Saturday, April 28, 2018

The Folly of Wanting More When You’re Not Using What You Already Have

You buy a book, but there are already a bunch of unread books on your shelf.

You buy a computer game, but there are already a bunch of unplayed and barely-played games in your Steam library.

You buy a new cosmetic product, but there are already a bunch of unused and barely-used cosmetic products in your bathroom drawers and closet.

You buy a new Bluray, but there are already a bunch of unwatched Blurays on your media shelf.

You buy a new cell phone, but the cell phone you have works perfectly fine and does everything you want it to do.

You buy a new video game, but there are already a bunch of unplayed or barely played games in your entertainment center.

You buy a new item for your preferred hobby, whatever it might be, but you already have a bunch of items just like it that you’ve barely used.

In the lives of many people – I’d say most Americans, in my experience and in reading about overall trends – this is a common phenomenon. I know it’s a phenomenon in my own life, particularly when it comes to books and board games.

We want more – and often spend money on more – when we’re not even using what we already have.

Why is this? Why do we want more when we already have plenty? Why do we want new when we already have plenty?

In the end, it’s all about desire. Desire is all about wanting what we don’t have. We already have the things in our closet and on our shelves, so they don’t elicit any desire. On the other hand, we do desire the things that aren’t on our shelves and aren’t in our closet, simply because we don’t have them.

Obviously, desire that is constantly fulfilled causes financial problems. You spend all of your money on new experiences and things, and eventually you need space to store all of those things. The constant desire for more wears down your wallet.

The thing is, desire is a fleeting mistress. Desire is like an itch on your back – you scratch it and it feels good, but then you often feel an itch somewhere else very quickly thereafter. On the other hand, if you don’t scratch that itch at all, it will drive you crazy with distraction… but not for long. If you pay it little mind, it usually fades away, particularly if you know deep down that you can scratch it whenever you like if you choose to do so.

This realization actually gives us a lot of helpful advice on how to quell the beast of desire and keep it from devouring our financial future. Here are ten strategies that I use to dampen the desire for more when I already have plenty.

Work on your self-awareness. In other words, recognize and acknowledge that you have desires and then reflect on why you have them and whether they’re meaningful.

The goal here is to try to step back from subconscious acting on desires, where we buy things and do things nearly on instinctive autopilot rather than thinking about what we’re doing and the impact those actions might have.

There are a lot of ways to improve self-awareness. One simple way is to use your downtime to think about the reasons why you behaved the way you did in a recent moment, whether that was the right way to behave, and whether there was a better course of action. You can do this while driving somewhere or waiting at the doctor’s office or any time in which you have a free moment.

Many people practice that kind of self-awareness and reflection in the form of journaling, where they sit down and evaluate situations in their life and other things in their mind in a similar fashion. Why do they feel this way? Why did they react this way? Why did they choose this course of action? What would have been the best way to act?

Over time, that kind of self-awareness can actually shape your subconscious instincts so that you end up making better decisions in the moment, so that you’re not driven primarily by the momentary desire of wanting something.

Schedule blocks of time to actually use the things that you have. I love to read and I love to play board games. Over time, that has somewhat channeled itself into collecting books and board games; there’s always something new to desire!

Part of the reason for that desire, though, is that I don’t have the time I once had to get lost in a book or to play a six hour long board game. As that time has slipped away while the desire to participate in that hobby remains, I’ve filled it by buying board games and books that I intend to read/play “someday.”

The reality is that the desire of collecting when you have a busy life is really just a cover for the desire to have time for those hobbies, and the solution to that problem is to intentionally block off time for those hobbies.

What I often do is that I’ll spend many evenings doing household tasks until I’m ready to fall in bed rather than watching television, or I’ll turn off distractions to get a ton of tasks done. That way, I can feel good blocking off several hours on the weekend to play a big epic board game, or I can feel good blocking off an hour or two on a weekday evening to get lost in a book without worries.

In other words, I make participation in the hobbies I care about into a high priority. This tends to keep my focus more on doing things rather than acquiring things. If I’m going to have a desire, I’d rather that desire be oriented toward doing rather than buying.

Practice conscious regular rotation of the contents of your closet and collections. Whenever I start feeling a great itch to buy a new game or a new book, I spend some time going through my current collections. I’ll re-shelve my board games or go through my bookshelves and pull off everything I really want to read or play. I’ll create a new Kindle category and go through my full Kindle library, putting books into that category that match it. I’ll go through my closet and rearrange the contents.

Almost every time, I’ll find some games I want to play or books I want to read and I become very motivated to engage with those things. The desire to experience those things becomes front and center, pushing the desire for more stuff to the background. I want to play this game I’ve forgotten about, so my desire to pick up a new one has faded!

The goal of all of this is to uncover things that you currently have that may have slipped your mind, so that your desire to acquire something new is transferred instead to a desire to explore this item you’ve uncovered.

Use the 30 day rule. If you’re completely focused on acquiring some new thing, simply agree to do a “check” on that desire. Put the item down for thirty days. If you still want it thirty days from now, then buy it.

This is really a check against the fleeting nature of desire. Quite often, the thing we desire very strongly this week will fade next week and disappear the week after that. If you examine that desire from the vantage point of a month, it will seem unexciting or perhaps even silly.

I usually write down desired items in a pocket notebook, so that I have this sense in my head that I “took action” on that desire. I did something. This often takes the edge off of that desire and it starts fading. Almost always, a month later, I have no interest in that thing that I was desiring and I can easily just forget about it.

Redirect into a different area of life. If you find that your desires are constantly pushing you to consider purchasing the same kind of thing over and over – books, board games, and so on – then consider redirecting your focus into other areas of life.

For starters, consciously choose to spend less time reading and watching media related to that area of interest. If you read a website related to this point of interest every day, then delete that from your bookmarks. If you follow a bunch of social media pages that stoke your acquisition fires, stop following most of them.

Instead, seek out other areas of interest in your life. Different hobbies. Different passions. Redirect your energy and focus elsewhere.

For example…

Intentionally build a focus on more fundamental desires that lead to self-improvement, such as your physical health. If you need something to focus on as a redirection from that expensive hobby that’s full of desires, try focusing instead on some aspect of improving yourself for a while. Make your diet front and center, or make your physical fitness front and center, or some area of learning front and center, or make your relationships front and center, or make your mental health front and center.

In other words, focus intentionally on things that are oriented almost entirely around taking action that will improve your life. For a long period, improving our personal finances received this kind of laser focus for us and it’s still an area of focus. I find that whenever my focus is on making my life better, my desire for purchases declines sharply, because most areas of genuine self-improvement do not involve spending money.

That’s because, in the end, improving yourself really means using what you already have. You’re using your body. You’re using your mental faculties. You’re using your mind. You’re using your social network. You’re not investing your desire in things you don’t own.

Here’s another approach to that same idea…

Intentionally build a focus on collecting “achievements” rather than things. For example, rather than focusing on buying books or the size of your book collection, focus on building a list of books you’ve actually read. Rather than building a huge collection of Blurays that you’ll barely watch, focus instead on building a long list of films you’ve watched, whether it’s from your collection or Netflix or borrowing them from the library or whatever.

Do things. Read books. Watch films. Play games. Go on hikes (and keep track of the trails and parks you’ve done). Do whatever it is that you’re passionate about, but rather than focusing on possessing the stuff involved, focus on making a big list of the things you’ve achieved within that hobby.

I love to track the games I’ve played and the books I’ve read and the trails I’ve hiked on and the geocaches I’ve discovered. When I pair that up with the earlier strategy of consciously devoting time to my interests, I can actually contribute significantly to these lists, and that keeps my desires channeled toward doing rather than acquiring, which is much less expensive.

Here’s yet another way to channel your focus…

Intentionally build a focus on desires that help improve the world. In other words, rather than aiming your desires at acquiring things for yourself or pleasuring yourself, aim your desires toward improving the world and follow that desire with action.

Consider what frustrates you and disappoints you regarding the world right now. Is it climate change? Is it extreme poverty? Is it the lack of a cancer cure? Is it simply hungry children in your neighborhood? What element of the world sears you to the core that you wish you could change?

Now, what can you do with your time to help bring about change in that area? Even if it’s just throwing a single starfish back into the ocean rather than clearing the beach, you can make a difference with your actions, your energy, and your time. Take direct action to fix these things, or else make a nuisance of yourself to the people in power regarding this issue.

If you care about something deeply, channel your energy into making that change happen. You can do this.

Use negative visualization to take an edge off of the less urgent desires. Negative visualization is a powerful tactic that helps you really put a check on a constant desire for more and amps up your appreciation for what you already have.

Just do this simple thing. Make a list of the three things you care about most in the world. Someone you love deeply. Something you love doing. Your favorite regular aspect of your life. Now, imagine, one by one, what your life would be like without those things. What would my life be like without Sarah? What would my life be like without a hike in a park on a nice sunny day? What would my life be like without the ability to read a great book?

My life would be a much emptier place. The more I reflect on what that life would be like, the more I come to realize that I actually have an incredible life abundance already. It’s a pretty good life – what exactly do I need more for?

This type of negative visualization is a great reality check for those times when the desire for more gets way out of hand.

Put a sensible, pre-planned cap on your desire spending. In the end, even after all of those tactics, there will still be times when you desire some object or some experience that costs money. It’s human nature. Those tactics will help knock that desire down quite a bit, but it won’t disappear.

That’s why it makes sense to have a monthly budget with some breathing room in it, with some money intentionally budgeted and set aside to allow you to fulfill some of your desires. I call it my “free spending” allowance – I can spend it on whatever I want. If I come to the end of it, then I know I’ve given in to a lot of desires lately and I can wait until next month. If I’m careful with it, it lasts for a good month or more.

You can make up your own rules for what comes out of that budget, but I recommend that you include things like eating out, experiences out of the home, and entertainment and hobby purchases in that “free spending” segment of your budget.

Final Thoughts

If you’re reading this, it’s extremely likely that you already have a plentiful life. You likely have lots of relationships, some interests that you enjoy, and lots of little things in life that keep you lifted up.

In the end, the real key to avoiding a desire for more and a neglect of the many things you have is to simply be intentional with your focus. When you find yourself desiring something, put that desire down and spend some time considering the abundance you already have in your life.

Do you really need more? Does it really gain you anything that’s really worth the desire and the cost? Probably not.

Good luck.

The post The Folly of Wanting More When You’re Not Using What You Already Have appeared first on The Simple Dollar.

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Friday, April 27, 2018

Money Free Days

One of our family’s favorite ways to spend money is to have money free weekends. We simply aim to go through an entire weekend without spending money, relying solely on the food already in our cupboard and refrigerator for our food needs and the things we already have on hand for our entertainment needs.

Over the last several months, I’ve come to realize that “money free days” are actually a really big part of our financial strategy. There are simply a lot of days where I don’t spend a dime, neither does Sarah, nor do any of our children.

We don’t go out to eat. We don’t stop for a quick treat. We don’t buy anything online. We don’t spend money on entertainment. We don’t buy food. We don’t buy anything. No money leaves our home.

So, starting in January, I started tracking those “money free days.” I just made up a little spreadsheet that was just a list of days, and each day where I didn’t believe we spent any money, I made a little “X.” It turns out that more than half of our days are money free days.

Here are a few observations about this:

Money free days are mostly achieved through self control regarding splurges and unnecessary spending. Our necessary and planned spending usually occurs in large batches on single days, like grocery day when I’ll also often fill up the car with gas, or bill pay day. Most other days do not have any planned spending at all, so a “money free day” usually happens because we didn’t splurge or buy anything unnecessary. A “money free day” is usually just a “self control day.”

Money free days really add up. If we spent just $10 per day on those money free days this year instead of $0, we would have spent $630 at last count. That $630 is enough to make a huge difference in the finances of most people. It covers a couple of car payments or pays off a credit card. If you have 50% “money free days” over the course of a year, that’s 182 money free days, and at $10 a pop, that’s $1,820.

Money free days work because we make a lot of our own meals. On money free days, we make our own meals at home from stuff we already have on hand. We don’t go to restaurants or get takeout or get delivery or make a last-minute run to the store. Instead, we’ve planned ahead with a well-considered meal plan.

Money free days also work because we have a lot of free things we enjoy doing and sources of entertainment and fun already on hand. We don’t need to go out and spend money to have an enjoyable day or evening. Here’s a list of 103 things we do on money free weekends, for example, and those tactics just scratch the surface.

Having a “money free day” becomes a nice little goal that feels like a nice accomplishment at the end of the day. At the end of a money free day, it really can feel like you’ve taken a real step forward in your financial life. Not only have you conserved money for the day, you’ve reinforced to yourself that you don’t need to spend money to have a joyous life. You can go to bed feeling good.

Yet, a money free day isn’t actually unpleasant. It’s usually a pretty normal day. We just don’t buy anything. We’ll have family meals together, work on hobbies together, take care of household projects, work, go to school, and so on.

When you start tracking “money free days” and get a streak of them going, you really want to keep it going. I’ve found that when I get three or four Xs in a row in my spreadsheet, I want to continue that streak and add another day to it. It’s an unconscious drive, but a powerful one. It’s a technique I’ve described in the past that can show up again and again.

“Money free days” cause you to spread out treats and thus appreciate them more. If you try to do three or four money free days a week, those are days that you’re not indulging in perks that might become utterly routine. You’re not stopping for a quick bite. You’re not grabbing a cup of super sweet coffee. You’re not stopping in at your favorite shop. Instead, you’re spreading out those perks. They’re not an everyday thing any more. Instead, they become more infrequent, and thus more special and more appreciated. That type of appreciation has value – the anticipation is fun and the less frequent indulgence makes it feel more pleasurable, too.

How can you turn this idea of “money free days” into something useful for you?

One thing you can do is turn it into a 30 day challenge. A thirty day challenge means that for a single thirty day period (I almost always just use a calendar month), you strive to make some significant change in your life or do something frequently. I often track this by using a calendar page, marking each successful day with an X – you can print calendar pages quite easily. Set a goal for that 30 day challenge – maybe it’s 20 Xs. At the start of each day, look at the calendar and reflect on your challenge. At the end of each day, look at that calendar and add a big fat X on that date if you succeed. See if you can get to 20 Xs before the end of the month.

Another good tactic is to reflect on things you’d like to do or get done with the things you already have on hand. What hobbies have you allowed to idle? What things do you have stowed away in your closet that you’ve neglected? What unread books do you have? Have you gone on a bike ride lately? Have you played soccer at the park lately? Gone for a long walk or a jog? Have you cooked up some of the things stowed away in the back of the freezer? Do some brainstorming about the dangling threads in your life, pleasurable or otherwise, and then intentionally spend days (or whole weekends) tugging on those threads.

I actually like using some of my money-free days to tackle big day-long projects. I’ll do things like doing a meal prep day or taking on a home repair project using things I already have on hand, or play an epic board game with my family. If I have all of my supplies on hand, this easily becomes a money free day.

Another good strategy is to plan a social event at your home. Have a dinner party or a movie night or a board game night. Plan it out several days in advance, get all of the stuff you need, and invite people over for the event. Getting ready for it will probably eat a lot of your day, then the event itself will fill your late afternoon and evening with free fun.

I find that doing anything free with friends tends to be a lot of fun, whether it’s going on a hike or having a dinner party or playing soccer at the park or going to a community concert. The simple act of doing something with someone is fun, and it turns out that lots of people are very amenable to social activities where there’s no cost to them. A lot of my friends might balk at the cost of a night on the town but love to come over for a game night or a movie night or to work on a project of some kind together.

A final tip: meal planning really, really helps with this. Having a meal planning and grocery buying plan in place makes money free days really easy because you already have the food you need on hand to prepare meals for the day (and for a lot of other days). If you have a strong meal planning system, you can often go for a week and a half or more without going to the grocery store, which eliminates one common source of spending. This entire process really cuts down on your food spending overall and paves the way for money free days, which inherently represent lower spending in other areas (such as hobbies). I often plan ahead with filling up the car with gas in this way, too, as I’ll often get gas at the same time as I shop for groceries.

This is just a fun little practice to help you to realize that it really is pretty easy to go through a day without spending money, and the more days you practice this pattern, the more normal it’ll seem and the more money you’ll save.

Good luck.

The post Money Free Days appeared first on The Simple Dollar.

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Thursday, April 26, 2018

When ‘Going Cheap’ Is a Bad Idea

I usually go “cheap” when I’m spending money on things for myself or for my family. I aim for very low cost and healthy foods – I aim for spending less than $100 a week on food and household items for my family of five while still having healthy meals for all. I buy store brand versions of a lot of things. I rarely splurge on expensive items. I only buy clothes when they’re on sale, usually when clothing stock is getting rotated out at the end of the season.

Having said that, over the years, I have found that there are some things that I don’t skimp on.

“What stuff don’t you skimp on?” you might ask. “When is it a bad idea to go cheap?”

Don’t worry, I’ll get there and provide a list of items that I don’t skimp on for you, but first, I want to offer up my general rule on things you shouldn’t skimp on:

If you use an item every day AND you can identify specific features that make a significant difference for you, then you shouldn’t skimp on those items.

That list of items is going to be somewhat different for everyone, because we all live different lives and use different items in different ways. However, there are some things that we do all have in common, such as eating, sleeping, and walking, and my list touches on all of those things.

The thing to always consider is whether or not a good version of an item will meet a genuine need for you and make a significant difference in your life. Something might seem “cool,” but does it really help?

One feature I always consider when it comes to daily use items is reliability. Is it going to last for years and years and years? That’s what I want, and I’m willing to pay more for that. I will pay more than five times the cost for something that will last five years versus something that will only last for a year so I don’t have to deal with the cycle of breaking down and replacement each year.

So, that being said, here are things that I don’t “go cheap” on.

Shoes: If shoes hurt my feet, I’m not going to wear them with any regularity. If shoes feel comfortable, particularly after long days of walking, not only will I wear them all the time, I tend to latch onto those models and keep buying that same model for as long as they’re made.

I generally have four pairs of shoes, one pair of sandals (for the summer), and one pair of boots (for the winter). I have a pair of “everyday” shoes, a pair of “hiking/outdoor/likely to get muddy” shoes, a pair of “dress” shoes, and a pair of “gym” shoes. I replace these shoes when they’re either starting to fall apart (at which point I try to get the same exact model as before) or if I’m feeling foot pain (at which point I get a different model). For the most part, I stick with the same models over and over and over and over again until they stop being made or the company changes their construction. For the most part, these shoes last a couple of years each at least. I have a preferred model for each type and I always watch for steep sales on them because if I find such sales, I’ll buy a few pairs and stick them in the closet.

If my feet are hurting because of my shoes and it’s not due to breaking in a new pair of old standby shoes (I do exclude days where I do an exceptionally large amount of walking compared to my normal amount of walking), then I get different shoes. I don’t accept sore feet. I don’t accept the idea that I should dread going for a walk because of foot pain.
Foot pain due to cheap shoes is not acceptable; I will spend more on shoes to avoid foot pain, and I will stick with models that work. I prefer shoe models that will last for a long time and I seek out a good bang for the buck regarding construction quality and price.

In summary, when it comes to shoes, being able to wear them for a long period of time and on long walks in varied terrain without foot discomfort is something I’m willing to pay extra for.

Mattresses and pillows: This is a similar argument to shoes. I won’t tolerate a nightly mattress or pillow that causes consistent back pain or any other form of discomfort. If I am experiencing neck or back pain due to my sleep, then I rotate the mattress as a first response and also carefully evaluate my pillow. If the pain continues, I’ll replace my pillow immediately. If it still continues, I’ll replace that mattress.

I’ll stick with a pillow until it appears to be the cause of neck or back pain. The same is true for a mattress – I’ll stick with it until it appears to be the source of neck or back pain after rotation. When it’s clear that something is causing me to be in pain upon waking or causing significant discomfort during the day, then it is going, no questions asked.

For replacing a pillow, I have a consistent pillow that works well for me for about a year before becoming too flat and causing some minor neck issues and upper back pain (this is the one I prefer). Mattress replacement is trickier simply because of the difficult marketing of the mattress industry which does all it can to make things unclear, but we tend to get lots of years out of a mattress. I usually just take note of what mattresses I sleep on while traveling that cause me to wake up over several nights with no back pain and I look for those models. (I am very much in the “firm” mattress camp.)

In the end, for me, when it comes to mattresses and pillows, a good night of sleep without discomfort or pain in the morning is something I’m willing to pay well for.

Basic kitchen equipment: One thing I do almost every day is prepare at least one, and often two or three, meals in my kitchen. This often involves cooking things on the stovetop, chopping up vegetables, and so on.

For any tasks that I do that frequently in the kitchen, I want tools that just work – tools with a long lifespan that can take a beating, tools that don’t require endless maintenance, tools that just do their job.

For me, the core kitchen tools are a good chef’s knife (the Victorinox Fibrox is perfectly fine; I use a Global I received as a gift, but the Fibrox is where it’s at for quality versus cost), a good paring knife (again, Victorinox is perfect for my needs), a cutting board, a saucepan, a skillet (a cast iron one is best, one you’ve seasoned until the surface is basically nonstick), a pot of reasonable size (a Lodge 6 quart enameled cast iron works for almost anything you might do with one), a small spatula, and a larger one for flipping things in the skillet. With those tools, I can prepare most of the dishes that my family enjoys. Those things must work. Those things must do their job with minimal maintenance.

There are other things that I use frequently, such as a rice cooker, but I don’t mind buying the Goodwill versions of those if I need to replace one.

The core things I use in the kitchen need to be well made, to do their jobs well with minimal maintenance, and to last for a long time. I don’t want to waste time with things that aren’t working well any more when I’m trying to assemble a simple meal quickly for my family. This stuff needs to work. In summary, for me, with the daily use items in my kitchen, reliability and low maintenance are the killer features that I will pay more for.

Heavy-use appliances: I don’t go on the cheap end for appliances we use every day – the dishwasher, the stove, the microwave, the refrigerator, the washer, the dryer. For those large purposes, I tend to study Consumer Reports and go for their “best buy” recommendations, which is usually one that’s near the top of their rankings with a reasonable price. I tend to favor ones that indicate better reliability rather than more features, as I generally only care about the core features of that item. I want my washing machine to wash clothes reliably with just a few settings and ideally while conserving water and energy, for example. I don’t need a touch screen or other whiz-bang features.

This generally means that I’m looking for a middle-of-the-road appliance in terms of price when I’m buying. I usually know exactly what model I’m looking for and I shop around to find that exact model at the best price, and I look for ways to get further discounts on that model. Basically, I’m doing what I can to get a highly reliable but not necessarily feature-laden appliance at a good price. I will pay more than the low end for that. In summary, for the appliances I use every day, reliability is a key feature that I am willing to pay more for.

House guest preparation: When someone is a guest in my home, I don’t skimp on them in the way that I would on myself. The guest bathroom gets good soaps and toilet paper and the like. The guest bedroom is made up as nicely as possible, usually with highly regarded overnight toiletries for their use (usually higher-priced stuff than what I use myself). When guests come over for meals, I serve them genuinely high quality food, generally due to my own extra effort. I don’t serve cheap wine or cheap beverages unless I really know the person (some of my closest friends are quite happy with a bottle of “three buck Chuck” on the table, but when the social connection is more fragile, I will serve something else).

Yes, this means I spend more when I’m preparing for a guest in our home, but I view that cost as a social cost for the people I respect and for the relationships I value. My guests might ask me what kind of shampoo I use, for example, and they’ll often find that it’s a store brand, whereas I have the best shampoo (from Consumer Reports) available for them in the guest bathroom. So, for me, while I don’t use items for guests every day, I value very highly the comfort that guests feel in my home.

Garbage bags: This is one household product where I do not buy the store brand. I have bought ForceFlex bags in bulk for years and they have done incredibly well for our use, as they tolerate being filled to the brim and often handle very heavy items without breaking or tearing. We have only extremely rare issues with the bags no matter what we do to them. In the past, when we have used store brand bags, they often tore no matter what was in them if the bags were over half full.

It is worth paying a little more to reduce the chance of a kitchen trash blowout from 10% of the time to 0.1% of the time. The time invested in trash bag blowout cleanups isn’t time I want to ever invest, so I will pay more to avoid it. It is an extra cost that is at least partially recouped by the fact that I feel fine filling our current bags to the absolute brim, whereas with store brand bags I would barely fill them past halfway to avoid blowouts, and sometimes double-bag them if something heavy was in there. That added greatly to the cost of store brand trash bags. So, for me, trash bags are something I use every day, and the key feature that’s worth paying more is avoiding trash bag blowouts.

Writing tools: I am a writer and a prodigious note taker, and I also write in a journal nearly every day. I am very particular about my writing tools, and I get so much value out of reliable ones that it’s well worth the extra cost.

I virtually always write with a pen, and I want one that just works but isn’t expensive enough to freak me out if I lose it. For me, that’s either a Pilot G-2 or a Uniball Ultra-Micro gel pen (they come in a few different models, but they’re all fine). I keep a staple-bound pocket notebook on me at all times, one with a sturdy cover that doesn’t fall apart at a moment’s notice (the brand varies, but I don’t buy the cheap spiral-bound ones). I also have a number of larger notebooks and journals that I fill to the brim (I really like Leuchtturm 1917 and Baron Fig notebooks and journals). I will happily make do with composition notebooks from the dollar store in a pinch, however, but I prefer notebooks and journals that are really well made and can handle a beating and a lot of leafing-through without falling apart.

Again, the cost per day of use of this stuff remains really low, but it is higher than buying super-cheap pens and spiral-bound notebooks. Neither one of those hold up: the pens often leak, and the notebooks often fall apart.

For me, writing tools (pen and paper) are daily use items, and it’s worth spending a little more to get reliable pens that always write and don’t leak, and reliable notebooks that hold together while being filled to the brim and leafed through later.

Car and tire maintenance: While we don’t go high end for cars (we tend to buy entry-level late model used cars from reliable manufacturers like Honda and Toyota), what we don’t skimp on is auto maintenance and tire maintenance. I fill up the tires at the gas station to the maximum recommended pressure frequently and replace them when we get even remotely close to thin treads. I also stick strictly to the recommended maintenance schedule and have a trusted mechanic do everything (unless it’s just an oil change, which I can do myself).

Those moves simply add to the reliability of the car. It’s not going to blow a tire. It’s not going to skid around on a winter day. It’s going to start when I go out there and start it. It’s not going to have lights go on unless there’s a real breakdown problem. Issues aren’t going to jump out of the blue.

For us, a car that runs is a daily requirement, and I ensure that by keeping up with tire maintenance and auto maintenance. It might cost a little more right now, but it avoids a lot of issues down the road in all sorts of ways and it also extends the life of the vehicle.

Health and dental checkups: In our family, we follow a pretty standard protocol for health checkups. Adults under the age of 65 get one about every two years; children, once a year. Dental checkups tend to happen every six months to a year depending on our dental health. We follow the schedule more or less like clockwork.

Why? Health surprises, when caught early, are usually pretty easy to treat in terms of both cost and life impact. Health surprises not discovered until later can be a complete disaster to treat in terms of both cost and life impact. It’s just that simple.

Our health is something we depend on every day, and without it, quality of life can decline rapidly. A body that runs well is a daily requirement, and this is ensured to the best of our ability by getting regular medical and dental checkups. It’s also aided by being active and eating a healthy diet, of course.

Final Thoughts

These examples cover most of the areas in my life where I don’t “go cheap.” In each case, the same core principle rings true: If it’s something I use daily AND it’s something that I can identify as providing necessary value beyond the minimum expense option, I’ll go for the better option. Good shoes and a pillow and a mattress keep a lot of pain at bay. Good kitchen tools makes meal preparation for my family easy. Auto maintenance keeps our cars running well for a long time. Medical checkups (and a good diet) do the same for our bodies.

In the end, almost all of these things come down to preserving the basics of life: our health, our closest relationships, our sense of well being. If those things are in place and well secured, it’s easy to have a good life. Going cheap on those core things is a bad idea.

Good luck!

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When Does It Make Sense to File for Bankruptcy?

Bankruptcy should be avoided whenever possible, but there are times when people who are overwhelmed with debt have no viable alternative but to seek bankruptcy relief.

Bankruptcy laws are designed to ease the financial pressure on people who can’t pay their bills. While filing for bankruptcy can erase unsecured debts, prevent foreclosures, and stop debt collection activity, it has some drawbacks, said debt resolution attorney Leslie Tayne. Going through bankruptcy can affect your credit report for up to 10 years, making it difficult to qualify for a mortgage, a car loan, or other lines of credit, Tayne said.

For most individuals, there are two types of bankruptcy: liquidation (Chapter 7) and reorganization (Chapter 13). “There are other chapters of bankruptcy, but for most consumers, these are the two available options,” Tayne said. Depending on individual circumstances, most of your debts may be discharged or reorganized to create a manageable repayment plan.

A last resort

Deciding when to file for bankruptcy can be a difficult judgment call. It depends, in part, on your tolerance for living with the stress of being deeply in debt.

Experts generally agree that bankruptcy should be entered into as a last resort. You should consider it “when you can no longer afford basic necessities and all other options have been explored and exhausted,” advised Tayne.

Attorney Jen Grondahl Lee said the time to file for bankruptcy is “when you are so stressed from your finances that you cannot see the light at the end of the tunnel.” And attorney Parisa Fishback said bankruptcy may be appropriate if you have property that’s in danger of going into foreclosure, or if you’re thinking of taking money out of a retirement account in order to pay an unsecured debt.

Before you decide to seek bankruptcy protection, consider taking the following steps:

  • Get a handle on your finances. First, add up your assets, including your savings accounts, the value of your home and your automobile, your retirement funds, and any investments you have. Next, tally your liabilities, including all bills and obligations. These include outstanding loans and credit card debt. If your liabilities are far greater than your assets, it may be time to consult an attorney about bankruptcy. Understanding your assets and liabilities “will put you in the best position to make a decision on bankruptcy,” said New Jersey attorney Paul J. Riviere.
  • Try to negotiate with your creditors. Many creditors would rather make a deal than see you file for bankruptcy. That’s because some or all of the money you owe them could be discharged in court. You may be able to convince your creditors to forgive part of your debt or agree to a more manageable repayment plan. Consider contacting a nonprofit credit counseling agency that’s accustomed to working with lenders and credit card companies.
  • Make sure you’ve exhausted all alternatives. Borrowing money from relatives to repay your debts or selling property to raise money may be preferable to bankruptcy, depending on your circumstances.
  • Prepare for the job of starting over financially. This means changing your spending and bill-paying habits in order to make sure you never again find yourself in this situation. For example, if your financial problems were caused by credit card debt, you should be willing to stop relying on credit cards for your day-to-day needs. This will be easier if you commit to building an emergency fund you can use for unexpected expenses, such as car repairs.

Make peace with your bankruptcy

Once you’ve made the decision to declare bankruptcy, don’t waste time feeling guilty or dwelling on the damage that has been done to your credit report. Your credit score can start to recover in just a few years, so learn from the past and focus on the future.

Having a bankruptcy on your record means you likely will have to pay higher interest rates for loans, because you’ll be considered a greater credit risk. Although it can take up to 10 years for a bankruptcy to fall off of your credit report, the impact will diminish over time.

Florida consumer protection attorney Donald E. Petersen said it can take two to three years for your creditworthiness to recover enough to allow you to obtain a home loan on favorable terms. Be aware that there are predatory lenders who work with people with damaged credit in order to charge higher interest rates. Consider putting off major purchases that require borrowing until your credit rating improves.

Related Articles:

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Wednesday, April 25, 2018

“Financial Success Only Works for Other People”

One of the most interesting things that occurs with The Simple Dollar is the sharing that goes on with the site and with the email newsletter (some readers receive the articles from the site in email form). People share articles to others on social media or by forwarding an email, and sometimes those people will share it, and so on, and eventually an article makes it into the hands of someone who feels the need to tell me how wrong I am about the relatively simple math of frugality and financial success.

Usually, the response I’ll get (via email or social media) boils down to one core idea: “Sure, what you talk about might work for someone who is rich, but it doesn’t work for most Americans.” I hear that again and again and again and again.

So, let’s start with some reality from my own financial journey.

When Sarah and I started our financial turnaround, we lived in a tiny two bedroom apartment that was about 600 square feet. Our combined salary was about the average American household income, but we held somewhere in the high five figures in student loan debt, over $10,000 in credit card debt, and two car loans. We also had a baby that we were raising in that tiny little apartment.

I don’t think you could make a good case that we were in the top half of Americans in terms of our financial state. We were about average in terms of salary, but boy did we have a lot of debt.

Over the next year and a half, we paid off all of that debt. I wrote about that journey in the early days of The Simple Dollar; I started the site well into that debt repayment process and I started the site to share the things we were learning along the way.

We then bought a house and had two more children and I had a career change. Within four more years, we paid off that house, too. We were completely debt free and owning our own home within five and a half years of starting our financial journey.

We didn’t do this with exorbitant wealth. We had exactly two years where our combined income bubbled over $100,000 a year during that entire process, and during both of those years I practically killed myself with work to get there.

So, how did we do it, then?

We did it with self-control and frugality. We recognized that every dollar we were spending needed to be bringing some real lasting value into our life. A lot of the things that we were spending money on – and that most Americans spend money on – bring short bursts of joy and then fade quickly into being forgotten entirely. They might be really tempting short-term pleasures, but they’re just short-term pleasures.

This is still mostly true for us: unless we’re pretty sure that something is going to be providing a ton of positive value for us for the dollar and it won’t be something we forget in a day or two, we’re going to try as hard as we can to spend minimal money on it – ideally, none. Yes, we have to buy food, but most meals are just forgettable fuel for the body, so we go for cheap healthy meals – think rice and beans and eggs and simple stir frys and oatmeal and lots of vegetables and things like that – that are nothing more than healthy fuel for the body. Yes, we buy things for entertainment, but we’re extremely careful about getting the most bang for our dollar in terms of long-term value and we often borrow things from the library, go to community events, go on hikes, and do other such things that have zero or very minimal cost. Yes, we buy household supplies, but when we do, we buy store brand and usually in bulk.

The hard truth is this: spending money does not lead to more happiness. I’ll repeat that: spending money does not lead to more happiness. Yes, you have to cover some basic expenses, but those expenses, once you peel back the unnecessary layers, are pretty cheap. The rest? It’s unnecessary, and spending that money does not lead to more happiness.

But what about splurges? What about fun? If you’re thinking like that, you’re not getting the message. Spending money does not lead to more happiness. Happiness comes from the things that you’re doing, and that rarely requires you to spend money. There are tons and tons of fun things to do that don’t involve shelling out money. Spending money might give you access to more, but it comes with a cost that we no longer wanted to pay.

Yes, we do spend money freely on entertainment and hobbies, and we do plan a nice family vacation each summer. We budget and plan for those things, though. There’s a reasonable cap on that spending and when we hit that cap, that’s the end of it until the next month.

We did it by keeping our eyes on our goals. So, we started living well beneath our income level. Why? We had other goals.

The biggest one was that we wanted to be completely, 100% free of debt. We did not want big monthly debt payments to be steering our lives for the next thirty years. We didn’t want to be making big monthly rent payments, either. We didn’t want the stress of it. We didn’t want our choices to be restricted by it. We didn’t want our children’s choices to be restricted by it, either. So, our goal was to be debt free and to own our home free and clear.

After that, we had a number of dreams – a home in the country, financial independence, international travel – but those were secondary to our big goal of complete debt freedom. Almost everything we did had that central goal in mind. (Now, our main goal is financial independence – a state where we can live off of our savings without having to work.)

Achieving this goal became the center of our focus in many areas of our life. It was certainly our financial center, and our professional goals often lined up with this as well. To a somewhat lesser extent, it shaped our social, spiritual, and intellectual lives, too.

We achieved that first big goal in about five and a half years, all told. We’re now working on the independence goal.

We did it with a plan built around consistent and logical financial choices. Our plan for being free from debt was very logical and clear and it told us what we should be doing at every step.

First, we built up a cash emergency fund equal to about a month’s worth of living expenses. This was to help us ensure that emergencies that life sometimes deals out didn’t interfere with our plans. If our emergency fund was low, refilling it was always the number one priority.

Second, we started paying off our debts, starting with the one with the highest interest rate. We made minimum payments on all of our debts, then we made the biggest extra payment we could on our highest interest debt. Rinse and repeat, month after month. We had a lot of fun tracking that progress and watching our debts melt away.

When we bought a home, that mortgage went into the debt pile at the bottom of the list because the interest rate was pretty low. We rather quickly reached a point where we were making triple (or even bigger) house payments. Within four and a half years of getting that mortgage, it was fully paid off.

Now, we’re saving for financial independence. We’re fully funding our Roth IRAs each year. Sarah is stocking up in her work 403(b) plan. We have a healthy amount of money in a taxable investment account because we usually save more than we can stow away in retirement accounts. We also have well-funded 529 plans for our children.

It all comes back to the plan. We’re never unclear on what our immediate financial tasks are. It’s never in doubt what we should be doing with our money and, in fact, we automate a lot of it, with contributions going automatically into the accounts where we want them.

We did it together. All along the way, Sarah and I did it together. We have been on the same page with every one of our financial goals. We’ve been on the same page with every step on the path. If anything, Sarah is more frugal than I am and more adamant about our goals than I am and more celebratory and joyful about our efforts than I am, believe it or not.

Our accounts have both of our names on them. Our possessions have both of our names on them. We’ve both made tons of choices over the last several years to help bring us to this point. Our choices aren’t just about what would make us happy right at this moment, but what would bring the most lasting joy and pleasure to our family over time, while avoiding any addition of stress.

The thing is, we do all of this without being “rich.” We’re not rich in the least. We earn a little bit more than the average American household, but not astoundingly so, and we’re still well within being able to contribute to Roth IRAs and the like. We have three children at home with all of the expenses that entails. We’re not high income couple with no children – we’re about as “normal” as an American family gets.

You don’t have to be “rich” to find financial success, period. You just have to have priorities in your choices. If you prioritize spending your money on name brands without having even considered the store brands, if you prioritize constant “treats” for yourself that are forgotten within a day, if you prioritize eating out regularly (yep, even if it’s fast food), if you engage in regular “retail therapy,” then it is your choices that are keeping you from financial success, period.

Financial success doesn’t just work for “other people.” Financial success works for most Americans (not all, but most) provided they make the choice to try to make it work.

Good luck.

The post “Financial Success Only Works for Other People” appeared first on The Simple Dollar.

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Tuesday, April 24, 2018

Ten Tips for Maximizing the Value of Eating Out

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A few things worth noting:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Good luck!

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10 Things You Won’t Find on a Credit Report

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

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

Credit Scores (Yes, Really)

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

Deposit Account Balances

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

Salary Information

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

Employment Status

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

Your Spouse’s Credit History

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

Interest Rates

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

Most of Your Utility Accounts

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

Criminal Records

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

Nontraditional or Private Loans

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

Outdated Negative Information

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

Related Articles: 

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

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Monday, April 23, 2018

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

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

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

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

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

On with the questions for this week!

Q1: Paying off house early

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

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

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

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

Q2: Difficult refinance

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

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

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

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

Q3: Am I financially independent?

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

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

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

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

Q4: Preparing for a layoff

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

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

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

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

Q5: Applying for a joint loan

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

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

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

Good luck!

Q6: First lien position HELOC question

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

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

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

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

Q7: Saving on home photo printing

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

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

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

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

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

Q8: Light bulbs and rentals

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

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

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

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

Q9: Structure in retirement

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

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

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

– Tammy

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

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

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

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

Q10: Unrealistic stories

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

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

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

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

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

Q11: Camping on the cheap

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

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

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

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

Q12: Confusing Meetup experience

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

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

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

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

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

The post Questions About Refinancing, Photo Printing, Camping, Light Bulbs, and More! appeared first on The Simple Dollar.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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The post The DIY Dilemma: Knowing When It’s Time to Call in the Pros appeared first on The Simple Dollar.

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