Tag Archives: Motivation

To the Class of 2012…

Graduation season is winding down, and I’ve been thinking a lot about the college graduates who are now entering the “real” world.  The transition from college student to independent adult is mostly awesome, though it does entail some new challenges.  All you new graduates out there now have the freedom (and responsibility) to manage many more areas of your own lives, including your finances.  Even if you are still searching for that first job that will launch your career, you can and should begin to develop a relationship with money that is healthy and positive.

In the ten years since my own college graduation, I’ve learned a few things about money.  I continue to be a student of personal finance, but I hope you will allow me to share with you the most important things I’ve learned so far:

The way you spend your money is a direct reflection of your values and priorities in life.  It’s very easy to mistake success for “stuff.”  Wearing a tee shirt with a designer logo does not mean that you are successful; it means you are susceptible to marketing.  If you looked at your spending as a snapshot of who you are, would you like what you see?

Experiences make you much happier than “stuff.”  Experiencing something is truly living.  You and your college friends will be separated in the future by time and distance.  Spend less of your money on “stuff” so that you can afford to meet old friends for dinner, or even vacation.  Remain connected with people you care about by experiencing things together.

You will never, ever regret starting to save sooner rather than later.  Albert Einstein said, “Compound interest is the eighth wonder of the world.  He who understands it, earns it.  He who doesn’t, pays it.”  Personal finance can seem complicated, but the most important principal is easy enough for a child to understand: Save as much as you can as early as you can, and you will build wealth.  It really is that simple.

If you want to live a free and independent life, avoid debt.  You must give up your time and energy to earn money, so having debt means that someone else owns a piece of your life.  Sometimes debt is necessary, but be honest with yourself about the significance and gravity of obligating your time and energy to someone else.

You don’t need to have personal finance figured out all at once.  Slow and steady wins the race.  Small successes in managing your finances will make you feel incredibly proud.  Congratulate yourself on every small victory.  Use that positive momentum to learn more and to create new goals for yourself.  In a very short time, you will feel confident and in control of your finances and your future.

We all have our own definitions of success and our own ideas about what makes for a happy life.  Regardless of what your ambitions are, always remember that the lead role in your life should be played by YOU.  Money should never play anything other than a supporting role. 

Congratulations, 2012 Graduates, and best of luck.  Viva la frugal!


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Filed under Money Philosophy, Motivation, Personal Finance

Kickin’ Worry to the Curb

When I began living frugally and writing this blog, I really had only one goal: to live comfortably and never worry about money.  Anything more specific than that – building an emergency fund, paying off my HELOC, saving for retirement, etc. – was really just a tactic to achieve the overall goal of financial freedom and comfort. 

I thought that I would achieve this goal sometime in the very distant future.  I imagined that there would be some tangible measure or trigger that would let me know that I could finally stop worrying about money.  Maybe it would be paying off a mortgage and owning a home outright, or maybe it would be reaching a $1 million balance in my retirement accounts.  Whatever “it” was, I mentally prepared myself to wait a good 20+ years before I felt confident enough to say, “I no longer worry about money.”

In actuality, it took only 12 months to reach that point.

Now, don’t get me wrong… I certainly did not achieve any exceptional financial milestones in that time.  I didn’t generate an impressive investment portfolio, and I didn’t pay off my mortgage.  But after 12 months, I did have a focused goal, discipline, and enough progress to feel confident and excited about my financial future.  As it turns out, that’s all I really needed to stop worrying about money.

It’s probably important to clarify what I mean when I speak of worrying about money.  To me, worry is what I feel when I’m scared or insecure.  I worried about money when I asked myself these types of questions:  Am I going to be able to pay my full credit card balance this month?  If my house needs a major unexpected repair, how am I going to pay for it?  If I become really miserable in my job, can I afford to look for another one?  Am I going to have enough money to retire at a reasonable age?

When I worried about money, I didn’t have answers to these questions.  All it took to rid myself of worry was to have good, solid answers:

Q:  Am I going to be able to pay my full credit card balance this month?
A:  Of course.  My spending has been within budget so I’ll have the cash to pay the bill.


Q:  If my house needs a major unexpected repair, how am I going to pay for it?
A:  From my emergency savings fund. 


Q:  If I become really miserable in my job, can I afford to look for another one?
A:  If I ever feel miserable because I’m being put in a position that violates my personal or professional ethics, I can afford to resign and live off of emergency savings while I look for another job.  (Note: This is obviously an extreme situation, and not one I have ever been in or expect to be in.  But it’s very good for my peace of mind to know that I can afford to get out of a seriously bad situation.  If I simply didn’t like my job, I would probably never quit unless I already had another one in the bag.)


Q:  Am I going to have enough money to retire at a reasonable age?
A:  Yes.  I am contributing to my 401(k) aggressively and when I calculate my compounded return over the next 30 years, I can see that I’ll be in great shape. 


It was really important to realize that I could stop worrying about money simply by having a plan and sticking to it.  I’ve definitely lacked discipline in my spending over the last couple of months since I bought my new house, but I know I can get back on track.  In a way, getting off track has been good for me…  I absolutely love my new house and the things I’ve bought for it, but I hate feeling the financial worry creep back into my life.  This has been a good reminder that I love independence and financial freedom more than I’ll ever love things, even beautiful things that make my house look amazing.

The past couple of months have been a financial hiccup for me, but I’m going to take it in stride.  I’m going to use the worry that I feel to reinforce the importance of my long term goals.  There’s no reason why I can’t be worry-free again in a few months, and that’s something I will work toward with focus and confidence.

Viva la Frugal!

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Filed under Frugal, Money Philosophy, Motivation

Hobo Chic, Without the Chic

In the days before HotFrugal, I spent a LOT of money on clothes and shoes.  In fact, I put a much higher priority on shopping than I did on saving for my future.  That’s certainly not the case any longer.  Now I save one third of my income and live on a pretty strict budget.  If I manage to live below my budget in any given month, I take the extra money and put it in a second savings account for vacations, gifts, and shopping.  (This isn’t really a savings account since it’s where I keep money I intend to spend, so I’ve borrowed a term from my mom and I call it my “mad money” account.)

When I first began my efforts to live frugally, I really missed going shopping whenever I felt like it.  I would anxiously await the time when I had accumulated enough mad money to buy a few things.  Then I would gleefully hit up my favorite shopping websites.  This was actually a pretty responsible approach to shopping… I spent money I actually had, and I accumulated that money by being disciplined in other areas and coming in under budget.  It was truly guilt-free shopping. 

But a few months ago, I noticed a change in how I felt about buying new things.  Suddenly, I didn’t want to part with my money.  I no longer looked forward to shopping with giddy anticipation.  Instead, I dreaded having to buy new clothes to replace the ones that were becoming worn and out of date.

It’s good that I’ve become less materialistic.  However, I may have taken things too far.  When trying to get dressed for work the other morning, I spent ten minutes staring at my closet and I realized that I have very few nice clothes anymore.  By “nice” I mean decent quality and in good shape, with a flattering fit, and at least somewhat in keeping with current trends.  Much of what I saw in my closet was faded, boring, worn out, and outdated. 

It appears that I’m in danger of becoming a bit of a hot mess.  HotFrugal: Good.  Hot mess: Bad!

There is a balance one must achieve between being frugal and being stylish.  Like it or not, clothing does have a major impact on how we look, how we are perceived, and how we feel about ourselves.  This is especially true for women.  A guy may be able to get away with dressing somewhat sloppily and with little concern for how he looks, but a woman who takes the same approach is going to look like a hobo.  I know, I know… It’s not very liberated of me to accept society’s double standards and the importance it places on a woman’s appearance.  But damn it, I don’t want to look like a hobo!

So it’s time to go shopping, and it’s time to go shopping in a pretty big way.  In an effort to not get completely carried away, I’ve gone through my closet and made a list of all the things I need to get.  I need some basic pieces (black blazer, grey pants, denim pencil skirt, etc.) and some more fun and trendy things to make my wardrobe interesting.  I’ll spend decent money on the basics since good quality clothes should last two or three years.  For the trendy stuff, I’ll hit up sales and discount stores. 

I’m excited about looking more put together and less like a hobo, but I’m not looking forward to breaking into my mad money.  I’m still a little emotionally traumatized by the realization I had in my last post about the money I wasted in my twenties.  That realization will definitely keep me on track in achieving my big picture goals, but it shouldn’t make me feel guilty for spending money on things I can actually afford. 

With that little pep talk to myself, I’m off to shop…


Filed under Shopping

Save, baby, Save!

I’m pleased to announce that I have a buyer for my house and we will be closing at the end of June!  The terms of sale have been negotiated and agreed upon, so nothing should go wrong between now and closing.  That means it’s time to start making plans for the money I’ll be getting after the sale.

Yep, I am one of the lucky few who have been able to sell a house in this market and make a small profit.  It was great luck that I bought my house in 2004 before the market went crazy and housing prices shot up.  Even though the bubble has burst and prices have fallen, they are still a bit above what I paid.  After my mortgage and HELOC are paid off and the closing costs are covered, I should clear about $12,000.

I don’t plan to spend any of that money, but I still feel like a kid at Christmas!  When the sale goes through, I am going to have the $24,000 emergency fund I’ve been working so hard to accumulate.  By the end of June, I will have grown my emergency savings to $12,000.  I’ll add the $12,000 from the sale and be done.  Why am I so excited about that?  Because it means that all of the savings I do from that point on will be for something much more rewarding than a cash cushion I can never touch. 

I plan to go right on saving like a fiend.  I will open a Roth IRA with the next $5,000 I save, which is the maximum allowable annual contribution (to learn more about IRAs, check out RothIRA.com).  I’ve always contributed to my 401(k) at work, but this feels like the first time I’ll be taking really proactive steps to achieve my goal of early retirement.  It’s a great feeling. 

A sidebar on the wonders of compounding:

There’s a great tool at Moneychimp.com that allows you to calculate the value of an investment that compounds over time.  Withdrawals from a Roth IRA are allowed at age 59½.  I am currently 30½ years old.  That means I can make 30 annual contributions and earn compounding returns for 29 years before I’m eligible to make withdrawals.  I plan to contribute the maximum amount allowed each year, which is $5,000. 

I’m assuming that I will achieve a 5% rate of return.  This is conservative, but I want to err on the side of caution.  Also, I’m a little more risk averse than many people when it comes to investing.   I’m likely to switch to lower risk / lower return funds earlier than most people would. 

I entered all of these variables into the calculator at Moneychimp and it revealed that my IRA will be worth approximately $347,775 when I’m eligible to begin making withdrawals at age 59½.  My total investment of $150,000 will generate $197,775 in earnings over 29 years.  Sweet!

But since I occasionally like to torture myself with regrets…  I used the calculator to see how much money I would have if I had contributed $5,000 per year beginning at age 22 when I started working.  By age 59½, my IRA would have been worth $563,955.  My total investment of $190,000 would have generated $373,955 in earnings.  By spending money throughout my twenties on a bunch of crap I didn’t need, I basically threw away $176,000.  Aaaarrrrggghh!! 

Lesson learned:  When you have the opportunity to earn compounding returns, invest as much as you can as early as you can!


After this year’s IRA contribution is covered, savings from that point on will go toward the purchase of a new car and a new house.  I have to say, those savings goals are a little daunting…  Actually, they’re a lot daunting.  I’m going to need around $20,000 to purchase a reliable but modest new car when the time comes (probably in five or six years if I can stand to wait that long).  I’ll need another $50,000 in order to purchase a $225,000 home with a 20% down payment and enough cash to cover closing costs.  So basically, my next savings goal is $70,000.  VERY daunting. 

But I’m not going to freeze like a deer caught in the headlights of my savings goals.  As always, I’m going to maintain my motivation by focusing on the big picture and by feeling proud of what I’ve accomplished so far.  The truth is, I should be able to achieve my new savings goals within six years (while still making my annual IRA contributions).  In the grand scheme of things, six years isn’t that long.  At 36 years old, I will be in great financial shape.  It’s difficult to predict what my financial goals and priorities will be in six years, but I love knowing that I will have options.


Filed under Motivation, Savings & Retirement