Why are weddings so expensive?

So it turns out weddings are super expensive.  We’ve already talked a little bit about why wedding planning sucks and the average cost of weddings in the US but now that I’m fully ingrained in the process, I’m seeing a bit more of the nonsense than before.  In this day and age, I’m used to looking up the prices of whatever I want online.  Want to compare prices of surf lessons?  Not a problem.  Skydiving quotes?  On it.  Cost of wedding venues?  Hah, forget about it.  Most wedding venues do not put cost information online.  Neither do caterers.  Why is this?  Why wouldn’t they want people to be able to find out more about their costs?

Because we’re young, dumb and in love!  That’s why.  The wedding business is a big business, $50 Billion a year in revenue, and thrives on the lack of information and efficiency.  Most of these places don’t want people to be able to know the itemized costs without meeting them.  Some places like to adjust the costs based on the people that are getting married.  Some places even make you fill out a form that includes your yearly salary.  All of this so that they can size you up and figure out how much you may be willing to pay.

Now, I’m not saying that all wedding venues are bad.  The truth of the matter here is that the wedding industry has one fantastic advantage over other industries that stands out among all else: almost everyone is a first time buyer.  You may be a great negotiator but if it’s your first wedding (and it likely is), then you don’t know where the best areas to push people are.  Maybe it’s the flowers.  Maybe it’s the chairs.  Maybe you need to hire a coordinator (more money) and let them deal with the vendors to get the best prices.  Everything costs something.

Another big problem is just random fees that seem to appear.  Maybe a caterer charges $40 per head for food, plus tax, plus service charge, plus gratuity.  So $40 a head can quickly turn into $60 a head (although a good budget SHOULD account for tax and tip.  Who knows what this service charge is).  Maybe the place is great, has a food and drink minimum that’s in your budget, great band, perfect view.  Then, boom, rental fee.  Some places charge a separate fee for the location.  Normally, this is fine.  I’ve seen them range from $500 to $2000, all of which makes sense to me.  It’s your place, might as make some extra money!  But sometimes, sometimes, the fee is outrageous.  I’ve heard of some places where the food and drink minimum can be north of $25K with a rental feee over $10K put on top of that.  At that point, things are starting to get ridiculous.

All I really want from any of these vendors is a list.  An itemized list of costs.  How much do the forks and knives cost?  Are linens included?  Is there cake (the answer best be yes)?  These are simple wishes and demands and as I trudge along, looking for a place that won’t send me to bankruptcy, I’ll be sure to keep you all informed.  I know that at least a couple of you are enjoying the oncoming insanity that seems to be brewing!

I'm just saying, Vegas wedding...

I’m just saying, Vegas wedding…

 

Photo courtesy of Andy Baker

No one is perfect

This year has been a pretty good year for me.  I managed to save up a good chunk of money, got a raise, bought an engagement ring and am on the right track financially.  So I’m feeling pretty good about myself.  Then I decided to do a bit of a comparison on my expenses in Mint.  Oh man, was I wrong.  In virtually every major category, I spent more money.  Every one of them!

Don’t get me wrong, I track my expenses.  I track every movement of my checking account, savings, etc.  What happened was lifestyle creep.  I just let things get away from me that really took a lot more out of me than I should’ve allowed.  Since we’re moving towards the end of the year and getting into goal setting mode, I think it’s time to take a look at the biggest problems with the budget last year, where we busted it the most and how this is going to change in 2014.

1.  Food and Dining

The year isn’t even over yet and I surpassed the amount spent in 2012 by over $2K already.  Dammit.  Almost $1500 of this was an increase in just going out to eat, despite trying hard to reign in that sort of spending.  The remaining $500 was all in groceries, likely due to my proximity to Whole Foods and all the awesome meats in the butcher there.  I guess there is a reason they call it Whole Paycheck after all.

So expensive but so good.  Decisions decisions

So expensive but so good. Decisions decisions

2.  Travel

I spent almost $3K more on travel in 2013 than 2012.  This is another super frustrating area.  Even though I know that I got good discounts on rental cars, flights and hotels, it pains me to see how much money I spent here.  One of the things I’m vowing to do going forward is to never pay for a flight if I don’t have to.  I’ve been following an amazing website, milevalue.com, for a while now and it’s absolutely incredible.  This guy basically figures out the best way to get miles for airlines without having to actually pay too much for them.  I’ll write more about this someday but yeah, I’m never paying for a flight again.  In fact, the Fiance and I are traveling to Dallas next month and, lo and behold, we used miles for our trip.  I had to do a bit of finagling to make it work but our flights ended up costing us $10 total.  Since we’re saving for the wedding, I’m hoping I can keep this category down a couple grand next year.

3.  Shopping 

So it turns out that, without having bought all my Christmas gifts yet, I have spent $2k more out shopping.  Normally, I would think this is deplorable BUT $1500 of this came from the purchase of my new laptop after leaving my old job.  You see, I only had one laptop (a work laptop) and had to give it back.  I really enjoyed the Macbook Pro and decided to get one for myself.  I know it will last a while and I can amortize the cost over a great while.  Additionally, the money for it came out of the vacation time I was paid out.  I know these are just excuses but, still, I did need a computer.  Wouldn’t be able to do any of my consulting or other online work without it!  The other areas that grew, well, no justification.  It may be time to turn off one click purchase at Amazon.  That’s all I’m going to say about that!

These three areas all blew their budgets big time in 2013.  Next year, I will have to be even more diligent about how I spend my money.  No more trips to Hawaii, no rental cars if I can borrow one, no new laptops.  By just by cutting out the excess spent this year I can save almost $7k next year.  If I can attack the base, from 2012, I could maybe save a total of $10K next year.  That’s half of the budget of the wedding!  While this isn’t a new year’s resolution, this is definitely in the mix for being one.  Until next time!

What does affordable actually mean?

Affordable is a tricky word.  If you look at it simply enough, when an item is affordable then you can spare the money to buy it.  But I’ve been thinking a lot about this lately.  I’ve had discussions with various friends about this, largely stemming over the potential large purchases in life (cars, houses, engagement rings) or the month to month costs that we regularly incur (iPhones, iPhones, iPhones).  What I’ve realized is that most people have very different beliefs over what affordable means and when certain things are affordable.  So everyone is on the same page, I think we have to define the term for pretty much all purposes going forward.

So many iPhones, it's just...wait what the hell is that big thing??

So many iPhones, it’s just…wait what the hell is that big thing??

Defining what is affordable and what is not has to be a fluid state.  What’s affordable for someone making $20k a year will probably be significantly different than for someone that is making $100K a year.  That can get even more skewed if the person making $20k a year is actually just collecting that in dividends from their $1Million in mutual funds.  So let’s just try to set some base rules.  We’re talking major purchases and everyday recurring transactions.

1.  Homes: The rule of thumb that you will hear from bankers and mortgage brokers is that your monthly home payment shouldn’t be more than 30% of your gross income(income before taxes) for that month.  There is actually a decent amount of debate here in the personal finance community, mostly because frugality is constantly desired.  A modest home can achieve just as much love and happiness as an expensive home can, while saving you a huge chunk of cash.  Let’s look at the numbers here if you’re on a budget with a $50k a year gross income.  That means your take home gross is $4,166.67 a month, before taxes.  This means that your home payment can be as high as $1,250 a month.  That doesn’t sound bad until you realize that your take home, after tax income is only about $1,450 each pay period (semi-monthly pay).  So on the first of every month you pay your mortgage and than have only $200 until your next paycheck to cover your expenses.  In the interest of keeping our budgets in check and maximizing savings, I think that 20% is probably the actual best number for someone to pay for their home.  Realistically, this should be for both a rental and for a home (yes, I know that with property tax deduction you can do more for a mortgage but hey, we’re trying to simplify!).  Verdict: no more than 20% of gross income

2.  Cars: This is a simple one.  We’ve mentioned it in the past and I’ve stolen it straight from the Financial Samurai himself.  Never purchase a car that costs more than 10% of your gross annual income.  If you make $50K a year, then you better find a good and reliable $5K car to purchase.  I know that I’m guilty of not following this rule myself but, in my defense, I hadn’t started trying to turn my financial world around at that point.  And I wouldn’t do it again.  The truth here is that by using a disciplined approach on this big purchase, you don’t have to suffer the opportunity cost of money lost on car payments when they could have been spent on investments.  If you’re serious about getting your finances in shape, it’s essential to follow this rule.  Verdict: no more than 10% of gross income

3.  Cell Phones: Everyone has one.  Everyone.  And pretty much everyone out there has an iPhone or an amazing Android.  However, the plans from the big providers can cost you well over $100.  I don’t pay for my plan (company phone) but I know that the cost is somewhere around $125 a month.  Now, it’s ok for my company to expense it but for me, that’s a steep price to pay.  There are other, better plans, from some carriers out there that will run you less than $50 a month.  T-Mobile offers some extremely competitive plans in this area with unlimited data.  Another great plan is Republic Wireless.  On their network you pay $19 a month, get a pretty good phone and end up with unlimited talking, data, and texting.  You have to hook it up to your wifi network at home but I’d say it’s worth the cost.  If I didn’t have a work phone, I’d probably go with this.  Verdict: No need to ever spend more than $50 here

4.  Discretionary items:  A lot of every day items tend to be things that people think they can afford.  I’m talking about clothing, a night out, or an expensive dinner.  While I don’t think we should restrict ourselves completely (it’s ok to buy yourself something nice every once in a while), we all have to stick to our budgets and live within our means.  If someone has a goal of saving 30% of their salary a month and has 30% tied up in their car and home payments, well, they only have 40% left to split up amongst utilities, gas, groceries, and taxes.  Those items can take up to 30% of one’s income.  That means that only 10% is left for the fun discretionary things.  If you make 50K a year, you’re not going to have much more than that 10% to really spend on the extravagant things in life.  Verdict: 10% of your income is discretionary, no more!

I know that some of these items seem fairly harsh but we all know that we spend too much money. Without sitting down and really quantifying what affordable truly means in dollars, we will never really know.  Use these amounts as guidelines or maybe you have some of your own.  I’m sure that there might be a category or two out there that I’ve missed!

 

Picture courtesy of Nobuyuki Hayashi

Is a Sou Sou right for you?

Also, what is a Sou Sou?  So some of you may have heard of this before but most of you haven’t.  I first heard about it from Planet Money a few months ago and I found it pretty interesting.  You see, a Sou Sou (or sou-sou) is an informal savings group.  Every month or week or other indeterminate length of time, you and your friends put an equal amount of money into a pot, after which the money all goes to one individual in the group.  The order in which everyone gets the money is already set so you know when you’ll get your money.  If there are 12 people in a group and they each save $100 a month, then that means that each one of them will get at least $1200 during one month of the year before the order starts over again.

I may have rushed that explanation a little bit but seriously, I find this savings method fascinating.  It developed in West Africa and the West Indies ages ago and people continue to use it to this day.  Interestingly enough, while doing a little research on it, I found that most young people use it to help pay for going to Carnival, quite possibly one of the most awesome and amazing looking things ever.

 

Definitely a good use of the Sou Sou.  Definitely.

Definitely a good use of the Sou Sou. Definitely.

But back to the reason I find this fascinating.  See, one of the main problems most people have with trying to establish their financial independence and even with trying to build good habits is a lack of self control and accountability.  What a Sou Sou does is it makes saving a group activity.  If you don’t put in your payment one month, you let down your friends and family and screw them out of their payday.  You break their trust they have in you.  This guilt alone should keep every member of the Sou Sou from letting bad savings habits creep into the mix.

While you’d be better off putting the money into a savings account or an indexed mutual fund and using compound interest to help build your cash, I can completely understand people utilizing this.  First off, it would be sweet to get a nice lump sum amount every once in a while.  I mean, what if the 12 people put aside $100 a week, instead of a month.  That means that every 12 weeks you would get $1200 put in your pocket.  That lump sum right there is amazing!  And you’ve built a good savings habit.  If you take that cash and sock it away somewhere, you’re good! You may have missed out on the interest but the fact remains, you’ve taken control of one aspect of your life and you’re helping others do it as well at the same time.  That’s not just great, that’s admirable!  One of the things I strive for is to help people get their finances under control and begin to take back their lives when it comes to money.  A sou sou can do more for a group of people than I ever could!

If you want to do a Sou Sou, I suggest getting together with close friends and family and putting one together.  Start out with people you trust.  If you want to really branch out there, there’s actually a website you can check out (http://sou-sous.com/home/) that is a sort of online community to help keep you accountable.  In the long run though, you’d probably be better off sticking with your close friends and family.  Trust is always going to be the most important thing when money is changing hands.  If you don’t trust someone, then you probably shouldn’t do a sou sou with them.  Or do business with them.  And definitely don’t tell them embarrassing stories about that time at that place. You know the one I’m talking about.  Definitely don’t tell them that.

So, in other news, I’m really looking for more interesting and innovative DIY finance tricks and tips, like the sou sou, that can help me and others improve themselves in their financial goals.  If you read or hear about anything, drop me a line!  If you’d like to write about it, let me know and we can absolutely feature you on the site.  Until next time!

Big Life Changes

So, life is changing pretty quickly out here in LA.  The girlfriend, a licensed attorney in the state of California, has officially resigned from her current job in order to actually pursue her legal career.  You see, her current job has her doing virtually no legal work.  It’s the job she took while she was studying for the bar so she could make ends meet.  It ended up turning into a full time position after everything was said and done.  While they want to hire her on as a junior counsel, they don’t have the budget for it and just can’t keep her.

So she’s going out and hanging a shingle (yeah, I didn’t get it at first either.  Crazy lawyers).  She’ll freelance for a bit, doing whatever legal work or overflow work she can find from her network and get some more experience.  The hope is that by getting the exposure to more legal work and having some attorneys see the quality of her work, she will be able to get a job offer as an associate somewhere.

I'd put this sign outside the apartment but I'm afraid of the riff raff it may attract

I’d put this sign outside the apartment but I’m afraid of the riff raff it may attract

What does that mean for me and Jackson?  Well, for Jackson it means that he’ll get a lot more belly rubs and won’t be so lonely while she’s at home.  For me, it means buckling down even further.  Since we won’t know where her next paycheck is coming from, we’re going to focus the first portions of her freelance earnings directly into her student loans.  She went to law school and they’re a pretty decent size, so this makes the most sense.  As she makes more money, incrementally, we’ll be able to increase how much she pays towards rent and other expenses.

I’m going to have to cut back a huge amount as well.  I was already cutting down on going out to eat or get beers.  Now that has to drop to zero.  Additionally, I’m going to finally get a Costco membership and start saving some money over there.  Hopefully I can at least share a friend’s card for a bit before putting the money down for it.  I’ll also keep looking into options on selling my car and eliminating that payment.  I’ve been toying with the idea of become a one car household and purchasing a bicycle but we’ll see.  I’m still underwater on the car loan unfortunately, which makes any decision there a difficult one.

This is going to put a dent in my savings I think.  I’m still going to put away the same amount as now, I just won’t be able to save any extra on top of that.  That means that Financial Independence will get pushed back a few years.  While I’m not happy about this, it’s a step in the right direction for her.

So if anyone has any legal work that needs to be done, send me an email.  I know a young and enthusiastic attorney that would love to help!

 

Image courtesy of loop_oh

We got a puppy!

Jackson the jack russell beagle mix
Jackson the jack russell beagle mix

My new dog, Jackson

Well, he’s not actually a puppy.  He’s a full grown dog at this point.  By now, we’ve had him for a full month and he’s doing extremely well in his new surroundings!  He’s pretty healthy and he’s forcing me to go on more walks than I used to.  He also, however, is costing us a little more money.

Like reasonably responsible people, we adopted Jackson, a Jack Russell-Beagle mix.  Neither myself nor the girlfriend would ever get a dog from a puppy mill.  We found him at an adoption event nearby for Life 4 Paws, a local rescue that does a pretty great job finding homes for their dogs.  We found this little guy and instantly had a connection.  Pretty much, he loved us from the get go.  So, we filed our papers for adoption and started to get ready to take this guy home once we were approved.

If you’re paying attention, you’ll notice we forgot something: money.  Adopting a dog isn’t free and that was and is the case with Jackson.  You might be wondering why I’d be willing to take on another mouth to feed and additional expenses when all I’m trying to do in life is minimize the money going out of my pocket.  Well…he’s adorable.  Also, this is one of those recurring expenses I’m willing to take on.  I’ve wanted a dog my whole life and I won’t lie, it’s a different experience having a dog just unconditionally love you.  It adds something to the day to day and helps relieve the stress and tension you build up from work.

So how much did Jackson cost exactly?  Let’s take a look (numbers are rounded):

Adoption Fee: $200

Pet Deposit:     $500

Crate:               $100

Food:                $75

Toys:                $20

Leash:               $25

Total Cost:      $920

That’s actually a bit of a doozy.  And this is without us taking him to the Vet (his first appointment is on Tuesday, settle down now).  The good thing is most of this is up front expenses and won’t be recurring.  The pet deposit is refundable and so far, he hasn’t shown any destructive tendencies in the apartment, as well as being an expert at bladder control.  Hopefully our apartment agrees when we eventually move out!  If in the long run he costs maybe $50 a month, I think that’s something I can live with.  The benefits of having a dog (lower blood pressure, decreased stress, increased physical activity and overall well being) well outweigh the costs in the long run.

I’m going to start keeping a tally on the cost of Jackson and will update it every month in my Net Worth Update.  I’m pretty sure that in the long run, the average monthly cost will be between $50 and $75 but we will find out for sure in time.

If you have a good dog adoption story, please feel free to share here!  I’d love to hear other takes on dog ownership from people trying to achieve Financial Independence!

Breaking Bad Habits

Running - Courtesy of Sean Venn

Running – Courtesy of Sean Venn

We’ve all got bad habits.  I love cookies.  I especially love freshly baked chocolate chip cookies (keep this in mind everyone, I can be bribed with these).  I’m also one of those people that has to keep moving.  No matter what, I’m always moving.  Whether I’m tapping my foot or clicking a pen, I’m always doing something.  It’s a habit and it tends to annoy the hell out of the people around me.  The point is, we all develop habits, good and bad, over the course of our lives.  When we get to the point where we are trying to get back into shape, eat better, or rehabilitate our finances, we struggle and fail.  It’s why gym’s always have their promotions in December and January; they want to take advantage of your bad habits and get a paying member that they don’t actually have to cater to.

We’ve all built these habits up over the years.  The question here is how do we break them down and get rid of them.  A few years ago, I had a track coach that taught me a few things about habits.  In track you are always trying to build new, good habits.  You want to be able to pass the baton as if it’s an extension of your body.  You want to be able to keep your foot in just the right position, move your arm a certain way, react just right out of the blocks.  It’s all about perfecting these tiny, unseen movements over thousands of hours of practice that get you to become an elite athlete (aka, not me).  So when you’re teaching a habit, there are a few steps along the way before you know it without knowing it, you know?

1.  Unconscious Incompetence: You don’t even realize you suck.  This is what happens when you’re living paycheck to paycheck, leasing that BMW 3 series and partying every night (the $30K Millionaire style) and wondering why you’re broke.  You’ve never had a moment of self reflection about your finances and you have no idea what a budget is.  You think it might be French and pronounced boo-shjay.

2.  Conscious Incompetence:  You’ve figured it out.  You know you’re bad with money.  You think it has something to do with spending more than you earn but you’re testing out some general theories on the matter.  In general, you don’t know what to do, so you start reading some good finance blogs and reading some books.  You’re still screwing up but at least you know it.

3.  Conscious Competence: With your budget in hand, a vanguard account and IRA rolling every month, you’re maxing out your 401k and doing everything right.  But, you’ve still gotta watch your budget.  You can still be impulsive and sometimes you just plain don’t think when you buy more expensive items. At this level, you’re doing most things right but they just aren’t second nature to you.

4.  Unconscious Competence:  It’s all second nature. You’ve been budgeting and saving and thrifting for so long, you don’t know what else to do.  Everything is just automatic.

Now, these four levels apply to all aspects of life.  Want to run a marathon?  We’ll, you’re going to need to get in the habit of running a lot.  How long will it take before you actually go running everyday without your mind saying no way?  According to this study, it should take you about 66 days.  That means repetition every day, or else you’ll lose it.

So how can we apply this to our daily lives?  If you’re here, then I’m going to guess you’re at least at number 2 above.  To start with, make a budget!  Stick to it.  Plan your groceries out before you go and buy them and keep an eye on your mint.com account.  Don’t have one?  Start one!  Check it every day.  Keep your spending in control.  If you want to buy something big, expensive, wait two weeks.  Wait a month.  If you really want it, figure out how to get it without using credit or busting your budget.

In reality, these are all little things.  But each one of them adds up.  Most people don’t realize how much they spend going out to eat or drink.  Looking back at my mint account when I was more of a paycheck to paycheck guy, there were some months where I spent $500 going out to eat and $500 at the bars.  And I didn’t have that much money to spend each month!  But I just looked at it and moved on.  I didn’t recognize what was actually happening.  Now that I watch my budget and spending each day, each week, I’m on a much better path.

Each of these habits will take you a while to form.  Just recognizing that you need to form them will be difficult in itself, let alone the actual habit.  But with time, you can get to a point where you have good financial habits and are fixing the mistakes of your past.  It’s easy!  Just do something small, everyday and eventually, you won’t even notice that you do it.

 

Are you a $30K Millionaire?

Are you a $30K Millionaire?  No, I don’t mean $30 billion, I mean are you someone who makes $30K a year but acts like a millionaire?  It’s ok if you’re that person.  Hell, we’ve all done stupid things (if you’re reading this here, I am assuming you DON’T want to pretend like a millionaire but rather BE one).  I’d say that my car purchase, currently the bane of my personal cash flow, was me acting like a $30K millionaire.  But REALLY is a $30K millionaire?  Is this an actual thing?  Is there, perhaps, a website or article regarding them?

Courtesy of Sergey Melkonov

Courtesy of Sergey Melkonov

I first heard about the so called $30K millionaires several years ago, when I was living in Texas.  It was common there to meet plenty of young men that were living well above their means, working an OK job during the day while partying at night.  As you might guess, they financed or leased everything.  It drives right to the heart of financial illiteracy.  In Texas, these guys were common.  They’d just gotten out of college, got their first job and wanted to appear successful.  $30K doesn’t get very far but when you live at home and you lease that BMW, you can look pretty goddamn slick.

Moving to LA, I’ve experienced this even more.  When asked about it, most people will just say something along the lines of “Fake it till you make it.”  Now, don’t get me wrong, sometimes this can be a good thing!  You visualize your goal and you put yourself in a position to achieve it.  That’s a huge part of the psychology of athletics and success on several levels, including business and personal.  But when we’re talking about achieving financial independence or becoming an actual millionaire, I think these guys might be missing the point just a little bit.  They want so bad to appear rich and powerful that they’re willing to completely destroy their financial future for it.  All because in their mind, that’s the only way to make it.

So, are you, my readers, $30K millionaires?  If you answer yes to at least two of the following questions, you might be one:

1.  Do you go to clubs or lounges (not regular bars) more than once or twice a week?

2.  Is your car leased or financed with next to no money down, despite being a luxury car?

3.  Do you have more than two credit cards, all of which have a balance on them?

4.  Are you living paycheck to paycheck?

5.  Do you spend more money on clothing, expensive dinners, and clubbing than rent?  That is, if you pay rent.  If you live at home, just assume you paid rent.

Now, let me clear, being a $30K millionaire doesn’t make you a douchebag, like the Dallas Morning Observer article was talking about.  That is, obviously, a very specific and rare breed of $30K millionaire.  But that doesn’t mean you aren’t living beyond your means trying to create an image for yourself.  It doesn’t have to be a millionaire image.  It can just be the image of moderate success.  Remember, I was guilty of this as well.  I had credit card debt that I kept revolving.  And I purchased my car in a panic driven state, put next to no money down and now have a monthly cash flow drain that makes me furious every time.

So, who out there is a $30K millionaire or a recovering one?  Let me know your story!  You know mine and I think it’s time for you to share.  Leave your stories in the comments or feel free to send me an email.

Revising my budget

Every once in a while, I find that I need to revise my budget to make sure that it really reflects what is going on in my life.  I know some people like to create a budget and stick to it until the end of time but for me, it’s really a fluid part of our lives.  In my case, my budget needs a drastic overhaul.  The girlfriend and I have moved into a new (more expensive) apartment, I have increased my contributions into my 401k and my savings, and payroll tax wen t up (damn 2%!).  Overall, I need to seriously adjust my budget to account for an additional $600 a month I’m moving into other locations.

This is really leading me to my main point about being flexible.  As I mentioned above, a lot of people create their budget and never deviate from it.  As if it were handed to them from up on high, they worship the budget.  No no no no no.  Not cool.  A budget is a tool, a flexible tool, that we need to use as part of our financial freedom repertoire.

So then, how the hell will I do this without letting my life suffer?  I’ve got to find $600 a month!  And I’m not getting any additional income from any other sources right now.  So, how will I do it?  Well, I won’t lie, I haven’t been living the most mustachian of lifestyles (by the way, if you haven’t checked out Mr. Money Mustache yet, do it.  He’s insane and it’s amazing.  I love it).  Basically, I have been indulging in some things that I shouldn’t have.  Namely, spending excess money going out to eat, drink, etc.

Now, we all need to enjoy ourselves from time to time.  Going out with friends is typically a good time and I doubt you look back too often and say to yourself “Damn, that burrito with Tony was not worth it.”  Because let’s face it, a burrito is almost always worth it.  But what isn’t worth it is going out to lunch EVERY day.  It’s not worth it for your wallet or your belt.  Really, going out to eat or get drinks should be an occasion for you, your friends, and your family.  Why waste the time, and the money, doing something like that every day.

I can understand what some of you are probably thinking: you just cannot stay in the office at lunch.  Yeah, you’re not the only one.  Trust me on that one.  But if you can’t stand it then just get out!  Eat in the park or go for a walk.  Bottom line is that if you can pare down your lunchtime expenses so you’re only eating lunch out of the office maybe once a week, it can go a long, long way to correcting your budget.

Granted, I don’t spend that much money a money eating out.  I’m also going to have to cut out on other things.  I’ll be walking to work more in order to save on gas, as well as wear and tear, on my car.   I’ll also take a little bit out of my cost of insurance, as that recently went down, as well as my bottom line.  Generally, I always budgeted in a cushion each month.  Between that, the things above, and more diligence on my part, I should be just fine with this extra $600 a month.  Just, you know, don’t hate me when you see my February net worth update.  Because it’s going to be AWFUL.  Moving and getting some new (used) furniture, as well as a security deposit, has wiped me out.  But that’s a story for another day.  Until next time!

Earning more than you spend

Image courtesy of 401(k) 2013

Image courtesy of 401(k) 2013

There are some interesting opinions about personal finance floating around the internet the past few days, some of them from more respected sources than others.  Two, however, really stuck out more than the rest.  The first was a Lifehacker post that a friend of mine posted on facebook.  Melanie Pinola of Lifehacker wrote an interesting article titled “Why you should focus on earning more, rather than spending less” and it really was not something I anticipated from Lifehacker.  But what REALLY surprised me was her source of inspiration: Get Rich Slowly.  For those of you not familiar with it, Get Rich Slowly is probably one of the oldest finance websites out there.  JD Roth, the founder, started it in 1999 or so and maintained it for his faithful audience for years.  Unfortunately, he has since sold the website and left as editor.  Which led to El Nerdo, one of the writers there, writing a post yesterday entitled “Throwing away an old rule.”   The rule is one you see constantly in the personal finance sphere: “Spend less than you earn.”

Now, the big thing here is that Lifehacker and El Nerdo are both using the difference in phrasing between to the two in order to put the emphasis back on earnings.  Why should we try to “squeeze blood from a stone” as El Nerdo writes, when we could focus instead on finding more work, more pay, more money!  I won’t lie, I don’t disagree with it.  Net income, how much you make each month after you subtract all your expenses and spending from your take home pay, is a two way street.  Like a business, you have Revenue and Expenses.  Like a business you want more revenue but you’re also mindful of your expenses, keeping them from getting too high and overwhelming your revenue.

Now, here is the big thing.  Like a business, we can suffer if we cut too much from our lives.  If you cut too much from the pay of employees or from Research and Development, a company will suffer in the long run.  If we cut too much out of our lives, we too will suffer.  Just because you can technically eat Ramen for every meal and save X amount of dollars doesn’t mean you should!

However, I’m not sure I 100% agree with the logic behind this. Granted, yes, we all want to earn more.  However, by shifting the focus to earnings rather than spending I feel we hit two problem areas.  One: we are no longer focused on our spending.  Obviously.  Because of this, your renewed focus on earnings will no longer keep you diligently focused on your budget, allowing little things to pile up and cost your more money than if you had just stayed focused on your budget.  This is what gets people into trouble in the first place!  Plenty of people make enough money to live a good, solid life.  The problem is that they try to have a rich lifestyle before they are truly rich.  Or, they are rich but they STILL spend more than they should.  All because they focus on their earnings instead of their spending.

Second: we now are running into a lifestyle change.  For some of us, a change in career could be a good thing.  Maybe we’ve outlived engineering and want to be a teacher.  For others, we’re underemployed and it’s time to find a better job for us.  However, for many of us, making more money means a sizable tradeoff.  For those of us with full time jobs, it means we either need to find a new job (not easy and fairly time consuming), work more hours (if we’re hourly), or get a second job.

We only have so much time in this world and if you ask me, working MORE is not how we should be spending it.  I know for a fact I could work weekends and evenings at a running shoe store nearby (they asked me already) and could easily pull down an extra $1000 a month.  However, I’d give up my weekends and evenings.  I’d lose out on the time with my girlfriend, my friends, and myself.  I won’t lie, an extra grand a month is huge.  But at what cost?

Overall, I’m pretty disappointed with both GRS and Lifehacker.  Of course everyone wants to earn more money rather than cutting their spending but that’s not the point of a frugal living.  Living within your means is supposed to mean living within what you can do right now.  If you make more money, great!  Stash 50% of it away and use the rest to up your standard of living a little bit.  But don’t go killing yourself to make an extra $500 or $1000 in life.  You’re supposed to live a balanced and healthy life.  We shouldn’t waste it all working our lives away.