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5 Steps to Save

: Image by BitHead via Flickr

“Saving is too hard.”

“I don’t know where to start.”

“How much should I save?”

“Who the heck are you to tell me what to do with my money?”

“Shut up, Jason.”

These are the things I hear when I start talking about getting a good strategy in place to save some money. Financial matters are intimidating to a lot of people. They’d rather not think about their money any more than they absolutely need to, if that much. Here, I’m breaking it down to some simple steps to make saving easy.

1. Get motivated. Why do you want to save some money? Are you trying to make a secure future, or do you just want to buy a new toy? These are the kind of questions you have to ask yourself. Nobody else can tell you why you want to make changes to your lifestyle, and nobody else’s reasons matter in the least. Saving money is something you have to do for you.

2. Figure out how much you can save. Generally, you’re going to need a budget so you can figure out what you can afford to save, but not always. If you are making ends meet, then you get a raise, you can obviously afford to bank the difference. If you do that, you’ll never even notice the missing money. If you try to save so much your mortgage goes unpaid, you’re plan is doomed to failure.

3. Open an account at a new bank. The biggest problem I used to have when I was trying to save was that it was too easy to get the money. Every time I checked the balance of my checking account, I saw the balance in the savings account. Worse, it took seconds to transfer that money from my savings account to my attached checking account. Every time I wanted to see if I could afford whatever toy I was looking at, I’d see money that wasn’t earmarked for anything in particular. Naturally, that money got spent more often that it was ignored and allowed to grow. Now, I can completely forget about the money.

4. Automate. I’ve automated everything I can. All of my bills are paid automatically, except for one company that insists on quarterly paper invoices. I’ve got $665(neighbor of the beast!) automatically transferred to my INGDirect account, to get divided between my various savings goals, including a fund for my semi-annual property tax payments and a fund to pay for the braces we haven’t actually had to buy yet, but will in a couple of years. The money disappears into a bank I don’t use for my day-to-day expenses and grows completely out of sight. Every once in a while, I look at the account and get surprised by how much has accumulated.

5. Get rich. Once you’ve got the other four steps in place, all you’ve got to do is let it work. Over time, you will build wealth in a way that may surprise you. Your goal at this point is to do nothing new. Every once in a while, you can pull out some money and tuck it into an investment account to get some real growth going for you.

“Thank you.”

“You’re the best.”

“What would I do without you?”

“How can I show you my appreciation? <wink><wink>”

“What the heck are you doing with my wife?”

These are the things I always hope to hear after sharing my strategies to save money.

Money Problems – Day 7: Paying Off Debt

Finance

Today, I am continuing the series, Money Problems: 30 Days to Perfect Finances. The series will consist of 30 things you can do in one setting to perfect your finances. It’s not a system to magically make your debt disappear. Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.

I’m not running the series in 30 consecutive days. That’s not my schedule. Also, I think that talking about the same thing for 30 days straight will bore both of us. Instead, it will run roughly once a week. To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.

On this, Day 7, we’re going to talk about paying off debt.

Until you pay off your debts, you are living with an anchor around your neck, keeping you from doing the things you love. Take a look at the amount you are paying to your debt-holders each month. How could you better use that money, now? A vacation, private school for your kids, a reliable car?

If you’ve got a ton of debt, the real cost is in missed opportunities. For example, with my son’s vision therapy being poorly covered by our insurance plan, we are planning a much smaller vacation this summer–a “staycation”–instead of a trip to the Black Hills. If we didn’t have a debt payment to worry about, we’d have a much larger savings and would have been able to absorb the cost without canceling other plans. The way it is, our poor planning and reliance on debt over the last 10 years have cost us the opportunity to go somewhere new.

The only way to regain the ability to take advantage of future opportunities is to get out of debt, which tends to be an intimidating thought. When we started on our journey out of debt, we were buried 6 figures deep, with a credit card balance that matched our mortgage. It looked like an impossible obstacle, but we’ve been making it happen. The secret is to make a plan and stick with it. Pick some kind of plan, and follow it until you are done. Don’t give up and don’t get discouraged.

What kind of plan should you pick? That’s a personal choice. What motivates you? Do you want to see quick progress or do you like seeing the effects of efficient, long-term planning? These are the most common options:

Debt Snowball

Popularized by Dave Ramsey, this is the plan with the greatest emotional effect. It’s bad math, but that doesn’t matter, if the people using it are motivated to keep at it long enough to get out of debt.

To prepare your debt snowball, take all of your debts–no matter how small–and arrange them in order of balance. Ignore the interest rate. You’re going to pay the minimum payment on each of your debts, except for the smallest balance. That one will get every spare cent you can throw at it. When the smallest debt is paid off, that payment and every spare cent you were throwing at it(your “snowball”) will go to the next smallest debt. As the smallest debts are paid off, your snowball will grow and each subsequent debt will be paid off faster that you will initially think possible. You will build up a momentum that will shrink your debts quickly.

This is the plan I am using.

Debt Avalanche

A debt avalanche is the most efficient repayment plan. It is the plan that will, in the long-term, involve paying the least amount of interest. It’s a good thing. The downside is that it may not come with the “easy wins” that you get with the debt snowball. It is the best math; you’ll get out of debt fastest using this plan, but it’s not the most emotionally motivating.

To set this one up, you’ll take all of your bills–again–and line them up, but this time, you’ll do it strictly by interest rate. You’re going to make every minimum payment, then you’ll focus on paying the bill with the highest interest rate, first, with every available penny.

DOLP

This is the plan promoted by David Bach. It stands for Done On Last Payment. With this plan, you’ll pay the minimum payment on each debt, except for bill that is scheduled to be paid off first. You calculate this by dividing the balance of each debt by the minimum payment. This gives you an estimate of the number of months it will take to pay off each debt.

This system is less efficient than the debt avalanche–by strict math–but is better than the snowball. It give you “quick wins” faster than the snowball, but will cost a bit more than the avalanche. It’s a compromise between the two, blending the emotional satisfaction of the snowball with the better math of the avalanche.

Snowflaking

For each of these plans, you can give them a little steroid injection by snowflaking. Snowflaking is the art of making some extra cash, and throwing it straight at your debt. If you hold a yard sale, use the proceeds to make an extra debt payment. Sell some movies at the pawn shop? Make an extra car payment. Every little payment you make means fewer dollars wasted on interest.

Paying interest means you are paying for everything you buy…again. Do whatever it takes to make debt go away, and you will find yourself able to take advantage of more opportunities and spend more time doing the things you want to do. Life will be less stressful and rainbows will follow you through your day. Unicorns will guard your home and leprechauns will chase away evil-doers. The sun will always shine and stoplights will never show red. Getting out of debt is powerful stuff.

Your task today is to pick a debt plan, and get on it. Whichever plan works best for you is the right one. Organize your bills, pick one to focus on, and go to it.

Assuming you are in debt, how are you paying it off?

Sunday Roundup – Life’s Been Busy

Misc

inventables — Image by hahatango via Flickr

I’ve been skipping the Sunday roundups for the last month. Over the last 4 weekends, I have put 2000 miles on my car, taking 4 trips–only one of which I consider optional and that was the only fun trip. With the extra gas, and having to pay for my son’s vision therapy, we went over budget by more than $4,000.

Ouch.

It’s the first debt I’ve picked up in more than 2 years. It’s leaving me twitchy and crabby. I don’t like it much at all.

And, with all of the traveling, I have let the Sunday posts slip.

Weight Loss Update

I am on the Slow Carb Diet. At the end of the month, I’ll see what the results were and decide if it’s worth continuing. For those who don’t know, the Slow Carb Diet involves cutting out potatoes, rice, flour, sugar, and dairy in all their forms. My meals consist of 40% proteins, 30% vegetables, and 30% legumes(beans or lentils). There is no calorie counting, just some specific rules, accompanied by a timed supplement regimen and some timed exercises to manipulate my metabolism. The supplements are NOT effedrin-based diet pills, or, in fact, uppers of any kind. There is also a weekly cheat day, to cut the impulse to cheat and to avoid letting my body go into famine mode.

I’m measuring two metrics, my weight and the total inches of my waist , hips, biceps, and thighs. Between the two, I should have an accurate assessment of my progress.

Weight: I have lost 45 pounds since January 2nd. I haven’t weighed in since my last Sunday update. For the last week, I haven’t been terribly strict about being on the diet and I haven’t stressed about staying on it while traveling.

Total Inches: I have lost 27 inches in the same time frame.

Best Posts

Every home needs a secret tunnel. Every time a house in my neighborhood goes up for sale, I try to convince my wife we should buy it and connect it to ours with tunnels.

Some day, when I’m a brazillionaire, if I hate my descendants, I’m going to set up my will to frustrate them all.

Haggling is a skill I need to work on.

The Monster Hunter Alpha early advanced reader copy is available. The Monster Hunter books are fun, fast reads.

Bacon art makes me cultured and hungry.

Making strangers smile is a way to make your day memorable.

I always get a warm fuzzy feeling when I hear about people successfully chasing their dreams.

I need to find a use for some of the unique materials here.

Carnivals I’ve Rocked and Guest Posts I’ve Rolled

Karate Guess So was the winner of last week’s Best of Money Carnival! Woo!

Debt Options was included in the Festival of Frugality.

Budgeting Sucks was included in the Carnival of Personal Finance.

The Benefits of Ignorance was included in the Totally Money Blog Carnival.

New Debt was included in the Yakezie Carnival.

Thank you! If I missed anyone, please let me know.

Get More Out of Live Real, Now

There are so many ways you can read and interact with this site.

You can subscribe by RSS and get the posts in your favorite news reader. I prefer Google Reader.

You can subscribe by email and get, not only the posts delivered to your inbox, but occasional giveaways and tidbits not available elsewhere.

You can ‘Like’ LRN on Facebook. Facebook gets more use than Google. It can’t hurt to see what you want where you want.

You can follow LRN on Twitter. This comes with some nearly-instant interaction.

You can send me an email, telling me what you liked, what you didn’t like, or what you’d like to see more(or less) of. I promise to reply to any email that isn’t purely spam.

Have a great week!

Sunday Roundup: Spent weekend

Misc

The problem with running a training class for a side hustle is that it sucks up half of my weekend, whenever I hold a class. I like my weekends. Unfortunately for downtime, I like extra money more.

30 Day Project Update

This month, I am trying to do 100 perfect push-ups in a single set. I’m recording each session in a spreadsheet. I am currently up to 50 in a set and 175 in a session, spread across 5 sets. This week, my elbow started hurting, so I took 2 and a half days off.

Weight Loss Update

I’m measuring two metrics, my weight and the total inches of my waist , hips, biceps, and thighs. Between the two, I should have an accurate assessment of my progress.

Weight: I have lost 38 pounds since January 2nd. That’s 2 pound since last week.

Total Inches: I have lost 22.5 inches in the same time frame, down 1.5 inches since last week. My biceps, which are part of this measurement, have grown half an inch each since I started doing push-ups twice a day.

Best Posts

My mother-in-law hates dandelions, with a passion that just isn’t sane. I want to make her a meal that consists of nothing but dandelions.

When I got my first RSA SecureID card, I thought it was the coolest thing ever. If you’ve never had one, it gives you a rotating password that changes every 30 seconds, so nobody can guess you password for long. It was neat, and, apparently, not that secure.

The idea of a tortoise on wheels makes me smile.

I’d like to try to make yogurt. I can try whatever flavors I like. Poptart-and-broccoli yogurt just sounds….

I work really hard to save money on vacations, and this post is full of good ideas to help me do that.

eBay is making changes to their fee structure that will make it a lot cheaper to sell things. I’m guessing the back-the-customer-no-matter-what-at-the-expense-of-the-seller’s-getting-scammed policy was costing them some money.

The big box stores are pushing for Amazon to collect sales tax on all sales, in opposition to a Supreme Court ruling on the topic. It won’t make a difference in sales. Amazon will still be cheaper. And I’ll get a Canadian mail drop.

LRN Timewarp

This is where I review the posts I wrote a year ago. Did you miss them then?

I talked about teaching my kids the joy of delayed gratification. Interestingly, my son has since decided he doesn’t want an XBox 360, because the buy-in is too high, with having to buy games and controllers to match the console. We’ve also changed his allowance to savings ratio. Now, 25% of everything he makes hits his bank account. The rest is his to do with as he sees fit.

Last year at this time, it was scam week here. I wrote a post on debt scams and another on disaster scams.

Carnivals I’ve Rocked and Guest Posts I’ve Rolled

Money Problems: Boosting Your Income was included in the Totally Money Carnival.

Living in Debt: How I Sacrificed My Future was included in the Carnival of Personal Finance.

My post on spendthrift whiners was hosted on Faith and Finance. In return, I hosted his post on paper statement fees.

Thank you! If I missed anyone, please let me know.

Yakezie Blog Swap

Jacob hosted the Yakezie Blog Swap, which is a bunch of bloggers writing on the same topic and sharing the posts with each other. Here is his list of the participants this round.

He wrote about 3 of my financial pet peeves (spending too much money on drinks, financing expensive furniture, and active investing strategies) on Narrow Bridge Finance.

Robert from The College Investor wrote about how people making mistakes with their 401k accounts is a big “no-no” at Thousandaire.

Narrow Bridge Finance posted about how people not taking responsibility for their financial actions infuriates him on My Personal Finance Journey.

Prairie Eco-Thrifter posted about how sales tax is her biggest financial pet peeve at 101 Centavos.

101 Centavos posted about how wasting food makes his blood pressure rise at Prairie Eco-Thrifter.

LaTisha D Styles writes about how greedy banks upset her at Retire by 40.

Retire by 40 wrote about how bigger is not necessarily better at FSYA Online.

Bucksome Boomer writes about how advertisers that hide the real price of a product is maddening at The Single Saver.

The Single Saver wrote about parents who do not teach their children financial responsibility at Bucksome Boomer.

Kevin from Thousandaire writes about people having misconceptions about Roth IRA’s at The College Investor.

Time from Faith and Finance vents about financial institutions charging to send paper account statements, but still send out a plethora of paper junk mail at Live Real Now.

Jason from Live Real Now politely rants about how aggravating it is to see people whine about their less-than-ideal financial situations, yet do nothing about it, at Faith and Finance.

Money Sanity vents about people complaining about paying overdraft and bank fees, while at the same time, having no idea how much credit card debt they have or their checking account balance at The Saved Quarter

The Saved Quarter writes about people who are financially irresponsible and want to complain about how broke they are while showing off the new things they bought at Money Sanity

Barb Friedberg talks about how investment advisors that get paid to sell products (more salesman than investment advisors in my book) upset her at Happy Simple Living

Happy Simple Living writes about how companies and people that exploit others aggravate her at Barb Friedberg Personal Finance.

Get More Out of Live Real, Now

There are so many ways you can read and interact with this site.

You can subscribe by RSS and get the posts in your favorite news reader. I prefer Google Reader.

You can subscribe by email and get, not only the posts delivered to your inbox, but occasional giveaways and tidbits not available elsewhere.

You can ‘Like’ LRN on Facebook. Facebook gets more use than Google. It can’t hurt to see what you want where you want.

You can follow LRN on Twitter. This comes with some nearly-instant interaction.

You can send me an email, telling me what you liked, what you didn’t like, or what you’d like to see more(or less) of. I promise to reply to any email that isn’t purely spam.

Have a great week!

Saturday Roundup – Dirty Beggar Edition

Misc

: Image by Chris Pirillo via Flickr

I have a favor to ask. Free Money Finance is running his annual March Money Madness blog contest. Please drop by and vote for me. Just comment with “Game 6: Bags”. Thank you!

Starting next week, my roundups will be happening on Sunday. I weigh in on Saturday, and that just makes me feel rushed on Saturday mornings.

Free Money Tip

INGDirect is having a sweet promotion. Open a checking account, use it three times in 45 days, and get $50 free. Free money is the best kind. I love my ING account and keep all of my savings there. If you don’t have an account there, yet, now is a great time to open one.

30 Day Project Update

This month, I am trying to establish the Slow Carb Diet as a habit. At the end of the month, I’ll see what the results were and decide if it’s worth continuing. For those who don’t know, the Slow Carb Diet involves cutting out potatoes, rice, flour, sugar, and dairy in all their forms. My meals consist of 40% proteins, 30% vegetables, and 30% legumes(beans or lentils). There is no calorie counting, just some specific rules, accompanied by a timed supplement regimen and some timed exercises to manipulate my metabolism. The supplements are NOT effedrin-based diet pills, or, in fact, uppers of any kind. There is also a weekly cheat day, to cut the impulse to cheat and to avoid letting my body go into famine mode.

I’m measuring two metrics, my weight and the total inches of my waist , hips, biceps, and thighs. Between the two, I should have an accurate assessment of my progress.

Weight: I have lost 20 pounds since January 2nd. That’s 3 pounds since last week.

Total Inches: I have lost 10 inches in the same time frame, down 1 since last week.

That is kind of a disappointing week, after losing 17 pounds in the two previous weeks. Still, it’s progress. Should I blame it on getting sloppy with the supplements and timed exercise, which aren’t(technically) necessary, the vagaries of losing weight, or the fact that I(gasp) had some feta cheese on a salad yesterday(Dairy is out, but I didn’t recognize it until it was too late and I was happy.)? I’ll go with B. Weight loss is never completely consistent.

Best Posts

If some puny little constellation can mess up our zodiac signs, what will a second sun do?

Everyday Tips and Thoughts ran a post on cell phone etiquette. I agree wholeheartedly with the bathroom talkers. I’m in there trying to concentrate, and you’re yammering to your bank, or your girlfriend? Expect me to flush every 2 minutes.

Important question: what caliber for land shark?

Do you juggle too much? Project Happily Ever After explains the difference between balls that bounce and balls that break.

Buy Like Buffet is giving away an iPad.

LRN Timewarp

This is where I review the posts I wrote one year ago.

I wrote a post about saving money on health care. It’s still a good post, but the HSA/FSA rules have changed. Now, you need a prescription to stock up on OTC meds at the end of the year to spend out your account.

When you buy something, do you ask yourself if you really need it? I wrote a post to help answer that question.

I also posted lesson 4 of my budget series. This is where I go over my “set aside” funds, the money for bills that are not regular or for set amounts.

Carnivals I’ve Rocked and Guest Posts I’ve Rolled

5 Things to Do in the New Year was included in Crystal’s rockin’ Totally Money Carnival. I’ll be hosting it in a couple of weeks.

Quit Smoking: My First Frugal Move…Ever was included in the Carnival of Personal Finance.

Thank you! If I missed anyone, please let me know.

Get More Out of Live Real, Now

There are so many ways you can read and interact with this site.

You can subscribe by RSS and get the posts in your favorite news reader. I prefer Google Reader.

You can subscribe by email and get, not only the posts delivered to your inbox, but occasional giveaways and tidbits not available elsewhere.

You can ‘Like’ LRN on Facebook. Facebook gets more use than Google. It can’t hurt to see what you want where you want.

You can follow LRN on Twitter. This comes with some nearly-instant interaction.

You can send me an email, telling me what you liked, what you didn’t like, or what you’d like to see more(or less) of. I promise to reply to any email that isn’t purely spam.

Have a great weekend!

How to Have a Perfect Life

Life

A few years ago, my wife and I were discussing life improvement, the options in front of us, and our future goals. She said she felt trapped by the scope of our goals and didn’t know where to start. That led to a discussion on

achieving our goals, which led to this.

Examine your life. Take stock of every aspect of your life. What pleases you? What upsets you? What do you do that adds no value to your life? Or worse, removes value? What do you do that adds the most value? What would you like to change? Eliminate? Improve? Count the small things. Nothing is insignificant. Write it all down and be specific.

Analyze your list. Are there any obvious patterns? Is there a single thread that is making you miserable or affecting multiple other items? Would eliminating 1 factor improve 90% of the rest? Is there a bad job or a toxic relationship ruining your happiness? Be honest and be critical.

What are your dreams? Where would you like to be in six months? A year? 5? 10? How would you like to retire? When? Write it all down. This is now your life plan.

Set goals. Set concrete, definable goals. Set goals that have an obvious success point. When you reach your goal, you want to be able to point it out. “Lose weight” is not a goal. “Lose 50 pounds in the next year” is a measurable, definable, concrete goal. Set incremental goals to reach your larger goals and, more importantly, your dreams.

Here’s an example:

Dream: Retire at 50.

Incremental Goal: Get a 10% raise within 6 months
Incremental Goal: Eliminate debt within 3 years
Incremental Goal: Max out 401k contribution
Incremental goal: Save 150,000 within 10 years
Incremental Goal: Save 45k each year after that.
Retire

When you are setting up your goal plan, make sure to include the analyzed items mentioned earlier. These are the things that will make today happier for you.

Now, you have examined your life. You have analyzed the results. You’ve gathered your dreams and compiled a goal plan based on your hopes, dreams, goals and desires. What’s next?

We’re going to take a page from David Allen. It’s time to Get Things Done. What do you have to do next to reach your goals? What is the next step? Don’t let yourself be overwhelmed by the scope of the entire list. Select one single item from your plan and look for the one single next step to make on the path to that goal.

Going back to the retirement goal plan, the next step towards a 10% raise could be researching salaries for your job description in your area to give you ammunition in the meeting with your boss. It could be updating your resume to hunt for a better paying job, or even just studying up on some resume tips.

If you want to run a marathon next year, the next step is to start walking every day to train your body.

If you want to improve communication with your spouse, the next step is probably to let her know.

If you want to eliminate debt, the next step may be setting up a budget or canceling unnecessary services like cable.

Every goal has a path leading to it. If that’s not true, you haven’t defined a concrete measurable goal.

Examine your life. Analyze your situation. Know WHAT you want. Know what you want to change. Set goals to get there, one step at a time. Take a single step towards your goals.

Then take another.

What are you doing to reach your goals and improve your life?