How to recover from an 'expensive' month

Every once in a while, I have a month where I blow my budget. Like not by a few bucks, but by a serious chunk of change. Usually, it's when there are large one-time expenses (i.e. car repair bill, surprise taxes, holiday shopping, or paying for an upcoming trip). These things may or may not be planned for, but as the month wears on, I usually start to feel like I've lost complete control over my spending. Usually that means I feel one of two ways: either I just throw my hands up and say 'screw it' and just buy whatever I want or I become a miserly old man and never step foot outside my home unless it's to go to work to make more money.

Neither response really seems healthy, especially when the situation is beyond my control.

So I've kind of come up with a quick fix for when I'm feeling pretty crappy about my spending.

• Sit down and look at exactly what I spent my money on. When I look at my budget and see that I've been good about all of my discretionary spending and the only thing that's messing up my budget is the one-time expense, I start to feel a little better about things. I'm not a failure, or at least this isn't evidence of it.
• Figure out how to prevent the expense from happening again. Young people are notorious for underestimating the ongoing cost of purchases. Maintenance is just one of those things that just comes with territory. So when I recognize that fact, and agree to pay the few bucks to keep my car in tip top shape, I start to plan for it and include it in my budget. This helps even out my spending expectations and prevent surprises from cropping up in the future.
• Accept that sometimes, expensive things are just going to happen. When I look at the hospital bill I'm still paying every month, I wince a little and am amazed that it's still there. Then I start to kick myself for getting all worked up about something that turned out to be nothing. And then I finish that thought with the old adage "nothing is more important than your health" and become grateful that I'm still here. Sometimes life is just going to throw us curve balls. That's what an emergency fund is for.

I'm going to have to deal with this feeling this month, with the repairs on my car and buying plane tickets for two trips this summer. My Mint account is not going to be looking pretty. Later in the year I'm going to have to lay out some more money for these trips, but it'll be worth it and I'll go through my process again to feel better about it. In the end as long as you’re not wasting money, what does it matter really?

How do you recover from an expensive month?

The cost of rushing

Back in October I wrote about getting out of the habit of leaving for work late in the mornings, thereby causing me to rush the whole way. It was working for a while, leaving for work earlier than I used to, but then things started slipping again.

One day, I left a few minutes later than late, and I knew that I wasn't going to make it to work in time. So I was rushing, hoping to make up the time somewhere along the way.

I hopped in the car, threw it in gear, checked my mirrors, and backed out. So far so good.

I park in a garage at my apartment complex, and one thing that's always bugged me has been how tight the turns are from one level to the next.

Well on this morning, as I headed around the corner to exit, an SUV was heading up at the same time. This happens fairly regularly and so I hit the brakes and pulled to the side. They slowed to a stop at the same time. Being in the rush that I was, I didn't bother to wait for them to finish the turn, I decided instead to squeeze by instead. And squeeze I did. Right against the edge of the concrete wall. Ouch.

Needless to say I was pissed at myself. Many obscenities were yelled all the way to work. Which I was now even more late for, since I had to stop and check the damage, as well as drive slower since I was paranoid about doing anymore damage to my car with the way the day had started.

So I recently took my car to the body shop to get an estimate on the damage. The mechanic took a few minutes to explain to me all of the different things they would need to do to preserve the resale value of my car. I kept a straight face to preserve my negotiating ability, but inside I was wincing at the mention of every little/big thing they would have to do.

Well with some fairly hefty discounts, I'm looking at a total cost for repair and rental car (I still need to get to work) of about $1000. $1000. $1000 because I took a longer shower than I planned.

I don't plan on going through insurance, because I don't want to have to pay an increased premium for the next couple of years. Not to mention that I would have to pay my deductible, which would leave me paying the same amount anyway.

Hopefully, I will learn my lesson now. We shall see.

Deciding when to take a vacation

A problem you probably never expected to have, but will probably experience when you start working is deciding when to take a vacation. I know...seems like a real nice problem to have, but it's actually very real.

It's strange how much of your life is dictated by the school schedule. Summer vacation, winter break, spring break, and numerous other holidays all filled the schedule prescribed by school. Now...things are not so directed. You may get 2-3 weeks of paid vacation time (in the US, workers in other countries often receive more), but when do you take it?

I've been having this problem recently and honestly, it can lead to burnout. Not a good thing.

A day on the beach would be nice.

The hard part is deciding when it's appropriate. Maybe you don't want to leave your boss alone with a mountain of work that never seems to dwindle. Or maybe you just feel like no one else takes vacation, so it might look bad in your quest to climb the corporate ladder. Or maybe you just can't make up your mind on when is exactly the best time to schedule some R&R and effectively postpone it forever.

Whatever the reason, it's important to realize that you can't work indefinitely. There's a reason that you have vacation time. Without a break, your overall productivity will suffer and you will probably be miserable.

My rule of thumb has been to take a day when things are getting a little too hectic at home or when there’s a decent reason to. For example, my brother and his fiancée recently purchased a home, and so I took a few days to spend helping them get settled in. Nothing crazy, but it was a well deserved break and I felt completely energized to come back to work and not have to paint another wall again (I joke, but painting for hours can be exhausting). Other times when I need to make a bunch of calls and head to a shop that's only open during business hours. Or maybe just an appointment at the doctor that you'll want to recover from without having to deal with everyday stress at work. Don't think that you're being selfish or irresponsible taking care of these things, they're just as important as many other parts of your life and will probably keep you from stressing out about it at work, or trying to fit too much into your lunch breaks.

Truthfully though, I don’t think I’ve taken enough days, and it’s starting to impact my work ethic. I’m just not as chipper as I once was. So I think I’m going take a few days soon, even if just to enjoy some time to myself and take care of an extended chore or two. 

How do you decide when to take a vacation? Do you feel guilty for being away? Or are you just happy to relax or do something you needed to get done?

Updated commenting system

A few minor aesthetic changes, but more importantly, I've moved the comment sytem over to Disqus. I never really liked the previous system and only recently started learning about how to change it. This should be an easier system to use, not to mention it supports threaded comments. As always let me know what you think.

Recognizing and creating opportunities

Life is filled with opportunities; you just may not recognize them when they appear. This is something I've come to realize over and over again recently. There are a few quotes that pretty much explain this concept super succinctly. I figure I might use them to explain some of my thoughts/realizations, hopefully without sounding too preachy.

“Luck is what happens when preparation meets opportunity.”

-Seneca

Often, I hear about how people have been super lucky to achieve a goal. I think of those who landed cushy jobs, or who found their true love right away, or numerous other things. Personally, while I do believe in luck, I think luck is credited for a lot of instances that are instead based on preparation. Whether that's physically preparing yourself, such as learning everything you can about your industry for when you get a chance introduction to your dream employer, or mental preparation, such as knowing exactly what you want from a life partner before you meet them, I think preparation is key. How can you get what you want, when you don't even know what it is, or what it might take to get there?

“Don't wait for extraordinary opportunities. Seize common occasions and make them great. Weak men wait for opportunities; strong men make them.”

-Orison Swett Marden

I've known a few people, who always seem to be able to create an opportunity out of seemingly nothing. It's almost frustrating to know someone who could meet a random person at a small event and somehow transform that into meeting a head officer of an organization a few weeks later. It's absolutely amazing. The thing about these people is that they created an opportunity; it didn't just fall into their lap. They listened to what this new person was saying and figured out how they could create an effective bond and probably help both parties out. A huge skill in being successful.

“Opportunity is missed by most people because it is dressed in overalls and looks like work.”

-Thomas Alva Edison 

One thing I have to keep in mind when I see people who seem to have it all, is that often times they had to work extremely hard to get to where they are. I'm thinking of founders of startups in this case. In the media you might hear about the next Mark Zuckerberg or Kevin Rose, and think that they got lucky and struck it rich. Well like miners who find a vein filled with precious metals, most times you don't hear of the times when these people previously failed or the thousands of others who didn't make it because they gave up. It took a lot of work for these people to get to where they are, and this work was effective effort.

Effective effort is working towards your goals rather than just working to work hard. Think of it this way: if you are trying to push a large boulder up a hill, sitting at the bottom squeezing it as hard as you can is a lot of work, but it's not going to get you any closer to the top of the hill. You have to push that boulder up that hill to succeed. You have to work towards your goals. Define what you want, then pursue it.

I've been trying to recognize opportunities more and more these days, and so far I think it's been working. However, I've also been watching them drift by, leaving me kicking myself. I've had wonderful interactions with people that have opened up new doors because I immediately recognized connections and opportunities. I've also met people and thought hours later how much more we both could have gotten out of a conversation had I been prepared. Hopefully I'll be prepared and ready more often than not.

How do you view opportunities? Luck or preparation? Something you can control or do they just appear? Hard work or just random occurrences?

I'm officially saving for retirement

Last week there was a giant individual retirement account (IRA) movement amongst personal finance bloggers. Check out this link to find out more about the movement. I didn't participate because well...I didn't know about it (I missed the memo). However, now I get to talk about it on a personal level. Today I contributed to my Roth IRA for the first time. Not opened; I contributed. I opened an account a while back just to get that step out of the way. But now I actually contributed to it, mostly because this week was my birthday week. This week I turned 25.

I don't talk about retirement very often, because well I don't know that much about it and it's pretty far away. One thing I do know, is that in order to save up enough money for my retirement, some estimates put it at as much as $1.5 million, I'm going to have to start early.

So what is a Roth IRA?

It is a form of an IRA which is a classification of accounts dedicated solely for retirement purposes. These accounts usually receive some tax benefits from the government to encourage people to save for retirement. There are two main types of IRA's: Traditional and Roth. The difference is mainly what money you can contribute and what tax benefits you can realize. The traditional IRA allows you to contribute pre-tax money, and watch it grow over the course of decades and then pay taxes when you withdraw the money for retirement. A Roth IRA allows you to contribute money you've already been taxed on, but when you withdraw you withdraw it tax-free. There are numerous reasons why you would want to pick one over another, which I'll go into in a later post. For now, just picking one is better than not picking any.

Most financial calculators will tell you that if you start contributing to a retirement account early in life, usually by age 25 is the example age, the resulting returns can be pretty astounding. The one in the above link shows that by contributing $2000 a year ($166 a month) from 25 to 35, totaling $20k, I would retire with roughly $340k. Alternatively, if I saved $2000 a year from 35 to 65, totaling $60k, I would only retire with $260k. Big difference. As such this was part of my quarter century crisis.

I didn't contribute much more than this.

Now I didn't contribute a whole lot, since I don't have a whole lot to spare these days, but getting started is the key. My goal is to double my contribution next year, and continue doubling every year until I'm contributing upwards of $400 a month.

My contributions are automatic withdrawals that way I never miss the money or forget to transfer it (automation is your friend and definitely my friend). 

The question I have to answer is what to do with the funds until I've amassed enough to invest it in a traditional way. It's usually not cost effective to buy one share of a stock or mutual find at a time. Honestly I'm not sure what to do.

Have you started saving for retirement yet? What did you do with the funds, how did you invest it?

Find more time (Part 2)

Part 2 of a two part series on finding more time in your schedule. Find part 1 here.

Stick it out

Some days I just don't have any free time to give up, and so it's not exactly finding more time, but every once in a while I will just choose to stay up an extra hour to finish off all of the things I need to do. During this time I am super efficient because I'd much rather be sleeping and I know that the longer I stay up the worse the next day at work will be. Usually I leave simple, but time consuming tasks for this time, since I don't want to make a mistake because I was tired. Folding laundry, cleaning the bathroom, and doing the dishes all fall into this category for me. Even if I'm tired the next morning, I feel great when I look around and all of my laundry is finally put away.

Eat well/exercise

By taking care of myself, I have more energy and feel more active. This translates into doing more with the time I have. If I feel like crap, I usually spend some time convincing myself to get up and do something, which is wasted time. When I feel great, I can easily get through more than I thought possible in just a few minutes.

Use dead time

My best friend for multitasking.

I like to make phone calls to friends and family while I'm driving to and from work. I've driven that same route hundreds of times and so it's pretty easy to hold a conversation and not get distracted. These conversations are usually pretty tame and just minor updates about life, nothing too involved, but important for maintaining relationships. Tidying up around the house is another good time to have conversations. Also, often when I'm cooking I'll put on a podcast and catch up with news.

Finding more time isn't about being able to work harder on something or being productive for sake of productivity, but instead I think about it as giving me the opportunity to do something I always wanted to do, or spend time with friends while we are still available. None of these changes are worth doing, if it means giving up what you love in life just so you can spend more time doing things you hate.

What are some of the ways that you're able to create more time in your daily life?

Find more time (Part 1)

Part 1 of a two part series on finding more time in your schedule.

One of the first things I noticed when I finished school was how much more free time I had. It's amazing that when I had classes, homework, and extracurricular activities, I actually had less time despite now working 40+ hours a week, plus commuting time. I've found that being able to leave work at work, when I get home the evening is completely mine. Weekends are even better. No projects hanging over my head. 

But somehow I still find myself running out of time to take care of things that I want to. Here are a few tips I've implemented that have helped me 'find' more time. 

Cut back on time wasters

My current 'time waster'.This is the probably the biggest change I made that drastically increased the amount of time I had to do the things I really wanted/needed to do. For me it was videogames, but for many people I know it's watching TV or obsessively researching hobbies. There's absolutely nothing wrong with these activities, and in fact I've incorporated playing videogames back into my life. The problem lies with the duration. Have you ever spent an entire Saturday doing something only to look at the time and realize that you’ve essentially lost an entire day? I only call these activities time wasters when I look back and wish I had done something else with that time.

Watching an episode or two of your favorite show every day is not going to kill productivity, and will probably make life more enjoyable. But watching 3-4 hours every night will. What I've done is just cut back an hour or so of playing videogames. So when a weekend comes along and I just want to play, I do. But instead of playing for 6 hours straight, I'll play for an hour or two and then call it quits for the moment. I go off and do something else instead and if I finish what I want to do early, then I can go back and play.

This takes a little bit of discipline, but when you think about it, shaving an hour off a time waster, roughly 20-30% of the time, won't drastically reduce your enjoyment. It will however allow you to do most of the chores around the house, cook a healthy meal or two, and maybe participate in a different enjoyable activity. I keep trying to read a few books I've had lying around and once I started siphoning off an hour here and there, I’ve been able to get through a lot of the current book I'm on.

Work on being efficient

This is actually a lesson I learned from playing a lot of real time strategy games. In these games you usually build a base of operations, collect resources, and fight off enemies to win. A key strategy in most of these games is to make sure that you upgrade different elements of your resource and fighting forces. By spending a little money, you earn money faster and spend less money fighting. Basically an investment. I try to use those same principles in my daily life. An example would be doing house chores. It's amazing how much time it can take to clean a small apartment and get things back in order. However if I take a few minutes to think about the best order to clean in, I can shave minutes off every time I need to clean, effectively giving me that time back. My mom always told me to clean from top to bottom, so I clean the kitchen counters before the floor so that I don't push crumbs onto a clean floor.

Another version of this is getting organized. It's amazing how much time I've wasted looking for things when I should have been actually doing something. Here are some tips for getting organized in the home. I noticed immediately how much time I wasted getting ready to go to the gym, rather than actually exercising once I got myself in a rhythm and had my gym clothes organized and ready to just throw on. That was huge in getting exercise as a part of my daily routine.

Stay tuned for part 2, where I list some of the other habits I've made to squeeze out a few more minutes in the day.

Guest post at When Life Gives You Lemons

Check out my guest post about 5 Common Financial Mistakes Young Adults Make over at When Life Gives You Lemons. I've made most of these errors myself, well actually all of them, and I see my friends and family making the same ones as well. Check out some of Daisy's other posts, they're really fun. She writes about personal finance and her own struggles as a young adult balancing school, work, and life. And the occasional shopping trip. :-) 

Overlooked benefit of renting rather than buying a place

There's a lot of discussion about the financial differences between renting and owning. A lot of times you will hear personal finance gurus exalting the benefits of owning your own place over renting someone else's. These benefits often include: building equity in a property so that in a few years you will own it clear and free, getting the deduction on your taxes for mortgage payments if you itemize, and being able to customize your place to fit your needs.

I can't decide whether to rent or buy this place. Decisions, decisions.

These are all great points, and there's definitely something to knowing where you are going to live until you decide otherwise. Renting is often looked at as "throwing away money" and while this is somewhat true, that's a whole different argument. It’s possible in some markets to come out ahead if you pocket and invest the difference between what you pay in rent compared to what you would pay towards a mortgage and associated interest. Otherwise, all the money you pay in rent will never materialize again. At least not in your pockets.

There is one idea that I think is often overlooked, but I just can't get past: Where would I want to live for the next 5-7 years to make buying a house even moderately worthwhile?

I've lived in the Boston area for 6 years now and I'm still finding out about different areas all the time. Here's an example from today. I used to live in a part of Boston called East Boston. In order to drive to work, I would drive through a nearby area called Chelsea. I always thought it would be interesting to live there, but when I was looking for a new apartment, nothing fit my criteria. Now I'm on the hunt again and I decided to take another look.

Lo and behold, an awesome loft was available. I took a trip down there right after work to look around the area to get a sense of where things were. I thought I was familiar with it, but turns out I wasn't. As with any neighborhood, there are good parts and there are...not so good parts. I think this one was in the latter. As I approached the building, I passed not one, not two, but three police cars patrolling the streets. About a block away, two more police units were parked and had a group of young men posted on the wall. One more car rounded out the visit on the next block over. Doesn't really look like the kind of place I'd want to be. But now I know.

Even now, I can't imagine buying a property and committing to living in a neighborhood that I’m not completely familiar with. I actually love the fact that every time I move to a new area, I learn about a new neighborhood and more about the Boston area overall. I think this benefit is huge, especially for young people in a new city. One day I hope to be able to look at a neighborhood and know unequivocally that I want to stay there for a long time, but until then I’ll keep on searching.