Use Halloween to Teach Kids Money Lessons

How can one thing mean two totally different things to different people? Take Halloween treats for example. Kids are delighted by it. Parents, not so much. Candies filled with high fructose corn syrup and food coloring, and kids that are hyper-active with so much sugar intake that they literally bounce off the walls. It’s every parent’s nightmare and the perfect scary ending to the Halloween holiday! But here’s a trick that will sound more like a treat – this unsavory situation can easily be turned into a money lesson for kids!

Let me explain.

The day before Halloween, you make a deal with the kids. When they return back from trick or treating, you will buy their candies from them for real money. From the day after Halloween they can buy the candies back from you. For every day past Halloween, the price of candies falls by 5%. Each day, they can spend only a preset amount of money on buying back candies. Knowing kids, they will want to eat the choicest candies in the first few days and in the later days as the number of candies they can have for the preset amount increases, the candies are no longer their favorites and so may choose to keep the money instead of throwing it away on candies they don’t like. They learn a few important money lessons while at the same time eating fewer candies. It’s a win-win situation.

Here is an example.

Say your daughter has collected 110 pieces of candy. You set the price of each piece of candy to say, a quarter. So if you can convince her to sell you 100 pieces of candy, then she will earn $25. Each day she is allowed to spend $2 of that money to buy back the candies. Each day the price of candies falls by 5%. Say you round up the number of candies she gets. Then for two days after Halloween, she will be able to buy 9 pieces of candy for $2. For two days after that, she will be able to purchase 10 pieces of candy for $2. And so on, until the candies run out on day 10. So, she gets to have all her candy back over a period of 9 days for $18. That leaves her with $7 to keep. Pretty good deal. Here is a table that I generated using excel to explain it better. You can do something similar with the exact numbers that work for your family and print it out so your children can easily understand the concept and keep track of it every day.

Day	Price per candy	# of candies for $2	Actual candies bought	Money in Hand
On Halloween	0.25			$25
1	0.2375	8.421053	9	$23
2	0.225625	8.864266	9	$21
3	0.214344	9.330806	10	$19
4	0.203627	9.821901	10	$17
5	0.193445	10.33884	11	$15
6	0.183773	10.88299	11	$13
7	0.174584	11.45578	12	$11
8	0.165855	12.05872	13	$9
9	0.157562	12.69339	13	$7
10	0.149684	13.36146	2	$7
		Total	100	$7

The beauty of it is, you can tweak it indefinitely to suit your family’s needs. For instance, if you want to teach the concept of interest, then instead of discounting the cost of candies by 5% you can let them charge you interest of 5% and let them earn more for their money. The math works out to be the same as above.

Or, you can match what they save at the end dollar for dollar, and that way entice them to give away some of the candies they don’t like. So, if they only buy back candies worth $1 a day for 10 days and have $15 left over they get to keep $30. It’s a very nice way to have them eat less candy.

Or, you can vary the price of the candies based on the calorie count. So the higher the calories, the lesser the price drops and so it will be less lucrative for them to buy back high calorie candies compared to healthier ones.

Depending on your child’s temperament you can make any number of changes. As long as you make it a fun game and not a math exercise, kids are bound to love it since they get to eat their candy and make some money too. All of it while learning the valuable lessons of delayed gratification! Small lessons like this can go a long way in protecting them in the future where credit comes easy and temptations are strong!

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What I Have Learnt About Success

10. Perseverance plays a far bigger role than hard work or luck.



9. The road to success is filled with many, many speed bumps and pot holes. If you cant deal with them, you better stay at home.



8. Just like there are some places you cant get into without paying a cover charge, there are some types of success that cannot be had without kissing ass.



7. Success won't be handed to you just because you have a fancy degree. You need to work for it like anyone else.



6. Success breeds success. So if you successful at one thing, think quick and leverage the 15 seconds in the spotlight to launch your next big thing.



5. Reading about success will not make you successful. Dreaming about success will not make you successful either. Usually, some sort of “action” is required.



4. Sometimes success springs on you as a pleasant surprise. What you think is trivial may seem like the hardest thing for others and they may laud you for your achievements. Make the best out of such rare opportunities.



3. Nobody gives a rat’s ass about how much effort you put in. If you want respect and accolades, you need to show results.



2. The ease with which you can succeed is inversely proportional to how long the party lasts. The easier it is to get there, the sooner you will be replaced by someone else.



1. And finally, the one that triggered this tirade: Sometimes success comes too darned late. By then you have moved on to something else. It doesn’t matter that your success is far more than what you ever anticipated or that you spent several years dreaming, wishing and hoping for this kind of success. Now it is nothing more than a piece of information that results in a bitter-sweet feeling that cuts like a knife at the pit of your stomach while at the same time filling your heart with joy and pride. Deal with it, and move on!

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Why Do Some People Prefer to Pre-Pay Mortgage, while Others Prefer to Invest the Money Instead?

Through good fortune and diligent savings, we have some money left over each month after paying off the bills and funding the 401K. Our mortgage rate is currently 5.125%. Investing in index funds will possibly offer a return of over 8%, over the long term. Rationally, it makes more financial sense to stash the additional money we have in a well-chosen index fund. But month after month, we apply the money to the principal of our mortgage loan. It’s not like we are this irrational all the time – while paying off our debt, we chose to pay down the highest interest loan first, instead of Dave Ramsey’s feel-good theory of paying the lowest balance loan first and I dabble in credit card arbitrage quite a bit. So, why are we so irrational when it comes to mortgage?

I have been mulling over this question for a long time now. I think I may finally be able to explain it using some of the behavioral economics concepts that I am reading. Here is one of the example “stories” from the book Why smart people make big money mistakes and how to correct them. Pay close attention and answer honestly.

Imagine that you are a commander in the army, threatened by a superior enemy force. Your staff says your soldiers will be caught in an ambush in which six hundred of them will die unless you lead them to safety by one of the two available routes. If you take route A, two hundred soldiers will be saved. If you take route B, there’s a one-third chance that six hundred will be saved and a two-thirds chance that none will be saved. Which route should you take?

Have you decided? If yes, then let me repeat the question, this time phrased a bit differently. Read the question carefully again, and answer honestly. Don’t let your previous answer affect you – just choose an answer that pops at the top of your head when you finish reading the question.

Imagine that you are once again a commander in the army, threatened by a superior enemy force. Once again, your staff tells you that if you take route A, four hundred soldiers will die. If you take route B, there’s a one-third chance that no soldiers will die and a two-thirds chance that six hundred soldiers will perish. Which route should you choose?

The book says that, according to research conducted by two Israeli psychologists, it is more than likely that you chose route A in the first scenario and route B in the second scenario. Even though it was the exact same choice, the first question was framed to highlight a sure saving of two hundred lives, which makes it a choice hard to pass up for most people. On the other hand, the second question highlights the guaranteed loss of four hundred lives. When presented with a choice between a huge loss and a gamble with the possibility of saving all lives, most people are willing to take the chance rather than commit to a huge loss.

The authors explain that this is the same with our financial decisions. Quoting from the book – "In financial matters this phenomenon results in a willingness to take more risk if it means avoiding a sure loss and to be more conservative when given the opportunity to lock in a sure gain". I think that nails it!

Let’s apply it to our decision about the mortgage. I have mentioned before that we had made some bad decisions early on and were in considerable amount of debt before. It left a very bad feeling in our mouth. We worked very hard to get rid of it. So when we took on a huge debt like mortgage, and now have some money to spare, we frame the decision as the choice of whether to lock in the *guarantee* that we will reduce our debt, or take the chance that we *might* get better returns by investing it elsewhere. When the decision is framed that way, the choice seems to be to go for the guaranteed reduction in debt. While responding to a comment in an earlier post, even before I started thinking of this from a behavioral economics perspective, I had said, "Stretching the mortgage longer will make sense only if you can guarantee that the interest rate on your investment will be higher than your mortgage rate. Paying the minimum on mortgage and investing the rest in stocks/mutual funds etc can provide the higher rate of return but there is no guarantee. If the stock market crashes, you have neither the equity on the house, nor the stocks. With a huge loan like mortgage, I would rather err on the conservative side." That pretty much says it all.

Now think of someone who does not have a bad experience with debt but has a bad experience with a lost opportunity. Or someone who has had the sweet taste of making huge returns on a successful investment. The scenario looks different. They look it as the choice of the huge opportunity cost of lost interest versus a chance to earn good interest. In which case they choose to not pay off the mortgage, but rather invest the money in ventures that earn better interest.

That said, is one choice better than the other? Well, if we think of it from a purely rational point of view, our choice to pay-off the mortgage is the one that is wrong. But from a psychological perspective, the more conservative approach offers us more peace of mind. We are more relaxed about where we are going financially. Also, since we have a prior run in with debt and have a deep seated hatred towards it, I believe we work harder at scrimping and saving when we aim to get rid of debt. This gives us a better chance to succeed at our financial goals. In other words, some times what is right rationally, may not be really *right* if you are not psychologically prepared for it. So, one way or the other pick what's right for you and keep at it. As long as you are making progress - be it in reducing the mortgage or increasing your wealth through smart investments - you are doing good.

P.S.: The book that the example stories came from - Why smart people make big money mistakes and how to correct them – is really nice. If you had an "aha" moment when you read the stories, I definitely recommend that book to you. It's chock full of example stories like these, to explain the different concepts in behavioral economics.

Update 05/09/07: I mailed JLP @ All Financial Matters about this post and he put up an article about it on his blog. There is an interesting discussion going on there which you might want to check out, if this topic interests you.

Related Articles:

• Should You Get a 40 (or 50) Year Mortgage?


• Steps to Avoid Foreclosure: What to Do When You Can’t Keep Up With Mortgage Payments


• Attitudes Towards Debt, Bills and Credit Card Arbitrage


• Debt – Were We Really Irresponsible or Just Ignorant?

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Productivity Tip for Students (From the Other Side of the Fence)

Now that I have started working, I can see that my days as a student could have been a lot more productive :) I completed grad school in fairly good time, but if I had not gotten into the “student lifestyle”, I could have probably completed it even sooner. Or had some time to pursue other passions in parallel. Anyway, here is my productivity tip for all you students, so you can finish up sooner than you thought possible. Structure your day. Set a schedule and stick to it. Set some goals for the day and finish it up first before looking into other things. That’s it. Believe me, just those small changes will make a huge difference.

My typical day at school looked like this (many of you will probably be able to relate to it) –

• Alarm rings sometime between 7:30 – 9:00 am.


• Hit the snooze button at least 4-5 times and finally manage to get out of bed an hour later.


• Dash out of bed, have a quick breakfast and shower, and run to the lab.


• Check E-mails. Hmmm... mail from advisor. Stare at the mail for a few minutes, desperately trying to make sense out of it.


• Maybe it’s too early in the day to read this heavy stuff. So, check personal email and news instead.


• Shoot, did I really spend an hour out there? I better start working!


• Look at that mail from the professor *again* and see if it makes sense this time around.


• Hmmm… maybe if I look this up on Google search, I will be able to figure out what the professor means.


• Hey, not bad, this student from University XYZ already has a publication in the prestigious Journal ABC. I wonder where else he has published papers. Start googling for his bio.


• Damn, those are some neat pics on his website. I should try and get my paper accepted in that conference in France.


• Let me look up the conference website for deadlines.


• Hmmm, the conference is not in Paris. I wonder how much it costs to take the Eurorail from the conference location to Paris.


• And on and on, until I head back home in the evening


• Somewhere in the middle I have managed to get in a few hours of work done.


• In the evening after supper, that cold feeling of “Oh my god, I haven’t got enough done today… at this rate, I will be in school for another eight years” hits me at the pit of the stomach.


• So I drag myself away from front of the TV where I was having dinner and sit down with the results of my experiments, and some research papers, trying to make some progress until the wee hours of the morning

And, I wasn’t even into blogging, StumbleUpon, Digg, Reddit or any other social networking vices back then!

The routine worked – eventually I got things done. But the problem was, most of my work was done late in the night and the day was wasted away on unnecessary things. Since the day is meant to be for “work” it wouldn’t feel like I have relaxed, in spite of spending so much time on browsing and doing unnecessary stuff. It wasn’t like I was sitting there and playing games for hours – I still got work done, but not nearly enough. And, more often than not, things spilled over into weekends. So overall, I used to feel like I never had any time to relax and chill. Even though I was never really “busy”, I was never quite “free” either. And over time, the days, nights and weekends blended into a blur of slow-motion activity, with no clear marking of when to work and when to play.

When I completed my degree and started working, I used to find it really difficult to haul my ass into office by 8:30 am. And to stay at my desk for hours on end. The afternoons in particular were sheer torture. But now that I have got used to it, I have started to like it. I try to get as much work done as possible during the day, so I don’t have to stay back at work later than 6:00pm. I come home, fix/eat dinner, and after dinner relax in front of the TV or the laptop until its time to crash. I have suddenly reclaimed a few hours of the day to pursue things I enjoy doing, like maintaining this blog. If I were to calculate the total work done, I would say the amount of work I get done in the day now is similar to the amount of work I used to get done overall earlier. But unlike before where my “free time” was scattered in bits and pieces throughout the day, I get it in a chunk at the end of the day. And that allows me to do other things not related to work so my mind is in a way relaxing. And the next day when I get back to work, I am fresh and ready to tackle what the day brings in.

So, if you are still a student and wonder where all your time goes, I have a simple suggestion. Set up a schedule for when you will go to school and when you will head back, and what you will accomplish in that time. No matter how strong the temptation, do not get distracted during that time. You don’t need to do a 9am to 5pm stretch. Just 2-3 hours in the morning and another 3-4 hours in the evening of uninterrupted work *everyday* should work. I am quite sure, if you stick to the schedule, you will graduate a lot faster. And, you will have more free time on your hands than most of your friends, so you can watch TV, play games or whatever else it is that you kids do these days :)

Note: This post was motivated by, and submitted to “The Ultimate Guide to Productivity” Group Writing Project @ The Instigator Blog. Head on over there to find out how you can submit your productivity tips and for reading some cool tips by other participants. Here are some of the tips from the host blog and other contributors that I liked from the submissions so far –

• Does Multitasking Really Make You More Productive?


• 14 Tips to Get More Done in Less Time


• How Productivity Comes From Clarity


• Productivity Increasing Guide for Computer Programmers


• Ultimate Guide to Productivity for Adult ADD Sufferers


• Just Do Something, Already

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How to Convert Failure into the Proverbial Stepping Stone for Success

Why are some people more successful than others? While good luck, hard work and being smart certainly help, there is one distinct trait that differentiates them from others. And that is, they know how to convert failure into the proverbial stepping stone to success. Be it your finances or your personal life, being able to recover from failure is crucial for both survival and excellence. Here’s how to overcome failure and head for success.

Think of it as a set back, not a failure
The term failure has a "final" ring to it. It has a lot of negative connotations attached to it since the beginning of time. Instead, think of what you just faced as a temporary setback. When you change your perspective, the whole thing starts to diminish and it becomes a lot easier to pick up the pieces and move on.

Acknowledge it, but don’t dwell on it
In order to be able to move on, you need to face your setbacks. Do what you have to, to acknowledge it. Punch the wall. Lock yourself in the bathroom and cry your heart out. Go for a jog. Do whatever that works for you. But once done, leave it behind and move on.

Do not give in to self doubts
This is the time self doubts will assault you in full force. But doubting yourself will not achieve anything. Instead of giving in to self doubts and losing your self esteem, turn it into constructive criticism and think of it as an opportunity to improve.

Do not play the blame game
Nothing will come out of a blame game. You will find temporary relief, but unless you determine what the problem was, fixing the blame on someone or something, does not resolve anything. Don’t beat yourself up either – that’s just tantamount to blaming yourself. Go after the solution instead of trying to pin the problem and you will find that progress just follows.

Inspect the reasons for the setback objectively
Are they in your control? If so, plan on how you will avoid them in the future. If not, is there anyone/anything you can influence that may modify the outcome in the future. If neither, then learn some discipline and patience. Worrying will only make things worse. Some things just aren’t meant to be.

Salvage whatever you can
Even if you think it is a complete loss, there may be a means to salvage something. Do your best to recover whatever you can. And then, bury the remains and leave it behind. Tomorrow’s another day.

Finally, plan for the future and focus on implementing your new plan
Ask yourself, what next. Do you want to try again? Is it time to move on to something new? This is a decision only you can make. Do not let anyone tell you what to do. Seek opinion, but ultimately, make the decision that is right for you. And follow it through.

You have to remember, failing is a part of life. It is natural to fail before succeeding. Think of how you learnt to walk. So, when you fail next time, instead of staying down, take a deep breath, hold your head high, and move on.

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Stop Blaming Your Credit Card!

As I browse through the personal finance blogs and finance related articles, I see a lot of people blame their credit cards for their debt problems. To me, this seems as absurd as fat people suing Mac Donald’s for their weight issues! If you are serious about getting rid of your debt and building a sound financial future, you need to get past this blame game. Your credit card is not responsible for your debt problems!

Nobody forced you to apply for the card
First of all, nobody forced you to apply for a credit card. Agreed that in some cases, the credit card companies may have come to the campus and enticed you with a T-shirt or a popular CD in exchange for filling up the credit card application. They may have lured you and tempted you. But they didn’t force you. It was your own ignorance and greed for the trinkets that made you apply for the cards. The earlier you see this, and stop blaming “them” for your problems, the sooner you will be free to make some progress in your financial situation.

Nobody forced you to spend
Once you did get your credit card, nobody forced you to use it. The agreement you have with your credit card company is that they offer you the convenience of carrying the plastic instead of a pile of coins, and an interest-free loan for one month, provided you repay it at the end of the month. Otherwise, they start charging your interest. If you go out and spend on your whims and fancies and conveniently ignore the repayment part, of course, you will have a pile of debt to pay. It is your irresponsibility you should be blaming, not the credit card company.

Your high interest rate is not the credit card company’s fault
It is likely that your credit card company has several million customers. So believe me, they didn't pick you out to receive a high interest rate. What they did is what any sound business should do – check the risk of investment. They looked at your credit history to determine how much of a risk you are, before they gave you their money. If you got a high interest rate, then it is likely that either your credit history is bad, or it doesn’t exist. If it is the former, you are the only one who can be blamed for it. Instead of complaining, go work on fixing your credit history. If you don’t have a credit history yet, instead of complaining about the high interest rate, be thankful that you have a chance to build a good credit history and qualify for a better rate in the future. Would you give a loan to a person that you have never met before or have no idea if he will ever return it? Then why do you expect it from your credit card company?

Blaming credit cards will only hold you back
I have heard a lot of people complain that with a credit card, they find it hard to resist the temptation to spend. The credit card offers them a false sense of being rich, and they are not responsible for succumbing to its dark calls to splurge. Well, if you really want to have “financial independence” and really want to be wealthy person, you better learn some discipline quick. If you can’t handle a few thousand dollars now, how on earth do you expect to be able to handle hundreds of thousands of dollars that is needed for a decent retirement? Start learning to control the credit card, instead of allowing it to control you.

Also, you need to face your past to prepare for the future. Stop blaming others for your previous mistakes, and consciously avoid those mistakes in the future. Together with a savings plan, you can make your dreams come true a lot more easily than you think!

One more point I want to make here is that some companies expect you to charge your expenses to a corporate credit card. For instance, my company handles reimbursements for all work related travel and expenditure through the corporate credit card. When you are in a situation where you own a company card with possibly no preset spending limit, what will you do? If you can be disciplined with the corporate card, why not with your personal cards? Believe me, you have a lot more discipline than you give yourself credit for (no pun intended).

You could be rewarded well if you play the game right
Finally, once you master the discipline of using your credit card and pay your balances in full every month, a whole new world of rewards and opportunities present themselves. So get past the blame game already!

• Whatever you spend on credit card is an interest-free loan till the end of the month. Where else can you get that?


• And can you beat the convenience of not having to carry a pile of cash and change with you all the time?


• How good are you at handling pennies anyway? When you use cash and receive pennies in change, do you take good care of it? How about nickels and dimes? If you add all the pennies, nickels and dimes I bet they will add up to quite a bit. With a credit card, every dime, nickel and cent is accounted for!


• In addition, many credit cards categorize your purchases and send you reports annually for your expenditure. It’s a great way to organize your finances.


• Also, there are many cards these days that offer fee-free rewards in the form of airline miles or cash back or points which you can use towards purchases. Usually it ranges from 1% to 5% of what you charge to the card. It may not seem like much if you plan to live well below your means and not charge a whole lot to your credit card. But over several years, it gradually adds up.


• There are several other benefits to using credit cards such as purchase protection, travel insurance, no liabilities for lost or stolen cards etc. You can’t get that for using cash.


• In case of emergencies, you may not be able to run to your bank to withdraw cash. Credit cards offer quick access to reasonably large amounts of money, in case of emergencies. Just make sure you pay it back ASAP.


• As you grow more sophisticated, you can make even more money from credit cards through arbitrage. For instance, this year I will make around $2000 from my credit cards instead of paying any interest to credit card companies. I have been in credit card debt before and now its payback time. Believe me, if I can do it so can you! But not if you keep blaming your credit card company for your problems! (Note: Sadly though, this article suggests that this may be not so profitable in the future)


• Finally, using a credit card responsibly is one of the easiest way to build your credit history. A credit history will be used in almost all walks of your life – whether you want to buy a car, or buy a home, or get a loan to start your own company and maybe even when you apply for a job.

So stop blaming your credit card for your debt problems. Learn to control it and educate yourself about the proper usage of this double edged sword and you will realize you are way more powerful than you thought.

(This post was inspired by 9 Reasons Why I Love My Credit Card by SVB @ The Digerati Life)

Related articles on this blog:

• Building Credit History


• Large Credit Lines on Credit Cards


• 7 Steps That Made Me Debt-Free


• Debt – Were We Really Irresponsible or Just Ignorant?

PS: I do not work for a credit card company. This is just one of my pet peeves. May the stoning begin :)


~~~oOo~~~

You can't blame credit cards for your debt problems! To get additional info about student credit cards or low interest cards, the internet can be a useful resource. When looking for a credit card application or even cash back credit cards, the web can provide you with many different view points.

~~~oOo~~~

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Relationship Hack: “Independent Money Management, Common Money Pool” - How to Make it Work

I mentioned some time back that I have started to hang out quite a bit these days in the forums on Steve Pavlina’s site. Recently, one of the participants in the forum asked folks to share their views on"The Family Budget and Your Spouse". I left a rather long comment, and since it is something that works for me and the better half, I thought I would share with y’all as well. Maybe some of these tricks will work for some of you too. Any suggestions for improvement, or your personal “relationship & money” hacks, are most welcome.

Set common goals, not common means to get there
Both the better half and I have very different idea on how money should be managed, budgeted etc. So one day we sat down and decided on some common goals that we both agreed upon. We could not however agree on what was the best way to get there. We agreed to disagree.

Do not try to impose personal will on the other
We are both "smart" people. While we agree that the other person's idea is great, we just don’t see why it is better than our own. So we decided not to impose one person's will on the other. Each person is free to follow his/her own choice. We just have to find a way to make this work, so we can each be independent and yet work towards a common goal.

Set clear expectations, but don’t let it "divide" us
To make this work, we decided to agree on what each person’s responsibilities are. So we sat down and decided which bills each one takes care of, how much each of us will contribute towards the long term goals etc. We do not however want it to "divide" us. So, when some "unexpected" expenses come up, we do not argue over whose responsibility the new bill is - one of us volunteers for it, the other person accepts it gracefully and steps up when something else comes up. Ultimately, we are both on the same team. We try to remember that the boundaries we have created are not about the money, but how to manage the money . Also, for large expenses (in our case anything > $100), we always talk to the other person first. It helps remind that, while the decision to spend the money is independent, it is still common money.

Don't Micromanage Each Other's Accounts
Finally, the most important one. At least for us. Since we have clear boundaries, we respect the boundaries. Each of us is free to spend/save our own money as we see fit. We do not micromanage (i.e., meddle in) each others accounts. We share ideas and we discuss what each of us is doing, but don't dictate what the other person should be doing.

That said, I have to admit, it wasn’t easy to get here - especially since both of us are fairly strong personalities. Like everything else in a relationship (and life itself), this needed some hard work, some adjustment on each of our parts, and some ad-hoc learning as things progressed. But now we are at a stage where things work smoothly (most of the time anyway :) ). One nice side-effect is that we have an unspoken competition of who can take on the most responsibilities and yet save more than the established commitment to our long term goals. Some healthy competition is good for a relationship :)

While I am at it, I want to highlight a part of Steve’s reply to the post -

Erin and I used to maintain a family budget. It got tedious after a while, and we soon abandoned it. Niggling over a few bucks here and there was pointless, and we soon saw the futility of it. We learned it was far better to focus our energy on boosting our income to the point where keeping a family budget wasn't even necessary.

I have mentioned before – I am very impressed with some of the things Steve has to say, but not so much with some of the other things :) In the comment above, I think the part about “focusing energy on boosting the income” is great! But the part about “reaching a point where a budget wasn’t necessary” was not all that good. Budgeting to me does not necessarily mean keeping track of every penny you spend, but having a clear enough understanding about where the money is at and what it is spent on, in addition to having some basic guidelines of how much can be spent, how much should be saved etc. So no matter how much the income grows, I still think it is necessary to have some kind of budget in place.

Well, that’s just me. What do y’all do to stay sane (and independent) in a relationship while managing the money towards a common goal? What do y’all think of Steve’s comments?

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More Work; Less Results?

(Note: This post is NOT specific to personal finance. I believe that overall personal growth is extremely important for making progress in any other part of life. As such, this post is a part of my "personal development" effort.)

It's two months to date since I started blogging. This has got to be the most "consistently time consuming" hobby I have ever had. I seem to think about my blog all the time. What should I write next, how should I present it, what are others writing, SEO, traffic, templates, phew!. It’s been a heck of a ride so far. I have a ton of seemingly great ideas. But still, when I look at my blog, I think very little is actually getting done. Computer engineers call this state "thrashing", where the system is too busy jumping from one resource to another without actually getting any real work done. (Psychologists will probably call it Attention Deficit Disorder, though :) Basically, I think about nothing else, and am constantly working on it, but nothing substantial really gets done. Ever happened to you?

Of all the self-sabotage games my mind plays with me, this is probably one of the most destructive ones. With so much time spent, and so little to show, it’s very easy to get disheartened and give up. But in this particular round of Me-vs-My-mind, I shall prevail!

Step 1: Walk away from the task
In this case, the blog. I hadn’t realized how little TV I have watched ever since I started blogging! So, I put away the laptop, got a big chunk of chocolate cake and relaxed in front of the TV. The chocolate cake is not a necessary part of this step, but somehow seems to help :) As I watched the TV (and ate the chocolate cake), I drove away all thoughts of blogging that were crowding my mind. I believe, before the advent of TV, people used to resort to meditation to clear their mind. Can you imagine that! Anyway, with a couple of hours away from the anxiety of blogging, the anxiety about the anxiety of blogging, slowly started to recede.

Step 2: Figure out what the anxiety is about
Ok. Let’s see. I am a new blogger. The main source of traffic to my blog is from carnivals. While I have posted a few times during the last week, not many of the posts are, by my standards, "carnival-grade". Most carnivals have deadlines on Sunday. So, I need to write something good quickly. I have so many ideas. I don’t know which one to start writing about. There are so many carnivals. I don’t know which one to write for first. Let me start with XYZ. Start researching on the net. One link leads to another. I am now on a page talking about ABC. Wait a minute, I wanted to write about ABC too. So let me read this first and maybe write about this first. Before I know it, I have spent a couple of hours browsing and read about all the letters of the alphabet, but haven’t written a single word. Gosh, I want to write about so many things, and I haven’t even started. Brrrrrriiiiiiingggg, anxiety.

Step 3: Stop "thrashing"
Pick ONE topic and start writing. Stay focused. Don’t allow distractions. In this case, I just started typing about the first thing that came into my mind (which is, but of course, "thrashing"). The idea is to get in the zone. To go beyond "OMG I’m not getting anything done" to "There, I have started". At this point it doesn’t really matter what exactly you are writing about. If there is something to research, leave a "hole" and continue writing. Kill the doubts. Quell the urge to go look up something. Ignore the call from other ideas. Just put the current thought down. That should be the ONLY focus. Keep writing until you are done writing about all you have to say about this ONE thought. The spellings are probably off. The grammar is probably bad. It doesn’t matter. Don’t stop until you are done writing about the ONE thought that you started writing about.

Step 4: Plug the holes, add the finishing touches
Once the writing is complete, breathe a sigh of relief. Relax and re-read the post. Did I say all I wanted to say? Did I say it right? Do I need to fix spellings or grammar? Do I need to add any links or pictures? Polish the post until it’s satisfactory.

Step 5: See, now you have a post. You are not trashing anymore!
Cheers! Applause! Drinks to everyone on me. Great. Now move on to the next thought/idea/task whatever that was causing the "thrashing" in the first place. Repeat.

I don’t know if "thrashing" ever happens to others. I would think it does, because I am a fairly normal person with fairly normal behaviorial challenges. If you have never experienced thrashing before, you probably have no clue what I am ranting about :) But if you do get into "thrashing" then, step back and clear your mind, reorganize your thoughts, pick one idea and see it through to the end leaving holes if necessary, return at the end to fix the holes, and repeat with the next idea. No matter how overwhelming things get, this simple strategy helps get some results! It's fairly generic too.... works in all sorts of situations like dealing with examinations, dealing with debt, starting a new venture etc.

PS: If you do "thrash" wouldja please leave me a comment? The last time I checked, I was quite normal :) Let's see how it goes this time :)

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What Stops You and What Will You Do About It?

Yesterday night, at the end of a busy day, I was lying in a semi-vegetative state in front of the TV randomly flipping channels. On one of the channels was this crazy over-enthused guy, literally bouncing off the floor, in front of a group of engrossed people repeating over and over “What stops you and what will you do about it?” It must have been one of those motivational talks or faith-based lectures or something. But all his excitement, when I was on the verge of comatose bliss, really annoyed me and I skipped right past that channel in search of something calmer, to help me put my day’s worries behind and go to sleep (Nothing like the history or discovery channel to lull you to sleep at the end of a busy day, but I diverge). Today morning though, to my utter dismay, I found that the question had somehow got stuck in my head. And like a broken record, it played over and over in my head, all day long.

So, What really Stops You and What Will You Do About It?

Be it making more money, or saving more money, or setting some simple goals, or being the best at my job, meeting people, whatever. What stops you and what will you do about it? The only way to exorcise that voice in my head was to answer it. So, here is a slightly off-beat post -

• The highest on my list of what stops me has got to be the fear of failure. Not being able to live up to expectations. So, what will I do about it? Generally, a simple question along the lines of “what’s the worst that can happen?” can help put things in perspective. Sometimes, it’s a bit more complicated. In such cases, I try and define failure. Determine what it is that I am really afraid of. Figure out what I can gain out of the failure – will it be a good learning experience, are the effects of ‘failure’ reversible, will I be able to bounce back, etc. A cost-benefits analysis of sorts. Sometimes I win, sometimes the fear does. It’s an ongoing battle. The aim is to recognize the fear, and to question myself, before throwing away an opportunity.


• The second one (in a very close race), is laziness. Somewhere inside me is an utterly lazy person, threatening to take over, any minute. Once I have committed to something, I usually see it through, though. But, while starting something new, the lazy person gets the say. “Don’t start that… too much work”. Again, another ongoing battle. I fight the lazy bugger the best I can. Some I lose, some I win. The one trick that works (most of the time, with a few embarassing exceptions), is to go ahead and make publicly known that I intend to do something and then I am accountable and have to stick it through.


• Finally, worries about rejection. This is not that big a deal, but every now and then, I pass up a really great chance to meet someone or do something due to the worries of being rejected. It’s really weird. Until recently, I didnt even realise how often I was doing it. I have now learnt to recognize this (almost) and started avoiding repeat occurrences. Maybe someday, I will stop giving a damn what anyone says or thinks about me, without having to consciously try. Right now, I am not there yet. Baby steps.

There are a lot of other nits. Some tiny issues not worth mentioning. Others, quite complicated that I don’t know how to verbalize. Not bad for a start, though, huh? What I would love though, is to hear from you. What stops you, and what do you (or will you) do about it? Gosh, I am starting to sound like the TV guy, arent I? Damn him!

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7 Steps That Made Me Debt-Free

(Note: I've used "me" and "us" interchangeabley in this post. The "us" is me, plus the better half.)

It’s OK. We’ve all been there. "How did I land myself in this situation?" "What have I done?" "How could I have been such a *&^%$#?" Questions that each of us has asked ourselves at some point or the other. It doesn’t matter now. What matters is that you are aware that you are in debt and you want to do something to reduce your debt. With that, you have already started! Take a few more steps and slowly, but surely, you will be debt-free. Believe me, I’ve been there. Here are the steps that I followed to get out of debt. Hope they help you too!

1. Stop adding any more debt: If you are really serious about being debt-free, then the next logical step, is to stop adding any more debt. This is very very important. That means do not charge more than what you can pay off each month, to your credit card. Also, postpone all purchases for the time being, unless you absolutely need it. That includes TV or a play station or a car (especially, a car!) or a dress – anything! Notice I used the word postpone and not avoid. Once you have paid off your debt, if you still want to, you can always go back to making those purchases. For the time being though, just put it off.



2. Know your personality: Getting rid of debt is little like quitting smoking. You will be surrounded by temptation. But if you are determined, you can do it. Knowing your personality or style will help improve the odds of success. If you wanted to quit smoking, would you go cold turkey or would you wean yourself away slowly? If you answered cold turkey, then you like drastic steps. You want results quick. If you answered slow weaning, then you are patient. You do not like drastic changes, but will make an effort a little bit at a time. While planning your strategy, keep your personality in mind. Push yourself, but know that sometimes you may have to pull back.



3. List your debt and sort it based on your style: If you already haven’t, then now is the time to make a list of how much you owe and at what interest rate. Sort the list according to your style. Here's an option. If your personality type is someone who likes drastic changes, then sort by the interest rate, so that the first item on your list is the one with the highest interest. If your personality type is someone who likes to go slow and steady, sort by the amount you owe, with the first item on your list being the one with lowest balance. Financially, you will be better off if you pay off the debt with the highest interest rate first. But, if you choose to chip away at your debt slow and steady, paying off the lowest balance first is supposed to help you stay the course psychologically. Remember, these are just suggestions. You can sort the list anyway it works for you. (Based on the usage of the term supposed above, you probably have guessed by now that I chose to payoff my highest interest debt first.)



4. Negotiate lower rates or transfer balances: Call every single one of the agencies you owe money to and request a reduction of interest rate. The competition in this area is quite stiff and if you have decent credit history, they may well agree to reduce the rates. I know this could be annoying, but it will be worth the time spent. Even a small change in interest rate can make a huge difference in the long run. Also, check if you can transfer some of your higher interest debt to lower interest credit cards. If you have multiple lines of credit by the same provider, see if you can consolidate them into one lower interest line. Keep hammering at that interest rate to bring it to the lowest you can. In the end re-sort your list, if needed, according to your style discussed in the previous point. (We kept transferring balances from one low interest blanance transfer offer to another, until we paid off. Educate yourself thorughly about the impact on your credit history, if you choose to go this path)



5. Plan the attack strategy: Now decide how you want to reduce that debt. Irrespective of how drastic you want to be, or how slow and steady you prefer, you will have to make some changes to your lifestyle. Get used to the idea. This may sound like psychological mumbo-jumbo, but it helps. Your changes could be something simple like skipping the latte at the coffee shop to brew your own, or packing lunch instead of going out. At the other end of the spectrum, you could choose something drastic like this lady who chose to live like the homeless until her debt was paid off! We preferred something mid-way; live like poor students :) Now budget the whole month out (rent, groceries, utilities, everything!). Set aside a little bit of money for miscellaneous expenses. Split the remaining amount among the different debt accounts. If you are asking “what remaining amount?” you will need to start making more changes to your lifestyle or add more sources of income… sorry that’s what it takes, but believe me it will be well worth it! Irrespective of what your style is, follow these rules. Rule 1: Pay at least the minimum on all cards; Rule 2: Pay more than the minimum on at least the one at the top of your sorted list. How much more? As much as you possibly can (and then some)! Remember, the more pump in, the quicker you can get out!



6. Implement the plan: Set up automatic payments for EVERYTHING that you possibly can. I cannot stress this enough. This was the most important step that helped us succeed. When you do not automate, you have to fight the battle every month, every day. You have to keep resisting the temptation to put the money towards the debt instead of something else that provides instant gratification. That’s asking for trouble. By automating, you will drastically improve your odds of success. However, make sure to check your payments and your bank balance every now and then to make sure there is no possibility of over draft.



7. Periodically re-evaluate: Are you ok with the current style? Maybe making regular payment has improved your credit history, try negotiating lower rates again. Re-sort list, and repeat above steps. I found that as we started to reduce the debt, it was so exhilarating, that we couldn’t get there fast enough. We pushed ourselves more and more. Find ways to make it a positive experience (more on this later). And sooner than later, you will be there. Debt-free.


That’s it. That was our strategy, and by golly, it worked! That said, here are is an additional "changing times" step.


8. I used to keep a journal with entries every month of where we were and where we were headed. Just some numbers to track progress. I had not discovered the blogosphere yet. These days, I see a lot of people doing the same thing, but publicly (of course, protected by a cloak of anonymity). Check if this is something for you. Start blogging away your debt like this person. It not only helps you vent out your hopes and frustration, but more importantly, helps build that anonymous support network. No matter how strong a person you are, it will help to have some support to ride you through the dark times.

Good Luck! You can do it, if you really want to!

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A Time to Save, A Time to Give

Every now and then, it good to stop for a bit and count our blessings. And look for ways to share with the less fortunate people around the world. Being students or fresh grads on the verge of starting out, it is hard to donate a pile of money for charity. In this edition, I will try to list out some of the other ways we can give back. Please feel free to add any other ideas I may have missed out. Note that while the ideas here are written with the focus of students and fresh grads, they could easily be adapted to fit other circumstances and charity drives.

For students:

• Money is not all that can be given away. Time, can sometimes be more precious. As students, you will have more time on your hands now than you will ever have again in life. While I am all out for making the most of it and having as much fun as possible, consider donating a few hours to a cause. Several opportunities are available right around the campus – eg., helpline, rides for the needy etc. You can also look up non-campus opportunities at this website, or look on google for other opportunities.


• Penny Drives. If you are an international student, this is a neat little way to raise money for a cause in your home country. Everybody has a jar, cup or a pile of pennies lying around. Request people to donate their pennies for a cause. State clearly what cause it is. Advertise all over campus clearly showing how a few pennies, when converted to the currency of the home country, can make a huge difference. While it is hard to raise money on campus for charity, you would be surprised at how much you might be able to collect through a penny drive!


• Craft show and sale. Urge international students to bring a few handicrafts earmarked for charity on their trips to the home country. Beautiful, handy gifts can be purchased very inexpensively in foreign countries, by locals who know where to get them from. They usually will fetch a comparatively large price when sold in the US. Similarly, you may have friends here who know folks that are interested in quilting, jewellery making etc and may be willing to donate or sell items for a lower price for charity. Hold a sale and donate the proceeds to charity.


• Food Drives. Several times during the year the church in our neighborhood does a food drive to collect canned food and distribute it to the needy. Look for such food drives in your neighborhood and help spread the word or help with the collection process. If you cannot find an existing food drive, check with your church to see if you can get one started.


• Yard Sale. Look on the notice boards and mailing lists for students trying to sell stuff for cheap. Look for sponsors to buy these items for a charity yard sale. Sometimes, when you say you are buying it for charity, some of the sellers may agree to reduce the price or give away the items. You can also post out notices for students to donate their stuff to your cause when they get a job and move on. You might want to co-ordinate this with your neighborhood church or some such organization, for giving credibility to the cause and also since you will need space to store the stuff and hold the yard sale.

For fresh grads: In addition to the above you could look at some these options below –

• Paycheck Deductions. Many companies offer paycheck deductions for a charitable cause. Look if the place you work for offers this. If the cause promoted by your company aligns with your interests, you can indicate a fixed amount to be deducted from your paycheck. You will not notice if your take-home salary is less by $10 or $25, but to someone, somewhere, it will make a world of difference!


• Participate in charity walks. Every big city sponsors walks and marathons for a cause – eg., cancer walk or diabetes walk etc. The way this works, you will have to pay the entry fee to participate. In return you will get a participation package, which will usually be a T-shirt with your number token and a few trinkets. The remainder of your entry fee will be donated for the research of the cure. Some of these will also allow you to create a personalized website, where you can request your friends and family to donate on your behalf. Finally, check if your work place will match your donation.


• Used car donation. When you plan to buy a new car, if your old car is in good running condition, why not donate it instead of trading it in for a few hundred dollars? Some organizations even accept cars that are NOT in running condition and will have the tow truck come and pick it up from the place where your trusty companion through years of college finally gave way to age, without any additional charges to you.

I am sure there are a lot more opportunities that I haven’t thought of. Feel free to share your ideas.

• Update 12/28/2006: Five Cent Nickel today has a post about American Red Cross, which made me think of one more. Organize and/or participate in blood drives. This may not be for everyone, but those who are healthy enough, think about it - you really can save lives!

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Steve Pavlina on Financial Turnaround

Steve Pavlina's blog is known for inspiring motivational posts on personal development. While I was browsing it recently I found an article on "Making a Financial Turnaround". I was quite surprised to find a personal finance related post on Steve's site. If you are feeling a few financial blues and looking for something to give you that inspirational nudge, you should definitely check it out.

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