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Wednesday, April 25, 2018

Tuesday, April 24, 2018

Ten Tips for Maximizing the Value of Eating Out

I have a few close professional acquaintances (other people who work from home and produce online content) that like to meet up for lunch about once a week. I get a lot of social and professional value out of meeting this group for lunch and so I’ve stuck with this group for many years even though many of them weren’t really concerned about being cost-conscious with this lunch.

Originally, we ate at nicer restaurants and the people involved would often have a drink or two with the meal and order a really nice entree. I’d go along but try to dig through the menu for inexpensive options because, as always, I was pretty conscious of the price.

As time went on, I think I slowly started affecting the other people in the group, or else the realities of their lives made them more cost conscious. We gradually started choosing less expensive places to eat, with me often leading the charge and choosing something inexpensive that I thought was a good value. Gradually, the two or three drinks at lunch became one, then dropped to no drinks at all for most of the group.

These days, the group is still largely intact, but we now follow most of the strategies listed below. We often share tips and ideas with each other, zipping coupons back and forth and pointing out good deals for the week.

The truth is that eating out is expensive. When you go to a restaurant, you’re not getting a bargain – you’re always paying for the food preparer’s efforts and the convenience of it or the quality of the food preparation or some other combination thereof. It’s difficult to eat a quality meal at a restaurant for less than $10; even a fast food meal usually jumps above $5 without even ordering a specialty item.

I’m pretty frugal with my dining dollars, which means that I tend to avoid restaurants if I can, except for the occasional family meal or the lunch described above or an occasional lunch with friends. Almost all of my meals are eaten at home or in the form of a sack lunch that I took with me to my destination. If I’m out and about and find myself hungry, I’ll usually stop at a grocery store and get something extremely simple and cheap to tide over my hunger, like a bunch of bananas (the remaining ones go home with me).

On the rare occasion when I do eat out, there’s usually a reason for it that isn’t covered by other options, and that’s really the very first strategy that I’m going to discuss.

Never eat alone. If you’re going to actually eat at a restaurant, do it with someone else and give it a purpose beyond the mere consumption of food. If you’re all alone and eating, eat healthy and at minimal cost, which means that you’re not going to a restaurant (which usually fails at the “healthy” part of that recipe and always fails at the “minimal cost” part of the recipe).

What if you need something quick? Honestly, the produce section at the grocery store is usually just as fast as a fast food restaurant’s drive-thru section. Grab yourself some apples and bananas and a carton of milk if you need some quick protein. You can assemble a passable meal on the fly in the produce section of a grocery store for just a couple of bucks, and it’ll be healthier and tastier to boot.

Basically, unless you’re getting additional social or professional value beyond the meal itself, you shouldn’t be spending the additional cost of eating at a restaurant. Go out and eat with friends. Go out and eat with professional associates. Don’t go out and eat when you’re alone – that’s the time to go minimal.

Stay off the hedonic treadmill. What I mean by this is simply don’t eat out often enough that it becomes routine and normal. Your “routine and normal” meal should be an extremely inexpensive meal prepared at home at minimal cost. If that is not your “routine and normal” meal, your food costs will skyrocket.

Eating out at a restaurant should be an unusual experience. It should be a treat that you don’t typically enjoy, so that it feels like something special and you get a bit of extra value out of the anticipation of it and the enjoyment of a meal that isn’t just the same old thing.

The “hedonic treadmill” refers to the idea that you can start to become accustomed to pricy options if you repeat them all the time. They become the new normal for you and you have to keep repeating them; less expensive options than the new normal begin to seem really suboptimal and you naturally begin to subtly avoid them.

That’s not a place where you want to be if you value your finances. You’re far better off if the default meal for you is extremely cheap and healthy, prepared at home with basic ingredients, and the meals that go above and beyond that are memorable but exceptional occasions, worth anticipating and savoring.

Choose a self-service restaurant unless there’s a clear reason not to. Self-service restaurants include buffets, fast casual restaurants like Chipotle or Noodles and Company where you order at the front and often pick up your order there as well, or quick serve restaurants like Subway or fast food places.

The advantage of going to a self-service restaurant is that there is no table service, thus there is no waiter to tip. You’ve done the minimal service work yourself by ordering at the front, retrieving your food when it’s called, and getting your own drink and silverware (if needed). Naturally, you do lose the convenience of having someone come around to fill your drink throughout the meal and there’s no one taking your order, but you’re generally leaving the restaurant with a higher ratio of food quality for your dollar.

When I’m uncertain as to where a person I’m with might want to eat and I don’t know that person well, I usually suggest a fast casual restaurant with a reasonably broad menu along with other inexpensive local options, and the fast casual restaurant is often chosen. Usually, you can get a decent meal there for under $10.

Know the restaurant. It’s well worth your time to do a little bit of research on the restaurant before you go. Most of what you need to know can be found directly on the restaurant’s website, but you can also do a general coupon search with Google as well.

A few things worth noting:

Does the restaurant have a “happy hour”? In other words, are there times during the day where there are discounted or even free drinks or appetizers or other small bonuses?

Does the restaurant have discounted lunches? Many restaurants have good deals on lunches, offering slightly smaller portions of dishes at a big discount. It’s often cost-effective to go out for lunch and eat dinner at home rather than vice versa.

Does the restaurant offer a customer rewards program? If so, it’s probably worth signing up using an alternate email address. Many customer rewards programs offer an easy online signup on the website and will send you a coupon immediately.

Are there other coupons available? Do a Google search for the name of the restaurant plus the word “coupons” and see what you find. You should also check the restaurant’s social media accounts, as they’ll sometimes offer coupons there.

Use your birthday. Many restaurants offer a nice discount on or around your birthday (typically within two or three days of it), usually requiring a photo ID to prove it. This might include something like a discount on a lunch or a free appetizer or dessert.

If you have a few “lunch dates” or “dinner dates” that you need to schedule, scheduling them in proximity to your birthday can net you several free items. I often try to visit restaurants with birthday support near my birthday and will even intentionally schedule such events to accommodate this. This has a real financial benefit, which is better explained below in a different tip.

Drink water as your beverage. One of the biggest additional expenses at restaurants is the cost of the beverage. A typical fountain drink often costs $2 or more, which is an awful lot to add to your ticket for fizzy water with corn syrup in it, especially when you can get ordinary water for free.

If you really want a sweet drink for lunch, one trick is to order water and visit the self-serve vending machine. Put a little bit of sugar in your cup (there are usually sugar packets nearby), then add a slice of lemon, then add water on top. I usually go with the “slice of lemon, then ice, then slice of lemon, then carbonated water” route to make a perfectly refreshing beverage to accompany my lunch. Most fast casual restaurants with self-serve beverage areas have the options to allow you to amp up your water in such a way.

Even if you don’t have such options, the advantage of drinking water is that it’s free and it’s usually bottomless, so you can drink a glass of it before your meal arrives and another with your meal, leaving you less hungry and thus sated by a smaller amount of food.

Aim for a dish you couldn’t prepare at home. There are a number of dishes that we often prepare at home. Pasta is one. Simple homemade pizza is another. Simple grilled foods is another one.

Like any family, if we have similar meals on a frequent basis, they become tiresome and routine and we end up excluding it from our meal routine for a while, which means that we have fewer regular options and have to be more creative. It’s much better to spread out our regular homemade staples.

Eating those regular meals when we’re out at a restaurant disrupts that home meal preparation cycle. If we go out and someone in our family orders a pasta meal that’s just like something we often eat at home, they’re going to enjoy it much less if we have it three days later in our own home dining room.

Thus, one great strategy for keeping your food spending low and maximizing the value of eating out is to order something that ordinarily wouldn’t be prepared at home. Order something with ingredients that you like that wouldn’t normally be in your home kitchen because someone else in your family doesn’t like it. Order something that you actually don’t quite know how to prepare. Order something that would be pretty time-intensive for you to prepare at home.

That way, you don’t run the risk of getting tired of one of your favorite low-cost staple meals at home.

Split a larger meal rather than ordering two smaller ones. If you’re dining with a close friend or your partner, consider ordering one large entree rather than two smaller ones. The large entree is likely to be quite a bit cheaper than the two smaller ones combined, but the portion sizes are very likely to be large enough to sate both of you.

For example, my wife and I will often order a single large pasta bowl when we go to Noodles and Company and just simply share it between us rather than ordering two meals. It’s substantially cheaper this way and we both leave comfortably full.

If you don’t like the thought of sharing the same bowl or plate with someone, ask for a second plate or a takeout box right when you order, then split up the meal at the table.

Eat sensibly and take home leftovers. When you have a big plate of food in front of you at a restaurant, it can be really tempting to just eat all of it and not leave a bit behind. After all, you paid for it – won’t it just go to waste. Sometimes, even being aware that you can get a leftover box isn’t enough to stop this.

My strategy? I usually ask for a leftover box (or grab one if they’re available, as they often are at a fast casual restaurant) as soon as the meal is delivered, then I put part of my meal in the leftover box well before I’ve finished what’s on my plate. This lets me feel the “empty plate” feeling while still having a box of leftovers to take home for me.

That box of leftovers often becomes lunch the next day, which essentially means that my one meal at the restaurant has actually covered two meals.

Combine the strategies. Yesterday, I went out to lunch with two friends at Noodles and Company. I ordered a regular sized entree for $8.99 along with a cup of water, applied a $3 off coupon to the meal, added lemon to the water, and snagged a take out container before I went to my table. I drank a full cup of water, then refilled it just before my food was ready. As soon as my meal arrived at the table, I put half of the entree into the leftover box. In the end, I paid less than $6 for a good-sized lunch and a leftover container that held lunch for the next day, and it gave me a great opportunity to see some friends and have some great lunch conversation and planning for an upcoming event.

To me, that’s frugality at work. I simply stacked together several simple strategies, reducing the cost of what could have easily been a $12 lunch by myself into $5.50 spent on two lunches, one of which was a really nice social opportunity. To me, that’s how you maximize the value of eating out. Stack these little strategies together and you’ll end up getting real value.

Remember, the goal here isn’t to have a “cheap” meal, but to get the maximum value out of your dollar. I find much more value in a good meal for $4 or $5 than I do out of a great meal for $20 when the good meal is 80% as good as the great meal. These frugal strategies often stack up on those good meals so that their price is easily palatable.

Good luck!

The post Ten Tips for Maximizing the Value of Eating Out appeared first on The Simple Dollar.

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10 Things You Won’t Find on a Credit Report

Your credit reports can tell lenders a lot about you. Credit reports reveal how you pay your bills, whether on-time or late. They also indicate how you manage your credit card accounts, such as whether you’re paying off the balance each month or revolving debt. And, your credit reports even show how often you’ve applied for new credit in the past 24 months.

Of course, not everything about you will be included in your credit reports. Certain information isn’t allowed to be included on a credit report because of federal law. Other information isn’t on your credit reports by a matter of choice. Here are 10 pieces of information you won’t find on your credit reports.

Credit Scores (Yes, Really)

While the information in your credit report is used to compute your credit score, and though you or a lender may often purchase a credit report and a score together, your credit scores are not actually a part of your credit reports. Instead, credit scores are a separate evaluation of the information contained in your credit reports. They’re an ancillary product; much like the leather interior in a new car, they are optional.

Deposit Account Balances

Your checking and savings accounts balances are not a part of the information included in your credit reports. As such, whether you have $1,000,000 in the bank or $1, neither fact will have any direct impact upon your credit scores. Other wealth building or “nest egg” accounts — such as money market, 401(k), SEP, and brokerage accounts — are also not on your credit reports.

Salary Information

Just as your bank accounts will not show up on your credit reports, neither will your salary, earnings, or net worth. There was a day, several decades ago, when salary information was a part of consumer credit reports. However, the information was not updated like normal credit accounts and, therefore, became outdated and incorrect fairly quickly. Further, most people don’t have a precisely static salary because of things like bonuses, promotions, stock options, fluctuating hours, or overtime pay. As such, it’s hard to report a single number and accurately call that your salary.

Employment Status

Although a list of past and present employers might appear on your credit reports, your actual employment status is another piece of information that’s missing from your credit reports. For example, my current employer on one of my credit reports is “student,” which is outdated by about 27 years.

Your Spouse’s Credit History

A common credit myth is that once you get married your spouse’s information will show up on your credit reports. However, this is incorrect. Credit reports are maintained at the individual consumer level and not at the household level or “married” level. The only way your spouse’s credit information will show up on your credit reports is if you’re a co-obligor of some type.

Interest Rates

While your credit reports contain all kinds of information, past and present, about your various loans and credit card accounts, surprisingly, the interest rates you pay on those loans and accounts are not included in your credit reports.

Most of Your Utility Accounts

Unfortunately, your on-time utility payments will generally not be reflected on your credit reports and, by extension, will not help your credit scores. In general the only time information about your utility accounts will show up on your credit reports is if you default and the debt is handed over to a collection agency.

Criminal Records

Some types of public records may appear on your credit reports, but criminal records do not fall into this category.

Nontraditional or Private Loans

Loans made by nontraditional lenders, such as pawn brokers, and private money loans, don’t typically show up on your credit report. And if you borrow money from your good-ol’ Uncle John, that doesn’t show up either.

Outdated Negative Information

The Fair Credit Reporting Act dictates how long most types of negative information are permitted to appear on your credit reports. In general, either seven or 10 years is the limit, depending on the type of information.

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 10 Things You <i>Won’t</i> Find on a Credit Report appeared first on The Simple Dollar.

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Monday, April 23, 2018

Questions About Refinancing, Photo Printing, Camping, Light Bulbs, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Paying off house early
2. Difficult refinance
3. Am I financially independent?
4. Preparing for a layoff
5. Applying for a joint loan
6. First lien position HELOC question
7. Saving on home photo printing
8. Light bulbs and rentals
9. Structure in retirement
10. Unrealistic stories
11. Camping on the cheap
12. Confusing Meetup experience

Over the summer, I am going to be doing a series of posts discussing the book The Wisdom of Frugality by Emrys Westacott. I intended originally to just review this book with a single review, but I found so many things I wished to talk about that I decided to make it into a series, one that will spread across several Saturday posts this summer.

This series won’t start for at least a few weeks, but I’m telling people about it now because I know some people like to read along with series like this that I’ve done in the past, or they like to finish the book first. You won’t need to have read the book to get value out of the articles, but having read the book will enable you to contrast what you got out of the book versus what I got out of the book.

Basically, the book covers the philosophy behind frugality and simple living from several different angles, looking at how it impacts lives and the world through the lens of various philosophical and religious traditions. It’s a wonderful book with a lot to talk about. (The Simple Dollar is briefly mentioned, which was a pleasant surprise.)

On with the questions for this week!

Q1: Paying off house early

I just read that you paid your mortgage in 4.5 years. Were you investing during that time or throwing everything at the house?
– Jim

During that period, we were contributing to our retirement accounts up to the point of receiving a full match from our employers, but aside from that, we were throwing everything else we could at our mortgage, making triple payments many months (and often more than that).

The reasoning was simple. We viewed every extra payment as an investment that paid a guaranteed 5% annual tax-free return (because 5% was our mortgage interest at the time). We weren’t going to beat that kind of return anywhere – we might beat it over a long period of time, or in years where we were lucky with the stock market, but not as a guaranteed year-in-and-year-out return with no taxes associated with it.

We paid the mortgage down and we did it hard and fast.

Q2: Difficult refinance

My wife has health problems that forced her to stop working. We have about $40,000 in credit card debt. I also have about $70,000 in student loans that is in an income based repayment plan to dramatically reduce the monthly payment. I have slashed every bill I can by calling all of our credit cards to get rates reduced and cut cable, cut out alcohol and even downsized to one car for our family of four. I also already borrowed $15,000 from my retirement plan and paid off credit card debt with most of that money. The rest was used to stay afloat and pay monthly bills. I am working a second job and trying to start a business to increase my income. My specific question is…we also have about $40,000 in equity in our home if we were to borrow up to 80-85% LTV. I have tried taking out a HELOC to consolidate credit card debt and reduce interest. One bank told me it looks like it might not work due to our debt to income ratios. Another bank told me they could offer a cash out refinance but not a HELOC. I’m concerned about the closing costs with a refinance and getting a higher rate as our current mortgage loan is at 3.75%. Also a little worried about shopping around and getting too many inquiries on my credit. Could you please help me with the pros and cons of a cash out refi vs. a HELOC, or offer any other advice or suggestions for our situation?
– Adam

You’ve basically laid out the big differences that are relevant to your situation. A cash-out refinance is just that – you refinance your home with a larger mortgage than what you currently owe and put the difference in your pocket, which you’d probably use to kill some of that credit card debt. A HELOC lets you take out cash as needed. I do understand, with your debt situation and your wife’s inability to work, why a bank would be hesitant to loan money to you. If you do go for the cash-out refi, put every dime of it toward those credit cards, starting with the highest interest ones.

If I were you, I would basically burn all of your credit cards and avoid getting into any more debt. If you think you “need” them to “get by,” then you’re living a lifestyle that’s above and beyond what you can afford with your current income. Something has to give here.

As an aside, if your wife’s health problems are permanent ones, you may want to consider downsizing your home to something more affordable. If you sell your home and move to something with more affordable payments, you may be able to make things work more efficiently.

Q3: Am I financially independent?

I have an inquiry as to your opinion on whether or not I would be considered financially independent, yet. I am a 40 year old disabled military officer retiree (Iraq/Afghanistan Wars veteran), and I receive a substantial military pension and a bit of Social Security for life as my injuries are permanent and total. All my current living expenses-minus my debt payments, are covered by my pension. My debt payments (which will be paid off in the next year) are all covered by my Social Security payment (Even if SS is cut by 20%). If social security is passive income like my pension, and I can comfortably live off both without active work for life- am I already considered FI. Or just when debt is gone and I don’t need Social Security’s supplementation?
– Annabelle

You’re as financially independent as anyone can be who isn’t wealthy enough to make themselves financially independent from the American government.

The thing to remember is that there are always degrees of financial independence. While you are free from the need to work, you aren’t free of the government; your independence relies on the continued healthy operation of the government and their continuation of the programs that support you. You have to be quite wealthy to become independent of that.

I think you’re in quite good shape, though.

Q4: Preparing for a layoff

A dear friend is facing a possible layoff and he is torn up what to do. He has more than two years salary saved as a emergency fund plus retirement funds of about $400,000, but he is in his late fifties and is worried he will never have a good job again ($80k is good to him) In fact, he has twice as much saved as his 30 year mortgage balance which has 29 years left on it. The mortgage balance is $250,000 at 3.5% and the payments are around $1600 a month with taxes and insurance . He keeps asking me should he pay off the mortgage debt he has with part of his retirement and emergency funds and take whatever junk job he can find? My advise has been to tell him to sit tight, look hard for the next job , make his payments and look where life takes him 1,2, or three years from now. How do you all see it?
– Edward

I think your advice is spot-on. He should sit tight, make his payments, firm up his resume, and start softly looking for his next job. I’d encourage him to really use his professional network in this job search – who does he know in his field that might help him find work elsewhere?

Also, if his workplace offers any sort of retirement savings, especially if there’s matching of contributions, he should start doing that immediately. He needs to be collecting every drop of employer matching if it’s available.

He should NOT quit this perfectly good job right now just to take “whatever junk job he can find.” Be patient. It’s far better to keep making $80K a year for now and then be as ready as possible to leap to a new job in a year or two when he’s very ready for it and when the layoff might actually happen.

Q5: Applying for a joint loan

Can we apply for a loan using joint income?
– Fred

Yes. You can apply for most secured loans (like a car loan or a mortgage, where the bank can repossess something if you fail to pay) jointly and many personal unsecured loans jointly. The bank will take into account your combined income, as well as both of your credit histories, when deciding whether to do a loan.

Be aware that, while most joint loans end up helping you secure a better loan, it can be problematic if one of the people has really bad credit. That can actually hurt your interest rate, though you’ll probably still be offered the loan you want.

Good luck!

Q6: First lien position HELOC question

Does it make sense to get a first lien position HELOC on your home, put your whole paycheck toward it, and then borrow back from that to live on?
– Erica

This question was asked by multiple readers, which makes me think that some major radio show or mainstream website must have been talking about this type of program within the last week.

In short, no, I would never do this. Unless that home equity line of credit comes with a fixed interest rate, I wouldn’t touch this plan with a ten foot pole. There is no way on earth I would ever put my entire home mortgage on an adjustable interest rate loan. If loan rates go up, you are in bad shape very quickly.

If you can find a home equity line of credit that offers a fixed rate – and by fixed, I mean permanently fixed, not just fixed for 2 or 3 years and adjustable annually after that which is what many are actually like – then this might make sense. However, you’re probably not going to be able to ever find such a loan.

Q7: Saving on home photo printing

What are some strategies to save on the cost of home photo printing? I like to print photos to use in picture frames and collages but paper and ink really add up.
– Denae

Printing photos at home eats up a lot of ink, and good photo paper is expensive, too.

One thing you can do is simply buy your photo paper in bulk quantities. This is a good thing to do at a warehouse club like Costco or Sam’s Club, where you can often find a good deal on a large bundle of photo paper in various sizes (4″ by 6″ and 8.5″ by 11″ are commonly found there).

Another strategy is to either refill your own ink cartridges using a kit that works with your cartridge type or take your empty cartridges to a service that will do it for you. Both options are far cheaper than constantly buying new cartridges, which you have to do if you print many photos at home.

Also, if you just have a large set of 4″ by 6″ prints to make, consider having them printed elsewhere. I’ve found that the cost of printing a large batch of 4″ by 6″ prints at home is higher than just sending a large batch to an inexpensive photo printing service.

Q8: Light bulbs and rentals

Saw this idea on another website and wanted to get your take on it. I live in an apartment and someone suggested buying a bunch of LED bulbs and replacing all of the bulbs in the apartment and then saving the old bulbs in a box in the closet. Then when I move out I take out all of the LED bulbs and put the old bulbs back in the sockets and then take the LED bulbs with me. This way I save on energy while living here and don’t leave behind the expensive LED bulbs. Does this make sense?
– Juliet

Yes, it absolutely does make sense. You will save money on your energy bill while the LEDs are installed and when you move out they’ll go with you to your next place.

The only real drawback I see is the risk of broken bulbs, which will eat into the savings, so I do have a few suggestions. First of all, make sure the bulbs you take out are stored well in a place where you’ll remember them. Put them in the box gently and then put the box somewhere where there’s little risk of them breaking. This isn’t going to be worth it if there’s a ton of shattered glass all over the place.

Second, when you take out the LEDs, pack them securely. If you install, say, 20 LEDs around your apartment, that’s a bit of an investment, and you’re going to want to make sure you carry that investment forward. Put them in a box, mark clearly what it is, and make sure it’s very secure with nothing on it. You may even want to pad the bulbs a bit inside the box. This is probably a box you’ll want to handle yourself.

Q9: Structure in retirement

Thoughts on this article? Many Americans Try Retirement, Then Change Their Minds

This is something I am puzzling over myself. I am 62 years old. I have been in the full time workforce for 42 years without cease. I am worried about what I am going to do with my days when I retire. I watched my father retire from a factory, go home, sit in his chair for ten years, and then die. I don’t want to do that.

But I am smart enough to know that the “big picture” isn’t enough to convince you to do something every day, especially when you are old.

Thoughts?
– Tammy

Figure out some things you want to do in retirement, then mandate a “work day” for yourself to work on them. That’s my plan for retirement. I plan on “working” an eight hour day most days on the things that I’ve always wanted to do or take care of.

Things I want to do when I retire: work for and revitalize a local charity, grow a giant garden, write a series of novels I’ve been thinking about for a good decade now, go back to college for a degree (I want to be one of those 70 year olds who graduate with a degree in history or something), go on camping trips with my wife and go on as many trails as possible and utterly stretch my physical capabilities, visit my children on occasion and just take their children off their hands for a while so they can have a break (assuming they have children, of course), and a lot of other things.

I fully intend to jam pack every day with those things, along with a routine that keeps me physically and mentally strong.

I think the key is “routine.” Suddenly, the routine of your job is gone. What are you going to replace that routine with? If you don’t have a routine pretty quickly, it becomes easy to spend your days without any structure, doing very little. Find a new routine. Make a daily schedule for yourself and stick with it to the best of your ability.

Q10: Unrealistic stories

I like reading your site and other sites as I get my financial house in order. The problem I have is that when I read stories about other people they just seem unrealistic to me usually because they have way more income. The money strategies of someone making 5x my salary seem useless.
– Amie

Honestly, I find the best strategies when reading about the lives of people in far different situations than my own, because most of the best strategies for people in similar situations are already known to me.

For example, I already know how to prepare a frugal American diet, so I often get good insights from reading about frugal foods from other cultures. I already know what to do for social and cultural experiences that are the norm around here; what can I learn for new ideas from people different than myself? What do rich people do? What do poor people do? What do people from other cultures do?

I’ve found useful financial and frugal strategies from people way richer than me, way poorer than me, from different cultures than me, from different places than me. Often, they’re strategies I would have never tried, like different ways to prepare and season rice or ways to use cabbage (which is always one of the cheapest items in the produce aisle) or the idea of growing a “three sisters” garden (planting corn, beans, and zucchini all together) because they sustain each other in the soil.

There is never anyone too rich or too poor or too different that you can’t learn something from them. Don’t worry about how much they make or where they’re from or anything like that. Just listen to what they’re doing and borrow what seems like it might be useful, even if it seems out of the ordinary to you.

Q11: Camping on the cheap

How can you call camping a cheap vacation? We were considering it for this summer but when we added up the costs it was well over $1000 just for 5 days! Not cheap!
– Andrew

It might help if you sent me your budget. However, my guess is that this camping trip involves buying all of the equipment and starting from scratch. If you’re buying a family tent and several sleeping bags as a startup cost, yes, it’s going to be expensive.

However, after that, those costs don’t recur. If you spent $500 on sleeping bags and a tent, then you can reuse those items at a cost of $0 for future trips.

We go camping four or five times each summer. We use the same sleeping bags every time. We use the same tents and other equipment every time. Thus, our only cost is getting to the campsite, paying for a campsite (if needed), and the food and other things we consume there. Camping puts us in a location where we have full days to explore what’s around us and the opportunity to engage in basic outdoor skills, such as starting a campfire. It’s an incredibly fun way to spend several days in the summer and it’s not much more expensive than staying at home (considering we turn off almost all energy use at home when we leave).

Q12: Confusing Meetup experience

I followed your suggestion and went to a meeting of [a political group] I found on Meetup. It was terrible. Most of the meeting was people talking about stuff that was way over my head and I was afraid of saying anything because I didn’t want to sound stupid. A few people came over to me and were really friendly but most of the meeting was a waste of my time. How do you find stuff that’s friendly to beginners?
– Marcia

This actually does sound pretty friendly to beginners. My suggestion to you is to go back to another meeting with a notebook and a pen and write down literally everything they’re talking about that you don’t understand, then take it home and look up every single one of those things from a fairly unbiased source. I usually tell people to start with Wikipedia to get a basic understanding and then branch out from there.

When you’re talking to someone later, simply say, “I’m new to all of this,” and don’t be afraid of asking if they have any “intro” recommendations, whether they’re books or websites or something else like that. Ask things like, “What do you guys all read for your political news?”

Take this as an opportunity to dig deeper into a topic with some social guidance. Trust me – the vast majority of those people are going to be thrilled that you care enough to show up and ask questions. Don’t feel dumb – everyone was once a beginner in the same exact shoes you’re in.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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The DIY Dilemma: Knowing When It’s Time to Call in the Pros

Every year during the first bright days of spring, I look up at the nearly 45-degree pitch of my roofline, see gutters and moss buildup that needs cleaning, and envision the myriad ways I could injure myself addressing these issues.

Sometimes the reward outweighs the risk, but other times my life seems too short to go chasing moss clumps on a second-story roof that would make a Victorian chimney sweep nervous. This leads to one of the key crises of homeownership: When do you do it yourself, and when do you call someone in?

When my wife and I first bought our home six years ago, we were convinced that we could handle much of the work ourselves and learn as we went. To a degree, that was true: I now know more about deck construction, cement flooring, lawn tractor maintenance, moss killing, gutter cleaning, shingle coursing, well-pump repair, and goat wrangling than I ever thought I would.

However, some of that knowledge sank in only after I’d called in a professional to fix a job I’d botched. As it turns out, you aren’t supposed to scrape off half of your roof shingles’ granules when attacking moss (fortunately, I learned that lesson on a garage). You also aren’t supposed to leave water in your well pump over the winter, even if you’ve “winterized” by shutting off the connections (a lesson learned one cracked pump later). Finally, I learned that no amount of effort on my part was going to fix a broken float on a dormant sump pump when the pump itself is already under a considerable amount of water (the three feet of water in the pump housing was still far worse than the inch of it in our basement).

All of the above were examples of yours truly blowing money by “saving” money. Just about any time you ask the question, “Should I call a contractor?” online, at least part of the answer is going to be, “How familiar are you with the job?” In each case, I knew absolutely nothing about the jobs I was attempting, or even the approach I was using: Resorting to YouTube videos in the best scenarios and poor guesswork in the worst.

As I learned later, just calling the folks who fixed my cracked well pump and asking them how to property winterize it would’ve given me all the answers I needed. David Bakke, who runs the MoneyCrashers blog, notes that consulting experts should be the bare minimum that an ignorant clod like myself does before taking on a project. Even stopping by a hardware store or home improvement center, asking for advice, and swallowing some pride by explaining how familiar (or unfamiliar) you are with the project can put you on the right track.

HGTV “House Counselor” Laurie March says one of the most important steps in choosing between a do-it-yourself project and a call to a contractor is your own threshold for calamity. Can you handle the task and, even if you can, are you okay with your house being in disarray during the time it takes to complete the job?

When my wife and I decided to remodel a bathroom, we opted to get to work and take up her father, an engineer, on his offer to lend a hand. We love the result, but also admit that contractors could have done in weeks what took us months to complete.

Also, don’t think that doing it yourself will automatically be a huge cost-cutting measure. The cost of labor is substantial, but if you’re doing a bathroom and have to buy all of the materials, rent or buy a wet saw for tile, rent or buy other items like a compressor and nail gun, or buy a second batch of drywall plaster when your work doesn’t quite pan out, those costs are still going to add up.

Finally, time and procrastination are going to be fine indicators of what you will and won’t do yourself. If each year, your well-manicured garden turns into more of a thicket, maybe it’s time to see what a one-off visit from a landscaper would cost. If your highest gutters seem to retain stubborn leaves or needles from years ago, perhaps it’s time to price out a cleaner and start from zero. If the dead branches on the trees surrounding your house are now just too high for your comfort, maybe give that tree service in town a call and get an estimate.

We aren’t going to pretend any of this is cheap. In one of my first encounters with a contractor, I called a plumber out to have a look at our well pump. He came out, told us he had no expertise with our well pump, recommended someone who did and charged us a flat rate of $80 for the visit. When the sump pump failed in our basement, it did so during off hours and required an emergency visit that cost roughly $150. When we opted to have a drywall company finish a guest room that the previous owners had torn back to studs, the resulting four-figure bill was more than it cost us to install a new staircase to our basement ourselves.

But there are jobs I will never be able to do myself, and I’ve accepted it. I may be able to clean a chimney, but I can’t put a liner down one, install a damper, or rebuild the top of one from scratch ($5,000 well spent). I may be able to sweat copper pipe and do some basic plumbing, but I cannot extend a gas line to the back of my house and hook it into a tankless water heater ($800 well spent).

I’ve learned a great deal about my own home and how to repair it during the last few years or so — but I’ve also learned my limitations. For that, my house and household are grateful.

There is a tremendous sense of satisfaction in completing household projects yourself and a sense of duty to take care of one’s own home. However, if your labor or inaction is doing your home more harm than good, or your body just isn’t up for climbing the ladders and hauling the equipment you could when you were slightly younger, it doesn’t hurt to at least give a contractor a call.

Related Articles:

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Sunday, April 22, 2018

Seven Free Digital Resources to Check Out at Your Local Library

I consider myself lucky to have grown up in a family of readers, and a community with an outstanding public library system. Some of my earliest memories are of story times in the children’s department and checking out bags full of picture books to take home at least once a week.

This library love has continued into my adulthood. I still drop by my local branch on a weekly basis, and I’ve made a habit of visiting libraries across the world whenever I travel. (If you’re also a library nut, make sure to put the Halifax Central Library in Nova Scotia on your must-stop list. The new building, with its green rooftop terrace, vibrant contemporary architecture, and five-story central atrium is absolutely stunning.)

Bringing home a stack of books to dig into is always a thrill, but I’ve also become quite fond of the technology that allows me to access even more free resources with just my library card and phone or computer.

Offering e-books and e-comics, to top magazines and movie streaming, the nation’s estimated 120,000 libraries are on the front line when it comes to accessible and reliable, no-cost media. Read on for our list of seven top resources, then visit your local library’s website to check out their individual holdings and offerings. You can typically either scroll to a ‘digital library,’ ‘eResources,’ or ‘CyberShelf’ section, or search for the exact app you’re seeking.

1. Library-Specific Apps and Basic Services

Many libraries today have their own proprietary app that allows card-carrying patrons to search holdings, reserve books and more, make title purchase suggestions, request extended checkout periods, and, should you keep something too long, pay fines. (Note: One of the benefits to electronic reading: You’ll never pay a late fee. You simply check out a title, and when it’s due back, the system returns it.)

Tip: Don’t yet have a library card? If your library offers the reading app Libby, you may even be able to register for a card online and access electronic materials automatically.

2. E-Books

E-book access ranges greatly across library districts. The largest collection, Overdrive Media Console, is currently used by more than 30,000 libraries in 40-plus countries. Not only does Overdrive circulate millions of titles across genres, from bestsellers to obscure indie publications, but you have the option to read any e-books you check out through your Kindle app or as an EPUB eBook, which can be downloaded to the reading app of your choice. For the youngsters in your family, seek out TumbleBooks for those in grades K-6 or Scholastic’s Bookflix for Pre-K to Grade 3.

Tip: Just like you can make recommendations to your library for print copy purchases, you can do the same in the Overdrive app for e-books (and audio).

3. Audiobooks

I’m not the best multi-tasker, but when it comes to making the less-exciting duties of the day (commuting, dishes, laundry, etc.) a bit more palatable, audiobooks have saved me — and my library’s audiobook apps have saved my books budget. Overdrive is also one of the top free apps for audiobooks; others include RBDigital (formerly OneClickDigital) and AudioBookCloud.

Tip: If there’s an audiobook you want to check out, but it’s currently not available, you can request to put it on hold through Overdrive just like you would a print book at your library branch. When it’s available, you can also set up auto-checkout and the next time you go into the app, it will be waiting for you.

4. Comics

From Star Trek and Naruto to Hellboy and Angry Birds, Comics Plus: Library Edition houses more than 18,000 titles of both single-issue e-comic books and graphic novels. The Hoopla app, while offering fewer titles, features an impressive list of publishing houses, including DC Comics, Dark Horse Comics, and Titan Comics. You can get your fix of Doctor Who, Batman, and The Walking Dead here.

Tip: While all of your devices can be used for e-comics, I think phones can feel a bit small for these types of pages, so save them for a tablet or laptop.

5. Film and Video Streaming

Options for film and video streaming continue to add up, and many of the same we’ve already mentioned (Overdrive, RBDigital, etc.), also include this service. However, one we haven’t mentioned yet is Kanopy, an app developed exclusively for film streaming.

Kanopy offers more than 30,000 films for free — which is thousands more than Amazon Prime and Netflix together. Depending on your library’s agreement with Kanopy, you can check out a certain number of films per month and access them from any device, including iOS, Android, Apple TV, Roku, and Chromecast. (For example, my library district lets me check out six per month, and I can keep each for three days.)

Tip: You won’t find X-Men or Frozen here, but if you want to watch a documentary or indie film, Kanopy has got you covered, and then some. Forbes called Kanopy “one of the most unique and compelling film collections in the world.”

6. Language Learning

Want to learn a new language, or brush up on those skills you picked up in high school and have since forgotten? Mángo Languages is an easy- and fun-to-use program that lets you choose from 71 languages, everything from Spanish and French to German and Japanese, as well as English courses for non-English speakers. Lessons teach vocabulary, grammar, pronunciation and culture. The Rosetta Stone Library Solution is another often-found option within public libraries, with 30 languages available.

Tip: If you have a learner under the age of 6, keep an eye out for Little Pim, Mángo’s foreign language-learning program designed specifically with kids in mind.

7. E-Magazines

Common library apps include Flipster and, again, RBDigital (formerly Zinio). If you’re wanting to cut back on your mail subscriptions (and save some trees), give these a try. Much like comic books, magazines really do lend themselves to the tablet format and make for a pleasurable electronic read.

Tip: Typically when you visit the library to borrow and bring home a magazine, you can’t check out the current month’s issue. However, when it comes to e-magazines, you can — and often even before the issue arrives on newsstands.

Related Reading:

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Saturday, April 21, 2018

Figuring Out ‘The Good Life’

A few weeks ago, I had a great conversation with a few good friends about what exactly it means to “live the good life.” It turned out that we all had somewhat different views on what “the good life” actually is.

For one person at the table, it meant that he could simply have things he wanted. If he wanted to have a certain thing or do a certain thing and he could mostly just do it or have it, then he was living a good life.

For another person at the table, someone who had dealt with a long illness and may not ever fully recover, the “good life” simply meant a day with minimal pain while going outside and doing stuff.

For me? I thought about it for a bit and said that, for me, a good life is one with little “background stress,” meaning that there were minimal ongoing things that worried me.

The idea of the “good life” is a core idea of philosophy, often described with a single Greek word, eudaimonia (there’s your new word for the day, most likely). It simply means aiming for the highest human good – the good life, in other words.

Those pictures, and the others that were shared, all point to rather different day to day lives, even though they all have a few things in common. Rather than rattle on a lot about what elements would make up my idea of the good life, I was actually more interested in what elements are commonly found in the ideas of the good life that lots of people shared with me, so I thought about those stories and asked a few others what they thought the “good life” was.

Here are some of the big things that I found that they had in common.

One, most ideas of the “good life” involve the removal of ongoing stress. Although this was pretty much my description of my ideal life, a life with minimal ongoing stress, it was an element in a lot of different descriptions of the good life.

Two, most ideas of the “good life” involve being a good person and being around people who treat you well, too, and having good relationships with them. Depending on the person, these can form a cause-and-effect relationship that goes either way, or they can both stand on their own. In either case, most people seem to think the “good life” involves being a virtuous person and also being around other people who are virtuous. This doesn’t mean that you or the other people are “goody two shoes,” but that you are surrounded by people who treat you well and you tend to treat those people well.

Three, most ideas of the “good life” involve having sufficient financial resources to have an expanded freedom of personal and professional choice. Usually, people don’t see themselves as exorbitantly rich, but merely having enough resources so that many of the “compromises” they feel like they’re making in life go away. We’ll definitely circle back to this one later on.

Four, most ideas of the “good life” involve having something worthwhile to do with one’s time. Pure idleness might be fun for a while, but most people seem to eventually want something to do in their life, something meaningful that drives them forward.

Finally, most ideas of the “good life” involve being personally healthy. People seem to often want to feel good in their minds and bodies, not feel like they’re breaking down, and to be able to move and do whatever it is they want.

While the ideas of what made up the “good life” varied far and wide, they almost always included those elements in some way, shape, or form. Low stress. Good people around you. Being good yourself. Having sufficient resources for things you want to do. Being physically and mentally healthy. Having something meaningful and engaging to do. Almost every concept of the good life either relied on those things or were variations on those things.

The thing is, those elements of the good life are actually pretty interconnected. If you achieve strength in one of them, it’s often going to help the other ones.

For example, a person in good financial shape has eliminated a fair amount of background stress from their life, and they’re much more likely to have a healthy amount of freedom of choice in their daily life.

A person who is a “good” person, meaning they’re virtuous without expecting others to engage in tit-for-tat behavior with them, usually feels low background social stress and has a lot of good relationships in their life.

A person who is physically healthy has a lot more freedom of choice in their daily activities.

The more you look for interconnections between those elements of the good life, the more they pop up. It’s all tied together.why

This is a big reason why I find personal finance to be so foundational. Whether or not personal finance seems important to you or not, it directly ties into many elements that almost everyone thinks of when they think of “the good life.”

Another thing worth noting in all of this is that most of the elements of “the good life” are things that people really can start implementing right away in their life, without waiting for some mythical future where everything is just perfect for it. Let’s walk through some of the elements and the specific things you can do to make it happen.

Build a Financial Backbone

Obviously, as a personal finance writer, personal finances – at least in terms of having enough financial resources to give yourself an enhanced degree of personal freedom – are a key part of living the “good life.” Having sufficient money saved up to alleviate many of life’s worries going forward is an incredibly powerful way to open up your options and lower your stress.

This site has thousands upon thousands of articles about how to build up your finances, but here are three core strategies (and a bunch of links to more articles) for building your financial backbone.

Spend less than you earn, then do something useful with the difference. By “useful,” I mean paying off debt, saving for retirement, or building an emergency fund.

Ask yourself whether your non-essential purchases are really providing lasting value for you. Whenever you spend a little money, use the ten second rule and give yourself ten seconds to really ask yourself whether the purchase is worthwhile; if not, put it back. If it’s a bigger purchase, use the thirty day rule and give yourself 30 days to decide whether you really want this item. Look back on it thirty days later and if you still want it, then start actively shopping for it. It’s likely the desire will fade, which means that it wasn’t a good idea to begin with. Another good strategy is to buy the lowest cost version of everything and then only buy more expensive versions if there is a real compelling reason to do so – in other words, you should fill your shopping cart with store brands.

Track and organize your spending. Keep track of all of your receipts, bank statements, and credit card statements. Once a month or so, sit down with them and see how much you’re really spending. Group those expenses into sensible groups – by retailer, by type of item – and ask yourself whether spending that much money on something is really worthwhile or if there’s a way you could cut back.

Get More Control Over Your Time Use

Many people feel overwhelmed by the demands on their plate, which brings them a great deal of stress, leaves them feeling as though they don’t have time for things they care about, and leaves them feeling exhausted. It can often feel like a vicious cycle that’s hard to escape from.

Yet, there is light at the end of the tunnel. There are proactive steps anyone can take to get a grip on their time and stop feeling as though they’re losing touch with the things they care about.

Here are three simple things you can do to get more control over your time.

Block off time for things you care deeply about. Literally write it into your schedule. Make this time sacrosanct. Turn off your cell phone and your computer and engage in those activities during this blocked-off time. This is important time. You need it to adequately recharge your body and mind so that you can perform well when it matters.

Use your “idle time” productively with mindless tasks. If you’re in a situation where you’re “idling” – which is okay, we all need to idle a little bit – find something mindless to do with your hands. Fold your clothes while watching Sportscenter. Do the dishes while staring out the window. Go to bed instead of napping on the couch in the evening.

Decommit from less important things. If you have too many commitments, step back from one of two of them, preferably the least important ones. Find someone else who can handle it, or simply end the commitment. If you commit to too much, you don’t give quality to all of the things you’re committed to.

Lower Your Background Stress

“Background” stress simply refers to a constant level of stress that we all feel in our modern lives, often brought on by having the other elements listed here out of balance. While correcting the other elements listed here will definitely help improve your stress levels, there are a number of practices you can do to improve your personal stress.

Here are three simple things you can do to lower your stress level.

Spend some time outdoors in a natural setting. Seriously, just spend some time outside in a park, whether it’s just in a grassy field or deep in the woods on a hike. There is a ton of evidence that nature exposure reduces stress in a bunch of direct and indirect ways, including brain scans that indicate less activity in the stress-linked areas of the brain, reduced blood pressure, and more reported calmness. In nicer weather, try to work outside for a while.

Get more sleep. 40% of Americans get less sleep than they should all of the time, and many others go for periods with inadequate sleep. Not getting enough sleep leads to worse performance and far more stress (and an inability to handle that stress). An ideal sleeping pattern is to simply go to bed early and rise naturally, without an alarm to wake you. This lets your body self-moderate the amount of sleep you need.

Listen to music that matches your desired mood. If you need some energy, listen to energetic music (dance music, for example). If you need to focus, listen to music that helps focus (ambient electronic, for example). If you need to chill and relax, listen to relaxing music (for me, downtempo bluegrass music is perfect). Just find music that works for different moods that you enjoy and choose to listen to music that tugs you toward those moods.

Surround Yourself with Good People

By “good,” I mean people who are generally virtuous and genuinely care about you, both in good moments and bad moments. Those people will be celebrants when times are good, allies when times are bad, and friends always. It can be difficult to build a circle of those people in your life, but it’s well worth the effort.

Here are three simple things you can do to seek out good people and integrate them into your life.

Build up relationships that leave you feeling good. Reflect on how you feel about people after you spend time with them, and increase the time you spend with people who leave you feeling good and happy and supported and positive toward the world.

Minimize relationships that leave you feeling down. At the same time, if people leave you feeling sad or worse about yourself or worse about the world, start trimming down the time you spend with those people.

Know your social needs and plan accordingly. Some people are introverts. Others are extroverts. Some people like crowds, while others avoid them. Some people love clubs, while others hate them. Some people love intimate dinner parties, while others do not. Know what social situations you like and be involved in the planning of the social events you engage in to choose situations where you’re comfortable and happy. It’s never bad to try new things, but you shouldn’t go to the club every week if you seriously dread going there. Find friends who enjoy many similar social experiences as you do. A good place to start is Meetup.

Be a Virtuous Person

Being a good person in as many situations as possible helps you to have a clear conscience and few worries, and it also helps sustain a positive social network and positive professional contacts. You don’t have to be a “goody two shoes” – just practice what you preach and be the person you wish you had around.

Here are three simple things you can do to simply be a more virtuous person.

Live out the golden rule in each interaction. Try to act towards others as you would like them to act towards you. If you wish friends were there for you when you were down, be there for friends when they’re down. If you wish people would be nicer to each other, be that kind of nice. It really is that simple.

Help others without expecting something in return. There’s often a temptation to fall into a “tit-for-tat” arrangement when helping others. Don’t let that guide you. Give the help you wish others would give you when you need help. Look especially for opportunities where a small help from you (like five minutes of your time) makes a huge impact on someone else (saving them hours or lots of money).

Be honest (but not cruel) in your dealings with others. Speak honestly but positively to others when you talk to them. Tell truthful stories. Don’t speak negatively about people when they’re not around – if it’s not something you would say to their face, don’t say it. Be honest. Don’t be cruel.

Promote Your Own Physical Health

Feeling good on a day to day basis is incredibly valuable. It adds to almost everything you do and every interaction you have. Almost everything you want to do is easier to do, and you feel happier and more confident in every social situation. It’s well worth the effort you put into it, especially since most of the things you can do to improve your health are either right in line with things you already do or can be enjoyable to do.

Here are three simple things you can do to improve your physical health.

Eat a healthier diet – real food, mostly plants, and not too much. For me, the biggest switch I made was to recognize that while food might be pleasurable, the primary purpose of food is fuel for my body. Focus on eating what’s good for it – mostly plants, some fish, not too much food, lots of “raw” foods that aren’t processed to the point where you don’t know what plant or animal they came from. It’s pretty easy.

Move around throughout the day. Don’t just sit in the same spot all day. Move around. Go for short walks every hour. This is actually the thing on this list that I’m worst at because I tend to write for long periods without interruption. Yet, I find that when I force myself to take breaks and move around, I feel better. The solution here, obviously, is to get a standing or walking desk, which I think is the best eventual solution for people with sedentary jobs.

Get some exercise that you enjoy. People often associate exercise with misery, but it doesn’t have to be. The key is to try different forms of exercise that involve doing things that you actually enjoy, then doing them at a pace where your heart rate is elevated and you’re out of breath but not miserable. I’ve found this in martial arts; I used to find it in basketball. I find that if I push myself just right, I get really out of breath and sweaty, but I feel amazing afterwards, and it persists. Even better, if you exercise regularly, that good feeling starts to become a baseline in your life. Make exercise, in the sense of doing something you like and doing it with enough intensity to raise your heart rate and get out of breath and sweat, a part of your life.

Promote Your Own Mental Health

On the flip side of the physical health coin is mental health. Do you feel generally happy (or at least not negative) about the state of things in your life? Are you generally in at least a neutral mood and regularly in a positive mood? Do you have good feelings about the world? Those are signs of good mental health. We all go through periods where we don’t feel this way, but having good mental health practices as a part of your life makes those periods less frequent and less intense, and this same practices

Here are three simple things you can do to improve and sustain your mental health.

Write in a journal each day. Simply spend a few moments each day writing in a journal. If you’re not sure what to write about, I consider Michael Hyatt’s eight questions to be a great place to start. It’s a format I often use. Another strategy is to simply write off the top of your head, literally whatever comes to mind, for two or three pages.

Do a daily mindful meditation. Each day, spend just five minutes or so sitting in a quiet chair somewhere. Close your eyes and start breathing calmly and slowly, focusing your attention on your breath, in and out, in and out. If your attention wanders, bring it back to the breath. I find that this is only slightly helpful as a one-off routine, but if you make yourself do it every day for a while (perhaps for a longer period), it’s incredibly powerful for making you feel calm and aware and in touch with your life.

Step away from consumption. If you find that you are consuming things as a matter of routine just because they alter your mood or alter your thinking or behavior, particularly if you are doing it almost on instinct, cut it out of your life. Get back to square one. Cut out the drugs, the alcohol, the cigarettes, the caffeine. Get back to the raw you and see where you’re at, especially when you’re doing the other things in this article. You might find that the substances you thought were helping were actually just dragging you further off the track (and costing you a pretty penny, too).

Have Something Meaningful and Engaging To Do

In both the workplace and outside of work, finding tasks that are deeply engaging and meaningful is a great way to make the tasks you have before you actually fill you up rather than drain you. That’s difficult to do, especially at a job that you don’t enjoy. The trick is to find the tasks that click with you and bundle them together into quality blocks of time.

Here are three simple things you can do to find meaningful and engaging things to fill your time with.

Find a hobby that gives you something that you really enjoy doing. The key is to find things that are so compelling to you that you literally lose track of time and place while doing it. That’s called a “flow state,” and it is one of the peak human experiences. Try to fill your time with that, and the way to do that regularly is to do what’s suggested above and block off time for your hobbies so that you can engage with them long enough to slide into a “flow state.”

Organize your time at work so that you can spend blocks of uninterrupted time on the tasks that really “click” with you. We all have things at work that we really enjoy doing and other things that we don’t enjoy doing so much. Reorganize your time as much as you can to make uninterrupted blocks of the “good” work and fill in the gaps in your schedule with the “bad” work. Ideally, find ways to offload the “bad” work entirely, if you can – maybe you can discuss simply eliminating some of those tasks entirely, or automating them.

Try to enter a “flow state” during those uninterrupted blocks of “good work.” When you settle in for a batch of meaningful work, do everything you can to put yourself into a “flow state.” Turn off distractions (like your cell phone and social media notifications). Close your door. Turn on some good focusing music, or some white background noise (I use this noise from an icebreaker ship). Drink a cup of tea and settle in. You’ll find that those times when you get into a flow state with work that really engages you are actually somewhat refreshing rather than wearing you down.

Final Thoughts

While these things won’t guarantee you “the good life,” they certainly will help you make forward progress on finding whatever it is you think of as the good life for yourself.

If you take nothing at all away from this, take this one thing: the “good life,” at its core, has little to do with having a lot of money. Having money does reduce stress and it does open up options, but most of the elements of the “good life” don’t require a lot of it. You can have the “good life” while still being incredibly financially responsible.

Good luck!

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Friday, April 20, 2018

A Deeper Look at Savings Rate

One of the financial numbers I’ve come to value a lot lately is savings rate; in fact, savings rate was at the center of my recent post on the “spectrum” of personal finance.

Let’s step back a bit and look at what exactly a savings rate is, and why it’s so important. Let’s start with a good definition, like this one from Investopedia:

A savings rate is the amount of money, expressed as a percentage or ratio, that a person deducts from his disposable personal income to set aside as a nest egg or for retirement.

In other words, your savings rate is the amount of money you’re saving each year for very long term goals for yourself (usually retirement) divided by your total disposable income for the year.

The first thing to notice is that savings rate really only cares about long term savings. It doesn’t care about short term savings that you’re likely going to spend in the next several years, like your emergency fund or your cash savings for a car or a down payment on a house. Instead, it’s concerned with retirement savings and other long-term savings that you may be doing. Money that goes into your 401(k) counts, as does money that goes into your Roth IRA. Taxable investments count if the purpose is very long term.

The other part is a bit tricky. This definition points to a person’s disposable personal income as the baseline, but what defines disposable income? Many people think of disposable income as being the money left over after you pay your bills, but what bills are fundamentally essential? For this calculation, the best answer is none of them, except for taxes. Take your annual salary, subtract the amount of taxes you paid, and you’re left with your disposable income, at lest for the purposes of this calculation. I don’t include sales tax in this, only income and property taxes. That’s why I usually use our net income on our income taxes as a good number to use for savings rate.

So, let’s say you make $60,000 a year and pay a total of $10,000 a year in state and federal income taxes and property taxes. Your baseline income for figuring your savings rate is $60,000 minus $10,000, or $50,000.

Now, let’s say, for example, that you socked away $5,000 in a Roth IRA and $5,000 into your 401(k). Your total long term savings is $5,000 plus $5,000, or $10,000.

To figure out your savings rate, you take your total long term savings, divide it by your total disposable income, and multiply it by 100 to convert it to a percentage. So, in this case, it’s $10,000 divided by $50,000, giving 0.2, and multiplying that by 100 gives a 20% savings rate. Easy enough, right?

What value does this rate really have, though?

First of all, it provides a nice financial benchmark to measure your financial progress with. If you calculate your savings rate for last year and calculate your rate for this year, you can assess pretty easily whether you’re improving your financial decision making or, at the very least, keeping pace. It boils down your efforts toward retirement (or other very long term goals) to a single easy-to-understand number.

Second, improving your savings rate becomes a nice goal that directly links to personal action. A higher savings rate means a more comfortable retirement or a shorter road to retirement, so simply raising your savings rate can be a worthwhile financial goal. Let’s say your savings rate was only 5% last year. Striving to raise it to 15% or 10% or even just 6% will have a profound impact on your savings for retirement. Nothing more clearly indicates a stronger commitment to planning for your future than raising your savings rate.

Third, a higher savings rate means a lower cost-of-living rate when you approach retirement. Let’s back up to that previous example. In that example, the person in question had a disposable income of $50,000, but managed to save $10,000 of it, which is a 20% savings rate. That person is living happily on $40,000 a year.

What happens, though, if that person’s savings rate bumps up to 25% due to their effort? 25% of $50,000 is $12,500. $50,000 minus $12,500 equals $37,500.

What does that mean? It means that the person in question here is now living happily on only $37,500 a year instead of $40,000, while actually saving more. That means that the total amount needed to retire has gone down at the same time as that person’s annual savings rate has gone up.

If you need $40,000 to live on and you’re saving $10,000 a year in a typical 7% annual return retirement investment and you’re planning on a fairly safe 4% withdrawal rate, you’d need $1 million in the bank and have to save for 31 years to make it there. (This isn’t accounting for Social Security nor inflation, just a simple illustration.)

If you need $40,00 to live on and you’re saving $12,500 a year in that same account at that same withdrawal rate, you need only 28 years to make it. This is the benefit of saving more.

If you only need $37,500 to live on and you’re saving $12,500 a year in that same situation, you need only 26 years to make it. That’s the benefit of spending less.

Bumping up your savings rate benefits in both ways – it’s about saving more, but it’s also about spending less. If you bump up your savings rate, you absolutely will be in better shape for retirement.

Calculating your own savings rate is easy. Just pull out your taxes that you likely just filed and see what your adjusted gross income is. Then, take a look at any and all retirement and investment accounts you have and total up all of your contributions to those accounts that you made last year. Divide your total contributions by your income and multiply that result by 100 and you have your savings rate, expressed as a percentage. It’s just that simple!

Now, what can you do to raise that savings rate this year?

The easiest step is to just nudge up your contributions to your retirement accounts. If you have a 401(k) or a similar account (403(b) or TSP, for example) at work, bump up your contribution a little. If you don’t contribute, start doing so. Try to aim to contribute enough to get every single dime of matching funds from your employer (I count those as “contributions” for this calculation). If you don’t have a retirement plan at work, open a Roth IRA somewhere (I use Vanguard, for a number of reasons, but there are reasons to go elsewhere) and start automatically contributing a little each week or each month, straight out of your checking account.

If that seems like a financial impossibility, consider making a few little lifestyle tweaks so that it’s not impossible. After all, on a $50,000 salary, just contributing $40 a month is a 1% bump in your savings rate. Can you find a way to spend $40 less per month? I bet you can, using any of the tons of ways to save money I’ve shared over the years. One great one that will easily save $40 a month for most families is simply switching to store brands for most household supplies and staple foods (try switching for everything, then only switch back to the name brand if there’s a specific problem with that product).

So, the core of what you need to know is that savings rate refers to how much money you’re saving compared to how much after-tax money you’re making and that improving your savings rate makes retirement come faster and more robust. The actual steps for making that happen aren’t hard, either.

What about me? As alluded to in the earlier spectrum post, our family’s savings rate (everything we save for the long term future) usually clocks in at around 30%. If we were childless, that rate would quickly shoot above 50% and possibly even higher than that – it turns out that children are quite expensive!

Good luck to you on your financial journey, and may your savings rates be high!

The post A Deeper Look at Savings Rate appeared first on The Simple Dollar.

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Thursday, April 19, 2018

Some Hidden Challenges of Debt Freedom and Financial Independence

Most of the time – well, let’s be honest, almost all of the time – I talk about all of the positives of achieving debt freedom and working toward financial independence. It opens up a lot of personal freedoms that aren’t available if you’re living paycheck to paycheck. It makes a ton of “background stress” and some moments of intense stress just utterly disappear. Life’s difficult moments are a lot less disastrous. The process of achieving those things has unveiled a lot of things in life that I might have never appreciated. I’ve mostly just given up things that I don’t miss (after a bit of transition, sometimes).

That doesn’t mean that everything about financial improvement is great, however. There are a lot of drawbacks to achieving debt freedom and chasing financial independence, and while many of them can be mitigated to some extent, a lot of them are just some negatives in the face of a lot of positives.

Here are some of the realities that I’ve found along our path to debt freedom and our ongoing path to financial independence, and what we’ve done (if anything) to mitigate those challenges.

You’re likely setting aside other life goals along the way. If you choose to achieve debt freedom, there are probably some choices in life that you’re not choosing.

As an example, one of our big life choices was to cut down on our traveling. In the years before our financial turnaround, we travelled to Europe, to Mexico, to the Caribbean, to Canada, and all over the United States. In the first several years after that, neither one of us left our state or any states adjacent to us for non-professional reasons. We have gone on a few longer trips since then, but even most of those have been camping trips or trips that were heavily centered around visiting family members. If we had kept up our previous travel-rich lifestyle and not found a good middle ground for us, we would likely still be in debt at this point.

Do we still want to travel all over the world? Sure, but we recognize it as a secondary goal, one likely to be achieved when we reach financial independence. We do want to enjoy a small bit of international travel as a family before our children leave the nest, so we’re planning two or three such trips in a few years, but we’re already saving for them.

Maybe you’ll end up choosing not to live in a huge house, or choosing not to live in a wealthier neighborhood, or choosing not to travel as we once did. Maybe you’ll choose a higher-paying career path that you don’t enjoy as much, or find yourself in entrepreneurship when you didn’t really expect or even quite want that path.

The reality is that opening the door to financial freedom means closing the door to some other things in your life. You can’t “have it all” – you only have so much time, so much energy, and so much money in life. The trick is figuring out which doors are the right ones to open and close, and there is no easy guide to that.

For us, our choice to cut down on our travel was due to the realization that there were a lot of low-cost things we wanted to do with our vacation time that we would highly enjoy without spending tons on long-distance travel. One of our goals, for example, is to camp for several days in every national park, most of which we can reasonably drive to and pitch a tent for a really low-cost vacation that we’ll both enjoy. Sure, the door is largely closed to expensive travel, but we’re still enjoying a lot of meaningful vacation experiences that Sarah and I both value and desire.

Just because you close the door on a super-expensive home doesn’t mean you don’t live in a nice home. Just because you close the door on an expensive prestige neighborhood doesn’t mean you don’t live in a nice neighborhood. Just because you close the door on driving new luxury cars doesn’t mean you don’t drive a nice car. It just means that you’re choosing to close an ornate door while leaving a perfectly worthwhile one open.

You have to say “no” to smaller things you can easily afford. Let’s break this down a little bit.

When you first commit to getting yourself free from debt, you’re probably living the same paycheck to paycheck lifestyle as 78% of other Americans. That means that you’re spending every dollar that you bring in.

The first step to fixing that is to start spending less than you’re bringing in. Hopefully, it’s quite a bit less than before, so you have some room to work with. Then, you take that money you’re no longer spending and start applying it to eroding your debt – you build an emergency fund, then start taking out those debts as fast as possible.

Then, one day, you find that most if not all of those debts are gone. Not only are your day-to-day spending habits far lower than they were before you started all of this, your monthly bills are far lower, too, because you paid off most if not all of your debts.

In other words, it feels like you have a ton of disposable income. That’s great, of course! You now have the resources you need to start building toward financial independence, early retirement, or whatever other goals you may have.

However, one thing you will notice as you move through this process is that you gradually have more and more and more disposable income. Early on, it’s actually pretty small, and you’re probably not seeing it as much as you’re dumping it into paying off debts, but as a lot of those debts start falling away, you start to realize that you’re really spending a lot less than you earn.

What that does is that it makes you realize that you actually really can afford a lot of smaller perks in life. You can afford things like a nice coffee maker or a new iPad or a nicer car and so on without putting yourself back in the debt shackles, and it becomes pretty tempting.

To me, this is a lot like the feeling I get several minutes into a good hard exercise session. I’ve done what I came to do, right? I’ve exercised. I’m theoretically in better shape than when I started, and it’s awfully tempting to just quit now and go relax.

Here’s the thing, though: I know that if I stick with that exercise, I’ll hit what I like to call the “euphoria” state, a state I often reach when I do moderate intensity exercise for an extended period of time. I’m not killing myself, but I’m breathing heavy and sweating, and then there comes a point where I start to feel great. It’s a physical state that I really enjoy reaching, and I would never reach it if I stopped at the eight minute mark because it’s tempting to do something else.

The same is true with a financial journey. Sure, I could give into lots of temptations in my life right now. There are a lot of things I’d like to have in the short term. I’d love to have a Philips Avance pasta maker, because I love making homemade pasta and this would remove a lot of the labor. I bet having an Apple Watch would be cool. I’m tempted to get a treadmill desk. I could list a lot of smaller things, too.

I could afford all of those things easily, with no debt whatsoever. All I’d have to do is trim back some of our savings for the month. It would be so, so easy to talk myself into those items.

Here’s the thing, though. If I start opening the door to things that I want but don’t really need without any restraint, I’m going to be closing the door to my financial goals. The only way to keep moving forward toward my financial goals is to put some restraints on my wants.

So, how do I restrain it? I simply budget a certain amount each month for hobbies and non-essential items. The pasta maker would fall into that, as would the watch and treadmill desk. If I really really really want something, well, I can save for it for a few months and then buy it without feeling bad.

This still doesn’t change the fact that I know I could afford such things if I wanted to, but I choose not to do so because I know that opening that door means that I’m abandoning financial restraint, which means that I’m closing the door on my big goals. Financial restraint got me here, and financial restraint will get me to where I want to go. It just means saying “no” sometimes.

Interactions with professional peers and social peers can sometimes be difficult when financial issues and spending patterns come up. My wife and I are close friends with a couple that goes on exorbitant trips every nine months or so – Japan, Thailand, New Zealand, and so on. Another close friend of ours travels to her vacation home in Mexico on a regular basis. We have other friends who drive brand new cars – a Lexus and a Tesla. One person I love dearly lives in perhaps the nicest home I’ve ever seen. All of those people are within a stone’s throw of our age and are following similar career paths as us.

The thing is, in each of those situations, we don’t have anything to really share when the things that matter most to them come up. Our comparable vacations as of late have been a camping trip to Yellowstone and a driving trip to the Great Lakes – yeah, not really conversation worthy when someone is telling you about Thailand. Right now, two used Toyotas sit in our driveway, so luxury car conversations aren’t really thrilling. Our home is a pretty modest family home with many inexpensive elements and choices – pretty hard to compare that to something straight out of Architectural Digest.

At the same time, none of them (with possibly one exception) are going to retire any time soon. They’re all going to be working until they’re very old, often at jobs that they seem to not like or have major issues with. Both Sarah and I have jobs we like, and we’re soon going to be in a place where we can just walk away if we so choose.

In other words, when we sit down to chat with people our own age about the things we’re doing and the stuff we own and the careers we have and the challenges of life, there are a lot of things that we simply don’t have in common. I often find myself politely listening and just interjecting with questions occasionally. I probably come off as quiet because I don’t have much to say about our own travels or home or cars or possessions. When people start grumbling about mortgages, I don’t have much to say there, either, that won’t come off as judgmental or some kind of oneupmanship. I generally just agree that mortgages are not fun and we move on from there.

The reality is that, as noted above, 78% of people live paycheck to paycheck and a healthy number more live pretty close to it. It turns out that there are a lot of conversations that take a paycheck-to-paycheck lifestyle pretty much for granted and center around all of the things that people spend money on and how onerous and unfair debt is. It can be hard to navigate those conversations without seeming judgmental or else sharing experiences that are kind of outside the norm of the conversation flow. I absolutely loved my Yellowstone trip, but it’s kind of awkward to bring it up when the other people in the conversation are comparing notes on Japan and Thailand, and it’s rather awkward to say that you’re mortgage free when everyone else is talking about their hated mortgages.

The key problem here is that people are trying to seek out ways to signal relative social status to each other, and one way to do that is to talk about experiences and possessions. It can be difficult to navigate that conversation when you’re intentionally aiming for fewer possessions and different lifestyle goals.

In general, my strategy is that I listen and ask a lot of questions, but don’t offer up too much unless specifically asked, and if I can, I try to nudge the conversation away from travel and experiences and possessions and finances into areas of more interesting common ground. I try to talk about day-to-day hobbies or career experiences or things like that instead.

A lot of modern culture shouts at you that you’re a “cheapskate” or otherwise flawed. This is something of an extension of the previous point, in that many people use possessions and experiences as a tool to figure out some degree of relative social status when they don’t know each other well. Why do we do this? Well, the culture around us offers up tons and tons and tons of cues that we should do exactly that.

Television programs and movies constantly use experiences and possessions as simple ways to indicate relative social status. We see beautiful people living a life of comfort surrounded by expensive possessions and having expensive experiences and those things push natural buttons of desire within us. This happens with almost everything, from television programs to advertisements of all kinds, from “newscasts” to online articles, and let’s not even talk about social media. All of those things constantly show us experiences and things that will improve our life in some way, even if in the end it just boils down to social status signaling.

Those types of ideas are constant, and they often come with the underlying message that you’re somehow flawed if you’re not buying these things or having these experiences. I find that the more I watch television, read the news, or engage on social media, the worse I feel about myself. I’m constantly looking at the highlight reels of the lives of others, and the comparison to the own dingy realities of my own life can leave me feeling awful in many regards.

So, what do I do about it? One tool is to simply have a healthier media diet, one that doesn’t leave me with negative feelings about myself or others. I mostly read books and long articles and essays; I don’t watch much television and avoid most of what would be considered news. I used to be much more involved on social media, but I have cut it down to very little over the last several years. Another tool I use is to remind myself what I am choosing on my path to financial independence. I am choosing things that can’t easily be shown, like peace of mind and freedom of choice.

Is it a perfect solution. Nope. Does it work pretty well most of the time? It sure does.

Charity becomes a troubling question. This is an extension of the previous issue of having plenty of disposable income if you were not applying it to your financial goals. If you’re aware that you do have access to this income, the presence of charitable needs in the world can be a very strong draw.

Charitable giving has always been a matter that I have struggled with as we improved our financial state. If I’m earning more than I’m spending by a fair sight and have at least some level of security, what right do I have to hoard more money if people are out there starving or animals are being abused?

There are a lot of good arguments and counter-arguments to be made when it comes to charity and a person’s obligation (or not) to give to those less fortunate. Suffice it to say, it is a troubling concern for me.

Before we go on, let me be clear that I don’t believe that whether you give to charity is a sign of whether you’re a good person or not. There are real reasons not to give to charity, or to be extremely selective in terms of what charity you give to.

First of all, I recognize that saving money is not really in opposition to charitable giving. If you save money for the future, you retain the ability to choose to give that money in the future if an appropriate cause presents itself. When Sarah and I die, much of our net worth will be given to charity, something that wouldn’t be true if we spent recklessly.

Second, having financial security means that I am far less likely to need charitable giving or become reliant on charitable giving in the future. Again, if I spent recklessly, this would be much more of a risk.

Third, our primary financial goal is essentially early retirement, after which much of our retirement time is planned to be used for volunteer work, giving our time and talents to those causes which we believe in.

Still, even given those reasons to be prudent, there remains a strong desire within me to give to charities. Charitable giving is something that Sarah and I carefully discuss, budget for, and give to the charities of our choosing automatically. We maintain an annual charitable budget that’s large enough for us to itemize our taxes, even with three kids and no mortgage, while still maintaining a healthy pace on the road to financial independence. We feel good about the choices we’ve made.

In the end, even though these challenges (and others) are present along our financial path, we still find far more value in pursuing it than reverting to “paycheck to paycheck” financial habits. The peace of mind and widening of life opportunities that come from having firm control of your finances is simply too valuable for us to give up.

Good luck.

The post Some Hidden Challenges of Debt Freedom and Financial Independence appeared first on The Simple Dollar.

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