Monthly Archives: September 2009

Stop Feeling Sorry For Me – I’m Frugal, Not Broke

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The other day I had problems with the old van I drive to and from work. A friend saw me struggling to get it started in my employer’s parking lot, and the next day said, “Man, I felt bad watching try to get the old van running. When do you think you’ll be able to buy a nicer car?”

That afternoon, while standing outside waiting on a ride home, and feeling a tad bit sorry for myself, it occurred to me that living frugal often gives people the wrong perception of your financial health. When others see you making frugal choices, they automatically assume you are doing it because you have to, not because you want to. Sure, I could go out and sign the next five years away with a new car loan, but I choose not to.

Over the last year or two there has been a growing trend towards frugality, and many people in the media are anxious to see if it lasts. Unfortunately, I don’t think it will, for one main reason.

Most Americans, myself included for far too much of my life, are overly concerned with what other people think of them. I mentioned the ability to ignore what others think of us briefly earlier this week, as part of my seven steps to financial independence, and Neal mentioned comparing ourselves to others in yesterday’s guest post. Living a frugal lifestyle means living within our means – our means, not within a fairytale lifestyle depicted in the media as the norm.

As we go through our day making little sacrifices here and there, voluntarily passing on opportunities to spend a lot of money, people not living a frugal lifestyle will naturally assume we can’t afford to keep up with them. That’s fine; you can’t control their thoughts and assumptions.

The fact is, most frugal people are in much better financial positions than those feeling sorry for them. The classic example is Sam Walton, who right up until his death drove an old pickup truck around Bentonville, Arkansas. Those who didn’t recognize him probably thought he was just an average guy not able to afford a “nicer car.” We know he could have easily carved $60,000 out of his billions for a shiny new Mercedes, but he didn’t need one. His old truck suited him just fine.

Unfortunately, most of us don’t think that way. So the thought of living frugal frightens many egos out there into thinking they may not appear as successful, or wealthy, if they shop at thrift stores, drive old cars, cut their own hair, clip coupons, and make their own homemade laundry detergent.

Just remember my take on a line from Dave Ramsey:  If people are laughing at you, or feeling sorry for you, you are probably doing something right when it comes to your financial plan.

How To Not Suck At Everything

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The following guest post is from Neal Frankle of Wealth Pilgrim. Wealth Pilgrim is on my short list of daily reads. After reading the post, head over to Neal’s site and sign up to receive his posts.

You probably don’t suck at anything….but your mind tells you that you do.

I just finished reading Adam Baker’s great post on How To Not Suck at Blogging.  Besides being a great read, it inspired me.

Just as Adam laid down some rules any blogger can use to “not suck” at blogging, I believe there are certain tools you can use to have a “suck free” experience while you are here on this planet – even if you aren’t a blogger.

The first and most important rule is this:

1.  You Only Suck If You Tell Yourself You Suck

Be honest.  Besides your teenage kids, when is the last time anyone said to you, “You suck”?   Unless you are still in high school or are a full-time Hells Angel, my guess is, it’s been a very long time.

In fact, I’ll bet the last person who told you this…was you.  Am I right?

For some terrible reason we are very proficient at treating ourselves worse than our worst enemy would – if we had an enemy (which we probably don’t).

I don’t know where this comes from and I don’t give a damn anymore.  I am officially declaring war on attacking anyone from here on…so Neal won’t be attacking Neal anymore.

Your Solution:

If you find yourself attacking yourself with negative crap talk, write down 5 reasons why you love yourself and then call somebody and tell them.  Be brave.  I know this is a hard thing to do but I will absolutely guarantee that the negative thoughts will stop if you take this action.

2. Stop Comparing Yourself to Anyone

My dad always told me that the only thing that really matters in life is trying your hardest.  If you do that, you are successful.

This makes sense.  If I’ve tried my hardest, what more can I do?

So why is it that I compare myself to others despite already having put in my best efforts?  I’m sick of it.  I’m declaring war on that too.

By any objective measurement, there is no part of my life that sucks.

  • I have the family that I literally dreamed of having when I was a kid.
  • I have a fine business that serves great people and provides for my family.
  • I have time to write my blog and I’ve received some nice responses to what I write.
  • I am healthy.
  • I get to play music with some very cool people.

What sucks about that?  Nothing.

Yet I’ve barraged myself with negative self-talk for years on almost all the blessings I have.  And of course the easiest way to hurt myself is to compare myself to others.

Let me give you a few examples;

When I compare myself to other business owners, I ask myself why I’m not doing as well as some other friends in my industry.  Rather than be grateful for still having a profitable business, I find a way to put myself down by comparing myself to others.

In terms of my body, I’m not obese but I’d like to lose about 20 pounds.  Rather than be thankful for the problems I have, I compare myself to the Brad Pitts of the world and lament my bad fortune.

Music. I am not an accomplished musician but I play well and get to play with some great musicians.  They keep calling me back so I must be doing something right.  Yet when I listen to the radio and hear kids half my age doing things on the drums that I can’t even understand, I tell myself that I have no talent.  Why?    In college, I even stopped playing for 10 years because when I got there, I met players who were so much better than I was.  What a shame and waste.

Am I the only person who does this?  Nope.

I’ll never forget the time I spent an hour with a super rich and successful buddy of mine. Believe it or not, this cat makes over $1 million a month!  Do you think he’s happy about it?

He isn’t.  He told me how much money his buddies from law school make and was feeling sorry for himself.

REALLY? 

REALLY?

Your Solution:

You’re making it all about you…and it’s not.

You’re spending too much time in your head and it’s getting boring.  Here’s an idea – do something for somebody else. Don’t wait to “want “ to be of service…..just do something despite how you feel about it.  This can be as involved or as simple as you want.

Here are a few quick ideas you can do right now:

  • Go read a book to your kid.
  • Go take a walk around your neighborhood and pick up trash.
  • Ask your spouse if he’d like a back rub (are you reading this honey?)

3. Create Humility

One of my favorite people in the world explained that humility means being on the same level with everyone.  Not better. Not worse.  The same.  If you tell yourself you suck at something that implies that someone else is better at it (which may be true) and therefore better than you (which is certainly not true). 

So let someone – or everyone be better than you are at some activity.  Just because someone else does something better than you, it doesn’t mean you suck.  Who cares?  Why let that mean anything?  Understand that the only person who gives that fact any credibility at all is you.  Stop it.  Right now.

Your Solution

My experience tells me that the solution for lack of humility is spiritual in nature.  It’s asking for help from a higher power.  However, I believe there are practical things you can do to solve this as well.

When you lack humility, you lack self esteem.  Do estimable acts.  Things that prove to yourself that you aren’t worthless.  You might have years and years of practice telling yourself what a piece of crap you are so this is going to take work.

But believe me, if you do estimable acts over a long enough time, sooner or later, the evidence is going to pile up and you’ll have more self-esteem.  You won’t be looking around for evidence to support that notion that you suck because you’ll know that you don’t.

4.  Get a New Currency In Your Life

We measure our success in life by how thin we are, how many readers we have for our blog, how big our house or apartment is (or isn’t), how much money we have, how much we travel etc. 

It’s very “me” based and it turns “me” off.

It’s a system designed to perpetuate misery.  There will always be someone who is smarter, better or faster.  Always.

When I was in junior high school, I remember reading about a tribe in Africa that measured their wealth by what they gave away rather than by what they had.  This story had a huge impact on me.

What if all our running around trying to have “more” is wrong?  What if it doesn’t mean anything.  I can tell you from working with people and money for the last 25 years, nobody has ever said that their greatest achievements in life had anything to do with money. Nobody.

What if our true wealth is derived from how much we try to help others?  Close your eyes and imagine that for just a minute.

When you do…it’s really hard to have the “I suck” conversation with yourself….isn’t it?

5. Bonus Solution – Laugh at Yourself

I hate to tell you this but in less than 100 years, you and I will be dust. 

Let’s enjoy the time we have.  Even if we are a klutz or not great at volleyball, who cares?  So what if you aren’t Angelina or Brad?  Who cares if you aren’t Bill Gates or Madam Currie?  It sure won’t matter in 100 years.  It probably won’t matter in 100 days.  Actually, it probably doesn’t matter now.

As long as you try your hardest, you can’t possibly suck at anything.  You may not do something as well as others, but that doesn’t mean you can’t be proud of yourself for your best efforts.  Believe me, I’d rather be around a person who tries her very hardest with modest results than a person who doesn’t put any effort in and seems to have everything flow his way.  Wouldn’t you?

Seven Secrets to Financial Independence

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One could probably build a small library for the books written on the subject of financial independence. It’s a subject many of us like to fantasize about, but few of us will see materialize in our lifetimes. Why? Mostly because we allow competing priorities, egos and financial peer pressure dictate how we spend, and save, our money.

The good news is you don’t really need a book to learn about financial independence (though, if you do decide to read more on the subject, I highly recommend Your Money or Your Life). All you need to do is remember the seven secrets below.

Secrets to Financial Independence

1. Pay off debt. Yes, even the mortgage. I can hear the mathematicians screaming now – “PAY OFF YOUR MORTGAGE?” What about the tax deduction? What about all-time low interest rates. I don’t care about either one. To reach financial independence I’m all about reducing monthly expenses. A mortgage represents the highest monthly expense in most family budgets, and ours is no exception. Knock out credit card debt, car debt, student loans and the mortgage and you’ll owe a monthly payment to no one, which puts you on the fast-track to financial independence.

2. Quit buying crap. And while you’re at it, quit signing up for crap. The other day I sat down to try to tally our monthly expenses. Seems simple enough, doesn’t it? Problem is I kept forgetting little expenses we’ve signed up for. Oops, there’s the Netflix charge; then the gym membership fee. The other day the TiVo bill hit. I enjoy all three of these examples immensely, but altogether they represent about $50 a month. Talk about being nickel and dimed! Of course, there are other things I’m forgetting to list here. You can see how challenging it is to come up with a total monthly outgo figure these days!

3. Forget about trying to impress people. Do you have any idea how much money is wasted in a lifetime trying to impress other people? Just think of the things we buy, and the options we choose, for show rather than for practicality. Flashy cars, big houses and expensive jewelry matter little to those working towards financial independence, because we recognize you’ll be paying for that stuff long after we hang up the employee badge.

4. Make savings a top priority. If I had a financial do-over, I’d start saving half of my income from the very first day I started working. I can think of no faster way to accumulate wealth, build financial discipline, and expand your creatively frugal way of thinking to make things work on a meager income. Trouble is, very few of us ever thought to do this, so right out of the gate we needed more like 90% of our income just to pay for all the goodies we accumulated. To make it happen, talk to your payroll office and elect to have 50% of your paycheck deposited in an online savings account (I’ve reviewed a few of the best online banks in the past), separate from your primary checking account. Now, live on what’s left. Every year you pull this off you are essentially buying (saving) a year of freedom from earning an income.

5. Be aggressive early on. I’m a conservative person by nature. I don’t like to take big risks – with money, or life in general. But if I could talk to my 20 year-old self now I’d tell him to live a little. Invest a little money (10% of your portfolio or less) in that stock you just know in your gut will be a winner, because you know the quality of the people in management, or you believe in their product. Don’t be afraid to invest in that “aggressive” portfolio in your twenties, and early thirties. You’ve got time for ups and downs. You’ll win some, and you’ll lose some, but at least you won’t have any regrets.

6. Be conservative as you near financial independence. As passionate as I am about taking risks when you are still young, I am equally passionate about being conservative in the last few years leading up to reaching your “number.” That’s the time to start dumping the risky stuff, and start gearing down into low-risk investments. Some of your nest egg should be in cash, a little in bonds, or if you like simplicity, maybe something like a LifeStrategy Income Fund that takes the thinking (and emotions) out of investing your nest egg, or at least a portion of it. Be sure to check recent returns on such funds, as many billed as “conservative” lost their shirts in the recent downturn. At this point in your journey to financial independence you should be fairly immune to market swings, and more concerned with protecting the principal you’ve worked to accumulate.

7. Determine your own “number.” Speaking of your “number,” don’t let some financial egghead across a desk look down his nose and tell you that you need exactly $1.4 million to “maintain your style of living in retirement.” Garbage. Most of these guys immediately follow this with a sales pitch for an annuity, or a scare tactic about clients living to 90 years-old and running out of money. If you are dedicated to living frugal, paid off all your debts (see step 1), and built a comfortable nest egg based on your individual needs, you should be just fine.

Financial independence doesn’t have to be a mythical place we only visit in our day dreams. There are enough people out there living it, writing about it, and experiencing the joys of being free from the requirement to earn an income to survive. Learn from them. Model your behaviors after them. But be careful who you follow.

As author Thomas Stanley proved in his book, The Millionaire Next Door, most self-made millionaires look a lot different than the Paris Hiltons of the world. They probably drive a two year-old car (or older), shop where you shop, and live in a modest home. They don’t wear flashy jewelry, have a string of letters after their name earned from a decade of schooling in the Ivy League, and their idea of a fun family vacation probably looks like a week-long trip Disney World, not Paris or the Mediterranean.

The real secret to financial independence is to start living your life with that goal at the forefront of all your financial decisions. The longer you put it off, the worse your chances of ever succeeding will be. But for those who start early, and stay passionate about their dream, the payoff at the end is one of the more freeing experiences we can ever enjoy.

Medical Expenses A Common Cause Of Bankruptcy

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The following guest post was submitted by Kevin, web content writer for Resqdebt.com. For more helpful tips on how to save money and stay out of debt, visit Resqdebt’s website at www.resqdebt.com.

When Americans think of a person trapped in enormous amounts of debt, inevitably they think of irresponsibility. They think of fast cars and fancy stereo equipment. They think of people living the high life who could not afford it. In short, they think of a deadbeat. If statistics are any real measure, this impression could merit a change – and a touch of sympathy.

Far from financial irresponsibility, medical expenses are among the most frequent causes of families falling into debt and eventually filing for bankruptcy. The precise percentage of medical bankruptcies is in dispute. However, it is generally acknowledged to be a significant number.

Estimates for the number of “medical bankruptcies” have a wide range. A Northwestern University researcher has placed the figure at 17 percent of all bankruptcies. A group of Harvard researchers have recently increased their estimate to more than 50 percent. According to a Federal Reserve report, households with high medical debt are 28 times as likely to file for bankruptcy as other households.  Most recently, an August report from the UCLA Center for Health Policy Research estimated that one in seven Californians carries some form of medical debt.  With the nation gripped in a discussion about public financing of medical care, the number of medical bankruptcies has become a topic of note.

Medical bankruptcy can arise in several ways. The most common and obvious is the medical bill charged to the ill patient. When the patient personally suffers a chronic disease, deals with a condition that requires expensive treatment, or must pay for pricey medication, then it can be easy to run up thousands of dollars in costs. Health insurance can help, but sometimes is not enough. However, there are other ways that medical expenses can drive a person or family into debt.

Many times the medical benefit is not for medical procedures performed on the person himself. They stem from helping to finance the medical care of a loved one. Sometimes this means caring for an elderly father or mother. Sometimes, tragically, this means caring for a sick child.

Also, some researchers describe “hidden costs” of medical bankruptcy. Often, these expenses consist of medical expenses placed on credit cards or paid on credit in some other way. This is an unwise thing to do. Once the expenses are placed onto the credit card, they become a target for interest and fees.

While medical expenses drive many people to bankruptcy, that is not the only option for handling overwhelming medical debt. Other options exist that can help a debtor take care of their debt before reaching that point. Among these methods are credit counseling, debt consolidation, and debt settlement.  Each method can help debtors resolve debt and rebuild their financial health.

“Medical expenses are a common reason that people come to us,” said Heath Tudor, community liaison for Resqdebt, a debt settlement provider in Allen, Texas. “The unfortunate thing is that it randomly strikes good people.  The fortunate thing is that it gives us the opportunity to help good people.”

In need of health insurance? Get a free quote at eHealthInsurance.com.

What Does Money Mean to You?

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This is a guest article by Ray, the owner and primary author of Financial Highway, where he discusses investing, saving and practical money management concepts. You can check subscribe to his RSS feed or follow him on Twitter.

Money plays an important role in all our lives; the fact that you are on this finance blog reading an article on money illustrates that money is an important topic to you. Earlier I discussed the importance of money and asked if money is the means to an end or an end in itself for you, the responses were interesting to say the least. Although majority of readers said it’s a means to an end, their “reasoning” varied widely. Today’s question is what does money mean to you?

Meaning of Money to You

We are often so consumed by earning money that we forget to take a minute and think about what it means to us; how do we feel about money and how does it effect our lives. For some money is just a necessity, they need/want just enough money to meet life’s basics needs. To other’s money means freedom and independence. Take a minute and think about what money means to you.

What feelings does the thought of money bring up? Is it worry, joy, freedom, anger, power…?

Do you give a percentage of your income to a charity? Do you share your wealth or do you control other’s with money?

For me the meaning of money has changed over time, when I was very young my parents were well off and I enjoyed more luxuries than most of my friends, but my parents fought constantly over money. As I grew older my parents lost all their wealth and I spent my teens being fairly poor compared to my friends while my parents continued to fight over money and eventually divorced each other. At this stage I developed an extreme hate for money, the thought of money would make me angry. As I grew older and started to earn some money, the meaning of money changed for me. Now money is a tool for me, it’s a tool to accomplish things and get what I need/want. Does it mean freedom to me? No it does not and I do not understand those who say money means freedom to them, if your freedom is dependent on money how free are you really? Aren’t you enslaved to money and money is your master? What will happen when you lose your money?

Although the meaning of money to me has changed over time, it has not become a symbol for freedom or independence.  What is the meaning of money to you? Has it changed over time?