The Number 1 Problem with Personal Finance

I just read a whole thread on Twitter “bashing” FIRE and extreme miserliness. The gist was “Why be miserable just to save money?”. It then started veering into the mentality of “If I can’t/don’t want to be miserly then why shouldn’t I spend/waste tons of money?”
I rarely get political but I think we have the same issue with politics today.

THE NUMBER ONE ISSUE WITH PERSONAL FINANCE AND POLITICS TODAY IS EXTREMISM ON BOTH SIDES.

The problem with extreme blogs and subreddits (though why anyone uses that as a barometer is beyond me) is that the extremism is broadcast and amplified on social media. At the other end is the extreme materialism that has permeated our culture. Those that show off their extremely lavish lifestyles. This, too, is broadcast and amplified on social media. I know that I sound like a grouchy old lady complaining about today’s ills and “social media” but I am just a millennial who is seeing what is going around in the world. There is no moderation. There is no “middle ground”, there is no “balance”. There is either good or bad. Extreme one way or extreme the other way.

In terms of finance, there is either a miser or a lavish spender. Pay off all your student loans in 2 years or never pay them off. Never buy deodorant or buy $11 deodorant. Analyze each purchase or never look at the bill. I think that “we” (as in people who live today) often tend to look at things and then either hate or love them. If we have an idea with which we disagree, we automatically take up the opposing stance without considering that there may be a middle ground. There may be a balance. There may be good and bad mixed up together. We are so desperate to label everything “good”, “bad”, “tolerant”, “intolerant” that we can’t see that maybe there is a middle. Maybe there is a mixture of both.

Now, since this is a personal finance blog and I don’t want to sit and complain about “what is wrong with the world today” I will turn my rant to personal finance.

There is a way to be financially responsible without becoming a miser. There is a way to enjoy life without spending all our money. You can be financially stable without being a millionaire or retiring at 40.

Now, if you choose to practice extreme frugalism, out of choice, (there are many people who must do this out of necessity) than I guess that is your choice and right. Just be aware that extremism can often lead to abuse and then it is no longer your choice or right.

My message is this: don’t be turned off from being financially responsible by extremism. Don’t stop listening or doing the best you can just because you heard/read/saw/experienced the other end. Allow yourself to find the medium and the balance that works for you.

You can stick to a budget and still buy things you enjoy.
You can cut frivolous spending and still do things you enjoy.
You can use hand-me-downs and not traumatize your children.
You can save money and still spend some.
You can be careful about going into debt and still go to school.
You can make careful financial decisions and still have children.
You can choose to stay home often and still still go to a family wedding.
You can not buy a brand-new Audit and still have a decent car.
You can shop sales and use coupons without driving you and your family crazy.

It does not need to be all or none. It really doesn’t. That voice in your head? The one that is telling you that it’s not worth doing unless you’re doing it completely? Realize that extremism is rearing its ugly head.

Let’s not let extremism of any sort ruin our lives and our futures.

How to Save Money on Gifts

Let’s not kid ourselves. There is no way to have an extensive gift list and but the perfect gift all on a miniscule budget. In order to REALLY save TONS of money on gifts you have to do the following:

  1. Give less gifts
  2. Give smaller gifts.

If any of those work for you-then do it! We should all reduce the amount of materialism happens around the holidays. But if you are going to disappoint your children for life or cause an irreparable family rift then you can’t just skip presents or buy something from the dollar store.

Here are some ideas that can help you save some money on gifts. If you are lucky and diligent then this may help you tremendously. The best way to tackle overspending is to make a STRICT budget and really stick to it. You can decide how much you will spend per person or total and then really stick to it.

 

  1. Be open. We all want to find and give the perfect gift and sometimes we have in our heads exactly what that gift should be. Be open, if the item you are searching for is out of your price range or is never going on sale then it’s time to think of other options
  2. Shop sales mindfully. Black Friday sales and per-holiday sales often have steep discounts on some amazing items. But keep in mind that the price you see “on sale” could have been manipulated to seem to be a steeper discount than it actually is. While Black Friday is a great day to do some shopping and a great time to find deals, don’t buy it just because its on “sale”– make sure you are actually getting it for cheaper.
  3. Shop clearance. There is nothing wrong with getting something off the clearance rack. Small children, in particular don’t usually care if something is the latest and greatest. A toy is a toy and a book is a book.
  4. Pair up. For more pricey gifts, see if chipping in with someone else can save you some money (and time). Maybe a group of siblings want to get together to get something nicer for their parents. If done correctly, this can lower individual costs and sometimes the combined gift is much nicer than what you could have afforded on your own.
  5. Give a family gift- if you have family that has many kids, maybe consider buying a family gift instead of individual gifts. If you do this properly it can save you some money. Consider a gift that everyone will enjoy-like a large toy or game or an experience that they can all do together- a membership to a museum or zoo (for example).
  6. DIY or Do it Simple. There are so many meaningful gifts that can be given that are DIY or partial DIY. Picture books, magnets, framed poems can all be lovely meaningful gifts that don’t break the bank. With a little creativity and time you can create some truly memorable items that probably will be cherished for much longer than that Starbucks gift card.
  7. Skip the babies. And if you can’t then give them something small or cheap. Dollar Store or Target dollar section works well for this. They really, really don’t need something big and is honestly a waste of money.
  8. Use Amazon (yes-this an affiliate link). Amazon is currently offering free shipping for all shoppers and has rolled out a targeted program allowing Prime members to have all their items ship at once which allows add-on items to ship without a $25 minimum. Keep on scanning deal sites and flash sales to score some great deals.
  9. Use deal sites. There are so many blogs, twitter accounts, and Instagram pages that are devoted to finding you great deals. Check these every day and sign up for alerts to get the limited time offers that are available.
  10. Use Ebates (again-an affiliate link). Don’t spend more because you think you will get cash back as the amount is not that large. But it does add up especially if you do a lot of shopping online. And its always nice to get a check a few weeks after the holidays are over.

Do you have any tips for saving money on gifts? Hit the comments or let me know on Twitter!

4 Great Books to Read Right Now

Running List of Books

Here are some great books that I love that have really helped me with gaining control of my financial life. Even though some of the books have nothing to do with finances- they have helped gain control of my life and therefore of my finances. Everything is intertwined. Having control of your life will help you have control of your finances. Having control of your finances will help you be in control of your life.

All these books are available on Amazon (affiliate links are located in this post) but you can check your local library to see if any are available. I don’t like to spend money and that includes books so I don’t buy a book unless I have already read it and KNOW that I want to own it.

I personally invested in a Kindle a few years back and I constantly check out books from the library onto my Kindle instead of buying books or e-books. This way I don’t need to make it to the library while they are actually open.

Here is a list of 4 great books and I would love to add more to the list. These are all worth a read!

(You can also give them as gifts but people don’t take kindly to being giving self-help books as a gift. It comes across as um.. sanctimonious and jerky.)

  1. The Total Money Makeover by Dave Ramsey. This is the basic book of personal finance and paying off debt. Although many people disagree with some of his methods it has worked for many, many people particularly those who are drowning in debt and can’t seem to get out. Its a great basic book and you have to read it first to disagree with it.
  2. How Not to Die by Dr. Michael Greger– This is not a personal finance book but a health book that helped me improve my eating habits. He is a big proponent of a plant-based diet which means cutting out a lot of animal-based proteins. Using this book as a guide has helped me cut down on my grocery bill tremendously while eating healthier. How Not to Die Cookbook is the cookbook companion and includes recipes that he approves of. Just Remember: just because it is vegan does not mean it is budget-friendly. I actually own this book which should tell you how much I like it because I don’t buy books.
  3. Sink Reflections by FlyLady– One of my favorites. My mother read this when I was a teenager and I adopted many of her tools since then. This is not a personal finance book but following her book will save your finances. Getting organized about meal planning, cleaning, shopping etc. will save you all that money that is unnecessarily spent. No more spending money on take-out because there is no dinner, no more buying things twice because you forgot where you put it, no more last minute shopping. The tools and habits in this book are life-changing! No joke.
  4. The Millionaire Next Door by Thomas Stanley- I haven’t read this book yet but it is on my reading list. This was recommended by @Financesafter50 after I posted on Twitter asking for recommendations. See what his response was here.

What other books have changed your life? Hit the comments or respond to my tweet! Great books will be added to this post! Respond here!

 

Emergency Fund: A Primer

  • 43.3% of Americans have less than $500 set aside for a financial emergency
  • 34.5% of Americans don’t have an emergency fund at all

and 14.5% of Americans don’t even know what an emergency fund is. (Source)

This post is dedicated to that 14.5%. You know who you are. Or maybe you don’t. But maybe you can read this post and then you can have the amazing honor of lowering that percentage. These types of statistics are what led me to start my blog.

Emergency Fund: A Primer

What is an emergency fund?

Exactly what is sounds like. Basically its money that you put aside to help you cover emergencies

Why is this different than other savings?

Because when we talk about savings we usually are talking about money that you are investing in a way that will make you money. You want the money to grow. An emergency fund is not meant to be invested. You just want it there when you need it. This means that you want it easy accessible. Think about a pile of cash that you can pull out in case of emergency. You want it readily available Of course, a pile of cash is NOT a safe way to keep money (although having some ready cash is always a good idea) but that is basically the point. I personally do keep my emergency fund in a savings account that earns interest but it earns very little compared to other accounts and it has no penalty for taking the money out.

Why do I need it?

Cuz life happens. Cars break. People get hurt. Medicine needs to be bought. Jobs get lost. People die. People get very sick. Crucial appliances get broken. The list goes on. The more catastrophic losses in life are usually covered by insurance- most people don’t have the cash to be able to cover rebuilding a house, for example but the smaller things in life have to be covered by you. Of course, covering an insurance deductible or co-pay can also be an emergency.

The hardest thing about emergency funds is that the harder you find to save for it- the more you are in need of it. Think about it- if you are living paycheck to paycheck then you can’t actually afford ANYTHING else-let alone a flat tire. Once when I was going through a long period of under-employment I used my emergency fund to buy my son $20 worth of medicine. If you barely have the medicine to cover basic bills, then an emergency can really knock you down.

Recently, there have been hurricanes and wildfire that forced many to evacuate. Having money to pay for transportation, for alternate shelter, for equipment to secure property, generators etc. can minimize the financial devastation that can be caused. In addition, having money gives you OPTIONS. For example, you can choose not to stay in a public shelter or you can decide to evacuate a if you are in a non-mandatory zone that is expected to be hit hard.

Why can’t I borrow money for an emergency if I need to?

Assuming that someone will lend you money (not always a given- even credit cards have a nasty habit of having pesky things such as credit limits or insisting on knowing that you have a way to pay them back so unemployment can get a card canceled) borrowing even small amounts of money from a private lender or credit card can spiral very quickly out of control. While you may get a bank-sanctioned loan for a low interest rate, usually an emergency would necessitate an unsecured loan that usually have very high interest rates and fees. The worst of these are Payday lenders who charge ridiculously high interest rates for small loans. If you have to borrow even the smallest amount from these kinds of lenders you may spend years paying off the interest. Unfortunately, sometimes small emergencies can cause a vicious cycle of borrowing to pay off other loans and falling deeper and deeper into debt- all for a really small initial amount! The best way to avoid this, (easier said than done) is to avoid the initial loan in the first place.

You may be able to borrow from kind-hearted friends and family but everyone’s resources and patience are limited and they may not be able to lend you the money you need on the terms you need. After all, who says they have an emergency fund? Additionally, there is no quicker way to ruin a relationship than to borrow money that will be difficult to pay back. When weighing a good relationship versus saving money I would pick saving money. “Neither a borrower nor a lender be” but I would much rather be the lender. 

Where I should I keep this money?

The best place to keep an emergency fund is in a regular checking or savings account. As long as you have an easy way to access the cash (checkbook or debit card) then you should be ok. I sometimes put an “emergency” purchase on a credit card and then immediately pay it from my emergency fund. So you don’t need to actually have the cash in your hand. It is good practice to have SOME cash in a safe, secure place to be used in case of emergency as well. I always suggest to have at least a $20 bill in your purse or car to be used for gas or drinks or a lift in case something goes wrong while you are out,

I personally use a CapitalOne360 Savings account for my emergency fund but there are many other $0 fee banks that you can use as well. Only use a bank that doesn’t charge a monthly service fee or withdrawal fee (or that can be easily waived-such as signing up for e-delivery of statements). There are so many banks that don’t charge fees that it is really stupid to be paying for a bank accounts.

How do I start one?

Just start. Take whatever money you can and open an emergency fund today. If you have a bank account that doesn’t require a minimum balance (no reason not to), then you can put $5 in and get started. Look around and see if any banks are having any promotions for opening an accounts. I personally started my CapitalOne360 account when they were having a promotion where they gave my $100 for starting an account with $100 in it. That doubled my saving immediately and gave my the push I needed to continue filling my account (see it’s easy!). Savings should come out of EVERY PAYCHECK. I put 10% of every paycheck into my emergency fund.

It may take you a really long time to actually build your emergency fund, especially if emergencies crop up while you are trying to build it. If that happens- take as much as you need out of your account to cover it and then start over. It took me 5 years (!) to finally have $1,000 in my account.

How much should I put in my emergency fund?

Your first goal should be to have $1,000 in your emergency fund. Why that number? Its nice and big and round and not too big to be overwhelming or out of reach. Dave Ramsey recommends it and it seems like a nice amount, so why not? I have found that $1,000 is about the amount that would be needed to cover a broken appliance, a deductible, or car trouble. If you have an emergency that is more than $1,000 (it happens) then pay what you can- at least you’ll have that much less interest to pay! The ideal level of emergency fund is a full 6 months of living expenses. The theory being that if you are unemployed and bringing in absolutely $0 income for 6 months you would not be evicted or starved. Its a large number and not an exact science so you can make your own calculations but it a good goal to start with. After you have a fully-funded emergency fund you would start investing more in other more sophisticated accounts or assets- so theoretically you could always liquidate those if things get really hairy-but that is a long, long way in the future.

When do I use my emergency fund?

Well, you can pray that you never have to but chances are something will come up that you will have to dip into that fund. An emergency is a “serious, unexpected, and often dangerous situation requiring immediate action” (dictionary.com). An emergency is unavoidable. An emergency cannot be pushed off. An emergency should not have been foreseen in advance. Obviously, its your money and you can do what you want but keep in mind that these should not be considered emergencies: Regular Bills, vacation, Holidays (you knew they were coming), events such as weddings or babies, or anything you can save up for.

Having an emergency fund is one of the smartest things you can do for your financial stability and one of the concepts on which all personal finance experts agree upon (although you may have some disagreement on the size, location etc).

Don’t let an emergency derail you life and your future. Don’t let a small thing ruin your life. Don’t be stressed about where your kids’ medicine is coming from. Build an emergency fund. Have a small piece of mind that you are doing your best to protect yourself and your family from financial disaster.