75 Personal Finance Rules of Thumb

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A “rule of thumb” is a mental shortcut. It’s a heuristic. It’s not always true, but it’s usually true. It saves you time and brainpower. Rather than re-inventing the wheel for every money problem you face, personal finance rules of thumb let you apply wisdom from the past to reach quick solutions.

Table of Contents show

I’m going to do my best Buzzfeed impression today and give you a list of 75 personal finance rules of thumb. Some are efficient packets of advice while others are mathematical shortcuts to save brain space. Either way, I bet you’ll learn a thing or two—quickly—from this list.

The Basics

These basic personal finance rules of thumb apply to everybody. They’re simple and universal.

1. The Order of Operations (since this is one of the bedrocks of personal finance, I wrote a PDF explaining all the details. Since you’re a reader here, it’s free.)

2. Insurance protects wealth. It doesn’t build wealth.

3. Cash is good for current expenses and emergencies, but nothing more. Holding too much cash means you’re losing long-term value.

4. Time is money. Wealth is a measure of how much time your money can buy.

5. Set specific financial goals. Specific numbers, specific dates. Don’t put off for tomorrow what you can do today.

6. Keep an eye on your credit score. Check-in at least once a year.

7. Converting wages to salary: $1/per hour = $2000 per year.

8. Don’t mess with City Hall. Don’t cheat on your taxes.

9. You can afford anything. You can’t afford everything.

10. Money saved is money earned. When you look at your bottom line, saving a dollar has the equivalent effect as earning a dollar. Saving and earning are equally important.

Budgeting

I love budgeting, but not everyone is as zealous as me. Still, if you’re looking to budget (or even if you’re not), I think these budgeting rules of thumb are worth following.

11. You need a budget. The key to getting your financial life under control is making a budget and sticking to it. That is the first step for every financial decision.

12. The 50-30-20 rule of budgeting. After taxes, 50% of your money should cover needs, 30% should cover wants, and 20% should repay debts or invest.

13. Use “sinking funds” to save for rainy days. You know it’ll rain eventually.

14. Don’t mix savings and checking. One saves, the other spends.

15. Children cost about $10,000 per kid, per year. Family planning = financial planning.

16. Spend less than you earn. You might say, “Duh!” But if you’re not measuring your spending (e.g. with a budget), are you sure you meet this rule?

Investing & Retirement

Basic investing, in my opinion, is a ‘must know’ for future financial success. The following rules of thumb will help you dip your toe in those waters.

17. Don’t handpick stocks. Choose index funds instead. Very simple, very effective.

18. People who invest full-time are smarter than you. You can’t beat them.

19. The Rule of 72 (it’s doctor-approved). An investment annual growth rate multiplied by its doubling time equals (roughly) 72. A 4% investment will double in 18 years (4*18 = 72). A 12% investment will double in 6 years (12*6 = 72).

20. “Don’t do something, just sit there.” -Jack Bogle, on how bad it is to worry about your investments and act on those emotions.

21. Get the employer match. If your employer has a retirement program (e.g. 401k, pension), make sure you get all the free money you can.

22. Balance pre-tax and post-tax investments. It’s hard to know what tax rates will be like when you retire, so balancing between pre-tax and post-tax investing now will also keep your tax bill balanced later.

23. Keep costs low. Investing fees and expense ratios can eat up your profits. So keep those fees as low as possible.

24. Don’t touch your retirement money. It can be tempting to dip into long-term savings for an important current need. But fight that urge. You’ll thank yourself later.

25. Rebalancing should be part of your investing plan. Portfolios that start diversified can become concentrated some one asset does well and others do poorly. Rebalancing helps you rest your diversification and low er your risk.

26. The 4% Rule for retirement. Save enough money for retirement so that your first year of expenses equals 4% (or less) of your total nest egg.

27. Save for your retirement first, your kids’ college second. Retirees don’t get scholarships.

28. $1 invested in stocks today = $10 in 30 years.

29. Inflation is about 3% per year. If you want to be conservative, use 3.5% in your money math.

30. Stocks earn 7% per year, after adjusting for inflation.

31. Own your age in bonds. Or, own 120 minus your age in bonds. The heuristic used to be that a 30-year old should have a portfolio that’s 30% bonds, 40-year old 40% bonds, etc. More recently, the “120 minus your age” rule has become more prevalent. 30-year old should own 10% bonds, 40-year old 20% bonds, etc.

32. Don’t invest in the unknown. Or as Warren Buffett suggests, “Invest in what you know.”

Home & Auto

For many of you, home and car ownership contribute to your everyday finances. The following personal finance rules of thumb will be especially helpful for you.

33. Your house’s sticker price should be less than 3x your family’s combined income. Being “house poor”—or having too expensive of a house compared to your income—is one of the most common financial pitfalls. Avoid it if you can.

34. Broken appliance? Replace it if 1) the appliance is 8+ years old or 2) the repair would cost more than half of a new appliance.

35. Used car or new car? The cost difference isn’t what it used to be. The choice is even.

36. A car’s total lifetime cost is about 3x its sticker price. Choose wisely!

37. 20-4-10 rule of buying a vehicle. Put 20% of the vehicle down in cash, with a loan of 4 years or less, with a monthly payment that is less than 10% of your monthly income.

38. Re-financing a mortgage makes sense once interest rates drop by 1% (or more) from your current rate.

39. Don’t pre-pay your mortgage (unless your other bases are fully covered). Mortgages interest is deductible, and current interest rates are low. While pre-paying your mortgage saves you that little bit of interest, there’s likely a better use for you extra cash.

40. Set aside 1% of your home’s value each year for future maintenance and repairs.

41. The average car costs about 50 cents per mile over the course of its life.

42. Paying interest on a depreciating asset (e.g. a car) is losing twice.

43. Your main home isn’t an investment. You shouldn’t plan on both living in your house forever and selling it for profit. The logic doesn’t work.

44. Pay cash for cars, if you can. Paying interest on a car is a losing move.

45. If you’re buying a fixer-upper, consider the 70% rule to sort out worthy properties.

46. If you’re buying a rental property, the 1% rule easily evaluates if you’ll get a positive cash flow.

Spending & Debt

Do you spend money? (“What kind of question is that?”) Then these personal finance rules of thumb will apply to you.

47. Pay off your credit card every month.

48. In debt? Use psychology to help yourself. Consider the debt snowball or debt avalanche.

49. When making a purchase, consider cost-per-use.

50. Make your spending tangible with a ‘cash diet.’

51. Never pay full price. Shop around and do your research to get the best deals. You can earn cash back when you shop online, score a discount with a coupon code, or a voucher for free shipping.

52. Buying experiences makes you happier than buying things.

53. Shop by yourself. Peer pressure increases spending.

54. Shop with a list, and stick to it. Stores are designed to pull you into purchases you weren’t expecting.

55. Spend on the person you are, not the person you want to be. I love cooking, but I can’t justify $1000 of professional-grade kitchenware.

56. The bigger the purchase, the more time it deserves. Organic vs. normal peanut butter? Don’t spend 10 minutes thinking about it. $100K on a timeshare? Don’t pull the trigger when you’re three margaritas deep.

57. Use less than 30% of your available credit. Credit usage plays a major role in your credit score. Consistently maxing out your credit hurts your credit score. Aim to keep your usage low (paying off every month, preferably).

58. Unexpected windfall? Use 5% or less to treat yourself, but use the rest wisely (e.g. invest for later).

59. Aim to keep your student loans less than one year’s salary in your field.

The Mental Side of Personal Finance

At the end of the day, you are what you do. Psychology and behavior play an essential role in personal finance. That’s why these behavioral rules of thumb are vital.

60. Consider peace of mind. Paying off your mortgage isn’t always the optimum use of extra money. But the peace of mind that comes with eliminating debt—it’s huge.

61. Small habits build up to big impacts. It feels like a baby step now, but give yourself time.

62. Give your brain some time. Humans might rule the animal kingdom, but it doesn’t mean we aren’t impulsive. Give your brain some time to think before making big financial decisions.

63. The 30 Day Rule. Wait 30 days before you make a purchase of a “want” above a certain dollar amount. If you still want it after waiting and you can afford it, then buy it.  

64. Pay yourself first. Put money away (into savings or investment accounts) before you ever have a chance to spend it.

65. As a family, don’t fall into the two-income trap. If you can, try to support your lifestyle off of only one income. Should one spouse lose their job, the family finances will still be stable.

66. Every dollar counts. Money is fungible. There are plenty of ways to supplement your income stream.

67. Savor what you have before buying new stuff. Consider the fulfillment curve.

68. Negotiating your salary can be one of the most important financial moves you make. Increasing your income might be more important than anything else on this list.

69. Direct deposit is the nudge you need. If you don’t see your paycheck, you’re less likely to spend it.

70. Don’t let comparison steal your joy. Instead, use comparisons to set goals. (net worth).

71. Learning is earning. Education is 5x more impactful to work-life earnings than other demographics.

72. If you wouldn’t pay in cash, then don’t pay in credit. Swiping a credit card feels so easy compared to handing over a stack of cash. Don’t let your brain fool itself.

73. Envision a leaky bucket. Water leaking from the bottom is just as consequential as water entering the top. We often ignore financial leaks (e.g. fees), since they’re not as glamorous—but we shouldn’t.

74. Forget the Joneses. Use comparisons to motivate healthier habits, not useless spending.

75. Talk about money! I know it’s sometimes frowned upon (like politics or religion), but you can learn a ton from talking to your peers about money. Unsure where to start? You can talk to me!

The Last Personal Finance Rule of Thumb

Last but not least, an investment in knowledge pays the best interest.

Boom! Got ’em again! Ben Franklin streaks in for another meta appearance. Thanks Ben!

If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

This article—just like every other—is supported by readers like you.

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Source: bestinterest.blog

By the numbers: My spending for March 2019

March was a mixed month in my financial world. I ended March with a slightly higher net worth (up 0.6%) but my spending was the highest it’s been this year: $5989.10. Yet, that spending was mostly mindful. I wasn’t frittering away money on silly things.

If I wasn’t buying dumb stuff, then where did my money go? A few worthwhile places:

  • I spent $653.31 on the yard and garden. Specifically, Kim and I tore out a big cedar tree in the corner of the yard, then converted that space to a small orchard. I use the word “orchard” loosely here. We planted three fruit trees, four blueberries, four grape vines, and a bunch of strawberries. I hope to write about this more in the near future.
  • I spent $625.72 on health and fitness. In the middle of the month, I had quite a scare. Out of nowhere, I had chest pains, so I visited the local hospital ER. My co-pays and prescriptions are reflected in March’s spending — and there’s more to come. (We’re about to have a l-o-n-g article on the $6800 hospital bill I received in the mail yesterday. That’ll happen in April or May.) Meanwhile, Kim had knee surgery at the end of the month. I paid for some of her stuff out of my pocket.
  • I spent $579.36 on gifts in March, which is very very unusual.
  • I paid the $450 annual fee on my Chase Sapphire Reserve credit card. (Yes, I know this seems like a lot. But remember the card comes with a $300 travel credit, which means my effective annual fee is $150. I believe I receive $150 in value from the card’s other benefits.)

I don’t consider any of that spending frivolous although I recognize that some of it isn’t necessary. (Do we need an orchard? Do I need to give gifts?)

That said, I did have some weak spots in my spending. I bought several movies on iTunes. In fact, I spent $72.63 on iTunes in March. I need to be careful lest I return to my former profligate ways. No more looking in the iTunes store! I also spent $230.15 on alcohol during the month (most of which was beer).

How did I do with groceries? As you know, my food spending had grown out of control, which is one of the primary reasons I’m tracking my spending in detail this year. Last year, I spent over $1000 per month in food. This year, I’m spending less than $700 per month.

I was very proud of my food spending for most of March. I spent a total of $658.21 during the month: $468.27 on groceries and $184.24 on dining out. That’s my lowest monthly food total in two years (excepting months during which I’ve been on the road).

Going into the last week of March, I’d only spent $241.87 on groceries. That’s amazing! Things fell apart, however, when I stocked up on food for Kim’s convalescence. Meanwhile, we only had three restaurant meals during the month. For one of those, I paid for two guests. Not bad. Not bad.

Quarterly Spending

Now that we’ve made it through the first three months of 2019, I was curious how my quarterly spending compared to last year. Monthly spending can fluctuate quite a bit. You can get a better idea of your actual habits by looking at a bigger picture.

Here are some highlights:

  • I spent $116.56 at the iTunes store during the first quarter of 2019. That’s less than I spent on movies and TV shows during any single month last year, so that’s a win.
  • I spent $2076.54 on food for the quarter, which is lower than any quarter in 2018. I spent $1179.53 on groceries, $323.52 on HelloFresh, and $542.29 on dining out. That restaurant spending is another big win. The grocery spending was good — better than any quarter in 2018 — but I feel like I can do better.
  • I spent a lot on health and fitness during the first three months of the year: $1752.60. And the thing is, it’s not going to get much better.
  • This year, I decided to separate hot tub expenses into its own category. I spent $151.88 on hot tub stuff (chemicals, etc.) during the first three months of the year. And, no, that doesn’t include electricity.
  • Our zoo — three cats and a dog — cost us $447.54 during the first quarter of 2019.
  • You know where I could save big bucks? By drinking less. I spent $586.36 on alcohol during the first three months of the year (and that includes four weeks during which I didn’t drink a drop!). That’s $6.44 per day. Time for me to cut back on my craft beer obsession…

I spent a total of $15,364.85 during the first quarter of 2019, an average of $5121.62 per month. That’s not a great number, to be honest. It’s pretty much what I was spending last year. Still, I’m trying not to get too stressed about things…yet.

The whole point of this exercise is for me to figure out where I’m spending my money and why. Once I have a clear picture, I can make some course corrections.

April is the Cruelest Month

Unfortunately, April is going to have some crazy, crazy spending numbers. My accountant called yesterday to give me my tax bill. I owe $20,000. (I’m not joking.) The hospital called too. They wanted to let me know that I owe them $6800 for the ER visit in the middle of March. To cap things off, payment is due on the vacation that Kim and I booked a year ago. We’ll be headed to Greece and Italy in August — but we’re paying for it today.

Fortunately, I knew that some of these expenses were looming, so I have cash set aside to pay for taxes and our trip. (The ER visit was a surprise, obviously, and I don’t have money set aside for that.) That doesn’t change the fact that April’s expenses are going to be insane, though. It just means I’m somewhat prepared for the insanity.

The upside to having a $6800 hospital bill so early in the year? It gives me a chance to make maximum use of my health insurance! My max “out of pocket” is $7900 annually. Since it looks like I’m going to hit that, it makes sense to address all medical issues that are bugging me in 2019.

At the end of 2018, I had a net worth of $1,334,227.20. At the end of March, my net worth was $1,397,545.18. That’s a leap of more than $63,000 (or 4.75%). That’s great! In reality, this simply reflects a hot stock market. My investment accounts are up $77,933.04 this year (11.45%).

A hot stock market can cover a multitude of sins…

Source: getrichslowly.org

How This Former Zookeeper Paid Off Over $40,000 In Debt

Hey! Today, I have a great debt payoff story to share from Steffa Mantilla. She paid off $40,000 in debt so that she could be a stay at home mom and start a business. Enjoy!

My husband CJ and I have been married for over a decade.  You’d think with all that time married would come wisdom but it wasn’t until year 10 of our marriage before we really took stock in figuring out our financial life.

How This Former Zookeeper Paid Off Over $40,000 In Debt

How This Former Zookeeper Paid Off Over $40,000 In Debt

Like most people, we got into a routine and didn’t question what we thought was working.  We had surrounded ourselves with other couples who were living the same way we were. 

There was no impetus to change because we had created a comfortable echo chamber with a “Keeping up with the Jones’ mentality.”

Fast forward to today and we’ve paid off $100,000 in debt and are on track to pay off our mortgage within the next 3 years. 

While there’s no “easy button” on debt payoff, I hope that our story can help others see what’s possible and the steps we took to get there.  

More debt payoff stories:

Our Debts

In 2016, my husband and I were close to $200,000 in debt.  Around $165,000 was our mortgage, $12,000 in student loans, and $30,000 in consumer loans.  We were a dual income couple with no kids and lived like money was infinite.  Most of our friends had a similar lifestyle and seemed to be able to afford it.  

The problem was, we put our entire life on payments because we had the mistaken belief that we “deserved it” somehow.  Payments for already-experienced fancy vacations, new cars, and furniture ate up the majority of our paychecks.  

From the outside, we seemed like we were well off when in reality, we were one missed paycheck away from not being able to make the minimum payments on our bills.  

What Made Me Want To Change My Career

By the time 2016 rolled around, we had been married for 11 years and were ready to start a family.  I had also been in my zookeeping career for equally as long.

I had worked my way up from an Avian Intern all the way up through my ultimate goal of Senior Keeper for Carnivores.  While I had loved being a zookeeper all those years, I had reached the limit of upward mobility.  All higher positions were supervisory and were no longer working directly with the animals.  

When we were discussing our future family plans, it became apparent to me that my career wasn’t going to mesh well with my idea of motherhood.  Zookeepers work long hours, often starting at 6AM to get the exhibits ready by the time guests arrive.  They also work every weekend,  evening special events, and every holiday.  

I was also capped out on pay. 

Despite working a decade in this field, having advanced continuing education certifications, and the required degrees, I made merely $16 an hour (roughly $30,000/year).  The long, strenuous hours left me burnt out and wanting a change.

One day, my husband and I sat down to do our budget planning for a baby.  After looking at all of the costs, including childcare, if I continued to work in the same job, I would be making negative dollars

This, combined with rarely being able to have weekends or holidays off with my family, was a deal-breaker.  I’d essentially miss out on my child’s entire childhood if I stayed in this job.

I brought up the idea of becoming a stay at home mom and we set out to make a plan.

What Needed To Happen To Make This Work

In order for me to become a stay at home mom, our family budget had to be drastically altered.  Thankfully, while talking about finances was awkward in the beginning, we quickly set aside any embarrassment or feelings of guilt that we had.  

Open communication without judgement, finger pointing, or blame was the only way we were able to make a real plan that we could stick to.  While it was stressful since we were essentially broke despite both earning incomes, we instead used this to come together and strengthen our marriage instead of pull us apart.

By the end, we came to the conclusion that a few things needed to happen:

  • Pay off all our debt (except the mortgage)
  • Lower our frivolous household expenses
  • I’d need to get a job to make up the difference in our budget

Our Money Mindsets

As a wedding gift, we had received the book The Total Money Makeover.  Neither of us had heard of Dave Ramsey before and didn’t really have an interest in learning about him.  Thus, this book sat on our bookshelf for 10 years unopened.

It’s kind of interesting thinking back about how we had the tools for financial success right in front of our faces for literally 10 years without ever using them.  But, we weren’t mentally open to change at the time.  

I think the saying that “you can help someone who won’t help themselves” is especially true when talking about money.  Money is a personal topic that many people have hang ups about. In our case, I knew investing was good so we did that but never really had a problem with debt.  I assumed everyone had debt and all my friends confirmed that.

For CJ, he grew up in a household where you didn’t talk about money.  It was always a source of stress because there was never enough.  Then when he grew up and got his first adult job, there was a sigh of relief.  All restrictions were gone and he could spend how he wished instead of constantly being in a scarcity mindset.

Even though we came from very different money backgrounds, we both were missing solid financial knowledge.  Neither of us had been taught about building wealth or living a debt-free lifestyle.  

This was a huge paradigm shift that we each needed to overcome in order to truly get on the same page and work together.

How We Got On The Same Page As A Couple

I love reading so I quickly devoured The Total Money Makeover in one day.  But no matter what, I couldn’t convince CJ to read the book.  He thought of it as “work” and he’d rather read for relaxation.

So I used my training in operant conditioning to subtly leave hints and clues about.  CJ and I now joke how I “clicker trained” him into getting on board. 

During car rides together we’d listen to the Dave Ramsey Podcast. I’d talk about how neat it was hearing other’s debt-free screams and then we’d discuss what we’d do if that were us.  Could we ever achieve that?  How are these people able to do this and we can’t when we’re earning more money than them?  

The best persuasion was learning about others achieving their financial dreams.  Dreaming together and making plans for our financial future was instrumental in giving us an achievable goal.  

Now it wasn’t just some vague idea; we had concrete plans for how we wanted the next 20 years to go.  We could eliminate financial stress and truly live a life we never thought was possible.

Our Plan To Pay Off Debt

So back to the debt.  We had around $42,000 that needed to be paid off before I could become a stay at home mom.  We weren’t a brand new couple so we did have some savings and investments.  Everything was disjointed and not well organized though.

After looking at our current financial state, we saw that a lot of the debt could be wiped out fairly quickly with the money we had in various places.  

Here’s where we took money from:

  • Sold stock from my childhood mutual funds that my parents had set up as a teaching tool. (~ $2,000)
  • Sold company stock from CJ’s job that was bonus compensation. (~$3,000)
  • Emptied out our $15k Emergency Fund down to $1,000 ($14,000)

These were the immediate quick wins that we could do.  We now had $23,000 left in debt to tackle.  

Rearranging our budget was where we found our largest consistent monthly savings.  After tracking our spending for a few months, we saw that we were spending an insane $800 a month on eating out and for entertainment purposes.  This was on top of the $600 we already spent on groceries for two people.

While we do live in a city where things cost more, it wasn’t enough to justify hundreds of dollars every month.  We were going out for dinner or drinks with friends whenever we were invited.  We never said “no” and our bank account was weeping.  

I also started to take any overtime that was offered.  I’d either come in to work on my days off when coverage was needed or I’d volunteer to work extra evening special events.  This also made it easier to save because a lot of my free time was being used up so I couldn’t go out with friends.

After rearranging our budget and adding in overtime pay, we were able to free up around $1800/month to go directly towards debt. It took 12 months for us to pay off the remaining debt.  During this time I got pregnant and now had to figure out what to do about my soon to be eliminated income.

Making Up The Deficit In Our Budget

Fast forward to me having a baby and being out on maternity leave.  During this time I was still being paid since I had sick days accumulated from the past 5 years.  I was working with my boss to try and see if a part-time or few days a week position could be created.  

Ultimately, while they were willing to work with me somewhat, it still wouldn’t have been financially viable due to the cost of childcare.  

After switching gears, I started talking to other zookeepers who did pet sitting as a side job.  They mainly did weekend pet sits or before and after work drop-ins.  I picked their brains a bit and then decided to offer up my services on Rover.

The reason I chose Rover was that there was already a built-in client base.  I knew I could get clients by highlighting my experience with animals.  Who wouldn’t trust their dog with someone who worked with cheetahs and lions?  By using Rover, I didn’t have to do any outside marketing and ended up having a client wait list.

I also made it clear that I’d be bringing my baby along with me to all dog walks or cat sits so I only took on small or elderly dogs and cats.  I met all clients ahead of time to do behavioral observations and stroller testing to ensure it would be safe. 

In the end, I took on 2 mid-day dog walk clients and numerous cat sitting clients. Our budget was going to be $500 short once my maternity pay ended but with these pet sitting clients I was making $500 a month bare minimum.  And I didn’t need to worry about childcare.  

Paying Down The Mortgage

As I got into the hang of mom life and my child grew older, I started looking into creating my own business.  I was now a self-taught personal finance enthusiast  and Certified Financial Education Instructor (CFEI) so I started my blog Money Tamer.  I was able to write blog posts during my son’s nap time and learned as much as I could about online business.  

My blog is now monetized and the income I take from it goes directly towards our mortgage principle.  Any extra money that CJ earns also goes towards paying off our house early.  We’ve sold things we no longer want or need to consignment stores or used online marketplaces.  

Over the past three years, we’ve been able to put close to $55,000 towards paying down our home making our total debt payoff close to $100,000. 

Our next goal is to have our house paid off in an additional 3 years or so.  

Final Thoughts

Getting out of debt is possible even when you feel lost.  So many people grow up in households where money is taboo and many schools barely touch upon the subject.  Even if you think you’re too far gone, I’m here to tell you it’s never too late.

We had been married and spending with abandon for over 10 years before we got our act together.  The biggest factor in our success was our change in mindset.  We started seeing money as a way to build freedom into our lives rather than surrounding ourself with consumer goods.

If you’re in a couple, it’s paramount that you have meetings to dream together.  You both need to create a dream you’re both working towards so that you aren’t tempted to derail one another.  When one of you is struggling, the other is there to help keep you on course and vice versa.  

This is the route we took, and while it’s not complete yet, we’re well on our way to being able to reach our goal of financial freedom.

Author bio:  Steffa is a Certified Financial Education Instructor (CFEI) and founder of the personal finance website Money Tamer.  She is an online entrepreneur who built her business while being a stay at home mom to her toddler.  Steffa has paid off over $100,000 in debt and now teaches others how they can get their finances under control to do the same.

Are you trying to pay off your debt? What are your dreams for life after debt?

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Source: makingsenseofcents.com

Pizza Delivery is for Millionaires

My son and I are having a beautiful Saturday night here at home. The sun is setting over the mountains outside my bedroom window and I’ve just finished baking a pizza which I am about to serve up for his dinner.

Although our day has been very simple, there has been an underlying magic within it that triggered an epiphany that I just had to write to you about. Because within this simple moment seems to be the secret to pretty much everything.

We woke up to a cloudless blue sky and were treated to summer-like warmth even though it’s November. I served up a French toast breakfast and then we ate together as we made plans for our day. We decided the first stage would be some computer work for him, while I went out to do some yard work and a bit of maintenance and cleanup on my construction van, to get it ready to lend to a friend.

Stage Two was our big walk downtown. Little MM wanted to get some shots of old buildings as part of an assignment for photography class, and I wanted to fix a minor leak in the roof of the MMM HQ Coworking building, so we decided to combine the errands. The walk was long and adventurous and we even stopped for some exorbitant ice cream cones on the way, courtesy of a gift card I received for helping someone last month.

We got it all done – Little MM got his 24 required shots, I fixed the roof and also ran into my co-owners Mr. and Mrs. 1500 who were setting up the building for a group breakfast tomorrow. So my boy and I strolled the 1.5 miles home through the sunny leafy autumn streets of Longmont and settled in for the night.

I popped one of my homemade pizzas into the oven. Because it was a big one, it was going to take at least 25 minutes to cook so I figured I’d use that time to shower off the day’s dust and sunscreen. But then I noticed my hair was starting to get a bit out of control so I gave myself a quick haircut before the shower.

And as I stepped out of my room, dressed in clean clothes and feeling sharp and healthy and arriving in the fancy kitchen I built last month just as the oven beeped to indicate the pizza was finished, I realized that this is the secret to wealth. Days like today. Monetary wealth for sure, but also every other kind of wealth.

We had just enjoyed an almost perfect day almost effortlessly, just by having the right habits in place.

We had a shitload of fun, socialized and exercised and advanced the projects that are important to us. But simultaneously, we spent very close to zero dollars, and left the world mostly unscathed as we finished our day.

The beeping of that oven full of homemade pizza was what really set off the epiphany in my head.

“Damn”, I realized, “even with all this excess money building up over the years, it didn’t even occur to me to order a pizza. It’s just automatic, and thus faster and cheaper and healthier, to make my own.”

Plus by avoiding the delivery I am saving my neighbors from one gas-powered car bringing an unnecessary extra serving of danger and pollution onto our street. It’s a three-way win with no losing involved.

Ordering a decent extra-large pizza including tax, tip and delivery: $20
Dad’s Homemade pizza: about $4
Difference: 500%

Sure, the difference here is only sixteen bucks, but I wanted to highlight the percentage difference instead. Because if you apply this philosophy of efficient, automatic habits all through your life, it really does tend to cut your costs so that your life becomes 2, 3, 4, or even 5 times less expensive.

So I thought to myself “WHY does anyone who is not even a millionaire yet, or even worse who has a mortgage or credit card debt, still do something as frivolous and easily avoided as ordering a pizza?*”

With that example drawn out in detail, let’s look at some of the other details of this day:

New kitchen in my latest frugal fixer-upper house in progress. Even the toaster is fancy!

My new kitchen which made that pizza cooking so enjoyable was built on a total budget of about $6000 including changing the floorplan, electrical, plumbing, cabinets, countertops and all the appliances.

This is less than half of what custom-ordered cabinets alone would have cost, and a full kitchen remodel of this type usually tops $25,000. But by getting assemble-it-myself cabinets from Ikea and my appliances from Craigslist and doing all of the work myself, I cut the cost by about 75%, while earning plenty of great physical exertion and satisfaction at the same time. Savings: about $20,000 or 80%

My son is in the public middle school rather than in the private school across town, which is where some of the other multimillionaire parents send their kids. If the private school were better for his needs, of course we could afford to send him there too. But we gave the local option a chance and it has turned out to be an incredible place for him. Savings: about $20,000 per year or roughly 100%

We chose walking as our means of transportation, and if we were in a rush we would have ridden our bikes. This habit of not driving doesn’t just save me gas and maintenance money, it also allows me to keep an older vehicle. I have a 1999 Honda van that is still in sparkling new condition.

She just reached drinking age, all cleaned up for her first can of Coors Light!

It stays new because I barely use it, because I have designed my life to be within an entirely muscle-powered radius. But this brand-new van is worth less than two grand and insurance is about twenty bucks a month. Maintenance is less than $10, registration is $5. Savings versus owning an “average” $35,000 American car and driving an average amount: about $600 per month or 90%.

We didn’t go “shopping” (100% savings), watched a movie at home instead of the theatre (100%), I cut my own hair for the something-hundredth time (100%), we advanced our health rather than chipping away at it (100%), and built this warm caring relationship with each other as well as with our friends (priceless).

And there were all sorts of other less tangible things working in the background too. I bought a commercial building and started this coworking space as a way to pass the time and spend time with old and new friends – the same reasons that someone might buy a vacation home in the mountains or at the beach.

But instead of costing me a few thousand dollars per month and requiring 100 miles of driving every time I visit, this building is just a pleasant walk from home and it generates thousands per month in cashflow and appreciation. It is great for the mental and physical health of all of our 75 members and growing, and we all save money by being a part of this community.

Mr. 1500 and I hosting a party at MMM-HQ for the first screening of the Playing with FIRE documentary, April 2019

The funny part of all this is that today was a completely normal day for us – most of my days are very similar to this one. The only unusual part was that I happened to take a step back and actually notice it. And that is really the point of this whole article:

We get used to our daily routine, and think of it as “normal”, even if it is completely ridiculous.

In recent months, I have just had my eyes re-opened as I have had more contact with people who are living more typical American lives than me. Their normal is different than mine, so when I visit I happen to notice the differences – more car trips and impulse purchases and pizza deliveries.

These people are not living lifestyles that appear exorbitant at all, and their houses aren’t packed with expensive things. But these little 5-to-1 differences just silently happen, quietly and consistently and add up to perhaps $100 per day, when compared with a more streamlined lifestyle.

And $100 every day becomes $36,500 every year, and if you invest that conservatively it will compound into about $520,000 every decade.

$520,000 per decade.
Just from the tiny mindset switch between
“hey lets order a pizza”
versus
“Hey, let’s throw a pizza into the oven.”

I really think this is important, and as this whole “FIRE Movement” thing grows, some people are getting soft and complaining that Mr. Money Mustache is “too extreme”, and so we should take a gentler and easy path and let our spending get sloppy if that is what’s right for us.

The thing is, this is usually just wrong. It’s laziness rather than practicality. Because Mr. Money Mustache is already plenty spendy, and plenty sloppy – well beyond the level required to live a happy life.

I can afford to live this way, because I’m old and wealthy now. If you are still young and poor, you should be spending less than me, not more.

So, pizza delivery is for millionaires, and it’s also time to put away those car-clown keys and get back on your bike. We’ve still got work to do.


* Of course, this is a perfect-world generalization. Real life has room for joyful exceptions and imperfections. But you have to know the reality of what you should be doing, before you can safely start making exceptions like ordering your pampered ass a pizza.

Source: mrmoneymustache.com

How to Navigate the Airport Rush During the Holidays

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The holiday season is the biggest travel season of the year, and traveling during the holiday season, especially with kids, can be super stressful. AAA forecasted that 112.5 million people traveled in the holiday season in 2018, and sometimes it feels every single one of them is in the airport with you at once! Here are 5 ways to keep your sanity if you have to navigate the airport while traveling this holiday season.

A little bit of planning goes a long wayEspecially if you are flying with young kids, make sure that you are planning your travel smartly. Yes, that red-eye flight or 6 hour layover looks like it won’t be a problem back several months ago when you booked the flight, but now that it’s impending, you might be starting to second-guess yourself. If you do find yourself in an unenviable situation, don’t just ignore it. Make a plan for it (and if you’re traveling with young kids, you might as well make 2 or 3 backup plans too!)

Keep track of your flights

One of the things that I highly recommend is to keep track of your flight reservations. Every couple of weeks, log on to the airline’s account and make sure that your flights still have the same time and you still have the same seats that you picked (if your ticket allows you to pick seats). Airlines are changing their flight schedules all the time, and the more time you have to make changes, the better. The worst thing that can happen is that you don’t find out about a flight change or an aircraft swap until the day before, when there isn’t much you can do.

Another thing I usually do, starting the day before my flight when I check-in, is to look at where my flights are, and where those planes are coming from. I use FlightAware.com to do that kind of research – you can put in your airline and flight number and it will show you not only the status of YOUR flight, but also where your plane is now.

By looking at where my plane is now, I usually know about flight delays BEFORE the airline itself acknowledges it. More information can help you plan your day and get a leg up on making alternate arrangements should you need it

Consider an airport lounge

If you do have an extended layover in an airport, you might want to consider checking if your airline has an airport lounge and how much it costs for entrance. Many credit cards come with access to the Priority Pass network of lounges, which allow you complimentary airport lounge access.

If you don’t have a credit card that gives lounge access, you can investigate how much it costs for a day pass. Most lounges cost $30-$50 for a day pass, though many admit children under 12 for free. Generally I wouldn’t recommend paying that much for a day pass, but it depends on your situation. Look at what you might pay for food and drinks at an airport restaurant and you may find that a day pass to an airport lounge isn’t that much more.

In addition to a quieter place than the terminal and complimentary food and drinks, many airport lounges have a separate children’s area which can be a lifesaver on a long layover.

Sign up for TSA Pre®  

Another travel benefit that comes with some credit cards is a $100 credit towards Global Entry membership. If you have Global Entry membership, you also generally will receive TSA Pre on your domestic flights. Depending on where and when you’re traveling, this could be a huge lifesaver to keep you from spending a ton of time waiting in an endless airport security line.

Many of the credit cards that give Global Entry / TSA Pre are premium cards with annual fees north of $450. But here are a few cards with smaller annual fees, including some that waive the annual fee the first year.

Be smart about checked bags vs carry-ons

Our final tip to keep your sanity in airports while traveling this holiday season is to take a step back and consider whether checking bags is better for your situation than just taking carry-ons. There are pros and cons to both situations and you need to decide what works best for you. Our family of 8 has done it both ways. When our kids were younger, with all the baby gear we toted around, we tended to check bags. Southwest Airlines and their 2 free checked bags on every flight were huge – I remember a Southwest flight to Reno where between checked bags, carry-ons, strollers and car seats, we lugged 17 pieces of luggage through the airport! We’ve now gone more towards not checking bags and just taking carry-on luggage. Not only does that save on bag fees, we also don’t have to wait at baggage claim or worry about the airline losing our luggage. But my kids are now all old enough where they can take care of their own carry-on luggage. If you have younger kids who can’t manage their own rollerboards in the airport, then you might consider checking your bags, even if you have to pay extra for it. You don’t want to have to be lugging around multiple suitcases through the airport on top of making sure your kids stay happy and safe.

I hope these tips have given you some ideas to de-stress your holiday airport travel. Got another tip? Leave it in the comments!

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Source: mint.intuit.com