discipline | Squirrelers

Every Hour Counts: Knowing How You Spend Your Time

Feb 042013

One of the areas of personal development I’d like to focus on is truly making better use of time. Frankly, it’s probably an endeavor that could help a lot of people be more productive and healthier!

I’ve written before about how I’ve come around to the belief that time is more valuable than money in the big picture. After all, we can make more money but we can’t make more time! Anyway, in that post I related how few peak days and hours we really have, so we might as well make the most of them.

Thinking about it some more, what if we broke it down on a weekly basis, and looked at the hours we have available to do things. First step is taking 24 hours and multiplying by 7, to get 168 total hours in the week that we have available. However, we certainly don’t have that full 168 hours to play with. Let’s say we should deduct 68 hours to get down to 100 hours, with that amount subtracted to account for 8.5 hours per day for sleep and getting ready. Given the importance of sleep, this is probably necessary for us to consider those hours as spoken for.

So, with 100 hours left, how do we allocate them? Not that we need to detail every hour here, but it’s worth thinking about in general, and also worth considering a few examples of trade-offs. One example would be total hours worked. Let’s say you’re on the job for 40 hours a week. That’s 40% of your available hours. What if you instead work 50 hours one busy week? That’s 10% of your 100 hours gone. However, it’s an incremental 17% of that remaining 60 hours.

Another example: let’s say you’re commuting 15 minutes each way to work. This comes out to a half hour per day, and 2.5 hours per week. What if you took a job that paid more, but required a 45 minute commute each way. In this case, you’re looking at 7.5 hours per week, which is an additional 5 hours per week in transit. 5% of your total 100 hours gone, but over 8% of your remaining 60 hours.

Third example: suppose you start a blog. Let’s say you spend 10 hours per week on your blog. That’s 10% of your non-working time spent online. How did you spend that 10% previously?

The point is that we have limited time, and I think it makes sense to consider tracking our time. Maybe not all the time, as that would be time consuming itself. Spending excessive time tracking time seems convoluted:) However, just auditing our time for simply one week might be worth the investment. It could allow us to see how we are spending our precious time.

Many people track expenses, and it truly helps a lot of folks understand where money is going, and where to make changes. Why not think about being similarly interested in how we’re spending our time? The payoffs might show up in money, health, or relationships.

I’m going to do this for a week, and see what I find out. My guess is that regardless of how I think my time might be currently spent, there will probably be some surprises and good learnings from it. We’ll see!

My Questions for You

Do you ever think about how you spend your time?

What are your thoughts about the importance of knowing how you spend time, versus how you spend money?

Are there any areas where you think you spend too much time, and you would like to reallocate to something else?

Thinking Inside the Box With Personal Finance Can Have Value

Financial Philosophy 5 Responses »

Jan 142013

Personal finance is a really interesting subject for many of us. Obviously, you can count me in that group since I run Squirrelers! I’m also assuming you have an interest in it, otherwise you wouldn’t be here reading.

For those of us that blog about the subject, personal finance can be a multi-faceted, complex arena with so many variables involved. We talk about all kinds of topics, such as various topic of making money – some of which are traditional (jobs), and others non-traditional (online). There’s an emphasis on the latter in many posts. We also talk about endless ways to save money and pinch pennies. There are so many different things we need to buy or want to buy, and we talk about how to save on these different purchases. We also discuss investing quite a bit, whether individual stocks, funds, metals, and so on.

Having said all this, I think that maybe sometimes we need to step back and keep it simple, and remember that there is value to thinking inside the box with money. The basic framework for increasing net worth can probably be simplified as follows:

1) Get an education, without excess loans

2) Start your career or business

3) Focus on both protecting and increasing your income

4) Live within your means, discerning wants from needs

5) Maximize the gap between your income and expenses

6) Avoid debt, and strive to be debt-free

7) Invest your money, starting as early in life as possible

8) Practice smart asset allocation, while managing risks

9) Develop strong, genuine relationships with people

10) Keep yourself healthy and fit

If one does each and every one of those things, it would seem like the path to having a good financial present and future would be right there in front of us.

I know, it’s easier said than done! There are pressure points above, and sometimes we can’t control the actions of those applying the pressure. For example, we could have trouble finding a job in a tough economy, despite our best efforts. Or, our employer could have trouble and we could lose our job. Maybe our spouse is a shopoholic and we can’t save as a result. Or, maybe we have unforseen health problems that take up our time and energy, and take away from our work.

So clearly, there are things that we might have challenges directly controlling. But many of the other things we probably can control.

Bottom line: Thinking outside the box of course has great value. But by also keeping it simple, thinking inside the box in many instances, and following some clear steps – we could probably put the odds of success much more in our favor.

10 New Year’s Money Resolutions to Get Started on Now

Other 16 Responses »

Dec 102012

New Year’s resolutions have become a normal part of life for many people, almost like an annual ritual. We make plans to transform ourselves beginning January 1, full of energy and excitement over what we can be. The sky is the limit!

Really, I do like the notion of getting excited about making positive moves, and like the energized feeling that seems to be in the air as the calendar hits January 1. Personally, I do make resolutions. Hope is such a great thing, and it can really keep people moving forward. Heck, for some people out there, it can simply keep them going.

That being said, there is something a little bit interesting about waiting until one particular day to make changes, and start (or re-start, in many cases) our quest to achieve goals. It’s almost like many of us just live it up doing whatever we want to do until the the December 31 New Year’s eve countdown ends, and we’re into the new year and things radically change immediately. I’ve seen this maybe 6 or 7 years ago, when the health club I belonged to got packed all of a sudden in the beginning of January. There was even a guy jogging – or struggling to jog - on an indoor track while he was wearing a shirt and tie. Clearly, he wasn’t used to health clubs or working out in general, and had just jumped right in to what was obviously a resolution of his. I do give him credit though, for taking positive steps.

Anyway, I suggest that we get a head start on our new year’s resolutions, and get things started now. Why not?

Of course our resolutions can be across all aspects of our lives. Here, I’ll list 10 new year’s money resolutions for people to consider:

1) Increase the percentage of your income that you save in your 401(k). If you’re maxing out, great! If not, how about setting a goal to increase this percentage by a realistic amount. If you’re investing 5% of your pre-tax income in a 401(k), try to push that to 10%.

2) Find 3 discretionary expenses to cut. Sure, we could go crazy over things to eliminate from our regular spending routine. Frankly, that might actually be a good thing for a lot of folks. For many of us though, we’re making reasonably good decisions in general – but probably have a few areas we could work on if we really looked at it enough. For me, it would be: cutting out one outside meal a week, cutting out any beverage purchases (soda, coffee) 3 days of the work week while subsituting water, and paring back on our cable plan. Nothing extreme, just a few cuts.

3) Fund a 529 account, if you’re a parent. Being a parent, and having opened a 529 account, I can see the value. Now, we can only do what we can do, and don’t want to forego our retirement to put in additional funds. However, as much as we can help with regard to college education, it will benefit our kids. If you already have a 529, perhaps try to bump up the savings - even if just a bit.

4) Focus on what’s important. Thinking about the 80/20 rule here. Yes, the Pareto Principle and money can be related. I’ve heard how 20% of customers might yield 80% of results. Well, If we focus on what’s truly most important, we are optimizing ROI of our time. Resolving to prioritize to-do lists weekly – or even daily – can help us stay focused and use our valuable time smartly.

5) Refinance your mortgage. If you don’t have a mortgage, this might mean diligently shopping for the best loan if you are going to be buying. If you do have a mortgage, there is no reason I can think of for most people to be carrying a loan that doesn’t have an extraordinarily low interest rate, as of this writing.

6) Try to exceed expectations at work. Our career, and professional reputation, can go a long way to determing our financial future. It’s good to focus on making sure that our jobs are to some degree protected, but also on advancement and career progression.

7) Set aside money for your next car purchase. Even if you’re years away from your next purchase, start saving now. Make a “car payment” to a separate car fund

8) Before purchasing something, ask ourselves if we really need it. I think at some base level, most of us probably know the difference between what we really need, and what we simply want. Or, at least I’d like to think that many folks get this. Even so, most of us slip up from time to time in terms of acting upon this knowledge.

9) Sometimes, just treat yourself and live in the moment. What? Am I contradicting what I just mentioned above? Perhaps, but in reality I mean that once in a while, we should just buy what we want as long as we aren’t breaking the bank. Perhaps getting that $5 coffee drink, or buying that outfit, or going to that game would provide you with a lot of enjoyment. Well, sometimes you just have to go do it. Life is short, let’s enjoy it. If we’re practical 100% of the time, why not cut back to 99%?

10) Look to find an opportunity to help someone in need. Sure, this can take on non-financial ways as well. But if we truly value money, and don’t like to part with it, then it’s making a sacrifice when we give to someone in need. Something reasonable can go a long way to help, and is especially nice to do when we expect nothing directly in return. When karma finds us later, we’ll be happy! As an adjuct to this, let’s make sure that we don’t get taken advantage of by moochers and freeloaders in other areas of our life.

My Questions for You

What do you think about the notion of getting a head start on new year’s resolutions?

Are any of these above applicable to you?

Do you have any others to add?

Self-Insure Against Life’s Biggest Risks

Other 10 Responses »

Aug 202012

Risk can be a big part of the financial world. It’s often said that where there is no risk, there is little reward. It makes sense, and we can see this in practice with the returns on different investments. Look at the risks and returns involved in buying individual stocks, and compare to the risks and returns involved with “safe” bonds.

When we step outside the realm of investments, and enter the world of money in our daily lives, it seems as though risks don’t always come with great rewards. Sometimes, there are some things that we want to make sure don’t happen, as the consquences can be less than entertaining for us!

This got me thinking about the concept of insurance, and how it’s supposed to protect us against risks. In many cases, it absolutely can protect us financially to a large degree. Insurance coverage is important in many aspects of life. However, what about the concept of taking things in our own hands, and supplementing this with own efforts to self-insure against different risks in lfe.

I’m not talking about buying additional insurance. Rather, I’m taking about insuring ourselves against risk by being aware of how things work, and using our brains to intelligently make decisions that help us avoid big problems throughout life. Importantly, this involves self-discipline as well!

Here are 5 ways to avoid financial risk in our daily lives, through taking steps to “self-insure” oursleves:

1) Manage your career

I say this quite a bit here, but we can’t save money for retirement – much less have money for daily needs – if we aren’t making money in the first place. To protect oursleves against the loss of income, we need to make sure that we are valuable to A) our current employer, and B) other potential employers. This means self-insuring against economic conditions and other bigger issues by taking an active role in treating your job and ultimately career like it is your own business. You need to manage it, rather than let it manage you.

2) Diversify income

First off, I do believe in the 80/20 rule, as the Pareto Principle leads us to focus our efforts on what brings in the most benefits. See “manage your career” above! That being said, there are benefits to diversification of our energies as well. As long as we don’t drop the ball on our primary endeavor, it can be a good idea to spend some time on diversification of income. If you do lose your job for whatever reason, a second income stream can help. This can apply in other ways, such as a couple where two people work instead of just one.

3) Stay healthy

Sure, we can and should have health insurance to protect ourselves financially against what can otherwise be sky high medical costs. That’s obvious. We should also strongly inconsider the importance of dental insurance to our finances, as those bills aren’t always cheap either. However, we can insure against medical expenses in a different way: by staying healthy! This means eating right, and getting exercise. The healhier we are, the less we may spend on health problems, and the more able we might be to work and earn money. Being healthy even means managing stress and getting rest – we’ve discussed the topic of sleep and wealth before!

4) Avoid accidents

On the surface, this might seem obvious. Who plans to get into accidents? Nobody I know, that’s for sure! Of course, if we aren’t careful, or take our eyes off the ball so to speak, things can happen. This means using our heads and not taking dumb risks where the downside far outweighs the upside. For example, while it’s clearly great to save money on auto insurance, we can also save money by self-insuring against risks by simply following the rules of the road, driving within the speed limit, refraining from texting and driving, and so on. This concept can apply to many other parts of life, as reckless behavior comes in many flavors.

5) Maintain good relationships

First of all, good relationships are healthy and great to have without any consideration of money whatsoever. People matter more than dollars. Keeping that disclaimer in mind, it still makes sense that to the extent that we get along with others, we’ll be better off financially. What if there was an inheritance that could be divided, but you and your siblings couldn’t get along? Worse, what if a relationship with a spouse didn’t work and the two people ended up in divorce? The bottom line is that we can insure against such risks by taking the time, attention, and genuine care to maintain good relationships with others. If we don’t, we risk poor results in many ways, one of which is money.

My Questions for You

Do you ever think about some of these risks to our financial health?

What do you do to actively prevent such risks in your life?

Are there any that you think are more important than others – or that should be added?

A Really Dumb Financial Move

Other 26 Responses »

May 032012

Not all ATMs are the same!

Wouldn’t it be great to be just about perfect? Well, not that I ever had any wacky illusions of that, but if anyone ever thought I was totally sound when it came to all money moves, a recent mistake would clearly disprove that.

We’ve all been there. You know, the times when we feel like a fool for making a dumb financial move.

Here’s what I did. Two weeks ago, I was in a major hurry to get someplace in the evening. I was leaving the city, and was headed out of town. Thus, while I often like public transpiration instead of driving, I did have to drive that day and parked my car in an out of the way lot. This place cost $15 for an “earlybird” rate, as long as you got out by 6pm. It was a deal, compared to the garages in this area of Downtown Chicago which typically charge between $30 to $40 to park during the working day. Yes, it’s not cheap here in the Windy City!

Anyway, I rushed to the lot and asked to pay. The guy immediately told me “Cash only”, which was corroborated by a sign at the booth. Okay, I suppose I missed that sign in the morning when I got there. So I had to tell him that I needed cash, and that I’d be right back after I found an ATM. He said fine, but I realized that I needed to rush back so that I wasn’t charged the full price.

I went a few blocks to a location I knew would have ATMs, and went to the first one I saw. It wasn’t for my bank, but at this point I didn’t care. I just needed to get the cash, get to the car, and leave. So I withdrew money, and agreed when I saw the prompt on the screen that notified me that the bank would charge me a $3 fee in addition to whatever fee my bank charged. I can’t stand ATM fees, but figured that this was a rare exception and that I didn’t have a choice in this situation anyway.

So, I withdrew the money, and turned to my left and started to walk away. As I did, I froze.

Right in front of me – literally, right there before me – was an ATM from my bank.

It instantly hit me that in my rush to just find the first ATM and get money right away, I never bothered to even glance around to notice the other ATM that was there. After paying the 2 fees, I just wasted $6 right there. For no reason whatsoever, other than carelessness. I mean, the no-fee machine from my own bank was basically right next to the other machine.

Now can you see how I felt like I made a dumb financial move? There is no rationalizing this away.

Well, when we make mistakes we should try to learn from them. Two quick takeaways for me were:

Pay attention. If I would have seen the sign in the morning that noted “cash only” , I might have been able to get the money ahead of time. By not having my head in the game at that time, I cost myself a few bucks.
Manage time well. If I would have planned my time better, even by a few minutes, I wouldn’t have been rushed and prone to making a careless move.

Of course we all know that we should pay attention and manage time well, but sometimes we need a reminder to do the basic things. This was a $6 reminder!

My Questions for You

Have you ever made any really silly, dumb financial moves like this one?

What were the circumstances, and why did it happen?

Did you learn any applicable lessons from the experience?

Is Most Debt Bad?

Debt Reduction 20 Responses »

Mar 142012

When you think of debt, do you get warm and fuzzy thoughts? Didn’t think so. Do you think of debt as something that you’d like avoid or work toward eliminating? This latter viewpoint seems to be the prerogative of many folks in the personal finance blogosphere, at least based on what I’ve read in numerous articles over the last several years.

A recent short article on Moneyland caught my attention, as it discussed the notion that more young people are leery of debt these days. Instead of viewing debt with the same mindset that their parents did, many are making decisions that reflect a greater reluctance to take on debt than prior generations. For example, making decisions such as living at home with parents or renting instead of going out and buying a place.

My take on this: Bravo!

Now, it’s probably true that instead of absolute fear of debt, it’s better to look at it objectively and realistically. It can be really bad, but at times debt can be a tool for getting certain things done – as well as an emergency safety net, dealing with totally unforeseen medical expenses, etc. Also, if there was no money to borrow, the business world would come to a standstill. So admittedly, debt does have an important role in the big picture.

That being said, however, for the average person out there, most debt is simply not worth taking on. There is something to be said for aspiring to debt-free living.

Here are some different thoughts on types of debt and their legitimacy:

Bad Debt

What do many people borrow to buy? Often times, it’s for consumer goods purchases. Buying clothes, electronics, furnuiture, etc. With such purchases, if we can’t afford to pay it off in full as soon as the credit card bill is due, it shouldn’t be bought. Carrying balances means that you shouldn’t have bought the thing in the first place.

What about cars? Are these worth taking out loans for? Well, probably not in my view. If somebody is solvent enough to have a decent emergency fund, then why not pay in full for a car? It doesn’t have to be a $25,000 new car if that’s not affordable. Why not get a functional $5,000 used car instead, if that’s what you can afford to buy in full.

I remember a guy I worked with over a decade ago who bought a brand new SUV despite being a few years out of college. He said he needed to buy it because he needed to feel like he “arrived”. Smart guy, otherwise. I’ve kept in touch with him, and he’s totally got his head on straight now. But back then, he made a decision that showed too much comfort with debt.

Borderline Debt

It’s safe to say that most home buyers, particularly first time buyers anyway, take on a mortgage. It’s just the way things are done. However, no matter what anybody says about tax deductions, the pride of home ownership, or things of the like - a mortgage is still debt. If you live in a dream home and finance it with a large mortgage, you will be working many hours and possibly years to pay for it. Sometimes it can be helpful to think about how time is money, and determine exactly how much we have to work to finance such dreams.

It seems to make sense that one should ideally buy something that fits legitimate needs in terms of space, location, schools, etc. Some debt is realistic in this case, but should be manageable with the goal of paying it off sooner than later. Trading up for a McMansion, luxury condo, etc – not sure about that if it requires extra financing versus what’s truly needed.

“Investment” Debt – To a Point, Anyway

Now, not all debt is bad of course. When people start questioning if college is worth it, I think that’s going way, way too far. It’s worth it, necessary, and needs to happen for most younger folks if possible. Such debt should still be minimized though, and choices can be strategically made to pick the right college based on quality and value. Then, this debt can be considered to be an investment in one’s future.

My thought is that burdening somebody with tons of debt to start out life is not ideal. But, since college is absolutely necessary for most people, why not view the choice of which college to attend as a strategic investment? You know, one that requires an analysis of costs and expected/potential returns. Perhaps it’s a matter of financial literacy, reframing the college decision, or thinking more pragmatically than emotionally.

My Questions For You:

Do you see as I do, that most debt is truly bad and unnecessary, other than a few of the specific examples I noted above (medical, limited home, smart college choice)?

Do you think that this recent aversion of debt by young adults is a good thing for our society as a whole? Or, is it irrational and has it gone too far?

Perception is Reality: Credit Scores and The Workplace

Career 15 Responses »

Feb 132012

The big interview

When looking for a new job, it’s important to do certain things. For example: network, optimize your resume, and keep your references informed – just to name a few steps. It also might be important for a job seeker to keep his or her credit report looking clean, and reflective of a responsible person. This because a person’s credit report might be reviewed by potential employers.

Of course, there are myriad other reasons why one would want to keep a good credit record. Particularly, the behaviors that result in a positive looking credit report are ones that probably help us live responsibly, survive, and even thrive. Interestingly though, based on what I read in an article on Kiplinger, a notable percentage of employers actually check credit reports.

Apparently they don’t have access to credit scores. That being said, according to the article, about 13% of employers do actually check credit reports. However, when you narrow down the list to selected positions, this percentage increases to 47%. Persons to whom this might apply to are higher level employees, those dealing with finances, confidential information, etc.

Now, I agree the notion that you simply can’t say no if you’re asked to let them get your report and review it. There is something to be said when it comes to protecting one’s private information, but when dealing with a prospective employer in which you have an interest, you have to play by its terms for the most part. What other choice do you have, other than choose to seek a job elsewhere?

It’s noted that it’s a low level criteria considered by employers, but if it wasn’t important, it wouldn’t be considered at all. One could surmise that there could be an expectation that an candidate is responsible with personal finance affairs.

I had two immediate takeaways from this:

1) It’s yet another reason to keep good credit. Obviously the actions leading to a good report are important for other reasons, as alluded to above. But this adds an extra layer of importance. Also, it seems like another reason to check your credit report to make sure it looks right.

2) Perceptions are often reality for job seekers. This is a bigger topic that can apply to any employee, customer, business partner, or other stakeholder. It seems like there are so many perceptions that be drawn, and many of them are actually quite dubious. That being said, it’s simply something to consider, for better or worse. We’ve talked here about how there are some email addresses that are considered uncool to certain employers, and how that impacts perceptions. Also, how some data shows that people with certain email addresses are more likely to have better credit scores than others. Obviously the email doesn’t cause this, but it’s a profile variable. Anyway, bottom line this that perceptions can matter – and this is yet one more example of this.

Frankly, this makes some sense if you think about it. If you were to hire someone for a position of certain importance, wouldn’t you want to make sure that the individual is responsible? If they’re (seemingly) reckless with their own money, how will they treat an employer’s business?

My Questions for You

Have you ever been asked to allow a potential employer to view your credit report?
What are your thoughts on the two takeaways above (and on this concept in general)? Feel free to elaborate.
Do you think that perceptions matter, even if not entirely fair?

Patience is a Virtue for Certain Money Goals

Financial Philosophy 25 Responses »

Feb 062012

Be patient, my friend

Many of us get so fired up to achieve our goals, that we can get a little bit impatient sometimes when things don’t happen right away. With information and applications at our fingertips more and more each day it seems, the bar has been raised in terms of expectations of instant results.

Nevertheless, it’s sometimes good to sit back and let things take their course. Not by being lazy, of course. Being passive and delaying an outcome by indifference isn’t a winning solution. Rather, putting a plan in place and executing it sometimes requires patience for success to ensue. In these cases, it can be better for the result as well as your stress levels to just resist the temptation to change directions or try new things, and just let things play out.

I mention this because I’ve had a certain goal in mind of late that I’ve been getting a bit impatient to achieve. It’s been gnawing at me a bit, and I feel like I’m not seeing the traction I want to see as of yet. It gets annoying sometimes when things don’t go according to your plans for success right away.

But as I’ve had these thoughts, I remind myself of a totally different goal I had some years ago, and how things at first seemed to be failing – but turned out to be successful. I just had to be patient and let things play out.

Here’s what happened. Some years ago, I was trying to sell a condo, and had purchased another place that was a little bit bigger out in the suburbs. The condo I was selling was kept in absolutely great shape – it looked just like new according to people who saw it, and was situated in a popular area for young adults. I worked with my realtor on doing all the research and due diligence, and felt that it was priced, staged, and marketed well. Keep in mind this was during a better real estate market.

Anyway, after the condo went on sale, I couldn’t wait for an offer to come in. I felt that I’d make a little money on the place, and given the market activity at that time, I thought it would happen within the first 2 weeks. This was typical at that time.

Well, the first few weeks went by with some showings, but no offers occurred. No sweat, I thought. Maybe by the end of the first month, something would happen.

Nothing happened in that first month. No offers.

As the second month went on, there was a decline in showings. By the end of that month, I was getting antsy. I had plans to move out to the suburbs, and assumed that this place would be sold in time for that to happen. I felt that based on the market situation, our pricing, staging, and marketing plan – we would have been achieved success. However, this hadn’t happened and things were dragging along. At the time, I started to question everything, and considered dropping the price and even potentially looking for another agent.

Then, just as the 2nd month ended, I got a call from the agent. Good news – we got an offer! Even better, we got two offers!

As it turned out, two people made separate offers on the same exact day. They both really liked the place, and actually ended up bidding full price for it. So what did we do? We then went back to them and told them the situation, and asked them to submit their best higher offer. In other words, we had a 2-party bidding war!

The net result of all of this is that I ended up selling the place, and even got a little bit more than I asked for.

Had I let my worry and impatience get the best of me, I might have lowered the price or gotten another realtor. That could have resulted in less money for me, and delayed things further. But I stayed the course, followed the plan, and it worked out to be the success for which I planned. It’s not like big money was made, but it was still a small profit that wouldn’t haven’t been there had I changed plans.

My lesson: Sometimes it’s best to be patient, keep doing things according to plan, and your efforts can totally pay off.

Now to be fair, there’s something to be said for being flexible and changing plans when needed. I do think that we can’t be rigid or static in our thinking. Plus, it’s important to recognize sunk costs and be able to act based on the present and future.

However, it depends on the situation. Sometimes we should make changes, other times we have to have belief in our plans and efforts, and stay patient. Good things can happen, and sometimes patience is a virtue with money. It could be selling a home, or it could be landing a job, getting customers for your business, getting published, or even accumulating assets for a financial goal. Whatever the case is, just keeping at it can be the right move sometimes.

My Question for You

Have you ever had a time where you just kept at it, stayed the course, and reached a goal that was money related? Or, even non-money related?

Do you find that patience is a virtue sometimes?

If you’re like many of us, and impatient to reach goals sometimes, how do you manage this?

Hara Hachi Bu and Money: The 80% Solution

Saving Money 27 Responses »

Jan 262012

Financial Diet: Spending Until 80% Full

Fitness has been one of my goals for this year (as it probably is for many people, in a lot of years), but this time I’ve put forth more effort into it. Aside from the most important part – taking action – I’ve done a little more reading on ways to improve health.

Of course, as I say here periodically, health and money are interrelated. Improve one, and you can help the other. Now in this case, I thought I’d actually do something a bit different. Here, I thought of applying a health-related principle to money. That concept: Hara Hachi Bu.

From what I’ve learned, Hara Hachi Bu is an Okinawan approach to regulating eating. The idea is that one should eat until reaching the point of being 80% full. The result? People eat less, don’t gain unnecessary weight, and have better health. It’s been said that Okinawa has an exceptionally high percentage of centenarians compared to the rest of the world. Eating fewer calories, when paired with an active lifestyle, might really help longevity and the ability to live a healthy life to 100.

It got me thinking – why not apply the 80% concept to our spending?

If calorie restriction and eating until 80% full might play a role in longevity, maybe spending 80% of what we think we need can play a role in longevity of our savings as well. If we spend less, we can increase our income minus expense gap. This increased savings, with time, proper investing, and the power of compounding, can result in a substantially increased net worth and financial security. This extended life of our savings can help us live a higher quality of life for a longer period of time.

Now, I don’t think this is just a matter of taking a high level of spending and bringing it down by 20%. Rather, I’m talking about taking what would be a reasonable budget made by financially responsible people, and living on 80% of it.

This could entail spending (and living on) less as follows:

Housing – moving to a less expensive area or living in a smaller home
Cars – driving an older used car, or for a family getting rid of a second car
Food – cutting out dining outside, and going the extra mile to make frugal dining choices

It’s almost like thinking about what you need to live comfortably, and then spending at 80% of that level. Maybe we can get used to that, just like the body gets used to living on less calories when stopping at 80% full.

Update: Just so everyone knows what I mean by 80%, I’m referring to 80% of current expenses. I’m not referring to spending 80% of income and saving 20%. Rather, I mean take whatever your expense level is and multiply it by 0.8. For example, if a family earns $100,000 and spends $80,000, they’re saving $20,000. By applying this Hara Hachi Bu concept, the family would take the $80,000 expenses, multiply by 80%, and spend the resulting amount instead: $64,000. In this case, savings as a percentage of incomes goes up from 20% to 36%!

My Questions for You

What do you think of the idea of living on 80% of an otherwise reasonable expense level?

Do you think that doing this could extend the life of your savings and substantially grow your net worth?

Much like the Hara Hachi Bu rule, do you think that this approach is one that would require a higher level of discipline than many of us are accustomed to?

Make Sure to Review Your Credit Card Statement

Debt Reduction 17 Responses »

Jan 242012

Review Your Credit Card Statement!

Do you carefully check your credit card statements, and review the transactions? It can help ensure that you’re not being charged unnecessarily for any ”phantom” transactions, unauthorized purchases, or mistakes. I had an experience recently that serves as another example of why we take the time to at least scan through our statements each month.

First off, I make it a practice to pay off any bills in full each month. I don’t like to carry credit card balances, and simply don’t do that. Rather, I pay it all in full and on time each month. So, when reviewing a credit card bill, I typically don’t think of there being any issues in those areas. I’m usually focusing on transactions instead.

A recent review of a statement showed that all the transactions seemed fine, but something else jumped out at me: an interest charge! Impossible, right? After all, I pay may bills on time and in full, so there should be no problems.

Immediately, I called the credit card company. After describing the situation, and asking why it happened, it turns out that my last payment had been received late. Now, that’s not something I wanted to hear, since you just don’t want to be paying bills late. There must have been some kind of mistake on their part!

Well, after they described the situation, I froze for a second and realized that I had been busy the month before and my payment was made close to the deadline. I normally don’t do that, but it was just one of those things. However, I pay bills online and the payment date was supposed to be right at the deadline date. Apparently, it must have hit right after that so thus the late fee.

Ouch. Obviously, if you read this blog, you know that this is NOT something I would be happy about. Being someone that takes pride in financial responsibility, I didn’t like that this happened.

I explained the situation to the person on the phone, and stated that I pay my bills on time in full every month, and that was the reason I was surprised and called. The guy on the line then said he would make sure that the fees were reversed and charges removed. Great!

After getting charges reversed, I felt some satisfaction in knowing that reviewing a credit card statement saved money. Of course, I also learned a lesson that even people who are responsible can slip and make a mistake by procrastinating. Best to pay bills well ahead of the deadline, to avoid any situations like this where you have to call. Minimizing credit card expenses is a good thing.

Finally a big thing I learned from the experience is that building up a stellar track record of paying in full on time can build goodwill.

My Questions for You

Do you review your credit card statements each month?

Have you ever found any surprise charges on there? If so, how did you handle the situation?

What is your process for making the payments each month?