What to Do When Personal Finance Becomes a Chore

the long road aheadYesterday, Sierra wrote that she's bored. She's reached a point in her financial journey where nothing exciting seems to be happening. She's paid off the easy debts, and now it's a slog as she pays off her big debts (and then prepares to save for the future).

Ah, yes. I remember that feeling well. While I paid off my final debt — and again while I made the transition from debtor to saver — I sometimes found it difficult to maintain enthusiasm. Sierra's on the right track: She's decided to find ways to turn saving into a game. But today, I want to share some of the things I did when personal finance became a chore.

Note: In August, Alissa shared her reader story about paying down debt. She devised a great “game” to make the long slog easier: She created a paper chain that represented her debt. Each link in the chain represented $100, and as she repaid her debt, she cut apart the links. I love this. If I were tackling debt again, I'd do this myself.

 

Set goals
I'm much more motivated to save (or to pay off debt) when I have specific goals. My initial goal was to pay off my debt. I thought this would take me five years, but because of focused intensity, I was able to do it in just over three.

After I paid off my debt, I decided to save for a Mini Cooper. Though it took me almost eighteen months, I was still able to buy a used Mini much sooner than I'd expected. Why? Because the goal kept me focused.

Eiffel Tower at nightNow my goal is travel. I want to see the world. And, as you know, I've started to do so. We visited Belize in February, toured France and Italy last month, and will see South Africa next year. (Plus, I'm already thinking of saving for a trip to Patagonia. Chile and Argentina look amazing!)

These goals give me direction. Whenever I'm tempted to spend on something I don't really need — an Xbox 360, for example — I remind myself what that money could be used for. Simple, but effective. And you know what? Sometimes I let myself change goals mid-stream. I recently pulled money from my Mini Cooper replacement account in order to fund our trip to Africa. I'll start saving for the new Mini in 2011.

Boost income
Many people get stuck in a savings rut because they've cut all the corners they can, and there's just nothing more they can squeeze from their budget. When this happens, I always offer the same advice: Boost your income!

For some reason — despite my exhortations (and those of my colleagues) — most people ignore the “boost your income” side of the basic personal-finance equation. (Which, you'll remember, says that your wealth equals what you earn minus what you spend.) People go to great lengths to rinse out their sandwich bags and to make their own laundry detergent, but many won't lift a finger to boost their income.

That's a shame.

Why am I so adamant that boosting your income is crucial to financial success? You can only cut expenses so far. Eventually, you're down to the bare essentials. When this happens, the only way to improve your circumstances is to earn more money.

This is also true when personal finance gets boring. When I found myself treading water, I decided to find ways to increase my income. I sold Stuff. I looked for one-time sources of income (like participating in a local university research project). And, of course, I looked for extra work. In the past, that meant holding two or three jobs at a time. More recently, that meant finding ways to increase readership at Get Rich Slowly or to earn more money from my writing. (Writing a book takes a long time and doesn't pay well in an absolute sense, but that money is still money, and it funded two vacations this year!)

Find balance
Finally, remember to loosen up. Yes, it's vital to pay off your debt. Yes, it's important to learn how to save. But never forget that money is a tool, one that you can use to build the life that you want.

Saving became a slog for me when I forgot that it's okay to indulge myself now and then, too. Remember when I griped about the cost of a movie? Remember when I whined about spending 87 cents on a mug of hot chocolate? Two years ago, I'd reached a point where personal finance wasn't fun anymore. I'd become too frugal.

With your urging, however, I learned to loosen up. I realized that, if I can afford it and I'm meeting my financial goals, it's perfectly fine to use money for fun. Comic books, Crossfit, and a Mini Cooper — it's okay to spend on these things when my other obligations are met.

But loosening up didn't come naturally. I had to adopt the Balanced Money Formula as a guideline to direct my spending. The Balanced Money Formula — proposed by Elizabeth Warren and Amelia Tyagi in their book All Your Worth — is based on your net income (your income after taxes). Warren and Tyagi say that, ideally, no more than 50% of your paycheck should be spent on Needs (and keeping them below 35% is best). Of the remaining amount, at least 20% should be devoted to Saving, while up to 30% can be spent on Wants.

Here's what it looks like:

 

That's it. Simple. Three categories. No detail. This is the sort of Big Picture budget that I find useful. In fact, it revolutionized the way I look at money. It helped make saving fun again.

Note: For more complete information, see my description of how the Balanced Money Formula works.

 

Not a chore
Too many people think that personal finance is all about self-denial. It's not. If you've made poor choices in the past, you may need to make some short-term sacrifices in order to get out of debt. But for me, smart personal finance is all about self-fulfillment. It's about deciding what's important to me and then finding ways to fund these things.

I know from past conversations that many of you have faced a similar dilemma. (Probably some of you still see personal finance as a chore.) How do you take the drudgery out of personal finance? What has worked for you? What hasn't?

Long road photo by qmnonic.

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Derek
Derek
9 years ago

Very true, goals are incredibly important! It’s also important to give yourself small rewards along the way.

Also, it’s great to have visuals that represent how close you are getting to your goal. For me, I just need to see the numbers, but my wife is not a numbers person. For certain goals we need to make a chart or a collage. You’ll find out what works for you very quickly.

retirebyforty
retirebyforty
9 years ago

I like your first tip – set goals. There was a study that showed when people set goals and write them down, they are much more likely to achieve that goal. It also give your confident a boost when a goal is achieved.
I think you found out the dirty secret of traveling. It’s addicting. 🙂
That balanced money formula looks a little low on saving – 20% is not enough for me to reach my goal. I guess everyone will have to make their own formula.

Nicole
Nicole
9 years ago

Like I mentioned on yesterday’s post. I’m all about the auto-pilot. I guess that’s very Smart People Finish Rich of us. Sometimes we have goals sometimes we don’t. That doesn’t seem to affect our spending at all. I don’t think you need a goal to have an idea of “enough” and the thought that you might as well put away the extra for later instead of spend it. It will always be useful later. (And ugh, I’m still SICK of travel. I’m currently skipping an important conference and will probably skip another one in January. Only travel this year is… Read more »

Kestra
Kestra
9 years ago

Because my main goal is financial independence, I use the wall chart described in Your Money or Your Life. Also networth charts and projections about retirement dates. Any kind of chart that I can maintain and shows some progress is fun to me.
I also track the income less expenses = savings every month. The overall goal is about 50%, so it’s nice to see months where the % is higher than that (to make up for the months when it’s definitely not).

Jane
Jane
9 years ago

The “boost your income advice” is just not something that we’re willing or able to heed. I imagine there are lots of people in our situation, which is why the advice often falls on deaf ears. We are in the “bored” stage Sierra wrote about. We have no debt except mortgage and are saving mostly for long term financial goals – college, retirement, etc. I sell things around the house when it’s easy, but that’s just a drop in the bucket, and with two young children, I don’t sometimes have the time it takes. Any part-time job I could find… Read more »

Karl@MicroMaximus
9 years ago

I couldnt agree more about setting goals, and it really applies to most everything you do.

My goal after leaving college was to pay off my auto loan, within 3 years, and students loans 2 years after that. I am happy to say I am well on my way to exceeding both of those goals.

Also, Derek has a great tip about using visuals. I love graphs and charts, so I use Yodlee to track my finances and a few different graphs that allow you to see your progress over time.

Michelle
Michelle
9 years ago

I wanted to add how I decided to make a visual aid in paying down my credit card.

I had found Alissa’s paper link to be a great idea but I decided to make my link out of large black tie-wraps (those plastic things that once they are tied cannot be undone without cutting through them). Each tie-wrap represents 100$ and let me tell you, that big mass of black plastic on my desk is a great reminder of what I owe and it’ll feel great to get rid of it bit by bit!

Lindy Mint
Lindy Mint
9 years ago

I’m liking the look of that Balanced Money Formula. I hadn’t seen that before 🙂 I forsee future slogging when we get to the repaying student loan game (bigger hole). I try to find little things to up the motivation factor when I lose it. I’m currently working on installing a chalk board in my kitchen with one of those goal “thermometers” so we can see each month how much we earned from our extra efforts and how much we saved. And the total monthly debt repayment amount is also a motivator, since that’s how much we’ll have in our… Read more »

Norman
Norman
9 years ago

I think its funny that slog rhymes with blog. Just sayin.

JonasAberg
JonasAberg
9 years ago

I’m curious; what kind of taxes do you pay on extra income over there in the States?

For me, it’s not that straight forward to “just boost the income” with a second job. The tax rate over her is 40% on secondary income. With a full-time job I wouldn’t be able to work that many hours. So if I needed extra cash I’d have to really think about whether it would be worth it to sacrifice free time for less than minimum wage (after taxes).

Wayne Mates
Wayne Mates
9 years ago

Nicole (#3) is right. If most things are on auto-pilot, you don’t have to think about what you are doing. It just happens. It assumes, of course, that you have taken the time to evaluate and set up your auto-pilot system. JonasAberg (#9) has a point but only to a certain extent. Even at a 40% tax rate, he still has 60% left to feed either needs, wants or to pay down debt. As a serial entrepreneur, most every time I started a new business, I would take some sort of job at night. This meant some money coming in,… Read more »

lil
lil
9 years ago

I like the simply formula, which seems to make saving easier. But how does the Balanced Money Formula work when you still have debts and mortgages? Are paying off those aspects part of Wants, Needs, or Savings? (I’ve always considered a paid off house as a part of my savings/retirement plan.) Or do you apply this formula only after you pay off debts?

Spedie
Spedie
9 years ago

On 12/1/2007 I finished paying off my last debt, excluding the house. On 12/1/2008 I finished my 6 month emergency fund. It has now been nearly 2 years in what some people call “the boring stage” and I am anything but BORED! These are some of the things I have done to make myself strong and ward off Murphy (and boredom): 1. Started living a month ahead. That means what I get paid in one month goes to next months bills (not what I earn, what I get paid). There is no stress when I pay a bill because the… Read more »

Katy @ The Non-Consumer Advocate
Katy @ The Non-Consumer Advocate
9 years ago

I’m a dyed-in-the-wool baggie washer-outer, but I also focus on bringing in the cash. – I make sure to stay in good standing in my job as a hospital RN. I stay on top of all of my required continuing education, and do whatever is asked of me at work. (You’d be surprised how many of my co-workers whine about difficult assignments.) – I am starting the process to get an extra certification that will add another $1.75 per hour to my wage. Forever. – I sell extra household belongings on Craigslist and in consignment stores. I’m getting ready to… Read more »

cspice
cspice
9 years ago

Nice post! I think that the plateau affect can happen at any of the stages of personal fiance and getting out of debt. Since I began my journey almost two years ago, and parading The Total Money Makeoverto everyone there have been many ups and downs, and the fact that my wife and i are back at baby step 1 is depressing if I think about it like that….but WE HAVE paid of a chunk of debt, we have a nice apartment(but not too nice), we have decent cars(but not really nice cars), we keep a budget, spend less than… Read more »

frugalscholar
frugalscholar
9 years ago

I agree with Nicole and other previous posters. Once I paid off my house, I stopped thinking much about day-to-day expenses. What a relief. Now I get to think about other things!

Bruce
Bruce
9 years ago

I find there is always something to learn in personal finance. First it was figuring out how to maximize income and minimize expenses. Then it was how to invest and determine asset allocation to reach a target retirement age. After that it becomes about asset preservation and sovereign diversification to mitigate the risk to one’s wealth.

Alissa
Alissa
9 years ago

I’m with Jane. I’m sure with a second job I could knock one of my student loans out very quickly. But I’ve realized I have two choices. 1. I can work two jobs, never have any down time and be miserable, ornery, and insane. Or 2. I can do the best I can on my student stipend and make the wisest financial choices I can right now and still have time to relax and actually enjoy my 30’s. But thank you JD for this post today. It has perfect timing. I’m not bored with my finances so much as uninspired.… Read more »

Melissa Tosetti
Melissa Tosetti
9 years ago

Creating achievable goals is a powerful tool for staying focused on your financial objectives. I also agree with your statement that you only have so many corners to cut so getting creative with ways to increase your income is key! Great article!

John
John
9 years ago

I have long ago concluded that I need to boost my income. And I keep reading things that say that’s what I need to do. But aside from taking a second job which would likely have to be a minimum wage job and working all the hours I am awake I can’t seem to figure out how I am supposed to make more. I look for a new job constantly as my current employer likes to screw me on raises. Part of my wage problem is that I am a terrible negotiator and am too loyal (I don’t job hop,… Read more »

J.D. Roth
J.D. Roth
9 years ago

@John ESI Money (#20)
You know what? I think your comment would actually make a very nice “ask the readers”. A lot of people have questions about how to boost their income. I’ll try to re-work your comment into a Friday post, possibly even for this week!

The Quest
The Quest
9 years ago

I would like to follow the balanced money formula as it’s written above. However, because of my past financial transgressions, I save absolutely as much as I can. I feel that I have to make up for lost time and wasted money somehow and, naturally, my life feels very unbalanced right now. That is the price I pay right now to live the life I plan to live in 5 years time. It’s not ideal.

The Quest
The Quest
9 years ago

I should also add that I have a simple Excel spreadsheet that shows my expenses in full on one screen on my computer. That way, I can see at a glance exactly where my money is going. Every Saturday, I update another spreadsheet with my saving progress. Being able to see everything on one screen without clicking around from sheet to sheet is simply what works for me and keeps me on track.

Becky
Becky
9 years ago

Question for Jonas (#10). Where do you live? In the states, you are taxed based on your income level…whether it is one job, two, three or 4 jobs. It doesn’t matter. If you aren’t making very much right now, adding another job won’t change your income tax rate incredibly–though,of course, it will increase your taxes. But most employers take it out as you go so you aren’t hit with a huge bill in April. If you sell on Craig’s list–your own used things, as far as I know, it’s not considered a job, and thus is tax free–why not? It’s… Read more »

Shara
Shara
9 years ago

I keep things going by celebrating interim points. I keep amortization tables of all debts and watch them drop. Passing round numbers (“With this payment I owe less than $10k on my car” or “less than $150k on my house” etc) keeps me motivated, even though it doesn’t change my payment I feel like I’ve accomplished something. It’s almost like I’ve mentally broken down my larger debts into smaller pieces so I can celebrate the smaller victories.

Though I have to say when I finally pay off my mortgage the first payment or two are going to a big party.

Kevin M
Kevin M
9 years ago

Piggybacking on my comment on Sierra’s post, I think part of it has to do with the finality of paying off debt – the goal is measurable.

For me, saving is so long-term, automated and ingrained now that I don’t take time to step back and say “wow, I saved $X last month…cool!”. I think doing that each month together with my wife and setting better goals will really help me regain the excitement.

Neel V Kumar
Neel V Kumar
9 years ago

There is one investment that almost no one is able to make – invest *in* oneself. I see my retirement savings as a way to become free of the NEED to hold down a job. If I can save enough money, I can quit having a job and spend time building software that can help lots of people whether it makes me money or not… And I continually dream of doing a startup. If I have enough in the bank to never need a paycheck, I can do the startup on MY terms…

Avistew
Avistew
9 years ago

I’ve noticed I have a tendency to become extremely frugal too. I do this almost on a cycle, so I try to catch myself and allow more room for spending when that happens. It’s made harder by the fact that after over a year and a half in Canada (from France) I’m still dealing with immigration and not allowed to work. A year and a half without an income at all is a real pain, and that does make supplementing it harder when you’re simply not allowed to work. At the very least, I get paranoid that any small thing… Read more »

Emily
Emily
9 years ago

It seems like a lot of people are equating “increasing income” with “get a second job.” It doesn’t have to be so invasive though. For instance, I shopped around for a better interest rate on my savings account and 401(k), and increased my income by several hundred dollars a year. I’m putting in the hours at work so I am entered into the bonus pool (we have lockstep salary, or I’d totally ask for a raise). I’ve been thinking of making jewelry and selling it online for a little bit of money; this could be knitting, curtains, cabinets, childrens’ toys,… Read more »

Briana @ GBR
Briana @ GBR
9 years ago

I use the balanced money formula too, only I have 60% for needs, 20% for wants, and 20% for savings. Eventually I’d like to cut the cost of needs down to 50% so I can increase my savings. I’m definitely looking for additional ways to boost my income, so I can speed up the process of my financial goals. Things that have kept me on track have definitely been to TALK about my finances. When I get my ideas/thoughts/issues out there, it helps me put it in perspective

Paj
Paj
9 years ago

The idea of boosting your income does not have to mean taking a second job. Try selling on ebay or half.com or taking online surveys (try Pinecone Research) to net a little something. I also use ebates.com for every online purchase I make. Personally, these work really well for me because I can do them when I want or have time, but also take weeks or months off if I’m not interested. I keep an excel spreadsheet of “extra income” and I’ve made $400 in cash and gift cards in 2010 alone from the simple ideas mentioned above.

JonasAberg
JonasAberg
9 years ago

@ #24, Becky I live in Finland, where we’re taxed on everything 😉 I don’t have any debts and manage to save 35-40% of my monthly salary pretty consistently, so I don’t really need to boost my income. If I had to pay off debts it’s definitely something I’d consider even if it wouldn’t add a whole lot. Selling your used stuff is tax free, so is collecting cans and bottles, so there are definitely options out there. As far as keeping things interesting without debt and meeting your goals, I constantly try to improve my budgeting, estimate expenses as… Read more »

chacha1
chacha1
9 years ago

I am on the fringe, I guess – income isn’t our problem. DH and I make a 90th-percentile income; but for most of our marriage, we spent more than we earned. I am far from bored by managing our money, since we are far from set for life.

We’re past the point of constant juggling, thank goodness, but it still takes attention, commitment, and creativity to not only live within our means, but to *improve* our current situation and our future possibilities – within our means.

Trina
Trina
9 years ago

Having recently read Your Money or Your Life, my partner and I sold our big house this summer and moved to a much smaller house. We’ll be saving on utilities, maintenance, and upkeep, as well as having only 1/2 the house payment. We were lucky enough to make a large sum of money from the sale of the house, so I finally paid off the remaining $20k of my student loan, and we’re putting the rest of it down on the mortgage as a lump sum after we finish the small jobs we want to do on the new house.… Read more »

Becky
Becky
9 years ago

JOnas…(#32)

I had wondered if you lived in Denmark. We went there a couple of years ago and the lady there said something about a 40% tax rate.

I’m in Poland, so “Hello neighbor!”

Steve-Personal Success Factors
Steve-Personal Success Factors
9 years ago

I like the idea of balance when paying off personal debts. Some of us need to be extra frugal for a while, some of us need to boost the income. But there are definitely times when it’s ok to use that debt money or other money set aside to pay cash for a ‘want.’ It sounds kind of like allowing oneself a cheating day once a week when on a diet.

Lauren
Lauren
9 years ago

I like the idea of boosting your income through side jobs or selling stuff. Is there any other ideas that have helped boost income? This is what I’m trying to do right now

Dwight
Dwight
9 years ago

I really like the advice of dividing up needs, wants and savings. I do this myself and it works along with journaling your spending. Goals are important to give you that map of where you want to go.

Dwight Anthony
Financially Elite Blog dot Com

Connie
Connie
9 years ago

I know I could use another job. I am able to save about $600 a month and am working on building up an emergency fund. I already contribute the minimum to my 401K to get the match (3% me/3% company)and will try to start fully funding a Roth IRA in two years for each year. I have my mortgage debt for only 4 more years, which will free up some extra money (only $500 a month). However, I am 51 years old and stupidly did not start budgeting or trying to seriously save until a year ago. Pretty late in… Read more »

Kelly J
Kelly J
9 years ago

I try to boost my income as much as possible. I’m going through a professional school program and my schedule changes with no advanced notice, which makes taking a real job very difficult. One way I’ve done that is by entering sweepstakes as a hobby for many years. I’ve not lucky compared to most people who are dedicated to my hobby and I certainly would do better if I were able to take another part-time job instead. Yet I’ve definitely won enough to make an impact on our small income, it’s completely flexible, and I can do it in my… Read more »

Renee L
Renee L
9 years ago

This sounds like me – my budgeting is under control, I’m saving around 40% of my income, and I could have my mortgage paid off in 5 years. In fact, that’s what my question is about. I have no debt except my mortgage, which is medium sized, and I am struggling to decide whether I should allow myself to take some of the savings $ to spend. I don’t save for targets – just to pay off the mortgage. I give myself $200 a week for eating out, presents and shopping, from which I can save around $50 a week.… Read more »

sam
sam
9 years ago

hey JD, i know what’s become a chore, and it ain’t saving money. the chore is reading your blog. it’s gone down hill horribly. whenever i actually come to the site, i have to read a plagiarized basic concept that you pulled from another 20 year old financial planning book and sugarcoated with some stupid, wistful talk about feelings and dreams. you’re not a guru. you’re not a messiah. i’m pretty much sick of reading comments that start off “like JD says” or name checks your book for you. i’m not going to read your blog anymore. it’s become the… Read more »

Bill
Bill
9 years ago

I found that once I became a saver instead of a debtor, I was able to relax a little and start thinking about all the great stuff I was able to do. It is amazing what the sense of relief is when you finally realize that you are no longer being controlled by your possessions and your habits.

spritz
spritz
9 years ago

#42 Wow…someone woke up on the wrong side of bed today. Don’t read if you don’t like it. Simple as that.

David/moneycrashers
David/moneycrashers
9 years ago

I find boosting my income to be a great challenge and motivator.

Not out of greed or need, it has just become a challenge. I guess its because I never knew this world was out there (being able to have and maintain a passive income) that its a challenge for me to expand it wherever I can

David M. Borowski
David M. Borowski
9 years ago

Nice concise blog. Boosting income makes a huge affect on how much debt you can pay. Some of us do make our own laundry detergent, but really you’re only saving $10-15 over the course of 2 months. If you can work overtime at your current job, get a second, or market for one-time tasks; that income boost can all be applied towards your debt (after taxes of course), and it will far exceed the laundry detergent savings. The income boost is only temporary to. Once you are debt free you will have much more cash flow for saving or enjoying… Read more »

Rob Ward
Rob Ward
9 years ago

I’ve found that tracking my net worth every month has helped me to keep working to pay off our debt. At first it was a bit depressing since it was so negative. But every month the number kept getting smaller and smaller until…finally we were positive! We still have a long way to go but I’m looking forward to the day when our only debt is our mortgage.

Stephanie
Stephanie
9 years ago

Wow JD, Sam puts you in the same category as he does Oprah. Awesome. The posts the past 2 days have especially hit home for me. My husband and I have been able to save about 15% of our take home every month (which includes our 401k) and it seems like we have been working on saving our 3-6 month emergency fund forever (in reality it’s just been about 1 year due to my layoff which lasted about 5 months of that). The saving part is relatively automatic but it’s hard to keep the momentum going when things seem to… Read more »

elledee
elledee
9 years ago

Great post…I have struggled in the past with save save save, without really knowing why. I know that we need to boost our savings to some degree, but I also know that we do a good job managing our money and should be able to enjoy. Doing the frugal things I enjoy doing (public transportation, making my own beans from dry) means I can do the not so frugal things I like (hiring a cleaning lady, having lunch out once a week) and I’ve recently felt freed from the need to avoid every cost imaginable.

Lincoln
Lincoln
9 years ago

I have eliminated 62K in debt over the past four years — 78K more to go (the remainder all educational loans). It is most definitely a chore. I’m not even halfway there. Most days, I’m just happy that I am below six-figure debt and my monthly payment is slowly improving. Five years ago I had no emergency fund, no retirement savings, etc. Slow but steady improvement.

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