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Bridging the gap between saving money and investing

J. Alan Maguire

The Importance of a Financial Journal

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money journal

Sometimes it’s the simplest of things that can help you stay motivated and get your finances to a place that you want them. While there are all kinds of theories and devices that you can use, simply taking the time to keep track of what you spend your money on is a hugely productive habit to have. An easy and effective way to expand this financial record keeping is to begin writing a financial journal.

You Think Clearer

For the vast majority of people, they’re able to think more clearly when they have the opportunity to write out their thoughts. The result is that doing so can help you achieve your goals. It will also provide you with a better understanding of your current financial situation, and allow you to see the progress that you have made by looking back over entries as time goes by.

Your Focus Will Improve

Another wonderful benefit of journaling about your finances is that you’re able to better focus on a specific topic when you write it out. Think about it. Instead of having a million different thoughts floating around in your head, when you write, you’re able to zero in and concentrate on that one, specific issue you’re writing about. This focus gives you an excellent opportunity to evaluate that aspect of your finances to see if you can improve it in some way.

You Create Chronological Documentation

Our memories aren’t always the best when it comes to how and when you have spent money, but having a history of this can be extremely useful when it comes to achieving important money goals. When you journal, you create documentation of your spending habits and goals. This information can be a tremendous asset when you decide to analyze your spending habits and when you set future financial goals.

Your Journal Can Help Others

While it might not seem to be that big of a deal, your journal has the potential to be an incredible resource which can help teach your children lessons from your personal mistakes and triumphs. For those that aren’t shy, you can also help others by sharing it with people outside your immediate family. This has the added bonus that others can comment and help you with money issues or questions that you’re having problems figuring out solutions on your own. This is how many people use personal financial blogs as a journal to share their daily money experiences with debt reduction and wealth creation.

The question that most people have when a financial journal is first suggested is what exactly should they put in it. There is no exact formula that everyone should follow. It’s important for you to adapt the journal to meet your needs, but here are a few suggestions for those who aren’t even sure where to begin that might be able to help get that creativity going.

Create Your Financial Goals

In order to reach them, you really do need to create goals. Money goals are especially important for those who a looking for ways to become and stay financially sound. It’s amazing at how many people never sit down to actually create their financial goals, and this can be an illuminating process. By writing down your money goals, you not only have them there right in your face every time you open your journal to make sure you don’t stray from them, you also have the perfect platform to note your successes and what you did to make them happen.

Record Your Saving Money Efforts

Another great way to use your journal is to answer the question, “What did I do to save money today?” Use it to list all the things you did each day to save money that day. This should be such things as not eating out, biking to work instead of driving, or skipping a snack from the snack machine. Creating a goal to accomplish a minimum number of these efforts each day can help to focus on them. Just make sure the listed activities are something you made an effort to do and not simply something that you would have done anyway.

Record Your Making Money Efforts

In the much the same way you record your money-saving efforts, you should also record any efforts to make additional money. This extra money should be income that comes from sources outside your ordinary income. Writing in your journal that you went to work each day, while true, isn’t very exciting and is something that you would normally do. Use the journal to record the extra little snowflakes like selling an old desk that you don’t ever use or helped a friend move and received a $25 gift card for the effort. This can help you find even more ways to earn extra money in your spare time to move you closer to your money goals.

Create a Point System

Another thing to consider is doing something that will enable you to have some fun when writing your financial journal. One way to do this is to make a game out of it. You can do it in a variety of different ways such as creating a type of point system which is based on your income or your net worth. In this case, each dollar can be worth a point. Then you could make a variety of different challenges for the game. For example, you could make the goal be to earn more points the current month than the you did the previous month. In the same way, if your main financial goal is debt reduction, using this same game should result in a reduction of your debt each month. Another variation would be to set time periods to reach a goal that you wrote down in the goals section of the journal.

It really doesn’t matter in what form you keep your journal (a notebook, a bound journal, on your computer, create a blog), but it helps to do it in a form that you’re most comfortable with and which feels right to you. It also helps if it’s in a form that you’ll be able to access anytime you need it. You also don’t need to use a single option. For example, maybe carrying around a small notebook so you can write down things during the day will help you later place it in a more permanent journal or on a blog. no matter which way you choose, creating a financial journal should help you greatly increase your ability to control your financial situation.

If you keep, or have kept a money journal in the past, what are the biggest benefits that you found you derived from having it?

(Photo courtesy of Rory MacLeod)

Face it: Eating Healthy Does Cost More

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eating healthyWhat do you usually have for a snack? Do you choose something healthy like fruit or veggies? Or is it more like a bag of chips or your favorite candy bar? How about dinner? Do you make dinner from scratch, or do you heat up something that is premade?

If you are like many people, you go the prepackaged high-calorie route. Why? Well convenience is a big part of it. We all lead what seems like lives that are more hectic every day and we choose the easiest route when it comes to food. But there’s another reason, and I think it’s becoming more evident than ever and that is eating healthy not only takes more time, but calorie for calorie, it costs more.

Now on a blog about saving money, am I suggesting we should go with unhealthy foods to save bucks? No, but I think the subject deserves examination into what it takes to eat healthy and why some just give up trying.

Availability

Grow a garden and get your own produce? On many personal finance and productivity blogs and sites, this is the advice we are given. This sounds like a good idea, but there are problems. If we are looking for healthier options that don’t require any more time commitment than usual, this is a no go. It takes a lot of time to set up a garden and maintain it. Moreover, there is a learning curve for some of us without green thumbs because the rules are different depending on where you live in regard to insects, soil, etc.

In addition, depending on where you live, your access to fresh fruits and vegetables may be limited. Sunny California or Florida can supply a lot of fresh produce almost year around, and since it is locally available, its expense from farm to market is low. On the other hand, large urban areas and colder climates must have their produce delivered, driving up the cost. Also, the quality and taste are affected as the produce must be picked sooner, or the process diminishes the taste. Ever compared a fresh from the garden tomato and one from the grocery store and you know what I mean.

Taste

I don’t know about you, but when I snack, I think naughty. I’ll eat veggies, but it won’t be my first choice. I’ll also need some dip like ranch dressing or caramel for apples. And as mentioned above, during Midwest winters, tomatoes and other produce taste terrible.

Time is Money

As I mentioned at the beginning of the post, many times our meal and snack choices are based on time. Are you going to make your own spaghetti sauce or open a jar? Most will do the jar. Unless you have the storage space, money for fresh ingredients, and the time, your family will hear that familiar “pop” of opening a jar of sauce when it’s spaghetti night. Eating healthy takes effort and time. No one ever said, “This is easy as a garden” or “That will be a piece of broccoli.” You get the idea.

Storage

More and more of us are taking our lunch instead of buying it, trying to be both frugal and healthier, but there are problems. That lettuce you opened for your sandwich is already looking brown by the next day. Your apples don’t last the week and those cucumbers have squishy spots. Oh, I’ll just buy my lunch today and stop by the store again on the way home. How often has this happened? The problem of storage has people buying canned fruit in syrup or skipping fruit and veggies altogether.

So Now What Do You Do

What I want you to take away from this is that eating healthy is something you should strive to do, but do it with your eyes open. If you start out thinking it will be cheap and easy, you’ll throw your hands up in frustration before the week is out. Know what you are getting into. Don’t believe the hype of eating healthy can be affordable or easy to do. I’ve heard it said that if someone would invent salad on a stick, we’d eat healthier and I tend to agree mostly with this statement. In the end, it’s hard to beat the drive-through.

Image courtesy of TheFemGeek

You Can Be Too Frugal

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too frugalHave you poured a half finished glass of orange juice back into the carton? Have you taken toilet paper down from your trees after being TP’d to use for its original purpose? I have heard of people doing just that. Have you done outrageous things just to save money? Are you happy with this lifestyle? Do you need to be so frugal?

We’ve all heard of peoples’ frugal habits, and just as spending too much money can be a problem, so can spending too little. If your situation does not require you to be extremely frugal, then why are you? Is it a goal you’ve set for yourself? Is it a challenge you enjoy? Or is it an addiction that needs to be stopped? Sure, you may have debt, or maybe not make as much as you want, and most of us could save more, but we have to achieve some kind of balance and avoid these problems.

Lost Opportunities

One problem with spending all of your life saving as much as you can is you may look back on your life and all you have to show for it is a pile of money and a string of wasted opportunities. This may be okay for some miserly people, but a healthy individual enjoys himself throughout his life.

Not knowing how to enjoy retirement

When you finally reach retirement and you decide you can spend some of the money you’ve saved, can you decide what you want to do with all of that money you saved? Have you been saving so long that interest in anything but saving has long since withered away?

Bad Health

Retirement can also be the time when your health gets worse. What if your health gives out and what you were planning to do is no longer feasible? The vacations you were going to take, the second house you were going to buy, the old car you were going to rebuild, etc.? Anything can be limited or nixed entirely by failing health.

Bad Family Relationships

Family members don’t necessarily share your frugal bug. I’ve heard of people getting nothing but hand-me-downs and never anything new. Worse, they did without many basic items all because their parents wanted to save a few dollars. It wasn’t because they needed to, but they were addicted to saving money. This may seem like nothing to some, but it hurts emotionally and sends the wrong message to children. Life is more than just about money.

Becoming a Jerk

Cheating is another way you can harm others. I know people who will complain about food or service, just to get a discounted or free meal. They do this every time they go out to eat. Others I know have stolen silverware, or emptied condiment containers into secret containers hidden in clothing or purses. Others have had no qualms about mooching off others food and hospitality just because they didn’t want to spend any of their own money.

Criminal Activity

Stealing music, movies, software, etc. with today’s technology is easy, but it’s also illegal. No matter where you stand on this issue, if caught, the consequences can be worse than spending the money.

I’m not suggesting we all necessarily live for today and forget about tomorrow. And some people have no choice but to watch what they spend very closely. That still doesn’t mean that we shouldn’t enjoy life as much as we can while at the same time setting aside money to continue to do so in the future. Find a healthy balance and stick with it. You’ll be happier for it.

Image courtesy of Tim Somero

Start: Your Finances Won’t Get Better Until You Do

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startYou know you need to pay attention to your finances and create some kind of spending plan. So why haven’t you started? Are you just waiting for the right software, book, or moment? Maybe you feel overwhelmed. The reasons for not starting and maintaining your spending plan are endless, but your window of opportunity closes a little more with every day you put off taking care of your financial well-being. What are some of your reasons for not starting?

If I only had the right software

Financial software, like Quicken or Microsoft Money can be helpful. These types of programs allow you to download your account transactions, create a budget, analyze your spending or investments, etc. Online options like Geezeo, Mint or Wesabe do the same thing as the software options, but also have social networks consisting of other users to compare notes with, give encouragement or advice, etc. Best of all, they’re free.

However, if you are waiting to find the perfect software, chances are you never will. I’ve tried all of these and I still find things I don’t like. I say just pick one you like the best and stick with it. They all take care of your basic, spending plan needs. On the other hand, you can also go analog and just use a pen and paper.

If I only had the right book

The personal finance section of your local bookstore or library has a tremendous amount of books offering various plans, systems and advice. Maybe you have read many of these and are waiting for the right plan that fits your situation? The reality is they all teach the same basic financial principles, just using different buzzwords and packaging.

If you haven’t read any personal finance books yet, read the cover blurbs and book reviews, find one that appeals to you, and stick with it. If you have read a lot of these, pick the one you liked the best, or write down the best ideas from them all and create your own personal financial guide.

If I only had the time

We all wish we had more time. The fact is you have to make time for the important tasks in life, and keeping on top of your financial situation is one of these tasks.

If you don’t think you have the time, start small. Take pen and paper with you everywhere you go and write down what you spend as you spend it. Do this for three months. At the end of three months, you will have all the data you need right before you. Reorganize this data to see what you spent your money on, where you can cut back, and create a spending plan that lets you spend less than you earn and allows you to save for your future.

In addition, you can try using one of the software or online options mentioned above. These can go a long way to help you organize in a hurry, though if you were worried about time, I’d go with one of the online options.

You can also save time by using online banking. After the time of the initial set up, you can cut the time you would have spent writing out checks and mailing your bills by setting up online bill pay. Check with your bank to see if they offer this. Most do nowadays.

So now what are you waiting for

Unless you are in real financial trouble, you don’t need to be an expert financial planner in order to start a plan. You know your needs and spending habits better than anyone does. You don’t need software or books to make financial decisions. Use these if they truly help you and appeal to you. Anything that gets you moving toward your financial goals is worthwhile, but the important thing is to start. If you remember to spend less than you earn, and save what you can, you are already on your way to financial success.

Image courtesy of CellPhoneSusie

Do You Hunger for Money?

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Spend less than you earn. Pay yourself first. Save 10 percent of all of your earnings. These are some of the most basic principles of personal finance, yet millions fail to do this. There are hundreds of personal finance books that talk about these financial basics, and more are on their way. Simple solutions are often not that simple for many people, but they should be.

People let their financial focus dim when they see something they want, especially if a friend, family member, neighbor, and even an enemy owns it. These days we are able to get the things we want by using credit cards and various other loans. This route has become too easy and shows no sign of stopping.

Many years ago, credit was not so easy to come by, so people had to do without or they acquired what some call money hunger.

Money hunger is when a person hungers for wealth and they become more aware of wealth creating possibilities around them. They focus on how to obtain wealth. They thirst for knowledge on wealth creation; they seek out opportunities to gain more money to get the things they want. This is how you should go about getting what you want, not using someone else’s money just to keep up with the Joneses.

Think of all the stories about how wealthy people started out poor only to work their way to a better life. They were hungry for money. They knew what it was like to be without what many of their peers had, and they did not want to live that way the rest of their lives. They became stronger through their struggle for wealth.

No one likes to struggle. If there is an easier way, most of us will take it. That is where credit cards have become such a pitfall and have taken away many peoples’ hunger for money. People think to the future only to figure out if they will be able to pay the balance, only to charge even more with the same thought in our head. When they bill comes due, they find they have miscalculated and will only be able to pay the minimum balance. Then the cycle begins all over again. They have lost the focus and clarity money hunger brings. People need to think about their future and plan by saving money today for tomorrow.

I am not saying credit cards are completely evil. They serve a purpose for emergencies when the cash is just not there. They are also useful in providing a level of safety in some situations instead of carrying cash. In addition, you build a good credit score by using them, giving you a better chance at getting a job or buying your first home. Nevertheless, people need to become more dependent on their actual earnings, not what the bank is willing to loan them. In addition, if they feel they need more, they need to get hungry and look for ways to earn more.