Dec 25, 2008

Credit Cards are another Tool in your Financial Toolbox

Firstly, welcome to all the Master Your Card readers wandering over here to take a look round. And to all my readers, go and take a look at Jonathan and Kristy's blog, it's a great read.

Today, as a lovely Christmas present I suspect, I've been featured as a guest blogger over there with a post entitled 10 Tips on Using your Credit Card Wisely so have a read of that article there before coming back here.

As a follow up post, I'd like to just take a few words to discuss a topic I alluded to in my guest post over there, a topic I fear is usually put into the "that's bad" basket without much further thought than that.

All Credit Card Usage is Evil (or is it)?

Pennies from heaven
Photo: bike

I asked in my guest post whether I was a bad person for using a credit card. In fact, what I really said was:

I’ll admit it. I’m a credit card user. I use it a lot, not everyday, but a lot. Am I wrong? Am I a bad person? Should I be slapped with a wet haddock for my sins?

There has been some discussion as to whether credit cards are evil or just dangerous and there are definitely people sitting on the fence too. But I'd like to make an argument that your credit card is actually a valid piece of equipment in your financial life and something which has quite specific and advantageous uses.

Another Tool in your Financial Toolbox

In reality, credit cards are just another tool in your financial toolbox. They can be used just as much or as little as you like and like any tool, must be used with care and precision. When was the last time you just blindly hit a hammer against a piece of wood to knock a nail in? That's right, you never did! Instead, you position the nail carefully with one hand and precisely strike it with a blow from the hammer in the other hand. It's all lined up, you know exactly what you're doing and you know the consequences of hitting the nail with the hammer.

And that's how a credit card should be used. You should know exactly how much you're spending, what you're spending it on, when that interest-free period stops and the date by which you need to pay your balance.

By using this particular tool in the right way and knowing exactly how it should be used, then you can actually maximise many of the advantages of using a credit card.

Using the Right Tool for the Job

Sometimes you need to do something for which you don't actually have the right tool. In woodwork, this is prevalent and in a lot of cases the job can be improvised by using other tools. In your financial toolbox, you also have other options if you don't have or won't have a credit card.

However I believe that there are certain benefits you can gain by using a credit card which you can't get from any other tool in your financial toolbox. For example, that interest free period on your spending is something you don't get elsewhere, nor do you find 1% cash-back offers from your debit purchases. (P.S. I don't use interest free periods when buying large items, instead I save up for them and pay it off in full right there and then.)

You really do have to weigh up the pros and cons of getting and using a credit card and like all decisions in your (financial) life, your own investigation into this area is extremely important.

And Finally ... It's Not For Everyone

Friends of mine point-blank refuse to own - let alone use - a credit card. That's okay with me since I think it is everyone's own personal choice. I also know of friends who have used credit cards before, gotten into debt and now never touch the damn things! Again, that's fine since obviously it wasn't for them.

From my own personal experience, I have had times in the dim and distant past when I carried a balance on my credit card for almost a year! Up to £4,000 in some cases. Pretty crazy stuff when I think about it now.

However, the advantages I gain by using a credit card nowadays far outweigh the risk that I would again carry a balance for so long (if at all). I have learned from my mistakes and now use the card to my advantage and in a sensible and very restricted and restrained way. I know exactly what is going on the card and I know exactly when it needs to be paid. It is completely and utterly 100% under my control.

So for me, I'd never do without my trusty credit card and in fact my life, and my personal finance life, is better for it too.

What's your take on the matter? Do you or do you not use a credit card?

Dec 18, 2008

Why You Should Do New Year's Resolutions All Year Round (but don't call them that!)

Are you one of those people who write down huge lists of things you're going to change about your life come 1st January? Maybe you just have a small list of things but the real question is, are you going to keep them?

Here, I'm going to tell you why you should do New Year's Resolutions all year round but instead of giving them a big official title like that, just tell yourself that you're going to change something about your life. Besides, most people don't last out January with their resolutions anyway, so what's the point?

Change a Little Something

Whenever I have changed aspects of my life on 1st January - admittedly something very rare in my life - I have usually failed at keeping up with it. But many times, I have just decided, right there and then, that I was going to change a little something. And this has been my most successful method when wanting to change direction in my life. Just start.

That's what you should do too.

Just do it spontaneously, don't think about it too hard, just do it. Yes, you might have been pondering it for a while but then suddenly you just know it is the right time to change.

Whether you are quitting doing something, doing more of something else or changing an aspect of yourself or your life, the best way to do it is to just say "To heck with it, I'm changing as of right now!"

No lead in time. No setting dates. No pre-planning and no further thinking about it.

Deciding that you will quit something on a particular day in the future just doesn't work. Then you realise that that day is going to be the last day you can ever have that particular thing means you hype it up too much. It becomes bigger than what the actual change is and maybe you even over-compensate prior to that date by having even more of the thing you're actually going to quit!

Surely this isn't the right way of doing it?

Wake Up One Morning and Just Decide

A number of major decisions in my life have happened when I've been in bed in the morning, trying to wake up and pull myself out of bed between snoozes and thinking to myself that I just don't want to get up today. When that happens, I usually know what it's about and on occasion I have decided right there and then what I was going to change.

One time, I couldn't get out of bed because I didn't want to go to work. Right then, I decided to quit my job and look for another one. After that it was easy to get up and I immediately stepped into the new wonderful world of looking for a new challenge rather than the old miserable grey world of the current job.

As a counter-example to this, I knew of a schoolteacher who said that she would quit smoking, not on the 1st January, but on the first day back at school. It seems to me that quitting smoking on what could be one of the most stressful days of the school year (teaching being quite a stressful job anyway) didn't seem to me to be the best plan. Instead, I told her to just wake up one day and to have just stopped. No date for when to quit, not ritual buying of the last packet and no 'last' cigarette. Instead, wake up and just say "As of now, I have quit smoking" and that's it!

Not just smoking but anything.

Changing My Whole Life

Back in September, I pretty much changed my entire life on the 4th of the month. It was a Thursday. I remember it well since I'd had the previous day off as my first Wednesday off of my first four day week. Prior to that Wednesday I had no idea that I would change my life so completely as I did the following day. I mean, things had been rolling around in my head prior to that day - a stewing period is always an advantage - but suddenly I woke up a new person.

I stopped buying takeaway coffee, I cut down expenses, I changed a whole myriad of aspects of my life - why, because I knew when I got paid in 12 days time it would be for a lot less than I got paid the previous month. I just had to do something about it to make sure I wouldn't end up going back to 5 days a week.

Use Any Kind of Stimulus to Make You Decide

It's not just about waking up in the morning though. You can make these decisions at any time you like but I find that the best time to make decisions is when that final straw broke the camel's back. Here are three quick examples of some aspects of my life I have changed in the last few years:

  • About three years ago, I'd had a terrible week in work and went to McD's for food that evening. Instead of the usual chicken burger, I bought a large beef burger (I forget the name of it). It was disgusting, dripping fat, mixed with mayonnaise, it just didn't taste good. It put me off for life and I've never been back to McD's since.
  • One day, I added up how much money I spent each year on takeaway coffees. It added up to almost $1,000 which was in my opinion, far too high a percentage of my salary - my net salary too! In fact, it wasn't this that made me stop but add it to the fact that I'd just received my 4th coffee that week which was caffeinated instead of decaf and that finally broke me. Paying extra on top of the already exorbitant prices for decaf which I never received anyway finally stopped me from going. Now I get the odd hot chocolate but usually as a treat and with friends.
  • The decision to sell my car was the culmination of having to pay out $70 one Wednesday on petrol, $170 the next day and the final straw of $630 on the Friday. I was not happy. I decided it was time to get rid. Less than three months later, I was car-less.

Today's Resolution

Why didn't you get out of bed this morning? What was it about today that didn't allow you to enjoy it? Did you get annoyed by something which you realise you just don't need anyway?

When I asked myself about whether I really needed the coffee, I knew I didn't but it has also evolved from that now. It is no longer just about saving money by not having that coffee, but also about having more time in the day to enjoy myself. When I walk past the shop nowadays, I actually shake my head at the huge queue of people wasting 20 mins every day (or even more) waiting to be served the drink they ordered oh so long ago. I actually get more time in the day now to enjoy myself that little bit more.

These are the kind of questions you can ask yourself. Sometimes you decide that it's okay for the moment, that you still want something or you don't want to change something else. But eventually, one day you'll decide that you do want change. And when that day comes you'll know it immediately and your life will be changed forever.

The best part about all this is, you can do this every single day of your life. Why wait until a very inopportune date to change something of your life? Just do it and do it today. If you want to change something, you may even call it 'Today's Resolution' but either way, just change. You'll be happier tomorrow if you do.

Dec 17, 2008

89th Carnival of Money Stories

Hi everyone and welcome to the 89th Carnival of Money Stories (replacing my usual Tuesday PF Roundup). I'm your host this week and I just wanted to start off by introducing myself quickly.

merrily they go around
Photo: wasaby

Happily, today is also my 33rd birthday so it feels good hosting my first carnival on this special day. I shall be retiring exactly 7 years from now (or hopefully before) so if you're keen on following my adventure towards financial independence, please subscribe to my RSS feed.

And now, let's get on with the carnival with thanks to Andy Oshira for letting me host it on my special day.

The 89th Carnival of Money Stories


Curt @
Christmas Trees Are Still Selling
Dan O'Connor @ beingpad
Make Money with Affiliate Programs in 10 Simple Steps
FMF @ Free Money Finance
Menard's Makes Cents
Joe Manausa @ Tallahassee Real Estate Blog
Real Estate Supply And Demand
Ryan Suenaga @ Uncommon Cents
Bailing Out Domestic Automakers–What's the Plan?


CreditAddict @ Credit Card Addict
American Express Increased Our Credit Limit
DR @ DR's Money Management Blog
How Smarter Money Management Can Make You a Cool $826.75 in 10 Minutes
Sun @ Earn More and Invest Wisely at The Sun's Financial Diary
New Credit Card Rules Coming Soon, to the Benefit of Cardholders
The Happy Rock @ The Happy Rock
Credit Card Late Fees With Chase Freedom - One Strike Down
Peter @ Bible Money Matters
When Canceling A Credit Card, Be Ready For The Emotional Appeals To Stay


Mr. CC @ Ask Mr Credit Card's Blog
Should You Pay Your Credit Card Bill Late? The Answer May Surprise You
Heather Levin @ The Greenest Dollar
The Benefits of Paying Off Your Mortgage Early


Andrew Chilton @ Retire at 40
Simple Steps Taken to go Car Free
Big Larry @ Out of Debt Christian
Ten Easy Ways to Save $1,000
Brian @
Estimating Your Social Security Benefits
Brooke @ Dollar Frugal
People are Much More Important….
Credit Card Assist @ Credit Cards Blog |
How Shall I Compare Thee, Credit Card?
FFB @ Free From Broke
Is It The Right Time To Buy A House?
FIRE Finance @ FIRE Finance
From Junk to Joy
Jim @ Blueprint for Financial Prosperity
Why High Octane Doesn't Matter (Unless It Does)
One Family @ One Family's Blog
Frugal Living – Ten Great Gift Ideas for Frugal Families (Christmas Holiday Shopping Tips)
Relax @ The Wise Curve
Let's talk about money
Savings Toolbox @ Savings Toolbox
Two Things You need To Know About Online Payday Loans
The Happy Rock @ The Happy Rock
My Finances and Saving System With ING Direct
vh @ Funny about Money
Yard sale adventures


Joanne @ Beginner Investing
Beginner Investing: Learning From Mistakes
Michael Cohen @ Stock Investing
I'm Betting On Oil
Silicon Valley Blogger @ The Digerati Life
10 Signs Of A Stock Market Bottom
Tristan @ Find Financial Freedom
How buy-to-let can work for you

Net Worth

Tyrone Solee @ Millionaire Acts
Journey to My Networth Millionaire Acts


Amanda @ Value For Your Life
My 25% Grocery Savings Rule In Action-Part 1-Intro
LAL @ LivingAlmostLarge
What an MBA has cost us
MoneyNing @ Personal Finance Blog by Money Ning
Let Your Children Handle Their Own Finances
SingleGuyMoney @ Single Guy Money
Stay Safe While Holiday Shopping


Next week's Carnival of Money Stories is at The Personal Financier.

Dec 14, 2008

The Little Things that Change Your Life Really Quickly

Every now and again, you see something and you say to yourself "That's a good idea". Sometimes it's the big things, like a different bank with a lower mortgage rate interest, a fuel efficient car, a type of insulation or even a kind of lawnmower. You just know if you were to switch to any of these it would somehow improve your life since they are such an integral part of it.

But other times, you see something really small and you think "Wow, if only I'd switched to this before." Well, this is my story of something really small, something I bought yesterday and already I know it has changed my life and changed it for the better.

Prior to My Purchase

A few weeks ago I was chatting to some friends of friends. People I had met a few times before and already knew I liked them both. They were telling me of their habit of switching every single electrical appliance off at the plug when not in use. The only thing that stays on in the house when they go out is the fridge (actually, they said everything but I presume the fridge stays on).

This includes the likes of the TV, DVD player, stereo, speakers, microwave and all those other things with the shiny clocks, the bright displays or the standby LED lights. We know these are a constant drain on power (and therefore money) so why not switch them off? I knew, but I didn't really practice it.

I'm Not That Good

There are some things I do but switching things off by the plug isn't one of my strong points, which is weird, because I always used to do it. I guess I just got out of the habit. I have always switched off the microwave but my main problem (and mainly because I'm a geek) is that my router and my computer stay switched on. I will have to change this at a future time but now I decided to concentrate on something else.

As we were talking, I curiously asked one little question which eventually brought about my purchase yesterday. I asked "What about your alarm clock?"

"Mine isn't plugged into the mains, it's on batteries, just a small travel alarm."

"Ah", I said, "That's pretty cool."

Not sure I had that 'Wow!' moment yet but it got me thinking, enough to actually go out and get myself a cheap (real cheap) battery operated alarm clock yesterday. My old one, a plugged-in one, with a bright and energy zapping red LED display was having trouble tuning in to certain radio stations anyway and the non-radio alarm was a horrible dull noise which sounded more like a jet engine trying to start but not actually going anywhere. So in reality, it was about time I got a new one anyway.

Added to the fact that I had a new reason for getting one too.

My New Alarm Clock

When I bought it in the shop, I realised that the alarm clock also had a temperature gauge on it. Cool, that's pretty neat. Still no wow factor but nice nonetheless. Then I got it home.

I duly opened up the very small packaging and pulled out a square of about 2.5"x2.5"x1". My old alarm clock was at least 6"x2"x4" so already I had made a lot more space on my side table. Seeing as I'm in the middle of decluttering my house, I started thinking out that this new alarm clock was a winner.

But that's not all. The old alarm had it's power cable running forwards of the bedside cabinet since there are no plugs behind it(it's an old house). With that taken away and the long aerial gone too, the area to the side of my bed is no longer a strewn and busy place but more a tranquil, quiet and warm place.

I started liking the alarm clock even more.

My Two Weather Stations

I bought an electronic weather station a few years ago and have been hauling it around to each place I moved. Alas, the only thing I ever looked at it for was the inside temperature since all the other readings just didn't bother me. Also, my Mum (for all her love and kindness) actually bought me a similarly duplicate weather station for Christmas last year and I've never had the heart to sell it or give it away. (We all know what I think about Christmas presents anyway.)

But enough is enough.

I decided that with my new temperature sensor in my new tiny alarm clock, I could actually get rid of both of these unnecessary weather stations. Wahoo! Another quick win for me, my house and my new simple life and another win for the small, cheap and somewhat-versatile alarm clock.

The Drawbacks

Not everything in life goes as swimmingly well as had been going thus far and I soon figured out the one minor and the one major drawbacks of the new alarm clock.

Firstly, there are only two buttons to the whole clock. This means that having to set the time, or more likely the alarm, is a complete pain. It doesn't even allow you to keep the button depressed to increment the numbers faster. Ah well, this is minor and I can live with it since I rarely change it anyway and usually just switch it off at the weekends.

The other drawback however is when I realised that this clock doesn't even have a snooze button. You know, the one you press in the morning just so you can get another nine minutes sleep. Then because that wasn't enough, you press it again for another non-satisfactory nine more minutes. This, as far as I was concerned, a terrible mark against the almost perfect new purchase.

Taking What You Want From Life

Over the course of the day though, I figured that both of these minor disadvantages could be made to work for me rather than against me. On the point of the inefficient button pressing, I have decided to set the alarm for 7:30 in the morning and to leave it at 7:30 in the morning, for every single day of the week including weekends. I am not going to bother trying to change it at the weekends or any other time unless I have special reason to.

This will make sure I get up at the same time every single day and maybe one day my body willget used to it and not actually need the alarm anymore.

But the best thing I think I figured out with this alarm clock is that, without having a snooze button, once the alarm clock went off, I would have to force myself out of bed, no matter what! As soon as I figured this out, I knew that this was now a 'Wow!' purchase, not through any fault of it's own but due to the way I shall be adapting to my new beeping friend.

The Full Story

I didn't realise originally how much or how quickly such a small purchase could provide but I'd like to recap these new advantages just in case you missed them:

  • I don't have to listen to crap and over-advertised radio in the morning
  • it doesn't burn through grid power all the time I'm not using it
  • it takes rechargeable batteries
  • it has uncluttered my bedside table
  • it had removed hazardous cables stretching to the plug away from my bed
  • I have removed two other unnecessary gadgets from my life
  • it will set me a regular (and reasonably early) time to get up at the weekend
  • it will force me out of bed at a particular time instead of snoozing around all day

... and of course, the reason why I wanted to get it in the first place, is so that it lowers my electricity bill ever so slightly. However, the thought of not having another appliance switched on all the time led me to turning off most of those other appliances too. This is where each individual gains adds up.

Take From this Story What You Will

You might think that this whole alarm clock story is silly, small and insignificant. That's fine, take from this story what you will but I'm willing to bet that there is something small you have bought, or changed in your life, from which you got enormous satisfaction. It may even have had further repercussions further down the track and you never know how much the addition of all those small but incremental changes finally make to your life.

This is also a story about how negative or disadvantageous things can be turned to your advantage. I mean, having more time in my day is something I am already looking forward to...

...all because of one small, energy efficient, compact, temperature reading, non-snoozing, hard to use, little beeping alarm clock which is now sitting happily on my bedside table next to my lamp, my notebook, a pen and nothing else.

Ah, happy days.

Let me know of any other things which at first seemed small to you but later took on a whole different meaning.

Dec 11, 2008

Are You Throwing Away Money? 5 Tips to Save You Money

Everytime you buy something with packaging, you're buying something only to throw away. Sounds crazy doesn't it but it's true. And for everything you have to throw away you also have to pay the council to come and take it away too so you're getting a double whammy against your wallet right there.

Think about it. You buy a six pack of yoghurts, or maybe a one litre container, and where does the packaging end up. That's right, in the bin. So firstly, you paid for the plastic to make the container and secondly you're having to pay to take it away again! (Unfortunately where I live, the council doesn't recycle that kind of plastic, so it has to be thrown out.)

That was just one example, but let's look at some others and some possible solutions.

1) Replacing 'Use Once' Kitchen Paper with Multi-Use Cloths

Banana Peel - Roland in Vancouver 1103.jpg
Photo: roland

Back in October, I realised that I used a lot of kitchen paper. Usually because I use it for the cat's bowls so I don't have to use my normal tea-towel. I don't have a huge amount of space in my kitchen so I prefer to have as few things as possible in there. Then I read an article which made me wonder why I was doing this.

Two months on, I'm just about running out of kitchen paper and last weekend I bought 4 facecloths (30% off of course) of about the same size as kitchen paper to be used instead. So let's look at the maths.

Two rolls of kitchen paper lasted me around two months. At about $1.50 per roll, that'd be something like $18 over the space of a year. The 4 facecloths I bought cost me a grand total of $5.54, just a bit below four rolls of paper towels. Each paper towel roll has 80 sheets, but these cloths will keep going for years. In fact, within less than 4 months the facecloths (now multi-use-cloths) will have paid for themselves.

Let's add to the equation that paper towels add to your waste even if this is insignificant. Ok, to be fair, I will have to wash the cloths every now and again (dependent on function) but this won't add up too much either. Certainly not as much as $12 in the first year and $18 for every subsequent year. Overall I'd say this was well worth it, not just because of money but for reducing waste too. Remember the paper towels also come in plastic bags whilst the tea towels just had a small paper tag.

2) Not Accepting Plastic Shopping Bags

No matter what you think about free plastic bags, whether you use them for lining your bin or otherwise, you still have to pay for them in one way or another. Usually they are counted as overhead for the shop so it's almost like everyone has to pay a 'plastic bag tax' when shopping at that particular store.

This 'tax' can be easily avoided by shopping at places which charge for giving out plastic bags. Therefore, only the people who use them have to pay for them. I presuming here that you won't pay for them because you're cleverer than that and instead use re-usable bags.

I myself have two cotton bags which I try and use every time I head to the supermarket. I must admit, every so often I forget and have to unwillingly take a bag but every time it makes me feel sad so this is something I really need to fix and stop doing.

An example of a place in New Zealand which charges for plastic bags is Pak'n'Save. They even advertise the fact that they charge for them to keep prices lower for everyone. Good on you Pak'n'Save! Unfortunately I believe all the other supermarkets still give out free bags, which is crazy because they also try and sell reusable plastic ones too! Let me know if you know of other stores here in NZ which also charge.

(Side note: when I was in the UK back in 2001, one of the supermarkets, Sainsburys', used to give me money every time I used a bag of my own! Granted, it was only 1p but forward thinking such as this innovative and also proof of the plastic bag tax.)

3) Composting your Organic Material

Almost every bit of your organic material can be composted and again this helps in many different ways. Firstly, your volume of waste reduces and therefore lowers the amount of money you spend having it taken away. Secondly you can use the compost on your garden the following year to create a rich soil in which to grow your vegetables - another source of food at a lower cost to you.

Finally, composting also prevents the organic material from going to the tip, in which conditions, instead of breaking down aerobically (with oxygen) it breaks down anaerobically (without exygen) and produces methane. In some landfills this is captured and used as an energy source but in most cases it leaks out into the atmosphere and is a significant contributor to the greenhouse effect.

What not to compost also helps when deciding whether something belongs in the compost or the rubbish bin. You'll have to figure out which plants are classed as weeds in your local environment since I think that article was written for a North American audience.

Even if you don't have a compost heap, you can (and should) just throw your organic waste onto your land anyway so that it can decompose naturally. This is something I had not heard about before, though it makes perfect sense and seems to be called Passive Composting. Quite a few things to gain for not that much work.

4) Shop Around the Outside of the Store

The science of laying out a supermarket is very well known to make shoppers buy impulsive purchases. Those tempting and scrumptious chocolatey or sweety things (as well as other fast but processed food) are all laid out in the thin aisles in the middle of the store. When you're stuck in a trolley-jam in the middle, your eye gets tempted by all those processed foods.

Generally you don't need these items but sometimes you want them. That right there should stop you buying them since they are a want, not a need. That's the first reason not to shop in the middle of the store and to limit your trip to around the outside.

But think about this too. Not only do you not need many of those items, you're also not even getting value for money since most of these things come in layers and layers of packaging. Take a simple block of chocolate. It is firstly covered in metal foil, then has a paper sleeve. A packet of individually wrapped sweets has got to be one of the worse culprits (think individually wrapper foil, with a sticker on, stuck to a frilly cup, all enclosed in further plastic). Even something better like a jar of pickle means you're paying for the jar and lid.

Next, think about the items of food which are better for you, especially the fruit and veg. I rarely use any bags in that section and instead put my purchases directly into the basket and then directly into my cotton bags at the checkout. Occasionally I think the cashier is a little annoyed since individual tomatoes can be trickier to handle than a bag but in reality, that doesn't bother me too much. Bananas are cool since they come in their own packaging and one which can also be recycled!

In reality this point doesn't always hold true (milk cartons for example) but the majority of items in the middle of the supermarket have an excess of packaging you just don't need. Also remember that when you do need something, buying in bulk also helps reduce your waste per unit item if this item can't be avoided.

5) ... and Back to Those Yoghurt Pots

In September, I was buying those 6 packs of yoghurt for around $3.00 when they were on special. (I refused to pay the normal astronomical price of over $5!) One week when none of the brands were on sale, I progressed onto buying a one litre container for around $3.50. It had less plastic (by my unprovable calculation) and more yoghurt per 100g than the multipacks. In both circumstances, I was still throwing away a fair bit of plastic.

Recently, I have taken my yoghurt maker out of retirement. I bought it a few years ago ($20) and stopped using it, mainly for the fact that my supermarket (New World) was charging over $3.50 for a packet which makes one litre. Ignoring the packaging for now, that in itself didn't make financial sense to me and more especially so since I think the normal yoghurt is a little nicer.

It turns out that after speaking to a friend of mine, the other brand of make-it-yourself yoghurt can also be used in my maker - and why I didn't think about this before, I don't know. Also, the Pak'n'Save (to which I shall now be making regular bike trips) was selling that brand for around $2.50. Overall a $1 saving on sale yoghurt and probably about $3 on regular priced yoghurt. In fact, it's nicer than the other make-it-yourself brand too. I usually go through just over one of these yoghurts a week, so within year one, I'll be saving over $30 and over $50 annually after that.

And did I mention that the packets the yoghurt comes in are just thin packets which scrunch up into a small ball. They take no space at all and could probably fit 100 of them into one of the one litre containers above. Yet another saving on waste collection.

You should also try it and see how it goes. You'll find that a bit of pre-planning means that you can make that yoghurt (12 hours wait), chill it and have it on the table ready whenever you need.

The Challenge is On!

This post was inspired by a challenge I read about a few weeks ago. EnviroMom blogged about the One Can a Month Challenge which I think means, in non-US terms, one trashcan/bag a month.

As I mentioned earlier, I have already noticed that the volume of waste I produce was lowering. There have also been some recent changes (such as the yoghurt and paper towel techniques) which will also reduce my waste levels and there are still some things I want to try to reduce it even further.

In trying out this challenge I decided to start when I last put out a bag for collection. That was two weeks ago and already I can see an improvement. In fact, I haven't even put my kitchen bin into the outside bin yet and usually it takes two of those for a full bag.

So far so good. I would say wish me luck but with these techniques, I won't need it!

Why don't you trial 'One Can a Month' and see how you go. Let us know how you get on or if you're already doing it.

Dec 9, 2008

The Tuesday PF Roundup - #2

This week's roundup comes on the back of some pretty exciting facts and figures for 'Retire at 40'. The main one is that I passed 100 subscribers. This actually happened to be one of my goals when I started this blog and I wanted to achieve it in less than 3 months - I'll be three months on Thursday, so that's good.

Anyway, on to the roundup.

The Tuesday PF Roundup - #2

Autumn dawn
Photo: jamesjordan

KrystalAtWork wrote about No More Buying Lunch.

This is a classic article and one which a lot of PF bloggers have in their arsenal. Spending all that money on on lunch and not brown bagging it adds up to a fair amount each year, not because lunch is so expensive but because there are so many opportunities to spend money - 5 days a week in fact (usually). This also means there is plenty of opportunity to save money too.

Single Guy Money spoke about how he Helped a Friend Organise her Finances.

It's almost sad to say but I think many of us actually like doing this and in all honesty it's not about the numbers. I have had many chats with my friends over the past few months and the single overriding thing I take from any conversation I have with people wanting to sort out their finances is this:

Great, that'll be another person who I can hang out with when we all retire early!

Yes, it's about being able to help someone else and talk about a subject close to my heart but in all honesty it's about them being able to also do the same as I am. There will be lots of time to hang out and go biking in a few years time.

Pat wrote at SmartPassiveIncome about The One Thing You Must Know About Passive Income, or Else!.

Sometimes you think you're mostly there with passive income but many times you still have to do something. He's right in that, you just must not have to do anything at all. I spoke about this in a previous post about Passive Income where I said that you must take you out of any equation for making money, that way, the sky is the limit.

Retired Syd spoke about not having any more performance reviews.

This definitely seems like a good thing, not having to go through those stale and boring reviews each and every year. In fact, the reason why I like them most is not to get a pay-rise (though that helps) but to hear and make sure I am doing what is expected of me.

Trent at The Simple Dollar talked about The Best Moment of your Day.

I have always found that writing a journal (a private one, not a web-based one) helps sort through your thoughts for the day. I also found that it could sometimes take a fair amount of time (each day becoming longer and more detailed). Instead, just write about the best moment of your day - that way you also have less to read when you pick it up in a few years!

Links In

I managed a few mentions this week, including a high profile link on Smart Spending:

and I was also featured on some carnivals:

Thanks to everyone for the links and for keeping on reading.

Any other posts you think should have been highlighted from this past week? This is your chance to highlight a post that you are proud of.

Dec 6, 2008

Turning Lifestyle Inflation into Lifestyle Deflation

In my earlier article on Managing your Lifestyle Inflation, I mentioned something which Karen Datko at Smart Spending seemed to click with. She said:

Andrew suggests that you look at expenditures you started making after your pay went up. "If you didn't have these things before, then you can probably still do without them now," he writes.

That was just a small part of my previous post but it is an interesting one. Essentially by sticking to your same budget, even after you get a pay-rise, then you are recognising this extra income for yourself and actually paying yourself first before adding to your lifestyle expenses. By swiping the extra into your savings account and not spending any more than before then you are managing your lifestyle inflation.

Lifestyle Deflation

In the kitchen
Photo: cmatsuoka

More importantly though, you also need to look at downsizing your lifestyle too. There's no point just starting from now and saying "When I get future pay-increases, I won't spend that", it actually needs to start before then. After all, maybe your lifestyle expenses are already too inflated ... usually this is the point at which you're spending everything you earn or even worse and spending more than you earn.

Instead, you should review your life as it is now. Look for the simple things you can remove and also go over your regular expenses to see which you can cut down or at least cut back on. I mean things like whether you increased your cable subscription to include more channels the last time you got a pay-rise. Do you even watch them? I bet not.

Expanding your Savings Range

This year I managed to get a pay-rise but instead of spending more, I actually started removing a number of (unnecessary) things from my life. The latest item I removed was my car seeing as I hardly ever used it. In total, I think I'll actually be up around $200 every single month now that all those car expenses are gone.

Both my pay-rise and my ability to cut out unnecessary things are actually expanding my savings range. I'm spending less of what I earn and therefore saving more. I'm also earning more than before and my savings increase there too. It's funny since I don't miss anything I cut out and instead I have replaced them with other more frugal activites.

When the Economy Improves

Karen also suggests something which should also be added to this list of things to do. Firstly, we're not succumbing to lifestyle inflation, in fact we're actively managing lifestyle deflation and to add another thing into the equation, especially for the current environment, Karen says:

We suggest that if you're cutting back in anticipation of the worst, you consider carrying that new budget forward when the economy improves (and it will).

With an improved economy, you may think that we are out of the woods and home-free but in reality it's still a long way to go to reach your prosperous and financially independent future-self. So instead of madly spending like others will when the economy is looking brighter, just quietly go about your usual still frugal way of life. And instead of reveling in the spend-happy new environment just take a moment to revel in the new and improved ways the new economy will help you save even more money and further reduce your lifestyle expenses.

P.S. After writing this article, I found that The Tao of Making Money previously mentioned Lifestyle Deflation in an article back in Feb 2008, though I can't find any other references to link to.

Any others articles about 'Lifestyle Deflation' you know about? What are you doing to actively manage your lifestyle expenses?

Dec 4, 2008

Simple Steps Taken to go Car Free

Over time, I have taken numerous steps to become car free. Each of these steps are small, sometimes infrequent but all of them have added up in the quest of attaining car-free status.

And now they have all now been worthwhile since yesterday, I sold my car and am now officially carless! And you know what, it feels great.


Bikes over here Cars in the Water
Photo: outofpaper

The first thing you need to consider is whether your life would be better or worse if you went car free. This one thing is the most important part of this decision since there would be no point getting rid of the car only to have your life become miserable and annoying. Everything you do should be to make your life happier, easier and more fulfilling.

For me, this decision was easy. I've never really been a fan of cars anyway and whilst I took a liking to my car (her name was Latoya because she was a Toyota) I just became sick and tired of the expense she was costing me, especially taking into account her old age and the number of repairs I had to do recently. Poor Latoya.

But after having a few chats with various friends a while ago, I decided that getting rid of the car was something that was definitely on my todo list but I just wasn't sure when. After having that short, sharp snap of car-related expenses back in September it became the final straw in the coffin with me and car ownership.

Having also moved in to town earlier this year this also made the decision to go car-free a lot easier. Transport to both work and almost all of the other places I frequent was now not required and in fact, probably slower.

If it helps, write down a pros and cons list of having, versus not having, your car. This is a good exercise since there might be some things you'd forgotten about. For example, the convenience of being able to drive to your holiday destination might be one but maybe you're more of a flier anyway. How about the reduced ongoing cost of not having a car versus the increased stress of having to ride public transport? (Unless public transport in your area is amazing.)

Add Up your Expenses - and Include the Car Price and Depreciation too

Another way to help you make a decision, is to add up how much the car is costing you vs the cost of having to pay for other travel arrangements. I can almost assume that because you are reading this blog that this particular item on the pros and cons list has a fair bit of weight in the final decision. It certainly was for me once I fully worked out all my costs.

As mentioned in my post about Two Ways Biking Substantially Improves Your Life, I mentioned a few ongoing costs of car-ownership and I'm sure there are probably others I have left out too. (For example, I think the car will have to have new tyres soon so I'm glad I didn't have to pay for that.)

Another item I forgot include in the original cost list was the actual amount of money I'd originally paid for the car. Now that I also have the sold price I can figure out that the car, over the four years I had it, cost me about another $50 per month just for the privilege of owning it. Of course, the longer I kept it, the less this would be but that's also a risk set against any upcoming repairs that might happen and one I was not willing to take. (Rust on the back windscreen and the slightly sticky gearstick are two repairs that will definitely have to be done soon.)

It Doesn't Stop There

As if you need any more convincing, there are also other factors to take into account. In the past six months, I have probably used the car 2-3 times per month and in fact, my friends borrowed her for the majority of this time. Even out of those two or three times I used it each month, two of those were probably unnecessary if a little convenient. When not in use, she would sit on the road gathering rust or having her wing mirror broken off which was no fun at all. All of these things add up to an unhappy car...

...and an unhappy me!

I knew I was having to spend over $250 per month on something I very rarely used and that amount was never going to get cheaper either (apart from the petrol price reduction recently but that's only a fragment of the ongoing costs). No matter how much or how little I used the car, I was out of pocket by a fairly reasonable percentage of my take-home pay, pay that I'd worked hard for and therefore money which wasn't returning the favour and working hard for me.

If you did choose to go car-free, that extra money would be much better off in a savings account, paying off your mortgage or even put into shares or property. Over the year, that saved money could come to something over $3,000 (or a lot more) not including any additional interest payments and that's a quite significant amount. Even just thinking that not having a car will knock years off your mortgage is really quite exciting.

Depending on the Most Reliable Form of Transport - Your Legs

Having always been a walker and now a keen cyclist too, I am relying on my legs more and more. In fact, I've always said that those legs are the most reliable form of transport ever. They've never slowed me up in a traffic jam, never broken down, never deviated from the scheduled timetable - since I set it - and almost always do exact what I want, when I want. They also never say annoying things over a tannoy system to hoards of beleaguered commuters when the points fail or the bus breaks down.

Both walking and cycling were the forms of transport I decided to concentrate on the most to help me out in the post-car era. I could say I was lucky in that most of my destinations are within walking or cycling distance but that would be wrong, In reality they are close because I specifically moved to this exact area for exactly that reason. All part of the plan, a plan which has been brewing for a year or more, with action taken over the space of six months and a final transaction yesterday to conclusively be rid of that four-wheeled contraption.

A Plan for Post-Car Blues

As shown above, I took a few steps to make sure I put myself into a situation where I could get rid of my car but there are other things to think about too. Maybe you'll find things slightly more inconvenient because you'll have to take the bus or train instead of driving but actually you don't have to make it harder on yourself by not owning any petrol-fueled transport.

Firstly, you could do what I did and buy yourself a bike. I managed to get one in the spring sales (in this hemisphere at least) and as I've said before, it's already brought a lot of joy to my life, both for exercise and for social engagements with other bikers. Essentially I have prioritised that a bike is more important to me than a car and therefore, I'm happier because of it.

Not to mention that I have already lost some weight and can feel that my stamina is steadily increasing.

Of course, you also have the option of public transport, which admittedly requires extra planning, but it's hardly a burden. If I can plan to retire at 40 then I can certainly plan to take a bus somewhere on a Sunday morning.

It's also not a bad thought if you remember you can still take cars every now and again. A taxi for a quick trip here and there doesn't work out to be too expensive (factoring in your lack of tax, parking, maintenance, insurance, breakdown cover and all the other things) or even hiring a car on the odd weekend for that jaunt away isn't going to break the bank either. In fact, you'll still probably be saving around half to three-quarters of what you were consistently spending every month and in some months near to 100% of that stays in your bank account!

All in all, no matter what transport you take during the course of the month, you'll be much better off than you were before.

Added Advantages

After selling the car yesterday, I also figured out a couple more advantages which, even if they are only small ones, still add up to extra happiness. Firstly, I was able to get some money back from my insurance company to the tune of $240 as reimbursement of my pre-paid yearly policy. It was a lovely parting note to my insurers and one that my Emergency Fund will be very happy about.

Secondly, when signing the official papers, I had to take my car key off my keyring and hand it over. And you know what, in that simple act, I went from having two keys on my keyring down to just one key and it was an amazing feeling. Simplifying my life in a most unexpected way made me smile and actually brought a little bit of joy to my face. Realising that you've just gone down from having a set of two keys to a measly one was much more fulfilling that I'd ever thought it would be.

Almost halving the weight of the keyring already makes me happier and certainly puts me one more step on the road to a life of simplicity and financial independence.

What would you do? Can you go car-free? What stops you, your family, your location, your job or something else?

Dec 2, 2008

New Series - The Tuesday PF Roundup - #1

I read a lot of PF blogs and each and every day I find new nuggets of information that I'd like to discuss but each of which wouldn't necessarily fill a whole article. I also find a lot of information that is best linked to so you can read the original.

To let you know what's happening in other areas of the PF blogosphere I shall be starting a new series called 'The Tuesday PF Roundup'. Head over to these other articles, leave a comment and say hi from me!

The Format

Flowers and bicycles
Photo: iainb

The format for my roundups will be a little different to a number of other weekly massive linkfests I see and instead I'll choose just a few - but good - posts. This will depend on how many I have seen in the past week but hopefully around 5 good ones rather than 20 or 30 average ones. This means you should get to see a higher quality sampling than just another long list of links. I shall be adding my own take on each post, whether I agree, disagree or have something to add.

Please get in touch if you have any opinions of the format of The Tuesday PF Roundup since I'd love to hear any improvements you can suggest. I don't want this to be just another set of links with the sole intention of getting trackbacks but instead a short list of potentially useful links.

P.S. I shall also be choosing an image which I like, for no other reason than that and not necessarily PF related either. Just for funsies.

The Tuesday PF Roundup - #1

Smart Passive Income talks about A Passive Income Mistake: Knowing and Doing Everything.

I agree mostly with Pat here but I think in his original case he didn't know how successful he was going to be and also getting to know and understand how the site (and the web) fits together is experience he wouldn't have had if he hadn't done it himself.

Of course, now he's successful, it's good to be able to get someone else to do the work for you whilst you concentrate on the aspect of creating good quality content.

Frugal Me talks about There is no Spoon.

We're always led to believe that when we want to do a job, there is one - and only one - tool for the job and it's a necessity too. Stephen mentions the use of spoons to take a tire off a bike though I have seen a couple of people do it recently without any implement at all. So, no need to spend extra buying unnecessary things, just do it with imagination and a healthier savings account.

Michael Kwan talks about Power of the Self-Fulfilling Prophecy.

When chatting to my friends about paying the house off and retiring at 40, whilst working a four day week, I sometimes add "I know it's insane but that's the plan". I do this, probably so that my friend doesn't think I'm a complete lunatic and that my grasp on real-life is still strong. However, I also know for a fact that this outcome is definitely going to happen! If I don't believe it's going to happen, I can hardly expect others to believe me! Michael finishes off with a great quote:

If you want to be happier, try smiling. Your mind will follow.

Which is exactly how I feel most of the time.

Miss M talks about Zero Based Budgeting

This seems like a great idea to me. I have my budget all sorted but that just covers my expenses, not every dollar that I earn. Sounds like a great idea and one I will be trying out soon.

Personal Finance Advice talks about The Money-Wasting Days of our Lives.

I have spoken about a number of these things before in 10 Little Sacrifices but Jeffrey goes a little further to show how many of these things, every day, really does add up. Just as a random thought: I don't think I've ever put a washing machine load on which was less than half full so I'm almost shocked people would actually do this. Just wear another shirt! :-)

Any other posts you think should have been highlighted from this past week?

Nov 30, 2008

December Challenge - Free Yourself of Material Possessions

Earlier, I posted about 5 Ways to De-Clutter and Simplify Your Life but in December, we're going to take this to the next level.

Being surrounded by material possessions weighs heavily on our minds. Sometimes I wonder how big the next place I move to should be just to fit all these things in. I wonder why I keep those DVDs on my shelf that I haven't watched in ages. My wardrobe, whilst not big could do with a trim. And all those other empty appliance boxes, folders of papers and books I haven't touched in a while just sit there staring at me.

And all the time, I think about doing something about these things.

Starting Out ...

Over time, people generally acquire lots of stuff. Each time they move, they shift it with them and since the new place is bigger, it's easier to acquire even more stuff and have it diffuse into the house like all the other belongings.

A spring clean every now and again removes parts of it, either to the charity shop or the rubbish dump but mostly, it just gets dusted and put back. Those things that haven't been used in a year or so but still being kept for the sake of it.

I've managed to do this with a few things since I downsized to my newer smaller flat but I still have lots of stuff, everywhere, all over the place. It'd be nice if this wasn't the case and I could actually get rid of a lot of it.

... and Finishing Off

This December, I challenge you to start filtering through all those secret cupboards you have left closed for eternity, those drawers that seem completely jammed and those cardboard boxes in the attic or garage that haven't seen the daylight since the turn of the Millennium. Just a little bit here and there will make a huge difference. How much? 15-30 minutes a day. That's not much but, as with Personal Finance, many small changes add up to a large difference over the long term.

Not only that, but once you've filtered your possessions you'll find it hard going back and acquiring more stuff. This not only helps your peace of mind but also your wallet.

The Act of Filtering

A friend told me the other day that she has three piles: Keep, Charity and Throw Out. This sounds like a good plan since then you know exactly what you're doing with every single item you find.

You might like to add a Sell pile too but this is your choice. Maybe you have a Give to Nephew pile or a Recycle pile and of course, you may have others but the best way to do it is to keep it simple. Also, as and when you look at each item from that cupboard, drawer or box, make a decision there and then as to what you're going to do with it. The worst thing you can do is decide to decide later.

Say 'No' to a Don't Know Pile

Whatever you do, do not have a pile called Don't Know since that will just assimilate back into that stuff you didn't actually know you owned. After all, the point of this exercise if to get rid of things, not just shift them to another location in the house.

As I said, pick up each item and put it into one of the definitive piles. That way, when you look at it in the future, you know exactly what you're going to do with it (assuming you haven't already done something with it already).

Do a Little Every Day

By doing just a little bit every single day, you'll be amazed at how quickly you can get through your stuff. I shall be taking this challenge and posting one or two updates throughout the month so we can compare notes on how we're doing.

You might wonder if December is a good time for doing this since it is a very busy time of year but I suspect that this will work out well for even the busiest house host. Instead of leaving all of your tidying up until a week before Christmas and New Year then just start now and see where you are in two weeks. I suspect if you did a bit every day until mid-December you'd be more ship-shape than if you left it until later.

So what are you waiting for? Get sorting through that stuff and let's have a clear, clean, stress-free and simple Christmas and New Year.

And remember to let me know how you're getting on in the comments, state that you're partaking in the challenge and blog about it so we can spread the word.

Nov 28, 2008

Welcome to Visitors from Get Rich Slowly

Firstly, I'd like to thank JD for linking to my site. It's an awesome thing to be able to say I got a link off GetRichSlowly in my first three months on this journey of mine towards financial independence and early retirement.

Retire at 40 — This personal-finance blog from Andrew Chilton is based in New Zealand, and features some excellent discussions of topics like budgeting, lifestyle inflation, and financial independence.

- JD Roth

But Things "They Are a Changing"

Soon I will be switching from Blogger to my own domain so if you guys want to keep up to date with all of my posts and not miss a beat, then please Subscribe to RSS . That way, you'll get full continuity with my posts and for which, I will be truly grateful!

Nov 26, 2008

Non-Cash Based Envelope System - The Bead System

Earlier in the week I talked about the Envelope System and how it can save you money. I also mentioned in that post that I am not a cash type of person. My transactions are almost exclusively on plastic, whether that is debit or credit, or completely electronic when banking online.

In fact, the only cash transactions I seem to do at the moment are at the Sunday Market for my fruit and veg every Sunday morning. I realised that last Sunday I still had the $8 change in my wallet that I'd received the previous Sunday. No cash entered or left my wallet for a week.

The Envelope System Without Money

Shallow beads, deep thoughts (10/365)
Photo: orangeacid

Instead, I have come up with an envelope system that you can use without money. It's not as accurate or as flexible but it'll do for my needs. It goes something like this.

Collect yourself a set of jars, containers or some other smallish holders. You need as many jars as you would envelopes i.e. as many jars as you have categories for your spending. I have a number of old empty spice jars which I am going to use.

The Bead System

Then get a number of counters, be it beads, tiddly-winks or any other kind of small item which you can use for counting. Each of these represents $1 each and it is these you will use instead of cash.

At the start of the month, if you're going to spend $250 on groceries each month, then you would count out $250 beads into that particular jar. Maybe you'll also count out $50 into the Entertainment jar. Trust me, this doesn't take as long as you think and it's only a once a month job. After a while, you'll probably get to know how far up the jar 250 beads go (or maybe if you had good scales, you could use them - yes, I jest).

Then, when you're entering your expenses into your accounting program at the end of the day, you can just take out the number of beads per dollars spent from the appropriate jars and put them in a special spent jar. Since you're keeping good track of your expenses, this is not much more overhead than having to remember envelopes each time you go out and buy something. It is also easier for those transactions which have expenses in two or more categories.


When using this system, you should consider that those beads represent full dollars and that you can't actually split a bead up any more than it's whole. In which case, if you have an expense which ends in a fraction of a dollar, just round it up to the next dollar and shift those out to the spent jar. The reason to round up is so that you don't actually go over your budget.

Even though the system isn't wholly accurate, it doesn't matter. Hopefully you track all of your spending in an accounts package so this system is just for a general idea rather than for exact detail.

Advantages of Using the Bead System

The bead system is a very visual one, especially so if you have bright blue glass beads in clear jars. It also doesn't require you to either count cash or load up your accounts on the computer just as you're heading out to the shops.

Just a quick glance can tell you approximately how much you have left in any jar. It's very easy to mentally take note of what's left in your most important jars and after a while you'll know approximately how many beads it takes to quarter, half or fully fill each jar. Knowing at a glance when you go to the supermarket how much you have left in your groceries budget is very powerful.

I'm sure that there will be times when you completely forget how much is left in any jar but in reality, most of your spending wouldn't be big enough to go over by a huge amount, unless you were doing it on purpose. If you were going for your weekly shop at the end of the month, you'd be pretty likely to find out how much you have left in the grocery jar before you left, ie. only when it's important. If you ended up getting milk on the way home from work, then I suspect that's not big enough to worry about even if you did go over.

Finally, the last advantage of the bead system is that it works without actually having to store all your cash in envelopes for the most part of each month. Instead, that money would be sitting pretty in one of your accounts earning interest instead of just sitting there not working at all.

December is Trial Month

I shall be trialling this system in December and I'll let you know how it goes. I should be able to find any deficiencies in it and then change it to make it work better. Let me know if you spot any problems or have any suggestions.

Are you going to try the Bead System? Please share your experience with our readers by leaving a comment below.

Nov 25, 2008

Choice Between a 4 Day Work Week or More Money

As I have stated before, I am aiming to achieve my goal of retiring at 40 whilst at the same time working a four day work week. Yes, I know it's insane but it's good to have goals.

Besides, if I miss it at 40, then I'll probably hit 45. But that figure isn't the most interesting one. To me the most important figure above is that I'll be doing it whilst working a four day week.

Initial Thoughts

Calendar Card - January
Photo: joelanman

My four day work week started in September and almost as soon as I started doing it, I was blown away by how good I felt. I decided to take Wednesdays off to split the week up and just the thought of only ever working two days on the run, before having at least one day off, was probably the best decision I ever made.

I had various detractors including people saying "but then you get two Mondays" to which I counter "yes, but you also get two Fridays!" And besides, all the people I knew who took Fridays off wanted to have a long weekend so they could go away every now and again - unfortunately, they never did.

However, no-one said that a four day work week was bad and in fact, a good percentage of people started thinking whether they could do the same.

As it turns out, Wednesday, for me at least, turned out to be a magical day. Almost like going to Disneyland every week - it was a dream come true.

A Change of Lifestyle

Early on I realised that my life had changed quite dramatically. I finally had more time to do things. being able to cook more often, eat better and exercise more has been refreshing and of course, the ability to do other things I enjoy, like walking, cycling and taking photographs meant I was distinctly happier than before.

It came at a cost though and that was a financial one. My pay was instantly 20% pro-rata lower than it should have been. In reality it really didn't bother me as much as I thought it might since I had already altered my lifestyle enough such that I'd stopped spending enough money on frivolous things that it actually cover this difference. On reflection then I was no worse off than before (luckily I'd also had a pay-rise a few months earlier which also helped).

It Lasted Two Months

You might be able to guess that my four day work week is no longer - temporarily - but for the moment it is but a dim and seemingly distant memory. At the start of November, work asked me if I could go back to five days a week until the end of the year. It is only two months and I knew the question was coming anyway so I happily said yes since I like to think I'm quite agreeable in these situations...

...not that I knew what I was letting myself in for.

The first week seemed to go quite fast, the second a bit slower and now, in my fourth week back at five days, life seems to slowly grind onwards ever inching towards that singular Friday when I finally get time to myself. It's not so bad but I have already realised that my life is the worse off, in a number of different ways, for it.

I have less time, my diet isn't as healthy as it was, my exercise routine has waned and I feel a little more stressed about a number of things. I certainly have less time to do bits and pieces as you'll have noticed by the dip in the number of posts in November.

Time Deficient

Now, I'm sure that there may be some readers who'll be saying "We've all got to do a five day working week so just live with it" but here's my case as to why I need a four day work week (and not just for mental reasons).

As a single guy, I inherently get less time than couples do (and here, I mean couples with no kids - couples with kids certainly get less time to themselves than I do). Let me justify that by saying for my situation, I'm the one who has to tidy the house, I have to do the shopping, I have to cook for myself, I have to do the washing up and the washing, I have to pay the bills and talk to the bank/utility/phone companies. Oh, and I also have to earn a living. With couples, they can at least share a number of these chores.

A number of my friends go out cycling while their partners shop and cook. While they clean up afterwards, their partners can get on with other things. If both of them tidy up, it takes half the time and in some cases less.

So you see, by having that little bit more to do what sometimes feels like an infinite number of chores really helps. This way I can at least spend proportionately more time doing the more feelgood activities like recreation or hobbies.

The Extra Pay

When I started back at five days, I knew I would probably enjoy getting my increased pay-packet but in reality, what I got extra - whilst significant - doesn't really compensate for all of the negative things I have already been feeling whilst back up to five days. I'm usually a happy person, and that's still the same, I'm just not as happy as I was in September and October.

I knew that over these two months I would switch my thoughts between sticking at five days (to help my finances and retirement plans) or four days (to enjoy life a little more) and wait until the New Year to decide which I wanted to stick with, but I think I have already made up my mind.

I shall go back to a four day work week come January and not care about the extra money. It's a call between my head and my heart and unusually for me, whilst my head has invariably won in the past, this time my heart has won out by a large margin.

As one of my friends said to me a few years ago "You can always earn more money but you can't earn more time". And that is why I shall go back to just four days in the New Year.

I'm curious as to what you would do, so if you were in my situation, what would you choose? Please explain.

Nov 21, 2008

How the Envelope System can Help Save you Money

The envelope system is a well known and much practiced system in personal finance to help stick to your budget. It's a simple system and is especially suited to those people who wish to primarily deal with cash (rather than plastic debit or credit cards).

I feel that it is falling out of favour since many transactions are now electronic but I'll present a modified version in a future article which I shall be trying out in December. This will hopefully help for people like me who hardly ever take out or spend cash.

Funnily enough, even in some high tech countries, cash is still king for normal everyday purchases so it's interesting to note that this is a very common technique in Japan, even to the extent that almost everybody does it (and not just those who are careful budgeters).

The Envelope System

perfect gift
Photo: ashevillein

The first thing you need is a budget. Without it, the system won't work. Then once you have that, you need to figure out which items on your list (whether they are broad or narrow) are those ones for which you can going to use cash. This wouldn't include things like automatic rent deductions or paying your utility bills online.

As an example, let's say you have 4 categories (a very much simplified month) for which you are going to budget cash for this particular month:

  • food - groceries and tops-ups like milk and bread
  • household requirements - detergent, soap, shampoo, bin-bags
  • clothes - socks, shoes, jeans, skirts, dresses and tops
  • entertainment - cinema, CDs, eating out with friends, hobbies
  • gifts and charity - presents and donations

Take yourself 4 envelopes and on the front of each, write that particular categories' name. When I tried this system, I also wrote on the front how much I had allocated to it too. e.g:

Entertainment - $75

At the start of every month (or the start of every pay-month), you take out your total alloted money for all these categories from the hole-in-the-wall and divide it into your envelopes as specified. Each and every time you want to spend money on a particular category, you should take that envelope (or a part of it) out with you when shopping. You can do this since you've planned your purchases - right?

If you didn't plan your purchase or you had to buy something then you should re-arrange the envelopes at the earliest opportunity. If you had $20 in your wallet from the Food envelope but you had to buy a pairs of socks, then shift the correct amount of money over from the Clothing envelope to the one that was compensating it.

Easy Peasy

The great thing with this system is that it is very simple to do and fantastically easy to see exactly how much you have spent and more importantly, exactly how much you have left in each of those categories at a single glance.

There would be no need to log on to your internet banking and no reason to wonder whether you're within budget for the month since you have all the information you need right there.

It is also simple because once that particular budget is gone, it's gone and there's nothing left in there to spend. If you really desired that new top you saw in the shop today but later found out that there is nothing left in the Clothing envelope for that month, then you're completely out of luck.


If you find yourself in this situation, try not to siphon some cash out from any of your other envelopes since then you'd just be cheating. In the case whereby your clothing budget is dry for the rest of the month, I'd say live with it.

However, if you are consistently running dry out of your food budget then you may wish to re-budget what you think you need for that category. This might involve spending less, changing your eating habits or it would be quite normal to increase the budget you had previously considered ok (you may well have under-budgeted by accident). So don't be ashamed if you have to increase your Food budget and of course, be more weary if you want to increase your Clothing or Entertainment budgets. Remember the differences between wants and needs.

Snowflake what's Left

Another great advantage of using the envelope system is that when you arrive at the end of the month, or the time you need to replenish your envelopes, you can use it to save a little extra money. Since you have budgeted to spend a particular amount, yet you didn't spend it all, then pretend it did all disappear and snowflake off what's left into your Emergency Fund, Freedom Fund, savings or retirement scheme.

By doing this, you wipe the slate clean every month and this helps you not accumulate extra money in your envelopes which you'll probably eventually spend anyway. If that's the case, then you're doing a disservice to the time you spent putting your budget together.

The non-Cash Based System

I have briefly played with the envelope system but I almost knew before I started that it wouldn't be for me - though please note that this is a personal preference. This system is being happily used by many people to keep their spending in check.

Firstly, I am not really a cash person though I guess I could be if I wanted to be. Secondly, I wasn't that great rebalancing the envelopes if I had spent money from one envelope on something from another. I found this strange, since I'm very particular about entering every single transaction into my double entry accounting software.

In December however, I shall be experimenting with a new system I have brewing in my head. It doesn't use cash and it amounts to much the same as the envelope system. I shall write a further post detailing this system in the near future.

I have chosen December as the start date for this trial since by that time I will have my budget in place. As I described on my budget post, I have been keeping a record of all of my expenses and by that time it will have been three months. I have noticed that my knowledge of where my money goes is increasing and therefore I'll have a greater idea of what I need to budget for and how much.

It's going to be interesting whatever happens and I'm looking forward to it already.

Do you use the envelope system? Leave me a comment noting any tips and tricks you use.

Nov 19, 2008

Are you Managing Your Lifestyle Inflation?

Have you ever heard the one about the graduate student who ate beans on toast for 4 years whilst completing his degree, accepted a top-class job with high prospective pay increases but even after 10 or 15 years of working never seems to have any more money in the bank than he did when he was studying as a poor lowly student?

Okay, I made this person up but the reality is that most of us know one or two people who are exactly like this. They are earning lots of money, in some cases more than you, but they never seem to actually have any. Yes, they have great cars or a big fantastic house but they always complain about owing so much on maxed out credit cards.

This could also happen to you if you're not careful. You see, these people are victims of Lifestyle Inflation.

What is it?

They Taste Even Better Than They Look!
Photo: sis

Lifestyle Inflation is something that happens to all of us at one time or other. It happens when we start working, it happens when we get a pay-rise and it can happen at almost any other time of our lives too if left unchecked. It's that function of our income which makes us say "Hey, I can afford that because of my new pay-rise" so you go out and spend the extra money on that new 'thing'. Because ... you know ... you're worth it!

It also has another phrase, one that is probably more well known than Lifestyle Inflation. It is also know as:

The more you earn, the more you spend.

You've definitely heard of that one.

Now, I want you to sit back, relax and have a think about what you did the last time you got a pay rise. I'll wait right here until you come back. Think of a few things. To help you out, you might want to consider whether you:

  • treated yourself to a nice meal out
  • splurged on new clothes, make-up or shoes
  • subscribed to another magazine
  • raised your cable subscription to the next level up
  • increased the amount you set aside for socialising
  • went out and bought a new car

If you can tick a few of these or maybe you have some of your own, then you are inflating your lifestyle.

So what? I deserve it

Of course you deserve it, you work hard for that money. That increase didn't come without having put those extra hours in, being good at what you do and finding a good position within your company. All that extra work you put in for that pay rise was worth it in the end and therefore you feel you deserve to spend it on whatever you like.

By all means treat yourself but do something low-key as a one off rather than expensive and continuous. That way, at least it is somewhat contained (and also, you need to treat yourself every now and again, otherwise you'd probably go a bit mad).

The Paradox

But here's the crunch. Yes, you put all that extra work in, your skills have increased and you're worth much more in your field of expertise but how does that benefit you if you spend all of that extra? Especially all that extra on something you have to pay every month for a very long time.

Think about it. Your employer is paying you more as recognition that you have improved both yourself and the company. But you're not recognising yourself. If you go out and spend that extra money in your paypacket every month, then you're not actually giving yourself a pay-rise.

Those extra car payments per month might come from your pay-rise but it's basically wiping that pay-rise out. What you end up with in your pocket is the same - or possibly less - than what you were getting before!

This doesn't make any sense. It means you're more valuable, you're earning more and you're being recognised but the end result is that you come out the same at the end of the month.

That doesn't make sense to me (and yes, I've been guilty of doing this in the past).

How to Stop It

Essentially you need to stop it by not allowing yourself to spend that increased pay-packet. Much like the old phrase PF bloggers like - Spend Less than You Earn - another one can be added to that list:

Don't Increase your Spending at the Same Rate as your Pay

There may be one or two things you want to spend extra on, possibly those things you've been holding out for for years but be careful not to spend every single extra penny you take home. If your expenses increase at a lower rate than your pay-rises, then you'll be doing well.

Of course, if your expenses don't increase at all when your pay increases, then you're doing even better. This is easily done by not altering any of your expenses budget but instead adding that pay-rise straight onto your savings budget.

Lifestyle Deflation

Recently, I have been a victim of a lifestyle change but happily for me, it is in the other direction. I have no idea if there is such as thing as Lifestyle Deflation but I think this is what I have been doing recently.

I recently chose to stop, cut out or cut down a number of my expenses and hence, even though I didn't get a pay-rise at the time, it sure has felt like one. It was a random time to do it but after almost three months I am already feeling the benefit of it.

To finish off, you might also want to consider what areas of your life you can downsize, cut out, do without, sacrifice or even just spend less on. You'll be surprised at how just a few things here and there add up to a fair amount of saving each month.

Oh, and by the way, the first places to look are those things you recognised earlier as contributions to your Lifestyle Inflation. If you didn't have these things before then you can probably still do without them now.

What is on your 'Lifestyle Inflation' list? What can you cut out to help with 'Lifestyle Deflation'?