2 week no purchase challenge update!

This post is long overdue, but at the beginning of February I started a '2 week no purchase challenge'. I was spending too much on food so I decided to not buy any for 2 weeks. Because of my interests in preparedness I always have a bunch of food in the house and so it was easy logistically for me to just eat what I already had for those 2 weeks.

It went very well and wasn't altogether difficult. I did have one outing that I paid for at a restaurant, but it was a pre-scheduled event with friends so I consider it more entertainment than food.

This challenge went so well for me and had such a great impact on my food spending for the month that I think I am going to work this type of food spending moratorium into my monthly food budgeting.

Every month I will stop spending any money on food when I reach my predetermined spending limit. From that point on for the rest of the month I will eat only what I already have in the house.

Not only will this help me control my food spending, but it will also help cycle through the food supplies I have stored in my house.




-The Money Monk

Don't just do things CHEAPER, do them BETTER!

A lot of people on a quest for early retirement and financial independence will get very zealous about saving money, at least in the beginning. This drive is a good thing, but if not controlled and directed in a useful manner it can result in a lot of 'cheapness' that isn't necessarily helpful in the long term and may not even really be saving you that much money.

I have written before about the difference between being frugal and being cheap. What's interesting is that most of the people who are super 'cheap' continue to be poor, and everybody can tell too. The true "Mustachians" are often living off just as little money, many times LESS money, yet they appear to be the same as everybody else from the surface. They still have decent houses and decent cars, clothes aren't rags, they still have vacations, etc.

So what is the difference? how can the 'cheapskates' be spending so much time and effort to do everything as cheap as possible and still come out behind the real experts?

Because you need to do things BETTER, not just CHEAPER.

The cheapskate is only concerned on paying less right now. They often buy things simply because they it is way below retail, like at a garage sale, regardless of if it will save them money in the long term, or if they even need it.

The 'mustachian' buys less, but buys smart, so they actually usually have nice stuff that lasts forever and actually works. They can often resell their items for as much as they paid for it, or almost as much.

One example I often think of is people who wash out their Ziplocs. instead of buying expensive plastic bags and going to great and unseemly lengths to reuse them and make them last, buy 1 Tupperware for the same price as a box of Ziplocs and use it for 20 years. No body will think you are a weird cheap hobo for washing it out and reusing it either.

If you look at thrift stores and garage sales you can even get that Tupperware for .50 or so, maybe less. Anything you can put in a Ziploc you can put in a Tupperware.

As a student, i remember one substitute teacher talking about how he stripped his car of all the seats but the drivers seat to save weight and thus gas.  Why do all that work, remove functionality from your car, and look like a crazy person, when instead you can use simply drive less, and use hyper-miling techniques when you do drive and get 20% or more increase in MPG?

So remember, focus on doing things BETTER. not just CHEAPER. You'll save more time and money, and increase your quality of life.





-The Money Monk

Support The Money Monk! And Yourself!

In my quest for financial independence and early retirement I aim to seek out any possible sources of income to take advantage of. I don't want people to just give me money, but there are certain ways to help me out on my goals, if you are interested, that won't cost you anything! One good tactic that I use, (and that you should use too if you have a blog) is to have an Amazon affiliate account.

Now, I know we all are aiming to spend as little as possible, so we should't be buying a bunch of frivolous shit, but even the most frugal among us have to buy SOME things. When you do, Amazon.com is a great place to get it at market price. If you are going to buy something on Amazon anyway, I'd appreciate it if you could use the link in the upper left side of this blog. It won't cost you a penny more, but I will still get a piece of the pie.

just click on the link that says "Buy anything you need from Amazon.com" and then use the site like you normally would.

If you have a blog, put up your own link and let me know! I can't use my own affiliate account, so I will use somebody else's when I have to buy something.

Let's take advantage of this opportunity while it still lasts (before Amazon goes under due to their unsustainable method of operations and razor-thin profit margins!

Thanks!


-The Money Monk

My 2 week No-Purchase Challenge

I spent way too much on food last month so I have given myself a challenge: I am not going to spend any money on food for the first two weeks of this month. Not directly anyway. I will be eating only food that I already have in my house.

One of my interests is preparedness, so that won't be quite as difficult as it seems, and it will serve the dual purpose of rotating through some of my supplies so that I can refresh them.  It will keep me eating decent food that is not expensive (canned veggies, frozen meats, etc).

I will be keeping track of what I use and replacing it on Feb 15th, so while the food won't be free it will keep me from buying junk food, fast food, etc.

We'll see if I can do it!

-The Money Monk

Cash Emergency Fund - Yea or nay?

There is some debate in the personal finance community about the use and utility of emergency funds.

Some people advocate not even having a dedicated emergency fund, and argue instead for relying on various lines of credit for actual emergencies (credit cards, HELOCs, etc). Their arguments are usually that the the need to use emergency funds are mercifully rare, so it's better to have that money working for you in the meantime. And in the event that you do have to use a line of credit, it is available right away, and you can then sell off some stocks or other assets to pay it off but in the meantime that money was at least earning you interest.

If we are talking about somebody with $50k or $100k worth of savings sitting in a band account earning a quarter of a percent, then they are definitely right. While I understand the feeling of security that comes from having that much money on hand, there is no reason to have that kind of earning potential just sitting on the sidelines. Especially since, in the event of a real emergency, you could liquidate most assets in a matter of days or a week or two if you really needed a lot of cash, and having a charge on a credit card or HELOC for a short amount of time like that isn't a big deal.

Where I disagree is with small, actual cash emergency funds.  One of my interests / hobbies is preparedness, and I think there are a lot of good reasons why everybody should have anywhere from $500 to $2000 on hand in actual, physical cash. The supposed interest you would be missing out on is minimal on an amount that small, and the risk of losing it to fire or burglary is also overblown by most people. If you put it in a safe secure spot, it is very unlikely that you would lose that money, even in the event of a burglary. And there are plenty of reasons to have actual cash on hand.

In many times of emergency or disaster, a lot of businesses will only accept cash. In today's technological climate, if there is any economic turbulence, electronic banking /atms are usually the first thing to get disrupted. These problems are usually short-lived, but not being able to buy anything for a week or more could be problematic, so it is useful to have cash on hand.

Having cash is also great for good opportunities, not just disasters. If you are a reseller, picker, or just have an entrepreneurial spirit in general, having cash on hand can allow you to take advantage of a lot of opportunities quickly.

Remember this applies to relatively small amounts of money. I am not suggesting you keep $20K in cash in your house, but having $1000 or so in cash in your possession maximizes the benefits while reducing the downsides to the point of being almost negligible.


For a larger emergency fund I would follow the advice I outlined above: have a line of credit that can be accessed quickly and is equal to 6 months or so of expenses, and don't use it unless you have assets to back it. Then you can use the credit to deal with the expense right away, and pay it off in a few days/weeks when you have liquidated assets (where the rest of your money should be, to make you money).



-The Money Monk

TRACK YOUR SPENDING!

I have never been a big fan of trying to keep a strict budget; my strategy when I really needed to save was always just to NEVER spend money unless I absolutely had to. Then I would track my spending and look back at the past month to see if there were any areas I feel had some fat to trim.

I still feel like this is the best strategy for me personally. Some people may be more comfortable with a strict budget, but not me. I am also self employed so I don't get the exact same amount of money at regular intervals like some people which makes it hard to set aside certain amounts or even percentages at a regular basis.

I just recently had a much better spreadsheet constructed for tracking my finances, and it helps alot. Just knowing that after you spend any money you have to go home and enter it in the spreadsheet is a great psychological help with avoiding spending it in the first place, because you can't hide it from yourself.

If you are just spending money haphazardly without tracking it, a Mcdonald's meal here and there doesn't seem like much. But when you are tracking it and see that you have spent $1000 in the past year on fast food meals, it is easier to skip next time you get the urge to be lazy and not cook for yourself.

Not only that, but tracking income and spending will show your progress, which is very motivating. Day to day changes are usually small and can go unnoticed, but when you can look back over the past few months or years, you can see just far you have come.

So track it!


- The Money Monk

If you will it, it will come - extreme actions get extreme results

I just read two articles on the Mr. Money Mustache forums that really got me thinking.

The first was from a guy who decided to still bike into work even though the temperature was 20 degrees below zero!!

Another was from a guy from in Slovenia who got a parking ticket. Apparently the parking tickets there are shockingly high, about a weeks pay at minimum wage. He decided he still would not go over budget for that month,  even though he was already sticking to a very strict budget with little fat to cut. At the time of the writing he only had 3 days to go, and was running low on food in the house but was determined to make it even if he had to fast

Most people today aren't even willing to skip a meal when their lives are endangered with obesity, or skip a night out when they are about to lose everything to debts. Let alone do it simply to accomplish their goals even though they could afford it.

The discipline and motivation exhibited by these individuals is something you don't see too often these days. If you have this kind of intensity and uncompromising attitude toward ANY goal, it WILL happen. And financial independence is no exception. The biker would have been totally justified in driving to work that day, and nobody would have begrudged him that, even on the MM forums. But instead he stuck to the plan and went "extreme".

The parking ticket recipient could have easily chalked it up as an unfortunate unplanned expense and moved on, but instead he got EXTREME and decided this was not going to negatively affect his goals.

At the end of the year all the people who said these are extreme actions would be right; but they will have less money and will be farther from FI than these two.

Extreme actions get extreme results.

Keep your eyes on the prize!



-The Money Monk