I think I might be a 'Saver'. . . .

I know it's really too soon to say for sure, but in looking at my expense-to-income chart and my ING Direct account balances, I think I might be turning into something I never thought possible: a Saver. Never in my wildest dreams did I believe that I could afford to save, let alone find the motivation and determination to actually do it.

In spite of my skepticism, my bank account tells a different story. Over the past two months, I've been able to place almost $800 in my 'internship year' savings account (which I'll use to 'bridge the gap' next year when I'll be forced to work part-time). That's in addition to the roughly $250 I place in other savings accounts each month to cover future school costs, utilities, and bi-annual car insurance payments. In the month of January, I managed to sock away $458, which represents almost 17% of my take-home pay! In February, I'm shooting for a total savings of $675---a definite challenge, but one that I look forward to. Just two years ago, I would have declared this goal 'impossible'.

"Big deal", you might be saying to yourself, finger on the mouse button that will take you away from this page. But to me, it IS a Big Deal (with a capital B, and a capital D). What does this really mean to me? It means that I have it in me to save money. It means I can be a Saver. For someone who grew up in a household in which extra money was spent before it was ever earned, and who lived off credit for 20 years, that's a HUGE deal. It means that when I finally conquer my student loan debt and have my mortgage under control, I can save the money to: buy a "new" used car; replace my computer; take a vacation; make home improvements. I can pay cash for these things, rather than throwing the credit card down at the checkout counter with the never-to-be realized intention of paying it off by the time that 0% introductory interest rate goes the way of the dodo bird.

According to a recent article at ABC News, I'm not alone. Due to decreasing income and the threat of layoffs, Americans have increased their savings rate during the past year from 0.4% in 2005 to 1.7% in 2008. This 2008 average includes a savings rate of 3.6% in December alone. Also driving that higher number is the May 2008 stimulus check---in that month, Americans saved their after-tax income at an astonishing 4.8% (meanwhile citizens in countries like China save closer to 30% on a yearly basis)! Nothing like a recession and the threat of unemployment to send Americans scurrying to the bank at last.

Of course, my own metamorphosis from a credit-dependent spender to a live-within-my-means Saver began not with the recession, but with a little book called Your Money or Your Life. Perhaps it was mere coincidence that I read this life-changing tome just a year and a half before the economy tanked. Or maybe it was some sort of supernatural prescience, who knows. What I do know is that it jump-started my journey into 'un-debtedness', rather than 'in-debtedness". That I rode the waves of the recession last fall while sending my very last payment to my credit card is due in no small part to YMOYL as well as to Dave Ramsey's The Total Money Makeover.

I had no idea when I started living more frugally and paying down my credit balance that I would one day have an emergency fund, that I would learn to keep track of every cent that leaves my fingers, and that I would have the financial fortitude to place money in a savings account long enough for it to actually earn interest. Since I was raised with the unspoken understanding that 'money comes, and money goes (and where it goes, nobody knows)', the psychological benefit of learning that I have control over both my spending and my savings is profound.

As I write this post, it occurs to me that it may sound overly self-congratulatory. It's not meant to be read in that way (although I do feel a certain amount of pride in my ongoing efforts to change my habits). With over $56,000 in student loan debt looming, I've quite a ways to go before I'm truly financially secure. No, what I hope to communicate is that if a person like me, with an average salary---especially when compared to my ridiculously large mortgage payments---can manage to pay off credit card debt and increase savings, so can any of the other folks suffering through this current (though, I'm convinced, temporary) economic recession. It's not easy, and it's not instantaneous. It's a process, a journey, a challenge. But when you reach the point where you can ever-so-tentatively label yourself a Saver, it's worth every moment spent noting expenditures, creating and updating budgets, determining spending priorities, and reading personal finance books (and blogs!)

Finally Frugal one year anniversary!

One year ago today, I published my first blog post! My financial life was pretty different at that point. Although I had decided in November, 2007 that I needed to begin living within my means, it was a slow process. Not using my credit card was painful, and in January 2008 I still owed about $4,500 to various credit companies. I still craved new shoes and clothes every day (I continue to struggle with this), and paid little attention to the money that was leaving my life in dribs and drabs each day.

In that first blog post, I discussed the book that changed my attitude---Your Money or Your Life, by Joe Dominguez and Vicki Robin. I purchased that book in late 2007, and in 2008 I ended up purchasing a CD (used, on Ebay) that featured a workshop given by Joe before his death in 1997, to help jumpstart my motivation. A year later, I still believe that this book (as well as Dave Ramsey's The Total Money Makeover) has been instrumental in helping me begin getting my financial life in order. If any of you are struggling with your finances, either of these books make great investments.

After reading many, many books about debt, financial independence, and rampant consumerism during those first months of 2008, I eventually began taking a close look at all of my 'variable' expenses, such as cable, cell phone, gym membership, and auto insurance, and either made money-saving changes or canceled those services altogether. I began tracking each penny that left my life, and started using the zero-based budget, which I still use to this day.

All of you regular readers will know that I have a long way to go. I owe over $56,000 in student loans, and I don't yet have a plan to begin repayment of this. I own a house with two mortgages, and the combined monthly mortgage payments equal about 40% of my gross monthly income--not a great percentage for someone who also wants to increase savings and investments. I work two jobs, at 50 hours a week on average, just to keep my head above water. I also go to school on a part time basis, and I am contemplating, with some trepidation, the 2009/2010 academic year in which I'll be obligated to work less than full time in order to make time for a required internship.

Many challenges and seeming obstacles lie in my way on the road to financial independence. In reading other personal finance blogs, the one thing that I keep reminding myself is that the path to meeting my financial goals is a long one---I can't expect success overnight, as much as I might wish it.

In spite of the challenges, I also remind myself of my small successes over the past year: I've paid off my credit cards; I've learned about my spending habits by keeping an eye on each expenditure; I've begun the process of getting a handle on my bad spending 'vices', such as clothing and shoes; I've learned that I'm actually a pretty good cook, and that I can be satisfied with a .10 cent cup of home brewed coffee instead of craving a daily $3.40 mocha.

Most importantly, I've 'met' so many other people who are also on their own, similar but unique financial journeys. Just knowing that there are others out there in the blogosphere who are either just beginning, are well on their way, or have met with success, helps me to stay on track and believe that I, too, can find my way to financial independence.

Overwhelmed? Have I got the book for you.

Several weeks ago, I was contacted by the publisher of an author named Louis Barajas. Mr. Barajas has a new book just out, and his representative wondered if I would be interested in reviewing it on the blog. Once I heard the title I had a feeling it would be right up my alley---and maybe yours too!

This self-help book is called 'Overworked, Overwhelmed, and Underpaid: Simple Steps to Go From Stress to Success'. Mr. Barajas is a financial planner, who focuses on underrepresented, lower income families who need help digging themselves out of debt and determining what to do with their limited money to afford the greatest security. He also does work with upper income folks, many of whom also struggle with questions surrounding personal finance.

I found his website to be very helpful, with many of the downloadeable forms that were mentioned in his book. I should note that Mr. Barajas has also written books regarding entrepreneurship and small businesses, which is a focus of his newest book.

So, how DOES one escape the cycle of feeling overworked, overwhelmed, and underpaid? The book is actually laid out in a very organized fashion (and I do love organization!).

First, Mr. Barajas discusses the concept of overwork (as someone who works two jobs and goes to school, I felt I could relate). In essence, the message is very similar to my other favorite book, Your Money or Your Life. The main focus of this chapter is on determining what is important in our lives, and gaining balance based on that knowledge. There is a 'life blueprint' form that can help us to figure out how much of our lives we really want to devote to work, versus the time and energy we'd like to devote to family, other relationships, spirituality, or hobbies. For me, it was incredibly helpful to see my life on paper, and to make decisions that I could view in black and white, versus simply considering---with no commitment to change---while on my way to work!

Next, Mr. Barajas turns to feelings of being overwhelmed. Again, the key word in this section is 'balance'. Except in this case, Mr. Barajas discusses the 80/20 rule, in which it is posited that 80 percent of our 'output' is actually connected to just 20 percent of the energy we expend. The key here is to determine (by using lists and prioritizing our activity based on level of success or output) what it is we're doing (what is the 20%) that is accounting for 80% of our output. The theory is that then, we can achieve more with less. Less time, that is. Now, for someone with just one job or one obligation, I think this might make sense. In my own life, I found it difficult to separate each of my jobs and obligations and determine what to cut. For example, my day job is a 40 hour per week position. Although I know that some of those 40 hours are much more productive than others, I need a full time salary to pay my bills (or most of 'em, anyway!). Therefore, even if I'm only using 20% of that time usefully, I can't just leave work when I'm finished---I at least have to pretend to be getting things done so I can keep my salary and my benefits. My 'overwhelmedness' comes not from having too much to do at ONE job, but at having too many jobs! Something to think about, definitely. When I have time, I'm going to try to apply Mr. Barajas' ideas to my own unique situation to see if I can make some changes that will help.

Finally, we come to being underpaid. This section brought up some very good issues, such as the five reasons we may feel underpaid:

1. You really ARE paid less than you're worth
2. You don't make enough to support the lifestyle you want (or the one you already have)
3. You're putting in more effort than you're being compensated for
4. Work is taking you away from what's important to you
5. You don't enjoy your work

As you can see, these are all quite different reasons for why we might feel like we're not making enough money (I can relate to several). Mr. Barajas then goes through a myriad of options for either changing careers, making more money at the career you already have, or making other changes that will affect the 'bottom line'. I hoped to see more discussion of frugal living (since that's my interest, and how I've given myself a 'raise' over the past year). However, this book is focused more on people who are willing and able to make career changes---maybe even those who would want to start their own business, since that seems to be a way to control and grow one's income more quickly than through conventional routes (like working in public education, as I do!)

In the end, I feel that this is a worthwhile book. While I've linked to Amazon.com just so you can read a synopsis of the book, I (of course) always recommend trying your public library or used book store first---it's not a financial 'bible', like Your Money or Your Life. But it is a good read, and one that I recommend to those who are thinking about making some big changes in the way they consider the interaction between work and personal life.

In fact, if this sounds interesting, I'll spread the love and mail my copy of this book to the first person who comments on this post (if you've actually made it this far you DESERVE a free book!). Just be sure to either enter your email address, or send me a separate email with your mailing address so I can send it along to you.

Frugal quotes. . . .

I am (still) reading Simple Prosperity: Finding Real Wealth in a Sustainable Lifestyle, by David Wann. Since I love insipiring quotes, especially those relevant to frugality, simple living, and happiness without 'stuff', I was delighted to find that each chapter begins with a collection of quotes. Here are some of my favorites so far:

"Happiness is a way station between too much and too little." Channing Pollack

"Fear less, hope more, eat less, chew more, whine less, breathe more, talk less, say more, hate less, love more, and good things will be yours." Swedish Proverb

"If it works, it's obsolete." Marshall McLuhan

"Too many people spend money they haven't earned to buy things they don't want, to impress people they don't like." Will Rogers

"The bad news is time flies. The good news is you're the pilot." Michael Altshuler

"To me a lush carpet of pine needles or spongy grass is more welcome than the most luxurious Persian rug." Helen Keller

"The point of life is not to slave away for years until the age of 65 and then say, 'Phew, glad that's over!' Rather it is to make sure that we do not die with our music still in us." Lance Secretan

"Nature uses as little as possible of anything." Johanes Keppler

"When you have Enough, you have everything you need. There's nothing extra to weigh you down, distract, or distress you. Enough is a fearless place. A trusting place. An honest and self-observant place. To let go of clutter then, is not deprivation; it's lightening up and opening up space and time for something new and wonderful to happen." Vicki Robin

This last, by the way is by Vicki Robin, one of the authors of Your Money or Your Life, one of my all-time favorites frugal reads, and one of the books that set me on my way to living more simply, paying off debt, and beginning the journey toward financial independence (not wealth, exactly, but removing myself from the 'earn to spend' mentality).

Life or Debt. . . .

This weekend, I picked up a book by Stacy Johnson (of TV’s Money Talks fame. . .), called Life or Debt. Although the book was published in 2002, it somehow seems dated (perhaps because Stacy mentions VCR’s and Walkmans). Despite the impression that the book was written in the early 90’s, Johnson does outline a fairly common-sense plan to get out of debt. In fact, there were a few times when I wondered if he had taken some of his idea straight out of my all time favorite, Your Money or Your Life.

Here are the steps to debt freedom, according to Stacy Johnson:

Step One: Compute your average hour after-tax, after-work-related-expenses wage. Just as YMOYL suggests, we need to find out how much we really make on an hourly basis, after taking commuting costs, food expenses, and clothing costs into account. Johnson includes his own instructions for doing this:
· Write down your annual salary
· Multiply this number by .7 (to account for taxes)
· Add up all the expenses (gas, food, clothing) associated with your job every year; subtract this total from the number in line two.
· Divide this new number by 2,000, the average number of hours a person gets paid to work every year. This is your true hourly wage.

Step Two: Inventory your possessions---everything, from the contents of the garage, to the attic, to the pots and pans in the kitchen. Write it all down.

Step Three: Go through the inventory, and make a mark by those things you purchased but didn’t really need or didn’t use. Do you really need two cars, three cell phones, two lawnmowers? Tally the total cost of the things you bought but didn’t really need. Multiply this number by 6.7, which will tell you the opportunity cost of these items. The opportunity cost represents the amount that you would have gained had you invested that money for 20 years at 10%. So, a $250 lawnmower you rarely used because you borrow your neighbor’s riding mower instead would have been worth after 20 years.

Step Four: Find items on your inventory list that truly meant something to you. Johnson’s example is an old backpack that took him through many countries. This exercise is meant to help you refocus on what is really important in your life.

Note: steps one, two, three and four are almost identical to information presented in YMOYL.

Step Five: Determine your 'Debt Destroyer'. Multiply your annual income by .10, then divide by 12. This is the amount that you will use each month to pay down your debt (in addition to your minimum payments).

Step Six: Finding that 10%. To figure out how you’re going to find that 10% for debt repayment, Johnson suggests writing down every penny that leaves your hands. Once you know how you’re spending your money, you’ll have an easier time finding ways to save (this is the ‘Latte Factor’ in action).

Step Seven: Begin eliminating debt, by:
· Not creating any more debt
· Ranking debts in order of fastest possible payoff (divide total amount owed by minimum payment; the lowest number is the first debt to repay)
· Build a ‘Debt Destroyer’---this is your extra 10% payment from step five.
· Pay off your debts, using the Debt Destroyer.
· When all debts are paid off, invest the Debt Destroyer plus the total of all of your old monthly payments.

I would characterize Life or Debt as a combination of ideas from Your Money or Your Life and Dave Ramsey’s Total Money Makeover, without the radicalism or the religious undertones. It’s a good book for someone who hasn’t read much else about debt reduction, and who is highly motivated. Personally, YMOYL and TMM both inspired and motivated me more than this book did, and I would recommend those over Life or Debt.

Do you know someone who might benefit from this post? Email it to them, by clicking on the link below.

Danger's gone. . . .

My friend left this afternoon, and as expected, the shopping and spending (hers, mostly) was a sight to see. Her current 'obsession' (other than bags, shoes, and makeup) is costly fabric, with which she's making these amazing little boxes. She buys cardboard boxes at a craft store, then covers them with velvet and silk fabric, embellishing with fancy ribbon. The piece de resistance is a flower made of ribbon, that she affixes to the top of the box. The boxes, while beautiful, are created with high-end materials, and are none-too-cheap to make. Not exactly a frugal past-time. I have to say, I did accompany her to a few fabric and notions shops in the area, and am guilty of spending some of my own hard-earned cash on pretty velvet---most of which I'll probably never use. Here's an accounting of the money I spent while my houseguest was in town (three days):

Dinner: $62.75
Velvet fabric: $16.50
Other craft supplies: $4.48
Pedicure: $26.00
Breakfast: $17.40
Movie: $5.50

Since I rarely carry cash, I used my debit card to take care of our dinner the first night, and also paid for fabric, for which my friend was going to reimburse me. Instead, she covered my drinks/appetizer/dinner and lunch the next day. At which time I felt that I then owed her money, and bought her breakfast. Now, I have no idea whether I spent more or she did---we didn't keep a close accounting of this. Next time I have a visitor, I'll do several things differently:

1. Save for the visit: I spent roughly $130 over three days---money that I could have had in savings, since I've known since December that this particular friend planned to visit. Had I saved $50 a month up until now, I would have had this money set aside, rather than taking it out of my checking account.

2. Carry cash: this will help me to pay for my share, rather than coming up with elaborate schemes in which I pay for dinner, the friend pays for lunch, and no one knows how much either owes.

3. Keep a close accounting of who paid for what: when spending time with a heavy shopper/spender, be sure that close attention is paid to what you owe---it may seem nit-picky at the time, but it can save money in the long run.

4. Don't get carried away by someone else's obsession: it was fun to shop for and buy fabric---I like being crafty. However, I have neither the money nor the time to be searching out high-end fabric and then sitting around and making pretty boxes. There are only so many people in my life who would enjoy a useless item (beautiful or not) like that.

There is some good news: I still can't find my credit card. Therefore, everything I spent came out of my checking account. This forced me to think about my purchases---I have a feeling that if I had been carrying a credit card, my purchases would have been even greater than they were.

I was happy to see my friend---we had a good visit. But it also reminded me of why I'm living a more frugal life. I don't need as much stuff as I used to think I did. Those pretty boxes are great! But they'll sit in my house and gather dust for about a year or two until I can find a way to get rid of them. Better not to have them in the first place!

Finally Frugal reminder. . . .

A close friend is in town visiting this weekend, so I'll be posting next on Sunday evening or Monday afternoon, with an update of how I managed to control my spending in spite of the influence of a "shopper".

The new epidemic: Affluenza. . . .

I've been waiting for literally three months for a PBS documentary called Affluenza to become available at my local library. I think when I placed my hold on it, there were 46 people ahead of me! Needless to say, I had totally forgotten about it when I read a post on WiseBread with a link to the documentary on YouTube!

The piece is about 10 years old, which isn't really a problem because the comments about American consumerism still hold true today. Note that in one of the segments, gas is shown at $1.28 a gallon!!! Wow. The most disturbing part, I think, is a segment in which a Disney marketing guru talks about 'owning' and 'branding' children----so they'll buy Disney products rather than some other company's plastic, throwaway toy. Basically, this documentary is a commentary on the U.S. 'earn and spend' mentality, how we got here, and what the consequences will be for our economy and our environment. I also own the book, which I promise to review at some point in the near-ish future.

The documentary has been divided into six parts on the YouTube site, probably because the entire video would have been too long to post. I've created links to each of the six parts:

Affluenza: Part 1 of 6
Affluenza: Part 2 of 6
Affluenza: Part 3 of 6
Affluenza: Part 4 of 6
Affluenza: Part 5 of 6
Affluenza: Part 6 of 6

Snarky note: Ted Haggard, of the New Life Church in Colorado is also briefly featured, talking about how to have a successful marriage/family life: he's the big-time pastor who was accused of homosexual relations with a gay man.

Finding frugality. . .

My first post! Since this is numero uno, a little background and explanation may be necessary.

First, I started this blog as a means of exploring, developing and further inspiring my journey toward a reasonable level of frugality. I don't want to live in the woods, eating tree bark and wild mushrooms (I don't even like mushrooms). Not that there's anything wrong with living a 'Thoreau-esque' existence. To each his own, whatever floats your boat, you get the drift. I like my life in general, there are simply some financial habits I'd like to---actually, NEED to---change, as painful as that may be in the short term.

No, what I'm attempting to achieve is a better balance between how much I spend, what I spend it on, and how much I am able to save and invest for a more financially secure future. This journey started last summer, when I read (finally!) Your Money or Your Life (otherwise known as YMOYL), by Joe Dominguez and Vicki Robin. One of my New Year's resolutions for 2007 was to borrow more books from the library, rather than buying them new and then either letting them gather dust in my house, or passing them along to friends and family. When I sought YMOYL at my local library, there were about 40 holds on the ten or so copies available!! I waited, and waited, and waited and then waited some more for 'my' hold to come up in the queue, and when the library notified me some three months later that it was 'my turn' with the book, I had almost forgotten what the book was about and why I even wanted to read it in the first place!

I consider myself lucky that I did check the book out and read it in its entirety. I was so moved and inspired by the ideas presented by Joe and Vicki that I actually used a birthday gift card to purchase the book at our local Powell's Books (the best bookstore ever, by the way----please visit if you're ever in Portland). Although it was November, 2007 before I began tracking my spending in earnest (one of the first steps in the YMOYL 'plan'), I vowed to spend 2008 working on my new goals---to pay off debt (including, eventually, my mortgage), to be more conscious of the 'stuff' that I bring into my life, and to plan now for a comfortable, financially secure future.

So, in short, this blog will share my own personal story with you. Within these pages, I hope to find kindred spirits, to learn more about my own issues with money, and to connect with others who are trying to find a better balance between being a consumer and being financially independent.