Jay wrote with a question that I think most of us have had to face at one time or another: What do you do when you feel like you’re slipping into bad financial habits? Here’s his story:
I have no real debt besides some student loans on which the monthly payments and interest are negligible and well under control. My credit card gets paid in full every month. I’m building an emergency fund. I recently got a decently paying full-time job. I live as frugally as I’m comfortable with — I pack my lunches for work, eat home except for twice a month (or when I’m out of town on business), and keep entertainment expenses reasonable. I manage to put away 30% of my take home pay into a high-yield online savings account and dump as much as possible in to the emergency fund every now and then. So why do I need advice?
I want to start a small side-business, and need to make just a couple of high-cost equipment purchases (about $700 worth). At the same time, my long-term girlfriend and I have just separated, so my living expenses are about to increase:
- I’m going to need to buy some furniture.
- The cost of groceries is going to increase.
- Vet bills will no longer be split.
- And so on.
What’s the best way to not fall back into the non-frugal rut, to still maintain a strong outlook on personal finance? Should I hold off on equipment for the side-business until I get a stronger handle on what’s going to happen financially? Is it better to live farther away from my job and pay less rent, but have a longer commute (and therefore pay more for gas)? I’ve been making good financial decisions, but even as I look at apartments online, I find myself thinking, “Well that’s a bit more than I wanted to spend, but I could do it.”
This feels like the first step to losing control. How would you approach something like this?
This situation gets at the core of personal finance — money is more about mind than it is about math. Jay understands the math, and he’s had the mental discipline for some time, but he can sense his strength beginning to crumble. What can he do to maintain his resolve?
This article is about Ask the Readers, Psychology
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Regarding getting a cheaper place but longer commute…DON’T DO IT. Not only will you pay more for gas, you’re wearing your car out faster and depending on how far, think of the cost of your time. Time when you can be doing something productive, resting, energizing yourself, instead of battling traffic.
Go the roommate route, craigslist is a great place as I have several friends who have found gems of roommates on craigslist.
Furniture: scour garage sales.
Food: There are numerous articles on how to meal plan and keep grocery costs down.
Business expense: buy used if you can, but since you didn’t specify what business you’re going into, only you can determine whether you’ll get a good ROI in the equipment you’re buying.
Good luck!
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Hey yall, I saw someone suggest this formula further up, $.10/mile + $/mile in gas. Can anybody suggest a good way to calculate fudge factor for car maintenance? I’m also trying to calculate how much it costs me to commute 48 miles to and from work everyday at todays prices. I don’t mind the commute so much, but it has definitely gotten old.
Superduper
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Superduper, try the Edmunds True-Cost-to-Own calculator, which I wrote about here:
http://www.getrichslowly.org/blog/2007/07/09/edmunds-true-cost-to-own-calculator/
I’m not sure that will give you the info you need, but it’s worth taking a look.
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I have to agree with Starving Artist… there’s nothing wrong with spending money sometimes.
Money is not valuable unless it helps you live a better life. When life happens, it’s OK to spend money.
The questioner does not go into detail about his specific financial goals, but saving 30% of your income plus is more than good enough. What’s wrong with taking yourself out the movies, or buying yourself a nice new bed (or something else that you objectively do need) if that would truly help you feel better after a breakup?
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People have already posted a ton of great ideas re commute, living situation, and furniture.
I avoid falling off the wagon by making saving for fun stuff a part of my overall savings. I have a wish fund that is basically for books, video games, comics, dvds etc… We also have a fund for vacations and spending along those lines. This way, we don’t feel deprived but it is sitting there just in case we need it for something more like a need.
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There is nothing wrong with spending money sometimes, as long as it is within one’s means. It is not all or nothing – spend like crazy and be in debt or save in the penny and not buy anything beyond basic needs. Everyone has things which are more important or less important, so it may be OK to spend a little more (within reason) on something one loves and a little less on something one doesn’t feel strongly about. Bigger apartment and save on other things (clothes, furniture, entertainment) or smaller apartment and have more money left.
There are also places when one can get stuff for less. Moving sales, garage sales, thrift stores can occasionally have good stuff – when I was poor I found some perfectly useable things there, even very nice things. When I just started working, there was a young woman at work who always looked very stylish. A friend of mine was really curious where she gets her clothes. The woman said – “you will not believe me, I get most of it at thrift stores”. She wasn’t lying, I bought some good things there at the time; I donated some really good clothes there in recent years. Some of the clothes I donated still had tags on them – bought at the end of the season on sales, than lost weight before having a chance to wear them.
In terms of longer commute vs more expensive place, I think this isn’t only about the money. Yes, calculations are useful. But so is free time. How long is the commute? Are we talking extra 15 minutes or an hour one way? I know one guy who works with me who commutes for 50 miles one way so that can live in a bigger house for less than half the price of a smaller one here, and it works for him. I tried it for two years after I transferred from Dutchess (NY) to Westchester (NY), and I found that it is too stressful and not worth it. Some people don’t mind driving even like it; others hate it.
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I agree with the first commentors. I would consider getting a roomate, AND living closer to your workplace. If getting a roomate isn’t an option, perhaps finding a studio or even renting a room out of someone’s larger house would suffice. I’d be careful with how far you decide to live from your workplace because it not only puts more miles on your vehicle, but of course it sucks away the gas.. which is getting more expensive by the day.
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My first question is regarding your credit card. What expenses exactly are on it and are they really necessary? Try getting into the habit of paying cash for now and use your credit card for emergencies. Try using a bank card where the funds come directly out of your bank acct. Second, the full time job you say you have…is this going to be a problem? To start up a successful small business you need to devote all of your time to it.
…There’s your $700.
$700 is not a lot to save up. Just because you “need” furniture, groceries (maybe vet bills), these things for living comfortably must be FORGOTTEN about if this side-business is a dream of yours. My advice for that: get use to a sleeping bag and Kraft Dinners for a bit. You can still survive
I did the whole spending more on rent thing just because “I could” but within the year cut back to a smaller, cheaper place so as to focus more money on the business. As long as you know the income from your side business is going to eventually pay off, which it will with blood, sweat and tears. Also, ask other business owners who they use as their accountant to eventually land the one that’ll save you the most money in the long run. Goodluck…and forget about the girl, stay focused right now on your business. There’s too many to choose from in this world.
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