Frugal in the Fruitlands

One of the greatest concerns in my financial life right now is my saving rate. While the average U.S. savings rate is below 1%, my personal rate is only around 7% (higher if you count pre-paying the mortgage). If you believe David Bach’s Automatic Millionaire books, one needs about a 10% savings rate to be well-off and about a 15% rate to be wealthy - so I am missing the mark there.

The reason I don’t save more is simply there’s no more room in my budget. Housing takes up a huge chunk of our budget, and everything left over must account for electricity, oil, maintenance and gas for two cars, phones, internet, TV, and a small slice for entertainment. I feel like we continue to cut where we can, but we’re living pretty narrowly as is.

Maybe I just need to be making more money.

Several months ago Millionaire Mommy Next Door (please note the new address) did a series of “abundant life” visualizations where she imagined how she would acquire that extra money and how she would spend it.

So I’m doing what MMND did: I’m inviting extra money into my life. Today, the amount I’m imagining is $10,000 a year extra, or a gross income for myself of $55,000.

The Power of Creative Visualization

Wikipedia defines “Creative Visualization” as “seeking to affect the outer world via changing one’s thoughts.” Lest this seems like nonsense to many of you, let me assure you I’m a hardcore empiricist myself. I have been personally involved in visualization experiments where there was a significant main effect of visualization on final performance.

But don’t take my word for it - one of the best-known studies of creative visualization involved Russian athletes (as mentioned in the Wikipedia article above). Over four conditions, those athletes who spent 25% of their training time doing creative visualization outperformed all other groups, including the 100% physical training group.

On a similar note, I’m reading T. Harv Eker’s Secrets of the Millionaire Mind. Eker makes the point that millionaires think differently than us lower class schlubs about money. This changes how we act around money, which affects how much of it comes into our life.

Why Only $10,000?

“If visualization is so great,” you might say, “why limit yourself to $10,000 extra? Why not visualize yourself as a millionaire?” After all, Mr. Eker says that the non-wealthy tend to think in terms of “thousands rather than millions.”

There’s a simple reason: it’s a big step to visualize yourself as a millionaire if you’re just managing to pay the bills and stash aside a little each month. Just ask those people who have become instant millionaires via the lottery: within a few years, most are back to their previous standard of living, no wealthier and no happier. (This Google Answers thread links to some relevant studies). If one doesn’t know what to do with a million dollars, there’s no use inviting it into your life.

$10,000 extra dollars… that, I know what to do with.

Brainstorm Ways to Bring More Money Into Your Life

Here’s my list:

• My company is being acquired by a larger company, which may mean higher pay and better benefits. Being more proactive rather than reactive at work may go far in this situation, though it’s hard to quantify how far.
• If all else fails on the J-O-B front, there’s always changing jobs to software/web development. That’s about the entry level pay for such a job, if not more.
• Hang my shingle out for the various “side hustles” (that’s a popular word in the blogosphere right now) I can perform. Some of these include:
  • Web design. I will need to finally put together my web portfolio to get this going!
  • Tutoring. I can tutor French and statistics. An ad on Craigslist and sign in my library would be cost-free ways to advertise.
  • Teaching. I can submit a proposal to teach non-credit courses in web design and/or blogging at my local community college.
  • Housesitting/petsitting. I think after housesitting for the head of the Objectivist Society and getting locked in his bathroom in the middle of the night in my pajamas, I can handle anything.
  • I can work harder to monetize this blog, or I can work on other topics I would feel more comfortable monetizing. I’ve considered, for example, starting a costuming blog, and using my expertise there to sell fabric through affiliate sites. Something like Kyle’s Learn Spanish On Your Own might be valuable as well, using French, the other language I speak.
  • I can sell stuff I don’t need or want anymore (Kung Fu DVDs, I’m looking at you)

Obviously I don’t want to do all these at once - the hunter that hunts two animals catches only one, to use a PETA-unfriendly metaphor. The idea is that the path to $10,000 is wide open.

Now, What Would You Do With This Money?

This visualization is not complete without a vision of how the extra money will be spent.

An income of $55,000/year would boil down to $2,115 every two weeks (I’m using my current pay schedule for simplicity’s sake). Adding this income won’t move me up a tax bracket, so I’ll be paying the same tax rate.

We’re in the 25% bracket, but according to my paycheck, I only withhold 22% in tax (Matt must make the rest up on his withholding). 22% of $2,115 is $465, so my “take home pay” will be $1,652 - approximately $307 more than my current take-home pay.

Now, if I add some of that extra money to my 401k I’ll be changing my taxable income, but let’s simplify this and assume all that extra money comes after tax.

• I’ll contribute $130 extra ($225 total) to my emergency fund until I have at least six months of mortgage expenses saved up.
• I’ll contribute $140 extra ($196 total) to my retirement fund
• I’ll contribute $37 to my “fun” fund, to be saved for things like my yearly vacation with my mom.

A Simple Visualization

In addition to the techniques above, I’m imagining myself counting out a pile of 10 $100 bills - $1,000. Then I’m imagining 10 piles just like that.

How about you: what amount of money are you comfortable inviting into your life? How would you get it? What would you do with it?

9 Comments »

In October 2007, I successfully tackled the goal of not dining out for a month. I’m hoping for a similar success in October 2008.

My goal for next month is to reduce my Internet exposure. I’ve realized that as I increase my blog/social network “face time,” my ability to concentrate on any one idea is decreased. There’s a good reason for this - I am surrounded by inspiring blogs and innovative people, who are always throwing new ideas my way; new ideas I inevitably feel I need to act on. This constantly distracts me, making it hard for me to focus on any one important goal.

Of course, “reduce my Internet exposure,” isn’t very SMART (specific, measurable, attainable, realistic, or timely), so here is the more concrete detail

For thirty days, I will:
Use PageAddict to limit the amount of time I browse “play” sites (i.e. LiveJournal, Gmail, Google Reader) to 45 minutes per day, per computer (work and home).

I originally had a much stricter goal here (30 mins per day per computer, plus a detailed outline of do’s and don’ts), but I realized the simpler it is, the more attainable it is. My Internet dependency (addiction?) is deep, and I’ve got to start small.

In preparation for this, I’ve been using PageAddict to classify certain pages as “play,” so that when the time comes I can’t cheat by finding different distractions. Obviously, this system is not perfect, but I am hoping it will at least be a helping hand to keep me in line.

Working on Frugal in the Fruitlands, or on the LARP I’m writing, is acceptable, though I will strive to do more offline.

You can do your part as a reader of this blog by reminding me of my goal. Anybody who emails, IMs, or otherwise communicates a reminder to me (i.e. “it’s 6 o’clock… are you reading blogs?”), will get a personal mention on my blog at the end of October, with a link to some of your best content.

1 Comment »

Many money management programs, such as Your Money or Your Life, or The Simple Dollar’s 31 Days to Fix Your Finances, are at heart based on a simple premise:

Determine what your life purpose is, and spend money according to that.

But what happens when you can’t figure out what your life purpose is?

This is the place I’m in. This is why these programs always stump me.

I should probably qualify that as an atheist I don’t believe in a cosmically-ordained life purpose. But I do believe that we gain a lot of direction and meaning from establishing a life purpose based on our personal values and identity. And if I knew what those were, I’d be going there right now.

I feel like I’ve been playing with identity since I was first aware of what it was. Growing up, when identity was as simple as “what do you want to be when you grow up?” I never had a standard answer to give. One day I wanted to be a veterinarian; the next a paleontologist; the next a truck driver - whatever interested me at the time. There was also a sense that I was always acting; trying on different roles to see which suited me.

The problem is, I haven’t made any progress since then. I still don’t know “what I want to be when I grow up,” and the answer changes tremendously based on outside forces. I’m envious of those people who, for example, “have always known” they wanted to be a particular profession.

When I’m asked to answer alternate life design questions like “What would you do if you had all the money in the world?” or “What would you do if you had only a year to live?” I just don’t know. The purpose of these questions is to get at what’s really important to you, but I can’t even begin to prioritize. I have a lot of interests, but do I have a lot of passions?

Sometimes I think the only thing I’m passionate about is doing something that will put my name out there, where people can see it - fame, if you will. But what do I want to be famous for? Since I’ve stuck my thumbs in so many pies without really committing to anything, there’s nothing I’m at which I’m skilled enough to answer even that question.

Writing is one thing I keep coming back to, but I’m not sure it’s the answer. I’m not sure something I so often loathe doing can be considered that. I just seem to have a modicum of talent at it, and it is able to invoke a flow state - not always, but sometimes.

Actually, my life tends to be woefully short on flow states, which is part of the reason this question is so hard to answer.

While I would have loved to made this a series on “how to figure out your life purpose,” this is just not a question I can answer. It’s a question that troubles me daily.

What are your thoughts on this matter?

3 Comments »

Back in June, I struck up a conversation with Nick Pagan about multiple streams of income, productivity, and cognitive science after I discovered his blog. Nick writes meaty articles on all of these topics (and more!) and he kindly offered to write a guest post for FinF. Eager to merge our two (blogo)spheres of influence, I suggested the topic “multiple streams of income with limited energy.”

This topic stymied both of us as a blog post, but it did make a fruitful discussion to share with my readers! Before sharing it, I would encourage you to check out his ebook “Understand How to Operate Your Brain Perfectly” - you can get it for free by subscribing to his newsletter, and it’s mentioned at several points in here.

All emphasis is mine, to bring out the juiciest bits :)

Lise: When I originally asked you to write a guest post, I gave you the topic “multiple streams of income on limited energy.” This topic had been sitting on my “things to write” list forever, and it seemed like something you could speak to. But the problem I was having - and, I suspect, which you were having, is what having “limited energy” means. It’s a situation I find myself in often, but I’m not sure I’ve taken the time to better define it.

Does it mean depression (at times in my life, it has)? Does it mean actual, physical energy, as in, I have to sleep a lot (this is also true of me). But I think most often what I actually mean is a lack of motivation, i.e. I can’t bring myself to work on something I ostensibly like.

I’m curious, then, what your first impression of the term “limited energy” is? Do you associate it with any particular activity in your life? Do you associate it with a lack of motivation?

Continue Reading »

2 Comments »