I had linked to Michelle Malkin before with this artwork ..  and Apparently its a good time once again.

“Tell Washington and blinky Nancy: Let the cameras in. Take action and sign the petition here.”

Malkin alludes to the recent C-Span promises of the Liar In Chief. Where he indicated openess and said all discussions would be out in the open.

But as we all know they are hiding the details of the healthcare boondoggle conference behind closed doors, where the top secret experiments are and the monster is being created.

Truly a “Frankenstein” monster the bill is, but one crafted by far more than a single villain.  Many legislators have gone so far they have become zombies with no predictable course.

The problem with this movie is we are all strapped to our chairs and the 3d glasses are super glued to our skulls.  This is nightmare causing stuff folks.

Hang on to your wallet, grab your crosses, cradle your rosaries, and pray we make it to November.

Develop Good Money Habits

The exercises mentioned in the last posting will point out some of your costly financial habits. You can start to control those. But there are a lot of little habits you might want to develop as well. Consider developing the following, but keep in mind that there are more than enough ways to accomplish financial control, so skip those that cause you too much stress and worry.

• Have your paycheck deposited directly into your bank account, so you’ll be less likely to spend a big chunk of it on payday. In fact, if you are thinking about payday as different from other days, you may want to work on your budgeting.
• Save windfalls instead of spending them. Put tax refunds, inheritances,bonuses and money received as a gift into a savings account of some sort. Use that for major goals, whether that means investing for retirement,starting a business or climbing mountains in Antarctica.
• If you and your spouse work, try to live off of one income and save the other for major goals. If you are already living off one income and your spouse gets a job, this should be possible. Otherwise try it for a while anyhow, to see what will happen if one of you loses your job. You might find a way to set aside at least half of one income.
• Regularly look for ways to cut expenses. Every time you pull out your credit card or checkbook or cash, think, “Do I really need this?” If you are going to the gym only once a week, for example, maybe you should drop the membership and exercise at home.
• Round up when recording your items paid by check. After a few months of doing this, you’ll have more money in the account than your balance shows. Transfer that extra to savings.
• Always apply “extra” money to your debts. If every time you have some overtime pay or a bonus or a tax refund, you use that money to pay off credit card debt, you’ll get out of debt sooner and spend a lot less on interest charges. This is a great habit to develop.
• Alter your perspective by converting the price of all discretionary purchases into “hours worked,” or “weeks worked to earn the necessary discretionary income.” The first is simple enough. If you take home about $12 per hour after taxes, a new television that costs $1,800 will cost you 150 hours of work. Before you buy, consider each purchase from that perspective – and do this while working – to decide if it is worth it.

The other perspective changer is to look at the weeks you’ll have to work to pay for the item out of your discretionary income. Let’s say you have $40 per week of excess income that you don’t need for bills or important goals, and you want to buy a new fishing boat for $4,800. With interest you’ll spend at least $6,400 you figure. Based on that, you’ll have to work for 160 weeks – more than three years – just to generate enough excess money for this one thing.

Jason, from www.FrugalDad.com, had yet another way to change how you look at your expenditures. He suggested considering how much you would need to set aside in order to pay for each expense when you retire. Then you can consider whether you want to maintain the habit.

For example, let’s suppose you drink a $3 cup of coffee four days per week. You might spend less than $2 to make delicious coffee at home, so this is a $10-per-week habit, or a $520-per-year habit. Now, assuming you will retire with income from safe investments that yield about 4% annually, you’ll need $13,000 extra in your retirement account just to maintain this habit.

That $13,000 will produce $520 annually at a 4% return. A round figure like 4% or 5% is easiest to work with, because you can simply multiply the annual expense by 25 or 20 respectively to arrive at the necessary investment amount.

Obviously this way of looking at your expenditure habits makes things look  expensive. And just wait until you do this with truly expensive habits. Suppose you think you’ll want to continue driving a new car in retirement, at an extra cost of $400 per month (because of payments and insurance) versus a paid-in-full used car. That expense will require an extra $120,000 in your retirement account. That might change your mind, right?

Of course, if you do have the money set aside (or will), why not enjoy the expensive coffee stops and the new car? On the other hand, this does point out the true price of these habits. Maybe that coffee isn’t worth the extra year of work needed to save the $13,000. You might get more enjoyment from quitting your job sooner.

The difference is actually more profound than this suggests. Not only will you not need the extra money set aside for habits that you choose to drop, but you’ll also free up that money for retirement savings as well. In other words, a $30-per-week pizza habit that you quit will allow you to save $1,500 more per year. This can add up to many tens of thousands of dollars over the years, meaning you will be free to quit your job even sooner (or have a wealthier lifestyle when you do quit). Or to make this more relevant to the subject of this book, it will help you get ready to survive in interesting times.

• Pay cash. Research shows that people will definitely pay more when paying with a credit card. For example, there was a study in which those who were allowed to use credit cards at an auction for Boston Celtics tickets bid twice as high as those who were required to pay cash. This was true even though the latter were allowed two days to bring the cash (this was to be sure that immediate cash availability wasn’t an issue).
• Pay off credit cards monthly. It makes sense to use credit cards for convenience, but only if you pay the balance in full each month. If you do use credit cards, think of each purchase as though you were paying cash anyhow, so you don’t get tempted into spending more than you otherwise would.
• Procrastinate when spending money. Our minds work in certain habitual patterns, so why not use these habits in your favor? For example, when we procrastinate about something, we often just don’t do it. This is certainly true when buying something. Don’t worry, if it’s important enough, you’ll still buy it later, but some things will be forgotten – as they should be. Procrastinating on buying decisions can radically reduce what you spend.

This is especially true with large discretionary purchases. If you find yourself saying, “But I need that new TV for this Sunday’s game,” you may have identified your real motivation – to impress friends this Sunday. Do you really need an expensive television for a day? Wait and see if it is more than that. If you buy it later you’ll have it for every other game anyhow.

Why is the worst thing a salesman can hear, “I’m going to think about it.”? Because they know you’re not likely to return and buy the item. Time will often change your mind on things you thought you needed. Wait a bit (at least a few days) before making any large purchases, and you’ll almost certainly spend less. Then, when the truly valuable opportunities come up, you’ll have the money for them.

Today’s installment addresses controlling of your expenses.

“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.” – Charles Dickens

Being cheap is not a good solution to money problems. Finding the best price for things is smart, but eating Ramen noodles is bad for your health. Denying yourself the things you need is bad for your attitude. Never paying for a lunch is bad for your friendships. And leaving a fifty-cent tip is just plain bad karma.

But making more money isn’t the answer either. Millionaires sometimes go bankrupt after all. And virtually everyone who makes twice what you make still worries about money just as much as you do. So where is the middle ground?

It is found in control. Develop good habits so you can find every opportunity to make more money (if you need to), while controlling your expenditures. This approach will help prepare you for almost anything that comes your way, but it isn’t just about survival. In fact, most millionaires built their assets following a simple conservative idea:

Spend less than you make and invest the difference.

In the long run then, you can have what you want without the stress of buying it on credit cards – before you can truly afford it. Just keep your expenditures to no more that 75% of what you make. Then use the other 25% to fund your “unexpected events account,” your savings account, and your investments for the future.

If 75% of what you take home doesn’t seem like enough to pay the bills and cover the other things you want in life, there are two solutions. First, you can make more money. Second, you can cut what you currently spend. That’s what the rest of this section is about.

Track Your Expenditures

You might think you know where your money goes. But if you were write a list of every expenditure you remember from the last thirty days, and then compare the total to what was actually spent, I’ll bet there would be a couple hundred dollars missing from your list. Where did it go?

A simple exercise will show you where it goes. All it requires is a piece of paper and a pen. For a month or two record everything you spend money on, with the exact amount spent on each item. You may be surprised at how much goes to some areas. For example, a friend of mine did the math and realized that his twice-weekly pizza delivery amounted to almost $2,000 per year.

The idea isn’t to make yourself feel bad. If having pizza delivered to your house every week is worth thousands per year to you, and you can afford it, why not continue? The idea is to see what things really cost you, so you can make that decision honestly and openly. You might realize for example, that you would rather spend $2,000 on a trip overseas, or to start a business.

The longer you do the exercise the better the data. A month is a minimum, because you will have paid most of your regular expenses during that time. Also, as you do this, you may find that you spend less as you go along. The process of writing down every penny spent makes you very aware of the money going out, and many people find that because they want to see smaller numbers on that paper, they start to adjust their spending habits.

Categories are a good idea too, although you can do this after the information is gathered. How much do you spend on eating out, for
example? How much on groceries? How much at the bar, or on movie rentals? Again, this isn’t about making yourself feel guilty, but about bringing it all out in the open, so you can make the choices that make sense for you.

Make Changes

So the first thing you can do with this information is to cut out some things that really aren’t worth what they cost. This may free up enough money to fund your savings goals (more on that in later installments).

The second thing to do with the information is to consider each item on your tracking form carefully, so you can find ways to spend less on almost everything. Start with the big items, like housing costs and car expenses. There are usually more ways to save more money on bigger expenditures.

Look at each item and/or category and ask, “How can I get what I need here for less?” A programmable thermostat that turns the heat down while you are at work and up again just before you arrive home might save you $10 per month. Cheaper car insurance might save you another $15 per month.

Most people when surveyed think 20% more income would solve alleviate their financial concerns. Of course, almost everyone knows people making 20% less than themselves who think the same thing. It is clear that the problem isn’t just one of income, but of control. Why not start taking control of your financial affairs?

Have A Zero-Expenditure Week

Set aside a week and try to spend absolutely nothing for those seven days. Of course, if a bill is going to be late, pay it. But avoid all habits and routines that involve spending money. Eat up the extra food in the cupboards so you won’t have to go shopping. Find something interesting to do at home instead of going out. Take the bicycle to work if possible, or walk. Bring a lunch.

This exercise might save you a little bit, but it isn’t meant to develop a new “cheapskate routine.” Spending less is not a goal onto itself. The idea here is to see what you miss the most, and what you really don’t miss. It gives you an idea about your true priorities and options. Maybe you have been spending $60 per week on lunches out, and you discover that you enjoy a packed lunch in the park near work just as much. That can save you over $2,000 per year.

You might find that having friends over to play cards or watch movies is as satisfying as going out to the bar or to other events. Maybe taking a walk while listening to your favorite music or audio books on your MP3 player is more fun than going to the mall. This exercise in alternatives is a way to see where you can spend less while possibly getting more.

—- More in Part II – Tomorrow ———

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