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.

4. GetRichSlowly posted a great article titled “Empower Your Willpower”. It’s a longer article, and it’s full of gold. I recently wrote on How I Found the Strength to Save.

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!

Exclusive Interview: “Frugal Under Forty” Shares Financial Wisdom

Thanks for reading! See you again soon!

Photo credit.

Here’s a link to the interview. Enjoy!

David consistently posts some of the best content around through his blog. After reading the interview, I’d encourage you to poke around his blog to find other great reads.

Thanks David!

Improving my financial situation was first and foremost about improving my relationship with money. It was about psychology, being realistic about risk and reward, being honest with myself regarding wants and needs (and knowing the difference between the two). And it was about understanding what I needed from life to be happy and fulfilled. It was about making choices. Last, but definitely not least, it was about setting realistic expectations and goals for myself and setting up a system to motivate me to improve my relationship with money, with rewards when I did well, and consequences when I fall short.

The sense of entitlement to spend caused havoc with my motivation. I spent too much, indulged myself without sufficient regard for saving and setting aside for longer term expenses (from a few weeks to a few months into the future). I had a reason to improve my relationships with money, but no motivation to follow through with it. And I had enough wiggle room in my budget to allow me to continue to believe that I could delay making the change for at least a little while longer.

So here’s the question …

When spending is your reward for doing well or healing a wounded soul, how do you motivate yourself to establish a different type of reward to replace the spending. You’re taking away the reward that you’re accustomed to, leaving a major gap in your ability to motivate.

Here’s what worked for me.

Wake up to reality

The first thing I had to do was admit that I simply couldn’t make the change on willpower alone. This was hard (being the “I can do anything I put my mind to” kind of guy). But it was true. I was on the losing side until I accepted it. So I did.

Develop a plan

The next thing I needed was a plan. I didn’t feel comfortable spending at my discretion until I could prove to myself that I was able to spend and save responsibly. So I read and read and read, and thought and thought until I felt like I had a plan that I could trust.

I won’t go into it in detail here. But one of the most important features of any plan (and where I failed miserably for years) is wiggle room. How will your plan handle unexpected demands? Without wiggle room, you will fail to follow through on your plan. No matter how much you want your plan to succeed, without wiggle room, you won’t. So build it into your plan.

Decide what’s most important

In developing a plan I had to make choices about what was most important to me. It was clear that I couldn’t have everything that I had before. And it was equally clear that I could afford the things that mattered most to me, with some adjustments to quality, frequency and portion size.

Adjust

Some adjustments were needed in order for the plan to work. Some were structural adjustments, like downsizing our living space. Others were discretionary adjustments, like brown-bagging lunches instead of buying lunch most days. (read more about structural and discretionary spending here).

It might seem that this would be hard. It definitely took some planning, forethought and follow through. But it wasn’t really so bad, for one simple reason: the changes weren’t being forced upon me. I was choosing to make these changes. I knew these changes were good for me. Plus, I was determined to not go back to my old ways, and without adjustments there was just no way forward.

Make it easy

Sticking to a diet would be easy if you were only exposed to small portions of brown rice and bamboo shoots. But it’s hard when you walk past bakery windows with warm crescent rolls and cinnamon buns beckoning.

I find it hard to stick with a plan when I have to choose to stick with it over, and over again. Once the decision is made, it comes down to follow through. So I made it easier for me to follow through.

I reconfigured my direct deposit. I set up several checking accounts to allow me to better track my structural spending and allow enough (though not much) for a little bit of fun. I set up daily balance reminders on all my accounts. And I set up automatic transfers to delegate my income into the various accounts.  So I never again had to do the math to figure out if I had enough for this or that. I never had to worry whether or not I had enough for given expenses. I knew everything would be paid for before I earned or spent a dime.

Let the plan do the work

With the plan in place, my success or failure to spend less and save more was more a function of the plan than it was my ability or lack thereof to spend and save responsibly. And with my money being allocated automatically to my various obligations, all I had to do was stick to my limits, which at this point were crystal clear.

My responsibility was effectively reduced from my entire paycheck down to my “fun money”. Everything else was taken care of. And I didn’t need to worry any longer!

Wrapping up

Now it may seem like I’ve diverged from my initial topic of “finding strength to save”. What I’ve done though is shown you that it’s not really a matter of strength. It’s much more a matter of coming to grips with reality and plotting a course for success.

The hardest thing in the world to do is to get a person to change their behavior without effective motivation. And when spending is your reward system, taking that away is equivalent to debtors prison. And who wants that?

With a plan in place, you’re not taking away the ability to spend as a means of reward. You’re just changing the context of that spending, and imposing necessary limits. With the plan in place you don’t struggle as much with the question about whether or not the plan is a good idea, or why you decided to use it, or why you have to follow it through. Once the plan is in place, the plan just is. The limits are there and you just have to respect them.

Many personal finance bloggers have shared their story about waking up to the realization that they were on a collision course with financial ruin, and the process they went through to change their relationship with money for the better. Many of them have shared the anxiety they felt until they got on the right track. Many of them have shared the relative suffering they endured as the result of their unhealthy relationship with money.

It may seem that I’m not giving enough significance to the number of choices and the amount of personal change that’s involved in “just respecting” the limits of a spending and saving plan. I’ll simply say this: however bad your relationship is with money, that’s how easy it will be to respect the plan. The worse your relationship with money, the easier it will be to follow through on the plan. The more  suffering and loss of opportunity that you face as the result of a bad relationship with money, the more motivated you will be to never go back to your old ways.

In my case, the transformation was completely life-changing, for the better in every possible sense. I hope you have as healthy a relationship with money as I now have, thanks to the steps I mentioned above.

So what’s your story? Do you need a little motivation from time to time to spend and save responsibly?

I break spending into two camps:  structural spending and discretionary spending.

Structural Spending

Structural spending includes basic care and feeding.

• Rent or mortgage
• Utilities (heat, hot water, electricity and gas)
• Food
• Medicine for chronic illness
• Education for children
• Clothing
• Transportation

These are essential ingredients to daily life. They are necessary, but not sufficient for a generally happy life. They lay the groundwork for all of the things that make life interesting.

Discretionary Spending

Discretionary spending is where all the rest of your money goes.

In the bad-old days, I would have equated discretionary spending with “fun money”. This is wrong. Discretionary spending includes money set aside for short and long-term savings, debt repayment, money set aside for known future expenses, and fun money.

As Side Note About Debt

Did it surprise you that I categorized debt repayment as discretionary spending? If you answered yes, that’s a major red flag.

In many, if not most cases, debt is a choice. At first, debt is something you’re willing to live with. But over time it becomes something that you can’t escape without help.

At that point debt seems like a structural expense. But it’s not, if you’re doing it right. You’re going to need food for the rest of your life. You’re going to need a warm place to live for the rest of your life. Are you planning to live with debts for the rest of your life?

I don’t want to get sidetracked too much onto debt, so just know that in my opinion, debt is a discretionary expense.

The Big Picture

To put structural and discretionary spending into the big picture, we start with our income.

Just imagine your income as a circle. We’re going to cut that circle into two pieces. One piece is structural spending, the other piece is discretionary spending.

Here is what it would look like if we split our total income into half discretionary and half structural spending.

The whole pie represents our income. We’ve allocated our income evenly to structural and discretionary expenses. What would this actually mean in terms of lifestyle?

Could you get by if you allocated your income this way?

Some personal finance gurus recommend this sort of breakdown with the 50/30/20 budget. The 50/30/20 model allocates 50 percent of income toward living expenses, which includes basically everything that I’ve classified as structural expenses. The 20 percent goes to savings. And the 30% goes to all of your “wants”.

Keep in mind that all of these numbers are after taxes.

Tension

The thing to understand is that the circle stays the same size. No matter how much you earn or how much you spend, the size of the circle always stays the same.

The tension between structural and discretionary spending is what determines how we are able to live. If we choose to live in a more expensive house, then the blue side grows, leaving a smaller red side. If we have lots of debt, then  the red side grows, leaving a smaller blue side. The quality of our retirement depends on the size of the red side, because the red side is where our long term savings goes.

Homework

Now, I want you to take some time to think about all of your expenses, including debt repayment, including contributions to short and long term savings as well as donations to charity. Think about how much you spend on fuel for your car, eating out, vacations, preschool tuition, everything.

Write it down.

After you’ve got all your expenses on paper, sort all your expenses into either structural or discretionary categories to answer two questions:

What percentage of your expenses are structural?

What percentage of your expenses are discretionary?

Stay tuned

I’m going to follow up with another post on what money management means in the context of this simple model of expense categorization that I’ve shared with you here. In that post I’ll share more insights and strategies for managing money more effectively to give you enough for everything you want to do.

In the meantime

I would love to hear about what it’s like for you to think about your spending as structural or discretionary. How does it change your perspective on your own money management strategy?

Stay tuned!

This is a defining moment.

Will You Go Back?

Recidivism is a common phenomenon among convicted criminals. Recidivism is when a person is arrested and sent back to prison after being released either on parole or after completing their sentence.

According to Wikipedia:

One of the main reasons why [convicts] find themselves back in jail is because it is difficult for the individual to fit back in with ‘normal’ life. They have to reestablish ties with their family, return to high-risk places and secure formal identification; they often have a poor work history and now have a criminal record to deal with. Many prisoners report being anxious about their release; they are excited about how their life will be different *this time* which does not always end up being the case.

Does this sound familiar?

Without a fundamental change to the way you think about and manage money, simply having money doesn’t change anything.

Mentality and Self

Being broke defines you. You have a reason for not going on nice vacations (where you would form enduring positive memories with your friends and/or family). You have a reason for not investing in your personal appearance. You have an excuse for not engaging in many behaviors which would make you more appealing to other people and possibly more successful. You have an excuse for not doing all the things that financially healthy people enjoy.

Maybe the truth is that you’re just not an interesting person. Maybe you don’t go out and do interesting things because you’re afraid to be around other people. Maybe you don’t go on trips because you just don’t care about what’s out there in the world. Maybe you don’t invest in making yourself more appealing to other people because you don’t feel comfortable being around other people.

But perhaps you’re a wonderful and interesting person trapped by a set of bad habits and lack of knowledge about personal finance and money management. I’d like to believe that I fall into this category.

Being broke gives you an excuse to live with these shortcomings. Having no money enables you (in a backwards sort of way) to perpetuate whatever is keeping you broke. Better yet, you can project all of your shortcomings on everyone else. It’s the big banks that are stealing your money. Or maybe you choose to believe that materialistic people are shallow and less interesting than you are. “They only care about money.”

The truth is that none of those things are true. The world is not out to get you. The banks aren’t trying to destroy you. And past a certain point, how much money you have doesn’t define who you are as a person.

If you’re successful in improving your financial health, and reach a point where you have no debt and have enough savings to endure reasonably adverse unexpected events, then you will have to decide what your future holds.

My Big Day

This day came for me. And when it did, it completely freaked me out. It crept up on me over a series of several weeks. For the first time in my life I had real money in the bank.

For years and years, every time I received a financial windfall, the money went straight to pay off debt, leaving me with nothing. Then my bad money management skills would work me straight back into debt. This cycle repeated over and over.

I eventually got myself on the right track. Years later I had paid off all my debts. Several months later I received a bonus from my employer and received a nice tax refund. That money went into the bank and it stayed there.

For about two months I dove in to learn about investing. I thought that now that I had money in the bank I was on the verge of becoming a zillionaire through savvy investments. I was so eager. I felt that I had accomplished so much. I felt that the hard part was behind me.

Pause

What I realized was that it was more important for me to not go back to the lifestyle of being broke than it was for me to become a zillionaire overnight. I knew that the likelihood of losing money was higher than the likelihood of making money through investments given my relative lack of competitive advantage in the marketplace. I knew that investing was absolutely in my future. And I knew that I wanted to be successful at it. And that meant waiting until the probability of being successful was more in my favor.

Taking time to pause at this turning point was invaluable for me. It gave me time to appreciate what I had accomplished. It gave me time to think about all of the lessons I had learned through my past mistakes. It gave me an opportunity to set new goals and develop plans to achieve those new goals.

The Bottom Line

Money management is a skill like any other. Some people know how to paint in the impressionist style. Some people can drive an 800 horsepower car around a track at 200 miles an hour without crashing. Some people can play the trumpet. Some people can build rockets. Some people can perform brain surgery. Some people can manage money.

Money management is a simple skill that anyone can learn. However, the psychological association between wealth and personal identity is hard to change. And until a person allows him or her self to accumulate wealth, they won’t. They will come up with reason after reason to justify their financial situation, deferring the moment when they have to confront their financial mistakes and admit that their choices have yielded all of the financial abilities and disabilities that they live with.

Final Note

Many people are broke by circumstance, not by (bad) choice or dysfunction. These are not the people I’m talking about. Those who are broke by circumstance need aid more than they need lessons in personal finance. There can be a grey area though between the two groups however. Some financial hardships are caused by lack of planning, knowledge and forethought and are therefore entirely preventable. Others (such as those caused by inherited diseases or injuries caused by an accident) cannot be foreseen and therefore need treatment instead of prevention.

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#7

#6. I’m a big believer in mindset being the key element to breaking free from financial weakness. You have to believe that you can achieve the type of freedom from worry and despair that comes from not having enough. It’s OK to have enough. There are children starving in Africa. Heck, there are children starving right here in the United States. But you won’t be able to help them until you are financially strong. Don’t use how little they have as an excuse to justify how little you have as enough.

So how much is enough? Enough is more than you need but less than you want. That’s the sweet spot.

SavingAdvice.com shared some thoughts on How Rich People Think. Some really good ideas in there. For example “Vaccinate yourself from Either/Or Syndrome”.  You can live a balanced life while earning lots of money. You need to figure out what works for you and then manage yourself and circumstances around you in order to achieve the balance that works for you.

Another great point made in one of the comments on that post is that wealth can take more than one generation to achieve. Perhaps you won’t achieve the level of wealth you’d like to. But if you make good progress, and teach your children all the lessons it took you so long to learn, they have a good chance to do much better than you did. And that’s still a success!

#5. Is your career where you want it to be? Probably not. If it is, that’s awesome! But it won’t stay there forever. Flexo shared 5 Reasons You’re Unhappy With Your Career Progress. Again, this all comes back to mindset and managing your relationships with those around you. Solid stuff Flexo!

#4. Here are some thoughts I had after reading MoneyCrush’s post on Believing Becomes Doing.

Belief and faith (religious and otherwise) is the start of everything worth doing. The difference between the possible and the impossible is just whether or not someone else has yet been able to do it. Once one person does something, then everyone else knows that it’s possible. Those others get their faith from the actions of that first person. But how did that first person know that it was possible? They had faith.

Having faith and believing in something isn’t about being right or wrong. It’s about trying. Without effort and desire, nothing of value can ever be created.

Some incredibly smart people never actually accomplish anything. One reason for this is that they are more interested in having the “right” answers than they are in creating anything. They identify themselves as “being smart”, as though being smart was an accomplishment. Being smart isn’t the achievement, what you’re able to accomplish is the achievement, and being smart is desirable because smart people have greater potential to achieve than others. That said, I think that the idea of being smart is kind of baloney because different people are capable in all sorts of different ways. The ability to recall facts and figures and perform various calculations in your head is only one kind of smart.

The idea is that potential is nothing but raw ingredients. Belief is the recipe. And only when you combine those two with some effort do you get anything worthwhile.

#3. FrugalDad had two awesome posts this week. The first was titled Getting Into Financial Shape with the Decamillionaire Next Door. This was an awesome post which covered three of the ideas that I share with anyone that will listen (thank you readers): the importance of cash flow, the importance of having the right mindset when it comes to money and that how much money you make is less important than what you do with it.

#2. The other post that caught my eye over at FrugalDad was The Issue of Combining Finances. The issue of combining finances is a major one when it comes to couples. But, as FrugalDad mentions in his post, there are lots of ways in which finances can be combined within a relationship, and marriage doesn’t even need to be a part of the equation.

#1. This week’s top spot goes to Amazon.com for yet another phenomenal piece of innovation. As the saying goes, what’s old is new again.

This week Amazon.com released a feature called the Kindle Owners’ Lending library. Each month hundreds of titles are made available to borrow for Kindle owners with Amazon Prime subscriptions. The books are borrowed out for one month. There’s no cost to borrow, and when the month is over the book simply disappears from your library. Thus, no late fees.

This might hurt local libraries. Though I hope not. But the idea is still awesome.

I think this is worth mentioning on a blog about frugality because it makes so much financial sense. A kindle Fire (the top of the line model) costs $199. An Amazon Prime subscription costs $75 for a year. That’s about $300 with taxes. For that I can purchase books on the Kindle for a fraction of the cost of physical books. Then I can borrow books for free. That’s way more than read books-wise, though some people read a lot more, making this a money-saver. Then, Amazon has recently made streaming movies and TV shows available for free to Prime customers. So, while this might not suit everyone, I can cancel my cable (something I did years ago anyway) and still get to watch a ton of the shows I like. I can read more than I’m able to read, for a fraction of the cost. And then with a device like the Kindle Fire, I can do email, browse the web, use apps, play games and everything that I now do on my expensive iPhone, for about half of what I paid for my iPhone. It’s an awesome deal.

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#7.

#6. Making little bets is a strategy which helps me bring about change. Ramit Sethi, from I Will Teach You To Be Rich shared How To Use Little Tests for Big Career Wins this week. It’s a great spin on this basic concept.

Change is scary for many people. And even people that crave change can fail to effectively produce it without a plan and a proven method. Proving, or testing an idea is where good ideas develop into great ideas. Going from generating an idea to testing is a big jump, because you run the risk of finding out that what you thought was your eureka moment, really wasn’t. With testing your idea might prove to be not so great after all.

There’s a lot more to say on this, but it’ll have to wait for another post. For now, read Ramit’s article.

#5. It doesn’t matter how good you are at what you do if you can’t influence others. Flexo agrees, and so does Warren Buffet. Boost Your Human Capital: Public Speaking covers the heart of it in relation to being professionally successful by saying basically that who others think you are is equally, if not more powerful that who you actually are. This might sound superficial. But it’s really not. Suffice it to say that it’s basically the “If a tree falls in the forest, and no one is around to hear it, does it make a sound?” adage. To be a successful person in life and in work be a great person, and share yourself with the world.

#4. Hard work. People talk about it, but what does it really mean? How hard is hard enough? And what about working smarter, not harder? Sometimes working harder than everyone else just means that you’re not doing something right. In my experience, it always seems to pay off in the end. But it’s a double edged sword. If you spend all your time working, then what are you working for? What’s the reward? My college rowing coach once told me that “A life nobly lived is forever chasing the shade tree under which you will never rest.” This week The Simple Dollar has two great articles on the subject of hard work. The Secret Ingredient to Financial and Career Success and The Changing Value of Hard Work are definitely worth a read.

#3. Many people agree that a strong education is an essential ingredient in the recipe for success in work and life. Successful people learn some lessons in school, and others in the school of hard knocks. Personal finance is a topic that should be taught in school. Honestly, if our home and schools are yielding hard working, well-educated people, that’s a great thing. But if those people don’t possess the skills to finance all the wonderful things they’re capable of, they’re going to be unhappy people, and they probably won’t be able to accomplish all of the wonderful things they are otherwise capable of due to lack of funding.

DigeratiLife shares a very well-written article this week titled Should a Personal Finance Be Offered in High School. A strong personal finance curriculum in schools has as much, if not more potential for positive social transformation as any other. I strongly urge you to join in the discussion.

#2. What you learn in school is helpful, but not sufficient to produce a professionally successful individual. In order to successfully apply everything you learned in school you need, well, to learn how to apply everything you learned in school. In med school the mantra is “See one. Do one. Teach one.” The book learning is an assumed pre-requisite. The first step in the sequence basically amounts to mentorship. Connecting the dots, we have a process that amounts to this:

1. Learn everything you can.
2. See how others apply that same knowledge.
3. Develop your ability to successfully apply the knowledge.
4. Teach others to do the same.

A recent post from SavingAdvice.com titled Emulate Someone Who Earns Less Than You: Strange Ways to Save Money. I think looks in the wrong direction, and I want to share a few thoughts on it.

First, it’s not about how much you make. It’s about how much you spend in relation to what you make. The guy who spent $1.3 million on a Bugatti Veyron 16.4 might seem like a bad role model because who really needs a car that can go 253 miles an hour (but only for 12 minutes until it runs out of gas). But if he’s worth 100 million dollars and paid for the car in cash, then he’s been pretty reasonable on balance. He’s still got $98.7 million in the bank. And then there’s Warren Buffet who still lives in the house he bought in 1958 for $31,500. It takes all kinds.

On the other hand, the guy who earns half of what you do, and has devised all sorts of inconvenient, yet clever workarounds for all of the challenges introduced by being broke I would consider a right awful mentor. Sure he or she has all sorts of little tricks to share. But if you’re having trouble making ends meet, or haven’t saved, are living paycheck to paycheck, or consider yourself flat broke, then what you need isn’t a handful of tricks to allow you to eek out a couple dollars here and there. What you need is a complete plan for changing your financial situation. This includes lifestyle changes, like eating lentils and tuna fish more than you’re accustomed to, buying in bulk, brown-bagging lunches or getting comfortable stitching your own clothes. But it can also include lifestyle changes like downsizing your living space, or moving to a neighborhood where housing is cheaper, or sending your kids to public school instead of private.

The point is that lifestyle changes are tactics which are useless without a comprehensive strategy with clearly defined objectives, milestones, incentives and motivation mechanisms, consequences, etc.

Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.

Second, the formula  that allows one person to achieves balance between enjoying the moment and saving for the future isn’t likely to work for most others. Everyone has a different set of priorities, needs, fears and wants. So while one family might consider spending 20% of their income on vacation an indulgence, another family might consider it a top priority. The bottom line is that you can’t adopt other people’s priorities.

I think the biggest reason why people struggle with money is that they try to do what everyone else does instead of deciding what’s important to them and then building a plan to achieve it. There’s no single person out there with all the answers. And even if there was, and they could instantaneously impart all of their knowledge upon you, you still would have questions and would fail to achieve your goals until you made it your top priority to achieve your goals and devised (and proved through testing) a plan that works.

The only path to success, financial or otherwise is the one you create which exists solely to achieve what’s most important to you. And clearly, charity toward others can be your top priority. I’m not saying that you should simply hoard success for yourself.

#1. A Big List of Things to Be Happy About. Because really, what could be better?

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#7

#6. What does it mean when municipalities start filing for bankruptcy? When the government goes bankrupt, who bails them out? And what happens to all of us? I never thought I’d have to ask that question. And I don’t have a good answer. But it’s apparently a reality. I’m not much of a doom and gloom kind of guy. I’m not interested in stirring up fears of a dark financial future in the near future. But this is something to think about.

#5. Successful personal money management is about keeping little expenses from growing into big expenses (like the $1 coffee that costs you $36 because that one charge overdraws your account and incurs an overdraft fee), building resources to accommodate big expenses (like buying a home, unexpected medical procedures, etc.), and financing all the things you want to do in life. In my experience it wasn’t the things I focused on that caused problems. It was always the expenses around the edges of my main expenses like rent, car, education, etc. The difference between your income and expenses is your margin. And if you don’t plan for all the peripheral expenses (with or without a budget), then your margin is what gets eaten up by those expenses. For better or worse, your margin is also your opportunity to really get ahead with savings, investments, etc. David J. Garcia at The Frugality Game did a great job this past week with a video explaining margin. I recommend it. Learning to utilize your marginal funds will make the difference between getting by and getting ahead.

#4. Poverty isn’t something most people would choose. But it is something that many people allow themselves to endure through laziness. It’s absolutely something that can be thrust upon you as the result of fraud or misfortune. But it’s not always someone elses fault that you’re living below the poverty line, or even if you’re just broke (i.e. have no savings or living paycheck to paycheck). To understand more about the causes of poverty and want to know what you can do to protect yourself against it, read 4 Reasons For Poverty.

#3. Needs vs. wants. Can you tell the difference? Many people avoid making the distinction. If you’re in debt or living paycheck to paycheck, refusing to make the distinction is choosing to stay broke. Like getting a shot, taking your medicine, or asking out that man or woman you’ve been flirting with, it’s only scary until you actually do it. Once it’s over, it’s not scary anymore. And after you’ve done it, you’re almost always better off. Take a few minutes to read FreeFromBroke’s comments this week on Turning Monthly Financial Waste into Debt Reduction.

#2. Many people dream of being their own boss. It can be a wonderful, empowering, enriching experience. But if you do it wrong, it can ruin your life. Being the owner means that you’re responsible for everything. Customers and employees takes their cues from you. Having a great product or service isn’t enough. Managing your business to put the odds in your favor in every aspect is the job of a successful business owner. This encompasses everything from providing outstanding service, to having a great product, to keeping cash flow strong to knowing when to say no. The list is long. Thankfully, OutOfDebtAgain put together a great list of 15 Stupid Ways to Run Your Business. Don’t quit your day job before reading this list.

#1. If you’ve been living for a long time without financial freedom you will need to convince yourself that you can achieve it. But all the enthusiasm and conviction in the world won’t produce change without a plan to make it happen for you. There’s no one-size-fits-all plan for financial success. You’ll need to develop a plan that’s a good fit for you. Even developing a plan though requires motivation. So we’re back to motivation. There are only two types of people when it comes to motivation. Some people get up in the morning, early and eager to explore what the world has in store for them that day. Other people lie in bed, repeatedly hitting snooze as long as they possibly can. The first group is motivated by opportunity. The second group is motivated by consequences. Both groups can be successful.When it comes to personal finance, the first group is motivated by maximizing their financial strength. The second group is motivated by fear of being broke. This week Jennifer Derrick from SavingAdvice shared her thoughts on thinking positive. If you’re motivated by opportunity, this should really resonate. If you’re motivated by consequence, this will give you some insight into how the other half lives.

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#6. When it comes to investing, we’ve all heard the “Buy low and sell high” mantra. Well, it doesn’t only apply to investing. And it doesn’t only apply when you’re planning to resell what you buy. This week Jessica Ward shares a great collection of thoughts on bargaining, haggling and generally getting what you want at the price you want. I love it!

#5. Quitting isn’t always a bad thing. Death is part of life. One of my favorite quotes from GetRichSlowly’s article this week titled How to Know When to Quit is “Winners are Strategic Quitters”. It’s a great post. Check it out.

#4. Mindset is really the key to success in anything. Whether it’s financial success, success in your career, or just living life to it’s fullest (however you define that), it all starts with having the right mindset. This week Len Penzo shares 4 Surprising Truths You Must Learn Before You Can Be Rich. In particular I like the point about how costs right now have a different psychological weight than future costs. So true!

#3. No matter what you want in life, if you don’t already have it, you’re going to have to ask someone for something to get it. People like to want. But they don’t like to think through what they would do if they actually had it. They often either wouldn’t know what to do with it, or would have to admit to themselves that they never really wanted it in the first place. It’s a lot easier to blame someone or something else (or the lack thereof) for tough circumstances or unhappiness than it is to just take the chance that someone will say no if you ask for what you need to really change your situation. Well it shouldn’t be. LittleHouseInTheValley shared a great post this week from Ashley at Stock Market Basics on The Power of Asking. Learn how to ask more effectively and get to yes.

#2. Side Hustles. I love them. I’ve always got some sort of project going on. They keep me sharp and I learn a tremendous amount through them. MoneyCrush has her own side hustles. Go MC!

#1. One of the lessons that I’ve learned through my recent study of trading stocks and futures is that money can be made both when price is going up (going “long”) and also when price is going down (going “short”). Some people feel more comfortable with one side or the other. I’ve found it a bit tricky to get used to playing both sides. This week DigeratiLife explains shorting wonderfully. I particularly like her ideas about shorting a stock as a hedge instead of as a purely speculative move.

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