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I’ve mentioned often on The Simple Dollar how journaling is a daily practice for me and has been off and on (but mostly on) since middle school in various forms. At times, it’s taken the form of simply cataloguing my day; at other times, I’ve written in response to various prompts; today, it’s completely different (and I’ll write about that in a bit). In any case, writing in my journal – simply put, getting thoughts out of my head down on paper – is something that is a daily part of my life.
Why have I kept up with it for so long? How has it helped me in any way that’s made it worth the time investment? And what does that practice look like? That’s what I want to share today.
Let’s start with the why.
The Benefits of Journaling, Financial and Otherwise
I keep up with a daily journaling practice for a lot of reasons.
First of all, it feels like a mental relief to do it because it quiets the monologue in my head. Along with meditation, it’s one of the two most effective routine things I’ve found in my life for getting the constantly chattering voice in my head to quiet down a little. That voice is constantly going over things I need to do, things I’m thinking about or worried about, my upcoming plans, some problem I’m interested in, and all kinds of other stray thoughts. That constant stream of thought is distracting. I find that dumping some of that stream of thought down on paper quiets that distracting voice pretty well, at least for a while. I’ve found that one big burst of writing in my journal at the start of the day coupled with having a pocket notebook on me at all times to jot down other stray thoughts throughout the day keeps that voice a lot quieter and a lot less distracting.
Second, I use it to work through challenging problems in my life that I’m not quite sure how to solve. When I observe something I don’t like in my life, my mind often worries on that problem without ever really coming to a good conclusion on it. I’ll think about that problem over and over, but at best my idle thoughts will come up with really half-baked solutions. When I sit down and journal and dump that problem out on paper, I find that I almost always work toward an actual good solution to the problem (or problems) in my head. By writing out the problem as I see it, I usually get some better insight into what’s really going on, and then as I write down that insight, more pop up, and eventually I lead myself to the real source of the problem and perhaps a start down the path to a good solution.
This applies very well to personal finance. For example, it was writing in my journal that really helped me piece together that something was wrong with my financial life and gradually led me to the decision to make some major changes. It has helped me figure out what things in my life were frivolous expenses and which ones were not. It has helped me to identify situations where I was spending money nonsensically as an emotional response to some other situation in my life.
Third, it’s helped me to understand complex ideas by taking a bunch of swirling bits and pieces I’ve learned recently and didn’t fully understand and combine them into something meaningful and comprehensible and useful. Many of my journal entries have originated from my thinking about something I read recently or experienced recently that I didn’t quite understand, and by simply spelling it all out piece by piece, the idea came together for me. I used to do this a lot when I was in college, but I still do it quite frequently when I’m reading something or when I’ve had a difficult interaction with someone.
For example, it was this practice that really helped me to understand investing and how index funds work and helped me decide that I should put as much of our investment money as possible into index funds. The ideas made sense on their own, but it was assembling the ideas and relating them to our own situation, which I did over a bunch of journaling sessions, that locked our retirement planning into place.
I did the same thing when we were shopping for a home. Many of my entries during the months in which we were house shopping were oriented around figuring out how the house buying process worked, how mortgages worked, and so on. This actually leads well into my next point.
Journaling has helped me come to a firm conclusion when there were a lot of options on the table. Often, decision making comes down to being able to filter through a lot of options, figure out which elements matter the most, and choose from those options based on that. Journaling has helped me with every piece of that process for many different major decisions in my life.
As I noted earlier, journaling was essential in our home buying process. I wrote down extensive thoughts on each home we visited, the relative merits and drawbacks of each, and what each would look like financially. My journaling process helped Sarah and I choose a home that we could afford that met our needs, a home we still live in.
It’s helped me decide between investment options. It’s helped me make career choices when I had several options on the table at a few points in my life. Simply writing through each of the options, figuring out what was good and bad about each one, and then coming to a clear decision not only helped me make a great decision at each of those crossroads, it also helped clear my head of constant worrying and constant thoughts on the subject.
So, how exactly do I do this? What does my journaling practice look like?
My Own Journaling Practice
I’ve used a number of practices over the years, but the one I’ve used for the last few years, with a few tweaks, has been a small variation on the “three morning pages” journaling practice first popularized by Julia Cameron.
In Cameron’s original practice, she simply suggested that a person sit down with a blank journal and start writing, filling up three pages in a journal with their writing before stopping for the day. Write about whatever’s on your mind – if it’s on your mind, just write it down, no matter how inane or pointless it seems. It gets that thought out of your head and makes space for whatever’s next. Some days, everything is inane, and that’s fine. Other days, you’re working through some very difficult things, and that’s fine, too. The goal is to empty that junk out of your head so you can get clean start to your day.
I tried doing this exact thing for a while, but I ran into a number of small problems with it. The biggest one was that my handwriting is small and the pages in my journal are big. I tend to journal by writing in block capital letters – it just feels the most comfortable to me – and the writing is pretty small. Most of my journals are either full size pages or close to it. Thus, it can take a long time to simply fill up a page with words, even if I’m writing as fast as I can.
So, I modified the practice to what I call “45 morning minutes.” I just set a timer for 45 minutes, sit down with my journal, open to the next blank page (or partial page), and start writing. When the timer goes off, I keep going until there’s a clear break in thought and then I write a big double line across the page indicating the end of the day, and I’m done. Journaling with a strict time limit keeps it within a reasonable time frame for me and makes it easy to schedule.
Obviously, I do this in the morning, usually before anyone else is awake. I find that doing this early in the day is really effective at quieting down that internal monologue that distracts me with chatter and ideas throughout the day. I’d rather have it quiet in the mornings and afternoons so that I can get focused work done. So, that’s another big part of the equation for me: journaling in the morning quiets my internal monologue so that I can focus better during the work day.
After I finish, I usually read back through my entry over the course of a few minutes, mostly to extract things that I need to get done in the near future. Are there any actionable items that I thought about or generated during that journaling? If so, I move them to my to-do list manager or to my calendar so I can find them later on in the day when I’m actually doing stuff. Again, another key point: journaling often generates specific actions I need to work on or things I need to take care of, so I transfer those out to a to-do list.
After that, I just close my journal and go about my day.
There are a few obvious questions that come about from that description, so let me address them right now.
I read old entries, but nothing older than a few months. After four or five months, the old entries start to read like they were written by another person living another life. It’s familiar in the way that a distant memory is familiar, but it doesn’t feel like me any more. When journal entries reach that point, then there isn’t really any value to them any more, at least not for me. The method of journaling I use is not really a record of what I did each day, so once the entries aren’t fresh, I don’t find any personal value in them. I’ve changed enough as a person that the situations and solutions I wrote about in old journals no longer apply specifically to new situations. I haven’t actively read journal entries more than a few months old in a long time, and every time I happen to see one, I really don’t care to read it.
There are a few reasons for this, but most of it boils down to the fact that my journals reflect my active thinking at that moment, but when that moment fades away, there’s not much value there. It’s not a record of my life, but an outpouring of my current thought.
There are some specific reasons, too.
I am often deeply critical of myself, something that doesn’t need to be re-read and dwelled upon. I sometimes tear myself to shreds when I’m writing a journal entry. I’m extremely critical of my flaws and mistakes, and while that can be good in the moment when I’m assessing a situation or setting out a goal, it doesn’t do me any good to read it later or for someone else to read it.
I am sometimes honestly critical of my children in a way that I wouldn’t want them to read; I do this not to be cruel, but to figure out how to be a good parent to them. It does not make me a good parent to pretend that my children are perfect and flawless. Rather, one of the best things I can do as a parent is to honestly assess their good features and their flaws and take those into account when I figure out how to communicate well with them and guide them toward good decision making practices, life ambitions, and things of that nature. For example, I might write down that one of my children is extremely conscientious of others but is sometimes excessively boastful, or I might write that another child is richly thoughtful but very quick to frustration and anger. (Obviously, these aren’t actual observations and are quite sanitized to boot, just examples so you understand what I mean.) Those aren’t thoughts that I want them to read, or anyone else to read.
The same is true for my wife and my role as a husband and, occasionally, some of my friends and my role as their friend. I do similar evaluations of my wife at times. In what ways is she amazing? In what ways can I complement her with my strengths? In what ways does she complement my own weaknesses? How can I help out in areas where she’s not as strong? I’m sure she’s glad that I think about such things and consider how to be a better husband, but I don’t think even she would want to actually read such thoughts. The same thing is true if I assess a friend, particularly if they’re asking me for some life advice. I want to give the best advice I can to them, and that sometimes means being critical, and sometimes those words find their way into my journals.
Thus, I don’t save old journals, at least not anything older than my most recent one. I keep my current journal and my previous one in a secure place where they can’t easily be found. My current journal is easy for me to grab in the mornings, but it’s not in a place where it would likely be found. When my current journal is full, I destroy the previous journal after I read through it again.
For a while, I was keeping digital copies of my old journals, but I found that I was never looking at them, didn’t really want to ever look at them, and didn’t want anyone else to find them, so I stopped doing this. The downside to others finding those thoughts was worth more than the upside of any potential limited use I might have for them in the future.
The policy of destroying the journals and keeping the current one secure lets me be more unguarded with my journaling. Given that I know my journals won’t be around for posterity, I feel more comfortable just letting my thoughts fly on the page. I don’t worry about who might read them or how they might appear for posterity. At worst, the most recent journal or two might be found, and that doesn’t worry me too much. I usually start off each journal with a note saying that this is a collection of my unguarded thoughts as I worked through personal decisions and I would appreciate that the journal would be destroyed upon discovery if I were to pass.
I vastly prefer handwritten journaling, but I may switch to using a stylus and writing on a table in the future as those technologies improve; writing by hand provides a clarity of thought that typing doesn’t quite provide for me. For me, typing is conducive to rapidly recording ideas, but the process doesn’t allow me any space to think about them. If I want to explore my thoughts, consider things, and actually remember them, I write things out by hand. This is true for journaling, but it’s also true for taking notes at meetings, taking notes when I’m reading, taking notes during a lecture, and so on. I write all of those notes by hand and, if there’s potential value that I might get out of them later, I convert them to digital format.
I feel like taking notes with an Apple Pencil on an iPad is 90% of the way to where I want a stylus to be, but it’s not all the way there yet. When it’s perfect, writing thoughts down on a tablet using a stylus will be the best way to journal and take notes because it offers the advantages of both writing by hand and digital notes, but for now, it’s not quite there yet, and given a choice between the two, the thoughtfulness and retention of writing by hand outweighs typing out journal entries for me.
I use Leuchtturm 1917 journals and either Uniball Signo 207, Pilot G2, or Pilot Juice pens. The journal isn’t a requirement – I’ve used all kinds of different things over the years – but I really like the size and the binding and paper quality of that specific journal. One of those usually lasts about two and a half months for my journaling purposes. As for the pens, I really only have three requirements for a pen: it needs to write when I want it without a lot of futzing around, it needs to have a thin line and not bleed all over the page or make a mess, and it needs to not leak in my pocket. The pens listed up there pass those tests with flying colors. I can get weeks and weeks out of writing with just one of them and it costs less than a dollar, which is good enough for me. I’d rather spend $0.75 on a pen that will write for weeks without fail and not make a mess or leak than a $0.25 pen or a freebie that will need a bunch of waving around or tinkering when I want it to write, leave a ton of messy ink on the page, and inevitably leave a big blotch of ink on the paper or in my pocket.
Spending some time each day journaling – simply writing my thoughts down on paper – not only helps me piece through the problems in my life and ideas in my head, it also helps clear my mind and make it easier to focus on the tasks of the day because it quiets the voice in my head that would otherwise keep running through those problems and ideas. It has helped me not only figure out a bunch of financial and professional problems, it’s also helped keep my mind focused when actually doing work to earn an income.
I find that my “45 morning minutes” practice works extremely well for me, but there are many practices out there that range from simply listing the events of the day, writing what you’re grateful for, brainstorming, and many other things. I highly recommend trying several practices until you find one that works well for you and then stick with it for a while. You might just find that it becomes an essential part of your life toolbox.
I recently read this great little article by Molly Conway entitled The Trap of Turning Hobbies Into Hustles. In it, she makes the astute point that when you attempt to start earning money from something that’s a hobby, it ceases to be a hobby any more – rather, it starts to seem like work:
I have a friend who is living her dream. She makes and sells leather pocket belts, holsters and ruffle tops for the steampunk/Renaissance Faire/Burning Man crowd. Her designs are worn and enjoyed by thousands of people; she’s created more jobs for Bay Area artists; she’s her own boss — and she hasn’t taken a real day off in roughly eight years. Because that’s what it takes to do what she loves. I admire […] her, but every time I’m tempted to listen to someone who says I should open a restaurant just because I throw a good dinner party, I think of her, and remember that admiration is not the same as envy.
That’s not to say there isn’t joy to be found in turning something you love into your life’s work — it’s just to say that it’s okay to love a hobby the same way you’d love a pet; for its ability to enrich your life without any expectation that it will help you pay the rent.
This hit home for me.
One of the cornerstone elements of our financial turnaround was that I was able to find a side gig that I was eventually able to turn into full time work – and you’re reading it. The Simple Dollar started out as a pet project I did in the evenings in our tiny apartment as I wrote through some of the ideas I was discovering and working through in order to turn our financial life around. It became reasonably popular and, while it never earned enough to make us wealthy, it did earn enough that switching to writing it full time was a real option because it also reduced our child care burden (since I was at home and had a super flexible schedule).
Writing has always been a hobby of mine, and while I was in the “honeymoon period” of my financial turnaround where everything was new and exciting and I was trying all kinds of new (to me) things, it was purely fun to write about those experiences. As time went on, though, I found that what Molly describes above as purely accurate. Suddenly, something that was a hobby to me was making money – which was great – but now it was burdened with deadlines and responsibilities and expectations – which wasn’t good.
Yet, here I am, still writing about personal finance. How did I make that work? How can I still keep writing about personal finance and earning an income at something that was my hobby without being miserable?
I think that what I learned from that transition serves as some powerful advice for anyone looking to turn a hobby into a side gig.
First of all, I had to accept that writing was no longer a hobby, but a profession. Prior to that point, writing was something I purely did for personal fulfillment. I have always loved taking my ideas and putting them down on paper, much like how other people love and are fulfilled by woodworking or crafting or fishing or cooking or whatever. However, it was never something I had to do in order to produce an income for my family. I did it when I had the time and when I had burning ideas inside of me and I did it solely because it fulfilled me.
When you choose to do something for money, particularly when it becomes a source of money that you or your family relies on, that relationship changes. You can no longer do those things when you feel like them. You have to keep at it, regardless of how you might feel at the moment.
Leisure activities are enjoyable because they’re things you want to do and you can do them at whatever level feels right for you. When you have to do those things for a living, that choice of what to do and when to do it goes away. It’s no longer your choice. Even the most successful writers out there, like Stephen King, sign contracts and have obligations for their craft. They can’t simply choose when to write and not do it if they don’t feel like it.
That’s the difference between a hobby and a profession. With a hobby, you want to do it and, if you happen to not want to do it today, that’s okay. With a profession, you have to do it, regardless of whether you want to do it today.
There are days when I wake up and the last thing I want to do is write. I have all kinds of other things I’d love to fill my days with. However, I have an obligation to write, a freelance agreement that I signed that provides income for my family (good) but has stiff consequences if I don’t write (bad).
That change from wanting to do something to having to do something is a serious change and requires a far different approach. It means that it’s no longer your hobby, but your profession, and you have to approach it professionally. You have a set schedule and requirements and it’s no longer the free thing that you used to do.
In the early days, when I did The Simple Dollar for fun, I wrote about whatever I wanted pretty much whenever I wanted. If I didn’t feel like writing, it was fine. Today, I spend several hours a day most weekdays doing some sort of personal finance writing-related activity. There are times when it’s purely fun, but there are a lot of times when I have to do it even though I don’t want to.
So, how do you make that change?
The first thing I figured out was that on the days when I’m feeling in the groove, I need to get as much work done as I possibly can. If there’s a day when the writing comes easy and feels good, I do everything I can to stick with it all day long and all night long, if need be. Once every few weeks, I’ll just tell Sarah that I’m in a groove and I need to ride that groove for as long as it lasts. I often talk about “flow state” on The Simple Dollar, and that’s exactly what I’m talking about here – if I have days where I can get deeply into a flow state and just keep writing and writing and writing, I do it.
What this does is that it gives me breathing room for the days when it’s not working quite so well, when I’m dreading writing or when I can’t get anything to come out. On those days, I can walk away and professionally recharge.
Without that ebb and flow, this whole thing wouldn’t work. If I simply stopped on those good days when I had two or three things completed, I wouldn’t be able to do this. On those days when I really feel motivated and engaged and excited, I have to get as much value out of them as possible.
Why? Nothing makes a hobby-turned-side-gig miserable faster than the days when you’re not engaged at all with your gig but you still have to produce work. You’re going to be miserable and you’re going to not be very productive at all. You are far better off those days simply walking away and recharging or finding other aspects of your work to do. In fact, if you keep doing this, if you keep grinding when the passion is zero, it’s going to become miserable and your quality is going to fall off a cliff and you’re going to lose the whole thing anyway. Trust me – I’ve been there.
if you try to turn a hobby into a hustle, be aware that you’re going to lose a hobby. When you start doing something for money, there starts to be expectations involved with it and you can’t simply pick it up when it feels fun and let it sit when it doesn’t. You have to pick it up every time, and that’s work, not leisure.
There’s nothing whatsoever wrong with that, and work can most definitely bring you joy, but there are times when you have to do it even when you don’t want to. That’s the difference between a hustle and a hobby – a hobby can be put down, while a hustle can’t.
Make absolutely sure that this is something you want to give up as a hobby. If it’s something you genuinely value as a way to escape, as something you can pick up when you want and leave alone when you’re not feeling it, you should think very carefully about whether you want to convert it into a hustle.
Thus, if you do go down this path, you have to find a new hobby. Your old hobby is no longer a hobby. It fills more of your time than you would ever like. That doesn’t mean it no longer brings joy, but what it means is that it no longer serves as a hobby, as something that provides leisure and escape from the routines of your life.
Ten or fifteen years ago, my main hobby was writing. When that went from hobby to side hustle, it no longer fulfilled and refreshed me. It was the thing that sometimes made me need to feel fulfilled and refreshed. I discovered cooking. I discovered hiking. I (re)discovered tabletop gaming. I (re)discovered reading. Those are my hobbies.
Writing, although I still love it, is my work. It is not a hobby. It is not an escape. It is not something I can pick up when I’m excited about it and put down when something else is more compelling at the moment.
I’m lucky in that most days I’m excited about it, but there are most definitely days when I have writing commitments and it’s the last thing in the world I want to do. That’s what makes it work and not leisure.
Finally, turning a hobby into a side hustle generally only works well if you’re utilizing skills and talents you have. If you love to knit, for example, but you’re a mediocre knitter who can turn out good stuff but slowly or bad stuff quickly, it’s probably not a good choice to try to turn knitting into a side hustle. It’s a great hobby, but not a great source of income.
Writing happened to work well for me because I can write reasonably good material (I don’t claim my writing to be great in any way, but I do think I can lay out points and tell a decent story) in large quantity and fairly quickly. That’s a skill, one that I utilize every day.
It’s my belief that turning a hobby into a hustle works best if you have several hobbies, you see a clear path to income with one of them, and you can apply strong skills you already have to that path. That way, you’re not turning your main passion into work and you’re able to do something of value that others will want and appreciate, thus ensuring at least some chance of success.
Let me tell you three stories. The first comes from my own life, while the other two are things that I’ve observed recently.
* * *
For my own tale, let’s roll back several years.
At that time, I worked as a research assistant focusing on data mining. My job mostly revolved around writing tools for researchers to explore a very large data set in a simple fashion, essentially enabling them to make connections within the data at a click of the mouse, and I also spent a significant amount of my time digging through the data myself, looking for useful patterns and trying to make sense of it all.
I really loved the work I was doing. When I was actually doing the data mining, or when I was working with researchers to come up with ways to help them explore the data on their own, I deeply enjoyed the work. It was intellectually challenging, interesting, and meaningful. I also dearly loved the small team I worked with at the time.
What I didn’t enjoy was the bureaucratic end of it. I didn’t enjoy the travel. I didn’t enjoy the many bureaucratic meetings. I didn’t enjoy the constant filling out of forms that seemed to be largely purposeless. I didn’t enjoy the constant change in how we filed our travel receipts, the constant changes in our email services, and many other aspects of the job that were purely bureaucratic.
I was also frustrated by how there were constant promises of more resources that were sorely needed to actually improve our offerings, but those resources seemed to never actually materialize. Because of that lack of resources, I felt my work slowly turning from creating useful new things and discovering new data connections to just maintaining tools so that they wouldn’t break when other people changed things. I gradually became more and more responsible for IT management, fixing servers and things when they had problems, and that caused me to have to go into work on more and more weekends and spend more and more time effectively on call.
Over time, my feelings on this job began to shift. I went from feeling great about going to work each day to dreading going to work, particularly on days when there were meetings and particularly on days leading up to travel.
For the last year or two that I worked at this job, I felt miserable. Travel was causing me to miss several big moments with my children, including my son’s first steps. Most days were filled with bureaucracy and maintenance. I felt deeply unhappy.
So, why did I stick around for that last year or two? The big reason was that I felt like I needed the job. I didn’t have strong financial control over my life yet and thus I really needed the stability that the job provided. In short, that job and that situation had control over my life. I couldn’t walk away without putting my wife and my young children in a very precarious place.
* * *
The second story comes from a reader who I’ll call Jeff, who wrote in with a long story for the reader mailbag. After some back and forth conversation with him, he wanted me to share his story in a post.
Jeff grew up in an upper middle class family. In college, he fell in love with Suzanne, who he thought was also upper middle class until, shortly before the wedding, he learned that Suzanne’s family was rather wealthy thanks to her grandfather. Suzanne has a large trust in place for her that’s controlled by Suzanne’s mother. Suzanne and Jeff have been married for several years and apparently they’ve spent much of this time jousting with Suzanne’s mother, sometimes even in court, to gain access to the trust. It is apparently up to Suzanne’s mother as to when the money can be released to Suzanne and Jeff. He wrote in asking for advice on some other means to try to gain access to that money.
My response to Jeff was simple: try to live your life for a while as though that trust does not exist. What would your life be like if there was no trust that was ever going to appear? What would you do? Live your life that way. If the trust money comes, then it’s a boon. Right now, the lack of a trust is a bust.
After some back and forth emails with Jeff, it seems as though he and Suzanne have had a lot of conversations about the situation and have decided to do just that – to stop worrying about the trust at all and start living as though it doesn’t exist.
* * *
Here’s a third story that might seem unrelated at first, but it’s well worth discussing.
My wife went on a very long-planned trip with her sisters this spring. They had been planning the trip for almost a decade and this spring was the culmination of those plans.
During their trip, they had the opportunity to visit Chichen Itza, the Mayan ruins in southern Mexico. While there, Sarah took a ton of photographs and short videos. They were all focused on the view, a view that she wanted to always be able to remember even when her memory of it faded a little.
One thing I couldn’t help but notice is that in many of the video clips and photographs, there was a young woman who had an elaborate selfie setup that involved tripods and lighting poles and so on. She was backed up right against the edge of where she could walk and, in every video clip and picture, she was either taking selfies with Chicken Itza in the background or checking the selfies. This was going on over a long period of time.
Not once, in any of the photographs, did the young woman seem to be paying any attention to Chichen Itza. She had traveled so far to see one of the wonders of the world, and yet her full attention was on getting a great selfie or two, ostensibly to post to Instagram or some other social media service.
* * *
These three stories all have something in common. They all depict people living their lives under the control of others, not themselves.
In my own situation, I lived my life under the control of my supervisors and the bureaucracy of my workplace. I absolutely loathed it, but I persisted under it for years. Why? I had chosen a lifestyle that required the income and stability provided by that bureaucracy. I had ceded control of my time and energy over to them.
In Jeff’s situation, he and Suzanne lived their life obsessed with the money sitting in that trust and constantly battling Suzanne’s mother for that money. That battle absorbed tons of their time, energy, and focus, and although he didn’t get into it, it seemed clear that the relationship with Suzanne’s mother was weakened by the fight. In that case, Jeff and Suzanne had ceded control of their time, energy, thought, and focus over to their mother-in-law simply out of a desire for more money.
In the story of the woman at Chichen Itza, her focus was solely on producing an amazing selfie, ostensibly to share with others. This took her attention away from the destination of a long trip and the grandeur of a wonder of the world. Instead, she focused on the lighting on her face and the camera she was using. I suppose she may have been a professional photographer and a model at the same time, but it seems far more likely in our modern era that she was simply trying to get the perfect shot for Instagram. In other words, she ceded control over her own time and focus to her Instagram followers, causing her to miss out completely on the amazing opportunity before her.
In all three of those stories, someone else is in control of a person’s life and decisions. I wasn’t in control of my professional decisions or their own financial destiny. Jeff and Suzanne weren’t in control of their familial decisions or their own financial destiny. The woman taking the selfie was ceding control over her time and focus in one of the most amazing places on Earth to anonymous Instagram followers and other social media “friends.”
* * *
If there’s a lesson I’ve learned throughout my adult life, it’s this: there are few surer routes to unhappiness than ceding control of your life over to the whims of someone else.
When you cede power over your life to your boss out of financial need, you give your boss the power to take away your free time and all of your energy. Even if your boss doesn’t do that, that power still rests in their hands.
When you cede power over your life to someone who might give you money, you give that person power over your attention and your thought and your time and your destiny. Even if that person is very giving in terms of that money, they still retain that power and can use it as they please.
When you cede power in your life to social media followers and constantly do things that you think will impress them or interest them or make them envious, you give those anonymous followers the power to shape your decisions and shape how you use your time. You’re no longer doing the things you want to do; you’re doing the things they want you to do and hoping for their approval.
Those situations bring unhappiness. I’m speaking from my own experience and the experiences of many people in my life and many readers. Whenever you feel like you don’t have control over your life and you’re forced to bend your life over and over to the whim of those who do have control, it brings about sadness and serious dissatisfaction with life.
What about situations that come with responsibility, like becoming a parent? In those situations, there are definitely moments where you feel trapped and out of control, and those times do bring bad feelings. However, they’re typically counterbalanced by the good moments and the fact that you chose this responsibility. Also, responsibility often leaves some level of control over the situation – you do control how you choose to parent your child.
On the other hand, you don’t have control over the fickle nature of social media followers or the whims of your boss or to those who can turn off the spigot of money you’re relying on or the organizations to which you owe money… this list goes on and on.
It’s that lack of control that brings unhappiness, and making financial and lifestyle missteps is one of the surest ways to lose financial and professional control and freedom in your life.
This doesn’t just manifest itself in terms of personal unhappiness – that’s just the start. It has negative physical and mental implications due to the stress of the situation. It has negative financial implications because many people drown themselves in “treats,” giving themselves little bursts of pleasure so that they can temporarily feel a burst of joy.
What can you do? It’s easy. Start taking control back. Even if you can’t fully wrest control of the situation back immediately (sometimes you can, but often the situation is deep and complex enough that you can’t), you need to start down that path.
Here are some strategies for doing just that.
Spend a lot less than you earn and bank the difference, so that you can make changes to your life if they’re warranted. Walking away from a miserable job is a lot easier if you’re already living on less than you earn and have been doing so for a while and you’ve put away the extra money for the future. In essence, it was the start of our financial turnaround that gave me the ability to try new things and then eventually have the financial freedom to walk away from a job that was leaving me feeling crushed.
The power of this strategy is that it frees you from being under the control of anyone who can turn the spigots of money in your life on and off. Before long, you’ll have the freedom to be able to move to another opportunity (like moving to a new job) or to just start ignoring a particularly troublesome one (like Jeff and Suzanne’s family issue). Eventually, you won’t need to think about a spigot at all – it’s a convenience, but not a need, and you can walk away if you don’t like the relationship without needing to just jump to another opportunity.
This can be challenging because one of the most obvious places to start is to cut out the stream of low-value “treats” that many people who feel unhappy and trapped use as a stream of happiness bursts in your life. You have to seek out other sources for those moments of bliss that don’t require spending money.
Spend less than you earn. Make that gap as big as you can without introducing new misery into your life. Use that gap to get rid of debt and start saving for the future, whether it’s retirement or any other significant life change. That’s the recipe.
Focus on building relationships with people who enjoy doing the things you would do on your own (or with an army of clones of you). One of my favorite questions to ask myself is “what would I do if I had to live the rest of my life on an island with 100 clones of myself?” Meaning, in other words, that they all had the same internal desires that I do.
What would I do? I’d read a lot and have conversations about those books. I’d go on lots of hikes and explore every inch of the island. I’d play a lot of long, complex board games. I’d make amazing meals and a lot of fermented foods and craft beer.
Thus, this advice tells me to find other people who like to read a lot and talk about the books that they read. This advice suggests that I find people who like to do easy and moderate difficulty hikes (I don’t like rock climbing and my balance isn’t superb) and go on hikes with them. This advice suggests I find people who like to play long strategic board games. This advice suggests that I make a lot of meals and good food and beer and share them with people who appreciate them, and maybe find people who like to make them, too.
Those are my people. I need to find them and build friendships with them. That way, I find companionship and friendship and affirmation by doing the things I naturally want to do anyway, rather than having to mold myself to appease others. This gives me much greater control over my free time and my hobby time.
Who are your people? What are the things you would do on an island by yourself and 100 clones of yourself? Figure that out, then find people who like that, too, and make friends with them. That way, you don’t have to change who you are or spend time or energy or money on things that you don’t really care about in order to feel friendship and acceptance.
Learn how to say “no.” Many people find themselves eventually trapped by a mountain of commitments and arrangements they brought on themselves by being unable to say “no” to others when they’re asked for something. This often leaves them feeling overwhelmed and unhappy and typically not performing at their best at any of those commitments.
Here’s something to consider if you’re in this camp: if you feel overwhelmed with commitment – or will feel overwhelmed if you take on something someone’s asking of you – remember that you will not perform at your best on this commitment or on the other commitments you have if you say “yes.” In fact, by committing to more, you’re likely going to end up with that other person in a worse position than if you had simply said “no” right now.
I often turn things down by saying some variation on this: “I really appreciate that you asked me to help, but I have to say no. My plate is already really full right now and if I took on that thing as well, not only would I not be able to give it my full effort and attention, I would also be letting down the things I’m already committed to.” I usually then follow it up with a suggestion of other people who might be able to help.
Saying “no” in that way is more valuable than saying “yes” to something that overwhelms you and that you can’t live up to in a quality fashion. It is far better to say “no” than to let someone down when they’re relying on you or to deliver a bad result. Plus, saying “no” preserves your sanity and also gives you the space you need to excel at the things that you do choose to keep on your plate.
Give yourself the power to have control over what’s on your agenda, so that you can fill it with just things you can excel at without being overwhelmed.
Finally, be very wary of long term commitments you can’t easily back out of. I absolutely love being a parent and it’s a role that fulfills me deeply, but if someone is asking me if they should have kids and they’re really unsure about it, I’ll usually advise them to not have kids. Don’t commit to having children unless it is a full-bore full-throated deep commitment, because a child deserves that from their parents.
This is true with any long term commitment you may face in life. For example, don’t get married if you don’t think you can live up to those vows or you’re not sure you can live your life with this person. It’s better to say “no” than to say “yes” and fail that commitment and that other person who put their trust in you.
If you’re agreeing to something over the long term, you’re ceding some control over your life and breaking that commitment is likely to be painful. Be very careful when doing this, and make absolutely sure that this is something you truly want. Don’t walk into a huge commitment without high confidence.
The message in all of this is simple: most of us feel happiest when we have maximum control over our lives. When we cede control over our decisions to others, by allowing things like our boss to push us into unpaid overtime or unethical tasks, by allowing ourselves to become financially dependent on things other people control, by allowing our emotions to be controlled by the approval of others, by committing to things and then growing to regret them, we bring unhappiness into our lives, and that unhappiness is often temporarily dealt with by overspending.
Take control. Cut those patterns out of your life. You’ll be happier for it.
One of the biggest mental obstacles that most people face when it comes to turning around their financial life is the perception that if they cut into their spending, they’re going to reduce their quality of life.
Typically, a person’s mind flashes to the non-essential things that they care about most. So, for me, when you talk about cutting spending, I imagine cutting into my hobby spending. I imagine cutting into my quality food spending. I imagine cutting into family vacations.
To tell the truth, that’s a pretty unpleasant vision. Those are the things I care about in my life. I don’t want to cut them out. I don’t want to lose those things that really bring a lot of joy and value to my life.
Most people who consider cutting their spending go through a similar thought process. Their mind immediately flashes to the things in their life that they spend money on that bring them genuine lasting value and joy, and unsurprisingly they don’t want to cut that. Thus, the prospect of spending less seems like it directly leads to a lower quality of living and thus misery, and thus people often avoid frugality or enter into it with severe trepidation.
Here’s the catch: if I’ve learned anything from our own financial turnaround, which led us to being debt free with a paid-off mortgage by our early thirties and well on our way to early retirement as soon as our youngest leaves the nest, it’s that cutting back on your spending is really ineffective when you cut the core things you most care about, but it’s brutally effective if you aim it at everything else. That’s the secret of frugality – cut back on the things you don’t care about, don’t expand your spending on the things you do care about, and the leftover money will make a huge difference in your financial state without reducing your quality of life one bit.
That sounds simple enough at a glance, but it’s actually got some pretty serious pitfalls.
First of all, it requires a strong sense of what things you actually care about and which things you’re spending money on out of routine or to impress others or from bad advice or from media influence. The things that you really care about are worth spending money on. The things that you spend money on because it’s just how you do things or because you want your friends to be envious or because someone suggested it to you or because you heard about it on social media or the news are not worth spending money on, because they contribute almost nothing positive of value to your life.
The trick is to distinguish between the two groups, and that’s harder than you think because those things that aren’t worth spending money on often do give you a little momentary burst of pleasure, and we do remember those bursts. We end up associating that burst of pleasure with it being a “good” thing. The catch, of course, is that lots of things give us a little momentary burst of pleasure, and many of them don’t require us to spend money. I get a burst of joy when I’m working and my wife walks by me and puts her hand on my shoulder for a moment. I get a burst of joy when I’m done with my work an hour early and can curl up for a few unexpected chapters of a book. I get a burst of joy when I’ve been hiking for an hour and reach an amazing vista. I get a burst of joy from making a really good family dinner and savoring that first bite and seeing my children dig into it.
Life offers us so many little bursts of joy for free that it’s silly to pay for more of them. Instead, we should save our money for the things that are more deeply meaningful. Often, they provide a burst of joy, but some element of it lasts and lasts over time because it’s tied to something that we truly value.
So, that’s our challenge, laid bare. The real key to spending less without reducing quality of life is to spend money on things that bring lasting value into our life while not spending (much) money on things that are merely little bursts of pleasure and instead finding those mostly for free. The closer we can get to that ideal, the less we spend while maintaining the same quality of life.
That dividing line is different for everyone. The line between the things in my life that are really worth spending money on versus the things that really don’t matter to me is different than your line between those two groups.
Thus, I can’t actually suggest to you which items are on which side of the line. All I can really share is how I went about (mostly) figuring them out and putting that knowledge to work.
One thing that helped me was to cut certain types of spending out of my life entirely and see how I reacted to that. Quite often, once I was able to adjust my daily routine a little bit, there was no real lasting impact. I found that cutting off regular coffee shop visits didn’t really alter my quality of life. The same with regular book store visits. Those were things that I felt pretty confident were “core” things that really mattered to me, but by cutting them out and finding a somewhat different life routine, I learned that they really didn’t matter that much. I use thirty day challenges for this, meaning that I do it for thirty days and evaluate the results afterwards.
Another thing that helped, and this might seem strange at first, was to reorganize my schedule so I could spend more blocks of time on my hobbies. Often, I find that when I’m passionate about something but my schedule doesn’t afford me the time to explore it like I want to, I throw money at that passion. If I’m really missing playing board games and I don’t have a window to play, I’m more prone to spend hobby money on a board game. It’s a “substitute” impulse because I don’t have time for the thing I really want. Giving blocks of focused time to my hobbies takes away that “substitute” impulse.
Another strategy is to consciously go through every bit of your spending and trim spending on things that are obviously unimportant. For example, I switched almost all of my food staple and household staple buying to store brands because, honestly, my quality of life is not tied to whether I buy name brand hand soap for the bathroom or whether I buy name brand sugar. I negotiated for better insurance rates and shopped around for better policies because my quality of life is not tied to what my insurance carrier is. I eliminated our satellite service because I realized that the content on there wasn’t really adding to my quality of life in a world where much content is available elsewhere.
If you find yourself regretting something you cut out of your spending, don’t hesitate to bring it back. This follows the same principle as any significant life change – if it’s making you feel miserable, dial it back. You’re far better off finding a more moderate change that makes you feel good and empowered than a radical change that you’re going to eventually fall back on. Don’t view this as a failure or a loss. Instead, view it for what it actually is: setting yourself up for sustainable long term success.
My final suggestion is to recognize that not buying something is often more empowering than buying something. Spend the money and it’s often just a burst of joy that’s forgotten quickly. Keep the money and it actually becomes something, a piece of the life that you want to be leading. At this point, I’d almost always choose the little piece of the better life than the quick treat I’ll forget about tomorrow, but it took me a long time to genuinely begin to feel that way. Just remember what not spending actually means – it’s a genuine step toward your goal, especially if you use that money well by throwing an extra $5 toward debt repayment or an extra $20 into savings. That’s empowering. That feels good in a wholly different way.
Remember, the quality of your life doesn’t have a whole lot to do with spending. There are many great things in your life that don’t have a financial cost at all. Don’t spend your money chasing the things that aren’t great; rather, use that money so you can find even more greatness.
When signing on for a loan, whether it’s a mortgage for a new home or a personal loan to consolidate credit card balances, you’re often offered insurance that promises to make the debt payments should anything happen to you.
At first blush this sounds like a great idea, right?
After all, such insurance is designed to step in and cover monthly loan payments and protect you from default in the event of anything from job loss to debilitating illness and even death.
While there are benefits to this type of protection, there’s also a long list of reasons to think carefully before signing on the dotted line, including the fact that there are better options out there that will protect you and your family more directly and thoroughly in the event of the unexpected.
The Types of Loan Insurance Policies Available
As the Federal Trade Commission (FTC) explains, there are several types of loan insurance (also known as credit insurance) available to consumers. Options include credit life insurance; credit disability insurance; involuntary unemployment insurance and finally credit property insurance.
None of these should be confused with private mortgage insurance, otherwise known as PMI, which is typically a requirement for homebuyers who put less than 20% down on a home purchase.
Among the drawbacks of loan or credit insurance is the decreasing value of the policy, says Kathleen Fish, a certified financial planner and president of Fish and Associates.
What does that mean exactly?
In the simplest sense, it means that you will always pay the same amount for your monthly premium despite the fact that the face amount or benefit offered by the policy decreases with each subsequent payment, explained Fish. She suggests that level term policies, which pay the policy’s full-face value for the life of the policy term, are often a better option.
Zhaneta Gechev of One Stop Life Insurance offers similar criticism of loan insurance and says she’s passionate about educating consumers regarding the drawbacks of such policies.
“For example, you start off with a $200,000 policy and you’re always paying the same premium. However, in X numbers of years, your policy could be worth half of what you started off with,” said Gechev. “Why pay the same price for lower coverage?”
Yet another important distinction to understand about loan insurance is who benefits from the policy. The answer is the bank or the lender, not you, and not your family members.
In other words, with a standard life insurance policy, for instance, you get to select the beneficiaries. “You get to name the beneficiary who can in turn pay off the loan and keep the difference,” said Fish.
But with loan insurance, the bank or lender is the sole beneficiary. To make this point clearer, if you pass away before your mortgage is paid off, for example, mortgage insurance will pay the balance owed on the home. That’s it.
“But this may not be what your family needs at that particular moment,” explained Gechev. “Your spouse or parents or children will need money to pay for your funeral. And as we all know, they are not cheap.”
Surviving family members may also need to pay medical bills and other expenses.
“To me, as a consumer, I want to keep control of the decision about how the money is spent,” continued Gechev. And by opting for loan insurance rather than a traditional life insurance or disability policy, you lose that control because the beneficiary is the lending institution.
For all the money you pay into loan insurance, there’s no guarantee it will actually cover you in a time of need, says Angela Bradford, of World Financial Group.
“The companies decide at the time of the claim if the person was insurable. They don’t always pay out,” she said. “Most are set up this way. At the time of something happening is when the company decides if they’re going to pay out the loan or mortgage… If the client had past health problems, the companies get away without paying out.”
To help avoid this pitfall, before signing up for a policy ask about the company’s underwriting procedures, specifically whether policies are underwritten when applied for or when claims are filed, said Sarah Jane Bell, a financial advisor with Sun Life Financial.
“Often it’s underwritten after a claim, so if you had a medical issue not disclosed upon applying, the claim can be denied even after paying premiums along,” Bell said.
You May Already Have the Coverage You Need
Many consumers fail to realize that they already have the coverage necessary to pay a mortgage or some other loan in the event of an emergency.
This coverage comes in the form of other policies (think: life insurance, disability insurance) and often, those other policies have the added benefit of not requiring the funds be used solely to pay off your loan, as already discussed.
“When shopping for loan protection insurance, first review your current life insurance, disability insurance, and other coverage to see if you really need additional coverage for your loan,” suggests Kathryn Casna, an insurance specialist with TermLife2Go.com.
Most employers, for example, offer employees the option to sign-up for short-term disability and unemployment insurance during the on-boarding process, and may offer long-term disability policies as well, Casna said.
If you still decide that a loan protection policy is the best approach for you, it’s important to shop around, identifying the best price and the right coverage for your situation.
Many loan protection insurance plans cost around 0.2% to 0.3% of the loan or mortgage, said Jared Weitz, CEO and founder of United Capital Source.
“The price will vary based on the duration of the plan, the size, and the level of coverage,” Weitz explained.
Also, as part of your research process, make sure you’re getting the right type of policy, said Casna.
“Credit life insurance pays out only if you die. Credit disability pays out only if you can’t work due to a disability, while involuntary unemployment insurance pays out if you lose your job for any reason that’s not your fault,” Casna explained.
Review your policy carefully to ensure it will cover your concerns. Some credit disability policies, for instance, won’t pay out if you work part-time, are self-employed, or your inability work is due to a preexisting health condition.
“Read the fine print before signing up, you need to be aware of what the policy actually covers and under what grounds you’re able to file a claim,” said Weitz.
Mia Taylor is an award-winning journalist with more than two decades of experience. She has worked for some of the nation’s best-known news organizations, including the Atlanta Journal-Constitution and the San Diego Union-Tribune.
Clearlane, an online auto lending platform that’s powered by Ally Bank, offers auto loan refinancing and lease buyout options for borrowers with nearly any type of credit score. They do so by utilizing a nationwide finance network and offering fast and easy online quotes. They even let you get pre-qualified online and without a hard inquiry to your credit report.
If you’re curious about refinancing your car or buying a car you’re leasing, this online lender may be exactly what you need. Keep reading to find out how Clearlane works, where it falls short, and why you might want to consider it.
Clearlane Auto Refinancing: Key Takeaways
Refinance your current auto loan or borrow through Clearlane to buy out your lease.
Use your Clearlane loan to purchase a new or used car.
You don’t have to share your Social Security number to get pre-qualified.
Get loan quotes from multiple lenders in one place.
Interest rates run from 3.64% to 21.9%.
Borrow between $5,000 and $100,000.
Clearlane Auto Refinance Review: Solid Auto Loans for All Credit Types
If you currently have an auto loan with a less than stellar interest rate, you may want to consider refinancing your car loan with a company like Clearlane. According to stats from the lending platform, refinancing an auto loan saves the average consumer $107 per month and $1,687 in interest over the life of their loan.
Of course, those savings are predicated on qualifying for a lower interest rate with Clearlane. While the company does offer rates that start at 3.64%, keep in mind that the best rates and terms only go to consumers with excellent credit. If your credit is poor or just okay, it’s likely you’ll pay more than the lowest advertised rate. Then again, refinancing could still be a great deal, but only if you’re able to secure a lower rate than you’re paying now.
That’s why auto loan refinancing is usually best for consumers who have improved their credit substantially since they first took out their car loan. With a better credit score, Clearlane and other auto refinancing companies may be able to get you into a new loan with a lower monthly payment and better terms.
In addition to auto loan refinancing, Clearlane also lets you use their loan to buy out your lease. And with either option, you can get pre-qualified online without a hard inquiry to your credit report.
Clearlane also offers auto loans for new or used vehicles, although cars must be less than 10 years old. Their loans also come with no application fee or hidden fees.
What to Watch Out For
Clearlane does offer some low starting rates on their auto refinancing and lease buyout loans — but keep in mind that these loans aren’t for a new car purchase. Clearlane does offer auto loans for consumers who want to purchase a vehicle, but you can’t apply for them on the Clearlane website.
Another downside of Clearlane is the fact that they don’t originate any loans themselves. Instead, they work as a loan marketplace that connects users with a nationwide network of banks and lenders. That’s not necessarily a bad thing, but you’ll need to do some research on any lenders you might end up connecting with once you get pre-qualified.
Another thing to consider: Any time you refinance a loan to get a lower payment, you could be extending your repayment timeline in the process. If you choose to refinance your auto loan with Clearlane or any other company, make sure to keep that in mind. You may want to score a lower monthly payment, but perhaps not at the cost of paying on your car loan for several more years.
As a final downside, Clearlane doesn’t offer any specific eligibility requirements for their loans. This lack of transparency makes it difficult to know if you’ll qualify, although they do let you get pre-qualified without a hard inquiry on your credit report.
Who Clearlane Auto Loans Are Best for:
Consumers who have auto loans with high interest rates but may be able to qualify for a new loan with better terms.
Anyone in a lease who wants to purchase their vehicle.
Consumers with good credit who can qualify for Clearlane loans as low as 3.64% APR.
How We Rate Clearlane Auto Loans
At The Simple Dollar, we aim to provide a general overview of a lender’s products and services through a standard rating process. After a thorough research and discovery period, here’s how Clearlane stacks up:
Clearlane makes it easy to apply for auto refinancing or a lease buyout through their website, and they even let you get pre-qualified by offering only your auto details, loan payoff amount, your name, your birthday, your email, address, and your annual gross income.
Once you get pre-qualified, you can look at a selection of loan offers tailored to your unique borrowing needs. If you don’t like your options, that’s perfectly okay. But if you do, you can move forward with the full loan application by including more details such as your Social Security number, housing payment amount, and employment information.
If you’re approved, you may receive your loan funds or have them applied to your old auto loan within a few business days.
The Bottom Line
Refinancing an auto loan can make sense if your current loan isn’t that great. It’s possible your credit score and financial standing have improved enough that you could qualify for a better deal, so why not give it a try?
Still, there are a lot of lenders that offer auto refinancing and lease buy-outs, and you should definitely consider more than one. Make sure to see how auto lenders stack up in terms of the interest rate you can qualify for and any fees they charge before you move forward.
In the book The Millionaire Next Door, the authors Thomas Stanley and William Danko surveyed more than a thousand households that had accumulated more than a million dollars in net worth, looking for traits among them that were decidedly different than the mainstream population. What did people who had accumulated wealth do that others do not, and vice versa?
The entire book discusses the results of that study, but very early in the book the authors efficiently boil down the differences in financial behavior between those who are able to accumulate wealth and those who do not down to seven key factors. These seven factors are the key things that people who are effective at building enough wealth to be financially independent do that are different than most people.
While rereading the book, I thought these seven factors were interesting enough to discuss on their own, so let’s walk through them.
Factor #1 – They live well below their means.
Spend less than you earn and do something worthwhile with the difference. It’s at the core of pretty much every personal finance strategy out there – every one that actually works with any level of reliability, anyway. Yet many Americans struggle deeply with this strategy. The average American saves somewhere around 5% of their income (depending on the exact moment in time and the exact survey), and that includes the prodigious savers that put away large portions of their income. To average out at 5%, for every person that saves 50% of their income, there are nine more who are saving nothing.
People who accumulate wealth at a high rate simply save money at a high rate. They choose not to spend a sizable portion of their income and instead invest it for their future, and they achieve that by simply spending a lot less than they earn and not letting their spending keep expanding to gobble up their entire income.
Let’s say a person brings home $100,000 a year. The average American would spend about $95,000 of that and putting aside perhaps $5,000 of it. Someone who is on track to become wealthy is likely spending something more like $60,000 of that and putting aside $40,000 of it. One of those two people is treading water financially, while the other is heading toward building wealth.
How do you do this? Well, it’s the main topic of The Simple Dollar (if there is one), so if you’ve been here for a while, you’re probably familiar with many of the best strategies. Here’s a quick refresher.
Understand your needs versus your wants. There are some things in life that you need – basic food, basic shelter, basic hygiene products, basic clothing, transportation to and from work. Almost everything else is a want – it’s stuff that’s not necessary to continue to enjoy life. That includes better versions of those basic items. Understand what is a want and what is a need.
Be selective about fulfilling wants. People who end up spending everything they earn are often in a cycle of drowning themselves in want fulfillment. They fulfill countless impulses, big and small, and never really say “no” to themselves. The thing is, most impulsive desires are really a waste of money. They fade very quickly if you don’t fulfill them right away. Even if you do fulfill them, they bring only an instant burst of pleasure which immediately fades. Learn how to be selective with your wants.
Look at the big expenses first. The big expenses for most people are things like housing, a car, and insurance, along with any other monthly bills that top the $100 mark (this might include things like a cell phone, a cable or satellite service, and so on). What can you do to cut that cost? You can cut housing costs by living in a smaller place or in a different location. You can cut transportation costs by using mass transit or a bicycle or your own feet to get places. You can cut your insurance costs by thinking about each policy and shopping around for them. You can cut your cell phone costs by shopping around and moving to a plan that matches your use. You can cut your cable and satellite costs by simply ditching cable. Cutting a big expense can make a difference of hundreds of dollars a month.
Try out some basic frugal strategies. I suggest trying frugal strategies as a thirty day challenge and then deciding for yourself whether they work out after thirty days of commitment. Here are a few ideas: buy all of your food and household staples in store brand form; prepare all meals at home without eating out; take leftovers to work every day; don’t spend any money on hobbies and instead enjoy and use the hobby materials you have; and avoid the coffee shop and make your own; don’t watch television and see if you really need cable.
Factor #2 – They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
In other words, people who are efficient at accumulating wealth tend to use their already-available resources in ways that accumulate wealth rather than devour it.
They tend to indulge in hobbies that don’t have much upkeep cost compared to their level of income. They put their money to work by investing it in things that will grow in value or produce more income.
More importantly, they tend to avoid spending their time, money, and energy on things that are going to consistently drain money from their accounts.
This doesn’t mean that they sit around Scrooge-like using their money to count their coins. Rather, it just means that the way they spend their time and energy doesn’t work in strong opposition to their financial progress.
Here are some practical ways to do this.
Get interested in your own financial state and financial planning. Make it your goal to know your budget inside and out and how to stick to it. Also, make an effort to understand where your money is invested, why it’s invested there, and whether it’s making a good return. Make this into a minor hobby – it doesn’t need to be an obsession, but it does take some time to read some books on investing and understand what you’re doing with your money.
Choose hobbies that require active mental or physical involvement and don’t require much financial upkeep and practice those hobbies. There are infinite free or very low cost hobbies out there. Reading is one, as long as it centers around reading and not just buying books to put on your shelf. Hiking or just going on walks is one. Golfing, on the other hand, isn’t one, nor is shopping. Which of your hobbies require active mental and/or physical involvement and don’t require much financial upkeep? Those are the ones to target. I generally aim for hobbies that require less than $1 in expenses per hour of participation.
Avoid media sources and people who mostly just encourage you to buy stuff. A surprising amount of media – television and magazines and social media in particular – is oriented around making you aware of and making you desire the latest stuff and the latest premium (read: expensive) experiences. Dump all of it. Cut your news reading down drastically – breaking news is often inaccurate, so read the news once every few days and stick to well-reported sources. Skip social media unless you’re actively looking to contact someone. You’ll be better off for it.
Factor #3 – They believe that financial independence is more important than displaying high social status.
Often, the millionaires in your community dress pretty casually and drive reliable and non-flashy cars. They aren’t dressed to the nines most of the time. They aren’t driving a new Maserati. Those are things that people who are up to their eyeballs in debt often do.
Why wouldn’t they enjoy the “good things”? They are enjoying the good things. The good things are things that don’t break down along the side of the road. The good things are things that aren’t a target for theft. The good things are things that put a smile on your face without taking money from your wallet. The good things are things that you do to lift yourself up, not to attract or impress others. The good things are deep relationships with good people, not “impressing” people who drive by or who see you on the sidewalk. Not having to go to work each day? That’s a good thing. Being in control of your own destiny? That’s a good thing, too. Independence. Freedom. Not worrying about what others think. Low stress. All good things.
People who accumulate wealth have decided that those good things are more important than things like dressing up or driving nice cars or constantly eating at fancy restaurants or having huge wine cellars or having an Architectural Digest home to impress others.
Here are some strategies to move toward that mindset.
Question your thinking, especially when you’re about to buy something. Why are you buying this? Are you thinking of impressing other people with the item you’re purchasing? This is more and more important as the purchase gets bigger and more expensive and should really matter when it comes to things like cars and homes.
Cultivate friendships with people who appear to be like who you really are inside, rather than the image you want to portray. If you put in the time to build a social circle around you consisting of people who truly share the values you hold inside, you’re going to be much more able to simply not worry about what others think regarding your personal choices. If you’re constantly worrying about what your friends will think of you, reboot your social circle. If you have interests you’d love to explore except you’re worried about what your friends think, reboot your social circle. Don’t live your life based on what your friends might think.
Stop trying to be perfect. This is especially true if you invest significant time trying to create a “perfect” picture of your life to show others on social media. Perfection can never be attained and the journey to try to get there is self-destructive. Rather, just try to be a better person than you were yesterday in the areas you care most about.
Factor #4 – Their parents did not provide economic outpatient care.
In other words, people who tend to accumulate wealth typically did not receive money from their parents once they reached adulthood and had a job. Their parents didn’t slip them money to help them maintain a higher level of affluence beyond what they could afford with their own earnings.
If you’re in a situation where this is currently happening, your parents are financing an unsustainable lifestyle, one that makes you beholden to them. If you’re in a situation where this used to occur, you know quite well how difficult the transition can be when the spigot is turned off.
What can you do if this is your situation?
Spend less than YOU earn. You absolutely must learn to live on less than what you are earning. This does not include what your parents are handing you. You have to learn to live on less than your paycheck, because that extra income is not a reliable one and it leaves you dependent on your parents.
Remember that the money is theirs, not yours. Many people who receive additional money from their parents in adulthood move into the mindset that such gifted money is a right of theirs and not a gift from their parents. A sense of entitlement to that money often appears and it adds a great deal of strain to the situation. You have to completely accept that such money is not yours and that your parents have an independent life of their own and may choose, at any time, to stop giving money. That’s not only their right, it’s probably what they should do for their own financial health, which they are sacrificing so that you can have a few extra bucks in your pocket. This is a gift and should be deeply appreciated. It’s not a right to be demanded.
Use the money that’s being given to you to eliminate debt and supercharge savings. You should be making minimum payments on your debt from your own earnings (and still spending less than you earn overall), but the money from your parents should go to making extra debt payments so that you get out of debt quickly. If you don’t have any debts, this money should go into savings and investment so that you can rapidly move toward financial independence.
Factor #5 – Their adult children are economically self-sufficient.
This is the flip side of the above situation – people who accumulate wealth with ease do everything they can to raise children who are financially and emotionally independent from them and then do not hand them additional money to artificially inflate their lifestyle.
The reason is clear: giving your children money to inflate their lifestyle not only damages your own financial state, it causes the child to be dependent on that financial assistance, which, as noted above, means it’s less likely that your child will be financially successful on their own. Giving your child money means they’re less likely to find independent success.
Following this step is pretty straightforward.
If you have younger children, make it clear as they grow older that you expect them to be fully independent as early as possible. This doesn’t mean that you’ll consign them to homelessness as soon as they’re eighteen. What it does mean is that you expect them to be preparing for a career, actively finding work, or working in a career path as soon as they graduate, and that they should plan to choose a career path that can sustain the lifestyle they want.
If you have children who already have a full time job after school, start weaning them off of any financial assistance you’re providing them. Sit them down, make it clear that you want them to be fully independent of you and have their own life under their own control and destiny, and then start peeling back that money. Don’t make it abrupt, as that can cause financial hardship, but start moving gently in that direction by slowly turning off the spigot.
If you have a child on the verge of independence, don’t start financial support. Even if it appears that the change will be difficult for them, this is a moment where you must let the young bird spread their wings and fly on their own. If you’ve given them any indication that you will continue to give them money once they’ve made the leap, correct that indication right away.
Factor #6 – They are proficient in targeting market opportunities.
What this means is that they frequently look for opportunities to make money with relative ease, usually through investing money they’ve put aside just for this purpose. They look for opportunities to leverage their own knowledge and the money they’ve been able to accumulate to either save a ton on future expenses or to make a very nice return.
This takes a lot of forms, but it boils down to two ingredients: knowledge in a certain area and money on hand. People who accumulate wealth use those things to generate more wealth as often as possible, keeping their eyes constantly open for opportunities.
There are many ways to do this. Here are a few.
Watch Craigslist, estate sales, and yard sales for enormous bargains on items you know you can easily flip. This takes advantage of some particular domain knowledge that you have and uses cash you’ve accumulated from spending less than you earn to turn a quick profit. For example, I do this with older trading cards, old video games, and other such hobby items – I have an idea of what things are worth and will often buy items just to flip them. I go to yard sales and thrift stores and estate sales looking for those kinds of items.
Cultivate a hobby in which you make things that you can use (at a lower cost than buying them), sell, or inexpensively gift. For example, I love home brewing and making fermented foods, and I have given both away as gifts in the recent past, often as items to bring to the host when invited to a party, but sometimes as holiday gifts as well. I make my own sauerkraut (my favorite condiment, where I can make a quart for about $0.30 which is a tiny fraction of the store cost) and my own kombucha (which costs about 10% of the price of buying it in the store). I’ve made many, many other things over the years, too. The key is that I get personal enjoyment and value out of the process of making it, and it just so happens to produce something that I can use or that can serve as an inexpensive gift.
Invest in something that can become your hobby that you can eventually turn around for a profit. I have a close friend that does this with old homes. He’ll buy one, move in for a few years, spend those years renovating it as an evening activity, and then sell the house at a tidy profit and move elsewhere, buying a old house with some of the proceeds. I have a few family members that do this with junk cars – they’ll buy an old junker, renovate it and completely rework the body, then sell it for a tidy profit and buy a junk car with some of the proceeds. In both cases, they’re using their passion to make a little money, but it’s more about their passion on their own terms than making money. It’s a hobby that happens to line their pockets a little.
Factor #7 – They chose the right occupation.
This doesn’t merely mean an occupation that pays well. Rather, it means that they chose an occupation that pays well that also aligns with their natural skills and is something they don’t mind doing. It doesn’t have to be a burning passion, but it needs to not be something they intensely dislike, so that they don’t wind up hating the work.
Finding this career path and finding it early in life seems to be the key for many people in terms of finding financial success. Having a job they don’t hate that earns a reasonably good income and offers opportunity because it happens to match their skills tends to lead to a very solid lifetime of income, and that makes it much easier to follow the other factors on this list.
Here are some strategies for this, even if you’re already on a career path.
Gain some awareness of what your skills and strengths actually are. There are many ways to do this. Some involve tests, while others involve procedures of self-reflection. One element I’ve always found important is to trust the opinions of others who know you well in a professional or academic context, as they often know what you’re good at and not good at in comparison to others on the team. Consider what classes came easy for you when you were in school. These are the things you want to lean into when choosing a career (or rebooting one).
Look for jobs you can reasonably enjoy that match up with those skills and strengths (and, ideally, pay well, too). Once you have a good idea of where your strengths lie, start looking for jobs that utilize those strengths. Filter those jobs through a lens of what you might reasonably enjoy doing – you don’t have to love it, but at the same time, you probably shouldn’t turn your hobby into a job, either. If you’re still finding a lot of things, start filtering those prospects by income level and choose one that pays well.
Always look for career situations that let you lean in to your strengths. If you know what you’re good at and what you’re not good at, it’s a good idea to find positions that really line up well with what you’re good at. It’s never bad to try to work on your shortcomings, but you’ll generally be most highly rewarded when your skills line up with your job, because you’ll be a top performer in that specific field.
These seven factors often don’t line up with how the average person makes choices in their life, but at the same time, the average person struggles to build a good financial foundation. Remember, almost four in five Americans live paycheck to paycheck. Those that do not are doing something different with their lives, and the data in The Millionaire Next Door points strongly at these seven factors. It’s very likely that you’ll find it worthwhile to integrate these factors into your life.
When it comes to shopping wisely for a car insurance policy, perhaps the number one rule to keep in mind is the age-old adage about not being a penny wise and a pound foolish.
Cliched as that expression may be, buying too little coverage is one of the consumer mistakes most frequently cited by insurance professionals.
Unfortunately, it’s just one of the many things consumers do wrong when shopping for what can be a particularly critical insurance policy in your portfolio of coverage. Each year there are millions of vehicle crashes in the United States. In 2016 alone, there were about five million crashes that involved property damage and about 2.2 million that caused injuries.
With such figures in mind, here’s a look at some of the other mistakes to avoid when searching for a car insurance policy.
Mistake No. 1: Carrying Too Much or Too Little Coverage
Finding the right balance between purchasing too much and too little coverage is an important part of the process when signing on for a new policy.
Carrying coverage you don’t need is simply a waste of money, says Tony Arevalo from Carsuance.net.
“Collision insurance for an old car is a perfect example,” said Arevalo. “Such a vehicle is cheap enough to repair or replace that you will end up in the long run paying more for insurance than the car’s value.”
Often consumers will have overlapping insurance coverages as well. For instance, some people’s health insurance policy protects them in the event of a car accident, said Arevalo. If that’s the case, there’s no need to pay for medical expense coverage through your auto policy.
Carrying too little coverage is even more dangerous, continued Arevalo.
For example, in Florida, consumers can choose a policy with only $10,000 property damage liability, he explained. Those who opt for such minimal coverage may end up paying a significant amount of money out of pocket in the event of an accident.
Jo Ann Fisher of Premier Insurance Groups says state minimums for bodily injury and property damage are outdated and are no longer enough to protect anyone.
“They were put into place when incomes and prices were so much lower than they are today,” she explained. “People need to make sure they have enough liability coverage to protect their assets, including their income.”
In most states, if your car insurance has paid the maximum that a policy stipulates and that amount is not enough to cover all of the damages you may have caused as part of an accident, there’s a possibility you will be required to pay the difference.
Mistake No. 2: Not Shopping Around
Another critical mistake consumers make when buying car insurance is not exploring the market and the competition, says Arevalo.
“The prices and the quality of insurance vary significantly based on the insurer,” he noted.
As an example, State Farm charges about $251 monthly for full coverage in Long Beach, Calif., according to Carsurance’s own market research. Wawanesa, on the other hand, charges $118 for the same service.
“On top of that, Wawanesa is the second-best Californian auto insurance company in customer service, according to the 2018 J.D.Power rankings, while State Farm is tenth,” said Arevalo. “This illustrates how much variance an average customer may encounter. That’s why shopping around and requesting quotes from at least five insurers is paramount.”
Unless it’s packaged with other coverages you want or need, experts often recommend skipping the road service coverage with your auto policy. Here’s why.
“You may find that you already have this coverage with AAA, through a credit card perk, or as part of your vehicle’s new car warranty,” says David Miller, vice president client executive for personal lines at Plexus Groupe.
The savings associated with not including such coverage on your auto policy may be minimal, but filing a road service claim on your car insurance shows up on your Comprehensive Loss Underwriting Exchange (CLUE) report, explained Miller.
“All of your insurance claims show up on this report, and the data is shared amongst insurance companies when you shop for coverage. More and more insurance companies are starting to look at the total number of “incidents” on your CLUE report, rather than just at-fault accidents, so you want to avoid making towing claims on your insurance policy if possible,” he said.
Mistake No. 4: Carrying Collision Coverage on an Old Car
As Arevalo mentioned, collision is an area where some people overspend if they own an old car. To avoid doing this, it’s a good idea to measure the cost of your collision coverage against the value of your car.
Sites like Edmunds or Kelly Blue Book can provide estimates of your car’s value. You could also check websites like CarGurus to determine what dealers are charging for cars similar to yours.
If you determine that the cost to provide collision coverage is 20% or more of your car’s value, you may want to do away with the extra coverage, said Miller, of Plexus Groupe.
“For example, let’s say you’ve done your research, and your car would sell for about $3,000 retail,” Miller explained. “The cost for collision insurance on your car is $500 a year and you have a $500 deductible. If your car is totaled, your insurance company will pay you $2,500, which is the car’s $3,000 value less $500 deductible. Your $500 premium represents 20% of the value of your car. Over the course of five years, the amount you pay in premiums will equal the value of your car and that’s assuming your car retains that value over the course of five years.”
Mistake No. 5: Not Updating Your Policy to Reflect Life Changes
Everything from moving to buying a home can impact the amount you pay for car insurance. Yet many consumers forget to call their insurance provider and notify them of such updates.
“For example, shortening your commute means you could qualify for lower rates,” Fabio Fashi, property and casualty team lead at Policygenius. “Or if you’re transitioning from being a renter to a homeowner, updating your auto insurance policy to reflect this change could earn you a discount.”
Owning a home generally represents a better financial situation, explained Fashi, which is why it can translate into a preferred rating from insurance companies. The discount will vary based upon the carrier you choose, but is typically around 5%, he said.
Mistake No. 6: Not Getting the Premium-Versus-Deductible Balance Right
Often, to save money, consumers opt for a policy that offers lower monthly premiums in exchange for a higher deductible in the event of an accident. This approach may not always be wise, said Fashi.
“It may not pay off to have lower monthly payments if you can’t afford what you have to pay out of pocket when filing a claim,” he explained.
“The balance between deductibles and premium payments is related to how much money you have in the bank, and if you’d prefer to pay more or less at the time of an accident,” Fashi continued. “For example, if you frequently have less than $1,000 in savings, you probably wouldn’t want to have a $1,000 deductible.”
Conversely, if you have a solid rainy-day fund, it’s more likely that you can afford to opt for the reduced monthly premiums and higher deductible.
Mistake No. 7: Paying for Gimmicks Like Accident Forgiveness
Some auto insurance providers are starting to offer a variety of gimmicky add-on coverage options for policies, and not all of these new products are necessarily worth the cost.
One of the most popular examples is what’s known as a deductible savings bank.
“When a deductible savings bank is added, the client earns $50 towards their deductible for every six-month policy term that they don’t have an accident or violation,” Miller explained.
Policyholders can use the money in their “bank” to pay down a collision or comprehensive deductible. Often, such an option can only be added to a policy if the collision and comprehensive deductibles are set at $500 or higher, said Miller.
“I have a quote for a new business client… without the deductible savings bank, the premiums on his cars are $722 and $899 every six months. If I add the deductible savings bank, the premiums increase to $738 and $922,” Miller explained. “So, for an additional $39 every six months, the client gets a benefit worth $50, but it’s only good if they remain ticket- and accident-free for that six-month period.”
You’re basically pre-paying for an accident you might never have or a ticket you may never get, Miller pointed out.
Additional examples of gimmicky new add-ons include accident forgiveness and deductible dividends. As part of accident forgiveness, an insurance company typically will not charge the policyholder for the first accident occurring after the coverage is purchased.
Deductible dividends meanwhile, are similar to a deductible savings bank. They increase your monthly payment in exchange for a credit on your deductible if and when an accident occurs.
Mia Taylor is an award-winning journalist with more than two decades of experience. She has worked for some of the nation’s best-known news organizations, including the Atlanta Journal-Constitution and the San Diego Union-Tribune.
What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question. 1. $250K to raise a kid? 2. Long term care? 3. $20 bill budgeting 4. Expense of laundry service 5. Backlog of unused media 6. 403(b) risky? 7. Cheap or expensive bag? 8. Thoughts on Aldi 9. Is renters insurance necessary? 10. Appliance repair or replace? 11. Saying no to parent 12. Getting value from self-improvement books
Spring usually begins with a mix of rainy days and dry days, warm days and cold days. Sometimes, it’s a warm, dry day and all I want to do is go outside. Other days are wet and cold and I want to stay in out of the rain.
The hardest part are the beautiful days when I need to stay inside and work. I want to go outside on a long, long walk through the countryside and through the woods, looking for mushrooms and enjoying the fresh air.
Spring is wonderful.
On with the questions.
Q1: $250K to raise a kid?
My husband and I are in our early thirties and were starting to think about having a couple of children in the next few years. We started to look into the costs and the most common figure we found was $250K to raise a child. That can’t even be right as there are families that raise kid that barely bring in that in total in 18 years. What is the actual cost of raising a child in your experience?
When you see numbers like $250K, you’re seeing the total long term cost over a period of at least twenty years, and that often includes paying for college and other such large expenses. It’s also an average and includes families who are paying for things like private school.
My experience has been that the cost of raising a child is often connected directly to the financial means of the parent. You can raise a child perfectly well on a low income – my parents were never, ever very well off when I was growing up and they raised three children. My father worked in a factory (when he wasn’t laid off) and had side gigs (most notably commercial fishing) for a living and my mother was a stay-at-home mom. There wasn’t a ton of money there.
We are most certainly spending more per child on our children than my parents did on me, but the truth is that a lot of the extra expense is on optional things like a band instrument or sports fees or an extra ticket to an event that we’re going to as a family. We could not spend those things and our child would be perfectly fine.
In other words, those $250K estimates are numbers that summarize what parents are choosing to spend on children, not what they have to spend. Outside of some basic things like food, shelter, clothing, public education, and medical care, most expenses related to raising a child are very optional, and many of those required expenses can be incredibly low out of pocket.
What are ordinary people supposed to do when they need long term care? The wealthy can pay for insurance or higher care, but that’s not an option for a poor person or even a middle class person. If me or my wife needed long term care I don’t know what we’d do.
This is one of many issues that have radically changed in society during the 20th century and that we haven’t really figured out how to handle as a society.
At the start of the 20th century, people who needed this kind of care usually didn’t have the medical care necessary to continue to live. They perished. Thus, it was fairly uncommon for someone to need this kind of care for an extended period of time, and when it did occur, there were typically large families and even whole communities who stepped up to provide that care.
Today, much of that has changed. In many situations, medical advancements enable people to live through things that they would not have survived 100 years ago. This means that more people who are in a long term care situation are surviving when they previously would not have done so. At the same time, nuclear families are smaller and communities are less tight-knit, for various reasons.
The truth is that as a society, we have not figured out how to handle this yet. We haven’t figured out how to handle a lot of the advancements of the 20th century yet as a society. One only needs to look at the cruelty of many internet forums as further evidence of this.
The problem, of course, is that there is no ready-made solution. Long term care insurance is definitely one step many people can take to gain peace of mind about future situations, but it’s expensive for many. The honest truth is that many families, when faced with long term care situations, just have to deal with it moment by moment to the best of their ability. Some families struggle to provide that care at home, particularly when there’s a larger pool of family members that can help, while others go into debt. Many families rely on some form of government assistance to make it work.
If you can easily afford it, long term care insurance is a great idea. If not… well, society doesn’t have a robust solution for you. The “solutions” vary widely from situation to situation.
Q3: $20 bill budgeting
Was reading an internet forum that reminded me of how I used to budget in college. Back then, I used to have an envelope with $10 bills in it. Each month, I’d put $300 in $10s in there and each day I would take one out. Aside from rent, I had to live on that $10 each day. It paid for the bus and for food. Strategy I saw used $20 bills today which would be roughly the same.
Let’s spell out this system a little bit.
Aside from scheduled bills like rent, electricity, and so on, a person would aim to live on $20 a day in cash. Each month, a person would withdraw $600 cash from savings in the form of 30 $20 bills and put them in an envelope somewhere secure. Each day, that person would take a $20 bill out of the envelope and put it in their pocket. They would have to live off of that $20 bill and change from the previous months.
This gives you room to splurge if you want to, but to do so would involve eating beans and rice for a while. In other words, lean days would directly help with expensive days. It would also be needed to help you make up front purchases like a bus pass, which would ease daily expenses a little going forward.
I mentioned this idea to a friend and she said that she would probably try to have days where she could get by without pulling a $20 out of the envelope and then at the end of the month there’d be some $20s left over, which she’d use for bigger goals or big expenses or emergencies. That seems like a strong idea to me.
I think this system would work very well for anyone who is trying to make ends meet on a very tight budget.
Q4: Expense of laundry service
There is a service in our town that just started that will take your laundry off of your front step and bring it back within 24 hours washed, dried, and folded. The cost is $2 per pound of clothes (rounded up to nearest pound), paid up front. I am trying to do the math on whether this makes sense or not for us.
A typical large load of laundry weighs somewhere between 7 and 10 pounds, but that really varies depending on how much you stuff in your washer with a typical load. I actually weighed a load of laundry that I just pulled out of our dryer on a kitchen scale and it weighed about 9.5 pounds.
So, you’re paying somewhere between $15 and $20 per load of laundry to be done for you.
What is that saving you? The big savings is the time. You aren’t carrying your clothes to the washer and filling it up. You’re not moving clothes to the dryer. You’re not folding those clothes, either. That’s all done for you.
In terms of cost, the cost of a load of laundry at home, including all materials, energy, and equipment depreciation, is around $1.
So, in essence, you’re paying someone between $14 and $19 to put a load of clothes into the washer, transferring them to the dryer when done, then folding them for you when the drying is done. That’s at most half an hour of effort, and probably less than that.
Thus, unless you are very strapped for time and can extract a lot more than $30 of value per hour out of an extra freed-up hour, then this isn’t a cost-effective move. It essentially adds up to paying $15 or a little more for an extra 20 minutes or half an hour of free time.
Q5: Backlog of unused media
What are your thoughts on people who have large unused media collections and keep buying more without using what they have? Why does that happen? Is there a fix?
I noticed this myself with my collection of Kindle books recently. My son is home from college and he piped up and said that he actually has a lot of computer games unplayed as we often buy him Steam gift cards. He has a ton of computer games left unplayed yet he will often seek out new ones.
I want to be less into getting new stuff and more into using what I have.
The reason’s actually pretty simple: buying and acquiring and getting and collecting new items for your collection scratches a much different itch than actually enjoying the items in that collection.
I have the same issue in some areas of my life (far fewer than I used to, thankfully). The feeling that acquisition and discovery gives you is much different – and I think more addictive – than the feeling that diving deep gives you. This is particularly true when you don’t have as much time as you’d like to dive deep, but that’s not the sole cause of it.
The only solution I’ve found that works is to put moratoriums on new acquisitions. Give yourself a 30 day or a 90 day challenge to simply not buy any new Kindle books. Suggest the same for your son with his Steam games. If you have the urge, ignore it or, if you must take action, put that item on a wishlist.
This does a great job of strongly curtailing that desire to acquire, but it’s a desire that can easily grow if you’re not being conscious about it. I find that doing these kinds of moratoriums regularly does a pretty good job of slowing down my collecting nature.
As for actually using those backlogs, the best thing I’ve ever done is to consciously block off time in my schedule for that kind of exploration. I block off an hour a day for reading, and that has caused my book backlog to evaporate. I block off time on many weekends to play board games and that means the games in my collection are getting much more play.
Q6: 403(b) risky?
I work at [a public university]. One of my coworkers claims that people shouldn’t put money into a 403(b) because politicians will eventually target that money for extra taxation or reclamation because it is public funds. He thinks that because we are government employees our 403(b) money will eventually get reclaimed by the government so saving in a 403(b) is a waste. Is this even possible?
Well, anything’s possible, I suppose. However, if you’re running your life in response to what you think it’s possible that the government might do, you’re walking by a ton of opportunity.
I mean, I think it’s possible that the government might outlaw certain classes of opioids. Does that mean I should start hoarding them, just in case, even though they’re very likely to just sit in my cupboard and go bad? Of course not, and I consider new opioid restrictions to be far more likely than any changes to 403(b) taxation.
Let me put it to you this way: if the United States government starts retroactively taxing the retirement savings of a large class of citizenry in a way that invalidates the entire reason for putting money in there in the first place, we will already be in an extremely ugly situation that will get much uglier. 401(k) and 403(b) plans are already big wins for the federal government because it’s a way to pump tons and tons of money into investments – and thus helping the economy – in exchange for merely delaying taxes for a while. The government makes far more money leaving 401(k) and 403(b) plans just as they are than if they were to tinker with them in a way that would drive people away from them.
It is possible that the government would do something like that, but if they’re doing things like that, then we have much bigger fish to fry, like a rapidly devaluing dollar. In fact, most financial conspiracy theories that people use to justify weird financial choices are ones that, if they came to fruition, would be completely overshadowed by a collapsing economy and a hyperinflated dollar.
In my opinion, a 403(b) is about as safe as you can get, and the risks you are taking by having one are overshadowed by the risk of having your money in the form of American dollars, and I don’t consider that much of a risk either. The only realistic change I can see to a 403(b) is that they might change how the program works in the future, and that would probably involve sunsetting the current 403(b) program and letting the current accounts continue to exist without further contributions while introducing some form of replacement account. They absolutely would not want to risk any mass withdrawals from 403(b) plans – if they abruptly taxed them, Wall Street would lay an egg and the value of the dollar would plummet. The government will bend over backwards to avoid that, not encourage it.
Q7: Cheap or expensive bag?
I need a messenger bag or backpack for work. I have been looking at the options and it seems like you can either get a cheap one for like $20 that will last for a year maybe before the straps start breaking or you can get one for like $200 that will last for several years – maybe five or ten, maybe twenty.
Cheap bag does the job now for only $20 but I will be replacing it before long if I use it every day. Expensive bag will do it practically for life but it’s really expensive right now and I have a hard time justifying spending $200 on a bag.
I know you lean toward buying things for life and I can see that the long term cost might be lower with the expensive bag, but I can’t justify $200 on a bag right now.
To me, the deciding factor in these situations is the cost of failure. What exactly happens when a bag fails on you?
In my own experience, that’s usually the moment when it’s time to get a new bag – the old one failed in some way. A strap breaks or the bottom rips out or something like that.
What’s the consequences of that kind of failure? What happens if you’re actively using your bag and suddenly a strap breaks on your or the bottom rips out?
If the consequences aren’t too disastrous, that’s a mark toward a cheaper bag. If the consequences are dire, that’s a mark toward a more expensive bag.
Personally, one of the things I strongly consider when buying an item is the consequence of failure. If it causes a potentially major career or life hardship or an enormous mess, I’m going to get the reliable version. If it’s something small, like an overcooked or undercooked meal, the cheaper version seems much more acceptable to me.
For me, this was what drew me to getting a “buy it for life” kind of bag for daily use.
Q8: Thoughts on Aldi
Aldi just opened up in my community. We shopped there and thought it was okay and that the prices were great but there were weird little annoyances with layout and selection and the carts. Then I saw on CNN about how Aldi is expanding fast. What are your thoughts on Aldi? Good place to shop?
That article describes it well: they strip down the shopping experience as much as possible to make the prices low. What I’ve found is that it means that their selection is kind of limited and some of their items aren’t particularly healthy, but their prices on what they do have are amazing.
There are two different Aldi stores within about fifteen minutes of my house. Aldi is probably the cheapest grocer available to me, though Fareway isn’t too far behind them and has a somewhat better selection.
I basically find that the cheaper a grocery store’s prices are, the weaker the selection is and the more bare-bones the shopping experience is. I generally don’t mind the bare-bones shopping experience, but I do find that it restricts what I can cook if I only use Aldi (or, to a much lesser extent, Fareway). I find that if I shop at Aldi, I usually have to make a second stop for some items; occasionally, I have to do the same with Fareway, but not too often. Other grocers, like Hy-Vee, will have everything I need, but the prices are higher.
Thus, it comes down to a convenience thing and a meal planning thing. If I plan very simple meals, I can get everything I need at Aldi, but our meals aren’t very… varied. They’re certainly cheap, but not varied. If I add more variety, I either need to make multiple stops when grocery shopping, adding significant time to my shopping trip, or shop at Fareway or even Hy-Vee.
Honestly, I still mostly shop at Fareway. The prices are very good and they generally have almost everything I need. Aldi is lower on the items that overlap with Fareway, but I usually don’t have to make a second stop if I shop at Fareway, it’s closer to my home, and the prices aren’t really that different for a typical week’s grocery list.
Aldi is great if your list is entirely common food staples, and I do shop there sometimes.
Q9: Is renters insurance necessary?
Is it always necessary to get renters insurance? Just moved out from parents and my apartment has a bunch of Goodwill stuff and family hand me downs. If it’s gone I don’t lose much.
First of all, it’s very possible that your landlord requires you to have some sort of renters insurance policy. You’ll need to look carefully at your lease; if you don’t have it, you might be in violation of your lease. Many leases require the renter to have a $100,000 (or more) liability policy.
Honestly, the big reason that many first time renters need renters insurance is for the liability coverage. If you accidentally burn down the building and it’s clear you’re at fault, the landlord’s insurance may cover some of it, but you also have a legal liability too. If you don’t have insurance, that can be a huge problem.
Renters insurance is pretty cheap, though. You can get a policy that includes $30,000 in property coverage (covering your stuff in event of theft or disaster) and $100,000 in liability for around $15 a month.
I think it’s a good idea, even for people without much stuff, to get this kind of insurance if they’re renting, just because the cost is so low compared to the downside.
Q10: Appliance repair or replace?
Our washing machine has broken down twice in the last six months. A family friend has fixed it both times but he says that to really fix the problem will cost about $200 in parts and that we should get someone else to fix it as he’s more of a “handyman.” Time to replace?
Absolutely. I don’t even hesitate to say yes to this. When a repair bill is going to be a large portion of the cost of replacing an older item, it’s time to replace the item, as there are likely other points of failure coming in the future.
There are exceptions to this, of course. If you are familiar with repairing the item yourself or have an interest in figuring it out, then you should by all means give it a shot. If you can find the parts for cheap and want to tackle the repair on your own, maybe with the help of that friend, then it’s probably worth it. My guess is, given the price, that electronic components are involved, but the actual procedure shouldn’t be too difficult.
However, that’s not something that necessarily appeals to everyone or works with everyone’s life. In that situation, I think a replacement is very justified. The nice part is that your current washer should last long enough to allow you to shop around.
Q11: Saying no to parent
I’m 31 years old and single. My father passed away about six years ago. My mom didn’t handle it well and has become an alcoholic and possibly a drug user. She comes to me and my brother regularly to “borrow” money. She does manage to keep her job at a grocery store that she’s had since I was a kid but I have heard that the manager keeps her on out of loyalty and she shows up to work drunk sometimes. She was so wonderful raising me and to see her like this tears me apart but I don’t know how to say no when she asks. She asks frequently enough that it does put some financial strain on my situation, though I am still making progress on my student loans. Do you have any advice for me?
If I were you, the absolute first step I would take is to find an Al-Anon group for you. The purpose of Al-Anon is to support people in your exact situation, those that have loved ones with alcohol abuse issues.
It sounds like your mother is a good person who was broken in some way by the death of your father and she doesn’t know what to do so she uses alcohol to self-medicate, and that is causing difficulties in your own life. Al-Anon can help you deal with things on your own end and perhaps help you figure out how to help your mother.
There will probably come a point where you will have to tell her “no,” but I can’t really offer specific advice on that because I don’t know the specific situation. I can simply recommend Al-Anon as a great next step.
Q12: Getting value from self-improvement books
A lot of times when I read a book about personal finance or getting organized, the ideas make a lot of sense but then I close the cover and none of it seems to matter or take hold in my life and before long I’ve forgotten everything other than a few main points. Do you have any tips for making personal finance books or organizing books more “sticky” in my head?
My group of friends has been kicking around an idea and I wanted to get your take on it. Let’s say you had to live out of a suitcase or a big duffel bag permanently. That’s all the possessions you could own. What would be in that bag and why?
I actually wrote about this a few years ago when I discussed a month-long period where I did this as a 30 day challenge. During that challenge, I aimed to live out of a backpack and a duffel bag. I gave a brief list of some of the items I carried in that bag, but I didn’t get into too much detail; instead, I moved quickly on to the things I learned from doing it, which I boiled down to six lessons:
+ Lesson #1: It is far easier to do this if you have living space of some kind.
+ Lesson #2: At the same time, this approach to life makes a very tiny apartment in a city much more reasonable.
+ Lesson #3: ‘One bag’ becomes more of a challenge with children.
+ Lesson #4: My hobbies would need a lot of re-thinking.
+ Lesson #5: There were some huge advantages, too, like reduction in household chores, easy travel, spontaneity, and reduced expenses.
+ Lesson #6: I would quickly start to put a very high premium on high-quality sturdy stuff that just works as well as stuff that takes up less space.
I would really encourage you to read that first article, as I’m going to try to avoid covering the same material again.
I kept a lot of notes during that thirty day challenge, so I have a list of what I originally kept in the bags when I was trying to do this. However, going back through that list with some further reflection, I would change some items. Here’s how I would pack for that kind of “one bag challenge.”
The Bag Itself
If I were to do this, I would want a sturdy and very well made duffel bag that could last for many years. I actually have a duffel bag that I love that I think would be perfect for this – the Best American Duffel #5. It’s incredibly well constructed, holds 85 liters of stuff, and has smartly designed handles and straps. If I were looking at a less expensive option, I would look for a duffel from an army surplus store.
The first thing I would put in this bag is a smaller backpack or large messenger bag. The reason for that is that there are many times when I want to take a small portion of my possessions elsewhere but not carry around the large duffel. For example, if I’m visiting someone but want to spend the day out and about, I’d want a smaller bag to do so, or if I’m going on a short trip, a backpack makes more sense than a huge duffel. I have used a North Face Surge II for many years for this purpose and it works well; I also have a Goruck GR1, which is an incredibly sturdy but overpriced backpack. I will likely never need to buy another one as long as I live, between the two I already have.
Contents of My Bag
So, what goes in the bag? This is a modification of the list I kept when I was doing my thirty day challenge and in much more detail than the earlier post. It’s worth noting that some of these items are in there because I’m not assuming things about where I’ll be staying. If I can assume that I’m always living in a home or apartment or hostel or something like that, many of these items can go away.
Clothes are the foundation of the bag. Not only do I need enough clothes to survive for a number of days between washings, they also provide the padding needed to protect some of the stuff in the middle of the pack.
Five shirts Two t-shirts, one long-sleeved t-shirt, one dressier short sleeved shirt, and one dressier long-sleeved shirt. I would buy items that are extremely wrinkle resistant and store them by rolling them up to minimize space.
Four trousers/pants One fairly dressy pair of pants, two pairs of jeans, and one pair of nice shorts. This would shift a little depending on the climate, but I typically avoid shorts until it’s at least in the upper 80s and I live in Iowa, so this is appropriate. The dressy pants and shorts must be as wrinkle resistant as possible.
Five pairs of socks Two pairs of athletic socks that I can sweat in, one pair of dressier socks, and two pairs of winter appropriate socks (probably thick merino wool socks). Again, this covers the various uses of socks. During the summer, I wear sandals 95% of the time, so these are mostly for workouts where I’m wearing shoes or cold weather.
Five pairs of underwear This is self-explanatory.
Two pairs of long underwear Again, this is more important in colder climates. This serves as an under-layer beneath my pants on cold days.
A hooded sweatshirt Essential for several months out of the year in northern areas.
A cardigan A dressier alternative to the hoodie.
One reasonably dressy fall jacket This will be worn much of the time in the fall and spring and less intense parts of the winter. I want a sturdy jacket I can wear in a variety of temperatures.
One hardy winter coat This will take up some real space, but isn’t needed in warmer climates. On a -20 F day in Iowa, though, I’ll pull out my arctic Carhartt. Keeping warm is far more important than appearance at those temperatures.
Winter accessories, meaning a stocking hat, gloves, and a scarf.
A summer hat, which is less expensive than sunscreen.
A tie for dressier moments.
A pair of dressy shoes These are worn on nice occasions.
A pair of cross training athletic shoes These can be worn for exercise most of the time. I would beat the snot out of these and replace them when they start to fail.
A pair of sturdy sandals My default when it’s warm.
A pair of heavier winter shoes My default when it’s cold and snowy and icy.
My clothing would take up about half of the bag’s volume. The rest of the items would fit in the other half, largely surrounded by clothes.
A couple of reusable bags This would be useful for organizing and carrying laundry and keeping dirty laundry separate, as well as other carrying purposes.
A couple of plastic plates, bowls, forks, spoons, and cups This enables me to eat with some civility in most situations.
A flashlight so that I can see in the dark. This would be a pretty small one.
A very basic tool set or a multi-tool so that I can open packages, make minor repairs, and so on.
A basic sewing kit to repair minor issues with clothing.
A tightly compressed sleeping bag so that I can sleep anywhere.
A pillow to rest my head on at night.
Two towels and two washcloths for bathing.
A bag of toiletries, including a toothbrush, toothpaste, dental floss, deodorant, soap, shampoo, conditioner, hairbrush, comb, a razor and blades, and a nail clipper.
A sturdy nylon rope for all kinds of things, but the big thing would be an impromptu clothesline.
A first aid kit including things like bandages, a bottle of aspirin, antibiotic ointment, tweezers, and so on.
A bottle of sunscreen so I don’t burn myself to a crisp.
A super-sturdy umbrella, something I wouldn’t skimp on. I usually use cheap umbrellas that break frequently, but if I lived out of one bag, an umbrella would be vital and I’d want one that was incredibly sturdy.
Insect repellent to keep bugs at bay.
A loud whistle in case of emergencies, to attract help. Believe it or not, I used to carry a whistle around my neck all the time, something that I did for much of my adult life until recently.
A security pouch that would contain a few vital documents, to be worn under my clothes much of the time. This would include things like my passport, my drivers license, my credit card, my bank card, some cash, and so on. This would be protected with the utmost care, rarely leaving contact with my skin.
A TSA-approved luggage lock to secure my stuff when I travel or when I’m not around my bag.
The remaining space would mostly be filled up with things that I personally would find useful and valuable. These would vary a lot depending on the person.
A sturdy laptop I write for a living, so having a laptop to write on would be vital. I’d probably want a tablet, too, preferably an iPad with an Apple Pencil, but that’s not quite essential. I found room for it last time, though.
A Kindle would provide me with more than ample reading material for a very long time, so there’d be no reason to pack books. I’d load the thing up with books just in case I was away from an internet signal for a while.
A smartphone for communication and navigation as needed.
A GPS device in case my smartphone couldn’t navigate because of no signal or no data plan.
Chargers for those devices, including a solar charger so I can charge devices literally anywhere there’s sunlight.
A notebook and some pens because journaling is a major part of my life. Collecting my thoughts on paper is how I stay sane much of the time.
A deck of playing cards and one or two very small footprint games Tabletop games are a big part of my life. It would be the hardest thing, space wise, for me to give up. I would definitely include a deck of cards and a book on my Kindle with the rules to many card games, but I’d likely find room for a few very small games as well. I’d likely include a small magnetic chess and checkers set. The publishers Button Shy Games, Oink Games, and Jordan Draper Games have some wonderful games with tiny footprints, too.
A water bottle and some water purification tablets Obviously, I need something to drink. The purification tablets are needed if I’m not sure of the water source.
Some nonperishable food items I’d have things like granola bars and protein shakes stowed away in there.
A hot plate and a small pot Ideally, I’d want a hot plate with a magnetic stirrer and a bunch of stir bars, but this will do. This would enable me to make soups, pasta, vegetables, and a lot of other things.
These items would almost perfectly fill up the duffel described at the start of this list. I was able to largely live out of a duffel bag with a list of items very similar to this for thirty days (obviously, I didn’t abandon my home to do it, but I did make every effort to stick to the possessions in the bag).
Why Is This Useful?
While this list might be interesting, how exactly is it useful to real-world personal finances? What application does it have to the financial challenges most of us are facing?
First of all, it clearly shows that we don’t need as much stuff as we like to think that we do. I have far more possessions than I could ever possibly fit into a duffel bag, but the truth is that the vast majority of what I need or want to use in a given day could fit in one. Yes, I would miss some of my other possessions, and it would seriously cut into some of my hobbies (like cooking and playing tabletop games), but the advantages are numerous.
The big advantage is, obviously, you spend far less time managing and organizing and moving stuff when you have far less of it. This is the issue with having more stuff: you have to spend more time organizing, you have to spend more time moving, you have to spend more time cleaning, and that adds up to less time actually enjoying the stuff. Living out of a bag basically deletes that problem – you spend very little time cleaning or moving or organizing. Everything’s just in your bag, and when you want to go, you grab your bag and that’s it.
Thus, when you’re investing less time in cleaning and organizing and moving, you’re able to spend more time doing things. If my experiment with living out of a bag taught me anything, it was that such minimal living gave you a lot of free time for hobbies. The time I would have spent cleaning and organizing and such could be spent reading and hiking and so on – things I actually get deep personal value from.
Such minimalism also leads to incredible savings in terms of living space. If you adopt such minimalism with your possessions, it’s far easier to make do with, say, a tiny efficiency apartment or a tiny home. With the contents of the bag listed above, I would easily be able to live in a small single room, which would keep the rent quite low, and still enjoy most of what I have in my life right now. The less stuff you have, the less space you need, and thus the less housing costs you.
If you want to start down this path, start looking at your life through an 80/20 lens. If you spend some time evaluating your stuff, you’ll find that you spend 80% of your time using 20% of your possessions. The other 80% of your possessions scarcely get used… so why keep them around? They almost entirely take up space, and even if you’re in a situation where you would use one of those items, there’s often a substitute available for you.
Try this for a month: whenever you use an item, put it in a place of commonly used items, maybe a table somewhere or something like that. As the weeks pass, notice that you’re frequently going to that table rather than going around your home for items. By the end of the month, most of your time retrieving items will be centered around grabbing stuff from that table. So, why do you have all of that other stuff? Why not just start selling it off and getting rid of it if you’re scarcely using it? It’ll make some pocket money for you, make your home a lot less cluttered, and not take away anything you use regularly.
While most of us are never going to live out of one bag for an extended period of time, experiments like these do demonstrate that we actually don’t use most of our possessions very much and we use some questionable justifications both to keep those possessions and to buy new ones. Those justifications add up to money lost buying those possessions we rarely use, money lost in larger living space to store those possessions we rarely use, and time lost taking care of and moving around those possessions we rarely use.
Take some time and think about what would be in your own “one bag.” Then, when you’ve got a good sense of that, start being extremely critical about your possessions – and particularly any new purchases – that would be outside of that bag. They’re going to cost you money and time and the likelihood is that you won’t use those new items very much – are they really worth the money you’re spending on them and the cost of storing them?