This week we’re back with Seven on Saturdays. I was off my usual schedule for a couple weeks with Thanksgiving and a few other posts that I wanted to write. The personal finance blogosphere has been on fire over the last few weeks. Oodles of great ideas and thoughts have been posted. And it’s my pleasure to share a few of them. So here we go …
7. Here’s a wrinkle on the notion of the importance of having an emergency fund which came to me from DigeratiLife. If you’re not putting savings aside, you’re taking your lifestyle for granted. Don’t take your lifestyle for granted. It can change nearly overnight. If you wait until you need it to realize that it’s important it will be too late to do anything about it.
How much do you need to save? At a minimum, enough to cover structural expenses for long enough to get back on your feet. Getting knocked off your feet can come from losing your job, an unexpected medical emergency, loss of a home, etc. It can be anything you don’t expect.
So don’t leave yourself vulnerable. Don’t take your lifestyle for granted. Build an emergency fund.
6. MoneyCrush reminded me of a piece of advice that has been incredibly helpful for me over the years. Don’t make things harder than they need to be.
If you’ve been reading my blog for a while, you’ll know how strong of an advocate I am for planning. The dark side of planning is “analysis paralysis”. Planning is meant to enable you to succeed at your goals by forcing you to take the time to think through what you want to do, allow you to prepare for challenges and sidestep obstacles. That’s it. When the planning itself becomes your main focus, you’re making it harder than it needs to be.
Don’t make things harder than they need to be.
5. Along the planning theme, harness the power of lists. When you take the time to compose a list, you give yourself an edge. When you build a list you’re thinking ahead to what may happen. When you’ve thought through what might happen along with what you want to happen, you’ve given your subconscious an opportunity to work for you until those things happen. You’ll find it less of a struggle for things to go your way because you’ve subconsciously set yourself up to do the “right thing” by default. You’ll be less stressed out and you won’t be caught off guard as often when challenges materialize.
It can sometimes be difficult to do the right thing. But that doesn’t mean that you’re doomed to failure. A good first step to getting on the right track would be to read these two posts.
3. The Simple Dollar reminded me this week of a very important point. The difference between second place and first place is marginal. The greatest achievements come from marginal changes. This is true in general, and success in building wealth is no different.
When it comes to spending, I think of spending as either structural or discretionary. Structural spending is about 80% of my spending, and it includes savings and “paying myself first”. That 80% is the bedrock of my lifestyle, my retirement, my children’s college education, etc. I don’t focus on that 80% once I’ve got it working well. When I want to boost my savings or increase my income, I think of it as a function of the 20%, which is my margin. Over the long term, the biggest changes to my lifestyle and general happiness will come from what I do with that 20%, not the 80%.
2. FrugalDad hit the nail right on the head this week with The Four Phases of Frugality. This rang so true for me. At first I didn’t know what I was doing wrong. I just knew that things were seriously wrong financially. So I fixed them. The fixing took a LOT of learning about myself and finance in general. It took over a year to really improve my relationship with money. But once I got on track, things were better all around, and the path to prosperity was clear. From then on I could easily see when I was getting off track. And I had the means to get myself back on track pretty quickly.
The road to wealth is paved with many small choices. Until you go through “the wreckoning” you can’t tell the difference between good and bad choices. Once you know the difference you test the bounds of right and wrong to see how far you can go. After enough trial and error the right choice becomes your default choice more often than not. And from then on it’s just a matter of staying motivated to do the right thing.
1. I’ve reserved the top spot this week to share with you an interview which I did for David Garcia from The Frugality Game. I really enjoyed working with David. The experience gave me an opportunity to put my relationship with money into a new light, and to share it with new readers.
You’ll enjoy reading the interview. And I hope you’ll get one or two helpful ideas from it. Enjoy!
Thanks for reading! See you again soon!