Saturday, March 15, 2014

8 Ways To Spend Less & Save More

Today we are trying an experiment. Amy Matt found me on the internet and asked if she could write a guest blog. I decided to give it a try. Below you'll find her thoughts on spending less and saving more. Here's her self-introduction:

Hi. My name is Amy Matt and I am known for my over-supportive behavior for living a frugal life. The reason is that there was a terrible time in my life when I had to encounter excessive debt. I am happy to be guest posting here today. Please visit my blog to learn more of me or read more of my posts.

We are indeed in the age of spending. There are just so many wonderful things available that we trade our money. Spending less in a spend-happy world then seems a stretch. And saving? Forget it. Something always comes up. Right?

No. I challenge that belief, and use it as a foundation to justify the following eight tips on spending less, and saving more.

1. Do not create debt

How much would you save if you incurred no debt, and spent within your means? That jolt in your chest represents a realization. You would save a lot, wouldn’t you? But how do you do it?

There are two circumstances that justify debt: when you’re up against a wall, or when the value of your purchase will increase more than what you will pay in interest. That increase is direct or indirect. For example, borrowing to buy a used car may make sense if public transit can’t get you to and from a new job whose increase in pay is much greater than the car payments.

2. Be frugal, but not cheap

Spend less without sacrificing your quality of life. Remember that above all your happiness is most important. Happiness yields positive results. Think of different ways to keep doing the same thing.

For example, eat an appetizer at home, and split an entre at the restaurant with your significant other if you like to eat out. Buy used instead of new. Watch Hulu and Netflix rather than cable. Split the Internet bill with other residents in your vicinity. Borrow from the library rather than buying a book or movie. Get creative and your bank account will thank you. For more of frugal tips, check out Frugal Magazine.

3. Change your thinking

Convert all your purchases into hourly equivalents. Let’s say you make $12 per hour. A purchase that runs $84 is equivalent to seven hours of your time.

Was it worth it? Was that a little depressing? Good. It will make you see that the value of your money is more than just paper in hand; it is also your time. That perspective will change your idea of value, and help you make more responsible spending decisions.

4. So-and-so has it! Why can’t I?

So what? Yes it’s great, it’s shiny (more often than not), and man, does it ever (appear to) make life easier. How nice would it be to have that?

How many times have you made that purchase, only to have the item in question disappoint, and gather dust in the corner? You can either look rich, or be rich. Time wills out in the end because you cannot have both. Decide what really makes you happy – hint: it’s not possessions – and spend, or don’t spend, accordingly.

5. Educate yourself!

These days, useful financial tools abound to help with investing, retirement planning, etc... Unfortunately, many investments are empty promises. Be cautious.

The Internet is an excellent resource for sharpening your financial knowledge. Just be sure they are reputable before you share the information in your wallet. Once I was facing a huge debt problem and I used a professional consultancy to help me by looking into my situation.

6. You knew it was coming – clip those coupons!

Do you know what a coupon is? It’s the company, manufacturer, or supplier paying part of the cost of your product on your behalf. You get to keep your 50 cents, further fattening your bank account, one calorie at a time.

But don’t be wasteful. Only use coupons on products you need, and not at the sacrifice of more cash. In other words if your generic toothpaste costs $1.99, and you have a coupon for 50 cents off for a brand name, but even with the coupon it is still more expensive than your generic brand don’t go for it. You’re living wisely as it is.

7. You’ve heard this one before – pay with cash

Statistics say that you are likely to spend up to 30 percent more if you use plastic, or checks, as opposed to cash. A wallet full of cash creates an awareness of how much you are spending without an effort, like balancing your accounts. You can see and feel your money leaving your hands. That feeling cannot be had without serious effort when using your credit cards, or checkbook.

Challenge yourself. Use cash for one week. At the beginning of the week calculate how much you will need to get through the next seven days. If you have habits like a cup of coffee every day, put that in. Live your week. At the end of the week do you have excess? Did you have to take out more? Why? What did it feel like? Have you noticed a difference in how you feel about your money? Good. Think on that.

8. Live like tomorrow is your last day, but invest like you’re going to live forever

Making money by investing over the long term is easy, but overnight? You might as well flip a coin to guess whether the markets will go up or down. Patience is a virtue, and a fine trait for growing your money. Even in the worst of times, the market rebounds eventually. Hang tough!

~ Amy Matt

Monday, March 10, 2014

The Husband’s Secret

My Savannah book club, Bound to Please (don’t you love that name), recently read The Husband’s Secret by Liane Moriarty. I stumbled onto the club when they chose Bad Policy as their December 2013 book. Jan and I have continued to go to meetings because it is a good group of people with a variety of ages and interests, and they often choose books we wouldn’t normally read.

I was disappointed in The Husband’s Secret. If you want to know why, contact me off list, because I want to talk about a question I asked the group and the answers people gave. I’m not giving anything away to say that the husband wrote a letter to his wife, sealed it in an envelope, which he labeled with something to the effect of “open upon my death.”

Here’s the question—and answer it for yourself before you read on:

If your still living spouse/significant other left just such an envelope and you found it, would you rip it open?

I was fascinated to see eighty percent of the hands shoot up without hesitation. One participant noted that she wouldn’t rip it open; she’d steam it open. I wished I had thought of that, since I would have ripped it open and then destroyed the evidence of my moral crime.

Ben Franklin supposedly said something like, “Three can keep a secret, if two of them are dead.” Ben may have been an optimist. There is something in human nature that does not like secrets. We can’t keep others’ secrets; we often can’t keep our own; and assuming my book club is a fair representation of Americans, given the opportunity to learn someone else’s secret, we won’t hesitate to break their trust. Of course, owners of the gossip magazines by the grocery checkout have profited from this knowledge for generations.

Somehow we are shocked (shocked, I say) that our government eavesdropped on our allies—as if they weren’t doing the same to us. To those of you old enough to remember party telephone lines, I ask, “Didn’t you listen in on your neighbors?”

We should not be surprised that the NSA oversteps its bounds. Hoover’s FBI certainly did in their day. Today’s tools are exponentially more sophisticated, but that hasn’t changed our human desires to know what others want to hide.

Information wants to be free. We need laws (treason for so-called state secrets, copyright protection for authors, patents for inventors) to prevent it. But you know, once again Mom was right when she said, “Don’t do something you wouldn’t want on the front page of the paper.”

Life can certainly be a lot less stressful if you’re not trying to protect secrets. Now, where did I hide that diary again?

~ Jim
Originally Published on Writers Who Kill (3/9/14)

Monday, March 3, 2014

“Bitcoin is Still in Beta”

So says Bitcoin’s executive director, Jon Matonis as reported by CNN. Now, I’m sure that bit of information, combined with Matonis’s further advice that “You should only invest in trade what you can afford to lose,” is very comforting to people who used Mt. Gox to store their investment.

In other words, the executive director classifies bitcoin as an extremely risky investment, not a monetary store of value. I suppose that’s obvious for anything which has had its value jump to over $1,000 and subsequently slump to under $600. Notice from the chart below that this is not the first slump since Bitcoin went stratospheric. Also notice since Mt. Gox’s demise that bitcoins have been trading higher. I suppose you could attribute that to classical economics: since the supply of bitcoins has decreased, all other things equal, the price should go up. Alternatively, you could view it as whistling past the graveyard.

Mt. Gox has filed for bankruptcy protection in Hong Kong, so perhaps their account holders will receive pennies on the dollars for their accounts when the debacle is finally resolved. Apparently even before Mt. Gox was hacked and “lost” 1.5 million bitcoins, they were under financial pressures that should have been sufficient to alert investors that the exchange was unsustainable. Again, according to CNN it appears Mt. Gox’s 2012 revenue was less than $400,000 and its expenses included $5 million seized by the U.S. government for alleged false answers on bank documents.

All of that was news to me because I had no reason to follow Mt. Gox. However, those with bitcoin “investments” are now surely warned (if they weren’t before) to perform careful due diligence of the organization holding their bitcoins.

Bitcoin’s Jon Matonis thinks in five years bitcoins will be mainstream, with apps that are as easy to use as Skype. That comparison is not fully reassuring to me. In the meantime, may the Force be with you and your bitcoins. I’ll continue to enjoy the action from the outside looking in.

~ Jim