How to Forget the Joneses and Embrace Frugality Instead

Embrace Frugality

Have you been quick to dismiss frugality? If you’ve found yourself trying to keep up with the Joneses, it’s easy to think frugality restricts us. We’re conditioned to spend our money on the newest things to hit the market in order to appear “cool.”

(Apple Watch, we’re looking at you.)

We don’t think twice about how it affects our financial future because we’re so focused on the present.

Unfortunately, that often ends in a story of debt, living paycheck to paycheck, or not having enough saved up for retirement. That’s where forgetting about keeping up with the Joneses and embracing frugality instead comes into play.

Put the Focus Back on You

Chances are, your friends are so absorbed in their own lives, they’re not taking the time out of their day to think about how your bank account is doing. They’re not checking in with you to see if you’re maxing out your 401(k). After all, do you?

You’ve probably heard it before, but no one will care about your money — meaning, money in the bank, in your retirement accounts, and what you have invested for your future — as much as you do. In most cases, trying to keep up with your family, friends, and colleagues isn’t going to lead you in the right direction when it comes to being financially responsible.

The first step in fighting the need to keep up with anyone else’s spending is to simply put the focus back on you and your financial situation. Stop caring about what others are doing, and create a list of priorities and goals for yourself.

Your Financial Future Does Matter, Even Now

It’s easy to live in the moment and give into impulse purchases, or to think, “oh well, I get paid next week.” But that’s the wrong way of thinking about things.

You need to start considering how your larger purchases fit into your financial plan. (And if you don’t have a financial plan, now is the time to make one!) This is where that list of priorities and goals factors in. Will buying a $3,000 TV cost you down the road? Does that eventually translate into working for an extra year and delaying retirement?

Start thinking about how your purchases affect your finances, both in the present and the future.

Frugality Probably Doesn’t Mean What You Think It Does

Frugality is a mindset, and it simply means being financially responsible. It’s not about cutting back all the time, or going crazy clipping coupons (unless, of course, that makes you truly happy and fulfilled). It’s about focusing on what’s important to you and spending intentionally on those things. In that way, frugality allows you to live the life you want to live.

Notice there’s nothing in there that says to deprive yourself. Being a tightwad isn’t the same thing as being miserly. You can absolutely spend your money, but the key is doing it in a way that makes you happy.

Think about where the majority of your money goes. Do you spend on things that make you happy? Or are you spending on things because that’s what’s “socially acceptable?”

For example, do you have a cable subscription so you can keep up with the shows everyone in the office loves to talk about, but don’t actually enjoy watching them? Do you get your hair and nails done every other week to look a certain way, even though you’re perfectly happy doing without? Did you lease a $300 per month vehicle because that’s what everyone in your family does?

Start thinking for yourself and stop following the herd.

Are You Being Wasteful?

Sadly, sometimes keeping up with the Joneses results in a lot of waste. Look around your house. Are there any items you bought just because everyone else did that are now collecting dust?

The fact is, fads change, and they change quite often. Buying into them only creates waste, especially when you’re buying things for extrinsic reasons. If things don’t actually matter to you, or they aren’t valuable in your eyes, then don’t buy them.

Purchasing new things constantly pulls you into a cycle of waste (and sometimes, debt). There will never not be a time where nothing new is being promoted in the media. You need to pull yourself away from the allure and go back to that list of priorities and goals.

Ask yourself if the item you’re considering buying will actually be useful to you. If you don’t think you’ll use it more than once, or will lose interest after a month, hold off on the purchase. There’s no point in bringing more stuff into your house that will just become clutter in a matter of months. That’s the definition of throwing money down the drain.

Embrace Frugality

It’s time to embrace frugality and forget about keeping up with the Joneses — or anyone else, for that matter. It’s time to make a choice: a secure financial future, or a future where your financial freedom is uncertain?

There are far too many individuals stuck in the second situation, being forced to work a few extra years (or never being able to retire), simply because they weren’t financially responsible years ago. Don’t let that be you.

It comes down to this: embracing frugality and intentional and meaningful spending will give you wealth, and keeping up with the Joneses won’t. It’s an easy choice, but a difficult battle. One worth fighting to win.

Why (and How) You Need to Plan for the Cost of College

College

The Money-Guy show is back this week and Brian and Bo are talking about the importance of figuring out how to pay for college.

In light of a recent New York Times Op-Ed piece written by Lee Siegel, Why I Defaulted On My Student Loans, Brian and Bo wanted to offer more helpful and proactive advice to parents and students out there contemplating the cost of college.

Fidelity published a great article around the same time, titled How Much College Can You Afford? The Money-Guys take a look at both sides of the coin in this episode and suggest how you can plan for the cost of college (so that you don’t need to worry about defaulting on loans).

How Planning Ahead Can Prevent Dire Situations

After reviewing Lee Siegel’s story, Brian and Bo discuss how proper planning, including calculating how much student loan debt you could reasonably afford to take on, can help avoid those kinds of financial situations.

Another article, Student Loans and Defaults: The Facts, was published after Siegel’s piece ran and took a deeper look at the details. This piece reveals that Siegel graduated from Columbia University with a bachelor’s degree and two master’s degrees. Obviously, that must have cost a pretty penny! Considering Siegel wanted to be a writer, were three degrees even necessary?

The typical writer’s salary isn’t going to cut it when paying back loans for three degrees from an Ivy League school. Siegel attempted to blame the broken student loan system for his predicament, but there’s an element of personal responsibility to consider here, too.

Don’t let this happen to you or your kids. There’s no reason to consider defaulting on your student loans and ruining your credit score because you didn’t plan ahead properly.

How to Plan Ahead for College Expenses

How can you plan ahead for college, especially if you’re a parent whose kids aren’t sure what they want to do or where they want to go? Fidelity’s article has some great insights.

First, you need to consider salary projections. If your child knows what they want to major in, they can use this handy calculator from finaid.org to figure out how much debt they can truly afford. The average starting salary for a particular field is taken into consideration, and this provides you with a reasonable estimate of how much student loan debt your child will be able to handle based on that salary. Student loan debt shouldn’t exceed more than 10% – 15% of your income.

Second, create a realistic budget. Figure all the possible costs associated with college — not just tuition. Include post-graduate education if it’s required for the field your child wants to study.

Third, encourage your child to help pay for their education. According to Fidelity’s article, more and more parents are choosing this route as they plan for college alongside their retirement. (After all, there are no loans for retirement!) Students can work part-time during college, live at home and commute, go to a public university (instead of a private college), or set aside savings.

There’s no excuse for not planning ahead. You don’t have to end up in a situation where you think your only option is to default on your loans. Defaulting has serious consequences that Siegel downplayed in his article.

When you sign your promissory note, you’re making a promise to repay your loans. Be responsible about your choices and fulfill that promise.

What’s Your Money Personality?

Money Personality

We all have intrinsic habits based on how we grew up, experienced formative periods in life, and how we internally relate to the world. You may have already heard of the Myers-Briggs personality test, defined by Extraversion/Introversion, Intuition/Sensing, Thinking/Feeling, and Judging/Perceiving — but did you know you also have your own money personality?

It’s true! And knowing what kind of money personality you have can help you better understand how to make decisions around your finances. Being aware of your natural tendencies and characteristics can help you make improvements to any negative money habits you may have.

Money Personality Types

Much like the Myers-Briggs test, it’s possible to be a combination of many different money personalities at once. Also, even if you have a seemingly “negative” money personality, it doesn’t mean that defines you entirely. These money personalities are starter descriptions on how you relate to money, but you may have a combination of two or more personalities.

The following money personalities are based on two qualities: Savers and Spenders. Read the descriptions below to see if you lean more toward the spender personality or saver personality, or see if you fall in between!

The Impulsive Spender

The Impulsive Spender purchases things, goes out to eat, and enjoys life without planning ahead. While the Impulsive Spender may like the idea of a budget, they rarely stick with it for a long period of time.

If the Impulsive Saver makes enough money, they can generally go through life not really noticing how their impulsive purchases affect them. In addition, Impulsive Spenders with a sufficient salary generally feel less anxiety about their finances because they are able to buy what they want and need, when they want and need it.

But being totally carefree about finances — even when you make a lot of money — can lead to trouble. Things can and do go wrong and the unexpected happens.

If an Impulsive Spender doesn’t make enough money, they may reach the end of the month stressed out about finances. An Impulsive Spender may also have a lot of “stuff” in their house that they don’t need, which may clutter up their space, leading to more stress. Even an Impulsive Spender with a high salary may suffer, as they’re letting too much discretionary income slip by and not investing it for retirement.

The Carefree Spender

This spender makes purchases without thinking about his or her bottom-line, often because they lack the know-how to create an effective budget. Unlike an Impulsive Spender, they may not care they have to subsist on ramen at the end of the month, but they may not know why it’s happening.

Similar to an Impulsive Spender, Carefree Spenders usually have less anxiety about their budget. Carefree Spenders may prefer this scenario, as they may have chosen a career that doesn’t pay well on purpose. Carefree Spenders may have a more casual attitude about their life purpose that doesn’t center on money.

But without an effective budget, a Carefree Spender may not have the necessary funds in retirement or to survive a setback (job loss, accident, disability). A Carefree Spender that has an important-yet-underpaid job, like teaching or social work, needs to set a budget as soon as possible. Even if they don’t care about material possessions or living an extravagant lifestyle, Carefree Spenders need to put aside a small savings for those “just-in-case” moments.

The Thoughtful Spender

A Thoughtful Spender is someone who thinks of everyone else first, and themselves last. They’re the person who shows up with the perfect gift or sends “thinking of you cards” just because they really were.

Thoughtful Spenders are givers, and get a lot of affection in return. If they fall on hard times, Thoughtful Spenders generally have a wide network of people to contact for support.

Like the Carefree Spender, the Thoughtful Spender generally doesn’t have a lot to show for their purchases at the end of the month (other than goodwill of family and friends). Unless the Thoughtful Spender has a high salary to compensate for their purchases, they are short-changing themselves by buying gifts for everyone else.

The Thoughtful Spender doesn’t have to stop getting thoughtful presents for people, but may want to consider giving the gift of time, or less expensive gifts (like bringing over food, or homemade gifts) instead.

The Avoidance Saver

The Avoidance Saver may be an introvert by nature, and they use their money-saving habits as an excuse to not hang out with people. While the Avoidance Saver may be very close to family, and have a few friends, they likely aren’t the ones to socialize at or after work.

The Avoidance Saver, if they are investing well, is likely to have a large retirement savings when the time comes. Depending on the Avoidance Saver’s passions, they may be the type to meticulously calculate their savings and even plan an early retirement because of their diligent avoidance of spending any money outside of necessities.

Depending on how much avoiding the Avoidance Saver does to save money, they may suffer from a lack of promotional opportunities. In many industries, networking with peers leads to more growth opportunities. Going home right after work may keep the Avoidance Saver from promoting faster or having access to other opportunities.

In addition, by avoiding some activities to save money, the Avoidance Saver may not get to enjoy some of their prime years. Avoidance Savers should prioritize activities over things, and carefully spend money in accordance to their priorities throughout the years.

The Obsessive Saver

The Obsessive Saver is, well, obsessed with saving — and often other money-making ventures, like investing and side hustling. Well-versed on all things related to saving, investing, and building a portfolio, the Obsessive Saver is often motivated to go above and beyond to educate themselves and work hard. Their reward? Watching their investments grow.

But the Obsessive Saver’s enthusiasm for new products (like new stocks) could potentially lead them to make dubious investments. In their quest to maximize their investments, Obsessive Savers may also keep their money in the stock market longer than is prudent, as stock investments should decrease the closer you get to retirement. The Obsessive Saver may want to consider hiring a financial planner to help keep their core investments safe, while still allowing them some room to make riskier yet profitable bets.

The Apocalyptic Saver

The Apocalyptic Saver is a money hoarder, plain and simple. Whether the Apocalyptic Saver thinks the banking system is going to collapse, or they were burned by the stock market and don’t trust it any longer, the Apocalyptic Saver saves their money either in cash, in bonds, or a little bit of both.

In their quest to have the safest savings, Apocalyptic Savers may miss out on tremendous gains from the stock market. If they only keep their savings in a savings account, they risk losing money to inflation. Apocalyptic Savers have to balance their desires for safe investments while still maximizing returns to take care of themselves in the future.

What’s Your Money Personality?

Do any of these personality types sound familiar? It’s likely that you identify with one more than the others — although most of us probably fall somewhere on a spectrum rather than in the extremes. Knowing your type can help you identify strengths to rely on, and it can also help you pinpoint potential trouble areas.

If you do see negative money habits creeping into your everyday interactions, it’s good to know it sooner rather than later. After all, your money personality isn’t fixed forever. If there are habits you’d like to improve, set goals and take action to make the changes you want to see with your money management!

A Baby, a Wedding, and a House

Engagement Ring

The Money-Guy Show family has been extremely busy lately! We’re excited to celebrate a number of big life milestones with the leaders of Tightwad Nation.

This show is a bit different, as Bo is busy welcoming Baby Hanson to his family. Gabe joins the show today as a guest co-host. He’s another UGA grad and soon-to-be CFP® — and he just got engaged!

To celebrate these big events in the lives of our Money-Guy family, this show goes through some great information, details, and resources on finding the right engagement ring and getting started with your wedding planning. Even if you’re already married, Brian and Gabe take a deep dive into this subject and provide a lot of knowledge that you could pass along to other friends and family members who have yet to hit this milestone.

Fascinating Facts on Engagements — and the Rings

  • 61% of guys consult with girlfriends before buying the ring
  • 27% of brides call best friends after proposal
  • 2,000 couples get engaged at Disney World
  • 14.7 months average length of engagement, and December is the most popular month
  • 37% of brides completely surprised

When you’re ready to go shopping for a ring, make sure you read this article from 1982 (yes, 1982!). It’s from the Atlantic, called Have You Ever Tried to Sell a Diamond, and it goes well beyond just a article. It’s a well-researched, informative essay on this subject.

The article helps you understand the true value of diamonds — and how diamonds came to be the popular choice among couples getting engaged. There’s nothing wrong with buying a diamond ring if that’s your preference, but know that most rings aren’t investments.

How Much Should You Spend on an Engagement Ring?

Consumer driven websites have higher averages and rules of thumbs. Other, less biased sites will be lower. Common “rules” state that you can spend 1 to 3 months’ worth of salary on an engagement ring.

But the rule you probably need to follow? Forget the rules. Brian says the ring should be timeless, and you don’t have to spend more money than you can truly afford. It’s up to the person buying to determine what makes sense on the financial side.

There’s another interesting article from The Huffington Post makes connections between more expensive rings and a higher chance of divorce. The article also states that women whose weddings cost $20,000 or more were 3 and ½ times more likely to get divorced.

Getting a Good Deal on an Engagement Ring

That being said, Gabe explains that you can do some legwork and get a great deal on a ring. First, you need to make sure you’re financially prepared to get engaged and married. You need a firm financial foundation before you jump into .

Here are some more of Gabe’s tips:

  • Budget, budget, budget!
  • Understand what your significant other wants, and see where that falls into your budget. If it doesn’t, consider how you can lower the cost or generate more money to
  • Know the diamond quality scales
  • Familiarize yourself with the “5 Cs” of diamonds
  • Don’t forget about the metal used for the setting of the ring.

Be sure to tune into the show today to pick up one big piece of knowledge Gabe shares to save more money on an engagement ring — he and Brian explain an important action he took before buying.

You’ll also want to listen in to the very end to grab a list of apps and tools that can help you stay financially on track through the wedding planning process!