Financial Everyday Systems

An everyday system, TM, is a simple, commonsense solution to an everyday problem, grounded by a pun or metaphor. Propose/discuss new systems here.
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larisa0001
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Financial Everyday Systems

Post by larisa0001 » Tue Apr 26, 2005 6:15 am

I was just wondering, in general, what "everyday systems" people have come up with that deal with finances. I find that I've been using one all along and never knew that it qualified as an everyday system. So - are there any others out there?

LM

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reinhard
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Post by reinhard » Tue Apr 26, 2005 11:47 am

Hi Larisa,

Tell us more about your system!

I haven't come up with much financially myself, but one I'm impressed with that someone else came up with (David Bach in the Automatic Millionaire, which I have to confess I haven't actually read), and you may have heard of, is the "Latte factor."

Basically the idea is, many people buy a cup or 2 or 3 of fancy coffee everyday at several dollars a pop. Individually this might not seem that much, but when you add it up over the course of a year or a lifetime and consider how much that money would have made if it had been invested in an index fund, it's literally a fortune.

Maybe you don't drink $3 lattes on a daily basis, but the author suggests that most of us have similarly seemingly cheap but actually hugely expensive habitual indulgences. Identifying your personal "latte factor" and getting rid of it is a simple and relatively painless (depending on how much you like that latte, I guess!) way of saving a lot of money.

It's a catchy name, it's a sound concept, I'd consider it an everyday system. Do I practice it? Yes, sort of, it definitely does inform my decisions. Do I have any reservations? Yes, too. It's a little small and miserly, especially if you live in a place with a real cafe culture. A $3 coffee at starbucks might be an easy sacrifice, but I'm not sure the same could be said of a $3 cafe au lait and the hours of reflective leisure it represents at a cafe in Paris. Of course, you could argue that in that case a Parisian's latte factor would be something else, but the Parisian (after a few hours leisured reflection) might argue back that a tainted metaphor leads to tainted actions.

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gratefuldeb67
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I'm glad this site is free!

Post by gratefuldeb67 » Tue Apr 26, 2005 12:24 pm

I've got to be the biggest nerd on the planet!
Sitting here, checking the boards for systems, LOL, with my cafe olay!
(that's the kind they drink in Mexico not Paris!) :D
I don't think I'd be here that much if it cost money...
However this group is really priceless to me...
Always motivational, inspirational, and something else ational....
Thanks Reinhard et others...

Hey Larissa, Navin and Sandie :)
Thank you friends, for your recent posts...
I am feeling too lesuired and lethargic to respond yet... I will though, when the caffeine, inspiration and the right words come to my feeble morning brain. Larissa, are you new? If so welcome and enjoy our group! Would it be okay with you if I continued the finance stuff directly at your email? I get really detailed and have loads of "duh" type questions sometimes, so it might be better not to clutter everyones brain space with my queries on that...
As for the music! Ha! I am a trained musician too... Wen't to Queens College and Graduated from the Aaron Copland School of Music back in 1989. I am a singer and guitarist... Even funnier, I just finished writing my latest song this month but before that it was about 5 years ago! Weird coincidence eh? But it's not an opera! Wow... Pretty ambitious :)
Don't loathe yourself for your temporary halt in production... Creativity and inspiration are tough to force into action... I do have some ideas though, and I'll put them up soon (when I'm inspired! LOL :P )
Kindof makes you astounded to think about people like Bach... popping out those Cantatas and stuff every week for years and years!
He is my idol 8)
I too am a trained musician and have had the issue of "buckling down and writing something" plague me over my relatively short 38 years...
Well back to my nerdy lesuire time with my
instant coffee with powdered hot chocolate and soymilk...
The whole bottle of Tasters choice costs 4.35!
I will think about what you wrote Reinhard... it makes so much sense...
I will try to identify my "S" expenses which are optional and are eating up my potential savings... Then we'll see what I do after that... too early to spring my rags to riches plan in full.
Have a lovely sunny morning!
Love,
Deb

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Post by larisa0001 » Wed Apr 27, 2005 12:40 am

reinhard wrote:Hi Larisa,

Tell us more about your system!

I haven't come up with much financially myself, but one I'm impressed with that someone else came up with (David Bach in the Automatic Millionaire, which I have to confess I haven't actually read), and you may have heard of, is the "Latte factor."

Basically the idea is, many people buy a cup or 2 or 3 of fancy coffee everyday at several dollars a pop. Individually this might not seem that much, but when you add it up over the course of a year or a lifetime and consider how much that money would have made if it had been invested in an index fund, it's literally a fortune.

Maybe you don't drink $3 lattes on a daily basis, but the author suggests that most of us have similarly seemingly cheap but actually hugely expensive habitual indulgences. Identifying your personal "latte factor" and getting rid of it is a simple and relatively painless (depending on how much you like that latte, I guess!) way of saving a lot of money.

It's a catchy name, it's a sound concept, I'd consider it an everyday system. Do I practice it? Yes, sort of, it definitely does inform my decisions. Do I have any reservations? Yes, too. It's a little small and miserly, especially if you live in a place with a real cafe culture. A $3 coffee at starbucks might be an easy sacrifice, but I'm not sure the same could be said of a $3 cafe au lait and the hours of reflective leisure it represents at a cafe in Paris. Of course, you could argue that in that case a Parisian's latte factor would be something else, but the Parisian (after a few hours leisured reflection) might argue back that a tainted metaphor leads to tainted actions.
I've heard about the "latte factor", and I think it's a rather misguided way to think about it. I go about it in the exact opposite way, in fact - I live in a small apartment, drive a small gas-efficient car, but then spend money on little luxuries. I will only be young and healthy for a short time. If I deny myself all pleasures until I'm 80, I won't be able to enjoy the money I've saved. There are things I do not care about - I economize on those. But I never economize on the little things.

Think about it - the difference between an apartment that costs $1500/month and an apartment that costs $1000/month is $500/month, or $6000/year. The difference between a 16mpg car and a 40mpg car can also be quite enormous, depending on how much you drive. Neither of these feels too much like a sacrifice, and neither requires you to change your habits.

As for me, I rather enjoy my lattes. I only drink about a latte a week, if that. For me, it symbolizes luxury. I go to the friendly local bookstore, grab something interesting off a shelf, sit there and read and sip and think - rather like a Parisian, I suppose. It feels incredibly self-indulgent - and for the $3 I spend, I think I get my money's worth. $3/week is $12/month is $144/year. Not that much.

Oh, and my system -

1. I record everything I spend, except cash. I use a PalmPilot and a nifty little program called PocketMoney for that purpose. It enables me to know, to the penny, how much I've got in what account.

2. I withdraw a regular amount of cash every week - lately, it's been $20. It varied over the years.

3. I can spend the cash on anything I want (like lattes!), without recording it.


That's all, really. It enabled me to get out of a really horrible financial situation - I lost my job, was unable to sell my house, and ended up in about $16,000 worth of credit-card debt. I paid it all back, even though I never did get another job. (I started a business instead)

I notice that now this system has become a part of me. It's a reflex now, whenever I spend money, to reach for my PalmPilot to write it down. And I feel weird using my bank account money for nonessentials.

LM

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Re: I'm glad this site is free!

Post by larisa0001 » Wed Apr 27, 2005 12:45 am

gratefuldeb67 wrote:
Hey Larissa, Navin and Sandie :)
Thank you friends, for your recent posts...
I am feeling too lesuired and lethargic to respond yet... I will though, when the caffeine, inspiration and the right words come to my feeble morning brain. Larissa, are you new? If so welcome and enjoy our group! Would it be okay with you if I continued the finance stuff directly at your email? I get really detailed and have loads of "duh" type questions sometimes, so it might be better not to clutter everyones brain space with my queries on that...
Thanks! And sure - feel free to email me. It's a fairly simple system I've got, though - the amazing thing is that it worked as well as it did.
gratefuldeb67 wrote:
As for the music! Ha! I am a trained musician too... Wen't to Queens College and Graduated from the Aaron Copland School of Music back in 1989. I am a singer and guitarist... Even funnier, I just finished writing my latest song this month but before that it was about 5 years ago! Weird coincidence eh? But it's not an opera! Wow... Pretty ambitious :)
Don't loathe yourself for your temporary halt in production... Creativity and inspiration are tough to force into action... I do have some ideas though, and I'll put them up soon (when I'm inspired! LOL :P )
Kindof makes you astounded to think about people like Bach... popping out those Cantatas and stuff every week for years and years!
He is my idol 8)
I too am a trained musician and have had the issue of "buckling down and writing something" plague me over my relatively short 38 years...
Yeah. My problem is always that if I try to force myself to write, it all comes out cliched and trite and awful. And then I get all disgusted and quit. The reason I'm so loathe to abandon this opera altogether is that it's got some stuff in it I like - even some stuff I'm rather proud of. I can write decent tunes sometimes. And sometimes, I can't.

Incidentally, is your song findable online?

LM

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Online Music? Not yet

Post by gratefuldeb67 » Wed Apr 27, 2005 12:59 pm

Hi Larissa :wink:
You asked if my song was available online yet?
I wish I could say yes, but sorry it's not :?
I literally just finished writing it last week, and as of yet still have no recording gear, or band for that matter... I am going to try and change that this year.
So it's in the "Sing the song in my room to my son" stage so far, but I plan on trying it out on an audience probably tonight, when I go to a local blues jam... It's not blues though, it's more of a pop folk song...

I know what you mean about that experience of writing some music, and then thinking "Awgh this is pure drivel... and the lyrics sound like a very bad hallmark card!" and then inevitably cursing your writing skills for "sucking"! LOL :lol:
Sometimes you can have one really good thing in the, I'm going to say "song", just for simplicity's sake, even though you may be in the throes of writing an overture, or some other instrumental passage, and that's really the core of the piece... But then you try to "fill in the rest" and it sounds contrived, or "made up"...
If there is a seed of goodness in the song, you should not abort the mission of making it into a full piece... It doesn't have to be long...
Consider, I think, Cherubino's aria from Mozart's Le Nozze Di Figaro, where she loses the Contessas ring (am I remembering the plot and character names right? Wolfgang forgive me!)
That mini aria "I have lost it" is a total gem! How long is it? Like one minute?
Well, more on this topic when I'm not rushing off to my new job! Today's my first day. It wouldn't be good to show up late :P
I see you have no email listed here, so please feel free to email me sometime off list so I can annoy you with kindergarten level financial planning questions, and we can talk more about writing music!
Oh, also, any of your stuff hearable on line?
Peace,
8) Deb
my email is DeborahFederLMT@hotmail.com
Take care...

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Post by reinhard » Thu Apr 28, 2005 12:26 pm

Hi Larisa,

You're right, there is an element of "penny wise..." about Latte factor. Besides potentially misdirecting your energies from bigger more important issues, there's a self righteous aesthetic selfishness about it, as if denying yourself all pleasure for the sake of your bank account were somehow a positive virtue, that the goal is to become some kind of monk of finance, contemptuous of fools who enjoy wealth instead of merely amassing it. Your system of a limited cash "latte fund" sounds more effective both in terms of attention and pleasure. It sets limits without requiring soul killing, error prone and time consuming micromanagement.

If there is something to be said for Latte factor, I think it's mostly to draw people's attention to the fact that there are discretionary expenses that seem small, but are actually quite large. As large as rent and car payments? Of course not. But I have noticed that paying a little attention to what I'm spending can make a difference of hundreds dollars a month, and I wasn't exactly prodigal before. We drive a 13 year old car and got a good deal on our home, so further economy there isn't really possible. And I wish it weren't necessary, but my goodness, kids are expensive...

But again, your "latte fund" does this as well as "latte factor."

In terms of monitoring expenses, I do it by putting everything on my credit card. I'm good about paying it in full every month, so that's not an issue, and they give a nice itemized report (and also 2% of whatever I spend into my daughter's 529 college fund). My wife and I have agreed upon monthly limits that we try not to go over. It's been working well. As for cash, I try not to spend it, both because I don't get automatic monitoring and because my bank doesn't have machines I can use without paying a fee. Because of the fee issue, I take out larger sums every few months instead of a small amount each week. The fee then becomes insignificant.

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Monks! You make me laugh :)

Post by gratefuldeb67 » Sat Apr 30, 2005 2:32 pm

reinhard wrote:Hi Larisa,
there's a self righteous aesthetic selfishness about it, as if denying yourself all pleasure for the sake of your bank account were somehow a positive virtue, that the goal is to become some kind of monk of finance, contemptuous of fools who enjoy wealth instead of merely amassing it.

.....That's so great, and funny Reinhard!
Why, do I laugh at the mere mention of monks?

Give up your lattes, and you unnecessary earthly desires you fools! LOL..
The Dalai Llama doesn't go to Starbucks!
Sanctimoniously yours!
Deb
(who secretly reveres the discipline of Monks, but could never be one!)
ps...To anyone who has the time to explain:
What do I do to get the quote I want in that nice and neat "white box" so it is easy to tell who is saying what? I don't seem to have a handle on this technostuff yet :)

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Post by Samurai » Sun May 01, 2005 2:28 am

Hello All
One nifty trick that can net you a couple hundred dollars a year is to piggy bank all your loose change.

We have an automated coin-rolling bank that we drop all the loose change from our pockets in when we arrive home each day. The most I've heard of saving in one year, and this from the guy who told me about it, was just over $600.00. He was using that money to save for his daughter's college fund, who was 4 years old when he started. She'll have no problem going to the college of her choice at that rate of savings and investment.

The most I've saved at one time is $165, but that was only after a few months and calculated when I finally took the bags full of coin-rolls down to the bank. Since then I haven't kept track annually but regularly add another $40-50 to my savings account every couple months.

As for the cafe latte rule, I regularly dropped $5-10 a day on sodas and convenience store goods. I got into the habit (you're right about habits, Reinhard!) of always having a drink handy when I was on the road at work. I'd often drink colas for breaksfast! Although I haven't made a consscious effort to place that money in savings, just cutting back as a result of NOS has saved me some cash, too.

And finally, if you really want to save money you have to stop eating out, if you're a frequent restaurant diner like I used to be. It is EASY to drop $20 a day on restaurant meals, if you eat out twice a day. We often don't think about how much we spend on a daily basis, but if you do the math, thats $400 a month! You could eat at home and take your lunch for half that amount, easy. In this case, NOS is also a cost-cutting feature!

Reinhard for president! :D
One should not be envious of someone who has prospered by unjust deeds. Nor should he disdain someone who has fallen while adhering to the path of righteousness. - Imagawa Sadayo (1325-1420)

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Post by larisa0001 » Mon May 02, 2005 11:19 pm

reinhard wrote:Hi Larisa,

You're right, there is an element of "penny wise..." about Latte factor. Besides potentially misdirecting your energies from bigger more important issues, there's a self righteous aesthetic selfishness about it, as if denying yourself all pleasure for the sake of your bank account were somehow a positive virtue, that the goal is to become some kind of monk of finance, contemptuous of fools who enjoy wealth instead of merely amassing it.
That's what grated upon me, when I read all the books I read about finances and debt and getting out of debt (my typical approach to a problem is to read a book, or two, or 10) - every single one of them recommended that you give up all your petty hedonistic joys and start leading a serious, ascetic existence. I'm not an ascetic and I have no desire to be one. It was then that I decided that I was going to do that thing (i.e. pay back $16,000 or so) without giving up a single luxury. And I did.

The thing that I did, though, was think very seriously about what luxuries I enjoyed. I like good food - so even at my most destitute, I always shopped at upscale grocery stores. I could not, and still cannot, stomach the idea of economizing on food. However, I do not much care for good clothing - it doesn't do much for me, one way or another. So I bought my clothes at Goodwill. I think that if one really considers what one does to please oneself, rather than to please others, it won't be such a horribly long list. Mine wasn't - and I'm a shameless hedonist.

Another thing is that if you deprive yourself too horribly much, you risk setting yourself up for a binge afterwards. It happens with food, and to some degree, it also happens with finances. Whereas if you allow yourself a few little luxuries, you won't be as tempted to stray.
Your system of a limited cash "latte fund" sounds more effective both in terms of attention and pleasure. It sets limits without requiring soul killing, error prone and time consuming micromanagement.

If there is something to be said for Latte factor, I think it's mostly to draw people's attention to the fact that there are discretionary expenses that seem small, but are actually quite large. As large as rent and car payments? Of course not. But I have noticed that paying a little attention to what I'm spending can make a difference of hundreds dollars a month, and I wasn't exactly prodigal before. We drive a 13 year old car and got a good deal on our home, so further economy there isn't really possible. And I wish it weren't necessary, but my goodness, kids are expensive...

But again, your "latte fund" does this as well as "latte factor."
True - and I found that the recording that I do in my PalmPilot draws my attention to the little expenses just as well as anything would. And then, I can limit myself. Am I spending too much on groceries? I can see it instantly. Is my bank account getting low? I can see it, and make the appropriate decision about whether or not to buy truffle oil for my cooking. :)

I started thinking of a "latte fund" when I started my small business - some clients paid me in cash, and it was easier to just spend it than to deposit it into my bank account. I tried to record the cash influx/outflow, but it was just too much trouble - and it's pretty easy to see how much cash I've got in my pocket.

LM

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Re: Financial Everyday Systems

Post by brownstudy » Thu Jun 09, 2005 2:55 am

larisa0001 wrote:I was just wondering, in general, what "everyday systems" people have come up with that deal with finances. I find that I've been using one all along and never knew that it qualified as an everyday system. So - are there any others out there?
I'd be interested to know what your business is. I was looking for work most of last year but decided I had an employee mentality and entrepreneurship was not for me.

I'm using a framework laid out at http://www.thebword.com. Once you get past the breathless prose, you see that he advocates one checking acct for your fixed monthly expenses, a second checking account to hold your flexible monthly expenses (your debit card draws from this), and a savings account where you basically employ the "envelope" system: saving out bits of money every month to handle periodic expenses (like car insurance). When I draw out money or check my balance online, I can tell how much money is left for the month for me to spend on eating out, books, misc expenses, etc. It puts a natural brake on my spending.

He also suggests handling all your financial stuff twice a month only--that means writing the checks early, even if today is the 15th and they're due on the 1st. This actually does make the bookkeeping less of a hassle, once the accounts and your records are in place.

There's more to it, and the software is very simple (you could reproduce it in Excel, actually), but I needed the hand-holding so I paid for it.

I've found his ideas most useful to me for planning. I still use Quicken to download my debit/credit transactions from the credit union, as it's great at categorizing expenses and spitting out reports.

I used to track all my cash (as prescribed in the book YOUR MONEY OR YOUR LIFE) but I stopped that recently. Too much hassle, unless it's groceries or gas or an expense I like to track monthly.

The YOUR MONEY OR YOUR LIFE book also advocates figuring out your "true" hourly wage. Their idea is that money represents life energy. So when you tote up what you spend on clothes, food, gas, etc vs time spent commuting to work, thinking about work, being at the office, etc. you arrive at your "true" hourly wage, which represents the amount of life energy you expend to procure that money. Then, when you're tempted to buy something, you do the math and see that the item represents 3 hours of your life energy, and so you ask yourself, "is it worth it?" That's a horrible oversimplification, but I hope I got the idea across; check out the book from your local library.

This was a mish-mash of ideas but I hope it makes sense to someone.
Mike Brown

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Post by ClickBeetle » Thu Jun 09, 2005 4:15 am

There is a book called "The Artist's Way" by Julia Cameron that is widely considered the top book on motivating creative work.

It's kind of a classic in the field, in the way that "What Color Is Your Parachute" is THE classic work for jobseekers and career-changers.

It's full of everyday systems that you can pick and choose from, and adapt to your own needs.
Chance favors the prepared. - Louis Pasteur

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Post by reinhard » Fri Jun 10, 2005 2:10 pm

Mike, welcome. Sorry I didn't see your post yesterday. This is good stuff. I like the "true hourly wage," if only as a gedankenexperiment. And handling finances only twice a month is a great idea. I'm at 3 right now (everything else is auto deducted from my checking account/credit card, which is very helpful). I'm sure I've spent far more over the years on late fees than I would have forsaking a few days extra piddling float. Funny how the latter consideration has loomed so disproportionately large in my concerns... no more! B-word looks very promising... I'll have to spend some more time looking at that.

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BWord

Post by brownstudy » Sun Jun 12, 2005 4:00 am

reinhard wrote:Funny how the latter consideration has loomed so disproportionately large in my concerns... no more! B-word looks very promising... I'll have to spend some more time looking at that.
Hi Reinhard -- I wonder if "the float" really means anything anymore what with instant deductions from checking accounts and very few paper checks written anymore (I write very few of them anyway). I find that writing the checks early and either mailing them pronto or just sitting on them till it's time to mail them offers me great psychic relief because that chore is simply not on my mind or floating in the future to be dealt with. Frees up my mind for other things.

If you have any questions about B-word, feel free to ask or to email the guy who thunk it up. (By the way, he issues a 43-page PDF as his "book", which is included with the software. In another thread, I ponder whether your No S diet would work as an e-book.) His framework isn't groundbreaking, just a few good separate ideas that seem to mesh and which you can tweak to your own preferences.

Since his information is proprietary and BWord sales constitute his income, I won't give away all the plan's details. But if you have questions, I'll try to answer them as best I can.

Regards,
Mike Brown

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Post by Justin » Wed Aug 17, 2005 4:50 pm

I have a new little everday system. When I go to the ATM to get cash, I set aside 10% and put it away (in a little safe I have.) I've been doing it for a couple of months and I've set aside quite a bit already. Makes me concerned about how much money I spend! Anyhow, after I put it away I tend to forget about it and only use the cash in my wallet. I hope to save up enough money for a flight to Italy in January!

Of course, part of the reason it works is that I use cash for most of my daily purchases. Credit card companies take such a big chunk out from the merchant that I think it's better for them (and the local economy) if I buy with cash.

J

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Post by gratefuldeb67 » Wed Aug 17, 2005 5:01 pm

That seems like a good and simple system Justin...
Please send me a postcard from Milan when you get to go on your trip!!!
I am going to try this out with all my cash starting next month...
I might have to allot a little smaller percentage though, maybe like 5 percent, since my bills out weigh my income by a lot these days....

Thanks Justin!
Peace,
8) Deb

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Post by Justin » Wed Aug 17, 2005 5:20 pm

5% is great too! It's not like the money is disappearing, just being put away for another purpose. But if expenses outmatch income, then it might not be a good idea. Then again, it depends on the expenses. I've stopped getting coffee out and I bring my own lunch most days now. Every penny counts!

J

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Post by gratefuldeb67 » Wed Aug 17, 2005 5:33 pm

Yes, they do...
No room here these days for conspicuous consumption!
A goal like taking a trip to Italy is worth cutting back on pricey coffee...

So, do you mind me asking what you use as a "Safe"...
Don't worry, I won't rob you!!! LOL...
I'm bad at this part (shoot, I'm just bad at saving in general, no matter what safe I use...)
Any suggestions???

This guy I work with says the best place to hide money is wrapped up in tinfoil in the freezer...
This is the best place to put it incase of a fire, according to his thinking..
Smart, though slightly paranoid! LOL....
Well, here's to your fund!
May it grow to a nice chunk, which will translate into a moonlight gondola ride for you and your GF one day!
Love,
:wink: Deb

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Post by Justin » Wed Aug 17, 2005 7:27 pm

gratefuldeb67 wrote: So, do you mind me asking what you use as a "Safe"...
Don't worry, I won't rob you!!! LOL...
I'm bad at this part (shoot, I'm just bad at saving in general, no matter what safe I use...)
Any suggestions???
I bought my safe years ago just as a place to store things like important documents and unused credit cards. I bought it online somewhere, but I can't remember where exactly. Of course, it's not really "safe", but safer than just sitting out in the open.

J

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Post by carolejo » Thu Aug 18, 2005 4:13 pm

I know quite a few people who have hidden compartments built into their houses which are 'safes' without a lock, by virtue of the fact that they're so hard to find.
C.
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Post by Francois Tremblay » Wed Jul 05, 2006 3:02 pm

Both sides of the issue- "pay less of the little regular things" and "pay less of the big things"- have merit. I think the answer is not necessarily in one or the other exclusively, but in making a budget and doing your best to fit everything in there, cutting down on what you value the least. I would be interested in seeing an Everyday System for the financial side, although being a small spender I wouldn't really need it.
Francois Tremblay
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Post by Pete » Thu Jul 06, 2006 12:53 pm

one of the fellows I used to live with always put his change from a night out into a jar when he got home.

Just before I moved I helped him take it all down to the bank and have it counted. Final tally was over $1000 if memory serves. A hefty sum just from saving the shrapnel in your pocket!

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Post by reinhard » Wed Jul 12, 2006 3:26 am

I've actually been doing the handle all finances once a month system that Mike recommended (he recommended twice, but I've found I can get away with once). The "Financial 14th" is the day that works for me. Less chaos and stress, no late fees.

Reinhard

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Post by reinhard » Tue Feb 06, 2007 8:45 pm

I just wanted to report that I'm still doing the once a month finances thing (except I had to move it to the "financial 4th" instead of 14th because one of the due dates changed). Such a simple system, but really helpful. More for the worry that it spares me than anything else, since I tended not to miss bills anyway.

Thanks again, Mike!

Reinhard

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Re: Financial Everyday Systems

Post by larisa0001 » Wed Feb 07, 2007 3:20 am

brownstudy wrote:
larisa0001 wrote:I was just wondering, in general, what "everyday systems" people have come up with that deal with finances. I find that I've been using one all along and never knew that it qualified as an everyday system. So - are there any others out there?
I'd be interested to know what your business is. I was looking for work most of last year but decided I had an employee mentality and entrepreneurship was not for me.
Online math tutoring: www.aristotletutors.com

Also, I'm now selling my CD and sheetmusic: www.larisamigachyov.com

Also, I pick up a translation project every now and then (from Russian to English). Don't have a website for that business yet.

I've cut down on all of the above businesses somewhat, since I'm in law school now. So at present, I'm mostly earning "pin money" - though anything is nice when one is a starving student.
I'm using a framework laid out at http://www.thebword.com. Once you get past the breathless prose, you see that he advocates one checking acct for your fixed monthly expenses, a second checking account to hold your flexible monthly expenses (your debit card draws from this), and a savings account where you basically employ the "envelope" system: saving out bits of money every month to handle periodic expenses (like car insurance). When I draw out money or check my balance online, I can tell how much money is left for the month for me to spend on eating out, books, misc expenses, etc. It puts a natural brake on my spending.

He also suggests handling all your financial stuff twice a month only--that means writing the checks early, even if today is the 15th and they're due on the 1st. This actually does make the bookkeeping less of a hassle, once the accounts and your records are in place.

There's more to it, and the software is very simple (you could reproduce it in Excel, actually), but I needed the hand-holding so I paid for it.

I've found his ideas most useful to me for planning. I still use Quicken to download my debit/credit transactions from the credit union, as it's great at categorizing expenses and spitting out reports.

I used to track all my cash (as prescribed in the book YOUR MONEY OR YOUR LIFE) but I stopped that recently. Too much hassle, unless it's groceries or gas or an expense I like to track monthly.

The YOUR MONEY OR YOUR LIFE book also advocates figuring out your "true" hourly wage. Their idea is that money represents life energy. So when you tote up what you spend on clothes, food, gas, etc vs time spent commuting to work, thinking about work, being at the office, etc. you arrive at your "true" hourly wage, which represents the amount of life energy you expend to procure that money. Then, when you're tempted to buy something, you do the math and see that the item represents 3 hours of your life energy, and so you ask yourself, "is it worth it?" That's a horrible oversimplification, but I hope I got the idea across; check out the book from your local library.

This was a mish-mash of ideas but I hope it makes sense to someone.
Oy, the BWorld system sounds way too complicated for me. Though I've kinda done that thing with the two checking accounts by necessity; the bank that holds my main checking acct doesn't have any locations in the city I moved to, so I've had to open another checking acct here. If I receive a check in the mail from a client, it goes into the local account; if I receive a Paypal deposit, it goes into the main account (as does any student loan money I receive). So I guess I do the "fixed expenses from one account and varying expenses from the other one" thing by default. It works for me, because I don't feel guilty about spending the money I earn (from my local acct), whereas I do feel guilty about spending my loan money on frivolous things. Since I'm not working very much these days, my spending is automatically limited.

Since I am self-employed, I know exactly what my hourly wage is; I set it myself. Moreover, I love to teach, and it's not a drain of my life energy but an increase thereof. It's not a question of "losing" one hour of my life to teach a student; it's a question of enriching my life by spending one hour teaching a student. I never understood the idea that work has to be something horrible and awful that one endures in order to have fun later. It's never been that way for me. I've always loved the work I do - whatever it is. Or, to put it another way, I'm unable to do work I hate for any length of time.

LM

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Post by reinhard » Wed Feb 07, 2007 3:05 pm

I should have visited your site in 2006 when my new years resolution was "learn math." I didn't learn much math, but I did learn some humility :-).

Reinhard

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Post by larisa0001 » Tue Feb 20, 2007 11:42 pm

You're welcome to come any time. :)

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N- and S- spending

Post by stevecooper » Thu Mar 08, 2007 9:12 am

Within the last six months, I've turned myself round from having too little month left at the end of the money to being really quite good at saving huuuge amounts of cash.

I divide spends into two categories; coincidentally enough, when I wrote this up last year, I called them necessary and surplus; n-money and s-money.
The Cry of the flesh is not to be hungry, thirsty, or cold; for he who is free of these and is confident of remaining so might vie even with Zeus for happiness — Epicurus, Vatican Sayings #33

N-spending are things that if you don't have make you physically suffer: food, clothing, accomodation, and healthcare. Without these things, life is truly miserable. You shouldn't feel bad about n-spending. The people who haven't spent enough on n's we call starving, naked, exposed, and sick. N-spending is truly guilt-free.

S-spending is everything else; toys, lattes, computer parts, trips to the cinemas, etc. It also includes duplicates or indulgences of things in N; basic supermarket shops are N spends. Restaurants are S spends. Making sure you have a pair of shoes is N; buying several pairs is S. Paying the rent is N. Putting in that granite countertop is S.

So, with those distinctions in place, my rules are;

* Every tuesday night, get £40 out of my account; £80 on the last tuesday of the month.
* Leave all your cards in a drawer at home.
* If you need to buy N-goods, get the card, buy the thing, put the card back in the drawer.
* Spend cash in your wallet however you like.


And that's it. So some examples and thoughts;

* Weekly food shop is Tuedsay nights. I grab my card, go to the supermarket, get my money from the ATM outside, and do a full shop for the week. This is enough food for the week, and it's good stuff too; Literally, why go out for a burger when you can have steak at home? For me, a big saving is just not being tempted to go to restaurants. And when the cost of a roast chicken dinner for two, with wine, is the same as a couple of muffins and coffees at starbucks, what's the point?

* If I want a latte, or a computer game, or a set of coloured pens for my habit-traffic-light cards, I've got cash in my pocket. Or, if I've spent it, I don't. Just as the one-plate rule in No-S lets you see your gluttony, spending cash from your wallet lets you see your extravagance.

* If I need to buy clothes, I grab my card on, say, saturday morning, buy it, and get it back in my drawer saturday afternoon.

* When I first started this, I asked my fiancee to carry my card for me. That way I had to ask her for the card to indulge. Knowing that I would have to give at least a pretext made me reconsider a huge number of silly impulse purchases.

* The £80 on the last tuesday of the month is a way to let me afford the occasional big luxury. If I want something, I know that, once a month, I'll get a nice cash injection, and will be able to save the rest over the month.

* Some subtle changes come out of this. I now take a packed lunch to work because the impact of haemorraging money on shop-prepared sandwiches started to make itself obvious when every sandwich took me further away from the computer game I wanted. I consider packed lunches 'free' because I incorporate them into my weekly n-shop.

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