Living Frugally: Try Leaving Your Wallet at Home

RS Living FrugallyTaz Bright helms this series. Taz is a father, speaker, long-time business owner and graduate of the school of hard-knocks. Taz uses his past business and personal finance experience to help steer others in a positive financial direction while, hopefully, avoiding the mistakes he’s made along the way. As a former 6-year victim of Identity Theft, Taz shares unique lessons learned while trying to regain his financial footing. Taz is a member of Toastmasters International, a martial artist, former bodyguard and a CrossFit athlete. As the owner of Bright Balance Ministries, Taz’s goal is to help as many people as possible reach long-term, solid financial stability.

The other day I left home to run a few errands. While out I got a little hungry and decided I’d grab a snack. While walking into a convenience store and felt my pocket to be sure my wallet was there.

It wasn’t.

A picture of my wallet flashed in my head: Sitting on the bedroom shelves next to the Xbox. I left the store just as hungry as when I arrived. It was then that a few things struck me.

First, I wasn’t all that hungry. I’m one of those vegan, all-organic, 6-meals-a-day, CrossFit-trained guys. I can (& do) eat a lot and prefer to never skip meals. The slightest growling of my stomach and I’m searching for sustenance: vendors selling fruits on the side of the road are a favorite and the new Vegan smoothies at Smoothie King are always tempting. And Ooooh veggie rolls … mmm, I’ll take six please.

See what’s happening here? I’m not really hungry, I’m just enticed by the thought of enjoying great-tasting, healthy foods. I imagine the flavors, textures and even the temperatures in my mouth. It’s the anticipation created by my imagination that makes me feel I’m hungry. In other words, it’s make-believe. (Enter Mr. Rogers.)

If you’re like me you have to resist against this make-believe hunger or your very real wallet and bank account will suffer. On this particular day I was very happy I didn’t have my wallet with me. I completed my errands and made a really good sandwich when I got home: Freshly baked bread; sautéed mushrooms, onions and peppers, a little kale, spinach, almond cheese slices & mustard. Cost: $0.00. Being frugal tastes sooooooo good.

Second, I didn’t spend unnecessarily. I didn’t do it on purpose but not having my wallet was very freeing and it kept my bank account from losing a few dollars. There was no feeling of regret — “Man I wasn’t supposed to spend that money, now I have less to (fill in your blank).” Instead, I thought I should do this more often. In my head I calculated what I would have spent for a bottle of water, a banana and an apple.

I then looked at my budget for the next few weeks and decided I could transfer that total to my Scottrade account. After all, if I had it to spend I had it to invest, right? This allowed me a few more dollars toward creating assets instead of throwing money out the window. Moving this money into my Scottrade account is an act of discipline which helped me remember impulse buying isn’t an option. If I step outside my spending plan and find myself in the convenience store or at a fruit stand, I need to pay the price for lack of a better phrase. This will keep me focused and help me build my asset holdings. That’s a win-win situation.

Keep in mind, I’m not encouraging you to leave your license at home. If a police officer asks for identification you should be ready at all times. But do we really need all our credit/debit cards every time we leave the house? No we don’t. Once all your bills have been paid, you’ve added to your savings and donated to charities, pull your cards out of your wallet and place them in a secure place in your house. This way when the craving for that PS4 game hits or those new shoes beckon you or the bin of pre-owned movies whispers sweet nothings in your ear you can respond with, “Sorry guys my money is, thankfully, at home” and walk away victorious.

Third, forgetting my wallet forced me to be disciplined. I felt very accomplished having stuck with my budget and spending plan. Although it wasn’t planned discipline, forced discipline worked just as well. Being frugal, as mentioned before, is very much a discipline and skill. It’s not about a magic formula or being cheap. As the saying goes, “Begin with the end in mind.”

The frugal life is about choosing to enter the future on solid financial ground so that when economic earthquakes hit we are not washed away in the inevitable landslides or swallowed up by sink holes. We must keep in mind that there are forces and powers in place which have heavy influence over the economy we take part in. Laws are passed and deals are made daily which affect us. We’re not invited to the meetings where papers are signed concerning our way of life but we are subject to the results none-the-less. What we can do is create a cushion against the things we cannot control. It’s up to us to grab hold of our finances, our habits and desires and steer them in a positive direction in preperation for rough times. Save when times are good so you can spend when times are rough.

Stay Frugal!

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Income Funds

During the course of previous discussions, we have identified three general stages in an individual’s investment life-cycle: building a fiscal foundation (conducted during your 20s and 30s), accumulating wealth (occurring between the early 40s and mid-50s), and pre-retirement, the five-year period prior to your desired retirement age. During the pre-retirement stage, debt is eliminated and a plan – considering the withdrawal rate (e.g. the 4% rule) and the order of withdrawal from the various retirement accounts – to draw down the retirement nest-egg is developed.

Retirement IncomeWith a sufficient nest-egg in place, debt eliminated, and an understanding that the nest-egg has to be drawn down in a manner to ensure that it will last 30+ years if necessary, the question then becomes, “how can I turn my retirement savings into a reliable retirement income and what type of investments should be held during the retirement period?”

One potential option are income funds. These types of funds are geared toward individuals already in or entering retirement. As the name suggests, an income fund is a type of mutual fund that emphasizes current income, either on a monthly or quarterly basis.

Develop Your Withdrawal Plan [RetirementSavvy]

Unlike growth funds, which focus more on capital appreciation – normally accompanied by above-average risk and volatility – income funds tend to utilize a more conservative asset allocation strategy. These funds attempt to meet the objective of providing steady income throughout retirement by holding some combination of government, municipal, and corporate debt obligations, preferred stock, money market instruments, and dividend-paying stocks.

As with any mutual fund, a thorough reading of the prospectus should take place before deciding on a particular fund(s). Key factors to consider include ensuring that there is no load associated with the fund and the expense ratio is less than 1%.

In a later SavvyDiscussion, we will look at annuities as options for reliable retirement income.

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Stronger – A SavvyReview and Giveaway

Interestingly, the authors of Stronger: Develop the Resilience You Need to Succeed bring together three diverse backgrounds. George Everly Jr., Ph.D., is a founding father of modern stress management and a pioneer in the field of human resilience; Douglas Strouse, Ph.D., is the Managing Partner of an international management consulting firm and a recognized expert on business resilience; and Dennis McCormack, Ph.D., is one of the original Navy SEALS and pioneered SEAL combat doctrine and tactics in Vietnam.

Stronger - Book CoverImmediately after receiving the book I read the Forward by George Worthington, a retired Rear Admiral and Navy SEAL, and my interest was piqued when he noted the author’s definition of resilience. The succinct definition, the ability to adapt to or rebound from adversity, works well for me. Moreover, they identify five core factors to achieving personal resilience, which they refer to as psychological body armor: active optimism, decisive action, moral compass, relentless tenacity and interpersonal support. Good stuff.

As might be expected, the book’s first five chapters correspond to the aforementioned core factors. The book’s sixth, and final, chapter discusses lessons learned about human resiliency.

A nice feature of the book are the self-assessments and homework assignments spread throughout the book. Instead of just reading about becoming stronger and building resiliency, the authors provide mechanisms for readers to be more engaged in the process.

While the tendency might to associate resilience as only being a requirement for high stress professions such as police officers, emergency medical personnel, athletes or military personnel, investors can benefit from understanding and developing the five core factors.

Will believing in yourself and your purpose – securing your family’s financial future – serve you well? Absolutely. Will there be times when decisive action (e.g. immediately buying a stock, selling a mutual fund) is required? No doubt. Why are you investing and how are you going about it? If you lack guiding principles as you build wealth, it will be easy to get lost along the way. Will you fail at times and will some decisions lead to losses? Of that you can be certain. Being tenacious, perhaps even more so after a failure, is absolutely necessary. And finally, can you do it alone? Nope. As I have discussed previously, building family wealth requires communication, teamwork and mutual support. I highly recommend this book as the information and lessons contained within will benefit readers in their pursuit of any endeavor, financial or otherwise.

Recommendations II - Read More

I will be giving away a complimentary hardcover copy of the book to a reader. The winner will be randomly selected from those who leave a comment. For those readers not fortunate enough to receive the complimentary copy, Stronger: Develop the Resilience You Need to Succeed is available at Amazon in Kindle, Audible and Hardcover formats.

The Giveaway will end, and the winner selected, at 12:00 p.m. (EDT) on Sunday, August 30th.

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A Challenge for Men and Women

All of us know that women tend to outlive men. A compilation of life expectancy lists – from the World Health Organization, the United Nations, the Global Burden of Disease Study and the CIA – on Wikipedia show the age breakdowns for what I assume is every, or nearly every, country. While there may be one or two countries where men outlive women on average, I do not recall seeing one on my scroll through all four lists.

Life Expectancy Lists

What does this mean in the context of personal finance? It means that most women will spend the last few years of their lives without a partner and solely responsible for managing their finances. Perhaps I am mistaken – and it wouldn’t be the first time – but my experience has been that men are generally more comfortable dealing with financial matters and in fact, are more likely to be responsible for managing household finances. (It is entirely possible it is a generational thing … I say this as a Gen Xer and child of Boomers.) Millennial ladies, if I am way off base, feel free to chastise me! If anyone can share a link to a good survey/study on the question of ‘who tends to manage household finances?’ that would be great.

Two recent events have brought this thought to the forefront of my mind, hence this post. First, my father passed away last month, meaning that in addition to a change in my mother’s household income, she has to be more attuned to managing her near (daily) and long-term finances. Fortunately, at least I believe fortunately, she has me to assist. The second was driving to work this morning. As I pulled out of my driveway and headed down my street, I saw a recently widowed – her husband passed about a year ago – neighbor out picking up the morning paper; and just as I finished waving to her, I spotted and waved to a second neighbor – who has lived alone for as long (seven years) as my wife and I have lived in our home – walking her dog. I would guess both women are in their mid-60s.

Seeing both women, and thinking of my mother (70) who lives a few blocks away, I was struck by the fact that these three women are managing their own money (or have made arrangements for someone else to manage it) and I wondered how that is working for them. While I am well aware of my mother’s status, of course I have no idea how these other two ladies are managing their money and their comfort level with doing it.

The challenges? If you are a man who prides himself on learning about personal finance and have the primary responsibility for managing your family’s finances, not only include your wife in your planning, take the time to help each of the ladies (wife, daughter, granddaughter, sister, mother, mother-in-law, nieces) in your life learn more about personal finance and become more comfortable with money management. The odds are that in their later lives there will be a period when they have sole decision-making responsibility.

If you are a woman with a significant other, and you are not intimately involved in your household’s financial planning, start improving your financial literacy today and get involved in your household’s planning today. Your future self will thank you.

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