Wednesday, February 25, 2009

Frugality 102

Did everyone take good notes? I sure hope so. After all it is more productive for me to take a nap than to maintain this website. It saves me time and money. I am in the middle of a few investment deals and in the process of being richer than what I am now. I will elaborate later like the evil genius I am but I rather go back into my special on Frugality.

It really is a science to be frugal. Do not take my word for it; invest in or "download" Quicken to show what I mean. Honestly, I could care less how you obtain it; just try it out. It is a program that is geared towards saving money. it has been on the market for years and it is no "secret". Since there are a bunch of sheeple that are either a) broke or b) in debt. I have decided to write this blog because I was tired of writing all these blogs on different websites and I wanted to help people.

This session of frugality is more or less about reducing complications to the basics. Frugality is a art to me. I live to save money and re-invest it. In fact nothing gets me more depressed than spending money in a manner that makes me less wealthy. And nothing gets me more riled than having "dead-beats" trying to cipher off of my blood, sweat, [brains] and tears. In frugality, you heard the madness, now onward to the method.

Frugality Continued

So you keep hearing about these layoffs and these scandals. Bankers are taking bailout money used to stimulate the economy and use it towards themselves. Like no one saw that coming right? Yeah, and I put the Statue of Liberty up on EBay. There are people like this out there that want your money. They often scam you with credit deals and mutual funds. This nation is being run by people that sell us credit and are mutually broke. In this issue of frugality there are some basic steps to adhere to, to simplify your life. Who are you going to start listening to? Your co-worker who "lives" paycheck to paycheck. To me that is a bonafided wage slave. If you want a fancy college word for it, corvee labor is a notable substitute.

Debt works in cycles. you accumulate it, you gather more of it, you put it off, and your broke again until then next loan. Like I said frugality is not rocket science. It is just doing the opposite of this. Now I am going to talk about frugal investing.

Warren Buffett and Sam Walton are two of the most effective cost analysts. They analyze risk and they do not spend more than their means. Now you might be thinking that Buffett and Walton are elitists, but I would counter that with a definite nay. They both grew up in the early 1900's, were by products of the 1930's great depression and build empires on frugal saving. They built their empire on saving and reinvesting. You have to master one to get the other. Do not fret: CB is here to help you save money.

If you read frugality 101, I talked about keeping a budget. For those of you that do not understand what that is, should go back and re-read the section. Keeping a budget is integral to this current assessment. We are going to get into simple budget analysis-and help you save more money by doing so.

When did I stop living paycheck to paycheck? Very recently. In fact, last year, I had a job that was out in the boonies, I took a bus in order to get there and I ate out a lot. I was saving money, but the amount that I was saving was rather pit pat. I was living roughly off of $600/month while making sometimes less than that. While it is nice to save money, you need to make more money to save more.

While we are still in a recession, there are also still jobs that will raise one's income. If you saved money and landed a full time job, just looking for a better job should suffice, but the ones that are trying to move into full time work should read this session. In you are currently doing temp gigs here and there, you can actually obtain something from here too.

Cutting Expenses

So how did I get out of my rut? Well I should say, it was not easy. In fact I am still getting out. The one thing that should be noted, is being broke and relying on a 9-5er is the some of all fears. People say it is risky investing, but in actuality moving from job to job is even riskier. There is a probability that you could burn bridges with your old employers, but unless you made this epic impression on them that they will not be able to forget you, chances are, unless you keep in contact with them or work in a company for a long time they will.

When I was working for the City of Reno Parks and Recreation I would have to take multiple trips to a school on the Citi Center buses. The trips literally took 4 hours of my day just so I could work for 6. I would also have these time gaps where I would be free for 4-6 hour periods. Good for college and high school students, bad for graduates. While the hourly pay was ok, I was lacking in a location that was a short distance and paid more.

Using my same level of expenses in Frugality 101,

600assets-600liabilities= 0 aka breaking even.

Time is Money

True, I could have gotten another part time job that would of balanced out the difference in pay, but that would be a place with odd time constraints and possibly more expenses, depending upon location. So what I am trying to demonstrate here is that time is a form of currency. In lay man's terms: Time is money.

Time was of the essence. I applied at over 40 different firms. Based off the calculations, 80% of the employers will not be interested in what I had to offer, while 20% would be. First I worked at Integrity Staffing, which was a temp job at a billion dollar job firm. I was making a month's pay within a week, but I had to make ends meet and this was temporary. Later on I was hired at Sam's Club and it has been history since. Currently, I am both working there and investing on the side.

And I got in at the perfect time: right at the start of the 2008 hard recession. America officially declared it then, but we have been in one since 2007, though most people who do not read would argue with this. So while time is money, "timing" is golden!

Monthly Budgeting
Being in a 9-5 provides a source of income, it is stable so as long as there is not mass layoffs. I need not worry too much about this because I have invested well. There is a lot of risk however. People get stressed, mad at each other, tempers flare, mass layoffs and firings happen. Not everyone will get their "dream job". Statistics show that 70% off all people who graduate from college with a degree get starter jobs that do not relate to their vocation of choice and pay less. I certainly was no exception. If this is you then fear not, there is some light at the end of the tunnel.

While most people start out at low wages, it does not have to be that way. "Low Wages" is all in perception. While I am no Donald Trump, I do not live from paycheck to paycheck. I make sure I have liabilities lined up. For those of you that took on a huge loan, I suggest making bare minimum payments, until you have mastered the later lessons of this special. Take it from me, you do not want to fall behind on loan payments. That is more money you will have to fork over to the system. If you are working at a small business as your start up job then, try to take out your debt by setting up payment schedules on your calender. If you can arrange to accept checks "off the books". Some people will probably agree to this, while others might be more skeptical. Insted of paying extra tax for earning a specific income, the best thing you can do for yourself is to pay the bare minimum and obtain tax free oppertunities. This will add to your money budget and will have keep eggs in the hatchery.

The other formula to this is that you have to be able to keep eating out, electronics bills and other stuff that does not matter low. Do you need Micky'Ds? Do you need a Sony Bravia? Do you need a new Fender Starcaster? If you can justify a eleborate reason why you need it (i.e. you want to start a underground band or have not ate there in a year) then my answer is you probably do not need it. This is not the needs of a frugal person. This is impulse buying. We are all victums of it and this attidude needs to be curved. You need to cut all doodads or bobbles from you budget and, invest $10/ week toward your item that you cannot "live" without. Ate that point you earned it and owe it to yourself to buy your LCD or new video game console.

The final formua is to wipe out bad debt and reduce necessary debt. Reduce those phone bills and opt out of those contracts and go with pre paid programs. If you can, share resources with a close friend of relative. This behavior will curb spending. If you drive a car, either carpool or just walk. If you live a long distance from work, buying a monthly bus pass might be another viable solution. Go to warehouses and buy in bulk: the savings in the long run will exceed the amount you have spent on food. Costco or Sam's Club should provide you with a chance to buy bulk goods for a membership fee. It is an excellent way to shop for gorceries and supplies.

Do Not Associate With People That Want Loans

This is one of the major attributes that keep people broke. I have three years experience in loaning out to people. I always get collarteral. If you are trying to make ends meet, you should read the subtitle at least five times and heed the advice. I am only elaborating so people do not ask why you should not loan out money.

First of all, people that borrow money usually do so without a contract and with feelings. The problem with the process is that the debtee also pays back "when he/she feels like it" if at all. Instead of dealing with dead beats, the best thing to do is avoid those people like the plague or lie to them and say you're broke. What I like to usually do is ask people for money back to drive home the point. That usually drives home the point that you are not interested in what they are asking for, but are self centered. Who cares though. These people only want your money and once they get it, they usually do not even associate with you afterwards unless you are dense enough to do so. Also when money is involved it often questions "friendship". Let me drive home one point: friends do not ask friends for money. I do not have anybody asking me for money as a friend. In fact I have had situations where I had to rely on "friends" to pay their share of the rent. It fell through and I had to pony up. Luckily, I had money saved up to sheild me from their stupidity and bad money management. Lesson learned and life goes on.

Frugal people are often creative and think about either saving or investing at least 30-80% of the day.

Does this fit you? If so read on. If not, just stop reading and continue to be a wage slave living pay check to paycheck. Just kidding. You can change you mental pratice by applying what has been discussed in Frugality 101 and Frugality 102. Often I think about what percentage of my monthly income is leaving the hatchery. That is how I think. And like Buffett, I often look for ways to grow my money. While compared to Buffett, the amount I have saved up is rather meager, but compared to non frugal people it is often immense. Most people buy stuff that loses value and is often beyond their means. And while there are good and bad investments, I do not have any fear as opposed to a LCD that loses value and becomes worthless once it is taken out of the store. I do not even fret losing money on a deal, while losing on something that has no value makes me depress. If you can understand this, you will become that much more frugally literate.

Thursday, February 19, 2009

Frugality 101

There are more and more people becoming homeless these days. It seems that the very words i am using are becoming rather prophetic, but alas poor frivolous spender I knew him well... he is on 4th street currently asking me for a quarter. Do you think this will be you if you continue to live paycheck to paycheck? If so then read on.

Now let it be told that I am no saint, but I am certainly not a prophet either. I am just a small time investor with big dreams. I just know what I need to do in order to save money and reach my goals. For those of you that wish to know more about the current economic crisis, books I recommend are "Getting Started in the Underground Economy" by Adam Cash, "Rich Dad, Poor Dad" by Robert Kiyosaki and "Finance Wars" by Stephen Palmer. This is your reading list for today. I am Prof. Eggleston and Surviving the Neo-Depression is now in session.

Here is some basics you need to figure out:

1. Setting a budget- Before you even start a saving plan you need to figure out how much you pull down every month. People with multiple jobs/investments will obviously have the advantage over the guy with just one job, but that is okay. With a budget you can set aside money to invest every month until something pays off.

The object of setting a budget is to gear you towards thinking like a frugal person and an investor. Let me put it to you this way: right now I do not make a whole lot, but I do not live paycheck to paycheck anymore. There is a reason for this-that is neo feudalism. At some point I decided that life was the pits and I wanted to do something about it. The first thing I did was set a budget and I have not looked back. I continue to reach for the stars even in this failing economy.

Do you think Donald Trump and Warren Buffett got anywhere by being frivolous spenders? No they set budgets on various projects. Trump even said in his book "Why We Want You To Be Rich" that setting a budget is one of the most important things you can do for yourself. It will put you on the path of being rich.

2. Set aside money as an emergency fund:

This is actually one of David Ramsey's suggestions in the total money make over and it makes sense. You got to start somewhere and the best way to do so is to save up $1,000 is quickly as possible. For those of you that are 9-5ers like me, you will find this rather discouraging, but if you have a lot of bobbles or doodads, you can formulate a strategy and turn them into a small profit. While you might have to sale some of your stuff at a loss this might actually be a good thing: the more stuff you have in your life, the more you complicate it. So to counter this and to set aside an emergency fund, have a yard sale, Ebay it or use some other site to sell your stuff on it.

For the most part, I have my emergency fund in precious metals because I am mainly preparing for stage 3, but I also have $1,000 in addition to this set aside. And I am glad I did this because I had a situation to deal with last month and I am glad it is over. And guess what? I did not even break a sweat over the $1,000 being gone--I earned it back. your emergency funds should be for your worse case scenarios--not your checking account.

3. Save $10 week: starting now- Both Dave Ramsey author of "Total Money Makeover" and one of my other friends recommend this. The object of doing this is so you can have something to spend for yourself. You CANNOT use this money until the end of the year or until Christmas.

Want that X-box? Want that LCD TV? With this strategy, you can have it in 1 year without dipping into your savings for it. The secondary objective is to teach you patience and how to manage money. If you just have a part-time job, this might be a bit harder, but taking $10/week aside will motivate you to a) find a better job and b) invest. This money should not be stored into your bank account. Any envelope will do. The reason for this is to curb temptation. If you find yourself diving into this envelope, obviously you suck at managing money and need to rethink your strategy. And if you cannot do this simple task, I'd rather have a trained seal give me financial advise. I have done this already and guess what? I reinvested it. I took the $520 and bought gold, silver, and a foot switch for my guitar (hey it is meant for yourself right)?

4. Calculate Expenses- While I have low expenses (more on this in Frugality and Personal Finance 102), I still have them nonetheless. Everyone has them. We all consume something and have to pay something. Everything has a price and this aspect of finance cannot be avoided. Let us use my expenses as an example.

Food: $90 Which is less than what it was, I could lower this more, but I enjoy eating out every once in a while. I am not a serf, so I eat out whenever I feel like it. Mostly, I target canned goods.

Phone: $45-Cricket Wireless; Per-paid service; no contracts.

Rent: $225

Laundry: $10

Investments: $160

Student Loan: $60

My total expenses is $590 for the whole month. It might hit $600-700 depending on which investment I go into, but for the sake of simplity let just say it is $600. Like I said I do not make a whole lot so we will just calculate my petty "earnings" which would be higher if I was not taxed but that will be reserved for another blog.

- 600

Note: This is above average: there are month where I pay more or less. This month I actually pulled down $900 because I ate out less and paid in advance on my loan. You might ask, why is there nothing for clothes, video games, hygine supplies, etc.? The reason why is because that expence does not come up all the time. I have a strategy for not spending much on neccesities and luxury items. In fact, I do not bother with luxury items. Instead, I invest my cash in myself and in ideas. That is what the $10/week for 1 year plan is for. LCDs and electronics lose half their value in roughly 2.5 months so I do not buy them.

Notice that my expenses are simple. I did not even have to sit down with a calculator to calculate what I am earning. I can fire off the numbers off the top of my head without breaking a sweat. While I love math, I hate complicating my life with stuff that does not matter. Yes, investments do tend to get complicated, but I have also strategized how much per month I am willing to invest. Usually I buy stocks and precious metals, but I will do other investments once I earn more money. This blog is one of those things. Instead of money, I am investing time. If I see a return on my investment, aka revenue or profit I will invest some money into this site, but for right now, I just do this in my free time.

For right now I will say simplifying your expences is rudimentary to successful frugality. If you cannot do this then you will live a complicated life and it will be more complicated to begin saving money. If you have to sit down with a calculator just to calculate your expences (excluding financial investors/advisors) you have to many expences and need to re-evaluate what is neccessary in your life. Obviously I do mean downgrading your lifestyle. Keeping up with the Jones's will keep you broke. You might have certain things you can't live without, but there are certainly things you CAN live without. Living without those things can keep you from living paycheck to paycheck and can keep you from living in the streets.

5. Releave Yourself of Those Nasty Credit Cards- Cut them up: I used to not understand the difference between good debt and bad debt, but not it is crystal clear. Credit cards are designed to keep you broke. You do not need a credit card to invest. Just get a debit card with a Visa or Mastercard logo. I use to have a credit card while I was in college and I was making the payments on them. They start out small but gradually increase with the more you spend. If you want to be frugal, you have to understand that credit cards will only keep you broke. When I paid mine off I felt a tremendous weight leave my shoulders. Yes, the loan I took worth way more than the credit card, but in the end, the card cost me money while the loan helped me make money.

While I am not in the career of choice, (70% of all college students start in a feild outside their studies) I have earned enough through to make myself free man and debt free. And there is a bonus to this: people who live their lives without using a credit card will find themselves with more cash in the long run than with people who actually gotten credit cards. Imagine that. You want a $1,000 to use? Save it up for a "rainy day" fund. Do not spend it on stuff that goes down in value. Borrowing credit is not part of frugality-eliminate "credit" from your volcabulary. The only type of debt that is good is that which could make you wealthier, but you need to mmake sure that whatever you invest in (i.e. mortage, stocks, assets) brings you a return before you start investing in it.

5. Save: This is the final basic step to follow. You might actually start out paycheck to paycheck, but if you say then you can calculate how many pay check away from the street you are. As a side note: if you start out, you might be this far from the street. It might take you awhile to get out of this, but the more you save the more you can earn. It is like walking a tightrope at first, but saving will be the end all for people. This is the simplieststep of frugality. You put money in the bank, it stays in the bank. You do not let it leave the bank. The more it leaves the bank, the more you will lose. I do not believe in losing as a winning strategy.

Now I know you are thinking, "that's it"? But simple things are rarely simple. This is where saving becomes an art: you have to figure out how to keep the money from leaving the bank. And that is where it becomes a little tricky. If you have bills find ways to reduce them if not eliminate them. If you have investments which are not earning you a profit, get rid of them. If you have people that are asking for hand outs, ignore them--they're losers that want something for nothing.

Your homework is to make a list of things in your life that cost you money and figure out ways to reduce them. If you can reduce them or eliminate them then you will figure out one facet of personal finance-reducing costs. Bills are liabilities, so reduce them as much as possible and you will be on the path of NOT living paycheck to paycheck. If you find anything I mentioned above complicated, then there is a special little white school bus you should be taking.

If you have anything that is in your life that is considered "complicated" excluding stuff that is beyond your control like child support, I will be glad to help you for a nominal fee of $50/consultation visit. I have to charge for the complicated stuff because it is taking away time I could be using for the internet for research or working. I do not do "free". It is another word that I rarely use. Everything has a price, and so do my services.

The dollar might collaspe, due to the mis-management of the economy, but if people in Congress knew how to be frugal, then there would be no problems in the dollar, but we are a nation of spenders and our economy is being managed by spenders. You might want to think outside the box and save. Quit borrowing for expensive stuff that is above your means. Do not fall for anything that is on the ol' idiot box. I wrote a long article on saving because people obviously do not know how. Everyday people come up to me and ask me how do I do it.

Sunday, February 1, 2009

Site Will Be Slowly Updated Until Further Notice

My updates will slow down until a) I get my own Internet connection or b) I get another good Wi-Fi signal near my vicinity. My apartments currently do not have Wi-fi, but I am only paying $225/month so I cannot complain. I will probably save about $1,000 more and then I will see what I will do next.

I am worried about the layoffs a little, for Sam's Club is poised to lay off 3,000 Managers. I guess the associates will run the floor. Overall our market is pretty steady so I do not think the layoffs will effect my club that much.

I plan on reading another ten books in February, so the pressure will be on me.