Saturday, July 15, 2017

The ‘Coast’ Strategy for Retirement Savings – and How to Implement It

Erika writes in:

23 years old, graduated last summer and finally got a good job in my field making $60K in a good cost of living area. I don’t know what my future holds but right now I am single and live in a tiny low-rent apartment that I am very happy with. I spend most of my time working, hiking, and building professional relationships. So, not many expenses at all.

I will probably save 50% of my income this year, not because I save like crazy, but because I don’t spend because I don’t have any need to do so. I am in firm control of my wants.

What I need help with is actually how to save that $30-35K this year and probably in the next few years. My goal is to either retire really early if I stay single or if I have kids or something else changes I can drastically cut my retirement savings and just coast to retirement.

Look forward to hearing from you!

Like many articles on The Simple Dollar, this started off as a reader mailbag question in which the answer kept growing and growing as I kept adding ideas to it until I realized that it warranted a full answer in a devoted article. Erika’s question touches on a lot of interesting areas and points toward a retirement strategy that isn’t really talked about.

I call it the “coast” strategy.

The “coast” strategy is just a flavor of early retirement savings, except that it’s structured around starting as early as possible and saving as much as possible really early, ideally in a person’s twenties and thirties. This enables a person to have a wide variety of life choices in their mid-to-late thirties – they can make some challenging family and career choices at that point and still find themselves with more than adequate money for retirement when that comes around.

I like to think of it as being like a bicycle ride in which you choose to start at the bottom of a hill. It’s going to be some very hard work at first pedaling to the top of that hill, but when you finally reach the summit, you’re going to coast for a long, long time.

Is the ‘Coast’ Retirement Savings Strategy Right for You?

This plan is all about time. It requires that you have at least 30 years between now and your target retirement date. Every single year that you’re closer to retirement is one less year in which you can coast. This really is a plan for forward-thinking adults on the youthful side of middle age.

So, you’re young. What else is needed?

You have to be earning significantly more than you’re spending. This is the foundation of the “coast” retirement strategy. It’s centered around putting away a lot of money when you’re far away from a typical retirement age, and if you’re not earning a lot more than you’re spending, the whole thing becomes impossible.

You have to be willing (and even excited) to live a lifestyle significantly below your means. A key part of the “coast” strategy is that you’re living a lifestyle that’s substantially more frugal than what you could live if you spent all of your income. For example, in Erika’s case, she’s spending only about $25K of her $60K salary, so she’s doing this quite well. She could be living a lifestyle that costs $60K a year and not be building up any debt, but she’s choosing to live a more frugal lifestyle than that. That type of choice is vital for the “coast” strategy.

You likely need to have little or no debt; barring that, you need a large income. Having both is even better. If you come out of school with a lot of student loans, you either need to have a very high-paying job to pay down those loans while managing to also have your total expenses far below your income, or else this plan is essentially impossible. Let’s say Erika was living on $25K a year, but also had to make student loan payments that added up to another $15K a year. Suddenly, her total expenses aren’t too far below her income once you consider taxes and thus the “coast” strategy becomes quite difficult.

You should have some life goals that don’t revolve around spending a lot of money in your twenties. If your current desires and your personal ambitions for the next few years revolve around spending a lot of money on material goods, travel, and expensive “experiences,” then you’re going to find a “coast” strategy difficult to implement. Those personal goals are going to constantly gnaw at you and convince you to spend money on those things rather than your retirement plan.

That’s not a bad thing, however; people have different ideas of what they want out of life and, for some, it is very important to spend money on certain experiences and material things in their twenties before they’re married or tied down deep in a career.

The best situation to be in, in my opinion, is to simply have life goals and ambitions that aren’t centered around spending money. Perhaps your free time is centered around volunteering or community work. Maybe you enjoy free hobbies like hiking or playing disc golf or playing soccer using community resources, or reading books you’ve checked out from the library. For a bit of a quirky example, I have a friend who is deeply passionate about Bible study, and spends a few hours a day studying different Bible translations, most of which he borrowed from his pastor or was given as gifts. His expense is mostly in cheap notebooks that he fills up with his thoughts and notes.

Everyone’s different, but if the things you’re compelled to do and are excited about are low cost or free, you’re going to have a much easier time living far below your means and coasting to retirement.

Implementing the ‘Coast’ Retirement Strategy

So, you’ve checked most of those above boxes. You have a good paying job. You have the capacity to live below your means. You have goals and interests that support living that lifestyle.

How do you actually do it, then?

First, find a lifestyle that minimizes every possible expense without making you miserable. You need to consciously build a life where you feel content in your daily living and can still save a significant portion of your income.

How much is a significant portion? More is obviously better here, but if you’re incapable of saving an amount equal to at least half of your annual spending, then you’re probably not on a track that will lead to “coasting” later in life. Without that kind of number, you can’t truly reach the level needed to “coast” to retirement.

How much, exactly, is needed? Let’s say you want to “coast” starting at age 35. After that, you want to have children, go to Disney World, have a nice house, etc., and know that your retirement is secure. You’re starting at age 25. So, you have 10 years to save and 30 years to “coast.” How much do you need?

Let’s say you want to get $30,000 in today’s dollars out of retirement per year. You’ll probably have some form of basic income or Social Security to supplement that in your old age, so we’ll call that enough. If we assume an average of 3% inflation per year, that means you’ll need about $100,000 a year in retirement. You’ll need that to be only 3% of your retirement if you want to live “forever” on that money, so you’ll need about $3.3 million in 40 years.

Sounds like a lot? Maybe. But let’s assume also that you’ll be investing in the stock market with a 7% annual average rate of return for 40 years. How much do you need to save every year to get there, assuming you stop after the tenth year?

It turns out that the answer is about $31,500 per year. If you can save $31,500 per year for the first 10 years of your professional life, you can stop at that point and retire 30 years later, withdrawing $100,000 a year for the rest of your life with a high level of security. That $100,000 a year at that point is like withdrawing $30,000 a year now, of course, but it’s a pretty solid retirement income.

Naturally, the less you save per year, the less that result will be, and the more you save per year, the higher that result will be. The more years you save, the higher that result; the fewer years, the lower the result.

Still, $31,500 a year for 10 years is a lot of savings. How can a person really do that? Won’t life be “miserable”?

A big part of this is really understanding your wants and needs, because “misery” often isn’t true misery. People often feel “miserable” when they want something and it’s unfulfilled, transforming a very mild discomfort into something much more stressful and painful. In the end, most of us are driven by the things we want, not the things we need.

One key part of spending less than you earn is simply having a firm grip on what your needs are, what your big goals are, and what your wants are and how they’re secondary to those needs and goals.

Consider some of these “outside of the box” strategies. Many of them might step on the things that you want, but they don’t take away from things you need and they can certainly help you achieve your goals.

Live with your parents, with other family members, or with multiple roommates. Living with other people drastically reduces the cost of living. It cuts the cost of rent or a mortgage payment, cuts the cost of utilities, cuts the cost of insurance, cuts the cost of entertainment (you’ll likely share a cable bill and an internet bill, for example), and likely cuts into the cost of food, too.

Live without a car and rely on public transportation. A car is a symbol of freedom for many, but if you can get to most of the places you want to go using public transportation, getting rid of a car eliminates the cost of the car itself, the cost of gas, the cost of maintenance, the cost of parking, the cost of registration, and the cost of insurance all at once. That’s a lot of savings!

Prepare most of your own food from low-cost high-nutrition staples. Learn how to prepare a lot of low cost foods at home using ingredients like rice, beans, peanut butter, pasta, chicken, potatoes, sweet potatoes, and so on and you’ll find yourself with a shockingly low food bill at the end of the month. It takes some learning to know how to make meals efficiently and prepare tasty things that you enjoy, but once you get there, that skill will save you thousands a year.

Focus your spare time on free and low-cost hobbies and activities. What things do you enjoy that are free or could be? Focus your energy on those activities and hobbies rather than expensive ones. For example, I personally spend most of my time on things like hiking in the woods, reading books I’ve checked out from the library, and experimenting with strange recipes (like making homemade radish sauerkraut), all of which are low cost hobbies, indeed.

If the foundations of your life are very low cost, then it’s going to be very easy for you to live well below your means and come up with enough money to actually make a “coast” retirement strategy work. The thing to remember is that if or when you do decide to change things or your circumstances change at a later point in your life, you’ll already have retirement savings in check. Nothing is permanent – this is just the life you’re leading now and, because of that, you’re opening up a lot of opportunities later on in life.

Second, build a plan for what to do with that gap money. Given that your goal is to save for retirement, you should be focused on taking advantage of retirement savings plans that offer tax benefits for retirement savings.

These accounts come in a variety of flavors: Roth and Traditional, IRA and 401(k) and TSP and 403(b), and so on. It’s a word salad out there, so here’s a simple plan to follow that I offer to almost anyone, a plan that works very well if you’re shooting for a “coast” strategy.

First, put money in the 401(k)/403(b)/TSP plan available at your workplace up to the employer match. If your employer matches your contributions in any way, you’re going to want to vacuum up every dime of that matching money. If you have a choice between a Roth account and a traditional account, choose the traditional account, because you’re better off hedging your bets on whether a Roth will pay off more (meaning that taxes will be higher when you retire) or a traditional will (meaning taxes will be lower when you retire). Since it’s not clear at all which will be true 40 years from now, hedge your bets, and that means using a traditional account.

Second, open a Roth IRA and contribute to that to the maximum limit. Almost every investment firm offers a Roth IRA. What you’re going to want is a simple one that you can set up automatic contributions to and then simply forget about. I use Vanguard for my own Roth IRA, but many companies have solid Roth IRA offerings.

Third, contribute as much as you possibly can to your company’s plan. Once you’ve maxed out your Roth IRA, up your contributions again to your company’s retirement plan.

In Erika’s case, that means she’d be contributing a full $5,500 a year to her Roth IRA and then $18K to her employer’s retirement plan, as $18K is the annual limit for elective contributions. Anything beyond that can be saved in a traditional investment account.

But what should people invest in? With 30 to 40 years to go before retirement, you’re going to want to choose a very aggressive investment option. One good option is to simply choose the target retirement fund with the latest target date, either 2060 or 2065 as this is being written, and use that for all investments. Later on, you may want to move your money to one with an even later target date. This will ensure that your money is invested aggressively when you’re young and it will gradually become less aggressive as you age.

Third, automate that plan and leave it alone. Sign up for automatic contributions to your employer’s plan at work, and when you sign up for your Roth IRA, sign up for automatic contributions from your checking account – $100 each week with a catchup at the end of the year is a good choice.

If you automate this savings, you simply don’t have to think about it regularly. The money just goes away, pushing you toward the point where you can “coast” to retirement.

Fourth, live a thoughtful and reflective life, and change your plan only as needed. If you live your life according to what you need and what your genuine desires are, you’ll be able to pull this off and still have a deeply fulfilling life. Just be sure that when your feelings begin to change, you reflect on those changes and make sure that you’re ready to start shifting toward a “coast” mode. If you never reach that point, then you’re likely to be able to retire quite early with this strategy.

Less Extreme ‘Coasting’

Some people might be interested in this plan but find themselves without the means to save that much each year or don’t have the inclination to commit so strongly to the plan. What can they do?

You can still “coast” by committing less per year during your twenties and thirties. However, you’ll need to add back something else to compensate, either in the form of more years of buildup or a small contribution in subsequent years instead of contributing nothing at all. The math might change a little bit, but the core principle does not: by saving a ton during your early years, you can save very little in later years and still achieve a wonderful retirement.

For example, if you’re in a field where employers consistently offer matching, it might make sense to simply take advantage of that matching even as you enter “coast” mode. This means that you can save with less intensity during your buildup years and then “coast” by contributing only enough to retirement to get matching funds.

Some Final Thoughts

The “coast” strategy definitely isn’t for everyone. It requires a healthy career and a true commitment to low cost living in one’s twenties, two factors that don’t always show up together.

However, when you have the ability and the desire to use the “coast” strategy, you’ll find yourself with the means to coast to retirement before you ever hit middle age. That gives you a great deal of freedom over how to live your life at that point, with countless career and family options before you.

Good luck!

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Friday, July 14, 2017

What Would You Do to Improve Yesterday?

Over the last several years, I’ve come to believe that if you do four things daily, you’ll see steady improvement in your life: meditate/pray, get some exercise, get plenty of sleep, and write a reflective journal entry. I’ve made it my goal to do those four things every single day.

Today, I want to focus in on the value of that reflective journal entry. It’s useful for one simple reason: It provides an opportunity for you to step back and look at your life outside of the heat of the moment. When you do that – when you re-evaluate your day-to-day life outside of those moments when you’re actually doing those day-to-day things – you can often see little mistakes that you’re making, and those mistakes are often easy to fix and improve. By doing so, you directly make your life better. This applies to virtually every avenue of life: financial, professional, social, spiritual, and so on.

For me, journaling has become a morning routine. I use a paper journal and a pen and I try to find a quiet spot somewhere, usually on the deck behind our house. I enjoy the morning sunshine and I reflect on two different things. First, I make a list of five or so things I’m grateful for right then. My children. The sound of the birds. A sleepy kiss from my wife that morning. Good health. Whatever it is in my life that I feel content and joyful about at that moment gets listed.

The other part, though, is the one I want to talk about. I think about at least one thing that I could have done better yesterday and I write about it. I write down what I did wrong, why I think it was wrong, and what I could have done better.

So, to start, what did I do wrong? I simply try to think about something that I did yesterday that doesn’t live up to my goals for myself or what I expect out of myself. Maybe I spent money foolishly. A few days ago, I bought an expensive board game and blew my monthly hobby budget to smithereens, for example, which was clearly a mistake. A while back, I chided myself for making a mistake on a tax return.

I’ve made mistakes in how I relate to people. I’ve made mistakes in keeping up with personal goals. I’ve made mistakes in parenting and in marriage.

The goal is to come up with something that I didn’t do as well as I could have yesterday and simply write about it.

Then, I ask myself why I think that it was a mistake. Clearly, I had some reason for choosing the path that I chose. Why was it a mistake? Why were my reasons in the moment so flawed?

For example, let’s take that recent board game purchase. I spent a lot to buy a fairly expensive game at cost, but it was a title that has been out of print for a while and I was almost shocked to see it on a store shelf. I chose to buy it because I perceived that I would likely not have a chance to do so again.

The question, though, is whether or not it still made sense, even given that. Should I have bought it, even knowing I blew my hobby budget to smithereens? Should I have bought it knowing that I have other board games right now that I’m excited to play, and that I have other hobby items that I’m thinking about purchasing soon? I felt that the purchase was a misstep, looking back, but why? Why was it a misstep?

Another recent mistake that I wrote about came from an awkward social situation. Sometimes, in group settings, I simply don’t know what to say, so I step back and just listen and don’t say anything at all. Usually that’s fine, but later on I realize that I probably should have said something and been more involved. This happened recently when I was in a group of people discussing funding for a local charity. I had a suggestion that I thought was really useful, but my introverted nature made me stay quiet. Looking back, I shouldn’t have stayed quiet, because I could have actually been a helpful part of that conversation and could have strengthened some community relationships.

After that, I ask myself how I could have done it better. I usually visualize myself actually not making that mistake and making the better choice. I visualize the better outcome from it. I’ll tease that around in my head a little bit and then write about it. The goal is to think about a better way of doing things rather than just chiding myself for a mistake. I also look for ways to fix that mistake, or to avoid repeating it going forward.

With the game purchase, I probably shouldn’t have purchased it at all, or, if I did, I should have sold other games to pay for it or flipped it immediately for a profit. Honestly, I have other games to play. So, what I ended up doing first is visualizing myself not buying the game. Then, I resolved to actually sell off a couple of other games to even things out.

With the conversation, I visualized myself actually participating in that conversation with a positive outcome, so that I would feel more prepared to speak out in similar situations going forward. I also took steps to contact a couple of people in the conversation to share what I knew as a follow-up. I also started listening to the audiobook of How to Win Friends and Influence People again, as I see some tendency in myself to revert back to being publicly introverted lately.

That three-pronged approach – this is a problem, this is why it’s a problem, this is what I can do to fix that problem – is a great way to evaluate the day that’s gone past and slowly, step by step, craft myself into being a better person.

Some days, I’ll come up with two or three mistakes and, if I can, I’ll write about each of them. I’ve had entries that have run on for pages, provided that I have 45 minutes or an hour to write them all out. Often, though, I keep the entry short and stick with just one mistake paired with four or five things I’m grateful for.

Remember, the philosophy under this is that my choices are the one factor shaping my life’s destiny that I can control, so it’s worth my time to shape myself to aim toward the best possible outcome. That takes time, because there are so many dimensions of life upon which we can improve. Our good financial choices. Our knowledge. Our social skills. Our ability to organize information. It goes on and on and on and on.

It’s also invaluable to remind myself that I truly do have a good life and that I don’t need to buy things to make it better. For me, reflecting on gratitude reminds me that the true frontier of achieving financial independence and a better life really is in improving myself. I have a good life as it is, and the surest way I have for undermining that is in bad personal choices. Buying more things, for example, generally won’t improve my life very much, but it can undermine the financial stability upon which this good life rests. What more do I really need? My gratitude reflections remind me of that, and it supports that reflection on what I can improve about yesterday.

I strongly encourage you to give a trial run to a daily routine of asking yourself what you can improve about yesterday. Commit to doing it for a few weeks and see if you notice any life improvements. Along the way, consider pairing that evaluation of yesterday with some thoughts about the things you’re grateful for each day.

You might just find that, together, those things put you in a much better mindset to tackle the challenges of your life, from financial and professional challenges to things like parenting and personal relationships. These types of simple reflections have been a key part of improving my own personal finance choices over the last several years, as well as many other dimensions of my life.

Good luck!

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Thursday, July 13, 2017

Life Isn’t Permanent: How to Handle (and Utilize) Impermanence in Your Money, Life, and Career

“‘All conditioned things are impermanent’ — when one sees this with wisdom, one turns away from suffering.” – The Buddha

As anyone who has read this site for very long can probably guess, one of my passions is learning about new philosophies and religions and intellectual traditions in order to see what the wisdom of others can teach me about my own life. I incorporate bits and pieces of many different things that I pick up from books, conversations, and life experiences into a hodgepodge of ideas by which I govern my life, a mix that I’m constantly adding to and occasionally removing bits from.

Today, I want to talk about one of the things I picked up from Buddhism – the idea of impermanence. In fact, I consider the focus on impermanence and its meaning to be perhaps the most valuable lesson on modern life that most of us can take from Buddhism.

One of the central tenets of Buddhism is the idea that everything has a life cycle. It comes into being, grows, ages, withers, and decays. People do this. Ideas do this. Thoughts do this. Buildings do this. Plants do this. Buddhism argues that everything does this.

If you take that type of thinking a step forward, you’ll realize that Buddhism thus argues that tomorrow will be different than today and will consist of a mix of ideas and things from today that have aged a bit as well as new ideas and things, each of which are on their own cycle of life.

At the most cursory of glances, this seems to be a depressing philosophy. It means that there’s a constant acceptance that everything is on an endless march toward its end! How can that be joyful?

Actually, it is quite joyful. If you accept that an end is a natural part of everything, two things happen. First, you already have some degree of acceptance that everyone and everything will eventually meet an end, and that’s a normal part of life. More than that, though, you recognize that your time with which to enjoy and appreciate many things is short. Even your own life is short.

When this idea first really clicked with me, it brought a period of intense joy into my life. I began to realize that nothing was permanent, so I needed to say and do the things that were really important now rather than later. I started telling many of my family members and friends that I really cared for them, because I didn’t want me or them to leave this earth without saying that, and recognizing and accepting the impermanence of both of us nudged me in that direction. I started really appreciating today more and more, and I also started appreciating little details of life.

Right now, for example, as I write this, I can hear a robin chirping. I know that it’s a young robin, almost assuredly one of the robins that hatched in a nest on our property. I had the joy of seeing the blue robin’s eggs in that nest this spring and now I can hear robins chirping, likely those same tiny chicks I witnessed in May who have grown much larger in the ensuing months. That robin will eventually grow older and may serve as a parent for another nest of robin’s eggs somewhere else. That chirping robin in the warmth of summer is not permanent; there may be another robin next summer, or there may not be. Why not enjoy it now?

I love the feeling of warm sun on my skin, a sensation that does seem to be very, very common, but in truth, there will come a time in my life where my chances to feel that nice sensation will be very limited.

For now, though, why not appreciate it? The same is true for almost every little experience I have in my day that brings me joy: the smells and sounds of walking in a forest, the feel of a fountain pen etching across paper, the gentle soreness the morning after exerting myself, the feeling of my wife’s skin on my fingertips and the taste of her lip balm after a kiss, and so on. Those things are little joys; why not slow down a bit and appreciate them? I won’t always be able to do so, after all.

Buddhism takes this core idea of impermanence and turns it into what it calls the “four noble truths.” These are, in order (and with some variation based on translation):

There is suffering. Life contains disappointments, failure, and loss. We don’t always achieve what we want. Things we relied on eventually wear out and fall apart. Our things, our relationships, our own bodies and minds. Our children grow up. Our friends and loved ones die. Others drift away. The things that once made us passionate can sometimes dull over time.

Suffering has a cause. The cause of suffering is the pursuit of things which decay. We work so hard to obtain things that are fleeting, and when those things drift away, we experience suffering. For example, many parents often struggle to watch their children grow up because they are attached to those people in their childhood state, and seeing that state drift away is difficult.

The cessation of suffering exists. The cause of suffering is our attachment to things that are transient. We become attached to having things as they are, in their current state. The cessation of suffering comes when we accept that things will change and remove our attachment from the current state of things. For example, love your children as they are, not as they once were, and don’t lament the change.

There is a path to the cessation of suffering. How do you do that? How do you let go of things as they currently are and accept that they change? It’s not simple, but there is a path. Buddhism offers an eightfold path to this type of perspective on the world, consisting of perfected vision, perfected emotion and aspiration, perfected speech, perfected action, perfected livelihood, perfected effort, perfected awareness, and perfected concentration. Practicing that path makes it easier to understand the world as impermanent and remove your attachment to a particular state of the world while still loving it.

wooden buddha statues

All of this may seem interesting, of course, but what exactly does any of it have to do with personal finance? This is The Simple Dollar, after all. Let’s start heading in that direction.

The first thing to realize is that nothing in your life is really permanent. The way your day-to-day life is right now is not the same as it always was, nor is it the same as it always will be. Your job will change. The people in your life will change. Your financial situation will change. Unexpected events will happen and have an impact and change the course of things. Change is the only guarantee.

Knowing that such impermanence is the reality of things, we can prepare for it. We can do things today, when things are as they are right now, to prepare for an uncertain future, so that we’re better able to enjoy the unexpected good things and better able to sustain the unexpected bad things. The only certainty is that the future will contain new things and the fading of old ones, so we should prepare for it.

How do we prepare for it? One key way that many people take is simply having an emergency fund. In other words, just stick money into your savings account for whatever may come, and only tap it when you need it. I do this automatically, so I don’t have to concern myself with it on a daily or weekly basis. It’s simple – just instruct your bank to transfer a specific amount of money each week from your checking account to your savings account, and then don’t touch the savings account until a need arises.

Beyond that, we can save for things like retirement or for the education of our children. We don’t necessarily know that those things are coming, but we can see that many of our paths lead in those directions and that those paths will be much easier for us to follow if we take action today and save for those things.

Another useful way to prepare for an impermanent future to improve yourself. The stronger and more varied your personal skills, the easier it is to handle whatever changes may come your way in life. Work on your communication skills, your physical fitness, your self-control, your ability to not react emotionally to things, your information organization skills, your carpentry skills, and so on. All of those skills widen the possibility that you’ll be able to handle whatever changes may come in your career and your life. You can do this by taking online classes or getting involved in groups that help build skills, like Habitat for Humanity.

Another aspect of impermanence worth considering is the fact that the person you are tomorrow will be different than the person you are today. I often compare myself to who I was 10 or 15 years ago and the truth is that many of my interests and passions and uses of time are quite different than they once were.

What does that imply about your spending? Don’t buy anything you can borrow. I might be really tempted to buy a book or a game today, but will I still like it in five years? Many of the board games I bought several years ago are ones that I have no interest in playing today. Many of the books I bought several years ago are ones I have zero interest in re-reading. Why own these things? Borrow them from the library. Go to a community game night and play them.

Not only that, having piles of stuff means it’s harder to move to a new place. It’s harder to keep things clean and organized. It’s harder to move on to a new phase in life. Your stuff holds you back. It holds you in a spot in your life that might be fading away. In other words, it’s a call to minimalism. More and more, I’m finding that I want to have less stuff because it means that almost everything in life is easier going forward.

It means less money spent on physical items and thus more money that’s free to save for the future or to use to improve myself. It means less time and effort spent on maintaining things. It means more time to devote to other things that I care about and more time to devote to actually using the things that I do still own.

It also has interesting implications regarding your career. Don’t be attached to your job. Instead, look at it as a stepping stone, a place where if you do your best, you’ll be setting yourself up for more options later. (Again, we’re getting back to that theme of self-improvement that runs through all of this. Diversifying your options down the road means you’re better able to handle whatever changes may come.) What skills can you build here? What relationships can you build? What projects can you complete so well that you can show them off in a portfolio or on a resume? If you build genuine value in yourself, then you’re not just taking from your employer, as they have a more valuable employee, too. If you hit a home run with a project at work, you both win. If you build a new skill, you both win.

The final implication I want to discuss in this is one that has become very central to my life. Live your life as though today is the only one that matters.

Many people see that as an excuse to be irresponsible. I don’t. I actually see it as an excuse to be very responsible and productive.

Here’s why: although the statement makes it clear that your focus should be on today, it doesn’t say that your actions don’t have consequences. Everything you do is like tossing a rock into a still lake – it has waves that ripple out into the future in many ways. Many of your best days are the ones where you cast powerful positive waves out from the rocks you throw in. In other words, your best days are the ones where you make the most progress you can on the things you care about by focusing on the moment, by focusing on what you can really do today to make things better.

I can’t control the future, of course, but I can do things today that will roll forward with positive impact and potentially make the future better.

I like to use my children as an example. My children are constantly changing. I look at a picture of them from just a few years ago and I am stunned at the changes in them. I know that if I saw them as they will be a few years from now, I’ll be blown away at the changes.

However, I can’t do a thing about the past, and I can’t really do anything directly about the future, either. The only tool I have to guide them on a great path is right now – this very moment. I can choose to pay attention to them, to listen to them. I can choose to spend time with them in which they are my genuine focus. I can choose to control my emotions when they make a mistake and use every ounce of focus I have to guide them well. Will it be enough? Maybe. Will it be another key segment in a long journey? Absolutely.

You can look at finances in the exact same way. The choices you make today regarding your spending either cause money to drain out of your savings or allow money to stay there for your future self. It is only today when you have that choice – you can’t fix the choices of the past, nor can you do anything about what may happen tomorrow. You only have today to make the best choice.

In order to fuel this concept, I try to avoid looking at myself as unchanging. I will not live forever. I will age. I will not be as physically strong in the future. I will grow tired more easily. My mind may become a little muddled. In short, I’m probably as strong – or close to as strong – mentally and physically right now as I will be at any point after this. Why would I not, then, choose to bear some extra burdens now so that the weight is lifted from the shoulders of my future self? I don’t want to be struggling with work in my old age. I don’t want to be trying to handle a child that I didn’t give my full commitment to as they were growing up. I don’t want to be trying to build a career or trying to save desperately for retirement.

It is far better for me to take on the harder tasks now, when I know I can handle them, rather than later on, when I may not be able to. Life is impermanent. I may not be able to do these things later. I may not be as strong later in life. I may not be as focused later in life. I may not have a great job or a great career later in life. I have all of these things now. Why not use them before they slip away, as things do?

Yes, of course, there is that possibility that I might die tomorrow, that this is my last day, so why shouldn’t I enjoy it? On the other hand, if this is my last day to make a mark on this earth, what better way to spend it than by spending some meaningful time with my children or to do something that leaves as much behind as possible for them as they grow? What better way to spend it than to enjoy the wonderful things that the world already has on offer for me, like the sunshine on my skin and the things I already own, without throwing away elements of my future out of some sense of the unknown?

If this really is my last day on earth, I want to leave it in a state where Sarah knows that I love her, that my children know that I love them, that my parents know that I love them, that my friends know it, too. I want to go away knowing that I found joy in this world without just giving away everything I worked for. I don’t achieve any of that by shirking responsibility and spending every dime that I have. I achieve that by working as hard as I ever have, by focusing on the things that I care about the most in my life, by enjoying the pleasures I already have, and by accepting that none of this is permanent. That’s a pretty amazing day, and a fitting cap to a life well lived, I think. I can send no better ripples into the future than those.

“Ardently do today what must be done. Who knows? Tomorrow, death comes.” – The Buddha

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The Overlooked Job Skill That Could Be the Key to Your Next Raise

It’s time to come clean about something that brings me shame: Up until a few years ago, I was a “hunt-and-peck” typist. I only used five fingers, and I had to look down at the keyboard every few seconds while I worked.

I know, I know. I was supposed to learn “touch typing” — all 10 fingers dancing around the keyboard without looking down, choreographed by muscle memory — during a middle school computer class. Unfortunately, I spent more time secretly playing computer games with my friends than focusing on learning the craft of typing. (Sorry, Mrs. Ames.)

When I started freelance writing, I figured it was time to get my act together and learn how to type like an adult. I was sick of slogging through assignments doing the five-finger shimmy.

I eventually got my act together, and I’m so glad that I did. Not only am I more efficient with my work, but the latest research suggests that remote workers who can type well are giving themselves a big leg up in the workplace. Touch typing on a physical keyboard, so overlooked in a world of smartphones and voice recognition devices, could hold the key to quicker promotions, more prestige, and higher paying positions.

The Research

A recent study out of the University of Iowa showed that those who can type quickly are more likely to emerge as leaders of remote groups. That’s a direct correlation between typing speed and being perceived as a high performer.

It goes without saying that high performers at work get promotions and raises more quickly. Thus, better typing skills should lead to higher salaries. Somewhere, Mrs. Ames is reading this and thinking, “I told you so!”

The Iowa study found that “individuals who can type faster are able to more quickly communicate their thoughts and drive the direction of a team.” In my experience, that is spot on.

I’ve been a part of innumerable Skype chats with people from all over the world. When things get tense and critical business decisions have to be made, my chat window will fill up with little “thought bubbles.” These indicate that multiple people are typing at once.

Whoever gets their thoughts written (coherently) and sent the fastest has the best chance of driving the conversation. It’s simply human nature. We want to follow a fearless leader, and quick, decisive writing indicates someone who is bold and confident. My company has a fairly flat structure, where input from many voices is taken into account. In offices like that, speed definitely matters.

Furthermore, the nature of both chats and email chains is such that any responses must at least acknowledge the content that came before it. If you completely disregard what someone has said before you, you run the chance of coming across as arrogant and also confusing people. If you want to have your voice heard, it’s best to be a fast responder.

But accuracy matters as well. If you’re always replying quickly but you misspell a bunch of words, that will reflect poorly on you. The researchers noted that individuals were only perceived as leaders after “taking into account both speed and accuracy.”

That being the case, you want to take the advice of legendary basketball coach John Wooden: “Be quick, but don’t hurry.” You’ll be much better equipped to do that if you’re a confident touch typist.

The Rise of the Remote Workforce and ‘Business Chat’

Each year, more and more Americans are spending time working outside the office. As of 2017, “43% of employed Americans said they spent at least some time working remotely,” according to the New York Times.

These workers are relying more and more on Skype, Slack, and similar “business chat” technologies. Slack, in particular, has been growing like crazy. The young company is already valued at over $1 billion. There’s a lot more “business chat” going on via keyboard communication than even just a few years ago. Meetings are dying, and text-based chats are taking their place.

If the rapid adaptation of chat services by big companies is indicative of a trend toward more written communication in the workplace, than employees who can type clearly and quickly will only increase in value over time. This applies whether you work remotely or not.

Resources: Teach Yourself How to Type

If you’re hiding in the hunt-and-peck closet and you’re ready to step out into the light, a quick Google search for “how to type” will serve you well. There are tons of free online tools to help you improve your skills. I found the free lessons at Typing.com to be intuitive and challenging. Plus, they make it easy to chart your progress.

Most community colleges offer typing courses as well. If you learn better with an in-person instructor, those would be a great option.

In my case, breaking my bad habits was really hard at first. Muscle memory is powerful. Try eating your morning cereal with your weak hand, and you’ll get a small feel for just how difficult it is to build up new fine motor skill pathways.

But, keep in mind that this is not like learning to speak fluent Mandarin Chinese. Within a few months, you can go from being an embarrassingly slow typist to one that is above average. I am living proof.

Summing Up

If you’re interested in learning one skill that has a low barrier of entry and a high return on investment, touch typing is a great choice.

Steve Charlier, who led the Iowa study on typing and leadership, puts it best: “Individuals who can type fast are simply able to communicate more information within a given period of time. In turn, adept users of electronic communication are more likely to set strategy, drive conversations, and influence work teams as a whole.”

If you have dreams of improving your standing at work, becoming a great typist can be one of the keys to making them a reality.

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Wednesday, July 12, 2017

10 Smart Ways to Use Leftover Bread (Smart Staple Strategies #6)

This is part of a short summer series covering smart strategies for using leftover staple foods – things like rice, beans, pasta, and so on. Here’s what you do when you cook a bit too much and don’t know what to do with the rest!

I’m a huge fan of homemade bread. I’ve made it at home many, many times, to the point that I could basically do it blindfolded, and it’s always amazing when you pull it out of the oven, let it cool, and slice it for the first time.

The problem with homemade bread, though, is that it goes dry and becomes stale so quickly. The first time or two that you use that loaf, within several hours of it coming out of the oven, it’s amazing. After that… staleness sets in surprisingly quickly, even if you take steps to preserve it. The same thing happens with bakery-fresh bread, too. That’s part of the reason that store aisles are stuffed full of bread that’s got a lot of extra stuff on it, so it’ll last on store shelves.

This doesn’t stop me from making homemade bread or picking some up from a bakery every once in a while. I love fresh bread! However, I’m often faced with the remnants of a loaf that’s gone stale and dry. You can’t just slice it for a sandwich and it’s pretty crusty and stale for simply eating it, so what can you do with it?

Here’s my repertoire of uses for stale homemade or bakery bread.

Start off the day with some French toast. Stale bread actually makes for better French toast than fresh bread, in my opinion. The dried nature of stale bread seems to soak up the beaten egg very well and makes for a more consistent piece of French toast on the plate. In fact, I’ll often intentionally keep aside part of a loaf of bread early in the week for some tremendous French toast for the family on Saturday or Sunday morning.

It’s easy. Just beat one egg in a bowl for every four slices of French toast you want to make. For every egg you’ve beaten, mix in a teaspoon of vanilla, a half teaspoon of cinnamon, and a quarter cup of milk. Dredge a piece of stale bread through this mix, flip it over in the mix, let it rest for fifteen seconds or so, and then put it directly in a warmed skillet over medium heat. Check the bottom and flip it when it’s golden. When the other side’s golden, serve it with some syrup. It’s amazing, and stale bread makes it even better!

Toss it in the toaster for regular toast. While I don’t like using stale, dry bread for sandwiches, I certainly don’t mind toasting it – after all, toast is simply dry and slightly crisped bread, right?

Just toss a piece of stale bread in the toaster, brown it thoroughly, and then spread whatever you like on it. I personally love spreading peanut butter on it and then slicing a banana on top of that, but simply spreading some butter on top is delicious with a cup of tea.

Turn it into breadcrumbs, which can be used for countless things. Stale bread is perfect for turning into breadcrumbs, which can be used as a thickening agent in all kinds of dishes as well as a great breading for various dishes.

It’s easy. Just preheat your oven to 250 F, place slices of stale bread right on the oven racks, and leave them in there for 30 minutes. Remove them and they’ll crumble easily by hand. You can also toss them in a blender or a food processor to make finer breadcrumbs.

I like to use breadcrumbs to thicken soups, to “stretch” things like meatloaf, and to bread mushrooms or fish filets.

Bake the stale bread into croutons for an amazing salad. Another strategy is to simply chop old bread into one inch cubes, put them on a baking sheet, and bake them in the oven for about thirty minutes at around 250 F to turn them into fresh croutons, which are perfect for salads.

You can create a lot of variations on croutons by dipping them in olive oil or adding seasonings – basil, oregano, garlic, and so on. It really depends on what flavors you want to imbue into the croutons.

Use old bread as a topping for French onion soup. Another great use for old, dry bread is to simply put it on top of a bowl of French onion soup. This is a great recipe for French onion soup in which you can use almost any stale bread.

There are few things I enjoy more on a cold autumn or winter day than a bowl of French onion soup with a thick slice of bread on top that’s soaked up some of the juices of the soup. It’s just amazing.

Jazz it up and bake it into bruschetta. Bruschetta is basically crusty bread with toppings, so bread that’s somewhat stale is almost perfect for this appetizer.

Just brush slices of dry bread with olive oil, bake them in the oven at about 300 F for a few minutes, then top them with whatever sounds delicious on bruschetta. (While the bread’s out of the oven, raise the heat to 450 F.) I like to used diced tomatoes, mozzarella, and basil, of course, but add whatever sounds good to you. Once you’ve topped the bread, return it to the oven (at 450 F) and bake for about seven minutes. It’ll be an amazing appetizer or side dish!

Use old bread as the backbone of a breakfast casserole (or strata). My mother in law is master of this type of breakfast casserole, which is basically just dry bread in the bottom of a casserole dish covered with scrambled eggs and other toppings. It’s really easy to make – you almost can’t go wrong.

Just take a baking dish or casserole, coat it with oil or butter to prevent sticking, and add several slices of bread. For every slice you add, beat two eggs in a bowl (so, if you’re using 6 slices, beat 12 eggs) along with whatever savory flavorings you’d like – diced onions, mushrooms, bell peppers, cooked breakfast sausage, and so on. Pour that mix right onto the bread, then top it with a layer of cheese. Stick this in the oven overnight.

The next morning, preheat the oven to 375 F and put the casserole in there, covered. Bake for about 20 minutes, then uncover it and bake for another 10 to 20 minutes, checking the middle for doneness. Serve it immediately for a wonderfully savory breakfast.

Alternately, turn it into a sweet (or savory) bread pudding. Stale bread is just begging to be used in a bread pudding. I can’t even count or describe the number of different bread puddings out there; suffice it to say, many of them are just delicious.

A few of my favorite bread puddings include this cinnamon roll bread pudding (for breakfast), this simple cheese and herb bread pudding (for dinner), and this chocolate turtle bread pudding (for dessert). All work great with dry, stale bread.

Make a stale bread salad (also known as panzanella). This is a great use for bread that’s already fairly crusty, but has become really crusty due to not being used. If you have a loaf of crusty Italian bread that’s become too crusty to use normally, use it for panzanella.

Just chop your leftover bread into one inch cubes. Then, for every four cups of leftover bread you have, add a diced large tomato, 1/4 of a cucumber (diced), half of a dice red or yellow bell pepper, 1/4 cup chopped fresh basil, a quarter of a medium onion (diced), 1/4 cup extra virgin olive oil, 4 tablespoons red wine vinegar, and salt and pepper to taste. Toss all of this together and let it rest in the fridge for about 30 minutes. It’s amazing.

In the end, though, my favorite use for old bread is for grilled cheese sandwiches. I vastly prefer older, stale bread for grilled cheese sandwiches. If I’m going to have a grilled cheese sandwich, I’m going to do it right – it’s going to be gloriously tasty and cheesy and gooey and buttery and unhealthy – and stale bread does this wonderfully.

I just take two pieces of stale bread and thoroughly butter one side of each slice. I place one of those slices in a hot skillet over medium-high heat, put a few slices of cheese on there (gruyere is my favorite), and top it with the other slice (perhaps slipping a tomato slice in there as well). I peek at the bottom and when it’s nice and golden brown, I flip it over, cooking the other side until it’s golden brown. Delicious.

Don’t let old bread worry you too much. Even if it’s dry and a bit stale, there are lots of things you can do with it that will make your mouth water!

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Here’s How We Took a $20,000 European Vacation for $3,500 This Summer

More than a year ago, I started dreaming up a plan to take my family on one of our longest trips yet – a nearly three-week vacation to Europe. The driving force behind this trip was somewhat selfish — mostly because my husband and I love Italy so much and were desperate to go back. In the meantime, we wanted to take our kids on a fun and educational trip somewhere new and interesting.

Obviously, I wanted to travel affordably, too. But as you can imagine, planning a three-week trip to Europe without spending too much is quite a challenge.

Our budgeting efforts really deteriorated when we decided to bring along a caregiver for our kids. Our children are ages 6 and 8, after all, and I knew my husband and I would want to do some exploring on our own. And since they typically crash early (around 8 p.m. at home), a caregiver would save us from being trapped in our rental condo every night. So, we wound up planning a trip for five instead of four, which made our lodging and transportation options a lot more expensive. Obviously, we would need a miracle to make this work, both logistically and within our budget.

Over the course of a few months, I dug around to determine what type of financial commitment this type of trip would take. Of course, I also leaned heavily on rewards credit cards to build up a stash of points and miles that would bring our travel dreams to life.

Through signup bonuses and a ton of regular (planned) spending, we built up a stash of rewards points to pay for the bulk of our standard travel expenses. And now that we’re finally home, I’ve added it all up. Amazingly, we scored a $20,000 vacation for around $3,500 – plus a little more if you count the fact that I had to hire a dog-sitter at home.

How We Paid for Our European Vacation with Rewards

Over the course of 19 days, we flew into Munich, Germany, for a few days of fun, spent nearly two weeks in Italy, then enjoyed five days exploring some of the most scenic areas in Switzerland. Fortunately, most of our trip was paid for with credit card rewards and not with real money.

As someone who writes about credit cards for a living, I have (or have had) nearly every rewards card out there. But, the rewards I redeemed for this trip came from four specific cards and programs – the Platinum card from American Express (both the personal and business version), the Chase Sapphire Reserve, the Chase Sapphire Preferred, and the Barclaycard Arrival Plus™ World Elite MasterCard®.

Nearly half of the expense of our trip was consumed by airfare. For five round-trip flights into Munich and home from Zurich, we used 250,000 American Express Membership Rewards points transferred to Air France/Flying Blue, plus around $490 in airline taxes and fees. The retail value of these flights was around $1,800 each – or $9,000 total.

Obviously, we had to stay somewhere, so we booked two hotels and three Airbnb vacation rentals across five cities – Munich, Verona, Rome, Florence, Grindelwald, and Zurich. While it might seem like rental condos would be more expensive, this was actually one of the best options available to us since we had five people in our group. Plus, staying in a vacation rental afforded us a kitchen and even a washing machine at one point, which helped us save on food and laundry.

Here’s how much we paid for each of our lodging options, along with how much each stay was worth:

  • Munich: Booked Hotel Meininger with Chase Ultimate Rewards, normally costs $120 per night.
  • Verona: Booked a $200 Airbnb rental, paid with cash back from Barclaycard Arrival Plus World Elite MasterCard.
  • Rome: Booked five nights in a cheap Airbnb, paid $691 with cash back from Barclaycard Arrival Plus World Elite MasterCard.
  • Florence: Booked four nights in an Airbnb rental for $950, paid with cash back from Barclaycard Arrival Plus World Elite MasterCard.
  • Grindelwald: We spent two nights at Mountain Hostel for $400, paid with cash back from Barclaycard Arrival Plus World Elite MasterCard.
  • Zurich: We booked two rooms at Hotel Fly Away near the airport with Chase Ultimate Rewards points, normally cost $271.

(We also spent two free nights in Lucerne, Switzerland, due to a work obligation, but I didn’t count those nights in this run-down of our costs.)

We took trains in between each of our city stops, and I was so grateful for the opportunity. Flying with kids isn’t easy, but train travel is a piece of cake. In total, we paid approximately $700 in train fare to get from Munich to Verona, Verona to Rome, Rome to Florence, then Florence to Grindelwald. While most of the trains were cheap (around $20 per person), it was the Switzerland-bound train that really got us; that set us back $400 on its own.

In addition to these transportation expenses, we rented a car for three days in Switzerland via Chase Ultimate Rewards. Although we paid with points, the retail cost of this benefit would have been around $300.

How We Paid for Sightseeing, Day Trips, and Epic Fun

While we paid for the nuts and bolts of our trip with a combination of money, cash back via credit card rewards, and Chase Ultimate Rewards points, we paid for the bulk of our “fun” with Chase points. During our three-week trip, we did all the fun touristy stuff we wanted to do and saw some amazing sites with our kids. The best part is, all of our formal excursions were free.

Here are all of the “activities” we booked with points from our Chase credit cards, along with their retail value:

  • Pitti Palace and Palatine Gallery Walking Tour in Florence: $100 for two of us
  • Small Group Florence Duomo and Museum Tour: $250 for five of us
  • Pizza and Gelato Cooking Class in Chianti: $375 for five of us
  • Nighttime Vatican Museum Tour with Dinner: $228 for two of us
  • Cinque Terre Day Trip from Florence: $375 for five of us
  • Colosseum Small Group Underground Tour: $600 for five of us
  • Pompeii and Amalfi Coast Small Group Tour: $1,355 for five of us

In addition to these rewards-fueled activities, we paid cash for several fun side trips while in Switzerland. For example, we paid $140 (expensive!) to ride a mountain gondola to First in Grindelwald so we could hike to a mountain lake. While this was a big splurge, the views made it worth the expense.

Viv Mountain

My daughter admiring the Swiss Alps

We also drove our rental car from Interlaken to nearby Kandersteg to ride an amazing alpine slide – you know, the kind you see in viral videos. The adventure set us back around $100, but again, this was a once-in-a-lifetime opportunity we won’t forget.

Alpine Slide

Lastly, we paid $20 to spend a day swimming in the world’s most beautiful lake in Lungern, Switzerland. This was money well spent for the views alone!

The tiny town of Lungern, Switzerland

The tiny town of Lungern, Switzerland

Other Expenses We Had to Plan For

Before we left on our trip, I budgeted $200 per day for food, miscellaneous expenses, small souvenirs, and taxis. That sounds like a lot, but it’s easy to spend that much (and more) when your group includes five people. On top of that, I didn’t want to cheap out on the food or our experience since we had traveled so far and I’d been planning for so long.

I mean, who wants to go to Italy and avoid pizza, delicious pasta dishes, and limoncello? Not me!

Of course, we had saved and set aside the money we needed before we even left on our trip. Fortunately, we spent less than I’d planned on food, miscellaneous, and taxis. Overall, our grand total for food and miscellaneous spending was around $2,500. Keep in mind, however, that’s after we paid more than $900 out-of-pocket for trains and other components of our trip.

Final Thoughts

Paying $3,500 or more for a vacation isn’t something we plan to do every year, but we figured this year was perfect since our kids are still so young and curious. They’re also not yet bogged down with summer activities that make traveling more difficult.

Was it worth it? Absolutely. I’ll never forget my children’s faces as they studied the death casts in Pompeii, rode an alpine slide down the side of an actual Alpine mountain, or listened to the horrific stories surrounding the history of Rome’s Colosseum. Not only did they learn a lot, but we had weeks of uninterrupted fun where we could bond as a family. And, that’s what vacation is about anyway – spending time with the people you love.

The kids exploring Pompeii, listening intently to their guide

The kids exploring Pompeii, listening intently to their guide

If you’re considering a similar trip or any trip abroad, my advice is to research credit card rewards strategies, start planning early, and of course start building a travel fund as soon as you can. While it’s not that hard to pay for airfare or hotel stays with credit card rewards, travel is never “free.”

To plan a long trip that’s also affordable, you’ll need plenty of time, an attention to detail, a solid rewards strategy and, most importantly, a commitment to put some money in the bank beforehand.

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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Have you ever planned a long trip using rewards? How much did you save and spend? Please share in the comments below!

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Tuesday, July 11, 2017

Personal Finance and Life Contentment

One of the biggest struggles I’ve had with my life throughout my twenties and thirties was with this idea that I had to be happy. If I didn’t feel happy, then I was really missing out on life, and that sentiment would often make me feel sad. It would drive me to try to seek some nebulous sense of happiness.

Over time, though, I’ve come to realize that genuine happiness is a nebulous and rare thing. It’s something that you can grab onto for a little while, but it will always fade. Eventually, you come back to kind of a “default state,” and I’ve come to realize that the best moves you can make in life are the ones where you can maximize that “default state” rather than constantly shooting for happiness.

In other words, most of my journey in the last five years has been to find a state of genuine contentment in my life, not happiness. I view contentment as a state where I am generally pleased – and not displeased – with the state of my life and the ground is fertile for bursts of happiness and bursts of sadness are rare. I am not seeking a state of constant gratification or joy, but simply contentment.

(Please note here that I’m not talking about clinical depression or other mental health challenges, but the day-to-day struggles that many people have with seeking happiness and contentment. Mental health challenges are serious and far outside the realm of what I am discussing here, and if you find that you’re struggling with finding any non-negative feelings in life, you should speak to a mental health professional immediately.)

Here are a few of the things I’ve discovered over the years on my own journey to find happiness and how I began to realize that contentment is a much better goal.

First of all, happiness is extremely fleeting. I certainly don’t persist in a state of true happiness for long periods, nor does anyone else I know. Sure, I experience happiness fairly often, but that feeling goes away pretty quickly even at the best moments. I fall back to a default state.

Why not strive to be happy all of the time? The truth is that when something special happens, I want to have an elevated feeling to go along with it. If you strive to maintain a special feeling all of the time, soon, nothing feels special.

More than that, when you buy happiness, it becomes more and more and more fleeting. It might feel wonderful to go buy something you’ve been wanting for a while and you feel a burst of happiness when you do it, but when you go back to that well again, it’s not quite as joyful as before, and the joy becomes less and less and less until the purchase becomes meaningless.

The default state – which I call contentment – is an overall sense that things are good, but isn’t strongly joyful in and of itself. I don’t feel constant happiness, but I do have a sense that things are in a good place in my life. I have a life that is full of things that may naturally bring about happiness, but it’s not forced. It’s just there, like fertile ground. The natural course of my life spreads seeds onto that fertile ground which may blossom into happiness, and by making it fertile, happiness happens fairly often on its own.

In the end, a content life is much like tending to a garden. You’re making the topsoil as rich as possible. You’re removing rocks and debris – the bad things in your life – and leaving only rich soil that’s full of positive possibility. When you do that, happiness happens naturally – you don’t have to buy things to force it. You already have things in your life that bring positive feelings without having to buy things and your life is primed to have great things grow in it.

Does contentment mean life is perfect and wonderful? Absolutely not. It simply means that you’ve put in effort to make your life as good as possible with what you have. You’ve put in effort to make the soil of your life as rich as possible. You’ve removed a lot of rocks and debris as well. Your life is as primed as possible for good things to grow in it.

Steps to Building a Content Life

So, what exactly makes up a “content” life? A content life is one where you recognize a lot of positive options at your disposal while also not being exposed to significant stresses. In other words, when you take action to minimize or eliminate things that might add to your stress and distraction and discomfort, you’re making for a more content life, and when you take action to improve the life options available to you, you’re also making for a more content life.

There are a lot of different strategies that one might employ to build a content life, but many of them vary from person to person. What each person really wants out of life differs quite a lot. However, I’ll suggest the following as being strategies that will work for most people.

Note that a lot of these strategies either revolve around or touch upon finances. Why is that? Personal finance can create a lot of stress in a person’s life, taking us away from contentment. It can also help enrich the soil and increase the options available to us. Both of those things are a major source of contentment. I would go so far as to say that making sensible personal finance moves is the most important thing you can do to build lasting contentment.

Here are several strategies that you can use to improve your contentment with life.

Build an emergency fund. An emergency fund is simply a pool of money in a bank account that you can tap in the event of an emergency to help you deal with that emergency. Having an emergency fund quickly eases a lot of stress that people feel about potential unexpected events. For example, with an emergency fund, the stress of a car breakdown melts from a mountain into a molehill.

How? Simply go to your bank and ask them to start moving a small amount each week automatically into your savings account and don’t touch that money until there’s an emergency. If your bank won’t do this, sign up for an online savings account at Ally Bank or some other established online bank and set up the automatic transfer there. Leave that money alone and only tap it when you really need it.

Pay off your worst debts quickly and avoid acquiring more debts. Having debts hanging over your head creates a level of stress that seeps through your life, making it harder to feel much contentment about anything. Getting rid of the worst of your debts will not only alleviate that, but it’ll drastically help your monthly cash flow.

How? The key here is to cut back on your spending. Put your non-essential spending – meaning everything that isn’t bills or gas or food from the grocery store – on a tight budget. I recommend withdrawing a pool of cash each month for all of those expenses. Use that pool for everything – a cup of coffee from Starbucks, meals eaten out, that item you saw at the sporting goods store, and so on. Once you do that, and stick to that, you’ll find it much easier to handle your bills, and the only spending you’ll really lose is the least essential stuff, the stuff that’s just completely forgettable.

Establish a healthy career with lots of options if things get rocky. No matter what your job is, you can take a lot of steps to improve your options going forward. You can open yourself up to raises, to promotions, and to new jobs.

How? Treat your downtime at your job as a way to “invest” in future jobs and pay raises. When you don’t have an immediate task, use that time to build strong relationships with coworkers and with other people in your field, to take on tasks that need to be done even if you haven’t been told to do them, to learn new things, to ask questions. Prepare yourself for the things you’ll be called on to do if you have a better job than the one you have now and build the connections you’ll need to get there. Even if nothing comes of it, you will have drastically improved your job security at your current job, easing at least one significant degree of life stress.

Build lots of strong positive relationships with the people in your life; care for them without strings attached. Having lots of positive relationships lifts you up and provides a strong and fertile foundation for your social life and for your mental well-being. One of the challenges, though, is that relationships often become burdened with expectation. Cultivate relationships without expectation and just see where they go. Don’t expect that everyone will be perfect and reliable, but give of yourself anyway. You’ll find that if you don’t expect anything in return from your relationships, you’re always pleasantly surprised.

How? Ask questions of people and listen to their responses; don’t just use the conversation as an opportunity to say what you’re thinking. Go to lots of social events and rather than feeling awkward, ask questions of people and value their opinion. They will appreciate it. Offer your help when it’s needed in terms of action, not just words. Don’t expect things in return, and be gracious and thankful when people help you. You’ll build a lot of great relationships naturally by doing this.

Improve your physical health through exercise and better eating. Improving your diet and your physical shape will directly improve how you feel on a daily basis. You don’t have to become vegan or become an athlete to do this, either. Just make little changes, apply them consistently, and stick with them.

How? For food, I like Michael Pollan’s guidance: “Eat food. Not too much. Mostly plants.” In other words, avoid processed and prepackaged food when possible, eat only until you’re not hungry and not until you’re stuffed, and make fruits and vegetables the majority of your diet. Pretty easy. As for exercise, just go for a walk each day or go on a bike ride each day. Any steps you take beyond these are great, but these basic steps exceed what many people do.

Improve your mental health through adequate sleep and meditation/prayer. Insufficient sleep has large negative mental and physical health consequences. Getting adequate sleep is an enormous boon for one’s health, both mental and physical. Meditation (of which focused prayer is one particular type) is similarly beneficial for improving mood and increasing the effortless tolerance of pain. Both lead directly to a mindset that’s more open to contentment, whereas lack of sleep and focus tend to be fertile ground for discontentment.

How? Go to bed a little earlier in the evening. Try to strive to wake up most mornings naturally, before your alarm. Spend a few minutes each day quietly focusing on nothing more than your breathing or on nothing more than a single positive message in your mind, bringing your mind gently back to that focus point every time it wanders. Both practices will do wonders for your everyday mental state.

Find fulfilling hobbies that don’t require continual purchases for enjoyment. There are many, many hobbies out there that have very little ongoing cost and provide a great deal of personal joy. Reading books. Going on walks and hikes. Physical fitness. Participating in a sport. Gardening. Volunteering. The key is to find hobbies that don’t require continuous purchases and that focus on actually doing things rather than acquiring things or spending money on experiences.

How? Try different things. Think of the things you’ve had an interest in at various points in your life, then dabble in the ones that don’t require a lot of money and see if they click with you. Read a book. Go on a hike. Check out Meetup and see if anything interesting is happening around you. Check out VolunteerMatch and look for some volunteer opportunities near you. The key here is to do things that you enjoy that don’t involve spending money.

When things worry you, take action to minimize the potential harm that worry could cause. All of us have stresses in our lives – things that bring us worry when we’re going to sleep at night. When those worries become intense, they damage our sense of contentment with life and bring us down. Thus, it makes sense to try to take action to alleviate some of our biggest worries.

How? Spend some time assessing the things that bother you the most, come up with a plan of action for the biggest worries, and then move forward on that plan. Taking the time to actually address the worries in your life with real action eliminates a great deal of stress and adds greatly to life’s contentment.

Stop blaming others for your problems. In the end, the only thing you can control is yourself. You can’t control what others do. The difference between a good outcome and a bad outcome, in the end, is you. People are going to behave badly sometimes no matter what you do. Assigning blame for all of life’s problems to others simply allows you to continue to make poor choices. Stop blaming others. Start looking at what you could do better.

How? Spend some time journaling each day, reflecting a bit on what you can do to improve yourself and the things you are grateful for. Once a day, make a simple list of five things in the world that you’re grateful for. Then, think of one thing you did in the last twenty four hours that you could have done better and write about it. What did you mess up? How could you have done it better? At the same time, think of one thing you did in the last twenty four hours that was really good. How can you replicate that kind of thing in the future? The thinking that goes into those writings will go a long way toward improving your appreciation of the world and cutting down on the blame game.

Downsize your possessions a little. This might seem like a surprising suggestion, but it helps in several ways. For starters, it gets rid of the sense that you have a lot of stuff that you should be using but aren’t. Many of the items in your closet also have monetary value, which can help with the financial aspects. It also makes it easier to both clean and maintain things, as well as to potentially move.

How? Go through your closets and your shelves. Anything that you haven’t used in a year and won’t realistically use in the very near future should be sold off. Use the proceeds to build an emergency fund and knock down some debts, thus taking care of another piece of this puzzle.

Final Thoughts on Finding Contentment

Happiness is a wonderful thing to find in life. It’s something that many of us seek. The truth, however, is that happiness is fleeting. It doesn’t last, and the harder you try to preserve those moments of happiness, the quicker they slip through your fingers. Efforts to recreate happy moments usually fall flat as well.

A much better approach is to shoot for contentment – a sense that life is good on the whole, but not a constant state of happiness. What you’ll find in a content life is that it is fertile ground for happy moments.

Contentment comes from finding space in your life for things that can potentially bring you joy and from eliminating stresses in your life, too. It comes from putting yourself and your relationships into the best possible state. It also comes from having a strong grip on the basics of your finances. The best part is that many of those factors are interrelated – significant improvements in one area often lead to improvements in other areas, and those collectively lead to a more contented life.

The beauty of contentment is that your day to day life feels … good. It’s not a constant state of bliss and happiness, but it’s a state where you feel good and you have good relationships in your life. It’s in that state that happiness arises automatically and with surprising frequency, like beautiful flowers blooming in a fertile field.

All you have to do is make the soil fertile and plant the seeds, and that’s what the strategies above are all about. They’re all centered around making the soil of your life fertile by making yourself healthy and putting yourself in a good financial state and doing some real self-reflection, then planting seeds in that life by building great relationships and finding hobbies and passions that don’t drain your wallet. Together, they build a wonderful life. A content life.

Not everyone’s life is going to look the same. Some people may find contentment living alone in a small apartment in the city. Others may find it in a big house in the country with a big family. Still others may find it by being devoted to a career, or through a particular passion. What these people all have in common is that they put in the effort to make their mind and body clear, they get their finances under control, and they find things that bring them joy without draining their mind and body and finances. These tools can help you find that place, whatever it might be.

Good luck!

The post Personal Finance and Life Contentment appeared first on The Simple Dollar.

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Does Taking on More Debt Boost Your Credit Score?

It’s well known that earning and maintaining good credit is to your benefit. Perhaps because our credit scores have such a big impact on our lives, credit scoring models, such as those created by FICO and VantageScore, receive a lot of unwarranted criticism from consumers, consumer advocates, the media, and many others. When it comes to credit reporting and scoring, almost everyone’s a critic, unless they’ve got an 850 credit score in their pocket.

Although misguided, it’s somewhat understandable why some might harbor resentment toward the way credit scores are calculated and used in the United States. No one likes to feel judged. There’s also no question that life with credit problems can be difficult on many levels.

Unfortunately, these feelings of disenchantment can lead to some dangerous misconceptions about credit scores.

The Problem with Blaming the System

A lot of misinformation floats around the internet on the subject of credit scores. Adding to this problem is the fact that many financial celebrities gain a huge following by essentially blaming the credit scoring system and/or credit cards for everyone’s debt related problems.

These popular advisors will even go as far as to call credit scores “debt scores.” They help to perpetuate the myth that credit scoring models reward you for going into debt and, as a result, building a cash-only life free from credit is the best way to live.

Of course, the idea that credit scores reward you for going into debt is completely false. In fact, quite the opposite is true. Blaming credit scoring systems or credit cards for your problems is like blaming your scale or forks for those extra pounds you’re carrying around. Not only does this line of thought defy logic, but if something else is responsible for your problems, then you have no power to change your situation.

Debt and Credit Scores

To understand why having debt isn’t actually good for your credit scores, you should first take a look at a credit score’s purpose. Credit scores are designed to help lenders predict the risk of doing business with you. This is achieved by analyzing the data on your credit reports, and producing a number that lenders can use to easily determine your level of credit risk. The higher the score, the less risk the lender is taking on by extending financing.

According to the Equal Credit Opportunity Act (ECOA), credit scores must be “empirically derived” and “demonstrably and statistically sound” to be used in lending decisions. Simply put, this means that credit scores must be built using proven, scientific methods and must actually work. If FICO or VantageScore designs a credit score used by lenders in the U.S., it must meet this criteria. Spoiler alert: All of FICO and VantageScore’s credit scoring models are ECOA compliant.

Credit score developers review tens of millions of credit reports any time a new credit scoring model is created. As a result of studying the behavior of millions of consumers, one fact is certain – higher levels of debt lead to higher levels of risk. Because of the increased risk that debt represents, credit scoring models penalize consumers for being in debt, particularly credit card debt.

Managing Your Debt

Although your debt does have the ability to impact your credit scores negatively, that does not mean you should be afraid of borrowing money. It is completely possible to earn elite credit scores, well into the 800s, with debt of any type, including mortgages, auto loans, student loans, and, yes, credit cards.

The bottom line is simple. Credit scores don’t reward you for being in debt. Credit scores reward you for managing debt properly. Credit scores don’t reward you for using credit cards. Credit scores reward you for using credit cards responsibly.

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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 Does Taking on More Debt Boost Your Credit Score? appeared first on The Simple Dollar.

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