Thursday, April 24, 2008

When Do You Let Things Go?

As always, I've been thinking about budgeting and money management. Most recently, I've been thinking about when people let go. Let go of bad habits, let go of restrictive habits.

Personally, I created my personal finance spreadsheet when I realized my debt load was not in any way close to what it needed to be if I wanted to buy a condo. It wasn't a matter of me getting to a point of debt where I couldn't live on what I was making, or when I was in the red in my bank accounts. In fact, I had several thousand dollars in the bank.

I know with relationships, many people have a tendency to stay in a bad relationship, because it's felt like ending it and starting something new would be too hard, or inconceivable. Or maybe they stay in the relationship because they like one quality, and convince themselves that that is enough to keep holding on. The latter happened with me and my last ex-boyfriend, and it was difficult to talk with him and break it off. I knew it was for the best, but it still hurt a great deal to do it.

Is being in a bad cycle with debt like being in a bad relationship? I think it is.

Is the turning point for other people hitting rock bottom financially? Do other people realize that in order to meet a certain goal (e.g. home ownership) they need to change their ways? Is there another factor that pushes the decision to change financially?

What do you think?

This Week's Carnival

I'm late announcing it, but I was included in this week's Carnival of Personal Finance. It was hosted over at The Happy Rock, and my article How I Save Money (aka Why I Have Seven Savings Accounts) was included.

Because it's relevant to me, I found Freelance and Contract Technical Writing Rates interesting. I know I got lucky with my first client, in the rate I negotiated and the fact that I hadn't had specific technical writing experience (though I had plenty of other writing experience). The article also does a great job of encouraging you to know your worth in your job market, which is invaluable. I recently heard a story of someone who is receiving $50/hour as a contractor. Sounds great, right? Then this person learned their agency was charging the client something like $180/hour. Outrageous!

Just looking over the titles and summaries of the other articles included show there is an exceptional number of good articles. I hope to catch up with them over the weekend!

Sunday, April 20, 2008

Why I Love Thrifting

I went out for drinks and dinner with a girlfriend last night, and she loved the skirt I was wearing. Her jaw dropped when I told her I'd bought it for $4.

I went thrift shopping yesterday, and I found tons of great things (though I didn't buy everything I found). Notably, I bought five nice, most likely new, skirts yesterday...for under $20. Yep. Five skirts for $20.

A couple of the skirts will be part of my Change The Color project (I already have a few things I want to dye). One of the skirts is particularly ugly (which is certainly why there were at least 30 of them at Goodwill), though I'm confident it will look great when dyed blue (or red).

I've been wanting some more skirts, and I felt like I hit the bonanza yesterday. Normally, there aren't a lot of skirts in my size (my size isn't all that unusual or extreme), though that was not the case yesterday. I'm pretty certain I was looking at the result of a lot of other people's Spring Cleaning. While I generally don't find huge numbers of things I want to try on, I tried over five things in one place, and probably ten or more in the next. Three of the skirts I bought are new, since they were obviously donated by Target; one looked brand new; and one was probably actually owned and worn by someone else.

So, if you're in the market for some new clothes, check out your local thrift stores. Drive to the nearest major city, if it's a doable drive, or go to the nearest wealthy community (I once lived in a wealthy city/suburb of 10k, and the thrift shops often had high-end clothes for $10...). The change of seasons is always a good time to find things. People are cleaning out their closets right now...take advantage of it!

I'll be off to at least one more thrift shop today...

Thursday, April 17, 2008

How I Save Money (aka Why I Have Seven Savings Accounts)

I don't have just one savings account. In fact, I have seven. It breaks down like this: 2 for emergency fund (one in my bricks and mortar bank, a larger one with Ing), 1 for my IRA, 1 for my taxes, 1 for travel, 1 for my condo downpayment fund and 1 for my snowflake fund. The snowflake account is actually a checking account, but I don't use the account for anything else, so I consider it savings (I also don't put money in this account expecting to earn interest -- I earn money from this account, instead, by using it against my debt and saving money that I would otherwise pay in interest).

Keeping so many accounts may seem excessive, yet it works quite well for me. Each week I get paid, I allocate money to a different savings account (the emergency fund gets two allocations per month, and the IRA gets an allocation each check). Having these separate funds allows me to better manage my savings accounts, and to also not feel guilty when I take or plan a vacation when my emergency fund isn't fully funded. I like having more than one account, so that it's not constantly a battle to remember exactly how much of a lump sum belongs to particular budget item.

Paid Twice recently wrote about how she currently keeps a single savings account, as "all funds are emergency funds until you have a sufficient buffer." I agree with this, though I still prefer to have multiple savings accounts. Now, I don't plan vacations when I know I'm not going to be working. However, I don't want to let my not having a fully funded emergency fund from preventing me from a vacation. (Believe me, I needed the four-day vacation I took last week. A LOT. In fact, I could really use another couple weeks off (preferably on a Mexican beach), but that's something else, and something my travel fund can't currently support.) I also like to save up for things, and having separate funds for travel and a condo down payment allows me to save for these things (albeit slowly) and watch them progress and grow.

All that said, I do know that if an emergency came up next week and needed more than what's currently earmarked as emergency fund money, the condo downpayment and travel fund would be the first hit up for cash.

Too, I know that I generally don't need to tap my emergency fund too often. In fact, I really only tap it when I'm not working. Occasionally I need extra money because some irregular expense or other has come up (e.g. getting a couple fillings at my last dentist visit), but thankfully, I rarely need money for true emergencies.

It also works like this: I'm pretty obsessive about having money saved and cash stashed at home. I also know that if something Really Big and Really Expensive happened, I have a couple credit cards with fairly obscene credit limits at my disposal. Yes, I know a credit card is surely NOT the best option for an emergency, but I do feel a certain amount of security knowing I have that option if something really catastrophic happens. In fact, the friend who helped me create my initial finance spreadsheet said I should just put all my money to my debt and use the credit card for emergencies. I explained about how I must have some cash in the bank, and then we agreed to disagree on that strategy...though, if I had a regular full-time job, I could conceivably consider doing that. Though, I'm self-employed (hurrah!) and I don't plan on changing that anytime soon, so it's a moot point.

In all, I think a savings strategy needs to be done based on where someone is at financially, and what will make them feel comfortable. For some, I imagine it's more soothing to see one or two accounts with larger sums in them. Regardless of how exactly we do it, we need to save money -- and like how and how much we save, it's a personal choice.

Monday, April 14, 2008

Back in the Game

Whee. Four days is not an adequate vacation, when you haven't had a proper vacation in 16-17 months... Though I do feel a bit refreshed, and it was wonderful to be away from my email and laptop for four days. It did take a couple days to get past the sickness that started the Saturday before, though I now feel about 95% better.

It was a lovely getaway, filled with nothing more than a lot of walking, napping, and restaurants.

So today, it's back to work (sigh), back to making pretty necklaces (yay!), and back to getting some more articles posted for you, dear reader.

Wednesday, April 9, 2008

Reader Request: Balancing Frugality and Being Debt-Free

Kelly has a difficulty many of wish we had: she's debt-free. However, she feels guilty when she spends money on herself.

She left the following comment earlier today:

I consider myself frugal, although I do very much appreciate nice things like $250 jeans and such. As my husband and I become more successful- I will splurge on items here and there. recently I splurged and bought 2- $200 purses and a $130 on a single top- and I feel sooo guilty! Here's our situation:We have no debt, make good money and have 50k in savings. Most people in our situation would think that we've got it made and we're well off. so why do I feel sick to my stomach about spending money? Also I should point out that I recently sold a bunch of my old clothes on ebay to help justify this splurge- but it doesn't seem to be working! I wish I could just relax and enjoy my recent purchases which I absolutely LOVE but in the back of my head I just keep thinking I threw away $550. So PLEASE help me to put my splurge into perspective. what are your thoughts?

This is a perfect example of why I talk about balance. If someone practices strict frugality at some point in their life, to the point that it becomes second-nature, this guilt can easily appear.

Really though, as long as Kelly isn't spending like this weekly or monthly, I really don't see the problem in occasionally "splurging" on oneself. She didn't include her and her husband's income or monthly expenses, so it's difficult to say if $550 is a big percentage of their after-expense monthly budget. If they're both contributing solid amounts to retirement accounts, there's absolutely nothing wrong with splurging now and then. After all, if you're debt-free, earning good money and planning for the future, why not spend some of the extra money on yourself?

Too, I would also recommend paying attention to why and what is bought. If spending $200 on a purse means that you're buying a well-made purse that will last longer than it takes for the next fad to start and finish, great. But if that $200 is spent on something trendy and poorly made, then that isn't great. If buying these things is a stop-gap for other emotions, that needs to be addressed first -- because the issue isn't about money, money is just how the something else is being manifested.

Also, this really isn't a splurge, considering that ebay profits were (mostly) used to buy these items...

Aside from this, I think the real issue in this situation is a person's relationship with money. I, too, would love to have $50k in the bank and no debt. I know, too, that it would take a while for me to adjust to having money to spend after having been in debt for so many years. Kelly doesn't say if she's been in debt, or grew up with little money, so it's not clear if she has frugal habits from not having extra money before, or if there is another reason.

Overall, my advice is to still work from a budget and set aside a certain amount for splurges each month. As long as the occasional splurges don't become regular things (e.g. "where/when did I get this handbag?! It has dust/the tags on it!"), there's not a problem. If you have the excess money (post-monthly expenses and retirement contributions), there shouldn't be guilt in having the disposable income to buy things you like/want.

This situation is one of the reasons I have different savings accounts for different things, why I think super-strict budgets don't work in the long-run and why I think they create potentially dangerous money perceptions, and why I think we all need to work towards having a healthy relationship with money and how we manage it.

What do you think?

Back in the swing of things...sorta

So, I'm finally starting to feel human (though I faked it last night, with the help of super Argentine cold medicine, when I went to a dvd night at a friend's).

I've already been able to get a couple hours work done...yay! Though I'm starting to feel light-headed, and I know I'll need a nap before too much longer.

Really, I'm just happy to be able to get some work done today, since I leave for my mini-vacation tomorrow morning (and I am not taking my laptop!).

I also hope to finish and post one or two pieces for all y'all's reading pleasure. I just hope I don't overdo it with all the things I want/need to accomplish today!

Monday, April 7, 2008

Ugh...I Waited Too Long

Of course, I wrote about my sore throat. By the end of Saturday night, it felt like the outside of my throat was expanding (it was) and the inside was shrinking (can't scientifically prove this, but it felt like it). Not a joyful weekend, no.

I was laid out yesterday, and took two (!) naps.

Today, I'm feeling better, though my attention span is still quite limited. Yesterday and today, I've been trying to do a tiny bit of work on the website project, and I've only been able to focus and concentrate for about 10-15 minutes max. I haven't even been able to focus on a single sudoku puzzle most of the weekend... I haven't even been able to focus for long stretches on the book I'm currently reading.

So, yes, just as I'm gearing up for a vacation, I get sick. It looks like I'll be better by Thursday, based on how I feel today. Though I'm not sure if I'll go to my client's office tomorrow... I was scheduled to go today and was planning on both Tuesday and Wednesday. I have work that I can do from home, so it won't be a total wash this week, but I certainly will not be billing the hours I expected.

I originally wanted to go on my vacation starting this past Thursday, but I had dinner plans with a very-hard-to-pin-down friend (i.e. he was taking me out for my birthday dinner, and my birthday was, umm, seven months ago...).

In counterpoint to my last post, while taking a vacation can make you money, not taking a vacation can cost you money. Granted, other people have sick time, but still... I've known plenty people (ahem...workaholics) who've not taken vacations and blazed through all their sick time and then had to use vacation time when they were at home wheezing and sneezing.

I think it's time for another nap.

Saturday, April 5, 2008

How Spending Money Makes You Money

By going on a mini-vacation next weekend, I'm making money. How? Simple: if I don't re-charge my batteries soon, I will A) become sick (in fact, I can already feel the glands in my throat are swollen) from exhaustion; B) do a quality of work that does not meet my standards. The first results in my losing money because I can't work, and the second is important because I want to keep my clients happy.

I can't wait to leave town next weekend and have time away from work, my laptop, and email. By not working for a few days, I'm doing something for myself that will allow me to work better and faster after I return. I'm not taking my (current) dream vacation of a few weeks in Iceland. Because my travel fund isn't funded enough for that trip, I'm taking part of what I have and finding a nice alternative for myself. Right now, I'm too tired to do an activity-rich vacation, and I don't have the energy to explore someplace new. So, I'm going somewhere I've been before, and somewhere I won't feel overwhelmed with "I should be doing something/anything/that activity!" all the time

I'm not sure if it's just the season, but I've read a few "do I or don't I take a vacation" posts in different blogs. My response is: if you have the cash, definitely do it -- and do it before your mental or physical health makes a vacation an emergency priority. Saving money for personal (and/or family) mental health is a very important thing, and it shouldn't be ignored for "well, I/we could use that $500/1000/whatever for paying down our debt."

Burnout is a nasty, draining thing, and this happened to me a couple times during my hi-tech days. It's scary when you go on a two-week vacation and you're not rested and relaxed when you come home. Feeling tired all the time and having the attention span of an gnat is not enviable or recommended.

The first time I hit burnout, I didn't realize it until my supervisor pointed out that I was doing about 25% of the work I had been the several months leading up to that point. My work volume had decreased by 75%!! That was scary to find out -- especially when the supervisor immediately launched in to a "well, this has to change or you will be experiencing some change in your employment status" speech. That she waited so long to say anything or ask about how I was doing is something else entirely -- though the moral of that is: you can't wait for your boss (or anyone else) to recognize the signs of burnout and then have them nudge you into taking some time off.

After that first bout of burnout, I focused more on my job and planned a vacation. Eventually, my work volume returned (and I also got a better supervisor).

The healthier you are mentally, the more apt you are to get new projects and stay off the boss' "what the heck is wrong with Joe?!" radar. While there are definitely things you want your boss to notice, you don't want them to notice you being tired, worn out and with a limited attention span, or having your volume and/or quality of work noticeably change for the worse.

I don't think I'm currently at a point where my work quality is suffering, though I'm pretty certain I could accomplish more in less time if I didn't currently feel so tired all the time. I'd certainly also save time on re-verifying content and having to look at my notes to remind myself of details.

So, by taking time and a little money for a vacation, it is possible to make more money. I know my situation is a little different since I'm self-employed and don't have a sponsored "vacation pay" benefit, yet I still think this is true for anyone. It's not only about being able to bill more hours, it's about being able to do better work, and it's also (very importantly) about doing something for myself.

Thursday, April 3, 2008

2008 Goals Update: March Redux

Another month has passed, so it's time to check in with the goals I posted at the beginning of this year.

1. Pay off an additional 40% of my [original] debt. This isn't coming along at the pace I'd like for this year... I'm hoping that the recent surge in work will help make up for a lackluster start to meeting this goal.

2. Diversify my income. Yeah. Yes. Si. Oui. Ja. Let's see, in the past month alone I've: worked for primary client, copyedited for a new client, sold my first necklace and (shameless plug for myself) listed several others on etsy, petsat, started building a new website for another client. I'm succeeding in this goal more than I expected for so early in the year.

3. Make more money. After a couple early year lulls, it is picking up. It's worth noting that some of the diversification from Goal 2 doesn't provide immediate compensation (e.g. the website is a fee-based project, and I have to wait for people to buy my sparkly necklaces).

4. Work more. Uh, yeah. See Goal 2...

5. Invest. Alas, this has not happened yet. My emergency fund is not yet at 3-4 months living expenses. It's a lot easier to use up an emergency fund than to restock it...sigh.

6. Open and fully fund a new (Roth) IRA. I'm still actively saving for opening my a new, Roth IRA. My heart is pretty much set on a Vanguard Roth, so I'm diligently saving so that I can make the $3k minimum buy-in.

7. Use cash only. This continues to go well. I do use my debit card a bit more than the first couple months of this year, but I'm comfortable with how I'm doing.

8. Travel. Next weekend, I will be heading to lovely Victoria BC, for four days of relaxation, walking around, and Roger's chocolates. If the weather's nice, I may try to make it to Butchart Gardens, though I don't know if anything is in season there yet. Really, I may just sleep most of the time, as I've been getting quite exhausted recently (if I didn't take a minimum of a long weekend, burnout and true exhaustion would be nipping at my heels soon).

9. Build up the readership for this blog and cultivate a daily readership of 500 readers. This is going well. My RSS numbers continue to increase (thank you faithful readers!), and more of you are leaving comments (which I greatly enjoy and appreciate -- it's nice to see comments of people who've found a post to be particularly relevant or thought-provoking).

10. Help my mother sort out her finances. This is still, unfortunately, kind of in limbo. I've received a couple updated documents, but nothing more. My mother is definitely of the "let someone else deal with it" mold, and isn't very proactive in getting me what I need. I'm also a bit wary to give Big Financial Advice, because of the impending recession. My current plan is to see how things have changed for her in the last few months, make a recommendation of my own, and ALSO recommend she talk to a financial advisor (I think she has one). She is slated to retire sometime in the next few years, and I want to make sure she gets the most of what she's saved.

11. Snowflake. Yeah, I've been snowflaking. Though I've only just decided how to apply the $300+ I snowflaked in February...

The Festivals and Carnivals

Again, this week I participated in both the Carnival of Personal Finance and Festival of Frugality. The CPF included my article If You Build It, They Will Come (though the host didn't include a one-line summary of the article, and I've had almost no traffic from the carnival...sniff...I really like this article!), and How Much Money Do You Lose Through Laziness? was included at the Festival of Frugality.

Head on over to see the bevy of other articles. I've been swamped with projects, so I haven't done more than quickly peruse the lists of articles, much less read any...sigh.