This is the sixth post in a series of Money Fails.

Money Fail: Broke on Thursday
Money Fail: Dead End Job
Money Fail: The Payment Mentality
Money Fail: Ignoring Unpaid Bills
Money Fail: Spending to Impress
Money Fail: Never Track Finances
Money Fail: Lenders of Last Resort

Keeping a Budget

For people who don’t know where their money is going, can’t pay all of their bills or are sinking deeper into debt each month, a budget is a pretty good idea.  In fact, it’s critical for financial survival.  I have been there as well, but I was too stubborn to create a budget.  So, I accumulated a lot of credit card debt.  I don’t recommend the debt treadmill for anyone.  It costs a lot of money in interest and creates a lot of stress.  You are way better off with a budget.

It’s not fun to sit down and go over your expenses each month.  But, it’s an eye opener to see where all of your money goes.  And, it becomes obvious what needs to be cut to balance the budget.  The credit card statements alone can give you enough buyer’s remorse to change your spending habits permanently.

If you were lost in the forest, you would need a compass.  If you were lost in your car, you would need a GPS.  If you are lost financially, you need a budget.

Bank Overdrafts

Before they reformed the overdraft laws for banks, I know a person who used to overdraw their checking account regularly.  Two years ago, he spent nearly $1,700 on overdrafts.  Some of them happened because the banks reordered the transactions, but most just happened because he wasn’t paying attention.  One time, I looked at his statement and he had bought seven different small items in one day.  So, for a total of about $40 in purchases, he wound up with $245 in overdraft charges.  That was a pretty expensive energy drink and burrito.

It’s easy to avoid overdrafts, if you are keeping track of your balance.  If you don’t want to your balance your checkbook, you can check the balance quickly on your cell phone, before you pay an extra $35 with your debit card.  Better yet, just say No to overdraft and let the purchase get declined.  Your bank should have automatically turned off overdraft on your debit card after the reform act went into effect.  But, the banks are going around trying to convince everyone to turn it back on.  They were making billions on overdrafts and they aren’t happy about losing all of that easy money.

Late Fees & Penalties

Years ago, I paid my fair share of late fees and penalties.  Then, I decided it was a colossal waste of money.  So, I have been very vigilant in paying all of my bills on time to avoid them.  However, I still miss the car registration from time to time and those penalties are huge.  There is nothing worse than giving the bank or the government extra money they don’t deserve.

The best way I know to keep on top of the bills is with Bill Pay.  Not only can you pay bills electronically, which is faster than snail mail, you can see the last time you paid each bill.  You can even set up automatic payment of some bills, so you don’t have to worry about them at all.  Online banking and Bill Pay are a Godsend.  Take advantage of this technology.  It’s often free.

Behind on Payments

One of the saddest things I see is people who get behind on their bills.  Soon, they are facing collections, repossession or foreclosure. It’s nearly impossible for most people to catch back up once they are behind, so they can lose a lot of money.  Not to mention the hassle and embarrassment of losing your house or vehicle.  Another really important balance to keep current is for child support.  The penalties are brutal and they can put you in jail.

There is no big mystery to keeping current on payments, you just have to pay them every month.  The problems occur when the payments are too high for the income or the income stops.  Then, payments can become a nightmare.  I try to avoid payments at all costs.  All of my cars are paid off and I intend to keep it that way.  I look forward to paying off my mortgage in a couple of years, so my only monthly payments are for utilities and insurance.

The Bottom Line

The bottom line is that it’s critical to keep track of your finances in order to get ahead financially.  The less attention you pay to your account balances, the more you wind up paying to the banks.

“In the old days a man who saved money was a miser; nowadays he’s a wonder.”

Anonymous

Recommended Reading

Bruce Bucks - What does it Mean to be Frugal?
Money Crush - The Power of Money is Relative
Little House in the Valley - Quick Money Tips: Avoiding Bank Fees

This post was featured on the Carnival of Personal Finance over at Barbara Friedberg Personal Finance.  If you aren’t familiar with the Carnival of Personal Finance, you need to check it out.  It’s the bee’s knees and the cat’s meow.

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This is the fifth post in a series of Money Fails.

Money Fail: Broke on Thursday
Money Fail: Dead End Job
Money Fail: The Payment Mentality
Money Fail: Ignoring Unpaid Bills
Money Fail: Spending to Impress
Money Fail: Never Track Finances
Money Fail: Lenders of Last Resort

All Show and No Dough

Security is the Reward

Most of the wealthy people I know are more concerned with financial security than material possessions.  Sure, they have nice cars and houses, but it’s knowing they could live for many years without an income that makes them happy.  I believe it’s one of the reasons they are so down-to-earth.  They don’t have the stress and worry that people on the debt treadmill have.  They aren’t worried about losing everything, because it would take a catastrophic event for that to happen.  They have a surplus of income and they can enjoy most of the things that make them happy.

That’s my dream for the future.  I don’t need to live like a rock-star, in a mansion.  But, I do want to live without stress and worry.  I want to be able to buy a car or take a vacation, without wondering how long it will take me to pay it off.  I want to be able to wake up without an alarm clock and take a day off of work, without filling out a form.  I don’t know how long it will take before I can live my dream.  But, I do know I am getting closer each and every payday.

The Mountain of Wealth

One thing I have noticed about wealth is that it’s like pushing a heavy rock up over a mountain.  It takes a lot of effort to push it up the front side, but then it starts to roll down the back side almost by itself.  I still remember how long it took me to save my first $5,000.  It took almost 4 years and it was painful saving that $100 every month.  But, it seemed to go from $5,000 to $10,000 in the blink of an eye.  Not only was I putting more money away, but the money I had already invested started to grow.  Now, I save more every month than I used to save in a year.  And, the interest I earn doubles that amount in a good year.  The hardest part is getting started and having faith your savings will pay off.  The easy part is when your principle starts to double a couple of times.  That is when you know you are on your way.

The Bottom Line

The bottom line is that every dollar you spend on bling is a dollar you won’t have to power your future.  And, every dollar you go into debt, takes a couple of dollars to dig back out.  If you really want to impress the world, power up your investments, instead of your loans and credit cards.  Buy the bling when you can afford it.

“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.”

Will Smith – Actor and Entertainer

Recommended Reading

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Online Investing AI Blog - The One Thing That Buys Happiness
Life and My Finances – 5 Reasons why Immigrants are more Wealthy than You

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This is the fourth post in a series of Money Fails.

Money Fail: Broke on Thursday
Money Fail: Dead End Job
Money Fail: The Payment Mentality
Money Fail: Ignoring Unpaid Bills
Money Fail: Spending to Impress
Money Fail: Never Track Finances
Money Fail: Lenders of Last Resort

The Conscience of a Deadbeat

I had someone show up at my apartment on vacation claiming to have lost their wallet.  Normally, I take people at their word, but this person owed money to everyone we knew.  She cleared customs and got on a plane, so I assume she had some form of ID.  When we lent her $150, I considered it a gift, instead of a loan.  I knew she wouldn’t pay us back and she didn’t.  This is the mindset of someone who shirks their debts.  They have no problem lying or taking money from others.  They feel entitled to money that doesn’t belong to them.

Borrowing without repaying is a lot like stealing.

The Lifestyle of a Debtor

Being heavily in debt is about as close as a person can get to modern day slavery.  Much of their future income goes to service the debt, which leaves little money to enjoy for themselves.  Even after the payments are made, the debt often grows under its own interest and new spending.  It can seem nearly impossible to shed the burden.  Some debt, such as tax liens and student loans, can’t be discharged in bankruptcy.  So, they can literally follow someone to the grave.

Here are some of the degrading things debtors face.

• Wage Garnishments
• Subprime Credit Rating
• Harassing Phone Calls
• Lawsuits and Judgments
• Collection Agencies
• Foreclosure and Eviction
• Fines and Repossession

Ignoring debt only makes it worse.

Making Wiser Choices

How do people eliminate their debt?

• File for Bankruptcy
• Refinance with Home Equity
• Transfer Balances
• Debt Management Services

All of these popular options have one bad thing in common; they don’t change the spending habits.  Unless someone lost their income, got divorced, experienced an illness or suffered a catastrophe, they probably spent themselves into debt.  Unless the spending problem is addressed, debt will always be a problem.  Even worse, most of these options don’t eliminate the debt, they only shuffle it around.  This is more of a problem than a solution.

Shuffling debt is not the same as paying it off.

Taking Control of Debt

When it comes to paying off debt, the important first step is accepting personal responsibility.  Every excuse or denial allows a reason to avoid dealing with the debt.  Even if the bank changes their terms and raises the interest rate, they aren’t the ones who borrowed the money.  They aren’t the ones who need to pay it back.  When Citibank did this to me, it made me so angry I decided to stop doing business with them.  So, I cut up their card and paid it off.  I realized I had become too comfortable with the debt and allowed them to take advantage of me.

Blame is the opposite of responsibility.

Tasting Sweet Success

Nothing is quite as empowering as paying off a large amount of debt.  I have done it and I can say with all honesty, it’s an amazing thing.  It’s hard to describe how it feels to make the final payment on a debt that once seemed insurmountable.  It’s like climbing a mountain, winning the lottery and unshackling chains, all in one moment.  It took a dedicated effort over many years, but it was well worth it.  I only wish I had of avoided that debt in the first place.

We hold the power to eliminate our debt.

The Bottom Line

The bottom line is that a debt is a responsibility.  Whether someone owes a bank or a friend, their willingness to pay it back is a sign of character.  Their care and caution to stay out of debt is a sign of intelligence.

“Home life ceases to be free and beautiful as soon as it is founded on borrowing and debt.”

Henrik Ibsen – Norwegian Playwright

Recommended Reading

Magical Penney - Debt in the UK
Barbara Friedberg - How to Get Rid of Debt; Start Here
DINKs Finance - Credit Card Users Anonymous

This post was featured on the Carnival of Personal Finance over at Beating Broke.  If you aren’t familiar with the Carnival of Personal Finance, you need to check it out.  This post was selected as the Editor’s Choice.

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This is the first post in a series of Money Fails.

Money Fail: Broke on Thursday
Money Fail: Dead End Job
Money Fail: The Payment Mentality
Money Fail: Ignoring Unpaid Bills
Money Fail: Spending to Impress
Money Fail: Never Track Finances
Money Fail: Lenders of Last Resort

The Weekend Warrior

Living on the Edge

Most people today don’t fear debt like our parents and grandparents did.  They have been conditioned to think it’s OK to owe money on the things you want.  Some kinds of debt are even considered “good” debt.  But, all debt carries a risk.  It’s called a liability for a reason.  If your income stops or you can’t afford to make the payments, you start to lose all of the things you worked so hard for.  And, people have a lot of unnecessary stress and anxiety related to the debt.

The problem with living on the edge is that it only takes a small financial setback to push someone over a cliff.  And, this small setback is going to happen sooner or later.  An accident, illness or layoff can set someone back for years.  They may lose their place and have to start over.  And it’s completely avoidable, by saving a little money each week.  Being broke on payday is an indicator that something is wrong.  It’s a red flag that you are taking too much risk by having no cash reserve.

Struggling Financially

Imagine coming home from work and your wallet, gas tank and refrigerator are empty.  The phone rings and it’s a bill collector.  You don’t have the money to pay all of your bills, so you screen your calls.  Last week, you got a ticket for an expired registration.  It has gone up by 50%, because you missed the due date.  Your bank account is overdrawn and you got hit with five separate $35 overdraft fees.  On payday, you juggle some bills and pay others.

Why People Struggle

• They pay a lot of interest, penalties and fees
• They have no idea where their money is going
• They pay extra to have the latest and greatest
• They have very expensive habits and hobbies
• They feel entitled to things they can’t afford
• They try to impress others and look successful
• They use credit when they run out of money
• They don’t save for problems or opportunities

Are you one of the millions who are struggling financially?

A Prosperous Life

Now imagine payday rolls around and there is still some money left in your bank account.  The bills come in and you can afford to pay them all.  You invest some money for the future and buy something nice for yourself.  An unexpected expense pops up and you have the money to handle it.  You are saving for a vacation and researching destinations.  Despite the fact you make the same level of income as before, you live better and have way more money.

How to Prosper

• Invest part of your income from every paycheck
• Watch your budget to keep from overspending
• Save up for wants instead of using credit cards
• Avoid monthly payments, except for a mortgage
• Eliminate consumer debt as quickly as possible
• Increase your income by any means necessary
• Create a sound financial plan and stick to it

Would you change your spending habits in order to prosper?

The Bottom Line

The bottom line is that people shouldn’t be waiting for payday just to become solvent again.  They should be paying themselves first and pulling ahead from every paycheck.  There’s no joy on payday when others keep your pay.

“Being broke is a temporary situation. Being poor is a state of mind.”

Mike Todd – American Film Producer

Recommended Reading

Invest it Wisely - Planting a Seed of Savings
Punch Debt in the Face - You’re not Debt Free if you Have Debt
Beating Broke - Taking Financial Ownership

This post was featured on the Carnival of Personal Finance over at Mrs. Nespy’s World.  If you aren’t familiar with the Carnival of Personal Finance, you need to check it out.  There are dozens of amazing posts.

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Do you have what it takes to become successful?  Then, read on.

Don’t skip down to the bottom or you’ll miss all of the good stuff.

It’s Not what you Earn

Image by Meddy Garnet

I met a lot of fun and interesting people in college.  I also met some people who were fairly obnoxious.  One particular guy in my Physics class was extremely arrogant.  He kept interrupting the lecture to add his own comments.  And, it was obvious to everyone he had no idea what he was talking about.  Our professor, who was a brilliant Physicist, took this all in stride and kept on with his lecture.  This student kept trying to prove how smart he was, but he wound up making a fool of himself.

One day, I was talking to a couple of my classmates at break and he blurted out, “How much do you make?”  Even though I considered it fairly rude, I told him my salary.  He immediately shot back, “Last year, I made $250,000.”  I said, “Wow, that’s great.  How much did you keep?”  His response was, “Huh?”  I said, “If you are a single guy and made a quarter mil last year, I sure hope you saved some of it.”  The look on his face was priceless.  It was obvious he had blown every penny.  Instead of looking smarter than the rest of us, he looked pretty stupid.

No one gets rich by spending all of their money as fast as they earn it.

It’s Not what you Buy

Some people buy expensive things to look rich, when they aren’t.  Some people want the finer things, even though they can’t afford them.  Some people have no idea why they buy things they don’t even need.  Some people hide their spending from their spouse, because they know it will cause a fight.  In all of these cases, spending is a problem.  Not only does it jeopardize that person’s financial future, it lowers their quality of life.

I know two people who loved to drive Cadillacs.  Even though they both had working class incomes, they traded in their sweet Caddy for new a one every four years.  Both of these people wound up broke at retirement and had to sell their houses.  One moved to a trailer park and the other moved out of state.  I appreciate a fine ride as much as the next guy.  But, it’s a pretty heavy price some people pay to drive expensive cars.  For people who can afford new cars, it’s not a problem.  For those who can’t, it’s a financial disaster.

No one gets rich buying fancy things, but they sure can become poor.

It’s What you Keep for Yourself

No matter how you slice it, people have to keep some of their earnings in order to accumulate wealth.  It doesn’t matter if they are barely scraping by or making money hand-over-fist.  If they don’t keep some money for themselves, all of their hard work will only benefit others.  It’s not rocket science.  It’s easy for anyone to understand.  But, most people just won’t do it.  So, they give up their chance for a better life in the future.

I have a friend who used to own a telemarketing company and he made a lot of money selling copier toner.  But, he spent most of the money on items that had little future value.  I remember him buying a $10,000 statue in the ’80s, when that was a lot of money.  He got sick a couple of years ago and lost everything.  Now, he works at Lowe’s for the health insurance.  This could have easily been avoided if he had just saved some of the money he was making.

Most people get rich by saving part of their income over a long time.

My Success Secret

I can’t tell you what works for other people, but I can tell you what works for me.  As soon as my paycheck gets deposited into the bank, before I spend a dime or pay any bills, I Pay Myself First.  I jump on the website of my brokerage account and my mutual funds and I transfer money into my investments.  I could easily automate the process, but I like to do it manually.  As I put the money into my investments, it reinforces that I am working for a better future, not just to make a living.

Back when I was young, poor and saving for a house, I would envision people trying to take my paycheck away from me.  And, I would have to fight them off to keep some of my money.  I imagined the landlord, Citibank and the utility companies all trying to bum-rush me on payday.  And I would be punching and kicking them with my money clasped tightly in my hand.  I know it may sound ridiculous, but it worked.  I saved up a big down payment on a small income and I bought my house.  If I hadn’t fought so hard to keep my money (at least in my own twisted mind) I would still be broke and paying rent.

Most people get rich by refusing to let others take away their income.

The Bottom Line

The bottom line is saving money is no secret, but it is the way to success.  This is something many people know, but few people do.  Saving money now is almost like winning the lottery in the future, except it’s a sure thing.

“It’s not the things you don’t know that will cause you problems in this class.  It’s the things you think you know that just aren’t so.”

Professor Joel Levine - Master of Physics

Recommended Reading

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Life is more Precious than Money

Image by Joel K

Money comes and goes in our lives, but time can never be replaced.  It slowly ticks away and sometimes ends without warning.  I’m not a big fan of the deprive yourself mentality.  I spent way too much of my time in my 20s and 30s chasing after dollars.  My new mantra is to prosper and enjoy my life and money.  That doesn’t mean that I will forsake my future, because I could die tomorrow.  It means I’m not afraid to spend some money on the things that bring quality to my life.

Money can be the means to a happy life.  But, it can also become a source of problems and worry.  It can destroy happiness just as quickly as it can bring it.  Embrace life and see money for the simple vehicle it is.  When your destination is the cemetery, money isn’t going to do you a whole lot of good.  If your only legacy is your wealth, your precious life will have been squandered.

The Curse of Consumerism

When I think about the worst of consumerism, I think of the celebrities, musicians and athletes, who spend all of their money on jewelry, cars and houses, only to wind up broke a couple of years later.  I think of people like Nicolas Cage who own mansions, yachts and private islands, yet they are on the brink of financial disaster.  I think of people like Charlie Sheen whose insatiable thirsts mask a deep void in their lives that can’t be filled.  But, most of all, I think of all the awesome hard-working people trying to live the dream, unaware that it’s only a mirage.  As they walk across the desert of life towards prosperity, the oasis slowly keeps moving out of their range.

The reality is that consumerism is manufactured.  It is created and encouraged by the people who benefit from our blind acceptance of this sham.  And, it’s highly effective at separating people from their income.  It takes a huge amount of courage to reject consumerism, when we are judged everyday by our cars, clothes, schools and houses.  It’s hard to convince our loved ones that diamonds are only semi-precious or that luxury cars don’t represent the spirit of Christmas, because thousands of carefully crafted TV commercials have labeled everyone as failures, unless they can afford them.

Fighting the Urge to Splurge

Broke on Purpose – One way I avoid impulse spending is to constrain my budget on purpose.  I have been doing it for decades and it works great for me.  Basically, I save 20% of my net, pay extra on my mortgage, pay all of my bills and live on the rest.  So, money usually gets pretty tight by the end of my pay period.  This keeps me from blowing money on discretionary items.  Other people freeze their credit cards in a block of ice or leave them home when they shop.  Some people shop only with cash, so they won’t overspend.

Arms Race Treaty -  I have two wealthy cousins who always try to one-up each other.  One day, they realized their folly and tried a new tactic.  They went into an RV dealership together and asked for a big discount for buying two motor homes at once.  They both bought the same model, with slight differences, and I believe they still have them.  Did you ever consider the Jonses might be keeping up with you?  Maybe, you should call a truce.

Meticulous Budgeting – I’m not a budget fanatic, but it sure works for some people.  Knowing what should be spent each month for each expense category can counteract the urge to splurge for an expensive item.  Tracking your budget points out the frivolous purchases of the past, to help avoid budget busters in the future.  If a budget helps you save, I recommend it.

Wait and See – Another strategy some people use is to have a “cooling off” period on any large purchase.  A 30-day wait and see period can not only save you money, it can save you from purchasing the wrong items.  By the time the 30 days is up, you have had plenty of time to research the item, to make sure it’s the best fit for your needs.  An even better solution is the wait and save approach, where you save up the money and buy items with cash.

The Bottom Line

The bottom line is money can buy happiness, provided it isn’t squandered on a bunch of shiny baubles.  For me, true happiness comes from a lack of stress and money problems.  And, the financial dream of my future is the ability to create my own income, without depending on a paycheck.

“There is no dignity quite so impressive, and no independence quite so important, as living within your means.”

Calvin Coolidge – 30th President of the United States

Recommended Reading

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Economix – Consumer Spending: The Chicken or the Egg

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Since I am an avid Do It Yourselfer (mostly because I am cheap), I thought I would share three examples of where we saved a ton of money by doing it ourselves.  And the projects came out great.  As for Man Points, I have to admit my wife looks at me totally different after I fix something on a Sunday, instead of napping on the couch watching an Angels game.

The Pergo Floor

Having cream colored carpet at the beach is just a bad idea, especially in the entry way of the front door.  I had always wanted to put in some bamboo flooring, but budgetary concerns kept me from realizing my dream.  (I was too cheap.)  One day, we were in Lowe’s and my wife pointed out the Pergo flooring.  Since it snapped together, even amateurs like us had a shot at putting it down.  Plus, we wouldn’t have to wax, refinish or maintain it.  It was right up our alley.

We measured it out and bought the materials.  We also bought the little plastic hammer, pounding block and other accessories.  I already had a table and jig saw, so I only needed to borrow a chop saw.  The demolition work wasn’t much fun.  We had to remove all of the carpet, Linoleum, tack strips and nails. We also swept up about 50 pounds of sand that was under the carpet.  Putting in the Pergo wasn’t that hard.  My wife laid down the underlayment; my brother laid down the Pergo; and I made all of the cuts.  One weekend and $1,000 later, we were the proud owners of a beautiful new faux wood floor.

The Truck Bed Swap

Nothing brings back teenage memories for a middle-aged man like watching his kid trash their vehicle.  When my son got rear-ended by a speeding BMW, I thought the little Toyota truck was lost.  But, after I inspected the damage, I realized that the frame was straight and only the bed and bumper were damaged.

I figured we could get a bed and bumper at a junk yard and fix the truck, without going to the very costly body shop.  Our big opportunity came when my nephew lunched the transmission on his similar Toyota truck and we bought the parts from it.  We unbolted the two truck beds, picked them up and threw them on the lawn.  Even though the trucks were different model years and one was an extra-cab, the trucks beds were nearly identical.  They were even the same color, so we didn’t have to paint.  We swapped the beds and bolted them on the opposite trucks.  Four hours and $500 later, the truck was as good as used.

The Upstairs Bathroom

Nothing is more terrifying to the average homeowner than the two dreaded words, plumbing leak.  This condition is enough to send a staunch man into a quivering state of shock, as he has visions of dry rot and empty bank accounts.  This will immediately affix the wife onto his case, until the situation is stabilized.  She will be having visions of mold and mildew in the walls.  Plumbers and contractors love a situation like this, because it’s practically an open checkbook.  It’s not like a remodel, where you have a choice to do it or not.  It has to be fixed, and it has to be fixed now.  They will be having visions of bass boats and Hawaiian vacations.

It takes some pretty big boots to rip up a sub-floor for the first time.  And, it takes some awesome power tools.  This project created the opportunity for me to buy the reciprocating saw I have always wanted.  The rest of the materials were pretty cheap.  I bought some glue, 2x4s, a sheet of plywood, caulking and some Linoleum tiles.  I finished the job with ten fingers and toes.  Six hours and $300 later, the kid’s bathroom was water tight and looking good.

Tips for Do It Yourselfers

There once was a time honored tradition of going into the hardware or the auto parts store and asking someone who worked there for advice.  If you were lucky, they had someone on hand who either worked in the trades or was a solid amateur.  Now days, you walk into a warehouse store and talk to a kid who looks like he changes his clothes, about as often as you change your motor oil.  We still have a downtown hardware store, so I am happy to pay a little more for my building supplies.  Since I live in a military town, I find a kid in the auto parts store who looks like a Marine from Indiana.  If I see a Mustang or a Camaro in the parking lot, I can usually get help.

Thanks to a modern marvel called the Internet, help is often only a couple of clicks away.  I like to jump on YouTube and watch videos of people doing these projects, before I get started myself.  That way, I have the right supplies and I don’t go off in the wrong direction.  Twice, these YouTube videos have completely saved my project when I was stuck in the middle and had parts everywhere.  Something as simple as changing the brakes on a Jetta can turn into a nightmare, until you figure out the how the mechanics compress the wheel cylinders.  Watching the YouTube video is way better than reading through my Chilton’s manuals.

Disclaimer

No wives or other females were harmed during this post.  Any reference to people you know is purely coincidental.  Men are well aware that most women work really hard, but we enjoy acting like the stronger sex.  My wife has helped me lay tile, remove Linoleum, change oil, install Pergo, paint the house dig an irrigation drain and scrape the cottage cheese off the ceilings.

The Bottom Line

The bottom line is that people can save a lot of money by doing some things for themselves.  I have personally saved tens of thousands of dollars and have the satisfaction of a job well done.  But, it takes careful preparation to avoid a failed project.  Some projects are better left to the experts.

“It takes half your life before you discover life is a do-it-yourself project.”

Napoleon Hill – Author of Think and Grow Rich

Recommended Reading

Frugal Dad - Outsourcing Household Chores
The Financial Blogger - Extra Income for Hands On People
Ask the Builder – Water Damaged Drywall

This post was featured on the Carnival of Personal Finance over at Kitten a Go-Go.  If you aren’t familiar with the Carnival of Personal Finance, you need to check it out. It’s the greatest carnival on the net.

This post was also featured on:

101 Centavos - Revolution, Baby! A Bastille Day Roundup
Money Crashers – Round-Up: Don’t Lose Your Footing on Life

Thank you for the links to my blog.

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Change is the Only Constant

Image by Aunt Owwee

In order for financial planning to be effective, it must take life events and personal factors into account.  A 25 year old single parent isn’t going to be able to save money like a middle-aged DINKs couple.  But, it’s still every bit as important.

One of the saddest things I see are people who are unprepared for the future who wind up in financial trouble.  They may have worked hard their entire lives, only to wind up broke when they are older and can no longer work to generate income.  The worst part is that it’s completely avoidable with a little bit of planning and financial discipline.

Spring (Teens & 20s)

Spring is the season where everything is fresh and new.  Life is colorful and exciting.  Energy and optimism are in abundance.  Every door is open and opportunties are endless.  This is also the season of youth and inexperience.  Others know this and they take advantage with credit cards, overdraft and cell phone contracts.  Winter is still 40-50 years away, yet the new car and the bright lights of the city beckon today.

Spring is a time for balance.  It’s a time to heed the call of nature and enjoy the qualities of youth before they disappear.  Yet, it’s also the time to plot a mature course toward the future.  Choices made in the Spring can lead in directions that may be difficult to change later in life.  It’s a good time to go on an adventure or start a business.  It’s the time to take a shot at big dreams, while the downside is minimal.  This is a bad time for extremes.  It’s a bad time to engage in destructive behavior or develop addictive habits.

Summer (30s & 40s)

Summer is the season of the long hot day.  It is the season of buying houses and raising children.  The burden is heavy and the bills are endless.  The resources are limited and needs overwhelming.  Work becomes the focus, the solution and the consolation.  A person’s title becomes their identity.  Income is the key element which balances the books of life.  And, it becomes the prize.

Summer is a time to make hay while the sun is shining.  It’s a time to shore up the financial foundation and to pull ahead in life.  It’s a time when the choices made earlier start to produce a result.  It’s the time when the industrious are rewarded and slackers fall behind.  It’s the time to shed debt and accumulate assets.  It’s a bad time to squander resources or purchase liabilities.

Autumn (50s & 60s)

Autumn is the season of the harvest.  It’s the time when all of the hard work finally starts to pay off.  The kids are big; the bills are small; the house is finally paid off.  Saving money becomes much easier.  Yet, the compounded results are minimal.  Those who have experienced setbacks will struggle to catch up, while those who are fortunate pack their pantries.

Autumn is a time when winter becomes inescapable.  It’s a time of panic and anxiety for the unprepared and a time of happiness and pride for those who have been resourceful.  It’s a good time to become more conservative with investments and to avoid potential risks.  It’s a bad time to learn about money the hard way or to lose focus on the future.

Winter (Retirement)

Winter is the season of long nights and bitter cold.  It’s a time of tumultuous change.  The strong survive; the weak struggle; the old and sick are lost.  Resources become scarce for the ill prepared, while others live in warmth and comfort.  Although time is ticking away, daily freedom is in abundance.

Winter is a time for conservation and relaxation.  Life is precious and waste becomes a sin.  It’s a good time to do and see the things that have always been dreamed of.  It’s a good time to adopt a healthy lifestyle and keep a positive attitude.  It’s a time to show some love and impart some wisdom.  It’s a bad time to become concerned with all of life’s problems.

The Moral of the Story

The moral of the story is that people must save during the first three seasons of their lives, in order to survive the Winter.  Waiting until Summer or Autumn is a huge mistake.  Whether someone is 25, 35, 45 or even 55 years old, they need to invest in their future, before their paycheck disappears.

Never give your paycheck to others without keeping some for yourself.

“You must take personal responsibility. You cannot change the circumstances, the seasons, or the wind, but you can change yourself. That is something you have charge of.”

Jim Rohn – Motivational Speaker & Entrepreneur

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This post was featured on the Carnival of Personal Finance over at Canadian Personal Finance Blog.  This week, my post was selected as the Editor’s Choice.  Check it out.

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It Costs a Lot of Money to Drive

According to AAA, it costs an average of $9,519 to drive a midsized sedan 15,000 miles per year.  This was calculated in 2010 with gas costing $2.60 per gallon.  If you drive an SUV, luxury car or pickup truck, these costs go way up.  Check out the brochure Your Driving Costs on the AAA website for detailed information.

Some People don’t have a Choice

Unless you live in an area with good public transportation, it’s nearly impossible to live without a car in America.  If I lived in a city like Boston or New York, I would skip the car and take the subway.  Here in sunny Southern California, it seems like a two-hour bus ride to go two miles, then a five mile walk from the bus stop.  In many rural areas, it can be a half hour drive, just to get to a store or a gas station.  In vast places like Texas and Montana, it takes almost a whole day just to drive across the state.  So, the decision to purchase a car is often more practical than personal.

I believe the high costs for automobiles hit the younger generations the hardest.  This comes from my own experience, as well as from watching others.  Young people are so image conscious that they often buy cars they can’t afford on their limited incomes.  And, they do it at a time where they really need the money for more important things.  But, a new car shows they have arrived.  So, it always seems to be high on the list of wants.  Banks, car dealers and insurance companies are happy to take advantage.

What about Opportunity Costs?

If the average American saved just half of the money they spend on cars in their lifetimes, they would almost certainly become millionaires.  Take the example above.  If a person saved just half of the average cost of $9,519 per year, they would have an investment worth $2,173,441* at retirement.  A two-car couple would have saved well over $4 million.  That’s a lot of money to give up for a fancy set of wheels.

*This amount was calculated at $396.63 per month over a 50-year working life and a 7% rate of return.  It doesn’t include inflation or future value.

The reason I brought this up is because most of the people I know who are cash poor have some pretty nice cars.  I have nothing against nice cars for people who can afford them.  But, they don’t make a lot of sense for people who are barely scraping by.  If someone has a lot of debt and can’t seem to save any money, their biggest problem may be parked in the garage.

Money Saving Strategies

Optimized Purchase - Two effective ways to save money are; buy new cars and keep them for 10 years or buy used cars and keep them for 5 years.  It’s considerably cheaper than buying or leasing new cars every 4 years.  Investing the savings could make a huge difference in their  financial future.

Vintage Rides - My favorite strategy is to buy older cars for cash and drive them until they die.  This works for me, because I drive basic American cars and I’m able to maintain them.  Used cars are cheap.  So, I can get a pretty nice ride, without spending a fortune.  I save a lot of money on interest, insurance and registration.  If I get tired of a car or run into some maintenance hassles, I just get another one.  If it gets scratched or dented, I’m over it.

Limit your Commute - For 25 years, I commuted 40-60 miles per day, round-trip.  Anyone who has been to California knows what rush hour on a freeway looks like.  In 1996, I had a job 28 miles away that was a 90 minute drive on a bad morning.  After I left that job, I refused to commute more than 20 miles each way.  I now work 3.2 miles from home.  I save thousands of dollars and hundreds of hours per year.  The lifestyle change is amazing.

Use your Feet - People are questioning the wisdom of living in suburbia.  In some master-planned communities, you have to drive for miles just to get out of the neighborhood.  I live downtown, so I can easily walk to shops, restaurants, stores, my bank and the beach.  A few years ago, I would drive these short distances.  Now, I walk more and enjoy the scenery.

Alternative Energy – For the past 20 years, my dream has been to own an electric car. Ever since I saw the Chevy Impact (GM EV1) in Popular Science, I have wanted one.  A low-maintenance vehicle that doesn’t use gas or oil makes a lot of sense.  Once people realize it costs 3 cents per mile to charge a battery, they may reconsider the high price of gasoline.  Like computers, EVs will definitely get better and cheaper.  I have my eye on a Ford Focus EV.

The Bottom Line

The bottom line is that cars are a depreciating asset.  They lose up to 20% of their value in the first year and cost a small fortune to own and operate.  The less you spend on cars, the more you will have for other purposes.

“We are the first nation in the history of the world to go to the poorhouse in an automobile.”

Will Rogers – American Humorist

Recommended Reading

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This post was featured on the Carnival of Personal Finance over at Stupid Cents.  This is the Greatest Blog Carnival on the Net.  Check it out.

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