personal Finance Story

Everyone has a reason to want to make a difference in their lives.  When it comes to finances, motivation can make a huge difference in your approach to money.  Some people have it while others don’t.  Some people need a major financial event to incite them to make a change.  Others, such as myself, I believe have a constant drive born out of a perceived necessity.

Without motivation, you are never going to force yourself to make a budget let alone stick to one.

Without motivation you will never track your spending for any amount of time to finally see exactly where your money goes.

Without motivation you are never going to be able to force yourself to make a positive change in your life, financial or otherwise.

Family

Growing up, my family did not always have lots of money.  There were good times and there were bad times.  Even though my parents made a good attempt to shield my siblings and I from the reality of our situation, I always knew.

My family motivates me to work harder and make my life better.  My ultimate goal is to be in the best position possible to help them.  I want to make a difference in my family’s lives.  They deserve it.

Friends

There are several friends from either high school or college who are very close to me, despite that fact that I don’t get to see them as much as I would like. Some of them I know for a fact are in a very tough situation and to be able to help them in some way later on down the line would mean so much to me.

Helping others is a great goal.  But in order to do that I need to be able to take care of my closest family first.  That means my own life with my wife, and perhaps a family of my own, has to take precedence.  That is my motivation, to help others achieve the financial freedom I know they all deserve.

Find your motivation and the rest will follow.

As the title suggests, I paid off my car recently. The last payment of $1,852.00 has cleared through the system and is in the hands of Toyota Financial. It took them a bit longer to process than my ussual payments but I guess that can be expected.

I’m feeling great. Getting rid of debt once and for all is an invigorating event. I feel very proud that I have made it this far and stuck to my frugal guns to make this day happen. Lets make a rundown of how this affects my financial life from here on out.

One Less Bill to Pay

I’m going to type that again, because it feels so good. One less bill to pay. I can officially delete two rows out of my budget spreadsheet (The payment in my expenses worksheet and the total in the liability sheet). One less bill to pay means less stress and more peace of mind. It is the unlocking of money that can now build my net worth month in and month out. That is financial power.

Lower Emergency Fund

While I do not have my emergency fund fully funded yet, the requirement of that fund is now lower and easier to reach. If I aim for three months savings, then the goal just dropped by $750. If I wanted six months, then the total savings would be double that or $1,500. That is significant change that can be put to better use elsewhere, like debt reduction or wealth building.

More Fuel for the Debt Snowball

I now have $250 extra each month to put towards other debts. First in line would be my wife’s car payment. The best part is that if we commit to it, we can easily pay off her car by next month. Within two months of our getting married, we will have paid off both of our cars.

And after that we can start making a few choices. For me, it may make sense to start sending $500 payments to my student loans just until the balance comes down to where the interest is not killing me as much each month. After that, the house fund gets priority. We are adamant about owning our own home in the near future and need to be sure we will have a 20% down payment to buy one.

A Promise for the Future

I will never have another car payment so long as I live. I like my little Corrola. I often joke in my monthly reviews about my Corvette fund. If I ever do get another car or that coveted Corvette it will be paid in full before leaving the dealership. I don’t want to ever have to make a payment for a car again. That is a promise to myself that am happy to keep.

Thoughts on the Big Day

With the wedding itself in the rear view mirror all we have left is the memories of the event. The guests are gone, the cake is eaten, and the bill is waiting to be paid.

First before I begin any kind of analysis on the cost of the event, I have to say it was worth it. We had a lot of fun. We saw friends we had not seen for a while and got to spend meaningful time together.

It was worth it.

The Final Cost

Our original budget for the wedding was $10,000. In the third most expensive state to get married in, was it even possible?

We managed to find out. While we did not exactly hit our goal, we got close. And by keeping frugal thoughts in our heads throughout the planning process we were able to get it close.

From my records, our total cost for the wedding was $11,079.11.

Our wedding ended up having 55 guests. Only the closest and most important people were invited. We did away with brides maids and best men. We skipped the limo as well. With the ceremony and reception at the same venue, there was no real need to look fancy just because.

Not everything worked exactly as planned. I am not sure either of us was prepared for how much a cake or flowers would cost. We ended up liking the respective vendors so much that we went with them anyways despite being slightly higher than we had anticipated. In the end we were thrilled with their work and would not have done it any other way.

• Wedding Bands $802.50
• Dress $1,070.00
• Tuxedo $144.99
• Invitation & Postage $101.65
• Wedding Application $30.00
• Ceremony and Reception Fee $476.25
• Officiant $150.00
• Florist $1,000.00
• Photographer $1,000.00
• Hors D’Oeuvres $977.90
• Dinner $2,095.50
• Bar $1,563.99
• Cake $568.33
• Music and Entertainment $1,100.00

Frugal Yet Satisfying

We kept things simple, but still have all of the memories you would otherwise have had. Our evening was intimate and memorable. All of our guests felt important because we had the time to interact with everyone during the festivities.

We are both thrilled with how the wedding turned out and are looking forward to starting our lives together on the right financial foot. While we may argue on the path needed to get there, our goals align well. I hope this blog serves to further our financial knowledge and help us work together towards a common purpose in the future.

Cheers!

According to my budget, I am saving or investing a bit over 20% of my gross income.  I am actually doing a bit better than this if you count money I am putting towards paying off my debts early. For the moment however, 20% is how much I am really putting away.

To put this number in perspective, I will have to gross around five million dollars to actually have saved a million for myself.  Dividing that five million by my actual gross salary and I will have an estimate for how long it will take to actually save my first million dollars.

I am currently making a bit over $70K at my job, so that translates to 71.4 years.

That is of course just a rough estimate.  I should obtain a million much earlier than that if my investments provide any sort of meaningful return over the next few decades.

Increase Your Saving Rate

No matter how you slice it, increasing the amount of every dollar you keep for yourself will help push your millionaire moment closer.

If I could double my saving rate, I would be a millionaire in only 35.7 years.  All of a sudden that number seems more reasonable.

Don’t think you can double your own savings rate?  How much money are you putting towards debt repayment right now?  For me, including extra payments I am making above and beyond my minimums, I am right around 10%.  As soon as my remaining debt is gone, my savings rate will jump to a bit over 30%.  Already half way there without too much sweat.

Don’t Forget to Make More Money

The best way to increase your savings rate is to simply make more money without increasing your standard of living.  Easier said than done?  Absolutely.  But then if the best things in life were accomplished by reading blogs, we would have nothing but happy and successful people in the world.  Here are a few broad ideas.

• Ask for a raise at work
• Start a side business
• Turn a side project into something marketable

Keep the idea in the back of your mind at all times and be ready when an opportunity presents itself.  Inspiration may come from unanticipated sources and fortune as we all know favors the prepared.

I need to offer up some penance for the month of May. I had another friend over this past weekend and with the visit, I made another round of spending above and beyond the budget. Suffice to say, and I have mentioned it before, May is going to be a bad month for my budget. It will be the first month out of the year to be over budget. It makes me just a little sad.

So in order to make myself feel better, I am announcing that July will officially be known as ‘Don’t Buy Crap’ month.

NO crap will be purchased for the entire month. I am going to make amends to my wallet. It is hurting this month.

Some Exceptions Apply, Void Where Prohibited

There are always a few exceptions to anything official and ‘Don’t Buy Crap’ month is no different. This only applies to discretionary spending. Obviously, I’ll need to buy gas and groceries. It is all of the rest that I will be targeting. Eating out, entertainment, hobbies.

However, I will still purchase gifts that I had already budgeted for that month. Just because I need to make up for a horrible month of budgeting does not mean that my generousity has to take the month off as well.

I will also continue to go out to eat at the end of each week with my pseudo-boss at work in typical Never Eat Alone style.

Why July? Just One Month?

It can’t be June because I am going to get married that month. I would be very interested to see someone make it through their own wedding without making several large purchases. July is the next closest month. By then, we will also be done with our honeymoon. After the wedding and the honeymoon, I wouldn’t be too surprised if I was tired of spending money anyways, which would make July go by easier.

Shouldn’t every month be Don’t Buy Crap Month? Well, yes, to a degree. Just because I am classifying my entertainment and hobby spending as Crap for the purposes of July, it does not mean that they are actual crap spending that I could do without forever. My hobbies make me happy and I will continue to make them a part of my life, frugal or otherwise.

What I am looking for at the end of the year is balance. When I look back on my performance for the year, there is undoubtedly going to be a huge black mark for the month of May. July can be the balancing force to even out the year as a whole. It will make me feel better about myself and will help me accelerate towards my financial goals which are for the most part on hold anyways due to the fact that my fiancé and I are paying for our wedding very soon.

I would of been better off if I never went crazy with my hobby spending at all, but I feel that I should be able to take opportunities when they present themselves. That is another form of balance. I should be free to pursue what makes me happy while taking the right financial steps along the way. Not every step is going to be the most correct through the unforgiving lens of frugality. But I am willing to live with it.

I’ve got that sinking feeling.

This month I will be over budget. After four consecutive months of good behavior, May is going to kick my behind.

It all comes down to choices, and this month, I made several decisions to prioritize entertainment and eating out at restaurants higher than others. Here is a quick rundown.

I had an old college friend over for a full weekend. While we made a point to eat in where possible, we just could not resist the quick and easy option of a restaurant. So we went out twice, once for dinner and once for breakfast for which we paid for.

And then there were the purchases. The whole reason for my friend coming over was to revive an old hobby. An expensive old hobby. I managed to almost double my entertainment budget alone on one trip to the store with him. It seems easier to spend money when you have a friend around who wants the same as you.

This month will be the first of this year to be over budget and I accept it. I’m not going to go back and try to expand the original budget numbers. I am going to bite the bullet and let the chips fall.

That in and of itself is another conscious decision. It is better to admit to yourself your shortcomings rather than be surprised when the truth comes out. In personal finance, that means being accountable for all of the line items in your budget.

I look at the numbers constantly and know where I stand at any given time during the month. For all of the prior months of this year, I knew they would be close, but I knew I had otherwise behaved and thus had a good shot at coming in under budget, which I did. Today, I know that I’ll be over. There is no doubt in my mind.

What I am not doing is sticking my head in the sand. That sort of behavior is true financial suicide. I have seen that sort of attitude ruin a few folks I know including close and not so close family. Knowing and accepting the truth about your money is very important. I believe that way of thinking will allow me to make amends later on this year.

That said, there are few options at this point to get me through to the end of the month without too much more financial heartburn. It basically comes down to watching my spending and not allowing myself to write off the month as a loss and rack up a bigger shortfall than I would otherwise of had.

Whatever shred of discipline I have left will have to work harder this month.

This isn’t a post about the fine line between being frugal and being cheap. No, this is a post about keeping your wits about you in a world over whelmed by personal finance advice.

I read many personal finance blogs. I enjoyed them enough to start up my own. I have heard a million times over what I should do and I am doing it. Month in and month out, I watch my budget and ensure that my money goes in all of the right places. I watch my latte factor, I brown bag my lunch, my apartment is full of CFLs. It is boilerplate personal finance. Besides a few missteps here and there, I control my money, it does not control me.

That said, a life lived under a draconian budget without flexibility can lead to feelings of being constantly deprived. You need to go ahead and splurge every once in a while. If done in a controlled fashion, it can be very financially healthy.

Saying ‘Yes’ So You Can Say ‘No’

Being frugal is important but not at the expense of all else. I believe it is very necessary to allow yourself luxuries now and again as a reward for keeping your finances under control. If you have a strong budget as I do, then go ahead and budget in some money for your favorite hobby or guilty pleasure.

Delayed gratification is a very good skill to have. A dose of frugal trend bucking can be a tool to help you keep your cool in tempting times. More often than not, if there is something I want, within reason, all I have to do think ahead in my budget a month or more to know that I will have some money to spend and spend frivolously. I’m not talking huge amounts, but at the end of the month when I am craving a trip to my favorite restaurant for a burger, it is easier to say ‘No’ if a new month’s budget is around to corner.

Saying ‘Yes’ every once in a while will make the more frequent ‘No’s much easier to handle. It is a clear method to keep yourself on track and honest.

Taking a Month OFF From Frugal Living

When you have no credit card debt and a heap of discretionary income at the end of every month, you are in good shape. Everyone needs a vacation. I propose an anti-frugal vacation for those feeling on the verge of a frugal burnout. Take your discretionary incomes for one month out of the year and spend every dime instead of investing and saving. In the long run, the amount you spend will be dwarfed by your other yearly contributions.

Right now, this is exactly what we are doing financially now. My fiancé and I are putting savings on hold while we save for our wedding and eventual honeymoon. Our wedding is due in about a months time and we are getting excited about it.

One of the things we are not overly worried about is how to pay for it. We will have plenty of cash in the bank to pay off all of the vendors as well as embark on a memorable honeymoon. The only unfortunate thing is that our time off of saving and investing is looking to be more like three months long, maybe less. It is still worth it in my mind. After all, you only get married once, and as I have posted before, we are not exactly having a gigantic princess wedding.

So in nutshell, keep yourself sane in a world overflowing with advice to save every penny and invest all of you dimes.

• Understand that you are human and you want to spend money, it’s only natural
• Cater to that need in a controlled fashion through your monthly budget
• Once a year, take a break from frugal living to recharge the batteries

Sometimes, the easiest targets for consumer backlash are the least to blame.

Case and point, The Latte Factor.

Anyone familiar with the writings of David Bach will know about one of his signature teachings. He points with great flair in his books that people usually don’t realize the amount of money they spend on a daily basis. The frugally unsavvy go through their lives complaining about never having enough money to save while chugging down $4 lattes accompanied by $3 muffins.

So what happens when the reigning king of lattes begins to slip? Starbucks (STAR) is off 10% year to date. Recent competition in their prime marketplace, that of premium coffee, has come from upstart McDonald’s (MCD) as well as Dunkin’ Donuts. Coincidently, the golden arches are up 3% year to date. Dunkin’ Donuts are privately owned franchises and is not publicly traded.

So what is it going to be now that lattes are out and 99 cent premium coffee are now the rage? The Dunkin’ Factor? The McD’s Factor?

It is a paradigm shift and Starbucks is on the losing end of the bargain.

Later in life, no one will ever care how fancy your coffee was or what fancy name it was called. A dollar is a dollar to your bank account though. Food for thought.

At the beginning of this week, I had $10.00 cash in my wallet. I usually don’t ever carry cash. I use my Chase Freedom credit card for just about everything I spend. If I didn’t need laundry quarters then I wouldn’t use cash at all. And yet, for some reason, I felt it necessary to get an additional $10.00 in singles along with my monthly supply of quarters.

Fast forward to today and inside my wallet stands a single lonely dollar. All of his friends have gone away.

What the hell? Where did $9.00 go so quickly and quietly? I had to sit down and think about it for a while, retracing my steps to discover where all of those dollars went. Here is what I found.

Lunch Time Monday

I chow down my lunch, which happened to be leftovers. After returning a few phone calls and checking emails, I head back out to our test facility. However, ever so conveniently located between my cubicle and the building exit, is a vending machine. I make a few quick steps in an attempt to keep moving, but the temptation of the new large format Kit Kat is too much. I sent away one dollar for a sugar rush to get me through my day.

Amount Spent: $1.00

End of The Day Tuesday

I feel exhausted. I ran for exercise on Sunday and Monday and am feeling like I deserve a treat. There happens to be a Wendy’s on the way home from work. After a few moments of hesitation, I throw on my turn signal and zip through the drive through for a tasty frozen treat. It was delicious.

Amount Spent: $3.00

Start of The Day Wednesday

I am getting tired of the oatmeal packets I keep at work. For a slight change, I decide it would be a good idea if I had something a bit more substantial for breakfast that day. So off I go through the drive through at Dunkin’ Donuts and get a bagel with cream cheese. And a muffin too.

Amount Spent: $4.00

What’s Wrong with My Math?

That’s the worst part of it. I can only account for $8.00 out of the $9.00 I know I spent. I can’t remember ever spending it. It’s just gone. I’m not one to misplace money. I had to of spent it somewhere but for the life of me, I can’t remember where.

One dollar may not seem like much, but it is a full 10% of what I started with.

There are countless personal finance guru’s that praise the use of cash as a means to combine physical pain with the purchase of goods and services. Somehow, I don’t fit that mold. I don’t feel pain when I let physical cash slip through my fingers. What does hurt for me, is looking at my credit card activity at the end of the month and having to account for each and every penny I spend.

Often before making a purchase, I will have my card balance in my mind. I know how much I have spent in different categories and make spending decisions on the fly. That extra effort helps me to curb otherwise frivolous spending. But then, that is who I am, I’m weird because I like numbers so much.

Credit cards (and even debit cards too) are a useful way to track spending without looking like a weirdo carrying around a spending notebook. If I did not have that cash in my pocket, I would not have made all of those purchases.

• The vending machine does NOT accept credit cards
• $3-4 is too trivial an amount to put on a card. I would have felt silly paying for them at the drive through.

A little touch of social stigma would have prevented $8 (or $9) of frivolous spending in only three days time. Not that there is anything wrong with cash. People are different and respond to stimulus in unique ways. Finding what works for you is part of the challenge in personal finance. Remember that first key word, it’s called personal finance for a reason. It is personal because it is.

A while back, the governor of New Jersey in an attempt to correct the massive fiscal shortcomings of the state, proposed sweeping toll increases on all toll roads state wide. The toll increases would not be a one time event but many phased in over the course of several years.

To say the least, it was not the most popular idea. The state legislature never let the plan see the light of day.

Even so, the mere idea of rapid toll increases got my attention. I took a step back and decided to see how much a toll increase would effect my own life.

I was spending $40.00 each and every month for over a year commuting to work. While $40.00 may not seem like a big deal at first, it was one more bill I had to pay. I don’t like bills. I’d rather see my money spent doing something I enjoy, being invested, or given away in some form of gift to friends or family.

After a bit of Google maps research I determined that this expense was avoidable. I could get myself to work using local roads only. I would only use toll roads for special trips for fun and leisure.

It is important to note that this change does not happen in a vacuum. There are other factors at stake.

• My gas mileage dropped from 36 to around 32 since I was spending less driving time on highways.
• My commute time increased by an average of 10 minutes.

The question is this, are these changes worth the $40.00? The first is obvious, the slight drop in mileage is easily offset by the cost savings. I do not use up more gas than the cost savings give back. The second is more difficult. Time is a valuable commodity. We trade our time for money all of the time.

• We work 40 hours or more a week to receive a paycheck from our employer.
• We stop at Dunkin’ Donuts to pick up a cup of coffee/tea we could easily have brewed at home.
• We drive a few miles more to get to a Costco or Sam’s Club for deep discounts on household purchases.

So is the extra time worth it to me?

The drop in mileage increased my gas bill slightly more than 12%. That works out to an extra $25.00 based on my budget. That makes the price tag for my time at $15 for 10 minutes. If I were to be paid at that rate at work, I would be making around $90 an hour. That is far more than my employer is currently paying.

I’ve been following the new driving route for a little over two months now. I’ve adjusted my budget for the remainder of the year accordingly. It seems like a small step to me now, but I am sure than in time, I will thank myself for making the extra step to cut expenses. Now if I could only apply the same technique to my burgeoning hobbies, I’d be saving much more significant amounts.

One step at a time.