As we discussed yesterday, it’s simple to improve your personal financial situation, but it’s not easy. The concepts are not difficult–we discussed some yesterday, in particular keep in mind the usual “spend less than you earn”–but the practice is what is.
To change the example a bit, a budget–or a savings plan, or an asset allocation, or all of these–is the easy part of dealing with your finances. Having the discipline to follow the plan is the difficult part. Going back to the comparison to losing weight–it’s easy to have a meal and workout plan. It’s not necessarily easy to eat that way and workout that way.
What makes it so hard to follow the plan? Any kind of change in behavior is difficult. Ever try to do something different, like watch less television or eat out less? How about something that’s an even larger struggle, like stop smoking? Changing what you do is very difficult for many reasons. We’re creatures of habit; we’re used to living a certain way, a certain lifestyle; a lot of things we don’t directly correlate with spending money are certainly related. One of my friends who now lives in Houston is coming into town in a few weeks; I have every intention of meeting up with her and her family and some other friends, but that will, in all likelihood, involve dollars I haven’t budgeted.
Compared to some other behavior changes, however, you don’t have to be perfect working on your finances; we all have slip ups. My purchase of a Wii bundle for my niece last month? That was a slip up, but I’m making up for it by running a tighter spending allowance this month. And small changes can make a difference; $50 a month is not a ton of money, but it’s $600 a year, and enough of that kind of saving can make up a lot of dollars over time, especially combined with compound returns or compound interest.
While this article doesn’t address ways to stick to your plan–there are many and we’ll discuss them (and have already)–it does make the distinction clear: having a plan is only half the battle, no matter how great the plan is; sticking to it is the other half.
Gas prices have eased, but reducing fuel use needs to be a priority for me no matter what. It’s a substantial part of my budget, for sure; in a typical month, approximately 8% of my take home pay is spent on gasoline. When something is that large a part of your budget, it’s really worth taking a look to see if there’s any way to reduce that expense.
Given that, the 5% Plan–my plan to reduce my gas consumption by 5% a week–is making a comeback.
I have been on an unusual schedule and task pattern the last few weeks, so my figures wouldn’t be all that useful, but right now things are starting to (but haven’t fully) settle down, hopefully meaning any kind of data I collect will be more representative of my typical use.
To review, my goal has been to use 5% less gas per week than my basline–in other words, to use 9.98 gallons of gas (or less!) per week, which I estimate at 247.7 miles of driving. One of the weapons I now have in this battle is the GPS which I didn’t have when I started all of this. With that on the windshield of my Tacoma, let’s see how I did this week:
My total miles driven this week (ending on Saturday, October 18, 2008) were 261.4. I’m estimating my gas use at 10.89 gallons, which points me to 24.0 miles per gallon.
Two trips I made that were outside my usual this week: once to the dentist (about an additional 14 miles), and once to help with an interview at my part time job (about 25 additional miles). While I like to think of these as “extra”, the truth is there’s almost always “extra” commuting in life. Next week, for instance, I’ll be off on Friday but attending Podcamp Hawaii rather than my job (which has a shorter commute). Still, all of this data is valuable; let’s see how I do next week!
Volatility in the stock market has been very, very high, and the market has mostly gone in a direction that’s down. But not on Monday, where the indices posted double digit percentage gains. That said, the markets are still down mightily from the start of the month, and while anything is possible, there’s a lot of ground to cover before October 2008 can hit the break even point–never mind a profit.
Still, as the stocks go up, down, and all around–more twists and turns this year than a roller coaster–perhaps the most important thing to do is keep an even keel and maintain your perspective. One day, even as big of a gainer as Monday was, does not a bull market make; in fact, one day is just another day on the road to retirement or whatever other financial goals you have in mind–just like one horrible day, or even one horrible week (like last week was), does not in itself constitute financial doom.
Yes, I’m happier with my portfolio right now than I was over the weekend. That said, I don’t expect that 2008 will end up being another year with positive returns in the market–all I can hope for (and I hope for it with a lot of certainty) is that when I’m really retirement eligible (not from my current job–I’ll retire the second I’m early retirement eligible there and find something else), my portfolio will have grown considerably from what it is now. And in order to get there, I’ll endure lots of ups and downs along the way, and I’ll do so because I believe that long term, history will repeat itself and my portfolio will do just fine and dandy. And that’s the lesson in all of this: when things go great, don’t get too high and when things go poorly, don’t get too low. Eventually, things tend to right themselves–they always have so far!
Welcome to your week late Link Payday! It’s been a horridly busy few weeks with the fumigation, the century ride, and life in general. Now that I’m having a weekend where I’m not ridiculously busy (just the typical really busy), I’m trying to get caught up here on Uncommon Cents and giving you highlights of some of the best personal finance blog posts of the last few weeks:
JD over at Get Rich Slowly shares a post by guest blogger Erica Douglass who shares the secret to Finding Time to Pursue Your Dreams. The big secret: turn off the TV! I’ve already done that, though; I have to find 750 more post TV hours to pursue my dreams here…
One of my favorite personal finance bloggers (actually, one of my favorites regardless of area of interest), Mrs. Micah discusses some of the benefits of Combining Kiva Lending and Birthday Presents and how it can be a way to give back to the community and the world. While Kiva is interest free lending, it can benefit those in developing nations big time and has very little in the way of default risk. I’m thinking about doing just this.
Frugal Dad spends some time doing dirty work for the rest of us when he puts his energy into Evaluating the Best Gas Credit Cards for Rebates. While I agree that the Discover Open Road is a great card (I have one), my personal choice, the Pentagon Federal Credit Union Platinum Visa isn’t mentioned–until it was commented on by another reader and myself, anyway!
My buddy Ron over at The Wisdom Journal gives us 17 Sneaky Savings Strategies. These c an help whether you’re trying to pay off debt, save for specific goals, or save for retirement. This is a fantastic post for all of us who are interested in trying to save.
Finally, Trent over at The Simple Dollar gets right to the heart of the matter of people living beyond their means (which is the primary cause of financial distress) when he says it right out loud and pulls no punches by telling us to Stop Trying to Impress Other People.
And that’s your Link Payday for October 12, 2008!
While these are tech podcasts and not financial, there are some real gems in them regarding the current economic mess.
From This Week in Tech:
Jason Calacanis: Just focus on product… because at the end of the day, if the product gets better, y’know, and you get more sales, everything will improve.
Andrew Horowitz: Who said that stocks should only go up?
From MacBreak Weekly:
Leo LaPorte: Hold the line, stay here, keep doing these shows, build an audience… we can survive, and eke out a living, and be here when the tide turns. Let’s hope it does.
This is probably wise advice for personal finance bloggers in particular; talk about a business that you can start very part time without a lot of up front investment and a low burn rate for money. Remember that down cycles are normal parts of the normal life of the stock market. Sooner or later, if your content is great, things will get better!
One week from today, I’ll have contributed as much as I legally can to my 403(b) plan for 2008. While not quite “dollar cost averaging”, regularly contributing to a 401(k) or, in my case, a 403(b), tends to be one of the most important factors in building a portfolio over the long term. The fact that most working Americans get paid twice a month (or sometimes more) means that if they’re contributing to their plan, they’re investing 24, 26, or maybe even 52 times a year.
Unless they’re like me and they hit the maximum early.
Why do I choose to hit the maximum early? For one thing, studies on the effectiveness of the concept of dollar cost averaging have shown that investing the same amount of money at one early date results in better earnings vs. spreading it out starting at that early date and going over time. I also like that I get a sort of “fake” raise starting in August; my paychecks the rest of the year in terms of take home are larger, which allows me to fund some other savings vehicles, like my Roth IRA.
If I could afford it, I would hit my maximum even earlier; in fact, I’m considering if I can do that in 2009. Heck, if I could afford it, I’d hit the maximum in the first paycheck of the year, but I don’t make nearly enough for that to be a possibility.
However, let me make something clear: even if you can’t afford to contribute the max to your 401(k) or 403(b), contributing anything is better than nothing. Try to at least contribute enough to get full use of any employer match or you’re leaving free money on the table. That alone ought to be enough incentive for anyone to contribute to these great retirement plans.
One of my personal finance blogging buddies is Squawkfox, a Canadian female who is athletic (finishing two Ironman Triathalons), educated (in topics as diverse as journalism and computer science), and irrepressibly female (she’s posted underwear pictures–just the undies, not her in them!–on her blog multiple times). Squawkfox recently put out a free for subscribers eBook called Frugal Food & Fitness–55 pages of material that are not available on her blog.
The book is split into three parts: Frugal Food, Meals and Recipies, and Frugal Fitness. Just the fact that the material presented here is new–meaning not on her blog–is amazing. As a blogger myself, I find it very hard to believe another blogger who posts as often as Squawkfox does has the time to come up with a 55 page book of original material, but apparently she does.
Squawkfox is an aspiring photographer, and this book shows it. She does lots of food photography in this book (this is not an easy subject to photograph, trust me!) to go along with some general and specific information on food (including quite a bit of education on the whys and hows of soaking dried beans–including frugal reasons as well as educational ones). The second part of the book–the recipes–may be the most practical. They are cheap, fast to make, and the ones I tried were great! In particular I liked the Spaghetti with Sneaky Black Eyed Pea Sauce (I’m a sucker for pasta). Finally, our author comes up with some great ideas on how to get into fitness frugally. As a cyclist and runner myself, I try to encourage the same kinds of activities. Squawkfox does a great job of giving bite sized suggestions as to how to get going on improving your physical condition.
In conclusion, I really like this eBook, and the price is unbeatable (the only way it would be better is if she paid me to read it). Squawkfox does a great job of taking some very basic needs–food and exercise–and making them seem easy and fun for people to take on, as well as frugal. All in all, I would call this a great job by one of my fellow personal finance bloggers. Well done, Squawkfox!
As I’m sure my friends and possibly my readers are sick of hearing by now, I got a free GPS about a week ago from MyGPSOffer.com. I’ve become quite fascinated in the little electronic device–I’m a Geek, so of course I’m trying to learn as much about it as I can–and the routes it’s suggesting for trips I’ve done for years.
For awhile, I tracked (and will soon start tracking again) how many miles I drive every week as well as how the routes I took affected my gas mileage. I tried a couple of different routes to see what that did for both my total miles as well as my mileage and settled on one that appeared to be the most fuel efficient. Now that I have a GPS, I’m seeing that it’s suggesting I try a couple other, slightly different routes depending on whether I’m asking it for the shortest route or the fastest route. Can a GPS actually help me drive fewer miles and get better mileage? In a word, yes, especially if one of the things I’m doing is going to places I am not familiar with. Can it do well enough to pay for itself? Well, in my case, certainly, because I got the GPS for free, so any amount that I can reduce spending is like a profit, but this certainly depends on the cost of the GPS–as well as the cost of gas and the miles per gallon that you get.
Interestingly, something free might end up costing money as well! For instance, I’ve become intrigued with the activity/sport of geocaching and am interested in trying it out, but wondering if I’d be better off using a hiking style GPS rather than the automobile one that I have. Of course, the hiking GPS would cost me money and since I’ve been so impressed with the Garmin nuvi 200 auto GPS I have, I’m considering another Garmin, so maybe out of a “free” GPS, they’ll make some money off of me as well! I guess this cuts both ways!
I’ve been watching and rewatching (well, more like listening to and relistening to) the late, great, Dr. Randy Pausch’s videos, both the well known Last Lecture as well as his presentation shortly thereafter on time management. One of the points he makes is that in America, we’re really good at thinking of money as a commodity (but concedes that not all Americans are all so great at doing so when he states, “that’s what makes the credit card industry possible.”) but not so good at thinking of time as a commodity when it’s even more of a precious resource: once you’ve spent time on something, you’ll never be able to get that time back to do something else. On the other hand, you can always make more money.
If we start considering time as money, will we get better at managing it?
Some ideas:
Doing things at the last minute is very expensive: Pausch uses the example of being able to use the United States Postal Service rather than FedEx if your package doesn’t need to be there overnight, because it’s much cheaper. But it’s not just expensive in the monetary sense to do things at the last minute. If you wait until time is running out, things must go a lot closer to perfect in order for them to work out–a consultant out sick or on vacation for a day or two can really be a huge issue when time is running out. You can also only really do one thing at one time and if something really urgent comes up, whatever you’re doing may be pushed to the side again!
Putting time into things early on can pay off in the long run: advance planning always helps in the long run. Figuring out things like a budget or a shopping list can save both money and time. Not being prepared can make what would be a difficult situation impossible. Think about putting a little time into planning your day, your finances, your expenditures, your retirement–so you can deal with these things better later.
Time really can be your money’s best friend: The longer you have to invest, the more compounding interest and returns can help you out! Don’t put these things off–the longer you wait, the more you’ll miss out. Wise use of time, planning, and prioritizing can make a tremendous difference in how you deal with both money and time. Remember we don’t try to manage our time better so we can become harder working workaholics (aside from a certain blogger); we manage our time better so we can spend more time with the people we love and doing the things we love.
Try to consider the way you use your time and how time is like money, as well as how poor use of time costs you money; this might be the mindset necessary to do a better job with both!
If you remember my snowflaking summary for June, I expected that snowflaking efforts in July were not going to be as profitable as in June, as I had a banner month in June including a large $60 Discover Cash Back Bonus. It turns out I was correct.
Blog income for July was a bit less than in June, totaling $130.52. I received no other snowflaking income this month, partially because I was out of town for a week. Still, this is far from a trivial amount.
Combine this with the previous $510.87 I snowflaked before July, and we’re talking serious money: $641.39. Guess what? That’s more than half of what I spent on the MacBook that I bought before I really wanted to. Let’s see if we can have an even better month in August to get closer to that total!
