Your Tax Refund is Not a Reward

This past weekend I was driving my three boys to a family birthday party. We were listening to Pandora in the car-specifically the Final Fantasy music channel (why yes, we’re a family of video game geeks. Don’t judge). Since I’m too cheap to spring for the ad-free version of Pandora, we were also treated to some lovely advertising. We were about halfway through our trip when this lovely gem of an ad came on:

You’ve worked hard all year and you’ve earned your tax refund! Treat yourself for all your hard work – come on down to Hairy No More for laser hair removal today!

Now, I couldn’t let that one pass on by without a rant. Since my kids are still young (13, 9, and 1) they have yet to earn a paycheck where they get the joy of seeing part of it evaporate to various taxes. We rarely get a tax refund – last year I owed $17 and it was the happiest tax year ever! – and when we do it goes toward our financial goals of the year. So the boys don’t see us getting or spending a tax refund, and I figured they may not be aware of what many others do with theirs.

And so began my opportunity for what I’m sure was an extremely interesting educational experience on tax refunds.

Your Tax Refund Is Not A Reward For Your Hard Work

“Wow! Did you guys hear that advertisement! I can’t believe it!”

“What?” asked my 13 year old, who had been using the long car ride as an opportunity to get some time on his 3DS.

“There was just an advertisement on Pandora saying that your tax refund is a reward for your hard work all year! And you should use it to treat yourself to laser hair removal! That’s so rediculous. Do you guys know what a tax refund is?”

“No,” said the 13 and 9 year olds. My one year old was sleeping in the car, but even if he’d been awake, he wouldn’t understand what I was saying.

“When you go to work, part of what you make is kept by the government in taxes. If they keep too much of your money, then they give it back to you. When they give it back to you, that’s called a tax refund. But it’s not a special thing or a reward-it just means they kept too much of your own money from you! Instead of getting a tax refund, you could have been keeping that money all year long to use for the things that are important to you.”

“That sounds dumb,” said my 13 year old.

“It is dumb. You shouldn’t be happy if you get a tax refund-you should be changing it so the government doesn’t keep as much money in taxes in the first place.” I said.

“Are we almost there?” asked my nine year old, clearly fascinated by the conversation.

I figured this should be the end of my rant. When it comes to teaching my kids about money, I try to use opportunities like this as “teachable moments”. Whenever we’re in the store, see something on TV, or have a conversation about college, I use a few minutes to try and teach a quick money lesson. I assume that some of them will stick with them, and some won’t. Since this was a brief conversation, I thought they may not even remember it later in the afternoon-let alone when they’re adults. But I don’t want to let opportunities like this pass on by without using them as a quick money lesson.

I see and hear this same kind of attitude around tax refunds all the time in the media. A few weeks ago, I heard a car commercial that was offering to match your tax refund (up to a certain amount) for a down payment on a car. If we had regular TV – we cut cable many years ago – I’m sure I would be seeing much more advertising that would be fodder for educational opportunities aka rants.

What Are People Doing With Their Tax Refund?

According to a survey by Bankrate, it looks like most people are planning to use their tax refund wisely. Or at least, they tell surveyors they are. According to that article, 84 percent of Americans receiving refunds intend to pay down debt, save or invest their windfall or use it for necessities. I was interested to learn what people are really doing with their tax refunds, versus what they planned to do, but I wasn’t able to find that much on the topic. I did see this from CNBC from a few years ago that confirmed my suspicion that what people plan to do, versus what they actually do, is different.

Why might this be? Well, lets say that you’re participating in a survey about how you’re going to use your tax refund. You know that you should save it, or invest it – maybe use it to pay down some of that car loan or credit card. Since you know that’s what you should be doing, you’re more likely to answer on surveys that way. The same phenomenon happens when you survey people on what they eat, and compare it with what they actually eat. People know they shouldn’t say that they’re planning to have a donut and coffee for breakfast, or Cheetos for a snack. So they don’t mention those things, and instead answer in a more idealized fashion. This concept is called “response bias“, specifically social desirability bias. This is the fact that “…desires of the participant to be a good experimental subject and to provide socially desirable responses may affect the response in some way”

What Should You Do With Your Tax Refund

Sorry to give a lawyer – type answer, but “it depends”. The best thing is to look at your overall financial dreams and determine how this money can help you accelerate them. Don’t have specific goals yet? Pop on over to my article on getting to know your dreams, and keep this money aside until you’re clear on what they are.

Some excellent potential uses of a tax refund include:

• If you don’t yet have an emergency fund, or it’s lightly funded, you can use this to beef it up. Here’s why you should always have an emergency fund and plan
• If there’s a debt you’re working to pay off, you can put it toward that
• If you’ve been meaning to start a college fund for the kids, use my college gifting resource guide to start a 529 plan. Or if you already have one but want to increase it, go ahead and mail that check
• You could be like me and put it toward a mortgage freedom fund
• Set it aside in a specific savings account for a planned future expense – car repair fund, home repair fund, car replacement fund, planned vacation
• Use it to start a “snowball of savings” in your life and optimize your expenses. I’ll write about this more in the future, but essentially this is using small windfalls or savings to exponentially increase the amount you can save each month. Examples include:
  • Buying an Ooma online and using it to ditch your internet phone, saving $45 or more a month
  • Snagging a Roku or Amazon Fire stick so you can cut cable and switch to streaming, saving $100 or more a month
  • Get cell phones from Google Fi, switching from your expensive provider and saving $100 or more a month
  • Pick up a warehouse club membership and use it to get some staples, saving you $50, $100, or more a month

For more great advice on managing windfalls, be sure to check out Bogleheads.

Also, look at adjusting your withholding. Only you can know if you’re going to really have the discipline to save extra money each month vs. managing it well if you get it all at once. Although this is technically an interest free loan to the government, the interest on savings accounts is so low lately that the amount you would have earned is negligible. If you would have the discipline to save it, it’s better to get that money working toward your dreams every month rather than waiting. But if you know you would just absorb that extra into your expenses, go ahead and continue to get the refund. It’s all about what works best for you.

Family Financial Lessons – And I Want to Hear from You!

After having a fun time at the family birthday party, we began the long drive back home. About half an hour into the drive, the same commercial came on Pandora again. This time, my 13 year old piped up and said, “Mom, there’s that dumb commercial again! Can you believe that they’re saying that you worked hard for your tax refund when you’re just getting your own money back?”

So there’s hope that something on that particular lesson will stick with them as they get their first jobs.

If you’re using your tax refund to further your dreams, and you have kids, be sure to talk to them about it. Let them know what a tax refund is, and why you’re putting it toward that specific dream. Talk about why this dream is important to you and your family. Don’t let the laser hair removal and car companies of the world be the ones to teach your kids about the way to spend a refund.

I want to know – are you getting a tax refund? If so, what are you doing with it this year? Let me know in the comments!

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This week I’m reviewing “Frugal Isn’t Cheap: Spend Less, Save More, and Live BETTER” by Clare Levison, CPA.

Note – The link to the book is an affiliate link. If you buy the book, I’ll receive a small commission at no cost to you. Thanks for supporting the site!

The book opens with Clare checking in with her checking account – and surprise, surprise, it’s a negative balance! She then goes on to assure us readers that it’s OK if we, too, are not perfect. Instead of beating ourselves up, we should just move forward and work to do better in the future.

The TL;DR version of this review is that overall it’s a pretty solid book for beginners. You’re not going to find advanced, hardcore frugality strategies a la Mr. Money Mustache, and if you’re a personal finance nut like I am there’s not going to be anything new here. But if you’re just starting out your financial journey and looking to make some small changes to get out of debt and save more, this book will provide you good basic information while being reasonably entertaining.

Living Well on Less – In this section, the author talks about separating what’s important about yourself from the things that you own. You might think of yourself as a good employer, son, mother, father, or sibling – you likely don’t think of yourself as “the person that owns that cool thingamajig”. So what’s really important is who you are, not what you have. She also talks about some ideas on specific ways to save money, like foregoing a DVD purchase to watch a Redbox rental

Less Spending, More Balancing – Recommendation here is to start saving anything, no matter how much (or little) you’ve saved in the past. The “balancing” part is around living on a balanced budget-preferably a cash one so you can’t overspend.

Getting Out of Debt – Here she goes through the different types of debt payoff strategies – debt snowball (pay off debts from smallest to largest amount), debt avalanche (pay off debts from highest to lowest interest rate), and the “ticked off”method, where you pay them off in the order they annoy you from most to least annoyed.

Saving More Money – Recommendation here is to work up to saving 20% of your income-an excellent recommendation for most people. She recommends a three phase strategy – “Piggy Bank” phase, where you cut spending in small ways and instead put what you would have spent into a piggy bank; “Pay Yourself First” phase, where you start automatically drafted from your paycheck or checking account; and “Goal Phase” where you begin to save for specific goals

Investment Plan – The basics of 401ks, IRA’s, Employee Stock Purchase Plans (ESPP’s), stock trading accounts, and real estate. And alpacas.

Large Purchases – This section is all about buying a home

Net Worth – It’s pretty basic: assets (money/real estate) minus liabilities (debt) equals net worth. There were some interesting stories in this section about Thomas Jefferson and MC Hammer, both of whom apparently struggled with debt

Income – Gives a few “side hustle” ideas, but is mostly about increasing income at your main job. The author cautions here against starting a business as rather risky, preferring to rely on an employer for income.

Money Doesn’t Make you Evil – Starts off with how you’re not an evil person just because financial security is important to you. But the section is mostly about charitable donations

Teaching Your Children – All about allowances and college

Achieving Financial Success – You can sum it up as “spend less than you earn and save/invest the difference”

All in all, this is a solid book for those who are looking to start reading about personal finance. Although it doesn’t cover any one topic in great depth, it does touch on all the major topics you need to learn about in a relatively entertaining way.

Now I Want to Hear From You!

What financial bookWhat book

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If you’re into personal finance and investing like I am, you’ve likely heard of “The Latte Factor.” This is the concept first made famous by David Bach, the bestselling author of “Smart Women Finish Rich” and “The Automatic Millionaire.” The examples he uses in his books are of people who usually pick up a latte and a muffin for breakfast, eat out at work for lunch, and grab “a few things” on the way home. He shows how this “latte factor”, as he calls it, is actually keeping these people from becoming millionaires. Small amounts invested consistently over time in index funds can lead to great wealth thanks to the power of compounding.

There have been criticisms of the latte factor, most notably by Helaine Olen in her book “Pound Foolish” (which I’ve reviewed before and you can find here. The usual complaints are that not everyone buys lattes, lattes don’t really cost $5, and that the compounding rate Bach used was too high. These critics are missing the point, however. The point wasn’t about lattes at all. It was about defeating the “I can’t save anything” attitude by showing that you can save large amounts of money over time by making small cutbacks in lifestyle. Your “latte factor” may not be lattes at all-perhaps you hate coffee, you’re more of a tea person, or you drink a plain coffee that costs a dollar or two. You might never have set foot in a Starbucks, but this idea still applies to you. If you tracked your spending in detail for a month, you would see all the small things that are adding up to big bucks over the course of the month. Running to the convenience store for overpriced milk and bread. Not bringing lunch to work. Grabbing a few magazines, or a bottled water. Those are all seemingly small expenses that you can use to change your life, particularly if you’re one of the sixty percent of Americans without access to $500 in case of an emergency.

The Savings Snowball

Bach suggested simply investing your latte money and reaching millionaire status-instead, I’m going to introduce you to the “Savings Snowball”, a concept I was first introduced to in The Tightwad Gazette (pages 148-149 in The Complete Tightwad Gazette specifically). What’s that, you might ask? It’s the simple idea of using your freed up money to buy things that will save you even more money over time. Over the course of five years, you can use savings of just $10 per week to set the stage to becoming a millionaire.

Don’t believe it? Think it’s impossible? Take a look at this story and how Suzy and Dave could use a simple $10 per week savings to snowball their way to a nearly $25k nest egg, freeing up almost $7k per year to continue investing.

Year One – Starting Small

Suzy and Dave are a young couple just starting to think about saving and investing. Like many, they don’t have a lot of money sitting around and think that investing is just for the wealthy. So they decide to start small and target putting aside $10 every week. How are they doing that? They decided to switch from picking up coffee at work every day and bought a french press to keep at their desk, making fresh coffee at home and brewing it at work. They also committed to brown-bagging lunch once every week. At the end of the year, they’ve saved $520.

Year Two – The Snowball Starts

They keep up their new habits, preferring freshly brewed coffee to that swill sold in the work cafeteria anyway. Brown-bagging it isn’t the hardship they once thought, so they decide to bump it up to three times per week, bringing their weekly savings to $20. They also take $500 of their original savings and pick up Google Project FI cell phones when their contract with the big cell phone company runs out. Given that they previously had a very average cell phone bill of $148 with Verizon, they’re able to save $100 per month.

Total savings end of Year Two – $1040 from coffee and lunches, $1,200 from cell phone, and $20 left over from last year = $2,260.

Year Three – Growing Bigger

They continue to bank their $100 per month cell phone savings, and coffee/lunch savings of $20 per week. They take their money from last year and invest in the following:

• They pick up an Ooma for the house for $100, saving $40 per month on their landline bill
• Buy meat in bulk for the year for $500, saving $1,000 over buying it piecemeal
• Get a warehouse club membership with cash back for $100, saving $1,000 over the course of the year
• Get new insulation for the house for $1,000, saving $600 per year in energy costs
• Pick up an Amazon Fire TV stick or a Roku for $100, and sign up for Netflix and Hulu for $10 per month each. They’re then able to cancel their cable, saving $100 per month

Total savings end of Year Three – $1040 from coffee and lunches, $1,200 from cell phone, $480 from Ooma, $1000 from bulk meat, $1000 from the warehouse club, $600 energy savings, $1200 from cable, and $460 left over from last year = $6,980.

Year Four – Bigger Still

Continuing with the money-saving habits they developed in Year Three, Suzy and Dave are able to put away another $6,520 ($1040 from coffee/lunch, $1200 from cell phone, $480 from Ooma, $1000 from meat, $600 energy savings, $1000 warehouse club, $1200 cable). Of course they have to pay for another year at the warehouse club and for their bulk meat again, which costs $600.

They take the leftovers from last years stash, and some of their freed up cash flow, and get:

• A pellet stove and pellets for $1000, saving $500 per year on oil
• A home energy audit for $100, saving $300 per year in electricity
• Several books online about saving money (like The Tightwad Gazette, my personal favorite) for $50, which gives them ideas that save another $1450
• 401k contributions up to their employer match, totaling $6000 for the year, giving them each $1,500 per year in free money and saving $1,500 in taxes
  • Assuming they both make $50,000 per year, and get a 3% match for contributing 6% of their salary

Total at the end of Year Four – $6,520 from their monthly savings; $1800 from the pellet stove, energy audit, and books; $3000 from their new 401ks in tax savings and match; and $5,230 leftover from last year = $17,000. Six thousand of that is in their 401k, and they then use the extra $11,000 to each max out their ROTH IRA for the year.

Year Five – Let The Snowball Roll Downhill

During the past four years, Suzy and Dave have been hard at work freeing up cash flow to find room for investment. They’ve done a great job, making investments in money-saving endeavors rather than buying a new car or remodeling their house. But now, they feel like they’ve optimized their expenses almost as much as they can. This year, they focus on continuing their 6% 401k contributions, and work to max out their ROTH IRA’s again. They can do this because of the habits they’ve developed over the years, and the investments they’ve made that are now on auto-pilot. They look for bargains and deals over the year and manage to free up enough cash to meet both goals.

At the end of Year Five, without making getting any gains in the market, they’re going to have a stash of $34,000 ($17,000 from their original savings and $17,000 in their ROTHs and 401k).

Just Let It Roll

Suzy and Dave are proud of everything they’ve accomplished in the past five years. They went from having “no money to save or invest” to having tens of thousands of dollars set aside. They then decide this is a good enough strategy- they’re just going to continue doing this for the next 30 years, increasing contributions with inflation every year. Raises and bonuses will be spent on having fun – going out to eat, picking up new cars for cash, and going on vacations. But without fail, every year they set aside that money they worked so hard to free up.

So what will they have in 30 years, if they’re able to get a 10% return over that time? $2.5 MILLION DOLLARS according to this calculator. This would give them $100k per year at the 4% safe withdrawal rate. Adding this to social security would be more than enough to cover their living expenses comfortably in retirement.

Lets say they only get an 8% return – they’ll still have $1.3 million in the bank, able to take out $52k per year. This with social security, even if cut, should be enough to comfortably sustain them.

Even more importantly, their ROTH IRA’s have been working and are ready to be withdrawn with zero taxes. Since they’ve invested in both ROTH’s and traditional, they can create a tax strategy where they’ll owe almost no taxes in retirement.

Criticisms and Counters

Whenever someone writes on this topic, I see a number of the same types of criticisms. Don’t let excuses derail you from using this information to better your financial life! If you’re stuck in critic land, let me get ahead of the game by giving you the top four common criticisms and my counters to them:

• Criticism: But CMO I don’t pay for (insert thing here – landlines, heating oil, cell phones, cable) – or CMO I don’t pay that much for (insert thing here – lunches at work, coffee, meat, etc.)
• Counter: I think you missed the point. Of course everyone pays different amounts for different things! I live in the Northeast where heating costs are high, but maybe you live in Texas where you need to pay for air conditioning. Maybe you don’t have a landline, but you do have subscriptions to magazines you don’t read. The point is to take a critical look at your expenses, work to free up small amounts of cash, and use that money to invest in things that will save you even more cash in the future

• Criticism: A million dollars isn’t what it used to be! – OR – A million dollars won’t be worth much in 30 years!
• Counter: People who say this usually don’t have a million dollars. Sure, a million dollars back in 1920 was worth a lot more than it is today (it would be worth about $12 million according to this calculator). But having a million dollars is a lot better than living paycheck to paycheck and hoping the government will fund your retirement. Even 30 years from now, having a million dollars in the bank will make you better off than not having it.

• Criticism: Thirty years is too long – I want a million dollars now!
• Counter: First of all, there’s no “get rich quick” scheme that will work for you. Sorry about that. If you want get rich quick dreams, please feel free to go pay a voluntary tax and buy some lotto tickets. The real path to wealth is usually slow and steady, over long periods of time. It takes time for interest to compound-that’s the miracle in it. That said, there’s nothing keeping you from accelerating the process. You can do all this in one year if you make enough money and you’re determined. You can also decide to increase savings and investments with future raises and bonuses, rather than using them to increase your lifestyle like Suzy and Dave did. You can reach the millionaire mark faster if you save more sooner. It’s simple math.

• Criticism: Ten percent (or eight percent) is too aggressive – the stock market won’t return that over time!
• Counter: People who say this will also say “it’s different now!”, which has been said right before the tech crash, the real estate bubble burst, and the Dutch tulip craze. The reality is that since 1900, with dividends reinvested, the stock market has returned a CAGR (compounded annual growth rate) of 9.6%. Check out this calculator to see for yourself, and play around with the time periods. Yes, the returns in the S&P since 2000 have been under 5%. Yes, stocks might return less in the future than they have in the past. You’ll still be better off with the money than with no money. Please feel free to do the calculations yourself with whatever rate of return makes you comfortable.

Have you used this concept before in your own life? What kinds of things would you recommend investing in to free up cash flow over time? Let me know in the comments!

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.

Your job – how’s it going? Is it just pretty good, but not great? It pays the bills, but you wish you could make some changes at work. Maybe you disagree with some policies, think your boss isn’t making the right calls, or feel frustrated that you can’t accomplish what you want. But you’re down in the hierarchy at work, and you have limited ability to make significant changes. So why are you still there? Well, it’s comfortable, pays well, and change is hard. Besides, you need to pay those bills, right?

Raises come and raises go – hooray, another extra three percent in the paycheck. It seems like they always just get absorbed into your life, and you’re no better off after the raise than you were before.

Lets not forget about bonuses, and tax refunds. The first time you got a bonus, or a big refund, you felt amazing! The possibilities were endless. If only you could get a bigger bonus or other windfall, you’d really be able to get ahead. But now you’ve come to expect your bonuses, rely on them even, and if the company has a poor year you’ll be one of those at the water cooler grumbling. You need that bonus, after all. How else will you be able to pay off your debts, or go on a vacation? Your kitchen and bathrooms could use some remodeling too.

It seems like no matter how much that raise or bonus is, it’s just never enough.

But what if it was?

What if it was enough – and more – to buy you freedom?

Putting Windfalls to Work

This year, instead of letting that raise just get absorbed into your daily spending, pretend you didn’t get one. That’s right, no raise this year, sorry about that. After all, if your company was in trouble and didn’t give you a raise, you’d find a way to get by-right? So figure out your dreams and put this money to work. Maybe you’ll invest in yourself, your family, your dreams, or your freedom. Don’t put this money to work getting more stuff, upgraded stuff, or other things that will just tie you closer to your job.

Take that bonus, tax refund, or other windfall and make it disappear. That’s right, you didn’t get one – after all, if you didn’t get one, you’d manage-right? It’s more important to keep your job. So as soon as it hits your account, go ahead and transfer it right out again. Even if you don’t know what you want to do with it yet, just keep it aside so it doesn’t get spent in drips and drabs here or there.

When you use your raise to upgrade your lifestyle, or your bonuses on stuff or fancy vacations, you’re just letting those golden handcuffs get tighter around your wrists. When you’re on the earn and spend treadmill, you need to keep earning in order to keep spending. You’re running as fast as you can just to stay in place, like the Red Queen said to Alice in Wonderland.

A Different Path

When you’re on the earn and spend treadmill, you’re dependent on your income to sustain your lifestyle. You have almost no control over your job. Even if you’re the CEO, you’re beholden to your shareholders and the board of directors. The larger economy, regulation, or missteps at the top can bring your company down and into bankruptcy, even if you’re stellar at your job. Your entire livelihood is tied to the company. If that company has a bad year but you did a great job – you had a bad year and no raise/bonus for you. If your company makes some bad bets and folds, you’re out of a job. If your department, boss, or the business changes-you and your skills might no longer be needed.

Financial independence gives you a different path. You can do good work for its own sake, whistling while you work. When you hit the “crossover point” as they call it in Your Money or Your Life, you’re “bulletproof”. You disagree with the boss? You can let them know without fear for your job. Your skills aren’t needed anymore? *shrug* OK, time to move onto somewhere that they are needed. Company folds? Just pack your stuff, head on home, and go for a hike-or watch a movie. You can go start your own business, take some time off and work on your hobbies, or travel the U.S.-or the world-and then pop back into paid work when and if you want to.

So don’t let your bonuses and raises just pass by, slipping through your fingers, keeping you on the Red Queens treadmill. Break free of the golden handcuffs by striving toward financial independence a little bit more every day. You’ll find a few of those links breaking every year, the handcuffs getting looser, and that gold chipping off. After some years, you’ll look down and see that under that gold, the handcuffs were made of rust all along. The only thing keeping you cuffed was yourself and your fear of change. You’ll finally tear them apart and you’ll be free to live life on your own terms.

What are you doing with your raise or bonus this year? How will you use it to further your way to financial freedom? Let me know in the comments!

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.

P.S. I did a guest post today over on the Notorious D.E.B.T – if you have a chance, be sure to swing by and check it out! As of this writing (7 AM EST) it’s not up yet but should be soon.

For many years, we didn’t go on very many vacations outside small day trips in our state, or an overnight in Boston or New York. We went to Florida a few times (where my husbands brother and one of his sisters lives), and Washington DC (land of the free activities!), but mostly we stayed around the state and went tent camping in the summer. Last year we decided to try something new – a road trip during spring vacation. And my older boys absolutely loved it. All they can talk about for the past year is where are we going on our next road trip.

Now, planning on going on a road trip is nothing unusual here in the personal finance community, but it seems pretty out of the ordinary where I work. My coworkers are constantly traveling across the US by plane multiple times per year, traveling internationally, going on a cruise, or looking forward to annual trips to Disney World -complete with dining plan. I’m sure these are all lots of fun, but then I also get to hear all about how they can’t possibly save the six percent required to get the 401k match (really? you make six figures!), or are looking for a way to hide their income from the government so they don’t have to pay for their kids college. I’ve learned to smile, nod, and then plan trips that work for my single-income (mine) family of five.

So now begins the planning for the next road trip. We’ve decided to head north this spring vacation, but when you live in Connecticut, I’m finding this might not be the wisest choice. Lots of fun things to see and to do are closed in the spring, because the weather is still very unpredictable. In fact, on our last road-trip it started snowing while we were driving through Pennsylvania! Next year, we should head south or west-or maybe wait for summer.

Getting The Kids Involved

Last yearway

A quick trip down to the library confirmed my suspicion – they had kids books on every state in the USA. For most states, there were two or three different books. So we took out all the books they had on the states we were going to visit-Pennsylvania, Washington DC (OK not technically a state, but there were plenty of books), and Virginia. Luckily they had books geared both to the grade 3-5 age range and the grade 6-8, so each boy was able to have their own set of books at their grade level. Over the next few weeks, I had the older boys read the books and write down the things they wanted to see and do.Then my husband and I made our own lists, and we planned out the trip so we would drive in a loop.

Why did I do this, instead of just planning the whole thing with my husband? Having the kids do the research helped teach them about planning a trip, which they’ll need to do themselves one day when they’re older. They also learned about each state-the books didn’t just cover tourist sites, but also information about the states geography, history, and major cities. Sure, some of this was information they might learn at school, but much of it was new. In their classes they don’t dive deep into each state, and usually just cover capitol cities and major historical events. And I thought it would help build excitement around the trip, since they had helped pick where we would go.

Although the one year old didn’t help with the planning, you can see he “helped” with the packing!

Sure enough, it worked. The kids each found fun things they wanted to do in the states. I also used Groupon in the states to find some deals on things to do and places to see. So last spring we headed out, trying to keep the driving to only a few hours a day and the rest of the time spent having fun. We stayed in Hershey PA, which was a lot more fun than we thought it would be, spent a few days in Washington DC (free, free, and free museums!), went to Williamsburg VA, Luray Caverns, and finished up the trip in Philadelphia before heading back home. Our few hours driving rule was only broken once, when we ran into horrendous traffic and had to spend an eight hour stretch in the car (ugh). The boys favorite part? The hotel in Washington DC. Gotta love when the hotel is the highlight of the trip!

We also made sure to budget plenty of money for food on this trip. All the hotels had a free breakfast offering, and we brought snacks and water/juice to drink during the day. One of the hotels had a kitchen, and we were able to use that to make dinner a few nights. But we wanted part of the trip experience to include exploring local places to each in each location, which my 12 year old loved. He made a rule for the family that we can’t eat at any chain restaurants on a road trip, and had a great time trying out new places to eat. Usually he’s not the most adventurous eater, so this was a welcome change. We had soup dumplings, discovered Millers Twist in Philadelphia, and ate a local shop called Hot Bagels. Side note – my husband made an exception to the rule for chains that aren’t available in our state, so he could have a “Waffle House Loophole”.

While on the trip, I let my middle son be the one to snap pictures. He quickly discovered that he loved photography-and to my surprise, he was really good at it. Many of the best pictures from the trip came from him, and we were able to get shots of everyone together in a way we usually can’t. He’s now become the official family photographer, taking pictures at all family events and day trips. You can bet that during our next road trip he’ll be at it again, snapping pictures of everything.

Overall they had a great time, and they’ve been talking about planning our next road trip for the past year. So this January we went to the library and got some more books about the states we’re going to hit this year – Rhode Island, Massachusetts, New Hampshire, Vermont, and New York (not NYC-been there done that). They both made lists again, and we made ours.

Now I have all our lists by state in a spreadsheet, we’re going to head out and get a map of the Northeast. Why an actual physical map in these days of Mapquest, Waze, and Google Maps? I figured that having an actual map would be better to show the kids just what the routes look like, and how we can figure out the amount of time to go from one destination to the other. Plus I don’t want to spend all my time plugging destinations into the computer when I can see it on a map more easily. My now nine-year hold has selected about 50 different things he wants to see (of course), so we need to see which ones will be practical. Once we have the route and major sites planned out, I’ll look for other things to do near the areas we’ll be, and reasonably priced hotels with a free breakfast.

Having Fun Doesn’t Need To Cost A Lot

Heading off to somewhere expensive can be fun. I’ve loved my trips to China, Japan, England and France and I wouldn’t trade them for the world. But taking a trip in your home country can be just as much fun, especially if you approach it with the same sense of adventure and exploration as an international trip. So don’t think that a trip with kids needs to be to Disney or Universal to have a lot of fun. Or that you need to do all the planning yourself. Cultivate a sense of adventure in your kids by getting them involved in planning the trip. Talk excitedly about seeking out new things to do. Make a family pact that you won’t eat at chain restaurants while on the trip, so you can remind them when they beg for that McDonalds at the rest stop.

Teach your kids to seek out adventure in less expensive ways, and I bet you’ll all have a great time at a fraction of the cost of a more “traditional” vacation. Lets say you save a few thousand dollars each year using this strategy. If you put that away, then before your kids finish high school you’ll have more than enough to take them on an amazing, adventurous international trip. Or if that’s not one of your goals, you can use it toward paying off the house, saving for college, or starting a business. No need to give Walt Disney your hard-earned money when you can have just as much fun – and learn more – by planning out a road trip together.

What do you like to do on family vacations? Do you get your kids involved in the process, or do you plan to when they’re older? Let me know in the comments.

Want to learn more about teaching kids about money? Check out this great page with my top articles and resources I’ve found from around the web.

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.

What’s the secret to something going viral? What causes “the latest thing” to go from early adopters into the mainstream? Why is it that back in 2008 almost no one had a smartphone, and today everyone has one? Malcolm Gladwell lets you in on the secret in “The Tipping Point: How Little Things Can Make a Big Difference.”

Note – The link to the book is an affiliate link. If you buy the book, I’ll receive a small commission at no cost to you. Thanks for supporting the site!

Although this book was published back in the early 2000’s, it’s just as relevant today as it was back them. Gladwell studies what causes social epidemics to flourish-or fall-seemingly at random but really due to factors you can predict and control. He goes through the roles of different kinds of key people that cause information to spread like wildfire, and what makes an idea “sticky”, or have staying power. As you read it, you’ll find yourself nodding or thinking to yourself “oh, that makes sense.” And if you’re like me, you just might find yourself thinking about how you might be able to use these concepts to make the world a better place.

The Law of the Few

What is it that makes someone persuasive? How is it that some people can have an idea, buy a product, or use a service and cause it to go viral-but for others the idea just stays put and never goes anywhere? Gladwell discusses the roles of three key types of people in spreading ideas-the Connectors, the Mavens, and the Salesmen (or saleswomen).

• Connectors – These are the people with lots of connections between different groups of people. When I read the description, I immediately thought of my grandmother. She was always bumping into someone she knew wherever she went-no shopping trip could go by without her seeing someone from church, work, an old friend, the parent of one of her kids, or someone else. She, like most Connectors, was very social and loved talking to people and learning about them. Heck, she even kept in touch with old friends from elementary school well into her 80’s. Since they have so many connections among different groups of people, connectors can help ideas to spread and networks to grow.
• Mavens – The real experts in a field, interested in digging down into the nitty-gritty details most people aren’t interested in. Mavens can tell you more than you ever wanted to know about the details of a specific car model, refrigerator, or financial product. My grandfather was a Maven. Although he wasn’t as social and gregarious as my grandmother-preferring to spend his time reading, studying up on his latest interest, or in his workshop building something – you could always count on him to provide an in-depth analysis of any topic he was interested in. Mavens not only have deep expertise, but also want to share it with you in order to help you. This, when paired with a connector, can be powerful in spreading new ideas, concepts, products, and services to the masses
• Salesmen – These are the persuaders we run into in life. They’re not salesmen in the “cheesy car salesman” kind of way, but in the way that makes you want to buy whatever it is they’re selling-without feeling like you’ve been sold anything. A true salesman can sell ice in Alaska, hot cocoa in Florida, and shark repellent spray to Batman. Salesmen have a quality about them that’s hard to put your finger on, but they’re incredible at influencing others.

If you pair a Salesman with a Connector and a Maven, they’re a force to be reckoned with. Mavens will vet an idea extensively, putting all their expertise to work, and ensure it’s a quality one. The Salesman will persuade others that the idea has merit, and the Connector will make sure it spreads far and wide. This is most powerful when you have two or three of these traits in the same person-they can cause an idea to go from a tiny acorn into a huge oak tree almost overnight.

Stickiness – Why Some Ideas Have Staying Power

Have you ever had a jingle you just can’t get out of your head? Maybe “This is The Song That Doesn’t End” from Lamb Chop? (If you’re around my age it just got stuck in your head-sorry. If you’re not my age and you don’t know what I’m talking about, go watch this and then, I’m also sorry, it’s probably stuck in your head now).

Gladwell uses two classic children’s television shows – Sesame Street and Blues Clues – to show in detail just how the show producers got educational concepts to stick in children’s minds. Shows had to be entertaining, not confusing, straightforward, and ideally get participation from the audience. I’ve seen this at work with my older kids when they were small, and with my one year old. Their favorite shows are slow, simple, and repeated ad nauseam. If you have a child, and you’ve been forced to watch the same video over and over and over, you know what I’m talking about.

You’ll see this repeated in successful adult movies, books, advertisements – almost everywhere you look, once you learn about it. Concepts that are simple and easy to digest are memorable-complex ones are frequently forgotten. That’s why people gravitate toward “rules of thumb” like saving 10% of their income, or saving $100 per month for college. Complex ideas like calculating your exact expenses, extrapolating out 10, 20, or 30 years, predicting investment returns and inflation, determining your personal future 4% withdrawal rate-all are too complex. To be “sticky”, you need to package an idea in a simple way that makes it irresistible.

The Power of Context – Your Environment Matters More Than Your Morals

Have you ever wondered what causes some areas of town to be “bad”, and others to be “good”? Why is one street full of litter and graffiti and the next one not? Believe it or not, it may relate very little to the type of people who live there and it may be more about the context in which they live.

I’ve seen this concept play out in my house and car, with the kids making messes. One kid leaves his books in the car. The next sees the mess and figures that a little more mess won’t hurt anything, putting their water bottle on the floor. And so on, until I need to yell at someone for making my car a disaster area. The good news about this concept is that it works in reverse too – as people see things cleaned up, better behavior, less litter, etc., they’re more likely to act the same way and be neater, better behaved, and stop littering. This idea is what led to the dramatic decline in crime in NYC from the 80’s to the 2000’s. Those in charge began focusing on cleaning up in small ways, and it led to big changes in crime rates.

How Can These Concepts Help With Financial Literacy?

We all know the abysmal state of Americans finances. Forty six percent of Americans can’t cover a $400 financial emergency. Seventy-two percent don’t know what a 529 plan is. The average savings amount for college, which includes the wealthy and is probably skewed high, isn’t enough to pay for one year of in-state college, room, and board. Half of Americans have nothing saved for retirement. There’s been a lot of hand wringing as to why. People blame the media, the lack of financial education in schools, peer pressure to keep up with the Joneses, and many other factors for the lack of financial aptitude.

Is there a way we can use these concepts in The Tipping Point to help spread financial literacy like a virus? What if we could make talking about your 401k or your 529 plan as cool as chatting about the new car you just purchased? If everyone knew about financial products and could explain them simply and clearly?

Many of us personal finance bloggers write because we want to help others. We’re usually Mavens on money – we enjoy diving deep into topics like what are our 401k fees or analyzing the cost of pizza take-out, pizza kits, and making your own. Our ideas are usually a hit within our own communities online, where everyone is interested in money and usually has a higher than normal knowledge of financial information. But how can we spread our ideas out beyond our community-and into the mainstream?

Help spread the word about money. Come up with simple, sticky ideas that people can easily understand and remember. Use stories to persuade people why an idea is a good one, or how saving money can be just as fun and even more rewarding than spending it.

What ideas do you have on how we can reach the financial tipping point and send America down a better path? Do you know any Salesmen or Connectors that can help spread the word? How can we use context to help people see saving as “just something you do” rather than a sacrifice? Let me know in the comments!

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or everything I’m reading over on Goodreads.

The past few weeks, my mortgage company has been sending me increasingly urgent e-mails, telling me that the feds are going to be raising rates shortly and I better hurry and refinance my loan! Side note – yeah, they want me to refinance my 2.75% mortgage into something higher. Oh, and take out tens of thousands in equity for college, home improvements, or to “pay off debt” (of which I have none except this mortgage). Uh, no thanks! On the 15th, it happened – the feds raised rates by a quarter of a percentage, and signaled two more rate increases are coming this year. But what does that mean to you and your wallet? And is my mortgage company generously concerned about my financial well-being? (Hint – No, they’re not).

For most people, this means exactly nothing in the short term. It will have an impact longer term on your loans, savings accounts, and bond funds. How? And why? Let me go through the details with you. Today I’ll cover the impacts to existing and new loans of all kinds, savings accounts, I Bonds and bonds/bond funds.

Existing Student Loans, Mortgages, and Car Loans

The key question to ask on loans is whether or not they’re at a fixed rate. If they are, the feds raising the fund rate has exactly zero impact on your finances. Your monthly payment will stay the same, and you’re locked into the interest rate you received when you took out the loan.

With mortgages, only about one percent of people take out an ARM (adjustable rate mortgage). Why so low? People know that these interest rates we’ve been seeing in the years since the Great Recession are the lowest they’ve been in history. When the interest rates are at an all time low, that’s the time to lock in your rate by using a fixed loan. Also people have seen others get bitten by rising rates before, and rates had no where to go but up. So an ARM only made logical sense if you were either planning to have it paid off or were going to sell your home before it adjusted.

Car loans? Those are typically fixed rate as well. In fact I’ve never heard of an adjustable rate car loan before, but apparently they do exist. So if you’re locked in to a low rate car loan, enjoy it while you get that depreciating asset paid off. Bonus points if you scored a zero percent loan!

Student loans? Again, if you locked in a fixed rate you’ll be fine. Your monthly payments won’t change at all. If you have a variable rate loan, you’ll see your payments go up eventually.

Let’s say you do have a variable rate loan – what should you expect to happen?

• Usually your interest rate is fixed for a period of time before it starts to adjust
• Once it starts adjusting, there’s usually restrictions on how often it can happen. It won’t adjust every time the feds change the rate
  • For example, if you have a 5/1 ARM rates can only adjust after five years have passed, and then they adjust once per year
• You still have time to refinance into a fixed rate loan – and while rates are higher, they’re still pretty good from a historical perspective
  • Given that two more rate hikes are coming within the year, now’s the time to get going on that refi
  • Even if you can’t get a lower rate, it may be worth paying slightly more in the short term to have the guarantee of a low rate in the long term
  • But, if you’re going to have the loan paid off either before it adjusts or shortly thereafter, it may not be worth the cost and hassle

Bottom line – for anyone with an existing fixed rate loan, the rising rates have no impact on you. For those with an adjustable rate, now’s the time to look at refinancing or set a goal to have it paid off soon.

Looking to refinance a student loan, personal loan, or mortgage? Use my referral link to SoFi and get $100 bonus when you refinance a student or personal loan. No payments on mortgages, but I’d still suggest popping over there to check out what they offer. I’ll get a payment for referring you, and you’ll get extra money – win/win! I haven’t used them before, but I’ve only heard good things about their loans, service, and support. They have a five star rating over on Credit Karma, and 3.9 with the Better Business Bureau.

Why am I not recommending a company I’ve done business with?

• I hate my mortgage company with the burning passion of a thousand suns, and would never recommend them to anyone
• I have no experience with personal loans
• The only student loan I had was through the government, and I paid off the balance before the monthly payments began

Want to check out the latest rates? Head on over to Magnify Money and compare rates on loans. You’ll also notice that SoFi is ranked highly over there.

New Student Loans, Mortgages, and Car Loans

OK, so you don’t have an existing loan – but you’re thinking about a new loan. You’ll be shopping around soon for a mortgage, or a car loan, or a student loan. So what does this hike mean to you?

It means borrowing is going to get more expensive, and higher payments, unfortunately. But not at the scary amounts you might think:

• New car loans will see their monthly payments rise by about $3 per month for every 0.25% increase in the fed funds rate. So if the fed hikes rates three times this year, the monthly payment will go up by $9 on a typical $25k car loan
• What about mortgages? I turned to my all-time favorite mortgage calculator for an answer. The average mortgage is $157k according to this article, so I’ll use that in my calculations. Before the rate hike, the 30 year mortgage rate was 4.21% and 15 year was 3.42%. Lets compare the “before” and “after” for a 0.25% rate hike (note – mortgage rates don’t rise/fall exactly in tandem with the fed funds rate, so this is for illustration purposes):
  • Before: 30 year mortgage payment is $768.67, and the 15 year is $1,116.21
  • After: 30 year mortgage payment is $791.77, and the 15 year is $1135.52
  • Bottom line: The 30 year mortgage payment would go up by $23.10 per month, and the 15 year by $19.31. Hardly enough to break the bank
• New student loans may rise, but not as much as you might think. Private student loans most certainly will, but federal student loans make up 90% of outstanding loans. The federal loan rates are tied to the 10 year treasury rate, so again there’s not a direct rise from the fed funds rate

Bottom line: Although borrowing might get more expensive, it should still be affordable. Even if rates rise twice more this year, I’m sure you’ll still do better than the first mortgage I ever got, at an 8.375% interest rate (!!!).

Credit Cards and Home Equity Loans

These are usually adjustable rate, and will go up as the fed rate goes up, so now’s the time to get them paid off or refinance into a fixed rate loan. If you’re one of the people that pay off your credit cards every month, then the interest rate doesn’t matter. But if you carry a balance, pop on over to one of the rate comparison sites and look for a better deal.

Bottom line: Now’s the time to get that debt paid off, or refinance to a better rate. If you have credit cards, use that SoFi link and get $100 bonus for locking in a better rate on a personal loan (while I get a payment too). For home equity loans, look into refinancing that loan into a fixed rate mortgage.

Savings Accounts and CD’s

Finally, on to the fun stuff! With rates so low, savers have been punished with extremely low rates on their savings accounts. In fact, the average savings account rate is currently only 0.06%, which is horribly low. I can remember back in the day when I was getting over 5% – in a savings account!

Today I’m happy getting my 0.75% with Capital One 360. I’ve been with them since they were ING Direct, opening my account back in 2004 when internet banking was still new. In my 13 years with them they’ve consistently had one of the highest interest rates, and I’ve had nothing but good experiences. If you’re interested in opening an account with them, I’d love if you’d consider using my referral link, giving both me and you a small bonus. You’ll get $25 for opening a checking or savings account, which is more than the interest payment for a year with most banks!

I want to note that Capitol One not the highest rate available right now. Ally Bank, Synchrony, Goldman Sachs and Barclays are all offering 1% or more right now. All four companies get A ratings on Magnify Money. They won’t pay you (or me!) a bonus, and I can’t recommend them from personal experience, but I want my readers to have the best information and the best rates they can get.

At times, banks can be stingy about passing on the additional interest from the fed funds rate to you. So be sure to shop around for a better savings account deal, and check it out once per year to see if there’s a better deal for your money. Magnify Money has multiple savings accounts giving over 1% right now, even without the fed funds rate rise. As rates go up, you should be rewarded with higher interest on your emergency fund.

What about CD’s? Those have lingered with poor rates too. A quick look at historical CD rates shows that they’re currently hovering around a quarter of a percent. Again, you can get higher rates even now by shopping online and comparing deals. You can get a higher rate than a savings account, but at the cost of locking up your money.

Personally, I would not recommend locking in a low rate on a CD right now. With two more rate rises coming this year, you’re likely to get a better deal is you wait. While you’re waiting, be sure to keep your money in a savings account that pays more than that 0.06%! But if a CD is right for your financial situation, just make sure you get the best rate you can.

I Bonds

Ah, one of my favorite investments for keeping your money safe. In fact, right now the I Bond rate is higher than my mortgage rate. What are I Bonds? They’re inflation protected savings bonds, whose rates rise and fall with inflation. And why is the fed raising rates? To offset inflation risk. So I Bonds, which at times in the recent past haven’t been a good deal, are potentially about to become a lot more attractive.

There are five key downsides/restrictions to I Bonds that you should understand.

1. Your money is locked up for 12 months before you can cash them
2. If you cash them in before 5 years is up you will lose three months of interest
3. There’s a limit to how many I Bonds you can buy in a year. It’s currently $10k per person online, with an additional $5k in paper bonds from your tax refund (side note – this is a good reason to get a tax refund!)
4. The rates rise and fall with inflation. If inflation falls to zero, you get zero. The rates adjust every six months.
5. A lot of people don’t like the website where you need to buy the bonds online, Treasury Direct. It can be a bit of a pain to navigate

I Bonds used to be sold with a significant fixed rate in addition to the variable inflation rate, but recently that fixed rate has been nothing or almost nothing. They can still be a valuable part of your overall portfolio. To learn more about I Bonds, head over here for an explanation or here to go to Treasury Direct and open an account.

Bonds and Bond Funds

Rising ratesbond funds

Lets say during the low rate environment you bought $10,000 in bonds from a company, paying 3%, that will mature in 10 years. That 3% rate would have been pretty good at the time, especially compared with a savings account.

Now rates rise and new bonds are paying 6%. Your bond has 8 more years to go until you can get your $10,000 back. What if you need to sell it today? People aren’t going to want to pay you $10,000 for your bond. After all, they can just go out and get a new bond paying twice the interest rate. So you’ll be forced to sell your bond at a discount for less than $10,000. Exactly how much of a discount varies depending on (1) your interest rate compared with current rates and (2) how long until the bond matures. Interested in doing the math yourself? Find the formula and an explanation over here at Investopedia.

This process essentially works the same in bond funds. The longer term bond funds will fall more than the short term bond funds. Lower rate bonds will mature or be sold, and be eventually replaced with higher rate bonds, but the price of the funds may go down in the meantime. Bonds have had a bull market for many years, and financial experts see that coming to an end.

Does this mean that bonds have no place in your portfolio? That you should run out and sell them all, and go to gold? No. Remember to “Be greedy when others are fearful, and fearful when others are greedy” as Warren Buffet advises. When everyone is selling bonds and buying stocks, just hold steady to your investment policy statement. Don’t take on more risk than you’re comfortable with just because the talking heads are spouting gloom and doom. Remember, they always do that because it makes for good television/articles. Just “stay the course”, as Taylor Larimore of Bogleheads says.

What About You?

What impact, if any, do you see rising rates having on your financial life? Are you planning to lock in low fixed rates while you have the chance? Are you looking at your bond funds in fear? Let me know in the comments.

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.

The first year of contributing 10% to my 401k, I had a whopping $2500.

Of course, back then I made $22k per year and was working my way through college, paying my own way through work reimbursements and my earnings. I had been reading books like The Richest Man in Babylon and The Wealthy Barber, and had learned that saving 10% of your income was the key to wealth. But I couldn’t stop looking at my sorry little 401k balance and feeling sad. How on earth was $2500 going to make me wealthy? And how could I ever even think of maxing out my 401k? Back then the maximum limit was slightly over $10,000, and it just climbed every year.

Today I contribute the federal max to my 401k. That sorry little 401k has hundreds of thousands of dollars in it, despite the fact that I left that employer back in 2011, rolled over the 401k into a Vanguard IRA, and haven’t contributed a dime more. Many people I work with, who make more than I do, “can’t” even contribute the 6% of salary they need to get the full match.

So if you’re in this situation, just starting out, how can you set out on the path to maxing your 401k? I have a simple, yet powerful, solution.

Start Where You Are – And Start Now

Did you not ever contribute to your 401k? Are you in your 40’s and just starting to think about retirement? Or maybe you’re in your 20’s and don’t see how you can possibly put anything away, what with your student loans and rent payment. There’s no sense in beating yourself up over the past. You can’t go back in time and contribute more to your 401k, so forget about it. It’s over and done with. Just start now-today-with something.

Remember, money contributed to a 401k comes out pretax, so it won’t “cost” you as much as it may seem at first. A $100 per month contribution may only cost you $75 after the tax break.

Think about it this way-if your boss sat you down today and said “I can either give you a 5% paycut, or you can lose your job”, what would you pick? Note – if you’re already Financially Independent (FI), you might pick losing your job, but stay with me here. Likely you would take the paycut. After all, it’s only 5%. Sure, things might be tight for a bit, but you’d figure out how to get by. Maybe you’d put off that new car purchase, cut down on lunches at work, or take a less fancy vacation this year. And really, when you think about it, getting your pay cut by 5% would reduce your income and social security taxes. So you’d only feel a cut of about 3% in your paycheck. It wouldn’t be too bad, right?

So sign up today for 5% to come out of your paycheck and go into your 401k. Don’t have a 401k at work, or you have a terrible one with no match? No problem. Open up an IRA and have 5% of your net pay automatically drafted out. You can open a Fidelity IRA with no minimum. Or if you prefer Vanguard, open an IRA and invest in a Target Date retirement fund for $1,000.

Don’t have the thousand dollars to open an account yet? Don’t let that stop you. Open a savings account with a company like Capitol One 360 (bonus-if you open an account you get $25 to help you toward your goal, and I get a bonus too!), and have the 5% automatically drafted every paycheck. They can take money every week, every two weeks, or every month-whatever you need. I’ve been with them since 2004 back when it was ING Direct, and only have good things to say about my experience. Continue the automatic draft until you have the thousand dollars, then open the Vanguard account.

It’s amazing – just like you don’t really notice that 5% raise, you won’t really notice the 5% (or 3% after tax) decrease.

Already contribute to a 401k, or do you want to start a different account like a ROTH in addition to the 401k? You can use this same exact hack to get that started. Pretend your boss has given you a 5% pay decrease so you can keep your job, and take that money to increase your 401k contribution or start a ROTH IRA with one of the companies above.

“But CMO, I can’t do 5%! I’m living paycheck to paycheck, every dime is accounted for, we have nothing extra!”. If this is the case, then try doing 1% for a few months. It’s a penny out of every dollar-I’m sure you can do that. The important thing here is to start, wherever you are. And you know what? If you use my savings account strategy, then the money didn’t go anywhere yet. If you really need that penny you can get it out again. But I bet you won’t even notice it’s gone.

Use Half Your Raises

Did you get a paltry 2% raise this year? Does it seem like these tiny raises just get absorbed into your lifestyle, and amount to almost nothing extra in your paycheck? Time to celebrate, because that means you can put an extra 1% into your 401k or IRA and still get a pay increase.

After all, if you had gotten no increase because the company wasn’t doing well, you’d manage on your old paycheck. Using this technique will let you put away half of any raises toward your goal of maxing out your 401k. And you’ll still get a raise-just not as much of one as you “really” got.

You can power up this hack by using your entire raise, instead of half of it, toward your 401k. So if you got a 2% raise, you increase your contribution by 2%, and live off your old pay for another year. Since you never saw that raise in your paycheck, you won’t miss it, and it won’t feel like you got a paycut.

Do It Every Year

After one, two, even three years of this hack it may not seem like it’s doing much. After all, your account might still only have a few thousand dollars in it. But over many years you’ll suddenly see the difference. You’ll log onto your 401k account and see a five figure balance, and eventually, a six figure one. And you won’t have felt deprived or like you needed to live on beans and rice along the way.

Don’t Tell Me – Show Me

We’ll take Susan, who currently makes $40k per year and is 25 years old. She has nothing put away for retirement yet and thinks putting aside $18k per year is absurd. After all, that’s almost half her paycheck! With all her bills, student loans, and so on it seems impossible.

This year she did a phenomenal job at work. She gets a 5% raise and decides to finally start this retirement thing. She’ll just take that 5% and put it in the 401k, living off the $40k like she did last year.We’ll assume she’ll make 8% on her 401k every year, and she’s in the 25% tax bracket.

So at the end of Year One she’s feeling a bit like I did at the end of my first year of 401k contributions – a bit down. Contributing all year and she only has $2160!

From this point forward, she’s getting 4% raises every year and decides to use half her raise to bump up that 401k. Again, she’s making 8% on her money. Where will she be at 43?

So at age 38, she’s contributing almost $20k into her 401k, has increased her take-home pay substantially, and has a balance of almost $200k. She decides to stop there and use all her future raises to increase her take-home pay. With $190k at age 38, contributing $19,500 every year, what would she have at age 58? $1.7 million. Check out the numbers using this calculator here.

If she decided to bank all 4% for a short time she could supercharge this process:

At 33 she would have gone from nothing in the bank and being unable to save a dime for retirement, all the way up to maxing it out and having almost $100k set aside. Having supercharged her 401k earlier than before, her balance 25 years later at age 58 would be $1.99 million! That’s the power of hacking your raises to up your 401k

How Did You Do It?

Did you already go from zero to 401k hero? How did you do it? Let me know in the comments!

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.

In order to master your financial life, you need to spend less than you make – right? Interestingly, there are two ways to do that, and one might lead to higher spending than the other.

When people talk about saving money, what are they usually referring to?

• Saving money on a vacation
• Using coupons to save on groceries
• Buying a new cell phone to get a cheaper cell phone plan
• Picking up a great new purse at a thrift store
• Making a sword for the kids out of paper towel tubes (No? Just me?)
• Buying a Roku so they can cut cable
• Hanging up laundry to dry
• Sewing a new outfit for your dog
• Going to the library to get books and movies instead of buying new
  • Protip – Make sure you don’t have a new dog that will eat all your library books when you do this. Made that mistake four years ago when we had a new young dog in the house!
• Making your kids birthday cakes (Just me again?)

All those are great ways to save, and they can help you use your latte factor to save millions over time. But these types of activities aren’t the only way to practice frugality. And some of them don’t actually save you money, they just cause you to spend. Let me show you how, and then talk about passive frugality a bit.

The Draw Of Active Frugality

So-called Active frugality is what people usually talk – and blog – about. “10 ways to save money on groceries!”, “Cut cable now!“, “How I saved $100 on my cell phone bill!”. These are exciting and interesting activities. You can take pictures of them, make TV shows about them (Extreme Couponing, anyone?), talk about how to do them to others. They make frugality seem exciting, interesting, and full of activities.

But some of these active frugality activities may be driving you to spend more money than you could otherwise. Or they may not be actually saving you any money.

For example, lets take grocery shopping. Yes, you could save a ton of money using coupons. You too could be one of those people that gets stuff for free. But is it stuff you need? Or want?

When I got serious about living a debt-free life after my husband almost died of septic shock five years ago, I started following all the couponing sites. Hip2Save, Krazy Coupon Lady, Fatwallet, Retail Me Not – all great sites where you can find excellent bargains. But as I followed them, I would find that I was getting things because I could get them for free-not because I wanted them. Or that I was spending money I wouldn’t have otherwise in order to get something at a great price.

Getting things for free that you don’t actually want is a waste of your time.

I can vividly remember when I stopped pursing the free things. I had found a deal at our local grocery store to get a free pouch of Campbells crockpot slow cooker sauces. Now, I love my crockpot, but usually I would just put in some beef or chicken bouillon, the meat & veggies, and call it a day. Then I would make the liquid into a gravy by adding flour after it was done cooking. I thought since I could get a free slow cooker sauce, I could save on the cost of a cube of bouillon and the flour (probably 5 cents?). No – it was the most awful thing I’ve eaten! We could barely eat the pot roast. So this “free” sauce had almost caused us to waste the cost of an entire roast.

You’re not Saving Money if You’re Spending It

This is something to remember if you’re on the hunt for great deals.Lets say that you find a hotel that costs $200 per night, and you manage to find a sale and spend only $150. So you think you saved $50. But did you really?

What if you could have found a hotel in the area that would have served your needs just fine for $100 a night? Then you didn’t really save $50. You actually spent $50 more than you needed to.

This is something important to remember, especially if you’re someone that gets caught up in deals or bargains. Getting something that costs $5 for 10 cents might seem like a great bargain, but is actually a waste of money if it’s something you won’t use or don’t need. Getting a name brand product on sale and discounted with coupons might feel like a good bargain, but was the generic version of the product actually still cheaper? Did you get that pack of cookies because it was on sale, but if it wasn’t, you just wouldn’t have gotten any cookies? Then you didn’t really save money, you spent it.

Making It Yourself Only Saves Money If You Would Have Bought It Anyway

You’ll want to remember this, because it destroys a lot of the “money saving” tips you’ll read in books and on the internet. For this example, lets take the paper towel tube sword I made for my one year old.

I could write a blog post about “Five Things You Can Make For Your Kids With Stuff Around the House!” (maybe I will one day-I can do a lot with boxes, old containers, and paper towel tubes). And I could claim that making your own paper towel tube sword saves you $5 or $10 over buying one at Target or Walmart. But it only saved you money if you were going to go out and buy that sword. If you weren’t planning to go out and get it, then you didn’t really save anything.

That’s not to say that these things are not worth doing-not at all! I find it fun to try and find new uses for old things, rather than just tossing them in the trash or recycling. And little ones find it just as much fun as a new shiny plastic thing from the store (especially when I tape streamers to the end of the “sword”). But I wouldn’t say it really saves money, because I wasn’t going to go out and buy a plastic sword anyway.

A Different Path – Passive Frugality

This is a concept that’s simple, but can be difficult in practice. The simplest, best, easiest, and most effective way to save money is…to not spend it.

Rather than saving money by using coupons while grocery shopping, eat what you already have in the house.

Instead of saving money by using a coupon to a restaurant, you eat dinner at home.

You don’t spend the weekend at the mall, shopping for bargains-you spend it at home with Netflix and a good book. Or going hiking at a nearby trail.

As opposed to saving money on your landline, you get rid of it.

You want new clothes, but instead of using coupons to get items on discount, you decide to make your existing wardrobe last another year.

There are millions of examples, but they all boil down to simply trying to spend money as infrequently as possible. This is “black belt” level frugality, where you just spend less overall. It doesn’t make for interesting pictures, and it’s not as “fun” as active frugality. But it’s extremely effective. You might not “save” as much, but you’ll certainly spend less overall.

Hanging around the house might not “save” as much money as getting half off of an expensive vacation, but you’ll certainly spend less overall

So next time you’re contemplating saving money by spending it, ask yourself if you’re truly saving money. Is this something you need to buy anyway? Are you already paying for something and what you’re contemplating will help you spend less? If so, great! You’re really saving money. But if not, and you’re just getting something because it’s a bargain, then you’re really spending money you don’t need to.

Do you tend toward active or passive frugality? Have you ever made a purchase that you thought saved you money, but actually ended up costing you money? Let me know in the comments!

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.

Last week when I went to the library, I posted a picture of the books I was planning to take out on Twitter, asking what I should read first. The resounding response from multiple followers (including The White Coat Investor-one of my top ten favorite big bloggers!) was that I needed to start with The 4 Hour Workweek by Tim Ferriss.

Note – The link to the book is an affiliate link. If you buy the book, I’ll receive a small commission at no cost to you. Thanks for supporting the site!

Ironically, I had just listened to “The Tim Ferriss Show” podcast for the first time the other day, after Fritz over at Retirement Manifesto recommended checking out the episode with an interview with Mr. Money Mustache – another of my top favorite big blogs. I had loved the podcast (check out the episode for yourself here), and the premise of the book looked interesting. Really, who wouldn’t want to work for just four hours a week and earn hundreds of thousands of dollars while jet setting around the world?

So I read it in about two days. I’m a fast reader – that’s how I can do so many book reviews. And what did I think? Well, I absolutely loved the first half, but one part of the second half made me feel…uneasy. Let me go through the details with you.

First, The Good

Tim kicks off the book in a way that really hooks you in-telling his story about how he went from the 9-5 (or more!) drudgery to working only four hours a week and making more per month than he used to make in a year. The “New Rich” (NR) create luxury lifestyles by using their time and mobility wisely. He promises that it’s a process that is simple to duplicate while being stranger than fiction. The process he uses is called DEAL:

• D – Definition – The overall lifestyle design recipe, where you learn the new rules of the game of working less and making more
• E – Elimination – Eliminating the unnecessary tasks, cultivating selective ignorance, developing a low-information diet, all to free up more time
• A – Automation – Put your cash flow on autopilot with geographic arbitrage, outsourcing, and rules of non-decision
• L – Liberation – Introducing the concepts of mini-retirements, flawless remote control, and escaping the boss

He talks about turning the way we view money and cash flow on its head-not just in terms of the absolute amount of money you can make, but how much money you earn in context with your lifestyle. So the person making half a million a year may be much worse off than the person making one tenth as much, if that $500k comes at the cost of complete and total wage slavery (complete with 80 hour workweeks, weekend work, and no vacations). The person making $50k who only has to work a few hours per week remotely, no weekends, and unlimited vacations is more free and may in fact be wealthier. This is a familiar concept to many seeking FIRE (Financially Independent, Retire Early) – if you can get your living expenses to a reasonably low level, you can support your lifestyle on a low income working just a few hours a week.

Challenge the Status Quo

Those of us familiar with the concept of FIRE are already used to thinking differently. Tim introduces a 10 step framework to think differently about work, earning money, and retirement. This information is from Pages 31-37 of the book.

1. Retirement is the worst-case scenario – Traditional retirement is no more. We don’t have golden pensions waiting for us at the end of a forty year work life with a single employer. You have to save huge amounts of money to support even a $40k per year lifestyle. And if you’re able to save those amounts, you’re probably the kind of person who’d be bored with traditional retirement anyway
2. Interest and energy are cyclical – Distribute mini-retirements throughout your life, working only when you’re most effective, and your life will be both more productive and more enjoyable
3. Less is not laziness – Don’t do stuff just for the sake of looking-or feeling-busy. Do it because it adds value and produces meaningful results
4. The timing is never right – Just like having a child, there’s no good time to embark on this journey. You can easily succumb to “One More Year” syndrome, afraid to leave the perceived safety and familiarity of the 9-5.
5. Ask for forgiveness, not permission – If you go around asking for permission, you’ll be denied due to preconceived notions from your boss or others. Just do it and ask for forgiveness later if you need to
6. Emphasize strengths, don’t fix weaknesses – Build on the things you’re good at, and eliminate, automate, or outsource the things you’re terrible at. Stop trying to become mediocre in your weak areas-become amazing where you’re strong.
7. Things in excess become their opposite – Don’t think this process is about developing idle time where you’re just going to sit on a beach or binge-watch Netflix every day. Excess of anything isn’t good for you
8. Money alone is not the solution – Money isn’t the root of your problems, nor is it the solution. It’s usually a symptom of something else. So don’t get “busy” making money and neglect your life
9. Relative income is more important than absolute income – If you earn $150k per year but need to work 80 hour weeks, weekends, and vacations to bring that in (comes to about $36 per hour), you’re earning less than someone bringing in $50k per year who has eight weeks off and only works 10 hours a week (comes to about $113 per hour). So don’t just focus on the end dollar amount, focus on the dollar amount for time spent
10. Distress is bad, eustress is good – Healthy stress helps you push your physical and mental limits, expand your comfort zone, and grow as a person

Overall, there’s nothing here that I don’t agree with. I too have seen what he calls the “fat man in the red BMW convertible” syndrome – people who answer e-mails at all hours of the day and night (when it can wait), work every weekend for a company that would lay them off at the drop of a hat, and use their income to buy more stuff that keeps them trapped in their jobs.

It terms of the “less is not laziness” concept, I whole heartedly agree with that one. I’ve seen highly paid people spending hours and hours doing work that adds no value to the company, like taking information in a system and manually re-keying it all into an Excel or PowerPoint. That system has an extract option! Just extract it! Similar stories abound with people doing duplicate updates, or duplicate planning, and so on. People are afraid to speak up against the insanity and just go along with it. Too many of them will just complain about it to their co-workers but do it anyway.

What About That Four Hour Week?

The title of the book sucks in all of us who might tire (even occasionally) of the 9-5 grind. So how can you too live anywhere and make tons of money in just a few hours of work per week?

Basically you start your own very profitable business, outsource everything possible, scale it up, refuse to answer e-mails or phone calls except for once a week or on an emergency basis (relying on others to make decisions for you), and let the money roll into your account while you travel the world.

Not the entrepreneurial type? No problem. Just convince your boss to let you work remotely, by working harder and smarter while remote on a trial basis. Complain about how constant interruptions at work are sapping your ability to focus, and start doing a poor job while in the office. Then lie about the fact that you’re needed out of state to visit ill relatives, and really take off halfway around the world. Your boss will be none the wiser!

In the book he provides a lot of additional detail on how to make the above happen. I’ve read other stories in Millionaire Women Next Door on this same type of concept – I believe it was Brian, who got into rental properties, who was struck by one of his car-detailing clients who owned a slew of apartment buildings and could just decide to stay on vacation for an extra week anytime he wanted. How? Because those apartment buildings essentially ran themselves, and deposited money in the clients account on the first of the month whether or not he was on vacation. Typically, though, an entrepreneur will go through a lot of hard work, failures, and long days before building up to the point of scalable automation.

For the employed, I’m not convinced that deception is the best way to get a remote work arrangement. This book is ten years old now, so perhaps there was more resistance back in 2007. But nowadays there are plenty of fully remote jobs and I work with many people who are remote full time. In fact, just the other day I was talking with a colleague who spends winters in FL and summers up in CT, working remotely while in FL. I can easily see making a work arrangement to take time off in the summer and pair it with remote work so you can travel the country for a month, or take off overseas. Obviously this depends greatly on your boss, your workplace, and your type of job.

I want to give Tim credit here – although I’m pretty sure this kind of arrangement could work at my office, I’ve never thought to ask for it. Now that I’ve given it some thought, perhaps that’s something I’ll do once this mortgage is paid off. I’d like to go on a big trip with my kids while I still can, and my oldest is off to high school next year. Time is running short.

The Part That Made Me Think

Outsourcing your life. If you’re part of corporate America, then likely you’ve been exposed to the concept of outsourcing. If you’re in IT, like I am, then you’ve almost certainly come across it. It’s the concept of paying someone else to do something for you, so that you can free up your own time. When I read the section of the book, something was bothering me. It took a little bit to figure out exactly what that was.

Finally it hit me – you may have developed a four hour workweek for yourself, but you’ve built it on the backs of other people who will need a 40 ,50, or 80 hour workweek to survive. So this isn’t something that “anyone can do”. It’s not scalable to the rest of the population, because it relies on you being able to outsource your work and life on the cheap to someone else.

If you’re paying $20 per hour to a US based virtual assistant, or $4-$10 an hour for an India based one, I’m pretty sure they can’t have the four hour workweek you’re enjoying. Not unless they can live on $80 a week (or $16-$40 per week). Tim talks about full automation, with his virtual assistants and employees taking care of all the grunt work and day to day tasks, leaving him free to check e-mail for only an hour and then take off for a beautiful day in Buenos Aires. I’m pretty sure if they were only working four hour workweeks too, he would be somewhat annoyed.

I Want To Hear From You!

Did you read the book? What did you take away from it? Are you itching to eliminate all those wasteful tasks from your daily life? Let me know in the comments.

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.

Many personal finance (PF) bloggers talk a lot about their savings rate. There’s a lot of debate within the community on how to calculate it, and some bragging about whose is larger. If you’re just starting out saving and investing, it can be intimidating to read about all these people saving 50, 60, or 70% of their income. But does it really matter? I would argue No.

Now, you might have a 50% savings rate and be darn proud of it-and that’s great! Really, it is. But is knowing your savings rate what will actually allow you to achieve your goals?

Why Your Savings Rate Is Meaningless

If you’re saving 50% of your income of $50,000 per year, you might think you’re doing an amazing job. But what if your savings are going mostly into retirement accounts (say, maxing out a 401k and a ROTH) but your goal is to pay for your kids college next year? Or if your savings is going into a college fund, but what you really want to do is retire early?

Your savings only matters in the context of your goals. You need to know what you’re aiming for, the amount you need, and your time horizon-only then will you know if what you’re doing will get you where you want to go.

This is why getting to know your goals and dreams is one of the first steps toward financial freedom. If you’re reaching for an arbitrary savings goal without being clear and focused on your dreams, you may be saving in the wrong kind of account – or even the wrong amount! Perhaps your money is going into a savings account instead of being invested toward retirement. Or you’re aggressively funneling extra money into mortgage payoff when you have credit card debt.

Your savings rate alone, while it can be helpful, won’t get you where you want to go. You don’t want to end up sacrificing to obtain an arbitrary savings rate, if it’s not getting you some steps closer to your dreams.

Fudging the Numbers

How do you calculate savings rate anyway? There are many different methods, which is another reason why this isn’t a meaningful statistic. Let’s say someone you know is “saving 50%” of their income, and you’re saving 50% of your income. You could actually be saving different absolute dollar amounts, because you might be calculating it differently. For example:

• Do you count debt pay-down as part of your savings rate? Principal payments only? Extra principal payments only?
• Do you count your 401k match? Or do you add the 401k match to your after-tax salary?
• What about all those other things taken out of your paycheck pre-tax: medical/dental/vision insurance, HSA contributions, FSA contributions? Do you count those in your income? What if your employer contributes to an HSA on your behalf?
• How about your mortgage payment? Or just the principal portion of the payment?
• What about savings toward short and mid-term goals? Are those part of the savings rate, or not? Does it make a difference if you’re saving for a goal you’ll pay for next month vs. next year vs. 5 years from now vs. 30?
  • All money you’re saving will be spent eventually, of course, it’s just a matter of time horizon.
  • Even if you end up not spending it yourself, it will be spent by someone that inherits your money.
  • Does having a high savings rate really benefit you in the long run if you’re saving 50% of your income for a new car next year?
    • If that’s one of your major goals, then yes!
    • If your major goal is to retire early, then maybe not.
• Do you count your 401k or IRA contributions towards your savings rate?
• Do you use your net income after taxes, or your gross income before taxes? Or some other formula using a combination of after-tax income and some of the pre-tax contributions?

As you can see, there are a lot of different factors that can be taken into account when calculating a savings rate. Different people answer the above questions differently, which leads to two people saving the same amount having different “savings rates”. More than once, I’ve seen people online talking about their high savings rates without the context of exactly how they came up with that amount.

A Deeper Look

Lets take two people – John and Susan. They’re talking one day in the cafeteria at work and discover they’re both saving for early retirement. They have the same job, and both make the same $75k per year income. John brags that he’s saving 50% of his income, while Susan admits she’s only saving 25%. Susan walks away from the conversation beating herself up for her low savings rate-after all, John makes the same amount she does and can save so much more! And John walks away feeling good about himself, like he’s won a frugal bragging match. But Susan is actually saving more money than John. How could that be?

How they’d explain it if someone asked:

• Susan says “25% of my income goes into my 401k, so my savings rate is 25%”
• John says “First I take my net income and add back in my 401k contribution and match – Total $60,375. Then I add together all my principal payments toward debt and my 401k contribution and match – Total $30,750. So my total savings rate is 50.9%!

If Susan used the same formula as John, her savings rate would be 52.2%, because she’s putting aside $33k per year in the 401k, match, and mortgage principal.

You can only compare your savings rate against someone else if you’re using identical formulas. So remember that next time you see someone online talking about how they saved X% of their income – if they don’t show you how they calculated it, ask!

What I Do Instead

Rather than calculate my savings rate, I have specific target goal amounts for various short, mid, and long term objectives. Then every time I calculate my net worth (quarterly, for those that are interested), I bump up the amounts I have saved towards those goals against my targets. Then I can see how much I have left to go, and since I know how long I have until I need or want to reach that goal, I can see if I’m on or off track. If I’m off track, I can calculate what adjustment might be needed in my future savings or investment plan to get back on track to meet the goals.

Although it might sound cool to say that I save 50, 60, or 70 percent of my income, I haven’t found that my savings rate helps me figure out if I’m making the progress that I need toward my goals. So I don’t calculate it, and just track my progress instead.

I wrote a whole article on the in-depth process of getting to know your dreams, to help you figure out exactly where you want to go in your financial life. Some other information that might help:

• Make sure your goals are SMART (Specific, Measurable, Actionable, Relevant, Time-Bound)
• Once you have your financial goal, sit down with some financial calculators (give this one a spin, or check out some of my favorite calculators for different situations) and plug in:
  • How much you currently have
  • How much you need
  • How long until you need it
  • If the answer to how much you need to save/invest isn’t doable, you may need to change the timeframe or the goal
• Repeat for each goal until you have a plan
• Execute against that plan
• Periodically check in on your progress and re-evaluate if your strategy is on target.
  • You can then accelerate the process by saving more
  • Or refresh your goals if life or the target amounts have changed
    • For example, while saving for college for my three boys, I re-evaluate the target annually
• Rinse and repeat until you’ve met your goals
• Enjoy!

How about you? Do you calculate your savings rate? If so, what formula do you use? If not, what do you do instead? Let me know in the comments!

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.

Perhaps, like me, you’re an avid index fund investor. Even so, I love reading Warren Buffett’s annual letter to the shareholders of Berkshire Hathaway corporation. They’re full of wisdom – not only in how his company is currently operating (in plain language), but also in a variety of other topics.

Why yes, since you ask, I do own the book Snowball about Warren’s history, have seen the HBO documentary on his life, and have a book that now looks to be out of print of Warren’s past letters to shareholders. Yes, I’m a personal finance nerd. There’s a club of us, and we meet in Omaha at the capitalist version of Woodstock.

The Gem This Year

And in the 2016 letter (read the full thing here) Warren does not disappoint. He gives us these three great paragraphs to remember when things get rough-and they will. From Page 6 of this years letter:

American business – and consequently a basket of stocks – is virtually certain to be worth far more in the years ahead. Innovation, productivity gains, entrepreneurial spirit and an abundance of capital will see to that. Ever-present naysayers may prosper by marketing their gloomy forecasts. But heaven help them if they act on the nonsense they peddle.

Many companies, of course, will fall behind, and some will fail. Winnowing of that sort is a product of market dynamism. Moreover, the years ahead will occasionally deliver major market declines – even panics – that will affect virtually all stocks. No one can tell you when these traumas will occur – not me, not Charlie, not economists, not the media. Meg McConnell of the New York Fed aptly described the reality of panics: “We spend a lot of time looking for systemic risk; in truth, however, it tends to find us.”

During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted. Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively-financed American businesses will almost certainly do well.

My Experience in 2008 and 2009

It was the first time I ever had a sign that my husband was really listening when I talked about all this nerdy personal finance stuff. The market was going down, down, down. I had a sum of money invested at the time (I was 27-29 through this period), which represented years and years of savings. As I talked about when giving you tips to hack your way into maxing your 401k, and my guest post on my career, I used to be quite the low earner. I had what was to me at the time a significant amount invested, and there was blood in the streets.

The house I had bought in 2006 was crashing in value. My companies stock, after hitting a high of over $100 per share, was under $4 a share. My company had to have a TARP bailout to the tune of $4 billion. My husband lost his job in 2009, with his factory closing. And my investments, hard-earned and saved over years, were evaporating. Years and years of sacrifice, hard work, and dollar cost averaging were gone in days.

Those of you who didn’t invest during that time can’t understand what it was like. I certainly didn’t. I had read all the books. I understood that the market went down, and thought I could hold on through anything. But it was terrifying. We had two young kids, my husband lost his job, our house value was collapsing, and it looked like the financial system was going to come undone.

After another triple digit loss, when I thought I just couldn’t take it anymore, I said to my husband “I’m getting scared. When is this going to end? Maybe I should just sell everything and put it in case.”

He looked at me and said, “Liz, don’t you remember what Warren Buffett always says? Be greedy when others are fearful, and fearful when others are greedy. Just hold on. It’ll be all right.”

I stared at him, surprised. I’m the personal finance nerd in the family, as I’m sure you can tell from this article, all my other posts, and the fact that I blog about personal finance and investing – as a hobby.

Side note – the coolest hobby in the world!

I would occasionally (frequently) talk to him all about my latest financial interest, the cool book I’d read or site I’d found, and all kinds of investing concepts. This was not his hobby, but he always looked at me, smiled and nodded through our (my) conversations, and would look at our net worth statement every few months. I had no idea he had actually internalized the lessons I’d been preaching.

So the student had become the teacher. I didn’t sell, and kept dollar cost averaging right into the same funds I had before the financial crisis. And guess what? It came back, and more. Since I dollar cost averaged right on through, my investments since that time have gone from the S&P 500 low of 676 all the way through today where it’s 2300. Some quick math will tell you that it’s doubled – twice.

Unpacking Warrens Advice For Us

So Warren is telling us there will be more crashes. We don’t know when, and we don’t know how bad they’ll be, but they will come. After living through 2008/2009, the smaller dips don’t bother me at all.

So let’s unpack the key points behind what Warren, the Oracle of Omaha, is telling us. The key is in that last sentence:

• Investors who avoid high and unnecessary costs – Don’t invest in hedge funds, actively managed expensive mutual funds, high-fee investment options, or other investments that will cost you a lot. You can get great value at a low cost – in an index fund.
• and simply sit for an extended period – Don’t panic and sell, and don’t put money into stocks that you need in the short term. Take Ron Popiel’s advice and “set it and forget it”
• with a collection of large, conservatively-financed American businesses – Diversify your investments. Invest with large, well known companies, like in an S&P 500 index fund
• will almost certainly do well – There are no guarantees. But investment history tells us that after all crashes, there is a recovery. Even after the Great Depression, investors who held on eventually made their money back.

So those are the keys to a successful investment strategy – low costs, long time horizons, conservative (not speculative) stock investments, and patience.

In case you don’t get the Ron Popiel reference, here you go:

I Want To Hear From You!

What did you think of Warren’s 2016 advice? What’s your favorite Buffett saying that you find yourself repeating all the time? Let me know in the comments!

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When people think about kids, they’ll usually think about toys and other such fun “stuff”. But kids, especially small kids, love playing with things you might not expect. Have you ever heard a parent complaining that they got their kid a brand new toy for Christmas, only to have them be more interested in playing with the box than the toy? Or perhaps it’s something you’ve seen yourself. Perhaps you’ve seen someone shaking their head as they tell you this, sighing about how silly kids are to enjoy the box more than the toy itself.

Well, no need to sigh and shake your head-use it to your advantage!

Not A Box

One of my older kids favorite library books when they were little was a simple one called “Not A Box“. We took it out from the library over a dozen times, and each time the kids would beg to read it again and again. A few years ago we finally picked it up on Amazon as a Christmas gift, and although they had slightly outgrown it by then (they’re now 13 and 9), they still love the book and were excited to finally own it.

The premise of the book is simple – the main character (a rabbit) has a “not a box”. Because it’s a box, but it’s not a box. It’s a fire truck, a rocket ship, or something else that the rabbit is imagining. It’s a book I highly recommend to people with kids, to get them using their imagination and thinking creatively about the box.

You can apply the “Not a Box” principle to any object. This is “not a stick”, it’s a magic wand. It’s “Not a Pretzel Container”, it’s stackable blocks. Let’s not forget about “not a paper towel roll” – tape a few together, and it’s a sword!

The box my little guy is in above was decorated by his middle older brother, who was excited to make a “not a box” for his baby brother. Although of course the little guy has no idea what a “not a box” is, my middle son does. He remembers well how much he loved that book, and still plays with a large cardboard box we have in the living room despite being nine years old. It’s a refrigerator box given to us by my parents (yes, we give large interesting boxes away in my family), and it’s big enough to stand up in. Sometimes things will be put on top of the box. Other times it becomes a fort, a racecar, or a place to play video games. We have had other large boxes over the years that eventually get destroyed. No problem – there are always other boxes to be found.

Don’t Kids Need Real Toys?

Now I did write last week about how this isn’t necessarily a money saving strategy. After all, I’m not really saving money by making a paper towel tube sword if I wasn’t going to go out and buy a plastic sword.

Also, some parents may mistakenly believe kids “need” real toys. Oh, and new toys. Because used toys are somehow “icky” or not as much fun.

Parents, I can tell you right now that you are categorically wrong.

Mrs. Frugalwoods wrote about this a few months ago, talking about the myth of gross used things, and it really resonated with me. After all, I’ve been a mom now for over 13 years, to three different kids. We have many, many years of birthdays and Christmases under our belts. My kids have gotten piles of toys from both sides of the family over the years, and I’ve seen first hand just how long the new toys last vs. the old toys.

It’s the same amount of time. Believe it or not, kids will normally outgrow or tire of the things well before they wear out. I have come to regret many of the new toy or clothes purchases I’ve made for my kids over the years.

Also, how long do they play with stackable pretzel containers, fluff containers, peanut butter jars, and the like? Just as long as they play with expensive new stackable blocks. “New toys” hold small kids interest for a very short period of time. Better to have the “new toy” of the day be something you can recycle later, rather than something you picked up at the store because your kids were whining for it.

I actually get sad when I go to my favorite kids consignment shop, seeing all the clothes not worn and toys not played with. All the toys look brand new, and there’s an entire wall completely stuffed and overflowing with them. How can I think about buying some new plastic something or other, when there are so many near new toys in perfect condition, in need of a home? The same is true with clothes. Would I rather get a new cheap outfit from Target that the little guy will outgrow in a few months, or a beautiful, never worn sweater from Janie and Jack for the same price that he’ll outgrow in a few months?

Teachable Moments

For me, this is both a frugality thing and a non-wasteful thing. I want to teach my kids that it’s part of their responsibility to take care of their money, but also to take care of the earth. Buying used – whether it’s toys, clothes, furniture, or video games – both saves money and keeps one object out of the landfills. Then when they’ve outgrown or tired of the object, since it was bought used it can be sold for about the same as it was purchased for.

I also use shopping used and using things around the house for fun as a lesson for my kids. When we’re at the consignment shop or the video game store, I’ll point how just how many used things they can pick up for the price of one new thing (wow, you can get three of those toys for the price of one new one!). My kids have learned that we should always check used book stores, thrift stores, eBay, and consignment shops for things we need or things they want to buy with their allowance. Only after checking those sources will we consider buying new.

And for things around the house, we’ll talk about how much fun they have in “not a box”, and how it’s fun to use our imagination. They can use anything we might recycle to create with – my middle son once made a ghost from the Mario video game series out of an old milk jug! They have free creative reign over anything that’s going to be recycled, which they love.

How about you – do your kids have any “not a box” around the house? How do you encourage your kids to use their imaginations? Do you show them how buying used saves both money and natural resources? Let me know in the comments.

Want to learn more about teaching kids about money? Check out this great page with my top articles and resources I’ve found from around the web.

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.

Don’t let FOMO (Fear Of Missing Out) rule your financial life. That’s the basic premise of Rachel Cruze’s latest book, “Love Your Life, Not Theirs – 7 Money Habits For Living the Life You Want“. In the book, she talks about her struggles with seeing all her friends going on nice vacations, getting great new cars, and having Pinterest-ready homes, while she and her husband, Winston, are living a debt-free newlywed life on a shoestring (well, it’s a shoestring in that she can only buy one pack of Pottery Barn fancy baby washcloths instead of the multiple packs she wants). Don’t let FOMO rule your life, she preaches, and then proceeds to go through the seven money habits you need to live life the Ramsey way.

Note – The link to the book is an affiliate link. If you buy the book, I’ll receive a small commission at no cost to you. Thanks for supporting the site!

Now, I listened to Dave Ramsey’s podcasts for over a year, every single day on my commute to and from work, to get out of debt. There’s no person that will motivate you more, and I’ve listed him on my favorites page for being the best for reaching debt freedom. If you’re struggling with debt, go download his podcasts and take “Financial Peace” out from the library today. As for this book – well, read on for my review.

The Baby Steps

Rachel doesn’t exactly refer to the baby steps in this book in a nice clean format, but they’re definitely here. She’s just written paragraphs and passages about them instead of listing them in clean, clear steps. If you’re not familiar with them, they are:

1. Save $1,000 in a baby emergency fund
2. Pay off all debt except the house
   • Use the “Debt Snowball” – take all extra money every month and pay off debt, starting with the smallest balance. Once the smallest balance is gone, take that payment and the extra you were paying and attack the next-largest balance. Continue until debt-free.
   • Note – in the book she says to “start an avalanche” but then talks about using the debt snowball. The “debt avalanche” is actually a different debt payoff method, where you pay off your debts starting with the highest interest rate instead of the lowest balance. It’s mathematically, but not behaviorally, superior. And studies have shown behavior is what counts.
3. Save a 3-6 month emergency fund
4. Invest 15% for retirement
5. Fund college for your kids
6. Pay off your house, which you’ve gotten with a 15 year fixed rate mortgage taking up only 25% of your take-home pay
7. Build wealth and give!

Once you know them, you’ll see the baby steps throughout this book. You can also pop over to this site to check out more about them.

The Seven Habits

The first two chapters of the book are devoted to feeling blessed with what you have, rather than jealous of other peoples “#blessed” lives they’re posting on social media. If you focus on what your friends and family members are posting, you may feel that what you have is inadequate-even if it made you happy five minutes ago. Rachel also talks a lot about budgeting, living a debt-free life, and being on the same page financially as your spouse.

The seven money habits she walks through are:

1. Quit the Comparisons – Stop that FOMO!
2. Steer Clear of Debt – A debt-free life is the only way to go
3. Make a Plan for Your Money – Budget like crazy
4. Talk About Money (Even When It’s Hard) – Be on the same page as your spouse/partner
5. Save Like You Mean It – Save for the things you want, including hopefully a house on the 100% down plan
6. Think Before You Spend – Spend in alignment with your values, not just because other people are spending
7. Give a Little…Until You Can Give a Lot – Give to others, even when you’re in debt. She suggests giving 10% of your income to start

If you think this looks like a very basic list, you’d be right. This book isn’t for the personal finance nerd, or someone who’s interested in refining their frugal habits. It’s also not for the hard-core frugal. It’s a very soft, basic, gentle book that has lots of stories that someone who’s been used to living beyond their means might relate to.

Rachel’s Struggles

I’ll be honest – I don’t find her struggles or stories personally compelling the way I do her fathers. Dave went bankrupt and fought his way out of debt, clawing his way out of the hole, and became a huge success after many years of hard work. I like his story, and the examples he can give both from his real life and the lives of the many he’s worked to change over the years. Despite the fact that he’s a multi-millionaire today, you can tell that he’s really struggled to get there.

Rachel also shares her stories, but they’re rather…privileged in my opinion. I don’t find an emergency where she was in a small car accident – after dropping off thank you notes from her wedding of hundreds of people – to be inspiring. This is probably because my emergency was when my husband almost died of septic shock (and I also had 50 people at my wedding, that I paid for myself). Or that time she’s in New York City for work and spends $250 over budget shopping for clothes – she felt guilty for not letting her husband know ahead of time. Don’t worry, there’s a happy ending because she texted her husband eventually and she got to keep the clothes. And the fact that she can only get a “few nice pieces of furniture” for her new house. In her 20’s, when most of us are still making do with Ikea, Craigslist, and hand-me-downs. So she’s embarrassed to have friends over because they don’t have as much nice furniture as she wants. And lets not forget her sadness when her mother bought a nice expensive purse but she couldn’t afford the same thing as her multi-millionaire mother.

We can all relate to the struggle where your mom got a new Hermes bag, and all you can afford is the Prada. Right?

I noticed the same thing in her last book, Smart Money, Smart Kids. She tends to use examples from her life, which is usually a good idea. After all, we as humans find stories to be extremely compelling. That’s why we read other peoples blogs, right? They’re essentially stories of someone elses life. For me, her stories fall a bit flat. Maybe someone that grew up more upper-middle class can relate better to them. But I’ve had a life of struggle – working my way from $22k per year to six figures, going from community college to an MBA, becoming debt-free despite living on one income (mine) – so I relate much more to Dave and his stories.

Her experiences are hers – I’m not invalidating them just because I don’t relate to them. The fact is that she doesn’t have a compelling story of struggle like her father. And that’s fine! Hopefully other women who do have the background she does and can relate more to her are helped by this book. The more people that can be helped financially by different people, the better off we’ll all be.

My perception is that I’m not the target audience here. It looks to be targeted at late-20’s to early 30’s women who grew up upper-middle class. They struggle with wanting “all the things” their friends have, and the things their parents have after 30+ years of hard work. Perhaps they have some debt (car loans, credit cards, student loans) and are tiring of all the payments. If they need someone to talk them into a slightly-less fancy SUV, then Rachel’s here to help. If you’re interested in financial independence, early retirement, or you don’t have an excellent job in your back pocket-you might not find the stories relatable either.

Product Pitches In The Book

As a public service, I wanted to be sure to identify where Rachel is selling you things. If you’ve picked up this book and you’re not familiar with the Dave Ramsey empire, you may not be aware of the pitching for various “Ramsey Solutions” products. Here are four product placements you should know about:

• Every Dollar app – Recommended on Page 125 to help you budget and track your spending. The app is free, but you’ll need to manually add in all your transactions, which you can do in Excel for free as well. If you want it to automatically track your spending like Mint and Personal Capital do for free, you’ll need to pay $99 per year for the “Plus” version
• Retire Inspired by Chris Hogan – This book is recommended on Page 147 as “…the only retirement book I’ve seen that’s easy to understand and actually fun to read.” She forgets to mention that Chris is another Ramsey Solutions personality
• Clip System – Rachel devotes much of a chapter raving about a clip system she uses to manage her money. Essentially she takes the budgeted amount for each category and uses the clip system in her wallet, so when you’re out of money, you’re done! Now, you can do the same thing with envelopes from your drawer for free, but why do that when you can pick up her book plus the wallet and clip system for $49.99? It’s usually almost $100, but you can save 46% going online! Don’t need the book? You can get the clip system alone for $39.99 – as featured on Rachael Ray!
  • CMO Protip – If you’re struggling with debt and want to try out a cash budget, please just get some envelopes from the drawer and put your cash in them. Don’t have envelopes? You can buy some from Staples for $3.99 for 50. Or use paper clips. Or rubber bands!
• Financial advisors – On Page 148 she recommends getting a financial advisor to help you with retirement and college planning. Perhaps this is just because I’ve listened to the podcast so many times, but I took this as a plug for Dave’s “Endorsed Local Providers,” or ELP’s, who will help you manage your money. Retire Inspired was also full of plugs for financial advisors. And what better place to find one than looking through Dave’s ELP’s?

Last Thoughts

You’re certainly not going to go wrong following the advice in this book, and you’d be better off than most Americans if you do. But if you’re a personal finance nerd like me, there’s not going to be anything new here. Personally, I’m glad I got it from the library and it definitely isn’t going on my “re-read” list. I’d rather read Dave’s books again.

This would be a good book to give to a woman (I don’t think most men would like it) who lives an upper-middle class life and is just starting to get interested in money and better managing her financial life. There’s nothing hard-core frugal here, no investment formulas, no “intimidating” math, and very few specifics. It’s mostly paragraphs of stories and talk about developing good habits, sprinkled with the baby steps and some product placement.

Have you ever read any of Rachel Cruze’s books, or heard her on the podcast? What do you think of her stories and her books? Have you ever bought any “Ramsey Solutions” products? Let me know in the comments.

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.

I’ve written before about how my husbands near death from septic shock taught me about the importance of emergency funds and emergency planning. Today I’m going to write about how the experience impacted my attitudes about debt, and tell you my debt freedom story. I hope this story can either help you to keep out of debt if you’re already debt free, or inspire you to continue your own debt-free journey.

For many years, I was completely debt free except for my mortgage. That all started to change when I was 29. My husband was in a bad accident in my lovely old car (a 1997 Dodge Stratus – loved that one) and it was unfortunately totaled. At the time we had two young kids, and we both worked opposing shifts, so we needed another car. I had a good job by then, having worked my way from $22k per year up into the $70k – $80k range by that point.

The Car Loan – Mistake One

I asked my brother what kind of car I could get that would last forever, and he recommended a Honda Accord. I’m not a car person, and my brother is, so I decided to take his advice. He had a friend who was a Honda dealer in the next town over, so we went by to check it out. This was my first experience buying a new car, and I wanted to just get one and drive it forever. Note – I still have this car today, it has over $100k miles on it and still going strong. The dealer gave me a good price, at under $20k for a brand new car. I had done my research so I knew it was a good deal.

But here’s where I made the mistake – I decided to get a car loan. Now, I had the money to pay cash, so why would I get a loan? I didn’t want to deplete my cash reserves entirely. I was starting an MBA program in a few months and thought I might need the cash for something related to school, or that an emergency might come up and I’d need cash. So I put 30% down and took a loan for the rest.

Was this a bad decision? It’s actually hard to say. I did end up needing that cash. My husband lost his job only three months later, when his factory closed thanks to The Great Recession. He would be out of work for years to come. So not depleting my cash reserves was a good idea. But if I were to do it all over again, I would have bought an inexpensive used car for the cash I used for a down payment on this one.

So now I had a bit of debt, but manageable payments. Not a big deal. Even with my husbands job loss, his unemployment coupled with my salary was enough to cover our expenses. But it was barely enough, so here’s where the second type of debt came in: credit cards.

Credit Cards – Mistake Two

Do you know those people that put everything on their credit cards for rewards/points/cash back, and then pay them off every month? I was using that strategy, and it worked well – until it didn’t. Suddenly there was a month where the balance on the card was more than I could pay off with my paycheck. No problem, I thought, just a tricky month. I’ll take a bit out of savings to cover the difference.

The problem was that it kept happening – again, and again, and again. Every few months there would be a credit card bill that we couldn’t quite cover. Not a problem, it could come out of savings. Unfortunately this kept knocking down our emergency savings until it was running low. But then I’d get a windfall – a bonus or a tax refund – which would go to replenishing my emergency fund. Oops, then would come another credit card bill that my salary just couldn’t cover. It was a vicious cycle. Then would come the times where I couldn’t pay it even with the emergency fund, and I would need to let the balance carry over to the next month. There was one year that I paid over $1k in credit card interest-which I never had before.

This was a hard cycle to stop. Since my cash in my checking account had become dependent on this strategy, there was never enough in it to cover day to day expenses. They had to be put on the card, and then the card paid off with one of my paychecks. In order to stop this cycle I would not only need to pay off the card, but I would need to start using the checking account for all expenses, meaning I would need enough in checking to cover the expenses for the month. I couldn’t do that if the money had already gone to paying off the credit card.

Student Loans – Mistake Three

Remember that MBA I had started back in Mistake One – right before my husband lost his job? Well, my original plan was to fund it the same way I had my undergrad, with employer reimbursements. Unfortunately there was a flaw in that strategy that I hadn’t seen coming, and it came when I switched jobs.

The company I had been working for, that I had been at since the late 90’s, was in trouble during the Great Recession. Its stock had once been over $100 per share, and had bottomed out at $3.65 before they received a TARP bailout of $4 billion to stay afloat. The company had come extremely close to bankruptcy, and it showed in the opportunities available at that company, as well as the attitudes of the employees. I was ready for bigger and better things – more opportunity, a better environment, and more work/life balance than I was getting at the time. So I found another job at another company that actually had a better reimbursement policy for graduate school. I struck gold, right?

Well, no. Unfortunately there was something I’d forgotten to ask about – when, exactly, you could apply to start reimbursement. You had to be at the company for six months first. But I was in the middle of a semester, and I didn’t want to slow down getting my MBA. So for the first time ever, I took out student loans. $25k worth, to be exact. Most of that was to pay tuition and fees, but some of it went to clean up Mistake Two. At the time, I was focused on trying to keep the family afloat as the Great Recession roared on, and my husband still couldn’t find work. I didn’t recognize this situation for what it was – a downward spiral into debt that was going to get worse unless I did something to stop it.

I also took advantage of the opportunity of getting my MBA by doing some of my education in France and in China (including some adventures at a Chinese Walmart). Fun, educational, life, and perspective changing times were had-but it was all on the back of this debt.

One Last Mistake – Then Everything Changed

Through all this time, I had made another “mistake” (sort of) – I had continued to invest in my 401k and my kids college funds. The reason I say it was sort of a mistake is that if I had stopped and just cleaned up the debt, I would have been debt free faster. However, those investments continued through the lows of 2008, 2009, 2010, etc. This means I bought at the bottom, and those investments have worked out financially much better than if I had paid off the debt. I had no way to know that would be the case, though, and when my husband lost his job I should have stopped the extra savings.

According to my net worth spreadsheet, as of February 2012 (the month before my husband almost died), I had $33k in debt. I was paying that car payment every month, but the student loans were still deferred because I was in school doing the MBA. Some of them had no interest accruing, but some of them were growing while deferred. No payments were due yet, though. We continued the struggle with those credit cards, but I had set aside a substantial chunk of bonus money in our emergency fund to pay for my husbands upcoming surgery.

And then in March of 2012, everything changed.

To be continued on Friday

Be sure to follow my blog (on the sidebar) for more great posts via e-mail, or connect with me on Facebook or Twitter and say hello! You can also check out what I’m buying or baking on Instagram, what I’m pinning on Pinterest, or the latest books I’m reading (or want to read) over on Goodreads.