I hope all of you are having a wonderful weekend. My girlfriend are enjoying a couple festivals happening around us this weekend. The weather is finally starting to feel like summer, and it was really nice to be able to walk outside this afternoon. Here are some of the great articles I found around the personal finance blogosphere this week. Take some time to check them out, because they’re all fantastic.
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When my girlfriend and I first moved to California, one of our most important decisions was whether or not we needed two cars. At the time I believed that having two cars was almost necessary, because carpooling could be a major pain depending on our office locations. Also, if we did have two cars and one broke down or needed maintenance, we would still be able to get by. We lucked out on the first issue since our offices are only 10 miles from each other.
We got wound up with all the minor details. Infrequent events such as maintenance, almost pushed us to purchase a second car. It seems crazy. And yet, there we were seriously considering it. We even went so far as test driving several cars.
In the end we didn’t buy a second car. We took a serious look at the financial implications and we decided we would be better off trying to “get by” with only one car. Looking back on this made me wonder what was going on. What was making me change my definition of my needs?
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Have you ever experienced embarrassment in your financial life? A few weeks ago, my girlfriend and I were at a restaurant. At the end of my meal, the waitress came to give us our check and I handed her my credit card that I had activated earlier that day. She came back a few minutes later and said, “Sir, I’m sorry but your credit card was declined.” I could feel my face becoming flush. I knew the reason why it didn’t work was that it was just activated. I pay my credit card bills in full every month, and I was no where near my credit limit, and yet, I felt this need to explain it to her, to make it known that I was financially responsible. It got me thinking, what other ways does embarrassment affect our personal finances?
I can think of a number of occasions both in my recent and distant path where I’ve opted to take the path of least resistance for fear of being embarrassed. Have you done the same? Maybe you were afraid to order the cheapest wine on a date? Or maybe you’re too afraid to use coupons at a grocery store for fear of the stigma associated with coupons. For me it most often comes in the form of shying away from confrontation of any sort. I’ve always been afraid to haggle, partly because I don’t want to look cheap.
Whatever the occasion it’s a feeling that’s happened to many of us. The worst part about embarrassment is that it can sometimes inhibit our money saving potential. Getting past embarrassment can help you make smart financial decisions, and can help you focus on the things that matter to you.
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Do you fear budgets? Have you tried them in the past and failed? I’ve had my fair share of failed budgeting attempts, but I’ve finally found a system that works well for me. I’ve been using a zero-based budget for the past year and it provides the right amount of control and flexibility, while still being easy to maintain. Dave Ramsey is famous for advocating the zero based budget system. Here’s what he says about it, “Make sure you write it down. Give every dollar a name on paper. Spend your income on paper before you actually spend it.”
We’ll take a look at why zero based budgeting makes for a good budgeting system, and end with 5 tips that will help you start your zero based budget.
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I hope all of you are enjoying your 4th of July! Today I’ll be going on a day trip up to wine country! Woohoo! Here are some weekend links for you to enjoy. All of these articles are wonderful so definitely go check them out! Have a safe and fun weekend.
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You’re on a hot date at a fancy restaurant. Your date recommends ordering a bottle of wine. Looking through the wine menu, what do you get? You can’t get the cheapest thing on the menu because that’ll make you look bad. You also don’t want to ask for a recommendation from your date or your waiter because then you’ll seem incompetent. So instead you opt for the second-cheapest wine. Now that’s class.
According to an article at Serious About Wine, Castello a cheese maker conducted a survey and found that 25% of the participants would order the second cheapest wine in order to save face. It’s no coincidence that the second cheapest wine at restaurants are typically their highest profit margin wine. Stated differently, it’s the worst value for you.
What’s going on here? How is it that one in four people fall for the exact same pitfall? Where else does this occur?
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Numbers are absolute. They’re cold and predictable. But humans aren’t. You can’t treat personal finances like a math problem. Scribbling a bunch of equations on a piece of paper won’t give you a solution. Personal finance is so much more complicated than that because it’s personal.
We use personal finance heuristics to simplify things. Heuristics are simple rules that reduce the complexity of a problem. For example: don’t spend more than 37% of your pre-tax income on housing. They are great because they can help you make sense of your finances. But you have to be careful, because sometimes these great tools make us lose track of the personal element in personal finances.
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You created some financial goals, and you realize that your financial situation is not where you want to be. Perhaps you’ve come to a realization that your debt is much more serious than you previously imagined. Or maybe you realized that in order to live the lifestyle that you want, you need to save even more. Whatever the reason, sometimes getting from point A to point B can be a little overwhelming. You know that there are multiple areas in your life that you need to change, so you try to force a change.
You cut your food budget by 25%.
You reduce all of your entertainment spending.
You stop going out with your friends because it costs too much money.
In the end, you give up because it was too stressful, too difficult, and too much effort. Rather than putting yourself through all the stress, it’s important to realize that incremental changes are more likely to lead to success. The saying, “Rome wasn’t built in a day” holds a lot of water, and likewise you shouldn’t expect your financial situation to change overnight.
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I’m not sure what the weather is like where you live, but here in sunny California, we have a beautiful weekend ahead of us. I’m planning on having a frugal picnic outing this weekend with a bunch of my friends. I hope you will also find frugal fun ways to spend your weekend.
Here are some of the great posts that I found around the Personal Finance Blogosphere this week. Enjoy!
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Do well in school.
Go to college.
Get a good job.
As a kid I heard those phrases all the time. One thing they didn’t tell me was how much debt I would have. When I graduated, I accumulated nearly $60,000 in debt. One common theme amongst personal finance bloggers is their journey from rags to riches. J.D. at Get Rich Slowly and Trent at The Simple Dollar battled through their debt.
When I first started this blog I didn’t consider myself to have a backstory of struggling through debt. I never got myself in trouble with consumer credit card debt, and for the most part, my spending was under control. The only debt that I’ve ever had to my name is my student loans. Today I’m taking a stance against my student loans.
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