January 31, 2011

create your own extended warranty

Posted in budget, investing, saving, stuff I think about tagged at 7:32 pm by weiszguy

Extended warranties are almost always a bad idea.  An extended warranty is the protection plan offered to you when you buy some gadget or other.  Relative to the cost of the gadget, the extended warranty is pretty expensive, and you almost never get the opportunity to take advantage of it.

In other words, your gadget almost never breaks in the period of time covered by the extended warranty.  It may break early on, due to a manufacturing defect, in which case the plain vanilla warranty that comes standard will cover the repair.  Or it may break due to old age, which will be after the extended warranty period is expired.  Result?  You gave the company a bunch more of your money and didn’t get anything for it.

The problem is, declining the extended warranty makes you nervous.  What if it does break during the extended period?  Won’t you be upset you didn’t buy the warrant?

Try this.  Next time you are offered an extended warranty, ask what the cost is, but then decline the plan.  When you get home, take that amount of money and set it aside in your own “extended warranty” fund.  Do this every time you are offered a plan.  Eventually that fund will be really big, because you won’t ever need it.  You’ll save yourself the expense, you’ll earn interest, and if you ever do have a covered accident, you’ll have plenty of money to just buy yourself a new one.  Beauty, eh?

February 12, 2009

encouragement to save a few pennies

Posted in money, saving, spending tagged at 8:40 am by weiszguy

If you’re discouraged because you can never seem to save enough money, or if you’re tired of everybody telling you how you can save a few pennies and retire rich, Trent has an interesting analogy you should check out.  It helped me.

July 11, 2008

defining “paycheck-to-paycheck”

Posted in money, saving, spending tagged , at 4:27 pm by weiszguy

There has been much written on the concept of living paycheck-to-paycheck, and the noble cause of trying to escape that rat race.  Here’s a good article, in case you want to read up.

My question is, what does “paycheck-to-paycheck” mean?  Is there anybody who doesn’t live paycheck-to-paycheck?  If a person’s checking account is low on the day before payday, is he living paycheck-to-paycheck?  How large would his checking account balance have to be on the day before payday to NOT be living paycheck-to-paycheck?

I suppose I’m only talking about people who hold down jobs to pay their bills.  Someone who lives on a trust fund or endowment, for example, doesn’t depend on a paycheck to pay their bills.  On the other hand, such a person still cannot spend without regard to their checking account balance.  It’s just that deposits into their checking account come from a different source.  Maybe I’m talking about them, after all.  So does a trust fund baby also live paycheck-to-paycheck?

bucket o' money

bucket o' money

I use a bucket system for managing my money.  Every time I get paid, I put a predetermined amount of money in each bucket.  My buckets are labled, “Auto Insurance”, “Household”, and “Medical”, for example.  After distributing to these buckets, any leftover money goes into a bucket called “Available” to be used for other expenses, like food and gas.  Every time I have to spend some money, I look for an appropriate bucket, and if none can be found, I use the “Available” bucket.

My “Available” bucket is usually pretty empty.  So empty that we often put off buying food until the next payday.  Sometimes we forgo car trips because we only have enough gas for a couple errands.  Occasionally, I even pay the cell phone bill a little late, for lack of funds.  And when the next paycheck arrives, we breath a big sigh of relief, because now we have more money to do things with.

That last paragraph sounds exactly like someone who is living paycheck-to-paycheck, if I understand the term correctly.  At the risk of puffing up with pride (and please don’t take this as pridefull), I can tell you that our checking account has thousands of dollars in it, even at times when we put off purchase decisions due to lack of funds.  Most of that money is sitting safely in other buckets, waiting patiently for the day we’ll need it.  It’s just that there isn’t much in the “Available” bucket.

All in all I think this is a good system – voluntary deprivity, I call it.  (Not to be confused with depravity, which is a very, very different thing.)  I even wrote a newspaper article about it. By creating individual buckets for individual goals, I’m meeting those goals on a limited income, but also tricking myself into not spending much because it always seems like I don’t have much left.

So, what do you think?  Is that paycheck-to-paycheck?  If so, is paycheck-to-paycheck bad?

January 16, 2008

volutary deprivity

Posted in money, newspaper, opinion column, saving, spending tagged , at 6:03 pm by weiszguy

I know something about you.  I know you don’t have enough money left at the end of the month.  There are things you wish you could do, but you don’t have the funds to do them.  If you had just a bit more money, everything would be fine.  This is true whoever you are, whatever your income.

Think about it.  No matter how much money you make, it isn’t enough.  If you make $20,000 a year, don’t you wish you made $30,000?  If you make $200,000 a year, don’t you wish you made $300,000?  This is a near-universal experience.  But rather than whine and moan about it, I wonder if there’s a way we can use this to our advantage?

Let’s say you’d like to be saving 10% of your income, but you haven’t started yet because you don’t know how you’d get by without that money.  Things are so tight right now – there’s no possible way you could survive on less.  But we just established that ALL income levels feel inadequate.  If you earned 10% less than you earned right now, would that really feel any different than what you make now?  Yes, your checkbook would notice, but would you feel any different?  My guess is you’d only notice the difference for a week or two.

Try this experiment.  The next time you get a paycheck, put 10% away somewhere – anywhere, under the mattress if you want – it doesn’t matter.  Then try to make the rest last until your next paycheck.  If you’re like me, just the thought of 10% less scares you to death, but I bet you’ll make it to the next check without much difficulty.  If you’re successful, you’ll be living on less, AND you’ll be saving up for a rainy day.  And you’re doing it EVEN THOUGH you don’t have enough!

This post originally appeared in the January 16, 2008, edition of the Greenhorn Valley View.

December 22, 2007

unexpected debt

Posted in debt, money, newspaper, opinion column, saving, spending at 3:57 pm by weiszguy

This year we had an unexpected debt come up: $2600.  Other than mortgage debt, we don’t have any other debt, so this is a large amount for us.  We paid it off in seven months, which is good.  Really good, in fact.  I’m pretty proud of the way we pulled our money together to get this debt paid off quickly and with as little interest charges as possible.

Nevertheless, a couple of questions are haunting me.

What were we going to do with that money if we hadn’t incurred the debt?  I’m sad to say, probably nothing.  We probably would have lost that money through the cracks.  Cracks like extra meals out, more expensive meals in, extra do-dads and trinkets for the kids or ourselves.  None of which would have any meaning or purpose.  (Contrary to what you might think if you observed my dining habits, I don’t really think eating out enhances our lives.)

If we hadn’t incurred the debt, and we didn’t lose the money through the cracks either, what could we have done with the money?  I think we could have done a lot.  We could have taken a fairly nice vacation in the mountains, saved for the kids’ educations, made some repairs to the house or car we’ve been meaning to get to, or done something meaningful for charity.  I think the possible meaningful uses for that kind of money are legion.

Here’s the million dollar question.  How many $2600 blocks of cash do we regularly throw away?  And by extension, how many great and meaningful things are we not doing because we throw that money away?  As our experience paying off the debt shows, it really isn’t that hard to come up with that kind of money.  We weren’t hurting because of the debt.  But I think we may be hurting ourselves by not being more deliberate with our money.  This year, I’m going to look for another $2600 in our spending, and redirect it to something I can be proud of.

This post originally appeared in the December 19, 2007, edition of the Greenhorn Valley View.

November 14, 2007

beginning investing, part 1

Posted in investing, money, newspaper, opinion column, saving at 4:59 pm by weiszguy

Hopefully, if you’ve been saving long, you’re starting to build up a tidy little sum in your savings account.  Before too long you’re going to wonder what to do with all that cash.  You know there are investment options available, but you’ve also heard that some people have lost their shirts with their investments.  Should you get involved?  Maybe it would be best to stay out?  What, exactly, can you do with a little extra money, and what are the risks?

You could continue to what you’ve always done, i.e., leave the money in your savings account.  This is possibly the safest option, since all bank deposits are insured.  Even if your bank should fail (as mine recently did), your money would still be safe (up to $100,000).  The downside of this strategy is that you’ll be earning fairly low interest rates.  My new bank is currently paying 4.2% on a money market savings account.  While that’s pretty good for a savings account, it’s only a tiny bit above the inflation rate, which means it would take an excruciatingly long time to grow your nest egg.  This type of savings account would be a great place to keep your auto insurance premium, for example, if it was due three months from now.

A bank Certificate of Deposit (CD) is an option with an attractive feature – it earns a higher rate than a savings account.  My bank is currently paying 4.8% for a six month CD, and this money is also fully insured.  The downside is you have to tie up your money for six months.  If you need this money before the six months are up, you’ll have to pay a fee to get the money out.  Because of this limitation, CD’s are great places to keep money you don’t need right away, but will definitely need in the near future, like the money you’re saving for your vacation next summer.

But what about stocks, bonds, and mutual funds, that’s where the big money is made, right?  Yes, but big money can be lost here as well.  These types of high-octane investments can be thrilling and depressing, sometimes all in the same day.  Tune in next week when we discuss the advantages and disadvantages of each.

This post was previously published in the November 14, 2007, edition of the Greenhorn Valley View.

October 3, 2007

frugality

Posted in investing, money, newspaper, opinion column, saving, spending tagged at 5:34 pm by weiszguy

I’ve talked a lot before about how debt robs you of your future. To go into debt is to presume that you will have the money at some later point in time, a point at which you would probably rather have that money for other things. But here’s another twist on that same idea: any time you buy anything, even if you pay cash and incur no debt, you are robbing yourself of that same future.

I hear many complaints from people who don’t like being advised to live a frugal lifestyle. “You have to have some fun now,” people say. “I don’t want to live like a miser just so I can go to the grave with a big bank account,” others moan. “Mr. Smith” enjoys reading, double tall sugar free vanilla breve lattes, and eating out. In a typical week he spends $25 on a book, and $75 in lattes and restaurant meals. Mr. Smith complains that he’ll never be able to retire and feels bound to his job. But every week his bank account bleeds $100. Because Mr. Smith wants to “have some fun now,” he is deliberately postponing the day when he can leave his job behind.

What are your dreams? Do you want to buy a house? Do you want to take a big vacation? Do you want to retire early? Do you want to start a business? Whatever your goal is, ask yourself if this latte is worth putting in another hour at work. Or how about this question: “Is being frugal now going to help me reach my dream sooner?” If so, is that a trade you’re willing to make?

September 19, 2007

minimalism

Posted in money, newspaper, opinion column, saving at 8:37 am by weiszguy

Many of us recognize we have a problem with spending. Our problem is, we do too much of it. We never have enough money left at the end of the month and we don’t know how to change that. I’ve often heard that the key to being in good financial shape is to spend less than you earn, and do it for a long time. And while that formula certainly will work, it’s too cliched to be meaningful. How, exactly, do I spend less? You don’t know what it takes to keep a family clothed and fed. And how, exactly, to I earn more? You don’t know what my boss is like. This week let’s look at minimalism as a practical method of spending less. As an added benefit, this method will help us look deeply and meaningfully into our inner lives, and help us decide what is most important.

Have you ever thought about how much you actually need to live comfortably? Minimalism is an approach to, well, everything, that helps us get to the least common denominator and stay there. A minimalist tries to find the least amount required to get the job done and still be comfortable, and then hover right above that minimum. For example, how high does your water heater need to be turned up? Why not find out? Go to your water heater right now and turn it down a notch. Tomorrow morning when you take a shower, are you able to get the water hot enough for your tastes? Yes? Then turn it down another notch. Keep doing this until the water is not hot enough for your shower, then turn it back up a notch. Now you’ve found the right level, and are saving as much as possible on your energy bill.

While we’re in the shower, how much shampoo do you need? Can you cut your normal amount in half? If you do, can you still get your hair clean? Again, keep cutting the amount of shampoo until you find the amount that no longer gets the job done, then add back just a little.

This method can be used in just about every area of your life. I’m always looking for new areas I can cut back. But beware, you may end up cutting back farther than you at first anticipate. Using the minimalist method I discovered I don’t need any shaving cream at all! I kept cutting and cutting the amount until there was none left, and I still got a close – and comfortable – shave. (So now I’m thinking there must be some sort of conspiracy in the personal hygiene industry, but that’s a topic for another column.)

Consider minimalism in every part of your life: your work commute, the food you eat, the clothes you wear. Consider finding the minimum amount of Internet, TV, and telephone you need. I bet you’ll be surprised at how much you can trim without even noticing.

This post was originally published in the September 19, 2007, edition of the Greenhorn Valley View (registration required).  Actually, this post didn’t appear in the paper.  It will be in there next week.

September 18, 2007

save money by cutting expenses!

Posted in budget, money, saving, spending at 10:37 am by weiszguy

Ordinarily, I really like the articles that go up on http://www.zenhabits.net. But check out this post from a guest blogger: http://zenhabits.net/2007/09/put-your-spending-into-reverse-gear/

She makes the case that if you can cut back your spending slowly, you won’t even notice any pain. Which is a good point. But the details make the argument, and in this case, I think most of us would have a hard time relating. She talks about how she scaled down to the $100 jeans, and how she saves so much money by getting her morning coffee and muffin at 7-11 instead of Starbucks.

I’m all for a gradual shift into the frugal lifestyle, and I commend the author making the plunge. But having only begun her frugal journey, she doesn’t have much to offer the rest of us. Would you ask a freshman acting student for his thoughts on Richard Burton or Laurence Olivier? He might have an opinion, to be sure, but it wouldn’t be nearly as interesting, or as valuable, as an opinion from Cecil B. DeMille or Robert Altman. This is just an example by analogy, of course. The point is, if someone tells you to cut back your spending, and then offers up a personal example of cutting back to the $100 pair of jeans, how credible are they?

September 12, 2007

buying in bulk

Posted in budget, money, newspaper, opinion column, saving, spending at 9:12 pm by weiszguy

The other day King Soopers was running one of those 10 for $10 specials. They had half-gallons of milk and 200-ct boxes of Kleenex at that price. We needed both those items so I thought I’d grab a few. But when I got there the sign on the Kleenex said if you buy 15 boxes, you get an extra $5 off your total order. So I bought 15 boxes of Kleenex and 6 half-gallons of milk, and the total bill was only $16 plus tax. The Kleenex look beautiful on our closet shelf and I’m happy in the knowledge we can handle all the snot winter can throw at us. The milk is quietly taking up space in the freezer, just waiting to be thawed and poured over oatmeal.

There are two main advantages to buying in bulk. First, you can often get a discount on the purchase price. In this case, the store was using milk and Kleenex just to get me in the door, hoping I’d buy a lot of other things while I was there. Because I didn’t buy a lot of other things, I walked out of the store with some great deals. But even without specials like this, buying in bulk is usually cheaper because of the economies of large lots.

The other advantage of buying in bulk is, obviously, that you end up with a whole bunch of the stuff on your shelf at home. If you plan this carefully, it’s possible to have so many different things stocked up that you’ll only have to run to the store once a month! Imagine being able to skip your weekly shopping trip this week. I bet there are lots of other things you could do with that time. Imagine being snowed in for a week and not having to worry about food.

So save up a little money, wait for the right sale, then go crazy and get all you can (or a least enough to last until the next sale).

This article originally appeared in the September 12, 2007, edition of the Greenhorn Valley View.

August 31, 2007

financial planning basics

Posted in budget, credit cards, debt, money, newspaper, opinion column, retirement, saving, spending at 9:13 am by weiszguy

There are several principles at the core of any good financial plan. The first and foremost is this: spend less than you earn, and do it for a long time. And while that doesn’t sound like a lot of fun, it is the only way to get ahead. Over time the few extra snowflakes you don’t spend can turn into a giant snowball, growing more massive with each passing day. But if you don’t seed that snowball with those first few flakes, all you’ll get is – flaky.

Once you decide to spend less than you earn, you’ll be faced with a question: what do I do with the extra? There are many options, of course, but an excellent place to start is with your employer’s retirement plan. The match that your employer contributes to your plan is all gravy – it’s instant profit. To top it off, all the money in the retirement plan usually has quite a while to grow, and in the investment world, time is money.

Once your retirement plan is on autopilot, you should tackle any consumer debt you have, including your credit card debt. Paying a little extra each month on a credit card with an interest rate is the same as earning that same rate in an investment. What I mean is this: if your credit card is charging you 12.99% on your unpaid balance and you send in an extra $100 next month, that $100 is actually earning you 12.99%. This is a rate of return that’s tough to beat without taking a fair amount of risk. (By the way, if you don’t pay that extra $100, the credit card company is earning the 12.99%. Now you know why they’re so anxious for you to carry their card.)

If your credit cards are properly whipped into shape, you should think about building an emergency fund. This is money that will be available to you in case of emergency, so you won’t fall back into the credit card trap. Start out by building up one month’s worth of living expenses. Now when you have an emergency (and that killer pair of shoes at the unheard of sale price is NOT an emergency), you’ll have the money to cover it. And when you don’t have an emergency, that money is sitting in an account quietly earning you interest.

It doesn’t matter what stage of life you are in, or how many of the above principles you have already addressed. Start wherever you are and just take the next step. Once you have addressed all these principles you’ll be in a much better place to begin to think about other investments.

This post originally appeared in the August 29, 2007, edition of the Greenhorn Valley View.

August 28, 2007

automotive telemarketing

Posted in debt, money, saving, spending at 4:25 pm by weiszguy

A local car dealer, who shall remain nameless (and who obviously doesn’t subscribe to the Do Not Call list), called today because they are in urgent need of 1999 Plymouth Grand Voyagers.  And would I please consider trading mine in for another vehicle?  They offered a newer model at a lower payment.

Wow.  Car dealers are getting desperate.  This was a new one for me.  I had no idea there was such a hot market for eight year old minivans.

I paid the Voyager off a few years ago, so my current payment is exactly $0, so it would be hard for them to lower my payment, unless…

Unless THEY PAID ME to get a new car!

Which, of course, is exactly what is going to happen a couple years.  In a couple years I’ll have the cash saved up to buy a newer vehicle (without the telemarketer).  The interest payments that I don’t pay the finance company is effectively money that they are paying me to drive the new car off the lot.

I can’t wait!  Paying cash for a car is going to be a lot of fun!

August 22, 2007

to give or not to give

Posted in budget, credit cards, debt, giving, money, saving, spending at 7:36 am by weiszguy

Have you started saving for the holidays yet?  Believe it or not, they’re right around the corner.  And with the holidays come the crisis we love to hate – gift giving.  Although we save throughout the year, it seems like we never have enough money to give the gifts we want to give.  So we have some options: we could borrow the money we need to give the kind of gifts we want to give, we could limit our gift-giving to just the amount of money we have on hand, or we could not give anything.  We’ve tried all three options at different times, and all three have their pros and cons.

Borrowing money to give gifts is the easiest way to meet the social expectation of giving.  You’re going to receive a certain amount of gifts and you should give a similar amount.  Borrowing money from your credit cards allows you to meet that obligation without any social pain.  You look like a generous giver, and nobody has to know you’re now in debt.  And that’s the negative side – debt.  Borrowing money requires you to repay, and many people end up repaying well into the summer.

Or you could try limiting your spending on gifts to just the amount of money you currently have available.  The advantage here is you incur no new debt – nothing to repay!  The disadvantage, of course, is that you might not be giving as much as you’d like to give, or as much as you feel like you should give.

One year we didn’t have any money saved up, and we couldn’t borrow any, either.  So we ended up not giving anything to anybody.  Even if you’re at your counter-cultural, rebellious, anti-capitalism, hippie-loving best, I don’t recommend this choice.  We ended up receiving gifts from people we knew weren’t any better off than we were, but we gave nothing in return.  We felt ungrateful, unappreciative, and cheap.

So what should we do?  What do you do?  We have to give something, but don’t have the cash, and don’t have the desire to borrow.  The best solution I can think of is to be more diligent about saving larger amounts throughout the year, but that’s a plan best implemented in January, not August.  Does anybody else experience this dilemma?  How do you work through it?

This article originally appeared in the August 22, 2007 edition of the Greenhorn Valley View.

August 17, 2007

advice from Poor Richard

Posted in budget, debt, money, newspaper, opinion column, saving, spending at 8:40 am by weiszguy

Many estates are spent in the getting,
Since women for tea forsook spinning and knitting,
And men for punch forsook hewing and splitting.

Thus Poor Richard explains in one of his famous almanacs.  Read it again; 300 year old quotes sometimes require a couple readings to soak in.

Many estates are spent in the getting means that many people are spending, or never earning, great amounts of money; money which, if properly sown and cultivated, would provide that person a large living.

There is little question that human passions and desires (desires for things, leisure, and renown, for example) pull at us and cause us to spend excessively.  How many times have you bought this year’s sandals when last year’s are still in perfect shape?  How many times have you neglected work because you had already done enough to get by, even though a little more would provide exponential returns?  Pushing past these desires and looking just a few minutes into the future can be an extremely profitable endeavor.  If you begin to look, you’ll find small amounts of money turning up under all manner of rocks.

Since women for tea forsook spinning and knitting, and men for punch forsook hewing and splitting.  How often have you chosen a social engagement over completing the task at hand?  How often have you chosen to toss back a few at the expense of a profitable enterprise?  If you’re like me, this happens all too frequently.  We can’t forgo all pleasure, of course, and unhappy is the man who makes the attempt.  Nevertheless, we should make every effort to complete our work before engaging in other activities.  Have you performed your job superbly?  Have you hit your quota for the week?  If so, your leisure will be sweet; if not, the most luxurious of locations will not make you feel truly relaxed.

Follow Poor Richard’s advice.  Work diligently until your work is done.  And then sit back and enjoy the fruits of your labor.

This post originally appeared in the August 15, 2007 edition of the Greenhorn Valley View.

July 17, 2007

the cost of tv

Posted in money, saving, spending, technology, video games at 9:45 pm by weiszguy

How much does watching TV cost?  Free?  Maybe $500 if you count the cost of the TV set?  Think about it for a minute, try to figure how much it actually costs you (as opposed to a hypothetical “average” person) then click here for a little surprise.

July 10, 2007

America’s Cheapest Family

Posted in money, newspaper, saving, spending at 8:14 pm by weiszguy

Here’s my latest column.

Looking for a way to spend less money? Think there must be a way to wrangle what you need out of life without spending a king’s ransom? During this past month of not spending any money, I read a great book by Steve and Annette Economides (yes, that’s their real name) called America’s Cheapest Family Gets You Right on the Money. Their book is packed with insight for living well without breaking the bank. But they don’t just give you a few tips and tricks; they give you a whole different way of thinking about money. Rather than viewing money as a drug, with all its addictive qualities, they teach you to view money more like a mechanic views his wrenches. A mechanic needs his wrenches to complete the job, but he doesn’t need an ever-increasing supply of them to keep getting ahead. They got ahead on the income they had, not the income they hoped to have tomorrow.

The Economides also publish a monthly newsletter (available at http://www.homeeconomiser.com/), that has more of the ideas spelled out in the book, but in a smaller newsletter format.

Among their great ideas are ways to build up an emergency fund, how to pay cash for cars, and creative ways to pay off your debt quickly. And they have the best solution to the age old question of whether or not to give children allowances. They don’t just hand out money for nothing, but they also don’t tie money to basic household chores that should be done by all family members anyway. You’ll have to read it if you want to know more.

You also don’t have to spend a lot of money for the book. I’m so cheap resourceful I borrowed the book from the library. In fact, that might be a column for another day. The library is a fantastic resource for all kinds of information. I don’t even own most of the money books I read; they come straight from the library.

July 5, 2007

future debt

Posted in debt, money, newspaper, opinion column, saving, spending at 7:52 am by weiszguy

My column from this week’s Greenhorn Valley View:

So the thing about debt is, it presupposes on the future.  Let me illustrate.  You want a new computer.  In fact, you need a new computer.  Your old computer was created before the dinosaurs and has about as much memory as one.  So you start looking around and find the latest screaming fast machine that will have people drooling for blocks around.  The only problem is – gulp – it costs way more than you have on hand.

Not to worry!  It can be yours for only $55 a month!  Why, you could find that much between your couch cushions!  What can be a little harder to discover, however, is that you’ll be paying only $55 a month for four years.  If you do the math, you’ll discover that you’re going to end up paying a lot more for that computer than if you had just bought it outright.

But the interest on that debt isn’t my point today.  My point today is that you do not know what the future holds.  Sure you have the $55 right now, but will you next month?  How do you know?  Will you be able to make the payment one year from now?  How do you know?  What if you lost your job?  How soon could you find a new one?  Would it pay as much as your old one?  What if you or someone in your family suffered a major injury?  Where would you get the money to cover it?  Would you end up defaulting on the computer loan?

Here’s another idea.  Instead of buying the computer now and paying for it for the next four years, why not pay yourself the $55 a month?  That way you could pay cash for the computer, not have to pay any interest, gain the interest the money makes sitting in your savings account, get an even better computer (because you’ve waited awhile to make the purchase), and the best part is, if you suffer a job loss or medical emergency, you just stop paying yourself for the computer, and all the money you’ve saved is available for the emergency.  Not to mention the very real, but intangible, benefit of peace of mind that comes from not being enslaved to anyone through your debt.

Give the debt free life a whirl.  You’ll find the benefits well worth the wait.

June 5, 2007

Jonses

Posted in budget, money, newspaper, opinion column, saving, spending at 11:22 pm by weiszguy

My column from the Greenhorn Valley View, on June 6, 2007: 

My family and I are half way through our little experiment.  We’re not spending any money for a whole month.  In spite of a couple interesting insights and anecdotes, I can’t wait for this to be over!  Forcing myself not to buy something I want, even when I have the money, takes a high degree of discipline that I would rather not exert.  Friends and family aren’t too keen on our experiment either.  More than once we’ve had to decline an activity with friends because we couldn’t spend money.

Things have gotten interesting around on the home front, too.  My daughter (9) questions every purchase we make, asking if it is a “necessary expense,” even making the little quote marks with her fingers.  When did she become the voice of my conscience?  My son (10) was walking through Walmart with us when something caught his eye.  “Man,” he said, “not being able to buy things makes me want to buy even more.”

I think he’s on to something.  I think discontentment might be the root cause of most of our society’s overspending.  For a variety of reasons, we’re not happy with what we have.  We secretly hope spending will make us happy, maybe fill some void that needs filling.  The little thrill of the new purchase makes us temporarily forget something we’d rather not face.

Then, of course, there is the desire to keep up with the Joneses.  Naturally, since we derive our view of ourselves by comparing ourselves to the people around us, we will always want to be a half a notch better than the Joneses.  Is it possible to forget about the Joneses?

Or maybe forgetting about the Joneses isn’t even desirable.  Capitalism is an economic system built on man’s inherent greed.  Yes, greed is bad, but since it is impossible to eradicate, capitalism seeks to turn an inevitable evil into an economic good.  Because people are hungry for more, inventions are invented, jobs are created, diseases are cured, and our environment is overall improved.

So this is where we are.  We’re combating our desire for more by curtailing spending.  And while we expect that our family’s finances will improve, we’re confused about the overall role spending plays in our lives and in our culture.  Talk back in the comments section below.

several recent influences that are convincing me I shouldn’t read newspapers

Posted in money, newspaper, saving, spending at 9:22 pm by weiszguy

Lately I have been bombarded from several different angles regarding the wisdom of reading newspapers.  I’ve read three books that all downplay the necessity of newspapers.

In The Four Hour Workweek, Timothy Ferriss suggests that newspapers take too much time.   His book advocates doing only what needs to be done, and deliberately not doing things that don’t need to be done.  He finds that newspapers pull his mind in directions that have nothing to do with his business, and cause him to remain unfocused for a much longer period of time than it took to read the paper.

In America’s Cheapest Family, the Economides suggest that newspapers take too much money.  Their book is all about getting your personal and household finances in order, and newspapers are one of several items they identify that offer nothing to the reader, but in the long run will detract from his financial position.

In The Contrarian’s Guide to Leadership, Steven Sample suggests that newspapers negatively affect a leader’s ability to make correct decisions.   He once conducted an experiment where he deliberately avoided newspapers (and news from any media outlet) for a period of six months.  Because he got his news directly from his trusted advisers (who assimilated news from a variety of sources, and whose biases he well understood) he was generally more in-the-know than those who read the papers.  He now reads newspapers only for entertainment.

All of this really hacks me off.

I love reading the papers – as many as I can get my hands on.  My ideal morning starts with an hour of coffee and the Wall Street Journal (and maybe a bagel).  I subscribe to the Pueblo Chieftain and the Greenhorn Valley ViewI write a weekly column for the Greenhorn Valley View!  I spend liberally on newspapers and would spend even more if I could.  I purchased subscriptions for my parents and my parents-in-law.

And yet, I can count on no hands the amount of useful information I’ve received from newspapers over the last several years.  I find myself fairly well informed on matters that don’t matter.  The hour I spend reading the paper costs me two hours of productivity.  The money spent could be better used for other things.  And if I want to lead, I don’t need to let editors and reports tell me what to think.

I’m not crawling into my hermit hole just yet, but I think I’m finding myself in the uncomfortable position of having to analyze and prune a favorite habit in my life.  I feel like a wino who has just realized he has a problem with alcohol.  I still want to enjoy my habit, but I don’t want it to control me.

I get no money from Amazon or anybody else.  The links are here only for your convenience.

April 25, 2007

be the frog

Posted in money, newspaper, opinion column, retirement, saving at 8:03 pm by weiszguy

My latest column in the Greenhorn Valley View:

If you were reading along last week, you know we were talking about getting ourselves psyched up to start saving. Finding a good reason to put money in savings is a great start. Once you’ve discovered your motivation, the next question you’ll need to ask is, “How much?”

If you go to a financial planner for advice, you’ll come away thinking, “I have to save that much! There’s no way I can do that!” So save yourself the trouble; don’t go to a financial planner.

Remember the story about boiling a frog? If you want to boil a frog, don’t put it in a pan of boiling water, it will just jump right out. Instead, put it in a pan of room-temperature water, and slowly turn up the heat. The frog won’t be aware of the rising temperature until it’s too late. This story is usually used to make a negative point, as in, “You don’t want to be that frog!” But in the case of learning to save money, you DO want to be that frog!

Start small. Start with whatever you’re saving now, and bump it up a small amount. If you’re not currently saving anything, start with something so small you won’t even notice it, say $10 a week. Is $10 a week ever going to amount to much? Probably not. What it will do, however, is get you into the habit. After you’ve gotten used to the idea of putting away a small amount of money each week, bump it up a little. Maybe save $20 a week for a while. Will you miss $20 a week? Experience tells me, yes, for a couple weeks. After that, it’ll be as easy as the $10 was. In fact, every time you increase the amount you’re saving, you’ll probably feel a little pain for a couple weeks, but the pain gets smaller and of shorter duration each time. And every time you get accustomed to a new saving level, you’ll wonder why on earth you worried so much about the previous level.

Or consider a weight lifting regiment. If you’ve been doing 20 reps a day, and one day you decide to do 30 reps, will you notice it? Yes. Most definitely. For a couple days. Then what happens? You get so used to 30 reps that you blow through the first 20 without even thinking about them, and wonder why 20 ever gave you so much trouble in the first place.

You want your savings to be like that. Do more reps. Be the frog.

April 18, 2007

newspaper column on retirement

Posted in inheritance, money, newspaper, opinion column, retirement, saving at 7:44 pm by weiszguy

This column by yours truly appeared in the April 18, 2007 edition of the Greenhorn Valley View:

What would you do if you didn’t have to work to provide for your needs? Imagine for a moment that you have a bottomless bank account, that just magically has money in it that you can use to pay your expenses. Now you’re free from having to have a job to pay the bills. What would you do?

Would you continue to work, just to have something to do? Would you do volunteer work with your favorite charity? Would you travel ’round the world to see the sights?

Where would you live? Colorado City? Waikiki? Costa Rica? How about hobbies? Would you learn to play a musical instrument? Learn a new language? Write the next best-seller? Paint the next Mona Lisa? Take up golf?

Make a list of your answers to these questions. Draw a picture of yourself doing whatever you would do if you weren’t required to work. Imagine yourself speaking French while painting a picture of yourself playing guitar for underprivileged children in Rwanda. (Your image may vary.) Now tape that list and picture to your refrigerator.

Congratulations! You’re half way there! You’ve just discovered your motivation for saving for retirement! You can provide that bottomless bank account for yourself. With a few bucks a month, and your new-found motivation, you’ll be living your dream sooner than you know it.

People in their 20’s and 30’s have a hard time getting motivated to save because retirement is a distant uncertainty. People in their 50’s and 60’s have a hard time getting motivated to save because retirement is nipping at their heels. But if you take time periodically to imagine how your life would be if you didn’t have to work, saving might not seem like such a futile activity.

Personally, my goals are less about retirement and more about leaving an inheritance for my children and grandchildren. I imagine my grandchildren spending their time in philanthropic endeavors, possibly directing large, multi-national charity organizations, without having to worry about how to put bread on their tables. Obviously, I have to spend copious amounts of time now and in my retirement years educating my children and grandchildren in the principles of making and managing money. And the chunk of change required to fund this vision provides me the motivation to keep saving.

But every person is different. Each person’s motivation is unique. Spending some time thinking about your future can be a very healthy exercise. I think you should do it often.

Six straight weeks of writing this column! I’m on a roll!

March 30, 2007

saving with passion

Posted in money, newspaper, opinion column, saving at 7:44 am by weiszguy

Here’s my latest column, which ran in the March 28, 2007, edition of the Greenhorn Valley View:

One problem with saving money is – it’s no fun! Most of us would prefer a root canal to putting off the purchase of a new magazine subscription. In most peoples’ minds, saving = not spending. Any money that I save right now is money that I can’t spend right now. Furthermore, any discussions of saving money usually focus on ways to make sacrifices now, in order to fund some nebulous long-term goal, like retiring in 30 years. That kind of talk is depressing! How can we make saving fun? How can we make the act of putting away money something we’d rather do than subscribe to that new magazine?

One idea is to do just that – make saving fun. Is your goal to eventually have enough money to quit work and live off the interest? That’s a good goal, but it’s pretty lofty and isn’t going to help you with the magazine dilemma. But what if you could have your magazine and not have to pay for it out of your paycheck? What if you had enough money in a “magazine fund” that you could use the interest it earns to pay for your magazine subscriptions every year? That way you’d be done paying for magazines for the rest of your life!

But wait a second, how much money is that going to take? There is a simple rule that will give us the answer. The rule of 25 says that whatever your annual expense is, multiply it buy 25 to get the amount that will fully fund that expense forever. For example, if you spend $40 a year on magazines, you could put away $1000 ($40 x 25) , and the interest from that would pay for your magazines for life (assuming a real return of 4%). $1000. That’s not so bad. You could come up with that kind of money in a few months.

And once you had your magazines taken care of, you could move on to the next spending category. Before you realized what was happening, you’d have so many spending categories permanently funded that your need for current income would go down. Now think of the possibilities. Retire early! Do volunteer work! Do work that you’re passionate about, even though the current income isn’t as much as you formerly would have needed.

These are the kinds of things we need to spend more time thinking about. If you’ve been inspired to make saving fun, I’d love to hear your story.

Many thanks to Rob Bennett for his ideas on saving with passion. Read more of Rob’s ideas on www.passionsaving.com

March 23, 2007

my first published column

Posted in money, newspaper, saving at 8:01 pm by weiszguy

My first newspaper column was published this week! How ’bout me? The paper is the Greenhorn Valley View, which you can find at http://greenhornvalleyview.com/ You can’t actually see the column there because it is only available to subscribers (although, I’m sure they wouldn’t mind if you subscribed), so I’m printing the column here. Enjoy!

There are many reasons not to save money. Consider the seasons of your life:

20’s – Save? Now? Are you kidding? I just graduated and I’m getting married. I need to buy a house and start working my way up in the world. Then there’s the car payment and the student loans to pay off. And anyway, retirement is so far away…

30’s – I can’t start saving now. Our second child is one the way. My wife will be off work for a few years and I need to put an addition on the house. I’m trading up to the bigger car and I’m trying to make partner at work. I’ll start saving soon…

40’s – I know I need to start saving, but how can I do that with all the kid’s activities? My son made the varsity hockey team and is playing games around the state, and my daughter’s gymnastics team is in demand around the country. With all the traveling, there’s nothing left to save.

50’s – Have you seen what college costs these days? I can’t start saving now. In fact, I’m borrowing money so the kids can go to school. I can’t refuse the kids their educations, can I? I’ll start saving a whole lot real soon…

60’s – I can’t start saving now. With only a few years left until retirement, there isn’t time enough to put away what I’ll need for the future. I guess I’ll have to keep working forever.

70’s – I can’t start saving now. My health has gone downhill so fast I can’t work anymore, so I’m living on Social Security and staying with my daughter. I sure wish I’d started putting money away earlier…

But it doesn’t have to be this way. Consider again the seasons of your life:

20’s – I know I need to save. Even though my bills are high right now, I think I’ll just put away a little out of each paycheck.

30’s – That saving habit I started right out of college is really paying off! I haven’t noticed the little bit that’s missing from my paychecks at all! In fact, I’m bumping up my savings amount! I sure hope I can keep this up.

40’s – My savings is snowballing fast! The interest my money is making is more than I’m putting in from my paychecks! I wonder what would happen if I started saving a little more?

50’s – My investments have done so well that I retired this year! But I’m not just sitting in my rocking chair, I’m teaching some classes at the community college and volunteering for charity work overseas.

60’s – I get such a kick out of traveling with the grandkids! I get to watch them in hockey and gymnastics, and I’ve put away some money for their educations.

70’s – Traveling is getting harder these days. But we’ve built a house on the ocean and I love sitting on the porch and watching the sunset. I sure am glad we had the foresight to start saving early!

I’ve seen people at every stage; none of these examples are made up. Although the choice to save isn’t easy, we’ll be better off if we can force ourselves to do it.

March 8, 2007

passionsaving

Posted in money, saving at 1:05 pm by weiszguy

It’s a concept I’ve been mulling over in my mind for some time now, but have been unable to fully articulate. It’ a concept I’ve tried to discuss with others, but have been unable to get them to see my point.

The concept is this: saving money is a good thing, but it requires a sacrifice. Every dollar we save right now is a dollar we can’t spend on something fun right now. Which is a very negative, depressing thought. Is there a way to turn saving into something fun? Is there a way to make the thrill (yes, thrill) of saving equal or exceed the thrill of spending? If there was, I bet a lot more of us would do a lot more saving.

I found a website where this basic premise is explored in great depth. passionsaving is a concept developed by a guy who was laid off in a recession, and never wanted to be dependent on a paycheck again. He started figuring out ways to motivate himself to save, and ways to motivate others to save. I can easily see how employing some of these devices would turn saving into an adrenaline-pumping, no-holds-barred, full-contact extreme sport.