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 ...

Photo: orinrobertjohn

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.

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!

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

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.

Rounding

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.

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

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.

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

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.

Re-Budget

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.

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?

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'?

Does your Bank have a Broken Business Model?

It seems that everything is moving online these days. Your communication moved online quite a few years ago, morphing from your old letter writing days into your emailing days. Commerce came online quite quickly too and instead of flicking through books at your local store, you went and looked online for them. Music has gone that way too, your news articles and your TV programmes are now online and your banks have been there for a while.

In a lot of these cases, those commercial entities have also retained a bricks and mortar presence on the high street too, for those people who want to walk into a branch, speak to a real person and see and feel cash in the hand.

Personally, I'm not one of these people. Back in 2001 I changed my bank from a traditional high street bank to a totally virtual one. That's right, it had no branches.

Reasons for Change

Photo: mamchenkov

When I look back on that now, I think I was a bit of a pioneer. I know that every single bank in the world has an online facility but back then, doing it solely online was a bit unique.

But the thing is, I didn't switch banks because I wanted to be online but because my old bank was most annoying. They did things I didn't want them too, they annoyed me whenever I spoke to them and they charged me through the nose for all kinds of minuscule actions.

To me, it seemed like they thought I was the privileged one to be banking with them. Of course, I begged to differ and when the time was right (I'd paid my Graduate Loan off) I changed banks.

The Advantages of Living in the Virtual World

When I started looking for a new place to bank, I was immediately surprised at how little the purely on-line banks charged for their services. I was also happy to see that my normal, everyday current account, would be earning interest at a massive 5%! In comparison to other bricks and mortar banks, this seemed like lunacy (for them) but since it was loaded to my advantage I took the opportunity without so much of a second's thinking time.

By this stage, I'd realised that by doing everything online, or via phone, they were able to run their business at a lower cost to them and therefore at a lower cost to their customers. It was also very refreshing that whenever I spoke to anyone on the phone, I was made to feel good about being a customer, good about myself and they knew who the most important person in that relationship was.

Fast Forward Six Years

After a change of country, I also had to change bank. This wasn't something I wanted since I was very happy with my virtual bank but obviously it was a necessity due to my change of location.

I went with a traditional bank but that didn't last long. Whenever I wanted to transfer money from NZ to the UK it ended up being a labour intensive and very stressful time. It seemed like it would have been easier to organise a trip to the moon (for me and my cat) than for the tellers to fill in the form correctly.

I also felt like the staff were a little too inquisitive to the tune of being intrusive rather than helpful. I guess I just wanted a personal account manager and not a friend. I want my relationship with my bank to be warm but not too personal. Don't ask me why - I guess I just see that business is business.

After two years, I switched to what seemed like a more clued up and modern bank. So far I have been really happy with the service I have received from them but times-they-are-a-changin'.

The Broken Business Model

Recently, I have had to speak to my account manager on a number of occasions, mostly because my fixed mortgage is up at the end of November and I will need to renew at some stage. Of course, this means I have been doing my homework and looking online to see what the current mortgage rates are from all the banks in NZ.

It turns out that my bank's mortgage rate was quite a bit higher than one of the other banks and I told my account manager this. It wasn't just a small bit lower but at the time almost a percentage point lower!

It is no surprise that this other bank, the one with the lower mortgage rates, is mostly online too (and leverages the NZ Post Shops for any physical transactions).

As soon as I had told me current account manager that I was thinking of moving my mortgage to the online bank, my first thought was that he would say something along the lines of "Well, we can't compete with that" since it was completely obvious that was the case. Instead, he proceeded to tell me how they looked after their customers more and that they gave out better advice than those on-line type banks. That they had more personal contact (which I don't necessarily see as an advantage). Also the fact that running a branch costs them $100,000 a year!

Whoa there. Say that again! I felt like saying "Actually, it doesn't cost you $100,000 a year, it actually costs ME lots of MY money each year." And with that statement I decided there and then to leave my current bank.

Unfortunately for him (and me) my old account manager left his bank and went to work for what will eventually be my new one. Add to this the fact that my new account manager is one of the most annoying people in the world ... let's just say that I shall be moving due to many different reasons.

But one reason stands head and shoulders above everything else.

Saving Me More Money

At my new bank, I shall be saving more of my own money that I work very hard for. Here's a very quick list of advantages and I'm sure it's not a complete one:

• the interest on my mortgage will be much lower
• I have no 'relationship' fees
• there will be no transaction fees (same with the old one)
• no charges for having a credit card
• the interest on my credit card (not that this concerns me) is lower - just in case
• any savings accounts I have will earn extra interest

Due to these reasons, I shall be changing from the broken business model that is the high street bank to a purely online one. The cost of running a virtual bank is much less than a traditional one and therefore, I get to see more of those savings in my own account. My baseline will be increased due to this one decision and each and every month, I will get to keep more of my money.

It is considered difficult to change bank but in all honesty, it's no worse than changing job or even buying a car. It is important to me that I get a good and honest relationship with my bank, I want it geared towards me rather than them and I want to enjoy whomever it is I talk to about my finances. I have found that my relationship with any new bank is immediately successful since they're just happy I'm switching over, especially so because I came to them.

In conclusion, I shall be changing banks for the fourth time in 10 years during the next few months and I know that this one will be better for me in many more ways than each of the last two banks.

Are you happy with your current bank or are you thinking of switching? What would stop you from changing even if you weren't happy?

Prioritising so You Can Have Your Chosen Way of Life

Life is all about compromise. In almost everyday situation we come across, we have to trade one item off for another. For example, when I buy cream cheese, I usually go for the lower priced version rather than the much more well known Philadelphia. Why? Because I think the taste is identical and I get to save money at the same time too.

However, if I'm buying that delicious yeast spread for my toast, I always, always, always get the real Marmite. All of the others I've tried, especially in this part of the world, aren't quite the same.

I'm trading off the price of the goods for the taste. Usually I'll go for the cheaper option but in this case, there is no comparison, it has to be the original. I consider this to be a trade-off I am willing to take.

It's a Trade Off

Photo: aunto

Every single day, we're forced to trade something off against something else. Yes, you can go out for lunch with your co-workers every day but then you wouldn't be saving as much as if you'd brown-bagged your sandwiches before you left in the morning. Of course, you don't want to cut it out completely either since there wouldn't be any fun in that at all. It's a compromise.

It's the same with anything. You can take that expensive holiday abroad and enjoy it for 10-14 days, or you can choose to invest that money and spend 3-6 months there in 20 years time. By that stage in your life, you're probably more financially sound and more importantly you also have more time too (you're not still working in 20 years are you?).

Of course, you never know if you'll still be able to do that in 20 years time but that's not a big worry since you've already decided in your own mind what is important to you now. What is important to me now is my future lifestyle in 7 years time when I can semi-retire. If by then I want to go travelling, eat out every day or buy those large squidgy Marmite jars, then I'll do that - I'll do whatever is important to me then.

Choose Your Way of Life

Your future therefore is determined by the choices you make now. By deciding that your future is the most important thing for you, you should do everything you possibly can to make that turn out for the best.

If you have children, you might decide that they're the most important things to you, so again you should do everything you possibly can to make that turn out for the best too. You may decide the environment is your thing, in which case, give it a high priority in your life.

No matter what you decide, by channeling a lot of your energy into that area of your life, you'll be handsomely rewarded further down the line.

Prioritising for Retirement

As you all know, I have recently decided that my retirement is something which is very important to me and I am channeling a lot of effort into making it happen. Almost everything I do these days is somewhat influenced by my recent decision to both pay off my mortgage and retire from the daily grind by the time I reach my forties.

When I get up in the morning, I have my breakfast at home and wait until I'm in work for my coffee. I head home for lunch and I don't snack in the mornings or afternoons. My tea is usually planned - except when it's not - but I have reserves in the freezer for those times. I exercise plenty and am now biking. My car is about to be put on sale (just two more things to do) and my house is the smallest place I have lived in for almost 10 years.

The interesting point to note is this. Even though I have recently changed almost every aspect of my life - sometimes radically so - nothing seems overbearing. In fact, almost every decision I make now is influenced by my ultimate dream and in a lot of cases makes these decisions easier (it's almost obvious which of the choices I should take).

A Happy Life

And this brings me back to my chosen way of life. Even though my ultimate decision is to retire at 40, it has actually made the rest of my life, as it is now, a much happier and meaningful one. I prioritise time over TV, I choose exercise over going to the pub and I choose the great outdoors on a bike instead of a supermarket car-park in a car.

It just so happens that not only do these decisions make me happier, healthier and fitter, they're also making me wealthier and therefore one step closer to my ultimate goal.

What are you prioritising to get you closer to your goal?

Two Ways Biking Substantially Improves Your Life

I mentioned before that I would be getting rid of my car and instead buying a bike. It turns out that I couldn't wait before selling my car and I got the bike anyway. (Don't worry, I shan't be keeping the car, she'll still be sold when I planned, I just so happened to buy the bike a bit earlier.)

So far, the bike has been a revelation to me. I have been out on numerous occasions, done some things I have never done before and even taken part in some crazy shenanigans. After only a month of having the bike, I am completely devoted to it, the lifestyle it creates for me and the way it makes me feel.

But let me tell you about the two ways I think it has already brought me a lot of joy and happiness and how getting a bike can do the same for you.

Saving Money

Photo: brimelow

I wondered whether this was too obvious but then I figured out the something which was not quite as obvious. It is all about how much money you'll actually save rather than the fact that you'll be saving something.

You'd be surprised at the amount of money you do actually save by not having a car (or should I say how much you spend by having one). The outlay required to just own a car seems to keep getting larger and though petrol prices are not as high as they once were, it is still a huge outlay even for someone like me who hardly ever drives anywhere.

Taking a look at my approximate outgoings for the car on a monthly basis:

• $20.00 - insurance
• $6.00 - breakdown cover
• $17.50 - road licensing
• $12.50 - Warrant of Fitness
• $80.00 - repairs (from the last two bills)
• $7.50 - residential parking charges
• $70.00 - petrol (one tank)

I'm sure some of these figures (apart from the repair bills) are quite low in comparison to other peoples' cars but you can see that it's over $200 per month just to keep her ticking over. I haven't included things like covered parking charges either. Even if I were to give my car away, I would still be better off after only 4.5 months! I am hoping however that selling the car will actually cover the cost of the bike even though it is crazy to think how low it has deprecated to (though I did buy it 4th or 5th hand).

By not having the car, that's an almost automatic saving of over $200 a month. Of course, this savings figure would depend on whether I need to hail a cab or hire a car during the month but I suspect those jaunts will be few and far between. Averaged out over the year, I expect to save well over $1500 if not closer to $2000. It could also be much higher if you take into account that I would probably fill up way on average more than one tank a month.

Go ahead and make a list of your own monthly expeses. It doesn't even have to be that detailed. Write down all the charges you pay for over the space of a month or a year. Divide it all out to a month and take a note of what you'd be saving. Sometimes even doing it in small steps helps.

Another aspect you should also look at is the lifestyle saving not having a car gives you. You wouldn't have to remember such things as paying road licensing, insuring yourself, obtaining breakdown cover, getting the car checked and having any repairs done. Even paying for or washing the damn thing seems like too much hassle to me so I'd rather not do it.

All in all, removing the car simplifies your life further and for me, that's one of my current goals.

Getting Fitter

There's no doubt that I have already noticed my fitness and health is improving. Whilst I used to run around on an indoor soccer pitch and get worn out, I can already run around for pretty much the entire game without getting as tired. The longer bike rides have given me more stamina which is also improving my other exercise activities.

We all know that exercising is good for us but in many cases, we don't listen to the advice our internal mind is telling us. By not having a car, it almost forces us to play by different rules. Walking, running or biking to your destinations becomes a part of your life rather than a part of your exercise regime and is therefore easier to keep up. For example, last week I rode to my friends' house to play Ultimate Frisbee and rode back again afterwards. It didn't take much longer than it would have in the car yet that was an extra 30 mins of exercise (around other exercise) that I wouldn't have otherwise had.

By making exercise a part of your life, forcing you to do it by not having a car, improves your fitness, health and wellbeing without even thinking about it.

Of course, public transport is also an option but if you're trying to spend less and save more like me, then the bike wins for those closer destinations.

Other Advantages

Owning a bike has other advantages too. It uses up less raw materials, it's greener to run, the more people have bikes means that the drivers are more aware of them and plenty of other reasons too.

Anything to add to either of these ways biking improves your life? Any other reasons you can think of how that you'd like to share, please comment below?

Why I Must Become Financially Independent

I have just read a short but fantastic article over on Breaking Free. It's called Why I Must and it tells us why Brian must become financially independent.

As you know, my blog is also about becoming financially independent and his idea of keeping a list of reasons of why this must be so is really appealing to me. In fact, I think it's such a good idea, I'm going to start the list right now, copy this list to a file on my computer and add to it every time I think of a new one.

Reasons "Why I Must" Become Financially Independent

Photo: luchilu

I must become financially independent so that I can:

• devote more time to developing free software
• do some volunteer work
• devote more time to organisations I am already involved in
• work for myself instead of for someone else
• enjoy my time off doing whatever it is I like
• spend more time on my hobbies
• excercise more
• get out and see more of the countryside
• spend more time with my friends
• spend more time with my family

That list is in no particular order and I guess it is only the start of what might become a fairly long list. Maybe you should try it too so that you can also see what you'll be able to do when you become financially independent. The endless possibilities may convince you to start on your journey to a prosperous and productive future.

Any others you think I should add to my list, or any that you would have on yours?

Ideas and Actioning Them

Ideas are great things. They come at you all day, every day, from all angles. Sometimes you're tying your shoelace and an idea hits you. You're daydreaming on the bus and suddenly your eyes light up with a new idea.

Occasionally you're just walking along the street when suddenly maybe you've just figured out the secret to renewable and everlasting energy.

You know what, that's just GREAT!

Invariably, 99% of those great ideas you have during the day you have completely forgotten about by the time you get home.

Write Them Down

Photo: seanj

A number of people carry a notepad with them at all times and I'm starting to come around to this idea too (hmm, maybe I should write it down on Page 1 so I don't forget). Being able to capture those ideas whilst still fresh in the memory is of huge importance. As I said earlier, if you don't write them down now, you'll forget about it completely before the day is out.

All you need is a few notes on the page. If you have a few minutes, just let the creative juices flow. Write down anything you think is applicable, even if you also think it is silly. It's easier to scratch the silly things than it is to re-visit this massive flow of creativity.

For example, let's say you decided to write an eBook to sell online and increase your passive income, you might go through a few things like this:

• yeah, I'll write an eBook
• maybe charge $15, okay maybe $10; $20 would be nice though
• oh, get a proper cover from elance
• maybe I should write a smaller one to give out free to subscribers
• or even make it viral and tell people to read it and share
• get some references from some well known bloggers
• hmm, now I need to think about what I want to write about
• how about Personal Finance :-) (too obvious, be more specific)
• 100 great, simple and frugal recipes for crockpots ...
• ... ok, how about saving money when grocery shopping
• I do enjoy going to the market though, maybe something about that

What you'll find after a brainstorming session like that is that you began with a wishy-washy idea (an eBook with no subject) and ended up with about 3 different eBook ideas and plenty of other ideas on how to market it. Within the space of just 2 minutes, you have not one but a number of fully-fledged ideas and many more smaller ones.

An Idea Which Isn't Actioned, is the Same As No Idea at All

However, no amount of ideas are good if they are never actioned. Once you have that notepad, you need to go over it more thoroughly when you have more time. Tick off or circle the things you're going to action or move them over to your wiki or other action list. After all, if you don't do anything about the idea itself, it's just the same as not having had it at all.

Whilst we're still at the start of whatever idea it is you might just want to put a few more minutes or hours effort into figuring out whether the idea is a good one or not. Tell your family or friends and see whether it is something they would be interested in. But remember, many people are negative to your ambitions or ideas so don't let them talk you out of a good idea (but it's okay if they talk you out of a bad one). Use this information to decide for yourself whether going ahead with it makes sense.

Good Luck

As with all new ideas, you need to be a little brazen and a little bold when going ahead with it. You might not see immediate results but keep at it, keep plugging away with it and hopefully the reward you deserve will eventually come.

And if that reward doesn't come, the best thing you can do is learn from your failures and keep moving. Just turn that page of your notepad to your next great idea and give that a go too.

No matter how many times you try, one of them may succeed. If you don't try at all, you're guaranteed to fail.

Tell us what you do to remember, develop and action your best ideas? Any war stories you can tell us about where you failed, succeeded or maybe even both.

'Living it Down Small' instead of 'Living it Up Large'

Have you ever seen the lights in Las Vegas? How about the skyscrapers of Hong Kong or New York? Ever been through the suburbs of Los Angeles or seen the sprawling mass of London?

To me, these cities typify places in which you can Live it up Large. Large living, large entertainment, large houses (ok, except for Hong Kong). Over the last few years however, I have been downsizing my living spaces each time I have moved and have really enjoyed moving into smaller and smaller places. Before that I had constantly moved into bigger and bigger places. Each time I moved, I ended up getting more stuff to fill it, in a lot of cases sometimes stuff that I didn't even want.

Going Smaller

Photo: roludsgn

Five years ago I moved into a small two bedroom house and only had two bags and a box. Over time, I bought stuff. Then I moved into a larger two bedroom house and filled that too. I then graduated to three bedrooms (and two bathrooms) and whilst I didn't fill that space, it had plenty of stuff spread throughout. Then I started going smaller. I squeezed all my stuff into a two bedroom unit and finally, I am now in a one bedroom flat.

Over that time, none of these moves have been related to my current financial plan though I guess my last move was a pre-cursor to it. I realised that I could live in town for less money than living in the burbs for more. That also generates a saving on transport too.

When I first moved in, it was physically impossible to move since I had so much stuff in such a small place. However, over the past few months I have been amazed at how well I have been getting rid of stuff. The floor is now something I see every day but I know I can clear all this stuff by a lot more.

It's been very liberating to be free of the shackles of extra stuff and I can already see some benefits of living in less space. Also, all that extra floor space you fill with junk, actually costs rather a large amount of money.

Interesting how spending money on extra stuff you don't need actually ends up costing you even more money!

The Simple Life

Over the past few years which have included my downsizing moves, I have hankered for the simple life. Mostly I did nothing about it but this year my breakthrough came. Not only did I move into a one bedroom and start to de-clutter, I have of course, started this blog and becoming more financially aware with a view to becoming financially independent.

There are so many benefits to heading in this direction, most notably having to pay less rent/mortgage for my accommodation but also because there is less space to put extra (and unnecessary) things. Things I wouldn't be able to buy since there wouldn't actually be any place to put them. If it was something that was desperately needed, it would have to be space-exchanged for something no longer needed.

So think about where you live and whether you actually need all that space. After all, most of that area is space you probably don't even use on a day to day basis, yet you're paying for it in rent/mortgage and you're buying things to fill it up!

I shall be continuing my plan on annexing a lot of my stuff and hopefully when the time comes to move again, I shall be able to find a place of a reasonable size, for a reasonable price and it still be like a castle to me.

What are your thoughts on the size of your house? Do you need more or less? Would you be able to survive in a smaller place?