The Simple Dollar
Peter Baylies shows his older son, John, how to cut onions. Inviting friends over for a potluck dinner is a great way to have a frugal social life, Hamm recommends. (Melanie Stetson Freeman/The Christian Science Monitor/File)
Social life breaking the bank? Find frugal friends.
When you spend time with your friends, what do you do?
Do you go to each other’s houses for potluck dinners, or do you go out on the town for dinner?
When you watch movies together, do you toss a DVD someone already owns into the DVD player at a friend’s house, or do you head to the theater?
When you have a party, do you try to outdo each other with expensive finger foods and beverages, or do you just enjoy whatever’s available?
When you’re bored and call up a friend for something to do, do you get together and play a board game or do some crafts, or do you head out for a round of golf or some shopping? ( Continue… )
A January 2011 picture illustration shows a $100 banknote laying on $1 banknotes. A raise is an opportunity to genuinely improve your life over the long haul, Hamm writes. (Kacsper Pempel/Reuters/File)
Got a raise? Spend it wisely.
A raise is something well worth being proud about. You’ve worked hard and your employer is recognizing that in the clearest way they can – with their cash.
The challenge is that when you get a raise, there’s a strong temptation to raise your spending right alongside it.
First, there’s the temptation to celebrate and reward yourself. You’ll tell yourself that you earned a goodie thanks to your hard work and you’ll pick out a nice splurge for yourself. However, that splurge takes away from other goals you might have and a big splurge often comes with costs – insurance, a data plan, and so on.
After that, there’s the temptation to live “a lifestyle matching your income.” You raise your expectations in terms of the places you eat, the vehicle you drive, and perhaps even the place you live.
The result? You find yourself right back in the same financial rut you were in before that raise, just with slightly shinier baubles around you. ( Continue… )
This is one view of the 'You Need a Budget 4' software, which is based on four rules about cash flow. (Courtesy of You Need a Budget)
The seven rules of cash flow
A few days ago, I downloaded and tried You Need a Budget 4, a software package that helps people develop a working budget and get better control over their money. I won’t get into a long review of it – my belief with tools like these is that they’ll work great for people who want it to work and won’t work at all if you’re not committed to the personal changes – but I did want to talk about some of the ideas behind it. (If you do want a full review, here’s a great review from Wealth Pilgrim.)
As it clearly says in the documentation and is implied throughout the software, You Need a Budget is based on the so-called Four Rules of Cash Flow, which are as follows:
Rule 1: Give every dollar a job.
Rule 2: Save for a rainy day.
Rule 3: Roll with the punches.
Rule 4: Learn to live on last month’s income.
Let’s walk through each of these a bit. ( Continue… )
Hershey's candy bars are displayed at a gas station in Phoenix in this 2011 file photo. Small purchases are easy to forget, but they can add up to a big monthly tab. Here's how to improve your money memory. (Joshua Lott/Reuters/File)
Selective memory and your wallet
I love my children. I’m proud of them. When I think about their behavior, my thoughts are almost entirely filled with positive things. I think of my oldest child’s studiousness, my daughter’s creative energy, and our youngest child’s humor.
What I often don’t recall is when they do things that they shouldn’t. If you ask me at the end of the day what bad decisions they had made, I would have a hard time recalling more than one or two of them.
I know on some level that there are things that they do wrong. They make messes. They leave their coats out. They’re incredibly noisy at times. The sibling competitiveness between our two older children sometimes reaches dangerous heights. They don’t listen at times. They make horrific messes at the dinner table.
The thing is, my ongoing memory of these events is pretty selective. We’ll handle a situation, we’ll move on from it, and I’ll forget about it. I remember them later in an aggregate sense, knowing, for example, that they’ve made big messes on spaghetti night at the dinner table. At the end of a given day, though, I don’t specifically recall many of the little things they’ve done wrong. ( Continue… )
This December 2010 studio image shows a calendar. Don’t let yourself be burdened by a tight schedule on vacation, Hamm advises, and give yourself the freedom to explore the new things you find. (Ann Hermes/The Christian Science Monitor/File)
Travel light – in cargo and in activities
I’ve gone on one vacation in my life where we had pre-bought tickets for activities on most of the days. I thought I was doing a great job in terms of bargain hunting. Oh, how wrong I was.
For one, we didn’t even end up doing some of the activities. We’d go out to eat after a long day with two or three of the activities, be enjoying a beverage out on a patio somewhere, and just decide to skip the evening activity so we wouldn’t have to rush our wonderful dinner.
For another, I can’t tell you the number of times we had to rush by things that looked interesting or that we wanted to explore simply because we had to get to some specific place on time.
If your travel plans for vacation are starting to look like one of the pages in your daily planner, throw out those travel plans. You miss out on a lot if you vacation that way – and it usually winds up being more expensive if you use a detailed itinerary, too. ( Continue… )
A German tourist reads a tourist guide as she floats in the Dead Sea, in this June 2005 file photo. Locals that care about you, like friends and family, will do a great job of making sure you get the best of the area at a good price, Hamm writes. (Emilio Morenatti/AP/File)
Looking for cheap destinations? Locals know best.
In 2009, my family travelled to the Dallas, Texas area. In that area, I have two great aunts and a number of first and second cousins. We spent a lot of time with them, enjoying meals and reconnecting.
In 2011, my family travelled to the Seattle, Washington area, much like we did in 2004. We visited my wife’s sister, spent a lot of time with her on the event of her wedding, and visited my wife’s other sister who lives out there, too.
Fairly regularly, we visit the Chicagoland area, where one of my cousins lives. I adore this cousin and her two children, and we stay with her every time we go there. We also have the chance to see several old friends who now live in that area.
Almost every time we travel, we do it in conjunction with family. We often make it a point to visit places where there are friends and family to see, either along the way or at the destination. ( Continue… )
A boy does a headstand at sunset on Copacabana Beach in Rio de Janeiro in this December 2012 file photo. Use the 'peak-end' concept when planning your travel and you will save money, Hamm writes. (Gary Hershorn/Reuters/File)
Tight travel budget? Adhere to the 'peak-end' rule.
The “peak-end” rule is a tactic that can not only maximize the value you get out of your vacations, but it can maximize what you get out of almost anything in life. It pops up again and again in everyday life, from the plotting of movies and television shows to how meals are served at restaurants.
The idea behind the “peak-end” rule is that when you think back to a past event, you generally have the strongest recollections and feelings about two elements of that event: the “peak” and the “end.”
The “peak” is usually the moment where you had the strongest response (either positive or negative) to whatever is happening. For example, you might remember a trip where the “peak” was visiting a national park you’d always dreamed about.
The “end” is how you felt about how the trip concluded. For example, you might remember dinner on the final night of the trip or something else that occurred on your vacation. ( Continue… )
People walk and jog at Torrey Pines State Park in San Diego last month. There are ways to keep working toward your goals even after discouragement sets in. (Mike Blake/Reuters/File)
Discouraged after making resolutions? Four steps to success.
Whenever someone takes on a goal, they tend to go through a few phases.
At first, there’s the honeymoon phase, where the person is enthusiastic about what they’re working on. They’ve got a clear goal, one that they’re sure is going to change their life. The steps to achieve that goal seem fresh and new, and they can often see real results from those steps. Even if those real results are small, they seem wonderful because they’re moving in the right direction.
After the honeymoon phase comes what I call the valley phase. The initial enthusiasm fades and the person begins to see how the small, real results are going to take a long time to add up to the big results that they want. The thrill of making good moves is gone, and the minor drawbacks of those good moves often come to the forefront.
Once you push through the valley, you often come to what I call the ascent phase. The ascent phase comes when a person has truly incorporated most of the changes they need to make to achieve the goal into their lives and the positive progress toward that goal becomes a natural thing. Often, the goal begins to feel inevitable once you reach the ascent phase. ( Continue… )
A child touches rabbit-shaped souvenir items for sale during Chinese Lunar New Year celebrations in Chinatown, Binondo in metro Manila in this February 2011 file photo. (Romeo Ranoco/Reuters/File)
For cheap travel, avoid souvenirs
For me, the best souvenirs are the memories. I don’t really need physical things to recall my vacations, as I’ll just look at the digital pictures and my mind fills in the blanks.
Of course, many people like to bring home physical items to remember their vacations by. Sarah takes this route with her souvenirs. She likes to have a physical object to remind her of where she once traveled.
It would be easy for Sarah to find a souvenir in a shop somewhere, but let’s be honest – most of those souvenirs are drastically overpriced and often not very useful. Who wants to pay $20 for an ordinary t-shirt or something silly like that?
Instead, when she looks for a souvenir, she looks for something atypical, either something free or something without markup. ( Continue… )
Tony Hawk attends the X Games Night of Film Benefit presented by Time Warner Cable in Los Angeles, in this June 2012 file photo. Tony Hawk has wisely leveraged his skateboarding success into long-term financial security, Hamm writes. (Casey Rodgers/Invision for TWC/AP/File)
Children need financial role models
Children look for role models (as do adults, to some extent). They look for people who embody the things they see as successful and important and emulate their behavior to some degree.
I recognize that, for my children, I’m going to be a role model, both consciously and unconsciously, but I also know that I’m not going to be their only role model. Far from it. They’re going to draw on a lot of people for ideas on how to live their life, and they’ll be exposed to them in a lot of different ways.
The challenge for parents is that positive uses for money are rarely lauded in popular culture. Instead, the media tends to shine their light on expensive items or people with exceptionally high incomes who can afford to spend in a way that’s inaccessible to most of us.
What can I do as a parent to ensure that my child has money heroes that behave in a sensible fashion? ( Continue… )
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