No-Kill Finance

(approximately 0.8% of the library)

First, a brief note:  sorry for the hiatus.  Not much free time as Istruggle to stay caught up with school and work.  But enough about that!

As returning readers may know (do I still have returning readers?), I recently tried to sell a lot of crap via the internet.  eBay proved difficult on account of my schedule generally conflicting with the hours of the post office, so I turned to facebook.  After I listed all of the books I hoped to sell, a friend told me she’d take whatever five that I most strongly recommended.  This should prove difficult…

See, I own a lot of books.  Too many books.  I took a tally a few years ago, and at that point (I’ve since acquired many more), I owned something like 1300 books, and had only read about 20% of them.  I of course intend to read them all, but as I go through a maximum of two books a month (or, lately, more like zero), that’s not a realistic goal.  Hence, I tried selling some of them.  But the ones I want to sell are not the ones I’ve read (hence, difficult to offer recommendations).  Nor are they the ones that I much want to read.  And this made me wonder, why would I expect money for them if I don’t think of them as being worth keeping?

The books I’ve decided to keep (and it should be noted that I was only trying to sell 100 or so) can be classified into two broad categories:  books I’ve read, and books I want to read but haven’t.  The books I haven’t yet read are the ones that I think of as being worth something, monetarily.  They are goods that I have purchased and not yet enjoyed.  So, I own them, but still hold material desire for them.  The books I have read, though (that is, the books I could reasonably recommend to my interested friend), are beyond monetary value.  If I wanted to part ways with a book I’ve read and enjoyed enough to keep in the first place, I would never, ever ask for money in exchange.  It would be handed over to – no, bestowed upon – a friend as a cherished gift.  There are few things I take as seriously as a good book.

So why, then, do I sell the crap that I don’t care about?  Or, rather, why do I expect anyone to want to buy it?  I mean, yes, there are some award-winning books in there, and books that I would probably have loved if I’d ever gotten around to them, but if my aim is to make money, shouldn’t I try to sell the things that are subjectively worth the most to me?  Would anyone buy my repeatedly read, beat-up 1980’s mass market copy of Vonnegut’s Cat’s Cradle for what I think it’s worth?  (If so, please contact me privately, and I’ll give you the address to which you can mail the $500 check.)

I still intend to sell a lot more stuff.  I’m working my way up from the crap I don’t care about to the crap I shouldn’t care about but do.  But where do I draw the line?  How do you (if indeed there are any of you out there) ascribe value to personal belongings?

A few days ago, there was a discussion about money at work in which one of my coworkers uttered the claim, “I just can’t save money.”

I didn’t go into full budget-geek mode at work, but I have no qualms doing so here.  So, to that claim, that misguided idea that any person is incapable of saving money, I offer a simple retort:  Nuh-uh.

I can prove it.  I’ll even phrase it like a self-help guru (imagine me speaking in a Dr. Phil voice):

In one easy step, I can teach you how to save money.  I guarantee that this simple, solitary action will start you on your way to saving potentially hundreds of thousands of dollars.  Do you want to know what it is?  The secret to practically limitless savings?  Well, I’ll tell you:

Just save your money.

I know, it’s anticlimactic.  But it’s so terribly easy that the word “can’t” simply doesn’t apply.

There are plans you can follow, books you can read, and seminars you can take on how to save, how to spend more effectively, and how to be thrifty.  You can get a second job, sell everything you own, or win the lottery.  Or you can follow my one-step plan:  just save your money.

Okay, enough of the self-help guru.  And enough of the smart-ass one-step plan.  But saving is important.  You need money in an easily accessible account for when (not if) emergencies come.  And, if I were to play the part of a self-help guru and propose a plan to a new saver, it could indeed be broken down into very few simple steps:

Step One:  Save your money. (No, I’m not joking this time.)

On your next payday, take some tiny amount of money (it could be $50, it could be $5) and put it into a savings account.  If you don’t have one, there are many online banks that offer higher interest rates than your neighborhood bank is likely to, and many of them have no account minimums (so you could indeed start an account with just $5).  I use ING Direct, and have nothing but good things to say about them.  In fact, if you opened an account with them, you could cite me as a reference and we’d both get some free money out of it.  But I won’t turn this into a ploy to make money for myself…the point is, this is how you prove to yourself that you can save.  You just do it.  Put the money away and don’t allow yourself to touch it (having it in an online bank makes this easier, since it takes a bit more effort to get to and won’t be used for an impulse buy or anything).  It will be out of your hands and, even if the $5 was a significant percentage of your monthly income, you’ll be forced to find a way to do without it.  You’ll get by, and you’ll have saved in the process.

Step Two:  Watch your spending.

Do this however you think you’ll be most likely to follow through:  each time you spend money, record it somewhere (text it to yourself or write it in a notebook or record it in some fancy-schmancy budgeting app on your high-falutin’ smart phone).  Keep track of what you spend in a given period:  in a given day, week, pay period, or month.

Step Three:  Adjust your spending.

At the end of whatever period you settled on (in my opinion, the end of the month makes the most sense because so many common expenses are only charged once a month), look at where your money went, and ask yourself if it all needed to go there.  How much did you spend on coffee to-go when you could’ve brewed some at home?  How many times did you eat out because you didn’t feel like packing yourself a sandwich before heading to work in the morning?  Which of your expenses are based on your needs, and which are based on your wants?  What of the things you spent money on would you have been better served by saving it?

Step Four:  Adjust your saving.

Now that you’ve seen where you can trim the fat, determine how much more you can afford to save from your next paycheck.  Set goals for yourself.  See if you can save even more than you budget for.  I make $1100 a month and save over $250 of it:  it’s not nearly as tough as I thought it would be.

Then it’s just a matter of repeating the same cycle:  save, track your spending, and save some more.  Perhaps it’s a grotesquely simplified version of a financial plan, but it’s a start.  And the simple act of doing step one alone is proof:  anyone can save money.

A quick post to start the day:

I was reviewing my accounts this morning, and something was off:  I owed $1.50 on the credit account that I’m so proud to have finally maintained at $0.00 for a whole month.  How could this be?  Did an ineptly risk-averse identity thief steal my credit card number and only charge $1.50 to it, just to play it safe?

It turns out that Chase charges a minimum interest fee every month, even if you don’t carry a balance.  At my interest rates, I could carry about a $150.00 balance, and pay the exact same interest rate I pay for carrying $0.00.  This strikes me as somewhat ridiculous.  Granted, I don’t understand the intricacies of the banking world, but I do understand the phrase “no-fee credit card,” and I also am pretty familiar with the phrase “false advertisement.”  Am I really supposed to pay interest on money that I haven’t even borrowed?

Chase has been a pretty disappointing bank for a while now.  The random fees attached to the (here’s that false advertising claim again) “free checking” and “free savings” accounts have probably cost me a few hundred dollars in the several years since my BankOne membership was bought out and turned into a Chase membership (mind you, this happened without the CEO even asking my permission!).

Plus, although most of my savings is done with my ING Direct accounts now (ING rave review still forthcoming in a future blog), I still have a small Chase Savings account that I use as short-term savings to set money aside for rent.  So, although I’m constantly contributing and then withdrawing from the account, the $300 I have to keep in it to avoid a $4.00 monthly fee gains only 0.01% interest annually.  Stacked against inflation, I’m probably losing $10 a year by saving with Chase!

I’d imagine I’d do better with a local credit union…the chief convenience of Chase has been the plethora of ATM locations all around Chicago.  But, frankly, I rarely use ATMs any more.  Chase and I have just grown apart.  And I think it would be better for both of us (or maybe just better for me and not at all noticeable to Chase) if I just moved on.

Where do you bank, readers?  (I do have readers, right?)  Are you big corporate bank people?  Small local bank people?  Credit union people?  Cash-under-mattress people?  What do you like/dislike about your banks?  (Please refrain from complaining about your uncomfortable mattresses.)

Yesterday, I got a phone call from my friend Danielle regarding my blog.  (She neglected to take me up on the free beer offered in the last post.  Big relief, since I can’t afford it.)  Since I neglected to save the message she left, I’ll paraphrase:

Justin.  I’ve been reading your blog.  How the @%&# do you save that much money when you make so little?  My fixed expenses are too high to save at all, and I make more than you.  What does your budget look like?

Well, Danielle, if I may respond in a public forum (though I didn’t ask before posting this), my main trick is that I just don’t spend much money at all outside of my fixed expenses.

I budget a monthly income of $1100, though I usually make a little more than that.  My fixed expenses are:

• $450 Rent
• $70 Transportation (approximate:  bus and train)
• $80 Utilities (approximate:  gas, electric, internet)

I’m fortunate enough not to have to pay for my cell phone, as it’s a recurring Christmas gift from my mother.  I also don’t currently have any monthly credit card payments apart from the not-quite-weekly $20 charges from the Chicago Transit Authority, which I pay as they appear on my statement (see “$70 Transportation”).  I don’t have any student loans (yet), because I was able to make it through my undergraduate schooling debt-free as a result of the responsible financial planning of my parents and grandparents.  (Side note:  this is one of the main things that makes me want to be financially responsible:  I want to provide for my children and grandchildren as well as my parents and grandparents did for me.)

But anyway, after those fixed expenses, I’m left with $500 a month to spend on food, pets, clothes, household expenses, and (if I’m very, very lucky) a bit left over for entertainment.  It’s a sparse existence, but I make it work.

For my non-fixed expenses, I eat a lot of cheap meals (made at home from cheap groceries…I price compare like crazy:  if something is 26 cents an ounce at Trader Joe’s and 27 cents an ounce at Jewel, I buy it at Trader Joe’s).  I keep and am sure to consume leftovers rather than letting them go bad in my refrigerator like I used to, and I scarf down any freebies offered to the staff at work (one of the perks of working for an animal organization:  lots of people want to thank us for our efforts by feeding us…even if it is mostly junk food).

I dine out very rarely, and try to do so cheaply whenever I do.  Again, I save leftovers and try to stretch them over a few meals.  (A trick:  I offer to brave the cold weather and pick up food for co-workers in exchange for getting to keep their change.  If I get six people to order Thai food along with me and they all round up to the nearest dollar – as a delivery tip – I end up getting an order of pad thai that lasts me two or three meals for just a couple of bucks.)

For entertainment, I rely on my “cheapest-plan-possible” Netflix subscription (complete with online viewing) and Hulu, plus the plethora of CDs, DVDs, books and magazines that I purchased and never fully enjoyed back in my days of unrepentant spending.  Mostly, though, I don’t leave myself time for entertainment.  Between school, work, and mindless internet browsing (I mean…constructive blogging), I don’t find much time to yearn for concerts or movies.

Household expenses are easy because we buy most household goods at thrift stores.  We clean with cheap cleaner (or sometimes just diluted white vinegar).  I re-wear shirts and pants until they’re simply too dirty to pass as clean in good company.  I buy clothes at thrift stores, too, and rarely at that since my job doesn’t really require any sort of dress code.  (All of my stained, too-small, white t-shirts are my “work shirts”…which I wear six days a week to match my work schedule.)

Mostly, I just cut back on the things that used to be my weaknesses: if I want a drink, I have $3 Trader Joe’s wine rather than $25 Jameson whiskey; if I want to see a movie, I stay in and see what’s new on Netflix rather than buying a ticket to see a new release; if I want a sandwich, I make one rather than running to the Quizno’s across the street; if I want to buy a book or CD or DVD or video game, I just…well, I just don’t.  And the best thing about it is that my extreme thrift hasn’t really detracted from my quality of life whatsoever.  I’m just as happy being cheap as I was being reckless.  And this way, I have $250 bucks or so every month to squirrel away for a rainy day, which just makes me more secure, therefore happier.

Returning visitors may recall that, in opposition to the unrealistic idea of holding myself to a New Years Resolution, I instead made several New Months Resolutions toward the beginning of January.  The time has come for a quick review:

Out With the Old

1.  Save 20% of my income to an ING Direct emergency fund. I’m happy to report that I overshot this one…by a very long shot, actually.  If you include all of the belated Christmas money I received (thank you, loved ones), I saved just over 53% of the money that came into my life!  And even if you don’t count the unexpected income from gifts, I still managed 30%.  I’ve been annoyed with how slowly my savings are growing, but I see in writing this blog that I’m performing so much better than I had budgeted myself to perform.

2.  Post at least 50% of my “crap” to Ebay or Amazon Marketplace. I found in starting this process that eBay and I do not get along.  And while Amazon Marketplace is lovely for buyers (it’s the source of hundreds of the books I’m now itching to get rid of), it doesn’t offer the best deal for sellers.  So, I found an alternative:  I wrote a facebook note with a list of all the DVDs and CDs I’m selling (at least 50% of my “crap”) and tagged all of my [geographically] closest friends.  So far I’ve sold about $130 worth of music and movies, and the requests are still coming in!

3.  Add at least 3 entries to this blog each week. For the first 60% of my blogging career thus far (that is, for two of the last three weeks), I was doing too good a job at this; I was obsessing over writing.  While this isn’t typically a bad thing for a creative writing graduate who has relapsed into writer’s block for the last five years, it is a bad thing for a returning student who should be devoting at least some of his brain power to chemistry.  So, after writing 4 or 5 a week for two (and a half?) weeks, I took a week off for studying.  More on that in #4.  But, strict numbers show that I made 11 entries in 3 weeks and 3 days, for a total of…3.08 entries a week.  Success again!

4.  Set aside seven hours a week (average one a day) for studying and homework. At my best, I have devoted five hours a week to studying.  This week.  But that’s following almost three weeks of not opening a single damned page of my chemistry book.  Even as I write, I realize I should be studying instead.  But I can’t abandon this, my primary source of self-accountability, totally.  I found that, in taking a week off of blogging in order to focus on my school work, I was far less capable of resisting the urge to be unproductive than I am when I’m writing here…perhaps I should just give up on school and do this full time.  (Just kidding; stay in school, kids.)

5.  Keep up with my chore list. This has been both a moderate failure and a moderate success.  In issuing myself a “procrastination challenge” last week, (though I failed colossally at focusing more on my school work) I was able to not spend so much time playing various computer games and reading random items of interest online, and therefore a lot of my important and occasionally neglected chores (animal care, general cleanliness, remembering to eat three meals a day) have become part of my daily routine.  But, in becoming part of the daily routine, I have forgotten to check them off of my chore list, thus I have forgotten to look at my chore list, thus some of the less crucial – but still important – chores (e.g. “Brush cat hair off of furniture”) have been overlooked for a whole month now.  I’ll have to modify that in this glorious New Month:

In With the New

1.  Save 25% of my income to an ING Direct emergency fund. In spite of the fact that I surpassed 50% last month, that may be a bit high to set as a given expectation.  But 20% isn’t cutting it!  I’m working full time during school, which I wasn’t planning on doing when I set down the 20% goal.  The result of this is that I’m making a lot more money than I planned on, and I have a lot less free time in which to spend it!  25% should be easy to meet and surpass (perhaps I can hit the $1000 mark in the emergency fund!), but by refraining from putting down a 45% goal, I’m not setting myself up for inherent disappointment.  After all, Christmas checks only come once a year…

2.  Add at least 3 entries to this blog EVERY week. Next month I won’t skew the numbers by taking an average…I’m new to blogging (perhaps you could tell that by my 2000-word entries), but I understand it well enough to know that taking a week off can hurt, in terms of readership.  Things have been going well here at No-Kill Finance (better than I expected they would after only 4 weeks!), and I should keep up the momentum.  Even if that means having to work harder to keep up with my next goal…

3.  Set aside seven hours a week (average one a day) for studying and homework. Yes, I still want (and need) to make this work.  This is a personal finance blog, and what’s more important to my financial future than my ability to pursue the career I want?  I need to get an A in this class, and frankly, I didn’t find it too difficult to be first in the class last semester.  So, now that I’m working 7 extra hours a week and trying to maintain a blog in my free time, I’m struggling.  But that doesn’t mean I need to drop one of those distractions so it can be easy.  It shouldn’t be easy.  It should be a challenge, and I should rise to accept it.

4.  Settle school finances before it’s too late! All this talk about school reminds me of a key point:  I haven’t paid for it yet!  I need to look into private loans (since, as a “non-degree-seeking graduate student,” I don’t qualify for federal loans) and sign up ASAP, because I’m sure the university doesn’t take kindly to delinquent payments.

5.  Find some time (somewhere) to see friends. One of the sadder aspects of being so busy is that I, a somewhat aloof fellow to begin with, haven’t seen some of my closest friends for months (over a year in one case).  This is absurd.  Some of these people live less than a mile from my apartment.  For all the rough patches that my friends have seen me through, no excuse (particularly not, “I hardly have any free time, and I’d like to devote what free time I do have to online gaming”) is good enough to neglect them for so long.  So, to any friends reading this, feel free to call me up and get on my ass about scheduling a rendez-vous some time in February.  (Mention this article and get a free beer at a neighborhood bar!  Why am I cutting prices like this?  Because I’m craaaazy!)

6.  Keep up with chore list. For real this time. All day, every day.  Starting now.  Bye!