Well Heeled Blog > 2011 > March

Living Well on Less Than $40K a Year: Lessons for Everyone

Written by on · 11 Comments

Can a family of four live well on less an income of less than $40,000 a year? Donna Freedman of MSN Money profiles two families who say “yes.”

  • Tracy and Danny Kofke, an at-home mom and a special-ed teacher, live near Atlanta with their daughters, ages 3 and 6. Adjusted gross income: just over $36,000.
  • Amy Halloran and Jack Magai, a freelance writer and an arborist/choreographer, live near Albany, N.Y., with sons ages 7 and 12. Adjusted gross income: about $30,000.

A lot of people live on less than that. In fact, both families are still well above the current federal poverty guideline of $22,350 per year for a four-member family. I chose them because they live in or near large cities, rather than in the deep (and cheap) countryside.

If you can own a home and raise kids in metro Atlanta on $36,000 a year, as the Kofkes do, you obviously have something to teach. And even though Halloran and Magai lucked out with cheap housing, their annual income is slightly less than the federal minimum wage for two people.

It’s nice to see stories of how this IS possible and how the two families made choices that work with their priorities. I make more than $40K a year but a whole lot less than some of the families usually featured in these money series. What’s great is that there is always something I can learn or some inspiration I can draw from all these stories, no matter how much more or how much less I earn than those profiled.

In Donna’s article, the two families offered five strategies for how to stretch an extra dollar, which can be implemented by people of all incomes to one degree or another.

Strategy 1: Know where every dollar is and where you want it to go.

Knowing where every dollar goes is important if you are either 1. on a limited income or 2. have big saving or debt pay-off plans. I cruised along without a budget for a while, and then I realized I needed to make some changes so I at least have an idea of where my money went.

Strategy 2: Start with cheaper housing.

One of the reasons why I can max out my retirement accounts this year is because I have very cheap housing. In fact, my rent is less than 15% of my gross income (most experts recommend your housing costs stay under 30%). There are a lot of ways to lower your housing costs, including sharing a space with roommates, buying multi-unit housing and renting out rooms, live in the not-so-trendy part of town, live in an older building, live in a building with few amenities, etc.

Strategy 3: Get creative about meeting needs.

I’m not so sure if I am “creative” about meeting needs. In fact, I’d say this is one of the areas where I can definitely improve on – starting with cooking at home more often. I do, however, get really cheap haircuts at a local beauty school.

Strategy 4: Get even more creative about meeting wants.

My level of “creativity” tops out at finding a really inexpensive Thai massage place ($40 an hour!), using restaurant.com coupons for eating out, and cashing in my credit card points for Sephora and Banana Republic gift cards. Oh, I also try to always buy quality clothes / shoes on sale or at off-price retailers such as TJ Maxx or Loehmann’s. Do those methods count?

Strategy 5: Stay true to your goals.

This is great advice, no matter if you make $40K or $400K. My goals are a sound financial retirement, future home ownership, a successful career, and meaningful personal relationships. One could argue that good money management skills play into all four. icon smile Living Well on Less Than $40K a Year: Lessons for Everyone

How are you doing on these 5 strategies?

_________________________________________________________________________

Thanks to Money Beagle for hosting the Carnival of Personal Finance Opening Day Edition and for featuring my post Bag Lady Syndrome: Do You Have It?

Giving Myself an Adult Allowance

Written by on · 42 Comments

Do you have trouble sticking to a budget? I do. The past several months have been tough from a money-discipline standpoint. I’ve went from “I don’t need a budget” to “oh shoot, I am spending A LOT of money” to “gosh I’ve eaten my way clean through the budget.” That’s why I’ve been batting around the idea of giving myself an adult allowance, or mad money, or free cash, whatever you want to call it. An allowance sounds like I’m back in grade school again, but sometimes I feel like I have even less self-discipline than I did way back in the day. So if the shoe fits…

money 300x225 Giving Myself an Adult Allowance

Several bloggers have sung praises about the adult allowance for themselves or their significant others as an effective money management tool, so I’m encouraged to give this a try. A brand new month is coming, I might as well try out a system that might work for me.

As a starting point, I am setting my adult allowance at $300/month.

I don’t really know what would be a reasonable allowance, but $300 sounds good and not too excessive. My “regular” monthly spending is probably around $1,800, including housing & utilities ($750), car ($450), food (budgeted at $250 but usually $300), medical ($100), student loan ($160), and charity and gifts ($100).

This $300 allowance can be spend on anything I want – from restaurant meals above my current $250 food limit to facials to movies. (Travel is excluded from this as I have a separate travel fund).

April will be my big experiment month. I am hoping the Adult Allowance works for me and I am greeted with a lower credit card bill (and I really WILL remember to pay my bill on time this month). The trick will be not to exercising my prerogative to increase the adult allowance when I exceed my limit, thus rendering this whole exercise moot.

Do you or your partner have an adult allowance? How much do you give yourself a week?

photo by Molly DG

See Yourself with Wrinkles and White Hair, Save More for Retirement

Written by on · 9 Comments

One reason why people – especially people in their twenties and thirties – don’t save for retirement is because our future selves are so distant. But if what you can come face to face with your Future Self? What if, you will be able to see your own face, digitally aged to 68 or 70, with wrinkles, creases, and white hair? Well, you just might be encouraged to stash more cash for retirement, so says the Wall Street Journal article on behavioral economics.

Why is it so difficult for people to set aside money for the long-term future? Low earnings and high temptations are obvious reasons. But perhaps the most basic cause is a fundamental human frailty: We view our future selves as strangers.

Estimating with any precision what you will want 30 or 40 years from now is almost impossible. You don’t know your future desires, because you don’t know your future self. What will you want or need when you are 65 or 70 or 80 or older? Who knows?

Viewed this way, it isn’t surprising that the young typically don’t want to save for their retirement, since that stage of life feels as if it will be lived by someone else. And when you save money today on behalf of your remote future self, you deprive your immediate present self of cash you could use right now.

Of course, if you spend tomorrow’s savings today, you won’t have cash when you need it in the future—but that day of reckoning is decades off. That is true for those of all ages, but the lost opportunity is greatest for young people, because money set aside at an early age has more years to grow.

Yet it is highly unusual for people to think more vividly about their future selves than about their present selves, say psychologists.

Imagine yourself as “grandma” or “grandpa”

One way I reach a connection with my Future Self is to imagine the 70-year-old me as a close loved one, a grandparent or a doted aunt, perhaps. Her welfare and comfort rests on my shoulders. Grandma’s source of income comes from Social Security and whatever I have put aside for her. Grandma can’t work, because she is old. Her health might not be up to snuff. Employers might be more reluctant to hire older workers. If I put nothing away now, grandma gets nothing extra in her retirement.

She will have to subsist on ramen and rely on library books for entertainment when she might have loved to eat sushi and visit Latin America. Even worse, what if grandma gets sick? If I don’t have funds for her, she will only have first-generation drugs with heavy side effects. She will not be able to pay for a in-home aid or a private room at the hospital. Do I want grandma to be in such sad straits? Of course not!

Grandma’s friends might plan a big trip cruise to the Mediterranean but she can’t go because she doesn’t have the money. On the cold days, she might not have enough money for heat. Or she will have to choose between heat and food, or food and medicine. Or she lies awake at night worrying about her future. How will she live? Will her house be foreclosed on?

That doesn’t sound like a fun retirement for grandma, does it?

Now we don’t not know what we will be like, exactly, when we are old. But looking at my grandparents, I know what matters: a nest egg that will provide for them in their old age and prevent them from being financial burdens to their children, family who loves and takes care of them, trips and lunches with friends, and a dignified death when the time comes.

ALL of the above is made easier with sound financial resources.

I think it’s a great idea that scientists are figuring out ways for people to save. But I don’t understand how people don’t think they will be old. Everyone grows old – or dies young. But I don’t need a sophisticated facial progression software to encourage me to save. I just imagine the plight of sad, old, grandma, who is confined to a life of bare subsistence because I didn’t make her a priority.

Does the “grandma” (or “grandpa”) trick work for you? Would you be more likely to save if you saw a digitally aged photo of yourself?

Late on Credit Card Twice – Should I Ask for a Refund?

Written by on · 20 Comments

Stupid money mistakes.. I have made many. But let me tell you about one in particular.

My credit card bills are due towards the end of every month. Last month, I missed it by a day because I was traveling for work and it completely slipped my mind. I got hit by a late fee and an interest charge.

That’s okay – I called my credit card company and politely asked for a refund, and they accommodated me with absolutely no problem.

Then, THIS month, I was again traveling for work and again it completely slipped my mind. I was again a day late for my payment. So of course I was hit by a late fee and interest charge.

If I call again, I can probably get the fees decreased or maybe even refunded. But I’m too embarrassed to do so! You can bet that my credit card payment date is forever seared into my brain.

What would you do in my situation? Would you suck it up and pay the $25 late fee, or would you call and ask for it to be lowered or refunded?

Best of Blogs Link Roundup: Bloggers I Have Met / Want To Meet In Person Edition

Written by on · 8 Comments

One of the very best things about blogging is all the great people that I’ve gotten to know and have met (or hope to have the chance to meet in the future). Even though we started out as virtual strangers, it’s quite amazing how a real sense of community and then real friendship can rise from the internet. Some people find their spouses from online dating sites; I have met some of the smartest, nicest, and funniest people through these past few years of blogging.

1. A Gai Shan Life: I think my friendship with Revanche is one of the best gifts that blogging has given me (How embarrassing would it be if she came on and disagreed? I swear I didn’t make up this friendship in my mind!). Oh, her fiance is great too. CB and I have met with them for lunch and now we have a big couple’s crush on them. I want many more double dates in our future.

2. J. Money @ Budgets Are Sexy: We actually video-chatted once… and guess what, he’s NOT a George Washington-look-a-like with blue hair. Weird, no? In truth, he’s funny and nice and drinks beer, and I do believe we are going to meet for coffee when I am in D.C. in a few months.

3. Fabulously Broke: FB has been one of the blogs I’ve read the longest, and we seem to share a similar fascination with food. I love meeting new people who love to eat! Plus, she has helped me tried to troubleshoot several blog problems I’ve had, and that’s a testament to her patience and willingness to help.

4. The Asian Pear: Again, love of good food = great basis for friendship (not to mention I slightly distrust anyone who doesn’t have a deep and abiding interest in our most basic sustenance). If I meet with her, I want to do it over LUNCH. Preferably sushi. And, as someone who has spent several short stints in an international long-distance relationship, I have the utmost respect for her and her boyfriend, who has been in an international LDR for 9 years and counting.

5. Kathryn @ Kathryn’s Conversations: This is a new blog that I have recently discovered. Kathryn is one cool lady. Her posts are un-PC, laugh-out-loud funny and thought-provoking. Check out this post on why online dating sites should require men to post their incomes. You are in for a treat.

6. Mapgirl’s Fiscal Challenge: Mapgirl was someone I’ve started reading back in 2007. When I was laid off back in 2009, she spent an hour on the phone with me brainstorming, offering suggestions, giving me straight talk laced with encouragement. I don’t even know if she remembers that, but I will always be thankful for what she did. Now she’s busy with work and travel and her posting has dropped off quite a bit, but I hope that she will be back before too long!

7. SVB @ Digerati Life: I actually don’t know SVB well at all, but she seems so interesting from her blog. I think I would really enjoy meeting her and picking her brain on balancing the whole motherhood / freelancing / web entrepreneur scenario.

8. Laughing at Gilded Butterflies: Does anyone else remember her blog? GB was around for a bit during 2007 and 2008. We have traded several emails back in the day, and for some reason her writing really spoke to me. I’ve always thought that she is someone I would have liked to know. I don’t know if she will ever come back, but I hope she does. At least to let us know how she is doing. So… GB – if you are reading this, say hi!

9. Sense to Dollars: She’s the original California-to-New Zealand PF blogger, so I think she’s the first NZ blogger I’ve read. I’ve been a long-time reader and lurker on her blog, and I really should comment more often – because I read every single one of her posts.

10. Paragon2Pieces: I actually stayed with her when I was in Austin – she is so nice and down-to-earth, and she is somewhat of a genius with a JD and an MBA.

There are many more bloggers whom I’d love to meet, but I’ll save those for another post!

Read and Return: Buy a Book, Read it, Return it for 50% Back

Written by on · 9 Comments

read return logo Read and Return: Buy a Book, Read it, Return it for 50% BackAt the beginning of this week I had a quick business trip. At the airport, I went into a book store, as I often to, to browse around. I saw a row of books with a big Read and Return bookmark. Apparently, Paradise Shops, a chain of airport bookstores, has been operating this program since 2003.

The program goes like this: You buy one of their Read and Return books, and if you return the book within six months with the original receipt, you will get a 50% refund on the original purchase price. In essence, you have rented a book for 50% of sales price.

Certainly, it’s cheaper to get a book from the library or even buy it on Amazon.com. Most paperbacks I saw at the shop was $12-$18, so even 50% would be close to $10. That’s pretty steep for renting a book for a few days or even a couple of weeks.

So… of course you know what I did. I bought Mennonite in a Little Black Dress for $14.00 on Tuesday, finished it in one gulp, and then returned it when I came back yesterday. It was a 1-day book rental that cost me $7.00. And the book wasn’t as good as I had expected.

But, I would totally do this again. For the sake of my budget, though, it’d make sense to buy books at used book sales or even on Amazon. There is something to be said, however, for the convenience that the Read and Return program offers. Besides, a book is a healthier impulse purchase than a bar of chocolate, right? Right?

Have you heard of Paradise Shops’ Read and Return program? Would you use it?

The Bag Lady Syndrome: Do You Have It?

Written by on · 12 Comments

The Bag Lady Syndrome is the fear, usually held by women, that they will end up alone, destitute, and homeless. Talk about a trifecta of bad news. I read somewhere that a majority of women – even very successful and wealthy women – harbor this fear.

Are you afraid of becoming a Bag Lady?

I am.

I wrote about this fear in a BlogHer article, and I focused on three ways I can minimize the risk of becoming a Bag Lady: (1) saving, (2) investing in my career, and (3) buying a home and paying off the mortgage as soon as possible.

In fact, the entire genesis of this blog may be a result of the Bag Lady Syndrome. In my About Me page, I wrote that I “do not want to be old and poor.” The unspoken corollary there is that I do not want to be old and poor and homeless.

Mom has instilled many great characteristics in me, but she also put into my head (rightly or wrongly, and I am inclined to say rightly) that being old and poor is one of the most tragic fate that can befall a person. It’s probably what she can see in her work as a medical professional.

Avoiding The Bag Lady Fate

I don’t want to live a life based in fear, but I admit that fear of becoming a Bag Lady drives my decisions today and will likely drive them tomorrow. For example, I try to save as much as I can for retirement right now, I educate myself on investments and asset allocation, I plan to invest in and always maintain a career.

Most importantly, I plan to buy a single family home and pay off the mortgage so that I will own it free and clear by the time I turn 50. (I plan on having several houses in my lifetime, one to live in, and others to serve as rental properties. But one home will always be paid off.) In my opinion, the biggest safeguard against homelessness is to have a home that you own, and that no one else can take from you.

I read Funny About Money’s account of how she survived on $22,000 last year – most of it from unemployment insurance. She said she felt like she was in penury. What struck me the most about Funny About Money’s post, however, was the fact that she wasn’t out on the streets – she had a home, that she paid off years ago, and so she would not be homeless:

No matter what anyone says about the alleged tax advantages of carrying a mortgage, when you’re unemployed a paid-off roof over your head is your second-greatest asset.

I agree 100%. The truth is, if someone didn’t have housing costs, he/she can probably scramble by for a year or more even in the face of unemployment. There are other options: food stamps, local health clinics, buses, ways to take on odd jobs or freelance assignments and make a few hundred dollars a month. Take out the biggest source of expense – rent or a mortgage – and you can get by if you are in adequate health.

Are you afraid of becoming a Bag Lady? What are you doing to prevent that fate?

5 Beauty Ideas That Save Time, Money, and Sanity?

Written by on · 20 Comments

The March 2011 issue of Real Simple featured “Five beauty treatments that will change your life,” which promises to save you time, money, and sanity.

1. Keratin Treatment ($150 plus): The keratin treatment promises to turn frizz into docile tresses by sealing keratin, a conditioning protein, into your hair. A common name is the Brazilian Blowout.

2. Lash Extensions ($150 plus): an aesthetician will apply individual hair to your lash line, for a fuller, more natural look. The results last 4-6 weeks.

3. Gel Manicure ($40 plus): Nail polish applied by a nail specialist and “cured” under an UV light – this manicure is supposed to last for 2+ weeks without chipping.

4. Laser Hair Removal ($150+ per session, most people need 5+ sessions): A technician aims the hair-zapping laser at your skin. Hair will grow thinner and smaller after treatment. Some people have permanent hair removal, others might need a touch-up.

5. Hair Extensions ($100 plus): Hair extensions, either applied at salons or at home, can give you the appearance of longer / fuller hair. The results last up to four months. You will have to use special care when washing and styling your hair.

Have anyone tried these treatments before? While I agree that they can certainly save time and sanity, I don’t see how they will save anyone money. All these treatments are quite expensive and require repeated applications for continued results. Not that I am against splurging – I get a facial every 2 months at $90 a pop. In fact, I am a little surprised that skincare is not one of the items mentioned on the list.

It’s funny that most of these ideas center around our relationship with our hair (too much, not enough, too frizzy, too flat, too dull, too oily, etc.). I used to spend $250 on thermal straightening. Since I’ve started embracing my natural hair, I find that my budget is much fuller!

Talbots Shoes Sale: Small Sizes Still Available

Written by on · 5 Comments

Talbots is having a great sale right now with many shoes dramatically discounted. If you wear a size 5 or 5.5 or 10-11, you are in luck. [Confession: I just picked up a pair of braided leather Gracie heels yesterday. Even with the $6 shipping and taxes, the total just came out to be $22]. There are some beautiful sandals and flats listed in the Outlet section for under $15. For these prices, they are even cheaper than Payless.

I have never bought anything from Talbots before, but I understand that they have a good reputation for quality construction, so I am excited to see how my pair of Gracie heels fit. The shipping is a little high starting at $6 for items under $50, but given the discounts on the shoes, I was willing to take a risk.

Here are a few of my favorite Talbots shoes on sale:

Gracie: braided leather T-strap slides, $119 $14.74, the Platino color, a warm champagne color, is available in size 5, 8.5, 10, and 11 (the black and white versions of the same shoe is available in sizes 5-11!)

GRACIE 7994 225x300 Talbots Shoes Sale: Small Sizes Still Available

Izia: wedge heels, $109 $13.49, the black and white versions of the same shoe is available in sizes 5-11. The Pool Blue color with cork wedge is available in size 5, 10, and 11.

IZIA4 7221 225x300 Talbots Shoes Sale: Small Sizes Still Available

Ivana: metallic wedge slides, $99 $12.24, colors Aluminum and Pewter available in size 5, 7 – 11 with some half sizes missing.

IVANA7 0159 225x300 Talbots Shoes Sale: Small Sizes Still Available

Photo credit: via Talbots

Help Your Significant Other Save for Retirement

Written by on · 19 Comments

One of the things about good relationships, I think, is that each partner help the other become a better person. Well, not to toot my own horn, but I think I’ve done my part when it comes to CB and personal finance. icon wink Help Your Significant Other Save for Retirement

CB isn’t as nerdy as I am when it comes to money management, but I’d like to think that I’ve nudged him towards the JOY and EXCITEMENT of saving for retirement. He first started a Roth IRA in 2009, and today he just put in the full $5,000 for 2010 (you have until the tax filing deadline – April 18, 2011 – to contribute to the Roth IRA for 2010).

I am so proud of him. CB is only in his mid-20s and he has already maxed out the Roth IRA for 2 years. Plus, his work has a very generous employer’s contribution, so with all of his retirement savings – Roth IRA, 401K, employer contribution – he is saving around 25% of his gross income towards retirement. How awesome is that?

Neither of us are out-of-control spenders or carry heavy debt load, so it wasn’t too hard to get the retirement-saving train rolling.

Here is how I helped my partner start saving for retirement:

  • Talked about why saving for retirement early is so important. The power of compound interest, y’all! “The old CB will thank you,” is what I always say.
  • Shared with him both my insecurities and goals – I do NOT want to spend my old age in poverty (I DO want to retire in sunny San Diego and have brunch every day), so it’s important to me that CB starts saving as well. Because if we stay together for the long haul (which is the plan), his financial well-being is mine and my financial well-being is his. By saving for retirement, he is honoring my priorities and showing me that he is committed to our mutual goals.
  • Gave him information on the logistics of opening up an account online, and helped him decide on an asset allocation that fits his goals and risk tolerance.
  • Encouraged him to sign up for a 401K in addition to the Roth IRA.
  • Told him he should put the money into retirement accounts instead of spending on Valentine’s Day (he still gave me a wonderful Valentine’s day, though, with a lovely bouquet of roses and lilies delivered to my office. So, I’m not sure that he listened to my advice… but I loved it!).

Personal finance is sexy. Now go and encourage your significant others to get a piece of the (retirement) action.

Have you successfully nudged (or been nudged) towards better personal finances by your partner/significant other?

——————————————————————–

Well Heeled Blog in the blogosphere:

Thanks to Magical Penny for hosting the Carnival of Personal Finance: International Pi Day Edition and for selecting my post on Mental Accounting as an Editor’s Pick! Also, Dr. Dean at Millionaire Nurse hosted the Yakezie Carnival: Spring Training Edition and featured my post on Starbucks Rewards Card.

Photo credit: matthew_hull from morguefile.com

 

How Many Accounts Is Too Many?

Written by on · 31 Comments

Do you ever have trouble keeping your accounts straight? I think I have done an OK job of consolidating all my accounts, but I still have quite a few.

Retirement

  • Roth IRA: First started in 2006, I’ve maxed it out every year since – even staying the course through dark days of 2009. I haven’t started contributing to 2011′s yet, that will start in June or July.
  • SEP IRA
  • Rollover IRA: I roll over all my old 401Ks into this fund.
  • Work 401K: Thanks to my laziness, I will be on track to maxing this out by May or June.

(all my retirement accounts are held at the same investment firm except for the current 401K)

Checking and Money Markets

  • Bank Checking #1
  • Bank Checking #2
  • Online Checking: I think I keep a grand total of $1.29 in this fund. Hmm… I don’t even know why I have it!
  • Investment Firm Money Market Fund: 2/3 of my cash savings – I expect to clean this out for graduate school tuition (tear).

Savings Accounts

In sum, I have 15 accounts held at four different institutions. How many accounts do you have?

What PF Bloggers Talk About

Written by on · 3 Comments
An exchange between me and Revanche of A Gai Shan Life…
me: oh and happy daily savings
revanche: huh?
me: daylight savings
hahaahha
oh man
revanche: HAHHAHA
I thought you were just going off the PF deep end

Lifestyle Design and Being OK with Being Conventional

Written by on · 54 Comments

life Lifestyle Design and Being OK with Being ConventionalMy love-hate relationship with lifestyle design

Like most people, I want to become a better person and a happier person (ah the great American ideal of self-improvement is alive and well!). So my Google Reader is full of personal development blogs. In the past few years, lifestyle design have become a huge niche in that sphere. A few nights ago Krystal of Give Me Back My Five Bucks and Clare at Never Niche and I got into a conversation over Twitter – about work, passion, and the rise of the lifestyle design blogs. And that conversation clarified some of the mixed feelings I have on those blogs.

On the one hand, I love the idea of lifestyle design – I want to design a life that matches my priorities and values, I want to live with intention. Many of the lifestyle design blogs I’ve read are inspiring and interesting, and many of them have good tips and tools. Besides, I truly admire people who are going after their dreams.

On the other hand,  some of these blogs are full of egregious self-promotion and barely disguised disdain for any other kind of lifestyles. The theme seems to be: if you are not (1) starting your own business in social media, web design, or personal coaching, (2) working in Thailand, Bali or another developing country with a low cost of living,  and (3) spending money on lifestyle design e-books and e-courses, then you must be too scared, stupid, and naive to grasp your One True Passion. Oh, and your soul will wither and die.

I also hate the fact that the default definition of lifestyle design – which sounds like a concise and elegant way to describe “living with intention” – is “I am going to be on permanent travel selling e-books and information products (with limited time offers and modules and super value-add bonuses!).”

Being OK with being conventional

Conventional has a negative connotation in the language of lifestyle design – it is a catch all for “average,” for “complacent,” for “ordinary.”  Conventional people are unsuccessful mice who are too afraid to change their lives, or even worse, they are deluded saps who doesn’t even know what they are missing. Who wants to be ordinary when you can “hack” or “test” your way to extraordinary, epic, radical, and awesome FREEDOM!?

I say that in jest, sort of. The truth is, I am envious of people who have figured out exactly what they want their life to be and have pursued that with passion (either that, or they are doing a great job faking it). I just wish they cut out the smugness for the rest of us.

Being OK with not wanting what these lifestyle design bloggers want doesn’t mean that I am lying to myself. If I am truly honest with myself, I know: I am wary of taking on very big financial risks. I don’t want to live in Thailand and work on a beach all day. I write a blog because I enjoy it, and my hourly income is somewhere in the neighborhood of fast food and retail. (Monetizing a blog is hard work – don’t let anyone tell you otherwise). I want to go to business school. I want a career that is interesting and financially rewarding, but it will still be work. I want to live near my parents when they reach their 70s. I want a nice house. I want a few rental properties to supplement my cash flow. I want to travel, but I plan to have a home base. I want a dog. I want to marry the man I met in high school.

Conventional doesn’t mean we are dead inside

As you can see, my aspirations are quite middle-of-the-road. The fact that I have a corporate job, I have an apartment, and I have more than 3 pairs of shoes certainly doesn’t mean that I look into the mirror and see “dark, hollowed eyes match the dark, hollowed soul that once was a vibrant, enthusiastic one, looking forward to all of life’s gifts.” This isn’t an attack on Nina. She has written some thought-provoking stuff, and she seems like a pretty cool person. But the sentiment that “if you are not doing what I’m doing then you are a dead shell of a person” is a prevalent one among lifestyle design bloggers, and that frankly irritates the heck out of me.

I can’t make $97,000 traveling through Latin America. I certainly don’t make this money charging a $20/month VIP subscription to read about how I make money. Again, this isn’t an attack on Ash. I respect anyone who can make six figures selling and hustling in Chile and has the time to drink wine during afternoons. I respect people who have found work that makes them happy and fulfilled. I respect people who work hard for what they have and I believe that lifestyle bloggers who make a living at this work very hard. We all work hard.

But am I a dunce because I have a long commute, I have long travels and I take client calls at 5am on Saturday mornings? (Wait, do I really want to hear the answer to this? icon wink Lifestyle Design and Being OK with Being Conventional ). I think I can learn from lifestyle design bloggers, which is why I still read their blogs. Call me crazy, but I am getting just the tiniest inkling that the respect’s not mutual. Hence the hate part of my love-hate relationship.

Share your stories, don’t be a jerk

The bottom line is that like most of the population, I do not have goals that consist of getting rid of 95% of my stuff, living in a developing country and selling e-courses on teaching people how to do the same. If that’s what someone wants to do, he/she should absolutely go for it. Regale us with stories, tell us about your struggles, teach us what you’ve learned. But please, please, don’t be a jerk about it.

For more on posts that capture my love-hate relationship with lifestyle design blogs, see ones by Studenomics, Michael Corayer, and Early Retirement Extreme.

photo by DanBrady via Flickr

Help Me Update My Blogroll

Written by on · 50 Comments

Hello blog friends,

As you might be able to tell, my blogroll is woefully out of date. I need to update it, and this would be the perfect opportunity to add new blogs. The plan is to start a new page on this blog dedicated to blogroll (and include some more information rather than just the URL for each blog), and keep a list of rotating frequent reads on the sidebar.

If you’d like your blog to be included, please leave a comment and tell me what you/your blog is about in 1-2 sentences. This description will be included with your blog link. Or, if you know of a site that you think I will like, tell me as well. I love discovering cool new blogs to read. icon smile Help Me Update My Blogroll I can’t promise I will include every blog that is suggested, but I will mostly include them if they are fun to read, personal, and is more than just “34 Ways to Save Money” post after post. I will definitely include them if I feel a personal connection with the way you write.

The links don’t have to be personal finance-exclusive, although of course I love PF blogs. I also like blogs focused on home decor/design, style & fashion, career & negotiations, and just plain interesting ones. My preference is for single / pair author blogs who write their blogs for primarily personal purposes.

Thanks in advance for your help – I can’t wait to see what you suggest.

photo courtesy of buzzgain.com

Starbucks Rewards Card: A Good Deal for the Frequent Drinker

Written by on · 47 Comments

Starbucks, you win.

My coffee shop fix has been a little over the top lately. I go to Starbucks about 3-4 times a week, in addition to sprinkles of Coffee Bean & Tea Leaf and Nordstrom Cafe visits.

starbucks rewards Starbucks Rewards Card: A Good Deal for the Frequent DrinkerCB and I like to go to coffee shops during evenings and on weekends – he studies for his GRE, I work on my freelance work. All those $5 here and there adds up, and we show no sign of quitting the java. So night I finally caved in and signed up for the Starbucks Card rewards program.

With Starbucks Rewards, you will earn 1 Star every time you pay with your card. Once you get up to 5 Stars, you get a small offering of free services, such as free flavored syrups, free soymilk, free refills on iced tea, etc. I am probably most excited about the free soymilk, as I love my chai soy lattes. For every 15 Stars, you will get a free drink. You also get a free drink on your birthday. Plus, you can you can always exchange gift cards in case you want to get another one.

Since the Stars are based on per transaction, I wonder if I can break up all my purchases into separate transactions. icon wink Starbucks Rewards Card: A Good Deal for the Frequent Drinker In any case, I have sort of admitted defeat to the lure of Starbucks.

Anyone has a Starbucks Card and is earning the rewards?

photo courtesy of Starbucks.com

Edit: The winner of the Cholula 4-pack giveaway is Julia C! Congrats Julia. Winner is Hedy. Thanks everyone for entering!

Bitten By the Shopping Bug

Written by on · 22 Comments

shopping 225x300 Bitten By the Shopping BugI need your help. I have been bitten by the shopping bug, and now, well, I am finding it very difficult to resist silky blouses, statuesque pumps, or well-constructed blazers.

First of all, you guys were right. I love my J. Crew Lady Day coat. It’s almost perfect, and would be perfect if the sleeves were just 1/2 inch longer, and the cut was 1/2 inch narrower. But those are minor quibbles, overall, the coat is lovely and a great edition to my wardrobe. It was certainly $150 well spent.

Getting that great piece, however, has unleashed the shopper instead! I have been bitten by the shopping bug, and it’s one mean bug. Unfortunately for my budget, I live within 20 minutes of two great malls, a Loehmann’s, a Marshalls, a T.J. Maxx, and numerous other boutiques. Plus, there’s always the world of online shopping. So, like I said, I need your help and advice on how to kick this bug and go into remission!

Do you ever get into these “I want to shop” phases? What tips do you have for beating the shopping bug?

photo by uberculture via Flickr

The Traps of Mental Accounting: Why We Treat Money From Different Sources Differently

Written by on · 25 Comments

Do you practice mental accounting?

Most people do. Do you treat $1,000 that you receive as part of your regular salary differently than the same amount from a bonus or a winning lottery ticket? Research says yes, we do treat money differently, even though we shouldn’t.

We are more apt to splurge (on expensive purchases or vacations) with a gift or bonus of $1,000, but we are often more conservative with the same $1,000 that is deposited as part of our regular payment. But why should that be? $1,000 is $1,000 regardless of where they come from.

What is mental accounting?

According to Investopedia:

Mental accounting refers to the tendency for people to separate their money into separate accounts based on a variety of subjective criteria, like the source of the money and intent for each account. According to the theory, individuals assign different functions to each asset group, which has an often irrational and detrimental effect on their consumption decisions and other behaviors.

Different Source, Different Purpose

Another aspect of mental accounting is that people also treat money differently depending on its source. For example, people tend to spend a lot more “found” money, such as tax returns and work bonuses and gifts, compared to a similar amount of money that is normally expected, such as from their paychecks. This represents another instance of how mental accounting can cause illogical use of money.

Logically speaking, money should be interchangeable, regardless of its origin. Treating money differently because it comes from a different source violates that logical premise. Where the money came from should not be a factor in how much of it you spend – regardless of the money’s source, spending it will represent a drop in your overall wealth.

Me vs. mental accounting

I understand this concept intellectually, and yet I STILL fall prey to the traps of mental accounting. Exhibit A: for the past year or so I have ramped up my freelance efforts because I enjoy it, and it never hurts to have extra cash.

I also have noticed, however, that I am much more lenient with my freelance earnings and bonuses than I am with my salary. The salary is for 401K contributions, it’s for rent, it’s for gas and car repairs. In fact, I am quite a tightwad with my regular paychecks.

Yet something in my brain tells me that I should treat my freelance earnings and bonuses differently – that those dollars are for splurging on new clothes, or nice dinners, or massages. I spend much more frivolously when I think I am spending my “extra” money. But the truth is there is no such thing as “extra” money. ALL the money I have, including any gift money I’ve been lucky enough to receive, is interchangeable, they are all part of my net worth. A dollar that I have received as a part of a bonus is still a dollar, it’s not any different than a dollar I have earned as part of my regular paycheck.

Fighting against mental accounting

I am working hard to change my mental accounting tendencies. Part of that effort is the setting up of the SEP IRA – putting money away means that I won’t be tempted to spend it all on frivolous pursuits.

In addition, I’ve started to put a significant portion of my freelance dollars toward the Galapagos Fund. The money will still be spent, but it will be for a big once-in-a-lifetime trip that I will remember and cherish forever, instead of for small purchases that I will forget a week later.

Also, with every freelance paycheck I get I contribute to my estimated tax fund. This minimizes the free cash that’s lying in my checking account (less spending!) and will help me avoid an unpleasant surprise when April 2012 comes around.

Mental accounting might have gotten the best of me for a while, but I am fighting back!

Do you do mental accounting? How do you stop yourself?

photo via pksoni.com

5 Lessons From PlaySpent

Written by on · 8 Comments

Several weeks ago I blogged about PlaySpent, an online game that gives a taste of life as the working poor. Today, I went back to the site and played again, and I felt compelled to write a little more about the experience. In my previous post about PlaySpent, several of you pointed out the shortcomings of the game (no options to get cheaper housing, no chance to take on another job, etc.). The game is rigged to make you “lose”, I don’t disagree about that, but I think it’s still a worthwhile exercise.

5 Lessons I’ve learned from PlaySpent

1. It is so difficult to build up any types of reserves. Many times I’d run out of money by the middle of the month. Even when I won the game (i.e. had money left over at the end of the money), the money I would have – at most $500 plus – isn’t enough for the rent I’d have to pay at the beginning of the next month.

2. One small money hiccup will cause a big problem. In one scenario, I need to replace a window for $100 after a neighborhood kid smashes it with a baseball. A $100 unexpected expense would be an annoyance in my current budget. But in PlaySpent, when I only had $70 until the next payday, $100 becomes a Very Big Deal.

3. You cannot afford to give your child a head-start or a leg-up. This is probably the most heartbreaking part of the game. My imaginary child gets selected for the gifted program at school, which costs $50. The cheapest thing to do is to decline the opportunity. It is so sad when $50 is too much to give your child a push in the right direction. Or, my imaginary child is falling behind in math, and my choices are to hire a tutor (too expensive), let the kid fail (what?!), or ask a friend for help. In the game I always chose the 3rd option, but how many low-income parents have friends who have the time to tutor their kid for free?

4. You are forced to delay necessary medical treatment. One choice I faced was to pay $400 for a root canal or grin and bear the pain with numbing gel. I chose the numbing gel because $400 would absolutely wipe out my budget for the month (and then some). I seriously think my tooth throbbed as I clicked the second option.

5. In the PlaySpent universe, I was poor. The truly depressing part, however, is that under the rules of the game I will very likely STAY poor. I wasn’t progressing, I had a basic survival job, not a CAREER I was building. Instead, of moving forward, I was barely treading water. There were so many setbacks and very few lucky breaks. It felt like everything served to pull me away from my goal of financial security.

That feeling, even though it was a game (a game!) was eye-opening. I don’t pretend to understand what it’s like to be on the edge of poverty, and I hope I will never experience that. But PlaySpent.org has opened my eyes to how and why it is so darn difficult to get back on your feet when you are so far down.