Friday, December 28, 2012
There are two schools of thought when it comes to financial independence.
One advocates increasing income, and argues that saving is pointless without income, and extreme frugality is no way to live. They advocate attaining financial independence through drastically increasing your income.
The other side says that while increasing income is good, it is not always possible, especially in this economy, and that no matter what your income FI can be attained by spending significantly less than you make.
So which is correct? is one tactic better than the other? Well, if you have read my first post, The Money Monk Method, then you know I think you can do both. It is a false dilemma for anyone to assume you have to choose one or the other. In fact, I think you would be a total moron to NOT actively utilize BOTH techniques, because there are benefits and limitations to each.
Increasing income is a super powerful tool for financial independence. In fact, income is the cornerstone of the entire plan. You HAVE to have an income of some sort to be able to save anything, no matter how low your expenditures are. So income can't be ignored. And adding income allows you to increase your savings even without changing your spending habits. Additionally, frugality has a floor (You can't spend less than 0, you are always going to be spending something) while income has no upper limit. No matter what you are making there is always technically the possibility to make more.
The limitation in increasing income is that, while it is always technically possible, it is not always practically possible, at least not for everyone. You don't just 'decide' to start making more money. It usually takes a lot of work, and there is often risk involved. People who are already low income may not be able to afford to risk much of anything. Other people just simply won't have the physical ability or knowledge necessary to make income increases happen in any significant way. The "increase your income' cheerleaders try to sell this idea that if anybody gets fired up enough about making money you can be rich, but that just isn't always the case, so you can't rely completely on trying to increase income if you really want FI.
Frugality has one thing going for it. ANYBODY can use it to gain FI. Almost no matter what you make, you can spend less. It won't be fun, but it can be done. And the thing about spending less than you make is that you will eventually gain FI. Guaranteed. How much you save will drastically affect how long it takes you to get there, but spending less than you make WILL work. EVERY TIME.
The downsides are that it can be very hard if you don't make very much. For some income levels it would require things like living in a van.
This is why I recommend using BOTH methods to maximize your opportunity to reach FI. But don't let people talk you out of being frugal, it is totally necessary, at least until AFTER you manage to drastically increase your income. And you should be aggressively working to make that happen. but until it does, do what you know works - spend less than you make!
-The Money Monk
Thursday, December 20, 2012
Such a small percentage of the population is actively pursuing financial independence that it is unlikely that very many of your friends, family and co-workers are pursuing the same goals as you. So most of the time you are going to be surrounded by people who's behaviors and attitudes about money completely destroy any chance of financial independence or retiring early (or at all!).
Because of this it can be hard to maintain the frugal lifestyle that is necessary when everybody around you is spending money hand over fist and seem to be enjoying life just fine. So it becomes important to find a way to interact with others who are on the same mission, otherwise it can feel like its always you against the world.
One of the best ways to do this is online. There are a lot of great blogs and websites about financial independence, and a couple even have forums. Seeing how much progress other people are making on their quest for FI can give you a good kind of competitive fire. It's almost like a 'keeping up with the Joneses' attitude, except that THESE Joneses are worth keeping up with.
Skipping a month of saving may not seem like a big deal, until you find out that during that same month Dividend Mantra added $3,000 to his 'freedom fund'. You may feel like you are suffering by driving an old ugly car, until you read on the MMM Forums about the guy who bikes 15 miles to work each way.
It can is especially motivating to be able to see the real time progress of these people as they attain their dreams.
I started following "Mortgagefreeby30" A couple years ago, and was along for the ride the entire time he paid off $86k mortgage in about 2 years. He is now truly mortgage free by 30! What freedom!
I have been following dividend mantra for about the same time, and have seen his 'Freedom Fund" grow about 30k in a single year! I have no doubts he will reach his goal of FI by 40 years of age.
Find somebody that deserves to be imitated. If you can't find them in everday life, find them online. They are out there. Get inspired.
If you're constantly having to go against the flow, maybe you need to find a different river to swim in!
- The Money Monk
Monday, December 17, 2012
We are headed into full-on winter weather for most parts of the country, so it is worth mentioning ways to save money on one of the biggest energy expenses in the modern home: Climate Control. In this case, heating.
I am not super strict when it comes to electricity use, but most of these are fairly easily implemented tips, and can still add up to some serious savings.
It takes a lot of energy to do this, which also means it takes a lot of money. But there are plenty of ways you can save money on your heating this winter. Some are drastic, some not so much.
1. Wear more clothes!
Living it Florida we normally have the opposite problem (its too hot) and in college before starting on a mission of frugality I liked to keep the AC cranked ridiculously low. Lower than would even be comfortable for me now that I have allowed myself to actually acclimate to the weather. One of my roommates preferred it cool as well. But we had another roommate who was always complaining about it being too cold, but he was always walking around with no shirt on. Seems like a simple solution, right?
Well that can work for you too. No reason to be walking around your house in shorts and a tshirt and then paying to heat your house. Put on pants, socks or slippers, and at least a long sleeve shirt or sweater. Then even if you do still have to heat your house, you don't have to heat it as much to be comfortable.
2. Use waste heat in your favor.
There are a lot of things that you do normally that can generate some heat, like using your oven or clothes dryer(assuming you don't hang dry). Use them whenever it is coldest and they will be serving double duty.
3. Use small one-room heaters.
If it is just a little bit colder than you can stand, try using a space heater to heat just the room you are using. It will use a LOT less power than central heating, and most of them are surprisingly effective.
4. Don't heat rooms you aren't using!
If you have to use your central heating, don't waste it on heating rooms you aren't using. Close the vents in rooms you aren't using to have all the hot air directed into the few you are actually in most of the time. Keep the doors closed, too.
5. Don't heat when you are gone!
If you have a programmable thermostat, make use of it, or at least be diligent about turning off your heater when you leave for work or anywhere else. There is no reason to waste money heating your house when you aren't even there.
These tips may not cut your power bill down to nothing, but they will at least keep you from drastically over-paying. Post any tips you have in the comments.
-The Money Monk
Saturday, December 15, 2012
As I mentioned a couple posts ago, I was inconsistent with accomplishing my goals for last year. I was able to increase my semi-passive income from online ventures WAY more than I thought possible, but I fell drastically short of my long term savings rate. The savings rate issue was a result of leaving full-time employment to start my business, so hopefully that will pay off financially. It has already paid off in a lot of other ways, and I get a lot of satisfaction from being my own boss.
So my goals for 2013 will mostly be in regards to these same issues:
1. Continue to build my business so that I have the option of hiring somebody else. This doesn't mean that I necessarily would, but want to get the business to the point that I could hire somebody to run the counter on a daily basis and still have enough profits left over to live on. This is currently not the case, but the business isn't even 6 months old yet, so I don't think that's really a bad sign.
My plans for doing this are more marketing, opening several more channels for moving my merchandise other than just my store, and some of that is already in the works.
2. Increase my online income to $2000 a month.
This may seem like a lot, and it is. It is ambitious, but I think it is definitely possible. I got it from roughly $100 a month to $800 in about 8 months, so it is entirely possible to increase it another 100%. I plan on doing this by increasing the effort on my existing online sources of income, and I am about to start a couple more that I am optimistic about. I am also considering writing an ebook or something along those lines.
Those are really my only specific goals for the year, and If I can accomplish even one of those, I will truly be living the dream. If I manage to accomplish BOTH, then I am basically FI!
-The Money Monk
Friday, December 14, 2012
If you are interested in financial independence you have certainly considered different ways to supplement your income to achieve your goals as soon as possible. You've probably come across various articles about 'picking', storage unit auctions, estate sales, garage sales, and other sources where you can buy stuff to resell.
However, if you have very little extra money, it can be difficult or impossible to spend it speculating by buying stuff to resell. If you have no experience reselling it can be especially problematic, as you don't necessarily know what is a good buy, so it is a lot more risky to spend money hoping to resell.
The first thing you need to do is start doing some research so you have an idea of what things are worth, what they sell for, etc. I will be doing a post on this in the future, but suffice to say one of the best ways is to watch youtube videos of resellers.
The next step is to get some stuff to sell! And I have several ways you can do that without spending any money!
1. Constantly check the free section on Craigslist. In the past I have managed to make about 100 to 300 bucks a month exclusively from the craigslist free section. Mostly on small pieces of furniture, etc. I would pickup the free stuff and then list it right back on craigslist! It doesn't get much easier than that.
2. Garage Sale leftovers
I recently did a video on this tactic, so check it out:
<iframe width="560" height="315" src="http://www.youtube.com/embed/tkg6gqCbofU" frameborder="0" allowfullscreen></iframe>
3. Put the word out!
You will be amazed at how much free stuff you will get from people you know once they hear you are a re-seller. Most of it they just give you instead of throwing away or paying to get hauled off. Just make it known that you are willing to pick stuff up.
These techniques allow you to get stuff to sell with NO RISK! if it doesn't work out all you are out is a little time. Worst case scenario you donate it to goodwill and get a tax deduction!
All the free stuff you get can be sold on ebay, craigslist, or at a garage sale. See my post on how to have a kick-ass garage sale!
-The Money Monk
Tuesday, December 11, 2012
Most personal expenses can be categorized as either a fixed cost, or a variable cost. Fixed being something that is the same every month, like rent, and variable being something that changes like gas, food, electricity.
Those of us who are trying to attain financial independence are always tracking costs and expenses and attempting to lower them as much as possible.
Most of the frugality is usually focused on the variable costs because your behavior and spending habits can vary those costs greatly, so they are usually the easiest to dramatically lower.
The fixed costs however, are usually what make up the majority of your monthly expenses, so it is super helpful if you can lower these at all. But many savers almost completely ignore these, assuming that fixed costs are stuck at that level. But this isn't always true, and a lot of times there are things you can do to lower your fixed costs, so never assume they are off the table. Even bills with contracts can be adjusted many times with very little effort.
I'll cover a few of these fixed costs and some things you can do to change them.
- Mortgages and rents.
Many people bought their houses or signed their leases before getting serious about their financial independence, and so they have loans or leases that they wouldn't get if they had to do it all over again.
For rent, ask your landlord about their policy for breaking the lease. Most of the time there is at least some option for getting out, even if it involves paying some fees. But if you can move to a place that is a lot cheaper, you may be able to make up the difference in only a couple months. Especially if the new place will help you save money in areas other than rent as well, such as less gas by being closer to your work, less electricity, whatever.
If you can't break the lease, see if subletting is an option. You get a new place and rent your current place to somebody else. Maybe even for more than you are paying!
With mortgages, refinancing is always something to look into, especially with today's historically low interest rates. Also consider selling if the place you are in is really too much. Or even renting out your house and then renting a much cheaper location for yourself.
The fixed cost of a mortgage also includes the interest you end up paying, so one counter-intuitive way to lower your spending is to pay more. Just an extra $100 extra a month toward my mortgage is going to take 8 years and over $30,000 of my total payments. Just remember to budget properly for the extra payment.
- Debts and loans
You should be trying to aggressively pay off any debts anyway, but take the time to see if consolidation is an option. Only do it if you can lower your total amount paid though. Don't fall for tricks that lower your monthly payment but increase your total obligation by spreading the term out.
It is also possible to save some interest by transferring balances to a card that has a year of 0% interest so it is not getting any bigger. You must be careful with this method though and make sure you can pay it off completely before the year is up, or else you get slammed with the interest for the whole year. Be sure to do the math and read the fine print before messing with this type of thing, but it can be done.
You should occasionally be getting quotes from other companies and comparing. Never assume you are getting the best possible deal. Even if you don't want to switch companies, you can use the fact that a better deal is out there as leverage, and try to negotiate a better deal with your company. It can't hurt to try.
For car insurance ask about good driver discounts or loyalty programs, or reduce your annual predicted mileage. For any type of insurance you should raise deductibles to the highest amounts feasible for your situation.
You better be joking
If you have any tips for reducing so-called fixed costs, post them in the comments.
-The Money Monk
Thursday, December 6, 2012
It's been several months since I posted here, and I aim to get back on track. There are a couple reasons for my absence, the main one being that I started my own business, a thrift store. I had been a re-seller for a long time on the side, and decided to make it a full-time venture.
The bad part is that I haven't been able to increase my savings at all, as I had to spend the money to start the business. So now the goal is just to get the business to the point where I am actually making enough money to be able to save 50% or more once again.
The benefits of working for myself are almost endless. I always knew I would never truly be happy as long as I was working for somebody else, so I am super happy to be able to make the move to self-employment while I am still relatively young. The freedom of not having a boss is something that you have to experience to believe. There is definite stress worrying about whether I will be able to make this work long term, but I am hopefully optimistic.
My last post on my goals for 2012 outlined 2 goals:
1. Maintain 50% savings rate
2. Increase internet income to $250 a month
I haven't been able to maintain the first goal at all, because of leaving employment to start my business. So there were a few months where I didn't have any income at all, AND I was having to pay to start the business. But hopefully long term this investment will pay off.
The good news is that as much as I under-performed on the first goal, I Over-performed on the second. My income from my various online ventures has exploded this year, and I am currently averaging about $800 a month in online revenue from my various ventures, with my highest month just clearing $1000. This is a monumental development, because it brings the possibility for pseudo-retirement / financial independence that much closer. It is a relatively passive source of income, so if I can get it to more than I am spending, I would consider myself financially independent! FI has never felt so close!
- The Money Monk
Wednesday, April 4, 2012
Spend even a couple minutes reading personal finance books or blogs and you will come across a ton of mentions of 'investments' of all shapes and sizes, and hear all sorts of purchases and activities referred to as investments. So what is an investment, really? And what makes a good investment?
The dictionary definition of invest is:
to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value
So a stock can be an investment. Or a rental property. Even buying artwork or antiques counts as an investment. The problem with today's standard financial advice is to invest almost entirely in the category of "appreciation in value" , as opposed to something that actually produces regular income. I have never understood why I would want to own part of a company and not get a share of the profits. Which is what most stock ownership is like today. The buyers are literally only buying because they think (hope) that somebody else will buy that share from them later at a higher price. But they get nothing in the meantime. That is why Dividend investing is much more appealing to me, as is rental properties, and other investments that produce actual income.
I am just getting started learning the ins and outs of dividend investing, so if you want more info on the subject check out Dividend Mantra, he's got some great info on the subject and always posts the changes to his personal portfolio.
- The Money Monk
Sunday, April 1, 2012
Some people seem to find joy in the mere act of being frugal. For most of us however, it is a means to an end, and any joy we get out of it is because we know we working towards our specific goals. This isn't to say frugality is painful, just that frugality isn't the goal in and of itself.
So there is always a trade-off with savings vs quality of life, and I have written before that my personal strategy is to save in the areas you don't care as much about so you can spend on the things that really matter to you and that make a difference in your daily quality of life.
An important concept to think about when trying to determine the optimal balance of frugality/quality of life is the concept of diminishing marginal utility. This is a term from economics, where 'utility' is usually used to simply mean the enjoyment or usefulness you get from an item
Diminishing marginal utility is the idea that the enjoyment you get from something is less for each additional unit of whatever that thing is.
An example that is often used is pizza. If you are hungry, a piece of pizza may be just awesome. A second piece of pizza will be great too, but not quite as good as that first piece. A third piece will be ok, but now you are starting to get full and don't really feel like pizza anymore, so the enjoyment from that additional piece is not that much. by the time you eat 5 or 6 pieces you probably won't enjoy it at all.
This concept works with money too. If you are making $0 a month, $500 will make a huge difference. If you are making 10,000 a month, you might not even notice an extra $500.
With almost every area of spending you will find that there is a sweet spot where a little bit more spending make a lot of difference in your quality of life. You may really have to suffer to keep your electric bill at $50, but have an easy time keeping it at $75.
SO try to find that sweet spot where you have to consciously control your spending, but where you aren't finding it mentally difficult to do so. If you do this for every category of spending it will automatically maximize your savings vs quality of life. And that will make the your life of frugality a LOT easier.
-The Money Monk
Tuesday, March 27, 2012
One of the ways I make extra money is to buy the contents of storage units at auctions and resell for a profit, usually via eBay, Craigslist, and garage sales.
After doing this several times I have picked up on a couple tips that will make your life a lot easier and limit the hassle involved. For this installment of storage auction tips, I'm going to list several things I recommend bringing with you to make the process easier.
1. Flashlight - Please don't bring a huge pistol-grip floodlight so you can look like the people in 'Storage Wars' You just don't need it. This is the equivalent of wearing sunglasses at a casual home poker game; it just makes you look like a douchebag. The vast majority of the time you can see what is in the unit just fine without using any kind of light at all, but sometimes it is helpful. It that case, any modern LED flashlight with decent output is fine. There is no reason it should be too big to fit in your pocket.
2. Padlocks - If you are lucky enough to win 1 or more units, you usually do not start immediately emptying it. You may have a couple more to auction off, or whatever. It is a good idea to have your own lock to put on there. Many times the facility will put theirs on there for you, but its easier and safest for you to use your own. Doesn't hurt to have a couple extra in your car.
3. Totes and boxes and garbage bags- Don't take it for granted that the items in the units will be bagged or boxed, as many times (maybe even MOST times) there is a lot of loose stuff. If you don't have boxes or containers to put it in you will waste a lot of time and spend a lot of energy moving every little item individually. And there will be trash. Sometimes LOTS of trash so make sure you have a few rolls of garbage bags handy.
4. Push Broom and dustpan - Speaking of trash, it is your responsibility to clean the units you purchase. Make this job easy on yourself by bringing a broom and dustpan.
5. Gloves - I recommend leather work gloves AND latex gloves. Work gloves for moving big stuff, and the rubber gloves for sorting through bags of random stuff or dirty clothes or whatever.
6. Water - It can get hot in those units while emptying them out. Stay hydrated.
You may be able to come up with more things once you attend some, but these are some basic items you probably want to have with you.
-The Money Monk
Sunday, March 18, 2012
As I have mentioned before, one of the ways I am working to increase my income is by reselling used goods. I get these from a variety of sources, like garage sales, auctions, the trash, whatever. But after doing this for a while one thing that you really start to notice is just how much value these items lose just by being used. I guess I should have said 'price' instead of 'value', and that is sort of my point. Used goods almost always have 100% of the utility or usefulness that they did when they were new, and yet they are significantly cheaper.
Most people sort of understand this on a basic level, but the extent of it isn't going to be clear until you see just how big of a difference there is. And I see it constantly because of my side hustle of reselling used goods. I am shocked almost every time I go into a store, at the prices of stuff. I'll be thinking "Those are HOW much?! I could barely GIVE those away!"
Almost every time the people pay extra for new goods they are doing so for one of 3 reasons:
Laziness, 'icky factor' or ego.
Laziness: People will pay 5.99 for a kitchen utensil that could easily be bought for a quarter at a garage sale or thrift store simply because they just want to buy it now and get it over with. I understand the sentiment, and like i have said before, if it was a one-time thing that extra 5 bucks wouldn't change a whole lot in the long run. But when you are doing that for every purchase, big and small, day in and day out, then the difference is huge. It can be the difference between poverty and financial freedom.
Icky Factor: I suspect this is mostly an ego issue, and wouldn't be a real issue if people were legitimately not worried about other;s opinions (which is the best trait to have). But some people are legitimately grossed out at the idea of using used things, like clothes, utensils, etc. What's stupid is that none of these people would think twice about eating at a restaurant, and using a fork that has been in 10,000 mouths, but they balk at buying a spatula at a garage sale because it has been used by ONE other family. This is just something that you will need to get over if you really want to be able to save big money. The premium for buying stupid plastic crap new is so huge it just doesn't make any sense.
Ego: This is the big one right here. When you learn to get over worrying about appearing cheap or poor or whatever, the journey to financial independence is almost easy. For many people it is the hardest aspect of living frugally, and one that many just simply can't overcome. But you HAVE to if you want success. The best solution I can offer you for this is to surround yourself with like-minded people. If you can't do that in real life, then visit forums like at Mr Money Mustache, or ERE. Then you can worry about trying to impress people with how LITTLE you spend. It's a totally difference mindset, and a much better one if you want to retire early!
So buy used if at all possible! Don't pay the ego premium!
-The Money Monk
Wednesday, March 14, 2012
1. Don't use it!
Don't worry, I'm not suggesting you don't GO to the bathroom, just that you try not to use YOUR bathroom. If you can, try to go at work, if you are still employed, or at the store. I know some people have hang-ups about using public bathrooms, but it saves, water, electricity, Toilet paper, soap/hand sanitizer, etc.
2. Use less 'product'
Most people use WAY too much bathroom products every time. Even the instructions on toothpaste says to use a pea-sized amount. I know the commercials show a huge dollop on the brush, but guess what? They get money when you have to go buy more, so they want to trick you into using it faster! The same goes for shampoo and stuff. many say to use a dime-sized amount. I recently read a thread at the MMM forums extolling the benefits of not using ANY soap or shampoo. Testimonials abounded of how, after an adjustment period, skin and hair was cleaner and healthier than ever.
While that may be a bit much for you, everyone not already concentrating on lowering their use of bathroom products should be able to easily cut their usage in half.
3. Try cold water
Water heaters are one of the biggest energy users in the modern home. If it isn't cold outside, try using cold water. Here in Florida a cold shower can actually be downright refreshing in the summer. Take a cold shower in the middle of the day instead of a hot shower in the morning.
This goes for hand washing and shaving too. You really don't need hot water to wash your hands, and you can try to forgo it with shaving as well.
4. Go in the backyard instead
Ever hear of a compost pile? Ok, I'm joking about this one. Please don't shit in your backyard.
What are your tips for saving money in the bathroom?
-The Money Monk
Wednesday, March 7, 2012
At one point during college I took a basic psychology class, and during one of the rare moments that I was actually awake, the teacher explained the term 'functional fixedness'. This is simply when a person is unable to envision a use for something beyond what it was expressly designed to do. Because of this people end up buying all sorts of stuff that basically doesn't accomplish anything that they can't already do with the things they have. The result is more money spent on useless crap which fills your house and separates you from financial independence.
The example the professor gave is somebody needing to tighten a flathead screw, and spending half an hour looking for a screwdriver, when they could have used any number of things to tighten the screw; a penny, a butter knife, other tools like a putty knife/chisel, an old credit card maybe, etc.
Now I recommend having a decent set of tools, but you get the point. How much money is unnecessarily spent to accomplish things that you can do with the items you already have?
Another example of this principle is when people buy things that are needlessly specific in their use Or feel like they have to use it for what it is labeled and nothing else. For instance, next time you are in the store, check the prices on antibacterial hand soap for washing your hands. Now check the prices of antibacterial dish soap. Hmmm. Who says you can't use dish soap to wash your hands?
This can be applied to any number of things. Why buy a dedicated potholder? all it is is a mitten, or many times even a square piece of cloth. Just use a small towel, washcloth, even a sock. Why buy a letter opener when you can use ANYTHING else. Do you really need a special scoop for your dog food, or can you use an empty vegetable can?
Each one of these examples may only represent a small savings, but consider that most people, instead of improvising, make purchases in these situations, day after day for their entire lives. That adds up to some serious coin.
-The Money Monk
Wednesday, February 29, 2012
Well here it is, all my dirty laundry laid bare for all to see. This month was slightly atypical for a couple reasons, which I will get into later. But without further ado, here is the month's spending:
FEBRUARY 2012 SPENDING:
- 80 electricity, gas, water
- 30 internet
Phone: 90 (phone + text + data)
- Groceries: 150.8
- Restaurants: 69.4
Crossfit Gym: 195
- entertainment: 17.00
- projects, home improvement: 19.46
- Totally unnecessary stuff for myself: 74.63 (comics, motorcycle helmet, pants)
- other: 59.79
TOTAL Spending: 1636.8
A couple notes: I am counting expenses as they happen, so that's why you don't see some things like car insurance. I pay less than monthly, so it will show up in the month I pay it. This method will cause more variance for the individual months, but there is less chance for error, it's easier, and after the year is done the total will be the same.
The gifts bill is unusually high due to a Valentines day error. I thought the outrageous price of the nice meal I was buying was for a couple, when that was actually the price for each person. Doubly outrageous! OUCH!
Gas bill is high due to having to travel 280 miles round trip once a month for my National Guard obligation. So it is a recurring cost for now, but not due to my general lifestyle. So that accounts for about 50-60 of the gas bill.
I am obviously unhappy with the gifts bill being so high, but that is definitely atypical so I am not too worried about a repeat of that. Luckily I had some atypical income boosts as well to offset it. Other than that, I want to get my food below $200 next month, and get that Misc down as well.
FEBRUARY 2012 INCOME:
Army Drill pay: 607.88
Birthday Gift Cash: 300
Home Escrow refund: 359.42
Online earnings and junk sales: 161.94
TOTAL INCOME: 3446.71
TOTAL SAVINGS: 1809.91
SAVINGS RATE: 52.5%
Relatives were generous for my birthday, and drill pay was for a day longer than usual this month. To top it off I got a refund of an overpayment into my mortgage escrow account.
Overall I managed a 52.5% savings rate, which is inline with my goal for the year. Which is good, but my earnings were unusually high this month, so even without the high gift bill I will have to cut some spending to stay above a 50% savings rate, or increase income somehow. The obvious big one is my $195 dollar Crossfit gym bill. But it is important to me, so for the time being I am leaving that be. Although it is good to know that if push came to shove I could instantly drop $200 off my monthly spending.
Needless to say I failed miserably on my goal to only eat out twice over the month. I think it was more like 8 or 10 times. Instead I am going to go with a more realistic target of once a week for next month, and an overall food bill of under $200, and Misc under $125.
Well there it is. On to the next month of (semi)frugal living and saving for retirement.
-The Money Monk
Monday, February 27, 2012
When calculating your expenses you have to be careful not to disregard bills and spending that doesn't necessarily happen on a monthly basis. It's easy to write down all the bills that you have to pay every month and say "Ok, I'm spending 1800 a month". But what about expenses that don't happen every month? If you spend $600 every Christmas on gifts for your family, you basically have an extra $50 bill that month. So you can't really maintain your current lifestyle on $1800 a month (you'll also need an extra $12,000 before you retire!).
This is something that I am very bad about. My base monthly expenses are very low, but I have a habit of not thinking about expenses that are recurring but not necessarily every month. That is one of the reasons I have this blog, to keep a running tally of everything I am spending, by month, and later by year. This will give me a much more accurate picture of my spending, saving, and retirement needs.
keeping track of every expense for at least a year is the best way to do this. But even then there are some expenses you should consider. A typical house roof needs to be re-shingled about once every 15 years or so. If that is going to cost $5,000, then you really have an extra $30 a month you should be putting away for a 'roof fund'. This replacement cost can be amortized for other things too, like vehicles, appliances, etc. The costs are infrequent, but they are real and they are guaranteed to hit you at some point. So best be prepared. I personally use a general maintenance fund, and don't save for each of these things individually.
Some various expenses you may want to try to keep track of that happen less than once a month include:
- Car maintenance: oil changes, new tires, repairs.
- Gifts and holiday spending
- Vehicle registration
So remember to keep track of ALL your expenses. It's the only way to make sure nothing slips through the cracks and to get an accurate picture of your income/spending/saving balance. I am not trying to amortize each of these costs into a monthly amount, choosing to instead just keep track of every expense for a year, then get the totals. THEN I can calculate an accurate monthly cost of living, with less chance for error.
My Spending for the month of February will be posted within the next week. Stay tuned.
-The Money Monk
Friday, February 24, 2012
Yesterday Mr Money Mustache had a reader case study that was very interesting. Of particular interest was the fact that while the reader's income was more than his spending by only 100 dollars, he was giving $250 a month in undisclosed charity donations, but luckily had a huge emergency fund of 18,000 in cash.
The debate at the MMM site focused mostly on the merits of holding the emergency fund vs paying down a mortgage or investing, but what got me thinking was the charity giving, which the reader described as 'nonnegotiable'. Based on the percentage, I assumed the charity is tithe to a local church, but I could be mistaken, and for the point of this article, it doesn't really matter. But I had an interesting thought on the matter:
There is no particular reason why the money has to be given in monthly installments. It could be given in a large lump once a year, or in an even larger amount after 5 years. In the meantime, you could forgo having a separate emergency fund and invest that money instead, paying off a mortgage or buying income producing assets. If there was a legitimate emergency, you could borrow against the charity fund at 0% interest, instead of having to use a credit card or HELOC.
This method seems to address many of the issues that come up when trying to balance the issues of still giving to charity, having an emergency that can be accessed quickly, but also not giving up earning interest on your money.
So with this plan the charity, whatever it is, will end up getting the exact same amount of money when all is said and done, and you will have an emergency fund without having to adjust your monthly budget. And 'your' money will still all be earning interest and invested productively.
Something to consider if you make regular charitable contributions.
-The Money Monk
Thursday, February 23, 2012
I mentioned yesterday how the savings rate drastically affects your retirement date, and today we're going to demonstrate just how much each little bill you have can delay your retirement.
Just to clarify, I am using the term 'early retirement' to describe the moment you have enough in investments to live off of the passive income created by those investments. Most people agree that you an safely withdraw 4-5% annually from your portfolio, so that would mean you would need 20 to 25 times your annual expenditure in investments to be able to 'retire'. So far so good.
So obviously the lower your annual expenditures are, the less you will have to have in your "stash" to be able to retire. But how much less? Most Americans think of their expenses in terms of monthly bills, so we'll use that.
Many people have a variety of things that they spend $50 or so dollars a month on each (haircuts, coffees, movies, subscriptions, whatever) and individually they don't seem like much. But in terms of how it affects your retirement date, these expenses are ALL a big deal. Check this out:
A single $50 monthly bill requires you to have an extra $12,000 in your stash to retire. And that's using a 5% withdrawal rate (at 4% its more like $15,000).
So that $50 cell phone bill? $12,000
That $50 cable bill? $12,000 more
$50 in haircuts? $12,000
$250 in food a month? $60,000
You can use this to find out just how much each of your bills will require you to save for retirement. When put that way, it is a lot easier to figure out why you should drop your food bill from $250 a month to $200, or lose the cable, or cut your own hair, etc. I am constantly reminding myself of these facts to motivate me to save. Remember, even those little bills make a big difference!
-The Money Monk
Wednesday, February 22, 2012
If you are interested in early retirement you may be surprised to know a couple things. First of all, it doesn't matter how much you make!
You may be shocked to hear that, but it's true. Literally the only thing that matters is how much you save as a percentage of your earnings. I know I have said this before, but it bears repeating, as nothing else controls when you will be able to retire more than your savings rate.In my opinion the above image is the most powerful message you offer when it comes to early retirement.
You may be saving 50,000 a year, but if you are taking home $250K then it will still take you 37 YEARS to retire and still be able to pay all the same bills!
Or you may only be making 25k a year, but if you save 13K then you can retire in just over 15 years!
So work on getting that savings rate up! You can do it by raising income, or by slashing spending. Or better yet, by doing both! That is what I am doing. My goal for the year is a 50% savings rate for the year as a whole. I have had a bad month as far as spending too much, but it still looks like I will be able to save 50%. I will do a post at the end of the month detailing my spending and income. But for now, just remember, it's all about the savings rate!
-The Money Monk
Tuesday, February 21, 2012
I sell a lot of stuff on Craigslist and eBay, but many items just aren't practical to sell online. Either they are too big, too cheap, items that people wouldn't necessarily be looking for, etc. So once I build up enough of these items, I hold a garage sale.
Things like clothes are very hard to sell individually on Craigslist or eBay, and are really too heavy to sell in bulk lots online, so a garage sale is perfect for these items. Other items that are best saved for yard sales are dishes and housewares, books that are not high demand, trinkets, nick-knacks, etc.
Here are a few tips to make your garage sale run well:
1. Try to have a good location. If you aren't near a major road, try to do it at a friends house. If you are too far out of the way people will just not want to drive all the way out there.
2. Wait until you have enough stuff. If you just have a tiny amount of stuff people simply aren't going to be interested. You will get a lot of 'drive bys' where people follow the signs but then don't bother to even stop once they see your paltry offerings. So just save up until you have enough stuff to at least cover your driveway.
2. Put things on tables, shelves, or racks. You probably won't have enough tables for all your stuff, but find some way to keep it up off the ground. It makes it appear like there is more stuff, and it makes the things appear nicer/more valuable, whatever. Clothes sell much better hung up then in a big pile, so try to rig up something to hang them up on. At the very least put down a blanket or tarp and set the items on that.
3. Mark everything with prices. I have sold many things simply because they see the price and it is much lower than they expected. If the price isn't listed, they are going to pass on things they aren't specifically looking for. But if they see that the books are only .25 for example, they will be tempted to buy them simply because they feel like they are getting a deal, even if they wouldn't have said 10 minutes ago that they wanted any books.
4. Use pricing schemes. There is a reason stores use these tactics; it works. Make things cheaper to buy in groups, buy one get one free, sell things as sets instead of individually. Instead of selling glasses for .50 each, sell the whole set for $5. Sell DVDs 5 for $10 instead of $3 each. Better yet list both prices, for individual items and cheaper to buy in quantity.
5. Make your signs large, white, and exciting. Brown cardboard signs are hard to see, so stick with white or orange or something like that. Don't just put 'yard sale', add terms like "huge' " super cheap' whatever. It works. I wrote 'epic garage sale' on my last sign, and people specifically told me that's why they stopped. Put signs at every location you can. No such thing as too many.
6. Use Craigslist to advertise. Make an ad on Craigslist for your garage sale. They have a 'garage sale' section, so use it. It's free. Make it earlier in the week, like Tuesday or Wednesday, then renew it on Friday afternoon so it shows up as a recent entry Friday night or Saturday morning. You can even make multiple different Craigslist ads for the same sale.
7. Lower the prices as the day goes on. If it hasn't sold in a couple of hours, lower the price. It is better to get $5 than to not get $10. I can't tell you how many people set stuff out there with a price, don't lower it all day, then just throw it away when it is still there at the end of the day. If you were going to throw it away anyway, ANY price is better. Even a quarter. They are literally paying YOU to haul off your trash! So lower your prices!
That should get you started on your way to having awesome, profitable sales. Let me know if you have any tips or tricks for garage sales.
- The Money Monk
Friday, February 17, 2012
One of the great things about living in this day and age is that we don't have to work all day just to make sure we have food to eat. That gives us plenty of time to do fun things, or hobbies, or complain about being bored.
I never really got the people who can't imagine not having a job because they are afraid of being too bored. Don't you have any imagination? I can easily think of 20 things that I would like to be able to do for an hour each day at least. But I guess that's the topic for another article.
But suffice to say we all have hobbies and activities and other things that we do to pass the time. As with everything else the average American does, this usually involves spending a LOT of money.
One of the best things you can do to reach financial independence, and lower your cost of living in general, is to try to engage in hobbies that actually make you money. Or at the very least are cost neutral. The activities don't have to make you a lot of money, just the fact that your time away from work is spent NOT spending money is extremely helpful.
Somebody's book writing hobby may only make them $10 a month from ebook sales, while they are spending 5 hours a week on it. Many people would look at that and say "he's only making .50 an hour, that's not worth it!". The fact of the matter is, this guy got to indulge in an interest of his for 20 hours last month and actually came away with MORE money than he started. So not only did staying busy writing keep him from spending money doing other things, but it actually made him a little too. And there is always the chance that one of these endeavors could take off and actually make a substantial amount of money.
Look for activities you enjoy that fit into one of the following categories:
1. Gives you skills that could be sold or traded (construction, mechanics, art, design, music skills, etc)
2. Allows you to make money (writing, blogging, ebaying/craigslisting,)
3. Basically free hobbies ( Reading, playing music, drawing, etc)
This is one area that I am good at. Most of my activities are either free or actually make money, even if only a little. The difference this can make over a period of years can be huge.
-The Money Monk
Thursday, February 16, 2012
One of the best ways to increase your ability to refrain from spending money is to find some way to measure your dollars against that is meaningful to you. We are constantly bombarded with prices of various things, and hear of billion and trillion dollar figures tossed about flippantly on tv so often that the worth of a single dollar (or even five or ten) can lose its meaning and become sort of abstract.
Finding something real to anchor its value can really help you to see the opportunity cost of your spending and help you save.
I have written before about a number of meals you can make for a dollar or less. I could use that to 'value my money' if i wanted. For example, if I was about to go to the movies for $10, I should stop and think that I would be giving up TEN meals worth of money just to see one movie. That's 3 days worth of food. Is it still worth it?
Personally, I value my money by how many hours of my life it took to get it. Right now I only make about $17 an hour, so a $10 movie would cost me well over half an hour of work, and that is pre-tax!
If you were really into calculations, you could probably calculate how many minutes earlier you could retire for each dollar saved! Now THAT would be some motivation!
How do you value your money?
-The Money Monk
Wednesday, February 15, 2012
Fellow financial-independence seeker Dividend Mantra has a great article about striking the balance between frugality and quality of life. This is something that a lot of people struggle with, especially in the beginning. I think one of the primary reasons people struggle with it is that they try to fit into somebody else's definition of frugal living.
If your goal is financial independence or retirement, there is only one rule that you absolutely have to follow:
Spend less than you make!
Other than that, it's just about how quickly you want to reach your goals and what you are willing to sacrifice to get there. And this will be different for every person. It's important to remember too, that the reason we want to be financially independent is to increase our enjoyment of life. If you are OK with being miserable all the time, then why does it matter if you are financially independent or not?
I have written before that my method is to save on the things that don't matter to me, so I can spend a little on the things that do.
Some people couldn't use 100 cellphone minutes a month if you paid them to, while another person just cannot fathom giving up their daily phone usage. Same goes for eating, car usage, and whatever else you are spending your money on. As long as your expenditures are controlled and part of the plan, it doesn't really matter what they are. So don't get caught up on working super hard and suffering trying to drop your power bill to $50 a month if it is a lot easier for you to shed $50 off your grocery or gas bill.
I am currently spending about 1500 a month on all my living expenses. If you take 100 people who are all spending that much, I guarantee our budgets are all TOTALLY different. And we would probably all be shocked at how much/little somebody else is spending on something we are spending almost nothing/ a fortune.
The key is to focus on eliminating WASTE, not just on eliminating an activity altogether. For example, there are a lot of things you can to do lower your power bill without actually changing your lifestyle at all. Same with pretty much every other category of spending. Obviously you should change your lifestyle in some categories, but you don't have to go extreme in every single one. Even Jacob Fisker of Early Retirement Extreme was spending $1200 of his annual $7000 budget on his martial arts training, because it was important to him.
It's better to have a plan like: I need to save X% of my income every month for X years, then to just try to never spend any money, ever. Not only is the first type of plan more likely to succeed, but your life in the meantime will be a lot more enjoyable as well.
-The Money Monk
Friday, February 10, 2012
I have always been a wilderness survival hobbyist, and have consumed dozens of books on the subject since I was a kid. In one book, I don't even remember which one, was a passage that I have always remembered, and I'm not even sure why. It was in reference to traveling through the wilderness in a survival situation, and doing so in a way to minimize energy spent and lower your risk of injury. The advice was, to paraphrase:
"Don't step on what you can step over, and don't step over what you can walk around."
I was thinking about this today and how the concept of not wasting energy or exposing yourself to unneccesary risk can be applied to your every life in a financial/spending sense. This is what I came up with:
Don't Buy new what you can buy used
Don't buy used what you can get for free
Don't try to get for free what you can improvise of re-purpose
Don't bother improvising what you can do without.
Just as with the wilderness survival example where you will end up walking around almost everything, if you follow this metric to its logical conclusion every time you go to buy something, you will almost always just end up realizing that you do not NEED whatever it is. In the occasional times that there is a legit need, following this metric will at least allow you to accomplish that need in the most frugal and cost effective way possible.
-The Money Monk
Thursday, February 9, 2012
I've mentioned several times before that part of my plan to reach financial independence is to increase my income through online ventures. This includes blogging, videos, and whatever else I can come up with to do online.
A lot of people have tried this before though, and most don't end up making any money. Not any serious money anyway. It's easy to throw ads on your blog and start making money. Anybody can do that. Living off the income from a blog is a different story.
There is really only one major difference between the guys that are making 50 cents a month, and the guys that are making 5 grand a month: Traffic.
Traffic is what drives everything online. If you have a lot of traffic you WILL make money online, regardless of how shitty your site is. If you don't have traffic, you won't get money, even if your blog is totally awesome. Traffic trumps all when it comes to making money online. You want more money, get more traffic.
And most people understand this to some extent. The problem is, it's like a recipe for elephant soup (step 1. Find an elephant) you know what you need, you just don't know how to get it.
Sometimes people's blogs will go viral, or get picked up by a big news site, or any number of other things that will gift you with a bunch of views and a nice jump start, but you can't count on that. Luckily the most guaranteed way to increase your traffic is something that anybody can do:
UPDATE YOUR SITE!
Seriously, it seems like it goes without saying, but it doesn't. Plenty of people have great ideas for websites, blogs, or videos, but they just DO NOT make enough content. And that will KILL your traffic, especially in the beginning. Once you are at super high levels your traffic can be somewhat self-sustaining (Maddox may only make a post once every 6 months and still get millions of views) but that isn't going to work for you. He has already built up a huge viewer base with links to his site all over the internet.
The bottom line is, if you are producing a content based website you have to update your site at a MINIMUM twice a week. When you are getting started it should be more like every day. Slightly less is necessary for videos, while blog posts should be on the higher end. Multiple times a day is even better.
The way the internet works helps your traffic snowball, and the more content you have, the better. Also, a lot of traffic will be based on repeat viewers. So give them a reason to come back. Even if they LOVED your last article, if they know you only put out content once a month, they aren't going to check back in that often.
Each article, blog, or video you do will get picked up by slightly different search terms, and different people, and has its own chances of getting linked, etc. That's what makes the traffic snowball. Each of your articles may only get one person to come back and check in next month. But if you have 100 articles, then your article next month will get 100 views. So maybe that article gets 5 or 10 people to come back. So then next months 30 articles get a total of 150 to 300 people stopping by regularly. So you can see how it builds. And by simply having more content you are increasing the chances that eventually SOMETHING of yours will get mentioned by another big site or blog and give you a decent chunk of traffic.
This blog is only 2 months old, and it's traffic has already surpassed another blog of mine that I just do for fun when I feel like it. But that blog has been around for 7 years!
If you have a content-based site, you are expecting people to show up for that content. So give them what they want! UPDATE YOUR SITES!!
-The Money Monk
Wednesday, February 8, 2012
I wrote a while back about some of my longer term goals, but today I am going to list a couple of specific benchmarks I am trying to reach by the end of 2012.
- Average at least a 50% savings rate for the year
- Increase my income from online ventures to $250 a month. I am currently at about $100 from all sources combined. (this isn't including eBay or Craigslist sales).
In addition to these I will continue to create new mini-goals each and every month, as I have been doing.
Financial independence, here we come!
-The Money Monk
I have seen some forum posts and articles among the early retirement community about the proper terminology to use, and what most accurately describes our goals and situations.
Here's how I see it:
Early Retirement: I consider retirement to be receiving most of your income from investments, and your current spending level is not dependent on any extra income other than your investments. This is not to say that you don't do anything to earn any extra money, just that you don't have to.
Financial Independence: You have enough in income from various sources that you no longer are enslaved by what would be called a day job, but you are predominantly living off income still, not savings. But that income may be adsense blog revenue, ebook sales, rental income, online videos, ebay sales, etc. So you are still living off income from 'work' but the sources are varied and are not typical jobs.
So while my long term goal is to be independent of all income sources other than that generated by savings, my current goal is to simultaneously develop alternate streams of income. And I'm well on my way. Keep reading to follow the journey.
- The Money Monk
Tuesday, February 7, 2012
I just submitted the paperwork to get my homestead exemption from my property taxes! I wasn't eligible until i was a resident on the property as of Jan 1st. So since I moved in back in July I had to pay full taxes, even though it was my primary residence.
The specifics vary by state, but in most states you can get a property tax deduction of some kind for your primary residence. Usually this is in the form of a deduction off the assessed value of your house. And this is definitely something you should take advantage of. I am ALL about saving money, especially when i'm saving it from going to the government!
Here in my county in Florida, property taxes are pretty high, so for my $110,000 house the taxes were still around $200 a month (ugh). However the homestead exemption removes $50,000 from the value before the taxes are assessed, so from now on they will be just over 100 bucks a month. So my savings will be about $1000 a year! Booyah
That is going straight to the stash for early retirement.
Always check and see what kind of deductions are available for you, as some of them can be substantial.
-The Money Monk
Monday, February 6, 2012
As I have mentioned before, the quest for financial independence involves not only decreasing spending, but also increasing income. This allows you to reach your goals quicker than by just focusing on frugality.
One way I personally work to get extra income is to sell things on eBay and Craigslist. If you are familiar with eBay you know you can set up a 'store' where shoppers can see the other items you have for sale. Craigslist doesn't have an option like this, so the people seeing your items will only see what they search for, and won't know about any of the other things you are selling. I usually have multiple items listed at once, so it is helpful to have the buyers be able to see everything I have for sale. They might see something they are interested in, but wouldn't have thought to search for.
The way I have been doing this is to take advantage of the free website/hosting that is now available, and to make a simple blog. I post all the items I have for sale there, and post a link to the blog in every Craigslist posting I make. I also went ahead and put adsense on the blog because, well why not. It gets me a buck or two extra a month. Everything helps.
So make your own blog or website to increase your sales of Craigslist. It has definitely improved my sales performance. You can also have links to any other websites or videos or products you sell, and get increased traffic that way. So there is really no reason not to create a free blog listing the items you have for sale.
-The Money Monk
Thursday, February 2, 2012
If you are on a quest for early retirement like I am, you will consistently come across plenty of resistance to the idea. I'm not sure what problem people have with others taking their own path in life, but the strength of the resistance you will receive can be startling if you aren't ready for it.
It may be because you expose their consumerist lives as the pointless slave existence that it truly is, and they aren't ready for the red pill. Or it could be that they really really would love to be able to retire early too, but aren't willing to accept that it is their personal choices and lifestyle that makes the difference, so they would rather pretend it is out of their control. Similar to how a lot of out of shape people insist they simply 'can't' lose weight, even when their behavior and lifestyle is the polar opposite of the in-shape people.
The Early Retirement Extreme Forums had a thread a while back where some members listed many of the arguments they had heard against early retirement. I am going to give brief rebuttals against these arguments.
Not really so you can argue with the sheeple, but more so that you have internal answers and your mental frame isn't shaken. Of course if you are a glutton for punishment or simply enjoy stripping bare the lack of purpose in your colleagues' lives, go for it.
Before I give you the list of common objections to early retirement, realize that most of them can be refuted with one simple core argument: Everybody plans and expects to retire at some point, and spend the rest of their days living off of income generated by work that was done earlier in their lives. Whether this is at age 65 living off a retirement fund and social security, or at age 30 after saving 85% of your earnings for 5 years is irrelevant. Any delineation between the two would be arbitrary. Any argument that could be used against retiring at 30 could just as logically be used against retiring at 65, or ever. So realize that many of these objections are defeated by that simple argument already, and will need no further rebuttal.
Here is the list of common objections to early retirement as offered by members of the ERE forum (my responses are in red):
1) Once you cover your own expenses, you are morally obligated to continue producing to help other people who are less productive. You are lucky and privileged to be productive, and you shouldn't forget this.
First of all, refer to prime argument. Second, almost nobody in America has a 'productive' job in the real sense anyway, so it is actually MORE productive for the economy to invest your money in real assets and businesses than to just buy stupid plastic shit from china that is headed straight for the landfill.
2) Raising kids on a frugal budget is selfish because it denies them important things that cost a lot of money.
All relative. Even most normal sheeple don't spend EVERY penny that they possibly can on their kids. So are they being selfish because they are spending less on their kids than other parents are? Any spending level below which was 'child abuse' would be totally arbitrarily set.
3) Wouldn't it take like 50-100 million dollars in assets to actually live off your investments?!
You can retire when you can live off 4% of your stash. Whether you do that by having a bigger stash, or being able to live off less doesn't matter. Both work.
4) If you realy believed this was the right way to live, shouldn't you be trying to convince everyone else to live like this too?
It's a personal life choice, it isn't necessarily about right or wrong. I may think it's stupid to waste all your money and work for 50 years to earn more, even when you have no time to use all the shit you buy. But that doesn't mean it's sinful, it's just not how I am choosing to live my life.
5) That's just plain lazy.
again, see prime argument. Nobody is at maximum capacity. People will only ever accuse you of being lazy if you are doing less of something than them. And even though there will always be people doing more than them, they will never call themselves lazy. It is no more lazy to retire at 30 instead of 65 than it is to go home after 8 hours at work when technically you could have worked 10 or 12.
6) You say you want to be free of money as an influence on your actions, but now you're spending *more* time concerned about money, not less.
I am not attempting to live without money. Just to have more freedom in my daily life and not be bound to one income source that dictates exactly how I spend my time day in and day out. It really has never been about being free from the influence of money completely.
7) The desire not to work for money is indicative of a short-sighted need for immediate gratification. (I found this one particularly baffling)
Yes, baffling, since early retirement requires constant DELAYING of gratification to be able to save and live frugally.
8) Working is the only way to derive meaning in life. Life without work is pointless.
I pity the fool.
9) If everybody stopped working it would be the end of the world as we know it (you got that right!), therefore you can't stop working.
If my aunt had testicles she would be my uncle. What's your point? Nonsensical 'what-ifs' Argument.
I pity the fool.
9) If everybody stopped working it would be the end of the world as we know it (you got that right!), therefore you can't stop working.
If my aunt had testicles she would be my uncle. What's your point? Nonsensical 'what-ifs' Argument.
-The Money Monk
Wednesday, February 1, 2012
In the last round I stopped buying plastic cups/utensils and paper plates, and drastically cut back on my purchase of UFC pay per views. So far I have kept with these resolutions, having not bought any PPVs or utensils/plates.
Now on to round 2. I have a couple more adjustments I am going to make for the month of February, and of course continuing with the previous cuts.
1. Eat out no more than 2 times the entire month. This includes fast food, anything.
2. Spend $50 less on groceries. I have been eating very clean lately, but I spent too much last month. Fresh fruits and veggies are expensive, so I am going to stick with the cheaper versions and spend at elast $50 less this month on groceries.
3. Switch to biweekly mortgage payments: I haven't finished researching the refinance yet, which is a carryover from last month. But regardless I am going to switch to biweekly payments. Every 2 weeks, not necessarily twice a month. That will add a 13th payment every year. Depending on how the interest is calculated, it could save on that too, with or without the extra payment.
That's all for now. It may not seem like much all at once, but if I can do 2 or 3 things like this every month and keep them up, that will snowball into a significant monthly savings by the end of a year or two. And it won't be as much of a shock as trying to enact all these 'austerity measures' all at once.
-The Money Monk
Tuesday, January 31, 2012
I have a glorious history of acquiring things cheaply and then selling them for a profit. I have sold everything from furniture and electronics to algae (yes, algae). I have gotten stuff from every source imaginable, including dumpsters and things in people's front yards that may or may not have been meant for the trash. One thing I had never done though is buy a storage unit. Mainly because I didn't have anywhere to store the stuff, and they always tend to have the auctions during weekdays when I am at work.
I had the opportunity to go to one lately though, as it lined up with some days I had off work.
I went with a friend and we planned to split the cost and the profits. We went to a total of 3 different auctions, where a total of 21 units were being auctioned off.
We actually ended up buying 4 units. One contained only a washer and dryer, but my friend bought those by himself because he actually needed a set for a rental property his family just purchased.
The other 3 units went for a total of 530 dollars including tax.
We didn't find any guns, gold, safes or anything crazy, but we did get a lot of furniture and other items, including:
2 dressers with mirrors
2 nightstands with drawers
1 queen bed, frame, headboard, and bed set
1 twin bed with frame and headboard
1 small computer desk
5 large paintings
a bunch of clothes
$3.50 in cash
So while we aren't going to be rich, we should have no problem turning some sort of profit. I have already sold a bunch of the clothes, the folding table, and one of the dressers for a total of $189, so we are well on our way. we should be able to make $100 each I would say when all is said and done. Not the easiest way to make some money, but every bit counts!
-The Money Monk
Monday, January 30, 2012
One of the major reasons I started this site was to have some accountability for my spending and saving habits and a catalog of sorts to compare various months and years to chart progress.
January was going to be the first month where I cataloged my finances, and I recorded all my spending and income. However, I realized I did it in an awkward and potentially incorrect way.
For things like mortgage, which is actually about $900, I counted it as $450 since my girlfriend lives with me and pays half. I did this with most of the other bills too.
What I should have done is count the bills in their totality as an expense, and then counted her 'rent' as income. That will give me a more clear and realistic picture of my situation. So that is what I will do from now on, and I will Post the results for February since I messed up on January and I don't feel like going back and recalculating everything for this past month.
What I will say however, is that I spent WAY too much on food this month, mostly eating out. Luckily this is abnormal, but the amount I spent was still appalling. About half of the restaurant spending was a result of two dinners that I attended as result of special occasions, Birthdays, etc. So I felt bad about declining. I will have to decide what to do about these situations in the future. Another large chunk was a result of failing to prepare meals for a weekend away. So with these eliminated Feb should be a better month for food spending.
I also spent more than usual on groceries, because I have been focusing on eating very clean, with a mostly paleo diet. I will have to readjust the things I am buying and stick with the less expensive versions because I am not willing to continue to spend as much as I have this month on food, even aside from restaurants. It was way too much.
The good news is I didn't spend almost ANY money on consumer goods. No clothes, no toiletries, no DVDs, nothing. So overall my spending wasn't bad, but I need to get it even lower. I don't have a high income so I need to save as large a percentage of it as possible.
-The Money Monk
Friday, January 27, 2012
I don't know what I can give you in the hope category, but I can talk to you about change. In general it's a better idea to be using cash for most of your purchases, for a variety of reasons, and this will invariably lead to you having some loose change lying around. When you include the random coins that you find or pick up (and you should pick them up) you will start to accumulate a decent amount of coinage.
So what do you do with it all? Most of you may have found out by now that it can be quite a chore to handle. You can't carry much, it is a pain to sort, and a lot of cashiers will act like you handed them a dead baby if you try to pay in change.
The problem of the cashier reactions can be solved by not caring what people think, but dealing with change can still be a logistical pain in the ass. So what is the aspiring early retiree to do with their change?
A couple tips:
1. Have containers for your change by type, and empty pockets every day. Have a different container for pennies, nickels, dimes, and quarters. And sort each time you have a handful of change until waiting until you have a giant pile. If you get home and throw your loose change in the right jar right away, most of your work is already done.
2. Buy coin rolls. You can get a large bag of around 30-40 paper coin rolls for less than 2 dollars.
3. DO NOT use coinstar! It takes a ludicrous 10% of your money for the simple task of counting it and converting it to cash! that is outsourcing at its worst!
4. Save work by pre-measuring the size of a roll. Find a tube of some kind that fits each type of coin. Then count out a rolls worth of that coin and put it in the tube. Now cut or trim the tube down until it is flush with the stack of coins. Now you have a way to instantly measure a full roll of coins without having to actually count them. Then you can simply stick in in the paper wrapper and you are good to go. Will probably actually take LESS time than coinstar!Note: you will have to do this for each type of coin, but only once.
If you can't find a suitable tube you can use one of the paper rollers that are crimped shut at one end and cut it to size. They do also make commercial products that are designed for this purpose, but I feel it is easy enough to improvise that you don't need to buy anything.
5. Save the change for vendors that don't give you shit about it: Even if you have the right mindset about not caring, it still may slow you down if some stores balk at taking change or insist on counting the whole roll. There are however several stores that will easily take your rolled change. Publix has a scale built into their register and they weigh the rolls to tell if they are whole. It is just as fast as paying with paper cash and I have never had a problem or a complaint from them. Gas stations also seem perfectly willing to take rolled change. I simply take a couple rolls in when I go to buy my groceries and I have never had any problems.
- The Money Monk
Monday, January 23, 2012
In the last post I talked about in-sourcing, and this is definitely related. You want to make sure you aren't inadvertently out-sourcing 'convenience' by failing to make simple preparations.
I have a weekend commitment to my national guard unit every month, and I have to travel about 140 miles each way to make it to my unit. Incidentally this is the main reason I can't give up my car, even though I'm not sure I would be 'mustachian' enough to do it anyway at this stage in my journey.
So I have to travel down there and I am responsible for my meals. This past weekend I was rushed while preparing to leave and didn't pack meals for the two days I was gone, so I was forced to buy food once I was already down there and ended up spending about $27 for food for those 2 days. that's only about $3 per meal, so its a minor problem, but I should be able to cut that in half if I am able to prepare adequately and bring my own food. If I do save half that the difference over ten years if invested would be almost $2300 bucks.
Little things like this might not seem to be a big deal, but a bunch of little charges that 'don't make a difference' ARE the difference between people who spend $12-15K a year and the ones who spend $30K a year.
So make sure you don't accidentally out-source by failing to prepare!
-The Money Monk