Real World Finance$

I finally did it last Friday.  For the past several months we have done nothing with the daily newspaper.  We pay $15 a month for the paper (Thursday to Sunday), and if it makes it in the house from the porch, it sits in it’s bag for a couple of weeks until I go through them and put them into recycling.  Well, Friday I called and canceled.   As luck would have it, the twice weekly local “free” paper they deliver is also going to a $20 annual subscription starting in November.  So, our lawn will shortly not be cluttered by unwanted newspapers.

I talked to my wife over the weekend after thinking about this for a bit.  That $15 a month adds up to $180 a year.  I realized that we spend a LOT of time watching the local PBS station (we don’t have cable) and listening to the local NPR radio station.  Well, we decided that we will take our saved $180 this year and divide it up between the two.  After all, we had been willingly spending money on news we didn’t want and getting what we did want for free.  We’ve talked about supporting our public broadcasters in the past, but never actually did anything about it.  So, we’ll have that money set aside and ready to give by early next year.  Just our small contribution to pay for what we actually use.

No, not me, it’s my brother.  I got word from him yesterday that everything is official now.  He will be moving to Beijing, China this summer to work for a minimum of 6 months.  The project could go as long as 1-2 years.  He just bought a house and sold his a year or so ago.  It looks like my parents will be moving back from Florida and staying in his house until he returns. 

Now, I’ve mentioned my brother before in one of my posts (Conversation with the brother).  As I said there, he is a very frugal and has always been somewhat stingy with his money.  I wish I had been a bit more like him in that way.

So, here’s a guy who is in his mid, going on late 30’s, not married a house with lots of equity and quite a bit of savings and retirement.  He’s doing very well for himself.  He’s getting shipped off to another country to work for a while.  The package is including a significant raise during  the time of the assignment (he said something along the lines of 30%), paid housing while he’s there and per diem money for food and expenses. 

Knowing him, he will be making money on the per diem alone and will have nothing to pay with his increased salary but his mortgage back home (the parents will be paying for the utilities and upkeep).  If he gets extended out for a full year or more, he will also have some significant tax savings as well.  If I also know my brother, he will come back home and probably almost able to pay off his house if he felt like it.  I don’t see him doing that, but I know he will have a TON of savings and some new retirement accounts open by then.  Guess he’ll be well on his way to retiring at 50 if he feels like it.

I was walking to the cafeteria at work the other day when I overheard a conversation by a couple of mid-twentysomethings. 

“Would you rather take 10, $1,000 vacations to Vegas or 1, $10,000 vacation?”

Seems to be a pretty interesting proposition doesn’t it?  If you assume that you would save the money from not going on smaller trips and stash that away for a larger trip, it becomes more interesting.

While to me, the idea of having a $10,000 Vegas vacation just seems so not worth it, but I know others would enjoy that sort of thing.  So, think of wherever you like to go on vacation and use the same logic.  For me, taking a vacation is the important thing.  I can be frugal in order to not go overboard and I still have fun getting away.  It’s not the excitement of doing all kinds of stuff in one trip that makes the memory.  I’d rather have lots of little memories and do things gradually over time.

The two who were talking were a bit the other way.  They seemed to think the big, grand vacation would be more fun.  The thought of staying the finest hotel and getting every good thing they wanted for a week was worth not having the other experiences. 

If you ask me, wasting money on a really nice hotel room doesn’t make my experience that much better that I would give up 9 other trips to get it.  Why is it that some people are so drawn to the “Luxury” item mystique?  What makes those items so much more valuable than others? 

I’ve stayed in $300+ a night hotel rooms on business.  To be honest, I didn’t get any more use or satisfaction out of it than I would have gotten if I had stayed in a $100 a night room at the hotel next door. 

A recent article on CNN money touts four ways to Fool Yourself into Saving Smarter.  Here are their 4 methods with my own explanations:

• Put it on Autopilot - This includes automatic 401(k) deductions as well as setting up your own automatic withdraws to savings or investment accounts.
• Reward Yourself - Give yourself a treat if you meet your savings goal.  People use this kind of thing for losing weight, so why not try it with savings.  Seems a bit odd at first to buy something if you manage to save a certain amount of money, but if done right it could definitely give you the motivation to get started.  I wouldn’t recommend it long term though.
• Wield a Stick- Just the opposite of the last one.  If you respond better to negative reinforcement just punish yourself for not reaching your savings goal.  They also mention a website called stickk.com that will make automatic payments for you for not reaching your goals.  Their example was say an automatic $100 contribution to the NRA for an anti-gun person if they don’t make a weight loss goal.  How about that for some motivation?
• Invest in a Roth- I don’t know that this one is really a fourth option, it sounds a lot like the first one to me.  They encourage investing your tax savings from pre-tax 401(k) contributions into a Roth IRA.  So, if you would have had to make $13,000 to put $10,000 in an after tax Roth, put 10,000 in your 401(k) pre-tax, save the 3,000 in taxes and put that amount into your after tax Roth.

In a way, I’m doing this at home as well.  Not only am I contributing to my 401(k) plan, but with our new checking accounts, I only have direct access to the money that we are allowed to spend.  The rest is stocked away in our other checking and savings accounts to pay bills and earn interest.  The automatic thing is the best method for me.  Putting the money aside and away from me up front is helping me to live within my means.