Articles Worth Re-Reading this Saturday Morning

Here are some articles that I enjoyed reading this week:

Latest Online Bank Savings & Checking Rates at The Sun's Financial Diary provides a list of the current rates from several online banks. As we build our emergency fund and other savings accounts, I want to make sure that money is working as hard as it can for us.

How to Deal with your Spouse and Get Out of Debt at Journey to Financial Freedom offers good advise for dealing with money matters with your spouse: Understanding your spouse's Character in Money, developing a communication style, compromising, and setting up a plan and taking actions. Since money is the leading source of marital discontent, any advice is always welcome!

Cash Money Life is Now a Member of M-Network at Cash Money Life announces the newest addition to the M-Network. I always enjoy the advice and lessons from the M-Network, and Cash Money Life will only improve the value of the M-Network.

http://www.thedigeratilife.com/blog/index.php/2007/12/23/beat-a-debt-habit-profit-from-cleaning-out-your-house-my-roundup/ from The Digerati Life is a roundup of the articles that Silicon Valley Blogger found helpful, as did I.

Do You Have a Will? Estate Planning 101 at Moolanomy provides the basics of Estate Planning and some questions that everyone should be asking themselves. Although we don't have any substantial assets right now, looking forward this is something we really need to do.

How to Fight with your Spouse about Money by Karen Datko at Smart Spending is another helpful article about money matters and marriage. She suggests examining your own attitudes about money, making sure you've identified the real issue, considering the place and time of the money discussion, being honest with your spouse, listening to your spouse, seeking compromise when possible, seeing the long term, and seeking help.

The Road to Becoming Debt Free is a guest post by Ryan of Uncommon Cents posted at Blogging Away Debt that offers more helpful advice for those of us burdened by comsumer debt. He suggests that we don't incur new debt, scour existing expenses for places to cut back, use free (or at least lower cost) services, ask for a reduction in interest and use balance transfer offers (with caution), make sure the unspent dollars from your cost cutting measures goes toward your debt, and find ways to increase your income. The advice is universal, and is a common theme across most PF blogs, but it always helps to see another perspective.

Zen and the Art of Item Replacement from The Simple Dollar provides sound advice for replacing property: (1) If it isn't broke, don't replace it, (2) When you do replace something, replace it with long term quality and reliability, (3) Upgrade before the end of the lifespan only if there is a clear and compelling functional reason for the change, (4) No item is upgraded unless all parties agree on the need, (5) Try to avoid things that have a steady "upgrade" cycle. Adhering to these rules will definitely help reduce expenses.

Everything You Want To Know About the Millionaire Mommy Next Door - And What She Can Teach YOU! at Millionaire Mommy Next Door provides a biography and FAQ stemming from her appearance on the Montel Williams Show. I've been reading MMND for a while, and have always found her to be a source of motivation and ispiration.



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Knowledge is Power: Instant Gratification

Put a young child in a room, make a small reward available to him, and tell him that if he doesn't touch the small reward for a period of time, he will receive a larger reward. What happens?

• He grabs the small reward, or
• He screams, shouts, and yells in an attempt to get the larger reward sooner, or
• He quietly occupies himself, whistling, humming, walking around the room, patiently waiting for the larger reward.

In the 1970's, US Psychologist Walter Mischel conducted this study and observed all three reactions amongst the participants. He put a series of 4-year-olds in a room with a bell and a marshmallow. If they rang the bell, he would come back and they could eat the marshmallow. However, if they waited for him to come back on his own, they got two marshmallows.

The children who waited longer for their reward went on to have higher SAT scores, attended better colleges, and had better adult outcomes. Those who rang the bell sooner went on to become bullies, had worse teacher and parental evaluations, and were more likely to have drug problems by age 32.

Self-control is a deeply-rooted behavior, but can be improved through consistent reinforcement and conscious decisions. Children subjected to the same test repeatedly got better at it over time. Children with parents who demonstrate self-control, who use every opportunity to teach self-control and demonstrate the rewards, demonstrate an improved self-control themselves.

What relevance does this have to personal finance? Self-control in personal finances takes practice, perseverence, and determination. We have to teach ourselves, through conscious decisions, to save rather than spend, and to wait for the right opportunity rather than jump at the first opportunity. I will use an extension of the Mischel experiment to demonstrate:

Take an adult who wants a new television that costs $1200. Put the adult in a room with a new television, a credit card, a cash account with a slowly increasing balance, and a bell. The adult can ring the bell, swipe the credit card, and walk out with a new television and a credit card balance, or he can wait until the cash account balance exceeds $1200 and walk out with the television and no debt. What happens?

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An Alarming Look At Our 2007 Spending

I decided just over a month ago to turn our finances around, get out of debt, and start saving for the future. In the long run, changing the way we manage our finances will secure a comfortable future - home ownership, capacity to handle emergencies, and ultimately retirement. In the short-term, so short that it is already starting to happen on the smallest scale, we will have more money for the things that are important to us by prioritizing our spending and applying a little common sense to our budget.

Part of the process to turn our finances around has been carefully analyzing our spending. Luckily, I used Quicken all year and have been vigilant about entering and categorizing every expense. I've been pulling reports from Quicken this month to figure out where our money goes, and it is definitely alarming.

The winner of the unnecessary and wasteful spending is ...

Finance Charges - $2,676.81 - This is the category that we are actively reducing. Carrying $43,000 in various forms of credit adds up quickly. One of our financial priorities is to eliminate debt - and fast.

With the money we paid out in finance charges this year, I could have bought the following items from my Wishlist:

4 Gateway T2080 Dual-Core 1.73GHz 15" Widescreen Laptops ($600 ea)

1 Sony Bravia KDL-46XBR2 46" 1080p Widescreen LCD HDTV ($2000)

5 Envision 32" LCD HDTVs ($500 ea)

17 Harmony 880 Universal Remotes ($145 ea)

Or ...

I could have purchased a Gateway T2080 Laptop ($600), an Envision 42" LCD HDTV ($700), and a Harmony 880 Remote ($145) and still had $1,155 left in savings.

Yet another addition for the long list of reasons to dig out of debt.

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I'm marking my calendar - Our First Debt-Free Christmas!!!

I did it! It is Christmas Eve, we're done with all of our gifting, and we made it through the season with $0 added to the credit cards.

That's not much of an accomplishment, you say.

I have lived on credit cards for the last 9 years, acquiring over $20,000 in credit card debt during that time. During that time, I went through periods of "debt-free" living, weeks or months without using a credit card, telling myself that I had to dig out of debt, but I always ended up caving in sooner or later and falling back into bad habits.

Towards the end of November, I decided that it was time to break the habit once and for all, and I'm doing it in the public's eye with this blog. I set up our finances to automatically contribute to our savings and investments, finally starting an emergency fund, and prioritized the debts. Now, any extra money we have is split between "rewards" to ourselves, debt snowflakes, and savings, and so far, I've made more progress in one month then I did all year.

With no time elapsed between starting on our road to savings and debt reduction and the onset of the holiday season, I can't believe we pulled it off - 100% of our christmas spending was cash. Of course, the money spent on christmas gifts could have lowered our debts, but it felt good giving thoughtful gifts to our friends and family - and even better not paying interest on them!

I am excited about the new year, and I can't wait to keep saving! To everyone, we wish you a safe and Merry Christmas!

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