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Karate Guess So
“Walk on road, hm? Walk left side, safe. Walk right side, safe. Walk middle, sooner or later, [makes squish gesture] get squish just like grape. Here, karate, same thing. Either you karate do “yes”, or karate do “no”. You karate do “guess so”, [makes squish gesture] just like grape. Understand?” -Mr. Miyagi
It occurred to me that lately, I’ve changed my day-to-day cash flow plans a couple of times.
A year ago, I was running on a fairly strict cash-only plan.
A month ago, I was running on a strict budget, but doing it entirely out of my checking account.
Now, I’m loosening the budget reins, and moving all of my payments and day-to-day spending to a credit card, including a new balance that I can’t immediately pay off.
The thing is, changing plans too often scares me. Like the quote at the beginning of this post, I start worrying about being squished like a grape.
The simple fact is that any plan will work.
If you want to get out of debt, just pick a plan and run with it. If that means you follow Dave Ramsey and do the low-balance-first debt snowball, good for you. Do it. If you follow Suze Ormann and do a high-interest first repayment plan, great. Do it. If you follow Bach and pay based on a complicated DOLP formula to repay in the quickest manner, wonderful! Do it!
Just don’t switch plans every month. If you do that, you’ll lose momentum and motivation. Squish like grape! Just pick a plan and go. It really, truly does not matter which plan you are following as long as you are following through.
This applies to other parts of your life, too. For example, there are a thousand fad diets out there. Here’s a secret: they all work. Every single one of them, whether it’s Weight Watchers, slow carb, or the beer-only diet. The only thing that matters is that you stick to the diet. If you manage that, you will lose weight on any diet out there. Except for the jelly bean and lard diet. That one will make you extra soft.
Another secret: the productivity gurus are right. Every single one of them. David Allen, Stephen Covey, Steve Pavlina, and the rest. They all have the One True Secret to getting the most out of your day. Really. Pick a guru and go! But don’t try to Get Things Done in the morning and do 7 Habits at night. Changing systems, changing plans, changing your mind will make you sabotage yourself.
The real secret to accomplishing great things, whether it’s paying off $100,000 of debt, dropping 40 pounds in 3 months, or tripling your productivity is to do it. Just get started and, once you’ve started, don’t stop. If you keep going and stay consistent, you’ll accomplish more than anyone who hops from system to system every few weeks.
3 Ways to Keep Your Finances Organized
I have 16 personal savings accounts, 3 personal checking accounts, 2 business checking accounts, and 2 business savings accounts. That’s 23 traditional bank accounts, spread across 3 banks. Just talking about that gives my wife a headache.
Every account has a reason. Three of the savings accounts exist just to make the matching checking accounts free. One of the checking accounts handles all of my regular spending that isn’t put on my rewards card. 14 of the savings accounts are CapitalOne 360 accounts that have specific goals attached. A couple of the accounts were opened to boost the sales numbers for a friend who is a banker. Really, it’s almost too much to keep track of. One credit card, 5 checking accounts, 18 savings account, all on 4 websites.
Sometimes, when you extend your bank accounts this far, it gets easy to let it all slip away and lose track of where your money is going. How do I keep track of it all?
1. Simplify
Whoa, you say? Simplify? I don’t simplify the number of accounts I have, I simplify the tracking, or specifically, the need to track.
Twice a month, I have an automated transfer that moves a chunk of money from my main checking account to C1360. I have a series of transfers set up there that move that money around to each of my savings goals. I move $100 to the vacation account, $75 to the braces account, and $10 to the college fund, among all of the other transfers. Doing that eliminates any need to keep track of the transfers, since it is all automated.
Using the same rules, I make every possible payment happen automatically, so I don’t have to worry about paying the gas bill or sending a check to the insurance company.
Simple.
2. Complicate
As you saw in the opening sentence of this post, I also complicate the hell out of my accounts. On the surface, it would seem like that would make it harder to keep track, but in reality, the opposite is true. I have 14 savings accounts at C1360, each for a specific savings goal, like paying my property taxes or going to the to Financial Blogger Conference in October. I can log in to my account and tell at a glance exactly how much money I have for each of my goals. In the account nickname, I include how much each goal is for, so I can easily see if I am on track.
3. Quicken
Everything I do gets set up in Quicken. This makes it easy to track how much actual money I have available. Since I’ve moved my daily expenses to a credit card, I only have about a dozen entries to worry about when I balance my checkbook at the end of the month. At that time, any excess funds get dropped into my debt snowball.
This may all leave me with a needlessly complicated system, but it’s a system that grew slowly to meet my needs and it is working well for me. I spend about 2 hours a month tracking my finances, and can–at any time–tell at a glance exactly how my finances look.
How do you keep your finance organized? Have you tried any unique savings strategies?
It’s Better to Buy a House than Rent
This guest post is brought to you by Lender411.com.
The debate is ongoing about whether it’s better to rent a home or buy one. Which is best?
To start, identify your goals. This includes short-term goals and long-term goals—anything relevant to your living situation or your finances. Are you someone who likes to move around and explore new areas, or have you put down strong roots in a specific location? Are you planning to raise a family? Is that family going to grow over the years? Do you plan to build up wealth? Are you aiming to retire a few years early? Work these things out as best you can. You need to know where you’re headed.
Beyond these life considerations, there are some specific facts about homeownership that typically make buying a house a better choice than renting one indefinitely. Specifically, you’ll save money in the long run if you buy a house. Studies have shown that if you plan to remain in a residence longer than five years, you’re better off buying than renting. Here’s why.
Equity. When you own a house, every dollar you put toward paying off the principal of your mortgage is actually going right back to your pocket in the long run. A house itself is an investment—it is a thing that holds value and, in fact, often gains value over time. It’s almost like a savings account. When you put money into a savings account, it stays there. Sure, you don’t exactly have access to the money, but it’s still there and, in the long run, it’s still yours. You don’t gain this value when you’re renting a piece of property. The money you pay out is simply gone.
Value. As mentioned above, a house, like any other financial instrument or investment, can actually increase in value over time without any effort on your part. Sometime property values just go up. Historically, in fact, just about all property gains value in the long run—often significant value. Real estate is a very popular form of investment even separate from the fact that it provides your family with a place to live. Even with a mortgage, the ultimate return you can get for your money is typically very good, especially if you’re able to find the best mortgage rates when you enter the loan. Renting doesn’t give you this opportunity to someday capture increasing property value.
Stability. One of the most appealing perks of home ownership is the consistency of payments month to month. If you have a fixed rate mortgage, your monthly payment is locked in at a certain amount for the next thirty years or so. This can be extremely comforting for some people and extremely helpful when it comes to budgeting long-term. When renting, prices may fluctuate from lease to lease, or you may move from one place to another and constantly have to readjust your budget and lifestyle. Also, mortgage payments on a house will, at some point, end. When those thirty years are up, chances are you won’t need to make any payments toward your house beyond property taxes from then on. Renting, however, never ends. You’ll never truly have a place of your own.
Despite the strength of these three facts in favor of home ownership over renting, the choice is ultimately one that must be made by individuals and families. Everyone has different long-term goals, and those goals must be identified first. But make the decision wisely. From a financial perspective, home ownership is the better of the two options long-term.
Update: I just realized I didn’t include the link to the Festival of Frugality that included this post. That’s fixed.
The 10-Step Saving Action Plan
- Image via Wikipedia
Getting started saving money is hard. It’s easy to get used to instant gratification and impulse purchases. Postponing material fulfillment takes discipline and deferred enjoyment. I don’t like deferring my enjoyment, but I do it. The path to successful savings isn’t always easy, but it is gratifying, when you give it the time and effort required to see actual results.
Here’s the 10 step plan to successful savings:
- Recognize the need. If you don’t understand why you need to save, you won’t do it for long. If you think it’s more important to buy a new car, a new TV, or the fanciest portable gadget out there, you won’t prioritize saving. You need to think about how saving a solid nest egg will benefit you and your future self, before you can be sure you will stick to your savings plan.
- Pay yourself first. When you get paid, whether it’s a traditional paycheck or a surprise windfall, immediately drop 10-15% in a savings account you keep completely off-limits, no exceptions. If you make this an unbreakable habit, you will have a surprising amount of money in a surprisingly short amount of time.
- Prioritize. Prioritize your expenses. If you don’t care about a particular optional expense, get rid of it! Examine the rest of the bill for things you can trim. Do you really need 5000 channels? Can you make do with just 300 specialized versions of ESPN?
- Compare prices. If you buy from the lower-priced store, you save money. No s****, huh? Doing this requires that you forgo impulse purchases and do some research before you buy most things. Shop online, at least enough to know what you should be paying.
- Save your change. When you get home at night, put your change in a jar. When the jar gets full, bring it to the bank. A medium-sized mason jar full of silver-colored coins will bring in about $100. Put that directly into savings.
- Save your dollars. I pay cash for everything I buy in person. When my money clip gets too many one-dollar bills, I put them all into a box. This would be a phenomenal addition to my savings account, if I weren’t planning to use it for spending money on our vacation next month.
- Save the extra $$. If you get unexpected money, don’t let it enter you regular cash flow. Get it straight into a savings account. You weren’t expecting it, so you won’t miss it.
- Save the new $$. Save your raise. If you start making more money, save the difference. Like #7, you’ll never miss it. Don’t give yourself a chance to expand your lifestyle.
- Club the naysayers in the knees. There will always be people who denigrate your choices. If they tell you it’s crazy to live within your means, or get upset because you don’t want to go to the fancy restaurant, screw ’em. Not literally of course. We’re trying to apply a punishment here, after all. If they don’t like your choice, kick them in the shins.
- Reward yourself. Don’t be afraid to schedule rewards at certain savings goalposts. When you get $5000 saved, let yourself take $300 to the high-end steakhouse. When you get $10000, look at buying the camera you want. Give yourself a reason to stay motivated. It is, after all, your money.
This is how we’ve managed to build up a small-but-comfortable emergency fund and tackle a nice chunk of our debt. Do you have plan to save?
What Happens When You Save
- Image via Wikipedia
I’m a debtor.
I’d like that to be otherwise, but I’m pretty close to the limit of what I can do to change that. Don’t get me wrong, it’s changing, but there is a limit to how many side projects I can take on at one time. So, I’m in debt and likely to stay that way for the next couple of years.
As part of my budget, I set up a few categories of items that are either necessities or “really wants” without being immediate expenses. For example, I’m setting aside some money each month for car repairs, even though my car isn’t currently broken. When it comes time to fix something, I hope to have the money available to fix it, without having to scramble or <spit> tap into my emergency fund.
All told, I have about a dozen of these categories set up, each as a separate INGDirect savings account. Twice a month, a few hundred dollars gets transferred over and divided among the savings goals. Most of these goals are short-term; they will be spent within the year, like the account for my property taxes. Some of them are open-ended, like my car repair fund. Some are open ended, but will eventually end, like the fund to finance my son’s braces. All of the accounts are slowly growing.
As I’ve watched the progress of my savings accounts, I’ve noticed something funny.
My confidence is up.
It may only be a few thousand dollars, but it’s more money than I have ever had saved. The vast majority of this money will be spent over the next few years, but having it there, now means that I have tomorrow covered. For the first time in my life, I’m not living paycheck to paycheck. No matter what happens, I know I can make ends meet for a couple of months. That fact alone has reduced my stress level more than I could have imagined.
Two years ago, I was sure I was going to file bankruptcy. Now, I’m looking at being just two years away from having all of my debt gone. I have faith that my future will be bright, and only getting brighter. If I can dig myself out of this hole once, I can do it again, no matter what happens.
This has brought a calm that I can’t easily explain. I don’t have to worry about where next week’s groceries are going to come from, or how we’re going to afford braces in a couple of years.
Having an emergency fund and some auxiliary funds has been entirely worth the work we’ve done for last two years. Have you noticed any changes as you pay off your debt and build savings?
