A couple months ago, my husband’s aunt got new living room furniture and offered us her old stuff.  It was 10 or 15 years old, but we liked it better than our own mis-matched pieces, so we happily accepted.  We now have a couch, chair, loveseat, and footrest – all matching!

What didn’t match was our throw pillows.  Our old couches were tan, and our pillows were shades of brown and red.  The new furniture is shades of grey and blue, so there was a lot of clashing going on:

Last fall, I bought a king size blue sheet at a thrift store to make curtains for our son’s room.  I had a lot of leftover fabric, so yesterday I spent less than an hour to whip up covers for our pillows:

Much better, I think!  The covers are as simple as can be – no zippers or buttons, I just made the back out of two overlapping pieces of fabric.  Here’s a picture that shows the back of one of them:

The best part is that they are easy to take off and wash.  And our living room looks a lot better.  Not bad for leftover fabric… I spent $6 on that sheet, and ended up with curtains and three pillow covers.

Somewhere recently I came across a quote that went something like this:

Never sacrifice what you want most for what you want right now.

This really resonated with me, as I think it can be applied to just about anything in life… money, exercise, diet, personal relationships, jobs, etc.  We all have things that are on our list of what we want most.  But we often let what we want now get in the way.  For myself, my own list of what I want most looks something like this (in no particular order):

• To always have a strong relationship with my husband and son and with our extended family and friends
• To still be active and healthy when I’m 100
• To own our home free and clear as soon as possible
• To be able to weather whatever financial storms life might send our way

Since these are my priorities, I try to make them a part of my life every day.  I spend time with my husband and son, and make sure that I keep in close contact with the rest of my family and friends.  I exercise every day, and make sure that pretty much every bite of food that passes my lips is increasing my chances of reaching that 100 year mark.  We put extra money towards our mortgage every month.  We set aside a good chunk of our income each month into various savings accounts, continuing to keep our lifestyle pretty much the way it was when we were earning very little money.  By doing these things, we’re keeping our focus on what we want most, rather than on what we might want at the moment.

Over the years, I’ve found that focusing on what we want most has become a habit.  So much so that what we want right now and what we want most are almost always the same thing.  I derive much more satisfaction from sending extra money towards our mortgage than I would from spending that money on a pair of shoes, for example.  And I much prefer an apple to a piece of cake – seriously! (that took a while… I used to have a raging sweet tooth)

The thing I love most about the little piece of wisdom at the top of the post is how it applies to anyone, no matter how different our goals might be.  One person’s strongest wish might be to become president of her company, while another person’s greatest desire might be to climb Mount Everest.  It doesn’t matter what we want… what matters is that we each know what we want, and focus on it, without letting day to day distractions and fleeting desires get in the way.

I found this quote inspiring, and I hope some of you do too.  If it inspires you to write down the things that you want most, and figure out strategies for getting them, even better!

Hi everyone!  Sorry about the lack of posts recently.  We’ve been on vacation, and I took a break from the computer while we were away.  We spent several days with my husband’s parents at their sunny winter home.  They live in an RV park in the southwest during the cold months, and it was great to see palm trees and wear shorts!  But it’s great to be home again too.

While we were away, we used disposable diapers for our son.  Before we left, we bought a package of 7th Generation diapers at the co-op where we now do all of our shopping.  They were definitely more expensive there ($20 for a pack of 35 diapers) than they would have been at a baby store, but we were in a hurry that day, and wanted to make just one stop.  We considered taking our cloth diapers along and washing them while we were there, but decided to just take the easy route this once.  It’s the first time we’ve ever bought disposable diapers for our son, and he’s 22 months old, so we gave ourselves a pass.

The first thing I noticed about the disposables is that they hold a lot more liquid than the cloth diapers.  I typically change our son about once every two hours, but I found that even after three or four hours a disposable diaper would still feel completely dry on the inside.  So the package we bought lasted for the whole trip, and we even have a few leftovers that we’ll give to a friend.

It was nice to have the convenience of disposables on our trip.  But I must say, I’m thrilled to be home and have our little guy back in his regular mama-made diapers.  For starters, the 7th Generation diapers still use the same crystalline absorbency technology that other disposable diapers use.  I like the fact that they don’t use bleach to whiten the diapers (they’re a light brown color), but I do feel better with plain old cloth on my baby’s behind… even if it isn’t as absorbent.  And no matter how convenient the disposables were, they didn’t come close to dispelling the guilt I felt about the bag full of diapers that we sent to the landfill this morning before we left.  There is no way I would be able to do that for two straight years.

I’ve always liked our homemade cloth diapers.  We’ve spent barely any money on them, they’re a cinch to use and keep clean, and I have no concerns about what’s in them.  And each week we just dump a tiny amount of trash into our outdoor bin (still using that same garbage bag we were using in January!)  Now that I’ve tried disposables too, I’m still just as sold on my cloth diapers.

Last month, I wrote about how my husband and I are starting the process of estate planning.  There were some great comments on that post – thanks for all your thoughts!  Although I must say, I was surprised at how unanimous the opinions were in terms of hiring a lawyer instead of using software to do it ourselves – usually my readers tend to be pretty split on issues like this.

We haven’t decided what we will ultimately do, but for now, we’re working through the process ourselves.  Just as with our taxes, we want to really understand the whole plan, rather than just hand it over to a lawyer.  The first step we took was to pay $14 for the Suze Orman protection package, which is teaching us a lot.  We’ve already used it to do my healthcare power of attorney and advance directive (still need to get it witnessed and notarized), and will do my husband’s this weekend.  That alone is worth more than the $14 we paid for the program.  We’ll go through the whole program, paying attention to the details and figuring out what questions we need to ask ourselves, and what the answers will be.  We may end up using a lawyer for the will and/or trust paperwork, but I want to understand all of the details before we show up in the law office – if we do at all.

One of the issues to which we hadn’t ever given much thought was inheritance in general.  I guess we had both just assumed we’d leave our estate to our son, but we hadn’t thought about it beyond that.  Once we started to consider it, we decided that we don’t like that idea at all.  In general, we’re both relatively opposed to the idea of people inheriting large sums of money.  Right now, our net worth isn’t much.  But it’s growing at a fairly good pace, and ten or fifteen years from now (to say nothing of fifty), it could be a considerable sum.  We have known several people who are aware that they stand to inherit large estates, and to be perfectly honest, we feel that the knowledge of the future inheritance has had a negative impact on those people.  Some even get irritated when their parents spend money, as they feel entitled to the money (?!?!)  Some don’t put much effort into saving or planning for the future, as they are simply counting on the inheritance to fund their retirements.  To each their own, but our opinion is that large inheritances are often more of a curse than a blessing.

We want to give our son the tools he’ll need to be successful in life.  We’re saving to help pay for his college education, but only $100/month, and we have no plans to fully fund his education – we want him to take an active part in that process too.   In general, we want to give our son the things that money can’t buy.  We want to teach him the value of money, and how to manage it responsibly, but we want him to earn his own money and make his own way in the world.  As soon as we had a conversation about this, it was an a-ha moment for both of us.  We didn’t want a will or trust that simply left everything to our son.

For now, our son is not even two yet.  If we both die, he’ll need a guardian, and he’s also the contingent beneficiary on our life insurance policies.  The guardian we’ve picked is just as frugal as we are, and the life insurance money would be more than enough to raise our son to adulthood and pay for college.  But what about the rest of our estate?  These are the questions we’re looking at now, and there are no easy answers.

We did take a first step earlier this week when we opened our SEP IRA accounts.  We each listed each other an our primary beneficiaries, but rather than listing our son as the secondary beneficiary, we each picked a favorite charity.  The nice thing about retirement accounts is that beneficiary designations make it very simple to transfer assets without a will.  The Vanguard forms we filled out just required us to check a box and list the charity of our choice – couldn’t have been easier.

Hopefully we’ll both live to be 110 and spend our last dime the day before we die.  But just in case, we’re working our way through this process.  I gotta say, I’ll be glad when we’re no longer pondering our mortality!

I am thrilled and flattered to find out that I’m a finalist for a Plutus Award for best frugality blog.  The Plutus Awards were created by Flexo, of Consumerism Commentary fame, to honor all sorts of aspects of the financial world.  There are a ton of great blogs that have been nominated for awards – I’m in good company!

The finalists were chosen by the personal finance blogging community, including writers and readers, and I’m honored to be among the frugality blogs that were selected as finalists.  Voting begins on Wednesday, February 24th.  If you enjoy my blog, I’d love to get your vote.

Back before we became self-employed, my husband and I each worked for a large company, and we both had 401k accounts.  When we quit our jobs, we rolled those accounts over to IRAs, and that has been our retirement savings ever since.  In the early days, we didn’t contribute anything at all, but gradually worked our way up to putting the maximum allowable amount into our accounts for the last few years.  Although we were happy to be maxxing out our IRAs, we were aware that a lot of people our age have IRAs in addition to employer-sponsored retirement accounts.  We incorporated our business four years ago, and considered setting up a retirement plan at the time, but the money just wasn’t there.  We were drawing pretty small salaries, and just maxxing out the IRAs was a stretch.

But time has passed and our business has grown, and we decided to revisit the retirement account question.  We looked at three options: the Individual 401k, the SIMPLE IRA, and the SEP IRA.  The 401k option would have allowed us to contribute a larger amount of money, since the contributions aren’t based on salary (we could each put up to $49,000 into a 401k).  The SIMPLE would have allowed us to contribute $11,500 of our salaries, plus up to a 3% match from our corporation.  The SEP allows our corporation to contribute up to 25% of our salaries into our accounts.

We debated the relative merits of each option, and discussed it with a representative at Vanguard, where we had decided to open our accounts.  The 401k allows the highest contribution, but is also the most complicated to set up and maintain.  And neither of us is going to come anywhere near having $49,000 to put into the account.  So the higher limit would pretty much be a waste at this point.  That narrowed the choice to the SEP or the SIMPLE, and we liked the simplicity of just having the contributions come straight from our corporation, without having to mess with paycheck deductions and contributions from multiple sources.  We’re an S corporation, so all of the money our business earns above expenses goes to us one way or another – either by salary or by distributions.  Now we’ll just have lower distributions and the the company will put money into each of our SEP IRAs each month – and the company will get a tax write off for doing so.

We’re still working at paying off our mortgage as quickly as possible, and we will continue to max out our IRAs and HSA, and keep contributing to our emergency fund and our son’s college account.  With all of that, I think that the restriction on the SEP that limits our maximum contribution to 25% of compensation will be more than enough.

It feels great to be opening our new SEP.  We completed all of the paperwork yesterday, and things should be on track for initial contributions in March.  After eight years of self-employment, our business is finally starting to be all grown up.

As with any financial ideas that you read on a blog, please don’t think that what works for us is the best option for you.  If you’re looking at setting up a retirement account for your business, do your research and talk with an accountant if you have questions.

In other news, my article was an editor’s pick in the Festival of Frugality today.  Thanks RC!

The Carnival of Personal Finance is live over at Budgets Are Sexy.  There are tons of great articles, but here are some of my favorites this week:

Money Beagle asks if the bank forced you to sign your mortgage.  Prepared to get fired up – there’s lots of discussion in the comments too.

You Have More Than You Think explains how friends don’t make friends overspend, when it comes to weddings.  My husband and I got married on top of a mountain in our hiking clothes.  I love this article!

No Debt Plan explains why doing your own taxes is a good idea.  I’ve been doing my own taxes for years.  Back in the day, it was simple – just a W2 and a 1040EZ, and I was all set.  I would do my own, and my husband’s (back before we were married) in about an hour each year.  Then we became self-employed and our taxes got much more complicated.  Instead of one W2 for each of us, we had about ten 1099s each, and tons of business expenses.  A few years later, we incorporated our business, and I had to contend with a corporate tax return, in addition to our personal return.  I thought about throwing in the towel and going to an accountant.  But I have a strong DIY nature, and more importantly, I wanted to really understand what the heck was going on with our taxes.  I didn’t want to just dump a bunch of paperwork off at the accountant’s office and come back a few weeks later to sign our returns.  So I poured over the tax laws, reading and re-reading things until they made sense.  There were some frustrating moments, for sure.  But I just finished our 2009 taxes, and it does seem to get easier every year.  I now have a very solid understanding of tax laws pertaining to an S-Corp (granted, only for our particular situation, where we have no employees – but hey, I’m not doing anybody else’s taxes, so that’s really all I need to understand).  I know how various expenses will impact our taxes, and I understand how the structure of our business and compensation impacts our personal return.  Yes, I have devoted a lot of hours to taxes over the years, but the knowledge I have gained seems well worth it to me.

Check out the carnival when you get a chance – I’m sure you’ll find lots of interesting reading.

Remember that wood that I fished out of a dumpster a couple months ago?  Now it’s a pantry.  Our laundry room is just off the kitchen, and it had a closet in it.  There was one high shelf and a hanging rail, but other than that, it wasn’t a very useful space.  We didn’t need it as a closet, but we did need a pantry.  So we transformed it.  We used the wood that I diverted from a landfill to make shelves, and I scrubbed them with vinegar before we put them in.  My husband took out the hanging rail and mounted it under a set of cupboards in the laundry room – right where a dryer would go if we had one.  Now I have a place to hang things like shirts as soon as I take them out of the washing machine, and everything else can go out on the clothesline or onto my drying racks.  Here’s the pantry, which will be a lot more crowded after I pick up our first bulk food order this evening:

Dawn at Frugal For Life has written an article about overcoming frugal fatigue.  Given the economic problems of the last couple years, chances are a lot of people have been frugal by necessity for a while now, and Dawn’s article is aptly timed.  Ever since I was a child, opening my first savings account, I’ve gotten more of a thrill from saving than from spending, so I’ve never had a problem with frugal fatigue.  But I do remember the early years of our self-employment, when we were deeply in debt from starting our business (a combination of business debts and debts incurred to buy things like groceries while we were earning diddly squat for income).  I had huge amounts of debt fatigue.  I had all of our debt amounts listed on a yellow legal pad, and I would sometimes just stare at them for ten minutes, wishing that I could get the numbers to go down faster.  Each month was like a puzzle, and I would figure out how much we could put towards each debt, and where it would make the most sense to put extra cash.  We were completely focused on paying off our debts, and it absolutely resulted in fatigue.  I would imagine how amazing it would feel to see zeros all across my legal pad, and mentally fast forward ahead a few months to picture reduced debt.  On one hand, being so focused was what got us out of debt relatively quickly (we paid it all off in about three years), but it sure was mentally tiring.

These days, our only debt is our mortgage.  While it’s a much larger debt than our business debt was, it doesn’t feel as oppressive – although we still want to be rid of it, and are working to pay it down as fast as we can.  But the mortgage is just one aspect of our long term financial goals now; the rest is focused on retirement savings, cash savings, college savings, etc.  We’re just as focused on saving now as we were on paying of debt several years ago, but saving feels like fun.  There’s no fatigue from working to grow our nest egg, the way there was when we were digging out of a hole.  Both are satisfying, and both have the effect of increasing our net worth, but what we’re doing now feels a lot less stressful.

If you’re feeling fatigued by frugality – especially if you’re focusing on paying off debts – maybe it would help to divert a little bit of your extra money away from debt repayment and into a savings account.  For the first year that we were paying off debt, we didn’t save a dime – no emergency fund, no IRA contribution – everything went towards debt.  I wonder if maybe it would have been less exhausting if we had opened a savings account and put a little money into savings at the same time.  In the end, it all evens out, but if you’re considering giving up on frugality because you’re tired of it, taking a mini break now and then might do the trick to keep you on track long term.  Same goes for debt repayment:  As long as we keep the long term goals in sight, a little deviation now and then might be just what we need.

We eat salads just about every day.  That means we go through a lot of salad dressing.  I’ve found that salad dressing is usually either really expensive or a dietary nightmare.  The organic stuff made of good ingredients without a bunch of preservatives and crud mixed in, is usually at least four dollars for a little bottle.  The cheaper stuff is usually a complex mixture of high fructose corn syrup, hydrogenated oils, and a whole bunch of synthetic junk.  I stopped buying the latter years ago, but I had continued to buy (grudgingly) the really expensive stuff until recently.

A few months ago, I started making my own salad dressing.  I had always done the vinegar and oil thing, but my husband prefers creamy dressings, and I like to mix it up a bit too.  I got this book as a gift, and my favorite thing about it has been the salad dressings.  My favorite is made of nutritional yeast, celery, hemp seeds, herbs, miso, lemon juice, and some flaxseed oil, and I always add some apple cider vinegar.  It’s so tasty that I usually eat the leftovers with a spoon, straight from the blender.  It’s nutritious, made entirely of ingredients that I have on hand in my kitchen (no mystery stuff), and so much less expensive than the dressings I used to buy.  I can change the flavor by switching the herbs (cilantro instead of basil, for example), and I can make just enough for one or two meals so that it’s always fresh.  It usually takes about five minutes to make a great dressing.

I’ve started experimenting, and have had lots of luck with adding and subtracting ingredients – most of my dressing attempts have been successful, even though I’m usually winging it, just using whatever I have on hand and tossing it in the blender, using lemon juice and/or apple cider vinegar as a base.  An added bonus is that there’s no salad dressing jars to recycle or reuse afterwards – just a blender to clean.

Do any of you make your own salad dressings?  Any favorite recipes or secret ingredients to share?