This article is by staff writer April Dykman.

Many years ago, when I was paying off a car loan and some credit card debt, I became really frugal. Almost obsessively frugal. I looked for every possible way to save money, and I dreaded ever having to spend money.

Then one morning my husband accidently broke our coffee carafe. I helped him clean up the glass and caught myself feeling anxious about having to buy a new carafe. How much was that gonna cost?

As it turned out, only $12. That’s when I knew I had swung too far in the tightwad direction. I’d gone from not really being in control of my money to being a control freak. And it was making me miserable.

From one money extreme to the other

Before I educated myself about personal finance (starting with GRS, actually!), I never tracked how much I was spending. When my credit card bill arrived each month, I had no idea how high or low it was going to be. If it was low, whew! I could relax. If it was high, I’d buckle down for a few months and pay it off. Then I’d continue with my previous spend-now-worry-later habit.

Opening the credit card bill was pretty stressful back then. Here’s what I wrote almost five years ago about that period of my life: “My stomach dropped as I looked at the balance, added the expenditures in my head, and realized that yes, it was correct. The bank didn’t make a mistake. I bought that stuff.”

Eventually, I started learning about emergency funds and the real cost of paying interest. As I followed J.D.’s story, I slowly started to get my own financial life in order. I saved a small emergency fund first; then I started to tackle my debt.

Being type-A, though, I felt like I had failed in the personal finance area of my life. So I wanted to pay off my debt as soon as humanly possible. I wanted it gone, erased from my credit report and erased from my life. I dreamed of the day when everything would be paid in full.

But somewhere along the way, I started to get anxious about spending money. I worried that I wasn’t getting the best deal. I beat myself up because I’m terrible at clipping coupons and remembering to use them. I’d read frugal blogs and kick myself if the writer DIYed something that I just bought. Spending was making me miserable.

Now, there’s nothing wrong with being frugal. But replacing a $12 carafe shouldn’t ruin your morning, you know? I didn’t want to live like that any more than I wanted to dread the credit card bill every month.

I needed to find middle ground.

April in the middle

I didn’t find that balance right away, of course. It took time to (mostly) make my peace with spending and saving. So today I thought I’d share what this more balanced approach looks like for me.

Here are my spending guidelines and how I approach spending these days:

  • I only spend money I have — meaning, no credit card balances … ever. I pay off my rewards card at the end of every month. This action alone alleviates a ton of money-related stress.

  • I spend guiltlessly on things that are important to me. For instance, I greatly value my family’s health. So I’m okay with the fact that we pay a lot for grass-fed, organic what-have-you. I’m okay with our gym dues and paying for yoga classes. It feels good to spend money on the things we value.

  • We indulge sometimes. I like the Balanced Money Formula a lot, which leaves room for indulgences like eating out and, in our case, hiring a housekeeper to clean our house twice a month. Uber-frugal me would never, ever, not in a million years, hire a housekeeper. But it is actually more affordable than I thought and, for me, it’s been life-changing. Between cleaning sessions, the house requires very little upkeep, and this means we’re always ready for company. I enthusiastically pay my housekeeper. She’s amazing.

Here are my saving guidelines and my more balanced approach to saving money:

  • We have an emergency fund. Right now, it would get us by for at least a year. That’s probably a little too much for an emergency fund; but we sold some land recently, and I still need to figure out what we’ll owe in taxes and then set that aside and move the rest of the funds.

  • We contribute to Roth IRAs. Knowing that we’re saving for retirement and that we have an emergency cushion helps me feel less guilty about spending money elsewhere. I don’t have to worry about what we can spend if we take care of savings first.

  • I comparison-shop for the bigger stuff. If it is an expensive purchase, like the refrigerator we had to buy last year, I spend a fair amount of time sorting through reviews, looking for the best deals, and Googling coupon codes. But researching like that for something like a $12 carafe? I have to let that go. It keeps me more sane.

  • I do a quick gut-check. Before I buy most things, I take a little timeout. Do I really like/need/want this? Do I already have something that works just as well? Could I make it myself? For instance, I recently planned a baby shower for a friend. I saw these neat tissue paper tassels I wanted, but they were $30. Spending $30 for something I wouldn’t reuse bothered me. So I Googled “how to make tissue paper tassels,” and I made my own in about 30 minutes with an extra $3 worth of supplies.

  • I lower our bills as much as possible. I love to save money on property taxes, insurance, cell phone plans, and other expenses that I can lower without feeling a pinch. This also can include things like cutting subscriptions and memberships you no longer use and refinancing your mortgage when rates drop.

Of course, this is just what works for me, and one of my favorite GRS tenets is to do what works for you. You might be more frugal than I am; and if you are perfectly happy that way, that’s great! I’d probably be envious of how much you save. Or maybe you think protesting your property taxes is a waste of time, and you’d rather focus on increasing your salary. I wouldn’t necessarily disagree.

So, readers, let me know in the comments: Have you ever been at a spending or saving extreme? What does balance look like to you?

This article is about Frugality

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This article is by staff writer Lisa Aberle.

The older I get, the more complicated my life gets — and the harder it is for me to make decisions. Do we have anything in common there?

By far, the most complicating factor has been having children. Not that that’s a bad thing. It’s not bad, just … complicated. And since we just added another child about two weeks ago, we’re adjusting to less sleep and more laundry. So kids = sometimes hard decisions. For example, here are a few of the decisions that we’ve considered since having children:

But the decisions extend beyond money, too. How do we manage our time? In the middle of adjusting to a newborn, we are still in the middle of a huge remodeling project on our fixer-upper. What sane person decides to replace the siding, windows, wiring, and insulation in the middle of major life changes? We are doing it, but our sanity should be questioned.

Anyway, so I find myself a little overwhelmed with making the best possible decision for my (and my family’s situation).

Enter Decisive by Chip and Dan Heath. The subtitle of the book is How to Make Better Decisions in Life and Work. If that doesn’t sound like what I need (and maybe you, too?), I don’t know what does.

I loved the book and wanted to share a few things I learned from it.

Agonizing over decisions?

The authors describe four “villains” to decision-making.

  • First, we define our decisions too narrowly. For example, as we were preparing to have children, I first asked myself: Should I quit my full-time job or keep it? Two options. The authors say that often, we should be asking ourselves broader questions and broadening our options. Should I stay full-time? Quit completely? See if working part-time is a possibility? Maybe my husband should cut his hours or work from home two days a week.
  • Second, we — all of us — suffer from “confirmation bias.” As they discuss in the book, “Our normal habit in life is to develop a quick belief about a situation and then seek out information that bolsters our belief.” Uh oh. So we deliberately seek information that supports what we think already, huh? We think we’re making good decisions, but we probably aren’t making the best decisions if we unconsciously sought what we wanted anyway.
  • Third, short-term emotion affects our decision-making abilities. Sometimes we need to detach ourselves from the situation to gain some perspective.
  • The last villain is overconfidence or assuming that we know more than we really do about what the future holds. This is one that some readers took issue with when I wrote about our smaller retirement savings. Just because we think we’re doing okay doesn’t mean our retirement savings won’t be obliterated by an accident or disability.

Decision-making tips

So how do we make smart decisions anyway?

  • To counteract the narrow framing, widen your options. Are there more than two choices? Is there a better way? And another way, take away all current options and force yourself to think of new options. But don’t have too many options. Studies have shown that having too many options doesn’t improve the decision-making process. You can also look for others who have already solved your problem. One of my favorite things they recommended was looking at yourself when you did do things well. For instance, if you had several days in a month when you didn’t spend money impulsively, analyze what was different about those days compared to the days you did spend impulsively.
  • For confirmation-bias, you need to test your assumptions against reality. Instead of looking at the option you want, you may want to consider the opposite — or find someone who disagrees with you. They also discuss zooming in and zooming out on certain situations. By zooming in, we’re looking at a close-up, and by zooming out, we’re taking more of an outsider’s perspective. And I learned a new word by reading this book: “ooching.” “Ooching” means to test your hypothesis by creating a mini-experiment. A swimming example is to dip one toe into the water to test it before diving in.
  • Find a way to become detached from your short-term emotions. Another excellent strategy they offer is the 10/10/10 strategy. When faced with a decision, ask yourself how you will feel about your decision 10 minutes from now, 10 months from now, and 10 years from now. We like what’s familiar to us, so even though not all personal finance advice is applicable to us, we are more comfortable with what we’ve heard most often. To combat this, try looking at the situation from the perspective of an uninvolved observer (or, think about what you would tell your best friend to do if she were facing a similar situation, and why). Think about your priorities and honor them.
  • Since no one can know the future, prepare to be wrong about the future. The authors talk about a tripwire, something you put in place that causes you to evaluate past decisions. I think this one may be particularly valuable in past financial decisions, because it prevents status quo. To prevent overconfidence, they mention considering a range of possible outcomes, both good and bad: What’s the worst thing that can happen? What’s the best? A premortem is to consider that your decision has totally tanked. By asking yourself why your decision was theoretically a bad one, it forces you to face your overconfidence.

This book was full of interesting stories and case studies. I found its premise to be very helpful as I personally navigate a lot of important decisions.

Do you have any tricks to avoid decision paralysis? Do you think you make good decisions generally and, if so, how do you think you accomplish this?

This article is by editor Linda Vergon.

It used to be part of everyone’s existence, like going to the grocery store once a week. You’d stand in a teller’s line and hope everyone in front of you had uncomplicated transactions. Then you’d hand over your cash and the teller would stamp your passbook to record your deposit. It all felt very solid and respectable, even sort of fun knowing you were adding to your savings.

When we moved to rural Washington, the nearest branch for the big bank where I had my accounts was 70 miles away, so I opened an account at the local bank too. It was an entirely new experience for me, going to the bank in our little town. I’m certain that the tellers were on a first-name basis with all their customers, and it didn’t take long for us to fit in and enjoy the social interaction at the branch too. In fact, we still have the branch manager’s mobile number on our cell phones.

Now that we live in the big city again, it’s actually been five months since I stepped foot in a bank. The last time was in March, and I only went because I needed to give the bank my new address – for my safe deposit box that is housed in another city. Apparently client information for safe deposit boxes at my bank is still handled the old-fashioned way. Otherwise, I could say I almost never go into a branch.

In this environment, I much prefer to conduct my banking online – day or night, from my computer. When I went in March, I actually thought I’d have to take off work to conduct my business; so I checked online for the location and hours to plan my visit. I was surprised to find that they were open even though it was 4:00 p.m. on a Saturday. (Definitely not the bankers’ hours I remember.) I decided I would just go to the bank on my way to the grocery store that day so I didn’t have to take time off from work.

We talk a lot about the convenience of online banking at Get Rich Slowly. And I get that not everyone has a computer. (Heck, not everyone has a bank account!) But I have to admit to being surprised that there were actually people at the branch. I mean, it’s not like I had to fight for a parking space – and the customers were outnumbered four to one – but that’s not where we go for social interaction in the big city, so were they all dealing with their safe deposit boxes? I think not.

It’s obvious that some of us still need to visit a branch every so often. But when I live in a large metropolitan area, there’s virtually no reason for me to visit a branch when I can transact all my business and even open a new account online. I think, overall, that we’re moving away from needing brick-and-mortar institutions, but I also think we’re sort of just at one point along a continuum.

If you look back at how other banking products like automated teller machines (ATMs) and debit cards were introduced to the public, there was a tipping point beyond which you could say, yep, this is the new norm. Where do you think we are with online banking? Is it now the norm? How long has it been since you went to the bank? Is there another way to measure the tipping point?

Former GRS staff writer Donna Freedman has been researching the importance of teaching children about money, and she asked if she could share some things she’s learned. This is the first of two articles on the subject. Donna writes for Money Talks News and blogs about money and midlife at

While researching a magazine article on “raising money-smart kids,” I felt sorry for parents and terribly worried about their children. (Also greatly relieved that I am not raising kids today.)

The article, for Consumers Digest, ran to a few thousand words. Short form: Our children face serious money temptations and pressures, and generally receive very little useful info either from parents or schools.

They also face consequences more serious than their parents ever did. We’re not talking about a few bounced checks or some other financial oopsie that you remember from your own early adulthood. An 18-year-old without sufficient financial savvy could within five years find himself:

  • Saddled with several decades’ worth of student debt
  • Paying double-digit interest on an auto loan
  • A victim of identity theft
  • Unable to get a mortgage
  • Looking at seriously underfunded retirement

Sound grim? It could be, but it doesn’t have to be. You can help your kids avoid years of financial struggle by consistently modeling certain basic money principles.

Today’s tykes are affected by a consumerism-drenched culture, and keeping up with the junior Joneses is a battle that gets more fraught every year. Even if your child doesn’t know someone who gives out $150 birthday favors or rents a limo for the junior-high dance, he’ll see similar excesses on social media or shows like “The Rich Kids of Instagram.”

Prepaid debit cards are marketed to impressionable tweens who then develop a taste for plastic a decade earlier than the previous generation. (One is actually called “Bill My Parents.” So help me.) It doesn’t help that plenty of today’s kids grow up watching parents swipe cards to pay for everything from a gallon of milk to a new dining-room set.

Most troubling of all: Our children will have to think about credit scores and self-funded retirements almost before the ink is dry on their diplomas – and those degrees now come with an average of $29,400 in debt, according to the Institute for College Access & Success.

That’s a lot to consider, and frankly some parents don’t feel up to the challenge. But if you want what’s best for your kids, it’s time to lean in. According to a 2013 study from Cambridge University, our money habits are formed by the age of 7. While it is possible to modify our behaviors later on, it’s easier to build a money-savvy kid than to fix a financially busted grownup.

‘Negligible effects’ on behavior

The youth financial literacy movement that began in the mid-1990s created a lot of sound and fury. Yet it signified virtually nothing, for two reasons:

  • There’s no guarantee your child will receive instruction. Currently only 17 states require some form of PF education during high school. It may not even be a stand-alone class, but rather a component of another subject (e.g., civics).
  • Recent research suggests these classes don’t work anyway. A 2014 study published in the journal Management Science analyzed 168 papers covering 201 previous financial literacy studies. It concluded that even “many hours” of high school PF classwork “have negligible effects on behavior 20 months or more from the time of intervention.” (Just ask J.D. Roth, founder of Get Rich Slowly. He did well on his high school PF class tests and wound up in major debt anyway.)

As youth financial literacy expert Dr. Lewis Mandell wryly notes, teaching PF is “the same as offering sex education and expecting there won’t be any teen pregnancies.”

At the first meeting of the new President’s Advisory Council on Financial Capability for Young Americans, council member Richard Cordray stated that he will “insist on financial education at all schools,” from K-12. (He is also director of the Consumer Financial Protection Bureau.)

That was in late March 2014. It’s unclear when such a project might be implemented. After all, the much-discussed Common Core educational standards originated from a 2006-07 initiative, but the curricula were not available for adoption until 2010.

What’s also unclear: whether a new approach will make any difference. (See “negligible effects on behavior,” above.)

Money comes from work

Even if those classes do get implemented – and actually work – parents still wouldn’t be off the hook. Would you let one sixth-grade health class about the birds and the bees provide the only information your kids get about love and relationships? Then don’t rely on schools to reflect your own money values, either.

For example, a class might presume that a two-income household was the norm, whereas in your family it’s important to have an at-home parent. Emphasizing the day-to-day tactics that stretch a single salary could teach a lot about smart money management – and also why the sacrifice is worth it. And if the at-home parent is also starting his or her own part-time business, kids could certainly learn a lot about the ups and downs of entrepreneurship.

Individual circumstances aside, all the financial experts with whom I spoke agreed that children should learn:

  • Money comes from work.
  • Money pays for needs first and then for “wants.”
  • Money also pays for emergencies and long-term goals, which means a portion of each paycheck must be saved.
  • Money is a limited resource, so you must make careful choices about how to use the cash you have.

Tips should be age-appropriate, of course. There’s no point in discussing mortgage points with a kid who can’t even stay dry at night. But even the weekly trip to the grocery store can yield lessons. Your 3-year-old can match coupons to products. An 8-year-old can search for the best deals on pasta or peanut butter. You can even bring up wants vs. needs: “We don’t get what we want every week, but this week we’re going to buy ice cream.”

Here’s a phrase to avoid: “We can’t afford that.” Don’t make your kids think you’re poor (even if you are). Instead, say, “That’s not in the budget right now.” This promotes the idea of spending as something that you plan and follow through on vs. giving in to temptation (or pleading).

“Every time you spend money you are making a choice,” says Gail Hillebrand, the CFPB’s head of consumer education and management. “It’s not, ‘I have some money in my pocket I can spend’ – it’s ‘I am making a choice about my family’s budget every time I spend’.”

Over time, children observe the results of those choices: “Those kids see their parents scrimping and saving – but they also see their parents making that down payment on a home or paying cash for a car.”

Pocket money: earned or given?

Thus the family budget should be a mostly open book. You don’t have to share everything, i.e., you don’t have to tell them exactly how much you earn. Simply explain that X percent of income covers the family’s essentials and the rest gets apportioned among other categories. Depending on your situation, these may include:

  • Savings/emergency fund
  • College accounts
  • Retirement
  • Future goals (e.g., pay cash for the next car)
  • Family fun (including saving up for electronics or vacations)

About that last: It’s vital that children learn the concept of saving up for non-essential items. Watching parents set aside $100 per month is a good example: By the time school lets out we’ll have enough to go to Six Flags! Experts suggest creating a visual representation of the goal; allowing kids to chart the family’s progress toward that summer trip gives a sense of pleasurable anticipation as well as cause and effect.

Children should be saving on their own, too, starting as early as age 2 or 3. Many PF experts suggest the “three jars” method: saving, spending and giving. Have your kids divide those coins or dollar bills among the jars, specifying at least 20 percent for saving. (gift money goes there, too – thanks, Grandma!). Emphasize the ways that saving gives us options: to handle emergencies, pay cash for an auto, buy a home, have a comfortable and happy life.

Let the kids determine where the giving-jar cash goes: a church collection plate, the food bank, an animal charity. When it’s time to go shopping, telling Junior to bring his spending jar is “a wonderful way to stop the whining,” notes Jean Chatzky, author of “Not Your Parents’ Money Book: Making, Saving and Spending Your Own Money.”

Where does this money come from? An allowance, probably: A 2012 study from the American Institute of Certified Public Accountants indicates that 61 percent of U.S. parents give money to their kids on a schedule.

Most money experts believe that allowances should be earned, e.g., for doing household chores or feeding the pets. Some advocate a “blended” approach, in which children get a relatively small sum plus the chance to earn more via special chores. Rachel Ramsey Cruze, who co-authored “Smart Money, Smart Kids: Raising the Next Generation to Win With Money” with her financial-guru father Dave Ramsey, grew up with “commissions” vs. allowances. All money had to be earned, first through chores and later through babysitting and other jobs.

Kids who earn most of their spending cash are more likely to understand the connection between “work” and “money,” according to Cruze. They’re also more likely to “treat their things better when they pay for it vs. when it was just given to them.”

Parents should gradually cede control of their children’s expenses to the kids themselves. The emphasis is on “gradual.” You shouldn’t expect a 9-year-old to budget and shop for her own school wardrobe, but she could be given enough to cover iTunes downloads, treats away from home and birthday gifts for friends.

Explain that there will be absolutely no bailouts. (Chatzky liked to remind her kids that their future bosses wouldn’t advance them their salaries.) So if Junior spends half his school clothing money on a single pair of shoes, then it’s up to him to learn to stretch what’s left. When your daughter chooses to blow the budget the first week, the corollary choice is having to skip a birthday party at the end of the month – unless, of course, she wants to take on extra chores to earn the money for a present.

“The only way to raise kids to be financially responsible is to allow them to make their own decisions and then to live with the consequences of those decisions,” says Mary Hunt, author of more than two dozen books including “Raising Financially Confident Kids.”

She used a monthly vs. weekly allowance because it taught her two sons to plan ahead. Hunt says if she had to do it over again she’d impose a 15 percent tax to get them accustomed to the idea of take-home pay vs. salary. (Now that’s some tough financial love!)

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