Category Archives: Philosophy

10 Commandments Of Personal Finance

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Mel Brooks tries to adopt a Centsei-quality beard in History Of The World: Part 1

We began this blog with an examination of the single most important idea of personal finance and lifelong happiness.  A few posts later, we mentioned one hundred tips to improve your finances and quality of life.  Today, we outline the 10 Commandments Of Personal Finance.  And no, you don’t even have to change religions!

COMMANDMENT I.  Thou cannot manage what thou does not measure

Translation: Budgeting and tracking is essential to your financial success.

The bodybuilder, trying to deadlift a new personal best.  The corporate executive, trying to profitably integrate a new product.  The dieter, trying to lose those last few pounds.  The athlete, trying to improve a batting average or free throw percentage.  The guitarist, trying to perfect a new song.  The gamer, trying to beat the original Super Mario Bros in the fastest time ever.  And finally, the Centsees (i.e. you), trying to better manage their personal finances. 

What do all of these masters of their craft have in common?  They all rigorously measure their performance.  Personal finance is a skill that can be taught, and no skill can be improved without a willingness to objectively measure one’s performance.

Start by measuring your net worth.  Add up all your assets with real value (cash, savings, car, retirement, property, stocks) and subtract your liabilities (credit card debt, mortgage, student loans, IOU’s, back taxes, other loans).  Here’s an easy tool to calculate it using Excel that takes just a few minutes.  Write the number down, update at least once per year, and keep track of it over time.

Is the number less than zero?  Don’t worry; this number just tells you that it would be best to aggressively cut back on your spending and pay down your debt.  Is that number greater than zero?  Nice start; set a specific attainable goal – whether it’s $10,000 or $1,000,000 – and focus on increasing your assets and minimizing your debt.  Most importantly, is your net worth number increasing month to month or decreasing?  You’ll only be able to tell through measurement.  Tools like Mint (free), Personal Capital (Free), or YouNeedABudget “YNAB” can help track and illustrate your progress, and they will be cover in depth in future posts.

Take this principle and apply it throughout your finances.  How much do you spend each month?  What percentage of your income do you save?  How much do you spend on essentials vs non-essentials?  How close are you to being able to cover your necessary expenses off your savings indefinitely (“financial independence”)?  What is your next financial goal and how quickly can you meet it?  The methodology is the same with each:  Assess where you are; set a goal; and track your progress each month.  Sure it takes a little effort, but don’t postpone it.  Just like the bodybuilder, the executive, and the guitarist, measurement is the key to financial management.

COMMANDMENT II. Thou shalt spend less than thou earns by minimizing the difficult choices

Translation: By limiting the number of decisions you need to make (via automation), you can spend less than you earn all the time without even thinking about it.

At its core, personal finance is about spending less than you earn.  “Wow, great insight, Centsei!”  The trick is knowing how to get there.

We’ve recently examined how to make more money and how to spend less, but to make doing so even easier, the trick is minimizing the number of difficult decisions you need to make.

It is a very “difficult decision” to set aside your “leftover money” at the end of the month for savings and long-term goals.  You only have to make this decision once if you automate your savings.  Set aside a portion of your paycheck to retirement, healthcare (including an HSA or other savings account to cover your deductibles and out of pocket), tax withholding, emergency fund, mortgage/rent payment, and even an account devoted to paying down your debts.  Most payroll companies allow you to split your paycheck between various accounts, so consider going so if you haven’t already.  If your payroll company can’t do it, your bank can, as almost every bank allows you to make weekly or monthly recurring transfers for free to accounts of your choice.  It doesn’t take long to set this up, so do this before sending a dime to your checking account… and don’t touch the money.  This “save first automatically” mentality will virtually ensure that you’re never hit with an unexpected expense.  For example, Lady Centsei and I each have over six different accounts that we devote our paychecks to (retirement, heath insurance, HSA’s, mortgage, emergency, and taxes) before we see any of it.  This one-time setup has made our financial goals a lot easier to attain.

The same is true when it comes to spending.  Your decision should always be between spending on the best option and not spending at all.  Saving should always be the second option.  Change your environment to match your goal.  If you have a financial “trigger” that causes you to spend, eliminate that trigger from your life so there is no longer a decision to be made.  For example, if you have a partying group of friends who cause you to spend frivolously, change your environment to one that limits the time with them and eliminates the decision of whether to splurge with them.  Harness your inner Centsei!

This philosophy can help you in other areas of your life that may or may not connect to personal finance.  Going to the grocery store with a shopping list and sticking to it (“no decisions”) will help you buy more healthful foods and spend less money.  Having a trusted friend assist you through a personal situation or choice can help you be more objective and waste less emotional energy.  Creating a specific schedule for your hobbies and routines can help you be more productive and waste less time.  Quantify your options, reduce irrelevant factors, and focus on the long term, and you will find yourself making more satisfying decisions just about everywhere.

COMMANDMENT III. Remember to keep holy thy recurring expenses, for none is insignificant

Translation: Letting your recurring expenses add up can devastate your finances.

If I asked the average person how much a coffee run in the drive-thru cost, what would you say?  Most would say maybe $3 per day.  Maybe $5.  The average American earned $27.16 per hour in 2018, it’s no wonder that small dollar expenses like this seem trivial.

However, the question was how much that coffee really cost.  A financially astute person might say the coffee cost $100 per month (let’s assume $3 every day or $5 per workday) or $1,200 per year, in after tax income.  The Centsei, nonetheless, would tell you that this recurring expense would truly cost you $250,000 over a 40-year working life (7% annual return).

($100 per month, invested rather than consumed, could be worth a fortune when you retire, as shown here)

Check every transaction in your bank and credit card statements every month.  Cancel any recurring transactions that did not bring you joy.  Did your cable TV subscription bring you joy?  How about that wine of the month?  That unused membership?  The insurance protection on your phone or chair?  The overpriced club?  That coffee/lunch each day?  Beware, because these transactions could hit you once a day, once a month, or even once per year, so it’s even more important to keep a close eye on them. 

Don’t become complacent and let “a few dollars here and there” every day or every month become a drain on your finances.  Cancel any recurring expenses that aren’t truly “holy” and bring you great joy!

COMMANDMENT IV. Honor and respect thy body

Translation: Taking care of your body is taking care of your finances.  And vice versa.

I think it was Buddha that said that “To keep the body in good health is a duty… otherwise we shall not be able to keep our mind strong and clear,” but since 50% of quotes are made up and the other 50% are misattributed, we’ll just give him credit on this one and move along.

There is no question that your physical and financial health can go hand and hand.  Those who take care of their body are better able to take care of their pocketbook, and vice versa.  There’s very little point in pursuing financial independence if you’ve sacrificed your body in the process.  And by “body” I don’t mean just mean trying to look like Brad Pitt or Jessica Alba; I mean the impact that things like stress, overworking, addiction, and fatigue can have on both your body and your mind.

We’ve already seen that exercise is literally like paying yourself $2,500 per year and that reductions of certain foods can add up to $10,000’s over one’s lifetime.

You’ll never regret time spent taking care of your health, and its impact on your happiness and bank account is immeasurable.

V. Blessed art thy savings; Cursed art thy debts

Translation: Saving for your future and freeing yourself from debt will allow you to live a happier and more fulfilling life.

Let’s begin this exercise by listing all the things you may have gone into debt for in your lifetime: A mortgage on a house?  A new car?  A business?  An education?  An unexpected health expense?  A shiny new phone or gadget?  Put these the debt itself next to the “thing” that it bought.  Now list which of those things you value the most today, starting with the most important and ending with the least important (what you most regret).

I’ll best most people put things like an education (for a subject in a high-demand field) and house near the top, the business and healthcare in the middle, and the junk they bought with their credit card or personal loan near the bottom (if they can even remember a fraction of everything).  This ties into one of our recurring themes of this blog regarding debt: Never go into debt for something that loses value over time. 

A house and an education won’t lose value over time.  A brand new car will.  A restaurant meal, a movie ticket, or a night out at the bar will – immediately.  If you can’t afford it in cash and if it’s going to become worthless over time, never ever go into debt to buy it.

Take a moment to think of a few things that you saved for and were able to pay for without debt.  Take another moment to consider the things you didn’t save for but instead purchased with debt.  Which ones brought you more joy?  Which brought you anxiety?

Things you save for diligently almost always bring you more long-term happiness than those you buy impulsively.

VI. Improve thy good habits and remove thy bad habits, one at a time

Translation: Improve your behaviors by building a routine that become a habit.  Focus on one small, easily achievable task at a time, and watch the benefits start to add up.

As I’ve mentioned before, I used to hate exercising.  Ugh.  There was always an excuse: too hot, too cold, too rainy, too far away (the gym), too painful, too tired.  I was young and in good health and couldn’t find a way to get into the habit.

I started studying why this is and learned some very effective ways of building good habits that stick.  It begins by making something a “routine” – a behavior that you have to think about, but that you do at the same time every day or week until it feels normal.  For me, that was the routine of walking for as long as I could at lunch.  Make the routine as easy and manageable as possible, then increase the time/effort you put into the routine slowly until you have more sustained benefits.  In time, this routine becomes a “habit” – something that you do without even thinking about it.  I now don’t even think about whether to go for a walk every day, I just do it, and my body feels weird without the walk. 

This methodology can apply to any area of your life where you feel like you’re not at your best.  Start by switching your routine, do it until it feels normal, and improve upon it until it becomes a habit.  Try one of the following, then add another:

—Walk 10 minutes a day at the same time, then gradually make it 30 minutes per day. 

—Stop buying just one type of “guilty pleasure” food at the grocery store, then gradually eliminate the rest. 

—Drink one large glass of water in the morning, then gradually drink one every hour for eight hours. 

—Throw one cigarette away from the pack you smoke each day, then two, then all of them.  (NOTE: Addictions may require specialized action, so make a plan with your doctor)

—Give up a time-waster like social media site first thing in the morning, then until noon, then all day (but never stop reading the Centsei!). 

—Do a 15-minute jog in place once per week, then gradually make it a daily routine or add in a 15-minute weight routine.

Focusing on one at a time is absolutely the way to go.  One minor change to your routine is infinitely more likely to become a habit than multiple major changes.  For me, I tried to go from no exercise to “three days a week for an hour at the gym” and my body quickly punished me for it until I lost motivation.  I started by just walking, added an easy weight routine after a few months, added one day per week at the gym after that (same day of the week at the same time), and am now up to two days per week – while not giving up the walks or weights.  Find ways to give yourself a positive feedback loop, and the habit will stick even harder.  It’s magical!

Interested in learning even more?  Check out The Power Of Habit at your local library!

VII. Thou shalt not covet thy neighbor’s goods, for there is no greater “status” than financial independence

Translation: Humans are programmed to seek status among their peers and often do so by spending money on status symbols.  Break free from these social cues.  The only status that matters is financial freedom.

We’ve all been there.  A classmate gets a sweet new iPhone and shows it off to everyone.  A friend gets a brand-new wardrobe with all the latest fashion.  A neighbor remodels their kitchen with high-end appliances.  An acquaintance gets “fancy” hair extensions, jewelry, or watches.  A family member takes a weeks-long vacation to some exotic destination.  A coworker buys a new car with fancy rims and leather interior.  It can be difficult to see other people buying nice things (seemingly) with ease and equally difficult to avoid the temptation to one-up them.

The fact is, however, the average person is really bad with money.  Half of Americans (about 61%) don’t have enough cash to cover a $1,000 emergency.  About a third don’t have a dime saved for retirement.  The average household has $8,000 in credit card debt, and 35% have some sort of collections reported on their credit history.  If that weren’t enough, more people are more concerned about paying for their next vacation than they are saving for retirement.  An astounding 20% of people making $100,000 per year are living paycheck to paycheck, according to a recent article.  Yikes!

Yet, these are the same people showing off their iPhone, flaunting their wardrobe, and flashing their new car.  The next time you feel that twinge of jealousy, remember that it’s much more likely that the person in question is spending beyond his means and has next to nothing in savings.  As that last article shows, people are poor financial decision-makers at all income levels, but this doesn’t mean you have to be as well.

Material possessions are no sign of status.  The only status worth having is ownership of your time and the freedom to do only the things you find meaningful.  This status is only truly accomplished when you’ve achieved financial stability and the peace of mind of being able to pay the bills and any unexpected expenses without taking on debt.  Such stability puts you on a path towards saving enough to cover all your core expenses for the rest of your life, of what I and many others call “financial independence.”  It isn’t something out of a self-help book; it is a very real position that you can put yourself in by keeping your spending low and your savings high.

This isn’t to say that you can’t enjoy a night out, a new suit, or a fancy gadget from time to time.  Rather, avoid all spending done to keep up with your peers.  Spend your money based on what you value, not what your peers value.

Be patient, keep saving, and imagine your fancy-car-coworker’s reaction when you no longer have to work by age 50 (or sooner)… and he’s still decades away.

VIII. Learn from thy past, appreciate thy present, and plan for thy future

Translation: Learn from the past, but don’t dwell on it.  Live in the present, but don’t lose yourself in it.  Plan the future, but don’t depend on it.

Ancient philosophers and modern thinkers (including bloggers!) each seem to have different thoughts on the extent to which humans should focus on the past present and future.  Let’s look at some examples.

Historians look deeply at the past and try to connect it to current events.  This is a useful exercise, as history can repeat itself, though not an easy one, as the world often evolves at a faster rate than textbooks.

Buddhists focus on the present and finding peace in the current moment.  This, too, has great value, as we often lose sight of the present and don’t always appreciate the many things that make the current moments in our lives so special.  However, too much emphasis on the present can cause us to lose sight of major problems right in front of us or behind us, so it does pay to reflect on non-current moments too.

Economists concentrate on predicting the future using data and analytics.  These predictions can have great value in helping people, businesses, and governments plan the correct course of action, but there is a reason they call it “the dismal science” – they’re often wrong.

Here at TheCentsei, we recommend a balance in all these things from the perspective of your finances and happiness.  Keep learning new things and sharpening your skills.  Take the time to examine the past to figure out what went well and what didn’t… but don’t beat yourself up if things weren’t perfect, just do it differently in the future. Continuous learning is the ally of success.

Image result for learning meme
Source: makeameme.org

IX. Thou shalt not hold thy financial goals in vein

Translation: Goals give our behavior meaning and keep us on the right track.

As you may recall, I moved back home after graduating from school in 2009 with a mountain of student debt and no job.  Being in your 20’s and living in your mother’s basement (or the first floor, in my case) can take its toll on your ego, and I knew it was on me to improve my situation.  So from the very beginning, I set myself on the path of paying off my student loans and finding a place to live in 18 months.  This was my goal.

I settled for a temp job that became a full time “intro level” job 3 months later because they were pleased with my performance (well, and I forced my company’s hand because I’d continued to job search and got another offer).  For the next year or more, I saved 70% of my after tax income, paid off my student loans, and saved enough for a down payment on an apartment and a car.  The remaining 30% was spent paying my mother rent and for gas/insurance on my old jalopy.  Virtually no nights out at the bar, no vacations, no video games, no new clothes, no status symbols.  I knew exactly how much I had to save each month to make my goal a reality.  This was my behavior.

In the end, the goal took 20 months to achieve, not 18, but it kept me entirely focused and genuinely happy about my life at the time.  Saving was legitimately fun because I could see the goal at the end of the tunnel, and I felt progress every month.  I spent more time with my friends, my family, and our new dog doing things that were not financially draining.  What might have seemed like an unfortunate situation to others proved to be a blessing.

The point here is just that having a goal brings value to our behavior.  The slight “let down” I might feel by sacrificing a night out at the bar is “made up” by a factor of 10 when I stepped into that apartment debt-free with a bright future on the horizon.  With no goal, I likely would have drained my bank account by pouncing on each opportunity to spending money without thought for the future.

From time to time, write down your financial goals and create an attainable plan for how exactly you can achieve it.  Do you want to pay off your debt?  Buy a home?  Go back to school for a degree?  Start a business?  Retire early?  From there, pick one and go get it!

Estimate how much this goal will cost and how quickly you’d like to achieve it.  Figure out how much you have and how much you need to make it happen.  Think about what (if any) sacrifices you’ll might to make to get there in a time frame that works for you.  Consider all options and set out on the one that suits you the best.  You’ll find it so much easier to pass on other spending when you have a goal in mind.

Once you complete the first goal, get started on the next.

Personal finance is as much about behavior as it is about numbers.  Giving your money a purpose gives your behavior a meaning.  With a purpose and a plan, you can accomplish anything.

X. Thou can

Translation: Nothing is more important to your financial success than a positive mindset.

You must believe that you can succeed.  It can be easy to give up trying to master your finances and decide it’s too complicated.  The only way to get past that is to believe in yourself. At that moment, you will begin to begin to prosper.

This blog is about how to live richly without spending a lot of money and how to become wealthy both in mind, spirit, and wallet without sacrificing your integrity. 

The requirement to get there isn’t being a math wizard, finance major, millionaire, or trust fund baby.  Indeed, personal finance doesn’t require a large salary, a prestigious education, or even a perfect past.

“It’s never too late to be what you might have been.” 

– George Eliot

“The man who moves a mountain begins by carrying away small stones.”

– Confucius

“Optimism is the faith that leads to achievement.”

– Helen Keller

Rather, the only requirement is the mindset that you can do it!  The rest is just learning how money (and your own brain) works and applying that knowledge to your situation to establish the right behavior.  Anyone who believes in themselves can begin making improvements in their life.

Study, after study, after study, after study shows the power of positive thinking.  Having the so called can-do attitude and willing to keep improving your skills not only affects your finances, but also bolsters your happiness and lengthens your life!

No, I’m no cultist or motivational speaker.  Yes, I am a scientist that believes in data, especially when it reflects my own experiences.

You can.  You will!

100 Money Hacks (that take 5 minutes or less) – Part 5: Everything Else

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On the fifth day of Christmas, my Centsei gave to me:

♪ 5-Minute Tips! ♪

If you have enough money, to spend the $40,000 that it would take to buy your true love all the gifts outlined in the carol with no impact on your financial future, then you probably don’t need this article, the final installment in TheCentsei’s Money Hacks.  For the rest of us, however, every dollar counts, and every minute counts even more.  With the holidays behind us, the new year is the right opportunity to make headway on our journey to financial independence and lifelong happiness.

Part 1: Budgeting

Part 2: Increasing Income

Part 3: Spending Less

Part 4: Health and Wellness

Part 5: Everything Else!

If you’re looking for a 2020 resolution, consider taking just 5 minutes per day to complete (or start) one item out of the 100 we’ve covered, and watch as these short simple tasks become permanent lifelong habits.  Thinking about change is easier than changing your thinking, but as we’ve said from the beginning, you can.

1) Check your annual credit report.  Once per year, you can check your credit reports for free, and ensure that the credit bureaus have accurate information on your account.  Click this link, enter your personal information, request one or all three reports, answer the security questions, and review the activity.  Do the reports show you as having a late or delinquent payment that you actually paid off?  Are all your credit accounts present and correct?  Is there an account you don’t recognize or potential fraud?  Ensuring the data on your credit reports is correct is the quickest, easiest, and cheapest way to improve your credit score, qualify for the best interest rates, and help protect your identity.  The above link is the only free, legitimate credit service that you’ll ever need.

2) Fix a mistake on your credit report.  If you find a mistake while reviewing your annual credit report, fix it as soon as possible.  Mistakes could include items belonging to people with similar names, errors in payments you made (or didn’t make), accounts that were not correctly closed by the lender, clerical errors in your address, loans or payments applied to the wrong account, double counting, and identity theft.  Start by calling the credit bureaus to report each error.  State the facts and request confirmation of the correction in writing.  You may also need to call the original lender.  Fixing a significant mistake, admittedly, may take more than 5 minutes, but fixing any mistake is worth your time, large or small. 26% of people have errors on their report, and the typical impact on their credit score is 10-50, which could cost them $100’s per year and tens of $1,000’s over your lifetime. This is especially important if you’re planning a large purchase, like a car or home, in the next couple of years.

3) Ask nicely.  If you haven’t read How To Win Friends And Influence People, I highly recommend it.  The ability to treat people well and take a genuine interest in their point of view is arguably the most powerful social tool you can develop.  Whether you’re asking for a raise or trying to get out of a fee that was really your fault, you’re exponentially more likely to succeed if you’re polite and empathize with the perspective of the person with whom you’re speaking.  “I work in customer service too, and I know this was partially my fault, but I absolutely love your product/service and a one-time courtesy like this would mean the world!”  Works like a charm (no pun intended), and has saved me a small fortune.  If someone can help you, your kind words go a thousand times further than your threats.

4) Switch to a less expensive brand.  Some name-brands offer a legitimately higher quality product than the generic.  Most do not.  Whether it’s something big like your car or clothing, or something smaller like your toothpaste or bottled water, your time is well spent by researching alternatives and balancing cost vs quality more effectively.  Spending money on a brand for status reasons is completely wasteful.  Remember, there is no greater status on Earth than financial freedom.

5) Dispute an unauthorized credit card charge.  Unfortunately, these crop up at least once per year for most people.  Review your statement and call the number on the back of the card to dispute anything you didn’t authorize.  Check all your transactions, especially the recurring ones, which can set you back years financially.  Some merchants offer you a “free” trial, then begin charging you if you forget to cancel.  Don’t rely on your bank; check your statements regularly, and promptly call about any strange charges or any good/service you didn’t receive.

6) Subscribe to a high-quality financial podcast.  I recommend The Mad Fientist but any podcast that advocates for financial independence and not some get-rich-quick nonsense could be helpful.  Subscribe now and replace one of your weekly TV shows with financial education. Have a podcast you like? Please share it under comments!

7) Order a free in-home energy assessment.  Many local/state/national governments offer a free in-home energy assessment.  See what is available to you and order it.  They often give you free products (we got 20 LED bulbs and a free programmable thermostat), and they may even subsidize larger expenses like a water heater, furnace, insulation, windows, or electrical panel.  A few examples include Mass Save, The Pennsylvania Public Utility Commission (PUC) Act 129, NYSERDA, EUMMOT’s in Texas, and the California Energy Savings Assistance Program (ESA).  Do a search for your state (or country outside of the U.S.) followed by “energy efficiency program” to learn more.

8) Learn a common skill.  Many everyday skills can be learned in minutes on your phone or computer.  DIY videos are your friend.  Here are a few things you can quickly learn: changing a tire, jumping a car, sharpening a knife, fixing an outlet, painting a room, ironing a shirt, using a drill or saw, putting out a fire, removing a stain, safely removing a tick, performing the Heimlich, and doing hands-only CPR.  Try to learn one per week, and save money when you next use it.

9) Repair a household item.  Similar the above.  Sewing a button, patching a hose, unclogging a sink or toilet, or replacing a faucet washer are tricks that everyone should learn over time.  When something breaks, spend a few minutes trying to learn how to fix it yourself.  Many household projects are not age, gender, time, or strength prohibitive – only knowledge (or confidence) prohibitive.  Don’t let these stand in your way.  Of course you should call a pro for the most complicated projects, but learn how to do the easier repairs yourself.  Last month, I saved $200-300 on a plumber because I learned how to fix a garbage disposal and unclog my kitchen sink.  Quick caveat: Make sure the issue is one you can fix, and call an expert if it’s truly beyond your abilities.

10) Clean (or replace) your car’s air filter.  Any driver can do this, and a clean filter can improve your gas mileage by up to 5%.  Learn how to do this for your home furnace too!

11) Research commuting options.  Finding a better commuting option could save you time and aggravation at the same time.  Cars, gas, insurance, tolls, accidents, and parking (which can run $75 in the heart of the metro area where I live) can be a huge drain on your wallet. Consider biking, public transit, carpooling, or occasionally working remotely if you can.  These options are sometimes faster and often cheaper than your car.  Do some research.

12) Sign up for a (free) accounting or tax class.  Of all the classes I took in college, the accounting course was arguably the single most valuable.  It pays (literally) to learn about how taxes, banking, compound interest, and financial statements work.  For intro courses, the math is simple and approachable for all skill levels.  More importantly, the benefit over your lifetime will be huge.

13) Unsubscribe from e-mail ads.  How many times have you gotten that email for an Amazon item you don’t need that is on sale?  Or a tasty deal at Chipotle?  Or an irresistible-looking special on pizza?  I found myself falling victim to all three.  The enticing ads was taking a toll on both my wallet and health, so I now unsubscribe from junk e-mails immediately, so as to not even see them in my junk folder.  Takes 5 seconds, not minutes, and saves you from the temptation of money-consuming advertisements.

14) Unsubscribe from catalogs or junk mail.  This is more difficult than unsubscribing from e-mail, but companies like DMAChoice or CatalogChoice can help and are easy to use.  You may need to call the sender directly or visit their website, but it’s worth the time.  It’s also a good way of going green at no cost.

15) Get on the do not call list.  Unfortunately, criminals and robots will still find ways of getting your number, but at least the law-abiding advertisers will not call you.  Countries outside the U.S. may have a similar service.

16) Install Ad Block.  All browsers.  All devices.  All the time.  Make your internet experience better and avoid the flashy nuisance that is online advertising.

17) Mute the commercials.  Credit to my old roommate for this tip.  While it’s always better to cut the cord entirely, muting the commercials can help you avoid the psychological tricks that advertisers use inescapably.  I’ll give you permission to leave them on during the Super Bowl though!

18) Register to vote.  Most voters don’t give a second thought about registration until election day, and by then, the officials can be overwhelmed, or the deadline may have passed entirely.  Even if it feels as though your vote may not make a big difference at the federal level, it can make a massive difference at the local level, where property taxes, schools, zoning, rent, and safety laws/ordinances are often decided by a few votes from the small percentage of voters that turn out. These can affect your finances and your community quality of life.  Don’t be part of the politically passive population of non-voters when so much good can be accomplished with just a little involvement.

19) Subscribe to your favorite blogger!  Shameless?  Not at all!  Aside from yours truly, be sure to check out Mr. Money Mustache, The Mad Fientist, and Living Stingy if you’re looking for some of the best bloggers in personal finance.

20) Re-read any of these articles.  But this time, stop reading when you find an idea that’s good for you, and get it done!  Then, do the same thing tomorrow.  Even if you just pick just one item on this list to do per day… and actually do it… you’ll be stunned at how quickly your finances improve and your road to lifelong happiness broadens.

I hope you enjoyed the series and make a resolution in 2020 to tackle those that are the most important to you. 

Do you have a favorite hack?  What is the most amount of money you’ve saved in 5 minutes or less?  Did I miss a tip you’d like to share?  Share your thoughts in the comments section below!

How Much Money Do You Need To Be Happy? The “Magic Income” That’s Considerably Less Than You Thought

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The Centsei provides commentary free of shock-value and click-bait, so today’s first topic shocks approximately no one: being poor really, really sucks.  

I don’t need to cite the studies to show that poverty is correlated with a variety of negative effects: 

• Shortened average lifespans
• Crime rates
• Withdrawal from society
• Substance abuse
• Hunger
• Sickness
• Discrimination
• Unhappiness (OK, I lied. One study cited)

Poverty is the ultimate expression of powerlessness.

In contrast, wealth is correlated with the opposite effects:

• Longer lifespans
• Participation in society
• Good health
• Education
• Confidence
• Happiness, of course

However, correlation (as all good Centsees like you already know) does not imply causation.

We see plenty of examples of people with great wealth that end up being the unhappiest of all: the bankrupt lottery winner, the burned-out child star, the actor-turned-addict, the head-shaven pop singer, the adulterous golf pro… not to mention the many criminals who experience great wealth or fame (and even their own Netflix TV shows!).

At the same time, we see countless examples of everyday people with much less wealth and considerable happiness: the family down the road involved in their children’s lives every day, the couple next door with more friends than open evenings for board game night, the single mother who volunteers what little time she has to better her community, the random internet blogger who characterized himself as a martial arts instructor with a comically long mustache and a flying pig sidekick.  Yeah, “normal” people like that!

Why does this happen?  What is the connection?  Do you even need money at all to be happy?

Well, yes you do, but not as much as you might think.

We’ve seen already that money buys you choices.  Having some choices (money) when you’d previously had none will definitely make you happier.  If you have some flexibility on where you live, what you consume, how you spend your free time, and how much free time you actually own, you will be happier.  We should all strive to have our core “needs” met, along with some of our “wants.”

“Some” is the driving term here, as having more financial resources and choices eventually plateaus and often causes one’s well-being to even decline. 

Not everyone handles the ability to have an abundance of choices very well… at all. The lottery winner has “friends” and family appear from out of the woodwork begging for money, and because he never learned to manage his wealth, he ends up destitute in a few years.  The child movie star never gets to be a kid, instead living in an artificial bubble created by adults where she gets introduced to adult things (e.g. drugs) and loses her cinematic appeal at the blink of an eye. The corporate executive makes six figures, but doing so comes at the expense of 80-hour weeks and driving home in his Lexus to find his children already asleep.

Higher incomes also tend to come with more responsibility.  You might pick up a new expensive habit. You might find yourself asked to help out a family member who’s down on his luck.  You might see your friends leaning on you to pick up the tab (in which case, find better friends). You might feel pressured to donate to causes you don’t really support. You might have acquaintances ask you to invest in their shady business ideas.  You might think it a bright idea to start your own business (more on that one later).

While it would be nice to be able to choose to do these things, these choices can turn into obligations.  The same money that once represented your financial freedom now becomes an anchor tying you down to a lifestyle you didn’t need or want.

A well-cited study by Nobel Prize winner Angus Deaton showed that happiness does tend to increase as annual income goes up, but only up to about $75,000 per year, at which point it flat lines or even decreases by some metrics.

C:\Users\w302755\Desktop\F1.large.jpg
Source (OK, OK… last citation for real this time!)

Here are what the lines represent:

(Left-hand side)
•  ‘Positive affect’ is the average of the fractions of the population reporting happiness, smiling, and enjoyment.
• ‘Not blue’ is 1 minus the average of the fractions of the population reporting worry and sadness.
•  ‘Stress free’ is the fraction of the population who did not report stress for the previous day. These three hedonic measures are marked on the left-hand scale.

(Right-hand side)
•  The ‘Ladder’ is the average reported number on a scale of 0-10.

Hold on a second!

You didn’t come here for academic mumbo jumbo, and I certainly didn’t come here to write about it. Let’s see if our friend Penny can summarize… in English.

That’s better!

Noteworthy is the fact that the study only considers the income of the individuals in question, not their spending, assets, debt, or other outside monetary factors that could affect their overall wealth.  There is no question in my mind that the person making $60,000 and spending just $50,000 (and saving for retirement) will experience more long-term happiness than the person making $80,000 but spending $100,000 (and filling that $20,000 gap with debt!).

The study sheds some light on a common misunderstanding: there is an upper limit on how much our paycheck affects our overall well-being. More importantly, it is an obtainable upper limit for a large number of people in a large number of industries.

Still, a higher income will only take you so far.  If you’re fortunate enough to make substantial increases in your income during your lifetime, don’t be surprised if you find that last pay bump a lot less satisfying that the first one.  If you’re already making $75,000 and are thinking about taking a job that pays more but would negatively affect your work/life balance, don’t.

Having no choices sucks.  Having some choices is a very good thing.  Having a too many choices (at the expense of our leisure time, stress level, or free will) can be a bad thing.  The journey to find that perfect balance is one we will continue to explore together.

The Great (And Only) Power Of Money: Why You Should Seriously Care About Your Cents

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Choices

As my birthday approaches this year, I’m reminded of a day from 25 years ago when a large envelope appeared in the mail with a note on the outside in Grandma Centsei’s familiar handwriting.  The envelope felt heavy and thick, and my anticipation of a card that might contain a bit more than just the customary birthday joke was very palpable.

The big day finally arrived, the envelope torn open, and the source of this “mystery bulk” revealed: two fresh, crisp twenty dollar bills.  In disbelief, I examined the bills closely, taking in their texture, weight, smell, taste (just a small lick, I swear)… their very aura. With such a thorough examination, I soon realized that these bills were truly a magical: they even had d sequential serial numbers.

I couldn’t believe my luck!  What were the chances that two bills like this would end up in my hands on my birthday (actually, not as unlikely as you would think, but try telling that to an eight year-old)?  Would someone pay a million dollars to me someday for this rarity? Could I frame them for all my friends and family to admire? The possibilities were endless.

In the coming days, reality set in.  More specifically, a new video game went on sale at Toys R Us, and the excitement of defeating the final boss now far outweighed the pride of framing duplicate Andrew Jackson portraits in my bedroom.  A seemingly insurmountable impasse had arisen: if I spent my money on this game, then my chances of being able to afford the more expensive new bike I wanted would basically be put on hold until my next birthday, basically an eternity.  What’s more, I wouldn’t be able to buy something even bigger and better down the road. If I saved even more money, maybe someday I’d be able to pay my little brother to do my chores for me! Now, the possibilities were truly limitless. My visions of the possible opportunities were growing like wildfire.

I remember going to my parents with my dilemma (conveniently omitting the little-brother-servitude bit), thinking they must have run into a conundrum like this before and could shower me with waves of deep financial insight.

Instead, their answer, which was less than half the length of a presidential tweet, really struck me:

“Well, it’s your money, so it’s your choice”

Deep indeed.

Money buys you choices.  Not material goods. Not status.  Not convenience. Not power. Not respect.  Not fulfillment. Not success. Not peace of mind.  Not even happiness. Choices.

There’s no question that money can be a means to many these things, but it is not an end itself.

The study of personal finance is one in the same as the study how we make choices.  Money is nothing more than a measure of your ability to make decisions for yourself, both now and in the future.  That’s why it’s so important to learn how to manage your money well.

The implication of money’s connection to choice is obvious throughout society.  High levels of wealth mean having countless product and lifestyle options. Low levels of wealth mean few, if any, choices.

Wealth is a spectrum, but for the sake of simplicity, consider the following scenarios that might arise in everyday life, as viewed from the perspective of a high wealth vs a low wealth individual:

 

High Wealth $$$

Low Wealth $

Location

Many factors for decision: 

  • Distance to work
  • Quality of the school systems
  • Neighborhood safety
  • Traffic
  • Proximity to family/friends
  • Culture

One factor: 

  • Cost of rent

Housing

Many factors: 

  • Rent or Buy
  • Square footage
  • Floor plan
  • Storage
  • Amenities

One factor:

  • Whether the landlord will accept me

Children’s Education

Many factors: 

  • Reputation
  • Public/Private/Charter
  • Boarding
  • Location
  • Religious focus 
  • Extracurricular activities
  • College Preparedness
  • Staff Quality
  • Culture

One factor:

  • Dictated by city/town school system

Food

Many factors: 

  • Nutritional goals
  • Dietary needs
  • Taste preferences
  • Brand
  • Convenience
  • Ethical standards

One factor: 

  • Giving family enough to eat this week

Healthcare

Many factors: 

  • Doctors preference
  • Hospital preference
  • Prescription needs 
  • Preventative care options 
  • Mental health care availability 

*All paid for by insurance

One factor: 

  • Whether I can afford this or have to put it off (again)

Cars

Many factors: 

  • Car, SUV, or truck, 
  • Size
  • Brand
  • Milage/hybrid/electric
  • Environmental/ethical standards
  • Durability
  • Amenities
  • Financing availability 

One choice: 

  • Public transit schedule

Financing/Loans

Many factors: 

  • Lowest interest rate
  • Financing length/terms
  • Customer service
  • Ethical standards of lender

One choice: 

  • Whether they will even lend me money

Household Maintenance Outsourcing 

Many factors: 

  • Cleaning
  • Landscaping
  • Appliance repairs
  • Remodeling
  • Painting
  • Childcare
  • Amenities

One choice: 

  • Keeping the household afloat without hired help

Free Time

Many factors: 

  • Time with my children
  • Time with friends and extended family 
  • Club/groups
  • Hobbies
  • Volunteering
  • Vacationing
  • Education
  • Developing new skills
  • Working out
  • Maintaining health
  • Resting/leisure

One choice

  • Number of second/third jobs that can be fit in

Financial Planning

Many factors: 

  • 401K’s, 
  • IRA’s, 
  • Pensions, 
  • Real estate,
  • Investments

One choice: 

  • Getting through until the next paycheck

(It’s not wrong to want to be in the left column, and I assure you that you can)

We’ll examine wealth, poverty, and how social class affects one’s outlook on life in future posts, but today’s message is short and sweet.  Human beings pursue money not because we are selfish, but rather because people value forging our own paths. Whether that path involves buying the shiniest new iPhone, stealing an expensive dinosaur skull, achieving financial independence, starting the world’s most successful charity, or just collecting sequential bills, you deserve that choice.

This blog will consider how we all can (hopefully) use our money more wisely to obtain… and retain… the greatest power on Earth: the power to choose.

The Centsei Philosophy

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The year was 2009.  A college student had recently graduated with no job prospects, no assets, $110 in his checking account, a mountain of student loan debt, and not even a romantic interest.  Sure, he’d done many of the “right things” (getting good grades, working campus jobs, and interning during the summer), but the economic reality of the times was setting in and the graduate wondered whether achieving the American Dream was only a myth.

Fast-forward to 2019.  The student is now gainfully employed, happily married, student-debt free, and rapidly working towards financial independence.  More importantly, however, he can unashamedly say that he is very happy and has a positive outlook on life.  

How did he get here, and how can you?

Welcome to The Centsei, a blog in which we will explore the journey of how to improve one’s financial and personal well-being.  

While the blog’s title may imply a Jedi-like “master/student” relationship, the reality is just the opposite.  I intend to share all my experiences – the successes (some) and the failures (many). I hope that you, the Centsees (readers), will consider sharing yours as well.

This blog is about is how to live richly without spending a lot of money… and how to become wealthy both in mind, spirit, and wallet without sacrificing your integrity.  There will be no articles about reusing toilet paper, eating lentils for a year, building your own 150 sq ft cabin in Montana, or shaving your back in the office bathroom to save a buck.  

Our mindset begins with courage, habit-forming, effort, and planning. There are no shortcuts, secrets, or gimmicks.

• Courage to say “no” when your peers say “yes”
• Habit-forming to help the difficult things become routine
• Effort to understand human nature and its limitations
And
• Planning to forgo what you want today for what you’ll need
tomorrow

(Purely a coincidence that this spells out C.H.E.A.P.?)

And don’t worry; I will never recommend something I don’t/wouldn’t use myself.  Check out my disclaimer if you’re bored, a lawyer, angry at me, or a bored lawyer who’s angry at me.

Each blog post will have a financial well-being theme, summarized with a simple “Centsei Says” caption, as seen here:

The Centsei philosophy is simple; it starts and ends with “I can.”  No specific background, education, or skill set is needed to benefit from this blog. You’ll just need the right mentality that you want things to get better.

• You can learn this stuff.
• You can develop better financial habits.
• You can be happy.
• You can achieve peace of mind.
• You will free yourself from the financial and emotional traps
designed to take away your money, your free will, and your
happiness.

All of your excuses for financial mismanagement are hereby banished.  Forever. The thoughts of “it’s too complicated…,” “I’ll never be able to get out of debt…,” “I’ll just start later…,” or “it’s all rigged against me…” are excuses of the past.  

The blog will also feature commentary from my trusty sidekick, Penny Why’s. While you might see nothing more than a flying piggybank, do not be fooled. Penny packs a punch! She will help us define complex terms, understand equations, and stay motivated on our path to financial independence… all while helping us understand the “why’s” of our conversations. .

(Penny promises not to hog all the puns for herself…)

The time to get started in your journey to financial success is now, and I hope my stories here can help.

Stay tuned for weekly updates, and please consider subscribing, commenting, bookmarking, following, or sharing with others.