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!

The post Figuring Out ‘The Good Life’ appeared first on The Simple Dollar.

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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!

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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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Who’s Allowed to Buy Your Credit Report?

Your credit reports are full of information about you, from the types of accounts you have opened to how you’ve managed those accounts, to your current and previous addresses.

What you may not realize, however, is just how valuable the information contained in your credit reports may be to a variety of different companies.

The companies that are responsible for collecting that information, along with the information of some 220 million or so other consumers, are known as the credit reporting agencies (CRAs). The three largest and most well-known CRAs are Equifax, TransUnion, and Experian. The CRAs make money, among other ways, by collecting your information, compiling it into credit reports, and reselling it to a variety of different companies that are allowed to purchase it.

Generally speaking, your overt permission is not required for the CRAs to collect information about you and store it as part of your credit management history. Your permission isn’t even always required when your your personal credit information is provided to a third party.

That being said, the Fair Credit Reporting Act (FCRA) does put some restrictions on who can access your information. In order for a CRA to disclose your credit report to another party, they must have what’s referred to in the FCRA as “permissible purpose.”

Here are a few, though certainly not all, of the most common types of companies with a permissible purpose to purchase your credit reports from Equifax, TransUnion, and Experian.


Are you planning to apply for a new loan or credit card account? If so, you can bet the lender or card issuer will be purchasing a copy of your credit report(s) during their review of your application. Credit reports — and credit scores, which are an add-on product typically purchased alongside credit reports — help lenders predict the risk of doing business with you.

Landlords and Property Managers

Lenders aren’t the only ones who use credit reports to help predict the risk of working with new applicants. Landlords and property managers will also commonly purchase credit reports and review your past credit history whenever you fill out an application to lease a home or apartment. If your credit is poor, then you may be denied housing or you may be asked to pay a deposit.

Current Creditors

Lenders and credit card issuers with whom you already have a relationship are permitted to check your credit reports as well. Credit card issuers perform routine account maintenance checks in order to make sure that your level of credit risk has not changed and that they’re still comfortable doing business with you. If you suddenly begin to have credit problems elsewhere, then your card issuer can lower your credit limit or even close your account.

Insurance Companies

Did you know that your credit history could potentially be as influential on your auto insurance premiums as your driving record? Auto and homeowners insurance providers regularly buy credit reports from the CRAs whenever a consumer applies for a new policy. The better the condition of your credit, the lower the insurance premium you’ll likely be offered.


Unlike every other scenario, your overt written permission IS required in order for an employer to purchase your credit report. Still, in most states, employment-related credit checks are quite common whenever you apply for a new job or position.

Collection Agencies

Collection agencies are allowed to purchase your credit reports, and for that your permission is not required. In fact, even if your credit reports are frozen, debt collectors will still be able to pull them. While you do have rights when it comes to debt collectors, the FCRA clearly allows for the credit bureaus to sell credit reports to collection agencies and to assist in their debt collection efforts.

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Wednesday, April 18, 2018

How to Use Your Financial Goals as a Litmus Test

When Sarah and I started turning around our finances, one of our biggest goals was to achieve complete freedom from debt while fully owning a family home for our children.

That was a pretty audacious goal. When we started, we had almost $20,000 in consumer debt, two car loans, and several student loans, and we lived in an apartment. We had minimal savings.

About five and a half years later, we owned a family home free and clear and had no other debts. Lest you think that we did this due to a secret windfall or something, we didn’t – during that whole span, we only earned over $100,000 in household income once and most of the time we were fairly close to the median household income in America (somewhere around $60,000 a year). Our income came mostly from ordinary jobs – Sarah was a teacher and I was a lab technician who mostly just handled and processed data – and a few side gigs. In the midst of that stretch, I switched to being a full time writer, which was actually a big drop in income – I made the switch mostly so that I could be more flexible and available for my children.

Obviously, to pull this off, we lived very frugally, probably more so than we do right now. We spent far, far less than we earned and found ways to cut back in all kinds of ways.

One of the big “litmus tests” that we used whenever we discussed an unnecessary expense was what I like to call the “debt freedom test.”

Will I get more value out of this purchase than I would get from the peace of mind of being completely free from debt?

While you might want to shout out objections to this question, in the end, it’s a completely legitimate question. As long as I kept saying that some little purchase “doesn’t really matter” in comparison to the size of my debts, then I was never going to have that debt freedom. Every single little purchase was standing in the way of debt freedom. So, I started comparing every single little purchase to the peace of mind and freedom of choice that complete debt freedom would bring, and when I asked that question honestly, almost all unnecessary expenses paled in comparison.

I used a lot of specific frugal tactics to really keep my spending low, but a lot of those tactics ended up boiling down to asking that question of myself honestly about every dollar I was spending.

Would I get more value out of buying soap than the peace of mind of debt freedom? Yes, but would I get more value out of buying name brand soap as compared to the cheap soap than I would from the peace of mind of debt freedom? Not even close. Cheap soap it is.

That was my philosophy about every dollar spent. In general, I tried to keep those choices from adversely affecting the lives of others by never skimping on guests in my home or things like that. I maintained a non-extravagant social life. I did splurge on occasion, but it was usually on something where the upside was very, very clear to me.

So, what happened when we climbed that mountain? What did we do when we hit debt freedom?

For a while, we drifted a little. We weren’t really sure what our goal was going to be. I restructured my career a little by selling The Simple Dollar and agreeing to become a long-term writer for the site. We went on a couple of nice family vacations. We kept stocking our retirement savings. And we thought about what was next.

Within a year or two, we figured it out. We wanted financial independence. By that, I mean we basically wanted to reach a point where neither one of us had to work for a living unless we wanted to, and we wanted to reach that as soon as possible.

This restructured the question we asked about every purchase. Now, it looks like this:

Will I get more value out of this purchase than I would get from the peace of mind of being completely free from having to work for income?

Now, I’ll be the first to admit that this question doesn’t have quite the same pull for me as the debt freedom question had. A big reason for this is that I enjoy my work. I have a ton of freedom in terms of what I write and when I write and how I write, very few meetings of any kind, and almost zero direct management. I enjoy helping people, I enjoy the topics I write about, and I enjoy exploring new facets and angles on financial issues and personal growth issues.

This question still works as a nice filter, however, and it keeps me from making particularly bad decisions with my money. We still spend way less than we earn. We still save a ton for early retirement. We sock away a ton for our children’s college educations. We avoid a ton of unnecessary expenses and maintain the vast majority of the frugality practices that we used during our years seeking debt freedom. We’re aiming for financial independence at roughly the same time that our youngest son leaves the nest, giving or taking a bit depending on their life situations, of course.

In short, this question works because it makes us reflect on what uses of our money provides us with the most value in our life. If there’s something we want to buy that has more value than saving for debt freedom or financial independence, we’re free to do that. If it doesn’t have more value, this question reminds us of what we’re shooting for in the big picture. No matter which way we decide, that question ensures that we’re getting the most value for our money in terms of the choice between enjoying pleasures now or saving for peace of mind later.

So, let’s bring this back to you. What does this have to do with your own financial journey?

To put it simply, this question really works for any financial goal. No matter what your financial goal is, this question works as a powerful litmus on your spending.

Just identify your personal financial goal, think carefully about how you will feel and the life benefits you’ll gain upon completion of that goal, and then start running all of your spending through this question.

Will I get more value out of this purchase than I would get from the peace of mind of achieving my specific goal?

If you’ve carefully considered all of the benefits of achieving your goal, you probably know that the value you’d get from achieving that goal is pretty high. It likely comes with a lot of nice perks, even on top of the pure peace of mind of being in a better financial place with more life security and (likely) fewer monthly expenses. That’s a lot of peace of mind, right there.

What purchases could you make that would beat that peace of mind and actually provide even more value? There aren’t many. The ones that rise to the occasion are going to be expenses that are really providing a ton of life value to you.

If you’re finding that lots and lots of expenses rise to this value, then you’re either trying to achieve a goal that isn’t providing a whole lot of value to you or you’re drastically overestimating the value you’re getting from everyday splurges. This means that you either need to seriously re-think your goals, or you need to reflect on how much value you’re really getting from momentary splurges. A few are okay – you can pack a lot of personal value into occasional splurges – but routine splurges just don’t provide a whole lot of life value.

Use this question constantly. Look at all of your bills through this question. Look at all of your expenses through this question.

Then, put your dollars where they provide the most value to your life.

Good luck.

The post How to Use Your Financial Goals as a Litmus Test appeared first on The Simple Dollar.

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Dreaming of a Frugal Christmas? It’s Easy — If You Start Now

The National Retail Federation predicted that U.S. residents would spend as much as $682 billion during the 2017 holiday season.

The NRF was wrong. We actually spent $691.9 billion.

And I have to admit that I didn’t do my share, even though I gave presents to 10 people and made some delicious holiday treats.

Understand: Christmas is one of my favorite times of the year and giving is very important to me. But I can’t – and won’t – break the bank to celebrate. Neither should you.

The good news: A mix of smart planning and savvy hacking will result in a Christmas (or Chanukah, or Kwanzaa) that’s satisfying, special, and solvent.

The better news: You’ve got almost nine months to set your holiday plans in motion.

As noted, I didn’t spend very much last year. These tactics really do work.

1. Start your own Christmas club.

Add up everything you spent on the holidays last year. Divide the total by number of weeks between now and Christmas, and start saving that amount each week. Bonus: If you use some of the other tactics in this article, you’ll likely spend less – which means money left over to seed the following year’s celebration.

2. Make a list.

Write down who you’ll be buying for and carry it with you (on paper or electronically). This positions you to start looking for great gifts the next time you encounter a clearance rack, a thrift store, or a garage sale full of like-new items.

3. Join a Buy Nothing Day group.

These Facebook-based organizations exist to keep useful things circulating. You might find some great potential gifts here and/or the materials to make your own presents. (I’ve seen a lot of craft supplies on a local BND group.) They’re like Freecycle, only smaller.

Speaking of which…

4. Start watching the Freecycle pages.

You may or may not luck out with regiftable goodies or the hobby supplies of your dreams. Bonus: You might also find things you need and had planned to buy (furniture, clothing, and the like) – and if you do, send the money you would have spent into your homegrown Christmas club.

5. Get a rewards credit card.

I use points from my rewards cards to buy holiday (and sometimes birthday) gifts. Get a rewards card only if you can trust yourself to use it wisely – that is, to buy only things you’d normally buy and to pay the balance in full each month. Many cash-back cards allow you to redeem your points for gift cards; Discover even boosts the value, so that cashing in $40 of points might fetch you a $50 gift card, for example.

6. Look for free-after-rebate items.

Toiletries, beauty supplies, and other items make great stocking-stuffers, and can really boost the recipient’s budget. (Have you priced body washes or makeup lately?) The Coupon Mom website matches coupons, rebates, and sales for you at major supermarkets, drugstore chains, and dollar stores.

7. Join an online rewards program.

You earn points for activities like doing online searches, watching short videos, playing games and shopping, then cash them in for gift cards to major retailers – or even for PayPal, which means you could get extra cash for holiday shopping. I belong to MyPoints and InboxDollars but my favorite is Swagbucks.

8. Join Coca-Cola Rewards.

This program changed in summer 2017 and isn’t as generous as it once was. Rewards vary, but I’ve gotten things like free magazine subscriptions, Amazon movie rentals, gift cards, and free Coke-and-popcorn combos at the AMC movie theater chain. Think “stocking stuffer.” If you don’t drink much soda (or any soda at all), ask relatives and friends who do to save you their points. (Pro tip: Check the lunchroom recycle bin, if you’re comfortable doing so.)

9. Join Pepsi Stuff.

Another soda-points program, with fun items like shirts, hats, clocks, signs, coolers, and even a full-sized refrigerator (honest!). It’s harder to find the Pepsi Stuff points than the My Coke Rewards ones, since not every Pepsi bottle/box has a rewards code. Keep at it, though; you’ve got months to save them.

10. Think about regifting.

The next time you get a book, purse, knickknack, or anything else that isn’t a good fit, consider whether it would be a perfect gift for someone else. For example, after volunteering for a big community event, my partner received a thank-you note with a gift card – to a restaurant he doesn’t like. Since a relative of mine loves that restaurant, it became one of her Christmas gifts.

11. Reimagine the holidays.

Are they too much for you? Specifically, are you feeling not just financially but personally stressed by all the hoopla?

One year I watched a young relative, overwhelmed by the piles of gifts, become stressed and even a little cranky before it was all over. In fact, he had to be convinced to open the last few gifts.

Ho, ho, no.

Personally, I love the four-gift rule: something you want, something you need, something to wear, something to read. Maybe your household doesn’t need stacks of gifts for each person. (Pop quiz: Can you remember every single present you got for Christmas last year?)

The holidays are particularly challenging if your extended family gets together with the understanding that everybody gets gifts. If you can fit this kind of celebration into your budget and it’s important to you, go for it. But if you find it takes months to pay off this celebration, ask yourself whether the annual hit to your financial security is worth it.

Brainstorm what a lower-key celebration might look like. For example, you might suggest the rule be changed to: “Gifts only to those 18 and under and 80 and over.”

Or if your household/extended family already has enough stuff, suggest people bring items to be donated:

  • Personal care items, such as toiletries and socks, for the homeless shelter
  • Boxes of disposable diapers for the family shelter
  • Pet supplies for animal rescue organizations
  • Books for a veterans hospital, nursing home or social services agency

Bring up the notion of change soon, to give your family months to get used to the idea. Remember: Some relatives might be feeling similarly stretched but too embarrassed to speak up. Those folks will silently thank you for starting the conversation.

Again: There’s no need to give up on giving, if it’s important to you. Just get smarter about what you buy and how you pay for it. Starting now.

Veteran personal finance writer Donna Freedman is the author of “Your Playbook for Tough Times: Living Large on Small Change, for the Short Term or the Long Haul” and “Your Playbook for Tough Times, Vol. 2: Needs AND Wants Edition.”

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Tuesday, April 17, 2018

The Expendable Employee

Quite often, I’ll read or hear stories from readers, from friends, and from other online sources that revolve around a company treating an employee pretty poorly. Tell me if any of these stories sound familiar…

Your company hires a new employee doing the same job as you and pays them a significant amount more than what you’re earning after having worked there for a while. You bring this up to management and, regardless of what answer they give, your salary stays low.

Your boss quickly says no to any request for a raise, even after a long history of good performance reviews.

Your scheduled time off is constantly altered without even consulting with you at all, often forcing you to cancel personal plans at the last minute.

People who engage in negative, backstabbing behavior in your workplace are rewarded, while people who don’t engage in that behavior end up with a knife in their back and lose their jobs or opportunities for promotion.

You are constantly asked to take on difficult tasks from other workers, often even from higher-paid workers, but aren’t compensated for it.

Stories like this are extremely common, and they all come back to one key point: if your business treats you in a disrespectful manner like this, they view you as expendable. They either do not see you as valuable, or else they believe you will just accept the poor treatment and bear it. In either case, you are nothing more than a cog in the machine to them.

The root cause of this situation is twofold. One, companies today often have a very short term focus. It’s far better to get as much value out of an employee as possible this quarter and not really worry about things beyond that, unless the employee is exceptional and a key asset to the organization. Two, many employees are forcing themselves into subservience by continuing to wear “golden handcuffs,” an idea I covered in detail in my recent article on regretting working too hard. Once you put yourself in a position where you have ceded power to your employer because you need that paycheck, then they can push a lot of mistreatment right back at you.

In short, many companies believe that most individual employees need them far more than they need the individual employees, and will treat individual employees accordingly.

If you’re being treated in an unfair way at work, there’s really only one way to change that mistreatment: you need to move from a position where you’re expendable and they’re not to a position where they’re expendable and you’re less expendable. Without that shift, you will never receive the salary or treatment that you should receive for your work.

So, how do you do that? There are several things you need to do.

First of all, as discussed in that “working too hard” article, you need to break the golden handcuffs. This is first and foremost. You cannot be fully financially beholden to the sustained continuation of your job. If you can’t financially survive a job loss of a few months or a significant reduction in salary, then you are financially beholden to your job. It is likely that your boss knows this, and thus your boss knows that the organization has leverage over you and can treat you quite poorly and get away with it.

After all, any risk to disruption of your job is financial risk to your current lifestyle and financial structure, so you’ll do everything you can to minimize risk at your job, and that often means accepting awful treatment.

That has to end.

The first step in breaking the “golden handcuffs” is to start living a lifestyle that’s below your income level. This doesn’t mean that you live like you’re in poverty. It means that you live as though you make, say, 20% less than you do, and you use the other 20% to give yourself some personal and professional freedom so that you’re never locked into an onerous employment situation again.

There are many, many methods for making that transition. Your goal should be to cut out the 20% of your spending that matters the least to you. Experimentation works well here. For starters, look for things you can do once that permanently reduce your spending going forward, such as replacing your home lighting with LEDs and installing weather strips where there is air leakage. Try replacing a lot of your everyday household purchases with store brand versions – things like hand soap, dishwashing soap, shower soap, pasta, and so on are typically unnoticeably different in store brand form. You should consider steps like eliminating your cable bill entirely by cancelling the service and switching to a mix of Netflix and free over-the-air signals for your television service. There are many, many things you can do to cut your spending – here are 100 of them, just to get you started.

When you’re doing this cutting, make sure that you’re not just replacing it with more spending. Instead, start doing automatic things with that money. If you’ve figured out how to cut $500 a month from your spending, have that money automatically transferred to your savings throughout the month, then do smart things with that money. Your bank should be able to set up this kind of automatic transfer for you. I suggest transferring small amounts each week.

The first “smart thing” you should do is build an emergency fund. Your savings account should always have at least $2,000 in it, and ideally should have at least a month’s worth of living expenses in there. This is money you can tap if things go haywire in your life without having to add to existing credit card balances.

Once you have an emergency fund, start eliminating your debts. Make a list of every debt you have, ordered by interest rate, with the largest interest rate on top. Make your normal monthly payments on each of these, but then make a big extra payment – as much as you can muster – on the top debt on that list. When it’s gone – and with this method, it’ll disappear in a matter of a few months – cross it off and move on to the next one, but don’t forget to add that newly paid off debt’s minimum monthly payment to the amount you’re automatically transferring, as described above.

Once that pile of debts is completely empty (or close to it), you’ve largely broken those golden handcuffs. You’re living on an income that’s far less than what you’re earning and you have a healthy emergency fund to boot. Losing your job is no longer the ominous threat that it once was. It’s now just an annoyance, but one you can easily survive and easily deal with.

Having this level of financial freedom changes a lot of rules for you. It enables you to consider job changes and even career changes. It gives you the resources you need to seek out additional training beyond what your employer might pay for. It also gives you the resources you need to be able to be more assertive at work.

That assertive part is key. Quite often, those who are held down with golden handcuffs are very afraid to speak up on their own behalf, so they accept whatever treatment they’re given. Without those handcuffs, it’s much easier to speak up on your behalf because there’s much less to lose. You don’t have to be afraid to ask for a raise. You don’t have to be afraid to ask for time off. You don’t have to be afraid to request and advocate for some reassignment of duties. The worst case scenario of standing up for yourself – a job loss – is far less frightening if you know you can survive comfortably for a while without your job.

What’s next, after you’ve broken your golden handcuffs? You need to make yourself as valuable as possible in your current position from the eyes of someone outside the company. Let’s break this down a little bit.

The first part of that statement is to make yourself as valuable as possible in your current position. This does not mean throwing yourself into endless hours of drudge work. It means evaluating the work that you do, figuring out where you actually provide a lot of value, and then maximizing that while minimizing the other stuff.

Ask yourself these two questions: what is it that you’re paid to do around here, the thing where you bring special skills to the table? and what can you do to be as valuable in that specific role as possible? Focus on doing those two things, and don’t worry about less important things.

The second part of that statement is just as important: make yourself as valuable as possible from the eyes of someone outside the company. What I mean by this is that you should be looking at every task you do in terms of how it will look on your resume and how it will lift your personal profile in your field. That shouldn’t be your sole criteria for deciding what to focus on at work, but it should be a major criteria.

Again, ask yourself two questions: what, among the things you do at work, looks best on a resume? and what things need to be on a resume to get a similar or somewhat better job at another employer? That’s the list of things you should be focusing on as much as possible at work.

The answers to those questions are going to vary widely depending on your career path. However, I will say that there are a few things that are really appealing in most fields: leadership, project completion, clear communication skills (particularly written skills), and technical skills within the field. Those things are almost always valuable regardless of your specific field, and you should be doing everything you can to bring evidence of those things to your resume.

Your focus should be on maximizing your personal value in your field through the skills you’ve built and the things you’ve achieved. That should ideally provide value to your current employer, but it should also provide a lot of value to you if you were to seek another position.

As you begin to add high value things to your resume, keep that resume updated on public sites such as LinkedIn and Monster. This does not mean that you are actively searching for a job, but that you are prepared in case something happens at your current job. Plus, there’s an extra benefit: headhunters. You may find that hiring agents for other companies may discover your resume and come directly to you with a job offer or at least an offer to interview, which basically gives you an option without you having to lift a finger.

This is an important factor because, quite often, people who are in a position where they are viewed as “expendable” are hesitant to run the risk of actively seeking another job. Having a solid resume out there makes it easier for people to come to you.

So, what do you do if you actually get an offer? Let’s say all of this clicks and you actually find yourself with another employment offer. What do you do?

It’s simple – you take the offer to your current job and ask them to match it. If they can’t or won’t, take the new offer. It’s that simple.

Obviously, this is the moment when you’re turning the tables, transforming the situation from you being an expendable employee to them being an expendable employer. If you are a valuable asset to them, they’ll treat you as a valuable asset. If not, well, they’re now expendable to you, so move on.

Beyond that, having a good resume that’s out there in the world adds to your own confidence in standing up for yourself at work. Combined with breaking the golden handcuffs, you now have the pieces in place to wonderfully handle the fallout from a short term job loss, or perhaps even a longer term one. You won’t fall apart financially and you’re already prepared for a career step, so why not be an advocate for yourself at work.

Another piece to this puzzle is building up a strong professional presence in your field. The way to do this is to make yourself known to people in your field beyond just your employer, particularly to those who may be involved in decision making. Do this by participating in professional groups (especially locally, if that’s available), participating in online groups related to your field, attending and being actively involved in professional meetings and conferences, and being helpful to those in your field that you can help (particularly when you’re not directly competing with each other). The more that you’re “known” as a positive force in your field, the better off your career prospects are going to be.

There is one final ingredient in this pie, however: you need to have the self-confidence to do this. It takes a degree of self-confidence and willingness to stand up for yourself in order to stop being an expendable employee who gets the raw end of the deal.

Assertiveness is that middle ground between passiveness (that’s the person who gets the raw end of the deal) and aggressiveness (that’s the person who runs roughshod over the rights and values of others). There’s a balance to be had there – you need to value your own needs and goals while also respecting the existence of others. It’s that state that strikes the balance best between your needs and the needs of others in the workplace. It doesn’t have to be all one (passive) or the other (aggressive).

So, how can you be more assertive at work? The first step is to set some boundaries by identifying what you personally won’t negotiate on. These may be things that you’ve negotiated on in the past, but if those things are untenable to you, you need to stop negotiating on them and never do so again. This may include things like a minimum salary, working hours, or workplace boundary issues. Focus on what really matters to you and what you would need at a minimum to be a happy employee. Then, simply don’t negotiate on those things, and if you don’t have them, allow yourself to be a little aggressive in getting them back. Be clear about them, too.

You need to take responsibility for your own problems. No one is going to come along and magically fix the things that you don’t like in your life. Stop waiting for your boss to make things better, because your boss isn’t going to do it unless you make it happen yourself. If you keep waiting for your problem to be fixed or for your boss to notice your exceptional work, it’s not going to ever happen. You have to make your problem known (in an appropriate way) and have a plan ready to fix it, and you have to make your good work known (in an appropriate way). Also, remember that you are only responsible for your own behavior. You can’t make other people behave a certain way, but only you decide how you behave. No one else can make you behave a certain way – you choose to do so.

A good first step on the path from passivity to assertiveness is to simply identify the two or three most pressing issues you have with your current job situation, formulate reasons why they need to change and a plan for those changes, and bring them up to your boss. Again, this becomes much easier if you’ve broken the “golden handcuffs” and even easier if you’ve made yourself a valuable asset in terms of the marketplace of your career.

All of these actions serve to facilitate one core goal: you want to transform the situation where you’re an expendable employee that relies on his or her employer to a situation where you’re less expendable and much less reliant on your employer. You are shifting the relationship from your dependence on your employer to a relationship of equals, and everyone benefits from that. You benefit because you’re no longer burdened by low pay and poor treatment, and they benefit by having a much better and more engaged employee.

This all starts with you. Start by breaking the “golden handcuffs” and building a little bit of financial independence for yourself. While doing this, bolster your professional situation by building yourself up into an employee that’s valuable at your position at any company, not just your own, and tell the world about that transformation. Finally, build up some assertiveness and develop a plan for the changes you want to see in your working life.

If you do that, you’re going to alter the equation in your relationship with your employer in a way that’s very beneficial to you and your career while also providing more value to your employer along the way. If your employer doesn’t see it that way, you have the tools you need to move elsewhere, where you’ll be more appreciated and the relationship is closer to equality.

Good luck!

The post The Expendable Employee appeared first on The Simple Dollar.

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Five Tasty Ways to Use Discarded Sourdough Starter

If you, like me, have been sucked into the sourdough bread craze and are nurturing a starter on your kitchen counter or in the back of your fridge, you probably hate tossing the discard — even though you know it’s important to keep your bread baby manageable.

By dumping that discard down the drain, you’re both sending dollars down with it and likely gumming up your sink disposal. (And forget tossing it into the trash — after a few days, the smell will take over your kitchen.)

Sharing it with friends who want to cultivate their own batch is typically option No. 1, but their enthusiasm will run out way before your discard does. Luckily, you have more delicious options to choose.

If you’re the sort who likes to play in the kitchen and experiment with recipes, Cultures for Health (my go-to site for learning to make any fermented or cultured foods) has a few suggestions. A recipe generally works well using discarded sourdough, they say, when it meets the following:

  • The hydration called for in the recipe matches that of the starter;
  • Sourdough starter is included for flavor and sourness, and not for fermenting the grains or for leavening;
  • No leavening agent is required.

As much as I love to bake, I still prefer to follow someone else’s recipe, so I’ve gathered five here to help you put that gloppy leftover mixture to good use.

Pancakes or Waffles

Google sourdough pancakes and the results are almost overwhelming. But this one-bowl recipe by Tastes of Lizzy T might make you forget about ever making bread out of your starter again.

I found, just as Lizzy says in her post, that they were “soft … fluffy … just barely sweet.” And for me, the sourdough flavor was a perfect complement to pure maple syrup, so make sure you’ve got some of that on hand too. (Sourdough waffles are also pretty common. I don’t have a waffle iron so I haven’t tried them at home, but even the folks at Saveur magazine say sourdough produces some of the “lightest, crispiest waffles they’ve ever eaten.”)

Banana Bread

When I began my search for discard recipes, the first one I came across was for this sourdough banana bread by Cultures for Health. I happened to have two overripe bananas and a cup of discard on hand and thought I’d give it a shot.

This particular recipe intrigued me because I like my banana bread heavy on banana taste and light on any other added spices or flavors. It was easy to prep and baked up like a dream. While it was a little tangy for my taste (which may just have to do with my particular starter), my husband really enjoyed it, and I would definitely bake it again.

Soft Pretzels

I’m a sucker for a soft vendor-style pretzel, and frozen ones don’t quite cut it, so this King Arthur Flour recipe has been sitting on my to-attempt list for a while. One of the benefits of this recipe is that you can use your fridge-starter cold, versus some recipes that call for feeding the starter, bringing it to room temperature, and/or resting it on the counter overnight before use. Most of the ingredients are pantry staples, but you’ll need to pick up powdered milk and coarse pretzel salt.

Pizza Crust

Homemade pizza really is the best. When it comes to adding in sourdough to the crust, it can be used simply to add flavor, or to help the dough rise. I’m leaning toward ease (and therefore flavor) here, and sharing this Genius Kitchen recipe, which requires just a short 30-minute rest after you’ve mixed it up.

One thing to note: Many of the discard-based recipes out there call for one cup of excess starter. This one needs 1½ cups. If you don’t have enough from one feeding cycle, you can collect and store discard in the fridge separately from your main starter until you have enough. Do know that the longer you keep it this way, the more sour the batter will be.


They sound fancy, and you could serve them with afternoon tea, but more likely this British staple will just take the place of your toast or English muffins at breakfast. I’m a big fan of Clotilde Dusoulier’s Chocolate & Zucchini website, and what’s particularly great about this crumpet recipe is that she also offers up a suggestion for hacking DIY crumpet rings out of empty tuna cans. Once you’ve got those, all you need is excess starter, sugar, salt, baking soda, vegetable oil, and some options for toppings (apple butter, almond butter, and marmalade are some of my favorites).

If you’re not ready to take on a whole recipe, here are two more pretty easy ways to do something productive with your discard:

  • Compost it: While it’s not necessarily the most exciting option, it’s worth knowing that, yes, you can compost discard. The folks over at King Arthur Flour say the simple mixture of flour, water and microbes is a great accelerant, and can be stirred right into your bin. (Feel free to whisk some cold water into it to thin the consistency a little if you want to make adding it into your compost easier.)
  • Make a loaf of bread — in a bread machine: When I don’t have time to commit to baking up a gorgeous boule, but still want some sourdough bread for the week, I pull out my bread machine. It feels a bit like cheating, because machine recipes call for extra yeast, and there’s very little work involved on my part, but it’s still dang tasty. If you own a bread machine, make sure it either has a sourdough or European setting, or alterable cycle programming. It’s also worth noting that bread machines can help cut down the hands-on time for standard loaves. Thanks to advice from my starter-baby momma, JL Fields at JL Goes Vegan — who regularly posts lust-worthy photos of her sourdough loaves on social media — I use my machine to mix and knead my dough, before transferring to a bowl for the rise period.

Got any favorite recipes for your sourdough discard? Share them in the comments!

Related Articles: 

The post Five Tasty Ways to Use Discarded Sourdough Starter appeared first on The Simple Dollar.

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Monday, April 16, 2018

Questions About Turbotax, Protein, Used Kitchen Appliances, 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. 30 vs 15 year mortgage
2. How can you recommend Turbotax?
3. Cheap protein after exercising
4. Handling financially disastrous brother
5. Beginner info drawn by hand
6. Organizing items on a receipt
7. Possibly over Roth IRA limit
8. Are used kitchen appliances safe?
9. Drawing the frugal line
10. Frugality as a game
11. Early Roth IRA withdrawals
12. Leaving a socially supportive church

Here in Iowa, spring youth soccer typically starts in late March and early April. All three of my kids are in youth soccer, so this is a busy time of the year, usually.

But not this year.

So far, every single game and most of the practices have been cancelled due to inclement weather, mostly due to snow on the practice fields, excessively muddy conditions due to melting snow, or freezing rain. The weather we are experiencing right now is more typical of late February or early March rather than mid April.

April snow brings May… water flow?

On with the questions.

Q1: 30 vs 15 year mortgage

My future husband and I are looking into buying a house. What are you thoughts on getting a 30-year mortgage, but pay it off like a 15-year mortgage?
– Cael

The only drawback of this plan is that a 30 year mortgage will come with a higher interest rate than a 15 year mortgage, thus you’ll be paying more if you pay off a 30 year mortgage in 15 years versus just having a 15 year mortgage.

Right now, as I glance at current interest rates, it appears as though a 30 year mortgage has a 4.5% interest rate and a 15 year is right at 4%. If you pay off a $200,000 mortgage at 4.5% in 15 years, your monthly payment will be $1,530. If you pay off a 4% mortgage in 15 years, your monthly payment will be $1,479. In other words, you’ll save roughly $25 a month for every $100,000 of your mortgage if you go with a true 15 year mortgage versus paying off a 30 year mortgage in 15 years, at current rates.

Now, the advantage of a 30 year mortgage is that you can make “normal” payments over 30 years. The monthly payment for a 30 year mortgage for $200,000 at 4.5% is $1,013 per month, which is a lot lower per month than the above option, but you’ll be making payments for twice as long.

The choice here is between minimum monthly payments. The higher the minimum monthly payment you accept, the lower the interest rate and the less you’ll end up paying overall because of the much lower total number of payments you’ll make.

What did we do? We took out a 30 year mortgage, but we paid it off in about four and a half years of huge payments. Some months, we made triple payments; other months, even more (and, yes, a little less than that a few months).

Q2: How can you recommend Turbotax?

How can you recommend Turbotax to anyone knowing that they lobby for more confusing tax laws? They literally spend their money trying to make sure that people can’t file their taxes without them!
– Jessica

Several people have sent me this ProPublica article entitled Filing Taxes Could Be Free and Simple. But H&R Block and Intuit Are Still Lobbying Against It or similar ones.

It’s worth noting that it’s not just TurboTax/Intuit that’s doing the lobbying here. A lot of tax software companies are in the same lobbying group, known as Free File Alliance. They basically lobby Congress in favor of bills that are good for the tax software industry and against bills that are bad for it, and, frankly, pre-filled tax forms would be awful for the tax filing industry as it would push them out of business.

While I agree that pre-filled tax forms would be good for all, I can’t really blame the tax preparation businesses, either, for wanting to protect their business. In an ideal world, our congresspeople would evaluate both sides of this and come to the conclusion that would bring the most overall benefit to Americans. As an individual without any investment in the tax preparation business and without any close friends or relatives in the business, having pre-filled tax forms would be a benefit – it would certainly simplify my filing each April.

On the other hand, if I refused to work with any company who has ever lobbied Congress for legislation that benefited them more than me, I would basically refuse to work with any company.

To me, I write this off as “this is how our system of government works.” As I said above, if this got me up in arms and refusing to use a company’s product, I would have to apply the same standards to all companies, and virtually every large company (and many small companies through industry groups) lobby Congress for bills that I don’t necessarily agree with. Honestly, for that matter, if I ran a sufficiently large company, I would probably spend some money lobbying Congress for legislation favorable to my company. To me, that’s just how America works, for better or worse.

Q3: Cheap protein after exercising

My MIL bought me a year’s worth of a personal trainer for Christmas, three sessions a week. (Yes, in-laws are very wealthy, and I basically asked for some sort of fitness help at Thanksgiving.) My trainer suggested that I start eating some protein right after a session because we always incorporate bodyweight exercise or weightlifting. He suggested a really expensive powder. What are some cheaper options?
– Amy

Peanut butter. Eggs. Canned tuna. Dairy products that are on sale, like milk or yogurt. Beans (lentils and black beans, especially). All of those options are pretty cheap and have a healthy amount of protein in them, plus they’re basically raw protein straight from a plant or animal source.

My personal favorite options are the first two. I’ll often just get out a tablespoon, scoop out a big spoonful of peanut butter from the jar, and gobble that down after exercise, or, if I have some, I’ll eat a hard-boiled egg straight from the fridge.

Another thing I often do is pre-cook a bunch of beans early in the week by soaking dry beans and then cooking them in the slow cooker until done, then straining them and keeping the beans in a container in the fridge. That way, I can assemble a simple bean burrito or bowl whenever I want – it’s super convenient.

Q4: Handling financially disastrous brother

My brother is a financial train wreck. I love him to death but he might be the worst person alive with money. We have always been each other’s confidants and talk through problems together (I am his older sister by 18 months). He is making so many money mistakes! I am trying to lead him to some kind of financial sensibility but I don’t know really how to help him at all. I tell him what I do (mostly just automate everything as you suggest and try to avoid debt) and he nods but then he just goes and does the same things again.
– Megan

Whenever I hear stories like this – and it’s surprisingly often – the best advice that I have is that you should actually back off with the nuts and bolts money talk. That’s not going to reach people if they don’t really see the point of it, or the point is really nebulous and vague. No one wants to make financial changes without a reason to do so, or a reason big enough to counter what they see as the perks of their current life.

So, I’d suggest stepping back and talking about goals. Don’t talk about how to achieve them, just goals. Where do you want to be in five years? Ten years? Ask a lot of questions about that. Then, start heading down the road of asking how he’s going to get there. What’s the game plan for getting from point A to point B?

Don’t tell, just ask and listen actively. Don’t lay down a bit of financial advice unless he asks. Just try to get him to grind out some answers and some realizations on his own. Send him away from one of your conversations with a lot of food for thought and see what happens.

I’ve found that giving financial suggestions to people who are really bad with money is almost always a lost cause. They need to see a purpose in it first, and if they don’t see that purpose, it’s all going to go for naught.

Q5: Beginner info drawn by hand

What I’m hunting around for (to be able to send to my daughter, long story…) is that image from years ago which was so inspiring to me when my husband came across it. I believe it was called the Financial One-Page, and I think it was from you folks. It was a handwritten, back-of-an-envelope type image, with a few basic rules. Am I nutty? I do remember it quite clearly but cannot seem to Google it into existence so I thought I’d run it by you.
– Connie

I’m almost sure you’re referring to Everything You Ever Really Needed to Know About Personal Finance on the Back of Five Business Cards, a post from a long time ago when a friend asked me to summarize what The Simple Dollar was about and the only convenient thing to draw on was a handful of business cards.

Later, I turned it into a free e-book that summarizes that info down to one page, then offers a ton of additional details and links to even more information, allowing you to dig deeper into each idea if you so wish. I have seen that e-book turn up in all sorts of places over the years.

I’m almost sure that you either saw the original “five business cards” post or the resultant e-book. Both are really good financial resources, though I am honestly tempted to have my daughter help me revise the business cards one, as she’s becoming an exceptionally good artist, far better than my own stick-man fumbling.

Q6: Organizing items on a receipt

Sometimes I feel like I am making improvements in my spending, but right now I am frustrated that I spent way too much money in 2017. I would like to get a better grip on where my money is going. I’ve been using Monefy, an app you can enter expenses into, but it’s very general. Ideally I would like to take a picture of my receipt, and have every item entered into a spreadsheet. I would like to see, oh I spent x $$ on laundry soap last year etc. The problem with simply categorizing a receipt as “groceries” is that many stores are not simply grocery stores. For example, we bought groceries at Aldi, but also a shovel and hose for our garden. Also, it would be nice to see how much was spent on vegetables vs. Ice cream or chocolate (luxury food) etc. Do you know of an easy way to do this? I was thinking I could scan my receipts with google drive, then copy paste somehow into excel. I have a toddler and baby at home though, so if it is too complex I will never do it.
– Carrie

Before I get into this, be aware that there is no app that does this perfectly. There is so much variation in receipt formatting that no app could actually completely master. Any app like this that you use is going to require some touching up of the data that it scrapes from receipts.

The best all-around receipt manager that I’ve found is Receipts. It enables you to simply take a picture of the receipt and it scrapes most of the information off of the receipt. Depending on the format of the receipt, you may have to enter some metadata (where the receipt’s from, what the date is) and you may have to categorize some of the items, but this is done with quick taps and swipes.

There are other receipt managers out there that do things similarly, but this is the best one I’ve found so far in terms of all around ease of use. Whether the threshold of effort is too much for your needs is something I can’t guess, but it’s not too much effort in my experience.

Q7: Possibly over Roth IRA limit

My husband and I should make right around the Roth IRA contribution threshold in income this year (I make 86K, he makes 90K), but we can’t know for sure until he receives his bonus at year end. We’ve both been contributing to Roth IRAs for the past couple of years when we were making less money and clearly under the income threshold, but we’re unsure how to proceed this year. We don’t want to keep contributing on a regular basis in the event that we go over the income threshold, our taxes will become a nightmare because we’d be breaking the rules? My question is – should we just focus on our 401(k)s for our retirement savings and forget about the Roth?
– Amy

If I were in your shoes, I would contribute to the Roth normally. If it turns out that you’re over the threshold, you don’t immediately drop from full contributions to nothing; instead, there’s a gradual reduction in your contribution cap. Your tax software will help you figure out exactly what that is.

So, what if you did contribute more than you should have? All you have to do is withdraw the contribution overage and any gains you earned and then do something else with it. You may owe a tiny amount of taxes (it will be small, most likely less than $100) on any gains earned while the money was in the account. The IRS doesn’t penalize you provided you withdraw the extra money promptly.

Given the relatively minor consequence, you’re probably making a good move by simply contributing to the Roth as normal this year.

Q8: Are used kitchen appliances safe?

How can you tell if a used kitchen appliance is safe? If I buy a Crock Pot or a rice cooker at Goodwill how can I tell that it’s OK to leave it plugged in overnight or when I’m not home?
– Sandra

The number one thing you can do is visually inspect the cord and look for any fraying. If you see even the slightest bit of fraying and aren’t familiar with electrical work, don’t buy the device and don’t use it at home. Fraying doesn’t strictly mean unsafe, but it does mean that some repair is absolutely in order as frayed electrical cords are a fire hazard. The cord should be 100% intact from the base of the appliance to the plug.

If that’s the case, then there’s very very little risk from a used small kitchen appliance. You should always plug it in and run it for the first time or two while you’re at home with it and can check it regularly to make sure it doesn’t get overly hot, but you should do that with a new one, too. Both have some small likelihood of having a defect, but if they run fine for a few times, you’re fine using them according to their intended use. You can never reduce the odds of an unfortunate event to zero, but there are far bigger risks to your life than leaving a rice cooker on while you go run an errand when the rice cooker has worked perfectly fine in the past.

I have seen so many of these questions in the last few months that I have to assume that the big “reveal” on the popular TV series This Is Us has affixed the idea in a lot of people’s heads that used small kitchen appliances are a raging fire hazard. Such an event as depicted on that show would be exceedingly rare.

Q9: Drawing the frugal line

How can you tell when you’re cutting back too much? I seem to be lacking some sensibility that others have because my sister and dad keep saying I am becoming a cheapskate but I’m pretty happy with things now. Don’t want to be a cheapskate but how can you tell if you’re not bothered with cutbacks?
– Damon

First thing: you shouldn’t be cutting back on the very basics unless you have no other choice. You should be eating a healthy nutritionally sound diet, have clean clothing, be keeping yourself clean, and have shelter over your head. If you’re letting any of those things go, then there may be problems.

Second, most people tend to view you as a “cheapskate” if you’re making frugal choices that adversely affect them. For example, if you’re refusing to go out with people when they ask because it’s too expensive without even attempting to compromise, or you’re inviting people over and giving them very cheap things when they’re your guest, you’re probably going to be labeled a “cheapskate.”

There’s also a factor of closeness here. Your sister and father may be more familiar with the details of your life and be paying a lot more attention than others will be simply because they’re your immediate family and care deeply for you, even if they tease you some. They may just be noticing minor changes that other people wouldn’t notice, like the fact that perhaps you’re wearing less expensive clothes or are eating out less than before.

In short, if you’re taking care of the things listed here, there’s no real problem to worry about. If you’re letting those things slide, you’re probably getting a “cheap” reputation.

Here’s another perspective on frugality that is an interesting contrast.

Q10: Frugality as a game

I find that frugality is a fun game for me to play in my spare time. I actually enjoy trying to meet personal objectives as inexpensively as I can. How can I get a gym membership at the absolute lowest price? How can I stock up on rice at the absolute lowest price? And then I will think about all of the costs involved in that, like driving around to places, and include that in the calculation. It really is a game to me, and it’s quite fun!
– Maxine

Honestly… it’s a game to me, too.

I do similar calculations as you’re doing all the time. I’m constantly trying to find the best “bang for the buck” solution for almost everything in my life, finding the point where I get the quality I want for the lowest price.

I also incorporate time into that calculation a lot – I won’t spend an hour saving a dollar, for example. At the same time, I don’t mind spending fifteen minutes doing a bunch of calculations to figure out which option saves me a dollar right now because the calculation is fun (it’s like hobby time), I can sometimes use the result in a post here, and I can often reuse the result in the future, saving more than just that initial dollar.

It’s that kind of calculation that taught me to drive just a slight hair over the speed limit unless I’m on a 70 MPH or higher road, at which point I drive exactly at the speed limit using cruise control unless there are hills or curves. I mathed this all out very carefully, maximizing fuel efficiency, time efficiency, and the risk and cost of traffic tickets, and that’s what I concluded, so now that’s what I do whenever I drive anywhere.

To me, this is the fun part of frugality.

Q11: Early Roth IRA withdrawals

Should I take out Roth IRA contributions to pay for child college education?
– Nick

It depends entirely on how the rest of your retirement planning looks. Is this your only source of retirement savings? Do you have a 401(k) or 403(b)? Do you have a pension?

In general, it is a bad idea to tap your only retirement savings in order to pay for your child’s college education. Doing so substantially increases the chance that you will be a financial burden on your child down the road, and if your child happens to either be unable to or unwilling to care for you at that point, you’re going to be in a very tight financial position. There is substantial financial risk in helping your child with college if you do not have a very secure plan for your own retirement, and the downside of that risk is far more devastating than your child dealing with student loans in their twenties.

Help with college if you really don’t need that Roth IRA money. If you do, hold onto it and then help your child a little out of pocket if you can to keep their loans low.

Q12: Leaving a socially supportive church

I am a 26 year old female, widowed with two kids. I married a wonderful guy whose family is members of a very tight knit church that offers a lot of social structure and help to families. They have free child care for members who tithe, lots of organized social events (many with child care), and so on.

My husband passed away last year in an automobile accident. I have remained a member of the church and they have been very wonderful to me in terms of social support and child care support.

However, since day one, I have strongly disagreed with the theology of the church. They have many religious and social views that I disagree with strongly and find extremely upsetting. I considered leaving the church when my husband was still alive. After he died, I stuck with it because everyone was so supportive and they still are but I am really really bothered by many of the tenets.

So here’s the deal. To become members you have to go through a lengthy review process that involves financial checks and so on. I would not be a member of this church had I not married into it. I remain a member, however my income is now quite low. Because I am a member “in good standing” (i.e., I tithe and go to church at the required frequency and yes they do count this) I get all of the benefits (the free child care and so on). There is no way I could ever afford this level of child care outside of the church. I can also do church events with others my age with free child care if the church hosts it and my in-laws will always watch the kids if asked. They also have a lot of meals and other things that really make it possible to make ends meet.

Without that support I am lost. I don’t think I can make ends meet without it. Dollar for dollar the value I get from my tithe is just enormous. But I feel genuinely uncomfortable going to church there and I worry about what my kids are learning at daycare and after school care and Sunday school.

I am trying to figure out how to leave this church. It is not cult like – they are fine with members leaving and don’t try to corner them. I just don’t agree with the teachings, to the point that I am really uncomfortable.
– Lana

I rewrote some portions of Lana’s letter to remove specific references to her church and location because I don’t wish this to turn into a discussion of the merits of a particular church or faith tradition. All that needs to be said is that Lana has a very different set of beliefs than the church she married into and is struggling with that versus the benefits of remaining a member.

The first question I’d address is how flexible the doctrine of this church really is. I reviewed this church’s web presence and mentions of it on social media and there was very little specific mention of doctrine in any of it. I couldn’t honestly tell much of anything other than they’re definitely a flavor of Christianity, really like music, and have a communion practice. There seems to be specific elements of their doctrine that you disagree with and you find upsetting; how inflexible are those elements? Also, are these differences hills that you’re willing to die on? Are the true differences between where you’re at and where the church is at worth leaving the church, the financial value you’re getting, the familial connection with your former in-laws, and any other social connections?

I think, before you make the full choice to leave, that you seek out the most understanding and flexible member of the clergy at this church and have some frank conversations. Don’t go at it from the perspective of “I am right and the church is wrong,” go at it from the perspective that you’re trying to really understand this church’s doctrine and how it contrasts with other popular prevailing viewpoints. In other words, ask for some one-on-one meeting time and come with lots and lots of questions, and ask follow up questions, and ask more follow up questions.

You need to make absolutely sure that you fully understand their doctrine, which parts of it are inflexible, and what you actually believe as well and whether it’s in direct disagreement with the inflexible parts.

It may be that your perception of the church’s doctrine may be altered by a speaker who is speaking from the edges of their actual views or other factors. I think that, given the familial situation and the amount of personal support they’ve given you and the fact that they’re not holding you in place, you owe them at least enough rope to figure out your specific disagreements and how accurate they are.

If this were a typical church situation, without the social support they have offered and the familial connection, I would be much more encouraging of you leaving quickly, and if it were cult-like at all (which I get no sign of from reviewing the church online or from your comments) I would tell you to get out. However, given the familial and social ties and the financial benefit of your continued membership and the seemingly benign nature of membership, I would give this some time and really figure out where your differences lie. This is a situation that’s very supportive of you in many ways; make sure you’re absolutely sure on the differences in doctrine before you walk away from the enormous financial and social value that you’re receiving here, because it is a rough road without it.

Good luck!

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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