Live Real, Now

The no-pants guide to spending, saving, and thriving in the real world.

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Don’t Screw Future-You

Finance, Life

A conversation between me and my temporally displaced self.
Future Me: Excuse me, Jason?
Me: Yes?
FMe: <Slap!>
Me: May I ask what that was for?
FMe: Of course.
Me: What was that for, jerk?
FMe: That was payback for all of the hell you have put me through.
Me: What?!?  I’ve never even met you, before.
FMe: Of course you have.  I am future-you, and I’m sick of getting screwed by past-me, that is, you.
Me: Huh?
FMe: Listen close.  You’re not  the sharpest brick in the box and I don’t want to explain this twice.
Me: ???
FMe: A long time ago, when you first met our wife, you were dumb.
Me: I don’t appreciate….
FMe: Shut up.  I was dumb then, too.  Remember?  You…err…we bought a new truck, built an addition on our…err…your…err…whomever’s house, got married in the same year.  On top of many other expensive decisions.  Do your recall?
Me: Yes, I do.  So what?
FMe: If that wasn’t enough, you and your smoking-hot bride are still shopping like you’re rich. You drive a new car.  Your kids wear new clothes.  You’ve got a house full of new furniture.  How did you pay for all of that?
Me: Naturally, I charged it.  Zero payments, zero interest for a year!  Pretty smart, huh?
FMe: What happens in a year?
Me: I don’t know.  I’ve got a full year to figure that out.
FMe: <Slap!>  I’ll tell you what happens!  Future-you, that’s me, gets screwed!   Your raise didn’t come through.  You had a baby. The truck broke down.  Your wife took maternity leave.  A roommate moved out.  You took a loss in the stock market.  You didn’t plan!  You had no savings to cover any of those problems because you were too busy servicing debt to pay for your current life.
Me: How was I to know?
FMe: <Slap!>  Life happens!  You never know what is coming next.  You need to plan and save for what might happen.  Otherwise, you’ll just accumulate more debt to be serviced by yours-truly.  That is not acceptable.
Me:  So?  What are you going to do about it?
FMe: <Slap!>
Me: Really?  Again?
FMe: <Slap!>  I’m struggling to pay your debt. Your son starts college next year, but you’ve left me completely unable to help.  Your daughter wants to get married in a couple of years, but the Father-of-the-Bride can’t afford a tux.  My wife, your beatiful bride, wants a vacation that I can’t afford.   You’ve screwed me, dude.
Me: I’m sorry.  What can I do to fix it?
FMe: Buy me dinner, first.
Me: Huh?!?!?
FMe: Stop the excess spending. Spend less than you make, for a change.  No credit.
Me: None?
FMe: None.  Nada.  Zip.  Zilch.  Only spend what you can afford. Budget.  Pay off those nasty bills.  Don’t leave me hanging.
Me: So, what you’re saying is that, if I don’t have the money, I shouldn’t buy it?
FMe: Exactly.  That’s the path to wealth, freedom, and financial independence.  Live in the real world.
Me: Gee, thanks, Future-Me!  Now I know.
FMe: And knowing is half the battle.

What would your future-you have to say to you?

 

Make a Budget

Finance

DSC02103
Image by r.lovewell via Flickr

In the past, I’ve gone through a detailed series of budget lessons demonstrating how to make a budget and showing my personal budget spreadsheet template.  If you weren’t here to see them develop, you probably haven’t seen them at all.    I’ve never built an actual index for those posts.

This is the master index of my budget planning resources.  As I develop more, this will grow.

Budget Lesson #1 – In this lesson, I go over how we handle discretionary income and I explain our modified envelope system.   The discretionary budget contains things like our grocery bill, or the clothes we buy.  We have near-total discretion over what is purchased, hence the name.

Budget Lesson #2 – Lesson #2 contains the details of our monthly bills.  These are the ones that are consistent, predictable, and actually due each month.  Most people take these for granted as the bills they have to pay, but it’s not true.   You can get almost all of your regular bills reduced just by asking.   You would also be surprised what you can do without, when properly motivated.

Budget Lesson #3 – This is where I explain how we deal with the non-monthly bills.  That is, the bills that have to be paid, but are not due on a monthly basis.  I also share the personal budget spreadsheet template I developed.   I am working on a few sample templates to match various imaginary scenarios.  If you’d like to be an anonymous case study, and get free help setting up a budget, let me know, please.

Budget Lesson #4 – In this lesson, I describe our “set-aside” funds for things that will need to be paid eventually, but not on a set schedule.  Sometimes, they are never actually due.   We set aside money for the parties we throw, for car repairs and for a number of other things.  A few of these items are outright optional, but they are part of what makes life fun.  You can’t make a budget without including some of the extras.

Budget Lesson #5 – This is the companion piece to lesson 2.   Learn how I’ve reduced–or attempted to reduce–each of these bills.   For the better part of two years, I called Dish Network every few months to ask for a discount.  For almost 2 years, it was granted.  Then one, day, they told me they were putting a note on our account to keep us from getting any more discounts, so I canceled.   100% discounts help us save more.

Budget Lesson #6 – This is the reduction companion to lesson 3.  These bills are harder to reduce.  Have you ever successfully gotten your property taxes lowered?

Budget Lesson #7 – This is the reduction companion to lesson 4.  Notice a pattern, yet?

Budget Lesson #8 – Here, completely out of order, is the reduction companion to lesson 1.   Watch as I magically reduce–or rationalize–our discretionary budget.

So, dear readers, what part of budgeting should I address next?

Debt Options

Finance

Debtor's Prison Historic Marker
Image by jimmywayne via Flickr

When you’re buried in debt, bankruptcy can seem like the only option.   When you get make ends meet, no matter how hard you pull on them.  When bill collectors interrupt every dinner.  When you have to choose between food and rent.   When there is always more month than money.  Do you have another choice?

Yes, you do.

Before you rush to file bankruptcy, take the time to understand your options.

Debt Settlement

Debt settlement is when you quit paying your bills and start sending the money to settlement company.  The settlement company does…nothing.  Really.   They take your money and drop it into investments or interest-bearing accounts.  You don’t get the interest, they do.  Eventually, when your creditors are howling, the settlement company offers to make a settlement on the account.   If the creditor accepts pennies on the dollar to kill your debt, the settlement company pays them.  If not, they get to howl louder and make you more miserable.

While this process is playing itself out over years, your credit is taking a beating.  You are doing nothing to dig yourself out of the hole you’ve dug.  Finally, when your creditors are so desperate that they accept the settlement offer, you get a huge additional hit to your credit.   “SETTLED IN FULL” is not a good status to have on your credit report.

Debt settlement companies do nothing you can’t do for yourself, and doing it for yourself at least lets you keep the interest your money is earning.

Debt Consolidation

Consolidating your debt comes in two varieties, a debt consolidation loan and a debt management plan.

A debt management plan is when you send one large payment to a debt consolidation company, and they pay your creditors for you each month.    The company will usually attempt to contact your creditors and negotiate your interest rate and payments to try to get you into a situation that precludes bankruptcy and will keep your creditors happy.   In the simplest terms, this is a debt payment consolidation.

A debt consolidation loan is generally done by taking out a line of credit against your home or other collateral and using that money to pay off all of your bills.   Then you make the payments to the bank, to pay off your line of credit.   The problem is that, if you can’t make the individual payments, can you make the payment to the line of credit?  If you can’t, you risk losing your house.

Repayment

This option is my personal favorite.    It involves taking responsibility for your decisions, cutting out the unnecessary expenses in your life, and paying your bills.  There are a few popular plans for accomplishing this, including Dave Ramsey‘s debt snowball.   The most important thing to remember are 1) debt it bad so stop using it; and 2) pay off as much as you can afford to each month.  It isn’t as sexy as making all of your debt disappear, but it’s still a good option.

Bankruptcy

Let’s see.  You borrow money on the promise to pay it all back.   After you borrow too much, you renege on your agreement.  You admit your word means nothing and you get all of your debt cancelled, forcing your creditors to raise the interest rates for all of the responsible debtors out there, as a way to balance the risk of those who will never pay.  In exchange you doom yourself to lousy credit for the next 10 years.  In extreme circumstances, bankruptcy may be the only option, but, I’m not a fan.

As you can see, there are almost always better options than bankruptcy.   Please, before you take that leap, look into the other choices.

This is a sponsored post written to provide some insight into the world of bankruptcy and debt consolidation.

 

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Budget Lesson, Part 5

Finance

I’ve explained my budget in some detail already.  See these posts for the history of this series.

Now, I’m going to go through each section, reviewing ways that I can reduce, or have reduced, my spending.  I’ll be starting with my monthly payments.

  • House Payment – I’ve mentioned that we have a small house payment.    A few years ago, when the interest rates dropped to almost the lowest point they reached in that particular cycle, we refinanced and got in under 5%.   There is nothing to cut.  We won’t refinance again, and the loan will be paid within 7 years, according to the lender’s schedule.  I’m aiming for 4 years.
  • Netflix – We’re on the 2 DVD/unlimited plan for $13.99.  We could drop down to the single DVD plan, but I’m worried that will trigger a rash of movie-buying.  2-at-a-time scratches that itch well.  I don’t think we’ll be reducing this plan in the foreseeable future. [Read more…] about Budget Lesson, Part 5

2011 Goals

Life

It’s that time of the year when people make public promises to themselves that last almost as long as the hangover most of them are going to earn tonight, otherwise known as New Year’s Resolutions.

Not a fan.

I am, however a fan of planning out some concrete goals and doing my best to meet them.     I do this through a series of 30 day projects.  I set a goal that can be reached in 30 days, and push for it.   I tend to make my goals fairly aggressive, and I tend to meet them.

Here were my goals and results for 2010:

  • January:   Wake up at 5am AND read to my kids every night before bed. These were easy goals to meet.    A year later, I am still getting up much earlier than I ever have, even if it’s not 5AM.   I write better late at night than I do early in the morning, anyway.    I’m not still reading to my kids every night, but we are making progress on teaching my four-year-old to read.
  • February:  Do 100 push-ups at one time by the end of the month. I accomplished this in 22 days.    I also had a secret project that involved doing something sweet for my wife every day.  By the end of the month, she was convinced I had done something horrible that I was trying to make up for.
  • March:  Do 100 sit-ups at one time by the end of the month. It took me a week, but I found out how bad sit-ups are for your back.   Pure failure.
  • April:  Spring Cleaning.  I will declutter every room in my house this month. We missed one room and one closet, but made a lot of charities happy.
  • May:  Have a sit-down dinner with my family, at the dining room table at least 3 times per week. We managed this one and enjoyed it, but we haven’t managed to keep it up.   I’ll have to try this again.
  • June:  No computer use, while anyone else in the family is awake, except for household necessities, such as bills. This one worked well and improved the quality of our interaction.  I’m not quite this strict about it, but my computer use has gone down dramatically while my family is awake.
  • July:  Write fiction every day. I don’t think I wrote more than a few pages of fiction, but I did write every day.
  • August:  Buy nothing new this month. We came very close to doing this one perfectly.  It wasn’t easy.
  • September:  Attempt to learn a new language. Total bomb.  I never even got started.
  • October:   No yelling at the kids. Have you ever thought about trying this with a a two-year-old and a four-year-old?  We never got started.
  • November:  No complaining.  Not at home, not at work. I didn’t make this an actual month, but I’ve been trying to complain much less.  I think it’s been working.
  • December:  I will have done 14 projects this year.  December is a month off. As planned, I took December off.

So I missed 4 months of projects.   This year, I’m going to modify my overall plan and only do 6 projects, every other month.   That will give me a month off to either relax or incorporate the goal into my ongoing habits without any stress.

Here are my goals:

  • January: I’m going to do Tim Ferriss’s Slow-Carb diet.  Yes, it’s a fad diet, but it beats the constant stream of garbage I eat now.   The basic plan is to avoid anything white; no bread, pasta, rice, potatoes, or sugar.   That’s accompanied by a targeted supplement regimen and a timed exercise plan to manipulate my metabolism.    I’m not adding any aerobic exercise to my day, because I want this to be as controlled an experiment as possible.   If it’s working at the end of the month, I will keep it going.    It’s time to not be fat anymore.
  • March: In February, I managed to get myself able to do 100 pushups in a single set.   In March, I hurt my back trying to do the same with sit-ups and that killed my workout habit.   This March, I’m going to do the 100 pushups challenge again, but this time, I’m going for perfect pushups.   Last year, they got sloppy after about 80.  This year, that won’t be good enough.
  • May: I’m going to do at least 30 days of the Couch to 5k running program.  It’s a 9 week program.   As a 30 day project, it’s designed to establish the habit.  When I tried picking up running last year, my knees were causing problems.  Hopefully, my January project will mitigate that this year.
  • July: I’m going to pick up a new language.  This is the failed plan from September 2010.   I’ve narrowed it down to either Spanish, Swedish, or Italian.  One is useful, one is a part of my heritage, and one is for fun.   At the moment, I’m undecided.
  • September: Undecided.  I am leaning towards a “nice” month.  30 days of doing something nice, for someone, somewhere.   If I go this route, I’ve got 9 months to plan, because that’s a lot of things to do.
  • November: Absolutely undecided.    Any suggestions?

That’s my plan for the new year.   Six specific goals, each lasting 30 days.    I could definitely use some help for September and November.   Please give me some suggestions in the comments.

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Make Extra Money Part 2: Niche Selection

Business, Finance

If you want to make money, help someone get healthy, wealthy or laid.

This section was quick.

Seriously, those three topics have been making people rich since the invention of rich.   Knowing that isn’t enough. If you want to make some money in the health niche, are you going to help people lose weight, add muscle, relieve stress, or reduce the symptoms of some unpleasant medical condition?   Those are called “sub-niches”.  (Side question: Viagra is a sub-niche of which topic?)

Still not enough.

If you’re going to offer a product to help lose weight, does it revolve around diet, exercise, or both?   For medical conditions, is it a way to soothe eczema, instructions for a diabetic diet, a cure for boils, or help with acne?  Those are micro-niches.

That’s where you want to be.  The “make money” niche is far too broad for anyone to effectively compete.  The “make money online” sub-niche is still crazy.  When you get to the “make money buying and selling websites” micro-niche, you’re in a territory that leaves room for competition, without costing thousands of dollars to get involved.

Remember that:  The more narrowly you define your niche market, the easier it is to compete. You can take that too far.  The “lose weight by eating nothing but onions, alfalfa, and imitation caramel sauce” micro-niche is probably too narrowly defined to have a market worth pursuing.  You need a micro-niche with buyers, preferably a lot of them.

Now the hard part.

How do you find a niche with a lot of potential customers?  Big companies pay millions of dollars every year to do that kind of market research.

Naturally, I recommend you spend millions of dollars on market research.

No?

Here’s the part where I make this entire series worth every penny you’ve paid.  Times 10.

Steal the research.

My favorite source of niche market research to steal is http://www.dummies.com/.    Click the link and notice all of the wonderful niches at the top of the page.  Jon Wiley & Sons, Inc. spends millions of dollars to know what topics will be good sellers.  They’ve been doing this a long time. Trust their work.

Niche Research
Click for full-size image

You don’t have to concentrate on the topics I’ve helpfully highlighted, but they will make it easier for you.  Other niches can be profitable, too.

Golf is a great example.  Golfers spend money to play the game.  You don’t become a golfer without having some discretionary money to spend on it.   I’d recommend against consumer electronics.  There is a lot of competition for anything popular, and most of that is available for free.   If you choose to promote some high-end gear using your Amazon affiliate link, you’re still only looking at a 3% commission.

I like to stick to topics that people “need” an answer for, and can find that answer in ebook form, since I will be promoting a specific product.

With that in mind, pick a topic, then click one of the links to the actual titles for sale.   The “best selling titles” links are a gold mine. You can jump straight to the dummies store, if you’d like.

Of the topics above, here’s how I would narrow it down:

1.  Business and Careers. The bestsellers here are Quickbooks and home buying.  I’m not interested in either topic, so I’ll go into “More titles”.   Here, the “urgent” niches look like job hunting and dealing with horrible coworkers.  I’m also going to throw “writing copy” into the list because it’s something I have a hard time with.

Bestsellers
Bestsellers

2.  Health and Fitness. My first thought was to do a site on diabetic cooking, but the cooking niche is too competitive.  Childhood obesity, detox diets and back pain remedies strike me as worth pursuing.  I’m leaning towards back pain, because I have a bad back.  When you’ve thrown your back out, you’ve got nothing to do but lie on the couch and look for ways to make the pain stop.  That’s urgency.

3.  Personal Finance. The topics that look like good bets are foreclosures and bankruptcies.    These are topics that can cost thousands of dollars if you get them wrong.  I hate to promote a bankruptcy, but some people are out of choices.    Foreclosure defense seems like a good choice.   Losing your home comes with a sense of urgency, and helping people stay in their home makes me feel good.

4.  Relationships and Family. Of these topics, divorce is probably a good seller.  Dating advice definitely is.   I’m not going to detail either one of those niches here.  Divorce is depressing and sex, while fun, isn’t a topic I’m going to get into here.   I try to be family friendly, most of the time.    Weddings are great topic.  Brides are planning to spend money and there’s no shortage of resources to promote.

So, the niches I’ve chosen are:

  • Back pain
  • Bankruptcy
  • Conflict resolution at work
  • Detox diets
  • Fat kids
  • Foreclosure avoidance
  • Job hunting
  • Weddings
  • Writing copy

I won’t be building 9 niche sites in this series.    From here, I’m going to explore effective keywords/search terms and good products to support.  There’s no guarantee I’ll find a good product with an affiliate program for a niche I’ve chosen that has keywords that are both highly searched and low competition, so I’m giving myself alternatives.

For those of you following along at home, take some time to find 5-10 niches you’d be willing to promote.

The important things to consider are:

1. Does it make me feel dirty to promote it?

2. Will there be customers willing to spend money on it?

3.  Will those customers have an urgent need to solve a problem?

I’ve built sites that ignore #3, and they don’t perform nearly as well as those that consider it.  When I do niche sites, I promote a specific product.  It’s pure affiliate marketing, so customers willing to spend money are necessarily my target audience.