I’m a people pleaser.  Always have been, probably always will be.  I want to make people around me happy, and that means that saying no is not my strong suit.  If people ask me to do something or go somewhere or help them with something, I usually say yes.  That’s fine most of the time, but sometimes I’d prefer to say no.  And that’s harder than it sounds.

My husband is very good at saying no, and very good at putting his family first above all else.  If something is going to interfere with his time with us, he says no, and it doesn’t bother him at all.  But for me, I find myself saying yes more often than I’d like, in order to avoid the guilt that sometimes goes along with saying no.

I’ve always been able to say no to things like girl scout cookies and the guy who comes to the door selling magazines to pay for his spring break trip to Mazatlan.  But it’s much harder when it’s someone I know.

I’ve been getting some practice with saying no lately, and although it’s still not easy, it feels much better afterwards, knowing that I’ve stayed true to myself and the people who matter most to me.

One of our neighbors brought over some cookies at Christmas with a note saying that she was starting a monthly ladies card game night at her house, and was inviting all the ladies in the neighborhood.  Her husband passed away last year, and I can definitely understand where she’s coming from.  But I’m in a very different situation.  My husband and I both work (from home, but we’re still working), and we have two little boys.  We’re also in the middle of finishing our basement and the yard is an ongoing project.  When I have free time, I want to spend it with my husband and our boys, or with our extended family and a few close friends.  I don’t want to make new friends right now.  That might sound selfish or odd, but I just don’t have space in my life to add anyone else right now.  Give me a few years, and things will likely be different.  The boys will be in school, our basement will be finished – by then, I might have room for new friendships.  But for now, nurturing the relationships I already have is my priority.

Anyway, I opted to not attend the first get-together, and figured that was the end of it.  Then a couple weeks ago, the lady who was organizing the whole thing stopped by our house to ask me again if I wanted to join.  I politely told her that we were just too busy with the boys and the basement, and thanked her for inviting me.

A few days later, another lady stopped by with her pre-teen daughter and said that the first lady had mentioned that we’re too busy with the boys and she was offering her daughter as a babysitter so that I would be able to attend the card nights.  Again, I politely said thanks, but no thanks.

Then yesterday, another lady from down the street contacted me to see if I was aware of the ladies night plans and would I like to come along?  My husband said I must be the coolest lady on the block, since everyone is trying to talk me into joining the card game.  He’s sweet.

Anyway, I told the third lady that I’m just not taking on any more commitments right now, and thanked her for contacting me.

In all three cases, I used strategies that my husband and I learned a long time ago when we read The Power of a Positive No – definitely a good book if you have a hard time saying no.  Add it to your library list!

And in all three cases, even though it was a bit uncomfortable for me to say no at the time, I felt good about myself afterwards.  If I had said yes in order to avoid the uncomfortable feeling, I would have been bummed afterwards, thinking “what did I get myself into?!”  I respected myself and my own desires and my commitment to my family and friends.  I avoided spreading myself too thin.  Even though the card game night would only be once a month, it’s easy for once a month things to spawn other commitments too – especially when lots of people are involved.  One of the ladies sells candles at house parties, which means that there would likely have been more uncomfortable moments of feeling obligated to do or buy something in the future if I had become part of that group.  Which would have been a bummer, especially since it’s not really a group that I want to be part of in the first place.

Anyway, I’m feeling good about saying no.  For some of you, this might be second nature.  But I know that there are plenty of you out there who have the same struggles I do when it comes to saying no.  It’s definitely a skill worth building though.  Remind yourself to be true to what really matters rather than what’s right in front of you at the moment.  Make a list of what’s important to you and tape it to your bathroom mirror as a daily reminder.  And then focus on those things.  Don’t sacrifice them in order to please other people or avoid temporary discomfort.

Leo Babauta wrote a post recently about making room for a new year, and the second item on his list involves clearing his schedule as much as possible, which he noted often means saying no to people.  His list is great, and I would add to it a reminder that January 1 is a very arbitrary day to make changes in your life.  You can make changes any day – any hour of any day, really.  And an uncluttered schedule is a beautiful thing.

Before I go, I want to share this DIY post with you.  Three pieces of homemade furniture from one piece of plywood.  Pretty awesome.

Happy New Year!  I hope that 2012 got off to a good start for you.  I’ve never been one for New Year’s Resolutions, simply because the date seems so arbitrary.  I prefer to make changes throughout the year as I think of them, and January 1 is no different from any other day in that regard.  One difference is with financial goals – it’s handy for us to start over on January 1 each year with those, simply because accounts like IRAs have annual maximum contribution amounts, and we like to get going as soon as possible when the new year starts. For most things though, we make changes as we go and focus on our goals throughout the year.

But I know that the new year inspires a lot of people to make changes, and I get that.  It’s a new beginning, a blank slate for the year you want to create.  And in keeping with that, I thought I’d share some of our favorite habits that help to keep our life happy and smooth.

Notice I said “habits” and not resolutions or fads or quick-fixes.  Resolutions have a dismal success rate, simply because people tend to make big plans and then let them go by the wayside soon after (ever visit a gym the first week in January and then the first week in April?  Notice a difference?).  Fads and quick-fix solutions are similar – if it’s not a sustainable, long-term change in habits, it’s not going to stick.  Not only will it not succeed, but it will probably set you back even further because you’ll be dealing not only with the original problem, but also with the sense of failure that goes along with not succeeding at sticking to whatever resolutions you set for yourself.

So with that out of the way, let’s talk about my favorite habits:

• Make your bed every morning.  I started doing this around the time I turned 32.  These days, I can’t believe that I spent so many years with a bed that was only made about two days a week.  It takes about 30 seconds each morning to make the bed, and it changes everything.  It makes the room feel clean and put-together.  It makes me feel ready for the day.  It makes me much more likely to keep the rest of the room (and the whole house!) tidy, since the bed looks nice.  Honestly, if you’re not already making your bed everyday, this is an easy habit to establish because it takes so little time.  I’m not talking about hospital corners here.  Just pull the sheet up, pull the comforter or blanket up, and put the pillows where they belong, either under or on top of the comforter.  Done.  I’m serious about it taking 30 seconds.
• Exercise every day.  How much is up to you.  If you don’t exercise at all right now, five minutes a day will make a difference.  And I’m not saying go out and lift weights for two hours a day – moderation is important, as is “active rest” (which means that even on a rest day, you still go for a walk, for example).  I honestly believe that some sort of activity or exercise every single day is far better for setting the exercise habit than scheduling a specific workout Monday, Wednesday, and Friday, for example.  Things that we do everyday get etched into our brains more permanently and become habits faster and easier than things we only do sporadically.  So commit to at least some exercise every day.  Walking counts.  So does five minutes of push ups on your living room floor.  So does a game of basketball with your kids at the park.  Do whatever you want.  Make it fun.  Tailor it to the equipment and gear you already have (or do bodyweight exercises that don’t require any equipment at all – no excuses!).  Don’t worry about finding just the right plan or just the right shoes or just the right gear.  Improvise.  Did I already say make it fun?  I’m repeating it because it’s so important.  I remember taking a kick boxing class at the gym several years ago.  I hated every minute of it.  Same thing with a step aerobics class that I took when I was in college.  If I had based my opinions on exercise on what I thought of the step aerobics class, I’d have quit right then.  But instead I found all sorts of exercise that I love.  Personally, I much prefer solitary sports and things that require strength, flexibility and endurance rather than teamwork or coordination.  Someone else might have exactly the opposite preferences and would be much better suited to daily pick-up basketball games.  It doesn’t matter what you do, as long as you do something every day.  For the last 8 months, I’ve been using Bodyrock.tv for my workout inspiration, and I love it.  It only takes 10 – 15 minutes most days.  It’s free and you can do it in your living room (hooray for not trying to find space in a crowded gym right now!).
• Eat right.  Skip the fads.  Skip the drastic elimination diets or anything that calls for dramatically different eating patterns for 30 days or something like that.  Sure they’ll probably “work” in the short term, but what happens when you’re allowed to go back to eating something other than celery and yogurt?  Different eating habits work for different people.  Meat, dairy and grains are controversial subjects in the discussion about healthy eating.  So do what feels best for you.  There are some non-grey areas though:  sugar, processed food and soft drinks come to mind.  I would say that the more you limit (or eliminate all together) those, the better off you’ll be.  Prepare your own food.  It doesn’t have to be fancy or take a long time, but eat stuff that doesn’t come out of a box or a can.  Oh She Glows has amazing recipes almost every day, and they’re pretty much always a hit when I make them.  Her site appeals to me because it’s vegan and she cooks everything from scratch, but that won’t be for everyone.  Search around a bit.  Find a cooking site that inspires you.  Subscribe to the feed so that the new recipes show up in your inbox.  Create a way to save the ones that you want to try and to keep track of the ones that get rave reviews.  I have a simple Google Docs sheet where I put links to recipes that we love.  I’ve been using it for about a year, and it’s become a great resource.  I can scroll through it and be reminded of recipes I’d have otherwise forgotten about, and it always provides ample inspiration for what meals I’m going to make in the coming week.  We never have “what to make for dinner?” dilemmas anymore.
• Spend less than you earn.  This is another one that has become cliche because it gets tossed around so much.  How exactly do you do it, especially if you’ve never done it before?  It’s all about habits, and spending is one area where computers and automation have made it very easy to stick with a goal.  Set up an online savings account.  Don’t spend so long comparing interest rates that you stress yourself out and abandon the whole idea.  Just get it done.  Then schedule an automatic contribution to the account – even $50 or $100 a month adds up over a few years.  The key is to not touch the money once it’s in the account, unless it’s a bona fide emergency.  The definition of that will be different for different people, but I’d say that the more strict you are with what counts as an emergency, the better off you’ll be, and the faster your emergency fund will grow.  If you have trouble with charging more on your credit card than you can pay off each month (without touching that emergency fund!), you might want to consider ditching the credit cards.  Personally, we put everything on a credit card and pay it off every month.  We’ve been doing that for years, and it’s the method that works for us.  Our American Express card puts 2% of our spending into an IRA, and we don’t pay any fees or interest charges.  It works for us, but that doesn’t mean it will work for everyone.  Switch to a cash-only method if you find yourself unable to pay off your card in full each month.
• Start saving for your future, beyond the basic emergency fund.  Again, automation makes this easy.  If you have access to a retirement plan through your employer, make sure that you’re contributing enough to get the maximum employer match.  Beyond that, if you can contribute the maximum allowable amount, go for it.  You can also set up an IRA on your own and arrange to have contributions made automatically throughout the year (Optimize.com has some good tools you can use to make sure you’re making the most of your savings).  You’ll thank yourself some day.
• Slow down.  Actively work to reduce the amount of commitments you have and the amount of time you spend multi-tasking.  Are there things in your weekly schedule that you do because you feel like you should, but they aren’t really adding anything of importance to your life?  Try cutting them out and see how you feel.
• Try going without TV for a while.  This is one area where you might want to do a 30 day challenge or something like that.  Put your TV in the garage or somewhere else out of sight for a month and see how it goes.  If you’re unhappy with the arrangement at the end of the month, by all means move the TV back where it was.  But you might surprise yourself and find that you love all the extra time you have in the evenings.  Netflix and all the other online streaming programs make it easy to catch up on your favorite TV shows (without any commercials so an hour-long show only takes about 40 minutes), and you can always watch movies on your computer too.  We got rid of our TV a few years ago, it was definitely a good decision.  My husband listens to football games on the radio while he works on our basement, and we use a laptop for Netflix.  The monthly fee for Netflix is a fraction of what it would cost to have cable TV, and we never feel like we’re missing anything.  Again, this might seem like something that you’d hate, but you won’t know until you give it a try.
• Stop buying stuff for a while.  30 days, six months, a year – whatever feels good to you.  You have enough shoes.  And clothes.  And kitchen gadgets.  And furniture.  Truthfully, most of us (including my own family) have far more than we need, and should probably be getting rid of stuff in addition to not buying more stuff.  But we can at least start by stemming the flow of clutter into our homes.  Don’t shop for fun.  Don’t open catalogs that come in the mail (and ask to be taken off their mailing lists so that no more arrive).  If you browse around in a store or page through a catalog, you’ll definitely find stuff you want.  Whether you need it is a whole different story, but wanting things we don’t have tends to lead to dissatisfaction.  And we don’t want any of that.
• HAVE FUN!  Focus on things that make you happy.  Find pleasure in small stuff.  Don’t wait for the weekend or for your vacation or for a special day… just enjoy today.  Remind yourself of all that you have to be grateful for.  Don’t compare yourself or your life with others (remember, when we do that, we usually don’t know the whole story and we’re comparing our strengths to their weaknesses or vice versa).  Tell your loved ones how much they mean to you.  Smile.  Hold the door for someone.  Shovel your neighbor’s sidewalk.  Be kind without expecting anything in return.  Tell yourself it’s going to be a great day.  Then make yourself right.

Here’s to a great 2012!

Ever since we bought our first house in 2003, we’ve always paid extra on our mortgage.  Even in the early days of being self employed when we had barely any money, we always tried to put at least a little extra money towards the mortgage principal each month – even if it was only ten dollars.  When we bought our current house, we opted for a 15 year mortgage, and set a goal of paying it off in seven years.  So far, so good.  We’ve been here 2.5 years and have paid off a little more than five years on the loan.  Our current amortization table shows the house being paid off 9.75 years from now if we stop making additional payments and just pay the monthly bill as scheduled.

Our strategy with paying off the mortgage has always been pretty straightforward.  We just add whatever we can each month to the payment we make to our loan company, with instructions to apply the additional money to the principal balance.  That has always worked well, and in the last 2.5 years, it’s put us 33 months ahead on our mortgage.  Seeing the house become more and more ours instead of the bank’s definitely makes all of our frugal habits worth the effort.

But we’re changing our strategy a bit.  The goal is still to pay off the house within the next four or five years.  But instead of sending the extra payments directly to the mortgage company each month, we’re putting them into a municipal bond fund at Vanguard instead.  We’ve had the fund for nearly two years, and have always considered it an emergency fund.  Knock on wood, we’ve never needed to take any money out of it.  Starting this month, we increased our monthly automatic contribution to that fund to be roughly equal to what we had been paying in additional mortgage principal.  And we’ve scheduled our mortgage payment to be just the regular amount due with no additional principal payment.

Once the balance in the bond fund equals the outstanding balance on the mortgage, we can pay off the loan in one lump sum.  We’ll probably actually wait until we have a bit more in the bond fund, in order to still have an emergency fund in place when we pay off the loan.  But you get the idea.

The interest rate on our loan is 4.625% (and we take the standard deduction on our taxes, so we don’t get a tax break for our mortgage interest).  The bond fund is currently paying roughly 3.5% in dividends and had been very consistent over the two years we’ve had it (the money we earn in the account is exempt from federal taxes since it’s a municipal bond fund.  We do pay state taxes on most of it – except for the bonds that are issued in our state – but that doesn’t amount to much).  The one drawback to the bond fund is that it’s not FDIC insured, but we’re ok with that.  It’s diversified across municipalities all over the country, and we feel very comfortable with it.  As far as we’re concerned, the 1% difference in rates between the mortgage and the bond fund is more than justified by the fact that if we put the money into the bond fund, we can still access it in an emergency, even though it’s earmarked for paying off the mortgage.  Whereas if we just send it straight to the mortgage company, it can’t be used for anything else.

If everything continues to go great, there will be no (or very little) change in the eventual outcome.  We’ll pay slightly more in interest on our mortgage over the next few years, since the principal balance won’t be dropping as fast as it was when we were paying additional money each month.  But the dividends we’re earning in our bond fund will increase faster than they were in the past.  And a few years down the road, we’ll be able to just pay off the mortgage in one big chunk.

But what if everything doesn’t continue to go great?  What if our income drops significantly?  What if one of us gets sick or disabled? (we do have disability insurance and an HSA, but a little extra cushion can’t hurt).  We’ve been in the health insurance industry for nearly a decade, but there’s really no way to know what the industry will look like five years from now, between reform laws, elections, court decisions, etc.

Those what-if scenarios were the deciding factor for us.  We’ve proven to ourselves that we’re very disciplined when it comes to money.  The contributions to the bond fund are already set up to be automatically drafted each month, we we know we’re never going to just pull the money out to go on vacation or buy a boat.  We’ll still consider it off-limits, just as it would actually be if we had sent it to the mortgage company each month.  But if we were to truly end up between a rock and a hard place, we would be able to use the money for something else.  Like making mortgage payments each month if we were to be without an income, for example.

We’ll see how it goes.  Here’s hoping we don’t run into any of our what-if scenarios, and the balance in the bond fund eventually meets up with the principal balance on the mortgage.  But it will also be a good feeling to know that we’re better prepared to take on financial challenges if they were to happen.

If you’re paying off your mortgage faster than scheduled, are you doing it directly through the mortgage company, or are you stashing the extra payments in another account and waiting until you can make a lump sum payoff someday?

Happy 2011!  I hope you all had a nice, relaxing holiday season.  Right now, we’re really enjoying the fact that our holiday decorations were limited to a little Christmas bear hanging on our wall clock, an evergreen bough on top of our kitchen cabinets, and a homemade reindeer ornament that our son’s cousin made for him.  Not much to do in terms of taking it all down!

And that brings us to New Year’s resolutions.  In keeping with our “doing things our own way” style, we don’t do resolutions.   January 1 is a day, just like every other day.  Sure, it’s the start of a new year, but there are plenty of other beginnings we can celebrate too.  12 times each year a new month begins.  52 times each year we get to start a new week, and 365 times each year we get to start a new day.  Maybe it’s because my family doesn’t place a great deal of importance on any holidays (trying instead to make every day special), but January 1 isn’t any more significant to me than February 1.

Instead of resolving to make big changes at the start of each year, my approach is to make changes whenever I think of them, or whenever I’m feeling particularly motivated by something.  And I tend to avoid making too many changes at once.  Sometime in the fall of 2009, I decided to start making our bed every morning when we got up (something I had never done before).  It takes less than a minute to make the bed, but for the rest of the day the room looks great.  This was a simple change, and one that later helped motivate me to be more focused on neatness throughout the house.  These days, I can’t imagine leaving the bedroom in the morning without making the bed.

Last year, sometime in April, I started to be intrigued by the idea of minimalism, purging clutter, and limiting shopping.  I decided to stop going to my favorite thrift stores (except to donate stuff) and vowed to not buy any clothing for the rest of the year.  I have no idea what the specific date was, but I was successful in making that change too.  I very rarely go thrift store shopping anymore (if I do, it’s with a specific purpose, like new winter boots for our son), and I haven’t bought any clothes since April.  Of course, I was able to drag my box of maternity clothes up from the basement a couple months ago, so it’s sort of like I got a whole new wardrobe anyway…

It was also sometime last spring when I decided to stop spending valuable time and mental energy reading the news.  That was another very good change, and although the start of it didn’t coincide with any significant calendar date, I’ve been able to (mostly) stick with it.  (I say mostly because I do still have to spend a chunk of time each day online for work, and sometimes I find myself clicking on links that end up being time/energy wasters.  But I’m much more able to recognize those for what they are now, and get myself back on task relatively quickly).

There are lots of reasons why most New Year’s resolutions are doomed to failure.  Some people try to take on too many things at once.  We all know someone who resolves to stop smoking, start exercising for an hour a day, give up soda, lose 20 pounds, and start meditating every morning… all on January 1.  For a very small percentage of people, making multiple radical changes at one time works quite well.  But for most people, it’s likely to be overwhelming.  I think that another reason resolutions made on January 1 tend to fail is because the date really is just another day.  There’s a lot of hype around the start of a new year, but it’s no easier to make major changes on January 1 than it is on March 23rd.  There’s nothing magical about January first.  Making changes in our lives requires just as much effort now as it would two months from now.  Sometimes I think that people make resolutions on January 1 simply because everybody else is doing it, rather than out of a deep desire to change something.  It might make more sense to make changes when the motivation strikes, regardless of the date on the calendar (January 3rd is just as good as January 1st!)

If you’re looking for a little inspiration in terms of making positive changes in your life, check out this article from Minimalist Mom.  And don’t worry about what the calendar says.  At any point in our lives we can make changes, both big and small, that will put us on a better, more rewarding path.  Listening to ourselves and paying attention to what we really want out of life is more likely to motivate us than the dawning of a particular day on the calendar.

We made our final contribution to my IRA for 2010 last week, and it feels great.  Still another month and a half left in the year, and we’ve finished contributing to our HSA and both of our IRAs.  In order to fork over the final lump of cash to my account, we focused on spending as little as possible on everything else last month.  We set a lower-than-usual goal for our credit card (we charge everything to that card, so it’s an easy way to keep track of our spending), and found that we had reached our self-imposed limit a week before the end of the billing cycle.  So we just stopped spending any money at all.

On November 2nd, we spent $10 at the nursery to buy a bag of ladybugs for our cold frames.  Then we didn’t spend anything else until yesterday (after the end of the credit card billing cycle), when I walked to the grocery store to buy some baking supplies.  We had seven straight days with no spending at all, which meant that we were able to keep our spending exactly where we wanted it for the month, and contribute the final payment to my IRA without too much stretching.

Not spending any money for a week turned out to be easier than it sounds.  Since we work from home, we don’t have to leave the house if we don’t want to.  Of course, we’d get cabin fever if we really didn’t leave the house, but we’ve got all sorts of places that we go that don’t involve any sort of opportunities to spend money.  The library is about a 30 minute walk from home, and there are a couple of parks that our son loves to visit that are also within easy walking distance.  Most days, our son and dog and I head out for a walk just to walk – no destination in mind, we just get out and enjoy the day.  Our cars never left the garage during our no-spending week, and we didn’t have to make any effort for that to happen either – we just walked or biked wherever we needed to go.

It helps that we have a pantry and freezer full of food.  We made a trip to Costco last month, and we also have a lot of food from our garden stored for the winter.  So there was no need to shop for groceries either.

And we long ago stopped shopping for fun, so there was no temptation to make random purchases.

We had a great week, and we really didn’t notice at all that we weren’t spending money.  A couple times it crossed my mind, but to be honest, our life over the last week was pretty similar to what we do on a normal basis.  Have any of you focused on going several days without spending any money?  Do you find that living a simple, uncomplicated lifestyle makes it easier to skip spending without cramping your style

I don’t know the exact demographics of our town, but it’s definitely a lower-income area than the city where we used to live.  There is only one grocery store in town, and it’s not stocked with organic produce and ten dollar jars of coconut butter.  Houses here are lot less expensive than they were in the city (which is the reason we were able to afford our 3/4 acre lot here, and for that we’re grateful).  We love the down-to-earth nature of the town, but we’re also aware that there are probably quite a few people here who are struggling financially.

We’ve moved beyond the days when frugality was absolutely necessary because of our low income.  But we continue to keep our expenses at pretty much the same level they were at when we were poor, because that allows us to move as quickly as possible towards our goals.  We want to add a window in our dining room, and even though I suppose we could technically afford to just have a window company put in a new one for us, we’re going to head over to the Habitat for Humanity thrift store and poke around in their enormous used window stash and see what we can find.  Frugality is so ingrained in us that we just prefer it that way.

But I wonder if it’s a luxury to be able to make decision like that?  Well, I know it’s a luxury to be able to ponder how to go about adding a window to a room… what I mean is whether it’s a luxury to be able to think in terms of buying things used, minimizing our ecological footprint, growing our own food, etc.?  The things we do are things that people a few generations ago did without even thinking about it.  But these days, it seems that people who are talking about things like environmental preservation, reusable shopping bags, thrift stores, and organic gardens are all relatively well educated and well off.

50 years ago, having a backyard garden was commonplace.  Now, it’s not as common, and I notice when I walk through town that the poorer neighborhoods don’t seem to have gardens at all.  A garden is a very frugal way to provide food for a family, but it does require a time investment, and people who are working two and three jobs probably don’t have the time.

It seems completely counter-intuitive, but I feel like frugality is more popular among people who don’t have to be frugal, but rather choose to be frugal.

Why is this?  Is it because middle class people have more time to ponder their choices?  Is it because we’re exposed to more choices in the first place?  I know that not having a TV is a very good influence on my family in terms of avoiding commercialism and advertising.  And I know other families have made the same choice.  But I wonder what the average income and education level is for TV-free households?

There are definitely people who are living below the poverty line and absolutely thinking outside the box in order to make ends meet without going into debt.  But I feel like many of us (at least those of us who are blogging about it) are living frugal lives in order to be able to save money for retirement, our children’s education, and various other goals, rather than to stretch a small paycheck to cover the bare necessities.

This has been bouncing around in my head for a few days now, and I’m still not sure if I’m doing a good job of explaining my thoughts.  Basically, I feel like more needs to be done to help people who could truly benefit the most from frugality gain a good understanding of the options that are available.  What do you think?  How can we make high quality organic food available to people who aren’t making a ton of money?  How can we encourage the dual benefits of avoiding consumerism and protecting the planet, when people are struggling just to make ends meet?

Lately my husband has been spending huge amounts of time researching investment strategies.  While we’ve both been committed to long-term savings goals for years, he’s really been getting into the nuances of it lately, and it’s made our retirement portfolios much more interesting to look at (of course they haven’t been much fun to look at this week, but that’s how it goes).  Between our various savings accounts and the extra principal payments we make on our mortgage, way more than half of our income goes into savings, and the new things we’re learning about investing just make us more motivated to keep it up.

We were talking today about how so many people with incomes similar to ours end up spending most of what they earn each month.  It would be easy to do, with payments on two newer vehicles, a more expensive home with a larger mortgage, several meals/movies out each month, some new (as in, not second-hand) clothes here and there… we started tallying up the money that an average middle class family could easily spend each month and it got high very quickly.

Then I started thinking about why people spend so much of their income rather than saving it.  For us, a healthy IRA balance is FAR more exciting than a new car, but I know that this isn’t the case for a lot of people.  In addition, a lot of people really don’t like their jobs, and feel huge amounts of stress over trying to balance work, family, fun, and all the rest of it.  But those same people might have brand new living room furniture, top of the line kitchen appliances, a new car, and a house with lots of custom upgrades.  The disparity between what they own and how they feel is striking.  Many of them are working at a job they don’t really enjoy, just to pay for all the things they own.

Some things are worth the money.  If a thing brings you great pleasure or gets used all the time, it was probably worth the money you spent on it.  My VitaMix blender is a good example.  It cost nearly $400, but I’ve used it at least twice a day (sometimes a lot more) ever since I got it in 2008.  It came with a 7 year warranty, and I can’t imagine my kitchen without it.  Each of us have things like that – a super comfortable piece of furniture, an outfit we feel great wearing, a vacation that created awesome memories… But a lot of us have things that we bought because we figured they would be impressive.  And often times, it wasn’t ourselves we were trying to impress.

This made me start thinking about my friends, and our relationships with each other.  I have friends with a wide range of incomes.  Some have fancy houses filled with fancy stuff, and others have apartments with futons that they’ve had since college.  And I can say for sure that I don’t care at all about any of it.  They’re my friends because I enjoy spending time with them.  They make me happy, and that doesn’t have anything to do with whether they have impressive “stuff.”  Think about your own life and the people you love.  Chances are, your friends and family don’t care about your stuff either.  When they come over to visit, it’s to see you, not your new living room set or big screen TV.  If you had to choose your five favorite people, my guess is that they would be the people who make you the happiest, who make you laugh, who provide a shoulder to cry on when you need it.  And whether or not they have a new car or a house with granite countertops probably has nothing to do with it.

Just food for thought for the next time that the urge to buy something impressive strikes (and yes, it strikes me sometimes too, although I’ve gotten pretty good at recognizing it for what it is and moving on).  The people who love you will love you regardless of what possessions you own.  The people who would like you better if you had more fancy stuff probably aren’t worth keeping around anyway.  And a secure financial future will get you a lot further than anything you can buy at the mall.

Ok, I’m stepping down off my soapbox now.  Hope you all have a good weekend!

My husband and I started our business in 2002, and have been growing it ever since.  The first few years were pretty rough financially.  We incurred a lot of debt, were earning very little, and basically had a life of forced frugality.  Eight years later, things are quite a bit different in terms of debt (only a mortgage) and income.  But our lifestyle has changed very little.  We still drive the same old cars (my husband’s is 20 years old, mine is 19), still buy all of our clothing and household stuff at thrift stores, still cook nearly all of our meals from scratch… We did have a big splurge in terms of entertainment a few months ago, when we signed up for Netflix – now we spend $9/month for movies.

As our income increased and our business grew stronger, we could have started spending a lot more money.  We could comfortably fit car payments and other doo dads into our monthly budget now.  The reason we don’t is because we are focused on the big picture and our long-terms goals.  Without those goals, there would be little to keep us from just spending our money as we earn it.

Our goals involve paying off our mortgage in order to be truly debt-free, saving as much as we can for retirement, and getting ourselves to a position of financial flexibility within the next 15 years or so.  By flexibility, I mean that we might not be quite to financial freedom at that point, but we’d like to be to a point where we can work less and be able to focus more of our attention on things that don’t necessarily bring in money.

Goals like that only work out if you break them into smaller steps that you can focus on regularly – otherwise, you wake up one day and realize that the 15 years have gone by and you’re still treading water.  So we’re paying extra on our mortgage every month – a concrete step.  We put 20% down on our house when we bought it last summer (thanks to the equity we had built up in our first house by paying extra on that mortgage for six years).  We got a 15 year loan with a 4.625% interest rate, and like knowing that every month, when we put additional money towards the principal, we’re cutting time off of that 15 year term.

For the retirement aspect, we’ve both been maxxing our our IRAs for a few years now (in the early years of our business, we could only afford $100/month in each account).  We also have an HSA that we’ve been contributing to since 2006.  Hopefully we’ll never need the money for medical bills and can use that account for retirement too – but it’s nice to know that the money is there (tax free) if we ever do have a medical emergency, since our health insurance deductible is $5000.

Since paying off our mortgage is a huge priority, there is very little temptation to spend our money on other stuff.  Having our IRAs, HSA, emergency fund, and our son’s 529 plan forces us to diversify and make sure that we’re working towards our other goals too, but the mortgage keeps us focused on the big picture, which is to be free of all debt.  It’s much more satisfying for us to see the balance dropping on our mortgage than to have a new pair of jeans.  Yes, the amount it’s going down each month is relatively small compared with the total balance, but over time, it adds up.

For us, big picture goals are what make frugality fun and exciting.  What keeps you frugal?  What are your big picture goals?  I’d love to hear your stories and what motivates you to make frugal choices every day.

Recently I got an email from a long-time reader, asking me if we still keep track of our monthly expenses.  I guess the answer is both yes and no.  We do pay close attention to what we are spending, and I check our bank balances and credit card transactions on a daily basis.  But we no longer keep track of every penny, nor do we break our spending down by category anymore.

We paid off the last of our non-mortgage debt in 2007.  Our income has slowly increased over the years without an increase in our living expenses (actually, as we paid off debt, our expenses went down).  And neither of us liked keeping every receipt for every purchase.  It was interesting to keep track of our expenses, and it did provide some motivation for keeping our spending down.  But we’re pretty far along on our frugal journey at this point.  Frugality is second nature around our house, and we never spend money mindlessly.  We ponder our purchases, buy used whenever possible, and avoid buying much of the time.  We use homemade cloth diapers, prepare pretty much all of our food from scratch, ride our bikes instead of driving, read books from the library, and we don’t even have a TV anymore.  Our cars are nearly 20 years old (no payments, and very inexpensive insurance and registration fees), and everything we wear comes from thrift stores.  We’re spending so much time trying to turn our little plot of land into a mini farm that we don’t have time to go out and spend money (we have spent money on things like fruit trees and berry bushes, but we planned for those expenses).

So we stopped keeping track of every penny spend quite a while ago.  Instead, we use a pay-ourselves-first approach that we like better.  Our only debt is our mortgage.  That means that each month our bills amount to current living expenses plus the mortgage.  In addition to that, we’ve created “bills” for several savings accounts.  Some are automated, some are not, but they are all priorities.  We have our son’s 529 plan, our HSA, our IRAs, and our emergency fund.  We also pay an additional amount towards our mortgage principal each month (it varies, but we try to make sure that each month we pay a little more than we did the month before).  Once we pay all of those “bills” we can use whatever is left over for current living expenses.  If there is a higher-than-usual amount left over, we tend to stash it in one of our savings accounts – we don’t spend it just because it’s there, but that’s probably a result of being frugal for so long that the habits are ingrained.

This is what works for us.  It guarantees that we keep making progress with our savings goals, but it also allows us some flexibility with how we spend our money.  Now that our checking account is paying more interest than our on-line savings accounts, we’ll be keeping more money in checking.  This means that we’ll have to do a little more keeping track, since money that is in our checking account will technically count as savings, and thus be untouchable for day to day expenses.  I do like having our savings in a separate place (out of sight, out of mind), but the extra interest in the checking account is enticing, and we’ll make it work.

What about you?  Do you prefer to keep track of every penny? (my mother started doing that in the early 70s, and still does to this day, even though she and my dad don’t need to anymore)  Do you use the pay yourself first method?  Do you have a budget at all?  Have you started keeping more careful track of your money since the economy headed south last year?  I’m curious to hear what other frugalites (and not-so-frugalites!) do.

Don’t worry… I’m not going to do it.  Not now, anyway.  But I am thinking about it.

Ever since I found out that my credit score wasn’t as perfect as I thought, I’ve been pondering changes I could make to improve it.   I know my score is still really good, but it’s not excellent.  My payment history is spotless, my ratio of available credit to credit in use is very high, and I’ve had credit established since about 1997.  I have a mortgage, credit cards, and a couple store credit cards.  The one thing I’ve never had is a car payment.

My husband’s credit score does fall into the “excellent” category.  For the most part, we have the same credit history for about the last 6 – 7 years, as we started combining our finances in 2002.  But he had a car loan when I met him, and it still shows up on his credit report.  He hasn’t had a car loan since the summer of 2002, so I assume that will be coming off of his credit report sometime this year.  But for now, we think that is what is giving his credit score a boost compared with mine.

I’ve always been proud of the fact that I’ve never had a car loan.  We bought my 1991 Civic with cash ($2300) in 2003, and it’s still cruising along.  Before that, I had a 1989 Hyundai Excel, which my sister still drives.  I just can’t get my head around the idea of paying interest on a depreciating asset like a car.

But I’m wondering if having a car loan might be worth it in terms of boosting my credit (our credit, since we would get the loan together, and I think that my husband’s old car loan won’t be on his credit report much longer).  We’re currently putting money aside so that one day when we need to replace one of our cars, we’ll be able to afford it.  Both of our cars are closing in on 20 years old, and we know they won’t run forever.  Our plan had been to just pay cash for another car one day.

But now I’m thinking about perhaps getting a loan instead.  We would pay it off quickly – perhaps making a total of 10 or 12 payments.  This would minimize the amount of interest we had to pay, while still building an auto loan segment of our credit history.  If I look at the interest as a fee paid to increase my credit score, it doesn’t bother me as much as the idea of paying interest on a car normally would.  If we went this route, we would still only finance as much car as we could afford to buy with cash.  But instead of paying cash, we would make payments for a while.

Right now, both of our cars are running just fine, and we have no intention of replacing either of them until they aren’t running at all.  We put very few miles on our cars, and don’t anticipate having to buy another one for at least a few more years.  So there’s plenty of time to mull this over (and build up our car replacement savings account).  And who knows – maybe there will be zero percent interest offers again by the time we need another car.  One of my girlfriends bought a car in 2002, paid it off in 2007, and never paid a dime of interest.  A deal like that would definitely make me reconsider my “never finance a car” stance.  (Although I think that those offers were limited to new cars, and we would only be interested in used vehicles).

Any thoughts on this?  We don’t often need our credit score, since we rarely apply for credit.  But since we’re preparing to sell our house and buy another one, it’s been on my mind a bit lately.  Anyone have any experience with changes in their credit score following a financed car purchase?