February was a great month for me. I used my tax returns to pay down 23% of my debt. However, I didn’t make nearly as much progress in March.

I paid off another 2.8%, which isn’t that good, but I’m still on track to achieving my goal of getting out of debt this year.

The red and green squares are visual reminders of my progress. Each time I pay down another 4%, I change the color of one square from red to green.

I didn’t get to change any squares this month, but I did make some progress, even if it wasn’t that much. Why didn’t I make more progress? Two reasons.

First, I took two weekend trips. It was worth it. I love travelling, and had a great time with friends and loved ones. I didn’t use credit on either trip, but my spending did eat into my debt payments.

The second reason I didn’t make as much progress is that I’ve been saving all all of my extra money for a landscaping project. Our irrigation is out of control. Our back yard is a muddy mess, and water is flowing towards the house in a few spots.

I need to hire someone to do this, as I’ve tried several times and failed. I’m not going to put my house and foundation at risk, nor do I want to deal with a tore-up yard and muddy dogs.

It’ll cost a pretty penny to get it fixed, but luckily I saw this coming last month. I’ve set aside a good amount, even on top of my other commitments (like my emergency fund, vacation fund, and paying down debt).

My March progress was disappointing, but I’m still on track to accomplish my goal of being debt free by December 31st. Even after a slow month, I’m a little ahead of schedule.  By this point, I should be 33.33% of the way there.

However, most of my progress came from my tax returns, which only happen once a year. I need to pay down $867 a month if I’m going to do this. Right now, I’m only setting aside $700, which is good, but will still leave me short in the end.

So what’s my next step? First, I’m not going to get discouraged. I’m going to keep plugging away. And second – I’m going to rework my monthly budget to make sure this goal actually happens.

But the weird thing is – they’re on track to do it.  How? They’re not using any secret formula or investing scheme. They’re just extremely frugal, and are passionate savers.

Their story

John Rodrigues is a manager at Microsoft. His wife, Gina, previously worked at Wells Fargo and Country Wide, but recently went into business for herself as the owner of a boutique. Together, they make an impressive $174,000 a year.

In the beginning…

They met as teenagers, when Gina was working in a computer store that John frequented. Their relationship started to get serious when they were in college.

John’s grandfather paid for his first year of school, but after that, he was on his own. This seems to have been a defining moment in John’s life.

Instead of racking up tens of thousands in student loans, he decided to get a job and practice frugality. As a result, he got his degree without going into debt.

Gina on the other hand, racked up $5000 in credit card debt before she came clean to John. They paid it off with the commission she made from selling her first house.

Life after college

After graduation, they bought a condo for $377,000 that quickly appreciated to $535,000. Emboldened, they decided to start investing in real estate, buying three houses in Arizona and Texas.

In addition to real estate, they put 15%-20% of their income into stock and cash investments. By the time they were 24, they had already saved $70,000 for retirement.

Where they are now

They have become experts in the art of frugality. They sold their condo for a pretty profit, and started renting a home from their parents for $650 a month.

They spend $300 a year on clothes, rarely travel, and only go out to eat three times a month (at the most). They use the extra money well. Half of their income goes to savings and retirement.

John aggressively buys discounted Microsoft stock, and the rest goes to his 401K and a variety stocks and cash investments. As of August last year, they had $380,000 in stocks, mutual funds, and cash (I’m guessing the portfolio is worth a lot less now)

Lessons learned

They’re doing a lot right, but are not perfect.

A few years ago, John went to a financial planner. Instead of good advice, he ended up getting locked into a pair of variable life insurance policies. They were ripoffs,  and he had to pay $5000 to get out of them.

They recently went to a pair of more reputable planners, and got some feedback about what they’re doing right and wrong.

Here are the opportunities for improvement:

• Dump the company stock. John currently has 37% of his portfolio in Microsoft stock, which is far too much to have in a single company. It’s even more dangerous, because his income is also tied to Microsoft’s success.
• Add some bonds. Right now, 99% of their investments are in stocks, and only 1% in fixed assets. The planners suggested 10% in bonds, 90% in stocks.
• Sell some real estate. They’re actually losing $750 a month on their three rental properties. The planners recommended selling one or two or their properties, which would stop the bleeding, and could allow them to break even on their initial investment.

What’s next?

John and Gina want to buy a home again. It’ll be expensive in the San Francisco area, but it’s a good time for it. Plus I’m sure they have the money for a down payment, and the credit to get a good loan. They’re looking to spend $350,000-$450,000.

They’re planning on being millionaires by the time they’re 40. If they can do that, they’re going to not only retire from their current jobs, but stop working altogether. Their long term plans are to move to somewhere less expensive – like Arizona – and start a small farm.

As for the financial planners’ advice? John isn’t buying it.

John insists on keeping the Microsoft stock, even though he’s putting most of his eggs in one basket.

Frankly, I think it’s dumb to sell low. I think it’s a safe investment to hold until the market comes up.

Their adviser’s response?

I don’t care what the stock price is. To diminish risk, you need more diversification in your portfolio.

As for the real estate? John doesn’t want to sell that either.

I think those properties are going to come back eventually. Even if they don’t, our retirement plan is not based on any return from those properties anyway.

Will they make it?

Their planners estimate that if they keep their current path, by age 40 they’ll have… drum roll please… $2.9 million. While that may sound like a lot, it isn’t, considering that they want to stop working at age 40.

Even if they draw from their retirement fund at 3% (instead of the standard 4%), they’ll run out of money at age 80.

My thoughts

I’m very impressed with how dedicated they are. It’s not easy to only eat out three times a month. It’s incredibly difficult to save half of your income.

However, for as dedicated as they are, they’re not always making the smartest decisions.

First, most of their portfolio and earning power is tied to the success of one company. Granted it’s Microsoft, but still, it’s dangerous to have your livelihood and retirement in one basket.

And I’m guessing John is incredibly intelligent, but could use some more work when it comes to his financial education.

He bought three properties – out of state – at the height of the bubble (partially because friends were doing it). Now he’s losing $9000 a year on properties, but refuses to sell, even though they’re not part of his financial plan.

He fell for the schemes of a shifty financial advisor, which I can sympathize with. But then he goes to advisers that he trusts, and refuses to listen to their advice.

Also, by retiring so early, he is giving up on the power of aggressive investing and compound interest. When they stop working, they’ll have to invest much more conservatively. Also, their portfolio will start losing money, instead of compounding every year.

Some people might criticize his frugal lifestyle, but I see it as an investment. However, by retiring so early, it seems like he’ll never really get to enjoy himself.

I don’t mind working hard and scrimping now, but it’s nice to know I won’t always have to. I like being able to do the things that are important to me – like travel. And I love knowing that someday, I’ll just get to enjoy myself and not have to think about money.

In the words of The Strokes:

I’m working so I won’t have to try so hard

- Someday

If you’re a Twenty-something consider yourself very lucky.

You’re probably healthy, super educated (only about 26 percent of Americans have a bachelor’s degree), full of energy, have a full set of teeth, and have very few, real-world commitments.

You’ve probably just started to think about how to go about “living” in the world, but have continued with the same day-to-day / task oriented existence that you’ve operated under since kindergarten, as opposed to an existence  focused on goal setting and planning.

If, however, you are that rare twenty-something who can plan ahead and set specific goals, you may have already started to figure out how you can truly enjoy a high quality of life over the long term.

What I’m advocating is that twenty-somethings begin setting life goals as quickly as possible so they can optimize living life, and avoid the nasty parts associated with being an average American consumer (namely, materialism, debt, living in the moment, etc…).

The three primary goals to focus on are simple and they include money, happiness, and family, but the associated questions that come with setting the goals are hard to answer.

However, the quicker you arrive at goal setting via answering the questions below the better equipped you’ll be at figuring out how to start running your life!

I’m not going to answer the questions for you, but instead pose the right questions so you can begin figuring out how to answer, and in turn, begin setting the right direction in your life!  Good luck!

Money Goals

What do you want money to do for you?

Do you want to earn money so you can purchase stuff (such as a car, flat screen TV, clothes, etc…), or do you want to earn money so you can make money work for you (in the form of an investment such as the purchase of stock or a CD)?

Would you feel better about saving 10 percent of your salary or 70 percent?  Do you see money as a means of security or as a vehicle to help you acquire things? Do you want to earn more to secure debt?

How do you want to earn your money; that is, by working for someone else or by starting your own company?  Do you get excited when you think or talk about money or does money make you feel uneasy?

Happiness Goals

What makes you happy each and every day?

Do you like to make things, sell things, talk about things, research things, teach other people about things, etc…? Can you see yourself doing the same type of job every day or do you require new challenges?

Do you crave being around people so you can get things done or are you most happy as an introvert? Can you point to a few, consistent, things in your life that have made you happy?

Is your personality consistent or does it change with the weather?  Do your family members all feel happy about the same sort of things?

Family Goals

How important are your father and mother to you?  How important are your brothers and sisters to you?  Do you enjoy spending time with your family or did your family life end when you moved away from home at the age of 18?

Do you desire to start a family and produce children?  Do you require constant companionship?  Do you crave isolation so you can work, read, play video games, play music, etc.?

About the author: When Vince isn’t asking questions, he is the author of Scordo.com, a blog focusing on practical life tips, saving money, how-to’s, and the occasional recipe. He created the site to share his life experiences with managing money, a home, and a life. To read more of his posts, click here to subscribe to his blog.

Depressed by your bank account, you decide that a change is in order.

So you sit down to work out a budget. You pull out a piece of paper (or open up a spreadsheet), and write your paycheck on the top line. After that, you diligently list and subtract all of your monthly expenses. Cell phone, electric, gas, internet, rent, etc…. Next, you set aside chunks for your emergency savings and retirement fund.

Looks great, right? You can’t wait to get started. It seems all too easy to follow your freshly-minted map to prosperity. But along the way – normally after the first month or so – you hit road blocks. Why is that?

There are three reasons why budgets fail:

• The budget was unreasonable to begin with
• There was no emergency fund to back it up
• The budget used cash based accounting, instead of accrual

I’m going to talk about the latter, because it’s the least obvious of the budget killers.

What is accrual based accounting?

There are two different methods of accounting:

1. Cash-based: in this approach, expenses and income are recognized only when they are paid/received. As an example, let’s say that you pay car insurance once a year. For that month, you’d have a car insurance expense. For the rest of the year, you’d show nothing.
2. Accrual based: in this system, expenses and income are recognized as they occur. You spread the amount equally over the relevant time period. Using the example above, each month would have a car insurance expense of 1/12th of the total cost.

What does this have to do with personal finance? Simple. Using a cash based system in your budget will give you an excess in good times, but leave you gasping for air when times are hard. It will break your budget.

What’s the big deal?

To show the effects of a cash-based mindset, let’s take a look at a real world example: Social Security.

Social Security has had a budget surplus every year in it’s existence, and will continue to do so through the year 2016. The surplus is always loaned to the federal government in exchange for Treasury securities. The federal government then spends the money in its annual budget.

While Social Security currently holds $2.3 trillion in Treasury securities, it won’t help the government as a whole pay for anything. The reason? The government essentially gave a loan to itself in exchange for an I.O.U., then spent all the money. When Social Security goes to cash the I.O.U, the government still has to pay for it.

Rather than investing the surplus in non-Treasury assets, the government spent it.  As a result, they won’t be able to pay for the program. They’ll have to cut benefits, print more money, or borrow to pay for it. None of the options are especially appealing.

Had they used a true accrual approach, the government would have non-government investment assets (not I.O.U.s), and would be able to pay for Social Security for a much longer period of time.

What does it mean to my budget?

Using cash based accounting is an inaccurate way to estimate your expenses. Budgets are more successful when they are consistent. It’s a lot easier for us to spread the cost of insurance out over six months than it is to scrape together the cash to pay for it all at once.

Also, this mindset can lead to dangerous spending patterns. Ignoring expenses until they’re actually due enables us to spend recklessly the rest of the time. When you fall into this trap, you’re living off of more than paycheck at a time, and hoping that you can make up for it later.

You may be able to pull it off a few times, but in the end, it’ll catch up with you. And when it does, most people just use credit cards to make up the difference, which throws off the budget even more.

What can I do about it?

Switch to an accrual based view of personal finance.

To start, make a list of all the one-time expenses you’ll face over the course of a year:

• Car insurance
• Gym memberships
• Health insurance
• Holiday shopping
• Subscriptions
• Vacations

Then, take it a step further. List your monthly expenses that vary significantly:

• Electric bills
• Gas (for your car)
• Heating bills (including natural gas)
• Water

Next step – estimate the annual cost

For all the items you’ve listed, estimate the total cost throughout the year. This is easy for fixed expenses like car insurance or membership fees, but it can be tricky for other things.

For gifts, use this opportunity to set a limit for how much you want to spend for holidays and birthdays. It will be hard to use discretion on the fly, but if you make a budget in advance, it’ll force you to be more reasonable later.

For utilities, you have a few options. If you have access to the previous year of bills, just add up the total. If you don’t have access to previous bills, try to remember how much your cheapest and most expensive bills were. Add them together, then multiply it by six. That will give you a very rough estimate of the yearly cost.

I included gas in my list, because it can more than double if prices go up at the pump. It’s easier for me to set aside more than I need to, rather than be caught off guard the next time prices go to $4 a gallon.

What I like to do is estimate how much it would cost me to fill up for the year if gas is $3 a gallon. For example, my car has a 17 gallon tank. If I fill up every other week, it’ll cost $1326 for the year.

Figure out the monthly cost

After you have the yearly total for all your expenses, figuring out the monthly amount to set aside is a snap. Just divide it by 12. Once you have the monthly amount, make sure that you include it in your monthly budget, and treat it like you would an actual expense that has to be paid out.

The hard part – setting it aside

Budgeting on an accrual basis is just half the battle. The hard part is making sure that you actually save the money until it’s needed.

For fixed expenses, set aside the amount you planned on. For variable costs, you set aside any extra you have left over after paying the actual expense.

As an example, if you budget $50 for gas every month, but it only costs you $40, make sure to set aside the extra $10 so you have it available in case gas prices go up later.

If you budget $150 for electric, and it only costs $100, make sure to set aside the extra $50 for the more expensive months.

Our natural instinct is just to spend any money we don’t need immediately, but you have to fight it. The best way to do it? Transfer it away from your regular account, so that it’s out of sight and out of mind. You won’t be tempted to spend money that you can’t see.

What I did to keep my money separate is open an account with ING Direct. They make it quick and easy to open a new account, and the site is easy to use. There are no minimum balances, and no transfer fees. I use ING, but there are other similar options available, like HSBC.

Once you have a main account, you’re free to add as many additional accounts as you’d like. I created sub-accounts for car-insurance, vacations, mortgage payments, etc…. One nice feature is that you can add nicknames for your accounts, making it easy to tell exactly what each is for.

Transferring money in

After you set up the accounts, putting money aside is easy. When you get paid, just transfer money from your regular checking to the ING account. Or if it’s a variable expense, transfer the money you have leftover after paying the current month’s cost.

Incoming funds take 2-3 days to show up in the account, and they are not available for use for 10 days. I like that I can’t use the money right away. It’s like a built in waiting period. Also, by the time 10 days has passed, I’ve forgotten about it anyway.

Paying money out

When the time comes to pay for one of your accrual expenses, you have a few options.

Some bills can be paid directly from your savings account. It all depends on the merchant you are paying. If they don’t accept payments from savings, they probably accept electronic payments from a checking account (which is also free to setup at ING).

If you’d rather use your regular checking account, just transfer the money from ING back to your bank. There are no fees, but it takes about 3-4 days for the money to show up, so make sure you plan accordingly.

Conclusion

Sticking to a budget is a lot like holding a drink while riding a bike. It’s easier to do if our path – and our expenses – are level and flat, rather than a series of peaks and valleys.

Taking an accrual based approach to planning ensures that our expenses are consistent from month to month. This makes it easier to plan ahead of time, and eliminates shortcomings (which are too often filled by credit cards).

If we consider expenses only when we have to pay them, it’s guaranteed that we’ll hit bumps and spill our drink along the way.

After all, it wouldn’t make sense for me to share tips on improving your finances or accomplishing goals, and then not listen to my own advice.

I started off the year with $10,793.86 in credit card (all on 0% balance transfer cards). Here’s how much progress I made in February.

(drum roll please)

I paid off another 23%, bringing my total progress to 32.99% ! 

About the chart

The chart above shows my original debt ($10,793.86), my current debt ($7232.74), and my progress towards paying it all down (32.99%).

The red and green squares are visual reminders of my progress. There are 25 squares total, and each time I pay down 4%, I change a square from red to green. It’s a simple, but extremely powerful movitator.

I strongly recommend this for anyone that needs a boost in achieving their goals. If this is something you’d like to try, keep on reading. I’ll help you do it.

How I did it

February was a good month for me. I got a pretty large federal tax return (which is not a good thing…I need to adjust my W4 to keep this from happening next year).  I put a good portion of the return towards debt, but not all of it. Here’s why.

I am trying to create sustainable changes, and I have some big expenses coming up in the next few months. Instead of using all my money now and then coming up short later, I decided to plan ahead and make sure that I’m setting a budget I can stick to. It won’t do me any good to pay down debt now, then rack it back up later.

Some of the things I’m setting aside money for include:

• Car insurance (lesson learned: I should set aside money from each paycheck so I can cover the six month bill)
• Chainsaw (absolutely need it for yard work…we had two big trees come down last year that we need to cut up)
• Exercise equipment. If you’ve been reading this for a while, you know that I’ll never sign up for a gym membership again. I’m thinking about getting a basic cardio machine (like an elliptical), and eventually some free weights. I know this isn’t something I need, but I’m not going to sacrifice my health to save a few bucks. I feel better mentally and physically with regular exercise.

Want to do this too?

Want a chart of your progress? I’ll make it for you.

All you have to do is comment on this post, or send me an email (at david@pimpyourfinances.com), and let me know the following things.

First, let me know what your goal is. It could be paying down debt, saving $1000 for an emergency fund, saving for a vacation, etc…. It doesn’t even have to be a financial goal.

Second, let me know the starting point for your goal. In my case, I hadn’t paid off any of my $10,793.86 in credit card bills.

Third, let me know where you’re at in achieving your goal. For me, it’s how much I’ve paid down so far.

That’s all there is to it. I’m so confident this will help that I’ll make the chart for you, and will update it for you as often as you’d like. Then you can use the it for whatever you want. Publish it on your site, print it out, etc….

I also believe there is strength in numbers, so if anyone is interested, I’ll make a regular post of everyone’s progress. At least once a month, I’ll post how we’re all doing in accomplishing our goals, and will include a link to your blog, along with some info about you and your site.

Give it a shot…there’s nothing to lose, and it could help you achieve your goals quicker, inspire others, and drive traffic to your site.

Two roads diverged in a wood, and I -
I took the one less traveled by,
And that has made all the difference

- Robert Frost, “The Road Not Taken”

I’ve always been a firm believer that to be happy in life and be successful like no one else, you’ve got to be willing to go against the grain and do your own thing.

After all…if you want to live a life that most people can only dream of, you’re not going to get there by following the crowd.

Each week, I’m reminded of this when I exit a subway train, and am forced to choose which escalator I take to get back to the surface.

There are two options.

1. I can walk with the crowd, and follow them to a bank of 4 escalators. It’s the most direct path, but all of them are packed, and I’m forced to move at the same pace as everyone else.
2. I can go against the crowd, and actually go in the wrong direction. There’s a single escalator that no one uses, because it’s slightly out of the way, and goes up in the wrong direction. But after I take it, I’m free to walk at my own pace to another single escalator. There is never anyone else on either of these.

Each week, I choose to take the escalator less traveled. People get angry with me, because they don’t understand why I’m walking in the “wrong” direction.

But each time I take that single escalator, I find it’s quicker in the long run. Yes, it takes more work at first, but it gets me where I want to go more quickly, and allows me to go at my own pace.

Also, I really hate the idea of being packed in like rats with a crowd of people. I can’t live like that.

So what about you – what less traveled escalators do you take?

The guest post can be viewed here. It’s an introspective look at the things I’ve learned about life from starting a blog. I knew I’d be writing about finance, but I didn’t realize how much I’d learn about personal development and achieving goals along the way.

I haven’t set any specific benchmarks, but I have been tracking my progress.  Last month, I paid down 9.96% of my debt!  That’s slightly ahead of schedule.  I’ll need to pay down around 8-9% each month to achieve my goal.

Since this past October, I’ve paid down a total of…9.96%.  I know that means I had a few zero-progress months, but during that time I also got married, went on a honeymoon, and made it through the holidays without going deeper into debt.  I’m proud of that, even if I didn’t make any progress until now.

Here’s a snapshot of my original debt, and progress so far:

In case you’re wondering why there’s so much red and yellow, it’s because I love visual reminders.  Just like a traffic light, yellow is something to be cautious about, and red is something I need to stop altogether.  It’s simple, but effective.

The top portion shows how much debt I’ve paid off.  There are 25 squares, and each time I pay down 4% of my debt, I change the color of one square from red to green.  It may sound cheesy, but its a great motivator.  I love changing the color of those squares.

The bottom section shows the dollar amount of what I’ve payed off.  I like knowing exactly how much I have to go.

Between the two sections, I get the best of both worlds.  A strong visual summary, as well as the detailed numbers.

As good as January was, I expected February to blow it out of the water.  I get my federal tax return this month, and plan on using all of it to pay down my debt.

Do you have any tricks you use to motivate yourself to pay down debt?

Welcome to the Carnival of Financial Goals.  I chose music for the theme because it’s a great source of motivation for me.  It helps me focus when there are distractions, and it drives me when I need a little more ”ummph” to accomplish a hard task.

There were more than 100 submissions this month, but unfornately, they couldn’t all make it.  It was hard, but I narrowed it down to a more readable number.

Withour further ado, here is the Carnival of Financial Goals – Music Edition.  I hope you enjoy these entries as much as I did.

Editor’s Picks

Rising up, straight to the top.
Have the guts, got the glory.
Went the distance, now I’m not gonna stop.
Just a man and his will to survive.

- Survivor, “Eye of the Tiger”

nickel presents Financial Goals for 2008: Reviewing Our Progress posted at fivecentnickel.com.

David presents Start The New Year Off Right With Some Budgeting Tips. posted at My Two Dollars.

MoneyNing presents How to Brighten the Path to Prosperity Even in a Dark Tunnel posted at Money Ning.

FIRE Getters presents A Simple Budget That Works? posted at FIRE Finance.

Shaun Connell presents How to Write a Financial Plan posted at Financial Planning.

The Investor presents The really obvious thing we all forget when borrowing money posted at Monevator.com.

Motivation / Point of View

Are you going to live your life standing in the back, looking around?
Are you gonna waste your time?  Gotta make a move, or you’ll miss out.

- Jimmy Eat World, “A Praise Chorus”

Dorian Wales presents Success: Who Dares Wins? posted at The Personal Financier.

Broderick Allen presents Persistence posted at Broderick Allen – Personal Growth and Enjoying Life’s Journey.

ChristianPF presents How to create lifelong memories posted at Money in the Bible | Christian Personal Finance Blog.

Debt Reduction

It don’t take money, and it don’t take fame.  Don’t need no credit card to ride on this train.

- Huey Lewis and the News, “The Power of Love”

Whapibak presents Financial Freedom Phase One: Tackle Irresponsibility posted at Second Child, Last Born.

Silicon Valley Blogger presents Debt Elimination Tips: How To Reduce Debt With These Dos and Don’ts posted at The Digerati Life.

Budgeting

I may not have a lot to give, but what I got I’ll give to you.
I don’t care too much for money, money can’t but me love.

- The Beatles, “Can’t Buy Me Love”

Tristan presents Managing Monthly Outgoings And Household Budgeting posted at Find Financial Freedom.

Raj Patel presents Build a Rough and Quick Budget in Minutes posted at DebtGoal.

Career

I went downtown to look for a job.
I had no training, no experience to speak of.
I looked at the holes in my jeans, and turned and headed back.

- Social Distortion, “Story of My Life”

Lazy Man and Money presents How Worried Are You About Being Laid-Off? posted at Lazy Man and Money.

Jim presents Three Morale-Boosting Tips for Job Seekers posted at Bargaineering.

Resolutions

Say it’s true, it’s true…
And we can break through.

- U2, “New Year’s Day”

Patrick presents 2009 Personal Finance Goals – Back to the Essentials posted at Cash Money Life.

Madison presents New Year’s Resolution: Organization and Execution posted at My Dollar Plan.

Fathersez presents My goals for 2009 posted at Father Sez.

Steward presents 2009 Family Financial Goals posted at My Family’s Money.

Goal Setting

Were you born to resist, or be abused?
I swear I’ll never give in, I refuse.

- Foo Fighters, “Best of You”

Andy presents Setting Effective Goals Using Indicators of Performance posted at Saving to Invest.

Finance Fanatic presents How To Set Effective Goals – S.M.A.R.T. Goals posted at Planning Financials | Personal Finance For You.

SingleGuyMoney presents December Savings Challenge Update posted at Single Guy Money.

RC presents Tips for Making Your Personal Finance Resolutions Stick- Turn Your Resolutions into Habits posted at Think Your Way to Wealth.

Net Worth

If I had a million dollars, well I’d buy you an exotic pet.
Yep, like a llama.  Or an Emu.

- Bare Naked Ladies, “If I had a Million Dollars”

FMF presents 2008 Net Worth Review: Ouch! posted at Free Money Finance.

Kat presents Annual $$ Check-up posted at the part-time life.

That concludes this special music edition of the carnival.  Thanks for reading!

You can submit your entry to the next edition of Carnival of Financial Goals using the carnival submission form.  Past posts and future hosts can be found at the blog carnival index page.

Then reality kicks in.  You experience a few failures, and if you’re lucky, a few successes.  But regardless of how much progress you’ve made, you start feeling down.  The potential of your expectations is contrasted against reality, and the result can be crippling.

The feeling is best described by Tinny Tim, the crippled robot orphan from Futurama:

 

You raised my hopes, and dashed them quite expertly.  Bravo!

How we handle ourselves at this point is critical.  Human nature says to give up, but why is that?  If we understand the psychology behind goals and motivation, we can overcome our self doubt, and accomplish anything.

Why do we feel a rush of motivation at the start?

There are a few reasons.  The first is that before we start on any endeavor, the possibilities are endless.  Any decision we make only limits our possibilities, so by definition, the potential is greatest before we start.

Another reason is that as we start on a new project, we’re thinking only of the expected benefits.  Although we know we’ll encounter difficulties, they do not factor into our thoughts as they have not been realized yet.

Why does the motivation fade once we start?

What goes up must come down.  It’s true of gravity, and also of human emotions.  The rush of optimism at the beginning must be great because it helps us turn an idea into an action, but eventually the initial buzz is going to fade. 

Maybe the results aren’t what we hoped.  Things could be harder than we imagined.  Or it could be that the appeal of something new is wearing off.

What happens next determines if we’ll accomplish our goal, or give up in failure. 

How can we overcome the setbacks?

When you hit a setback, don’t give into emotion.  Try to be analytical about why it’s happening.  If you’re reasonable and figure out the cause of the setback, you can figure out a way to overcome it.

As an example, I’ll use my goal of attracting viewers to this blog.  After a month, I had a week where I averaged 100 hits a day.  I thought I had reached a tipping point.  The next week, it was down to 20 hits a day.  Despite my low expectations, the decline was hard to take.

My first reaction was to doubt myself.  I questioned my writing, and wondered whether I could be a unique voice in the financial blog world.

Then I calmed down, and thought about why my hits had decreased.  First, I realized that I hadn’t posted in over a week.  Then I realized that I hadn’t tried to market myself at all since my last post.  No wonder my hits had suffered.

Instead of following my first reaction to give up, I decided to post more often and work harder at promoting my work.  Not surprisingly, my hits started increasing again.

Don’t give in

Once you decide you can’t do something, you lose the ability to do it.  It’s a self-fulfilling prophecy.

When you feel the worst, that’s when you’ve got to try the hardest.  Instead of giving up, try to figure out the source of your problems, and work harder to solve them.

If you overcome setbacks – especially the initial loss of motivation – you can accomplish anything.

I’ve tried focusing on the big picture, and choosing resolutions like “improve finances” or “be healthier.”  One thing I like about these type of goals is that it’s hard to be daunted by them.  Most people fall behind on their resolutions, get discouraged, and give up.  That’s harder to do with broad goals, but their vagueness is also their weakness.  Without benchmarks, you can’t track your progress.

So I went the other direction, and chose goals that are very specific.  You’ve probably heard of them – they’re known as SMART goals.  The idea is that goals should be specific, measurable, attainable, relevant, and time-bound.

I wrote resolutions that were incredibly detailed – down to how much money I needed from each paycheck to accomplish them.  This didn’t work for me either.

My goals were so specific that I missed deadlines and got discouraged, even though I was making solid progress.  Or I would focus on the details so much that I’d forget about the big picture.

This year, I’m trying something new.  I’m making resolutions that bridge the gap between small details and the big picture

My new approach has three W’s: What, Why, and When.  W W W.  Easy to remember, right?

The “what” and “when” give me an idea of what I want to accomplish, and enable me to make a plan.  The “why” explains its importance, and gives it context in the big picture.

So without further ado, are my resolutions for 2009.

1. Get out of debt
   • What: pay off all of my credit cards
   • When: by the end of the year
   • Why: having debt stresses me out, and I have better uses for my money than paying credit card bills and interest
2. Start a Roth IRA
   • What: open a Roth IRA account and start making automatic contributions from my paycheck
   • When: by the end of the year (after I pay off my credit card debt)
   • Why: I want to take advantage of the low market, and ensure that I have a very comfortable retirement
3. Start an emergency savings fund
   • What: start making regular, automatic deposits to an emergency savings account
   • When: by the end of the year (after I pay off my credit card debt)
   • Why: I’ll feel much more comfortable with some padding, and it’s vital to my long term security
4. Start a vacation fund
   • What: start making regular, automatic deposits to an emergency savings account
   • When: by the end of the year (after I pay off my credit card debt)
   • Why: I’m improving my finances so I can enjoy life more.  There’s nothing I like more than travelling, and I want to be able to pay cash for any trips I take
5. Improve my health
   • What: improve my health by exercising regularly, eating more nutritiously, and drinking less
   • When: immediately
   • Why: I don’t ever want my motivation to be restricted by my physical state.  I never want to be too tired, hungover, etc… to accomplish what I want

Notice a common theme?  Money has been on my mind a lot recently, as it has been for the rest of the country.  But improving my finances is just the means to an end.  My ultimate goal is to enjoy life more.  To me, that means not worrying about money, and being able to do more of the things that make me happy.

What are your resolutions for 2009?  Do you have any tricks that you use to stay motivated?

It’s not his first foray into technology though.  In 2006, he won a contest sponsored by British Telecom.  It was a nationwide competition encouraging young people to help older people learn to use computers and the internet.

Scott created a lesson plan, learning materials, and even report cards.  Then he used them to teach his mother and grandparents to use the internet.

Scott’s reward for winning?  Recognition from a Member of Parliment, and a new laptop.  He seems to have put it to good use in the subsequent two years.

I find Scott’s story compelling.  Not only did he think of a unique idea, but he put it in motion and saw it through to completion.  Now he is the CEO of his own company, again, at only 13 years old.

We could all learn a lesson from Scott.  With fewer resources and less experience, he has accomplished what most of us never will.  If he can do it, we have no excuse for not pursing our own goals and dreams.

All of it is on 0% interest cards, but I’m still uncomfortable having any debt, let alone that much.  It’s manageable now, but if something happened to my health or job, I’d be screwed.

So I decided to get out of debt as soon as possible.  I’ll sleep better at night without it, and I could use the extra money to generate wealth.  I’m treading water now, but I’m not getting anywhere.

I track my debt in real time, but this is the first update on the site.  After 75 days, I’ve paid off 4.68%, or a little more than $500. 

I thrive on visual motivation, so I put together a graphical summary of my progress:

Each square in the “Credit Cards” section represents 4% of my original debt.  As I pay down more debt, I change the color of the squares from red to green.  My one green square is looking lonely, but I’ll add more soon.

Paying off only $500 in two and a half months may not seem like much, but I’d like to give it some context.  In October, I got married.  I went on my honeymoon in November.  My wife and I paid for the wedding and honeymoon ourselves, and we did it without generating more debt.  I’m proud of that.  We even did some major home improvements before the wedding, like building a 400 foot fence, without using credit.

So ideally I would have paid off more by now, but I’m happy with what I’ve accomplished given the circumstances.  I’m expecting things to move a lot more quickly in 2009.

Do you have any tricks you use to motivate yourself to pay off debt?

Do what you got to do.  And say what you got to say.  Do what you go to do.  Yes, start today.  Start today.

- Smashing Pumpkins, “Window Paine”

The best time to plant a tree is twenty years ago. The second best time is now.

- David Chilton, “The Wealthy Barber”

When it comes to motivation, we’re our own worst enemies.  We come up with a good idea, then talk ourselves out of it by saying “it would never work”, or “someone else is already doing it better”, or “I don’t have the time/money”.  We set goals, then ignore them and say “I’ll just start next week”.

It’s a terrible feeling to look back, and wonder what could have been.  The first step in any journey is the hardest, but it’s amazing what we can accomplish once we start.  I recently found a few good articles on staying motivated, and wanted to share them.

11 Ways to cure someday syndrome – www.zenhabits.com

Zen Habits has a list of 11 things you can do to avoid putting off your goals

1. Be you
2. Clear out the junk
3. Know what you want
4. Make a grand plan
5. Take one step at a time
6. Ignore the rest
7. Get help
8. Don’t compare
9. Be uncomfortable
10. Celebrate the process as well as the end
11. Don’t stop at the easy point

Does Your Great Idea Die Because You’re Too Lazy to Follow Through? – www.youngmoneymogels.com

YMM reflects on the good ideas he has wasted by simply not following through.

How to achieve anything – http://thinksimplenow.com

The author uses jogging as an example, and extrapolates that to create a systematic approach that can be applied to anything in life.  A very thorough and detailed post.  My favorite quote:

Within each of us, we hold the power to change anything in our lives, and in doing so, experience more joy and fulfillment. Lasting change starts with a change in the way we think – a clear vision for our desired results, meaningful reasons why we must have them, and building momentum towards massive action to make our visions a reality.

So now that you’re feeling motivated, write down something you’ve been meaning to do, and list out the first steps to take in achieving it.  If you can do that, you’ve already gotten past the hardest part – deciding to get started.

Most people reading this have heard of his site, but in case you haven’t, Get Rich Slowly is a blog that preaches sensible personal finance.  Its message is that given enough time, anyone can get rich by living within their means.  It’s one of the most popular finance sites, and was even been named “most inspirational money blog” by Money Magazine.

He has had a huge influence on me, both financially and personally.  Not only has he helped shaped my outlook on money, but he’s also been a personal inspiration.  By working hard at something he enjoys, he is able to make a living from writing – a passion of mine as well.

I’ve been a reader for a while, and wrote him after reading a guest post on the site.  The idea of the post is that you can learn a lot from successful entrepreneurs.  The author suggested taking one out to lunch so you can gain invaluable insight from them.  J.D. ended the post by saying:

If you have the guts to ask, the rewards can be enormous

I took it to heart.  I wrote him an email and offered him a gift card in exchange for answering 20 questions (we live in different states, so lunch is not an option).  Sure enough, J.D. practices what he preaches.  Within a day, he had gladly offered to help, and even declined the gift card.

I took a long time to think about it, and came up with 20 questions that focus on starting a website/business, entrepreneurship, achieving goals, the economy, and lessons that he’s learned over the years.  Without further ado, here are 20 questions with one of the most influential bloggers on the net.

Starting a website/business

1. Why did you start Get Rich Slowly?

I started Get Rich Slowly because I was learning about personal finance, digging my way out of debt, and thought it might be interesting to share the things I was learning with other people.  When I wrote about these things on my personal blog, they generated a big response, so I decided to do a spin-off blog.