The ancient Babylonians are thought to be the first to make New Years Resolutions.  They made them to find favor with the gods and breaking them was supposed to bring bad luck.  Many of us continue to make New Years Resolutions every year and most of us fail to keep them.  The Babylonians were careful to pick resolutions that they could keep through the year and we should be just as careful.

Every year I make the same New Year’s Resolutions and every year I fail to keep them.  I might make some effort to keep them for a week or two but then other things become more important.  I have really spent some time this year determining what I want to accomplish in the next year.

The Most Common Mistake

Most of us make a very common mistake when we are making our resolution.  We make a resolution to do something to improve ourselves such as losing weight, quitting smoking, saving money, etc but we never really make a plan on how to do it.  We think about it for a week or so but then just flounder because the reason we haven’t done it in the past is because we really don’t know how to go about it.

Making a plan to support our resolutions

One of my New Years resolutions is to put and keep money in my emergency fund.  Well, that’s a pretty good resolution but it is non specific.  I have to ask myself how much money should I have?  How long should it stay there?  Or even more important why haven’t I been able to keep money in the fund in the past?   The easy answer is that I keep having emergencies but if I look closer, I really haven’t had but one emergency this year and that was when my father got sick in April.  I have taken money out of the fund for groceries, to pay bills, and to do car repairs.  All of these things should have been covered in my regular budget but our income for the month did not support the budget.

So if I make the resolution to keep money in my emergency fund, I am already setting myself up to fail if I don’t make some adjustments to my budget.  This year, instead of putting all my savings into my emergency fund, I am going to start a second account to use as an operating account.  Because our income varies drastically from month to month, I am going to start putting money aside specifically to be used to cover those months where our income is low.  In the past, we have just tightened our belts and done without and then dipped into the emergency fund to cover the essentials.

My plan this year is simple, specific and measurable.   I cannot take money out of our regular income for our emergency fund.  We just don’t have enough income to support it unless the economy does a drastic turnaround.   I do have irregular income that comes from my blog, some ebay and craigslist sales.  This income is going to go into my emergency fund.  Any boon in our regular income will go into a separate account to be used in the lean months.

Another Common Mistake

Another mistake I make every year is not looking at what didn’t work over the last year.  The answer this year is easy, I didn’t work.  I have made very few posts over the last 12 months.  My focus has been on other things and I have made less than a decent effort to write or promote my websites or internet business.  This is going to change this year and I am making a committment to write daily on this blog and several others that I maintain.  I am going to set aside time each day to accomplish this.

My Plan

Increase my internet income to $100 per month for the first quarter.

For the second quarter, I would like to double that to $200 per month.

For the third and fourth quarter, I would like to be making $500 per month.

My How

eBay -  I am going to start selling on eBay again.  I pick up knick knacks and collectibles at thrift stores and yard sales and resell them on eBay.  Historically, I have done pretty well at this, usually doubling my investment.

Blogs -  I need to double my traffic on all of my blogs.  It has dropped off simply because I have not been writing and I have lost quite a few of my readers.  I have also not been promoting them.  I will be writing at least three articles per week on each blog and promoting each article.  I actually enjoy this because so much of blog promotion is just getting out and visiting other blogs.  I learn quite a bit and make some great friends this way.

Guest Posts -  I am going to be accepting guest posts on all my blogs on a weekly basis.  I am also going to try to write some guest posts for other sites.

Results

My resolutions this year and goals are rather ambitious.  It will take time and hard work to accomplish them but it is a labor of love and I will enjoy both the process and the results.  I will keep you updated on how my financial goal is going over the months.

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When I had a job, I automatically had money put into a 401(k) plan.  It was thoughtless savings and when I left that job or fell on hard times, I ransacked the account, paid the penalties and counted my blessings.  If I had only known then, what I know now.

I watch my children, young and old, making the same mistakes that I made.  If they don’t have money, they spend it anyway.  When they do have money, they spend it like there is no tomorrow.  I cringe when I see the way that they spend money.  Don’t get me wrong, most of them are grown and have the right to buy what they want and live the way they want but I feel like I should have taught them better.

These few things took me 52 years to learn.  I wish that I could teach them to my children, it would make such a difference in their lives.

#1 – Save, Save, Save

Kids, I can’t tell you how long it took me to learn this lesson.  Save a small percentage of your money and protect it from yourself like a mother protects her nest.  When times are good, saving is comparatively easy and while it’s easy to save, it is also easy to rob that savings because it was so easy to accumulate it.  When times are hard and you can still manage to save a little, your savings are harder to come by and will give you security.   You will also value whatever small amount you can save.   It’s hard to remember that times might not always be good and you might need that savings at some point in your life.  So when times are good, save as much as you can; when times are bad, save as much as you can and remember when you dip into that savings for something that you might need it more tomorrow than you do today.

#2 – Debt Has Eternal Life

Most of the things that you buy today will have no value in 5 years.  That new phone or new car or new tv will not be worth a tenth in 5 years.  Quite a few of them will have no value in a year.  Yes, they are cool today but you will get bored with it quickly and want a newer model.  If you go into debt for it, you will probably still be paying for it long after it is gone.   Save credit for a house and a car as they are probably the only things that will outlast the payment. Even after paying your debt off, it lives on in your credit report.  If you have a 5 year loan, it will stay on your credit report for 12 years.

#3 -Learn About Money

No one teaches you about money.  There is no class in school that teaches basic finance much less about saving and investing your money.  You are pretty much on your own when it comes to budgeting, investing, saving and planning.  There are tons of good books out there that you can read about finance.  Take the time to learn about it.   Investing is fascinating and it was a total mystery to me until a few years ago.  I am still not sure I totally understand all the facets of it.  If you don’t know what a zero based budget is, find out.  You may not want to do it but at least learn about the choices you are making.

#4 – Don’t Put All Your Eggs In One Basket

What led to my own financial troubles was relying on the equity in my house to be the biggest part of my financial plan.  The unthinkable happened, real estate values dropped like a stone and I lost all that equity.  In six months, equity of over $100,000 dropped to $0.  I wish now that I had invested some of that in other things so that I might have had a chance to save some of it.  If you invest your savings in one thing such as the stock market, and it falls, you can lose it all.  Diversify.  Keep some in a savings account, some in CDs, some in stocks, etc.

#5 – Budgets Are Not Evil

A budget does not mean that you can’t spend money on what you want.  It is simple a decision making process to determine where you really want to spend money and how much money you will have to spend.  It is a process that allows you to prioritize your spending so that you have money to spend on the things that are important to you.  It gives you the security of knowing what you have, what you owe and what you will be getting.  Budgets aren’t set in stone, you can change them easily.

#6 – Credit Cards ARE EVIL

The single most devastating thing that you can do to your finances is buy things with a credit card.  Almost all credit cards charge ridiculously high interest rates even the best charge more than you would pay at a bank.  If you pay the minimum payment, you will be primarily  be paying the interest charge and you will pay it forever.  If you are late, most credit cards will not only charge you a late fee but raise your interest rate.  It is extremely difficult to pay off the balance especially when your budget is tight.

#7 – Emergency Fund

A credit card is not an emergency fund.  You need to have some amount of money in a savings account in case of an emergency.  Hopefully, you will have enough in it to support you for a couple months if you have no other income.  At the very worst, you should have enough in it to get you and your stuff home.  It is not easy to have the discipline to save an emergency fund but the more you save, the easier it gets.

#8 – Financial Freedom or Financial Peace

I don’t know if I will ever have financial freedom but I will have financial peace.  There will come a time in my life when I know that I have enough money to live on in the worst case.  Every dollar that I put in savings gives me more security and less worry.  To me, financial freedom would be the freedom to be able to follow my dreams and to have the money to do so.  I doubt at this point in my life, I will reach that but there is no reason why you can’t.

#9 – The Best Thing You Can Do For Your Marriage

Developing a financial plan and having an emergency fund is the best thing you can do for your marriage.  Agreeing on a financial plan, determining your financial goals and relieving the financial stress will do more for your marriage than any counselor in the world.   I have listened to all of you and your biggest marital problems are financial.  You and your spouse need to sit down and reach agreement on what is important to each of you and find a meeting point.  Once you have developed your financial goals, develop a plan to reach them and then stick to it.  This will help your marriage more than any other thing that you can do.

#10 – Teach Your Children

Do what I say, not what I did.  Once you have taken the time to figure out what to do with the money you have and  don’t have, teach it to your children.  Teach them about saving, help them to develop a habit of savings, let them see how their money can grow.   Teach them about budgeting.  Let them plan how they are going spend their money and let them suffer the consequences of not following their plan.  It is a hard lesson but it’s easier when you are there to help them.  Once they have learned about budgeting and planning, teach them about credit.   Teach them everything you know and it still won’t be enough.

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I have spent the last several hours compiling a plan to get my financial boat back on course.

1. Where The Heck Are You?Obviously, if I don’t know where I am now, I won’t know how to get where I want to go. I think this is one of the biggest hurdles for most people. How do you accurately determine what shape your finances are in? I sit down with the monthly bills and determine what has gone up (or down) and if there is enough income to pay them. Not having a job with a regular paycheck, I also have to determine what my expected income is for the month. Then I need to figure out what I am going to have left over for living expenses and savings. I have a monthly budget but it’s still easy to get blown off course with added expenses or crises.
2. Is Your Course Faulty
   Sometimes you have to look at the course you have set and determine whether it’s the right one. We have recently been considering the pros and cons of purchasing a newer used vehicle. With all of our vehicles being over 15 years old, it would be really nice to have one newer, more dependable vehicle. Our question has been whether it is more efficient to repair the ones we have or to save that money and put it towards a newer one. Currently I have 3 vehicles and each have their own purpose. I have a 93 Geo that we use for running around town and long trips when we don’t have to haul the trailer. The Geo needs 2 new tires and door handles but it gets better than 45MPG. I have an 89 Ford truck that we use around the farm for hauling trash, wood and currently for pulling the trailer. It’s in good running condition except for an oil leak that means it uses a quart of oil for every tank of gas. I also have a 88 Chevy dually that is in the final stages of an engine rebuild. It needs an undetermined amount of repairs and it is really the one that we are questioning as it will also affect our income.
3. Prioritize
   Once you have made your decisions about the course you really want to take, you need to decide which things are most important. For me, spending time with my parents is high on my priority list. It is not something that I can put off or change. I am going to have to push back some of the other things on my list in order to do this. I had been considering getting a part time or temporary job but I cannot do that and still spend 3 or 4 days a week in Georgia. If I go back to my vehicle decisions, the Geo is really going to save me money on gas in the next few months and so it might make sense to buy the tires that it needs.
4. Make a Map
   So now I know where I am, where I need to go and which destinations are the most important. The easy part is to figure out how I am going to get there. I am going to go back to my budget and tweak it here or there giving a priority to my new destinations. I don’t think that a new truck is on the horizon in the near future so it will probably make sense to go ahead and make the repairs on the Geo. The total cost will probably be around $150. I know that doesn’t sound like much but it is over 10% of our total expected income for the month. That makes it a major decision.
5. Increase Speed
   This is simply an evaluation of whether it is possible to increase my income for the month. While it is difficult to do with the economy and my other limitations, it is not impossible. I am going to sit down and make a list of possible ways to make additional money.
6. Decrease Fuel Costs
   Again, this is simply checking my expenses to see where I can decrease spending. There are some things that are fixed: phone, mortgage, internet but there are other places that I can decrease my spending. My first step is to go through my budget and determine which expenses I can control. These would be things like fuel, groceries, entertainment, and even electric. Yes, it is possible to control your electric bill.
7. Short term Goals
   My short term goals tend to be more flexible. They change more often than my long term goals. By the time, I have gotten this far in the process, writing down my short term goals are fairly easy. I need to increase my income to pay for repairs to the Geo and to rebuild my emergency fund. Short term financial goal: $650 in extra income.
8. Long Term Goals
   My long term goals are fairly simple: become debt free, have 6-12 months of living expenses saved up and to begin investing for retirement. They haven’t changed much in the last year. What most people lose sight of when they are budgeting is that your budget should be your map to obtaining your long term goals. If your budget is not showing you how you are going to get your long term goals then you need to rethink it.
9. Is Everyone On Board
   If you don’t want a mutiny to totally take you off course, you need to make sure that everyone in your family is on board with your budget changes AND your goals. You will have real challenges if half of your family has a different idea of what you should be doing to reach your goals. If everyone is committed to your goals, you can work as a team to reach them. If your spouse does not think it’s important to save money for an emergency fund then they are not going to be willing to make sacrifices for it.
10. Taking Back Control
    Now you know where you are going and how you plan to get there. When unexpected things happen, you can quickly evaluate the effects and change your plan slightly to compensate instead of getting blown this way and that way. If you have an unexpected expense, you will know your budget and your priorities well enough to know that you can take money out of the truck fund to pay for it instead of giving up on your budget altogether. I can’t tell you the number of times that I have felt like my budget was totally blown out of the water by a car or home repair. Instead of adjusting, I gave my budget up totally and started over the next month. If it happened in the beginning of the month, I might blow the whole month instead of making a minor adjustment and keeping on with my current budget.

Most people are afraid of budgets because when you write it down, it becomes permanent. Budgets should be written but not be written in stone. They need to be flexible. You need to have a process for evaluating and updating not only your spending habits but also your goals otherwise when unexpected things happen, you will be unprepared to deal with them.

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by Nieve44/La Luz

Several people on Twitter were talking about not being able to save money because they didn’t earn enough. It actually made me laugh because I earn less than $15,000 per year at my business. I have a mortgage that is over 50% of my take home pay every month. I would be willing to bet that the people complaining easily earn twice as much as I do.

Somehow, I have managed to save more money in the past few months than I did when I was earning $70,000 a year. So what changed? Well, I have a confession. For most of my life, I have thought that saving was…. boring. Yup! I’m embarrassed to admit it but I wonder how many other people feel that way.

Over the last year, saving money became a priority for me. I realized that it was no longer an option, I had to have an emergency fund. It is even more of a priority because my income is so low. When you have less than $300 a month to spend on groceries, electric, phone, and fuel even having a flat tire could be financially crippling.

These are the ways that I have found that I cannot save money on my current income.

1. I cannot have an automatic withdrawal from my account. My checking account is way too fragile with the balance usually hovering under $100 to have anything withdrawn automatically.
2. I cannot put a regular amount into savings monthly. My income is too irregular to plan on putting any certain amount on any certain day. I find that I miss the date or the amount and it de-motivates me from saving anything.
3. I cannot put large amounts into my savings account at one time. While I would love to save money in $100 chunks, I just can’t do it. If I wait to save until I have a large amount, the money will never get there.
4. I cannot use Smarty Pig. This has been a popular plan lately but with the restriction of having to close the account if you withdraw before you reach your goal, I just can’t justify the trouble it would take to set it up in the first place.
5. I cannot reduce my expenses any more than I already have with one exception. I smoke. I wish I didn’t but I do and I can’t seem to quit right now. It’s something to work on for the future as it’s an expense that I hate and really want to get rid of. I have reduced it to less than a pack a day and am working on reducing it even more.
6. I can’t have a payroll deduction as I don’t get paychecks. This is one of the drawbacks of being self employed.
7. I can’t save money by reducing my grocery bill. I am spending less than $100 per month on groceries now and I really can’t see myself spending any less than that.
8. I cannot save money by giving up movies, cable, eating out or other entertainment. I have not had the directv connected for the last year. I don’t go to the movies or eat out. I find my entertainment the old fashioned way. I spend time with my friends and family, and believe me, they are plenty entertaining.
9. I can’t save money by reducing my heating or cooling expense. I have found that my tolerance for keeping my thermostat set low is 60 degrees in the winter. Any lower than that and I just can’t function. I can’t reduce a/c as I don’t have it in this house.
10. I can’t save money by reducing my fuel expenses as I have already cut back as much as I can. I go so far as to only make one trip into town per week. Right now, that is my trip to Richmond for foster care training. If I need something in town, I get it then or I don’t get it.

So there you have it. I have tried most of the tips and tricks that are advised for saving money. It just won’t work for me. So how do I manage to save money? Stay tuned for Monday’s post on How I Save Money.

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by J.sLessard

One of the excuses mentioned in Frugal Dad’s Language of the Perpetually Poor was “I Work So Hard, I Deserve It”.  ‘I deserve it’ is a trap that I still fall into occasionally.  It’s not usually for big ticket items like cars or vacations but usually for the smaller ones like eating out when I have worked a long day or like the carpet I bought on clearance.

It is a mentality that is often reinforced by our well meaning friends.  I was fussing at myself to a friend for purchasing the carpet and he said “You deserve to buy some nice things for your house once in awhile.”  He meant well but too often we use this as justification.

I am changing my “I Deserve It” spending mentality into an “I Deserve It” saving mentality.  It is simply, or not so simply, a matter of changing my mindset.  Do you fall into the same trap?  Want to change the way you think about it?  Look into the mirror and repeat after me:

I Deserve It!

I deserve to have security!
I am going to be financially secure.
I deserve to have enough money in savings to pay for an emergency!
I am going to have enough money in savings.
I deserve to have enough to pay my bills every month.
I am going to pay my bills every month.
I deserve to have that great feeling of knowing that I can cover my expenses if I can’t work.
I deserve to be able to pay for repairs without using more credit.
I deserve to have enough money to eventually retire comfortably.
I deserve to not worry about how I am going to pay the monthly bills when money is tight.
I deserve to be debt free.
I am going to be debt free.
I deserve to have financial security.
I am going to have financial security.

I not only repeat this every day to myself but I have written it down and posted it on the refrigerator.  I spend a little time imagining what it would feel like to know that I am financially secure, to not worry about bills or retirement, to know that my savings are working as hard for me as I am working for myself.

It doesn’t always work but it has helped me to change my goals from instant gratification to a more long term view.  It has changed the way I look at purchases as I think a bit more about the cost to my goals than I do the cost to my immediate  pocket book.

What do you do to remind yourself of your goals?  Do you visualize them?

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by code poet

It’s been 2 months since I posted my Goals for this year and I thought I should go back and do a short review. You can read my New Years Goals here.

Frankly, I am not too please with my progress for a couple of reasons. In my business, January and February are brutally slow. I have kept my head above water but only by pinching every penny and doing without quite a few things. March should start to see income from the business pick up and April should be better yet. I spent two years digging this hole that I am in and I guess it’s going to take awhile to climb out.

The other reason is that my use of the check card caused overdraft fees in my checking account and I am no longer using it. I actually called and had it cancelled. I can’t afford to plug up holes in my budget just to leave the drain open.

Goal # 1 is to have $1000 in an emergency fund by Christmas. I still hope to accomplish this but I have not made much progress in the last two months. On the other hand, I haven’t lost ground either. I have had about $300 a month in extra income from my notary business but that has been eaten up by the lack of income from the business.

Goal #2 is to have all my credit card accounts paid off by December 2008. I will actually accomplish this way in advance since I reached settlement on them this month and will pay them all off with my tax refund next week. That will leave me with one outstanding consumer loan for about 10,000 and I can snowflake that away. I will not be able to get it paid off before the end of the year but should be able to make a dent in it.

Goal # 3 is to double the revenue from the business. I really need to make this a priority. The response to my newsletter was good and I need to continue to do some kind of direct mail every month. I have not had the money to do ads in the newspaper but I am hoping to get them running again in March. For a bad month, February income was not too bad. It’s gaining but not quickly enough.

My major accomplishment is that I still have the house and the business and I am still getting through from day to day. And I can still afford one more batch of Triple Chocolate Cherry Cupcakes.

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In thinking back over the amount of time that I spend maintaining, promoting and updating the blog and really thinking about whether it was worth the time I spending, I realized that if I had not been researching personal finance for my blog, I would not have known how to negotiate to reduce my debt.  Frankly, I probably would have thrown my hands up in the air, buried my head and let them get a judgment against me.

 I also realized that I have changed my lifestyle significantly not only because of my focus on my finances but also because of the education I have gotten from reading other personal finance and frugal living blogs. 

While I am still not swimming in money, I am in much better control of the money that I do have.  I know where it’s going and that it’s being spent on things that bring the most value.  Mostly, I feel in control of my life again and that is a very, very good feeling.

The following blogs have been most influential in helping me to understand where I was, what the problems were in my planning and how I could change.  These are listed in no particular order and are most certainly not the only blogs that have influenced me. 

 
The Simple Dollar  Trent has great material with everything from budgeting to cooking.

Being Frugal  Lynnae introduced me to frugal living and taught me that being frugal didn’t mean doing without.

I’ve Paid for This Twice Already  Introduced me to the concept of snowflaking and while I haven’t been able to snowflake my debt away yet, I have been snowflaking money into my emergency fund. 

It’s Your Money  Michael has a TON of cool tools and articles on his site.  If you want a spreadsheet for anything including Etsy and bless his heart, it’s all FREE.

Brip Blap  Steve has a little bit of advice for everything that has to do with improving your life.    

My Two Dollars  I identify a lot with David at My Two Dollars, like myself he started blogging while teetering on the brink and has made it back to a comfortable life.  I have dug around in his archives quite a bit to see how he did it. 

 There has been a lot of moral support from fellow bloggers as well.

Bouncing Back From Bankruptcy  BB has jumped in with advice and moral support at times when I thought that I would give up if I could only find a way to do it. 

Oh Horsefeathers  Mrs. Mom is the person who told me about Dave Ramsey and got me started on the hunt for more information.  She has also been tremendous moral support when things are going badly and someone to share the successes with when they go well.

My thanks go out to all of the above and so many more.  So after looking at some of the unexpected benefits of blogging, I need to sit down and go through my plan, update my spreadsheets and revisit my goals for the year.  Look for a goals update in the next few days.  It’s hard to believe that we are 2 months into 2008 already.   

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Lou Tice of The Pacific Institute has a free motivational email that goes out daily called The Winners Circle. He often talks about setting goals and it has made me think about the difference between people who set goals and people who reach them consistently.

1. Set a goal. Goals should be specific, measurable, attainable, realistic and time specific. Say for instance, your goal is to save money. How much money? How will you know when you have reached your goal? When do you want to have it saved by? Can you feasibly do it? If you don’t believe you can reach a goal, it is unlikely that you ever will get there. Make goals that you believe in.
2. Visualize. When you set a goal, sit down and think about what life is going to look like when you reach your goal. How are things going to be different? Will you have more money? Peace of mind? Will you look better? Feel better? If your goal is to buy a house, find some pictures of houses you like and put them on the refrigerator. Write down a paragraph about what it is going to feel like to achieve your goal and put it in your planner where you will read it frequently.
3. Steps to take. There is no point in making a goal unless you are going to take time to decide how to get there. Think of the goal as a destination on a map. It’s great to say that you are going to Hawaii but if you start out to go there and don’t have directions, the chances are good that you won’t make it. The difference between having a goal and having a dream is that you have a plan to accomplish your goal.
4. Do Something every single day to help you reach your goal. You spent some time determining what steps you were going to take, now take one every day. If your goal was to lose weight, forgo that dessert or take a walk around the block. It doesn’t so much matter what you do, its that you DO SOMETHING to help your reach your goal.
5. Reassess. Every so often along the way, you will need to look back at your goal and the steps you are taking to determine if you are making progress. I like to do this weekly because it keeps me focused on my goals and it allows me to make needed changes to my plan. If one of the steps I am taking is not working, I can change it, eliminate it or do it more often. If one is working better than others, maybe I should do it more often.
6. Reward. If you have set a good goal, reaching it should be the reward but sometimes you have to stop and think about why it’s rewarding. If your goal is saving money, you may need something to motivate yourself to sacrifice a few luxuries while you are saving. Write down what your reward is when you have reached your goal savings. For my emergency fund goal, this will be the peace of mind to know that if something happens, I will have the money to take care of it. I can easily visualize handing the mechanic the check when he fixes my car and how good it will be not to have to stress over how I am going to pay for it.

If you do these things for every goal you set, chances are that you will reach them. The human mind is a wonderful thing and like a computer, it is programmable. If you load the software and turn it on, it is going to run that program.

Photo Courtesy of casch52

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