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Frugality Tips

Written by Sam on April 12, 2010 – 12:20 pm -

I recently received a request to answer a few questions about frugality. The request came from CESI Debt Solutions who had posted quotes from 19 other personal finance bloggers that you can read here. That article was then picked up by Time magazine and as a follow up CESI Debt Solutions wanted to publish even more tips from more bloggers.

So here’s my little contribution.

Question #1 – What’s your “frugality story?” In other words, how and why did you become frugal?

My wife and I had recently moved into a house, adopted a child, had a number of surgeries, and transitioned from two incomes to one, all within a year. We were forced to get control over our finances quickly or have a major lifestyle adjustment (like moving out of our house). We had a strong incentive and knew we could survive by taking control of our finances. As a result, we worked our way through it and created our own system that has allowed us not only to survive but to reach our financial goals with increased speed and focus.

Question #2 – What, if anything, tempts you to overspend, and how do you resist?

I’m always shifting from one hobby to the next so there’s always an excuse to spend. My two biggest weaknesses right now are books and board games.

One general technique I use is to imagine what will happen after the purchase is made and I’m at home. For example, if I buy the book, will I read it when I get home or will it go into my pile of unread books on the bookshelf? Just getting that picture in my mind helps clarify if I REALLY want it and will use it or if I’m just in the moment and getting sucked into a purchase I won’t get any real enjoyment from. This trick works particularly well with board games since they’re social. Sometimes I almost get sucked into buying a game that I know my friends and family won’t be interested and will never get played. Projecting into the future helps me make a good decision.

Another trick I use is to see if I can rent or borrow the item. With books, you can borrow them from a library. With board games, you can often find a friend that has the game you can borrow. My local game store even has rental games you can check out for 10 days and the rental price goes towards a purchase when you return it. I’ve often taken that option and find after playing the game that I don’t really care to own it.

One interesting side note is that I bought a Kindle last year and have made no physical book purchases since then. In fact my overall book purchases have gone WAY down. I attribute this to the fact that I can get any book I want instantly through my Kindle. This eliminates the psychological response of wanting to get a book just to have it when I need it or because I’m afraid it won’t be there later when I want it. I only purchase the books I’m ready to read NOW which is a much smaller number than the books I WANT to read. It has probably saved me a couple hundred dollars in book purchases.

Question #3 – What personal finance or frugality habits were the hardest for you to adopt and why?

Using cash was probably the hardest because credit cards are so convenient. But whatever inconvenience you suffer on the front-end making purchases is more than made up for on the back-end when reconciling your transactions. One cash withdraw entry vs. 40+ miscellaneous purchases and entries.

Cash has also been the single biggest thing that has helped us to control our spending. It’s an instant, compelling feedback mechanism. It makes you feel a much stronger connection to the money you spend versus credit cards which make you feel disconnected and therefore make you more likely to overspend.

Question #4 – Have you ever taken frugality too far? How so?

You know, I don’t think I ever have. I tend to always push the limits of spending more than I should. My wife used to do things like rinsing out ziploc bags to use them later, but I convinced her it’s an unnecessary if not unsanitary habit.

Question #5 – What resources (blogs, books, websites) would you recommend to someone who’s newly frugal?

  • Anything by Dave Ramsey but, in particular, his Financial Peace University program
  • The Richest Man in Bablyon
  • The Millionaire Next Door
  • Rich On Any Income
  • My 12 Weeks to Fiscal Fitness program, of course

Posted in Saving, Uncategorized | 2 Comments »

How to Create a Master Budget

Written by Sam on March 23, 2010 – 8:50 pm -

The first step to actually creating your budget is to do a master budget. Later in the week I’ll be showing you how to create your working budget using a variety of tools. The Master Budget Excel file I’m using in the screencast will be made available to newsletter subscribers. You can also do your master budget using paper and pencil if you prefer that.

What is a master budget?

A master budget is a temporary document that helps you prioritize your budget categories and help ensure you have the money in your account when you need it. This is very important because when you first start budgeting you run the risk of overdrawing your account. The master budget also helps you see if you have enough money to meet all your budget categories and allows you to make adjustments before you create your working budget. It’s kind of like a template of sorts and you’ll use it as a reference tool for creating your first 1-3 budgets.

Once you get a month ahead and can budget for this month with last month’s money, you won’t need to use the master budget anymore because you’ll already have all the money you need for the month and won’t have to worry about timing.

How to prioritize expense categories

There are three ways to prioritize your budget categories:

  1. By Timing – You first want to make sure you have money for your set bills. Some people will run into a scenario where they have enough money for their monthly bills overall, but maybe they all come due in the first half of the month and your first paycheck won’t cover them all. In a situation like this, you’ll want to contact the companies and see if you can change some of the billing dates to the second half of the month.
  2. By Importance – Make sure the most important categories are funded. These can be needs such as food, clothing, housing, and transportation. These can also be things you value like savings, charitable donations, or power money.
  3. By Need – Even though groceries are very important and must be budgeted for, you may not need all of your grocery money budgeted for your first paycheck. Maybe you only need half now and half in the second part of the month. In contrast, maybe a category isn’t at the top of the list in importance, but you need the money earlier than other categories.

A word about Excel

I’m going to use Microsoft Excel a lot throughout this course and I consider it a basic personal finance skill. The Master Budget file that is available to newsletter subscribers is not protected and the formulas can be changed or deleted. I did this on purpose so that people would be encouraged to play around and see how I’ve created this document.

If you feel like Excel is confusing or threatening, please let me know and I’ll create some tutorials showing you the basics of excel.

Master Budget Download

The master budget excel file will be available to newsletter subscribers. You can also do a master budget on paper or in your own excel spreadsheet. There’s nothing magic to my spreadsheet, it’s just created to save you some time.

Posted in Uncategorized | 4 Comments »

Week 2 – How To Create Your First Net Worth Statement

Written by Sam on March 5, 2010 – 4:35 pm -

This week will be a simple one.  Last week you had a big assignment to create your personal financial binder and this week we’ll be adding the Net Worth Statement to the binder. 

I will be sending out a copy of the excel spreadsheet I created to newsletter subscribers so watch your inbox.

Part 1

Part 2

There are a couple of guidelines to follow in creating your first Net Worth Statement:

  1. Don’t go overboard and try to include all your possessions in the first version.  You should only include your house, cars, and at most 1-3  of your most valuable possessions.  Then, every time you update your statement you can add one or two more items.  Over time you’ll have quite a comprehensive record of your possessions.
  2. The first statement should take you 20-30 minutes to create.
  3. If you haven’t completed your List of Accounts and List of Debts for your financial binder, please do so first.  This will make creating your net worth statement much faster and easier.
  4. In the screencast I mention three resources for determining the value of your assets:
  5. Here’s a list of items you may want to include in your net worth statement
    • Assets
      • Cash
      • Checking accounts
      • Savings accounts
      • Money Market accounts
      • Stocks, bonds, CDs
      • Market value of your home
      • Major household items
      • Market value of other real estate
        • Rental property
        • Time shares
        • Vacation homes
      • Market value of cars
      • Value of Cash-value life insurance
      • 401K accounts
      • IRA and Roth IRA accounts
    • Liabilities
      • Mortgage
      • Lines of credit (HELOCs, etc)
      • Auto loans
      • Credit card balances
      • Student loans
      • Other loans
      • Owed taxes

There are several advantages to creating and updating a net worth statement.

  1. Your net worth is a single number that reflects whether you are making progress financially or not.
  2. Recording a list of your possessions can act as a safety measure if you were to be robbed or have a fire and needed records to get reimbursed for insurance purposes.
  3. Updating your net worth statement keeps you in tune with your various accounts and amounts in them.  It increases your overall financial awareness.
  4. In recording possesions and their worth you may uncover some assets you can sell for a healthy profit and put those assets to use in a more valuable way.

As always, leave any comments or questions below and I’ll do my best to answer them.

Posted in Uncategorized | 1 Comment »

12 Weeks to Fiscal Fitness – Pre-launch Podcast

Written by Sam on February 16, 2010 – 9:09 am -

It’s finally here. It’s time to start the 12 Weeks to Fiscal Fitness with a Pre-launch podcast. In this podcast I’ll talk about:

  • My family’s journey on the path to total financial control. How we went from barely being able to pay our bills to meeting all our financial goals.
  • What you can expect to learn from this course.
  • What this course won’t do for you.
  • Your first assignment:
    • Get your spouse on board. Agree to follow the course unless you BOTH disagree on a single point in which case you can choose not to follow that point.
    • Agree to never work on or discuss finances more than 30 minutes at a time


icon for podpress  12 Weeks to Fiscal Fitness - Prelaunch [28:50m]: Play Now | Play in Popup | Download

Please email me or leave comments below and let me know what your biggest financial challenges are.

Posted in 12 Weeks to Fiscal Fitness, Uncategorized | 7 Comments »

Giveaway Winners for the 14th, 15th, 16th

Written by Sam on September 18, 2009 – 11:29 am -

Wow, I’m posting a slew of winners today. Here are the winners for Monday, Tuesday and Wednesday of this week. I’ve been a little late publishing these winners because life has been a little crazy lately. We just adopted a little baby boy and have been back and forth between the hospital.

The good news is, the giveaway is still in full swing and we have another week full of prizes. Keep entering. Nobody has taken advantage of all the ways to enter yet so you could really increase your chances by doing so.

Here are the winners so far for this work week:

Jocelyn Robertson wins a Food Storage Made Easy Binder
Joseph and Heather Holdaway win a lifetime membership to the Scrooge Strategy
John Wininger wins a copy of The Millionaire Next Door courtesy of J.D. Roth of Get Rich Slowly

Posted in Uncategorized | No Comments »

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