Monthly Archives: June 2010

The Things Money Can’t Buy, and a Few Things It Can

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“Can’t buy me love.” Who hasn’t heard that before? But there are plenty of things money can’t buy, and even a few things money can “buy.” First, let’s get the negatives out of the way and look at the things money can’t buy.

String of Hearts by aussiegal on Flickr

Money Can’t Buy…

Love. At least not true love. True love is not for sale, not for any price. It is the deepest of human connections and is invaluable. However, money can be an instrument to show your love for another. You can give money freely to those in need, without expectation of repayment. You can use money to provide shelter for those you love. But if you think you can flash cash and stuff money can buy to find love, you will live a lonely life.

Happiness. Back when I was broke, I made a connection between my emotions and my spending pattern. I was an emotional shopper. When I was sad, I bought something. When I was happy, I bought something. Hey, at least I was consistent!

Spending money in an effort to influence our own emotions just doesn’t work because dollar bills are just band-aids. We have to identify the real reasons we are sad and do what we can, within our power, to turn those emotions around. Buying video games does not work. I can tell you from experience.

Contentment. All the money in the world isn’t enough to satisfy an insatiable appetite for stuff. Have you ever seen those lottery winner documentaries on television? You know, the ones where the auto mechanic wins the lottery and all he ever wanted was to own his own home. So he buys a home…a huge one, and suddenly has an urge to fill that home with 18th century gold statues and other seemingly ridiculous collections.

On the other hand, if we are content, no amount of money can influence our spending. If we are happy with our current home, why buy a new one? Never been interested in expensive jewlery? Why start hoarding it after a big windfall?

Respect. I have no more respect for the guy driving a Mercedes than the guy driving an old station wagon. In fact, because I’m wired the way I am, I have more respect for the guy driving that station wagon. This reminds me of a story about my old doctor in the town I used to live in. He had a large practice and I assumed he made very good money (and I’m sure he did). I already respected the guy, but one day my wife and I saw him and his family out and about. They were driving a late model family station wagon–I think it was a Ford.

Then I began to notice he wore the same clothes I did, shopped at the same stores I did, and basically looked nothing like most doctors I knew. He lived in a modest home, mowed his own grass, changed his own oil, and basically lived a frugal lifestyle. I later learned that he spent his money on travel – doing medical mission work. I sure miss that guy!

Money Can Buy…

Options. I spent the better part of my 20s in a dead-end job. Why? Well, for a lot of reasons. My wife and I married young, had our first child young, and because I wasted a good bit of time in college the first go around, I had little in the way of education or professional experience. When I did land a decent-paying job, I certainly had to hang on to it. After all, I was a husband and father, and owner of a small pile of debt from school and years of frivolous spending in those newlywed years.

Being debt free, and having a solid emergency fund, means you have options. I like to say that my BS-tolerance has gone way down since becoming debt free. If I find a job absolutely untenable, I can find a new one. If we decide we don’t like the town we live in, we can move. I would have loved to have the same freedom ten years ago.

Peace. It’s been said that there is no softer pillow in the world than having money in the bank. When we were deep in debt, I counted credit card payments instead of sheep. I literally stayed awake at night poring over Excel spreadsheets listing our debts, projecting when we may get out of debt, and imagining what like must feel like without payments.

Now, I can rest easy, knowing we no longer have credit card debt. Knowing we can tackle a small-to-medium emergency without skipping a beat. Knowing we are saving for our future, and for our children. To borrow a line from my old credit card pals, that my friends, is priceless.

*This article was featured in the Carnival of Money Stories: Independence Day Edition hosted by Out of Debt Again

Raising a Frugal Dad: An Open Letter to My Son

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Dear Son,

Every year, when Father’s Day rolls around, the media floods the airwaves with statistics reminding us how many bad dads are out there. From deadbeats who don’t support their children, and their children’s mother, to males who abuse the same (son, these are “males,” they do not deserve to be called men).

Unfortunately, too many good examples of great dads go unreported. The truth is, this land is full of hard-working men providing for their families. An even greater set of men (and women) serve this great country by willingly signing up to defend it and its allies around the world. Your great grandfather is one such man, and many of the lessons I’ll share today I learned from him.

A Legacy of Frugal Dads

Your great grandfather, Papa, as you know him, was born in 1925. Most of his formative years were spent in the rural south during the Great Depression. One of nine kids, his mom and dad struggled mightily to keep food in their kids’ bellies and shoes on their feet. In fact, most summers (and occasionally into the winter) they went without shoes.

Your Papa’s father was a carpenter, as was his older brother – a darn good one, too. The three of them had the opportunity to work together when Papa got older, but before that, Papa earned money for his family selling newspapers and magazines, stuffing bags of meal and flour in a mill, and a variety of other odd jobs. He might have kept a dime or two out for himself each week, but everything else went to his family.

These were hard times son. Harder than any of us can imagine. Few of us have known such despair, and I hope you never will. As a parent, your greatest fear is losing the ability to provide basic needs for your children. You’ll understand this as you grow older and one day have a family of your own.

As soon as he was old enough, Papa signed up for the Navy, and quickly joined the Marines as a fighter pilot. He served in Korea and Vietnam, flying both jets and helicopters, and did long tours in the Mediterranean, Japan, and other spots around the world. This meant he had to leave behind his wife and kids for long periods of time, which to him, was tougher than the duty he was sent off to do. He served 29 years in the Marines, and retired in his late forties.

Despite a tug to continue lucrative work in the private sector, he left the D.C. area and returned home to care for family members, an obligation he continued for nearly 40 years. At 84, you may have noticed it is now he who needs a little help from time to time, and your dad is happy to lend a hand. After all, it was an example set for me at an early age.

Being a Dad Worth Looking Up To

Once upon a time, dads were looked up to as an iconic figure – Dad could fix anything, he knew everything, and he always knew what was best. Over the years, for a variety of reasons, this respect for fathers has waned. I blame some of it on a few bad examples, but most of it on the media. As I mentioned in the beginning, the media loves to remind us of the bad examples, and rarely focuses the spotlight on the good ones. And believe me son, there are plenty of good ones out there. Here are two of my favorites.

“Dad, when we run it feels like my disability disappears.” – Rick Hoyt

Dick Hoyt, former military man and father to a disabled son, heard these words from his son as he towed him around on his bike, boat, and carried him during runs. And that was all he needed to hear. He and Rick participated in training runs, bikes and swims and competed in triathlons all over the country. Dick Hoyt raised his son Rick to be a productive, independent young man with his own career, despite physical challenges unimaginable to you and me.

Follow this link if you are unable to view video

Jim Redmon, father of track star Derek Redmon, didn’t just sit around and watch his son leave his race unfinished in the 1992 Olympics in Barcelona. He quickly made his way to the track to help his son, stricken with a torn hamstring, limp to the finish line in tears. Derek didn’t win that race. In fact, I don’t even remember who won it. What I do remember is the example of this dad being there for his son to lean on. To share in his agony, and provide a steady shoulder to help him through to the finish line – even chasing away track officials trying to stop them.

Follow this link if you are unable to view video

Those were two high-profile examples of great dads, but there are millions of other dads anonymously going throughout their days with family as the number one priority. They are working a night shift to save enough to send their kids to college, or help get their family out of debt.

Maybe money isn’t a problem, but to earn that money they have to stay in a job they don’t particularly like, or work for someone that treats them like dirt.

When they were younger, they dreamed of another career, but for now are content holding onto the job they have to help their children achieve their dreams.

They are raising their children alone after an illness or an accident claimed their spouse.

They are supporting their kids even though things didn’t work out with their kids’ mom.

Maybe they don’t have a job at all right now, and are living 24 hours a day in worry over their family’s well being. They are pounding the pavement looking for another job, or working part-time, or donating plasma, or doing whatever they can to make ends meet. You see son, a real man swallows his pride, and does what he has to do for his family.

Becoming a Frugal Dad

My son, there are so many things left for me to teach you about the real world. Much more than I could write in a single letter. But above all else, remember that no one owes you a thing. You are responsible for taking care of yourself, and one day, your own family.

You will be tested, by our culture, by our government, by bad examples, and by a lazy streak that attempts to attach itself to all of us at some point in our lives. You must ignore these influences, and remember that your goal is to grow to be as self-reliant as possible.

Here’s a few things to keep in mind as you grow older:

  • Do not depend on government for your well-being. In an emergency, don’t be too proud to accept help, but do not make it a way of life.
  • Do not depend on banks for financial security. The best credit line available is the one attached to your emergency savings fund. Remember, the borrower is slave to the lender, and you don’t want to be a slave to big banks. Take my word for it!
  • Do not depend on schools to provide 100% of your education. You must self-educate beyond the lessons taught in school. Challenge your educators, and challenge your own thoughts. Read books. Read books contrary to your own opinion, so that you may learn another point of view. Read books on subjects you don’t think you care about and you just may discover your passion.
  • There’s no such thing as get rich quick. Building wealth takes time, and a lot of hard work. If you want to be successful in anything, you must work at it for hours every day – sometimes late into the night, and early in the morning. If you are happy with mediocrity, punch the clock after 8 hours, plop down in front of a television and waste valuable time until you fall asleep. Repeat this process until the weekends when you can do even more of the same.
  • Be skeptical. Don’t believe anything you read, most things you hear, and even a few things you see with your own eyes. Question everything. Nothing in life is black and white.
  • Choose your spouse carefully – it is the most important decision you will ever make. Love has a way of robbing us of our intellect, and in many cases leads to irrational decisions based solely on emotions. Choosing someone to spend the rest of your life with is far too important for that. Look for someone that shares your hopes and dreams. Someone who is ambitious, but not too much. Someone who has the same values and beliefs as you do. Like you’ve heard your dad say before, opposites do attract, but they rarely stay together forever.

Love,

Dad

*This post was selected as an Editor’s Pick in the Carnival of Personal Finance #262: 80s TV Edition, hosted by Personal Finance Journey

Weekly Roundup – Summer Job Edition

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A few teenagers out there might have landed summer jobs and by now are full swing into part time employment. It’s a great time to introduce a few money concepts to teens. Help them open a checking and savings account. Introduce them to payroll taxes (always fun learning you don’t actually get to keep your hourly wage times all those hours). Encourage teens to set some long-term savings goals with their summer earnings.

Parents can also encourage teens to file a tax return and contribute the amount of their teen’s earned income (up to $5,000) in a Roth IRA in their name. Can you imagine dumping a couple thousand into a Roth IRA when you’re 16? Talk about getting a jump on becoming a millionaire!

The Frugal Roundup

Restaurants Where Kids Eat Free. Here is a great list of places to take the kiddos for free food. (@Generation X Finance)

How To Avoid The Personal Development Plateau. This article specifically talks about blogging but it can be translated into any part of personal development. (@Marc and Angel)

The Dead End of Home Ownership. Steve takes on the age old question about home ownership. He makes some great points which everyone should check out. (@brip blap)

How to Negotiate For a Used Car. Surprisingly, I know plenty of men who let their wife do all the talking at car dealerships! (@The Art of Manliness)

Best of the Rest

How to Prepare Your House for a Baby

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The following guest post is from Amber Hunt. Amber is an experienced personal finance writer with a knack for taking complex money issues and making them clear and simple.  By day, she’s a home loan expert at Quicken Loans, America’s #1 online lender, where she specializes in writing about mortgages and helping people refinance.

Congratulations!  You’re having a baby!  There are probably a million things racing through your mind as you prepare to embark on this huge next step in your life.  If you have started to search the internet for advice and tips you know that there are plenty of lists out there that tell you all of the things you should buy to prepare for the arrival of your bundle of joy.  But how should you prepare your living space?

Corner, Southeast by timsamoff on Flickr

Here are some important things to think about when you are preparing to add a human addition to your household.

  • Nursery – Measure the room to make sure your purchases and gifts will fit.  If you are painting, look for environmentally safe paint.  Non-VOC (volatile organic compound) paint will reduce exposure to fumes that cause headaches, nausea and respiratory problems.  Be sure to check if the tint is also VOC-free, as many tints are not.
  • Water – In general, local drinking water is safe.  The Environmental Protection Agency (EPA) regulates the public municipal water supply and tests the water frequently, often daily.  However the USEPA does not directly regulate private wells and the safety of tap water depends on the condition of plumbing in the home.  Before you put tap water in your baby’s bottle, make sure you are fully informed about the current water quality in your municipality.
  • Electricity – If you’ve noticed lights or appliances not working but have put off checking out the electrical system in your home, don’t put it off any longer.  If you know what you’re doing, turn off the power and test the electrical wiring. You can also call a professional and have them check things out.  Buy special plugs for electrical outlets and do not draw attention to outlets with decorative covers or nightlights.
  • Stairs – Stairs can cause many injuries, for all ages and sizes.  In addition to using baby gates, ensure carpeting on stairs is secure and that a handrail is attached securely to the wall or floor on all staircases.

Now that you know what to do to prepare your home you can focus on all the other things that will be occupying your time (and wallet) for the next 18 years.  If you’re interested in leveraging your home to ease the financial impact of having a baby, consider a home refinance.

If you’re looking to get cash from your home to help pay for your newfound baby expenses you may want to talk to a Home Loan Expert and use a mortgage calculator to see how much you can save.

Your life is undoubtedly going to soon change, and all the planning in the world cannot prepare you for the best experience of your life!  However, planning does help ease your anxiety, relieve stress and can make the journey more rewarding.  Taking time to manage the little things before the baby arrives can take some weight off your shoulders when that time comes.

Note from Frugal Dad: Funny how having a baby makes us more aware of safety issues in our home. While we may be willing to live with outdated electrical systems, or a little mold found after buying a fixer-upper, having a baby suddenly makes those issues more pressing. A word of caution here: you can go nuts, financially, trying to prepare your house for a baby. Make things safe and sound, but remain practical.

Starting a Household Ledger – With Pen and Paper

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My wife and I recently stumbled across a brilliant idea, and have decided to adopt it July 1st. And what better time? Many businesses close the books on their fiscal year June 30th, and July 1st begins a new fiscal period. That’s the approach we are taking in our house as well. So what’s the big idea? We plan to write down all income and expenses in a ledger book…with a pen.

That’s right; every single transaction, from the monthly electrical bill to the Sunday afternoon run for an ice cream cone, everything goes down in writing. We got the idea from fellow blog reader, and frequent Frugal Dad commenter, Mrs. White, who blogs at The Legacy of Home.

Creditor's Ledger, Holmes McDougall by edinburghcityofprint

*Our ledger is a little smaller than this one, but what can I say, this one looks more impressive!

Why A Household Ledger Account?

Here lately, we’ve recognized that we are a little detached from our household spending. We have all utilities and recurring bills going directly to our credit card. Occasionally, we use the credit card for other types of spending if we are low on “walking around money” – my description of cash.

This makes things pretty convenient. We get one credit card bill at the end of the month and pay it off. The problem is, we rarely know exactly what that bill represents. I’m not prepared to go to an all-cash basis because to be quite honest, it is a bit of a headache scheduling all the various household bills (electric, water, cable, etc, etc) online and/or writing checks.

However, we will begin recording all of our household transactions in a ledger, with my wife taking the lead on reconciling the household ledger book.

Where Did this Idea Come From?

Household ledgers are very old-fashioned, which is why I like them so much. It’s my opinion that the further we get away from common-sense financial practices (in other words, the more “sophisticated” we become), the more financial problems we have as a society.

We’ve discussed before the transactional pain associated with spending cash, something very few of us do these days thanks to online payments, and credit and debit cards. Before these tools were invented, people had to fork over cash, and it hurt. Imagine the difference in swiping a credit card for a $99 bill and handing over five 20-dollar bills and receiving a single one-dollar bill back. That latter transaction stings, and it should.

I’ve seen various examples of a household ledger account, but it seems the original use can be traced back to Puritan households, such as the one of Jonathan and Sarah Edwards. Jonathan Edwards was a Puritan minister whose wife kept meticulous records of their household spending in her ledger. In those times, the husband earned the wages, and the prudent housewife recorded all the money that came in, and all the money that went out.

Sure, it’s a bit old-fashioned, and these days I encourage couples to work together to reconcile their finances, but the concept itself is inspiring. My wife is a stay-home mom, and while we do have regular discussions on our household finances, I handle most of the “mechanics” – reconciling bank accounts, scheduling investment transactions, making the credit card payment, etc. Handling this ledger book will give her “more ownership over the household finances” (her words).

Hang on to those Receipts!

Here’s how we plan to organize the ledger. Beginning July 1st, all expenditures will be recorded in the ledger book from receipts collected throughout the day – doesn’t matter if an item was charged using a credit card, a check, or cash.

Credit card transactions will be coded with a “cc” to indicate they were charged to the credit card. When the credit card statement arrives the bill will be paid, but not recorded in the ledger. Instead, all of the charges marked “cc” will have a check mark in the “reconciled column” indicating they have been paid for.

Spending History Could Prove Helpful

Besides being a great exercise for improved money management, I like the idea of having something of spending journal to look back on months down the line. We can compare increases (and hopefully a few decreases) year over year, and even month to month, in various spending categories.

We can easily calculate our total average household monthly expenses which helps in planning how big our emergency fund should be. We will also have a consolidated view of past expenditures, which is great when trying to figure out if you paid the kids’ yearbook money for the year (was that a check, or did I pay cash?). It’s easy to look back at past spending and scan for “Yearbook” in the “for” section of the ledger, regardless of how it was paid.

I’ll report back at the end of July to let you know how the ledger is coming along. I’m looking forward to getting a better handle on how we are using our financial resources, and learning how we can be better stewards of those resources.