Money Obedience

This is our weekly roundup, where we share some interesting posts written by personal finance bloggers we follow. As always, when we list a post in this roundup we stick with our favorite themes: setting up a budget, household expenses, lower debt, and general personal finance topics that can aid in reaching financial goals. We hope that you enjoy the insights of these blog posts!

Setting up a Budget and Household Expenses

Spend Less Than YOU Make: Taking Responsibility by Saving for Serenity.

Tips for Hosting a Dinner Party by fivecentnickel.com.

My First Budget: Drafting a Plan for Discretionary Spending by Get Rich Slowly.

Should you try to reduce your rent? by Wisebread.

How to create a workable budget by Blunt Money.

Savings

Build An Emergency Fund To Avoid Financial Crisis by Moolanomy Personal Finance.

Lower Debt

Debt Reduction – It’s Not the Method, It’s the Plan by Suburban Dollar.

Investing

Joining An Investment Club? Watch Out For Groupthink by Manshu of MintOne.com on Digerati Life.

How My Retirement is Currently Doing? (June 09 Update) by Green Panda Treehouse.

When to Adjust Asset Allocation by The Oblivious Investor.

Miscellaneous

How in the world did I get here? - An historic roadmap to better personal finances by Gather Little by Little.

Would you fire me? by OneMint.

How Your Personality and Past Affect Your Money Habits by Man vs. Debt.

Three Steps to Choosing a Financial Adviser by Free Money Finance.

A friend of mine had many years ago run up credit card debt of around $25,000. She was fortunate enough that a senior member of management where she worked at the time loaned her the entire sum and allowed her to pay it back over time without charging interest. That interest-free loan made it a lot easier for her to eliminate debt rather than paying the 18% or more in interest charges to the credit card company. Think about it: 18% on $25,000 is $4500 per year or $375 per month – a hefty amount of money just to carry debt and get nothing for all that extra pay.

Anyway, my colleague paid off her interest-free loan in less than two years; quite an accomplishment. To do it, she cut back on her spending, especially on careless spending like buying shoes and clothing she didn’t really need, and going out. Before she knew it she was debt-free and she loved it.

When she told me how she got out of debt I felt really good. I like hearing financial success stories like that. She also stayed out of debt for a few more years. But then something happened. Well, nothing really happened except that she fell back into her old habits of spending money carelessly. She loved adding things to her shoe collection and wardrobe, and she bought nice and often pricey stuff. Needless to say she has run up credit card balances of about $25,000 again. But now, her other friend is no longer around. He retired a long time ago and moved away. So she does not have a financial knight in shining armor. If she wants to get out of debt she has to work a lot harder this time around.

It appears to me that reckless spending is a bad money habit that needs to be controlled vigilantly. It is all too easy to fall back into bad habits. For some, it’s more like an addiction. Any recovering addict can tell you that you have to stay alert so that your former addiction does not catch up with you, maybe years later when you think you are “safe,”

So, I’m writing today to say that eliminating debt is only part of the equation. You also must make sure that you stay out of debt. Don’t think that a small credit card balance years after having become debt-free won’t make much of a difference. It normally doesn’t all on its own. But if you are a debt-junkie a small balance can start attracting more and more debt and grow into a big balance before you know it. (Just ask my friend!) Once you are debt-free, stay alert to make sure that you stay debt-free forever!

Budgeting Money and Having a Life Too

Did you all hear the NPR story on hooking up the other day? The story explained that dating involves expenditures of money, but hooking up is far cheaper. One point of the story was that intimacy was costly, but hooking up was less costly and lest risky. Eye opening!

As creepy and I find the whole hook-up thing, I must admit that relationships of all kinds cost bucks. We have two little boys, and as sweet and little as they are, they cost money! They grow like weeds, need new clothes, preschool, and medical care. And we want the little buggers to have fun, so we take them to the town pool, and to our sad little local zoo, and such. We get them (garage sale) bikes and (hand me down) books, but they sure do have a lot of stuff! We’re not immune either. Hubby has hobbies (running, biking, golf and skiing) that I pray he never cuts back too far on, or he’d be too hard to live with. (At times, my plea is “please, please, go burn some energy!”) And me – I’m the family introvert. I have hobbies that require solitude, and expenditure – like yoga ($15 a class), knitting (have you seen yarn prices! egads!), and oil painting (don’t even ask).

As I’ve told you before, I use one credit card for everything – and I do mean everything – and I pay it off every month. I get plenty of “points” on the card and the points translate into cash that I spend on things I need for my household. Even though I work hard to stick to the budget, and even though we do manage to pay off the credit card every month, I feel guilty when I use the card on things that are purely for me. By that I mean spending on my hobbies, and on the rare times I have to “blow off steam.” And, by that I mean that every now and then I meet the girls for drinks. Some of my gals (mostly moms) like to do that at home, in small gatherings, and some of my gals meet at our “spot.” I work in New York City, and the “spots” there usually cost some. I feel awfully guilty budget-wise about going out on the town (like I just did today, hence, this blog entry), but I think I do it fairly infrequently. vilkri-he never complains, although I’m sure he’d like to, but I imagine he doesn’t complain because I do it so rarely. (Or maybe he thinks about how my infrequent early evenings out cost about the same as a round of golf?) Still, knowing that my fun time will show up on the household credit card makes me cringe. (Or is that the reason I’m so good at sticking to the budget!)

I comfort myself by noting that there are so many other things that cost money but I do for myself instead. For example, I don’t get manicures or facials. I wash/style/cut my own hair (unless I have damaged it and need help). Unless I can’t turn my head for the stiffness, I substitute a long soak in the tub for a massage. And, yes, to save money I try to make baking my hobby. If you didn’t already know, our household is gluten free for the sake of my health and that of my 3 year old son. We are gluten intolerant. Store-bought gluten free baked goods cost a boatload of money. And when you bite into them, they taste like you’re eating the boat in which they carry the grocery money. So I made a habit and a hobby of baking at home tasty gluten free goods which are both delicious and comparably cheaper. Sometimes the result is bad and becomes breadcrumbs or becomes a redux a la bread pudding. But so far, I don’t think I’ve done too poorly in the baking department, and it’s actually fun finding new recipes online. (My latest find: Recipezaar where people exchange recipes, tips, and photos of dishes.)

What’s my point? I guess I mean to underline the theme of this blog, Money is not an end, but a means to an end – the enjoyment of life. I think we all need a reminder: to the extent that your budget can accommodate it, be sure to budget in some fun that benefits the relationships in your life. By fun, I mean both the everyday kind (that include hobbies, and sharing good food and good cheer with friends and family) and the special occasion kind (holidays and vacations).

Remember the old saying: no one on their deathbed wishes they’d spent more time at work! Think ahead to the things on your deathbed you think you might wish you had more of in life, and squeeze them in now. As long as you don’t ruin the budget by doing it, you’ll enjoy your days on the planet so much more! If you can save your family some money as you get your giggles (be it baking, gardening, sewing, building things, or doing a babysitting exchange with your neighbors once a month so you can have a date with your significant other), well, have at it! Be creative, and I know you can fit it in the budget, and probably strengthen your intimate relationships at the same time!

I enjoy reading a few blogs on personal finance, some of which focus on frugality, eliminating debt, and setting up a budget. More than once did I read the recommendation in these blogs that instead of buying books you should just go to your local library and take out the books you want to read. But this doesn’t work for me.

When my wife and I were setting up a budget, we both agreed that we allow ourselves a generous amount to spend on books. Books are special to me – and to her, too. In a way, books become part of who I am. It does not matter whether I read a textbook on finance, a coffee table book on chocolate, or a paper-back novel. The content and the message of any book stay with me. To my thinking, so should the book itself.

Besides, I love building a library and see it grow. Each of the books on my bookshelves tells a story, pun intended! What I mean is that I own that book in more than just one way. Here’s an example. I just finished reading Günter Grass’ Peeling the Onion. While I read this book I felt like I was making a connection with the writer and the messages of the book – both the obvious messages and the hidden messages. I know that I would be very sad if I had to return this book to the library. I might never read it again, but I know that seeing the book looking at me from my bookshelves in the future will remind me of the time when I was reading it. My other books do the same. When I am done reading I scribble my name on the first inside page. To me that says “I own this book” – all of it.

So, the bottom line for any household budget is the following. A budget has to be tailored to your individual needs and preferences. There is not one right way to set up a budget. There may be some yardsticks that you want to adhere to, like not spending more than about 30% of your income on housing, but if housing is very important to you, I don’t see why you should not spend more on housing - even a lot more - as long as you stay within a budget and as long as you save some of your income for retirement and rainy days.

Most people might think that the amount my wife and I spend on books is wrong, but it does work for us. Like I said, most of the bloggers I referred to at the beginning of this post think that it is better to take out books from the library than to buy them. I respectfully disagree. I like buying the books I read and I rather cut back on other things. But that’s me. What about you?