Quick Budgeting Tips That’ll Save You Big!

Quick Budgeting Tips

Helping you make better spending decisions is a primary purpose of this blog. Sticking to them is the other.  These budgeting tips require little time and effort, but will have a major impact on your savings account.

There are a two ways your brain is hard-wired that make better spending decisions hard.

  • Adaptation to pleasure
  • Mis-predicting pleasure

Budgeting Tips – Adaptation to Pleasure

Our brains are hardwired to notice novelty. When an experience is new you get a lot of pleasure Quick Budgeting Tips For Being Happyfrom it. As you continue to have the same experience, you get less pleasure from it over time. Pleasure turns to comfort, and disappointment can set in. “I thought this would make me happier. Now I’m disappointed because I’m not as happy with this as I thought I would be.”

The second reason we adapt to pleasure is that our reference point changes. Maybe you get a new job and you’re making $10,000 more a year than you were before. You’re thrilled. Then you find out that you’re making 5% less than the next newest employee. Now you aren’t thrilled – your reference point has changed. Instead of comparing to what you used to make, you are now comparing to what you could be making.

Budgeting Tips – Mispredicting Pleasure

We consistently predict that things will make us happier or more miserable than they actually do.

The extreme example of this is lottery winners vs. accident victims. Several studies in psychology show that the strongest predictor of a person’s level of happiness after their circumstances change is their level of happiness before the change. Of course, this isn’t true immediately after the change, but over time people tend to revert to a sort of happiness “setpoint”.

Of course, accident victims are less happy than they were before – the point is the different is MUCH smaller than anyone would expect.

And this more recent study also confirms that the immediate impact of change in circumstances is much bigger than the long-term effect.

Daniel Kahneman calls this the hedonic treadmill. We seek pleasure, and novel experiences provide it, but then we adapt and the pleasure turns to comfort. We continue to seek pleasure, but now it takes another new thing to produce it, so we are always on the treadmill looking for the next “hit”.

Better Spending Decisions – The 5-Minute Solution

Budget Calculator
Budget Calculator – Create a Budget in Less Than 5 Minutes!

OK, so you’d like to get off the treadmill, but you still want to experience the pleasure, right?  This simple practice can help you make better

First, become mindful of your spending AND how much enjoyment it brings you. Just writing down what you spent helps you budget, but it doesn’t help you evaluate how your budget fits into your life.

Personal note: Those “write down everything you spend for 30 days” journal suggestions used to make me crazy! I hate!!! keeping records (you’ll hear me say that often). However, this way is relatively painless and it helps me learn more about what spending decisions are satisfying over the long term and which ones are not.

How to Implement These Budgeting Tips

Ourdebtfreelives’s website has a lot of great articles on creating a budget.  Regular bills don’t usually factor into your “joy index” unless you buy a new house or do something else unusual. For example, this week I bought a new cell phone and case, an exercise ball and a poster with exercises on it. I added those items to my spreadsheet, but not the regular monthly bills I paid.

Here are your columns:

  • item
  • category
  • amount
  • was it a need or a want?
  • Joy index – scale of 1 – 10
  • 1 mo. followup joy index
  • 3 mo. followup joy index (unless 1 month was 0)
  • 6 mo. followup joy index (unless 3 month was 0)

You can track this daily or weekly (I enter any new items daily, but only review once a month). If you wait longer than that it will probably seem like a bigger chore than it is. Over time, as you watch your satisfaction with each item decrease it becomes a little easier to remind yourself before you spend the money that the joy you experience from any given purchase is probably going to be short-lived.  Another way to increase savings is by increasing your income.  We have a great article on Sideline Business Models to get you that extra income.

 

Budgeting Tips – Final Thoughts

Give yourself time for this to make a difference in your spending decisions. Some of the research in this area used professors in the field as test subjects and they were no less prone to mis-predict pleasure or to adapt to it than others who were not familiar with the concept. If even the professionals fall for this, you shouldn’t get too down on yourself when it happens to you.

Curious if there is a way to reduce adaptation? Funny you should ask – keep reading to discover two simple practices that can reduce adaptation and get you enjoying your life more.

Sideline Business Models – Choose Carefully

Sideline Business Models

It’s time to look at sideline business models – you’re almost done! You’ve thought about what you want from the business and what the business will want from you. Now it is time to choose a business model. Don’t panic – this isn’t as complicated as the term might make it sound. A business model is just how you plan to operate the business.

Sideline Business Models Simplified

The questions you must answer are the same questions you would answer when planning a party – see, this isn’t hard!

How Much?

This cycles back to your desires and resources. How much will you have to invest to get your business going. Whether online or in the physical world, you can start many businesses VERY inexpensively. Chris Guillebeau’s The $100 Startup (yes, it’s another affiliate link – if you click it and buy something I’ll make some money – it’s part of my business model) highlights many inspirational entrepreneurs who started with very little money and built successful businesses.

I can’t remember the exact quote or even who said it, but I remember reading where some famous entrepreneur said that having a lot of startup money is actually a hindrance because you aren’t as creative when you have money to throw at a problem. All of us want to have that problem, right?  You can look at a site like www.ourdebtfreelives.com that has a number of different calculators such as a RV Loan Calculator and has great articles on investing.

Who?

Who do you want to sell to? Businesses or individuals? Availability plays a big part here. If your full-time job is during the day (like mine) it is difficult to sell to businesses because you simply aren’t available at the times they would want to talk to you. You could focus on providing services to other part-time entrepreneurs who are working after hours as you are. That solves your timing issue, but be sure you are able to grow your revenue independently of how much time your are working. Otherwise, you are self-employed, no a business owner.

What?

Every business basically sells one of four things – products, services, information, or experiences. Hotels sell experiences. Apple sells products. Authors, coaches, and marketing gurus sell information (and sometimes they also sell products, services, and experiences). Tony Robbins and Disney sell experiences. Boise SEO Consultants and designers sell services.

This is one of the areas where business models can get tricky. Diversification of revenue streams (a fancy way to say “having more than one way to make money”) is important. Many sideline business models involve selling more than one of the four things!

Where?

We touched on this back in part one – do you want a local business? Or do you want your business based online? Even if it is local, your business still may or may not have a physical location.

When?

This relates back somewhat to “who”. If your business is local, when will it be open? Is it year-round or seasonal?

How?

“How”is the heart of the business model.Sideline Business Model

Just looking at online business models, there are many variations, and new ones being created all the time.

Let’s say you decide to start a blog. That doesn’t describe a business model on its own.  Will you make money through advertising? Promote affiliate offers (commission sales)? Sell your own products (back to information, products, or services)? Create a membership site?

Will it be niche site or an authority site? Will you be the only author or will you accept guests posts or hire article writers to create the content?

Maybe you decide you want to sell products. You could sell them online through one of the marketplace sites like Etsy or Zazzle. You could create your own site and buy ads on Facebook to get people to it. You could sell at a local flea market on weekends. Or you could find a network marketing company and sell through a party plan. Of all the sideline business models, this is probably the one that is most designed especially to be a sideline.

Why?

Finally, we circle back to your values again. Every time you make a decision about your business model, you make it because you are choosing between values. Why sell information rather than products? Why focus on the needs of millennials instead of retirees? (Read about the Top Retirement Myths) Why decide to start a network marketing venture rather than develop your own products?

Every time you say yes to one value, you are likely saying no to a different one. That’s why we started with your values and goals. If you were starting a corporation, you would have to answer to shareholders, but this is YOUR company and you only have to answer to yourself, so take your time and design it the way YOU want it (while making sure it will be profitable, of course).

Are You Still Here?

Great! I hope you’ve gotten some value out of this series. As a reward for your diligence, I’ve put together a cheat sheet with all the big questions to ask yourself when you examine sideline business models.

Raise Credit Score 100 Points Overnight

Raise Credit Score 100 Points Overnight

The credit scores actually, an important component to get you financed in a flexible and affordable way. Poor credit scores prevent people from getting a good loan. So, it is a very necessary task to raise credit score 100 points overnight. But, people may often get in a fix what policies and strategies to adopt to improve the credit scores. Well, there are some ideas which would help people improving the credit scores in all the ways they want. If you are planning to find the ways to improve your scores you can go through the following procedures.  Read about Common Retirement Myths.

Five Steps Raise Credit Score 100 Points Overnight

The following are the five best steps to improve the credit scores.  Here you get to know those:

Step 1: Checking the credit report:

In order to raise credit score 100 points overnight you must check the credit report very carefully. You will have to do this for two special reasons. Reason 1 is to check whether there remains any mistake or loophole in the report or not. And secondly, you need to check where to fix to improve the scores. As an ordinary people, you may not understand the ins and outs if the credit report. It is consists of some complex part. For that, you need an expert who would explain to you the details of your credit report.


Here’s some great Budgeting Tips to help you better manage your money.


Step 2: Payment of bills in right time:

You will have to pay the bills in time and in accordance to the bill report. In fact, bill payment in right time has a hue positive impact on your report. The perfect bill payment sends positive feedback to your credit report. This positive feedback would extend 35% of your credit scores. So, you must understand how important the bill repayment is to maintain a good credit score and improve the scores.

Step 3: Applying for short term and short amount loans:

You can apply for short amount and cash loans no credit check. These may not help you financially, but can add positive feedback to your report. This report can increase 10% of your credit scores. So, even if you are not going through financial crisis, you can take such short term and short amount loan. The loan application adds to your credit scores.

Step 4: Proper repayment of the debts:

After getting the loans, you must have to repay the debts in time. Do not make any mistake in this matter. You must have to be a good repair of the debts in order to improve the credit scores. Do not make default. The proper debt repayment is the key thing to improve your credit scores. So, do not make any mistake in this matter.

Step 5: Getting FICO help:

You can seek help from FICO. The FICO helps the borrowers with effective measures which they can adopt and apply to improve the credit scores. You can share your problems to the particular committee and they would offer you with the appropriate and perfect plan so that you can raise credit score 100 points overnight. Read here for more info.

Retirement Myths You Should Know!

Retirement myths

Are you following the wrong directions for your retirement savings?  It’s time to get some of these retirement myths cleared up!

Back in the ’80’s my then-husband I were avid bicyclists. We lived in north Dallas and we used to ride north on Custer Road, out to a farm market road, east to what is now McDermott and then south on the service road of 75 back to Richardson. Preston Road was two lanes then and barely had a shoulder. There was a little country church where we used to sit and rest on the steps and when we got to the service road there was a McDonalds. It was in “the middle of nowhere”, apparently there for the travelers who couldn’t wait to get to Dallas to get a meal or a drink.

Imagine using my directions from the ’80’s to take that ride today. Custer is now 6 lanes. All the landmarks, including the church, are long gone. The farm to market road doesn’t allow bicycles anymore and it is also 6 lanes. The McDonald’s is still there, but now it is in the center of a busy retail area. Riding on the service road of 75 could only be considered suicidal.

Following directions from the ’80’s won’t get you where you want to go. Not on a bicycle, and not in your financial life, either.  Here is a great 401k calculator that allows your to create a number of different scenarios.  Now lets get to the retirement myths!

What’s the big myth about retirement savings?

Well, really, there are two.

  • Social Security will be there when you need it.
  • If your 401k balance equals a certain number when you retire, you’ll be OK.

What’s the problem?

Let’s look at some of the retirement myths:  #1 – Social Security will be there when you need it.

Surely you’ve heard that Social Security is in trouble. Just how much is up for debate and depends on a lot of assumptions. Without some intervention, the money is going to run out sometime within the next 15 years. Yes, there are bonds that are supposed to be “paid back” to continue to fund it, but that’s debatable, too.

To add to the risk, Social Security is at the whim of Congress. Everything about it – benefit amounts, qualifications for benefits, and other frules and regulations, can change.

In short, just because it has been there for years, doesn’t mean it always will be.

Retirement Myths:  #2 – A certain 401k balance guarantees a comfortable retirement

If you’ve had a financial advisor run projections about your 401k, you probably have a retirement savings balance you’re shooting for by the time you retire. Different gurus recommend different multiples of your current income to “guarantee” you won’t run out of money.  These retirement myths can leave you high and dry when it comes time to retire.

Here’s the problem – there are a LOT of assumptions in there that they don’t necessarily mention.

  • A rate of return has already been assumed before and after you retire
  • There’s a rate of withdrawal assumed, too
  • There’s an assumption about what your spending is going to be after you retire

That’s a lot of assumptions. The rate of return between now and retirement day doesn’t help you if the market crashes the week before you retire, taking your retirement funds with it. Even small variations in the rate of return will affect how long your money will last.

Why can’t we do something different?

Now we’ve covered some of the retirement myths we need to discuss what you can do going forward to be successful in saving for retirement.  Whether you’re anywhere near retirement or not, these two pillars of retirement “savings” have been the backbone of most people’s retirement plans for years now.

It’s a classic case of status quo bias and the anchoring effect.  The status quo is that you put $$ in your 401k and contribute to Social Security and everything will be OK. Any other approach looks crazy because “everyone knows this is how you do it”. And the number 65 has been anchored in your brain as the time you “quit working”. Once that number gets anchored, it’s hard to change.

What’s the Answer?

To get the right answer, you have to ask the right question. The right question is not “what worked in the past”, but “given today’s economic reality, what will work in the future?”.

Almost all retirement savings advice focuses on how much you need to save by the time you reach retirement so you don’t run out of money before you stop needing it. This is the wrong question. The RIGHT question is how much cash flow do you need throughout your life.

You don’t have to save a million dollars to have adequate cash flow in retirement. There are other ways to do it, and in today’s economy, they may even be more realistic.

Retirement Savings vs. Retirement Income

Phillip Brewer, in this article on Wise bread, argues that a return to financial solutions from the past is the answer to today’s economy. Specifically, he recommends investing in your own business. I totally agree with this, as this is a way to generate an income stream that doesn’t rely on the government or the stock market to secure your retirement income.

He also suggests that returning to the family as the primary economic unit is an appropriate response to current economic realities. Many millennial’s have already figured this out and are leaving home much later than their parents did.

Brewer points out that this model of the family business as the economic unit was the norm until less than a hundred years ago. THAT sort of redefines the status quo, doesn’t it?

What’s Next?

Assuming you have a job, and a 401k, and you’ve paid into Social Security, should you just ditch all that? Of course not!

Investing in your own business can be a supplement to all that. There are many businesses you can start on the side, and many smart people keep their business on the side. After all, there are benefits to the 401k and Social Security. There’s no need to throw the baby out with the bathwater.

Most people call this kind of business a sideline, but I like to call it a lifeline. Many people tell stories of how a side business kept them from financial disaster when they lost a job, became ill and were unable to work, or needed to take time off to care for a loved one.

I’ve put together a checklist for evaluating this kind of business and I’ll be happy to email it to you. Just put your email address in the form below and I’ll send it right over, along with semi-regular tips to help you make smart decisions about your money AND make them stick.