M is for Money

I think we have a new convert to welcome to the frugal fold. I used to spend mindlessly on objects lacking any true value. My conversion happened over time because I realized my path was unsustainable, the only thing I had to show for it was debt. I changed for my own good, not for anyone else’s. But I’m not talking about me.

Mr. M is not the wisest with his money, he has a pretty bad case of affluenza. But slowly I’ve seen signs of that mythical monster, change. At first it was subtle, I didn’t notice what was happening. He was making do with what we had rather than running out to buy something new. He was suggesting more economical choices to me, not the other way around. In fact, last week he proposed a change to our grocery shopping plan designed to cut back on time and cost. Who is this man?

Leaving my copy of the Tightwad Gazette laying around may have helped, I’ve caught him flipping through the pages several times. While he laughs at most of the suggestions I’m sure a few have sunk in. He is handy around the house and very creative, hallmarks of a good frugal.

Expecting someone to change is unrealistic, but there are ways to encourage frugality in your partner. Nagging and preaching won’t get you far, no one likes to be told what to do. Instead you need to set an example for your partner to follow. Discuss what it is you hope to achieve by living a frugal lifestyle, take an angle that will appeal to your partner. There are many reasons to be frugal, it’s good for the environment and your finances, it stresses simplicity over stuff. It encourages a do-it-yourself attitude that you can be proud of. I embraced frugality because I needed to get out of debt, but I’ve come to appreciate the other benefits.

I’m not sure where Mr. M’s sudden frugality stems from, I can only hope that I helped encourage it. Perhaps there was an inner frugal waiting to be unleashed. But he still manages to leave every light in the house on. Baby steps, I tell myself, baby steps.

How much debt do you have? What types of debt, credit cards or student loans, payday or personal loans? What is the interest rate on each? We are on a mission to eliminate that debt, so what are we fighting? Rule number one of war, know your enemy.

I’ll go first. At my breaking point I had 5 major debts:

• $20,500 on credit card
• $1,800 to Thomasville furniture
• $5,500 student loan
• $28,000 car loan
• $340,000 mortgage

That’s a sobering amount of debt, in fact the total minimum payment for all that debt is nearly $3000 a month. Focusing on monthly payments is one way people hide from their debt problem. It didn’t work in my case, my minimum payments alone were more than most people make in a month. Now it is your turn.

Making a List

You need to gather information on each debt that you have, use monthly statements or check online to see your current balance, interest rate, minimum payment and due date. Create a table or spreadsheet with this information, here is an example using my own debt:
How much is your total minimum monthly payment? How high are your interest rates? Don’t allow the amount of debt to discourage you. We are going to use the information you are gathering here to formulate a plan of attack.

Checking it Twice

Are you sure you’ve listed all your accounts? There may be debts you’ve forgotten or which have gone to collections. An easy way to see all your open accounts and approximate balances is to check your credit report. You can get a free copy of your report from annualcreditreport.com. This is the official site mandated by the government, avoid sites like freecreditreport.com. Those sites require you sign up for a “free trial” of some sort, when you forget to cancel on time they charge you. I speak from experience on that one.

There are three main credit bureaus (TransUnion, Experian, and Equifax) and all have substantially the same information. Go to annualcreditreport.com and just choose one bureau’s report this time, you can access each bureau’s report once a year. Later in the year you’ll come back and check the report from another agency as a way to monitor your progress.

How clean is your credit report? Do you have late payments, accounts in collections? Are there any errors? Your credit and debt are related. Errors should be dealt with immediately, here is some info on how to dispute errors on your credit report. If you have missed payments, late payments, or accounts in collections, your credit is damaged and you are paying for it with higher interest rates. Accounts in collections need to be included in your table of debts and dealt with as soon as possible. Set up a system to pay your bills on time, if you’re using snail mail make sure to send the payment in at least a week in advance. Little slip-ups like forgetting to pay a bill cost big money.

Preparing for Battle

The battle lines are drawn, in this step we’ve laid out how much debt you need to destroy. We’ve gathered crucial information that you will use in your plan of attack. At this point, you can’t deny how much debt you have and you’ve committed to erasing it. There is just one last task in this step - don’t add to your debt problem.

The Debt Stops Here

This is Part 2 in Deliverance from Debt, for Part 1

Part 3: Where Did the Money Go?

Watching the news yesterday I had one of those déjà-vu moments. Do you remember back in the fall when the banking crisis started to get out of hand, our illustrious leaders passed that $700 billion bailout for the banks. Before it passed the question was asked – how will this money be used? Most of the plan was for the government to buy up troubled mortgages from the banks, take the bad debt off their books. If the loans don’t default, the taxpayer would get their money back and maybe even make a profit. This was a major selling point. After the bill passed, they dropped the entire idea. Instead the government just handed cash to the banks with no input or oversight. It seems the banks mostly hoarded the cash or used it to buy up their troubled competition, meanwhile the crisis deepened.

Yesterday, I heard they are once again looking at the government buying up bad mortgages to get them off the bank’s books! If this is a great idea, why didn’t they do it the first time? Also, this will require "hundreds of billions" more since the initial money is mostly spent. Call me cynical, but I think the bait and switch was planned. Give them straight cash at first, Wall St expects their December bonuses. And, since the problem is dire the taxpayers will have no choice but to fork over more cash later.

It seems to me that no one has a clue how to fix this mess. They just keep throwing ideas at the wall, waiting for one to stick. I thought that only applied to spaghetti. So, what do you think? Was the first bailout a Christmas gift to Wall St? Does the government have a clue how to fix this mess or are they just burning money hoping some idea, any idea, works?

I know what it feels like to be deep in debt. I know the shame and the helplessness, the compulsion to keep spending. I lied to my family, I lied to myself. I felt I couldn’t pay it off, I owed too much. I found creative ways of coping. Denial is a wonderful drug, just ignore the balance on the monthly statement. Delusion is even better, it got me through a few more years. I was a debt junkie, caught up in a cycle of indulgence and repentance. I would pay it down only to spend it back up.

I was able to turn my financial life around. I was able to control my money, rather than letting debt and desire control me. Getting out of debt is like going on a diet, you start out strong but soon your commitment gets forgotten. I was like that. At the end of each cycle the balance was even higher than before. So what changed?

One day in late 2006, I reached my breaking point.

The Breaking Point

When you are in debt, there is a point where the stress and anxiety starts overwhelming all other feelings. It is possible to carry on for years, digging in deeper. I know I did. Slowly every dollar starts to feel heavier and heavier, occupy your thoughts more and more. I think we all reach a point where we’ve had enough. Though the reasons may be different, there is one common thread - the resolve needed to change.

Before buying my house I had paid off half of my credit card debt, $14,000 became $7,000. The next two years I ran the balance back up to over $16,000. Then one of my dogs needed emergency surgery, $3000. On the way home from the vet with frankendog in my lap, an uninsured driver took out my Subie. I didn’t have rental car coverage on my policy and my car was in the shop for months. Those bills were my tipping point. I was now over $20,000 in debt, not including the $1800 I owed on some furniture or the loans for college, a car and a house. It was too much stress, I was near the limit on my primary card. I couldn’t go on the way I had been - I balanced the budget, reined in my spending and took a brutal but higher paying job. I made a commitment to myself – the debt stops here.

If you are in debt I hope you’ve reached your breaking point, even though it’s painful. The sooner you start digging out the sooner you will reach freedom. Getting out of debt isn’t easy, it takes intense motivation. I don’t think the $14,000 in debt I had back in 2004 scared me enough. I didn’t own a house or have a car loan at the time. I became complacent to having that much debt, it felt natural. Only when I was stretched to my limit did I realize that change was my only option.

The Commitment to Change

This is it, the most important step to getting out of debt – commit to change. There are many ways to tackle your debt and a million roadblocks that will get in your way, you need commitment to carry you through. This step is not about why you got into debt or how you are going to get out. It’s about making the choice to free yourself from debt and committing to always move towards that goal.

This is part one of Deliverance from Debt, a multi part series on getting out of debt from someone who has been there. For step one I want you to share your commitment to get out of debt. Tell your mom, your significant other, your best friend, or share it here. Simply sharing your goal improves your odds of success by 10%.

Part 2: Tally Up the Damage

Last week I read several blog posts concerned about what happens after the debt is paid off - will you stick with new habits? Will you fall off the wagon and repeat the cycle? Some, like Ready for Change, have been there before and speak from experience. Others, like Shtinkykat, compare it to dieting. At first you do great and then slowly the weight (or debt) comes back. I paid off my credit cards a year ago and so far I’m finding it easy to stay on track. The key has been to add new goals to the list as the old ones get crossed off – finding new mountains to climb.

I actually have a different problem, I still won’t allow myself to spend. I used to shop for new clothes several times a month, now I couldn’t tell you the last time I stepped foot in a mall. I’m not sure my current lifestyle is totally healthy, but it has to be better than debt. Instead I’ve found other ways to put my money to work.

After I paid off my credit cards I wasn’t done tackling the debt monster. I next turned to my car loan, which was sucking up $480 a month of my income. At the start of 2008 I still owed over $10,000 on the loan - good thing I like challenges. I adjusted my budget, worked overtime and saved every bit of spare money I took in. I paid off the loan in October, about 15 months early. Then this month I paid off the remainder of my student loan. The rest of this year is all about saving. After spending years in debt I can finally look to the future. Woo-hoo!

Finding New Goals

After years of paying off credit cards you may not have set other goals. Even before you finish your current goal you should be looking forward to the next challenge. Don’t rest on your laurels, put your financial savvy to good use. Debt is an obvious place to start, do you have a:

• car loan
• student loan
• equity line of credit
• personal loan

By now you’re an old hand at paying off debt, why not focus on your remaining balances. Don’t look at it like a burden, it’s exciting. Now you know how liberating it feels to be free of monthly payments. Getting out of debt will also free up cash for – spending! Imagine what you could do with that extra money.

There are other worthwhile goals to tackle as well. If you have spent the last few years focused on debt you probably haven’t saved much money. Savings are your weapon against debt as well as an investment in your future. Here are just a few great savings goals:

• an emergency fund with 6 months living expenses
• a fully funded retirement account
• a downpayment on a house
• a college fund for the kids
• new car fund
• vacation fund

Staying Debt Free

Keeping out of debt also requires focus, commitment and vigilance. Don’t slack off on your budgeting or go crazy with your spending just because the debt is gone. It’s easy to fall back into old habits, but constantly striving for new heights will keep you motivated, moving forward and out of debt.

March Madness Tournament

Free Money Finance is hosting a pf blog style March Madness Tournament. Posts face off head to head and you the reader get to vote for your favorite. Winners from each bracket move on and at the end of the contest FMF is donating to the charity of choice for the winners, so it’s all for a good cause. My game starts tomorrow and I’m playing for The Midnight Mission, which serves the homeless of Los Angeles. FMF is kind enough to run this tournament, please go read the posts and vote for your favorites.

Articles I Enjoyed

As always, there is more great content out there than I have time to read. If only I didn’t have a full time job, sigh. Here are just a few of the articles that struck me this week.

• Shtinkykat says I Don’t Want to be a PF Biggest Loser. Dieting and debt have a lot in common.
• Dog Ate my Finances is seeing Dave Ramsey live and has a few thoughts about his teachings - One Last Problem with Dave Ramsey: Tithing
• Ashley gives her thoughts on the virtues of empty houses in the neighborhood when the alternative may be nuisance renters - Renters vs. Empty
• MoneyMateKate asks the question What’s the Weirdest Job You’ve Ever Done? She wins hands down with, bone counter.

• Thrift Paradox – Is Frugality Hurting Economy from Watson Inc
• Domestic Cents has ideas on Useful Portions
• 11 Weird Ways to Use Coca Cola and Save Money from Destroy Debt

Carnival of Money Hacks

The Carnival of Money Hacks was hosted by Pimp Your Finances this week, who included my article Free Money from Reverse Arbitrage. Here are a few more ways to pimp your finances.

• Budgets are Sexy asks Does Anyone Know if Pet Insurance is Worth the Beans? For most people no, but it sure would have helped with my 3.
• Passive Family Income wonders Are the Rules of Retirement Changing?
• Living Almost Large tells her tale From Rags to Riches

(Makes Two Loaves – One for now, one for later)

If you’ve ever planted zucchini then you know that they can produce more in one summer than you’ll eat in a lifetime. I developed this recipe as a way to use up extra zucchini once we had tired of it as a side dish. There are a number of substitutions you can make to this recipe, depending on what you have in the cupboard. You could use margarine or vegetable oil for the butter and vice versa, whatever nuts you have on hand (maybe not peanuts) or omit them if you prefer. I’ve done different spice combinations, but classic cinnamon seems the best. Also, check out the frugal recipe collection Ashley has gathered at Wide Open Wallet.

Ingredients:
3 large eggs
1 ½ cups granulated sugar
½ cup packed brown sugar
½ cup melted butter
½ cup vegetable oil
2 tsp. vanilla
2 tsp. citrus zest (I love half orange, half lemon)

3 cups flour
1 tsp. baking soda
¼ tsp. baking powder
1 tsp. salt
2 tsp. cinnamon

3 cups shredded zucchini (2-3 medium)
1 cup candied walnuts (recipe below)

Candied Walnuts
1 cup walnuts
2 tbsp. melted butter
¼ cup granulated sugar
2 tsp. cinnamon
2 tsp. flour

Directions:

Instructions for the Candied Walnuts

Preheat the oven to 350° and line a cookie sheet with aluminum foil, the candied walnuts should be made first or ahead of time. Chop the walnuts, the pieces should be small to medium size. Put the chopped walnuts in a small bowl and pour the melted butter over them. Toss with a spoon to coat the walnuts evenly with butter, then add the remaining ingredients. Mix thoroughly before spreading the walnuts in a single layer on the cookie sheet. Bake for 10 minutes, take out of the oven and set aside to cool while you prepare the rest of the batter.

Instructions for the Zucchini Bread

Keep or preheat the oven to 350° . Take two loaf pans (8x4 or 9x5 will work) and either line them with parchment or spray with a non-stick spray. Wash and trim your zucchini, do not peel them. Use a box grater or a food processor to shred your zukes. Set the zucchini aside for a minute. In a large bowl combine the 3 eggs, both sugars, the melted butter and the vegetable oil - mix for one to two minutes so the sugar will start to break down. Then stir in the vanilla and the citrus zest. The zest should be measured loosely piled, not tightly packed in the measuring spoon. A fine grater will work in place of a zester.

In a small bowl sift together your flour, baking soda, baking power, cinnamon and salt. A few tips: Remember to measure your flour loosely piled and then leveled with a knife, scooping or packing the flour down will mean a dry loaf. This is a quick bread, which require a light touch and minimal mixing once the flour meets the wet ingredients. Grab a spatula, it’s the perfect tool for folding in the zucchini and walnuts.

Add 1/3 of the flour combination to the egg/butter/sugar mixture and stir gently with a large spoon a few times, add another third and stir briefly before adding the final third. Stir a few more times, the flour should be mostly incorporated but not completely mixed. Grab the spatula and your zucchini, you are going to carefully fold your zucchini into the batter. Before the zucchini is fully mixed in grab your walnuts and fold them in last. Fold a few times, scraping the bowl, until the batter is mostly uniform and there is no more visible flour. Divide the batter evenly between the two loaf pans and bake for 60 to 70 minutes, rotate once halfway through. As always, check a little early just in case the oven is running hot. You can use the toothpick test to check for doneness. Cool the bread for 5 minutes in the pan before transferring to a wire rack to cool. Don’t leave them in the pans or the bottoms will get soggy. Wrapped up tightly they keep well in the freezer, so you can eat one now and save one for later!

More surgery for B, more bills for me! After last week's incident the nail didn't heal properly, when we went to change his bandages this morning we found the rest of the nail had shattered. The quick all the way to his pads was exposed and oozing, eww. Mr. M took him back to the vet this morning and the only way to get it to heal now is to remove all the remaining nail and quick. The vet will have to stitch up the end of his foot, poor guy.

There are two vets who alternate days at the clinic, one we like and one we don't. The one we like, Dr. H, did the nail surgery six months ago. There were no complications and it healed quickly. The other vet, Dr. K, did this one. Now they want us to pay full price to redo a surgery they should have gotten right the first time! We managed to get $100 taken off the bill, but it will still be over $400. That puts the total at almost $700 for one broken toe nail. It's time to find a new vet. Turns out Dr. K knew the rest of the nail was damaged but decided to glue it back together. He could have done it right the first time, now my poor B has to go through another surgery and I get to pay twice. I've just kissed my hopes for a new computer goodbye, what a crappy day.

Lately, Hollywood has not been kind to Mr. M or any of his colleagues. We are in better shape than many of our friends since I bring in most of the income. Some friends I fear are facing bankruptcy or foreclosure. Mr. M has only worked an average of 2 days a month since July.

Mr. M works freelance on movie and commercial sets, it’s good pay when there is work. When he isn’t working he collects a small amount of unemployment, only some of his jobs pay with W-2’s. Most are independent contractor, 1099 income, which is not covered. We’ve found that the state’s unemployment system is totally incapable of handling Hollywood employment.

California is the most populous state with over 37 million calling it home. In November, the unemployment rate here hit 8.4%. That’s a lot of people on unemployment. That also makes it hard to understand why they haven’t addressed a problem that must affect a large number of people.

Every two weeks Mr. M must send in "continued claim" forms to the Employment Development Dept (EDD) to keep his unemployment going. Some weeks he works, some weeks he doesn’t. Whenever he works, it’s a problem. Checks get delayed, money is lost and our stress level starts to rise. But after going three weeks without a check Mr. M spoke with them yesterday and finally got to the heart of the problem.

You are required to report any earnings to keep your claim open, which Mr. M has done faithfully per the instructions. But, the instructions weren’t written for 1099 type employment. He always reported who employed him - that was the error. The person at EDD explained to him that 1099 work has to be reported as "self-employment". Putting down the payee of the job meant a lengthy hold-up as they tried to track down the employer.

Mr. M said the proper way to report 1099 income is not offered anywhere in the instructions. This isn’t the first time he’s had this problem, but it is the first time we got any answers. He has probably spent weeks of his life on hold, waiting to talk to someone at EDD. The 3 lost weeks will go unpaid.

Lesson learned, when you are on unemployment make absolutely certain that you are reporting your income properly. Otherwise you may not get paid at all.

I’m sorry, this only loosely relates to personal finance. My mom asked if we were free for dinner this Friday night, I told her we were but that we would prefer to eat at home. Mr. M just had a movie deal fall apart and we’re not comfortable going out to eat. Even if mom paid for the meal, we would at least chip in tip or return the favor later. Instead I invited her to our place, I like to cook and could feed all of us for less than a tip would cost. Frugality in action!

I didn’t know she had an ulterior motive. My parents divorced last year after 33 years together and I’m still adjusting to the new reality. My mom doesn’t want to eat dinner with Mr. M and I, she wants to introduce us to her new boyfriend! I am not ready for that, I knew from prior hints that she was seeing someone, but that doesn’t mean I’m ready to meet him. It’s all very awkward and strange for me. I really don’t want to go and I really don’t know what to say. Words of encouragement anyone?

UPDATE:

Well obviously I survived the evening. There were some last minutes changes due to B's surgery, Mr. M refused to leave him home in a cone (isn't he sweet). So we opted for take out at my mom's and just brought B. A herd of boston terriers is overwhelming even to the most ardent dog lover. It was less awkward than I feared, but there were a few moments of oh please just get me out of here. But, I didn't really like the dude. My mom had given me a one sentence bio which said he had a dog that went to the same vet. Perfect I thought, we'll talk dogs. Well fairly early in the evening while talking about the rather large vet bills I've faced with my crew he told me he would just have them put down. For me that's pretty much an automatic disqualification. Then my mom has two beautiful shelties, he didn't know their names, couldn't tell them apart even though they're different colors and kept calling them overgrown rats. Maybe they just haven't spent that much time together, but in that case why should we meet him. Those dogs are my mom's babies, I couldn't see on what level they connect. He had some nice qualities too, but overall thumbs down.

PS - I hate my dad's personality so I'm definitely not expecting/hoping for a guy like that!

I have several paper I-bonds that I purchased back in 2002. Now that I have a Treasury Direct account for buying new bonds electronically, I am converting my paper bonds to electronic ones as well. I’ve always worried I’ll lose them and replacement is a hassle. Having all my bond information in one place will simplify my finances.

To convert paper I, E and EE savings bonds you need to create a conversion account. Log in to your Treasury Direct account and go to the ManageDirect page. They suggest you read through their step by step guide before converting, also you’ll need the paper bonds in hand for this process. Once you’ve created the conversion account you go back to the ManageDirect page and select ‘Convert my Bonds’. At this point you list the bonds you want to convert. The registration is to whom the bond is registered, if the bond has the same name/SS as your account then you don’t need to do anything. If you’ve changed your name or if the bond is in multiple names, you’ll need to add a new registration.

The process of adding your bonds uses an online shopping cart - you simply add the type, denomination, serial number and issue date for each bond. Once you’re done, you select ‘view cart’ like any online retailer. If everything looks correct, you then create the manifest. You’ll need a printer handy, you have to mail in the manifest along with the bonds. As they tell you over and over, only sign the manifest, do not sign the back of the bonds. You are not redeeming them. You are now ready to mail the manifest and your bonds to the treasury. In approximately 3 weeks your online account will reflect your converted bonds.

I sent mine in over a week ago and the conversion has not been completed yet. The government may have joined the digital age, but it still does everything at snail speed.

I need/want a laptop - at home Mr. M and I share my rusty old desktop computer. We manage OK considering we’re both huge internet addicts. But I’m an only child and sharing does not come naturally! The problem is, my yearly goals and budget leave no room for new toys. If I want a lappie, I’m going to have to earn it.

I did a preliminary run through my taxes this weekend in hopes of finding a big fat refund, one big enough to buy a new computer. The news was mixed, I am getting a refund from the feds but I owe the state of California. At least I won’t have to worry about getting an IOU instead of a refund! I should come out ahead ~$275, less than half of what I’ll need. I have enough work at work to keep me busy for years, so I should just put in some overtime and earn the money. I really don’t want to, after two years of working 60-70 hour weeks in the name of debt reduction, I am ready for a rest.

Now the question of spending money before I’ve earned it. I’ve seen several good sales recently, do I buy it now out of my savings and pay myself back later?

PS – spending my savings totally stresses me out so I’ll definitely replace the money,

I was four when my grandfather disappeared. He was a magician, among his many talents. He and my grandmother met in the early 50’s while entertaining through the USO. She was a singer, he a mentalist, hypnotist and sleight of hand man. Their marriage didn’t last long, none of his did. He went on to become a talented surgeon, making his fortune in the operating room. In later years the magic act mainly served as a parlor trick, an entertaining diversion at parties. When he disappeared the act wasn’t for the crowd, he was on the run.

My father grew up in poverty, raised by a single mom - my grandmother, who had demons of her own. Her career as a singer never took off and she eked out an existence as a lounge act in bars around Southern California. My grandfather rarely paid child support, but would occasionally whisk my dad and his brother off - sailing around the Channel Islands or flying down to Mexico to go diving. The ultimate divorce dad, his wealth and toys stood in stark contrast to life with an alcoholic mother unable to make a living. But he never hung around for long.

My grandmother was the third wife of seven or eight in my grandfather’s life, depending on how you count them. He married one woman twice and never married the woman he spent the last 20 years with. Add in the numerous girlfriends along the way and you can’t dispute that women were one of my grandfather’s many addictions. One of these girlfriends was an art dealer in San Francisco, through whom my grandfather acquired a notable art collection. My mom remembers the Cezanne and the Matisse, some of the more valuable pieces he possessed. They were acquired before the impressionist market exploded, before they were worth millions.

My grandfather had an affinity for blackjack, claimed he could count cards. He certainly was a brilliant man - pilot, surgeon, sailor - but his staggering losses make me think he was exaggerating. He lost everything - his boat, his house, his plane – all to pay off his gambling debts. He had to sell his paintings and sculptures, the entire collection. Finally, with nothing left, he fled.

On the run from debt, on the run from the taxman, he vanished from the face of the earth. My dad remembers the phone calls from the government, from strange men he’d never met demanding to know where my grandfather was. When he disappeared circa 1980 he owed Uncle Sam approximately $250,000 in back taxes. How much he owed the mob, I don’t know. Gambling was perhaps his worst addiction and his ultimate downfall.

No one knew what happened to him for seven or eight years, when one day out of the blue he called my dad. My dad had given up hope of ever seeing his father again, didn’t know if he was alive or dead, so the call came as a shock. He had been living in Australia for several years, had become a citizen down under and was working as a "substitute" doctor. He would fill in whenever a resident doctor would go on vacation, it paid the bills but he never regained the affluence he had in America.

As a fugitive, he risked arrest if he ever returned to the States. Unlike money he was never willing to gamble his freedom, but I had a chance to visit him twice in Australia. I saw a thoughtful man, but not an introspective one. He was friendly, but not open. He was still a gambler and a drinker, but never to a ruinous degree. Then last spring, facing a winless battle with cancer, he committed suicide.

Some of the mysteries will have to die with him. There were holes in his life story that no one can fill in, like the empty space between him fleeing America and arriving in Australia. It wasn’t the only gap in his life story. I never got a chance to ask him - what did it feel like to have had so much and to have lost it?

I sometimes wonder what my life would be like if my grandfather hadn’t gambled away a fortune. In today’s market his art collection would be worth millions. How would that wealth have changed me and my family? How would it feel to never want for money? What doors would that money have opened? It’s all a daydream because in the end my inheritance was one silver dollar, and one wild tale.

When money is tight and sentiment low, it’s natural to reduce our charitable contributions. I donate some cash and goods each year, but this year I’ve decided to add the local food pantry to my list. Giving food to the poor is a simple way to make a positive impact on our communities. With the rough economy, needs have never been higher and food banks have few resources to meet the increased demand.

My plan is to buy extra food suitable for donation each time we shop. At the end of the month I’ll have several bags worth and we will visit a local food pantry. Online it says they accept fresh and frozen items, I want to make sure that is true before I bring anything perishable. I also want to ask what they need the most or what items would families appreciate the most. I’m torn between staple items and wanting to donate some "fun" stuff like granola bars or cake mix. So far I’ve picked up canned fruits and vegetables, the ubiquitous Kraft Mac and Cheese, rice mixes, tuna fish and chicken noodle soup. The new Fresh & Easy (Tesco’s foray into the American market) just opened up and they had great prices on canned goods, frozen veggies and many other products. Any suggestions on other items to donate?

Like a lot of people, I am having an expensive January. Friday I had a dentist visit - $100 with deductible, then B injured himself to the tune of $275. Add in a bunch of shopping and I’m digging deep in my budget to cover it. Here are a few posts I enjoyed reading this week.

• I’m not sure I’m ready to give up my shampoo, but Mrs. Money did and gives you this recipe for "No Poo" Shampoo Alternative: Don’t Use Shampoo Again!
• K-Money at Three Rooms and a Path adds to my traditional skills list with help on where to find classes -Frugal living made better (and greener!) with Traditional Skills, but where can you learn them?
• The Saver Queen has a great discussion on The High Cost of "low-brow" foods. Personally convenience foods are a good first step for people trying to get off the fast-food lifestyle, it is cheaper and healthier than eating out, and they inspire less fear in non-cooks.

Festival of Frugality

The Festival of Frugality was hosted this week by Credit Withdrawal. Thanks to the host for including my post on Frugal Traditional Skills. Here are a few selections from this week’s carnival:

• I Want to be a Frugalista from SavingAdvice.com
• Top Ten Winter Frugal Foods from Sound Money Matters
• J. Money at Budgets are Sexy asks Would you take a 10% pay cut if it meant saving an employee?

The Carnival of Money Stories

This week’s edition of the Carnival of Money Stories was hosted at Your Money Relationship. My post Help, I Need $153,000! was included, along with these interesting tales:

• Renting my house by Living Almost Large (boy I know how that feels)
• Born Without a Silver Spoon in my Mouth from GRACEful Retirement

Carnival of Debt Reduction

Flexo at Consumerism Commentary hosted this week’s Carnival of Debt Reduction. He did a twitter theme and included both posts and quick tips sent via twitter. Many thanks to CC for including my post Financial Resolutions. Here are some other thoughts on reducing your debt:

• Snowflaking your Way to an Emergency Fund from The Thrifty Life
• Sharing Your New Years Resolution With Others Will Increase Success from Debt Goal

We have three boston terriers - B, C, and D. There are no plans to add "A" to the clan, three is enough. B is my George of the Jungle. He is an amazing athlete, capable of jaw dropping leaps, running down a flight of stairs in a handstand and hopping around the yard like a kangaroo. He is also the world’s biggest klutz. I once watched him make a huge leap from the middle of the yard to the porch, only to collide with the porch column! He flew backwards and ended up upside down in a rose bush. It took awhile to pull all the thorns out of him. The rose bushes were removed long ago, but he keeps getting into scrapes.

Yesterday he was playing in the yard when Mr M heard a scream. Poor B was limping, it appears he ripped a nail off. The nail is still attached at the top, but it completely separated from the quick. He did the exact same thing to the exact same nail 6 months ago, so off to the vet we went. The vet has to sedate him to remove the entire nail and quick, it can’t heal otherwise. $275 later, B is stumbling around the house drunk on pain medication, with a club for a foot. He got a Wendy’s cheeseburger to make up for the rotten day. I swear I have the most expensive dogs on the planet.

I can’t explain why I drown my waffles in syrup, so much syrup they start floating off my plate. More syrup than I could possibly eat, two-thirds of it just goes down the drain. Syrup is not the only thing I waste. From salad dressing to dish detergent, there are perhaps dozens of products where I use too much. I don’t know why I’m being so wasteful, but I do know that it’s a waste of money.

Waste Not, Want Not

Waste and excess are part of our psyche. From gas guzzlers to all you can eat buffets, overconsumption is an all-American pastime. There is always more in the land of plenty, but does that make waste OK?

There is a correlation between supply and consumption. For example, we usually eat whatever is on our plate. A simple weight loss technique is to downsize your plate. This doesn’t just apply to food, it holds true for almost any product we consume. The psychology of abundance is our tendency to consume more when supply is greater.

A side effect of that consumption is waste. We see it in the extra calories that hug our hips and the junk that clogs our landfills. The average household throws away 15% of the food purchased – yet we wonder why we’re broke.

Awareness and Cutting Back

What do you waste? An honest look at your needs versus your consumption will show you easy ways to cut back. Figure out how much you use and how much you should use:

• Read the Label – how much is a serving size or how much detergent should you use for a medium load in the washer. For laundry detergent, a large load uses less than a cap or a scoop full. They expect you to fill it up to the top, using more than you need to. Try tracking how many loads you can wash with one bottle. How does it compare to the claim on the package?
• Measure – Do you know how much 2 tablespoons of salad dressing is? Instead of guessing on portions, measure. You may find you aren’t satisfied with one portion, that’s OK. Now you know that big bowl of cereal in the morning is really two servings. Measuring will give you consistency and allow you to control the amount you use.
• Experiment – I’ve been using half as much conditioner in my hair and haven’t noticed a difference. Before I must have used too much, the excess was just washed away. Try a smaller dab of shampoo or half a dryer sheet, you may get the same results with less. Try to find the point where you’ve minimized consumption without changing your happiness.
• Conscious Consumption – many of our daily actions are habit, we do them automatically. Stop next time you are doing the dishes or the laundry, making a meal or washing your hair and be conscious of how much detergent you are using or how much oil you are pouring.

Making the Change

I am now making a conscious effort to use less, not less than needed but rather just the right amount. As consumption increases, so does waste. Using too much fertilizer or detergent is bad for the environment, the excess nutrients cause ecosystems to go haywire. Using excess butter and syrup is a waste of money and makes me fat. Somewhere there is a balance between satisfaction and results, consumption and waste.

My mom gave me a $100 bill for Christmas. This doesn’t sound unusual, except I’ve never gotten cash from her before. My family seems to have a strict taboo against giving money as gifts. But as noted in the card, the money was to help pay for C’s surgery.

C had his surgery the Monday after Christmas. The vet used a laser to cut away the excess tissue that was blocking his throat. The $1400 bill was charged to Care Credit, which is a type of credit card for medical expenses. They have various 0% financing plans. Mine is no interest for the first year, after that the interest rate is around 9%.

I didn’t use the $100 bill to pay for C’s surgery, instead I put the money in my FNBO savings account. I have budgeted to pay off the surgery this year, but I will only pay the minimum due each month. The difference, $90 per month, will be put into savings. Once I have the balance saved, around the first of December, I’ll pay the account off. When interest rates are good this is an easy way to make extra cash.

Credit card arbitrage is a way of earning 'free money' from interest. You take cash as a 0% balance transfer offer and put it in a high yield savings account. Make the minimum payments each month and pay off the balance before the 0% offer expires. This has been a popular way of earning extra money during the last few years, when credit was loose and limits high. I personally have never tried it, but my method for paying off the Care Credit balance is a variation on the theme, a sort of reverse arbitrage.

Free or low cost balance transfers are now hard to find, but cards offering an initial 0% on purchases still exist. You could use a no interest card for your family’s spending for a year, only paying the minimum each month and banking the balance. You need to be organized and never late with your bills for this to be a success. The longer the 0% offer, the longer you have to earn interest.

BIG FAT WARNING - If you have a debt or spending problem, do not try this.

Unfortunately rates are low right now, so the amount you earn is limited. Also, this method doesn’t have as high a payoff as traditional credit card arbitrage. Rather than having lots of money earning interest from the start, you are slowly building up the savings balance each month. But, it is still an easy way to earn some free money and once interest rates recover, your earnings will improve. It is another tool to keep in mind when you are looking for that extra buck.

I’m putting my extra "snowflake" money into I-bonds. To buy electronic I-Bonds you need an account at Treasury Direct. They may tout this as the quickest way to buy I-bonds, but if you don’t already have a Treasury Direct account, the setup is pretty slow. The online sign-up is not complete until they send an access card to your home address, snail mail. I wanted to buy I-bonds at the end of December, but didn’t account for the 1-2 weeks it takes to open an account. If you buy I-bonds at the end of the month, interest is paid as if you owned the bond since the 1st – a neat little trick.

The online sign-up only takes a few minutes and you’ll need to have your Social Security number, bank account information and drivers license handy. Your Treasury Direct account will be linked to the bank account of your choosing. After completing the online sign-up you will receive a confirmation email with your account number. Keep it handy, you will need the account number to sign in. Then you wait for your access card to arrive. The access card is like a secret decoder ring needed to open the treasury.

Security Check

Signing in to my account was frustrating given their security measures. For one, I forgot that the account number was in the confirmation email. Then you must use a scrambled, on-screen keyboard to punch in that really long password they made you create. The last step is to use your secret decoder ring. The access card is a matrix of letters and numbers, they’ll ask you to enter what’s in boxes F2, B1 and D5 for example.

Once you are in though, purchasing is easy. On the main screen there is an area called Purchase Express, simply choose the product (I-bonds), enter the amount you wish to buy and hit submit. They’ll confirm your purchase information and voila, you are done. You can also buy EE Savings Bonds, Treasury Inflation Protected Securities (TIPS), T-bills and Treasury Bonds with your account. I’m currently converting my paper I-Bonds from 2002 to electronic bonds, so I’ll have both in one convenient place. I can’t wait to build my snowflake savings.

It’s tough to drag yourself into the office after a vacation. Unless you truly love your job, you probably plead for just one more day away. I took time off over the holidays to focus on my life outside of work and now I can’t deal with the daily grind. Unfortunately, extreme early retirement is out of my reach. Instead of saving for the future I spent my early years dancing into debt – take heed 20-somethings. But that doesn’t mean I have to spend the rest of my life stuck in a job I hate. I’m working on a 5-year plan to move me out of the office and into a happier state of being.

I could start working for myself today, I have colleagues who do. But their life is like mine, each day they wake up and drive to the office. My aim is something different - same field but less commitment. My current line of work is too lucrative to give up entirely. My ideal set-up would be as a subcontractor working on one small piece of a large project. I would work from home and only come to the office once a week for coordination or meetings. It will take time and whole lot of planning to make this transition a reality.

Savings

First off, I don’t want to work full time, so I am expecting my income to drop. Then there might be lean months where I don’t have enough work or clients are late in paying. I’ll need substantial cash savings before I feel comfortable going out on my own.

Benefits

Group health insurance is essential in America, I’ll need to find a replacement for my employer’s plan. Currently, Mr. M does not have access to health insurance and I should not count on him covering us in the future.

Kids

We want to have kids in the future. Given my age – early thirties – and my plan, we should have them before I go self-employed. I want to be covered by decent health insurance for those early years.

House

With a kid or two we’ll quickly outgrow this tiny house. I’d like a modest house in a more family friendly neighborhood. Getting a mortgage is more difficult and costly for the self-employed, so I’d like to move up before moving out of my job.

Income

I’m the main breadwinner in our house. I need the comfort of having multiple income streams so we’re not dependent on one part-time job. Hopefully Mr. M will have more stable employment by then and I need to figure out additional side income for myself.

Networking

I am horrible at networking, which doesn’t bode well for being self-employed. I have a good reputation in my field, I need to learn how to leverage that into consulting work.

Retirement

Kids and self-employed sounds like a disaster for saving for retirement. I want to have a solid start on my 401(k), Roth IRA and other plans before taking that step. In 5 years I will be fully vested in my employer’s retirement program.

5-7 Years?

I think 5 years is an optimistic time frame for these goals, 7 years is more realistic. I don’t see us winning the lottery any time soon. Seven years is a huge improvement over the standard 20-30 years till full retirement. I don’t want to stop working, I want to stop working the way I have been. Also, having an escape plan makes Monday’s more bearable. So what have I missed? Any suggestions?

Sally works as an assistant at the firm of A&B making $20 an hour. Sally has big plans this weekend so she runs to the mall for a smashing new outfit. $400 later she emerges with designer jeans, a daring top and to die-for strappy heels. No big deal she figures, 20 hours of work will pay for the shopping spree. Sally just failed Personal Finance 101, what was her mistake?

Sally is spending her take home pay, which has been reduced by taxes, social security and other deductions. She will need to work more than 20 hours to have $400 to spend. Looking at my own paycheck, which includes deductions for a 401(k) and my health insurance, over 1/3 is taken off the top.

Sally is in a lower tax bracket and assuming she has few deductions, approximately 25% of her paycheck will go to taxes. In terms of take-home pay, Sally earns only $15 per hour and it will take 26.7 hours of work to pay for the shopping spree. That’s right, a 25% deduction off the top means you have to work 33% longer to save the same pay. This nuance is important when looking at the cost of a purchase and the value of your time.

My frugal conversion started when I began making a simple calculation in my head - how long will I be tied to my desk for this $100 skirt or that $75 pair of shoes? Measured in hours of my life, purchases suddenly became less appealing. Take your own paycheck and figure out how much you take home an hour. Next time you’re shopping, ask yourself how long you really have to work to pay for that purchase.

I love setting easy goals. I can already scratch No. 1 off of my 2009 Financial Goals list – Pay off my student loan. I set my budget several months ahead, so January’s budget was devoted to paying off this debt. On Friday I scheduled one final payment for the balance of the loan, almost 10 years after I graduated college. This is a good motivational tool for goal setting, early success spurs you on.

I hit Costco yesterday, which is never good for the bank account. I went to pick up turbo tax since they have a $10 off coupon right now. I’m hoping to get my taxes done early. California may issue IOUs instead of refunds, if I’m owed money I need to get my taxes filed before February. In other spending news, we finally replaced the Durango window after the break-in. We got a special deal through our insurance so it only cost $145 and they replaced it at our house. We never heard anything from the cops.

As we moved from living on farms to living in cities we lost many of the traditional skills that kept us fed and clothed for centuries. While I don’t see the need to learn how to milk a cow, there are other skills that come in handy for a frugal, urban lifestyle.

Each of these skills were part of daily life 100 years ago, today they exist mainly as hobbies. An interesting diversion, but not necessary in a country built to satisfy consumerist desires. I prefer the DIY lifestyle, why pay others for what you can do yourself. Recently I’ve repaired the water heater, replaced a light fixture, snaked a drain and ahem, installed a toilet seat. But I confess, I can’t do half the skills on this list!

Sewing – From creating cool original pieces to repairing your worn clothing, the ability to sew comes in handy. Instead of throwing away a pair of pants because a seam has unraveled, you can sew them back up. Fixing buttons, repairing zippers - being able to sew will save you money. In this case it is much cheaper to repair than to replace, as long as you do the labor yourself. Also, I think the prices on drapery are ridiculous. Curtains are easy to sew - many styles only require hemming - and much cheaper when you make them yourself.

Knitting – With winter’s chill upon us, warm scarves, hats and sweaters are a necessity. You can create your own with some knitting needles and yarn. Knitwear also makes good gifts, instead of buying presents you can create them for the price of materials. Like all hobbies, I hear this one can get out of control. Watch out for a developing yarn addiction, don’t buy more than you’ll use in a lifetime. Boston Gal recently created some cool hats using a knitting loom called the Knifty Knitter.

Gardening - I keep a vegetable garden through most of the year. My garden provides us with fresh produce that is tastier than what you buy in the grocery store. It’s also better for the environment, I practice organic gardening and my vegetables don’t travel thousands of miles to my table. An herb garden is an easy place to start and has one of the highest returns on investment – fresh herbs are expensive. Tomatoes, peppers and summer squashes are also beginner friendly. There is an initial cost to buy a few tools and other supplies, but as you continue to garden year after year these costs diminish. Next year I expect our garden to save us at least $100 in food costs.

Canning - This is a corollary to gardening, canning preserves your summer abundance for later use. Long ago this was the only way to get through the harsh winter. Even a small garden can overproduce during its peak, you don’t want the extra produce to go to waste. You can freeze some, but you’ll need a spare freezer, which consumes power. Canning preserves food for longer without the need to keep it cold.

Cooking - When my parents were kids they ate out maybe a few times a year. Dinner in a restaurant was reserved for special occasions like birthdays. Now there are families that never cook a meal at home, warming up take-out is considered eating in. Cooking your own meals is one of the best ways to save money, for the price of one meal out I can feed Mr. M and I for several days. Everyone should know how to cook, this one skill will save you thousands each year compared to eating out.

Carpentry and Home Repair – In the Little House on the Prairie, Laura’s Pa built each of their houses himself. She describes how he felled trees with an axe and built a log cabin by hand. The furnishings inside were by Pa too. Most Americans today can’t tell a hammer from a screwdriver. The ability to fix a broken chair leg or build a bookcase out of spare lumber will save you money. Doing your own repairs, like fixing a leaky toilet, will save a call to the handyman. With the information available online, anyone can tackle simple projects. If you want to save money, don’t outsource tasks you can do yourself.

The theme of the past was self-sufficiency, pioneers had to rely on their own skills and ingenuity to survive. Today these same skills are good for the environment and good for your wallet. I plan to pick up a few more to add to my money saving repertoire, what about you?

How complicated is your financial life? I have four different bank accounts, two investment accounts and two retirement accounts. Add to that my loans, numerous credit cards and all the various bills to pay each month and it starts to get a bit confusing. I can’t remember half the passwords or account numbers. Mr. M, who has zero interest in finance, has absolutely no idea where our money is kept.

A Financial Inventory

A financial inventory is a log of all your various financial accounts. In addition to names and account numbers, you should include other pertinent information like passwords for online accounts, due dates for bills and contact information for each account. This last bit can come in handy if your credit card is lost or stolen. It also helps if/when someone else needs to handle your finances for you. How much information to include about each account is up to you, but I say keep it simple. Your inventory shouldn’t take much time or be a burden to create.

What to Include and Where to Keep It

There is an endless list of possibilities for what to include in your financial inventory, each person’s situation is unique. Here is a short(ish) list:

• Bank Accounts
• Brokerage Accounts
• Retirement Savings
• Savings Bonds
• Student Loans
• Credit Cards
• Car and Personal Loans
• Mortgage/Equity Line of Credit
• Property Taxes
• Insurance
• Utility Bills
• Business Accounts

You should keep two copies of your inventory in different places. Do you have a parent or other trusted family member that can keep a copy? The other can be kept closer to home in a safe or safe deposit box. It goes without saying, there is some valuable information for thieves in your inventory. Make sure someone, your partner for example, knows that the inventory exists and where to find it.

Keeping it Up to Date

Once a year you should review and update your inventory. Some loans may have been paid off, other new accounts opened. This task won’t take long.

Preparing my Financial Inventory

I started my financial inventory today, primarily to have a concise record of my accounts. But also so Mr M knows where to find the money if the unthinkable happens. Creating a financial inventory is a simple task you can do to organize your finances.

Every field of interest has its great debates. For PF bloggers, one such debate is whether to include the value of your home in your net worth. For most Americans, their home is their greatest asset. But to many in the financial world the home you live in is a liability, not an asset.

The basic logic goes – you need a roof over your head. It’s one of the three human needs along with food and water. The value in your current home will likely be used to buy another home. If you move to being a renter, the cost of perpetual rent offsets the value of any equity. But if the home is a rental, not the home you live in, it provides cash flow. You could sell the 2nd home and bank the cash, so it is considered an asset.

I wrote this post in response to a comment on my monthly net worth wrap up. I do not include my house in my net worth estimate, for me it was an easy decision. I’m as much as $100k underwater, home prices have fallen significantly since I became a first time homebuyer. It’s simply too depressing, but even homeowners with equity sometimes choose to leave it off the balance sheet. There are a number of options when it comes to your home and net worth.

Variation 1 – Include Home as an Asset and a Liability

This is how most people treat their home. After all, there must be some payoff for all those payments. In this version the balance of your mortgage is included with your other debts and the value of the house included with your savings and investments.

The value - that’s the sticky question. How do you arrive at an accurate value to include? If you live in a condo, townhouse or tract subdivision, sales of similar homes are probably a good comparison. But what if all the homes in your area are unique? There are sites such as zillow that provide free (rough) home estimates. The last option is to simply list what you paid for the house. The change to your net worth represents principal payments, but no equity growth. I considered this option, but decided it wouldn’t be very honest in my case.

Variation 2 – Include Home as a Liability Only

Yes some masochists do this. You list your mortgage balance under your debts but do not include the value among your assets. As you slowly pay off your mortgage, your net worth rises. This makes sense for people who plan to live in their house for the rest of their lives.

Variation 3 – Leave the Home Out of It

In my net worth calculation, my home is neither an asset nor a liability. My mortgage is an expense like rent would be. The principal repayment each month does not add to my net worth, which definitely slows down my growth. There is another term for a net worth excluding the value of property - net investable assets. This is to reflect the difference between equity and liquid assets like cash. In the end, how you account for your home is a personal decision.

How do you come up with $153,000 in a hurry? Really I have no idea, but that is the amount I would need to refinance my mortgage. I bought a small starter home in 2005, we planned to move up after ~5 years. I took out an adjustable rate loan, which now seems like a ticking time bomb in my lap. Mortgage rates have never been better but like all the other underwater homeowners, I can’t take advantage of them. I tried calling my lender to see what they could do. The news wasn’t good.

They are holding my mortgage, it was not sold off to investors. But any modification or refinance would have to conform to traditional standards and the loan could not exceed 80% of the appraised value. The not so helpful loan officer asked how much I was upside down - I told him I didn’t know but it was significant. Afterwards, I used their online home valuation estimator. Based on my current loan balance, their value estimation and the 80% limit, the difference was $153,000. Yeah, I’ll just write you a check.

Their valuation model had some quirks, my home value was placed 50% below the comps! Only 1 of the 8 was actually in my neighborhood. None of the comps have a view like I do, most are in poor condition and all have smaller lots. Still, even an optimistic appraisal would leave me owing a hundred thousand to refinance. Money I don’t have.

The call left me rattled. I had held on to the hope that my lender, a credit union, would be more flexible. The money has already been loaned out, why not reduce the risk of default. It’s extremely painful knowing I could pay half as much for the same house. I’ve made a lot of financial mistakes in my day, but I’ve been able to recover. I don’t know what to do this time. It will take me 10 years to save up that much. If the rate adjusts to the maximum, my payments would increase by 60%. The $3500 monthly house payment would eat up most of my salary, say goodbye to saving. I feel helpless.

It’s that time of the year again, New Year’s Resolution time. No doubt some of you have made a few resolutions this year, you may even have a few financial resolutions. This is a time for dreaming big, easy goals won’t do. Here are a few popular financial resolutions:

• Get out of Debt
• Stop Living Paycheck to Paycheck
• Save for Retirement
• Pay off a Car or House

These are great goals, but for most people this is like asking a couch potato to run a marathon. First you have to get up and start moving. You can take these larger goals and break them down into more manageable steps - expecting a complete change overnight is unrealistic. So what are some small steps you can take today to fix your finances?

Get Out of Debt

• Don’t Take on New Debt – Step 1 to getting out of debt, don’t take on any new debt! If you’ve got a debt problem, put away the credit cards. Debit cards provide the convenience and many of the consumer protections of credit, without the interest charges and years of repayment. Or go to a cash system. Change your habits to stop adding to the problem, or any plan to pay it off will fail.
• Track your Spending – Most people get into $5,000 of debt $10 at a time. Do you know where your money is going? Small habits add up over time. This step can be very enlightening even to people without a debt problem. Devise categories and track your spending over 2-3 months, a small notebook carried in your purse or backpack will do. Every time you spend money, pay a bill or have any other expense write it down. This task will help you identify unnecessary expenses and places you can trim your budget, you’ll need that money to pay off your debt.
• Automate your Payments – Many banks and lenders offer automatic payment plans, no more late fees. Set up your payments (more than the minimum) so you can focus on staying out of debt and saving up the money to pay off past debts.

Stop Living Paycheck to Paycheck

• Track Spending – Do you know where that paycheck is going? If you don’t know what your spending habits are, how will you change them? Living paycheck to paycheck is a cycle that has to be broken, often a spending problem is the cause. Since knowledge is power, tracking your spending is a good first step.
• Reduce Expenses – You need to break the cycle, one way is to reduce expenses. If you’ve tracked your spending, then you know what your expenses are. What ones can you cut? Rent and bills have to be paid, but are there cheaper alternatives? You could take in a roommate, move to a cheaper apartment, conserve energy and give up the cable TV. You should comparison-shop on your insurance, reduce your cell plan and maybe give up your car for mass transit. The retail therapy and expensive nights on the town are obvious places to start. If you are living paycheck to paycheck, then you can’t afford your lifestyle.
• Avoid Lifestyle Inflation – When you finally get that bump in income, keep living like it never happened. By living on your old budget, the additional money in your paycheck can be put towards savings. Once you start saving, you are no longer living paycheck to paycheck.

Save for Retirement

• Tax Advantaged Accounts – The government does not want to take care of you in your old age. They would prefer you take care of yourself, so they established ways of making retirement saving easier. There are several types of retirement accounts that allow you to save money pre-tax. If you are in the 25% tax bracket, each $100 you invest will save you $25 in taxes. Does your employer offer a 401k plan (or similar) and do they provide matching funds? Your employer’s match is free money, everyone should enroll and contribute at least enough to receive the full match. If your employer does not provide a retirement plan you can contribute to a tax deductible IRA. For 2009, up to $5,000 ($6,000 if you are 50 or older) can be invested and deducted from your taxes.
• Start Small – Most people put off saving and investing because they feel they don’t have enough money. It’s possible to start small, many mutual fund companies have lower IRA minimums. There are also automatic contribution plans that allow you to invest small amounts at a time. For more information see my post Investing with Little Money.

Pay off a Car or House

• Start A Snowflake – Take all the little bits of "extra" money in your life – rebates, refunds, the $5 bill you found on the sidewalk – and put it to work. This is an easy way to get extra money to pay down a debt. Either add it to your payments or save it until you have enough to pay off the loan. The latter is how I paid off my car loan early.
• Add Extra to your Payment –Can you put an extra $50 or $100 to your payments? Adding a little extra to each payment will accelerate your payoff and reduce the amount of interest you pay.
• Bi-Weekly Mortgage Payments – Do you get paid every two weeks? You can set up your budget to pay half of your mortgage out of every check – in effect you will make one extra payment a year. Don’t pay for a program that sets this up, you can simply save the money and mail in an extra payment once a year. Making one extra payment a year knocks 7 years off of a 30-year home loan.

Sharebuilder regularly offers special deals to Costco members when they open a new account. Starting Monday, Jan 5th until Jan 25th 2009, the promotion gets even better. Costco executive members get a $90 bonus and gold star members get a $70 bonus. The bonus money is deposited in your Sharebuilder account, you can use it for trades or transfer it out to your bank account. Of course there are a few details to mention, to get the bonus it must be a new account (individual, joint or custodial) and you must also complete at least one trade before 2/25/2009. IRAs and ESAs are not eligible, bummer. The bonus posts to your account in 4-6 weeks. If you are interested, here is the site you use to sign up:

http://www.sharebuilder.com/mvm09

My butt broke the toilet seat the other day. Before the fat jokes start flying, I’m not that big. I weigh maybe 130. I should probably weigh 115, but that’s another story. Mr. M is a more likely candidate for crushing, he weighs over 250.

I was innocently sitting there when I heard a small snap and felt a little pinch. I couldn’t believe what I saw when I stood up, the seat was split in two! Said seat was less than a year old. When I bought it I couldn’t tell the difference between a cheap seat and the more expensive models, so I went with the cheapest. Since the average life span of a toilet seat is way longer than a year, this cheap model that has to be replaced every year was obviously a bad choice. A more expensive model that didn’t break would have cost less in the long run. Lesson learned we replaced it with a basic model from Kohler, hopefully the higher cost will be worth it. I won’t be able to live it down if my butt breaks another.

Like the sun setting in the west or the rise and fall of the tides, prices always go up. Or do they? The recent economic collapse has raised the specter of deflation, a persistent decrease in the price of goods and services.

What does this mean for inflation indexed securities like I-Bonds? Will I see a negative return since inflation (or the lack thereof) is factored into the rate? Fortunately, the answer is no. The government has taken steps to make I-bonds favorable even in the event of deflation. The absolute rate of return can never fall below zero. Here is information direct from the Treasury’s website:

"I Bonds even protect you from the effects of severe deflation—the earnings rate can't go below zero and the redemption value of your I Bonds can't decline."

Also, I-bonds include a fixed rate of return, currently 0.7%. In a mild deflationary environment, say –0.2%, the fixed rate would mean the absolute return is still positive. With deflation, even a 0% return means the value and purchasing power of your money is increasing.

Good bye and good riddance to 2008, what a lousy financial year it was. Vying for the title of biggest loser - my investments and the value of my home. I’ve set some big goals for next year, let’s hope the stock market cooperates. December was an expensive month, there was Christmas shopping, property taxes to pay, a $1400 surgery for my dog and a $1600 car repair bill. In the end, my net worth creeped up. Yay!

Happy New Year everyone! While nursing your hangover and working on those New Year’s Resolutions, why not read some personal finance articles from around the blogosphere. This week’s Festival of Frugality is hosted at The Well Run Dry. Many thanks to the host for including my post, K.I.S.S. – Keep it Simple, Small. Apparently, the Well Run Dry and I share an affinity for smaller homes. Here are few other articles of interest.

• Please Don’t Give High Upkeep Gifts from Blueprint for Financial Prosperity
• Tips for the Coming Decade of Frugality posted by Mighty Bargain Hunter
• What Can You Downsize to Save Money? asks The Family Wallet

The latest incarnation of the Carnival of Money Stories is now up at Greener Pastures. Among the many fine offerings you will find my post Gifts from the Heart, not the Wallet. Other stories you may enjoy:

• Should Mom and Dad Get an Allowance? Asks Debt Free Destiny
• Another Foreclosure in my Neighborhood by Single Guy Money

Last but not least, I am wishing everyone a happy, healthy and prosperous New Year.