” (Note: In her book, Sincero defines “rich” not as having a mansion and a yacht, but as being “able to afford all the things and experiences required to fully experience your most authentic life.”)

Taking risks is a big part of the process, says Sincero — whose first book, “You Are a Badass: How to Stop Doubting Your Greatness and Start Living an Awesome Life,” topped the New York Times bestseller list, but not until after she’d done the hard work of what’s now become her advice.

“You’ve gotten where you are today by doing what you’re doing, and that is very familiar and safe,” she says. “If you want to transform your financial reality, you have to do a ton of sh*t you’ve never done before, and a lot of stuff that’s really quote-unquote ‘risky’ to you, because it’s the unknown. And in order to participate in the unknown, you have to have a busload of desire and faith and drive behind it — and that is all mindset.”

Sincero weaves her own financial history throughout the book — both the risks involved, and the gratitude (and some faith in what she labels “Universal Intelligence”) that she had to invoke, to get to the secure place she is today. And it’s out of those experiences that she offers these four tips as a starting place for people wanting to change their money mindset:

  1. Focus carefully, because “what you focus on, you create more of,” she says. “Pay attention to your thoughts and beliefs and words. If you’ve got any crappy ones around money or finance, with your ability or your right to make money, question them, and start changing them up.”
  2. Hang out with people “who are kicking ass financially,” she says — those who are really positive about money, who make it well, and are excited to make it.
  3. Take on money-making pursuits that put you outside of your comfort zone as often as you can.
  4. Don’t just keep doing what you’re doing and hope it’s going to get better. You have to make it a very serious, concentrated focus that you are going to make money. Train your thoughts in that direction, and take action.

Money isn’t everything, but it’s a big, essential part of our lives – so it’s going to improve your life if you can get the hang of it. “Be really aware that this is your one go-around on Planet Earth, and to squander it by being in struggle around money — we need money every single freaking day of our lives, so it’s such a valuable and important piece to get straight with and to succeed at,” Sincero says.

“As a human being on Planet Earth, you need money to thrive, so don’t waste your life pretending you can’t do it, or that you can’t have it, and get on it already.”

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Wednesday, May 10, 2017

Your ‘Magic’ Interest Rate: Figuring Out Debt vs. Savings

When people first become acutely aware of their personal finances, they’re usually hit with a cavalcade of seemingly incompatible goals. They usually have a number of debts that they’re facing covering a variety of different interest rates. At the same time, there’s usually a strong demand to start saving for retirement or saving for a child’s college education or saving for a down payment. There may also be other goals on the horizon, like a career switch or a return to school.

How does a person even decide how to juggle those priorities?

Most financial gurus agree on one thing: High-interest debt is horrible and should be eliminated first. If you have debts with interest rates above 20%, you’re going to want to get rid of those as fast as possible. Simply sitting on a $1,000 debt with a 30% interest rate means that $300 of your money each year is evaporating into smoke without even touching the balance of that debt. There’s no question about it – that’s a financial disaster and you have to deal with that as soon as you can.

On the flip side of the coin are zero-interest loans. You borrow $1,000 from someone and they charge you no interest on that loan. They only require that you pay it back at a regularly scheduled rate. With that extreme, there’s no real incentive to pay back that loan with any speed at all. You’re better off just sticking the money in a bank account and paying it off as slow as possible and just collecting the bank interest for yourself! It makes virtually no sense to prioritize paying off this debt early when you have any other savings goals at all.

Those scenarios represent two extremes. Most people have debts that are somewhere in the middle of that. They have a credit card at 12%, a student loan at 6%, a car loan at 3%. How do they figure out which debts should be addressed as a top priority and which ones should lag in line behind other financial goals?

In other words, what is that “magic” interest rate above which you should prioritize paying off that debt and below which you should prioritize other savings goals beyond a simple emergency fund?

The difficulty with this question is that you’re going to get very different answers from different financial writers. Some are going to strongly prioritize debt elimination and will suggest a very low “magic” interest rate, prioritizing rapid pay down of even fairly low single-digit interest loans like car loans. Others will prioritize aggressive investing and will basically tell you to not bother rapidly paying of anything in the single digits or low teens.

They’re both right. They’re both wrong, too.

A person’s “magic” interest rate isn’t based on something set in stone. Instead, it’s one of those things that puts the “personal” in personal finance. There are a ton of factors that play into which debts you should prioritize before a strong focus on saving for the future and which debts you should wait on. (In fact, there’s a good argument that you should prioritize some savings in different ways, but we’ll not worry about that here.)

Here are five factors that make up a key part of this number.

Factor #1: Cash Flow / Overall Debt Load

If you’re struggling to come up with enough cash at the end of the month to even cover your bills, you need to be focusing on debt repayment rather than saving for goals. When you’re in a situation where you’re walking a tightrope each and every month, your mission should be to maximize the gap between your income and your expenditures as quickly as possible. You have to prioritize debt repayment.

If you’re not struggling to come up with enough cash each month to pay the bills and you can actually handle some career and life setbacks without financial armageddon, then you don’t have to put as much emphasis on debt repayment.

Most Americans are in the first category; remember, 76% of Americans live paycheck to paycheck. In my experience, most financial writing tends to target people in the second category, and thus they tend to focus more on savings than on debt as compared to the average American’s needs.

In summary, if you’re struggling to keep the bills paid, your “magic” interest rate should be lower, not higher.

Factor #2: Risk Tolerance

Once you’ve really committed to spending less than you earn, the choice to repay debt is a lot like investing in something with a guaranteed tax-free return. For example, if you’re paying down a 15% debt, that’s a guaranteed 15% return on your money after taxes. That’s a better return than stocks or real estate can provide in most years.

This is really the big argument for paying off debts until one starts to approach the long-term average annual returns of stocks or real estate, somewhere around 7% or 8%. Above that, it’s pretty hard to argue that investing is going to improve your finances as quickly as eliminating debt.

The issue starts to get trickier in that 7% to 8% range. Some people simply do not have the stomach for the volatility of many investments. Watching their retirement savings drop by 20% or 30% in value over the course of a year can cause them to make panicked moves out of stocks, which only guarantees their losses. They’re not tolerant of the risk.

Ask yourself honestly what you will do the next time the stock market lurches and you have a healthy amount in stocks within your retirement plan. Are you going to stay put as you watch the value of your retirement drop by 3% per month for several months, or are you going to get nervous and bail? If you’ll truly stay put, your risk tolerance is high and thus your magic interest rate should be 1% or 2% higher than average. If you’ll bail (and many people will), then your magic interest rate should be 1% or 2% lower than average.

Factor #3: Short-Term (1- to 5-Year) Plans

If you’re planning on making a major career switch or other major life change that will either drop your income level or put your income at risk, then cash flow becomes paramount. And when cash flow is paramount, the most important things for you to do are to eliminate debts and have cash in hand (from savings in a savings account).

In other words, your risk tolerance becomes very low because you can’t afford to lose much money in the coming years, thus you definitely lean toward paying down debt and your “magic” interest rate drops through the floor, down to as low as 2% or 3%.

If you’re hoping to keep things on track and are aiming to progress in your current career and perhaps build income, then preparing for the long term is what matters most and you can actually bolster your “magic” interest rate a little bit because of the long term power of compound interest in your retirement plan and other long-term tools. After all, you’re moving in a direction where you won’t need to tap it for a very long time.

Factor #4: Interest Rates Going Forward

If you have variable-interest loans, such as an adjustable-rate mortgage, a student loan with variable interest, or a credit card that can adjust the rate, projections of future interest rate hikes from the Federal Reserve should definitely impact your “magic” rate. If the Federal Reserve is expected to raise rates in the coming year, your “magic” interest rate should go up by that same amount when evaluating variable interest loans.

This has no impact on fixed-rate loans. Most mortgages and car loans and many student loans fall into this category. Thus, if that makes up the bulk of your debt, you really don’t need to worry much about this factor at all.

Factor #5: Proximity to Retirement

This is another “cash flow” issue. If you’re close to retirement, the most important thing in the final few years as you coast into retirement is to ensure that you have your bills as low as possible so you can make ends meet on your already existing retirement savings. That’s because, with such a short time frame, most retirement investments are very volatile and may not retain value for you.

Never dump cash into the stock market or real estate if you’re going to need it in the next few years. So, in this situation, your “magic” interest rate should be really low.

On the other hand, if you’re far from retirement, anything you save for retirement has a ton of time for the power of compounding to work in your benefit, so you should actually raise your “magic” interest rate a bit in this case.

What’s Truly Important?

For most people, these factors are going to be pointing in a bunch of different directions at once. If that describes your situation, then I’d keep my “magic” interest rate somewhere close to the long-term expected return of the stock market – around 7%. If your debts have a higher interest rate than that, focus primarily on paying those debts off. If your remaining debts have an interest rate below that, then focus on your savings goals and use any extra to keep making progress on your debts.

If most of the factors point toward a higher “magic” interest rate for you, bump it up by a few percentage points and switch over to saving once you’ve eliminated all debts above 9% or 10%. On the other hand, if most factors point toward a lower “magic” interest rate, focus on paying off all of your debts that don’t have a zero interest rate.

The key thing to remember is that this isn’t an exact science. You’re simply trying to make the best moves for you, and these are factors that can push you one way or another. It’s also important to remember that simply spending less than you earn and doing something productive with the remnants is the only truly important thing here. It doesn’t matter too much what you decide to do regarding a 7% interest rate debt because paying off that debt early and putting money away for retirement are both good moves, and you’re not really going wrong either way. This just gives you some guidelines when you’re trying to decide which one to choose.

Good luck!

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Why I Only Grow Four Things in My Garden

While I have wanted a summer garden for what seems like forever, I never made the time to build one until we moved into our current home four years ago.

That first year, I was insanely pumped for all the goodies I planned to grow. After borrowing a rototiller from a neighbor and carefully sectioning a garden spot with adorable picket white fencing, I was off to Lowe’s to stock up on seeds and plants.

Sadly, I didn’t do a ton of research ahead of time. And the stuff I bought to plant didn’t really mesh well, either. Across a tiny plot of land (maybe 8 by 10 feet), I planted everything from tomatoes to squash to strawberries, cilantro, cucumbers, onions, sweet potatoes, cabbage, basil, and eggplant.

Basically, I went a little overboard.

Over the course of the summer, some of my plants grew rather well. The tomatoes did okay, for example, as did the zucchini… which is easy to grow anyway. I also did okay with the cabbage heads I grew (although they never got very big), and my cucumber plants were absolute breeding machines!

But, the strawberries lived a short and rather sad life. The cilantro turned a crazy color and died shortly after. The eggplant and carrots I planted failed to launch.

And the sweet potatoes… why did I plant those again?

After picking what I could at the end of summer, I spent an entire day digging beneath the ground to find randomly sprouted sweet potatoes that were delicious, but still not worth all that work.

Why I Only Grow Four Plants in My Garden

Keep in mind, I’m not a professional gardener, nor do I want to be. I have no desire to spend my summers meticulously creating ideal plant habitats, testing soil samples, or watering my garden by hand.

And while my initial goal with gardening was to save money on produce, our main objective now is fun. Not only do I enjoy having a little garden, but my kids get a kick out of the process, too. They love picking plants or seeds, watering them with the hose extension, and watching baby plants grow into hearty, fruit-bearing adults.

But, after our first go-round with gardening, I realized something important – that perhaps, as I’ve found in many other aspects of our lives, less is more.

If I could focus on just a few plants instead of 10, I thought, we could enjoy the benefits of gardening without the hassle of figuring so much out – or the stress of plants dying all the time.

So, my thought process was this: I would eliminate plants that didn’t work well that first year, along with plants that didn’t produce enough to justify the work. I would also eliminate vegetables that are relatively cheap to buy.

For us, that meant getting rid of:

  • Cilantro, because I killed it.
  • Strawberries, because they never had a chance.
  • Cabbage, because one head doesn’t cut it.
  • Onions, because I use them infrequently and they’re cheap.
  • Sweet potatoes, because all that digging.
  • Eggplant, because I only got a few.

That left us with:

  • Basil, because it’s easy to grow and I use it almost daily.
  • Tomatoes, because they’re easy to grow and reproduce the entire summer.
  • Cucumbers, because they are easy to grow and we eat them often.
  • Zucchini, because it grows like hot cakes and I can prepare it at least eight different ways.

How I Maximize My Four Favorite Plants

While growing fewer things has made our garden a lot less diverse, I believe it’s been a smart move. With only four vegetables brewing at any given time, my gardening life has become a lot simpler.

That first year, for example, I would get a random eggplant or cabbage and wonder what the heck to do with it. Then, I would struggle to build a meal around it, and potentially buy more ingredients just to use it up.

With just tomatoes, zucchini, cucumbers, and basil, on the other hand, I never have that problem. Why? Because we eat these foods all the time. For example:

Meals we make with tomatoes:

  • Pasta sauce
  • Caprese salads (using the basil, too)
  • Tomatoes on sandwiches (or tomato sandwiches alone)
  • Cucumber and tomato salad with oil and vinegar
  • Tomatoes cut up in salads

Meals we make with zucchini:

  • Zucchini pasta (with my spiralizer)
  • Roasted zucchini (with Rancher’s Steak Rub from Wildtree)
  • Zucchini appetizers, with goat cheese and sun-dried tomatoes
  • Zucchini dipped in ranch dressing
  • Zucchini boats, with tomato sauce, cheese, and basil

Meals we make with basil:

  • Homemade basil pesto
  • Caprese salads
  • Adding herbs to nearly any summer dish

Meals we make with cucumber:

Basically, we’ll eat cucumbers, tomatoes, zucchini, and basil in about a million different ways. We’ll eat them as a main dish, use them to create a side dish, or cut them up and eat them plain. And no matter what, I can always find a way to use these four foods if a bunch of them become ripe at once.

Further, I believe that farming only four foods probably saves us money. Because we’re growing only foods we know we’ll inhale, we never, ever have any waste from our garden. These last few years especially, we’ve almost always harvested and eaten our fresh vegetables all on the same day – as in, I’ll walk out to the garden before dinner, see what’s ripe, and make a meal or side dish out of it daily.

The Bottom Line

If you’re someone who wants a garden but finds the idea overwhelming, consider a gardening shortcut. By growing only what grows easily in your climate — and what you know you’re sure to eat – you can have access to fresh foods minus the hassle and stress.

For us, this strategy has been a real game-changer. Instead of trying to be good at everything, I decided to learn how to grow four easy foods well. And now that summer is approaching, I can’t wait to do it all again.

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.

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What do you grow in your garden? Do you ever feel overwhelmed by all your options?

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Tuesday, May 9, 2017

My Favorite ‘Little Wins’: 12 Simple Frugality Tips That Just Work

Over the years, I have shared literally thousands of frugality tips on The Simple Dollar. Most of them are useful tips – they will save you money – but not every tip works for everyone. Many of the tips I’ve shared on the site are ones where I can see from my own experience how it does save money, but it didn’t work out for me for some reason or another.

Some strategies, though, have been utter home runs for my family. The dozen strategies in this article have flat-out made our lives better. They’ve directly saved us money without any additional significant effort or time investment or negative change in routine, and many of them save us time as well. Some of the tips have a positive environmental impact. Some of them make other aspects of our life easier or add quality to our life in some way.

Quite simply, these are my favorite “little wins.” They’re little frugality tips that, on their own, aren’t life changing, but they’re just simply better ways of doing things compared to what I used to do. In each case, they result in more money in my pocket, but they usually come with additional benefits, too.

Strategy #1: The Rag Drawer

We used to be avid users of paper towels. We’d buy them at the store and then we “graduated” to buying them in bulk at a warehouse club. Even at the best prices, though, we were still spending at least $1.50 per roll for decent paper towels with any degree of absorbency.

The problem, of course, is that paper towels simply aren’t reusable. If someone spills a drink, you throw several paper towels at it, and then you throw them away and the money is lost. They’re useful, no doubt, but every time you use them, it’s just gone.

Gradually, we switched to having a “rag drawer.” In our kitchen, we have a drawer that just has a ton of microfiber rags and other miscellaneous rags in there for whatever spills or cleanup jobs may happen. We just toss them in a small laundry bin after use and then we wash the contents of that bin the next time we have a small load of clothes and put the rags back in the rag drawer when they’re clean.

The rags handle everything. They’re super absorbent, so one rag can handle something that it would take a bunch of paper towels to deal with. You can just toss them in a bin when you’re done and wash them when it’s super convenient, so there’s almost no time involved in refilling the rag drawer, plus you’re no longer spending time on paper towel purchasing or storage any more, either.

This solution is also way cheaper, since you can get tons of rags for just pennies each in various places, even microfiber ones. You only need to wash them a time or two before it’s a cost savings over paper towels, and if you wash them a dozen times, the savings is tremendous. There’s also the environmental factor – you’re not filling landfills with used paper towels.

I have zero interest in returning to our heavy paper towel use of the past.

Strategy #2: The Perennial Herb Patch

If you walk out of our back door and turn to the left, you’ll see a little patch of herbs growing there. It’s pretty much constantly growing during the spring, summer, and fall. We never plant anything new there or do much of anything to care for it, but it constantly produces a variety of herbs for us. Right now, for example, it’s producing tons of chives, but at other times it might produce lots of fresh sage or thyme or oregano or tarragon or rosemary.

The only thing I do for maintenance on that herb patch is pull out a bunch of anything that’s threatening to dominate the patch. The chives tend to try to take over, so we’ll pull them out by the roots every once in a while. We sometimes water them a little, but they don’t need much, and sometimes I’ll spread some compost around in there – organic stuff like old bananas or vegetable peels or coffee grounds that’s completely turned into black compost by being left in a bucket for a month or so. I’ll usually compost and water at the same time once in the spring and then maybe once in the fall and then not worry about it for the rest of the year. If you don’t want to bother with compost, just get a small bag of fertilizer and use that instead.

Most of the time, though, we just do nothing at all with this little patch. It grows on its own and when we need some fresh herbs, we go out there while prepping a meal and cut them. It’s way way way cheaper than buying it at the store and it tastes miles better, too, and there’s almost zero effort involved once you have them planted. It requires maybe 30 minutes of effort a year – seriously – and it grows and grows every year without fail. That’s an amazing bargain, and it makes our meals tastier to boot.

Strategy #3: The Soup Vat

Whenever I make soup, I don’t just make a little soup. I make a giant cauldron of soup. I pull out our big stock pot and make an absurd batch of soup.

Why do I do this? The truth is that if I’m going to the effort of making a batch of homemade soup, it’s not much extra work to make a quadruple or quintuple batch all at once. I have to slice some more vegetables, but I already have the cutting board and a knife out to do that.

When we’re ready to eat, we just serve ourselves straight from that big vat, and then after the meal is over, I get to work. I’ll prepare some large reusable freezer containers with enough soup to feed all of us for a meal, and I’ll pop those in the freezer. I’ll also prepare some small reusable freezer containers with enough soup for a single meal, and I’ll pop those in the freezer, too. I label them with a bit of masking tape and a marker so I know what they are and when they were stored.

Then, when we need a quick meal, we just pull one out and warm it up. For the whole meal, we’ll pull out a family container. For just one of us, we grab an individual container. You can microwave it easily and it’s absolutely delicious; it’s often better the second time around.

Soup is a cheap and tasty meal. I can make a number of killer soups for maybe $0.35 to $0.50 per person. When they’re frozen and stored like that, they become very quick and convenient meals and the soups are often better the second time around because the flavors have melded. It saves us a ton of time over the long run and it’s so inexpensive!

Strategy #4: The Powdered Laundry Soap

For those who have been paying attention over the history of The Simple Dollar, you’ll know that I’ve tried a lot of strategies for cutting into the cost of laundry soap.

At first, we simply bought it in bulk, buying huge dispensers for the laundry room. After that, I moved on to a fairly complicated recipe which was definitely cheaper than the bulk detergent but required a fair amount of work. I kept tinkering with that recipe over time and eventually I got it down to something super-simple that saves a ton of money.

I just buy a bag of soap flakes, a box of borax, and a box of washing soda at the store. In a plastic container, I mix a cup of each of those things – I just put them in there and shake it around for 30 seconds or so. I then put a measuring tablespoon in there. When I go to wash a laundry load, I scoop out a flat tablespoon of the mix, toss it into the load, and then close up the container with the spoon in it again. When the container gets low, I put in a cup of borax, a cup of washing soda, and a cup of flakes and shake it up again.

That’s it. It costs about three cents a load, which is a fraction of the cost of buying laundry detergent, and it takes almost no effort. It’s also easier to just take a box of borax or washing soda down to the laundry room when I need a refill than it is to carry a giant jug of laundry detergent or a five-gallon bucket full of my early attempts at homemade stuff. My current method is just more efficient and way cheaper.

Strategy #5: The Reading Block

About two years ago, we started instituting a daily routine where one parent would spend 30 minutes reading silently with all three children (and, on good days, both parents would be there, too).

Our original reason for doing this was to improve our children’s reading skills. We wanted them to become very strong at reading and constantly encouraged them to read a mix of comforting and easy page turners and somewhat more challenging works, to keep reading fun but also intellectually challenging.

It seems like a noble goal, but how is it frugal? It’s frugal in a bunch of ways.

First of all, it cultivated our children to be readers. They love books now. They want books as gifts. When you reach a threshold where reading most things is actually easy in terms of processing the words and you’re reading fun stuff that interests and excites you, you want to read more and more. Reading books is now one of their favorite hobbies and they often way overshoot the 30-minute clock when reading and also read at bedtime and on road trips and often at random times during the day.

We channel that reading by going to the library every other week and checking out books to read. Everyone that goes simply checks out two or three books and returns the ones we checked out the previous time (or renews them, if desired). Everyone goes home with something they’re excited to read for free.

Even better, it’s cut down significantly on the amount of screen time they engage in. There’s less energy use around our home. There’s less clamor for us to buy new entertainment items. There’s more conversation.

Our 30-minute reading policy, sustained over multiple years, has paid so many dividends in our home. It’s helped financially, it’s helped intellectually, it’s helped empathically. I couldn’t really ask for anything more.

Strategy #6: The Lazy Thermostat

For a long time, we used our programmable thermostat heavily, as it did a really great job of keeping our house at a certain temperature. We let the temperature go up during the summer when we weren’t home and down during the winter when we were sleeping and it definitely saved us money. Over time, though, we came to realize that the heating and cooling would still kick on at times where it was completely unnecessary.

Now, throughout the year, we set the thermostat to have the heating and cooling “off” unless it actually feels excessively hot or cold in the house. We don’t try to keep our indoor climate at a specific temperature all the time and it varies by as much as 30 degrees throughout the year. We occasionally use the programming feature, but only when it’s absolutely necessary.

This usually only happens on really hot or really cool days, and even on those days, our first response isn’t to turn on the furnace or the air conditioner. On hot days, we close the curtains on all windows facing the sun and wear shorts and t-shirts and go barefoot around the house and take cold showers. If it’s still too much and people don’t feel comfortable, then we kick on the air conditioning. On cold days, we’ll just throw on a sweatshirt and some thick socks around the house and grab a blanket if we’re doing something sedentary and, again, if anyone doesn’t feel comfortable, we then kick on the heat.

In other words, we simply switched to letting our comfort guide things. If we’re comfortable in the house, we just don’t run the heating or cooling. It saves us money and it actually made us realize that we’re comfortable at home in a pretty wide array of temperatures, and figuring that out helped us to reach a much better and less expensive approach for heating and cooling our home. We basically just flip it off if it’s on and things are comfortable and then never touch the thing unless someone feels really hot or cold.

Strategy #7: The Multi-Pass Shopping Trick

Whenever we shop for clothes… or sporting goods… or school supplies… or lots of other things, we don’t start by heading down to the local department store. We start at Goodwill (or at other secondhand stores in the area).

We walk in there with a discerning eye and simply skip over 99% of the stuff there. It’s actually fairly rare that we find everything we’re looking for in a stop at a secondhand store. However, we almost always find one or two things that simply work. Someone dropped off a dress that looks basically new and is well made that perfectly fits my daughter and it costs $2.50. Someone’s selling some barely-used soccer equipment for one or two bucks, including some great goalie gloves for my son.

We might have 15 things we’re looking for and we find one at one store and two at another store and one more at a third store, but with about an hour’s effort, we’ve chopped a third of the items off of our list and saved $50 to $100.

Yep, 99% of the stuff we might find in a secondhand store isn’t of interest to us. So we ignore it. What we look for is that remaining 1% – the items that fit our needs and are well made but still carry a cheap price. Finding just one or two of those items per stop makes it well worth the stop, because it’s far better to spend $1.50 on a pair of barely-used goalie gloves or $2.50 on a dress than buying those gloves for $75 new or that dress for $50 new.

I like to call it the “multi-pass shopping trick.” We simply save up a list of important-but-not-urgent items that we need to pick up until the list is fairly long, consider the short term future to add a few more items to the list, and then start by shopping at Goodwill and a few other secondhand stores in the area. If we can knock just a few items off of our list by doing this, we’re saving a ton of money, and by shopping for all of this stuff together at once, we’re not really burning any extra time in doing so, either.

Strategy #8: The Magical Slow Cooker

Over the last several years, our slow cooker has become the absolute centerpiece of our family’s meal planning. Without it, we would be hard-pressed to eat low-cost meals at home and would likely often rely on much more expensive takeout meals and restaurant meals, which, for a family of five, would add up super fast.

Our preferred slow cooker recipes – the ones we come back to time and time again – are ones where we can toss in a bunch of ingredients at the start of the day and then have a meal that’s ready to eat when we come home. Usually, it just involves setting a timer (or having me flip a switch at 10 AM or something, since I work from home) so that it’ll cook for the recommended amount of time so that it finishes roughly at the time we expect to be eating.

We make all kinds of things in the slow cooker, from lasagnas to soups, from curries to chili. We’ve cooked whole chickens and pot roasts in there. We’ve made oatmeal and mashed potatoes and shepherd’s pie and taco filling. No matter what, it’s ready to go when we get home, as long as we spent 10 minutes putting ingredients in the slow cooker and setting it in the morning before the work day begins.

I’d estimate that we average two nights per week when we eat supper right out of a slow cooker, and then the remnants of that meal becomes leftovers for lunch for the next day or two for Sarah and myself. Often, this cuts the costs of that meal per person down to $1 or $2, which is far cheaper than virtually any option we might consume from the store.

Strategy #9: The Credit Card Deletion

I don’t store my credit card number at any online stores these days. I simply don’t do it.

Yes, it’s inconvenient. Yes, there are times when it’s way easier to buy things if I just keep my credit card number stored there. But hear me out for a moment.

By simply not storing my credit card number on websites, I put an obstacle in my way for online buying, and most online buying is pretty non-essential and impulsive. There are very, very few things that I need to buy from, say, Amazon, and the time I would spend typing in my credit card number is time I can spend reflecting on whether or not I need that item.

This is a shift from the way I used to shop online, where I kept my buying information stored in several different websites. This made impulse buying very easy, and there were times that my buying was so impulsive that I would actually be surprised when things showed up in the mail.

Simply keeping my credit card numbers out of websites has drastically cut down on the frequency of impulse buying, which has mostly just saved me from spending my hard-earned money on a bunch of stuff that I didn’t need at all and would have quickly forgotten if I hadn’t pushed the easy “buy” button. Not having my credit card information there has made it feel less inviting to shop online, so I spend less time at e-commerce sites than I used to and more time doing other things that are more fulfilling anyway.

Strategy #10: The ‘Money-Free’ Periods

Every so often, our family – honestly, mostly just Sarah and myself – will challenge ourselves to have a money-free weekend or even a money-free week. During that time, we pledge to spend no money on anything and thus must eat things that we already have on hand and entertain ourselves with things we already own or can access for free.

It’s pretty simple to actually pull this off for a weekend, and it’s not overwhelmingly hard to do it for a week, though two or three weeks can get tricky. Instead, all it really does is redirects our focus onto doing things that we might not otherwise do. We’ll assemble meal plans using only foods we happen to have on hand, so we won’t even think about the grocery store. We’ll look far more seriously at what’s going on in our town or in nearby towns for free. We’ll explore the offerings at local libraries, local community groups, and so on. We’ll check out meetups. We’ll dig things out of our closet that we might have just forgotten about recently that fill us with excitement when we pull them out again, like a box of paints or an unfinished kit project or a book of some kind.

These “money-free” periods almost always rekindle my interest in free or extremely low-cost hobbies. They almost always introduce me to something new in my neighborhood that I didn’t know about before – again, usually something free. They cause me to make meals that I might never have otherwise made and that sometimes causes me to discover something delicious that enters our low-cost meal routines.

In short, this kind of artificial limitation almost always has a very positive impact on my life after the challenge is over. I’ve discovered new things to do and old things to dig into again and new ways of doing things, and all of those things shape my life going forward. That’s on top of the fact that “money free” periods directly save us money. All I have to give up for that is a few of the ordinary routines of doing things for a few days. I consider that an amazing bargain.

Strategy #11: The Seasoning Mixes

This is such a silly tip, but it’s saved us a lot of money over the years and we use it all the time, so it makes sense to share it here.

We have a handful of meals that we frequently make. Crockpot lasagna (as mentioned above). Grilled black bean burgers. Spaghetti with marinara sauce. Grilled cheese sandwiches and soup. Scrambled eggs and pancakes. Each of those things require specific combinations of seasonings to really bring out the flavor.

Many stores sell those seasoning mixes. Italian seasoning. Burger seasoning. Chili seasoning. You get the idea.

What we did, over the years, is figure out seasonings that both Sarah and I like, then simply make them on our own. We’ll buy low cost basic ingredients – salt, ground black pepper, basil, oregano, and so on – and then combine them in equal proportions in a shaker. Then, we just copiously use that shaker with whatever we’re making. We’ll use the “Italian shaker” to turn a mix of tomato sauce and diced tomatoes into a great pasta sauce. We’ll use the “burger shaker” to turn a black bean patty into something mouthwateringly amazing.

The thing is, this lets us hone the recipe. For example, we had a (now defunct) seasoning that we loved to put on burgers, but we both liked to also put additional black pepper on top. Now, we put plenty of black pepper into our seasoning and we don’t need the separate black pepper any more. I can put tons of garlic powder into the “Italian mix” because we all like it.

This makes meal prep very tasty for us and very efficient. I can get a wonderfully seasoned pasta meal on the table very quickly if necessary, for example, or, if I have a bit more time, I can trim some fresh herbs from outside (as mentioned above) and cook them in with the sauce and try to hone it. Having all of these options makes cooking at home so convenient and yet so tasty and varied. These mixes simply allow me to make better meals at home than I ever otherwise would have, they’re cheaper and better than what I would have ever bought at the store, and that all leads to a much happier home chef.

Strategy #12: The Store Brand First

Whenever I need to buy a relatively inexpensive product that I’ll be using up over time, I generally default to buying the store brand version first. This goes for everything from hand soap to cereal, from milk to pasta, from trash bags to toilet paper. If that store brand product serves my needs without causing a calamity, I stick to it, and I only switch to different brands if there’s a genuine problem.

Why take this approach? It’s simple. The store brand is cheap. If it meets the needs I have from buying the product, why would I ever spend more money? There’s just no reason to do so. Of course, if I can find something wrong with the product, then it’s time to move on, but often there isn’t anything wrong, just an impression that another product might do the job in some “better” way that doesn’t really have much to do with the fact that the store brand takes care of what I need.

If a store brand doesn’t handle my needs, I’ll just go peek at Consumer Reports and try out their “best buy” recommendation as a replacement.

This isn’t how I shop for expensive items that I’m going to be reusing quite often. This is just a simple strategy for many basic food items and household items that I’m going to consume and eventually (theoretically) buy more of in the future. If I tried the store brand and it did the job, then there’s no reason not to buy the store brand again. If the store brand saves money, then I’m spending less with each purchase. If my grocery list is stuffed full of store brand items (and the humble grocery list is another powerful strategy), then I’m spending a lot less on each store visit, and that’s going to add up to serious savings over time.

Bonus Strategy #13: The Journal

Almost every article you read on The Simple Dollar starts off as either a question from a reader or an entry in my personal journal, and I attribute that journal to most of the good things that have happened in my life over the last decade or so.

I write in my journal almost every day. Whenever I’m struggling with something, I simply write it all down and then piece through what the solution is. Whenever I read some kind of powerful idea for self-improvement, I copy it down in my journal and see if I can figure out how it applies in my life. I use journal entries to review almost every aspect of my life on a rotating basis.

I try to examine the areas of my life where I’m unhappy and dig into why I’m unhappy and what I can do to improve it. I try to figure out what it is that I really want out of life and I do it for a while each and every day.

That process – looking at areas of dissatisfaction in my life, brainstorming solutions, trying out those solutions, reviewing what works and what doesn’t, looking at those areas I’m unhappy with, and repeating the cycle again – is something that has given birth to almost every good thing in my life over the last decade or so, and the core of it is making it into a daily routine and actually setting aside time for it and writing it down. The clarity that comes from that set-aside time and the actual process of writing down thoughts and reflecting on them as I write has been a literal life-changer.

It’s kept me focused on my finances when my attention wandered from it. It’s helped me figure out what works and what doesn’t work and why things work and don’t work for me. It’s helped me figure out solutions to every serious problem I’ve faced.

The amount of focus and direction that journaling has brought into my life since I really turned it strongly onto self-reflection rather than just listing the events of my day has been incalculable. It’s such a simple twist, but it’s helped me figure out that so many of my perceived needs are actually really just “wants” that I don’t need to follow up on. It’s helped me figure out strategies for spending less money on all kinds of things. It’s helped me prioritize what I actually should be spending my money and time on.

It takes about ten minutes a day, but it’s been a revolution in almost every spending choice, time use choice, and focus use choice in my entire life. I can’t recommend it more highly.

Final Thoughts

These changes are all pretty small changes. They’re all about choosing to do one little thing instead of another little thing. I buy borax and washing soda instead of a big jug of laundry detergent. I simply choose not to spend money for a weekend and see what happens. I reflect on things that dissatisfy me in my journal. I make giant vats of soup. I use our slow cooker like crazy. I shop at Goodwill after letting non-urgent purchases build up for a bit.

Here’s the thing: All of those little changes are, for me, almost strictly changes for the better. They result in spending less money and often spending less time and less effort, freeing me up to tackle other things in life. These changes aren’t sea changes, but they are all little repeatable improvements that are strict upgrades for me, and aren’t those really the best strategies, in the end?

Good luck!

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The post My Favorite ‘Little Wins’: 12 Simple Frugality Tips That Just Work appeared first on The Simple Dollar.

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