Archive for the 'Frugality' Category

12
Feb

The Failure of Neglect (or, Vacationing on a Budget)

By David 5 Comments
Categories: Budgeting and Frugality

One of the misconceptions I’ve had in this journey to becoming debt free is that I had to tighten my belt and not do the things I’ve wanted. To an extent, it is a wise idea for sure; I carefully budget for movies, eating out, and going out with friends. Having a set limit means I can’t just go out all the time and spend, and I’ve resorted to many not-so-fun nights at home. I think that while my debt is so massive, this is actually a healthy thing.

However, I’ve also neglected doing big, extravagant things in the name of saving money, such as relaxing vacations, or random adventures. I’ve had neither vacation nor adventure in the past two years, really. While that is a good idea finance-wise, it’s a horrible plan for a person’s psychology. The fact is that as Americans, we are far too busy, overworked, and underpaid to neglect setting apart time to take care of ourselves, to rejuvenate and get perspective. I’m a guy in my mid-twenties; I am supposed to be going on adventures and exploring right now. Since I haven’t, my vigor has atrophied. I feel blah and mediocre, and my conclusion is that I must take a vacation.

However, how is one to take a vacation where there is no money? Furthermore, how does one not feel so guilty about spending money on a vacation when there is plenty of debt to be repaid?

The answer to the latter is simple; I don’t feel guilty because if I keep neglecting myself, I’ll burn out at work, I’ll burn out in life, and there will be no energy left to keep up with everything life throws at me. I’ll try to fill life up with things again, which will sink me back into debt even more. The principle of interest works both ways; while sacrificing money in debt payments results in more payments down the road, sacrificing a vacation right now might result in a complete catastrophe.

The answer to the first is not as simple. Vacations are, simply put, expensive. While relaxing in the bahamas for two weeks would be awesome, I can’t afford several thousand dollars either! After using all the logic God gave me, I concluded that a trip to Washington D.C. was the perfect vacation. I’ll share some of my tips here, so someone hopefully benefits.

  1. Think About Proximity - A good vacation spot has to be far enough away to keep you from getting sucked back in to life, but close enough to keep travel costs down. D.C. is less than $200 airfare from Atlanta, which is great! Another thing keeping travel costs down is that it’s easy to walk once there, or take public transit. Either way, a perfect place location-wise.
  2. Find Cheap Lodging - I have a friend that just moved to the D.C. suburbs. Furthermore, he’s been wanting me to come up for a long weekend quite awhile now. Lodging costs will be zero. While it may be more difficult for a family to do this, there is also no harm in asking. I remember a time when I was a kid, we went to visit family and my parents stayed in one family member’s house while we kids stayed in our favorite aunt’s house. We both got a break from each other, and a family of four had free lodging. Win-Win.
  3. Consolidate Dining Costs - Most people ruin their food budget by eating out all the time. Since I’m staying with a friend, we can cook several nights. This means we can use our money to eat very nice meals strategically. What’s better, 5 decent meals out, or 2 really nice meals out and eating at home the rest of the time? Breakfasts are cheap this way, and I may even get stuff to pack quick lunches a few days, keeping total food costs around $100.
  4. Consider the Attractions - D.C. is a hotbed for things to do for free. Almost all the museums are free or cheap, and there are a plethora of them. I know two of my interests are politics and the arts, and D.C. is a great place for both. The only thing I’ll be really spending money on is if I see a show at the Kennedy Center, which I probably will. You can’t beat a city with enough free things to keep you busy for a full month if you wanted.
  5. Share Your Trip - Talk to people about your trip! They may suggest places to go or things to do. Or, like my roommate, they may know someone who can get you an exclusive tour of something. In this case, it is possible I can get a White House tour through this contact (rather than the 3-4 month waiting period through Congressional offices). Others may advise you on things to ignore, and some may even want to make it into a road trip! I found 3 friends who may want to go with me (and possibly do different things while there), but this keeps down travel costs, and those friends may tell other people who can help us out with the trip too!
  6. Time it Perfectly - In my case, I wanted it to be soon, but still have plenty of time to save up for it. I chose mid-April for many reasons. First, summer has not yet begun, and summer is peak season. Spring breaks should be pretty much over by that point. The weather is still somewhat cool at that time. It overlaps two paycheck periods, so I can work straight until I leave, and then work straight when I come back, meaning I don’t sacrifice any time off work even though it’s a whole week (and in my case, time off means I don’t get paid). Plus, it centers around the weekend, which means that my friend can take two days off and still hang with me pretty much the entire time. It’s two months away, which is plenty of time to save for it, yet two months is not a long time to wait for a vacation. All said, it is the perfect time to take the trip!
  7. Know Your Limits - The total cost for my trip is around $600, even assuming I go over in some categories. That is NOT a lot of money, and I can easily save that in three paychecks. Furthermore, I will receive a fifth paycheck while there, which means that if something bad happens and I need extra money, it won’t hurt me so much. Plus, the structure of the trip means that each paycheck can go toward something different. I’ll purchase the airline tickets this paycheck, other tickets and car reservation on the next, and then save for food on the last. The fourth will go toward “extras” on the trip, like possibly a new lens for my camera.
  8. Know Thyself - I know my personal physical limits, and planned days around light walking accordingly. There’s nothing worse than a vacation when you come home tired each day, so while I want to do a lot of things, I consolidate it in a way to where I’m not ever exerting myself. Plus, I’ll not be afraid to simply just not do something if I’m not feeling it. While I want to observe a Supreme Court session while there, maybe the better option is to just take their quick tour. Also, I just finished saving up for a nice camera (a Canon Rebel XTi), and D.C. is the perfect place to shoot the type of photography I like. While some people would choose different things to do there, I know my likes and dislikes and choose accordingly. That said, don’t fall into the “prepackaged tour” trap. Spend time planning out your vacation. Trust me, the planning alone is already making me feel energetic and ready to take on life. Don’t sacrifice that for a bit of convenience, especially when it means you might not fully enjoy everything on your trip.

So, all in all an exciting trip I have planned. A full week, no sacrifice with work time, cost is less than $600, everything is perfectly tuned to my interests, and a few friends might even join me (but not join me on EVERY thing). That sounds like a perfect trip to me. Plus, with properly saving the money beforehand, I won’t be regretting it 4 months down the road when I’m still paying on it. Putting vacations on plastic is a sure way to keep yourself home forever, and it will feel good to come back from it and STILL have less debt than when I left, thanks to the magic of automatic payments.

So the lesson here is to not neglect yourself when on the journey to financial freedom. Don’t feel bad about taking a vacation, just plan it so well that nothing is wrong about it. Then save the money (and extra money) ahead of time, and you are all set. It doesn’t have to be the Bahamas to have a great time and relaxing trip, but with a few basic tips like these you can maximize your Vacation ROI and make it even better than a plain old island adventure.

12
Sep

Thrown Into the Deep End

By David 1 Comment
Categories: Circumstance Navigation and Frugality

The past month has taught me some difficult lessons. In the same way working through college made me grow up faster than classmates who had the parental free ride, losing my job 2 months after starting to get my finances in order has taught me a lot, very quickly. In short, I did find another job that seems to be the perfect opportunity, but I will wind up losing a full paycheck because of the transition. This is my first week working full-time in 3 weeks.

First, I learned that even if I think I have things figured out, but don’t account for major shifts from the very onset, I’m doomed for failure before having tried. I started getting my finances in order in June. In August, I lost my job. Two months could have been enough time to get at least a basic strategy ready just in case something happened. Granted, I thought things were stable, but I still should have had at least one exit strategy.

Second, I’ve learned that it’s possible to be extremely frugal given the correct circumstances. I can say no to going out with friends, I can refuse to drive extra miles, and I can even eat off $100 for two weeks (when I normally spend $100 per week or more). I’ve cancelled every little subscription I had, and tried my best to find every spare dollar I had. If the money is simply not there, I cannot do that stuff. Translating this into my path out of debt, my goal will be to make debt payments first, and live off of what’s left. This means I’m forced to be frugal, where thus far I’ve tried to be frugal on the front-end. It’s hard to be frugal when the money is sitting there waiting to be spent, but much easier when you don’t know when the next check comes in.

Third, I’ve learned that some creditors are sympathetic. Within reason, of course. A few credit cards allowed me to not make payments this month, and resume next month. They are still charging me interest this month, but will not charge me for two months later, will impose no late fees, and will not report me to the credit bureaus. While it doesn’t completely save me from the lack of funds, it will be an immense help, and one less thing I have to worry about right now. It took a lot of time and talking to get it done, but a few hours work to save me peace of mind during this transition was well worth it.

Fourth, I’ve learned the real cost of not having my finances in check already. In June, I wanted to do it for peace of mind and looking to the future and marriage/family. I assumed the job was stable, that I would always have an influx of money, etc. By sabotaging my own future self financially, I made this thing much more difficult than it should have been. After all, I’m only missing one paycheck, not even a full month, much less half a year like some people do. I’m extremely happy I was able to quickly find another job, but if missing two weeks worth of pay messes me up this month, I’m in a very bad condition. If I was not motivated before to get out from under this debt, I sure enough am now.

My new job will be paying me a few hundred more per month than I am making now, but will not be paying my school expenses. After thinking long and hard about it, while school is important, I really need to build up some financial muscles. After this semester, I may put school on hold temporarily if I cannot find financial aid to help me out. At this point, I may even take out additional student loans to cover the cost, and use my extra money to get out of debt even faster. With a few hundred extra per month, and living more frugally, I should easily (or rather, difficult-ly) meet my target of next December. Even more, I should have a decent emergency fund by then. While it may put my education in somewhat of a bind or cause me to gather more debt in student loans, I’d much rather trade my credit card debt for student loan debt! And with the increase in salary, once my debt is paid off that gives me that much extra money to either invest or put towards those student loans, which is nice. Once I have my degree, that’s an immediate $10-15k bump in my value as an employee apparently (though personally I feel the caliber of my work is not affected by a piece of paper), and I’m all set.

And while it’s fun to think about the future, it’s taking everything I have to make it through September. I’ll probably be posting very rarely until money starts coming in, but know I’m getting some good life experience that will give me much better perspective on my posts. I hope I learn some more lessons worth sharing, but until then…

07
Aug

Price Books for the Digital Age

By David 1 Comment
Categories: Frugality

I’m lazy. Let’s get that over with.

One of the current things I’ve seen going around the personal finance community is the idea of a “Price Book”. And there are some great tips for building your price book already out there. However, once again I am lazy. I know up-front I’m not going to carry that book into the store, I’m not going to write down prices, and I’m not going to spend a ton of time on something that saves me pennies.

Enter the internet, and the magic of receipts. Spending an hour each weekend the past month, I’ve managed to get a good idea of what deals I should be able to get. I’ve also easily expanded this method to clothing articles like underwear and socks. Of course, the most important thing is finding out what will work for you, but in the interest of increasing the ideas out there, here is how I did it (and am still doing).

1. Write down items that you buy often. For me, things like bread, cereal, milk, fruit, and meats went here, along with canned vegetables and things like laundry detergent and toiletries. However, cross the cheap items like bread off the list. I know that generic bread costs $0.99 or so, and I can spend more if I want. There’s no reason to spend an hour trying to save five cents on bread. The opportunity cost doesn’t add up. List items that are reasonably expensive (detergent) or that you buy many of at one time (canned vegetables).

2. Make sure you visit a different store each week (or each few days if you shop several times per week). Grab the store’s flyer while you’re here, and be sure to either purchase or write down prices for each thing on your list. If you purchase something, the price is on your receipt, so you don’t have to worry about writing them down. If it’s in the flyer, you don’t have to write it down. See, it’s all about being lazy.

3. Check prices online. Many stores put their circular (the sales flyer) online, so you don’t even have to go inside the stores or make a trip. I imagine you can do a decent price book from the comfort of your desk chair. Also check online bulk retailers such as Amazon, especially for things like laundry detergent, toiletries, and diapers. You may find it’s just as cheap to purchase online and get them shipped directly to your door!

4. Break open Excel, make a list of each product on the left, list each store along the top. Fill in the grid with prices. For the lowest price of each item, highlight the cell yellow. For those with experience, you may be able to use conditional formatting and basic functions to automate the highlighting

5.  Pick two stores that seem to have a good mix of prices. For example, if Wal-Mart seems to have good prices on toiletries, and Publix has good prices on food staples, it’s not a bad idea to visit both, especially if they are both nearby your house. Going 7 different places, however, is not a good idea; you spend more in gasoline than you save. If you can get almost everything cheaper at one store, just choose the one store. If you can save money buying online, then do that.

6. Compile and print a list of each item and their respective price. I was able to shrink it down to the size of a business card. This way, if you happen to be at a store and see a cheaper price or sale on one of your products, you can buy it right then, or if the price is permanent you can make a note to update your Excel file. Keep in mind your list is better if it includes things that can sit in the cabinets for awhile, like canned goods.

7. Pay attention to seasonal trends, especially when it comes to fruits and vegetables. You may choose to track the prices of items over time and realize that it may be cheaper to buy strawberries in winter and spring, and switch to bananas for summer and fall, or vice versa. Know and adjust your purchasing trends accordingly. Baking goods may go on sale after Thanksgiving and Christmas due to surplus, so you may stock up on vanilla extract, baking powder, and things like that. Your Thanksgiving turkey may actually be cheaper in spring, so if you have the freezer room, you may purchase early (though this doesn’t mean a deep freezer will pay off).

I have found that things like socks, underwear, toiletries, and such are usually cheaper online. I’ve also found that buying in bulk does not save money for the things I purchase; going to a CostCo makes me spend more by purchasing things I would not normally get. For others, it may save them money on everything. The point is to make no assumptions; you may be able to get everything cheaper at Wal-Mart, someone else may find the local grocer has everything for cheaper. You may have a store nearby that is always cheaper, but is too dirty for you to walk inside. That’s ok. You may love the convenience of online shopping even if it costs a few more dollars. That’s perfectly fine. Know what you’re willing to do, and what you’re willing to sacrifice. I’ve found that just by sitting down and taking a look at the small prices, you can easily save $10 on weekly shopping. It’s the concept of small changes adding up quickly. That’s $40 per month in savings, which is quite worth the few hours it takes to accomplish.

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