Why frugality is an important part of personal finance

In a recent article in The Atlantic, Joe Pinsker shared some thoughts on why many ultrarich people aren't satisfied with their wealth.

There seem to be two reasons.

• First, people tend to ask themselves: Am I doing better than I was before? Do I have more today than I did yesterday? “All the way up the income-wealth spectrum,” one researcher told Pinsker, “basically everyone says [they'd need] two or three times as much” to be perfectly happy. It's the hedonic treadmill in action.
• Second, people can't help but compare themselves to others. They ask themselves: Do I have as much (or more) than the people I'm comparing myself with? Do I have more than other folks in my family? Do I have more than my friends? Do I have more than my co-workers? We measure our personal success by comparing what we have to what other people have. This is the proverbial “keeping up with the Joneses“.

While Pinsker's article is about the ultrarich, I think these tendencies apply to nearly everyone. Even me.

People in the middle class are just as inclined to hop on the hedonic treadmill. They're just as likely to compare what they have to what their friends have. The same goes for those who aren't well off. Even people in poverty get sucked into the comparison game.

In fact, I'd argue that for the poor and middle class, there's an added element. Time and again, statistics show that folks with lower incomes watch tons more TV than people who earn more. (Also here — and many more studies.) When you allow yourself to succumb to the “other world” of film and TV, you're exposed to more ideas about how people should and do live — even if these ideas are baseless. (It's like “The Grand Illusion” by Styx: “Don't be fooled by the radio, the TV, or the magazines. They show you photographs of how your life should be, but they're just someone else's fantasy.”)

The rich compare themselves to themselves and others. The poor do too but they also compare themselves to fictional characters on film and television.

The bottom line seems to be that comparing your situation to anyone is likely to lead to trouble. Whether you're comparing yourself to yourself, your family, your friends, or to people in Hollywood productions, doing so leads to a desire for more.

But it doesn't have to be this way.

Non-Consumer Advocates

Over the past few years, the early retirement movement has risen to prominence. People have figured out that they don't have to work for forty or fifty years at jobs they hate. If they manage to increase the gap between their earning and spending — if they can maintain a high saving rate — then then they can achieve financial independence at age fifty. Or forty. Or thirty-five.

Boosting income is a very important part of this equation, of course, but it's not the only piece of the puzzle. The fundamental equation of personal finance is this: Your wealth equals what you earn minus what you spend. Your spending plays a crucial role in how quickly you're able to build wealth and/or achieve your financial goals.

If you want to spend less, it's vital you resist the urge to compare yourself to others.

This is one of the FIRE movement's greatest virtues. From my experience, the folks in the early retirement community have consciously opted out of the comparison game. Thanks largely to the work of Joe Dominguez and Vicki Robin (authors of the classic Your Money or Your Life), financial independence is frequently framed as a life of non-consumption.

Here are some sample quotes from Dominguez and Robin:

• “If you live for having it all, what you have is never enough.”
• “How you spend your money is how you vote on what exists in the world.”
• “Americans used to be ‘citizens'. Now we are ‘consumers'.”
• “Consumption seems to be our favorite high, our nationally sanctioned addiction, the all-American form of substance abuse.”
• “Frugality is enjoying the virtue of getting good value for every minute of your life energy and from everything you have the use of.”

Dominguez and Robin helped to found the financial independence movement, and they founded it as non-consumer advocates. It helps too that Mr. Money Mustache, who has helped popularize FIRE in recent years, is also a non-consumer advocate. He's written extensively about topics like hopping off the hedonic treadmill and the virtues of frugality.

Obviously, not everyone interested in early retirement wants to be thrifty. Some people want to achieve financial indendence in order to pursue lives that cost money. They want fancy houses and fancy cars. They do want to have more than the folks around them. And that's fine.

Most of us, however, have come to realize that this fancy shit won't make us happy.

Note: While it's great that there's no pressure to spend in FI circles, I don't want to pretend that it's without competition. In fact, there's a sort of perverse opposite pressure. Too many people want to participate in frugal shaming and financial one-upmanship, racing to see who can spend the least. This sort of bragging is just as unhealthy as competitive spending and I wish that it would stop. But at least competitive frugality helps your finances instead of hurting them.

The Virtue of Frugality

While the non-consumer core of the FIRE movement naturally leads followers toward frugality, frugality has very real financial benefits regardless whether you care about consumption.

• The less you consume, the less you have to earn to support your lifestyle.
• The less you consume, the less baggage you have in your life.
• The less you consume, the sooner you can retire.

Like me, you've probably seen this math a million times. But I hope that, like me, you never tire of its beauty.

Let's say you have an average job. Maybe you're a box salesman (or saleswoman). You earn $50,000 per year selling corrugated packaging to industrial clients in your hometown. If you earn $50,000 per year and you spend $50,000 per year, you have no “margin”. If something goes wrong — you get sick, you lose your job — you have no choice but to cut back because your living expenses are the same as your income.

If, on the other hand, you spend only $25,000 per year, you have a buffer. If you suffer some sort of catastrophic box injury that prevents you from working for six months, you'll be better able to cope with the crisis. If you lose your job, you only have to find a job that pays $25,000 instead of a job that pays $50,000. By spending less, you give yourself more options for work.

The less you consume, the less you have to earn to support your current lifestyle. And the less you consume, the sooner you can retire in the future.

By maintaining an ambitious saving rate of 50 or even 70 percent in your twenties and thirties, you can retire when you're 40 years old instead of 65. This gives you forty years of freedom to do what you want with life rather than fifteen.

This table demonstrates the power of profit margin, the power of frugality:

Spending less makes all financial goals easier to achieve. As Dave wrote in his guest post earlier this week, frugality buys discipline — and discipline equals freedom.

Depriving yourself of certain “standard” choices now means you don't have to lead a life of deprivation when you're older. When you choose to spend less, you're not just boosting your bottom line. You're also gaining the time and freedom that would have been required to earn that money. Thrift isn't deprivation. It's wealth.

(This reminds me of Dave Ramsey's famous quote: “If you will live like no one else, later you can live like no one else.”)

Frugality and Me

So, why am I writing about this? Why have I been thinking so much about frugality lately? After all, I'm hardly a poster boy for thrift. I am by nature a spender. This is a known issue and has been all of my life.

That said, I do aspire to frugality. I admire frugal people. Because frugality is a core value of the early retirement movement, and because I spend much of my time with the FIRE crowd, their inclination toward frugality tends to act as a brake on my own spending. This is a good thing. And because many of my colleagues are non-consumer advocates, I find myself thinking about frugal alternatives (even if I don't always follow through with them).

This year, in particular, I've been focused on spending less. After writing about my plans for 2019 earlier this month, I've done my best to get back to basics. Here are some examples:

• Kim and I are both actively trying to spend less on food. So far, we're succeeding. (Minor victory: We both wanted to eat out at our favorite bar last week. Instead, she picked up a $5 frozen pizza on her way home from work. That probably saved us forty bucks!)
• Both of our cars are beginning to show their age. Kim's 1997 Honda Accord has never had any major issues, but currently has a variety of minor mechanical problems. My 2004 Mini Cooper has had two major repairs in the past two years. Right now, the sunroof is leaking, which isn't good during a rainy Oregon winter. We've talked about buying a new vehicle. (And we still might.) For now, however, I bought a 1993 Toyota pickup for $1900. We've become a three-car household — but those three vehicles have an average age of 21 years and an average value of $1500.
• After spending so much on home repairs during our first eighteen months in this house, we've been diving deep into DIY mode. This month, Kim has been painting the bedrooms. I'm repairing fences and faucets. There's still plenty that needs to be done around here, but we're going to take our time and learn how to do much of it ourselves.
• We're both out of shape and we know it. Our gym contracts have some time left on them, so we'll keep going for a while. Meanwhile, we've begun to set ourselves up for success here at home. We re-arranged the family room so that it's yoga-friendly. I set up an indoor bike trainer so that I have no excuse for not pedaling thirty minutes per day. We've both decided to reduce our alcohol intake.
• We've stopped thinking “new” and started thinking “used”. Twice this month, I've shopped at local thrift stores instead of defaulting to Amazon. I recently traded some concert tickets to my ex-wife for my old Nintendo Wii. We've been giving our used clothes and dishes to friends. Instead of meeting friends in restaurants for dinner, we're planning to meet at each other's homes. (How old fashioned!)

Frugality may not a natural thing for me but I can do it. Plus, it's fun. It's fun for me to challenge myself, to look at how and why I engage in consumer behavior — then to think about ways I can “opt out”.

As I mentioned at the start of this article, even the ultrarich compare themselves to others (and to their past selves). I'm just as guilty as anyone else. I always want more. Nothing is ever enough for me. I'm not sure why this is the case but it is. It's a reality that I have to deal with.

It's because of this constant craving that it's so important for me to spend time with my friends in the early retirement community. They apply peer pressure, but it's positive peer pressure. I see the frugal choices they make and I want to make similar choices. I hear how they get by with less and I want to get by with less.

“As you take your eyes off the false prize (of more, better, and different stuff), you put them on the real prizes: friends, family, sharing, caring, learning, meeting challenges, intimacy, rest, and being present, connected, and respected. In other words, those best things in life that are free.” — Joe Dominguez and Vicki Robin, Your Money or Your Life

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When to push, when to rest, when to quit

Imagine this:

You set out writing a novel by the end of the year.

You have your daily word count goal. You know exactly how your plot is going to go. And you set aside time at the beginning of each day to write. Great!

For the first few weeks, everything goes well! You write each day and you’re excited about how your novel is shaping up.

But then something happens. It starts to get harder and harder to write. Each morning begins to feel like a slog to hit your word count. Then, one morning, you get to your computer, boot up your word processor, put your hands on the keyboard, and … nothing. You don’t feel motivated to keep going with your goal to write a novel.

What do you do then?

The problem with traditional goals

Goals are great.

They can help you achieve success by focusing your efforts on a very defined objective. And coupling goals with effective habits that allow you to achieve them is even better.

But there’s a problem with the way we traditionally approach goals: We often pick the wrong ones.

There’s nothing wrong with goals like “I want to lose 10 pounds” or “I want to write a novel in a year.” Those are very lofty and achievable objectives to have.

BUT if those goals are arbitrary or don’t truly add value to your life, then why are you doing it?

There can be a lot of answers to this:

• “My friends/family are all losing weight. I want to try too!”
• “I saw an article about how the most successful people in the world wake up at 4am each day!”
• “I wanted to write a book because … well, I dunno.”

But if your goal doesn’t actually come from you, it’s not likely that it’s going to work out.

Here at I Will Teach You To Be Rich, we’re all about the Rich Life. That means focusing your time, energy, and money into the things that truly matter to you.

Not your friends. Not your family. Not the people on the internet who totally swear by the Paleo Diet.

That also means choosing your goals based on the things that matter to you too.

How to find out if your goals suck

If you’re wondering if you chose a goal you don’t really care about, don’t worry. We have a system that can help you find out whether or not you should keep going with your goal, pause it, or forget about it completely

And it all boils down to three areas:

• When to push
• When to rest
• When to quit

Let’s take a look at each area now and see what questions you should be asking yourself to see if you should push, rest, or quit.

When to push

Knowing when to push through our fears and challenges is crucial to getting the things we want in life.

However, it’s important to recognize whether or not the goals are really what you should be pursuing.

If you ever find yourself faced with the lack of motivation to get your goal done, start asking yourself the questions below. They’ll help clarify and reorient yourself in your goals.  

• Is this goal aligned with what I really want?
• Will not doing this activity today jeopardize my chances of reaching my goal in the time specified?
• If I don’t do this activity right now / today, will I regret it?
• Will not doing this activity today impact someone I care about in a negative way?

If you answer yes to any of these questions, think about pushing ahead with your goal. It’s only when you push through your challenges that you see the biggest growth in your habit forming.

When to rest

Sometimes it isn’t a matter of pushing or quitting. Sometimes you just need a break from your goals. A temporary breather to help you feel invigorated and motivated again.

These can be crucial for achieving any goal and avoiding the dreaded “burnout” — that feeling of working and grinding but without the sense of accomplishment or motivation. It can be devastating to your mental health and deadly to your goals.

That’s why we all need a little break sometimes — and that’s okay. To help you recognize whether or not you should take a break from your goals, ask yourself the following questions:

• Am I feeling drained, depleted, and depressed?
• Has my rigidity or commitment to doing this activity every day gotten in the way of my primary relationships?
• Can I take one day off to accomplish my goal in the time specified?
• Is participating in this activity allowing me to ignore other difficult or challenging issues in my life that need my attention?

If you find yourself answering yes to any of these questions, you might want to consider taking a breather. How long that break is depends entirely on your goals. It could be one day. It could be a whole week. No matter what the case, you’re going to want to take this seriously.

That’s because all could greatly benefit from a little self-care from time to time. No, this isn’t an excuse to overindulge or forget about your responsibilities entirely. It’s just a time to take it a little easier and reflect on your goals.

You might even find yourself asking, “Is this goal right for me at all?” In which case, you can move onto our next question:

When to quit

Sometimes, you might realize that a goal you were pursuing isn’t in line with what you actually want.

And that’s okay! You might feel a little dejected and disheartened by it, but you actually save yourself a lot of time and energy when you do.

Take it this way: Would you rather realize that marathon running isn’t a goal you want to pursue three months into training, or 11 months into training when you’ve sunk countless hours into your runs? The former, of course.

Be sure to ask yourself these questions if you ever find yourself lacking motivation to achieve a goal. They might just help you save a lot of time and mental energy:

• Am I completely unmotivated by this goal?
• When I imagine my ideal self one year / five years / 10 years from now, will this goal have contributed to that?
• Have I gained any ground at all in achieving this goal?
• Does this goal contribute to what I want to do and who I want to be overall?

These are perhaps the most important questions you can ask yourself. They ground you in the reality of what you want, and what contributes to that.

If you find yourself saying yes to any of the questions above, you should seriously consider either taking a rest from your goal or quitting.

But I get it: Quitting can be hard for top performers. But sometimes, that’s the best thing you can do for yourself and your future.

Avoid the Treadmill of Disappointment

Does this look familiar to you?

If you’re like the vast majority of us, then you should be very familiar with the Treadmill of Disappointment.

It’s a trap we all set for ourselves, where we set a lofty goal and ride a wave of motivation until we all come inevitably crashing down and feeling unmotivated completely.

The question now is how do we avoid the Treadmill of Disappointment?

Simple: We set good goals and form effective habits around them.

Don’t get me wrong; that’s easier said than done. That’s why I want to offer you something to help:

The Ultimate Guide to Habits: Peak Performance Made Easy

In it, you’ll learn the actionable steps to crush any goal through smart habits, including:

• How to set goals — the RIGHT way
• How to create and implement winning keystone habits
• How to make any habit last forever

Just enter your name and email below and I’ll send it straight to your inbox.

When to push, when to rest, when to quit is a post from: I Will Teach You To Be Rich.

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Discipline equals freedom: The difference between deprivation and depriving yourself

Financial independence and early retirement continue to attract mainstream attention. This is a good thing. Check that, this is a great thing. Of course, with this attention there are more naysayers and critics than ever.

One of the main criticisms of the FIRE movement — and of frugality, in general — is that those who seek FIRE are depriving themselves. Or leading lives of deprivation. On the surface, these two arguments may sound like the same thing but they're not. There's a big difference between “deprive” and “deprivation”.

Here are the definitions of these two words:

• Deprive (verb) — Prevent (a person or place) from having or using something.
• Deprivation (noun) — The lack or denial of something considered to be a necessity. The damaging lack of material benefits considered to be basic necessities in a society.

That's all very academic, isn't it? Let's take a deeper dive into the difference between deprivation and depriving yourself — and explore why one is actually a good thing.

The Difference Between Deprivation and Depriving Yourself

Life is full of choices, from the important to the mundane. Whenever you make a choice, you are by definition depriving yourself of the thing you didn't choose. When you choose to purchase a townhouse, you deprive yourself of a single-family home. When you choose to buy vanilla ice cream, you've deprived yourself of chocolate. When you enter one door, you leave another unopened.

Depriving yourself of something isn't necessarily bad. It's something we all do every day in the little choices we make. (As J.D. has noted, opportunity cost is what we give up in order to have the thing we choose.) Deprivation, on the other hand, is a different matter.

Look at the definition of deprivation again: The lack or denial of something considered to be a necessity.

To live in deprivation is to be lacking a need, not a want. Chocolate ice cream is not a need. You can deprive yourself of it, but that doesn't mean you're living in deprivation. (Although I'm sure someone out there who loves it may disagree.)

Clothing, food, and shelter are needs. To go without them is to be in a state of deprivation. But besides those, there aren't that many needs in life. By “needs” I mean needs in the strictest sense — those things we need to survive and continue breathing as human beings.

You might include access to medical care and access to transportation as needs. After that, though, it gets grey very quickly. Even transportation is a bit questionable as a need. You can live in a dense city all your life and walk to get food, clothing, and everything you need. I'm sure many do.

If you've traveled a bit outside of the first world, you quickly see how microwaves, dishwashers, TVs, and computers are just wants. Sure, some of these things might fall closer to needs on a spectrum of wants, but they're still luxury items.

Here's the curious thing (and the whole point of this article): By depriving yourself of things you want, you can protect yourself from a life of deprivation, a life where you lack the things you need. A little self-sacrifice in the short term can lead to prosperity in the long term.

Depriving Yourself to Avoid Deprivation

I love pumpkin pie. I really love it. My idea of eternal bliss is eating a good pumpkin pie 24/7, forever.

I only have pumpkin pie twice a year: on Thanksgiving and Christmas. (And to be honest, maybe a day or two after each of those holidays depending on how much is left over.) That's it. For the rest of the year, I don't have any pumpkin pie. None.

As much as I enjoy pumpkin pie, I make a deliberate choice to deprive myself of it most of the time. But remember the definition of “deprive”. I'm making a decision to not have it. It's not deprivation, though, because pumpkin pie isn't a necessity in life. It's not a need. (Although if I were allowed to redesign the human species from the ground up, I would make it so!)

But what if I had pumpkin pie more often? What if I started cheating? That's when deprivation would start.

Deprivation is a state of being. It's a noun. I choose to deprive myself of pumpkin pie the majority of the time because I don't want to live in deprivation. 

Confused? Let me explain.

If I ate pumpkin pie all of the time, the short-term result would be increased happiness because I'm indulging a want. But the long-term result would be that I'd start lacking things I consider to be actual necessities in life, such as my health. (As much as I love it, man cannot live by pumpkin pie alone!) And I'd lack discipline, the very thing that got me to financial independence. These things, to me, are necessities; to be without them would be living in deprivation. 

So, I deprive myself of pumpkin pie to assure that I'm not in a state of deprivation with my health. I deprive myself of many shiny “wants” in order to assure I'm not in a state of deprivation with my discipline. I'm okay with that because I gain much more than I give.

Discipline Equals Freedom

By depriving myself of pumpkin pie (and other fleeting wants), I've gained a healthy body and financial independence. I now have the ability to leave my job at any time — forever — and have plenty of money to live on.

I've gained copious free time to pursue my passions in life, reduced stress, more sleep, more happiness, and more fitness. I can race the twenty-somethings every Sunday on my bike and beat most of them. I've gained the awesome semi-retired lifestyle I now enjoy because I've deprived myself of many things. But the main thing I've gained is discipline.

My discipline is far from perfect. But what I do have has served me well in many areas of life, especially with money. The popular podcaster Jocko Willink has a tagline: “Discipline Equals Freedom”. If you're not familiar with Jocko, he's very very passionate about this philosophy (which is actually similar to J.D.'s “money boss” philosophy).

Discipline has indeed helped me reach financial freedom.

I suspect that many of the critics of the modern financial independence movement are probably deprived of the free time they really want, and deprived of the ability to be able to retire.

By not depriving themselves of certain things in life — expensive cars and other shiny wants — they've also deprived themselves of a key necessity in life, a necessity that could give them financial freedom: discipline.

They lead lives of discipline deprivation. As a result, they deprive themselves of freedom.

Consider your choices carefully. Depriving is just choosing one thing over another — it's an opportunity cost — so deprive wisely and deliberately. Deprive yourself of pumpkin pie for good health. Deprive yourself of shiny wants for financial stability. But don't deprive yourself of happiness.

Deprive yourself to create the life you want.

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The Secrets to Staying Positive in Poverty

It’s no secret that entering adulthood at this time is not easy, or cheap. Millennials, students especially, have been faced with a difficult progression into financial stability. It often feels like the system is built against you, especially if you belong to a marginalized community. Women are more consistently victims of poverty due to a [...]

The post The Secrets to Staying Positive in Poverty appeared first on Money After Graduation.

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#money #finance #investments

3 strategic ways to achieve your goals

Goals are great — but often, the ways we achieve those goals are tedious, time-consuming, and (let’s face it) boring.

Some examples:

• To run a marathon, you must train and run dozens of miles each week.
• To write a book, you must sit down and write thousands of words each day.
• To clean your house, you must … well, clean your house.

It’s this tedium that often results in people giving up their goals entirely — even if it’s something they really want to achieve. That’s the reason why gyms are chock-full of people at the beginning of the year but thin out dramatically by the end.

Luckily, there’s a way that you can work toward achieving your goals and build good habits, while having fun: A commitment device.

What’s a commitment device?

A commitment device is a method of locking yourself into a habit or behavior that you might otherwise not want to do.  

And there are essentially two types of commitment devices:

Positive devices. These are devices that give you a positive reward for performing different tasks. The idea is that when you associate that task with the commitment device, you create a positive feedback loop that makes it much easier to cement new habits.

For example:

• Listening to your favorite podcast while you work out.
• Watching a show on Netflix while you clean your living room.
• Drinking your favorite soda while you’re washing your dishes.

Negative devices. These are devices where you take something away or risk having something taken away to encourage you to follow through with a behavior or habit. The idea is that you force yourself to focus on the task by taking away the thing that is preventing you from focusing, or you do something that makes you risk losing something to force you to complete your task.

For example:

• Telling a friend that you’ll give them $100 if you don’t go to the gym every day for a month.
• Unplugging your television so you won’t be tempted to watch it.
• Throwing away all of your junk food in order to eat healthily.

While they’re called positive or negative devices, that doesn’t mean that one is better than the other! They’re just ways of describing how the commitment devices work. And whether or not you choose a positive or negative device depends entirely on your preference and what you want to achieve.  

Commitment devices are incredibly effective too. But you don’t have to take my word for it. Harvard released an article a while back penned by three doctors in behavioral economics that extolled the virtues of commitment devices.

“[Commitment devices] have been shown to help people lose weight, improve their diets, exercise more, and quit smoking,” the article says. “One randomized experiment, for example, found that access to a commitment device increased the rate at which smokers succeeded in quitting after six months by 40%.”

And it’s not just health goals. Commitment devices can help you adopt almost any behavior — such as fighting off mythical creatures.

The power of tying yourself down

Perhaps the most famous and oldest-used commitment device was in Homer’s The Odyssey.  

Our hero Odysseus was on his way home from the Trojan War when his ship encountered a group of sirens — mythical women who are somehow simultaneously beautiful and, er, also birds.

Source: NGV

Sirens have the ability to sing alluring, captivating songs that cause men to steer their ships into rocks in order to hear it better. Knowing this, Odysseus told his men to tie him to the ship’s mast and not undo him no matter how much he begged and pleaded.

While I don’t think you should go as far as tie yourself to a mast in order to achieve your goals…

Though I guess you can.

… you can use a commitment device — much like our hero Odysseus — as your veritable mast to keep you concentrated on your goals.

3 good commitment devices to get more done

Below are a few good commitment devices you can use to achieve your goals and build good habits.

Eventually, you’re going to want to create your own commitment device for whatever habit you’re trying to build. For now, though, these are good jumping off points.

Commitment device #1: Embarrassing social media bomb

This commitment device is good for time- or location-based goals like:

• Waking up early
• Getting to work on time
• Going to the gym

Here’s how it works: Using a social media scheduling dashboard like Hootsuite or Buffer, you schedule an embarrassing tweet or Facebook status to be posted at a certain hour. As long as you get to the dashboard before it posts, you can prevent it from posting.

For example, say you want to get into the habit of waking up at 6am. You could schedule a tweet to be sent out with an embarrassing message or photo of yourself at exactly 6:05am. That way, if you’re not up by 6, that message will post.

Alternatively, you can tell yourself that you can only turn it off at a certain location, like the gym or work. That way, you’ll only prevent the action from happening once you get there.

If you REALLY want to take it to the next level, you can schedule an automatic payment of $5 to a friend of yours at a specific time, so the only way you don’t lose your money is if you get up and turn off the payment.

Commitment device #2: Ice the problem

This is a tried-and-true commitment device we’ve talked about before here at I Will Teach You To Be Rich. It’s great if you’re trying to:

• Save more.
• Get out of debt.
• Curb your spending habit.

Here’s how it works: Take your credit card, debit card, checkbook — whatever is the cause of your overspending habit — put it in a bowl, fill the bowl with water, and put it in your freezer.

That’s right. We’re telling you to literally freeze your spending.

This does a number of things psychologically. First, it embraces the adage of “out of sight, out of mind.” If you don’t see your money, credit cards, or checkbook, the choice between spending and not spending becomes much more clear.

Second, if you REALLY want to spend money, you’ll have to spend time chipping away at an ungodly big block of ice in order to get to it. This gives you time to think about what you’re doing and whether or not you can live without whatever purchase you were about to make.

This sounds goofy, I know — but it works.

Alternatively, you can just give your checkbook, credit card, or debit card to a trusted family member or friend and they can hold onto it for you. But c’mon, the block of ice is way cooler.

Commitment device #3: Treat yourself

Here at I Will Teach You To Be Rich, we’re all about the Rich Life. That means spending and saving your money for things that you love.

The best part: You can leverage your spending in order to reward yourself for good behavior.

Charles Duhigg, habit-building expert and author of the NYT bestselling book The Power of Habit, says that any good habit is broken down into three components:

• Cue. The trigger for a behavior.
• Routine. The behavior in action.
• Reward. The benefit you receive from the behavior.

And the reward is the most important part of building habits.

Here’s how it works: When you finish a behavior or task as part of a habit you’re trying to build, you can reward yourself with something. This is a very powerful commitment device. That’s because you’ll be able to associate the behavior or task you do with positive emotions of getting the reward.

Imagine two people: Jimmy and Lucy.

Both set a goal to save $500 / month over the next six months. However, Lucy tells herself that she is going to treat herself to a $500 purchase of a pair of shoes if she saves that much. Meanwhile, Jimmy doesn’t set a reward for himself.

Who do you think is going to be most likely to achieve their goal? Lucy, of course. She has the incentive of a commitment device: The $500 pair of shoes. Jimmy, on the other hand, must rely on willpower alone. As such, he’s much less likely to achieve his goals.

That’s the power of a good commitment device. By acting as your proverbial mast, the commitment device keeps you grounded in your goals and makes you much more likely to achieve it.

Alternatively, you can reward yourself by pairing it with the behavior you want to adopt.

This is also known as “task batching,” and it works by grouping less enjoyable behaviors with ones you already enjoy.

Cleaning the house or washing dishes? Mix your favorite drink and enjoy it while you get your chores done.

Running on the treadmill? Load up your favorite audiobook or album to listen to while you work out.

By pairing things you like with the habits you’re trying to build, you’ll eventually come to associate that habit with good feelings — virtually ensuring it’ll be ingrained.

What’s your commitment device?

Now we want to hear from you: What are some commitment devices you’re going to implement?

Are there any you’ve used before to great success?

What do you recommend?

We can’t wait to hear from you!

3 strategic ways to achieve your goals is a post from: I Will Teach You To Be Rich.

from I Will Teach You To Be Rich http://bit.ly/2Wkh4TO
#money #finance #investing #becomerich

How to set goals and achieve them with the RIGHT reward

Chocolate can help you lose weight.

No, seriously. It can. Or at least that’s what Charles Duhigg, habit expert and author of The Power of Habit, says:

“Although it seems like very dissimilar rewards, it’s actually very similar in a neurological perspective … What happens is that chocolate is an extrinsic reward. You’re eating it and it tastes good. Over time, your brain will learn that there’s intrinsic rewards from exercise.”

When you set goals and find the right reward, you can build strong habit loops that last for a long time. That’s why we want to help you do just that.

Let’s take a look at how to set goals and achieve them using rewards, how to choose a good reward, as well as some resources to help you build great habits.

But first, let’s break down the issues with typical goal setting.

Why traditional goal setting sucks

Think about the last New Year’s resolution you set for yourself. It might have been to work out more, or maybe read a book a week, or maybe you just wanted to save more money.

Whatever it was, ask yourself: Did you get it done?

If you’re like the vast majority of Americans, you probably failed at achieving your NY resolution goals.

That’s because the problem with how you set goals is that they rely too much on human willpower — which we have a very finite amount of each day. Relying on it all the time takes away from that willpower until it’s depleted entirely.

Let’s take a look at that old nugget of personal savings advice that says you should cut out lattes or give up something else you love in order to save money. In your first few days of giving up lattes, you might be very motivated to stick with it. As the days go on, though, your willpower depletes until you revert back to buying lattes and forget about your savings goal entirely.

It might end up looking something like this:

This, my friends, is also known as the “Treadmill of Disappointment” — a cycle where we fluctuate between being very motivated and completely unmotivated. And it’s all because of willpower.

How, do we get off the Treadmill? Simple: With habits.

The power of Habit Loops — and rewards

Habits are the systematized solution to achieving your goals.

According to Duhigg, every habit you build has three parts to it:

• Cue. This is the trigger for a behavior.
• Routine. This is the behavior in action.
• Reward. This is the benefit you receive from the behavior.

Altogether, this creates something called a “Habit Loop,” which allows your habits to stick.

And at the heart of any good Habit Loop is a good reward. In fact, it might just be the most important aspect of building good habits.

That’s because it has the biggest impact on whether or not we stick with the behavior.

Let’s take a look at an example: Working out.

A typical approach to this might look like this:

• You go to the gym.
• You work out on the machines for 30 minutes.
• You go home.

Here’s what it would look like if you implemented the Habit Loop:

• Cue. You head to the gym when you wake up.
• Routine. You work out at the gym.
• Reward. You get a delicious breakfast when you’re done.

See the difference? One will likely result in you giving up the habit after a few weeks (or even days), while the other greatly boosts your chances because you’re rewarded for your behavior.

It subverts having to rely on willpower, because you reward yourself for achieving your goals.

THAT’S the power of a good reward.

Of course, it can work negatively for you as well. For example, smoking cigarettes.

A habitual, pack-a-day smoker is someone who has ingrained a Habit Loop that causes them to smoke cigarettes. Here’s what that Loop looks like:

• Cue. You wake up, or it’s lunch time, or work just got done, or you’re stressed — most anything can be a cue for smokers.
• Routine. You smoke a cigarette.
• Reward. You receive a euphoric buzz from nicotine.

Luckily, rewards can be used to counteract this. For example, whenever you get the urge to smoke a cigarette you go on a walk, or listen to music, or drink a soda. Whatever healthy reward can be used to replace your routine of smoking a cigarette.

Winning rewards for your goals

Let’s take a look at a few more examples of good Habit Loops you can build — and the great rewards that you can build with them.

Eating healthier

Potential cues:

• It’s breakfast, lunch, or dinner time.
• It’s the beginning of the week.
• You wake up before work.
• You arrive at a restaurant.
• You get hungry.

Potential routine:

• You learn to cook a new healthy recipe.
• You cook a week’s worth of healthy meals.
• You make a salad for lunch.
• You order a healthy meal.
• You snack on fruits or vegetables instead of junk food.

Potential rewards:

• You get to watch your favorite TV show after you cook a healthy meal.
• You have a “cheat meal” one day out of the week where you indulge in unhealthy food.
• You get to listen to your favorite podcast or music during work if you packed a healthy lunch.
• You treat yourself to a movie after you ordered a healthy meal at a restaurant.
• You get one serving of your favorite unhealthy snack at the end of the day (e.g., candy, soda).

Quitting an unhealthy habit

For giving up unhealthy habits, you have to first be able to recognize the cues, the bad routine that follows, and the reward you get from them. Some examples:

Potential cues:

• You wake up.
• You’re about to go to sleep.
• You work on a big project.
• You just got home from work.
• Something stresses you out.

Potential bad routines:

• You smoke a cigarette.
• You drink a beer.
• You watch Netflix.
• You browse the internet.
• You browse social media.

Potential rewards:

• Euphoric nicotine buzz.
• You enjoy the taste and feeling of drinking a beer.
• You’re amused by Netflix shows.
• You’re entertained by the internet.
• You get the dopamine hit from social media.

From here, you have to replace the routine with something that’ll give you a similar reward. This depends entirely on the routine.

For example, if you regularly smoke cigarettes, you can instead start going for walks or runs that’ll give you an endorphin boost. If you drink alcohol, you can start replacing it with sodas or La Croixs. Whatever works, as long as you have a good reward in place.

Reading more

Potential cues:

• You’re on a bus or an Uber.
• You’re in a waiting room.
• It’s the end of the day and you’re in bed.
• It’s a weekend morning.
• You just made a cup of coffee.

Potential routine:

• You read your book … that’s it.

Potential reward:

• You watch an hour of your favorite show on Netflix.
• You buy a new book after you finish your current one.
• You have a snack after you finish reading for a certain amount of time or pages.
• You watch the movie version of the book when you finish.
• You have a cup of tea or coffee as you read.

Working out

Potential cues:

• You wake up.
• You get home from work.
• You dropped the kids off at school.
• You finish your first cup of coffee.
• You eat breakfast.

Potential routines:

• Go on a run.
• Go to the gym.
• Lift weights.
• Start yoga routine.
• Head to a fitness class.

Potential rewards:

• Drink a smoothie.
• Drink a protein shake.
• Eat a hearty breakfast.
• Have a piece of chocolate.
• You go back to sleep.

Build habits for life

Choosing the right reward when you set goals is key to building good habits and accomplishing them.

To help you crush any goal you set out for yourself, we want to offer you something we’ve worked on to get you there:

The Ultimate Guide to Habits: Peak Performance Made Easy

In it, you’ll learn the actionable steps to crush any goal through smart habits, including:

• How to set goals — the RIGHT way
• How to create and implement winning keystone habits
• How to make any habit last forever

Just enter your name and email below and I’ll send it straight to your inbox.

How to set goals and achieve them with the RIGHT reward is a post from: I Will Teach You To Be Rich.

from I Will Teach You To Be Rich http://bit.ly/2HshHr3
#money #finance #investing #becomerich

Who has the best savings account in 2019?

Well, my friends, I need your help. I had been planning to research online savings accounts for an upcoming series of articles, but not for several weeks yet. Things have changed.

I recently received a $35,000 lump sum — I hesitate to call it a windfall for reasons that will be clear in a moment — and now I'd like to put it somewhere that I can earn more than 0.01% on my money! I want to find a good high-interest savings account.

But where? In 2019, which online savings account is best? Am I asking the right question? Is an online savings account the best place to put a mound of money like this?

First, let me explain why I'm even interested in finding a new savings account.

A Brief Tale of Heartbreaking Loss

As I've hinted a few times during the past month, in 2017 and 2018 I made three $50,000 investments in start-up companies. I dabbled in “angel investing”.

One of those investments, as I revealed last week, was in the retirement planning tool called NewRetirement. I also invested in the Financial Gym, an NYC-based financial advice company that takes a “fitness-inspired” approach to offering money advice to real people. (This concept is very similar to a business idea I had: a store that sells financial advice to everyday people. My friend Shannon had a better concept and she's created a killer business.)

Early last year, I made a third investment. I have a friend who is whip-smart and ultra-successful. She's started a couple of profitable companies in the past. She and her husband thought they had a great idea for a third, and although this particular concept was outside my area of expertise, I agreed to invest $50,000 in their company.

Well, things didn't go well. The company failed. I was afraid that with that failure, I'd lost all of my money. Fortunately, I hadn't. Earlier this month, I received a wire transfer for $34,869.73. After transferring $5000 to my business account (to help pay bills for this site!), I'm left with about $30,000 that I'd like to sock away somewhere that pays more than pennies. But where?

Seeking the Best Savings Account

The last time I went looking for the best savings account was in March 2007. At that time, banks were offering rates over five percent! Look at this screencap from GRS 1.0:

Based on reader feedback from that article — over 1000 responses! — I opened an online savings account with ING Direct. They didn't have the best interest rates the time, but their rates were very good and GRS readers loved them.

As you probably know, things have changed in the past decade. Interest rates are lower. Banks have folded or merged or been bought out.

That ING Direct savings account long ago became a Capital One 360 savings account. I still have it, but it's been a while since I used it actively:

As you can see, I'm earning 0.99% on my money. That's a lot compared to, say, a standard savings account at a brick-and-mortar bank. (I was mortified to learn recently that the family business has over $200,000 earning only 0.01% at a major national bank. Holy cats!) But 0.99% seems low for an online savings account. It's certainly not the best interest rate that's out there.

The company that used to own this website — with whom I still have a business relationship — has a handy tool that allows folks to look at a lot of today's top online savings accounts. Naturally, this is going to be a starting point for my search.

Here are a few of their current top offers:

Those rates are much better than my current 0.99% interest rate at Capital One 360. But I don't know anything about these banks (except HSBC). I haven't heard personal reviews from friends, colleagues, or readers. Plus, I don't know if these are the best interest rates available.

Seeking Your Help

I want to use this $30,000 to fund the next few months of my life. (I'd love to say that this money will last me a year, but it'll be more like six to nine months.) And now that I'm working again, I'd like to explore various saving options.

Naturally, I'm going to conduct research of my own. Most of my colleagues maintain lists of current bank rates. I'll do a deep Google dive to discover more obscure banks and credit unions. I'll investigate those “fusion” accounts that pay high interest rates if you jump through hoops.

My girlfriend is a huge fan of Ally Bank, and she proselytizes for them whenever she can. (I am not joking.) I see they're currently offering a 2.30% 11-month no-penalty certificate of deposit. (Their savings account interest rate is 2.20%.) I'll certainly check them out, but in the meantime I'm polling the GRS community.

I have no doubt that many of you money bosses actively watch bank rates and features. I suspect you have favorite online savings accounts. Or money market accounts. Or certificates of deposit. Or whatever. I'm hoping you can help me!

Which online savings account is best right now? Which online savings account to you use? Which should I use — and why?

Based on your responses here (plus the responses I get on Twitter, in the GRS Facebook community, and from the GRS email list), I'll look at a variety of different options. And have no fear. I'll report back in a week or two to share my decision and I'll collate a list of the best savings accounts according to you folks.

The post Who has the best savings account in 2019? appeared first on Get Rich Slowly.

from Get Rich Slowly http://bit.ly/2B2wcfx

Everything You Need To Know About The 2019 RRSP Explained

The 2019 RRSP deduction limit (contribution room) has increased to $26, 500. This is up from the 2018 limit of $26, 230. That is the main change you need to know for planning your 2019 RRSP contributions this year. Are you new to RRSPs or have some questions on what they are and how they [...]

The post Everything You Need To Know About The 2019 RRSP Explained appeared first on Money After Graduation.

from Money After Graduation http://bit.ly/2Hsyvyd
#money #finance #investments

4 toughest interview questions you need to prepare for

So you’ve crafted a winning resume …

… written an amazing cover letter …

… and you might have gotten a little ahead of yourself and started clearing out your desk.

Your hard work has paid off though, because you’ve nailed an interview with the job you want. Congrats!

But it’s not the time to celebrate yet. After all, you still need to crush the interview. That means preparing answers for some potentially hard, but common, interview questions.

Luckily, we have a list of five of the toughest interview questions you’ll encounter — and specifically how to answer these interview questions.

4 tough interview questions you need to be prepared for

When it comes to crafting perfect answers to common interview questions, you just need to remember one thing: Always look for the question behind the question.

It’s like when your significant other comes up to you and asks, “Does this outfit make me look fat?” What are they really asking?

They’re not just looking for an honest opinion; they’re seeking validation. They want to feel secure with how they look.

It’s the same with interview questions. Every question that comes your way is really asking a dozen other questions behind it. Your ability to answer all those other questions is what’s going to determine the strength of your interview.

Here are some of the most challenging questions you’ll face, what they really mean, and how you should answer it.

Question #1: What’s your biggest weakness?

What they’re really asking: What are you doing to improve yourself?

This question is to interviews what “Free Bird” is to a Lynyrd Skynyrd concert. You’re DEFINITELY going to hear it come up.

Not only that, but it’s a veritable minefield of potential pitfalls for the person being interviewed. If you’re too honest, you might reveal too much and alienate the hiring manager. If you go with something like, “I work too hard,” they’re going to pick up on your BS and be alienated even more.

You have to remember that the hiring manager doesn’t actually want to hear about each and every weakness. Rather they want to know how you’re working on improving yourself.

This is a great opportunity to leverage the power of storytelling. If you can show the hiring manager how you’re 1) Aware of your shortcomings and 2) How you have been actively addressing those shortcomings, they’re going to LOVE you for it.

Show them how you took a negative experience or trait and turned it into a positive growing experience.

Strong example:

“That’s a great question, and it’s something I’ve spent a lot of time thinking about. What I’ve found is that the majority of my career was spent working for one industry. In many ways, that can limit my perspective.

But, of course, I’ve worked in a variety of departments and been in several different positions. In fact, I was promoted faster than anyone else to lead new projects. But I’m ready to take what I’ve learned from this one industry to a different culture and new industry, and that’s why I’m here today.”

Question #2: Where do you see yourself in X years?

What they’re really asking: Are you just going to jump ship once a better opportunity comes along?

Hiring is EXPENSIVE.

The average cost of hiring just a single employee is typically around $5,000, according to hiring website Recruiter Box. Not only that, but once the company hires you, they’re going to be paying for your salary, training, and benefits. All told, the cost of hiring and keeping you as an employee will stretch at least into five figures.  

That’s why it’s in the company’s best interest to hire and keep you for as long as possible.

So when a hiring manager asks you where you see yourself in five years, what they really want to know is if you plan on staying at the job for a long time or if you’re treating the job as a stepping stone for another role.

To answer it well, you’ll want to remain honest while still showcasing that you’re ambitious and want to do good work for the company if and when you get hired.

Strong example:

“I’m very excited about the junior copywriting position with your company because in five years I want to be working at a director level in the email marketing industry. Knowing your needs for good email marketers, I know that I’ll have ample opportunity for growth and to learn the skills I need to get there.”

Question #3: Can you tell me about your work history?

What they’re really asking: What are your strengths and how have you grown?

When most candidates hear this, they’ll simply walk through their entire resume with the hiring manager and leave it at that.

DON’T be like most candidates.

Your hiring manager already has the resume in front of them. They can already see that you spent that summer interning at that one consulting firm and that you went on to X company to do Y work. That’s not what they want to hear from you.

What they really want to hear from you is how you’ve grown throughout your career so far and the wins you’ve gotten as a result.

That means highlighting key strengths in your background and crafting a story around that that showcases how you’ve grown.

Strong example:

“If you look at my work experience, there are three things that stand out.

First, I have experience with many areas of marketing, including social media, product marketing, and customer relationship management.

Second, I’ve always been fascinated by the analytical side of marketing, which is why I chose to study this in college. My recent social media campaign experience really allowed that passion to flourish.

Finally, I’ve always wanted to take my skills to a larger stage, which is why I moved from A Company, which was a startup, to B Company, which is more established. Now, I’m excited to be here talking with you today because of those transitions and how they fit so nicely with your needs around this position.”

Question #4: Why should we hire you?

What they’re really asking: What value are you going to offer?

Another classic interview question rife with potential pitfalls.

The danger behind this question though is how vague it is — inviting unsuspecting job seekers to ramble on without a point or purpose.

The key here is to remember:

It’s not about you. It’s about the company.

Instead of saying something like, “I’M looking for an opportunity for a job that challenges ME.” Reframe: “I see a lot of opportunities to help YOU.”

Put yourself into the hiring manager’s place and think about what they want to hear.

Strong example:

“Well, based on the things we’ve already talked about, I know there are three main challenges you’re looking at.

The first one is getting new leads, the second is increasing conversions, and the third is retention.

And my experience is in email marketing. I’ve done a lot of work on the conversion side of things and I think could help you guys in AREAS 1, 2, 3.

In fact, the last company I worked with increased their conversions by 26%. I think I can do even better for you.”

Avoid these mistakes

To help you even more, I want to offer you something we’ve put together: 3 FREE videos of our best interview hacks.

In these videos, our CEO and founder Ramit Sethi walks you through some of his best interview tips. These are the same ones he’s used to help millions of people find their dream jobs.

Just enter your name and email below and I’ll send it straight to your inbox.

4 toughest interview questions you need to prepare for is a post from: I Will Teach You To Be Rich.

from I Will Teach You To Be Rich http://bit.ly/2W1J9iC
#money #finance #investing #becomerich

Why NewRetirement is my favorite retirement planning tool

Over the past week, I've shared two terrific retirement planning tools. First, I explored the pros and cons of Personal Capital. Next, I looked at OnTrajectory, which is the best traditional retirement calculator I've found.

Today, I want to talk about NewRetirement. Since I discovered it two years ago, NewRetirement has become my favorite tool for retirement planning.

I like NewRetirement because it offers amazing levels of customization. Plus, it explains its assumptions and offers ample information about every subject it tackles. And it does all of this without ever becoming overwhelming. It's comprehensive and customizable, yet clear. Most importantly, NewRetirement is more than just a retirement calculator. When I say it's a retirement planning tool, I mean that.

NewRetirement offers three levels of service.

• Planner, the basic level of service — and the bulk of what I'll review in this article — is free. You do need to provide an email address, but once you do, you're able to create a personalized retirement plan. (I'll show you what that's like in a moment.)
• If you like the basic level of service and want more, you can upgrade to PlannerPlus for $6/month. This gives you access to advanced retirement planning tools, more detailed reports, and the ability to print your plan. (NewRetirement is offering GRS readers a 30-day free trial of PlannerPlus, by the way.)
• At the highest level, you can pay NewRetirement for personalized advice from a Certified Financial Planner. Unlike Personal Capital, NewRetirement won't pester you over and over to use their advisors. But the service is available for those who need it.

As I mentioned, I've been using NewRetirement for a couple of years. In order to give an honest and complete review today, I created a second NewRetirement account and walked through the process of setting everything up from scratch. Do I still like the tool as much as I did in April 2017? Let's find out.

Disclosure: Before I begin this review, I need to make one thing clear: I am an investor in NewRetirement. When I first found the service two years ago, I liked it so much that I started an email conversation with founder Stephen Chen. That grew into a friendship. Since then, I've invested $50,000 of my own money into the company. (Also, I was the first-ever guest on the NewRetirement podcast!) Having said that, I've done my best to provide an honest review here.

Getting Started with NewRetirement

After you register for an account, NewRetirement starts by asking you a series of basic questions. (You can opt to by-pass these questions if all you want is a simple retirement calculator.) Here's how I answered using my current financial state.

When you've finished entering your basic info, you're presented with the NewRetirement dashboard. It's here that you first get a hint that this retirement tool is more robust than any of the others. Front and center is a progress bar…and because you're new, that progress bar is nearly empty.

Even if you didn't flesh out your initial data, NewRetirement would give you some useful info. (Meaning that if you read this article and want to look at what the tool does, you can click over and get a quick overview of your financial future in just a couple of minutes.)

The fun really starts, however, when you dig deeper into NewRetirement.

Digging Deeper into NewRetirement

As the dashboard implies, NewRetirement features 33 different retirement planning sections divided into ten broad categories.

In each section, you can enter data and/or change assumptions. If all of this were dumped on the user at once, it'd be overwhelming. Fortunately, it's a step-by-step process that never gets out of control.

The ten main categories that NewRetirement tackles are:

• Basic profile and goals, including your age, life expectancy, desired legacy, and plans for retirement. (The latter is a written statement. I love it! Most retirement tools are all about the numbers. NewRetirement digs deeper.)
• Social Security, where you can enter your estimated retirement benefits and start date. If you don't know what to expect from Social Security, NewRetirement links to the official government website and a Social Security calculator.
• Work and other income. In this section, you can specify how much you earn from your job, but also input money from dividends, interest, rental properties, and other sources.
• Annuities and pensions. If you have access to an annuity or pension, you can enter your info in this section. I won't have either of these, so I skip this section.
• Savings and assets. This is a large section in which you list your tax-advantaged retirement accounts, regular investment accounts, bank accounts, large assets, and ongoing retirement contributions. Under “other assets”, I included the various businesses I own pieces of (including NewRetirement itself!). I did not, however, value this website.
• Expenses and inflation. Here you can choose both an optimistic inflation rate and a pessimistic inflation rate. You can also enter any known large one-time expenses in your future, such as buying a home, sending the kids to college, or charitable giving. You can tell NewRetirement which account the expense will come from, the age it will occur, and the reason for the expense. Pretty cool. Lastly, if you think your core spending will change over time, you can specify that here. Right now, for instance, I think I'm spending $5000 per month. If I think that spending will drop to $3500 per month when I turn 55, I could model that in this section.
• Housing, where you enter the current value of your home, the balance on your mortgage, and project future home appreciation. Another cool feature: You can model future changes to housing or mortgages. If I think that Kim and I will sell our current home and downsize in a decade, for instance, NewRetirement will let me do that. (Minor quibble: When I'm projecting my future, I assume that we'll sell this house in ten years and then rent a place. NewRetirement won't let me explicitly model that. My workaround is to model buying a new home for $1, then bumping my monthly expenses by $1500 to compensate for rent.)

• Medical and long-term care. As you probably know, medical costs are one of the fastest-rising yet most oft-overlooked chunks of the average American budget. NewRetirement includes an entire section for modeling current and future health-care costs.
• Debts. NewRetirement allows you to list all of your current debt (plus links to advice on how to manage your debt, if it's problematic).
• Estate planning. This section doesn't have a lot of resources but offers a bit of information. Plus, it lets you track whether you've completed important estate-planning documents.

Nearly every step of the way, NewRetirement offers you the ability to learn more about relevant topics. For instance, when you enter your expected longevity, NewRetirement links you to a life-expectancy calculator and suggests five related articles.

As you tick boxes indicating that you'd like to learn more about a particular topic, relevant articles are added to the “info and opportunities” tab in the main menu. This is an excellent, useful feature, something I've never seen in another retirement tool.

Forecasting Your Future with NewRetirement

Yesterday, it took me about an hour to work through all 33 retirement planning sections in the NewRetirement tool. I've been entering the same info into retirement planning tools for two weeks now, so I know where to find it. If this is your first time, it might take you a bit longer.

When I'd finished, the progress bar in the dashboard was no longer empty. It looked like this:

The NewRetirement dashboard contains an Analysis section that's available from the start. After you've entered your basic data during registration, you can use this section to look at a forecast for your financial future. But the analysis becomes more useful after you've entered more complete information.

By default, the dashboard displays your Savings Over Time graph (which is very similar to the graph that OnTrajectory keeps front and center at all times).

There's a “key metrics” view where you can see the core basic parameters and some of the ramifications.

Or, if you want more info, you can access a handful of other charts.

I'm a fan of the Savings Timeline chart because it gives me a quick look at my current financial trajectory.

And as much as I preach that you should not compare yourself to others, I like the “compare yourself to others” tool haha. (From my past articles about NewRetirement, I know that other GRS readers like this comparison tool too.)

Just for kicks, here's the same comparison view from when I first reviewed NewRetirement in 2017:

As you can see, there's plenty available with the free version of NewRetirement. In fact, it's this free tool that made me rave about the company two years ago. I still love it.

I do think OnTrajectory is a strong competitor for NewRetirement. That's a good thing. For many people, OnTrajectory may be a better choice. But the features I've reviewed so far in this article are free at NewRetirement. OnTrajectory costs money after the first two weeks of use.

In the future, I intend to promote both OnTrajectory and NewRetirement. They're both excellent. (If you haven't read it yet, here's my OnTrajectory review.)

PlannerPlus at NewRetirement

As you can see, the free version of NewRetirement packs quite a punch. Without paying a penny, you can do more with it than with 95% of the other retirement planning tools on the web. But what if you want more?

For $6/month, you can upgrade from the entry-level NewRetirement service to what the company calls PlannerPlus. Doing so unlocks another menu of options.

Behind the scenes, NewRetirement takes the data you've entered, crunches it based on the tool's assumptions — investment returns, inflation, health-care spending, etc. — then creates a series of data tables projecting your future financial health. In order to make these raw numbers more accessible, PlannerPlus provides its “Plan Inspector”, which lets you browse dynamic charts to explore your retirement plan.

Here, for instance, I'm looking at how even with optimistic assumptions, my savings will only last until I'm age 75.

With the free version of NewRetirement, you can enter as many expenses as you want, but nothing about the process is guided. It's all sort of free-form. For many folks, that's fine. Others want more help, though. For these people, PlannerPlus includes an advanced budgeting tool.

The budgeting tool in PlannerPlus allows users to model expenses at a far more detailed level. For instance, I could use my existing data from Quicken to enter actual expenses for almost everything.

Most retirement calculators ask for just a couple of Big Picture numbers. The good ones let you explore some level of detail. Like OnTrajectory, NewRetirement allows you to get as detailed as you want so that you can explore a variety of what-if scenarios.

With the PlannerPlus upgrade, you can also customize the software's alerts. Do you want NewRetirement to pester you when you use faulty assumptions? When your data is incomplete? When you could take steps to improve your future financial health? If so, do nothing. But if the alerts bug you, you can choose which ones to dismiss.

PlannerPlus also allows you to print your plan and/or export it to a spreadsheet.

The Bottom Line

NewRetirement isn't perfect and I don't want to pretend that it is. As I worked through the tool yesterday, I encountered a couple of minor bugs. Sometimes I couldn't figure out how to model my plans for the future. (How do I convey that I think we might sell the house in ten years, then find a place to rent?) For as much reporting as NewRetirement currently offers, it could always offer more. (We money nerds love to have lots of reports and graphs.)

That said, the company is very responsive to bug reports. They update the software regularly, so when users report issues, changes can usually be made within a few days.

Plus, NewRetirement is a work in progress. The company is constantly working to improve things, to give more value to their customers — even the folks who use the free level of service. Every month, founder Stephen Chen sends me a list of coming upgrades and his plans for the company's future. Much has changed in the two years since I first discovered the tool. Much will change in the years to come.

Ultimately, NewRetirement isn't a retirement calculator; it's a retirement planning tool. To me, that's like the difference between a pocket calculator and a spreadsheet. Each has its uses, no doubt. Sometimes, you want the pocket calculator. But sometimes, you want the more powerful option.

If all you're after is a quick overview of your financial future, you can use the basic retirement calculator at NewRetirement — or one of the dozens of other retirement calculators on the web. (Use OnTrajectory if you want a robust retirement calculator.)

But if you want to actually formulate a retirement plan, if you want a retirement planning tool that will actually guide you through the process, NewRetirement is an outstanding choice.

NewRetirement is offering Get Rich Slowly readers a free 30-day trial of PlannerPlus. You do have to enter your credit card info to start the trial, but if you decide that the service isn't right for you, you can cancel without hassle. NewRetirement isn't a scammy company. They want you to be happy.

The post Why NewRetirement is my favorite retirement planning tool appeared first on Get Rich Slowly.

from Get Rich Slowly http://bit.ly/2Mh2g3K

7 ways to buy back your time

If you had an extra hour in your day, what would you do with it?

Pick up a new hobby?

Learn a new language?

Find new ways to make money?

What if you had two extra hours, or even three? What would you do then?

To most, even an extra half hour in the day can seem like a gift. While some might think it’s impossible to even find enough time to eat, let alone do things they enjoy (I’m looking at you entrepreneurs), there are actually a LOT of ways you can carve out more hours in the day.

How? Simple: Buy back your time. 

Why spending money on convenience makes you happier

When we talk about buying back your time, what we’re really talking about is convenience. These are purchases that make your day-to-day more convenient — thereby saving money.

Some examples:

• Travel apps
• Uber / Lyft
• Pre-cooked meals
• Grocery delivery
• Personal trainers
• Housekeepers

By spending money on convenience and buying back your time, you’re able to get back hours in your day you’d normally spend on things that: 1. don’t make you happy and 2. you can hire someone else to do.

Science also shows that it can actually make you happier too.

According to a study published by the National Academy of Sciences, “spending money on time-saving services is linked to greater life satisfaction.”

To conduct the study, they recruited 60 people and gave them cash on two consecutive weekends and asked them to spend it two different ways.

“On one weekend we gave them $40 and asked them to spend it in any way that would give them more free time,” Elizabeth Dunn, co-author of the study, told NPR.

Subjects chose different services that helped their lives be more convenient, ranging from cleaning services to meal deliveries.

The next weekend, they gave the subjects another $40 but told them to spend it on “material purchases.”

“One person bought polo shirts,” Dunn said. “Another participant bought wine that she described as fancy.”

After these weekends, the subjects were asked how much “positive emotion” they experienced — and they wound up reporting better experiences when they bought back their time!

That’s because when you get your time back, you can spend it on things that actually matter to you. You no longer have to worry about the little things that add up in the day.

Plus you can use that time to invest in another income stream like a freelance side hustle or your own business and make even MORE money.

And yet … so few of us actually do it. Instead, we run around like chickens with their heads cut off and complain about being so busy — even though there are ways we can buy back our time easily.

This happens for a few reasons:

• We LOVE being busy. People relish being busy even if the time spent isn’t worthwhile. It makes us feel like we’re getting a lot of work done when, in reality, we’re getting WAY less done than we could.
• We feel guilty when we spend on convenience. A lot of people look at things like ride-sharing apps and house cleaners like unnecessary luxuries despite how helpful they can actually be. This is shaped by culture, society, and our upbringing.
• We don’t realize how much time it can save us. We just don’t know what we don’t know. As such, people don’t realize how many untold hours they could be saving by delegating some of their routine tasks.

That’s why I want to show exactly how you can start buying back your time today by leaning into convenience.

How to buy back your time

Buying back time is going to look different for different people. After all, your life and interests are going to be much different than everyone else’s.

However, you can find out what you should be delegating to others by asking yourself two questions: Where do I add the most value — and where do I add the least?

I Will Teach You to Be Rich’s CEO Ramit Sethi wrote about this once for our sister site, GrowthLab. In that article, he outlines a good system for recognizing the areas you can spend money to buy back your time:

1. Double down on where you add the most value. Recognize your talents and passions and lean into the areas you really care about (e.g., working on your business, writing, learning languages).
2. Delegate the areas where you’re value neutral. These are the things you’re ambivalent about doing in your day-to-day life and could live without performing (e.g., cooking, driving, making appointments).
3. Delegate the areas where you’re value negative. These are the areas of your life you dislike doing and you view more as a chore than anything else (e.g., laundry, cleaning, taxes).

Here’s how the system above might look for someone who is a parent and wants to spend more time with their kids:

• Double down on where you add the most value. Maybe you’re a fantastic parent and really know how to take care of your kids. That might be something you want to spend more time doing. Awesome! You should lean into this.
• Delegate the areas where you’re value neutral. As a parent, you often find yourself cooking for your kids — but you’re pretty ambivalent about it. You can buy back hours out of your week by purchasing pre-cooked meals from a private chef.
• Delegate the areas where you’re value negative. You HATE doing housekeeping work like laundry, scrubbing, and polishing — which is totally fine. Luckily, you can outsource all of that work by getting a housekeeper. Boom. Instant hours back on your schedule.

When you take a look at your value add, you can lean into the areas where you’re more valuable while delegating the rest.

7 areas to buy back your time

Now let’s take a look at seven areas in our lives where we can buy back our time. I’ve included a price range for how much you’ll be spending for each service — as well as how much time you can buy back.

1. Laundry

What you’re currently doing: Taking load after load of laundry to the dingy laundry room in your apartment basement you share with a dozen other families.  

How you can buy back your time: Pick up and drop off laundry services like Rinse.com.

Cost: $1.75 / lb or $59 / month

Time saved: 1 – 2 hours per week

2. Housecleaning

What you’re currently doing: Scrubbing, cleaning, and vacuuming every inch of your house and still somehow not getting it clean enough.

How you can buy back your time: Hiring a housekeeper.

Cost: $50 – $100 / hour

Time saved: 5 – 20 hours / week

3. Transportation

What you’re currently doing: Using public transportation, walking, or biking to save money.

How you can buy back your time: Using a ride-sharing app like Uber or Lyft.

Cost: $5 – $15 / ride

Time saved: Variable, depending on commute.

4. Home improvement

Source: USA Today

What you’re currently doing: Watching YouTube videos while risking life and limb to repair issues around your house.

How you can buy back your time: Hiring a repairman.

Cost: Variable. This depends on the work that needs to be done and the extent of damages. However, some appliance servicers charge anywhere between $100 – $200 / hour

Time saved: 3 – 6 hours / week

5. Cooking

What you’re currently doing: Cooking every one of your meals and trying to figure out why your food doesn’t look like it does in the pictures online EVEN THOUGH YOU FOLLOWED THE DIRECTIONS.

How you can buy back your time: Order food to be delivered via apps like GrubHub or Postmates.

Cost: $10 – $20 / meal

Time saved: 6 hours / week

6. Groceries

What you’re currently doing: Going to the grocery store each week, forgetting to bring your reusable grocery bags, and hating yourself for it.

How you can buy back your time: Grocery delivery sites like freshdirect.com.

Cost: Price of groceries, plus shipping is $5.99 / order

Time saved: 1 – 2 hours / week

7. Dog walking

What you’re currently doing: Taking Fido out three times a day including the occasional 3 a.m. bathroom break because he accidentally drank too much water in the evening.

How you can buy back your time: Dog walking services like Wag and DogWalker.com.

Cost: $10 – $20 / hour

Time saved: 5 – 7 hours per week

How are you going to buy back your time?

All told, if you outsourced each of the seven areas above, you could potentially save 46 hours each week! That’s more than SIX hours per day.

Now here’s something I want to hear from you: What would you do if you had six extra hours a day? Leave a comment below. I’d love to hear what you would do if you bought back your time.

7 ways to buy back your time is a post from: I Will Teach You To Be Rich.

from I Will Teach You To Be Rich http://bit.ly/2Dh1Szq
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