Since getting on board with our new frugal lifestyle I’ve notice that my wallet is getting a little thicker, and my gut is getting a little thinner. It made me wonder if there is a correlation between frugal living and losing weight. After reflecting on my progress over the last few months a few ideas stood out as possible explanations for why my weight has dropped.

I started eating like a kid again. Sounds like weird advice doesn’t it? No, I am not advocating eating hot dogs and ice cream three times a day, as that would surely have an opposite effect on my waistline. What I am recommending is using smaller plates, smaller drinking cups and therefore smaller portions. When selecting a large dinner plate, or tall glass for our dinner beverage of choice, the natural inclination is to fill them up. If you are like me and enjoy a cold soft drink or sweet tea with dinner filling a large glass can add up to quite a few liquid calories. By using a smaller glass I am reducing the caloric intake with my evening meal and increasing the life of that 2-liter bottle of Sprite.

We scaled way back on television viewing. My wife and I recently agreed to drop our cable service down to the basic package only. We had already eliminated digital cable last year, but further reduced the channel offerings and our monthly bill. The $11 bare-bones service provides us access to local channels, the Fox affiliate and PBS. The benefits, other than the reduced cable bill, are that we have had to find other things to occupy our time. Back when I was a couch potato I frequently snacked while watching television. For some reason the two activities just seemed to go together. Big game on? Let’s get some buffalo wings. A good movie on tonight? Let’s order pizza. With the television turned off there are less opportunities to sit down and snack. Reading a copy of The Total Money Makeover just doesn’t produce the same cookie dough ice cream craving as watching the new episode of Lost.

We only see the inside of a restaurant once a week, and it is usually a Subway. Eating out is a sure-fire way to destroy a food budget. It is tough for a for a family of four to leave Outback Steakhouse spending less than $50 for meals, drinks and a tip. When you compare that to the frugal grocery choices available for $50 you realize you are trading several days worth of food for one evening out. Besides the obvious financial benefits to eating in, your health will improve as well. Fast food, and food served in typical restaurants is loaded with calories, saturated fats and sodium.

By preparing food at home you control the nutritional content. Our weekly splurge is a visit to a nearby Subway where on Sundays they offer a “two footlongs for $8″ special. Like any good frugal dad, I resist the temptation to eat the entire thing that night and take the other half for lunch the next day, spreading the cost over two meals.

Has anyone else experienced a slim down thanks to focusing on a frugal lifestyle?

This is the sixth article in Frugal Dad’s week-long series, The 7-Day Turnaround: One Week to Change Your Family’s Financial Destiny. Each day brings a new step to implement and help you get control of your finances.

One of the most valuable gifts we can give our children is the gift of education. Used properly our kids can lead successful lives long after we are gone. I am not one of those that believes a college degree is an automatic way to wealth. What you do with your education is far more important than the degree hanging on your wall. Having said that, if you are in the position to help your children complete their education it will help them immensely because they won’t owe Sallie Mae two years of their first salary earned out of school. Too many new graduates are saddled with huge student loan debt, stifling their financial productivity in those precious early years after graduation.

Start early. Like any type of investing, the key is to start early. College tuition continues to rise at a staggering rate, and by the time your newborn heads off to school it may costs as much as your mortgage, in today’s dollars. The only way to beat that pace, other than hitting the lottery, is to get an early start and take advantage of 18 years of compounding growth.

Take advantage of tax-free savings vehicles. The government has made the job a little easier these days by offering two outstanding tax-free savings plans for college savings. Education Savings Accounts (ESAs), sometimes referred to as an Education IRA, may be opened at nearly all brokerages. Unfortunately, you can only contribute up to $2,000 a year for junior, but the earnings do grow tax free. So if that $36,000 in contributions from birth to age eighteen grows to $100,000 you can withdraw 100% of the account balance tax free, as long as it is used for educational expenses.

Education Savings Accounts may provide adequate savings for your child, but in case they get accepted to attend an ivy league school it might also be a good idea to invest in a 529 College Savings Plan. 529 plans are sponsored at the state level, and many states offer tax deductions for contributions made to your in-state plan. If your state’s plan is lousy, don’t invest just for the tax deduction. You are able to invest in plans managed in other states, you just simply don’t get a tax deduction on your state income taxes. Saving for College has a good 529 plan overview that lists all the state plans.

Financial aid is still available. Neither type of college savings plan are considered student assets in the eyes of federal financial aid providers, and therefore will not significantly reduce your child’s eligibility to receive federal financial aid. However, since most needs-based scholarships are offered at the individual school level the schools may have different rules on how assets are treated.

Chart your own course. Regardless of savings vehicle you choose be sure to select your own investments. Some of the best 529 plans offer a wide range of investment options in top mutual fund brokerages such as Vanguard or TIAA-Cref. Others offer only “managed allocation” options based on when your child plans to attend college. The plan administrator may not have the same tolerance for risk as you, and move your child’s savings balance to more conservative options too early.

What if my son or daughter decides to take a different path? If your child decides not to attend college you may assign another family member as beneficiary, which could be a nice gift for a brother, sister, or favorite niece or nephew. If you have a small family with no other beneficiaries available you can always cash out the savings and pay a 10% penalty, in addition to your ordinary income tax rate.

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I admit to being completely out of the loop (thankfully) when it comes to designer anything. Fashionable clothing, jewelry and accessories are all lost on me. I happen to believe the only “accessories” a man should wear is a wedding ring, but I realize that is just so “1980s.”

Today my wife told me about visiting a Neiman Marcus store with a friend and seeing a $150 Marc Jacobs coin wallet on a sale table. My first reaction was, “Who the heck is Marc Jacobs, and why would anyone care to buy his coin wallet?” Apparently he is some high-fa-luting “designer.”

I began to ponder what would motivate a person to buy a $150 coin wallet to transport metal currency in denominations no greater than $0.25 each – I mean, am I the only one who sees the irony in that? The story did remind me of the three questions I ask myself before making a major purchase:

1. Is there a cheaper alternative? Sure, you may have to give up brand loyalties or favorite designers, but chances are you could find a suitable, cheaper product or service that meets your needs. In the case of our coin wallet there are thousands of alternatives to Mr. Jacobs’ accessory. A quick search of Amazon.com lists hundreds of similar products for a lot less money. In fact, a comparable leather coin wallet lists on Amazon.com for $14.00. Of course, far be it from me to advise others on fashion accessories. When it comes to carrying change anything from a Ziploc bag to a warm pocket suits my needs just fine.

2. Will my life really be improved by this purchase? In this case, it’s hard to make the argument that this purchase does anything to improve our place in this world. I guess a few of your friends may be impressed, depending on the type of friends you keep. My friends would probably think I’ve lost my mind to spend a week’s worth of gas and groceries on a change purse, errr…”coin wallet.”

3. What is my motivation for buying this item? When I am about to make a major purchase I always attempt to identify my true motivation for the purchase. Now that I am devoted to frugal living I try to only buy things that are an absolute necessity. If I was in the market for a “coin wallet” I might ask myself why I had to have a Marc Jacobs coin wallet, instead of a $14.00 Fossil change purse from Amazon.com. Both serve the same function, both are made of high-quality materials, and both are reputable brands. In the end it comes down to opportunity cost. The money spent on more high-priced items uses up the opportunities for putting those funds to better use in the future. In the end, that lost opportunity could be much more costly than the $150 price tag.

Your Money or Your Life is not your average personal finance book. Weighing in at nearly 400 pages (including the prologue and epilogue), this selection seemed to be a “heavy” read. To the contrary, I found the book easy to work through, and extremely insightful and motivating. In fact, I’d rank it up there with The Total Money Makeover as the top books that have completely changed my outlook on money.

The basic premise of the book is that one invests much more “life energy” into their jobs than they realize. People further devalue this life energy with frivolous purchases and wasteful spending. If we would all simply determine how much we really earn at our jobs, and how much we really need to exist, we would discover that we are much closer to financial independence than any of us ever dreamed.

Your Money or Your Life: Nine Steps to Financial Independence

1. Making Peace with the Past. During this first step you will find out how much money you have earned in your working lifetime. I’ve always been afraid of doing this because the YTD earnings on my pay stub are scary enough – to think how much money has slipped through my fingers and into the hands of retailers, banks, etc. After you discover how much money you’ve earned over your lifetime the next step is to determine how much of you managed to keep. Gather up your assets and liabilities and take an inventory of your finances.
2. Being in the Present – Tracking Your Life Energy. This might be the most powerful idea in the entire book. Essentially, it is the author’s stance that most people have no idea what their “real hourly wage” is. In other words, you may earn $20 an hour while on the clock, but you spend an hour commuting each day, blow $10 on lunch, and have to maintain a fancy work wardrobe. The costs may drive down you actual “real wage” to only $16.00 an hour. This is a particularly useful exercise for families weighing the option of a spouse staying at home. When all factors are considered the “real wage” may not be worth continuing to work for money.
3. Where Is It All Going? Start tracking your income and expenses each month. Ideally, your savings should increase over time and your expenses should come down, as you appreciate the value of your life energy more and more!
4. Three Questions That Will Transform Your Life. Now that you have calculated your “real” hourly wage and are tracking your expenses it is time to decide if those expenses are worth trading for your life energy. I find myself now standing in a store asking myself, “Is this gadget really worth four hours of life energy at work?” No. I promptly put it back and realize that the item adds little value to my life, is not worth exchanging life energy for, and does not provide fulfillment based on my values and life purpose.
5. Making Life Energy Visible. Using the tracking data from Step 3, create a giant wall chart to plot your total monthly income and expenses. The gap between the two should represent your savings. Putting this in a highly-visible location is very motivating and creates kind of a game – each month you will want to drop that “expenses” point and increase your income.
6. Valuing Your Life Energy – Minimizing Spending. This step represents the end of frivolous spending. To achieve financial independence you must start to value your own life energy as a precious commodity, a finite resource that is cheapened with every gadget and toy your conspicuously consume each month.
7. Valuing Your Life Energy – Maximizing Income. The author best sums up this section of the book in the following statement: “Money is simply something you trade your life energy for.” After reading this chapter you will answer the question, “What do you do for a living?” differently. I’ll now say, “I am a writer, but I create software for money.” In other words, we should no longer be defined by what we do from 8:00-5:00 Monday-Friday.
8. Capital and the Crossover Point. Using the formula capital (savings) times the current long-term interest rate divided by 12 months you can determine your monthly investment income. To achieve financial independence you must get that monthly investment income above your monthly expenses identified in Step 3 and graphed in Step 5. The author presents a technique for doing just that through the use of a long-term investment vehicle.
9. Managing Your Finances. The final chapter in Your Money or Your Life outlines the investment vehicles to utilize to get to financial independence ahead of the traditional retirement age (65).

When I closed the book one thought came to mind – If I had only read this book ten years ago! I’m quite sure if I had I would have already experienced financial independence. I still can, it will just take longer thanks to my past choices which cheapened my life energy. Normally, I finish off a book and put it up on eBay to generate some funds to purchase my next book. However, this one is going on the bookshelf next to Millionaire Mind and The Total Money Makeover. I highly recommend this book for anyone interested in improving their personal finances, and/or anyone looking to improve their work-life balance.

This morning my son and I ventured out to the grocery store to stock up on our monthly supply of groceries and paper products. Our local grocery store had an excellent deal on paper goods, so we took along the debit card (I normally just take cash on store trips). After checking out and loading up our car in the freezing cold we headed to the gas station next to the grocery store to fill up. It was there that I discovered I had not placed my debit card back in my wallet. As panic began to set in I remembered the same advice I had given to hundreds of panicked callers during my time as a credit card customer service agent (yes, I used to work for the enemy!).

Contact your bank as soon as you realize you and your credit card have parted. Customer liability is capped at $50 for [tag]unauthorized transactions[/tag] (and most banks don’t even attempt to collect that in the name of customer service). Still, it’s important to notify your bank as soon as you realize your card is missing. If you don’t have your bank’s contact information you can call [tag]Visa[/tag] International at 1-800-VISA-911 to be routed to your banking institution. [tag]Mastercard[/tag] has a similar emergency phone number, 1-800-MCAssist. When connected to your financial institution advise them you have lost your credit card and ask that they place a watch on your account while you retrace your steps. If you have no idea where it could be it might be safer to go ahead and request a “block and transfer” to shut down the old card and establish a new account number, card and PIN.

Carefully review your next billing statement and report any fraudulent charges to your bank immediately, in writing. It is a good idea to take notes indicating the person you spoke to at your bank and the times/dates you first reported your card lost or stolen. It is also smart to go ahead and write down the last time and date you remember using your card, along with a short description of the merchandise purchased and total amount. When your statement arrives this will make it much easier to identify which purchases belong to you, and which ones were used by an unauthorized user. If you do identify charges not belonging to you contact your bank immediately and ask to speak to the [tag]fraud[/tag] victim division. They will provide instructions for disputing the charges, and advise whether or not a police report and affidavit is required. Be sure to follow up in writing. Federal regulations require a written letter from the customer to initiate the dispute process, even if you notify the bank via telephone. Send the letter “return receipt requested” so you have a record of when the bank received your notification.

If required, follow through with a police report (call the non-emergency phone number listed for your local jurisdiction) and provide the bank with a copy. If a suspect is identified you may be asked to sign an affidavit of forgery indicating you were a victim of financial fraud. Do not be intimidated, even if you know the person who used your card. Most credit card fraud is categorized as “[tag]friendly fraud[/tag],” meaning the victim knew the perpetrator. Doesn’t matter. The responsible party has committed fraud, and needs to either suffer the consequences or pay restitution to the bank.

My story had a happy ending. Turns out I slipped my debit card in my shirt pocket after checking out at the grocery store. I guess I was distracted by my son who was throwing handfuls of candy and gum on the clerk’s conveyor belt…how “unfrugal” of him!

LifeLock Identity Theft Prevention – Save 10%

This is the fifth article in Frugal Dad’s week-long series, The 7-Day Turnaround: One Week to Change Your Family’s Financial Destiny. Each day brings a new step to implement and help you get control of your finances.

Now that you have moved beyond the half-way point in your 7-day turnaround, it’s probably a good time to look back and see what all you have accomplished. After taking an inventory of your finances you established a three-month emergency fund to break the cycle of relying on credit cards. In step three we cut up those credit cards, saving one no-fee, low-interest card for emergencies only. Slashing your monthly, non-utility expenses was a major emphasis in step four, requiring you to think long and hard about trading your hard-earned income for things like gym memberships and cable service. By now you are debt free with a solid emergency fund – it’s time to start saving for your [tag]retirement[/tag].

The first step in planning for your retirement is coming up with your Number. Everbody has a Number, but few of use know what it is. Your Number is the amount of money that will grant you the level of financial independence that allows you to quit working for money. The Number, by Lee Eisenberg, offers many strategies for calculating your Number. It isn’t good enough to say, “I’ll retire when I have a million dollars in the bank.” Determining your Number takes actual planning, determining how much working capital you will need to live off of your [tag]investments[/tag], and estimating your expenses in your golden years.

Take advantage of matching funds from employer retirement plans. Most employers offer full time, professional employees the opportunity to invest in an employer-sponsored [tag]401k plan[/tag] (or 403b, if you work for a non-profit or educational institution). Many companies even offer to match employee contributions up to a certain percentage of the employee’s income. This is like free money. Get your retirement savings started by enrolling in the plan and contributing up to the percentage of income the company matches. Don’t worry if it is only 3% of your income, we’ll use your remaining earnings to save in a different savings vehicle.

A Roth IRA is the best retirement savings vehicle around. Some experts argue over whether or not to fully fund a 401k or a [tag]Roth IRA[/tag]. For me, the argument for Roth IRAs is explained beautiful in the following analogy.

Would you rather pay taxes on the seed or the crop?

In other words, would you rather pay taxes on your income now, when it is smaller, or later when you are a millionaire (and you will be if you stick to this plan!). Easy choice. I would rather pay [tag]taxes[/tag] on money now, and invest in a Roth IRA with after-tax dollars. When you withdraw that money in retirement Uncle Sam will let you keep 100% of the contributions and earnings, tax free! Conversely, 401k balances grow tax-deferred, which means you will save a little now diverting pre-tax income to your 401k plan, but you will have to pay more when making large withdrawals in retirement. Remember, the key to any good financial plan is to keep a long-term view. Sacrifice the reduced tax liability now offered by the 401k for a tax free payoff from the Roth IRA years down the road.

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This is the fourth article in Frugal Dad’s week-long series, The 7-Day Turnaround: One Week to Change Your Family’s Financial Destiny. Each day brings a new step to implement and help you get control of your finances.

At this step in your 7-Day Turnaround it is time to take a serious look at your [tag]expenses[/tag]. To make a dent in debts, or boost your savings, you have to free up some income by either earning more, spending less or some combination of the two. Begin this process with a review of your monthly, non-utility expenses.

Gym memberships are usually the first to go. At $40-$50 a month for the average membership you are giving $500-$600 away that could be spent building your Roth IRA balance, or paying down your credit card debts. Buy a good pair of tennis shoes and some used dumbbells to simulate your gym experience at home.

Consider canceling the cable. The mere thought of living without television strikes fear into most people’s hearts. Fact is, television programming today is filled with mindless reality shows and silly sitcom scripts that are far from educational. Spend your time away from work participating in things that enrich your life, not wasting it. Read a [tag]personal finance book[/tag], or a book on [tag]personal development[/tag]. Grab those new running shoes and take your kids on a walk. Take up a new hobby. Volunteer your time for a cause you believe in. All of these things will enrich your life, both personally and professionally. Knowing the last five winners of American Idol, or who got voted off the island will do little to further your career or your important relationships.

Adjust your W-4. Stop giving Uncle Sam an interest-free loan every year with biweekly contributions from your paycheck. Visit the IRS website, or Paycheck City, and estimate this year’s tax liability. Adjust your withholdings accordingly. Many taxpayers use the payroll tax system as a forced savings account and rely on their tax returns to plan for major purchases. If you depend on the federal government to save for your annual vacations you have a much bigger problem than credit cards.

Brown bag it. There is never a shortage of broke people out on their lunch breaks waiting for a table at their favorite restaurant. The average lunch combo runs $7-$8 with drinks and a tip. That could push your “eating out” budget to $40 a week, or roughly $150 a month. A simple switch to bringing you lunch to work could save you enough to make an extra car payment, or start a 529 college savings plan for your child. Plan to take soups, sandwiches and dinner leftovers for one month and monitor your food budget. Chances are it will shrink significantly, and so will your waistline.

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