Frugality in a Consumer Society
January 30th, 2008
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Western society is geared to make you spend money all the time which makes it incredibly difficult to be frugal and save money. The idea for this post came to me as I was sitting waiting in a store watching all of the people milling about me merrily buying products they probably didn’t need. Don’t get me wrong there is nothing wrong with a consumer society especially if you can afford to spend the money at will. Unfortunately a great many people don’t have that luxury. These are the people who are carrying debt loads that are weighing them down and making them worry about their finances.
Reading through other personal finances blogs you encounter some people who have managed to get rid of their debt through being frugal. These people are naturally frugal and they don’t like spending money unnecessarily. I know a couple people like this and it amazes me what they’re able to accomplish from a monetary standpoint by not spending money. Unfortunately many people who are living from paycheck to paycheck, like myself, find it incredibly difficult to stop the process of spending money all the time.
Each and every day we are bombarded with advertising and news that pushes us into the temples of consumerism, the malls, where we see other people spending money in droves. This pressures us into spending money ourselves. We see shopping as a right and a need, going so far as to use it as a means of letting our day to day pressures go. Personally I find it hard not to spend money though I’ve learned over the years to ignore my impulses. I am not by nature a frugal person though my debts and desire to be out of debt have driven some frugal elements into my life. Living in our society is hard for a person like me and I think there are a great many people out there like me.
Being frugal takes effort and dedication (at least for me), here are some things that I do to avoid spending money (on credit or cash):
- Don’t go shopping unless you need something
- Leave the credit card at home
- Before making an impulse buy question it and yourself (you might not need the item)
- Mentally understand the difference between needs and wants, don’t buy wants unless you have spare money
- Set aside a set amount of money for frivolous expenses
I know this list is far from complete and I’ll take any suggestions people might have to offer. Regardless it’s a starting point, especially if you need to spend less but are used to spending money all the time.
An interesting case study was done by a few people over the past few years where they simply removed themselves from consumer society. They stopped spending money on any item that wasn’t 100% necessary. One of these reads was Judith Levine’s Not Buying It:My Year Without Shopping
Could you Stop Spending for a Month?
The Compact (http://groups.yahoo.com/group/thecompact/) a group of people taking themselves off the spending grid for 12 months.
Posted in Budgeting and Planning, Commentary | 4 Comments
Carnival of Personal Finance is Up!
January 29th, 2008
Each week for the past 137 weeks there has been a Carnival of Personal Finance hosted by a willing participant. These Carnivals are collections of articles that are grouped around a single topic, in this case personal finance. I’ve found some of the blogs I read most often through these Carnivals and this week its hosted by The Dividend Guy, who has kindly included one of my posts from last week.
If you’ve never checked out any of these Carnivals there’s a great deal of awesome
Posted in Sites/Articles | No Comments
Alternate Income Streams
January 28th, 2008
Have you ever wanted to live without needing a paycheck? Or have you ever wondered what would happen if you happened to lose your job? Having only one source of income ties you directly to that source and makes you dependant on it. Having multiple income streams means that if any one of them vanishes you’ve still got the others in place so you don’t have to worry. A single source of income is prone to vanish at the worst of times, especially now that the American economy seems to be sliding into a recession and layoffs are constantly in the news.
If you’re conscious about your money and have been paying attention to the markets lately, you may have heard people mention that now is the time to make sure you have alternate income streams. The first question that really needs to be answered is what is an income stream? Very simply, it’s something that brings you income. For most people they have one income stream, their job. Alternate income streams are activities that you set up to bring you money from an additional source. For businesses this is essential in order to remain viable, but it also applies each individual in order to not be reliant on any single source of income.
There are two types of income: Active and Passive. An active source of income is something that requires you to commit your time and energy in return for money. A perfect example of this is a job. You spend 40 hours a week working for a paycheck; if you don’t go to work you won’t get the pay. Passive income on the other hand, is income that requires little, if any, input from you as a person. Some examples of passive income streams are dividends from stocks owned and interest on money in the bank. There are many more types of passive income but those two examples require no input from you and continuously generate income.
Personally, I would much rather have money coming in from passive income streams than active ones. I would love to have all the time in the world to travel and pursue activities that I want to pursue rather than go into an office. Another aspect to consider is, how many income streams do you have in place? If you have only one income stream, from your day job for example, you’re forced to maintain that job to pay for your bills. You are tied to this income stream and if you happen to be living from paycheck to paycheck this income stream becomes incredibly important. This type of reliance is what most people live with day to day. This is also one of the reasons that you want to set up alternate income streams.
Although your day job might be enjoyable and something that you’re passionate about it does not guarantee that you’ll get money from it all the time. I know the nay Sayers will argue that their job is secure but the reality is no single source of income is every guaranteed. Most of the time I like my day job but I am also tied to it because I have few other sources of income. In the back of my mind I worry about not getting paid (which happened lately) and the impact this would have on my life.
I’ve been working on a side project lately that would become an alternate income stream. Because I don’t have an extra 40 hours per week to concentrate on this project its slow in being set up but I’m making sure that when everything is in place there will be little need for my input. This will become a passive source of income for me. With a little planning most side projects can be set up this way. If this project works out the way I would like it to then my day job won’t be the only source of income that comes into my bank account.
Side businesses and projects are not the only means of setting up alternate sources of income. Saving money in a high interest saving account will do the trick. It might not be very glamorous but even 4% interest is extra income. There are many ways you can go about setting up alternate sources of income its just a matter of preparation.
Having alternate income streams means that you aren’t tied to a single job and don’t have to worry about the what ifs and issues if it happens to vanish. I think everyone should consider setting up a few income streams even if they are simple. If you can take the money you make and have it start making money for you then you won’t need to work as hard to maintain your lifestyle.
Posted in Commentary, Extra Income | No Comments
Fears – What’s holding you back?
January 24th, 2008
I’ve been going through a rather rough spell lately and my confidence in myself has been a bit rattled. I know that I can accomplish a great many things but for some reason I’m not accomplishing anything worth talking about. In reality there is no reason that I shouldn’t be able to do the things I’ve been setting out to do. I’m not setting my goals so incredibly high that I cannot reach them. I can even see the route to accomplish my goals yet I’m not accomplishing anything. I’m sure many of the readers of this blog have encountered this before or might even be feeling the same way right now.
The biggest problem for me has always been financial and money drives a lot of things for me. Continued failure to achieve any form of success has been weighing on my mind lately. All of this got me thinking not necessarily about what I’m doing wrong or what I’m not doing but more to the underlying causes of the problem. I believe that the root of a lot of my problems and lack of success is a set of deep seeded fears.
I’m sure everyone can releate to not doing something because a fear gripped us. Look at smokers for example; fear holds many of them back from even attempting to quit when they very clearly understand that smoking is unhealthy, expensive and not very enjoyable. Fear of not being able to pay your bills I’m sure has many people up late at night in a cold sweat. The question that I came to was what fears are holding me back and why and I managed to come up with a couple ideas though I’m not certain I’ve reached a resolution in my mind yet. Regardless here are some fears that I see that are holding me back right now:
Fear of Failure: This is a fear that has gripped everyone at one time or another. No one wants to fail at what they’re doing regardless of what it is. Personally I’ve done fairly well for myself in life succeeding to some degree pretty much all of the time. Failing at something is not something I enjoy and I make sure that I put enough effort into something that I achieve some level of success. Fear of failure keeps me going at the office, it guides how much effort I put into tasks to make sure they succeed. Unfortunately it has also slowed me down on many occasions. I’ve had ideas that could potentially be viable businesses but I don’t start them because I’m afraid what might happen if they don’t succeed. Fear of failure has kept me in jobs I didn’t enjoy because I was afraid of what might happen if I left and didn’t succeed at another one. Bills need to be paid! Overall I think this fear is a healthy one to have as long as it does not turn into something that prevents you from doing something.
Fear of the Unknown: This is another fear that I’m sure most people have encountered at some point or another. We fear what we don’t know and don’t understand, it raises our heart rate and makes us uncomfortable. The reality is that often this fear is due to a lack of effort or worse simply an excuse. When I was younger I didn’t fear the unknown I tried to figure out what that unknown was so that I could get past it. Now not knowing what to do slows me down, I worry about it and I don’t accomplish what I need to. About a year and half ago I had the opportunity to buy a cottage and had the money to do so. Everything looked like it would be in order with one exception I needed a larger down payment because of the type of property it was. I was $5,000 short and I really didn’t know what options I had to get around it. I knew there had to be a way but I didn’t know what it was. This fear held me in check for a couple weeks where I could have been trying to find out from more knowledgeable people. The end result is I did find an option that would have worked; unfortunately it was too late and the deal ended up falling through. Now on a brighter note I ended up using that same money to buy my girlfriend at the time an engagement ring and we got married. In the end I am far happier for getting married than I would have ever been owning a cottage. But the fear of the unknown slowed me down and prevented me from succeeding.
Fear of Success: Recently I’ve been thinking that this is also a fear that grips me. I know that it sounds like a strange fear since why would you be afraid to succeed but I believe it’s a valid fear. For example if you want to start a business and think it will succeed you simply go out and do it. But what happens if you do? You might end up running around like mad trying to keep everything going (we’ve all seen this) or worse you might end up doing really well and not need to do anything. Either way the change in lifestyle is huge the goal is success but the fear of actually reaching that point is subtly sitting in the back of our minds. This fear is a bit harder to grasp for me since its much more subtle than the other two I mentioned. It also doesn’t make sense since there should be no reason to fear accomplishing something yet looking back at my past I think this fear is probably the biggest one I need to conquer. I have started a great many projects and tasks in my life and most of them have sat there unfinished because of this fear. The thought of ‘what happens if I actually do this?’ runs through the back of the mind.
Between the three fears I think I might have found a nice happy place where I don’t fail too often, don’t succeed too often and don’t do anything too unfamiliar. I have been in debt for most of my working life and I recognize this. I’ve managed to stop going further into debt but I also haven’t gotten out of debt. Working in technology I make a decent living and there is no reason why I should still be as far into debt as I am. I think that a lot of people find a nice rut that they’re comfortable with and just stay there for most of their lives. They find a happy medium where nothing too challenging happens and they just do the same things over and over again regardless of how pointless they might be. If you look at all of the people living from paycheck to paycheck and assessed their spending, income, and expenses you could very quickly find a way for them to stop the pointlessness and anxiety that this lifestyle brings with it.
I don’t think I’ve gotten to the bottom of this myself, there are more fears that guide my thoughts, emotions, and actions but acknowledging them and seeing what options exist to move past them is a starting point. There is a lot more I need to do to get past all of these fears but I know that I can. I’ll post more about my fears and what I’m going to do to change my situation and hopefully right myself over the next week or so.
Posted in Commentary, Productivity | 1 Comment
Check out the Carnival of Personal Finance
January 23rd, 2008
The Carnival of Personal Finance #136 is up over at Green Panda House and one of my posts are listed. Definitely go check out the articles that are posted; there’s a lot of interesting items.
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Saving on Grocery Spending
January 22nd, 2008
As I was reading through my RSS feeds this morning I ran across a post on Blogging Away Debt where Tricia was describing how she is trying to save the family some money on the grocery bill. This got me thinking about my spending habits in this area and even though my wife and I split the cost of food over the course of a month it inevitably adds up very quickly.
The ideal way to save money on groceries is to know what you are going to eat over the course of a month, pick recipes that have the same ingredients and then buy in bulk. Although this is probably the best way to save money on food costs its not necessarily the most fun.
In my particular case I have a different approach to grocery shopping than Tricia does. We decide what we’re going to have during the course of the day or at a maximum a couple days in advance and then we buy the groceries on the way home. Now this might not be the most efficient way to buy food it but because we decide our dinner menu with very little lead time it prevents us from buying food that we don’t end up eating.
The net result from our approach maybe that we spend more money on food by going every day but I believe that we end up spending less in the long run by not throwing out food. Wasted food is no different than if you threw your money away. With all of this said we still keep some staples stocked it was just a matter of reducing the amount of wasted food and money while keeping the menu/eating habits the same. If it came down to a necessity we could always revert to a planned menu and buy in bulk (hopefully not throwing anything out).
Posted in Saving Ideas, Sites/Articles | 2 Comments
From not getting paid to getting paid twice
January 17th, 2008
In my last post I talked about not getting paid when my paycheck was due and the impact that this had on my life. Yesterday I received my second pay in two days. I have now been paid in advance an extra pay. This wasn’t intentional but the reason that things were a little screwed up with my paycheck caused this problem as well. Now don’t get me wrong I am not complaining about the fact that I have more money. Its actually quite nice at the moment.
Getting a months worth of money does bring with its own challenges though. I am used to a standard pay which comes in every couple weeks. I plan most of my debt repayment and expenses around this. Having a sizable amount of money is never a problem but having to stretch it for a longer period is. I now have to make sure that the money I do have lasts the full length of time without running out.
The nice thing about the whole situation is the fact that my raise has kicked in. Its not as much as I would have liked but it is by no means bad. The way I am intending to tackle this problem is to make sure that I pay all of my necessary commitments up front. This will allow me breath a little easier if all of the upcoming payments are handled (especially the important ones such as the mortgage).
As with not getting paid on time getting extra money and then not getting paid for 4 weeks is yet another reminder that I need to ensure I stop living from paycheck to paycheck as quickly as possible.
Posted in Debt, Financial Situation | 1 Comment
Not Getting Paid: The Dreadful Horror
January 14th, 2008
I won’t shy away from the fact that I am still living mostly from paycheck to paycheck. I’ve been making a fair bit of progress though my debt load and lifestyle really didn’t have me rolling in the money. This past weekend the reality of such a lifestyle really came crashing down. My paycheck wasn’t in the bank when it was supposed to be. The company didn’t go bankrupt but there was some odd clerical error and the automatic deposit wasn’t in the bank. I’ve been assured that it will be there tomorrow. Fortunately this happened at a time when few payments were automatically withdrawn.
What did happen was a forced reality check on my part and the impact that something as simple as not getting paid can have for me. The reality for me is that I spend more money than I make and I somehow manage to float along. Savings are something that I think are a great thing but never manage to keep for too long. And the worst part of the whole scenario is the fact that I truly live from pay to pay.
Would you survive if you didn’t get a paycheck?
I now know that I would be very hard pressed to survive if I missed a pay. I hate the effects that this has on me and I don’t think the full gravity of them shone through until I missed one of these magical pays. Coasting along in the status quo is what a great many people do. They don’t do this for a couple months or a year they do it for years on end and sometimes decades and then when retirement sets in they’re in trouble.
Retirement aside many people, myself included, would be in serious trouble if a single pay was missed. Some people would be able to cope for a few weeks or months on credit cards alone but that’s not a way to live. This little misadventure should be resolved shortly for myself but that does not mean there is no lesson to be learnt. It’s time to make some sacrifices and changes to remove the need to rely on the pay to pay never ending cycle.
Posted in Budgeting and Planning, Debt | 5 Comments
Giving up Time for Money
January 9th, 2008
One of the goals of personal finance in my opinion is not only to have the money you need and want but also to have the time to spend it. Tim Ferriss, the author of the 4 Hour Workweek
In order to make more money we have to be willing to give up more time; I completely understand this and I am willing to give up some of my time to make more money. But there is a fine line there. I have a fair amount of experience in my field and although I would not call myself an expert I do believe that I provide valuable insights and am worth a certain amount for my time. Unfortunately around this time last year I took a large pay cut for a great learning experience work wise. It’s been a year since then and I am now wondering what the return on future time investment will be. From a purely monetary point of view I believe that I should go back to making more money again (which I am partially). The larger question is am I willing to give up the same amount of time that I have up to this point? The simple answer is no.
Time is money. If you’ve ever heard that before you can quickly understand what that means and having time for leisure activities is just as important as having the money. Tim in his post alluded to knowing people who work a great deal and have fancy cars that collect dust. I do not want to trade happiness for a paycheck and I don’t think anyone should.
People should not forget that if all they do is work then they won’t have any time to enjoy the fruits of their labors. Happiness has to be part of the equation of life or it can very quickly loose its meaning. One of my goals for the year was to figure out what to do about my job, I am still working on this, but I am more and more convinced that this does not include trading more of my leisure time for more money. I took a pay cut to be where I am, I have learnt a great deal, and now I believe that staying with similar money for more free time for myself is something that I am going to include in my work goals. I want to be able to spend quality time with my friends, my family, and my wife.
Posted in Sites/Articles, Commentary | 5 Comments
Dreaded January Bills
January 7th, 2008
Are you one of those people who are dreading the bills that are coming in January? Did you overspend on Christmas and aren’t sure what to expect? I would guess that many of the people who come to this site are. Personally I know I overspent on Christmas by a fair bit but I am taking responsibility for this. I’m not dreading any credit card bills that might be coming in since I didn’t spend money on them. I am dreading the double payments on a couple of my bills though as I play catch up.
Regardless of how you put it overspending during the holidays is something that a great many of us do. I don’t remember the exact statistic of how long it takes the average person or family to pay off their Christmas bills but it’s a very long time. The worst part about the whole thing is that I know a lot of people will use this as an excuse for not having money in the early part of the year. Its not Christmases fault, it’s your own. No one put a gun to your head and forced you to spend thousands of dollars on gifts.
Taking Responsibility
If you are prone to overspending on Christmas or anything at least have the presence of mind to accept responsibility for this. If you know you do this and are likely to do it again then plan for it. Spending thousands of dollars at any time without knowing what’s coming is simply a recipe for never getting out of the debt hole. Credit card interest rates are scary to say the least; do you really want to pay them all that interest just so you can repeat the process?
Learn your Lesson
I don’t know if this is a general take on society or if it’s just me but I notice that a lot of people I know overspend on a regular basis and then are surprised when they end up living from paycheck to paycheck. Sadly I tend to do this myself (it’s a failing of mine). A definition of insanity is doing the same things over and over again but expecting a different result. If you’re going to spend more money than you have or can afford you’ll be in debt. There is nothing that can be done about this other than learning your lesson and stopping doing something that’s pointless.
I’m going to get caught up on my bills this month by spending a lot less than I normally do. It might end up taking me a month or two to actually get caught up but I will. The difference this time is I know when my next round of big expenses is and I am already starting to plan for it so when it comes I don’t have to scramble to figure out how to pay for them.
Posted in Budgeting and Planning, Debt | 1 Comment
