Myths On Money

Jan 21

The other night, I was reading Get Rich Slowly, one of my favorite finance blogs. I would like to lift a few of his comments from this fantastic post that illustrate why I LOVE personal finance, and what is truly important in our financial lives.

Freedom

To lift a quote from Get Rich Slowly:

“To me, life was all about the Stuff. I had hundreds of CDs and thousands of books. I had a TV, a stereo, a house, and a car. I wanted more. Sparky had none of these, but he had something I did not. Sparky had freedom. His frugal lifestyle allowed him to save and invest….
For some reason, I could not see the connection between Sparky’s thrifty lifestyle and his financial success. I could not see the connection between my own profligate ways and my mounting debt. I was blind.”

What is freedom? I think the idea can mean different things to different people, so I guess a better question would be: What does freedom truly mean to you? To me, freedom means that I can do as I wish. There is nothing (besides natural law) holding me down or constraining my actions. Nothing preventing me from fulfilling my every desire. Financial freedom is relief from servitude and slavery. I structure and manage my finances so carefully because I know that I am a slave, and I wish to someday find my freedom.

But slavery ended over 100 years ago, didn’t it? No, it didn’t. One kind of slavery did end after the Civil War, the kind we associate with cruelty, cotton plantations, and the Underground Railroad. But there is another form of slavery that has, rather than being stamped out, has been promoted, endorsed, and even celebrated in this country. The slavery I speak of is financial slavery, and it is a rapidly growing problem.

Think about it. Do you ever feel like your “stuff” owns you, rather than the other way around? Ever wake up in the morning wishing that you could just hit the snooze button and forget about work? What prevents you from doing so? Isn’t that what you would like to do on those mornings? I know I have those mornings. I don’t hit the snooze button for one very simple reason: I need money. I have rent to pay, groceries to buy, high-speed internet to pay for, burgers to buy, a car to fill up with gas. In short, my “stuff” is dictating my actions. I am going to work, (quite against my natural inclination) because my “stuff” demands it. So who, then, is truly in charge of your life? If you can’t take a day off because the car payment is coming due, then who is in charge of your life? Is it you? The bank? The car? Debt and excess are slavery, plain and simple.

I have structured my finances in such a way as to allow the maximum amount of freedom. I could switch to part-time work if I wanted to. I would certainly enjoy the extra free hours. I would have to sacrifice some other things to do so, though. Maybe the internet would have to go (a terrible thought!!), maybe we would have to eat ramen noodles and macaroni and cheese every day. But we could survive. We could pay our rent, keep the car filled with fuel, pay utilities, etc. The reason I could do such a thing is because I have limited the powers of my financial slave-masters. My rent is low. I have no car payment. I have no credit card debt. By stripping would-be financial obligations of their power, I have empowered myself. To a degree, at least. I would still need to work to get money, regardless of what I want. So I am not totally free, yet.

Since I only need a part-time salary to maintain my lifestyle, why do I work full-time? It’s simple. I CHOOSE to work full time because I want to get rid of all the forces that restrict my freedom. By spending significantly less than I earn, I am building my financial power. One day, that power will be enough to set me completely free. One day, I will have a home that has no payment on it, and investments that work for me to earn the income I need for my daily upkeep. When my money is working for me, rather than me for it, then I will be totally free, and I can use my time as I wish, and not as my creditors demand. That’s my financial dream. I want the right to CHOOSE to work how I want, when I want, as much as I want, for any pay (including $0). If I want to go on a vacation, I will need no one’s permission to go. I will just pack up and go. If I want to sleep in, then I will. If I wish to rise early, then I will. To be the master of my own time, to use it as I wish, oh what a joy that will be.

One of my favorite quotes, to sum up:

“Normal is getting dressed in clothes that you buy for work and driving through traffic in a car that you are still paying for – in order to get to the job you need to pay for the clothes and the car, and the house you leave vacant all day so you can afford to live in it.”
- Ellen Goodman

My friends, BE EXCEPTIONAL.

Money is not Wealth

From Get Rich Slowly:

“Please, my friends, always remember that true wealth has nothing to do with money. True wealth is built from friends and family, from experiences and relationships — it is derived from a life filled with meaning. Without these things, money means nothing. “

To this I would add that “stuff” means nothing. It doesn’t matter how shiny and new your car is. It doesn’t matter how dented and “economical” your car is either. It doesn’t matter how expensive of a gift you give. It doesn’t matter when your home was built, how big the yard is, how nice the granite countertops look. These things are not the source of happiness. Happiness comes from “friends and family, from experiences and relationships – it is derived from a life with meaning” and a life of freedom. Own your own life. Take control. Tell the advertisers that you don’t care that the Jones’ drive a better car, have a bigger house, throw bigger birthday parties. Tell the credit card companies that you will not be their slave and tell the banks that you will no longer work for them. Tell the Jones’ to join you on your way out of slavery and into freedom. As one who is living the frugal and “uncool” lifestyle, I can tell you that it is worth it. The greatest rewards are the furthest away, but the rewards of peace of mind and, yes, even freedom, that you will find the first day and onward make the small sacrifice worth it all by themselves.

Jan 17
Mythtip: Cut the Cable
icon1 Patrick Payne | icon2 Budgeting, Tips | icon4 01 17th, 2009| icon3No Comments »

The internet is a fantastic resource for anybody looking for the opportunity to shave a few bucks off their monthly budget. Well, actually, it can shave much more than a few bucks. Here is a tip on how to leverage the power of the internet to decrease your expenses and increase your savings!

Cut the Cable

Think about how much your monthly TV bill is. $50? $70? $100? $200!!? While it may not seem like a big deal to you to spend “just” $50 a month on cable, here’s something to think about. If you cut the cable and save even just $50 a month, then, if you invested it in the stock market, you would have $625 in one year, $3,871 in five years, and $113,024 in 30 years. Is your weekly fix of CSI:Miami worth $113,000 to you?

Am I suggesting you cut TV out of your life completely? No. I mean, you can, and that would probably be a good thing overall, but who wants to do that? I don’t. This is where the power of the internet steps in to save the day. There are great resources out there that let you watch your favorite shows online, FOR FREE. The major networks all post the latest episodes of most of their shows on their websites (CBS, ABC,NBC, etc.) Even some of the cable networks have free episodes on their websites (one such is HGTV, my wife’s personal favorite!) While these ‘”official” websites may not have EVERY show and EVERY episode, they are great resources and my family uses them regularly.

If you can’t find what you want to watch on official channel websites, don’t give up. Hulu is a great resource for finding literally millions of television show episodes. It divides the shows up by category, then you can simply browse by category until you find something that you like, or you can search for something specific. Another fantastic resource is Ovguide. This site searched many different video hosting websites for the show or movie you want to watch, then displays the results. A resource that I just recently stumbled upon is called Freetube. While I have not personally used Freetube very much yet, it seems to either feed a channel LIVE to your pc (which is way cool), or, if a live feed is not available, then it stores past footage and presents that to your pc. Just today I watched part of Get Smart on The Movie Channel off of Freetube. (be sure to turn on family friendly browsing when you go to the site; this makes it so that the adult channels do not ever appear as an option). There are many other options out there.

One thing to be wary of is a thing called Zango. Some websites that host video will want you to install Zango before they will allow you to access the content of their website. I would strongly encourage you to LEAVE any website that asks you to do this. Don’t click on anything except the ‘Back’ button on your browser. What Zango purports to do is essentially install a bug on your computer that allows them to track where you go and what you do on the internet. They use this information to present “helpful” and “relevant” advertisements directly to your internet browser window. Now, I am no tech-guru, but I smell a rat. Don’t ever ever do anything like this. There are so many legitimate and safe places to watch video online that there is no need to stay on a website that is even slightly questionable.

Using your TV

I know that computer monitors are generally not was easy to watch a show on as a TV, especially when many people want to watch at the same time. Well, there is a solution for that too. Most laptops have an s-video output that looks like this
You can get an s-video cable that will transfer the image on your computer screen to you TV screen. If your TV does not have an s-video input, then you can get cables that convert an s-video output to an RCA output. Last I saw, Radioshack had such a cable for $40, although I am sure that you can find it much cheaper other places. Cutting the cable not only saves you money, it also lets you watch what you want, when you want, wherever you want, and you can even do it on your existing TV.

Nov 29
MythTip: The Best Deal of All
icon1 Patrick Payne | icon2 Budgeting, Tips | icon4 11 29th, 2008| icon3No Comments »

In This Post:

  • Black Friday!
  • The Method
  • My Philosophy

Black Friday!

It probably comes as no surprise to you that I love a good deal. And what’s the best day of the year to get a great deal? Black Friday of course! I love Black Friday shopping. It’s fun to get out and absorb the eager excitement of the kick-off of the Christmas season.

But I noticed something very frightening in the stores this year, and it wasn’t (just) shopper’s frenzy. It was within myself. The impulse to buy something simply because it was cheap was frighteningly strong. The desire to get a great deal can be very strong. Whenever I face this temptation, I have a method that I follow to help me make sure that I don’t make an unwise purchases of any cost.

The Method

  1. Will I really use this? Sometimes we are tempted to buy something because it is a good deal and we might need it in the future. Do yourself a favor: unless you are absolutely certain that you will need it in the future, don’t buy it. If you don’t use what you buy, then it is too expensive, no matter what the actual cost. Remember, free is better than any discount any retailer may offer (even on Black Friday!). 100% off is the best deal!
  2. How much will I use this? If I determined that I would actually use the item in question, I then consider how much I would use it. Some things I might only use a few times (like a movie that I like but not enough to watch all that much, or a board game that is only fun the first time). If it will have only very little use, then it probably is not worth it.
  3. Is it quality? This question can be hard to answer in-store. If you are shopping online, then you can often find reviews of the product to help you get an idea of the quality of the product. Just remember that you usually get what you pay for. An example: a friend of mine purchased a cheap, $10 mouse for his laptop. It died a month later, so he bought another. This one also died within weeks. So he bought another. Guess what? It didn’t last. Finally, he consented to buy a high quality mouse for $25. It’s been working great for many months now. If he had just purchased a quality item in the first place, it would have been cheaper overall. There are times to buy cheap, and times to buy quality, and you must decide with every purchase whether it ought to be a frugal or a quality purchase.

My Philosophy

My personal philosophy regarding personal finance is that it is all about getting what you really want. The problem is, we decide in the moment what we want, and forget that the decisions of every moment take us either closer or further from our ultimate goals. Budgeting and conservative spending habits are not about denying ourselves what we want, it’s about getting what we want the most out of our money.

A quick example. My wife and I are currently saving for a car. We gave considerable thought to buying a TV this Black Friday because they are so cheap. Eventually, though, we decided not to. Why? Well, our current TV works just fine. An upgrade would be nice, but this one works great for us. Even more importantly, we decided that we would rather have the cash for our future car than the TV. Could we afford the TV? Sure. Was it a good deal? You bet! But do we want it more than we want the car? Nope. So we decided to save the money for what we wanted the most, and not spend it on what we wanted at the moment.

That’s why I write this blog. Because I believe that many people are wasting money without even realizing it. The principles of finance can reveal the unnecessary costs and expenses that we expose ourselves to; they can reveal the path to achieving out greatest financial hopes and dreams. We all have the capacity to be financially successful. We all have enough income. The question is: what do you want the most? Focus on that and avoid frittering away your wealth on impulse purchases and excessive financial drains, and you will one day find yourself with all that you truly want. There may be a price of frugality to pay now, but if you get what you want in the end, is it truly worth it? I believe so.

Nov 21
MythTip: Run the Numbers
icon1 Patrick Payne | icon2 Budgeting, Debt, Tips | icon4 11 21st, 2008| icon3No Comments »

Watch this first

(if you are having trouble viewing the clip, you can try going to the YouTube clip directly)

Personally, I think this video is fantastic. I wholeheartedly endorse the principles discussed here.
The principles that Dave Ramsey teaches in it are fantastic. How does this system work? Easy. No interest is paid. Instead of paying interest, you save that money and put it into your next car. Piece of cake. This is why debt is not your friend. Your monthly payment on the car isn’t really telling you what you are giving up.

What I would like to point out is how this illustration is effective only for the exact terms used. It assumes that you invest a full $464 a month at a constant 12% interest rate. And that’s great. There’s nothing wrong with that assumption. But if you want to run the same system yourself, and only save $200 each month at 4%, you may be surprised to find that you can’t upgrade the quality of your car quite so quickly.

This is why it is important for everyone to understand the basic principles of finance. Every situation is different and will yield different results from any other situation. So, what should you do? You should run this system for sure. You will save hundreds of thousands of dollars in car payments over the course of your working life. But, to minimize the number of surprises you encounter while operating this plan, you should run the numbers for yourself, for your situation. By doing so, you will be sure that your plan will run smoothly.

A Helping Hand

It just so happens that I have created a spreadsheet that you can use to create your own free-car plan. Ready? Then download it now to get started!

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