Hitting Your "Number." Top Three Things You Must Do

Five years in one sentence:  A catastrophic flood, three hurricanes, two moves, a condo sale, a home purchase, a dream job assignment come true out of the blue, an engagement, a once in a lifetime freeze in the tropics, a parents' death, my first grandbaby, and a pandemic.  No wonder I didn't post any blog updates.   

But I've graduated from work-life again!  And I hit my number with a big safety margin this time.  

So what were the top three things I did, free of charge, that helped me survive those swings?  

#1)  LBYM. Living Below Your Means gives you a McGyver tool kit of skills to survive financially, no matter what.  

If you don't know where to start just look at how much you spent over the last three months. Was there more income than outgo?  If so, that's great!   Because that "spread" is how much you truly earned in the quarter.  

Let me repeat it -- if you spent $1,000 less last quarter, then that's the increase in your Net Worth.  Your Assets.  Your Capital.  Everything else went to somebody else's paycheck.  If you want to quibble about your house note, okay, a tiny bit of it went to equity.  Let's be real.  What, about $200 a month maybe?   

Your next, most glorious step toward freedom, is to increase your net worth as much as possible in the next quarter by reducing your expenses.  

Every quarter I check my net worth through Personal Capital's software.   It's free.  You can use a spreadsheet or even just a pencil and a notebook, which is what I did for many years.  If I haven't added to your net worth, then you are just a wage slave and need to do some major adjustments.  

#2)  Don't Buy a New Car.  Ever.

Out of all the big expenses in today's consumer economy, housing and transport usually come up as 1 and 2 unless you are older and healthcare gets on the list.  (Oh, let me rant about that on another post!) 

It takes time and effort and energy and yes, money, to downsize your home and its expenses.  It is much easier to keep your automobile expenses low. 

Buy a car that is at least one-year-old or more.  

Real Life Money example:  I own a 2011 Honda Insight with 140K miles, paid $12,000 cash for it in 2014.  

This website https://repairpal.com/cars/honda/insight/2011 estimates average maintenance costs of $341 for a 10 year old car! 

I've only paid about $250 a year for maintenance, other than tires and a AAA battery replacement that was all my fault.  That $250 per year was cash ($1,800) I paid in 2021 to a local mechanic to get it ready for another 7 years of use.  Preventative maintenance.  

No car note, just insurance and about $50 a month on gas, maximum.  Even with day trips.  

But but but!!!!  What about warranties and safety?!!!  

1.  The warranties from the manufacturers are still available on preowned and pre-cerftified slightly used cars, so don't throw that one at me.  :-}  

2.  If you are going on a long car trip and don't want to risk it with your older car?  Rent a Car!  Heck, you can even Air BnB a car now.  https://studentloanhero.com/featured/turo-review/

But but but!!!! What will the neighbors think? 

Buy a used Ford 150 and they will think you might be a millionaire next door. 

#3)  Get Your Side Hustle On - Carefully and Mindfully

Not all side hustles are worth it, I hear you!  If I get one more email about Ibotta grocery store coupons or online interviews that never pan out, AAAHHHHHH!!!  Tried them all and just ended up wasting my time. 

Solopreneurship and sole proprietorships are a step up.  And not only do you make extra cash, you also have tax write-offs like office space in the home, that help with housing costs.   

- No employees, ever.  

- You aren't trying to scale a business

- You can try and fail fast

- Hanging out with your favorite people can make it profitable.

As long as you make a legitimate effort to sell your skills to the marketplace, it's a legit business, as per the IRS.  

This is one of the better, easy to consume blog posts I've found about solopreneurship.  https://www.incfile.com/blog/post/difference-between-solopreneurship-and-sole-proprietorship

My Real Life example:  I operated as Stansbury Creative Consultants providing AdWords consulting and marketing support as a side hustle for many years.  It brought in between $2 - $10K per year and allowed me to write off 50% of my new computer supplies and a percentage of my housing costs.  

More importantly, it has allowed me to do fun projects with people who "get sh*t done" without worrying about corporate objectives.  And I can continue to use my new side hustle brand to work on whatever appeals to me throughout retirement.  

What say you?  Have you survived a life of one dumpster fire after another and have wisdoms to share? 

Money Screw Ups: And the Frugal Living Lessons that Will Save You - 1

2015 was quite a money ride.  Some of the progress toward financial freedom made following my own frugal living tips (outlined in this post "Can I make it on $3k per month?"  got tossed overboard.  
  

Cushion the Body Blow with Frugal Living 

I can recover because my frugal living ways helped me saved.  That and the personal finance software addiction and fascination with minimalism and aggressive downsizing. 

But my pride and confidence hit the surf and it felt like I slammed into concrete.   Worse, it may have derailed complete financial freedom by a year or more.  

And some of it I could have avoided by listening to those much wiser than myself.     

Surfing Lessons From the Sages

1.  Retirement really is a psychological journey and you might want to prepare for that.

The first time I retired was about 15 months ago.  

As the retirement sages on www.earlyretirement.org said might happen,  I experienced a sudden depression. 

I wasn’t ready psychologically or emotionally, which affected how I dealt with the other surprises to come (i.e., not great). 

Just like every one said -- a great deal of your self ­perception can be tied to your work identity and title.  

In the past party talk - "So, what do you do?"  

My answer  - "Oh, I am a marketer and public relations professional."  

Notice - I didn't say what I do.  I said "this is who I am."   

It took about a year to adjust.  Therapy helped.  So did part-time work and volunteering for professional associations.  

There are plenty of resources on the web about transitioning to a new life phase, even AARP has a coaching service available.    

2.  Sound financial planning is not an exact science.  

I asked all the wise ones on the early retirement forums for advice as to "don't I have enough to pull the plug on this job?"  

The answer wasn't as positive as I expected.  As much as I had saved, they still said, "you need more of a safety cushion, nobody gets this stuff right on the money.  Hold on!  Give yourself a 5-10% margin of error." 

5 Best Guides to Beginning a Life Free of Financial Worry

It is beginning "the thing" or "the change" that can be the hardest, isn't it?

When I was at my lowest financial point of worry and anxiety, these five books lifted me up and over debt toward a life of fun frugal living and some financial security.  So I'm sharing the wealth.

Amazon has it on sale from time to time

 

1.  How to Get Out Of Debt, Stay Out Of Debt and Live Prosperously

This was the first book I read that took the shame out of debt and addressed some of the emotional issues.   It inspired me to take a second job as an adjunct professor.  This didn't pay much per hour but the extra $2K in a year helped lift my family out of debt.  I felt like a cork, bobbing above the water and suddenly seeing the shore.  What a relief that was! 

I found a copy of this one for .01 on Amazon!

2.   "The Only Investing Guide You Will Ever Need" 

This was the second financial self-help book I purchased and still have on my bookshelf.  Why?  Because it's so funny, lighthearted and real.  

Tobias is a Harvard graduate who helped me understand that when I avoided buying something, or saved $1.00 on something, I was actually saving $1.50.   A penny saved is a penny and a half earned! And understanding how our taxes affect your personal finance is mission critical. 

If you are being taxed at the 25% marginal tax rate for federal income tax, then add in state income tax, then add in sales tax -- well, you could say that you are being taxed at approximately 50% (for the ease of the example, even though it might be a little high).  

So, as Tobias gives as an example in the book, if you go out to eat on Thursday night and spend $40?  Well, to replace that $40 could mean that you have to earn $50-$60.  

Even though Tobias is a very wealthy guy, he still buys canned tuna "long" (i.e., on sale), and stores the extra cans under his bed.   He goes "short" on tuna when it's very expensive (i.e., he uses up his stores).  


Seriously people, this is how rich people act.  Just be careful you don't overbuy on tuna and never use it.

This is about $8 on Amazon

3.  I Will Teach You to Be Rich

So inspirational and easy to read.   

Ramit promised to show me how to make $1K a year in a side gig.  I didn't think I could do it.  But then I did.  And I still make $1k a year doing a side gig.   

I don't know how he does it, just call it "Ramit Magic"

Found this for .01 on Amazon too -- great deal! 

4.  Your Money or Your Life

Ground-breaking,loving and practical approach to understanding how you are trading your "precious" life for that new toaster, or pair of shoes, or kitchen blender, etc., etc.  -- is it really worth it?  Good practical guide to understanding how much your job is really paying you per hour.   

Think you are getting $30 per hour?  Add in all those hours to commute, the wardrobe costs, the unpaid CEU hours, the hours just unwinding from the stress...  hmmm...  maybe it's time to rethink that hourly rate down to about $5!   And the toaster really cost you four hours of your precious life.  Hmmm...

Definitely an eye opener for me and one of the inspirations for Breaking Free From the Corporate Cube.    Inspirational for living well on less.   

Still about $10+ on Amazon

5.  The Millionaire Next Door

Last, but certainly not least, the granddaddy of them all, "The Millionaire Next Door."  Reading about this scene from the book (page 27), with the Decamillionaires (worth $10 million or more) is the best take-away you can have this frugal Christmas.

The professors who wrote the book wanted to study millionaires, so they invited the subjects to a focus group.  Wanting to make the millionaires comfortable, they provided wine and caviar for the group.   Here's what happened next:   When one of the group members (who owned several pieces of downtown New York property) was offered a glass of 1970 Merlot, he said 

"I drink Scotch and two kinds of beer - free and BUDWEISER!"  

It's also where I first heard the phrase, "Big Hat - No Cattle," -- a term the millionaires saved for those who flashed fancy cars and clothes, but had no assets.  

Here are more millionaire tips.

That's my top five that will keep you busy learning through the cold winter nights ahead.  Do you have a favorite I missed?  Share It!


Disclaimer:  If you do decide to click on one of the photos and buy one of the books, I will receive a small commission from Amazon.  It didn't affect my list one whit -- I've had these books on the shelves for years.  And any proceeds will go back to making the blog better!

Deadline 12/14/2015! Special Offer to Get 10% Rewards on Chase Freedom and Amazon Purchases

If you enjoy Chase Freedom credit card rebate points like I do, then be sure that you sign up TODAY for your 10% cash back rewards through 12/31/2015.

The deadline is December 14th for this extra cash back offer.

(And even if you are reading this after December 14th, 2015, use it as a reminder to check your Chase Freedom Cash Back status.
There are plenty of juicy deals for the basic 5% to take advantage of before the end of the year.)   

Why Your Monthly Budget is a Dangerous Myth

 

Caution:  Your Monthly Budget is Only About 66% of the Story 

I have a budget built after years of study – and it’s about $3K per month in expenses.  At least that was the target amount that would allow me to claim financial independence from the MegaCorp life while still living well on less.  

It even included money for several “sinking funds” of savings for the nasty surprises that will happen eventually, but of course -  just not this month.   For example, I will need a new car someday, just not this month.  I will need new glasses that cost about $500, just not this month.     The appliances will someday go ka-put, just not this month.   Hmm…. 

But as smug as I’ve been about building a great budget including savings accounts for the “just not this month” expenses – the last few months of backing away from MegaCorp life have given me the time to examine what’s really happening in my financial life.

Basically, I’ve been fooling myself by woefully under funding those accounts.    What I’ve realized is that at least one of these “just not this month” expenses  seems to happen every month!

For example, during 2015 the “Not This Month” expenses included...

Financial Freedom: 5 Reasons to Run from the Corporate Cube

I've been out of the corporate cube for two months.  I've seen it from both sides.  Being on the outside looks and feels a lot better.  Here's 5 Reasons Why:

1.  It's tough to earn financial freedom in one lifetime by working for someone else.

If you still need to earn money, (i.e., your parents haven't willed you a couple of million in a trust fund), just know that owning our own business is one of the few ways in this country to create wealth in one life time.    I picked up these tips from the Millionaire Next Door classic book.   But I suggest you get your own copy and pour through it. 

Let's start with taxes.   I learned a lot in the Jackson Hewitt Tax School and I learned that Earned Income you get in the Cube is taxed more highly than any other kind of income.    Taxes are one of your biggest ongoing expenses.   Those who are self-employed, or who earn money from dividend income, or rental income -- well, they don't have as high a tax burden.   Do whatever you can (legally) to reduce these.

Financial Freedom: the Marie Kondo Life Changing Magic Way. But Watch Out for Those Emotional Barriers

From 2600 square feet (2010) to 1500 in 2010.    

From 1500 square feet to  697 square feet in 2014.  

I’ve cut my living space and stuff by 66% in the last five years and never felt freer or happier.  But each time I scaled down, I had to step over and toss out more than unused clutter – I had to face the accompanying fears and bogeymen haunting my psyche. 

The Top 3 Fears:

• What if all my stuff fit in the new space?  Would I end up embarrassed, with furniture or boxes of (fill in the blank) at the doorway, left by the movers who couldn't fit it into the new place?  
• If I have to get rid of it -- how will I manage without it?  (i.e.,)   Could I really live without a (fill in the blank?) 
• Wouldn't I be spending more money to replace the stuff I tossed?  Because obviously I would not be able to live with out.

Reality Check:  

The only things I ever gave away to movers because they wouldn't fit in my new space:

• A chest of drawers handed down to me from my family that I really didn't like.   Good riddance.  The mover seemed thirlled!  0% regret.
• A 9 foot-high-bookcase.  10%  regret.  I really liked that bookcase, but it was a choice between the bookcase and the antique sideboard my daughter loves and wants some day.  The mover who loves books ended up with the bookcase.  I can buy another one someday.  So far, I've done great without it.

But as I consider downsizing to 280 square feet, I’m even more perplexed and wondering "good grief, how am I going to live without a living room??" 

The rewards of downsizing draw me forward anyway:  pure joy, a new view of the world, a fuller life.

The KonMari Method Is Helping This Time.  Real Life Case Study Below.

For those of you facing the same kind of emotional collapse that is either slowing you down or halting the process all together, I’m sharing some of the tools that helped me and recent photos from my current use of the KonMari, the process laid out in The Life Changing Magic of TidyingUp by Marie Kondo. 

First Things First:  Your Clothes 

Marie suggests that you start de-cluttering your clothes.  NOT your closet, because clothes are stored many other places too.  And clothes are the easiest.  So here goes my Saturday.  

Escape From the Cube: Financial Independence Next Steps - Rental Income Big Gamble

You may have followed my last downsizing saga to improve my financial situation.  I moved from my 2500 square foot beautiful family home in lovely university area with 100 year old oak trees....to an apartment.   Traumatic?  Seemed so at the time.   As someone, maybe like you?  Who is  more left-brained than right-brained, my environment is very important to my creativity -- and hence my sense of well-being and safety.

The move was scary.  Here is a from back then with helpful moving tips if you are moving soon.  But I pocketed $50,000, helped pay off $5,000 of my daughter's school loans at Ivy League University, and had a 1 and 1/2 year vacation in a luxury rental condo.  Instead of desperately searching for handymen while trying to finish reports at work?  I went to picking up the phone to say  "Hello, maintenance?  Could you change my air conditioner filter today?  Great, thanks!"  I'm now a BIG fan of renting.

From that apartment, thought, I bought a town home.  To Rent or Buy was the question..and one of my most popular blog posts.  The initial ask was driven by my $50,000 nest egg going from a 4% return each year to a 1% each year.  Then there were those incredibly low interest rates on property.  Pushing me forward was that monthly rental "vacation" that cost $1,100 per month.  So I bought again in 2010.  And got a $6,000 first time home owner's credit.  Which I put into the new townhouse.


Now, 3 years later -- I'm ready to turn my townhouse into a rental income property -- gaining about $200 per month in passive income while paying off my equity --  and go back to renting (at only $975 per month).  Crossed fingers!

But to rent my place, I need to go through the transition again of moving and resettling.  I'm using the skills I developed during the previous moves in the last 5 years.  And would love to hear your tips and tricks to making moving easier.

I'm into the new space on July 13th, 2013, and will need to rent my town home out to someone else, with the right amount of rent, by August 1st.    It's a gamble.

I'll be posting every week -- let the Gambling Begin! 

Get Rich Slowly Video Contest

You can win $500 just by submitting your personal financial success to JD Roth at Get Rich Slowly.  His last post about the contest motivated me to enter -- he's only got six entires so far and the contest goes until April 15th.  He's giving away 3 different cash prizes along with runner-up prizes that include copies of his new book, Your Money:  The Missing Manual.  (Even a non-math major like myself can figure that she has a pretty good chance of winning something, just by entering).

With only two minutes to express my personal success story, it really made me clarify the most important lessons I learned on my journey out of debt into financial freedom.   Here's a stab at a short list of what I recommend to anybody and everybody who is interested.

Jerrold Mundis' "How to Get Out of Debt and Stay Out of Debt."  This little paperback taught me that Debt is just a number, and that the more fearful you are, the harder it is to dig out.  He takes the shame out of owing, and puts you back in control of your finances.

Andrew Tobias' "The Only Investment Guide You'll Ever Need."  It's a thumbs up recommendation because stock picking is hard, and math is hard, and Tobias reminds us that even supergurus on Wall Street lose money all the time.  Most important?  He says you don't have to be in the stock market to be financially secure some day.  (His tips on hoarding tuna under the coffee table are pretty funny -- and I'm 'long' on Tide Detergent right now, at $8.99 for the 63-100 load liquid variety, because Tobais taught me how.)

MSN.com Money Blog.  All the authors there are great and they, along with JD Roth at Get Rich Slowly, taught me that downsizing my house and car was a plausible, workable next step that would bring me a great deal of financial peace.  And it has!   Also an awesome reasource for car purchasing.

Dave Ramsey's envelope budgeting method (I still use it), and his debt snowball concept.  The envelope budgeting method helped me get to a place where I am out of debt snowballing, fully funded in my emergency account, fully funding my retirement plan, and now paying off my mortgage.

Langiappe (a little extra):  Quicken.com (I play with my accounts like other people play video games), Mint.com, Michael BlueJay's tips on saving energy,

Check out the videos on Get Rich Slowly!  Everyday people sharing everyday wisdom.  It's pretty inspirational.

Keep Your Money - Use Flow to Make it Fun

Goal setting for building your savings cushion can be almost as much fun as quitting your job with a million in the bank. I did say almost. But, managing your money to fund your fabulous life can be a game that consumes your attention so fully that you forget the mundane boring details of life. It's called Flow and it can apply to your personal budgets, household management, savings plans, you name it.

Michael Csikszentmihalyi (pronounced chick-sent-me-high) writes about the psychology of Flow in his book "Psychology of Optimal Experience. " It's that moment when time stands still and you forget to check your watch, you don't notice the temperature, you don't care if you are hungry, you are completely immersed in life. Athletes know about flow, it's the sweet spot on the tennis racket and the pure meditation on the golf course when you hit a perfect shot.

Flow comes when we have goals -- goals that are attainable. They help you concentate and crowd out petty distractions of the mind. It's not in the achievement of goals, but it's because lack of goals can lead to difficulty concentrating and avoiding distractions. Goals are structure, structure is good when the fears threaten to overwhelm you with negativity.

One vivid example in the book Flow is of prisoners of war who achieved flow by reciting stanzas in epic poems memorized in school. If that process can led to flow, then I know that we can achieve flow by reaching for financial independence and catching it...

I attended a lecture given by Csikszentmihalyi and took copious notes because Flow is WAY FUN. The key to setting your goals so that they engage your psyche is to setting them so high that they are a stretch, but not so high that you can't reach them (which produces frustration instead).

EXAMPLE: My goal is to say "bye-bye" to the corner office and to be my own boss, to employ family members, create more complex experiences in the every day world. The dream we all have -- to become my own family CEO, chart my own course, make my own decisions, hit that "cross over" point to financial freedom -- but that will take a cool $1,000,000 in conservative savings. I've got the equivalent of about half that in pension funds and retirement funds that can't be touched.

I've got 8 more years to do it all in. But just thinking about saving half-a-million is so depressing and overwhelming. Thinking about saving $50,000 a year is kind of overwhelming. But if I live on $2,500 a month, I can bank a good $40,000 a year. Wow...

So the goal is to make it on $2,500 or less THIS MONTH is a challenge.

1) I'm going to hit the dollar store instead of the mall.

2) Bring my lunch to work 3 days this week.

3) Stock up on the staples when they are on sale.

4) Read a personal finance blog tip every day.

5) Put some energy into a sideline business that will fund the fun extras like trips and dinners out(www.wineshopathome/conniemcleod.com is my current experiment). Do it with a friend so that we can enjoy the activity together and grow the relationship.

6) Dry my clothes on an indoor clothes line.

7) Investigate rental property

8) Turn off the lights when I'm not in the room.

9) Make coffee at home 3 times this week.

What's your goal for this month? This week? Is it doable? Is it a stretch?

Check out Bargaineering's personal finance blog for more psychological money games in a quick and easy video format.

Remember, Flow IS FUN...and making your money work FOR you, instead of you working for it, is a whole new kind of psychological high.

Mint.com

A co-worker intrigued by personal budgeting and software ran into my office this afternoon. "Can you believe it? I heard about Mint.com on NPR yesterday! And you were just talking about it...isn't that weird?"

Maybe. Maybe not. If www.glassdoor.com is an accurate gauge of salaries, then most of us who are employed by others are making between $40,000 and $80,000 a year. Try saving enough to pay for a house, put children through private school, and then into college, fund a retirement plan (again!), pay for a car, pay for school loans...well, you get my drift.

A LOT of us are using personal budgeting software and most of us have finite resources, even the Millionaire Next Door has to do some planning. (Okay, so it's mostly around taxes, but that kind of planning counts too...)

Mint.com is an awesome free resource for aggregating all of your accounts into one overview. The first time I really understood my net worth was when I began using the full functionality of Mint.com about a year ago. There are glitches with auto-updates at times, and once I had to go through set up again with an account or two, but usually it's a smooth working beauty.

You won't find tax tools, cash flow analyses, or any of the super analytical high end programs. But you will get a nice monthly budgeting overview, along with the account aggregator.

Definitely give 5 thumbs up to Mint.com

If you have experiences with the program, please feel free to comment!

Mint.com

25 years ago I was afraid I couldn't pay the rent. Before the stock market ever crashed, before it was cool to buy TIPS, way before anyone dreamed of living without their credit cards, I became addicted to personal finance information; websites, books, blogs, theories, gurus. A lot of what I've picked up along the way has helped me become debt free (no credit card debt, no mortage, no car loans).

Now I'm a single Mom with a stinky liberal arts degree who has helped her daughter go to the college of her dreams (Baby Coco has only $5,000 in student loans after 2.5 years at a sub-ivy costing $45,000 grand a year). Most of what I tried works really well...and if it doesn't, I spit on it and toss it out.

"The trick is to live a little beneath your means...because it's true...money does grow more money..."

I forget where I found that quote, but it's pinned to my bulletin board in my kitchen.

Mint.com is my most recent find - I can see how all of my accounts are doing, and it's really, really simple with almost automatic updating. So far, net worth is still in the low six figures. Ten years to half-a-million? Can I do it? Can you?
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Links I Love, and How You Can Be Free and Happy Too

How to Get Out of Debt, Stay Out of Debt and Live Prosperously
Selling the House for a Profit