Welcome to Be Better Now Money.

Money plays a tremendous role in our overall happiness. It’s true that money might not be able to buy you love, but it can help solve many of our problems.

If you are new to Be Better Now Money, reading Money and Personal Finance will tell you why money and personal finance is important. If you are already on board with that, you might want to jump straight to our Guide to Financial Freedom.

Money is an extremely broad topic with lots to learn. Feel like you might be spending your whole paycheck? Feel like you aren’t getting paid your worth at your job? Below you’ll find a few links that will help you target into those and many, many areas.

Related Subtopics:  > Smart Spending > Save Money > Budget > Make Money > Income

Summary: Valentine's Day is just around the corner, here's how to save money and still be the best boyfriend/husband ever (Tweet This!)

[Note: Like all my posts, this one comes from the gentleman's perspective. If you are a lady out there, perhaps you can subtly leave this post where your loved one might stumble upon it by accident ;-).]

Save Money Valentine's Day

Use these tips to save some green on Valentine's Day

Valentine's Day is right around the corner. If you have a special person in your life, now is the time to start planning for the Day that Hallmark Built. (Disclaimer: I'm not sure Hallmark created Valentine's Day, but it seems like it sometimes). If you don't have that special someone, you could do what my wife did for years... rename it National Do Your Taxes Day. Yes, it's sad, but at least that story (luckily for me) has a happy ending.

One of things that I've learned over the years is that it doesn't make much sense to overspend on events like Valentine's Day. I think it's much more meaningful and spontaneous to celebrate the random May 21st or August 3rd with a small gift. Plus, a lot of the time, you get stuck with a bunch of things that are pretty overpriced for what they are. This time of year you can expect big mark-ups on flowers and chocolate. One of the central tenants of this website is to save money to give yourself the financial freedom for the life you want rather than the life that "pays the bills." With that in mind, here are some ideas on how to save money on Valentine's Day.

Stay in For Valentine's Day

It can be tough to pull off the "Let's stay in this year" conversation. It is my experience that women like to get dressed up and go out... and this is one of the premier nights to do just that. However, going out gets expensive. Dinner and movie can cost upwards of $200 in some places (wine isn't cheap sometimes). If you can win the battle to stay home, the dividends not only pay off in the wallet, but the journey to the bedroom is much quicker. What can you do to pull of the "stay at home" plan?

  • Make Her Breakfast in Bed - I'll admit that it can be tough to pull this off in the start the week. My wife is a pretty deep sleeper, so I've been able to execute the breakfast in bed in the past. It's worth the effort.
  • Make a Special Dinner - There are a lot of ways to make a special dinner. You know her favorite foods, right? That's a good place to start. You can order some heart-shaped pasta online. Pair that with a white wine sauce recipe and you are in good shape. Don't forget the dessert wine with dark chocolate. The whole dinner may run you under $30... or a little more if you opt for seafood and more expensive wine.
  • Cue up a Movie - This is a good time to set up that Netflix queue. Look at what she's added and bump up a romantic option to the top. If your dinner is good enough, you might be able to pull off a romantic sports movie like For the Love of the Game. (Just go in with the mindset that you are watching a "chick flick", but with bonus sports footage.)
  • Cue up Music and Dance - Songza is a great free music service that you can set to your mood. It doesn't get any easier than that. However, if you want to go the extra mile , make a mix with iTunes or your smart phone. I personally skip that, as I'd probably just put Paramore's The Only Exception on repeat. (Take a minute to watch the video, especially the ending, and sing with me "I'm on the way to believing.")
  • Massage Oils and Candles - You've done the dinner. You've done the desert and wine. You've done the movie... or if your lucky only a small part of the movie. You probably don't need massage oils at this point, but it can't hurt.

Get out of the House

All is not lost if you didn't with the "Let's stay home" conversation. One of my favorite tips is to relocate the celebration of the Valentine's Day to a day on the nearest weekend. Who wouldn't want to a full day to enjoy the holiday instead of spending half at work, right? In addition to that, I usually try to earn extra points by surprising her with some kind of comfort food take-out that we like for the 14th itself.

When you move Valentine's Day to the weekend, you open up more options (including the breakfast in bed mentioned above):

  • Go for a Picnic - If you live in a warm climate, planning a picnic is almost always a winner. This year, most of you can scratch that idea.
  • Go to a Museum - Museums are typically the same price year round and they aren't nearly as crowded as movies.
  • Take a Stroll Down Memory Lane - Literally. Take her to places where you had your first kiss or went on a first date. Just be careful with this, because when it happens on those diamond commercials, it always ends in a proposal.
  • Create an Adventure - If you have some time you can plan a treasure hunt in the style of Midnight Madness. (Don't feel bad if you didn't see it, I think my wife and I are the only two people in the world who have).

Give the Frugal, High Value Gift

At the risk of sounding corny and cheesy, there are a lot of inexpensive gifts you can give. Here are some ideas to help you with that.

  • Give a Coupon Book - Make a book of coupons of favors that you'll do. This could range from chores to massages. (Bonus Tip) You might want to start with doing a few chores right away. Studies show that women like men who do housework.
  • Write a Love Note - This may sound difficult if you aren't the creative type. However, this is another reason why you should hone your writing skills. Look to the internet for advice on how to go about it, here's some from a female romance reader.
  • Exchange Small Practical Gifts - My wife and I keep our Amazon Wishlist updated throughout the year. Usually we have a few of these small practical gifts on the list. For example, I'm heavily considering putting the Wrap-a-nap on there. I showed it to my wife and she thought it looked pretty cool

Finally, since we are trying to be better, why not donate some of the money you save to charity? You can't go wrong by giving money to breast cancer. What tips you do you have for planning a frugal Valentine's Day? Let me know in the comments.

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Summary: Automating your money is one tip that can make you hundreds of thousands in just a few minutes. (Tweet This)

When it comes to money, one of the best things I've ever done was to automate everything. It's great for me, but as personal finance expert Phil Taylor points out: automating finances isn't for everyone.

About a dozen years ago, I had an epiphany... if I have to keep shifting money here and there something is going to fall through the cracks. When that happens, I'm going to lose money or incur a fee. I hate fees.

If necessity is the mother of invention, then laziness is the father.

Here's a guide of the processes that I automate:

automate your money

Let a robot Automate your Money

Credit Card Payments

It has been years since I manually sent a payment to a credit card company. I let them claw into my bank account and take what they need so that I never miss a payment and never trigger fees. This way, I reap the sweet, sweet rewards of 1-5% cash back.

The downside with this is that many people don't like to give credit cards access to grab money out of their accounts. I totally understand that. I gave it a try to see how it goes and years later, it has been perfect in about a thousand transactions across many cards now. It certainly beats my error rate as a human.

An awesome side effect of this system is that I know I need to keep a good chunk of money in my bank account just to be safe. I'm going to err on the side of caution, so keeping my bank account "safe" reinforces my frugal behavior.

Automate Payments to Retirement Accounts

As we covered in The Guide to Financial Freedom, retirement accounts are one of the best tools available to you.

You may have heard the saying "Pay yourself first." That is exactly what this is. It's paying "future me." I've learned over the years that "future me" becomes "present me" quickly. Let me tell you that "present me" is enjoying the contributions from "past me."

Confused enough? Good let's move on.

Automate Payments to a Savings Account

Just like automating payments to a retirement account, you should automate some payments to a savings account. Some people use this as my emergency fund. When that's got a safe amount of money in it (generally 6 months of living expenses), it can be redirected towards and opportunity fund. It's great to have a good opportunity fund in place, use it well and it can grow your net worth quite a bit.

The important thing is to move this money out of sight and out of mind. I'm testing out a new service called Digit that I love. They automate this process of squirreling money away from your savings account. They do it in small chunks that you probably won't notice, but it adds up over time.

Consolidate Your Banking

When I was 20, I signed up with every bank that offered a free T-shirt and a single with a B-side song of Blink 182. All the banks were at College Fest. I must have picked up dozens of credit cards for free stuff.

What I didn't realize is that I'd now have all these zombie accounts out there... and they are all looking for delicious brains.

In chasing the best rate and the best perk, my financial information was everywhere. It took some time, but after seeing how my wife had consolidated most everything USAA, I saw the light. It is so much easier to have everything in one place.

Set Your Financial Calendar

I'm going to give you some work to do right now while you read this. Don't worry, it'll only take a couple of minutes. Open up your calendar software.

I'll wait.

Got it open? Good.

Now flip ahead one month from today and put an entry to check your credit report. Make it a recurring entry and set it to go every 4 months. You can get a free credit report from Annual Credit Report every year. So why every 4 months? There are three credit bureaus you can get them from. Get a different one every four months.

If one of the credit bureaus is off it may take you a little time to notice it this way. However, this way you get to view what is 99% likely to be an accurate report. It is better to catch identity theft after 3 months than it is after 9 months.

Next, flip it ahead another month and make another entry. This time we are making an appointment for checking our net worth. Depending on what stage in life you are, this one can recur 1, 2, 3, 4, or 6 months. I personally like to calculate it every 3 months.

It may seem very complicated and tedious, but it isn't. If you consolidate your banking and use a spreadsheet, it can be knocked out in under a half-hour. The first couple of times will take longer, but as you get in a flow it will be much, much easier.

There's one final calendar entry to make. This one is going to be every 6 months. Every 6 months, I want you to do an audit of necessary expenses and subscriptions in your life. Many of these things like your mortgage and car payments won't change. However, you may be able to get a discount on cable service or a cheaper cell phone plan. You may find that you don't use that Netflix very often. Maybe you subscribed to HBO to watch True Blood and now that the series is over are left paying for nothing?

Conclusion and Further Reading

I can't begin to estimate how much automating my money has done for me. When I look into my retirement and see 6 figures starting with a crooked number, I can't help but think, "Would I have really saved this otherwise?" I know the answer is no.

So I guess I can begin to estimate how important it was for me. It is worth hundreds of thousands of dollars. With the power of compound interest, it could be millions down the line.

That thought brings us right into:

Further reading: This is an easy one... The Automatic Millionaire. Personal Finance guru David Bach has earned a 4.2 star rating with 460 reviews a great value for the current price of $8.12.

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Summary: These simple tips on how to save money at restaurants can keep thousands of dollars a year in your wallet. (Tweet This!)

Today, I thought I'd write about some more ways to Save Money. In the past I've written about how it is important to spend less than you earn, which lead to me writing about these high level tips on how to save money on almost anything. One of the items that I mentioned were the cost of "outings..." and the obvious example is the cost of going out to restaurants.

Save Money at Restaurants

Save Money at Restaurants

The average American spends thousands of dollars a year at restaurants. I've got nothing against restaurants. I'll be the first to admit that the food is generally better than I can make at home. However, I don't think it is that much better. I will say that my taste buds and sense of smell (which factor into taste) are, well, defective compared to most people's.

That said, I think for many people, there are ways to save money at restaurants. Here are some basic tips:

Avoid Restaurants

It shouldn't come as a surprise, the best way to avoid spending money at restaurants is to avoid restaurants. It is easier said than done. There are restaurants everywhere - and people need to eat. The combination of the two has made going out to eat an important social aspect of our lives. A lot of people don't go to restaurants for social reasons - they just want the convenience of a quick meal.

It's reasonable to fall for the social value eating out - a lot of people do. That said, it's worth suggesting an alternative such as a pot luck dinner. If your difficulty is in finding time, the answer is easy. You can make a few minor changes to your daily schedule and enjoy great quality food at a great price. I suggest you follow some of the tips in Be Better Now's Productivity category.

You want another reason to avoiding restaurants? It's often difficult to find nutritional information of the food (unless it is a large chain). If you are fortunate enough to find nutrition information, you'll quickly realize that it's next to impossible to maintain a healthy diet or lose weight, if that's your goal.

If you can't avoid restaurants the next best thing is to limit the damage to your wallet. So let's look at:

Top Ways to Save Money at Restaurants

  • Do Lunch Instead of Dinner - Lunch prices are typically significantly cheaper. Not only do you save money, but the portions are usually smaller and you are less likely to knock down a days worth of calories.
  • Save Half Your Meal for Leftovers - I sometimes ask for a take-out dish right away, so that I'm not tempted to eat the whole thing. This is another tip that's about health as much as it is about money. If a restaurant is going to give me 2,000 calories of food or more, I might as well space them out over a couple of days.
  • Split a Meal - Similar to above, the idea here is to split something with your companion. My wife and I do this regularly for lunches. She loves the salad and half sandwich. A half sandwich and fries (or steamed vegetables if I feel like being better) is enough for me. She orders the salad. I order the sandwich. I give her half with her salad. Sometimes a restaurant will charge a "split-plate fee." Some call this tacky, but I think you could just claim it's for portion control.
  • Cash in on your Seniority - If you are a senior citizen, you can often get a discount. You've earned it.
  • Skip the Alcohol - The margins that restaurants make on wine and other alcoholic beverages are tremendous. If you can save the drinks for home, you'll not only save money, but also avoid any nasty DUI incidents.
  • Look for Restaurants with No Corkage Fee - Bringing your own bottle of wine can lead to savings. If you find a restaurant that can't get an alcohol license it can lead to big savings. My wife and I found a pasta restaurant in western Massachusetts that allowed this. Cheap pasta and your own wine is a big win.
  • Take Advantage of Happy Hour - If you can't skip the alcohol and the corkage feeds are high, maybe you can get a half-price or 2-for-1 special during happy hour. They work equally well if your companion wants a drink too.
  • Cash in on the Early Bird Specials - There's a lot of money to be saved by dining at off-peak hours. This can also be nicely combined with the above tip about happy hour. Have a drink at the bar and bring it to your table. While on the topic of early bird specials I'm reminded of this great moment in Seinfeld history from the episode The Cadallac:

    "MORTY: Alright, are you ready to eat?

    HELEN: (glancing at her watch) Oh, right, let's go. Jerry, let's go, it's time
    to eat. We're going to dinner.

    Jerry wanders into the room. He's in a t-shirt and sweatpants, and holding a
    comic book he's been reading.

    JERRY: (confused) Dinner? W..What time is it?

    HELEN: (pulling on a coat) It's four-thirty.

    JERRY: (bewildered) Four-thirty? Who eats dinner at four-thirty?

    MORTY: By the time we sit down, it'll be quarter to five.

    JERRY: I don't understand why we have to eat now.

    HELEN: We gotta catch the early-bird. It's only between four-thirty and six.

    MORTY: Yeah. They give you a tenderloin, a salad and a baked potato, for
    four-ninety-five. You know what that cost you after six?

    JERRY: Can't we eat at a decent hour? I'll treat, okay?

    HELEN: You're not buying us dinner.

    JERRY: (emphatic) I'm not force-feeding myself a steak at four-thirty to save a
    coupla bucks, I'll tell you that!

    HELEN: Alright, (sitting on the couch) we'll wait. (pointedly) But it's unheard

    I'm with Morty and Helen. Grab that tenderloin, salad, potato for $4.95 (or whatever the incredible special price is). I'd probably aim to eat closer to 5:30, but other than that it sounds fantastic.

  • Eat on nights with "specials" - Many chains and even local restaurants offer incentives (i.e. good deals) during their slower nights of the week. You won't many specials on Friday or Saturday, but it's fairly common to find a good deal on Tuesdays (as one example).
  • Drink Water - Not only is water healthier than soda it's cheaper. In this case cheaper equals "free."
  • Use Coupons - There are a lot of coupons out there. Many of them offer a buy one get one free meal. You can sign up for Groupon and get free daily deals. You could also buy an Entertainment book an Entertainment Book full of coupons. You might also consider Restaurant.com a website where you can by vouchers for very cheap dinners (though they often come with restrictions).
  • Buy a Gift Card at a Reduced Rate - On Ebay you can often find people looking to get cash for their gift cards. With a quick search, you can save 10% or more.
  • Use a rewards credit card geared towards restaurants - If you can't find a gift card or don't have the time to wait for delivery, this is a good back-up. Some credit cards offer 3-5% or more cash back at restaurants. Some credit cards give you cash back at grocery stores or drug stores. You can take advantage by buying a gift card and using that for your bill.

With any and all the above tips, use your common sense. Don't try to split a meal with your boss. Have an alcoholic drink (if that's your thing) with a colleague. Don't pull out the coupons on the first date. In short, be smart and pick your spots.

Bonus Tip: Though it won't save you money, we like to think about health here at Be Better Now. Americans underestimate the calories in restaurant food by 642 calories (Official study by American Journal of Public Health).

That's another reason to share or save half of your meal for leftovers the next day.

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Summary: Housing is American's biggest expense - 40% on average. Make smart choices and save hundreds of thousands of dollars! (Tweet This!)

Did you know that according to government data Americans spend 41% of their money on their home? Sure that’s data from December 2011, and furnishings and utilities, but still nearly a third of everyone’s money goes towards their rent or mortgage.

Saving money on housing

Plan well and you'll be tossing money around like this house.

Housing is the highest living expense for most people. It is one place where saving a little money can have a tremendous impact on your finances for years.

Buy Vs. Rent

There are epic debates on whether you should or buy or rent. The war has been waged for decades and will likely continue for many more decades. Those on the “buy” side say that renting is “throwing money away.” Those that rent say that they enjoy not having to fix everything themselves.

At some level, both situations can work. If someone were to rent you the perfect home for a single dollar a month, for life, you’d be a fool not to take it. If someone were charging you a thousand dollars a month for rent, but willing to sell it to you for ten thousand, you’d be a fool not to buy it.

The final answer is very complicated, but it comes down to:

  1. What is best for you
  2. The valuation of buying vs. renting

How do you calculate the valuation of buying vs. renting? Take the price to buy a property and divide it by the annual cost to rent a similar property. If that number is around 16, it doesn’t matter. If it is over 16 you want to rent and if it is under 16 you want to buy. If it is just 15 or 18, that’s only a small indication to buy or rent. However, if the number gets to be 12 and under or 20 and over, you’ve got yourself a fairly definitive valuation.

For example, let’s imagine I have a small starter home that costs $100,000 to buy. However, there’s one in the same development that’s for rent at $900/mo. The price-to-rent is 9.25 ($100,000 divided by an annual rent of $10,800). This number is far below 16 and a strong indication that you’d do much better to buy.

It isn’t likely that your perfect home is going to fit that ideal scenario, but you can do this calculation for similar properties to get an idea if your area is a buyer’s or a renter’s market. You may even find that there are helpful tables like this one from Bankrate that give you the price-to-rent ratios in many cities as well as the United States in general. As I write this, Honolulu is 34.63, which almost commands you to rent. Conversely Detroit’s 7.16 number couldn’t scream “Buy Me!” any louder.

Improve Your Credit

Whether you are buying or renting, you’ll want to have the best credit score possible. If you are renting a great credit score tells the landlord: “I’m a responsible person who pays my debts on time.” A poor one says, “You are taking a big risk if you rent to me.” Which renter do you think has more power when it comes to negotiating a rent?

When buying a home, your credit score is even more important. It is used by banks to determine how much interest you’ll pay on a mortgage. A small difference in an interest rate means quite a bit over the 30-year span of mortgages that most people get. It can easily lead to a difference of a hundred thousand dollars or more.

Learn to Negotiate

Whether you are buying or renting, you are going to end up at the negotiating table. The seller or the landlord wants to maximize their money too. If you can negotiate just $50 a month off rent, you’ll save your $600 a year.

If you are buying, you may be able to shave ten or twenty thousand dollars off of the price.

Don’t Buy Too Much House

You’ve probably heard the expression “House Poor.” This happens when people pay too much for their home. The monthly payments are so large, they don’t have enough money for other necessities. And that means no money for saving and investing. And that means delaying your journey to financial freedom.

Your goal should be to buy a home that fits your needs. Many people think they need a McMansion, but living in small home can lead to a big payoff. They are (typically) cheaper to buy, require less furniture, and are easier to heat and cool saving money on utilities.

Some people take the “smaller is better” saying to the extreme and choose to live in very tiny houses. This allows them to pay off their mortgage in just a few years. The tiny house lifestyle isn’t for everyone, but eliminating one of life’s biggest expenses in a couple of years is a huge step to financial freedom.

Putting it All Together

These tips can save you hundreds of thousands of dollars over your lifetime. They could jump-start you to financial freedom. When buying a home, the stakes are tremendous. Decisions that seem small make a huge difference.

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Summary: You need a budget. Pick one of these three budget systems to take control of your money. (Tweet This!)

It's almost impossible to make money without being on some kind of budget. While some people think budgets are sexy, I think they can be a lot of work.

Here I cover three different types of budgets systems. We'll cover the pros and cons, which may help you pick the right system for you.

Budget System #1. Meticulously Keeping Track

There are a lot of systems that are quite tedious. Some of them require a lot of time tracking with a pen and paper or an Excel spreadsheet.

There is also an Envelope System where people put cash in envelopes at the beginning of the month and use it to pay their bills. They are forced not to go over budget because there's no money left in the envelope.

For beginners or those in debt, keeping track of every expense can be critical to their financial success.

budget system boy

Budget System #2. Reviewing in Retrospect Using Software

I use credit cards to make all my purchases. This allows me to earn rewards and cash back on almost everything I buy. It adds up! I pay them off in full every month using their "autopay" option. I never have to remember to write a check and I don't have to buy and stamps.

Using credit cards also gives me an unexpected benefit. I can use tools like Personal Capital or <a href="https://www.mint.com/>Mint to review the previous month's spending in various categorizes.

It doesn't prevent me from over-spending at restaurants like the envelope system, but I can review my spending at the end of the month and correct my mistakes next month.

This is great because all the organization is done for you. Instead of spending hours meticulously document each item you spent money on, you can spend a half hour at the end of the month and learn a lot.

Budget System #3. Don't Budget at All

I'm borrowing this from Mr. Money Mustache who "make(s) spending decisions based on [his family's] values." He does this by asking the following questions:

  1. Will buying this really improve my overall lifetime happiness?
  2. Is there another, more efficient way to meet this same need?
  3. Can the same benefit be had if I delay the purchase?

I use a similar set of guidelines, but I'm a little more "loose" with my spending. If the product is low-priced and just a one-time buy, I try not to get too bogged on the process. The questions are in the back of my head, but I rely on my instincts and trust that my frugal habits will make the right decision.

When things are more expensive or the kind of thing that I'm going to buy over and over again, I spend more time thinking about the purchase. The more expensive something is the more I think about it. I might put an hour into deciding whether a year of Amazon Prime is worth it. At the high end, I'm going to put in several weeks of research before deciding on a car to buy.

In either of cases, I'm going to ask myself similar to questions like Mr. Money Mustache. However, instead of asking if something is really going to improve my overall lifetime happiness, I instead think about whether the purchase is going to reduce stress in my life. It may lead to the same answers for most people, but I feel like being more specific helps me on many purchases.

Conclusion and Further Reading

I can't tell you which budgeting system is right for you. For people who have difficulty with debt, it makes sense to meticulously track your budget. However, I recommend everyone strive to discipline themselves to manage their expenses with the second and third methods.

My feeling is that if I can get 80% of the value for 20% of the work (see Parento Principle) that's the way to go. In this case, I feel like I get 95% of the benefit with 5% of the work. That saves me time for other activities.

If you really just don't know where to start here are a couple of highly rated budgeting books.

  • The Budget Kit - 70 people collectively give this book 4.3 stars on Amazon. Spending under $20 could save you thousands.
  • The One Week Budget - 164 people collective give this 4.7 stars on Amazon. It seems like a great deal to get the Kindle version at a little more than $6.
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Summary: Knowing how to save money on all your purchases will help you buy the important things, such as financial freedom. (Tweet This!)

Last week, I wrote about Spending Less Than You Earn, and how there are two components to that... spending less money and making more money. I'd like to dive in a little deeper into the area of saving money today.

When I think about how to save money, I look at my spending in five areas: big one-time purchases, small daily purchases, recurring monthly expenses, and the medium cost splurges, and outings. Today, I'd like to touch on how these five categories impact your overall financial picture.

Save Money on Big One-Time Purchases

Save Money buying a House

Save Money buying a House

It's hard to downplay how much shelter costs. Even if you are renting and not buying, your home is likely to represent a large chunk of your spending. There are a lot of ways to save money on housing. That article gives a few tips such as living in an area with a cheaper cost of living and choosing a smaller home.

For most people, the other big purchase aside from a home is a car. It isn't unusual for a car payment to be up to ten percent of a person's take home salary. A couple of ways to reduce that is to buy a cheaper, used, brand that has already depreciated in value. A three year old Hyundai is going be a lot cheaper than a new BMW. Don't expect the used Hyundai to compete with a new BMW, instead try to focus on how much financial freedom you'll be earning.

Cars and homes typically add up to 40% of the average person's income. Those two purchasing decisions will make a huge impact on your financial freedom.

Here's one final tip to save money on these big purchases: have good credit. Few people buy cars and houses without taking out a loan. When you get a loan, you want to pay as little as interest as possible. The best way to do ensure that is having good credit. A person with bad credit pays a lot more for the exact same purchase... and that earns them a nomination for the Be Worse Now Hall of Shame.

Save Money on Small Daily Purchases

David Bach's The Automatic Millionaire famously coined the term, Latte Factor, by examining how people can get rich just by reducing or eliminating small daily expenses. Of course the key example of a small daily purchase is... wait for it... the morning latte. It may not seem like much, but $3 a day adds up over time. If you make your own coffee at home and bring your lunch to work that can be a savings of $10 a day or around $3500 a year. Investing $3500 a year goes a long way towards any financial freedom goal. With the power of compound interest it may be enough to fund a retirement.

Save Money on Recurring Monthly Expenses

Much like the small daily purchases, these add up over time. Some monthly expenses like utilities are pretty hard to escape - although you can certainly do a lot to lower those costs. I like to call these necessary expenses. Others like to call them their monthly nut. These are things that you really need to have every month such as: housing, transportation, utilities, food, insurance.

There are also the unnecessary monthly expenses like cable television, Netflix, or a wine club can add up over time. I'm not going to ask you to give up your entertainment, but reducing and eliminating these costs will fast track you to financial freedom. (You noticed the trend to financial freedom, right?).

Somewhere in the middle of the necessary and the unnecessary sits the Internet connection. I require it for my business, so it is necessary just like transportation to a job, but I also get a lot of entertainment from it. That's why it is one of the last things that I'd look to eliminate.

Save Money on Medium Cost Splurges

This is where I group the "everything else" that I spend money on. I, like many people, really enjoy technology gadgets. So this means that I have to have the latest smartphone every year or so. In addition, there are costs for video game systems, new laptops, tablet computers, etc. This isn't to say that you should avoid all these things - I think you simply need to be consciously aware of these expenses. A few hundred dollars here and there really crowd that credit card statement. I've started to look for cheaper ways to get gadgets such as buying a used previous generation version on Craigslist.

Save Money on Outings and Entertainment

The last area that seems to eat up money is what I like to call the "outings" category. Some example "outings" include going to a restaurant, going to a concert, or going to a bar with friends. A few outings per month can add up to a couple hundred dollars very quickly. These tips for saving money at restaurants may save you a thousand dollars a year.

It's all a game of balance. I'm not suggesting that you avoid buying your dream home, a nice car, or a tablet computer. I'm not trying to ruin all your fun. I enjoy concerts, sporting events, and the theater (well let's not stretch it) as much as anyone. I'm asking that you be conscious of your spending and think about what your goals are with money. For me, having a safety net that allows me to go a year without working and building towards an extremely early retirement are top priorities.

Photo Credit: Apartment Therapy

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Summary: Learn how to make more money from your career, start your own business, and/or how to create passive income. (Tweet This)

We recently covered Spending Less Than You Earn. In it we established there were two ways to financial freedom - make more money or spend less money. Let's start with how to make more money.

Make More Money

Making more money isn't a magic trick

Earn More Money in Your Career

Perhaps the most obvious way to make more money is to look at your main source of income and looking to see if that can be increased. For most of you out there, that would be the 9-to-5 career.

  • Make yourself more valuable to your company - If you can find a way to be more productive at work, you can take on extra responsibilities. When you take on more responsibilities you can make a much better case for a raise.
  • How and when to ask for a raise - I've made the mistake of asking for a raise when business wasn't the best. I found that it didn't matter how good of a case I made, I wasn't going to get that raise.
  • Get a raise by switching jobs - Get out of that dead-end job. Most places don't evaluate raises based on performance - many times they feel that if they are giving a "good raise" based on your previous salary, you should be happy. Your view might be that you are worth a lot more. You might have to start with a fresh slate.
  • Get ahead with an advanced degree - An advanced degree isn't a guarantee to more income, but for the right professions it can push you into another salary tier. It can also help if you are switching jobs.

Get a Second Job

I know a lot of you out there are thinking that the last they need is more work. I'm with you on this one. However, there are times where it just makes sense. I have a friend who is a great freelance cartoonist/artist. Some years back, I was at an amusement park, when I recognized some of his art was featured. Being an artist wasn't his only gig, though. He also worked at a local bar at night. It got him out of the house, put some guaranteed cash in his wallet, and provided some much-needed health insurance benefits.

Another friend of mine, because a seasonal tax advisor for H&R Block. She's really good with numbers and enjoys numbers

Start a Business

Did this elicit another groan from all of you? Starting a business can be a lot of work. For 6 years, I lived in Silicon Valley where businesses are started every day, and the people starting them work 16 hour days. If that's the kind of thing that excites you, I'm cool with that. Feel free to donate me some stock options. However, if you'd like a more balanced lifestyle there are still some options available.

One idea for a starting a business is to get money from your hobbies. For example, if you are into crafts, you can sell them on Etsy. You get the fun of creating the craft, the joy of knowing that you made someone's day, and made a little money in the process.

Need another tip? How about a dog walking or sitting service. Sign up at DogVacay and you could earn an extra $25 or $30 a night... sometimes even more. To be fair, dogs are so awesome, you should be paying the owners for the privilege of spending time with them. When I look at it that way, any money you get is just gravy.

Create Passive Income

Finally a cheer (I hope)? Who doesn't love passive income? Getting money for doing nothing? What's not to like, right? Unfortunately it can be very difficult to find passive income sources. If you are really good with a guitar perhaps you can write a song. If you can get it on the radio, you'll earn some royalties. You can do the same if you are an actor. Unfortunately, it is very difficult to make it as a musician or actor. There is only so much room on the airwaves.

I found success with blogging. While some say that I have a talent for blogging, I didn't start out with it. It took a lot of trial and error to learn how to write interesting posts. Beyond that though, I got lucky. I fell in with the right crowd and we pushed each other and shared tips. It would be a stretch to call blogging passive income. While I do have the freedom to go to Australia for a month and still make money, I have to bust my hump, to not only write articles, but market them, and monetize them. Over the years, I've found blogging a lot like being a musician... there's only so much attention-span to go around.

One of the best ways to create passive income is through investing. You can buy stocks that pay dividends. You can buy businesses such as a Subway franchise. You can buy an apartment building and be a landlord. The downside to all these is that you have to have money to make money. The Subway franchise and the apartment building don't run themselves.

Putting it All Together

It's very unlikely that anyone other than rich, old uncle Bob is just going to give you money. Like anything else, it is something you are going to have to work at. For some people it will come easier than others.

Even if you are having trouble making extra money, take a lesson from The Christmas Carol. The Tiny Tim's of the world are often more happy than the Ebenezer Scrooges.

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Summary: When you spending less than you earn, you protect yourself from financial disaster and head towards financial freedom (Tweet This)

I've been interested in money for a long time. At age 7, I learned the concept of interest and more importantly compound interest. Even at that early age, I was enthralled by the concept of getting free money for doing nothing. As a natural progression, I started reading personal finance magazines like Kiplinger's Personal Finance and Money Magazine. In some 27 years of studying personal finance I have learned a lot.

You'd think I would have learned it all in the first 15 years. Unfortunately I didn't. It wasn't until age 30 when I started blogging about personal finance that I really started to learn about money. After a few months of blogging and reading other blogs, I came across one statement that summed up everything:

Spend Less Than You Earn

Saving Tons of Money Works Too!

Spend Less than You Earn

There are few topics as large as money that can be summed as succinctly. Though it sounds simple, it is very complex. There are a lot of people who either don't realize that's the secret or can't follow it. Too many people are living paycheck to paycheck. It's a dangerous and stressful way to live. It can shut you out of opportunities to pursue your dreams. What's the answer? Educate yourself (as usual).

Spend Less

There are a lot of ways to spend less money. I'll be covering many of them over the next few years. I thought I'd just tease you with a few though. What if you could save $100 a month on interest payments? What if you could save another couple hundred on subscription services and utilities? What if you didn't buy that doohickey that now sits in your closet? If you learn about how to get more value for your money, spending less doesn't have be as painful as it initially sounds.

Earn More

On the other side of things, there are a lot of ways to make more money too. What if you were better at giving presentations? What if you were better at writing proposals to your boss? Perhaps those things that are going to get you a promotion or a raise? What about simply knowing how to negotiate for a raise? What about investing your money so that you get more free money for doing nothing? What about side businesses or hobbies that actually make money? We'll get to these in time, but hopefully you can see the possibilities here are endless.

When you put together spending less and earning more, you grow that nest egg that hatches into financial freedom. That is when a lot of people's dreams come true.

Photo Credit: Binary Dollar

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Summary: Here's the ultimate guide to financial freedom. Learn how to create a passive income that lasts forever. (Tweet This)

Last week, I covered the importance of money and personal finance. I assume we are on the same page there, so I won't waste any more words on the the "why." I'll need those words, because this guide of "how" to be financially free is long.

There are volumes of books devoted to personal finance and financial freedom. I wish it were possible to cover it all in a blog post you can read in fewer than 10 minutes, but it isn't.

Instead, I'm presenting an outline. Think of it like a map across the country. This is the "zoomed-out" view where you can see the path through various states clearly. Each day, even each hour, of the journey has its own twists and turns. You have to "zoom-in" to navigate those challenges.

Over the next few weeks, months, and even years, I'll take this outline and fill it in with links that "zoom-in" on the important details.

I guarantee this outline will evolve over time. It's not that it is inaccurate in its current form. I simply believe that I'll be able to better express and organize the information over time.

Your Financial Guide

Save More Money that You Spend

If you only take one piece of information from this article, please take the importance of saving more than you spend. The savings can then be invested until it grows enough that you have financial freedom. Sometimes it really is that simple.

Financial Freedom makes me want to kiss my money.

Financial Freedom makes me want to kiss my money.

In order to save money, you might have to sacrifice some luxuries. Fortunately, I wrote a little guide to on how to save money on anything. One of the best ways to save money is to use a budgeting system.

If saving isn't your thing, you could learn to make more money. I recommend doing a little bit of both. If you spend wisely, you can live well on very little money.

The more money you can save... the more money you have available to invest... the faster you'll get to financial freedom.

  • Rule of 4% - The rule of 4% is a guideline of how much one can safely spend without depleting his/her nest egg. If you have a $100,000 invested, the rule of 4% says that you can spend $4,000 a year forever, without reducing your nest egg. In recent years, various financial experts have said that 4% is too high and that 3.5% may be a safe number. That's a detail that I'll gloss over for now.

  • Rule of 25 - This rule is derived from the above Rule of 4%. In fact, it is the inverse. If you know you need $50,000 a year to live on, you can multiply that by 25 to create a goal of amassing a $1,250,000 nest egg.

We can use that Rule of 4% to get a rough idea of how close to financial freedom we are. We can use the Rule of 25 to get a rough idea of what our goal should be.

Understand Retirement Expenses

Given the two rules above, the big question is "How much money do we need each year to live?" It varies from person to person. This is where, once again, it pays off to be able to spend wisely to live well on very little money. It's doubly awesome.

If we go back to the Rule of 25 example above, someone who requires $100,000 to live needs a nest egg of $2.5 million. Because of compound interest, it is certainly possible. I'd much rather race to $1.25M in savings for my financial freedom than $2.5M in savings.

It is impossible to calculate exactly how much retirement is going to cost you. Circumstances tend to change. However, we can make estimates. We can predict when a mortgage will be paid off. We can guess how much our car is going to cost based on what we want to drive. We can estimate inflation itself.

The best place to start is with your monthly living expenses today. Put those in one column of a spreadsheet. Then create some columns for future years and estimate what they'll be then. Don't over do it by trying to calculate every year. At most do it 3-5 times with guesses that are 8-10 years in the future each time.

How Much Do You Need to Retire?

If you asked most people this question, they'd tell you they have no clue. Fortunately, you just did most of the math to figure it out. I'd say that in just a few minutes you've done more financial planning than 90% of the population. That's a tremendous advantage in getting to your goal.

When I did the math of how much money I'd need to retire, I was pleasantly surprised. I found that $28,379.52 would generally cover my expenses. I'll pretend it is $30,000 just to round up to an even number. Then I'll add some padding for unexpected expenses... let's go with 20%. So now I'm estimating needing $36,000 a year... or using the Rule of 25, a nest-egg of $900,000.

If that number seems low to you, it is I am assuming that home is paid off (13 years to go). That's a large expense that goes away.

Paths to Financial Freedom

There are basic two paths to financial freedom: 1) Grow a huge nest egg and 2) Create a passive income cash flow.

1. Grow a Huge Nest Egg

Magnetize money

What I explained above with the Rule of 4% and the Rule of 25 is based on what I call "The Huge Nest Egg" theory of retirement. It's the most well-known path... build up a ton of money and use it to fund your retirement.

Save and Invest Wisely

This article is long enough without covering the basics of investing. That's a whole set of articles that we'll get to eventually.

I will however say that you can make some basic investments that almost universally seen as wise choices.

The United States gives you some tax breaks to help you with retirement. You can defer taxes by using Roth IRAs and 401k (or 403b or TSP plans for certain employees). This is extremely helpful for a couple of reasons:

  1. Compound Interest is Your Friend - Deferring taxes and compounding interest can be a powerful combination.
  2. Automated Savings - These plans can be set up to take money out before you notice it. To borrow the Ronco phrase, you simply "set it and forget it." Month after month, year after year, the accounts get bigger and bigger. There may be stock market crashes, but they always seem to rebound.

2. Create a Passive Income Cash Flow

The idea of building a nest egg of 1 or 2 million of dollars is a little daunting. Compound interest is a tremendous help, but what if we looked for another way... such as passive income.

In days of yore, there were things called pensions. They paid people an income in retirement. They aren't very common nowadays, but you can find them in government and military jobs.

Income streams can dramatically reduce the amount we need to save in a nest egg. If you could create an income stream of $10,000 a year, you can use the Rule of 25 to reduce your nest egg requirement by $250,000.

Let's pretend that I have a passive income stream of $16,000 a year. That means that I only need to generate another $20,000 to cover my expenses in retirement. Using the rule of 25, that's only $500,000. You may quibble with my use of only, but it is certainly better than the $900,000 that I needed before, right?

Creating passive income is easier said written than done. People don't just volunteer to give you $16,000 a year. So how do you get there?

The good news is that Social Security will likely provide some of that. Many people believe it will go away, but as long people are paying in, there will be money getting paid out. It just might not be as much as in the past. I like to presume that it is going to be zero and let Social Security be gravy in my financial freedom planning... much like how I purposely inflated my expected numbers.

1. Invest in Real Estate

I don't know if anyone ever said, "I love being a landlord." Perhaps someone has. It's not the greatest of jobs. However, you don't have to work that often, and it is more than possible to earn more than a $1000 month with it. Yes, that adds up to more than $12,000 or the majority of $16,000 in a somewhat passive income stream.

We personally have three income properties, and though they don't make much money today, in a little more than a decade the mortgages will paid off. At that point, they'll bring in over $4000/mo. in income... around $50,000 a year. Some 40% of that will go to taxes, vacancies, maintenance, etc. but the remaining $30,000 should be income we can use in retirement.

Potentially, the real estate and Social Security could be enough to sustain us indefinitely in retirement. It doesn't leave a lot of wiggle room, but it doesn't have to be the complete solution.

2. Start a Business

There are a number of great reasons to start a business. I'll give you just a couple:

  1. When you do something you love, it doesn't feel like work.
  2. You can defer even more taxes than people without businesses.

The first reason should strike you as common sense. The second reason is based on my understanding of how SEP-IRAs and Solo 401Ks work. As always, talk with your tax professional, but these vehicles can help you sock away even more money in tax-advantaged accounts than the average Joe for retirement.

Diversity is the Key

You don't need to pick a single path to financial freedom. You aren't required to go with either the Nest Egg or the Passive Income plan. In fact, I think you blend both approaches. Have some money coming from real estate. Have some money coming from a side business. Put money away in your tax-advantaged retirement accounts. Try to elect leaders who are going to keep Social Security well-funded and in place.

Can I Retire?

That's the big question that everyone wants answered. It's what we've been building up to. If you've done the above work, you should be able to answer this question almost as well as any financial planner. I want to stress that nothing is a 100% guarantee... the goal is to get as close to 100% as possible. The more money you have set aside and the bigger the streams of income, the larger your margin of error can be.

At this point, you should have:

  1. Good estimates of your annual expenses now and to a lessor degree in the future. (Take the numbers you calculated above and multiple by 12.)
  2. Your annual income now. Hint: Use the Rule of 4% on your savings.
  3. A goal of how much money you'll need to have when you retire. Hint: Use the Rule of 25 on your expenses calculated in #1 above.

You want to be very conservative with these numbers planning for more expenses and earning less than you think. Remember that these are estimates. Real life has a way of throwing you a curve-ball when you least expect it.

Once you've laid out all the numbers, you should have a good view of where your income and expenses are. I like to leave the "Can I retire?" question to you and your certified financial professionals. There's almost always going to be some amount risk. I can't be the one dictating your risk tolerance, so that's a road you'll have to walk alone.

Final Thoughts

There's a big difference between looking at a map and taking a journey. Information can only take you so far. You should have enough information to get started. Now it's time to put the information to work.

Further Reading: Your Money or Your Life - If you simply can't wait for me to fill in all these details, this is a good book to start with.

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Summary: Many things contribute financial fitness, which is part of almost everyone's definition of happiness/success. (Tweet This)

Unless you are one of the very few people who have more money than they can spend, managing your money and your career is going to play a huge role in how successful you are.

Most people equate success with money

In the immortal words of singer Liz Phair:


"It's nice to be liked
But it's better by far to get paid
I know that most of the friends that I have
Don't really see it that way
But if you can give 'em each one wish
How much do you wanna bet?
They'd wish success for themselves and their friends
And that would include lots of money"

Okay, Ms. Phair may have been a little off-track when she said that getting paid is more important than being liked. Let's just focus on the rest of the quote, "success... would include lots of money"

But money doesn't buy happiness

We know that money can't buy happiness. There are a lot of rich people who are not happy. On the flip side, there are a lot of poor people who aren't happy either. At least the rich people don't have to worry about how to pay the next month's rent. Eliminating the stress that comes with not having enough money is something I'd definitely put in the "good thing" category.

In short, money can be used to save you from things you don’t want to do. It can buy you a certain level of freedom. And having money creates opportunities that can lead to happiness.

Money is such a broad topic that there are dozens of areas to cover. I’m going to focus on a few specific areas. Some of these areas

Keys to Financial Independence

What if you had a clear outline on how to achieve financial independence? That’s what I’m going to give you. It will include subtopics such as:

  • Saving Money - One of the best ways to get ahead financially is to make the most out of the money you have. There's a big difference between saving money and depriving yourself... so we'll focus on things that will have minimal impact on your life.
  • Investing - I've read stories about how people saved money all their lives only to lose it with a bad investment in the end. I've also read how people like Warren Buffet turned a little money into a lot of money. We'll explore the things that make for good and bad investing.
  • Credit - Did you know that having good credit and using it wisely can save (and even make you) hundreds of thousands of dollars in your lifetime? We'll cover how to avoid getting trapped by credit, as well as how to use it effectively to speed the wealth-building process.
  • How to Get out of Debt - Hopefully, you never have to deal with debt, but for those who do, the first step to being successful with money is getting out of it.
  • Career - A lot of your earning potential comes from your career. So we'll look at how to find a job, clean up your resume, write a cover letter, how to interview, how to negotiate a raise, and other topics related to the working world.

Over time, we'll take these concepts and organize them. We'll flush them out from these broad (and useless) descriptions.

Final Thoughts on Money and Personal Finance

There are many things, both big and little, that combine to establish your overall financial "fitness." That financial fitness plays a role in most everyone's definition of happiness or success. Once you learn and implement the basic principles, you'll build a strong a financial foundation.

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