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Here’s a roundup of recent articles from around the Money Blog Network (and beyond).
Ramit at I Will Teach You to Be Rich has the post of the week, writing about an annoying e-mail he got. One of his readers wrote:
This is nothing personal against you, because every personal finance author I’ve read says the same thing, but your advice is not for real people like me. The “spend less, save more” theory is great for singles or young married couples with no kids … but I need some other strategies to help me get my finances in order.
Folks, all personal finance stems from this fundamental skill: spend less than you earn. It’s simple, but it is not easy. Why not? Because money is more about mind than it is about math.
Speaking of which, JLP wonders is personal finance really 80% behavior and 20% head knowledge? Dave Ramsey often makes this claim, but does it have merit? (I think it’s silly to assign specific numbers to this, but I agree with the basic principle.)
Jim at Blueprint for Financial Properity argues that you should never pay banking fees ever. Looking at one of my past posts, he points out that by staying with my bank instead of moving to a credit union, I paid $1728 in monthly account fees over eighteen years. Doesn’t sound like much, but combine that with the other fees I paid, and the money adds up! There are plenty of no-fee accounts out there to be had.
For the past several years, I’ve tried to buy into the Getting Things Done philosophy. I’ve tried a lot of things, but few have worked. I just have abstract random mind. Maybe a highly-productive workspace is not for me. It’s not for Flexo, either, who argues that the distraction-free workplace is the past to an unfulfilled life.
Here are some other article from around the Money Blog Network:
- No Credit Needed describes how he purchased a mini-van without borrowing any money. Great work, NCN!
- Free Money Finance notes that one way to get rich is to do something nobody else wants to do. Clean sewage, collect garbage, repair computers. Pick dull-normal jobs with high demand but few interested works, and you can earn a large salary.
- Nickel wonders: Does a busy schedule save money or waste it?
- The Mighty Bargain Hunter has a list of eight ways to invest in yourself, ways to boost your income and to increase your personal value. I like this list.
Finally, Andrea Dickson from Wise Bread recently
interviewed me via e-mail. If you’d like more background about Get Rich Slowly and my motivations for starting the site, this is a good place to start.
.jpg "The Money Blog Network - Improving your bottom line")
October 29th, 2007 at 9:16 am
_”…but your advice is not for real people like me…”_
hmm… people living in the real world should be able to spend more than they earn and not go broke…?
_”spend less, save more”_ is a theory?
The problem is _at least_ 80% beliefs, I think. At least. I have friends who were pretty much of the same mindset, struggling to make ends meet until he finally picked himself up and got a higher paying job. But they still spend their money on a lot of (what I would consider) optional items, and they say they can’t save, so I don’t know that they’re out of the woods yet, or if they’ll ever be. But it’s something I can only talk about very carefully with him
Great post, JD.
October 29th, 2007 at 10:04 am
I think that the commenter in Ramit’s post was clearly in denial of his spending. Unable to admit the problem that certain purchases are simply not necessary and can be removed or replaced with cheaper options. I’m happy he came to see this, and also realized that things would not change unless he made them change.
I realize that I make unnecessary purchases too, but I also realize that I’m doing it as a choice, not a necessity. The lifestyle I WANT carries a cost, and I consider it valuable enough to justify the price. He is clearly in the same position.
And I like the invest in yourself post also. It’s a familiar looking list, but that doesn’t mean it’s bad.
October 29th, 2007 at 10:36 am
J.D.’s advice works for my family of four, and, last time I checked, we are real people.
I don’t know this poster’s particular situation, but I suspect that the problem is his assumptions about what kind of lifestyle the family income actually supports. Part of learning to live within your means is questioning those assumptions.
* A family doesn’t necessarily need to live in a suburban house with a two-car garage. Perhaps a less-expensive townhouse near one person’s workplace will do. This is what my husband and I are doing, and we can’t wait to get rid of that second car!
* If you must have a car, they can be bought used. Cars last a lot longer than most people think, and many used cars have years left before they’ll die completely. Bonus, older cars cost less to insure and register, sometimes hundreds of dollars less a year!
* Kid’s clothes can come from a re-sale shop where they cost a fraction of what you’d pay for new. You might be surprised what’s available at these places. If you care for them well, you can re-consign the clothes when you no longer need them and put a few bucks back in your pocket.
* If your kids are older, they might enjoy thrifting for vintage clothes, which can be an excellent bargain. You never know! If they’re label conscious, consider from whom they adopted their expensive tastes.
* Starbucks is a luxury, not a a necessity; same with eating out. Learn to cook. It will save you a ton of money, and you’ll be healthier to boot.
* Cut up your credit cards and stop paying interest. Pay your bills on time to prevent late fees. Stay out of the mall. Target, too.
These are all things my husband and I do, and he earns a mid-six figure income. Just because you make it doesn’t mean you have to spend it. Challenge your assumptions and be creative. Don’t give up! If my family can do it, you can do it!
October 29th, 2007 at 10:40 am
Okay, I get the idiot of the day award. I just realized that it was Ramit’s blog that got the e-mail, not J.D’s.
I gotta learn to pay attention!
October 29th, 2007 at 11:21 am
“but I need some other strategies to help me get my finances in order.”
This actually makes me wonder how much of emailer’s problem is organization.
If you don’t pay the bills because you already spent the money, yes, you spend too much. If you don’t pay your bills because you can’t FIND them, then the problem is organization.
I got a BIG raise in 94 - over $500 more a month, take-home - right after I’d moved to a much smaller apartment to save money* and the same month I paid off my credit cards**.
Did I suddenly feel in control and pay my bills on time? Nope. I didn’t have a designated place for all bills and ONLY bills to go. Sure, I ate out a lot, I bought a lot of books and CDs, I spent a lot of money I didn’t need to … but the big problem was that I didn’t keep track of anything.
One day I was unpacking books and found I already had the “new” hardback I’d bought the week before. And I’d lost the receipt.
So I figured out how to deal with bills (sort mail immediately, anything that looked like a bill got opened and put in the only-bills slot and paid on Monday). I made a few phone calls and changed some billing dates to cluster bills together for my convenience. I started using my AmEx for anything non-check so that I could have a summary of what I spent each month.*** I unpacked and organized my stuff so that I knew what I had.
And, suddenly, I didn’t have problems with money. In fact, I could afford to max out my 401(k) contributions and open some other investment accounts.
*Roommate didn’t pay rent for 3 months, then moved out. So I moved from a 2-bd 2-bath at $950/mo to a 500 sq ft efficiency 1 mi from work for $550/mo.
**Stock options.
***This probably DID make me spend less, just because I was more aware of how much I did spend. But it wasn’t a conscious “oh I’m going to cut this out and limit that”.
October 29th, 2007 at 12:14 pm
I’m going to play devil’s advocate here and back up the guy who wrote to Ramit–particularly in light of the guest post from James (I think) who got and lived debt free on “autopilot” thanks to his virtual employer. As I was reading James’ article, I kept thinking, yep, I could see amassing $1M+ in 15 years–if I didn’t have kids in my life.
Redhead68 is absolutely right about all her points regarding living frugally. What’s she’s written is exactly how my family of four lives.
But it’s *also* true that we have to live in a bigger house for a family of four than is needed for a single person or a set of DINKs. And our car needs are different (need a backseat–gotta be able to fit in those car seats–and before long we’re going to need something with a *bigger* backseat to accommodate those increasingly-longer legs…whether we want to buy a car or not). And our grocery bills are higher, and day care costs practically go without mention, *and* both my husband and I both choose to work jobs that have enough flexibility to be with our kids as much as possible, and you know that comes with a hit to the salary.
The guy in Ramit’s post talks about “giving his wife and kid what they want”. This doesn’t always mean the latest and greatest electronics and other costly stuff. It’s reasonable and natural to want to do nice things for the ones you love, and even the things that are very modest add up. Even bare-bones basic birthday parties for kids cost $100, all told. Sports participation (all that gear)? Scouting? School field trips?
Not to mention all the unexpected, right-now expenses. A trip to the ER for a broken arm? The steady stream of things–coats, lunchboxes, school supplies, glasses–that get lost/stolen/misplaced/ruined at school? You can’t just “do without” some of these things, and often you don’t have the luxury to comparison shop when you need it dealt with right away.
Having kids IS EXPENSIVE, and that usually can and does have the effect of shrinking the margin between income and outgo.
There was an article in the Washington Monthly, I believe, a few years ago, that built a significant case that parenthood was a suckers’ game, from a financial perspective. You put so many resources into raising your kids, and some of that can return to you in the future, but it’s primarily for the benefit of society as a whole. This is an excellent example of a situation where economic analysis is NOT the only, certainly not the primary, way to look at the “costs and benefits”–but the economic impacts are pretty breathtaking.
Pardon the rant. But I bring it up because, by and large, it seems the most widely-read PF bloggers are people without kids (maybe that’s why they have all the extra time to devote to blogging). Parenthood is widely regarded as one of those things where you can’t fully appreciate what it’s like until you’ve jumped into it…I argue that that’s true on the personal finance front as well.
‘Nuff said. Sic Ramit on me if you want, I can take it!
October 29th, 2007 at 12:16 pm
Following up to add…my family takes the same tack as Redhead68’s–but our combined family (2 working parents) is well less of 6 figures. Income still exceeds expenses, but we’ve also got the braces and college years ahead of us–there’s no guarantee that it’ll stay that way.
October 29th, 2007 at 1:16 pm
Please don’t think that I was trying to diminish how expensive it is to raise children. I do know that they chew up a lot of our expendable income, but we understood that when we had them and have planned accordingly.
The biggest ways that we stretch our dollars are housing and cars. Challenging our assumptions about what a proper house with children looks like has made a big difference in our bottom line.
We recently moved cross-country and have spent a couple of years renting a smaller & less expensive house than that to which we were accustomed, with no discernable reduction in our quality of life. In fact, we now have a little more room in our budget for activities that we really enjoy rather than paying for, insuring, and maintaining a big house.
As far as the car, we bought a used car for cash and maintain it well. We recently took it in for an expensive repair, but the annual amortized cost was only about $200 a month, which is far less than the average car payment.
As an aside, I have a neighbor who is always complaining about not having enough money despite having a comfortable six-figure income. She admits that the $500 lease for her behemoth SUV, the insurance, and the fuel to run it is taking an unreasonable chunk out of their monthly income, but she was absolutely horrified when I suggested that maybe a less expensive car was in order, arguing that she DESERVES that car, her husband works hard to afford that car, a smaller car wouldn’t be as safe for her children, etc. Wow! It’s hard to know where to start with someone that much in denial.
October 29th, 2007 at 1:36 pm
Redhead68, believe me, I’m right there with you. I too know people who spend themselves into big trouble because they think that having kids means they need a minivan, or that each kid absolutely must have his or her own bedroom, or that it’d be impossible to live in house with just one bathroom. Or people who don’t have kids at all and piss away a lot of money on all kinds of things that seem extraneous and silly to me–but hey, it’s America, they’re adults, whatever, it’s their business.
I think it was the juxtaposition of the guest post and the letter to Ramit that got the burr under my saddle. Yes, you can live below your means as a family, and there are lots of good strategies for doing that. But also, having kids means your expenses go up *and fluctuate* in ways you can’t always predict and plan for.
October 29th, 2007 at 3:40 pm
Oh, I know about those unexpected expenses. My youngest is good for at least one emergency room visit a year, if not two. The last one involved a helicopter ride to Johns Hopkins for a suspected head injury. Fortunately, he’s fine. We joke that he’s the reason we can’t EVER go without healthcare insurance!
But back to the e-mail under discussion. When I hopped over to Ramit’s blog to see what all the fuss was about, my first thought was that the writer had a big problem saying no. I wondered about the long-term effects of giving in to his family’s material whims.
Now, I admit I don’t know much about this family’s situation, but I do know that in raising my own children it is important to me that they learn to set goals, delay gratification and exercise self-control. I can’t expect them to learn those skills if I set a poor example.
My husband often talk to our children about money: how we earn it and how we choose to spend it. We’ve talked about interest and taxes. We’ve taught them that the ATM is not a “magic money machine” (my daughter’s words). We encourage them to set financial goals, help them develop savings plans, and, of course, we celebrate with them when they reach their goals.
The point is, it’s hard to expect our children to say no in the face of temptation when we can’t do it ourselves. It’s essential that we face our financial demons if we expect our children to become fiscally-responsible adults.
October 29th, 2007 at 5:17 pm
Wait. Hang on here. Some people don’t earn very much. What if you earn $8 an hour at a 35 hour a week job? That’s $14k a year or $1200 a month. Assume your spouse would earn the same, so they stay home.
You have two little kids. Your rent is $600 a month. You’ve got $600 a month left over. Spend $200 on food and $100 on diapers. Now you’ve got $300 for prescriptions, clothes, shoes, transportation, utilities, telephone, insurance, etc.
Oh? You’re spending more than you earn? What other choices do you have? You’re in a dead-end job and you have few options to move up. Let’s say you have a learning disability. No money to take courses at night. No quiet place to study because your family of four lives in a 1BR apartment.
It’s easy to say “spend less than you earn” if that’s a choice available to you. But some people in our developed nations are not starting from the same place that we are.
October 29th, 2007 at 6:00 pm
Andrea, there is always an option. The Military is a great option for individuals who want to get ahead. You get education, health care, career options, etc.
If the Active Component is not a viable option for whatever reason, the Reserve Component has an excellent, affordable, quality insurance plan for families. If you want more info, email me and I will send you information.
Gregg
October 29th, 2007 at 6:03 pm
You said it, Andrea.
This is sort of getting into Elizabeth Warren’s domain–that financially precarious households are having trouble because costs for basic needs have outstripped income gains in the last 30 years. I’d argue that this is even more exaggerated with respect to costs of childrearing.
Car expenses are a great illustration. When I was growing up, it was perfectly legal to drive around with a pile of five kids in the back seat of a car. In this day and age, in virtually all if not all states, each rider in a car needs a seat belt, and all kids below a certain weight need a car seat. Of course, there are the expenses for the car seats, which people didn’t have before. And if you drive with more than 2 kids, you’re in minivan territory, whether you like it or not.
October 29th, 2007 at 6:08 pm
With all due respect, Andrea, your scenario does not appear to be the case with the subject family. His wife is in medical school, for goodness sake, and he as much admitted that he has a problem saying “no” to their material whims.
It is unfair to imply that J.D. & Ramit must offer universally-applicable advice in each post. The family you described needs assistance that goes well beyond “spend less than you earn,” while the family we have been discussing appears simply unwilling to exercise reasonable self-control.
October 29th, 2007 at 7:06 pm
I received the weekly e-mail from a former pastor today. It seemed relevant to our discussion, so I thought I’d post an excerpt:
“As for money problems, they are frequently related to life-style choices and not in any way to survival. A family of four can live in a 1200 square foot home or a 2400 square foot home or a 4800 square foot home. A family can drive Chevy?s or BMWs. We can go camping or to Europe on vacation. We can buy books or go to the library, etc.
What many people forget when they are stressed out is that they have choices….
The one message our society seldom, if ever, sends is that it?s okay to simplify, to down size….
So for all feeling great [financial] stress…remember you have options. Consciously or subconsciously you have made choices which [you] can change…if you are willing to accept the consequences of those changes.
No one can have it all. We buy everything at a price. The question is ‘Is the price worth it?’”
Credit: Pastor John Sabatelli; Christ Lutheran Church; Baltimore, MD.
October 29th, 2007 at 7:40 pm
Hang on. I’m somebody who put myself through a bachelors and a non-state-subsidized masters without any debt. I own my own home and have a low ratio mortgage. I don’t have any other debt. I run my own business. I’m married to someone with a masters and a great job. I definitely understand that it’s possible to get ahead.
However, what I sometimes hear in the comments section here is that everyone has this ability. And that’s just not true. Not everyone has the ability, opportunity, mental health or physical health or other means to pull themselves up. I just like to mention that once in a while. I wasn’t intending this to address the situation of the subject family.
As for joining the military, some of us are dead set against the poverty draft, US foreign policy and a multitude of other things I could mention about the military.
October 29th, 2007 at 8:08 pm
Andrea wrote…
“However, what I sometimes hear in the comments section here is that everyone has this ability.”
I think your post exceeds the scope of J.D.’s blog entry and the discussion at hand. We are not debating the hardship your example couple faces nor their need for assistance. No matter how worthy the topic may be, this discussion is not about the politics of poverty.
J.D. has asserted that the fundamental personal finance skill is “spend less than you earn.” He is absolutely correct.
October 29th, 2007 at 8:16 pm
But Andrea’s right, too, that there’s no one size fits all answer.
There’s been a lot of discussion in the personal finance blogosphere lately about the lack of information for poor people. The thing is, I don’t even think the personal finance experts have good advice for poor people. It’s a complex subject. It’s something that governments wrestle with, and have yet to solve. How can a blog writer solve it?
Advice found here (and at similar sites) is most appropriate for those in the middle of the bell curve, not at the extreme ends…
October 29th, 2007 at 8:23 pm
J.D.
I was only referring to the scope of this particular entry, not Get Rich Slowly as a whole.
For those who are interested in information about living frugally, try Frugal Village. There are many members who thrive, even with very low incomes. Members are mostly women, but there is lots of good information and encouragement.
October 29th, 2007 at 10:36 pm
Warning:
== rant from a tired mom ahead ==
I wish I could “have it all together” like many of my peers. Live with a roommate, use public transportation, pay off debts, save money, have a hobby that gets some side income, start a family when you can afford it… Some things are hard to change, if not impossible. Especially an unplanned child.
I WISH I could use advice about giving up lattes, movies, new cars, not eating out, etc. Except I never could afford lattes, movies, a new car or eating out to begin with. Vacations to Europe or cool gadgets never were part of my reality.
I am not complaining, I’m doing what I can. I have a decent job (not minimum wage), education, just finished paying off my CC debt. Working on paying off my car and growing an emergency fund. But boy, is life and finances easier without [unplanned] children…
== rant over ==
What I really want to say is this:
J.D. Thank you for understanding and non-judgemental attitude to those less fortunate. That’s why I love your blog, even though not all advice is applicable to my situation. It’s the gentle and positive attitude of your posts that keeps me motivated. Keep up the good job you are doing!
Also, happy to see posts from those who understand the joys and complexities of parenthood
October 29th, 2007 at 11:20 pm
I am affraid of potential misunderstanding, so just to clarify: I LOVE my daughter more than anything (which doesn’t mean she gets everything she wishes for in a store, and that’s ok).
The point is this: there may be life circumstances when cutting all luxuries and “wants” still leaves one way behind compared to those money-wise in a more favorable position. Not ALL those, who are below the middle part of the “wealth bell curve” can easily catch up by downsizing cars/house and using a library. Some have always lived like that.
October 30th, 2007 at 1:39 am
If you’re supporting 2 kids on $1200/month, you are eligible for many welfare programs. You are eligible for low-income phone, electricity, gas service. (As far as I know, only cable TV does not have low-income programs.) You will get a refund without paying a single dime of taxes due to the earned income credit. Oh it’s not a glamorous life but you will not go hungry assuming you don’t sell your food stamps off for booze. And you will have to stick with free clinics and county hospitals for medical care.
There is always choice to decrease spending. Even the ultra-poor in this world making less than $1 a day spend 25% of their income on booze & cigarettes. Keeping another 25 cents a day is not going to make them rich but that could pay for an extra helping of chicken drumsticks and keep them healthier.
October 30th, 2007 at 8:20 am
Single Mom…hop on over to Frugal Village. I think you might find a great deal of support and encouragement there.
Members run the gamut from those with very low incomes struggling to make ends meet to those with high incomes who want to live a smaller footprint life. And, if you want to rant, you’ll almost always find a compassionate ear.
What is most impressive to me about Frugal Village members is how empowered & motivated they are to make things work. There isn’t *much* whining, even from those in very challenging circumstances. Give it a look.
http://www.frugalvillage.com/forums/index.php
All my best…Redhead
October 30th, 2007 at 8:27 am
Also, Single Mom…a hearty congratulations on getting rid of your unsecured debt and starting an emergency fund. Way to go!
October 30th, 2007 at 11:25 am
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