Think Your Way to Wealth

Tips for Making Your Personal Finance Resolutions Stick- Turn Your Resolutions into Habits

by RC on January 7, 2009

Besides losing weight, getting your finances into shape is probably one of the most popular New Year’s Resolutions every year. But as with other resolutions, it is can be a pretty nebulous goal unless specifically defined.

Saying you want to make a change or do something is not the same as actually doing it. To make a resolution stick, you have to change the habits that got you to where you are. Just as overeating and a lack of exercise can contribute to your being overweight, not practicing good money habits can lead to financial problems or disaster.

Also, like the losing weight example, if you have a defined goal in mind, like lose 20 pounds, you are more likely to try to achieve that goal and stick to it. With your finances, a goal such as “pay off $10,000 credit card debt” is much more specific and actionable than just “reduce my debt”.

Make your resolutions specific goals

Instead of “save more money”, I will save $200 per month for a total of $2400 in 2009.

Instead of “reducing my debt” I will pay off an extra $50 per month above my minimum payments.

Instead of “paying off the car loan”, I will pay an extra $100 per month till the car is paid off.

And so on. Giving yourself specific goals, that you can take action with on a regular basis, can help you turn resolutions into habits.

Making your resolutions habits

Once you have a specific goal in mind, you can make that goal a habit. Where are you going to get that $100 a month to add to your regular car payment? Well, you could trim your expenses, by $100 a month, or earn more income. Breaking it down even further, it would be $25 a week, or $5 per weekday. Could you cut back on eating out at lunch and bring your lunch to work or cook at home more often so you don’t have to eat out? Could you work a few hours of overtime per week, or start a side business? Taking regular action (habits), and making the correct choices on a daily basis can help you reach your goal.

Tips for sticking with your newly developed habits:

Don’t over do it- Keep your goals reasonable. Trying to lose 50 lbs in a month, or pay off $5000 in two weeks might be a little to lofty.

Start small- Even a few minutes a day, or a few dollars a day can help you reach your goals.

Tell others- Let other people know what you are trying to do and why.

Track your progress- Keep track of how you are doing, and make adjustments if necessary.

Acknowledge your success-Reward yourself!- If you meet your monthly goals, reward yourself-just don’t over do it.

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Weekend Roundup- The Best of Think Your Way To Wealth 2008 Edition

by RC on January 4, 2009

Another one bites the dust! Another year, that is. I started Think Your Way To Wealth in February of 2008, so it has almost been a year that I have been sharing articles and other thoughts with you. I have had good success with the blog as well as my finances, but am looking forward to an even better 2009!

Thanks to all of the readers out there, for all of your support!

Below are some of my favorite posts from throughout the year:

I also participated in 3 carnivals this past week-

The Skilled Investor hosted the Carnival of Financial Planning and included my article “Going from Debt to Wealth- A Closer Look at Dave Ramsey’s 7 Baby Steps Plan”

The Fraud Files Blog hosted the Carnival of Personal Finance # 185-Cheesehead Edition, and included my article “How’s my 401k doing in the current market? I’m not really sure!”

Ask Mr. Credit Card hosted the Carnival of Debt Reduction #169 and included my post “Debt Reduction by the Overwhelming Force Method”

Also, Ben from Money Smart Life posted The Best Money Posts of the Year and was kind enough to include my article “35 Ways to Kick Start Your Debt Snowball”. Be sure to check out all of the great articles included.

If you haven’t yet done so, be sure to subscribe to the Think Your Way To Wealth RSS feed, or via email to get all of the latest posts and updates free.

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Creating a Household Budget and Why it is Important

by RC on January 4, 2009

For some, the dreaded “B” word, or “Budget” is akin to taking a trip to the dentist. We know we should go, but we really like to procrastinate in making appointments because it can be unpleasant!

Most people know a budget is a good idea, but don’t really like making one and have trouble sticking to them. I am not sure if we feel we are restricted or lack freedom with a budget, but many people even call them alternative names like “spending plan” to keep from saying “I am on a budget” to themselves or others.

I myself have never liked budgets either, and until recently never really put one together that I followed for very long. In fact, I still have problems with sticking to it and checking it as often as I should, but I am getting better.

Why are budgets important?

A household budget (or personal budget, if you are single) allows you to know where you are with your personal finances, and tells you if you can get where you want to go with your financial goals.

If you are in debt and want to eliminate it, or want to save more for retirement and retire early, unless you are extremely thrifty with your spending, you need to know what your are spending your money on, and how much, in order to put more money towards debt reduction or retirement savings.

Run your household like a business

Companies or businesses can’t exist very long without a budget- Almost all businesses of any size create a business budget to track expenses vs. income throughout the year. They must get deep into the numbers, and be able to show that they are operating within their means to get bank loans or lines of credit to make payroll. Why should your household be any different?

How to set up a personal or household budget

You need to figure out where your money is coming from, and more important and difficult, where it is going.

List all income sources-
If you only have a paycheck from a regular job, for you and/or your spouse, this in your total income. If you have other sources like a part-time job or hobby that makes some money, list those as well. If you want to budget with your after tax income, or your take home pay (after insurance deductibles and 401k or retirement contributions), that is OK, or you can include those in your budget if you want. Since that money is not available to me, I use my take home pay, but I think either way is probably fine.

List all expenses-
You should be able to rattle off your fixed expenses, like mortgage or rent, car payments, etc., but you may want to average other bills, like electricity or gas, as some of them fluctuate based on the season. You also need to figure out how much you spend on groceries, eating out, and other miscellaneous spending categories. Basically, you need to see where all of your money is going. I find looking at several months to a year of bank statements and credit card bills should suffice.

List all of the categories you have, and get a pretty good number on your total monthly expenses. You need to categorize “unaccounted for” transactions as well, such as ATM withdrawals. If you take out a lot of cash from ATMs regularly, you need to set a limit for that on a regular basis, such as weekly, monthly, or when you get paid, especially if this accounts for a large number in your expenses or expenditures column and you are not sure where it really goes.

If your expenses exceed your income, you obviously need to reduce expenses to below your income.

Once you see where your money is coming from and where it is going, it is up to you to decide where you are spending too much, and try to cut back in those areas-or reduce your budget- in order to free up money for the things you want to use it for, such as debt reduction, etc.

When you look at the numbers, don’t be surprised if you are surprised by where your money actually goes-If you haven’t been sticking to a budget, it is very easy to spend more than you think you are, especially on casual spending. Now that you have examined your expenses and set up a budget, stick to it, and you will find it a lot easier to reach your goals.

Free printable budget worksheets

There are a variety of ways to set up your budget, from pen and paper to online money management and budget tools. I have used excel (or open office, actually) for a while for a budget tool, and kept it pretty simple.

If you don’t know where to begin, several personal finance bloggers have created free printable budget worksheets that are a good place to start if you are looking for a template or guide to help get you started in making a budget-

Gather Little by Little- Personal Budget Worksheet

Mrs Micah- 3 New Years Worksheets

Get Rich Slowly-Budget Workbook

Another on I have come across is the Pear Budget Worksheet

Remember, a budget only works if you stick to it! It doesn’t have to be rigid though- tweak your budget, change your spending priorities, or do whatever you need to do as long as you are spending less than you earn and saving the way you want to.

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Happy New Year from Think Your Way To Wealth

by RC on January 1, 2009

Happy New Year from Think Your Way To Wealth!

I hope you and your family have a prosperous 2009 and achieve whatever financial goals you are striving for!

Photo by Jerry

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Use 2008 Expenses and Spending to Plan for a More Financially Successful 2009

by RC on December 31, 2008

It’s really hard to predict the future. What I mean is, I am quite sure that between myself, my wife, and my children, I (we) will be spending money next year on something (or a bunch of things, more likely) that I am not planning for right now. Hopefully, it won’t be anything drastic or a real emergency, but for most people, I would guess, unexpected expenses have a way of creeping up, often at inopportune times. Murphy’s Law, I guess.

Over the last few days, I have been thinking of the money I spent in 2008, especially expenses I didn’t really plan for. While I have an emergency fund, the way I look at it is, that if I can save money for expenses that are likely to happen or I know about ahead of time, I will be better off in 2009 financially than if I don’t try to plan ahead.

Now of course, you can’t plan for everything; but I think a little foresight will help with keeping my budget and personal finances on the right track. Here are a couple of ways I am planning on preparing for these types of expenses in the coming year:

Add dedicated savings for unexpected spending categories

School/Recreation Activities for Kids- (not talking about tuition for school, summer camp, or daycare-, but miscellaneous fees, registrations, fund raisers, field trips, etc. Even if it is only $10 to $20 a month, it adds up.

Vehicle Maintenance/New Car Fund- Do you drive a car more than a couple of years old? Chances are, you will have to have your car serviced sometime in the coming year, not to mention routine car maintenance for cars of any age, such as oil changes, or new tires. If your car is older, have you started saving for a replacement yet?

Christmas and birthday gifts- Even if you have a dedicated Christmas savings account, do you save up for birthday gifts for your kids, their friends, or relatives? What about the cost of birthday parties for your children? I would like to save money for birthday gifts this year on a regular basis.

Vacations/Travel-Did you take any spur of the moment trips in 2008 that you didn’t plan or save money for? Do you know if you will be doing any traveling in 2009? While my wife and I don’t have anything planned just yet, it is likely we will take 1 or 2 trips during the year, and I want to have that money saved ahead of time.

Look over subscription based services, and other recurring expenses

Did you upgrade or need to add any service, subscription-based, or other recurring expenses in 2008? Do you think that might happen again in 2009? Some things you might want to look over include:

Phone
Cable
Gym Membership
Taxes
Health Insurance
Car Insurance
Life Insurance
Transportation costs-gasoline, etc.
School or daycare expenses

And of course, there are many more. Can you cut back on any of them? Do you need to increase any of your coverages, such as life insurance?

While it is hard to predict what may happen to me in 2009, by looking back at 2008 I can see the types of “unexpected expenses” I might have in 2009, and I can look over my personal financial situation to see if there are any areas I may need to upgrade, like life insurance, for example.

Did you have any unexpected expenses in 2008 that makes you want to save money for something similar in 2009? Do you have any planned expenses in 2009 that you know about already?

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Mastering Frugal Living- Becoming More Self-Sufficient

by RC on December 29, 2008

This is the third part of a 4-part series on trying to “master” what I consider the key components of frugal living. They are delaying gratification, reducing waste, developing self-sufficiency, and simple living and avoiding consumerism.

In today’s world, it is easy to pay someone to do things that 50 years ago no one, unless you were ultra-rich, would have dreamed of hiring someone to do for them. We have become, for better or worse, a society of specialists, so to speak. Our overall lifestyle in the U.S. has become more affluent, as well as more complicated and crowded with all sorts of entertainment, electronics, and other choices and distractions for our time and money. While many of these items increase the quality of life, others are more “convenience” items, that may make our lives seem easier, when in fact they may make them more complicated instead.

Problems with an affluent lifestyle

While some aspects of an affluent lifestyle, such as better health care or education opportunities do increase the quality of many people’s lives, the increased convenience and increase in income may cause us to think we should just pay someone to do things instead of doing them ourselves.

This has become the norm, in fact, but it leads to problems:

We forget or never learn how to do certain tasks
Paying someone to do chores or tasks becomes routine
We become averse to performing certain tasks ourselves

Take cleaning your house, as an example, but it could easily be something else such as mowing the lawn, changing your own oil, or planting a garden. I know several people who have hired a cleaning person on a temporary basis, only to tell me that they can’t believe they didn’t do it sooner, and that they have hired the person on a regular basis now.

It is very easy to fall into the trap of thinking you are paying someone to do things for you temporarily, and then having that service or task you are paying for become a routine part of your life.

The fact of the matter is, hiring someone to do tasks for you costs money. If you are more than comfortable financially, or you are earning income in the spare time it would take you to perform the task yourself, then maybe it makes sense to pay someone.

But if you are in debt, or not where you want to be financially, it is probably a good idea to try to do as many things yourself as you possible can.

How can you become more self-sufficient?

Start doing things yourself- Do you really not have time to iron 4 or 5 work shirts per week? Instead of taking them to the cleaners, set aside 20-30 minutes on the weekend to iron all of your shirts for thew upcoming workweek.
Educate yourself and learn new skills- Routine car maintenance, for example is not too hard and can be learned from a book like a Haynes automotive manual. Learn how to repair all sorts of things around your house. You can also learn how to make things, too.
Cut back on some of the unnecessary luxuries you pay someone to do for you- Eating out for example, is basically you paying someone to prepare food for you. Do you eat out too often? Start cooking at home more.

Certainly, there are some things may be beyond the reach of people with a limited amount of time to learn new skills, or that may be dangerous, such as electrical work. But there are many more examples of types of do-it-yourself repair or maintenance, cleaning or yard work, fixing things, or other skills we all can learn to do ourselves instead of paying someone.

As an added bonus, you can perform tasks or fix things on your timetable, instead of waiting for a repairman to show up at your house or a mechanic to fix your car, and have the satisfaction of being more self-sufficient.

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Weekend Roundup- Quick Holiday Edition

by RC on December 28, 2008

Well Christmas has come and gone, and New Year’s is on its way. It has been a very busy holiday season for me, so this week’s edition is a little abbreviated. I will be heading back to work tomorrow for two days, and then will be off for another “extended” weekend. It will be great to spend some more time with family and friends! Hope you are having a great holiday season!

Andy at Saving to Invest hosted the Carnival of Personal Finance # 184-From the Land Down Under and included my article “Should You Try to Get Rich Quick or Just Get Rich Slowly”.

Great articles from the COPF:

What if saving was stupid? at Bripblap

Income Tax Breaks in the Bailout Bill at Five Cent Nickel

Destroy Debt hosted the Carnival of Debt Reduction, and included my article ” Interesting Video and Commentary-Money as Debt”