Author: Johnny Moneyseed

How to Act Like a Human Being During the Holidays

1. Holiday traffic is a nightmare. Plan ahead.

It’s 2013 and we’re an advanced civilization, yet 99% of travelers tend to hit the highways and airports at the exact same time. There has to be a better way. Why not try an alternate mode of transportation this year like a Greyhound Bus, or the Amtrak? One is a traffic reducer, and the other is traffic-evader.

If you choose to drive your POV across the country, state or county, try to time your driving against the other 100 million drivers. Depart a couple days earlier? Take the trip home a couple days later? I highly recommend using the Waze app on your Android/iPhone. It will get you to your destination in the fastest manner possible.

2. Don’t fight over electronics in Walmart (no matter how inexpensive they are).

There isn’t a TV on this planet priced low enough that it would be worth a night in jail.

3. Avoid shopping during big sales.

Obviously, being a frugal-minded individual, you prefer to buy stuff on the cheap — BUT — big sales lead to bigger than anticipated purchases. You might walk into Best Buy looking for a cheap TV and walk out with a new cell phone, some Blu-Rays, and a new oven.

This time of year EVERYTHING is on sale, so it’s hard to avoid the temptation to buy all new stuff. How about blocking yourself from visiting Amazon.com, and limiting mall and department store trips down to zero as well. Sales are intended to get you to spend more money.

The super-low priced products are used as bait to get you into the door. Choose to not bite.

4. Stay away from crowded areas.

With crowds comes stress. With crowds also comes enormous lines (which are even more stressful). When you’re forced to stand in a line for any long period of time you’re prolonging your exposure to the goods and products that surround you.

The crowded mall food court starts to smell delicious, and before you know if you’re spending $20 on lunch which only adds to the spending you’re at the mall for in the first place.

5. DIY gifts can be super affordable and totally awesome.

Unfortunately, the masses have been conditioned to purchase all of their gifts pre-assembled. It can be a huge time saver to hit the mall, grab a few things, and be done shopping for the year like it’s some kind of chore. Or you can create stuff for your friends and family that is completely badass and insanely inexpensive.

Check out this photo pin-board my wife made recently for less than $20. Yeah it took a little bit longer to physically make it, but she didn’t have to battle her way through the mall to purchase it either.

6. Remember books?! They, too, make great presents.

When I was a kid I loved getting books as gifts. Then, when I was a angsty teenager I hated it. Then, I became an adult and I began loving books again. They make the perfect gift, because they’re fairly inexpensive and they can be entertaining, educational, or spiritual. Whatever the recipient is into.

You can pick up used books at thrift stores for $1 or less. Sometimes you’ll find a gem of a book, and it will be in GREAT condition, and it will come to $1.06 after tax. How’s that for a great, cost-efficient gift?

You could even print out every Johnny Moneyseed article ever. Bind them. Put a sweet cover on it. And give it as a gift. Holy shit — that’s nearly a free gift and it’s amazing.

7. Less is more when decorating your house.

You may have recently watched National Lampoon’s Christmas Vacation, but hopefully you weren’t inspired to have the brightest Griswold-style house on the block this year.

There are many reasons to keep your holiday decor to a minimum:

  • The more lights you have the more electricity you will use which will lead to a bigger than normal energy bill.
  • The more things you have plugged, the higher the risk that you’ll burn your house down.
  • It costs a lot of money to buy a ton of decorations.
  • AND, your house probably just looks tacky if you load it with tons of lights and giant blow-up characters.

8. Keep drinking to a minimum (level of intoxication).

95% of the people that read Johnny Moneyseed love to drink alcohol — in moderation. Personally, I love a great craft beer or 5. But, when you’re hanging out with people you haven’t seen in a while a few drinks could end up in an impromptu wrestling match, or countless other bad decisions.

While we all love a good excuse to throw a few back, leave it at a few and don’t end up in jail for the New Year.

9. Don’t buy people shit unless they asked for it specifically.

Starting on December 26th, millions of people will be heading back to the malls with gift receipts in hand, for the purpose of getting rid of the crap they didn’t want.

Why enable this behavior? You’re going to avoid the mall in the first place, so it would be fair if no one else had to head to the mall to return stuff either. This is pretty easily avoided by getting people stuff that they actually want.

10. Gift cards are garbage.

I need to set the record straight on this. Why the hell would you ever buy someone a gift card? It’s like giving them money that they can only spend in one place.

It doesn’t mean that you want them to be able to pick out whatever they want, or even that you understand where they like to shop. It means that you’re lazy, have absolutely no creativity, and you just feel bad giving someone cash for whatever reason. Just give them the damn cash!

11. Set a limit on gift buying. and DON’T buy yourself ANYTHING.

I’ve seen it on Twitter and Facebook multiple times already “I went to the mall to buy gifts and ended up buying myself a few things. That’s okay right?” NO, IT’S NOT! Well, it is if you absolutely NEED something, but unplanned purchases typically fall into the ‘want’ category and should be avoided at all costs.

Without creating an upper-limit for holiday spending, gift buying can add up very quickly. With $200 you should be able to buy gifts for 10-20 people easily.

12. Great deals and saving are NOT the same thing.

Keep in mind that if you spend money of any kind, you essentially aren’t saving any money. You’re spending less than you normally would typically, but in no way are you saving anything.

Marketers have done their best over the years to make you feel like a good sale is extra money in your pocket, but this idea is complete lunacy.

13. Craigslist will be loaded with actual deals starting on December 26th.

Something magical happens right after a few hundred million Americans exchange gifts with each other. Tons of those people need to make room for the new stuff by getting rid of the old stuff.

You can find cheap appliances of all kinds, TVs, electronics, cell phones, games, etc. Pretty much everything you actually want is going to be on an instant fire sale, so set your Craigslist alerts and make sure you have a friend with a truck on standby.

14. Be grateful for what you do have.

Thanksgiving isn’t the only time of year that you need to be thankful of what you have. It should be an ongoing process, and shouldn’t be influenced by what you don’t have.

If you don’t receive the thing you really want, reflect on all of the things in your life that you do have. Think about the kids in Third World countries that have absolutely nothing. Think about your family. And, just think about how great the holidays really are.

17 Things That Will Push You From Middle Class To First Class

1. Learn the ins and outs of the US tax system.

The tax code may be one of the most boring and complex collections of documents in the history of the world. But — hidden under all of the Washingtonian lawyer jargon is some extremely valuable information. Information that could shave years off of your working career.

Have you ever heard of tax hacking? Traditional to Roth conversions? The fact that if you make less than $19,500 a year you don’t have to pay taxes whatsoever?? A tax-free life sounds pretty First Class to me.

Luckily there are actual human beings out there that have translated the cryptic tax hieroglyphs into human-readable format.

2. Own vs. Rent doesn’t matter. Size and function do.

There are advantages and disadvantages to owning AND renting. Equity vs. Mobility. DIY vs. Landlords. I know wealthy people that love being homeowners and others that have chosen to never settle in one place. Semantics!

What does matter is the size of your dwelling, and it’s intended purpose. Generally, the more space you require, the more it’s going to cost and the more it’s going to cost to insure. The bigger the place, the more you’ll feel inclined to fill it with unnecessary stuff.

Only buy/rent as much as you actually need and feel the added benefit of an increased positive cash flow. For example, we downsized our house which saves us around $16,500 every year.

3. Eat food that’s good AND good for you.

Food that’s actually good for you never tastes good, right? Once upon a time this might have been true, but the Internet tells us otherwise.

Vegan food can be delicious. Carb-free diets can be delicious. Healthy snacks like fruit, nuts and avocados ARE delicious naturally.

There are entire websites dedicated to providing healthy eating tips and recipes for creating amazing, delicious, good-for-your-body food. Feel free to leave other great health food blogs in the comments.

4. Do something about those love handles.

The most exercise that the average person gets on a daily basis is the walk to and from their car. It’s insanity! What are you doing in line for the elevator when it only takes about 2 minutes to climb 20 flights of stairs!? Exercise whenever the opportunity arises.

Make walking, biking, swimming, and general aerobic exercise a staple in your day-to-day life. Got a few minutes? Do some pushups, lunges, sit-ups or planks. Staying physically healthy significantly reduces the chances of medical treatment, ie. reduced health-care costs.

The easiest way to a long, happy, hip-replacement-free life is staying in shape.

5. Challenge yourself. Set goals. Plan.

When I started this site my intention was to be able to retire within a 7 year period, by age 35. As time went on my cash flow has significantly increased, and my plans have been accelerated more than I could have imagined.

What type of voodoo sorcery pushed me toward success? The simple application of goal-setting.

Create a plan for the next year, next 5 years, 10 years, 20 years. Once you write out a finite list of things that you want to accomplish, and make those goals a priority, you’ll find that you’ll become unstoppable.

6. Stop watching, start reading.

At what point in human history did “unwinding” turn into watching TV for 4-5 hours every night?

Call your telecomm company and remove cable from your account. You have better things to do with your time that are going to empower you in ways that the CBS Fall Lineup can’t. Plus, you’ll save about $900/year — so let them charge you a damn cancellation fee — who cares!

Figure out what your passions are, and start reading about them. There are self-help books about everything from sewing to learning how to master your finances.

7. Avoid small thinking AKA excuses and complaints.

I can’t tell you how many times I’ve heard people talking about the “Government Shutdown”, the “Fiscal Cliff”, “Obamacare”, or countless other Capital Hill talking points. These people have been trained to think that it helps to be informed about the latest crisis-of-the-day in Washington.

They complain about new policies that may or may not be in effect. And they stress out about the “what-ifs”.  They also think that their paychecks are under attack by taxes, but don’t realize that we currently paying the lowest taxes in US history!

Choosing to ignore political chatter will put you on the fast track to a First Class lifestyle. No one likes hearing other people complain. Especially about politics, so why join the conversation in the first place?

8. Mock convenience. The hard road is much more satisfying.

America is the convenience capital of the world. From the fact that almost everyone in the country has the following items: A cell phone, a car, access to clean water and toilets, and at least one convenience store or Wal-Mart within a 5-mile radius.

Why are we so obsessed with convenience? It’s because we’re fuckin’ lazy!

Your mission here is simple: Never step foot inside another convenience store, for any reason, ever. That includes Wal-Mart.

9. Optimize constantly.

No matter how hard you try, you will NEVER have the perfect budget. That doesn’t mean we shouldn’t strive for perfection though.

I try to optimize my family’s spending every single month. There’s always at least one category that needs our immediate attention. Anything from eating out to electricity usage to grocery spending is fair game. Not once have I ever had a perfect month, but we continuously try to improve where we lack.

Pare down your spending in all major categories, then focus on the categories that fluctuate the most from month-to-month. They’ll be easy to spot, and when you’re constantly thinking about optimization, your spending in these categories will nearly disappear.

10. Keep job related costs to a minimum.

Here’s the logic: You go to work to get paid, so any money that you spend on/at work reduces your pay by exactly that much. A $10 lunch 5 days a week isn’t just a $50 credit card payment, it’s $50 you had to spend when you were supposed to be EARNING money.

Thankfully, it’s really easy to counter this type of blatant wasteful spending. Here are a few ways to reduce the cost of being employed:

  • Bring your own lunch to work. No seriously, this saves so much money it isn’t even funny.
  • Bring a coffee pot to work and use it. Why tempt yourself into buying coffee on the way to work?
  • Keep a bunch of snacks in a cabinet at work. Peanuts, cans of tuna fish, whatever.
  • Carpool. Ride a bike. Rideshare. Public transportation. Stop driving a 2-ton vehicle to move your less than 300 pound body.

11. Buy used, refurbished, or last year’s model.

A great way to avoid the typical Middle Class lifestyle is to stop allowing advertisers to fill your heads with wants and desires that you don’t actually care about (this is another reason why ditching cable is a great thing).

I buy everything used or refurbished. Last year we were able to score a brand-new-to-us yet refurbished vacuum cleaner from Amazon, and we paid half-price. It works exactly like a brand-new product should.

Everything from furniture to electronics to books can be purchased second hand or refurbished. Why would you ever spend more money on something you could get cheaper? If you’re in the market for “new” stuff try typing in “refurbished” after your search term at Amazon. Or just go to Google and type “yard sales”.

12. Upgrade your cell service by “downgrading”.

For the past 15 years cell phones’ services and capabilities have increased at a logarithmic rate. Which means that newer cell phones really aren’t all that impressive anymore. Even Apple, the frontrunner, hasn’t done very much with its flagship iPhone over the past couple years.

So what happens when consumers are satisfied with the current array of top-tier devices? Anyone!?

This is when the cell phone providers have to do something different to attract customers — ie, drop the month-to-month cost of the standard bill.

Companies like Republic Wireless have taken this model to a whole different level. They’re offering a no-contract top-tier phone with unlimited everything for HALF-PRICE with plans starting at $5 that range up to $40 per month depending on features. While you might be leaving your big name provider, you’ll be able to keep up to $80/month every month by “downgrading”.

13. Embrace frugality.

It’s cool to be frugal these days. Seriously. Try posting the words “I just saved $50 at the grocery store” to Facebook and see how many ‘likes’ you get.

My mom (a Baby Boomer) got a lot of her clothes from Goodwill when she was younger and it was horribly embarrassing for her. Second hand clothes used to be ugly, but now they’re awesome.

And saving money is cool again, so you can show off your “new” threads and brag about the price you bought them for. It’s a best time ever to be a consumer!

14. Collect memories instead of stuff/things/junk.

One easy way to live a First Class life is to shift your value system — from caring about having stuff to caring about having experiences.

Oftentimes, people dream about travelling during retirement. Yet they spend their entire working careers buying more and more stuff. Wasteful spending is the reason why many people have to work into their 70s, and the reason they don’t get to travel while they’re still working.

When you’re on your deathbed, you’ll think about all of the things you DID in your life rather than the things you HAD. A significant reduction in spending can help to pad your “vacation savings” enough to be able to travel at least once per year. Internationally, if you do well enough!

15. Buy for life, not for the moment.

When my wife and I got married we bought a house and some basic tools…at Target. Needless to say, the tools didn’t last more than 6 months. At which point, we were forced to buy replacements.

They sell power drills at Target for $25 and at Home Depot for $100. You can imagine the dilemma. Do I spend less money for something that I know won’t last another 6 months OR do I spend the big money ONCE?

This question needs to be asked whenever you’re about to make ANY purchase. Do you want something kinda shitty for less, or something that’s a little more expensive but could possibly last forever?

16. Keep your car running for 200,000 miles (at least).

Financed vehicles cost as much (if not more) annually than the places we live. Yet, when our vehicles start to “get old” and have “high mileage” we trade them in for a new car payment and more insurance.

Your car is a 2009 with 85k miles on it?? That’s practically BRAND NEW!

Have you ever heard of a Haynes Manual? They teach you how to fix ANYTHING on a car. They make them for every make and model vehicle from Chevy to Ford to Qingpi. They’re like $20 and will pay for themselves a million times over if you can keep your car running for the next decade.

17. Build and maintain relationships that make you happy.

If you asked a million people what they wanted in life the most common answer would be “to be happy”. While happiness can only be achieved by individuals, it’s always nice to have a little bit of help from our friends.

Surrounding yourself with people that have a positive impact on your life and distancing yourself from those that drag you down can be very empowering.

It doesn’t take any money whatsoever to be happy. Achieving happiness is the only thing you need to live a First Class life.

How to be a foodie on $75 a week

Today I’d like to introduce a friend of mine named Anne. She’s a foodie blogger who currently lives in the Windy City of Chicago.

Since this site is about saving money and retiring early I challenged Anne to maintain her foodie status, but in the confines of $75/week.

If you have ever read my blog, you will know that food– both the restaurant and homemade varieties– is a big part of my life. You may even call it a passion.

I consider myself to be pretty money-conscious, as a general rule. I was raised by hardworking parents that started their married life (and our family) without a whole lot of money, so the principles of budgeting, saving, and worth vs. value have been instilled in me from a young age. My husband and I have both been laid off (twice each) over the past 5 years. We have since bounced back and are frantically trying to save up enough money to buy our first home so that we can start a family– not an easy task on two modest incomes in downtown Chicago. Living in a city known for its amazing restaurant scene and its amazingly high taxes, we do all that we can to keep our cost of living on the low side: limit our dining out, cutting coupons, cooking at home…

Even so, when Johnny Moneyseed challenged me to be a foodie on $75/week I realized I had no idea what a REAL food budget actually looked like. This challenge was a big wake up call for me and a really great exercise in learning how to budget, plan, and cook effectively– and to still be able to enjoy what we are eating!

Today I want to share a few of the biggest takeaways that I learned in this challenge. But before I do that, here’s how the whole thing transpired:

I first got to work on meticulously planning out a menu for the week with a corresponding shopping list. Staying within JM’s budget constraints was tricky, but I did make it work. In total, I spent $87.61 on groceries for the week. However, a lot of of the items that I purchased weren’t used in full during that week and could be frozen or used in meals the next week. After doing some nerdy calculations about how much of each item I actually used during the challenge week, the grand total came out to be $69.82 spent.

One other caveat to mention: I did not include what I consider to be pantry staples in my budget. These are items that I think most home cooks have on hand to use on a regular basis: oils, vinegars, butter, salt, pepper, and dry herbs. I didn’t use anything too out of the ordinary in terms of seasonings this week– just the basics like garlic, oregano, basil, parsley. If I were to have used something a little more obscure that you’re not likely to have on hand then I would have included that in the budget.

I’ll be posting some of the dinner recipes from this challenge week on my blog!

How to be a Foodie on $75/Week:

  1. Plan, plan, plan! Even before this challenge, I have always planned out a weekly menu and shopping list before heading to the grocery store on the weekends. It’s a great way to keep yourself from buying too many items that you won’t need or that will go bad before you can use them. It will also keep you sane at the store and when you come home from work– you already know what you’re making that night, so there is no guesswork involved.

I also recommend using your grocery store’s circular as the basis for planning your meals. For the challenge week, I found my store’s circular online and noted that chicken breasts were buy one get one free and that pork chops, potatoes, tomatoes, broccoli, and a few other items were on sale that week. I added them to my list and started creating meals around those ingredients. It’s a great way to keep your costs down and because sales change each week, it will also add some variety to your dinners week to week.

  1. Shop with coupons and look for unexpected deals. I’m not suggesting extreme couponing, but coupons are a great way to shred a few dollars off of your grocery bill without a lot of extra work. My store, for example, sends a $5 off purchases of $50+ coupon to me in the mail each week. That’s a big deal– especially when you’re working with $75/week! Additionally, about every other week I go to coupons.com and check for new coupons on products I use. You just print them off and take them to store and it’s an easy way to score some additional savings.

This challenge also taught me to look for deals where a foodie like myself may not always be looking. Buying generic products when possible, for example, is a great way to save some money. I’ll be honest that I don’t do it for everything, but for staple items like milk and cheese, I bought the store brand this week, saved some money, and didn’t notice a difference. And don’t forget the day old bread shelf! I’m a bit of a bread snob, and I found some great discounted (and still good) take-and-bake Telera deli rolls there.

  1. Find multiple uses for the same ingredient. This step is key for avoiding food (and money) waste– and boredom. Nobody wants to eat the same thing for dinner every night, no matter how much money it saves you. This week I made a big batch of BBQ chicken in my slow cooker, which became sandwiches one night and then a topping for Irish Nachos later in the week. And I only needed a little bit of heavy cream for theFried Eggs with Rajas recipe, but knew I would have some left over so it was incorporated into the tomato cream sauce for our spaghetti and then whisked into the omelets we had on Sunday morning.
  2. Meatless Monday may be cliche, but it works. It doesn’t have to be Monday, but it is true– going meatless is good for your body and for your wallet too. Even the cheapest cuts of meat can be expensive (and then they can be difficult to cook). Instead, use other ingredients like cheese, eggs, legumes, or squash to add some heartiness to your meal. You’ll notice in our meal plan that we enjoyed a few meatless dinners like Fried Eggs with Rajas and a Baked Spaghetti Squash. I could go meatless everyday, but my husband would disagree. I have to say, however, that he cleaned his plate after both meals so I think we are on to something with these recipes!
  3. Buy seasonal ingredients — or grow your own (if possible). Cooking with seasonal ingredients is a great way to save money because produce that is in season is abundant and doesn’t have to travel as far to get to your store. These items are easy to spot when you’re shopping because they are typically on sale and prominently displayed in the front or center of your produce section. The other huge benefit of using seasonal produce is that food tastes best when it is in season.

And if you have the space, patience, and the green thumb then growing your own fruits and veggies is about the cheapest and most convenient way to enjoy fresh produce. I live in a downtown loft and don’t have the luxury of growing a full garden. However, I love to cook with fresh herbs (and that’s some of the priciest produce of all!) so I have planted a few window boxes on my little deck and just snip and cook with them whenever I need them. I don’t have to buy an entire bunch of parsley when I only need 2 tablespoons for a recipe and I don’t have to worry about a $4 package of herbs going bad in my fridge before I can use them all. At the end of the season before it started to get really cold, I picked all my herbs, chopped them up, and then froze them in an ice cube tray filled with olive oil so that I can cook with fresh herbs all winter too.

  1. Use online deals and loyalty programs when dining out. If we are being completely realistic here I can tell you that dining out is something that I can curb, but not give up completely in the name of budgeting. However, I have learned a few tricks to make it more budget-friendly. One option is using online deal sites like Groupon or Gilt City to get discounted deals on new or favorite restaurants. Another great way to save money when dining out is to join restaurant mailing lists and loyalty programs. It’s a great way to earn points toward freebies or receive coupons or deals from your favorite places. There is a Chicago-based group called Lettuce Entertain You and they own/operate over 30 restaurants in our area. They also have a great loyalty program where every time we dine at one of their restaurants, we earn points. Between the points we had banked and the $15 birthday gift certificate they sent me, we were able to enjoy a free dinner out at one of our favorite LEYE spots during the $75/week challenge. Not bad!

I’m no financial expert, but this experience certainly opened my eyes to ways that I can balance being a foodie, while still being frugal. I hope you found it helpful too!

How to Become Debt Free Now

You’re reading this because somewhere along the lines, you failed.  You may have failed to control your impulses. You spent MORE than all of your money.

Or maybe you were unprepared for the unexpected and ended up with so much debt from medical expenses that you’re struggling to get by. Whatever the case may be, you have debt, and it needs to be eliminated.

Since this blog started 8 months ago, I haven’t written about how to get out of debt. I had imagined that every reader of this blog was well on their way toward Early Retirement, and just read my articles to stay motivated in their quest. But, thousands of people realize every day that they want to leave the Rat Race, and most of them are still in debt, so they need the tools to get out of the red so they can get way into the black.

As you may remember, I used to suck with money. It wasn’t until I was about 25 years old when I started giving a shit about my finances. My wife and I had made some poor financial decisions — who hasn’t? — all before we were officially deemed The Moneyseeds, of course. We ended up with a mountain of debt, big enough to warrant its own ski lodge, and if it sold us season passes we probably would have just added that to the pile as well.

Shortly after we decided to spend our lives together, we realized that our debt was a big, ugly problem and it needed to go. We began to look at our debt, not as a monthly bill, but as financial shackles that were holding us down from making any progress in our new life.

Now, we are debt free* and well on our way to Financial Independence. How did we get there? We followed what would eventually become “Johnny Moneyseed’s Guide to becoming really, really, ridiculously debt free“. We didn’t have a fancy name for it at the time, but the concepts were cemented into our thoughts and actions, and it became clear that things were working when our debt started disappearing at an incredible rate.

Have you ever heard anyone say any of the following ridiculous statements?

“Having more money would fix all of my problems. I would be out of debt so quickly!”

“This new iPhone is great, and thanks to my credit card it only costs me $20/month.”

“I don’t think getting out of debt is even possible. Where do you want to get dinner from tonight?”

These people are in debt denial. It’s a serious case that affects around 50% of North American consumers. Basically, people think it’s OK to carry debt. That it’s OK to buy something now that costs $300+ and only pay the bare minimum every month to pay it off. Then, there are people that know that having debt isn’t OK, but they have it anyway and spend most of their debt repayment money on shit they absolutely don’t need.

50% of U.S. households have credit card balances that are, on average, in the $14k range! Those same people are in front of you in line at Starbucks, they’re browsing for new TVs at Best Buy, and they’re getting box upon box delivered to their house through Amazon. They don’t treat debt like a priority. For you, reckless spending ends today. Follow this guide, and you won’t just get out of debt, but you’ll get out of debt way faster than you had ever imagined.

Step One: List all of your debts, their balances and interest rates.

This should be a pretty obvious first move, but don’t let the simplicity of it get the best of you. Get a piece of paper, a Google Spreadsheet, or open Notepad on your computer. Go to the website of every financial institution to which you owe money. Then, copy down all balances with their respective APRs (interest rate) exactly as they appear. It’s also very beneficial to know what your minimum payments are for every account.

After tracking down all of your debts, you’ll have a decent idea of how much is owed. Let it sink in, but don’t worry, in a few more steps we’re going to start getting rid of it.

Step Two: Set periodic goals.

Becoming a goal-oriented person is one of the most powerful things you can do for yourself, in finances and pretty much every other area of life. Goals allow us to break really hard things into manageable chunks that we can feel good about after we complete them.

When you set a goal to pay off your debt you first assess how much money you can contribute toward debt repayment every month. Then you can do a rough estimate of how long it will take you to get out of debt. (Debt / Monthly repayment = Amount of months until you’re debt free) Just understand it could take longer than this to repay your debt, but this is a good way to understand roughly how much longer you have to bare this burden.

The big goal, the final goal, is to pay off all of your debt. That should be the end point of your timeline. Then, it’s up to you what other goals you’d like to set. You could make every $5,000 mark a goal. Or every $10,000 for those with student loans.

Once your goals are in place, they’ll be almost impossible to ignore. This will push you toward accomplishing your goals way faster than you would have originally anticipated.

Step Three: Start paying off balances from highest to lowest APR.

There are a few trains of thought when it comes to the actual debt repayment portion. The first being: Pay balances low to high. This is dumb, because it doesn’t take interest rates into consideration. The second, and more logical: Pay off the debt with the highest interest rate first, then work your way down.

Make the minimum payment possible for every account, besides the one that you’re trying to eliminate first. This allows you to focus on it, and to lose the least to interest.

I’ve heard of people going to debt consolidation counselors, and also of people who transfer all of their balances to new credit cards that have 0% APR for an introductory period. While in theory these ideas could work for you, they aren’t the best ideas. Just imagine for a second: Why would anybody want to give you an unsecured loan to consolidate your debt? Or a 0% rate?

Step 3.14: Every time you pay off a debt, you have more money to throw at the next one.

This concept is known as “snowballing”. I think “avalanching” sounds cooler, so let’s call it that instead. Now, when you’ve paid off a debt, you’ll have freed up some money that you can now use in conjunction with the minimum payment that was already being made on the next debt down the list. Then when the next debt is paid off you keep the avalanche going.

Here’s where you become whiny.

Step Four: Trade in big ticket items.

Do you have a shiny new-ish car or two in the driveway? You can significantly reduce your total debt by trading in your car for something cheap. If you can get $18,000 for a trade-in, and you can find a $10,000 car on the lot then you just came into $8,000 to help you pay off debt. If you can trade-in two cars and concede to just having one you could double or triple this amount.

You can further apply this to boats, yachts, jet-skis, snowmobiles, Segways, or any other ridiculous self-balancing modes of transportation. Now isn’t the time to have toys. You can have toys when you’re debt free.

Step Five: Sell almost everything.

Now that ALL of your big ticket items have been either sold or traded in for less expensive versions, you can start becoming a professional Stuff seller. American houses and apartments are filled with crap we don’t need. A good way to figure out what you do need: Carry around a notebook and write down every item that you use over the course of a given week. It’s going to be a lot less stuff than you imagine. The rest — the crap that added to the debt problem — has to go. It’s unnecessary and dragging down your recovery efforts. Get rid of the stuff. There’s always time for stuff when you’re debt free.

Step Six: Work, work, work.

This one is going to blow your mind: To pay off debt faster you can work more. Overtime, second jobs, babysitting, etc. Check out this article I wrote about how to make more money.

Pretty obvious, right? More money, more debt repayment.

Step Seven: Reward yourself.

Achieving your goals, no matter how big or small should be celebrated. Don’t take this to mean that you should go out and spend hundreds of a dollars at the Mall for paying off $100 of your debt. Instead, buy yourself a cup of coffee. For a free alternative you could guilt people into congratulating you by posting your achievements on Facebook.

Step Eight: How to use windfall money.

My definition of windfall money is: Any money that you receive that didn’t directly come from your employment. Tax returns, bonuses, inheritances, birthday money, wedding gifts, whatever. If you are in debt then windfall money isn’t fair game. You should apply it directly to your debt. In most cases you’re getting free money to pay your debt. You couldn’t ask for a better gift, so don’t blow it.

Step Nine: This isn’t a step, it’s what you shouldn’t do when you have debt.

I talk to people who are in debt, or behind on their bills all the time who:

  • Continue to go out to eat on a regular basis
  • Go on vacations, elaborate or otherwise
  • Buy new model electronics
  • Purchase coffee drinks at coffee shops
  • Add to the mountain of debt
  • Don’t bring a homemade lunch to work
  • Go to concerts, the movies, or out drinking
  • Browse online retailers or hang out at the Mall
  • Trade in their vehicles for newer, prettier ones with more cup holders
  • ….And the worst kind of person: One who doesn’t read Johnny Moneyseed

Step Ten: Breakdance party.

You’ve made it.

All of your debt is completely paid off, so you officially earn the right to have a breakdance party. Turn on some old school Run DMC, have a friend flick the lights on and off, throw down a cardboard box and start busting out your best Suicide Rubberbands (learn how to do that move from a 12 year old).

If anybody has any other sweet tips for people in debt, please leave them in the comments below!

*Somebody is going to point out that I’m not debt free because I have two mortgages. Those readers can hold their comments and check out the posts I’ve written about not giving a fuck about paying off my mortgage early. Part 1 and Part 2.

You need more money? Do something about it.

“Johnny, I need more money!”

It’s a daily occurrence for me to either receive an email from a reader, or to hear from a friend or co-worker in real life, about how they don’t make enough money.

Normally, I take these conversations with a grain of salt, because most of the time I know exactly how much money these people make since a majority of these people work for the government (government employees pay charts are available publicly).

To find out exactly why they need more money I need to dig a little bit into their financial houses to determine whether: Yes, they do need more money or more commonly that No, they make plenty, but they could always make more (if they really wanted to).

There are a few questions that need to be answered whenever someone mysteriously “doesn’t make enough money”, because I usually won’t believe anyone that says they don’t make enough.

  • Have you already tried decreasing your expenses? Do you have a $90 iPhone plan or a $19 non-iPhone one? Have you created the most efficient system for your monthly expenses?
  • Are you making sufficient use of your time? Do you live close enough to work?
  • Have you started creating passive income streams? Do you have plans to purchase a rental property to increase your monthly income?
  • What do you do when you get home from work? If you work a 9-5 or 8-4, how do you spend your evenings? The average American family watches 30+ hours of television every week. That equates to more hours than a part time job. Try cancelling cable and stick to watching a couple episodes a week of your favorite shows on Netflix.

Do something about it.

First it’s important to know exactly how much more money is needed per month. Then, create a plan using ONE or ALL of the following suggestions.

— Sell a few things on Craiglist, eBay, or open a seller account on Amazon. Everyone has stuff laying around that they don’t need, so why not turn it into cash and add $100 (or more) to your monthly income?

— Get a second job! If your lazy ass is sitting on the couch every night getting fat and watching football or some crappy rehash of a 1970s detective show you’re wasting precious time that you could be out earning more money. Waiting tables at a restaurant for 5 hours 4 nights a week could net you an extra $300 take home. That’s a little over $1300/month on average.

— Start your own blog. Although it may take a while, all of your hard work could pay off in the end by increasing your income by $500 or more every month. Bloggers work for themselves, and have no employees to pay at the end of the day. Blogging won’t make you rich overnight (or ever), but it can be an enjoyable experience that could prove to be a new stream of revenue.

— Turn a hobby into a cash cow. It doesn’t matter what your hobby is, there’s probably money in it. You like playing video games, board games, or card games? Guess what! Human beings create those things. Design, or conceive the idea for a game and you could pull in some big money. Do you like widdling wood blocks into duck-calling whistles? I’m pretty sure that’s how the dudes from Duck Dynasty earned their claim to fame.

— Refinishing furniture to sell, Creating clothes for kids to wear, even Hairdressing can all be done within the comforts of your own home and help you rake in extra money every month. You can even do this type of stuff while being lazy and watching 30 hours a week of television.

— Babysit. Make yourself more available to family and friends. If you normally stay in on Friday and Saturday nights, you might be a perfect candidate for watching someone else’s children for money (as long as you aren’t a registered sex offender, and if you are please leave my blog!). And guess what dudes, it’s 2013 and we’ve been breaking down gender stereotypes for some time now and you too can be a babysitter. Or a “manny” if you do it professionally.

— Stay at home mom/dad? How about watching a few other children as well? Each child could be worth $500+ every single month. There are some legalities involved with this, but if you’re interested in earning more while staying at home then it’s worth the extra bit of work to get started.

— Become an available freelance writer. There is a huge network of people on the internet looking to create content for other people for cash. I don’t know the exact way into this business, but my good friend Erin from Red Debted is a master freelancer who could answer any questions on the topic. You might start out making $5 per post/article, but the deeper you get into this world the more you could make.

This year-to-date I have personally worked my ass off to increase my income and decrease my family’s monthly obligations. I started this blog, of course. I’ve also bought a less expensive house to live in and successfully rented out our first home for over 10% more than the monthly mortgage payment. I’ve invested money across the spectrum: Peer-to-Peer lending, Betterment, and standard index funds through Vanguard. I’m even thinking about getting a second job after our home renovation is complete.

If you aren’t doing any of these things to increase your income, you can only blame yourself for not making enough money. There is money to be made everywhere you look, all it takes is a little bit of know-how and a little bit of time.

Should you pay off mortgage quickly or invest?

A few months ago I wrote a post about why I think paying off your mortgage early is dumb— and nothing has really changed on that front, even with interest rates climbing almost a full percentage. There was much debate from both sides of the argument, so this time around I’m going to bring some actual numbers to help paint the picture.

First, let me start off by saying that paying your mortgage off completely is an awesome thing. I’m not against anyone paying off their mortgage, I dream of the day when my mortgage(s) will be paid off completely. It’s one of the best things you can do to increase cash flow and it’s a huge financial weight off of your shoulders. However, I don’t think any American should pay off their mortgage earlier than the full life of their loan. Circumstances do exist where you should be putting every last dime into paying your house off early, such as: having an interest rate that’s too damn high (5% or higher), or having an interest only loan.

Why are you paying off your mortgage early?

There are three reasons why people overpay their mortgage. The first is that they have been convinced by the big-media finance gurus that making extra mortgage payments is the smartest thing you can do financially (and logically this brainwash can start to make sense). The second is the fact that most Americans don’t trust themselves with saving money, so they’d rather apply “extra money” to their mortgages, because it’s like savings that you can’t touch. Kinda. The final reason is that the majority of Americans are fucking terrible at math.

I’d like to challenge the average person’s standpoint as someone who isn’t afraid to invest. I currently have two mortgages, and I don’t pay a dime over their respective monthly mortgage bills. Instead I take all of the “extra money” that I could throw at the mortgage and invest it. The main reason I do this is that the APR on both of my mortgages is 3.25%. As an investor I can reasonably expect to earn way more than 3.25% annually from my investments — of interest that has the ability to compound. Mortgage interest is simple interest which means no compounding. So, even if my earning rate was exactly the same as my mortgage’s APR, I’d end up ahead in the long-run.

The thing is that I don’t really care if you decide to pay off your mortgage early, invest or do both. I just want to set the record straight that you have a greater potential for earning more money over time if you pay the minimum balance on your mortgage and invest any overages. The reason for this is that money needs time to really see the phenomena that is compounding interest. Again — this is how the numbers actually work out, I’m not flipping numbers around here or anything. And I’m not going to get into the “peace of mind” discussion or anything, just the numbers.

Let’s imagine that you have a brand new $200,000 mortgage with an APR of 4.5%. That means a principle and interest payment of $1013/month (I’m going to ignore taxes and insurance because those are variables, they will not have an effect on the principle balance of your mortgage). After creating a nice anti-budget, you see that you have an extra $500 to spend every month. You can do three things with this money: apply it to the principle balance of your mortgage, invest it, or spend it.

Applying the $500 to your mortgage payment

If you were to pay your mortgage off in the full 30-year term you’d end up spending over $164k in interest! That sounds awful. Damn banks, taking all your hard-earned money! So, you decide “Shit, if I apply my extra $500 to my mortgage every month I’d split the total interest pretty much in half!” This is exactly right — the mortgage would be paid off in 183 payments (just over 15 years) and you’d end up spending around $76k in interest.

The inherent facts of this situation are that you have spared yourself from spending $88k in interest, you own your home in half the time, and you free up around $1500/month in spending (you’re still going to have to pay taxes and insurance though, sorry about that).

Assuming that you can pay the mortgage off in half the time — 15 years — you’ll have $1,513 now to put into investments every month. The following table shows what your money will look after a 15 year period.

Interest Rate Total Accumulation Total Interest Mortgage Interest Net Interest Gain
0% $272,840 $0 $76,000 -$76,000
4% $373,245 $100,905 $76,000 $24,905
5% $405,465 $133,125 $76,000 $57125
6% $441,235 $168,895 $76,000 $92895
7% $480,988 $208,648 $76,000 $132,648

Looks like you’d need to earn over 7% interest to cancel out the interest damage done by the mortgage.

Applying the $500 to an investment account

Let’s see what it would look like if you took that same $500 and put it into an investment account instead. Obviously in this scenario, we are going to take the entire 30 years to pay the mortgage off, and we’ll have spent $165k in interest; but in this scenario we should be earning compounding interest as well.

Over the 30 year period, we’re going to end up putting $180k of principle into the investment account. At a 0% interest rate over 30 years, you’d end up with your principle balance of $180k untouched. You’d have a house and $180k, but you wouldn’t have accumulated any interest on the money. Since you couldn’t at least match the interest damage done by the mortgage, you actually end up behind in the end (even with your $180k). This isn’t an ideal situation, but it does show how money can add up over the years.

Interest Rate Total accumulation Total Interest Mortgage Interest Net Interest Gain
0% $180,000 $0 $165,000 -$165,000
4% $348,681 $168,681 $165,000 $3,681
5% $418,363 $238,363 $165,000 $73,363
6% $505,268 $325,268 $165,000 $160,268
7% $614,043 $434,043 $165,000 $269,034

As evidenced by this handy graph you can see that even with a 4% interest rate, which is lower than the APR of the mortgage, an additional $3,681 is earned in interest over a 30 year period. This is what it would look like if you were investing very conservatively. Seasoned investors can testify that 4% is a very conservative estimate, most likely the kind of rates you’ll get from long-term bond investing. No matter if the interest rate seems high or low to you personally this shows that you can earn more interest over the long-term by investing rather than paying down your mortgage.

The inherent facts of this situation are that you spent $164k in interest over a 30 year period, but now you own your home. Depending on the interest rate of your investments you have an extra $3k-$270k in net accumulated interest. That means you generated more money in interest over the life of the loan than the loan charge you in interest. If you were earning 7% on your investments you’d end up with more money in interest alone than would be needed for the full amortization of the original loan! That’s pretty incredible.

There are all kinds of things that can throw these numbers out of whack. One such thing is the frequency that people move from one house to another. As long as you are moving laterally — to a house of equal selling price — then the numbers are unaffected (as long as you are using 100% of equity as a down-payment for all recurring home purchases). If you’re upgrading every time you’re buying a home and starting a new loan every time, you’re going to be locked down to a mortgage for the better part of your adult life.

While there is no blanket solution for everyone we look at the above numbers and have a pretty decent idea what our future investment accounts might look like if we started regularly investing any money that would rather go against the mortgage. If you do want to cut time off of your loan, but don’t want to pay any more than you’re obligated to, I would suggest two half payments a month instead of one full mortgage payment. This will help reduce the total interest slightly without causing you any financial strain — and you can do this even if you don’t have any extra money to invest or throw at your mortgage.

Republic Wireless – $19 a month cell service

With the smartphone world being dominated by Samsung, Apple and the comm-nexus that is Verzion, ATT, T-Mobile and Sprint (er.. Softbank?); there’s barely any reason — or way — to try to move to a smaller independent wireless company. The big companies lock you in with their fancy contracts and cancellation fees. And the most important reason of all to have a big brand name phone/plan — most of the independent wireless companies have shitty coverage and even worse customer service.

I was sick of paying a monthly subsidy to Verizon for my $600 phone that I got for “free”. $80 a month, and for what? Data caps? “Free” upgrades every two years? I did what no one wants to do and took my business elsewhere; and switched to a pre-paid service that only offers one phone — and it isn’t an S3, an S4 or an iAnything.

I ordered the Motorola Defy™ XT for $199 and planned to use it along-side my Verizon Nokia Lumia 822 for a full month before decided if I could handle the downgrade or not permanently. I was pretty used to having 4G service and a powerful phone that could handle pretty much anything I could throw at it; and then I received this tiny 3G phone with almost no processing power in the mail.

While I still had access to both phones, I always found myself being reliant on the Verizon phone whenever I needed to make an important call; or browsing the Internet when Wi-Fi wasn’t available. So, I made a hard, but necessary call — I put my Verizon service on hold so I could truly test out Republic Wireless.

The hardest thing was getting over the lack of a 4G network. It felt like the TARDIS had dropped me off in 2007. But after a day or two, I had begun to adapt. I began off-loading the majority of my data usage to Wi-Fi. Most of my data usage on the cellular network was from checking my Gmail, or my WordPress site — nothing too data-, or processor-intensive. I realized within a week that I was going to be okay with my decision to downgrade — at least on the data side.

Even though I hardly ever make phone calls anymore, I had to test out the full-spectrum of the phone’s capabilities. I was impressed to see that Republic Wireless installs software on their devices that allows (and encourages) Wi-Fi phone calls as well, which are of surprisingly good quality. When you’re not on a Wi-Fi network, Republic uses Sprint towers to process their calls.

The most impressive part of Republic Wireless’s business model, for me, is the price. After buying the phone outright, the service costs $19/month. There are no contracts, no cancellation fees, and no gimmicks. As far as I’m concerned, everyone should try the service out considering how cheap it is. If you can deal with the downgrade, then this is the phone for you.

Overall I have to say that I’m impressed with Republic Wireless. I realize that 90% of the people that I know have the best phone on the market, and will continue to upgrade their phones annually. But for those of you that have absolutely had it with paying $80 or more for your monthly cell phone usage, rest assured you have a viable, low-cost alternative waiting for you.

You can’t save money when you’re spending.

Anybody that knows me — either through this site, or in real life — knows that I love to save money. I think it’s one of the best feelings in the world to know that I have a stash of cash at my disposal. I’m a firm believer of paying myself first which is the process of saving/investing just after getting paid instead of waiting until the end of the month when money might be tight.

While I’m putting away money every month and building my reserves, most consumers are saving in a different way; a way that isn’t really saving at all.

I’ll start this off with a questionIf person A goes to the store and buys an item that normally costs $10 for $5, and person B decides to put $5 into a savings account; who saved more money? Without reading ahead you might think that both people saved $5, but really person B is the only one who has committed his money to actual savings.

When referring to money the word “save” can mean one of two things. The first definition is the one where you end up having more money: “accumulate money: to set aside money for later use, often adding to the sum periodically”. The other definition is the one that marketers use to take advantage of consumers: “conserve something: to avoid wasting something or using something unnecessarily”.

With the marketer’s definition it actually sounds like they’re trying to hook you up, and make you spend less money. But honestly, how could they possibly be helping you “save money” when they’re trying to get you into their stores to spend money? “Buy a new car and save thousannnnnds!” — this may be the most illogical sentence on this entire site, because you can’t save money when you’re spending money.

Now if you need to buy something, and it happens to be on sale you should take advantage of the sale. While I highly recommend buying things you need while they’re on sale, I offer a word of caution: Just because something is on sale doesn’t mean that you need to buy it. If you go shopping without a clear picture of what you actually want/need, you’re going to end up spending more money than you anticipated. The sale does it’s job by getting you into the store, and — believe it or not — there are people who go to college to learn how to position sale items to make you spend more money!

Malls, and car dealerships aren’t the only places that take advantage of false-savingpromotions. When you go to the grocery store the front-end cashiers are trained to emphasize your savings amount before they hand you your receipt. Our standard grocery store, Safeway, prints the percentage “saved” right on the receipt so you can walk out of the store feeling good about yourself, because most people will feel better about spending money if they knew that they could have spent more.

We need to shift our mindset away from the savings and onto the spending. When you buy an item on sale for $50 that originally costs $100, you aren’t saving $50, you’re spending $50. We allow numbers to confuse us and we develop irrational mindsets towards future purchases whenever we see price reductions. There’s a reason why almost everything in every store is on sale almost all of the time! A brand new TV that retails for $1,999, might be “on sale” for $1,499 which stimulates something inside the average consumer’s brain: buy this TV, save $500! No, silly-pants, you just SPENT $1500!! SPENT, SPENT, SPENT!

Saving isn’t spending, so what is it? Saving can be broken down into two main categories. The first is long-term savings which is money that you don’t really have a plan for besides the fact that it’s going to help you afford things (especially when you’re retired). The second form of saving is also known as “delayed spending”. This is when you save up for something in specific, whether it’s a new laptop or a house; in other words: this money is pre-spent in your mind, even though it may take you a few months to accumulate. It’s kinda like the opposite of having a credit card payment.

How do we fix the problem and reclaim the word “saving”? It honestly starts with the consumer; with us. We need to stop buying in to the marketing speech. Whenever you hear an advertisement claiming that you’ll save money this weekend at the mall, you need to audibly scoff. Explain this concept to children, so they can grow up understanding that spending is spending and saving is saving, and these things are completely separate topics of finance. We can still take advantage of sales, and price-reductions, but we should know that unless we are transferring money into savings accounts or investments we aren’t actually saving anything.

The process of Optimizing your monthly expenses

It’s become common knowledge to JM readers that the secret to becoming rich is — in essence — spending less than you make. We also know that the money we are able to save has the magical ability to accumulate interest and will continue compounding through our target retirement date. For me, that’s about 6.5 years away now. Being someone who intends to Retire Early, I have to maximize my monthly savings, but I also don’t want to suffer by working more than I already do. Having a family comprised of two active duty service members, an infant and a toddler doesn’t really allow for the opportunity to have additional employment. Even trying to find a few hours a week to write a blog post or two is an almost impossible task, so I’m well-acquainted with the concept of not having enough time.

Since I knew I wasn’t going to be granted extra hours in the day to try to rake in more money, I realized that I had to make our monthly expenses as efficient as possible to reduce the amount that was being automatically drained from our bank account every payday. I wanted to accomplish true expense-efficiency in a way that would have the least impact on my family. No one wants to completely overhaul their expenses overnight and feel the sudden and dreaded shackles of budgeting. When you properly perform the action of optimizing your expenses, chances are you won’t really notice a difference in your lifestyle, you’ll just have extra money lying around that wasn’t there before.

I found a spreadsheet that I had created in May of 2011 which shows our income as well as our expenses. Together Mrs. Moneyseed and I had a combined income of $6300 per month along with $2125 in bills. That means that roughly 33% of our money was being spent in bills alone. Back then we were child-free and rented a 500sqft apartment. We thought we were doing an alright job with our spending, but didn’t realize that our finances were being eaten by bills. **If you don’t track your monthly income/expenses, you definitely should. It’s pretty interesting to see how your personal money management system can change over time.

Fast-forward to June 2013 and we’ve been able to increase our monthly income to about $8800. Our living expenses have also gone up, but only slightly. We now have two daughters in daycare (this makes up almost half of our monthly expenses). We’ve also purchased two houses in Maryland in the past 2 years. Anyone that lives in Maryland can attest to the fact that houses and land are outrageously overpriced and overtaxed; which helps to make Maryland the #5 most expensive state in the Nation to live in. Even with all of our new-found craziness, our monthly bills have only increased by $235 as they currently total $2360 (around 25% of our income).

At first glance it may seem like we’re spending more now than we were back in 2011, but when we moved to Maryland in late 2011 — without any lifestyle upgrades from when we were living in North Carolina — our expenses shot up from $2125 to $3490. Literally, overnight! The drastic difference is mainly a product of the disparity in housing costs between NC and MD, which is insane.

Since November 2011, when we moved into our house in Glen Burnie, I’ve looked at the line items on our anti-budget and tried to pinpoint where we could lower expenses; I hated the fact that “cost of living” was getting the best of us. Sometimes when I’ve tried to find areas to save, good ideas have hit me like a ton of bricks, and other times I have to fish around to pull a deal out of the woodwork. Sometimes there’s just nothing you can do to lower an expense, no matter how hard you try.

The first thing we did to efficifize our expenses and reduce monthly costs was install solar panels. By adding solar panels we’ve split the monthly cost of electricity by more than 66%. Our house runs on 100% electric, and this month (June) — for example — our total energy bill is projected to be $34. It used to be $180. **Please note that this is the only instance that we paid out of pocket to reduce a monthly expense. Solar panels can be installed for FREE by SolarCity with a small monthly payment (still totally worth it).

Another area that needed closer inspection was cable/internet. Monthly we were paying $135 for cable/internet. We decided to make our house cable free; but we kept internet (of course) and through the Roku we’re able to watch better programming daily (and we don’t have to watch dumb shit like the Grand Canyon tightrope guy). Our total cable/internet costs are $68 (FioS internet + Hulu subscription). Savings? Almost exactly 50%.

Some people get pretty motivated about their small victories during the optimization process. They’ll relish in the fact that they cut back in one or two categories, but that’s usually where the motivation dies. That’s when it gets hard. That’s when you need to get creative and inspect your finances closer. For us, I realized that our insurance (car and home) deductibles were too damn low. Why would I pay a premium to keep a deductible low when I have the cash on hand to pay the full deductible in case of emergency? I called up the insurance company and said that I wanted the deductibles raised as high as they could possibly be. That had an incredible impact on our finances, but it wasn’t an obvious fix, because it’s a semi-annual bill. **Don’t do this, unless you can comfortably pay a high deductible out of pocket.

By far, we’ve saved the greatest portion of our monthly income by paying off our vehicles. My wife came into this marriage with a Ford Edge with a $575 monthly payment. Even though the interest rate was 0%, I couldn’t handle the fact that we had such a huge monthly payment for a 4,000 pound hunk of metal that takes us to/from work. And good ol’ U.S. law states that you need to have full comprehensive insurance on financed vehicles, which can add a significant amount to monthly expenses.

The only thing that remains unchanged between May 2011 and today is the monthly cost of our cell phone plan. We’ve been paying about $140/month virtually every month for the past two years. I’ve been trying to find the best possible carrier with the best pricing plans to replace our super-expensive-low-data cap-Verizon-garbage plan. I think I have one picked out, which only runs about $20/month! Holy moly! Sounds too good to be true. I’ll tell you what: I’ll do the research and I’ll give an honest review about the company and their service. If it sucks, I’ll be blunt about it.

The other half involved in optimizing your monies is to increase your monthly income. There’s a very simple way to accomplish this without even filling out one single job application. Simply, all extra money that you’ve creating in the first half of optimization should be used as a base from which more money can grow. One easy way to accommodate this seemingly impossible-sounding task is by investing your “extra money” into dividend paying indexed mutual funds. A decent rough estimate with this strategy is that for every $1000 invested you should expect about $5/month in dividends. If you were able to invest $12,000 in a year, you would effectively add $60 to your income (and this isn’t even taking compounding interest into account).

Investing should be a constant, and should only increase as your monthly expenses go down. You should look at investment money, not as money that you’re losing, or can’t touch right now; but as money that is helping you to increase your monthly income. The best part about investing in dividend paying indexed mutual funds is that while you’re invested in them, they will continue paying you dividends for the rest of your life (until you divest your money or croak).

Every individual and family is different when it comes to their monthly expenses. The things that I save money on every month may not be things that you have the control to reduce the cost of. Alternately, you may have line items where you could save money, that don’t apply to me whatsoever. I’m not trying to lay out a map here, and say “These are the things you need to do to increase your monthly income”. I’m really saying you should take a look at every monthly expense that you incur, and apply the principle of optimization to them all. Try to find small areas to cut-back your spending. If you can find $20 worth of savings each month for 6 months, you’ve effectively increased your income by $120; or reduced your expenses by $120. It’s all about how you perceive your new-found “extra money”.

OPEN YOUR MIND, AND THROW OUT YOUR BUDGET

When I officially decided that I wanted to start acting like an adult — I was about 25 at the time — I created an Excel spreadsheet to track my month-to-month spending, because that’s what grown ups do, right? Little did I know that I would come to obsess over the numbers that I had written, my own self-imposed restrictions, eventually causing me to throw my budget system out the window (otherwise known as defenestration).

The system my wife and I were working with was pretty standard. It kept track of how much money we had coming in (income), how much we had going out (bills) and then how much we could spend on gas, groceries, gifts, electronics, burritos… Seriously, every single category had a dollar sign amount attached to it. A number that couldn’t be crossed, and if it was I’d end up stressing myself out. Budget snafus also resulted in deprivation. Even though there were 20 days left in the month, we’d become hermits, because our “fun money” was already spent. Who lives like this? People who stick to their budgets do.

I’ve been harboring resentment toward the world of budgets for a while now. I don’t know when it clicked in my head, but I realized, for myself, that there had to be a better way. I didn’t want to feel unnecessary stress. I didn’t want to stay at home on the weekends. I didn’t want to be the people who had tons of money in the bank, but were too “broke” to do anything. If we budget in too much fun, we won’t have enough for groceries.

Budgeting is a stepping stone to greater things. You never really hear people say things like “I’m super rich now, because of my budget”. So then, what is the next step after budgeting? The ability to spend money at will, on whatever you want, without having to plan for it before-hand. This is the way we live our lives, and we end up having more money unspent at the end of the month than we did when we were hooked up to the budget-defibrillators. THHHHHHHMMP! You’ve spent too much money! Thankfully, we’ll never have to hear that sound again.

The first reason that our method of spending works is that there is no pre-defined “this is how much you can spend” amount. Normally, a budget will say: “Groceries – $400″, or something similar to this. This magic number has two distinct properties, even though it’s only supposed to have one: a limit to your spending in this category. The other less realized property is the notion that you can spend all of this money. When the end of the month comes, and there’s money leftover in the “Groceries” account, why wouldn’t you throw a couple extra bags of chips, and Ben and Jerry’s in the cart? In your mind this money has already been spent, so you’ll do the rational thing and spend it.

Another reason why it works is because mentally we’ve moved to a higher level of consciousness. Not exactly spiritually, but emotionally. We began consciously spending our money. You’re probably unconscious every time you spend money, and you don’t even realize it, because you have a budget or you are still at the pre-budget stage. You may not be sleeping physically, but dammit, you’re sleeping mentally. You nickel-and-dime yourself into brokeness. You buy things you don’t really need, and discard them shortly after. You overspend when you’re eating out, because you don’t realize that you have a choice not to.

Conscious spending is all about spending money on the things that actually matter to you while eliminating wasteful spending from your life. It doesn’t mean that you can’t go out to eat, or buy a new car. If those are the things that actually matter to you then that’s what you should be spending your money on. If you were to log onto your Mint account right now, could you justify every transaction that you’ve made with your debit or credit card? Are there any transactions that you’ve made recently that you didn’t really care about? Did their satisfaction not justify the expense?

If nothing else, budgeting helped us to understand where we were spending the bulk of our money. It allowed us to see the categories, and more importantly, the sub-categories where our money was going. Without budgeting, we wouldn’t have understood how much money we were actually spending on things like food, transportation, baby stuff, etc. Once we knew what we were spending our money on, we were able to sift through the categories, and make a determination about each one: How much does each category mean to us?

After targeting and eliminating wasteful categories in your budget, you can toss your budget aside, and start spending money on the things you want to spend money on. If it doesn’t work for you, and you find that you spend more money than you’d like to, go back to budgeting. It means you aren’t ready yet for a conscious spending plan, but don’t let that get you down from trying again. Occasionally, I find myself buying stuff that I don’t truly value. Having an occasional “Oops!” is okay though. Especially when you realize that you’ve made an “Oops!” and don’t just brush it off.

You’re still going to need to pay your monthly bills with your income, so here is a good way to set up your conscious spending plan: First, create a document that resembles a budget (if you already have a budget, that’s even better). You should write down your income, then subtract every monthly bill you have from it. This will give the amount that is leftover, ie “Discretionary money”. You might think that I just described a budget, but it’s actually the anti-budget. It’s a manner to describe the knowns in my financial life. I know how much I make. I know how much I spend on bills monthly. The one thing I don’t know is how much I’m going to spend.

I don’t need to know how much I’m going to spend, because that puts a cap on my spending. It’s the feeling a child gets when they want a toy that costs $6, but their mom or dad will only give them $5, because that’s how much they told little Johnny he could spend. The other reason I don’t need to know how much I’m going to spend, is because I know that I’m not going to spend all of my discretionary money. Part of conscious spending is knowing yourself and how you spend. The other part is NOT spending money like a jackass.

You don’t need to cutback on the things you like, only on the stuff that you truly find no value in. I dare you to look at the money you spend, and try to justify every single purchase. Remove this waste from your financial future, and you’ll start to see money piling up in your bank account without effort.