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.