Saturday, August 19, 2017

10 New (to Me) Finance, Frugality, and Life Books Worth Reading

If you spend much time at the Ames Public Library, you’ve probably seen me there at some point. I can often be found on the second floor, either at a table or in a study room, surrounded by a pile of personal finance magazines and books and other assorted materials, usually with my laptop open or with a notebook and pen open before me.

Why? To come up with the content for this site and to constantly expose myself to new ideas, I read. A lot. I spend at least a day a week at the library going through their personal finance and investing section and also nabbing books from the business section and the psychology section. I grab the latest issues of many different magazines when they come out as well.

While I don’t do thorough reviews of personal finance books as I once did – honestly, because most personal finance books are pretty similar to one another and I mostly read them to reinforce key concepts and look for new angles – I do sometimes stumble across books that really make me see the challenges of personal finance, careers, psychology, or other related matters in a whole different way.

Here are 10 of these books. All of them are (relatively) new to me and (I believe) all have been published in the last few years. I’ve mentioned a few of them in passing in other articles. Every single one of them deserves your time and attention if you find the topic relevant.

Let’s dig in to what’s new on the bookshelf!

Good and Cheap: Eat Well on $4/Day by Leanne Brown

This is a cookbook that is solely focused on using low-cost staples to prepare meals for your family. The goal of the cookbook is to enable families to prepare a full day’s worth of meals at a cost of $4 per day per person, which is a very reasonable target.

Brown does this by focusing on staple foods such as rice and beans and pasta, supplementing them with fresh vegetables that are often inexpensive (such as zucchini) and some inexpensive meats used in reasonable amounts.

Many of these recipes are designed to be flexible, meaning that they are really easy to modify based on what you have on hand or what’s on sale. Many recipes include an “additions” section, which consists of ways to modify recipes by adding other ingredients to the mix.

This is easily my favorite frugal cookbook. Anyone who is truly interested in cutting their food spending by cooking at home is well-served by putting this book on their shelf right next to a really good instructional cookbook like How to Cook Everything by Mark Bittman.

Good and Cheap is actually available completely for free in PDF form on Leanne’s website, but you can get a very nice book version for $8 on Amazon, which is likely cheaper than printing it yourself if you want a paper version.

The More of Less: Finding the Life You Want Under Everything You Own by Joshua Becker

The entire premise of this book can be boiled down to a single sentence: Orient your life toward worthy goals that are meaningful to you and get rid of everything else in your life – including possessions – that aren’t related to those goals. What’s meaningful to you? Center your life around it and drop the rest.

What ends up coming out of that core idea is a mix of minimalism and frugality and living a meaningful life, something that I think a lot of people are seeking these days. I know I sometimes feel like I’m drowning in possessions, pieces of projects that I was once passionate about or would like to tackle someday, and I often find myself buying into more and more “someday” projects.

These feelings and responses are natural outgrowths of being a curious and passionate person in the modern world. The challenge is to figure out how to channel those healthy tendencies in a healthy and meaningful direction rather than in a cluttered and expensive direction.

The Art of Money: A Life-Changing Guide to Financial Happiness by Bari Tessler

I have a close friend who is a brilliant and creative person. She generates fresh ideas like a fire hose generates water, cares deeply about the people in her life, and always seems to be there when you need her. She’s an amazing writer with this perfect comedic self-deprecating touch. She’s also terrifically bad at math and prefers never to think about money unless it’s hanging around her neck.

This book was written for her. Again, this is the money book for my friend.

Here’s the thing: Many personal finance books are written for particular audiences. There are ones written for Christians. There are ones written for philosophical types. There are ones written for number-crunchers. There are ones written for environmentalists. There are ones written for conservatives. There are ones written for liberals. There are ones written for college students. There are ones written for the elderly. You get the idea.

Those books really don’t differ in their core advice. Where they differ is in their presentation of that advice. Here, the advice targets what I would call “artistic” people, as it intentionally de-emphasizes the math and focuses instead on the meaning of personal finance choices, treating frugality as much as a form of expression as a tool for saving money. It’s an interesting perspective, indeed, one that I think would click with a lot of people (my friend being one of them, of course).

The Wisdom of Frugality: Why Less Is More – More or Less by Emrys Westacott

This book is really a philosophical look at frugality, written by a philosophy professor. The book tackles one seemingly simple question: why do people perceive frugality as a virtue, and why do people equate it with good living and happiness? That’s a thread that has appeared in writings for thousands of years and almost always taken as a given, but why? Even more interesting, why do people rarely follow that advice? Why is simple living and frugality often perceived as being outside the norm?

Westacott digs into those questions with rigor and insight, coming up with a lot of interesting conclusions. He digs into the difference between happiness and contentment, asks whether or not extravagance is really a path to lasting joy, and what the impact of frugality is on the broader world as compared to contentment.

As any good philosophical work does, the book steps carefully through the thought process that leads to a reasonable conclusion, but you’re supposed to question it and think about it. This isn’t a book of answers. This is a book intended to feed thinking. It’s a book that’s supposed to make you ponder the connection between frugality and good living – does it really exist? Why?

If that appeals to you, this is a must-read book. This book bridges the gap between the practical realities of frugality and the larger world of philosophy and manages to do it in a very readable and clear way. If you like turning ideas over in your head, this is well worth your time.

The Debt Escape Plan: How to Free Yourself From Credit Card Balances, Boost Your Credit Score, and Live Debt-Free by Beverly Herzog

Most of the time, when personal finance books attempt to adopt a sense of humor, it comes off as really corny and unrealistic. I often walk away not laughing, but thinking the person is rather… odd. The humor just falls flat.

This is perhaps the only book I’ve ever read on personal finance that employed humor on any level that actually works. It manages to successfully weave a light humorous tone together with solid personal finance advice in a way that doesn’t really undermine either one, something that really is a trick.

The book doesn’t really strike any new ground in personal finance thinking. Instead, it’s on this list for successfully bringing a fresh direction in writing about the usual strong base of personal finance advice. It blends humor and personal finance writing incredibly well, and that makes it a very good “overview of personal finance” book for someone who likes humor in what they read.

You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life by Jason Vitug

This is a very goal-focused personal finance book. Most personal finance books talk about goal setting but then end up essentially guiding people down a financial path toward goals that the writer already has in mind (often, those are either goals that are loved by the writer or goals that match the “average American family”).

Jason Vitug goes against that process here. His entire focus is on setting personal goals. The entire book is oriented around thinking about where you want your life to be in the future and then orienting the tools of personal finance to serve those goals. Everything is explicitly oriented toward the personal goals that the reader sets for himself or herself.

I really dug the goal-oriented approach of this book and how it treated personal finance as a set of tools to achieve goals rather than this standalone process that you must follow to achieve “success.” Many personal finance books fall short of treating personal finance as a tool for achieving goals and instead end up making personal finance feel like a goal to its own ends.

If you’re a goal-setting kind of person and mostly want to consider personal finance as a series of tools for achieving your own life goals that aren’t strictly finance-oriented, this is going to be a very good read for you.

The Recovering Spender: How to Live a Happy, Fulfilled, Debt-Free Life by Lauren Greutman

As I said earlier, most personal finance books are written for a specific audience. The person loaded with debt. The young person. The philosophically minded person. And so on.

The specific audience here is an interesting one. I would call the audience here the “recovering materialistic person.” This is a person who, at some point in the past, was heavily focused on material things but at some point became at least partially disenchanted with it. That person might still find some attraction in some material things, but their desires are pulling them down a different path at the same time, one that’s oriented toward building a strong financial foundation.

That change can be triggered by many things: personal growth, having a child, getting married, starting a tough career. Whatever that change is, Greutman speaks to that person in transition, a person changing from a materially-focused person to a person focused on other life areas, and she does it with a truly kind and gentle and non-judgmental touch.

It’s not easy to undergo that kind of sea change, and the author is really aware of that. Usually, such a drastic change in underlying life philosophy has ripples throughout all areas of life, and the book does deal with those changes while still focusing on debt repayment as a central theme. I think it’s perfect for someone who’s struggling to radically change their spending behavior and trying to deal with all of the ripples that such changes bring.

The Happiness Equation: Want Nothing + Do Anything = Have Everything by Neil Pasricha

This is another book where the core premise is really straightforward: Contentment and freedom are the foundations of a life that produces consistent happiness. This is a theme I’ve reflected in my own posts as of late – you can’t really achieve lasting happiness, but you can achieve lasting contentment, which is a fertile ground for happiness.

Pasricha does a great job of delving into the nuts and bolts of this idea, transforming it into a series of seven actionable “secrets” to push us toward a contented life:

1. Walk at least 30 minutes, three times a week
2. Write in a journal at least 20 minutes a day, usually about a positive experience
3. Do five random acts of kindness each week
4. Completely unplug to recharge as often as possible
5. Find the “flow state” as often as possible (“flow state” being when you’re so engaged that you lose track of time and place)
6. Meditate each day (he suggests for two minutes at a bare minimum)
7. Identify five things you’re thankful for each day

That’s a pretty solid life checklist, but what does it have to do with finances? The reality is that most reckless spending is driven by an underlying sense of discontentment, which means that it’s not easy to find a life that’s in full bloom with natural sources of happiness. We crave that feeling of happiness and we often find bursts of it through spending. That’s a mistake. Finding contentment is a better way through this.

The Obstacle Is the Way: The Timeless Art of Turning Trials into Triumph by Ryan Holiday

Holiday has written a trilogy of books in recent years on applying stoicism to modern life. I found The Obstacle Is the Way to be the most powerful of the three.

The core idea of this book is that life presents us with a series of obstacles, and many of them seem incredibly unfair. I am deaf in one ear, for example, which makes it extremely challenging to carry on conversations in noisy rooms or to place where someone is at when they call out to me.

When faced with a challenge like this, you can either break down at the unfairness of the challenge and complain about the unfair advantages that everyone else has, or you can simply let go of the things you cannot control, take hold of the things you can control, and find a way around it.

In that, an obstacle actually brings out the best in us. It enables us to see the strengths that we have and helps us to understand what parts of our lives we truly control, which prepares us for further challenges in life.

This mode of thinking prepares people quite well for life’s challenges – and, yes, personal finance is one of those challenges. The things you learn about yourself as you tackle an overwhelming debt load are things that you can apply in many other areas of your life. The key is to learn how to separate what you can control from what you can’t, and that’s what this book focuses on. It’s a great interpretation of ancient Stoic philosophy applied to the modern world.

Made from Scratch: Discovering the Pleasures of a Handmade Life by Jenna Woginrich

This book is probably the furthest from typical personal finance of any of the ones listed here, but it really hones in well on a particular thread of frugality that’s worth discussing – the idea of making stuff from scratch.

Quite often, stuff you make yourself from scratch – things like pasta, for example, or bread or sauerkraut – are of incredibly high quality compared to what you can get in the store, plus they’re usually really low financial cost. However, they come with an additional cost – they take time – and a bit of additional risk – they can go bad if you make a mistake.

That’s why, in my view, the idea of making stuff from scratch is something of a bridge between frugal practice and hobby. I can make some of the best pasta I’ve ever had from a bit of flour and a few eggs, but it takes time and practice to be able to do it efficiently, and to devote that time and practice when it’s not that much more expensive to buy a box of Barilla at the store means that if you respect the time value of money, this is mostly a hobby that happens to save you a few bucks and produces some pretty tasty results.

Having said that, making stuff from scratch is a wonderful type of hobby for a frugal person to have. It’s a way for a frugal person to actually spend a little less while doing something that they enjoy and ending up with some very high quality results.

It’s that wonderful balancing act that Woginrich talks about in this book. It really focuses in on the many pleasures of making stuff from scratch – the time and craftsmanship that goes into making things rather than just buying them. There’s great joy there, but it has to be an expression from within. Making stuff from scratch purely for frugality’s sake usually isn’t worth it.

Some Final Thoughts

For me, the best books related to personal finance and frugality these days are the ones that take on new angles on the classic principles or else focus intensely on one particular aspect of personal finance. Books that just write about the same old ideas without any fresh perspectives don’t hold an interest.

That’s why these 10 books stand out to me. Some of them take on all of the classic ideas, but do so from a new place – the philosopher, or the artist. Others dig into some specific principle – finding contentment, for example, or making stuff from scratch.

All of them are like strokes on a canvas, gradually filling in a picture of personal finance as part of a healthy and hopeful life, where financial strategies help people live the kind of low-stress and joyful life that most of us dream of.

Good luck, and happy reading.

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Friday, August 18, 2017

Finding New Culture in Your Own Backyard

“Travel is glamorous only in retrospect.” – Paul Theroux

My wife and I traveled to Europe for our honeymoon in 2003. The trip was a memorable one, but when I look back on it with honesty, most of what made it memorable was that it was our honeymoon. We were taking our first steps into our life as a married couple.

The reality is that I have traveled extensively over the last dozen years or so and three things really stand out at me from all of that traveling.

First, it was incredibly expensive. Many of the trips were fantastically expensive, often eating up thousands of dollars. Travel means that you’re losing many of the money-saving conveniences of home while also paying the costs of moving from one area to another. The transportation costs, the food costs, the lodging costs – even when you really cut those down to the bare minimum, it’s still incredibly expensive.

Second, while the experiences were memorable, they honestly mix right in with other life experiences I’ve had. I have some great memories of the trips I’ve taken over the years, but the truth is that those memories are great mostly because of the people I’ve shared those trips with, both the old friends I’ve traveled with and the new people I’ve met. My memories have very little to do with locations at all, to tell the truth. When I think of the best moments of my vacations, they honestly could have occurred anywhere (I’ll get back to this later).

Third, most of the new culture I’ve been exposed to can be found at a similar depth much closer to home, and often in a more meaningful way. The idea that I’m going halfway around the world to explore a new culture seems pretty attractive until I step back and realize that not only am I not in that culture long enough to ever shed the “tourist” bubble, there are also opportunities far closer to me to have meaningful cultural exposure and experiences, often from people who are much more willing to share that culture with me.

Isn’t “culture shock” a valuable experience? It’s difficult to have genuine culture shock when on a short trip of a few days or even a week or two. This article from Global Perspectives spells it out:

The first stage of culture shock is often overwhelmingly positive during which travelers become infatuated with the language, people and food in their new surroundings. At this stage, the trip or move seems like the greatest decision ever made, an exciting adventure to stay on forever.

On short trips, the honeymoon phase may take over the entire experience as the later effects of culture shock don’t have time to set in. On longer trips, the honeymoon stage will usually phase out eventually.

The length of time in which most of us will ever travel to an area with a different culture isn’t nearly long enough to break out of the “honeymoon phase.” In effect, we remain a tourist, seeing only the highlights. It’s only through longer experiences can the most valuable elements of culture shock occur, which is into a scope of travel that’s more akin to moving there.

In the end, I’ve come to the conclusion that if a big part of the attraction of short term travel is cultural exposure, you can find a lot of it right at home in any sufficiently large city in the United States. (If you’re seeking cultural shock, you should be moving to a different culture for a while, or attempting some form of long-term stay.) There is far more culture around you to explore than you probably notice, particularly if you’ve already decided that the only place to find new culture is to travel.

Try these eight experiences, all of which can be had in any sufficiently large city. You’ll find that all of these experiences are far less expensive than going on a vacation to a different culture while giving you a similar taste of that culture. These won’t be as rich as an extended stay in another country, but will provide a surprising level of insight and exposure into the lives of people different than yourself without completely busting the bank open.

Intentionally build a friendship with someone new to your country. If you have the opportunity to build a friendship with someone who is new to your country, do so. It is a fantastic experience that will open your eyes to a new culture and help you to introduce someone to your own. Have dinner parties with them, where you each make something culturally representative (you make something representative of your city, while they make something representative of their native culture). Share stories of your earlier life. Be very open to asking questions to each other that might seem “silly” or “dumb.” You’ll likely discover a great deal about the realities of a culture different than your own.

Spend a day in an ethnic neighborhood. Look for a neighborhood in your city that is primarily inhabited by people of a different ethnicity and spend the day there. Eat at restaurants that are clearly native to that area. Ask lots of questions along the way. Surprisingly, I’ve found almost universal positive feedback by admitting my own ignorance at the start by saying things like, “Hello! I have lived in [this city] for a while but I honestly don’t know much at all about [the culture of this neighborhood] and I’d really like to learn more about it. I have some really basic questions – could you help me?” Asking this at a restaurant where people aren’t busy or in another public place almost always results in great things. People love to tell others about their culture!

Visit a religious shrine or house of worship for a different faith, and even take in a service if allowed. Visit a mosque. Visit a temple. Visit a synagogue. Talk to the people who work there. If there’s a tour available, take it. Best of all, if they allow people to participate in the religious services, do so. There really are few cultural experiences that are more interesting than participating in the variety of religious experiences.

Eat at an ethnic restaurant that’s new to you. Try a style of food that’s different than what you’re used to. Take the time to find the most authentic examples of this style of food in your city, and also take the time to learn about why those meals are popular. What is the cultural basis for this food you’re about to eat? Go to an Ethiopian restaurant and try the wat. Go to a Scandinavian restaurant and try the lutefisk. Go to a Bengali restaurant and try the shorshe ilish.

Attend a cultural festival. Many neighborhoods in large cities, or smaller towns with a particular ethnic identity, will have a festival celebrating their ethnic heritage. Go to those festivals and dive deep into the cultural heritage being celebrated. Try the foods. Try the dances. Try the crafts. Admire the arts.

Learn a new language from a native speaker of that language. This is a wonderful thing to pair with building a friendship with someone from a different culture, as noted above. The person new to your country may be unfamiliar with your language, so spend time together learning each other’s languages together. Not only does this build a very strong friendship, it is also a powerful window into a different culture, as you can learn from the language itself what kinds of things are important in that culture. How does someone from that culture describe a conflict, for example? How do they describe a particular art style?

Get involved in producing a particular style of art or craft from a different culture. This is often a great outgrowth from attending a cultural festival of some type. Find a particular type of art that you’re really fascinated by, then take the extra step and get involved with learning how to produce that type of art yourself.

Read literature from a different culture. Look into the popular literature of another culture and seek out translations into your own language (even better, learn that language, as mentioned above). Find out what books are critically acclaimed in different cultures and read them for yourself. Books provide one of the most powerful tools we have to really understand what it is like to be and think and feel as another person would, so taking a well-written book from someone in a different culture can give you that window.

A final point of advice: turn off your cell phone. It’s very hard to have a new experience when you’re constantly tethering yourself to the culture you’re already a part of. Your cell phone is nothing more than a connection to the culture you’re already in. Turn it off and give yourself a true opportunity to explore something different. Don’t worry about what will make for the perfect picture for Facebook or Instagram, because when you do that, you’re not really exploring a new culture, but just riffing on your old one.

Good luck!

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Thursday, August 17, 2017

The Fear of Returning to Poverty

When I was growing up, my family lived on the edge of poverty – and sometimes perhaps over that edge.

My father worked in a factory most of the time, when the factory wasn’t struggling and laying people off for months at a time. Five people were supported on that factory wage – him, my mother, myself, and my two older brothers. In addition, we also provided housing for other people for long periods during my childhood – various uncles and cousins lived with us.

When the factory was closed down, my father did a number of things to keep food on the table. His primary side gig was commercial fishing – he’d keep enough for us to eat, sell some fish to individual clients, and sell the rest at a local fish market.

During my early childhood, my mother was a stay-at-home mom; later on, when that became completely financially untenable, she worked as a postal clerk to bring home additional income.

There were many times in my childhood when I felt the realities of this financial situation, even though my parents went to great lengths to shield me from it. I could tell when times were really tough. We scarcely went on any kind of vacation; the closest we came were a couple of two or three day trips to locales within a few hours’ driving distance from home. I remember a couple of very lean holidays; my parents worked very hard to make them not seem lean, but I could feel it anyway. I remember never having a car that was anywhere close to “new” and that it was always under a vague fear of falling apart. I remember hushed disagreements and money-related conversations after I should have been asleep.

Why am I speaking about this past?

The truth is that an awful lot of my financial choices in my adult life have been driven by a fear of returning to that life, or of putting my children through it.

I was lucky enough to go to college, and upon graduation I had a strong desire to “appear” financially successful, even if I really wasn’t. I wanted desperately to see myself and to present myself as financially successful. I wound up spending myself onto the precipice of financial disaster by doing so.

That experience of near financial disaster led me down a path of rather intense frugality coupled with absurd professional efforts, which was amplified by the birth of my children, a journey which led to the birth of The Simple Dollar.

Looking back, the one big consistent thing across all of this was that ever-present fear of becoming poor. I have dreaded the thought of ever returning to a state of anything close to poverty. I don’t want my children to ever feel as though their parents were anything less than reliable. I don’t want to ever feel like tomorrow will bring complete uncertainty into my life.

It’s a deep fear and a painful one. It’s driven me to make some less-than-productive choices over the years. It’s caused me to work way too hard at various points, pushing myself into illness with the stress. It convinced me to dig so deep into frugality that I began to turn into a cheapskate.

Yet, even after all of that, the fear is still there. I don’t know that the fear of poverty will ever really truly and completely go away.

It’s a dangerous fear, too. When you are driven by a fear, you never make fully rational choices. Instead, you overvalue choices that alleviate that fear in the short term and thus undervalue choices that might lead to the best long-term life. It’s like the person who is so afraid of heights that they won’t fly across the country to meet the love of their life.

Isn’t a fear of poverty helpful? One might believe that if a person is acting out of a fear of poverty, they’re most likely aiming in a direction of better financial success. Isn’t that a good thing?

Not really. As I pointed out above, something driven by fear isn’t too good at aiming itself. For a while, that fear drove me into a comically exaggerated form of affluence, where I bought into the idea that if I appeared to have my financial life together, I did have my financial life together. That led me to the precipice of a financial collapse.

Later, that same fear led me down a path of hyper-frugality, where I was doing everything possible to avoid spending even a cent. That wasn’t particularly healthy, either, as it actually began to impinge on my social life and free time.

When you are pushed by fear, you are operating emotionally, not rationally. This makes it incredibly easy to direct your efforts in directions that are very destructive to other elements of your life.

Over the last few years, I have made a number of conscious steps to help myself stop being driven by a fear of poverty and instead make more rational decisions about the various aspects of my life. Here are some of the steps that I have taken.

Forge a Self-Identity Unrelated to Money

For a long time, part of my identity was that I was proudly not anywhere near the poverty line, that I had escaped poverty, and I wanted to show that to the world. I wore expensive clothes, had nice gadgets, wore a stupidly expensive watch, drove a gorgeous vehicle. For me, a big part of my self-identity – and what I wanted to show to the world – was the fact that I was at least somewhat financially successful.

Here’s the truth: your finances really only exist to support the life you want to live and protect it from unfortunate events. A healthy self-identity is wrapped up in the life you want, not the financial underpinnings of that life.

Dress in clothes that feel comfortable and make you look good, but there’s no reason to wear expensive clothes. Own a smartphone (and maybe a watch) that functionally do the tasks you need, but there’s no reason to constantly chase the latest gadgets to show off your wealth.

(Yes, sure, there are some professions where dressing nice is part of the path to success, but that’s a small minority of professions.)

Think of yourself in terms that have nothing to do with finances. I’m a good father (I hope) and a good husband (I hope). I’m a writer. I’m a hiker. I’m active in my community. I’m a gamer. I’m a volunteer. I’m a home brewer. Adopt terms like that for yourself and think of yourself in those ways. That’s who you are. Finances just serve to support that.

This helps with the fear of poverty by building a self-identity that can’t be taken away by financial winds of change. I can no longer fear like my identity as a person is damaged if my financial state changes direction. That makes it much easier to see finances as a tool for the life I want rather than some indication as to the quality of my life.

Recognize and Call Out Avoidance

Are there situations in my life where I’m unconsciously avoiding certain situations and opportunities because of my personal hang-ups about poverty avoidance?

For example, about three years ago, I recognized that my innate fear of poverty was keeping me from helping out at a local food pantry. On a conscious level, it was something that I wanted to do. When I thought about it, I felt extremely supportive of the food pantry. Yet, I kept avoiding doing anything about it.

I realized after a while that I was avoiding it because I somehow viewed it as a connection to poverty that I didn’t want in my life. It was a completely foolish perspective, I know that, but that didn’t stop me from having those thoughts in the back of my mind.

Choosing to volunteer for the food pantry was one of the best things I’ve done in a very long time. I got to build some great relationships with other volunteers and even with some of the regular customers of the pantry. I got a powerful sense of being able to directly help people.

On a similar note, most of my career (with the exception of the leap to working on The Simple Dollar as my primary employment) has been focused around avoiding risk, which has kept me from taking many risks and has pushed me to accept some pretty poor options in my career out of a fear of a pink slip or an unhappy supervisor. My fear of poverty kept me from being much of an advocate for myself at times.

This kept me from raises at my old job. This kept me from taking on some professional challenges. This kept me from jumping on board some professional opportunities. I was too busy looking at the ground below rather than the path in front of me.

Now, I gut check myself whenever I see myself shying away from a challenge or accepting a burden. Am I doing this out of fear? Or is this actually a good opportunity for me?

Don’t Make Quick Financial Choices

Fear is an emotional response, and emotional responses often lead to quick decisions that are based on emotion rather than information and reasoning. The fear of poverty is no different.

A fear of poverty led me to spend money irrationally to make myself appear affluent, something that was often done as a snap decision. A fear of poverty also nearly turned me into a complete cheapskate that was damaging my personal relationships; again, it was a state mostly made up of snap decisions.

The best solution I’ve found to snap financial decisions is reflection. Give yourself genuine time to think about your financial choices, both before and after the fact. Are you making good money decisions? Was that spending choice you made a wise one? What could you be doing better to achieve your real life goals? Are you making “money-first” choices that are having negative repercussions in other areas of your life?

I work through these questions all the time in my spare thoughts and also in my journaling. I find that, quite often, my choices made in the heat of the moment are driven by emotions like fear and impulsive desire, and the best counter I have to those emotions is to understand them and know that they’re driving me to decisions that aren’t the best ones to make in the overall scheme of things. Gradually, those negative forces behind my decisions are ground down, leaving my decisions to better internal forces.

Allot Time (and a Little Money) for Self-Care

Whenever I feel stressed out or overwhelmed, I fall back on easy emotional responses to situations. It’s a common thing that most people do in challenging situations – their emotions take over and guide them through to the other side. The problem, as discussed earlier, is that such emotional decisions are often poor ones.

One great way to avoid this entirely is to make sure you’re taking care of yourself, no matter what’s going on in your life. Devoting some time to self-care (and even a little money) makes it much easier to handle life’s burdens effectively, without getting stressed out or overwhelmed.

Here are some of the simple things I do for self-care.

I meditate each day for at least ten minutes. This can take a lot of different forms. For some, prayer to a higher power works best. For others, repeating a single word as a mantra works. For me, I’ve found the best technique is to shut off distractions, sit in a comfortable place, and focus on my natural breathing. Breathe in, breathe out. I do this for at least ten minutes, and whenever I feel my mind wandering away, I gently guide it back to the breathing. I usually feel a little better after a session of this, but what I’ve found is that if I do this routinely, the effects gradually lower my overall stress level and make me feel less overwhelmed in busy situations. It’s not a sea change, but it’s a nice valuable step in the right direction.

I block off time for hobbies. I give myself at least one – and ideally two or three – multi-hour blocks each week that I dedicate to genuine leisure. I’ll curl up with a book and get utterly lost in it. I’ll play some giant multi-hour board game with a bunch of friends. I’ll make a batch of home-brewed beer or make a batch of homemade sauerkraut. I’ll go to Ledges State Park (my favorite park that’s within reasonable distance of my home) and walk the trails on my own for a few hours. Doing that at least once a week – and ideally a couple of times – makes an enormous difference in my well being.

I get plenty of sleep. Rather than staying up late to catch up on a television show or to try to squeeze in a household chore, I go to bed early. That allows me to sleep until I naturally wake up most days rather than being forced awake by an alarm, which means I’m naturally rested and thus am less affected by stress and a sense of overwhelm.

I try to eat a balanced, healthy diet without overeating. I try to eat a variety of things, mostly plants, mostly unprocessed stuff if possible, and not too much. It’s a diet that works well for me – the only part I struggle with is the “not too much” part as I tend to chow down on stuff that I really like. I feel worse – and much more prone to stress – when I’m not eating well.

I try to exercise every day. Usually, this takes the form of a brisk multi-mile walk or a bicycle ride or some sort of bodyweight exercises (think planks). The goal is to get myself breathing heavily and sweating but not completely killing myself, because the aftereffects of that not only leave me feeling good for at least a few hours afterwards, but doing it consistently leads to consistently better feelings and self-control.

All of those things do wonders for alleviating feelings of stress, and the end result of this type of stress reduction is that a much larger portion of my decisions are based on rational thinking rather than emotional thinking, meaning that I actually make forward progress on my long term goals and don’t short-circuit my plans because of my fears.

Add Line Items to Your Budget for Things That Bring You Joy

One key part of our family’s budget is that Sarah and I each have a line item for completely incidental spending. I usually refer to mine as my “hobby budget.”

Money within that line item can be spent by each of us with no questions asked. We can use that money on anything that we personally desire – books, games, food items, whatever – without any question.

This is beneficial in a number of ways. For one, it gives a great sense of freedom, a feeling that my life isn’t completely locked down. It lets me accentuate my hobbies and interests if I so choose.

Best of all, by having it as a line item in our budget, I know that the money I spend in this way is accounted for and isn’t going to interfere with our family’s financial future. It’s money that I can spend without fear of pushing us back into poverty.

Remind Yourself of How Far You Really Are from Poverty

One final trick that I love to use is to simply sit down and calculate our family’s net worth and then look at it in a few different ways.

Calculating one’s net worth is simple – you just add up the value of all of your assets (your savings account, your checking account, your investments, your retirement account, your home, your car) and subtract from that all of your debts. This gives you a number representing how much cash you would have if you were to sell all of your major possessions and pay off all of your debts.

One thing I really like to do with that number is multiply it by 0.03. That little multiplication trick represents the idea, supported by a lot of studies, that if you have your money invested for the long term and withdraw only 3% of the value each year, the investment should last forever, allowing you to withdraw that amount every year for the rest of your life. I call this my “annual withdrawal number.”

For me, one of the biggest thresholds of feeling like I was escaping poverty was when my annual withdrawal number began to respectably compare with the federal poverty line for a family of five, and then to pass it. In other words, unless I start pulling money out of the bank and spending it, there is no reason for my family to fall below the poverty line in almost any realistic situation.

Yes, I know that Sarah and I are not just going to fold up shop tomorrow and start living near the poverty line, but knowing that we could do this and be able to survive (even if the situation was threadbare) makes me feel a lot better. What makes me feel even better than that is that each time I re-calculate our “annual withdrawal number,” we continue to inch upward over time.

I’m leaving poverty behind, for good.

It’s Still Not Enough, But It Helps

As useful as all of these strategies are, they still don’t add up to a perfect solution. I still sometimes worry about falling into poverty. I worry that I will lose my current job and be unable to find anything else. I worry that our spending will accelerate and leave us without money in the bank. I worry that something unforeseen will hit us like a freight train and put us in a bad situation.

Nothing will ever completely eliminate those worries, I don’t think. They’re part of who I am.

However, the exercises I’ve mentioned above have helped me greatly in terms of taking the emotion behind those worries out of my financial decision making. When I choose to spend money or save money, it’s not driven by fears of imminent poverty, but of having a better life.

Good luck.

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The Future Is Coming, Whether You Save For It or Not

When it comes to money and personal finance, there are so many behaviors that seriously grind my gears. For example, it bothers me when people in serious debt don’t try to help themselves – as in, they’re complaining about credit card debt one minute and shopping for shoes the next. And I hate it when someone invites me out to dinner then tries to split the bill in half, even when I only had a salad.

Bank fees annoy me, and ATM fees send me through the roof. Another of my pet peeves is when people buy expensive new cars (with huge car payments) but also want to complain that they’re broke. When it comes to giant car payments, I just can’t deal.

But, if there’s one thing that annoys me about money more than anything else, it’s when people undermine others who are saving diligently for the future. They might say things like:

“Why are you even saving for retirement? The economy will crash or the world will end before you get there.”

“What’s the point of saving for college? Your kid is six!”

Why save for college anyway? Jobs will be different once your kid reaches college age.”

“Paying off your house is dumb! The world is probably going to end, and you’ll wish you had done something fun with that money instead.”

“Who cares about credit card debt? The government is going to collapse, and it will all disappear.”

Comments like these make my brain hurt, and not just because they’re critical of my own-money saving efforts; they hurt because they’re nothing more than excuses not to save.

Why It’s Important to Save, Even if You Think the World Might End

So, why does saving matter so much? What difference does it make?

If you’ve been paying attention to the Simple Dollar at all, you probably already know. Despite what the non-savers of my generation have to say, the future we’re saving for is coming – whether we like it or not.

We may not know exactly how our lives will pan out. We don’t know whether our kids will go to college or whether we’ll live long enough to retire. But, we do know one thing: that not saving money gives us a 100% chance of missing out on the future we want.

Is saving hard? You bet. It’s difficult to do the “right thing” when your friends think you’re nuts and advertisers devote their whole careers to getting you to part with your cash. It’s a lot easier to just pretend the world is going to end and buy whatever you want – especially if your friends are all doing the same.

The thing is, I’ve been around long enough to notice that those who succeed are often the ones who march to the beat of their own drum.

My parents are a good example of a couple who did everything right at a time when many of their peers were sprinting in the opposite direction. Thanks to their abhorrence of debt and their self-discipline when it came to saving money, they were able to retire early and live in relative comfort.

My parents paid off their home in 17 years instead of 30, and they still live there to this day. They saved for retirement, set aside money to help their kids with college, and avoided debt like the plague. They bought used cars and drove them until the wheels fell off. They reused everything they could, and my mom was quick to pick up clothing or other bargains at garage sales or discount stores.

Over their lifetimes, they have lived through several recessions that rocked our economy. They’ve endured housing booms and busts, multiple wars, and the invention of mobile phones, computers, and the internet.

While many of their fellow baby boomers were buying larger homes, ignoring their retirement savings, and snatching up every new gadget or appliance that hit the shelves, my parents were hunkering down and preserving their wealth.

I often wonder if the crazy anti-saving ideas that are so prevalent today ever crossed their minds. Just imagine if they hadn’t paid off their home and chose to constantly upgrade their digs instead. Or, imagine they assumed that college wouldn’t be around or that their kids would never earn a degree anyway. What would have happened if my parents believed they would die young and chose not to save?

How would our lives be different? Would their children be as successful and stable as they are? Would my parents still be working and paying off debt? Would they have the same quality of life they have today?

It’s pretty obvious that the answer to these questions is a big, fat “no.” If my parents hadn’t been so serious about their finances, they would probably still be working and paying off debt. And there’s no way they would enjoy the stress-free financial situation they’re currently in.

The Future You’re Saving For Is Coming

No matter what anyone says, the future you’re pretending won’t happen will get here soon enough. Sure, it might look different than we think, but the money you save today will always matter – one way or another.

Retirement may look different in the future, but that doesn’t mean you won’t need investments in the bank and cash to spend. Avoiding debt can absolutely mean missing out on fancy vacations and new cars, but it can also mean never having to worry about money once you grow old.

At the end of the day, saving money gives you something that all the doomsday predictions in the world never could – options. When you have money saved for the future, you can weather recessions, job losses, housing bubbles, crappy job markets, and all sorts of other pitfalls that ruin the finances of those who choose not to save.

When you don’t save, you’re stuck with the future you’re dealt. If you wind up working until you’re 80, or struggling with high-interest debt until you die, well, it will be far too late to change by the time you figure it out.

So, save your money and ignore the people who undermine your efforts. No matter what anyone says, the future you’re saving for is absolutely on its way. And once it gets here, you’ll be prepared.

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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Are you saving for the future no matter what anyone says? Why or why not?

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Wednesday, August 16, 2017

Is Financial Independence Possible for Everyone?

I like to talk about financial independence on The Simple Dollar quite regularly. It is the big financial goal on my horizon, a state in which the money I’ve saved up and the investments I made are returning enough money so that I don’t have to actively work for income any more.

Whenever I talk about it a bit too much, though, I usually hear from a few readers who tell me in no uncertain terms that financial independence is impossible for them and for many other Americans.

I disagree.

Financial independence is possible for everyone who is capable of holding down a steady job. Having said that, financial independence is a very difficult goal to achieve, one that almost all Americans fail at.

It is not impossible. It is just very difficult, even for people who happen to have a great job.

There are a bunch of reasons why it is so difficult.

First of all, delayed gratification is very hard for our human brains, and financial independence is all about delayed gratification. In order to achieve financial independence before very old age, a person simply has to spend a lot less than they earn, and in doing so, that means that said person is choosing to forego a lot of the pleasures of life.

Most people won’t do this. Options like living in a van when making a decent salary aren’t even on the table for consideration. Things like living on a true low-cost diet centered on extremely low-cost staples like rice and beans are completely overlooked. The idea of a life without a cell phone or a computer or a Netflix account or cable? Not going to happen.

All of those things are examples of delayed gratification. They’re simply a choice to live a less pleasurable life now in exchange for greater pleasure later. In this case, that greater pleasure comes from the freedom from work.

Second, self-imposed responsibilities make the path even more difficult. You choose to get married. You choose to have children (adoption is an option, even if it’s not a palatable one). You choose to own a house with expensive maintenance. You choose to have a job that’s chock full of stress and hard choices.

I’m not saying that any of those choices are the wrong choice. I’m simply stating that all of those choices are ones that make the path to financial independence even harder than before.

Life offers you lots of choices. Sometimes, the right choice leads you away from financial independence because you have values that rise above financial independence. That’s perfectly okay, but it means that the path to financial independence becomes even harder.

You simply cannot “have it all.” When you choose one path, another one becomes more difficult to climb.

Third, the only route to doing this quickly is with a high income, which is difficult for most people. While you don’t have to have a high-income job, financial independence with a low income job requires a level of sacrifice that many people are unwilling to make, as alluded to above. The higher your level of pay, the easier the path to financial independence becomes, period.

The path to a high paying job isn’t easy, either. Many people find themselves in a situation where the training and skills needed for a high paying job are either beyond their grasp or are prohibitively expensive and time-consuming.

The reality is that the vast majority of people simply wind up putting other life goals and ambitions before financial independence. They often make that choice nearly unconsciously, or they make those choices and fully commit to them before the idea of financial independence ever crosses their minds.

Those decisions are often so set in stone in their minds that they don’t consider a life without those choices, and with their choices set in place, financial independence becomes, for all practical purposes, unattainable.

I’m guilty of this in my own life. I’m married, which can make financial independence harder – it only makes things easier if you have a spouse committed to the same goals and committed to being your partner for life. I have children, which almost always makes financial independence harder. We live in a reasonably nice house – we could be living in a smaller one. We’ve both chosen careers with some time flexibility when we could have focused on earnings instead. We go on summer family vacations.

All of those choices take me away from the goal of financial independence because I’m putting some other value in my life ahead of financial independence. That’s okay.

The key thing to remember is that when you put other values ahead of financial independence, you make an already difficult goal even more difficult, often pushing it up to the edge of impossibility or beyond.

Financial independence is possible for everyone who chooses to make it a top priority in their life. It might even be reasonable in a relatively short timeframe if someone is lucky enough to have a high paying job.

Here are some questions to ask yourself if you’re considering raising the priority of financial independence in your life.

Are you considering having children? Children make financial independence very difficult. No matter how you slice it, children come with a lot of unavoidable expenses all the way through their childhood and well into adulthood. From the food and clothing and shelter to the educational expenses and the toys and the organized activities, they’re expensive, and they will pull you away from financial independence.

Are you married to someone who shares your financial independence goal? If you’re married, you really need to have a spouse that’s similarly committed to financial independence. If your financial goals aren’t in alignment, you’re going to find that your marriage is on very difficult ground very quickly, especially if you make a financial goal a top priority and your spouse does not agree.

Can you live in a much smaller home? Can you downsize in order to drastically cut your mortgage, your utilities, your insurance, your homeowners association fees, your property taxes? All of that goes down drastically if you move into smaller quarters. Also, living in smaller quarters puts some constraints on how much stuff you can buy, further saving money.

Can you stop eating out and prepare your own simple meals? Many people with busy lives find themselves in a routine where many or most of their meals are eaten at restaurants, taken out from restaurants, or delivered, and many more meals are prepackaged affairs. All such meals are quite expensive compared to making a simple meal from basic ingredients. Get familiar with your own kitchen and start making meals for yourself. You’ll drastically slash your food expenses.

Can you cut down on your entertainment subscriptions? Cable? Netflix? Home internet? Cell service? Amazon Prime? HBO? Do you really need all of those? Do you really need any of those? All of those services primarily exist to provide entertainment, so look for entertainment elsewhere. Listen to the radio. Watch over-the-air television. Read books checked out from the library, or download podcasts there to devices you already own and listen to podcasts. Go to free community concerts. Get involved in community groups. Find entertainment that isn’t draining hundreds a month from your pockets.

Can you eliminate a car? Maybe you can commute to work using mass transit – the bus system plus the subway system. Maybe you can bike to work. There are lots of potential options that would allow you to eliminate the cost of car ownership, or cut your automobile count from two to one. Doing so eliminates the cost of registration, fuel, maintenance, repairs… cars are simply a giant money pit.

Those are the kinds of questions that people ask themselves if they’re really serious about financial independence. They involve cutting into aspects of life that people sometimes aren’t comfortable trimming down, but if you want to have financial independence, it hast to be a priority over many of those things, which means you have to make some tough choices.

In the end, the answer is simple: yes, financial independence is possible for most people, but most people aren’t willing to make the choices needed for financial independence. Instead, good personal finances are used in their lives to achieve other goals. Doing that is completely acceptable, but it does mean that you’re likely closing the door on financial independence.

Remember, though, that when you choose to open a door in your life, you close another, and vice versa. Our lives are made up of a complex array of choices. The life we have is forged by the choices we make for ourselves.

Good luck!

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Married Millennials Merging Money: How and Why We’re Doing It

It’s been a big year for me. I got a promotion at work, I turned 30, and I’ve almost made it through a New York City summer without buying an air conditioning unit. I probably spent just as much washing shirts that were soaked with sweat as I would have on an AC, but I still feel accomplished.

Oh, and I’m about to get married. In preparation for that, my future wife, Ashley, and I have been getting our financial house in order. We’ve decided to completely merge our finances. We’re sharing a checking account, a brokerage account, and a savings account.

Here’s why we decided to merge everything, and how we make it work.

Simplicity and Trust

Deciding whether or not to join finances came down to a question of what we valued more: simplicity or independence. Would either of us feel less independent, less adult, or less “ourselves” if we joined our accounts? It’s a real thing we had to talk about.

We both take a lot of pride in being able to manage our spending and monitor our accounts. Wouldn’t it be weird to give up some of that freedom? Could it cause resentment if one of us was keeping spending low while the other was out buying new clothes all the time?

To address that concern, we established a rule. We decided that purchases above $50 would be a joint decision. It’s a system that allows for a nice balance of independence and collaboration. We don’t need to text each other to ask if it’s okay to buy a coffee, so it doesn’t feel like Big Brother is watching over our shoulders.

That being said, we still need to be on guard. While we’re both frugal, not all of our impulsive spending instincts have been stamped out. If I hang out with a friend who has a new FitBit, for example, I can pretty quickly convince myself that nothing is more important than my health and I’d be dumb not to spend a hundred bucks to order one right away.

Now, I know to check in with Ashley first. Usually, she talks me off the edge, and vice versa. We are constantly reminding each other that our goals as a new family are more important than what we individually crave in the moment.

Ultimately, we decided that the benefits of joining forces outweighed the costs. Everything just got a little easier once we dumped all our income into one shared account. In the past, something like paying rent was a two-step process that involved one of us cutting a check, and then getting a Venmo payment from the other. Now it all comes out of one checking account without any hassle.

The Challenges

I totally understand couples who don’t like the idea of doing joint accounts. At first, it’s a bit unnerving to think that your their partner can snoop on your accounts at any time. Maybe they like being able to buy gifts without having the surprise spoiled by their partner logging into the account and seeing a charge they don’t recognize. Maybe they’re really happy with the credit union they’ve used for years, and don’t want to leave to join a national chain.

All of those are perfectly reasonable objections. But, in our minds, the end result is that life without joint bank accounts is always going to be more complicated. Even if it’s just a little friction, it would be enough to annoy us. We’re the kind of people who love wireless headphones for the mere fact that we never have to take that extra five seconds to plug in an auxiliary cord. We feel a little part of ourselves die when we attempt to plug in a USB cable and it ends up not working because the adapter is upside down. The way we see it, separate accounts would mean daily frictions of the same nature.

On a more philosophical level, we felt that creating joint accounts builds stability and trust into the bedrock of our relationship. It’s freeing to allow someone into such a personal aspect of your life, because it means that you have a truly deep connection.

I should note that neither of us is entering into this marriage with a huge amount of savings, or debt, and we both earn salaries that are in the same ballpark. This financial parity certainly simplifies things. I can see how in more unbalanced situations things could be trickier to sort out. For us, it makes sense to treat all savings and income as shared, but each situation is different.

Investment Accounts and Risk Tolerance

Coming up with a method for handling your daily cash flow is one thing, but investing is a whole different beast.

We each already had Roth IRAs, but we had to figure out how we would handle investing in taxable accounts. We decided to create a joint brokerage account with Vanguard. In order to get on the same page with regards to our investments, we gave ourselves homework.

We each sought out a few different investing strategies that appealed to us, and then we spent a few weeks learning all that we could about them. These ranged from pouring everything into stocks, to a “Boglehead”-inspired three-fund portfolio, to the Permanent Portfolio.

I’m not saying that three weeks is enough time to learn everything there is to know about investing. We just needed that much time to settle on a strategy that felt good to us.

I tend to have a much bigger appetite for risk than Ashley, so it was nice to hear her perspective and to bounce ideas off each other. I was able to sway her toward some things, such as investing in small-cap stocks, and she convinced me that we should add in more bonds than I initially wanted.

The final asset allocation we chose is not important. What matters was that we had an honest discussion about how we viewed investing, and we agreed on a strategy that we are comfortable sticking with for the long haul.

Vanguard Makes It Easy

You always hear about how big financial institutions can be nightmares to deal with. I’ve experienced this with credit card companies, who have a tendency to drag their feet, fail to answer basic questions, and over-complicate even simple customer service requests.

When my fiance and I undertook the major reshuffling of our brokerage accounts, we expected to have a million forms to fill out, and at least as many annoying phone calls. With Vanguard, there was none of this. A friendly agent helped us figure out everything we needed to do on a five-minute call. He mailed a form, we signed it, and we were done. I want to put that agent on my holiday shopping list.

The Vanguard flag has been proudly waved by personal finance nerds forever, so this is nothing new — but I still wanted to give them a shout-out.

The Power of a Weekly Chat

In order to make sure we’re on the same page and that we stay that way, we singled out Tuesday nights as a time to talk through everything money related. Every Tuesday, we sit down and go over our spending, our budget, and our future plans.

If we notice discrepancies, or we have concerns, we talk about them honestly. We call this our weekly “Buisness Chat.” Yes, that’s misspelled. It’s because while taking notes on that very first Tuesday, Ashley was going too fast and spelled “business” wrong. The name stuck.

I know this is corny, but the silly name helps us to have fun with the whole situation. As the acclaimed relationship therapists over at the Gottman Institute always say, building traditions as a couple is a fun and important thing to do in the early stages of marriage. Buisness Chat is now a tradition, and we love it.

For the talks that get a little dicey or confrontational, always remember – wine helps everything.

Summing Up

There is no right or wrong way to handle money in a relationship. As long as you find a method that’s sustainable and makes sense to both parties, you’ll be happy. For us, that meant dumping everything into one big pot, sharing all financial duties, and handling “buisness” as a team.

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Tuesday, August 15, 2017

Using a Journal To Solve Financial and Personal Problems

Jill writes in with a really great question:

How exactly do you use journaling to solve your financial problems? Don’t get how writing in a daily diary can help other than maybe documenting when things happened.

As always with questions like these, my answer started off as a shorter response in the reader mailbag, but the answer kept growing and growing and growing until it was clear that it deserved a post of its own.

So, let’s start right at the beginning.

What Do I Mean By “Journal”?

When I talk about writing in a journal, what I specifically mean is that I’m taking out a notebook and, in my own handwriting, puzzling through something that troubles me in my life.

I take a situation that I’m unhappy with and try to figure out why I’m unhappy with it. I take a life problem that I can’t solve and I try to piece through how to solve it. I take a decision I’m facing and try to figure out what the best option is. I take an idea that I don’t understand and work through it, or I take something that I’m not quite seeing the consequences of and piece through the consequences of it. Sometimes, I’ll just step back and evaluate my life as a whole, or some aspect of my life. Sometimes, I’ll try to piece through the goals I currently have and whether they make sense any more and what my pan for that goal should be.

Basically, when I write in a journal, the purpose is to deeply and seriously reflect on something in my life and figure out what the best path forward is.

It’s worth noting that I do this kind of thinking constantly, during many moments of downtime. I’m usually reflecting on some aspect of my life or visualizing some aspect to come whenever I’m driving somewhere down a rural two lane road or taking a break from working or weeding the garden or doing anything that doesn’t require full focus. I’m addressing something like that in my mind whenever I have a gap to just think. I’m turning over an idea or a life situation or something.

So why use a journal, then?

I pull out my journal when the problem is particularly difficult, or when making the right decision is particularly important. It becomes a focusing point for something that I really want to deal with and understand.

The reason I choose a paper journal and a pen is because it helps me think and concentrate and focus, which helps me figure out problems. This isn’t an unusual thing – there’s a lot of research out there indicating that you learn and think better when writing ideas out by hand. Haptic nerves are activated by handwriting that aren’t activated at a keyboard, and the speed of handwriting is slow and thoughtful. It adds up to a situation where I’m often able to dig far deeper into a problem in my life or a new idea that I’m ever able to do while driving around – or even when typing at a keyboard.

(You’d be surprised how often the germ of a post for The Simple Dollar arises when I’m sitting there with my journal, puzzling over some aspect of my life. I’ll jot that core idea down elsewhere on an “idea list” to research and cultivate further, but many of my posts spring into their nascent form while journaling.)

To really drive home how journaling helps me with improving my finances (and financial-related aspects of my life), I’m going to give four concrete examples of how I’ve used my journal to process financial problems in the last several months.

Example #1 – When (and How) Should We Replace Our SUV?

Our SUV, which we bought off of Craigslist almost a decade ago, has been a very reliable vehicle, but it’s simply getting old. There are lots of little issues going on with it, from worn out struts to a weird transmission issue. There are about five major repairs that are coming up around the bend, and several minor things that should be done to it (like replacing headlight covers and fixing a small spot of rust).

Is it time to replace it yet? Or can we get a few more years out of it?

I sat down and worked through this puzzle in my journal. I got some estimates of what all of the repairs would cost to get the vehicle back into tip-top shape (about $4,000, all told) as well as just the more critical ones (about $1,500, all told). I looked at the prices for the type of vehicle we would replace it with – a late model used SUV or van, as we have a family of five to transport.

I also looked deeply at our usage of the vehicle, particularly during the academic year. During the summer, we’re effectively a one-vehicle household; it’s during the school year that we really need two vehicles. What are those scenarios where we really need two vehicles? Is it possible to survive with just one vehicle?

I wrote down all of these things, and as I was doing it, I gave each point some thought. I eventually came to the conclusion that it makes the most sense to hold onto the vehicle for a while, doing the critical repairs for now, and then evaluating our next step with it as we approach our next long “road trip” summer vacation, penciled in for two summers from now.

It was through taking the time to slowly work through those questions in one coherent block that led me to the best conclusion for the situation.

Example #2 – Should I Launch a New Side Business?

I had a vague idea for a side business that had been floating around in my head for months, but I hadn’t actually done anything to build it into something more than just a thought bubble.

I sat down with my journal and just fleshed out, step by step, what I intended to do with the side business. While I didn’t quite use the same formality, I actually walked through the basic structure of a business plan for a side gig that I described in that earlier article.

This largely took the form of notes. I was brainstorming the ideas down on paper so that I could see them all together. Often, during the process of brainstorming, I would clarify some earlier thought or come up with the next logical step in the plan.

This ended up filling several pages in my journal. At the end, I concluded that the idea was really good, but I do not have the time to devote to it to make it really work.

So, was all of this worth the time? Absolutely! It helped me work through a big idea I had in my head, one that had kept bouncing into my thoughts and leaving me wondering if this was something I could pull off. If I ever decide that I do have time for this idea, I basically have the structure of a business plan already down on paper. It also gave me a few ideas for other things I’m doing in my life, including The Simple Dollar.

Example #3 – Figuring Out Meaningful Gifts

In the spring, there’s a month-long period where there are several gift-giving occasions within our family. From late April to early June, our family ends up giving gifts to several people.

What I’ve found is that it’s much easier for me if I step back before that “season” starts and figure out the gifts I’m going to give all at once.

So, one journal entry, written about a month before this “season” began, consists of nothing more than a list of all of the gifts I have to give during this “season” and then some pure brainstorming for ideas.

The goal here isn’t just to come up with a bunch of gifts I can easily get off of Amazon. I can do that a few days beforehand with ease. The goal is to come up with truly thoughtful gifts, some of them homemade. Giving myself a lot of lead time makes it possible to think through gift ideas and come up with plans to make cool things.

I was able to plan ahead for a wonderful birthday for my wife. I was able to plan ahead for a homemade Mother’s Day surprise from my kids to my wife, as well as from our families as a whole to my mother and my wife’s mother.

This journal entry gave me time to stop and think about these things, working through several ideas and whether they made sense and whether I could pull them off.

Example #4 – Correcting Bad Spending Habits

A few months ago, I went through a period where I badly overshot my hobby budget two months in a row. I gave into some spending temptations and didn’t properly account for some of the spending that I did.

This needed to stop. I sat down with my journal to come up with a game plan for fixing it.

The first thing I did was list out all of my hobby spending over those two months. I just made a giant list of the expenses and totaled them up.

I then went through them, asking myself why I spent that money. I tried to write down a sentence or two for each one that explained why I spent the cash.

After that, I went through the things that I wrote and looked at the patterns. The biggest pattern that I couldn’t help but notice is that I would wind up spending hobby money after reading hobby-related websites and then I didn’t properly account for it (often because I used PayPal).

So, what could I do to solve that problem? I sat there and just brainstormed solutions and wound up coming up with a few that really made sense to me. The best idea was to de-link PayPal from other accounts and only use it if it has a balance in there. If I need to use it for another purpose, I have to manually fund it. This cuts me off from one frequent financial mistake. Another solution is to simply check out of visiting hobby sites that tempt me to buy and instead spend that time doing something hobby related.

Note, of course, that these are just four examples of how I use my journal. Now, let’s jump into my actual practice. What do I use? How do I do it?

The Mechanics of How I Journal

When I journal, I like to write on a page with plenty of space. I typically use composition-sized notebooks, not pocket notebooks, but not full-sized notebooks that people use for school, either.

The inexpensive composition books one can buy at stores work just fine for this (I prefer college ruled), but I really like the Baron Fig Vanguard and the Leuchtturm 1917 medium notebook, both with a dot grid pattern on the pages. I prefer dot grid when I mix writing and drawing things and making columns and rows, which is exactly what I do when I write in my journal. Those notebooks are expensive – I often receive them as gifts and use them up before moving on to inexpensive composition books.

To summarize, when I buy journals for myself, I usually buy these (which you can buy very cheaply right now during back to school season) though I often receive nicer ones as gifts from family members who observe my frequent journaling and note-taking.

What do I use to write with? I typically use these pens or these pens, whichever is cheaper. I buy them by the dozen box and then replenish whenever I find them on sale. These pens write with a very narrow line, are very reliable, and seemingly never leak. They’re also inexpensive enough that I don’t feel too bad if I misplace one.

In other words, I typically write in a composition book that I got for $0.25 to $0.50 (during a back to school sale) and a pen that cost about $0.50 to $0.75 (depending on the sale). I generally can fill two or three composition books before a pen runs out of ink, though I’ll use the pens for other things, too.

This isn’t an expensive activity. I probably use $0.05 in materials every time I journal.

I typically do this when I’m alone, often on a lap desk in a quiet room or at the kitchen table. I find it distracting to focus on a life problem when others are around because I’m usually throwing out my own thoughts without any filter and I don’t want them to be shared, plus the noise and action of others provides a distraction.

I do not do this every day. I do it when I have something that’s on my mind that I want to work through and figure out. I might do it three times in one day, then not touch it again for a week.

I usually start by just writing and writing and writing. I try to brain dump everything that’s in my head. When I feel that going dry, I then organize those thoughts a little bit. I read back through them, figure out what’s meaningful, and underline it or mark it somehow. At that point, I usually figure out some way to organize the thoughts – maybe I use a list of pros and a list of cons, or maybe I simply pick out a few of the best ideas and work through them a little more to make sure they work logistically.

Sometimes entries take less than a page. Other times, they’ll take up tons of pages. Sometimes I’ll finish and have a happy solution in fifteen minutes or half an hour. Sometimes, I’ll keep coming back to the same problem again and again and not come to a solution until I’ve been plugging at it for hours. It’s not consistent, nor should it be.

In the end, it comes down to this: I have a problem on my mind. I pick up a pen and a notebook and dump out all of my thoughts related to that problem. I then organize that big brain dump and see if there’s a solution (or a path to a solution) in there. I refine things by rewriting and organizing until a solution emerges.

In truth, all of this is a conduit for focusing and organizing my thinking. Without doing this, my thoughts tend to go all over the place on a subject and rarely come to a conclusion; even when they do, the conclusion is often not the best one. Whenever a decision seems important at all in my life, I turn to journaling to put it all down on paper.

Some Final Thoughts

My recommendation to you is a simple one.

Think of the problem in your life that’s bothering you the most. It’s the one that keeps peeping into your thoughts. It could be anything. It might be an untapped opportunity or a financial problem. It might be completely unrelated to finances – maybe you’re struggling to find time for something you care about or there’s a big home improvement project that you don’t even know how to tackle.

Whatever it is, set aside about forty five minutes or so and sit down with a pen and a piece of paper.

Think about the problem and start writing. Write the problem itself down. Write down what worries you about it. Make a list of all of the steps that need to be done. As it comes into your mind, write it down by hand. Let the benefits of writing by hand benefit you.

It doesn’t have to be perfectly organized. It just has to come out of your head onto paper.

Keep going with it until the ideas cease flowing. What you’re going to have is a giant mess of ideas. You’ll have bits of description of the challenge you’re facing. You’ll have a bunch of raw ideas about solutions. You’ll have bits of information that are relevant to the situation. You’ll probably have some bits that are just raw expressions of your feelings. It’s all good.

Now, go back through what you wrote. Mark anything that seems really worthy on your second passthrough – I often underline it or mark it with a big asterisk. You’ll probably find that some of the things you wrote before trigger more thoughts, so write them down below.

Do this a time or two until you have a bunch of worthwhile stuff highlighted. At that point, start organizing the highlighted stuff into something more cohesive. Usually, what you’ve highlighted amounts to the clearest description of the problem and some of the best solutions you’ve conceived of. Collect all of that stuff together.

At that point, you’re probably fairly close to being done. Spend some time working over those solutions that you’ve come up with, figuring out how you’re actually going to pull them off. How are you actually going to do these things? (You may have concluded that the idea just won’t work, and that’s okay, too.)

Take your final conclusions and plan and translate them into action. Add some things to your to-do list. Spend some time right away on the plan you’ve invented.

That’s the power of journaling. I’ve found almost nothing better for solving life’s problems. The act of just writing everything down seemingly performs a magic trick on the mind, unlocking ideas and connections that just don’t come up when you’re thinking about things in a fleeting moment.

If you found the exercise useful, get yourself a few composition notebooks and start using the technique regularly whenever you find yourself struggling with a problem in your life. You’ll be amazed at how the process pulls up solutions for you.

Good luck!

The post Using a Journal To Solve Financial and Personal Problems appeared first on The Simple Dollar.

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Three Ways to Improve Your Credit in 30 Days

Improving your credit generally takes hard work and a whole lot of patience. That being said, there are a few credit improvement strategies that can yield some results in a relatively short period of time. These methods will not turn bad credit into great credit overnight, of course, but they can potentially lead to a noticeable improvement.

Method #1: Lowering Utilization

Credit scoring models are designed to carefully consider a factor known as your revolving utilization ratio. This is the relationship between your credit card limits and the balances on those same accounts.

Here’s a quick look at how revolving utilization works. If you have three credit cards, each with a $1,000 limit, and those same three cards each have a $500 balance, then your aggregate utilization ratio is 50%: $1,500 ÷ $3,000 = 0.5 x 100 = 50%.

Lower is better! As you use up more of your available credit limits, your credit scores generally decline. Of course, this also means that as you pay down those same credit card balances and free up more available credit, then your scores will likely improve.

In fact, when you lower your revolving utilization ratio, your credit scores may begin to improve as soon as the next time that your card issuer reports your monthly account activity to the credit bureaus.

Another strategy for lowering revolving utilization ratios involves being removed as an authorized user from credit card accounts that have high balances.

If, for example, you’re an authorized user on a spouse’s account, and the card carries a high balance, you might consider asking your spouse to call the card issuer to get you removed from the account, at least temporarily. If the account is then removed from your credit reports, as is generally the case, then the account balance would no longer influence your revolving utilization ratio, nor harm your credit scores.

Method #2: Adding an Authorized User Account

Authorized user accounts are not always negative. In fact, sometimes being newly added as an authorized user to a loved one’s existing credit card can benefit your credit scores in numerous ways.

The first way that an authorized user account might benefit you is by helping you to lower your aggregate revolving utilization ratio. If you’re added to an account with a high limit and a low balance, then your overall utilization ratio may go down and, as a result, your credit scores will likely go up.

Additionally, if the account to which you’re added is older than any of the other existing accounts on your credit reports, then your “age of credit” will increase as well. Credit scoring models generally consider the age of your oldest account and the average age of the accounts on your credit reports when calculating your scores. Being added to a well managed, older credit card account could potentially help you to see a quick credit score improvement.

Method #3: Removing Derogatory Information

Mistakes on credit reports happen, which is why it’s important for you to proactively check your credit reports often for errors. If you discover and successfully dispute derogatory information appearing on your credit reports, then the result could be a deletion of the offending information and a potential credit score improvement in a relatively short period of time.

Negative information on your credit reports unsurprisingly has the potential to damage your credit scores. However, if that negative information is removed, then any such influence would be removed as well. Keep in mind, of course, that if a derogatory item is removed from your credit reports due to inaccuracy, yet your reports remain plagued with other derogatory information, then any positive improvement may be minimal.

Related Articles:

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

The post Three Ways to Improve Your Credit in 30 Days appeared first on The Simple Dollar.

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