Wednesday, March 28, 2012

Budgeting 101

Some of my readers have requested a basic budgeting lesson. I am pleased to have this blog become an interactive forum driven by reader response, so here it is:
Budgeting is important. Basic budgeting concepts are easy. Budgeting well is a little bit harder. Here is how I do it, along with some tips to help you get started.
Part 1 – The Basics
To start, it helps if you have some idea what you are working with. A little research is required. Gather your pay stubs. Think about all your sources of income: salary, tips, investment income, alimony and child support, rental income, public assistance – everything counts. Gather up your utility bills and recurring expenses. If you have not done so yet, begin writing down everything you buy. (You can come back later and read about this topic HERE.) You need to know where you have been spending your money to make a budget that reflects your reality.
You can calculate your budget using just a note pad, but I recommend graduating to a simple spreadsheet file such as can be made in Excel. Doing this electronically will be so much easier. You can tweak the categories and numbers to your heart’s content, and the spreadsheet will do all the math for you. There are many commercially available budgeting programs, but I recommend a real K.I.S.S. (keep it simple stupid) system that I have created. E-mail me at and I will send you the file for free. 

It is important to do your budget before the new month begins. You should be doing your April budget at the end of March, your May budget at the end of April, your June budget at the end of May, and so on.
The file is set up this way:
A) At the top, list all your income for the month. If exact numbers are not available, make your best educated guess based on your earnings history. Total up this amount. This is how much money you have to spend for the month. If any changes happen during the month, such as a cash gift, unexpected bonus, or a drop in income due to a missed shift or delayed payment, you must update your monthly income totals as the changes occur.
B) Next, list all the expenses you will incur over the course of the month. I suggest starting with the big expenses that seldom change and must be paid, such as income taxes and social security withholding, medical insurance, life insurance, retirement savings, emergency fund savings, mortgage or rent payments. For me, this category also includes charitable giving.
C) Next, list your recurring and variable expenses, such as utilities, cell phone bills, car payments and life insurance. Include in this section savings for larger recurring expenses, such as that big annual car insurance bill, car repairs (unless you drive cars that don’t break down), home improvements and repairs, and also gifts. (Christmas will come this year; try not to act surprised.)
D) Next, list the day-to-day expenses of living; such as groceries, dining out and take-out food, clothes and clothing care, beauty supplies, salon visits, gym memberships, dues and fees, minor car maintenance, housewares and minor home maintenance, gifts, entertainment, and any hobby-related expenses.
E) Finally, add up all the expenses and subtract them from your income. Your goal is for the total of income minus expenses to be zero. If the total is more than zero (a positive number), then you still have money to spend. Congratulations! You can beef up your savings, give more away, and otherwise enjoy the fruits of your labor. If the total is less than zero (a negative number), then you have busted the budget. You need to go back and tweak all the numbers to get the total to equal zero, or you will overspend and incur debt. This is when playing good defense comes in handy (You can come back later and read about this topic HERE),  since creatively lowering your expenses will help you get to zero.
Part 2 – The Challenges
You will almost certainly fail! How’s that for motivation? Kidding aside, budgeting is a process. This can be hard at first! Budgets are based on assumptions, and sometimes those assumptions are wrong. Surprises will come and mistakes will be made. There have been times when just a few hours after I completed the monthly budget, I learned about some huge expense that totally disrupted everything.  A good budget allows for those surprises with an emergency savings category and a recurring expense category. Recognize at the start that It might take a while to get this just right and you will reduce your frustrations. 
The numbers won’t work. If you can’t get to zero, and you have gone over-budget, then you need to increase income or reduce expenses. Many expenses can be reduced with minimal effort. We tell ourselves it’s not possible, but of course it usually is. It’s just not always convenient or enjoyable. If your very life depended on it, would you be able to find an extra $100 a month in your budget? I’m guessing yes. So just for a while, pretend it does, and find some ways to reduce expenses so you can get this darn thing to work.
Some quick, down and dirty money saving ideas:
  • Cancel cable. (You’ll live.)
  • Quit smoking. (You’ll live longer.) My cousin recently quit and is on track to save $3,600 this year. That will bring her some breathing room – in more ways than one.
  • If you have not been to your gym in 12 weeks, cancel the membership.
  • Eat out less often, or not at all.
  • Make your own coffee and save at least $60 a month.
  • Discover your library and you will find free movies and discount passes to area attractions. And they still have books, too.
  • Shop for things you need at consignment shops or on Craig’s List. Only underwear and toothbrushes must be bought brand new.
  • Call your insurance agent and politely say, “It’s time to lower my premiums.” 
  • Drive less.
  • Cars are the number one budget busters for many of us. If yours is dragging you down, trade to a less expensive car.
  • Wash it, fix it, do it yourself.
Pay yourself first. If you have never done this before, it’s time. This is not a new idea, but it remains the cornerstone of any financial plan. You simply must set aside something for the future. I recommend that your budget begins right at the top with 10% set aside for retirement savings. If this seems impossibly, start at a lower percentage, but not too low – it’s OK to let it hurt a little bit. Increase the amount whenever you are able. As you get better at budgeting, you will find money. 
Another way to find retirement savings money is to save your raises. If you received no raise this year, you would find a way to survive, right? So pretend there was no raise and beef up that percentage. If you are saving at 5%, and you get a 3% raise, save that raise so your savings rate becomes 7%.  Remember, I practice what I preach. I saved my raises for many years, and over time my retirement account contribution grew to 24% of my income. This was made possible by a constant re-examination of and reduction of expenses. Thanks to budgeting, my expenses went down as my income went up, and I saved the difference.
Part 3 – The Benefits
Feel richer. Budgeting done well will make you feel richer. I have found that careful budgeting reduces expenses, giving you a “virtual raise.” 
Smoother cash flow, more savings. One of the benefits of a budget is that it allows for an ongoing fine-tuning of your spending. A budget allows you to see exactly where the money is going, so you no longer have to wonder where it went.  If you are consistent in your efforts, you will get better at planning. As months go by, there will be fewer surprises, fewer mistakes, smoother cash flow, and more savings.
A budget allows you to see the RELATIONSHIPS between your categories of spending. Categorizing your spending and putting real numbers to each category allows you to analyze effectively.  You might see at a glance that if you had no car payment, all the numbers would fall nicely into place.  You might notice that you go over budget on food $100 every month, and perhaps begin to question the wisdom of that $170 cable bill. You might realize that it has been years since you shopped for a cheaper insurance plan. You might discover that your charitable contributions are less than your cell phone bill. You could realize that your spending at the coffee shop is greater than your retirement savings. Seeing the relationships between different categories of spending allows you to consider if that spending is in alignment with your goals and values. 
You will stay out of debt. If you budget well, stop overspending your income, and save for recurring expenses and emergencies, then you will no longer need to rely on credit cards to make up your monthly shortfalls.  This is important because debt is EXPENSIVE. Trying to do a budget and grow wealth while carrying debt is like driving with the emergency brake on.
Part 4 – Tips & Inspiration
Stay realistic. The primary goal of budgeting is to develop control and awareness. As the months go by you can work towards any secondary goals, such as reducing spending, increasing savings, or just making ends meet.  It might take a while to make the adjustments needed to get things right where you’d like them to be. Be patient with yourself, and give yourself a “pat on the back” for even making the effort. 
Use cash. When you shop, use cash, not credit cards. You will be much more aware of your spending, and probably spend less. (You can come back later and read about this topic HERE.)
Overcome the fear. This is important. This is worth it. Tend this garden, and it will yield a harvest. (You can come back later and read about this topic HERE.)
For richer or poorer. If you are married, then this is a process that must be done together. I believe that married couples should pool all resources. There should be no “yours” and “mine,” only “ours.”  This trip is taken on a tandem bicycle, with two riders, pedaling in the same direction. You must work together and agree on your goals and expenses. (Much more on this topic in a future post)
Look forward to the cool stuff. View this process as an adventure! A big reason why I budget is to get my money to do all the important stuff it needs to do so I can use any “extra” money to do some guilt-free cool stuff. Once the important stuff in your budget is covered (you responsible adult you!) then you can move on to the fun.  As you get better at budgeting, analyzing, and controlling your expenses, you likely will find that you have the money to enjoy more of life's pleasures.

Sunday, March 25, 2012

Offense and Defense – What's Your Game Plan?

When it comes to money, there are two categories into which everything can be divided: offense and defense. Offense is what you EARN. Defense is what you KEEP. Personally, by necessity, my forte has always been defense. I’m getting better at offense. My goal, posted here for all the world to see, is to become excellent at both.
Offense – Someone who is good (strong) at playing offense will earn a high income relative to their needs. Someone who is bad (weak) at playing offense will earn a low income relative to their needs. Simple as that.
Defense – Someone who is good (strong) at playing defense will spend less than their income, which means that there is income that can be saved.  Someone who is bad (weak) at playing defense will outspend their income, whatever it may be, leaving little or nothing for saving. While it is not difficult to overspend a low income, there are plenty of people who will overspend their income no matter how high it goes.
Many people are good at offense. Many people are good at defense. Much less common is the individual who is good at both, as this person will almost certainly end up wealthy. Someone who is good at neither may end up as broke as a $3 watch. Either way, the percentage of your income that you keep is more important than how much you earn. For this reason, I propose that defense is more important than offense.
OK, huddle up!
Strong Offense + Strong Defense 
(Make a lot + keep a lot, relative to income) = Winning with money!
Weak Offense + Strong Defense 
(Make a little + keep a lot, relative to income) = Winning with money!
Strong Offense + Weak Defense 
(Make a lot + keep just a little or none) = This game is too close to call.
Weak Offense + Weak Defense 
(Make a little + keep just a little or none) =  A losing season. Time to fire the coach.
As shown above, strong defense is the “X” factor in winning. If you have a low or modest income, but live beneath your means, you will have money with which to build wealth. Small amounts of money invested over a working lifetime can lead to a fortune at retirement. If you have a high income, and live beneath your means, all the better. Either way, you win when you spend less than you earn and invest the difference. 
As with any game plan, both a strong offense and a strong defense are best. I recommend that you get to work on the defense right away, since that is most important, and it is something you can have an immediate impact on. This means spending less and saving more. Improving your offensive game is a bit more work. To do this, you must make a plan to earn more. Easier said than done I know, but for most of us far from impossible.
One of my goals with this blog is to help you hone both your offensive and defensive game. I will do both with stories still to come. Meanwhile, some homework: brainstorm your own personal ways of getting better at money offense and defense. How will you start to earn more or reduce your expenses – right now, today? It would be cool if you’d share your ideas with the readers here at the Money Trip blog. Or, you may email me privately at Good luck!

Thursday, March 22, 2012

The Love of Money

Blessed are the poor. Store your treasure in heaven where no thief can steal or moth destroy. It is easier for a camel to go through the eye of a needle than for a rich man to get into Heaven. Growing up hearing these Bible passages, I arrived at adulthood thinking that money just might be a curse that would lead to Hell’s fires. As I began to make my way in the world, I actually got anxious about my success. 
After all, “Money is the root of all evil” – right?
I have heard this said more than once. It’s a safe bet you’ve heard it, too. Whenever it is said, everyone murmurs in agreement. Money is evil. How can this be? Sometimes people do bad stuff to get money. Sometimes people do bad stuff with the money they’ve got. I get that. But you can also do all kinds of cool, non-evil stuff with money. So then, what’s the deal? Is money really the root of all evil in the world?
This may surprise you but after careful consideration, I’m gonna go with, “No.”
This oft repeated statement is actually a misquote of a Bible passage – 1 Timothy 6:10: For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs. (NIV)
So, it’s the LOVE of money that is the root of all kinds of evil. Aha!
This is an important distinction. It’s not the money that is evil. It’s the love of it – the misplaced love that gives birth to all kinds of misery. Putting money above that which it should not be put above – also known as greed – is the real problem. 
Money is a tool, not unlike a hammer. A hammer can be used for good – to build something beautiful or useful. A hammer can be used to damage or destroy. We don’t praise the hammer when it builds something good, and we don’t blame the hammer when it is used to destroy. No one ever says, “Hammer is the root of all evil.” It’s just a tool. The person who is holding the hammer gets to determine if that tool will be used to build or damage, to create or to destroy. 
And so it is with money. It’s OK to like it, the same way you might like and appreciate any useful tool.  Just don’t love it, and you’ll avoid the “many griefs” waiting for those who do.

Monday, March 19, 2012

How a 10¢ Envelope Saved Us $300 a Month

For years, my wife and I have been diligent about tracking our spending and keeping a monthly budget. We had our notebooks in which to track all purchases, and I had my spreadsheets where I would predict spending each month. At month’s end, we would compare the plan to the actual spending to see how we did. We did this for four or five years; but most months, we were off, sometimes by quite a bit. This was discouraging, because being so diligent should pay off with consistent wins. Many months we were off by at least a few hundred dollars. When this happened, we either had to save less than planned or dip into our emergency fund to make up the difference.
Last June we really blew the budget, and it was not because the car broke down or some other big, unexpected expense popped up. The trouble was the grocery bill. We had budgeted $550 for food, which should be plenty for a family of four, especially when two of the four are very young. My wife and I both cook, and we know how to shop the sales and plan meals accordingly. We eat leftovers, and we know about 18 different ways to turn the leftovers from roasted chicken dinner into something else. 
At the end of the month when I tabulated our purchases to compare the spending plan to what we actually spent, I discovered that we had gone over budget – by more than $300. My jaw hit the floor! How did this happen? As my wife and I looked back over the month, we just could not figure out how we had spent so much. We were not eating porterhouse steaks and fresh-caught salmon fillet every night. We did not host a big dinner party or a huge BBQ. The only answer that made sense was that we had simply become super-sloppy in our spending. We must have bought too many convenience foods, too many top-shelf items, we did not shop the sales, and we must have been tossing our leftovers down the disposal. Whatever the cause, we knew that this budget busting boo-boo could not happen again. 
Spend less when you shop –
pay with cash.

The simple solution was a 10¢ envelope.
At the start of the new month, July, I took $500 out of our checking account and put it in an envelope. I handed that envelope to my wife – who does most of the food shopping – and said, “Good luck, baby!”  That $500 was our food budget for the month, and no matter what, we were not going to spend a dollar more. Period!  We prepared for a month of rice & beans as we joked about the ramen noodle dinners, dumpster diving and fasting that was sure to come. 
This envelope plan might seem slightly unusual, but up until about 40 years ago, this is the way that everyone did it. There was no other way. Our great-grandparents did not have Discover cards. They had cash, and when it was gone, it was gone.
Would you care to guess how much we spent on food in July?  Just under $500. Success!
We shopped the sales. We planned the meals. We ate the leftovers. The crazy thing is that we ate as well as ever! There was absolutely no sense of deprivation or loss.  There was, however, a tremendous sense of victory! Hurray for us! We were finally getting real control of our spending.
What we experienced in July was a universal truth: There is just something about using cash – cold, hard cash – that changes the way we shop and spend.  Peeling off dollar bills feels different than swiping a little plastic card. Somehow, it hurts more. As the month goes on, you see your food envelope getting thinner and lighter, and you instinctively begin getting conservative because you don’t want to run out of dough.  
This little budgeting trick – the power of cash – has not been lost on the merchants where we all shop. Merchants KNOW that shoppers who use plastic to pay spend 10-20% MORE than shoppers who only use cash. That is why the merchant is willing to pay a 2-3% FEE on every transaction processed by a bank or credit card company. That is why stores try so hard to get you to sign up for their own brand of credit card every freaking time you try to cash out. Merchants pay the bank fees and push their own store cards because YOU WILL SPEND MORE if they accept plastic as payment.
Cash is King, in more ways than one. If you want to spend less of it, skip the plastic and go old school. If you want to give yourself a “virtual raise” by cutting your spending, the “cash envelope” is the easiest way to do it. It really works! Merchants know it. Banks know it. Great-grandma knew it. Now you know it, too.

Saturday, March 17, 2012

500 Page Views in 10 Days = Thanks!

When I started writing stories for what would become this blog, I did not have any particular expectations regarding how successful it would be, or how I would define success. I was open to the idea that this might simply be an on-line diary to help me clarify my own thoughts and beliefs. If someone else should happen to read it, all the better. Although the blog stories have a central theme and the writings point to a certain mode of living, the blog format itself was an experiment.
This is why I am so pleased and surprised by the initial response. MoneyTrip has received over 500 page views in the first 10 days. On average, 50 people a day are coming to my blog and reading my stories. How cool! Also, many of those readers are offering encouraging comments.
One recurring theme of the messages I’ve received has been budgeting. People are saying, “OK, you’ve sort of convinced us we should be budgeting. So, how do we do it?” Considering this response, I have moved the Budgeting 101 lessons up to the top of the post queue, so you can look for those to come in the next few weeks.
If you see a story here that you like, please post a link to your Facebook page. Just click the " f " logo under the story. If each of my readers did this, there would be about 8,500 new sets of eyes who might find me here. The more the merrier, so I’d be grateful for the assist. With just a click, you can help me make it 5,000 page views!
If you would like to send me a message to say hello, make a comment or request a topic – and you don’t want to log in and post a public comment – you may do so at
So, thanks for reading, thanks for sharing, and thanks for 500 page views in the first ten days! Because of you, this has been more fun than I expected.

Wednesday, March 14, 2012

Lessons from a One Year Old

I have a son who’s just turned one. He is a big, mellow, happy boy who is always on the move. He can’t walk just yet, but he will be walking soon if his crawling and cruising is any indication. 
Watching him grow during his first year of life has brought me incredible joy and pride, also some insights into how I’ve been approaching the living of my own life.
Babies are incredibly focused. They put all their attention and energy into one goal at a time. An early mobility milestones for any child is the ability to roll over. The desire comes from deep inside. When my son was about five months old, he began to twist, wiggle, arch, grunt, and struggle. He was trying to move. Several weeks later,  he rolled from his back to tummy for the very first time. As is typical, he then discovered that being face down was not all he had hoped it would be and began to cry. But as soon as he was gently returned to his back, he immediately began to try again. Usually, this process continues until baby can roll from back to tummy and from tummy to back with equal ease. Then baby shifts attention to sitting up, then crawling, then walking, and so on. The point is that my infant son was totally focused on learning to roll over in spite of the uncertainty and discomfort that came with the effort
A few weeks ago my baby boy decided that he wanted to touch something new and interesting – the shiny brass handle on our front entry door. He crawled over to the door, considered his target, and began to reach up for it. As I watched him start his attempt, I thought to myself, “He’s never going to reach it. He’s not tall enough, and he’s way too wobbly on his feet.”  However, since there is value in the effort, I let him try while I kept watch close by. 

He quickly realized that he could not simply reach for it and grab it, and kneeling was not cutting it either, so he attempted to stand. Now, bracing himself against the door, he was closer to the goal, but still far away. Reaching up on tip toes, he fell. The fall shocked him and he started to cry. I picked him up to console him, and he immediately began to protest the interruption, wiggling out of my arms and back to the floor for another attempt. Crawling quickly back over to the door, he again climbed the face of it and resumed the attempt to grab that brass handle. He figured out that by pressing himself flat against the door, he could gain another few inches. Being a wobbly guy, this impaired his balance and he fell again. More tears. More protesting and wiggling down when I picked him up. As I watched him crawl back to the door, I thought to myself, “When’s the last time I tried so hard for something that seemed out of reach?” 
Pressing himself flat against the door while reaching was helping, but not really getting it done, since there were still a few inches left to go. Then came the big discovery: Baby figured out that if he stood on the toes of one foot, and then reached for the handle with the opposite hand, he could just about grab it. Closer! Closer! So close! Bam! Fell again. More tears and whimpering in protest, then right back to the door. This went on for at least half an hour. 
By now my jaw was hanging open. Partly because I couldn’t believe how focused and motivated he was, and partly because it looks like he’s actually going to figure out how to reach that handle. 
A few more attempts of the tippy-toes-with-left-foot and reaching-with-right-hand method and he had it! He grabbed the handle and let out a loud shout of victory, as if to say, “I did it!” Then, of course, he fell. I assumed that since he had been successful, he would lose interest; but again, I was wrong. I suppose he wanted to prove to himself that he could grab that handle any time he wanted to, because he continued in his efforts until he had successfully grabbed it five or six times more. Only then, having repeatedly vanquished his foe, did he at last turn his attention to some other activity. 
I wish I possessed the words to convey just how amazing it was to watch this process. I was schooled in tenacity by a one-year-old baby. How can I express the pride I felt? That’s my boy – he never gives up!  He achieves what seems impossible! He wins!
We grown-ups can be so lazy. My baby boy has more fire in him than I do. We are born with the will to try, to never give up, to experiment, to be focused and single minded and persist in the pursuit of goals. These traits are necessary for surviving and thriving through the first few years of life. How do we lose them? What takes this fire out of our bellies? How often do we talk ourselves out of worthy efforts before a single calorie is burned or a single risk is taken? I know I’ve done this too many times to count.  If we were as tenacious as a baby, we’d meet nearly every goal we ever set.
Next time you set out to achieve something worthy, be like my big baby boy.  Try, fall, get hurt, cry, try again. Then try again. Then try some more. Expect the best of yourself. Believe in the possible. Stay focused. Prove them all wrong. Grab that brass handle!
My life is full of challenges and opportunities. So many dreams and goals that sometimes seem out of reach. Now, whenever I feel this way, whenever I catch myself doing less than my best, or thinking about giving up, I’ll picture my baby boy reaching for that brass handle. Then I’ll get focused, work harder, and try again. My children are showing me how, and they are watching me. How can I do any less? 

Tuesday, March 13, 2012

Fear of Planning

Please note: This post was previously titled The "B" Word.  I had intended to title it Fear of Planning but talked myself out of it. Regretting the decision, I have restored my original name choice.

Budget. The dreaded “B” word. I’ve often wondered why this word conjures so much fear and resistance. Budgeting is planning, and I have never understood the reluctance to plan. What is there to lose? There are plenty of people who would rather step on a rusty nail than create and follow a budget.  Whatever the reason for the fear, budgeting is just too important and too fundamental to healthy finances to go undone. Failing to plan is planning to fail.
It seems to me there are five reasons people don’t budget:
  • Fear of Poverty: Some are afraid that they will discover that there is just not enough money to meet all their needs and wants. (If that’s the case, you probably already know it – and don’t need a budget to tell you.) But if this is your situation, a budget can help you to be certain your essential needs are met. If the money you budget for food is only spent to buy food, then you probably won’t run out.
  • Fear of Loss: Some are afraid that they will see the “financial truth” and be forced to conclude that a lifestyle change is in order. If you have no money saved and can’t pay your bills, it might be time to sell the Harley, move to a cheaper home, eat out less often, or stop shopping just for fun.
  • Fear of Maturity: Some folks are apathetic, prone to procrastination, or just lazy. (What? Who? Me?) Others are “free spirits” who figure the “universe will provide” for them and everything will magically work out. These individuals are unable to overcome their reluctance to look life square in the eyes and make the tough decisions that adults need to make. Unfortunately for this group, lack of discipline today almost always leads to a lack of options tomorrow.
This man is exhibiting
classic "Fear of Budgeting"
  • Extreme Wealth: Some are just so rich they could never spend it all. You are excused from the budgeting lesson if this describes your situation, but you might want to stick around just in case. Big time sports heroes, movie stars and rock stars file for bankruptcy nearly every day, in spite of their million dollar paychecks. Do you think M.C. Hammer had a budget? Think he knew where every dollar was going? Definitely not, but what he did have was a great big golden shovel with which to dig himself into a giant hole. It does not matter if you earn $30,000 a year or $30,000 a week, you still need a plan.
  • Ignorance: Some were just never taught, never learned, and never possessed the basic life skills needed to sort it out for themselves. We could cure this problem by teaching basic personal finance skills in junior high, and advanced skills in high school. (The cynic in me believes that one of the reasons we don’t teach this is because the ignorance is so easily exploitable for large profits. More on that in a future post.)
If you recognize yourself in any of the above examples, be assured I’m not trying to beat you up or tear you down. I’ve experienced several of these fears myself at one time or another. That said, this is a process that requires some honesty and self-reflection. You need to identify what is holding you back so you can move past it.
I believe that most people who avoid budgeting do so because, above all, they fear that some kind of SACRIFICE or PAIN will come. In my experience, there are no real sacrifices or pain that come along with budgeting - only decisions. After looking at my budget, I may CHOOSE to give something up, but when doing that I am usually trading it for something else. Often, I am trading little wants for big wants. A loss here is a gain over there. For example, what if you eat out much less, but doing so allows you to rent a beach house for your summer vacation? What have you lost besides maybe a few pounds? Not much. What have you gained? A week by the shore your family might never forget. Good trade.
A budget is just a spending plan, which means that you tell your money where to go instead of wondering where it went. That’s not so scary, right? 
If you do not believe that a budget is something you need to do, try these little tests. First, next time you receive your credit card statements, see if you have been charged interest. If you have, that means you are spending more than you earn, and using the credit card to finance the shortfall. If this is you, then you definitely need to start budgeting in earnest. Overspending your income is not sustainable. Second, check your savings account balances. Are they growing? If not, then you need to budget so that they can.
Remember that your budget is your budget - ultimately, you are in charge. Do what you want with your money, but do it knowingly, with thoughtful awareness, eyes wide open, lights on!
I believe that eliminating debt and building wealth are the personal responsibilities of every adult, and it is impossible to get serious about either without a spending plan. Do yourself a favor and jump this hurdle. Overcome the reluctance and fear! You have nothing to lose, and much to gain. I believe you will discover, as I have, that it is worth the effort.

Saturday, March 10, 2012

Customer Service – a piece of cake!

A few months ago I went to the local Stop & Shop supermarket to order a cake for my daughter’s birthday. The order was placed in advance so there would be plenty of time for the bakery to have it ready for my Saturday pickup. When I arrived on Saturday to retrieve the cake, it was NOT ready. Apparently, the original order had been lost altogether. Not good.
There was a gentleman near the bakery department who was stacking pallets. It did not seem to me that the bakery was his normal department, but nevertheless, he tried to be helpful. In the freezer, he located a cake that was similar to mine and did his best to write my happy birthday message on it. Since the party was starting soon, I thanked him and took the cake straight to the check-out register. As I waited in line, I took a better look at the cake. I was not thrilled by what I saw. The lettering was poorly done. The frozen cake had little chunks of ice on top. The lettering had gone over the ice, and the melting ice was causing the already less than legible letters to distort even further. I was starting to feel sad. This was not a cake worthy of my daughter on her special day. 
Just as I was realizing my disappointment, it was my turn to pay. As the cashier scanned my cake, I said to her in a quiet and conversational tone, “What do you think of this cake?”  She replied, “Why? Is there something wrong?” I told her that my order was not ready when I arrived, the cake was frozen, and the lettering was poorly done and getting worse. Then I added, “This is for my little girl.”

I was not complaining, just commiserating. I was simply being human and expressing my thoughts person to person. I had resigned myself to the idea that there was no time, no way for me to get a better cake. This was it.  The last one. I expected no action and demanded no remedy. 
What happened next surprised me.
The woman said, “Please wait here.” Then she took the cake and zipped straight into the manager’s office. Not 30 seconds later, the manager emerged from her office with my cake in hand and apologized. She asked me if I could wait, “Just a few minutes,” and I said, “Yes.” Then she disappeared. Ten minutes later she returned with a beautiful non-frozen cake with much nicer lettering on top. She handed me the new, improved cake with her apologies. She also handed me a store gift card equal in value to what I had paid for the cake. I was amazed. 
As a professional customer service supervisor and service aficionado, I took careful note of what transpired from the moment when I voiced my displeasure. Here is what I noticed:
First: The cashier had incredible empathy. She noticed that I was not happy. This was possible only because she was actually paying attention to me as a person. She was so good, she responded to a complaint so subtle that I did not fully realize that I had spoken it.  If she had replied to my comments with only a shrug, I would have walked out with the cake and that would have been the end of the matter, at least as far as she was concerned.
Second: The cashier had been empowered. Perhaps her store culture or manager empowered her. Maybe she was the sort of person who has the character and awareness to empower herself. Either way, she took action. Many in her shoes would not have realized that they had the ability to act in this situation. Many others would have lacked the will or the training to act.
Third: The manager showed extraordinary responsiveness. Whatever she had been working on in her office came to a sudden halt when she received the report from the cashier. She went straight to work righting the wrong. 
Fourth: The manager went above and beyond with generosity. Not only did she promptly fix the cake and then apologize, she also gave me a refund in the form of a gift card. I would have been satisfied with a better cake. Remember, I never actually lodged a formal complaint, nor did I ask anyone for anything! The refund was not expected, and it knocked my socks off. 
This is a team that really gets customer service. Empathetic. Empowered. Responsive. Generous. And really, really smart.
Why smart?  
What do birthday parties for small children usually have? Big crowds of people. People who talk. And what do they all gather around ? The cake. A good cake gets compliments and raves – “Ooh, so pretty, where did you get it?” A bad cake does not. My original cake probably would have been served with an apology and a story about how Stop & Shop dropped the ball. Instead, my new improved cake was served with a story about how Stop & Shop has mind blowing customer service. 
I told people at the party. I told people at work. I told neighbors. Who knows, it might even end up on my blog. Smart.
Now, who wants some cake?

Wednesday, March 7, 2012

The “F” Word

I feel bad for the word frugal. It is so misunderstood. I mean, frugal is such a classy dame, but everyone thinks she’s cheap. Frugal is wine and cheese in a picnic blanket, but everyone thinks she is mac & cheese in a plastic microwave dish. I’m here to defend her reputation.
Frugal does not mean cheap. Frugal is about intention. Frugal means using every part of what you have so nothing is wasted. Kind of like using all your vacation time before it expires or drinking your whole beer before it gets warm. There’s noting cheap about that. Frugal is savoring.
Consider for a moment what happens during a power blackout. It changes everything. In a blackout there is no electric light, no TV, no DVD’s, no Facebook, no video games, no time-consuming diversions.
What is there instead? Candlelight. Conversations and board games. Chatting by flashlight with seldom seen neighbors. Hide and seek and ghost stories for the kids. Going to bed early like folks did before electricity doubled the length of our days.  Once we remove all the extraneous modern distractions, we have simplified life. What we are left with is MORE of what really matters, and less of what really doesn’t. 
Much as a blackout redirects our attention to what is essential and fundamental, so too does choosing a frugal lifestyle. Instead of focusing on what you don’t have, you focus on what you do have.  Sure, you might choose to give up some things, but you are left with what is most valuable and essential. Eventually, if you persevere, you won’t miss the rest. When you savor the essentials of life, when you sit and breathe and count your blessings, you are living intentionally, and this is a big part of being frugal.  
Sure, there might be less food at the buffet, but everything there is healthier and tastes better. Frugal is better living by subtraction, and on that path lies abundance and peace.

Tuesday, March 6, 2012

What's in a Name?

Let’s break it down:
Money - a store of value, a medium of exchange, a social contract
Trip - a journey / a stumble or misstep / slang for one who is under the influence of a hallucinogenic substance and is not thinking properly
That about sums it up! I may occasionally stumble. It’s usually not too hard to find someone who thinks I’m kinda nuts. Nevertheless, I remain undaunted by my own missteps and the discouraging opinions of others. I am on a journey with a definite destination. 
I hope a few intrepid souls might decide to join me here on my trip. It’s much more fun to travel together.

Sunday, March 4, 2012

You gotta write it all down!

Many of the money books I read when I started to get wise instructed me to write down every purchase that I made. That’s right, everything. Just get a little notebook, and jot down every single purchase. And while I did just about everything those books told me to do, I just could not bring myself to do this essential step.
You can’t tell your money where to go until you know where it went. And a few years ago, I realized that I had gotten lazy and really didn’t know where much of the money was going. 
My darling wife and I had been married for seven years or so. We were DINKS dual income no children – and our careers had matured, so money was flowing. We were saving 15-20% into our 401K’s, we owned our home, we had two new cars and travelled often. We were living pretty well and saving without really trying. So what’s the problem? Life was good, but the lifestyle was creeping.
I forget exactly what the trigger was, but something I read once again mentioned the step of writing it all down, and I finally figured, “What the heck. We’ve tried everything else. Let’s just do it and see what happens. If we hate it, we can stop. Nothing ventured, nothing gained, right?” My wife, bless her ever-supportive heart, agreed to play along. 
I bought two notebooks, one for each of us, and my first entry into my notebook was:
2 Notebooks – $2.24
A pretty exciting start, you’ll agree.
Then for the next 30 days, we each recorded every single purchase we made. At the end of the month, we totaled  up all our purchases, organized loosely by category, to see where it all went. If you do this exercise, you WILL learn something about yourself, I promise. 
What did we learn?  
The first insight was that we each bought something nearly every single day. There was hardly a day that passed when each of us did not whip out the cash or the Visa to buy something. That, I did not expect.
The second surprise was that we has spent just about $300 on wine. Yup, $300 on fermented grapes. Not all at once, but over course of the month we had managed to justify the purchase of about 12 really good bottles of wine. 
This was a “light bulb” moment, folks. Spending $300 on wine might not be a big deal if you are George Clooney, an Un-Real Housewife of Who-Knows-Where or a master sommelier; but we are not those things, so spending $300 was stupid. Preposterous, really. And ultimately not in alignment with our values or life goals. Wine was becoming a bit of a hobby of mine. Time to find a cheaper hobby.
My wife and I decided that $30 a month really ought to be enough money for wine. When we made our budget, that’s what we allocated. Suddenly, the $7 bottle of Shiraz was looking pretty good. And the other $270? Well, it wasn’t too hard to find a better use for that.
I encourage anyone who has never done this to give it a try for at least three months. You will learn a lot about yourself and your spending habits, and like us, you might be able to find some money in your budget that you’d rather send somewhere else. Best of all, after three months of tracking expenses in this way, you should have the information you need to start creating a solid spending plan that reflects the reality of your life, a plan that you can live with.

Saturday, March 3, 2012

But Marc, why another money blog?

Well, I’ve been thinking about that for months, and I’ve arrived at three unique reasons to persist in this venture.
First:  Suppose that you saw a singer/songwriter strumming in a coffee shop, would you approach them and say, “Excuse me, but why bother? Do you know how many songs there are? The last thing we need is another song. Plus, my iPod is nearly full.”  Or, would you approach a painter in the park and say, “Dude, give up. The world has enough paintings. The Renaissance is over. There is no art left to make.”

Probably not. 

By discouraging the creative effort, we would seem rude and foolish. Worse still, we could miss out on tomorrow’s favorite song, or the next great masterpiece. As the examples above illustrate, there is always room for another voice in the world of creative ideas.
Second:  I’ve never found a money blog that I completely agree with. There are many, and many are quite good, but even the very best of them occasionally give advice that I can’t endorse. In spite of the available variety, I have yet to find one that was perfectly aligned with my particular viewpoints, so there are none that I can entirely recommend. I guarantee that all the content to come here will be totally “Marc approved.” The stories I will tell are authentic and true, and the advice I offer is exactly what I personally live.
Third:  Because I want to - and that is absolutely reason enough.

Friday, March 2, 2012

I wonder how they do it?

For me, the obsession started on the trip home after a visit with some family friends. I’m maybe 12 years old. As we rolled along, I was sitting on the wide vinyl seat with my two younger brothers beside me and my mom and dad were chatting up front. The exact details have been lost to time, but these family friends had achieved a level of material success that my father admired. They had what my dad wanted for himself, and apparently they had achieved it with resources similar to ours. In this context, my dad asked THE QUESTION: 
“I wonder how they do it?” 
I suppose that it was largely rhetorical. I don’t think my dad ever called them up to ask. Either way, I NEVER forgot the question. In fact, I’ve been pondering it on and off ever since. The question has power, because in it lies the implication that there is always another way. No matter what path you are on, there exist other options, possibly better options. I’ve spent the last 20 years studying, reading, meditating and sometimes teaching and preaching on matters of personal finance because of that question.
When I graduated from college in 1994 with $22,000 of student loan debt, $2,200 on a Visa card, and a low paying, entry level job, I wondered how I was going to “do it.” My debt load was higher than my annual income – I was starting out with a negative net worth. Yikes! Welcome to the real world. So I started hustling extra work to earn more money and I started studying up on personal finance.  With all that my 18 years of formal education had taught me, it taught me nothing about handling money. I needed to fill in the blanks, and fast!
I read every finance book and magazine I could get my hands on. I learned enough that I started to develop my own informed opinions. (I will recommend the best of what I’ve read in a future post.) Sometimes, I found myself disagreeing with what I read and able to argue against it. That’s when you know you are getting a firm handle on a topic. Ignorance cured, I was on my way.
In 2006, I went “all in” and enrolled in the Certified Financial Planning program at Bryant University. (I did this just for my own entertainment, and when my classmates found out, they all thought I was insane.) The classes I took were challenging. Completing them increased my financial confidence and competence. However, I felt that there was one thing missing from all that analytical book learning – a little bit of heart. 
Knowing what to do is a small part of managing your money. Actually doing it is the larger part. That’s where things get interesting. What each of us wants out of life (what we value) will determine what we think we ought to do with our money. This is the part I like best, and the part that compels me to teach, write and share on the topic of personal finance, most recently in this new blog.
This project is dedicated to my dad for asking the question that started it all, and to my mom for always encouraging me to write. It is dedicated to my wife Kelly who has very patiently taken this trip with me for the last 13 years. Finally, this is for my children, to whom I hope to impart all I know, so that one day people will look to them and say, “I wonder how they do it?”