One of the misconceptions about having a job is in thinking you aren’t in business—you are. And just like any business, you have income—your salary—and expenses, which we’ll cover in some detail.

Even if you have a job, you’re still in business, only with a job your income comes from a single client.

What are those costs?

Extraneous/uncompensated time

How Much is Your Job Costing You?

I suspect that’s the situation for most full time workers. It’s not just the time spend at work, but also the time commuting—both ways—plus lunch, and even more so if you have overtime or off hours work functions. This extra time, over and above the regular work schedule, and generally uncompensated, is an extra cost of holding a job.

So just hypothetically, if you make $20 per hour on your job, but you have to spend 10 hours on your eight hour job, you’re out $40 per day for the extra two hours of uncompensated but totally necessary work related time. In the course of a year that’s over $2,000!

Paying others to do what you don’t have time for

Another time related cost here. While you’re working, you have less time to do what ever needs to be done with the rest of your life. Most likely, you’re paying others to take care of that for you. It may be paying someone to care for your children, to clean your house or to cut the lawn. All of that costs money and you may have to pay it because you simply have no time left.

Can we put a dollar figure on that? Not here, because it all depends on how many services you pay others to do. I’d guess though that it’s well into the thousands for an average person, at least on an annual basis.

Extra wardrobe

Holding a job usually means spending more money for clothing. Most employers have some sort of dress code, and even if it’s a casual one, it’s likely more formal than what you wear around the house. And then there are the dry cleaning bills…

Again, how much you spend here depends on individual circumstances. Some employers enforce stricter dress codes that are more expensive for their employees. Some employees even like the formality and over-comply. However it plays out, you’re spending more money as a result of your job.

Commuting

This is the most obvious cost for a job. Whether you drive your own car to work every day or take public transportation, it costs money to get to your job each day.

How much? The IRS allows up to 55 cents per mile as a reasonable estimate of the cost of running a car. That includes gas, maintenance, depreciation and wear and tear. To get an idea what it costs you to commute to work and back each day, just take your round trip commute, multiply it by five days for a week, then again times 50 weeks to come up with a reasonable estimate of your commuting costs.

If you travel 20 miles round trip, or 100 miles per week, or 5,000 miles per year, you’re spending about $2,750 each year on commuting. And that’s not tax deductible either.

Lunchtime

Most of us don’t think of this as a job related cost but it is. Many people eat lunch in restaurants each day, and even if you only eat in fast food places at $5 per day, you’re still spending about $1,300 each year just to buy your lunch.

If you were working from home, you’d probably just get up and make yourself a sandwich at lunchtime—that’s what I do. Sure there’s a cost to that, but it’s a lot lower than $1,300 a year.

rrrrrrrrrrr S-T-R-E-S-S !!!

Whether you work at home or in an office, there’s stress. After all, work is work and there’s a paycheck attached to it, and that means stress. But when you work in an office you have to deal with office politics, close supervision and time wasting meetings. You also have to deal with the aforementioned commutes and company dress codes.

Though it’s hard to measure stress in monetary terms there definitely is a financial cost. Stress causes more trips to the doctor, greater reliance on medications, more meals out (“I just don’t have time to cook tonight”) and more money spent on activities meant to decompress. The range of possibilities is endless here, so coming up with even a rough estimate is virtually impossible.

Opportunity cost

This one isn’t monetary but it may be the biggest cost of all. Opportunity cost is what you’re not doing while you’re doing something else.

If you enjoy your job and the work that you do, there probably is no opportunity cost. But if you find your work to be boring and unfulfilling, and something you do only to pay the bills, you’re mostly going through the motions. What else could you be doing to earn a living that might make you feel good about your work? The answer to that question defines your opportunity cost.

You could be working for yourself, or you might be working in a job that while it doesn’t pay nearly as well as your current job, it would be much more fulfilling and enjoyable for you. Which begs the question: now that you have some idea what your job is costing you—and maybe even realizing for the first time that it even is costing you—what might you do about it?

The post How Much is Your Job Costing You? appeared first on OutOfYourRut.com.

For a generation addicted to McMansions, late model cars, eating out, vacations at five star resorts and the like, no amount of money salted away may ever be enough.

Adopting a low cost/debt free lifestyle

Good Retirement Planning Should Include a Low Cost – Debt Free Lifestyle

If this is the case, then perhaps the single best plan we can have will be a plan for a low cost – debt free lifestyle. There’s a tendency to believe that this is something we can do later when we’re actually in retirement. For a number of reasons, that thinking misses the mark:

• A low cost – debt free lifestyle will enable faster and greater accumulation of savings throughout life.
  

• It will mean less income will be required in retirement.
  

• Many spending decisions are structural and long term in nature. For example, what type of house you buy early in life is a decision that will impact your spending patterns for decades. See the next section.
  

• A high cost lifestyle is intimately connected with debt.
  

• Frugal living forces us to think and work around challenges, rather than following the herd and paying the shelf price for everything. If this approach is valuable during our working lives, it will be even more so when we’re older and retired and options are constrained.
  

• Frugal living is a habit, a lifestyle; the sooner it’s adopted, the easier and more complete the acceptance. If you have expensive tastes throughout your life, you’ll carry that and it’s associated costs into retirement.

This is something that needs to be done now, not when we’re 65. Frugality isn’t an age thing. If you’re old enough to be funding a retirement plan, then you’re old enough to adopt a low cost/debt free lifestyle.

The mechanics of a low cost – debt free lifestyle

It’s easy enough to talk about the theory of living a more frugal life, but what does that mean in practical terms?

Housing. Buying a high end home locks you into a high mortgage payment, high maintenance and repair bills, high utility costs, and another major expense we don’t think about: a high end house requires high end toys to fill it. That’s a treadmill that once we’re on, it’s almost impossible to get off. Retirement strategy: buy less house than you can afford, and be purposeful about paying off the mortgage as soon as possible.

Cars. We can spend a lot or a little on cars, and while the ego gratification of having an expensive model can be substantial, so too is the drain on finances. The classic pattern of trading up to a more expensive car every five years locks you into the never ending cycle of bigger-is-better as well as a state of perpetual debt. An average monthly car payment of $500 made continuously from age 25 to 65 totals $240,000! Can you at least cut that in a half? Retirement strategy: either switch to buying used cars, or plan to buy new, payoff quickly and hold the car for at least 10 years.

Credit. One thing none of us needs to be carrying into retirement is debt. But many in our culture have become too comfortable with it. We need to think of debt as a parasite. It represents a reduction in cash flow; every dollar paid into debt service is one more that isn’t going into savings or some other productive capacity. Retirement strategy: stop borrowing and begin paying off existing debt. Debt is a bad habit, a lifestyle, so get control of it now. The less debt we have the more control we have over our incomes, and the less income we’ll need in retirement.

Pastimes. In today’s marketing driven world, we’re herded into participation in activities that come with a high price tag. A big chunk of many household budgets is squandered fighting boredom. Trips to the mall, the movies and fun parks are examples. Some others we don’t typically think of as pastimes include gambling, smoking, and excessive drinking, which are not only expensive but can also bring complications beyond finances. Retirement strategy: embrace simple pleasures. Often we spend money because we haven’t found those things that truly make us happy. But happiness is usually found in the things we do to connect with ourselves and with other people, and usually don’t cost much at all.

Eating out. In a true sense, this is probably the most superfluous expense we incur. It’s basically getting someone else to prepare our food, something we could do ourselves and for a lot less money. Apart from the cost, most restaurant food is not as healthy as what we could prepare for ourselves. As with pastimes, much of what drives us to it is boredom. Retirement strategy: embrace cooking as a pastime. See it as an opportunity not only to control expenses, but also to take charge of your health, and to improve connections with family and friends by having them over for dinner more frequently.

Addiction to stuff. How much stuff do you need to be happy? How many computer games, mechanical gadgets, jewelry, clothes, furniture, time shares and sports equipment will it take? Stuff rarely fills inner needs or brings us closer to other people—which might be what we’re really seeking just before we go on a buying binge. Retirement strategy: Shift from buying things to doing things. Life is what we do, not what we have. If we think we need a lot of stuff to be happy, there are probably a few things going on that we don’t want to face.

Maintaining good health and healthy living habits. This topic is almost never mentioned in any discussion of retirement planning, but its relevance should be self-evident. The biggest variable expense for the elderly is healthcare, and the best financial planning available may be of little consequence if we enter retirement in poor health, tethered to the healthcare community and dependent on multiple drug therapies. Not only will health problems soak up much or most of our resources, but they can also prevent us from being able to work to supplement retirement income, in addition to keeping us from living life to the fullest. Many of the ailments of old age are preventable with better choices early and throughout life. Retirement strategy: adopt a lifestyle of better eating habits, regular exercise and avoid activities that have a high likelihood of causing crippling injuries.

In the event that tax sheltered retirement savings end up being less generous than the financial media promises, and/or if Social Security and Medicare are reduced or eliminated, a greater emphasis on a low cost – debt free lifestyle may be the most effective counter plan we can have.

What other expenses can we cut now that might have a positive impact on our retirement planning?

The post Good Retirement Planning Should Include a Low Cost – Debt Free Lifestyle appeared first on OutOfYourRut.com.

A car purchase is never a completely stand alone transaction. Because of the cost of cars today, buying a new one represents an important component of your overall financial well being. Buying the wrong vehicle, or buying it the wrong way—such as with a lease—can compromise our finances for many years to come.

What’s so bad about car leases?

A car lease is always temporary fix

How Car Leases Torpedo Your Finances

The problem with these benefits is that long term they do nothing to improve your financial situation. They’ll put you in a car—a new one at that—but you won’t build equity in it, nor will you be working toward the day when you’ll own it outright.

Ultimately, the lease will always need to be replaced.

You’re locked into perpetual monthly payments

Since you’ll have nothing to trade in when the lease expires, the most likely course of action will be to enter into another new lease. Dealers will make this process even easier by waiving certain exit fees. But don’t be to sure they’re actually waiving them—there’s an even better chance they’ll roll them on to your next deal and you’ll never be the wiser!.

A new lease will mean another term of payments—24 months, 36, 42 what ever—but you’ll always have a payment. And that works for the dealers; if you never experience not having a car payment, you’ll never know how good it feels and why you need to work so hard to get there.

Car leases create a future obligations

Part of the reason car leases are cheaper on the front end is because they’re more expensive on the back. The car company isn’t offering a less expensive program for leases, its just shifting the burden from one end to another.

If you want to buy out the lease at the end of the term, you’ll have to buy the car all over again but at a price much higher than what you’d pay for a comparable vehicle on the open market. After all, the dealer has a captive buyer on this!

Even if you want to get out of the lease early, there are penalties in place that you’ll have to pay in order to do so. And at any point you want to get out, the dealer can always assess additional charges for the vehicle condition—real or otherwise.

A car lease forces you to maintain the required maintenance schedule

It’s often said that when money’s tight, the first thing to go is maintenance. Who hasn’t been in a difficult financial position where maintenance had to be delayed, either on a car or some other possession? I’m not recommending this course, only pointing out that in the real world, this is a way people often stretch budgets.

With a leased car however, you may not have that option. Leases contain provisions requiring you to maintain the vehicle to manufacturer specifications otherwise you could be in violation of the contract and subject to penalties. If you’re playing it safe, by having service through the dealer, you’re probably paying the highest maintenance costs possible!

And here’s another drawback to having a leased vehicle—you can’t put cheaper, used parts in a new car, especially one you don’t own!

Leases aren’t just about a monthly payment; there’s a whole chain of other costs that go with it.

You’re bound by a contract for years at a time

None of us ever like to feel trapped. But trapped is what contracts to do us, and whether the car dealer calls it a “lease agreement”, “lease option”, or what ever soft title they choose, you have entered into a legally binding document, better known as a “contract”.

It doesn’t sound quite so benign when you call it that, does it? But that isn’t the worst of it…

Lease contracts are drawn up by the dealer’s lawyers (plural!), not by you and your lawyer. They’re drawn up to protect the dealer and his interests, not yours. A purchase is a one time event; you sign the papers, take your car and go on with your life. A lease is an ongoing process that legally binds you (not the dealer) to certain required performances.

Nope…it’s not benign at all.

A car lease leaves you with nothing when it’s over

People who enter car leases typically go in with nothing, and come out with basically the same thing—that is if you ignore the various exit fees that aren’t so easy to determine during the course of the lease.

Under the best of circumstances, you’re no worse off than when you started (not likely), but you still have no money or trade-in equity as a result of having the car for several years. No matter how leases are packaged, no matter how well priced, this fact is inescapable and by itself it’s sufficient reason to avoid the whole mess.

Our financial goals should be based, at a minimum, on a plan of always moving forward—if only a little bit at a time. Car leases don’t enable us to do that.

A car lease creates an appetite for new cars

This can be the biggest torpedo of all, and most of us never think about it. When you lease a car, it’s a new car, not used. This means you’re always driving something that’s new, and that’s a form of addiction.

Let’s be honest, few trappings in life massage the ego quite like a new car, and if you’re used to driving them—if new is the norm in your life—you probably won’t consider buying something used. Even though it would make much greater sense from a financial standpoint.

 
With all that going against car leases, why not plan to buy a good, used car instead? It may not be quite the emotional buzz of having a new one, but your finances will thank you for it. And you might even sleep better at night!

Have you ever leased a car before? What were your thoughts about it?

The post How Car Leases Torpedo Your Finances appeared first on OutOfYourRut.com.

While being frugal may seem to be primarily a financial activity, or at least one that specifically targets finances, I think that their are also ways in which being frugal can have a positive effect on your emotional well-being and happiness.

Traveling light in life – detaching ourselves from stuff

It often seems as if it is part of the “natural order” of human existence to accumulate stuff in life. We buy stuff because it makes us feel better about life and about ourselves. Perhaps it even gives us a sense of security. Maybe it’s that in surrounding ourselves with stuff we are unconsciously creating a protective barrier around us that somehow insulates us from some of the harsh realities of life.

The Connection Between Happiness and Being Frugal

If you have a large enough trove of stuff, you will need a larger than necessary house to store it, and that by itself can create a battery of entanglements. You are now working to support a house, that provides storage and protection for your stuff. It turns into a vicious – and costly – cycle.

But no matter how it looks on TV, life isn’t about stuff – it’s about people, relationships and experiences. And as a practical matter, living life to the fullest often requires having as little stuff as possible. In order to fully experience life, it’s usually better to travel light so that you’ll have the mobility and financial flexibility to take full advantage of whatever opportunities and adventures come your way. That’s harder to do when you are carrying a ton or two of stuff in the backpack of your life, or trying to live life according to standards set by others.

Detatching yourself from the trap of maintaining a certain standard of living

Loosely speaking, standard of living is about maintaining a lifestyle that is consistent with the community around us. It’s a way of blending in to our surroundings, financially speaking.

But as comforting as it may seem to be able to blend into our circumstances, it’s also an expensive way to live and fast becoming unsustainable for millions of people. As you become more frugal, you begin to realize that conforming to monetary standards set by others may no be in YOUR best interests, even if it seems good for so many others.

Yes, that can make you a pariah in your own neighborhood, but it’s also liberating. You don’t have to buy a new car every five years, prepare for “the best” education for your children, have top quality merchandise, or be on the constant hunt for a bigger and better home. When you let go of all that, you also let go of the stress that comes with constantly striving to have more. And in an almost inexplicable way, the world starts to look very different too.

Frugality and faith

As best as we can tell from the Gospels, Jesus had very few possessions in life. And the people who followed him – particularly his disciples – similarly had few material attachments. Much of Jesus’ teachings, as well as those of his disciples later on, dealt with minimizing the importance of material possessions.

The Sermon on the Mount is filled with such teachings, but Jesus makes a very specific comment about this topic elsewhere:

“It is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God.” – Mark 10:25

I’ve always thought this passage to be symbolic, however some years ago a minister set me straight on it – it actually had a literal meaning to the people of the day. In Biblical times, when rich people traveled, they typically took their most valuable possessions with them. They loaded their prized possessions on the backs of camels, and as they did the camels – already tall animals – were stacked even higher.

There is a gate in Jerusalem sometimes referred to as “ The Eye of the Needle”. In order for the camels to make it through this gate, they would literally have to drop to the ground and crawl through the gate. In this way, the rich were forced to lower their possessions in order to pass through. And so it is with the Kingdom of Heaven.

This has a profound meaning to us today even if we don’t think of ourselves as being rich. In order to walk the faith walk, we have to lower the value of our possessions. Our possessions can get in the way of our faith in much the same way they can burden us in life. They can even obstruct our view of God given the human tendency to bend scripture to fit our own personal preferences.

Being frugal means shedding some possessions, and that can clear the way for a less obstructed faith walk.

Greater self-reliance from thinking beyond money

I have a confession make. During the course of my life I have resisted efforts toward being more frugal. It just always seemed to be easier to pay someone else to take care of something for me, or to pay a little bit more money to have something now. Being frugal, after all, requires strong measures of self-reliance and self-denial.

But as I have gradually become more frugal, I’ve actually found it to be empowering. The more I can do for myself, the more self reliant I’ve become. In addition, I’ve become more confident about my abilities to do things that I didn’t think I could in the past.

But there’s something else that is even more significant.

Being frugal is enabling me and my family to live on less money. The less money that you need, the less worried you are about it. For example, I used to worry whenever something broke. It usually meant either having to pay someone else to fix it, or pony up to replace it completely – both expensive options!

Now I have something of a checklist that I go through when something breaks:

1. Fix it myself, or
2. Tap into a low cost repair source (you develop these as you become more frugal), or
3. Replace it with something secondhand and inexpensive.

Which ever option I use, it’s always less expensive – and usually far less expensive – than the practices of my previous life. Being frugal means thinking outside-the-box, which usually forces you to think beyond money. Once you break that barrier, it gets steadily easier to do. And it feels a lot better than always writing a check or swiping a credit card too!

Greater emphasis on people and on community

This is actually a pretty simple concept: the less you are wrapped up with possessions or with living a certain standard of living, the more concerned you become with people.

Being frugal has a way of bringing you closer to people. When you pay for everything that you need – usually to third party services – life is more insulated. You don’t need to take the time to get to know the people who are helping you, because you’re paying them.

But being frugal involves greater reliance on people. It’s not just a matter of paying – you have to get to know them, to work out reciprocal arrangements, and develop a life of cooperation. That forces you to build more constructive relationships. It may seem old-fashioned in our day and time when convenience is king, but it’s actually the way people interacted for thousands of years.

It’s what we might call community!

We often mourn over the fact and there seems to be no community. But there won’t be in a world where everyone is simply paying others to do everything for them. Community is about cooperation – oftentimes no money changes hands at all. You might cut your neighbor’s lawn one day when they are out of town and unable to do so, but a couple of weeks later they might baby sit your kids.

That’s community – it’s the kind of arrangement that you try to build when you become more frugal. Being frugal not only means greater self-reliance, it also means increasingly relying on the people around you. And as they also rely you, you forge reliable grassroots relationships that are based on cooperation and trust.

Do you agree that being frugal can have significant benefits beyond money and that it can even make you happier?

The post The Connection Between Happiness and Being Frugal appeared first on OutOfYourRut.com.

Achieving financial freedom usually centers on investment strategies that will enable us to reach some magic number at which point the goal be obtained. But investing is only half of the equation with financial freedom.

The other half is spending.

We can think of being frugal as a system of controls that force us to limit our spending. What are some ways that being frugal can contribute to reaching financial freedom?

Being frugal = lower cost of living = less need for income

The Connection Between Financial Freedom and Being Frugal

We’re talking here about being frugal as a strategic financial decision, so we don’t want to confuse that for penny-pinching. Some people are that way by nature, and it‘s not always a pleasant type of personality. We often refer to them as misers or cheapskates. It takes on the characteristic of being frugal for frugality’s sake, which is to say that it is an end in itself with no future goal. We need to think of being frugal as a strategy that will move us in a positive direction.

I believe that there are two major types of frugality – micro-frugality and macro-frugality. Micro-frugality is the process of cutting a lot of small expenses in the hope of producing big savings. Macro-frugality is cutting a small number of very large expenses to produce big savings.

In theory, you can – and probably should – put both macro- and micro-frugality into practice. But you’ll get the most bang for the buck with macro-frugality. You will cut your major expenses, such as housing, car expense, and perhaps even health insurance, to produce very big savings in your budget. That could be $1,000 per month or more, and that will create a lot of options.

These expenses are significantly harder to cut, but once you do it can have a domino effect. By cutting the big expenses (housing and cars), the smaller ones (utilities, insurance, and repairs and maintenance) fall automatically. And if you want, you can always supplement your macro-frugality efforts with as much micro-frugality as you can stand.

Frugality and investing

We touched on this a bit already, but let’s go deeper. Saving and investing money should be the endgame when it comes to being frugal. You are not cutting expenses to simply to cut expenses – you’re doing it to free up money to enable you to have the financial freedom a large investment portfolio can bring. That will make investing and being frugal two sides of the same coin.

But there’s something else about being frugal that is particularly important when you’re investing money in the stock market. By being frugal (as opposed to being cheap), you develop a natural ability to find value. This is no different than what successful stock market investors do all the time. They don’t simply invest in the trend of the moment – they find undervalued assets and markets to invest in. Those are where the richest returns will be found.

If you can bring the mindset of being frugal into investing, you’ll be on your way to a winning investment strategy.

Frugality and business options

That same frugal mindset can also be a big asset if you are either in business, or planning to be at some point in the future. I believe that there is a strong connection between being frugal and running your own business.

Just as with the stock market, being frugal helps you to identify value as a business owner. You will learn to buy low and sell high – which is the most critical component of any successful business. You will also be aware of the importance of making the best use of scarce financial resources, an ability that is also essential to business success.

But bigger picture, being frugal enables you to live on less money, which will make it easier for you to start a business in first place. Lower and fewer financial obligations almost always lead to more options in life.

Frugality and retirement

Being frugal can have a major impact on retirement planning. As noted above, by spending less, you’ll have more money to invest – and that includes investing for retirement. But being frugal also prepares you for retirement in an entirely different direction that is at least as important.

The less money than you need to live on, the less income you will need in retirement.

That will mean that your retirement portfolio will not need to be as large as it would be absent frugality. The smaller retirement portfolio requirement will also mean that your retirement goal will be both more attainable, and achieved more quickly.

Then you can start giving some serious consideration to early retirement!

Coming up on Monday, we’ll explore how frugality can impact happiness in The Connection Between Happiness and Being Frugal.

The post The Connection Between Financial Freedom and Being Frugal appeared first on OutOfYourRut.com.

Maybe, possibly in some cases, but I think there’s a lot more to it, and by the time you’re finished reading this list, you may have a better understanding as to why—if you’re deep in debt—you’re having such a tough time getting out of it. Knowing what you’re up against is the first step to solving a problem, and only when you do can you make any real progress.

1. Lack of sufficient income to do so

A lot of people are making less money than they were just a few years ago. They were making more money when they incurred their debt, but now the lower income level has them in a trap where they have barely enough money to pay living expenses, let alone pay off debt.

2. A rate of inflation that’s substantially higher than what is publicly reported

10 Reasons Why People Cannot Get Out of Debt

3. Conforming to a “standardized” idea of middle class life

When I was younger, if a family couldn’t afford a new car they bought a used one, and if they couldn’t afford that they bought a beater. If they couldn’t afford to keep their house, they sold it and moved to a rental or in with family. But in the past 20-30 years there’s been a kind of standardization of middle class life—how one must live and what one must own to live in it. Call it the “TV version” of middle class life. Many people can no longer afford to live this lifestyle, but they’re emotionally rooted in it and cannot abandon it. Once again, credit is often used to bridge the gap.

4. A benign view of debt

Culturally, debt is seen merely as a way to get from where you are to where you want to be. Want a house—take a mortgage. Need an education? Student loans can help. Can’t afford a car? Bring us your trade in and we’ll finance the rest. All of these require little or no money up front and make the process easy. Credit cards are just an extension of other forms of debt and a natural outgrowth. If debt is what “moves us forward” then how can it be a bad thing? Once you start thinking that way, you’re licked.

5. A culture that encourages debt at all levels

Credit is what moves the economy isn’t it? At least that’s what we’re told by those who are supposed to know. I’ve never agreed with this thinking. Money is what moves the economy–how it comes into being is the real issue. We can either earn it or save it—historically the preferred methods—or we can borrow it. The System—for lack of a better term—encourages us to borrow it since that’s the quickest way to make it happen. Once we have money—what ever the source—we can buy, buy, buy, and that’s what moves the economy. But when we use debt we’re also creating liabilities and they don’t go away once a paycheck shrinks or disappears.

6. A lack of orientation toward savings

Americans have a terrible track record when it comes to building savings, and we’re paying a huge price for it. Savings are the most fundamental antidote to debt—when we have plenty of savings we’re “self-financing” and don’t need debt. Building up savings is the first step to getting debt out of your life, and that requires a fundamental shift in financial thinking.

7. Too much structural debt

Over the past 20-30 years people have taken on too much structural debt. Mortgages and student loans are widely thought to be “good debt” but represent the foundation of even more debt. They’re long term debt, which creates the need for ever more cash later, and if it worked when you bought your house or your education it can work with anything else you buy, right? Mortgages and student loans can work if you don’t overbuy, then commit yourself to paying them off. For many people, however, mortgages and student loans set the stage for a lifetime of indebtedness.

8. An economic system that has a vested interest in keeping consumers in debt

Merchants have a symbiotic relationship to consumer debt—more credit equals more consumers, equals more sales, equals more profit. They’ll often provide the credit for you, all you need to do is come in and buy. This situation exists at nearly every level of the economy and, along with the media, it works to lower our resistance to consuming—and to going deeper into debt.

9. Habit

OK, this one is comes closest to being a pure personal fault by a debtor. Like smoking, drinking and over eating—people get into debt, learn to live with it and just continue on. If you want to break this cycle, it will require an effort comparable to a crash diet. Even though there’s long term benefit to doing it, the short term is uncomfortable and easy to avoid.

10. Debt has become a massive pyramid scheme

There was a time not long ago when lending was considered to be a fringe function in society; the old saw was “before you can get a loan you first have to prove that you don’t need it”. No longer. Credit is very easy to get and has been for a few decades. Because of that ease, lending has grown into a trillion dollar industry, with many layers. You can borrow with the swipe of a credit card, and when your revolving debt reaches the point where you can’t manage it, you can consolidate it with a home equity line of credit (HELOC). When the HELOC gets stressful, you can consolidate it with a new first mortgage on your home. See the trend? If it weren’t so legitimized in our culture and economy, we might be able to identify it as the pyramid scheme that it truly is. Nothing in that system is set up to encourage us to get out of debt, but just to roll it over to more tolerable loans.

 
As you can see, the obstacles to getting out of debt are enormous. It’s not just your bad habits and lack of discipline that are keeping you in debt, you’re getting a lot of help from a culture that’s keeping you in that ditch. This isn’t an attempt to give debtors a pass or to deflect responsibility, but rather to paint a full picture of the true obstacles.

If you have a serious amount of debt to payoff you need to…

• Understand the big picture obstacles you face in trying to get out of debt
• Make a concentrated effort to resist those obstacles by setting and living by your own standards and preferences
• Be fully prepared to lower your standard of living as low and for as long as it will take—separate wants from true needs
• Stop using credit going forward
• Be ready to increase your income—if you’re paycheck doesn’t increase to cover the true cost of living or paying off debt, then be ready to do what you need to find additional sources
• Make savings—and not borrowing—the standard of your financial success
• Once you’re out of debt, vow never to get back in.

You may not have the entire blame getting into debt, but rest assured you’re 100% responsible for getting yourself out.

What are your thoughts on why people can’t get out of debt?

The post 10 Reasons Why People Cannot Get Out of Debt appeared first on OutOfYourRut.com.

By selling your car yourself, you can maximize the amount of money you’ll get from it. Though many people prefer the ease and convenience of simply trading their old car into the dealership for what ever they’ll give for it, it’s worth remembering that it’s in the dealers’ best interest to see that you get as little as possible. The dealer, we must remember, is always the counterparty in a car sale or purchase.

Sell your car yourself – the mechanics

There are many ways to sell a car, but unless you’re a car dealer, it usually will require a variety of methods. None of the methods listed below are exotic or even new, but it helps to have a list of the available options when starting out. If you think you can do at least a few of these, it might encourage you to give it a try.

• Put big, bold for sale signs in the windows of the car
• Tell everyone you know that you’re selling your car; you never know who knows someone who might be looking for the car you have
• Do an email blast to everyone in your personal email database; ask a few of your friends to forward that email on to their databases
• Post flyers on the bulletin boards at work, at church, at the gym and in any local retail establishments that will allow it; be sure to include a photo or two on the flyer (bonus tip: coin-op laundromats can be excellent places to advertise since people are looking for reading material while waiting on their wash)
• Advertise the car on Craigslist – it’s free!
• Advertise on Autotrader or any other trade publications that are popular in your area
• Advertise it in your subdivision/condo/neighborhood/apartment newsletter, or any other free or low cost advertising media
• If you can’t sell it yourself, try selling it to Carmax. They probably won’t offer you top dollar for the car, but they’ll generally offer you something better than a dealer trade-in, and with fewer strings attached!

Pricing your car for sale

How to Sell Your Car Yourself

Edmunds and Kelly Blue Book provide free pricing tools on their web sites. They give three values: trade-in, private party and dealer retail.

“Trade-in” is the lowest, and the one a car dealer will give you on a trade-in with purchase. You want to do better than this. “Private party” is the likely price you’ll get selling yourself, and your best price guide. “Dealer retail” is what the dealer will sell your car for, but he can charge that much because he has a well-oiled marketing machine.

Autotrader also has a pricing tool on its site, as well as valuable tips to help you sell your car. Check out all three sites before trying to sell, that way you’ll have all the information you need before getting started.

Likely sales prices also reflect the condition of the car, so you’ll want to do some prep work before selling.

Make sure any obvious mechanical problems have been fixed prior to sale. A good wash and wax may do more to increase price and salability than anything else. Also correct any cosmetic defects that you can. For example, if the hub cabs are damaged, you can buy a set of four at Target for about $25. They won’t be original of course, but they’ll be new and uniform and that may be enough to satisfy a buyer.

Have some good looking digital photos of the car (interior and exterior at different angles) to include in any flyers or web or print ads you place. Some people will be most concerned with ad text, but others will be drawn to good looking photos.

Legal compliance

In order to perfect the sale of your vehicle you’ll need to transfer the title of the car over to the new owner. Since car titles are documents we get when we buy our cars, but tend to forget about shortly after, you probably want to be sure to locate it before you sell the car. Depending on state requirements, you may have to jump through a flaming hoop or two in order to get a replacement title if you lost the original, and that may take some time.

You’ll also need to provide the odometer reading on the car as of the time of sale.

You will most likely need to collect money for sales tax or any transfer fees required by your state. Check with your state’s department of motor vehicles for details on specific transfer requirements, documents and taxes.

Get the payoff balance on your car loan, if you have one. This number may be different than what you have in an amortization schedule, as there are typically time adjustments and minor fee charges added in.

When you’re getting the balance, also get specific payoff information, such as how and where to send payment, as well as reliable contact information. You’ll want the loan payoff to go as quick and smooth as possible once you have a sale in place.

Arranging payment

Method of payment is nothing less than critical. You’ll most likely sell your car to a perfect stranger so you’ll need to protect yourself. A certified check or any other form of transfer where the funds have been verified and restricted by the issuing bank are your best protection.

Even then, before turning the car over to the buyer, call the issuing bank and double check the authenticity of the buyer, the issuance and amount of the check and verify sufficient funds to cover. Verifying certified funds is becoming a more common practice in many businesses now.

The bank may not provide this information to you as an individual, but you may get it with the buyer’s assistance. If the buyer won’t cooperate in this effort, you may have good reason to suspect foul play.

Never accept a personal check! You’ll be turning your vehicle over to the buyer at the time of sale; if he’s paid by personal check and it bounces, you could be out the car and the money. There may be legal remedies available to you, but every one of them will most likely be less than perfect if they work at all.

If the buyer is a con artist, and passes you a check that’s completely bogus he could be a thousand miles away before you even know you’ve been scammed.

By selling your old car yourself, you get a pure play. You know exactly how much money you’ll have to put down on your next car. Trade it in to the dealer however, and you’ll be at his mercy as to what you’ll get for it. Dealers know how to separate us from our money, and often you don’t even get as much money as you’re told you’ll get. As the trade-in value rises, so do other costs on the new purchase. It’s a game we can’t win. Are you ready to try selling it yourself?

Have you ever sold a car yourself? Do you have any advice to give to others? What worked for you and what didn’t?

The post How to Sell Your Car Yourself appeared first on OutOfYourRut.com.

Raise your deductible and co-pays

Raising your deductible and cutting co-payments is the most common and probably the most effective way to cut your health insurance. In fact you can reduce your monthly premium by hundreds of dollars with just this one step.

As an example that I’m pulling from one of my own recent posts on this site:

“…coverage for a family of four living in Georgia (male, 40, female, 39, two children, non-smokers) with a deductible of $2,000 and $35 co-pays for doctor visits will be $863 per month (via Assurant). If the deductible is increased to $10,000 and the $35 doctor visit co-pay is eliminated, the monthly premium falls to $295.”

5 Ways to Cut Your Health Insurance

If you do raise you’re deductible, you can offset the risk with one or more of the following:

1. Add an amount equal to your deductible to your emergency fund
2. Enroll in a health savings account (HSA) if it’s available through your employer
3. Use mini-clinics, usually available at major chain pharmacies, for primary care – my family has used them several times and they charge a fraction of what a family doctor does
4. Use generic prescriptions where ever possible, or take advantage of special programs, such as $4 for common generic prescriptions at large retail chains.

Drop unnecessary policy provisions

Most health insurance plans include various add-on provisions that you may not need. A prescription drug rider is just such a provision. If you aren’t on any ongoing drug therapies you don’t really need this coverage. It adds hundreds of dollars per year to the cost of your health insurance policy for a benefit you rarely need. If all you need in a typical year is an occasional anti-biotic (which are usually quite inexpensive to begin with) then a prescription rider is mostly just a comfort provision.

Dental and vision coverage are two others. Most dental plans have a high cost-to-benefit ratio, and if you’re only going for a cleaning and ex-ray once a year it might be less expensive to pay the dentist direct than to maintain coverage. Vision plans work much the same, but you have an out here. Many chains, such as VisionWorks, offer online coupon offers that come very close to the benefit a vision policy will pay. I’ve done this myself and after that we canceled our vision coverage.

Eat less, move more

This has become a cliché with all things health related, so I won’t beat it to death, but it’s very true. Most illnesses (and even injuries) can be prevented by better living. You don’t have to work to be an Olympic athlete to get a benefit here, just cutting back on the worst foods and getting regular, moderate exercise can produce measurable improvements in heath, and ultimately lower health insurance costs.

Shop around from time to time

We get used to being in the same health plan and using the same providers, but change can provide noticeable reductions in health insurance costs. At any given time, one or more insurance companies might be looking either to increase their business, or cut it back, and you want to be on the alert for those who are looking to expand. They’ll usually reduce premiums (or not raise them with the herd) in order to grow their business. The savings can be substantial, if only for a couple of years.

While this can seem like being on a health insurance merry-go-round, it’s exactly what employers are doing by changing insurance carriers just about every year. It’s a bit aggravating when an employer does this, but it does serve to keep costs down. We may need to follow that example with private plans.

Get out of stressful situations

I’ve saved the best for last, probably because it’s the most radical. And perhaps the least considered.

Stress has an affect on healthcare costs, and how we manage it can have a major impact on our budgets—as well as so many other areas of our lives. In the near term, stress can cause a series of minor ailments, such as persistent fatigue, headaches, body aches, and – for lack of a better description – the absence of a sense of well-being. Increasing doctor visits, prescription medications and the running of medical tests are often the result. But it can get worse.

In the long run, if the stress is tolerated for too long, it can result in the kind of chronic illnesses that can cause the cost of healthcare and health insurance to explode.

While we might want to assign catastrophic health events to genetic or even environmental factors, evidence is increasing that stress plays a major role. A Canadian research study concluded that high stress work situations are not only associated with increased risk of illness and long term health problems, such as cardiovascular disease and depression, but—not surprisingly—also higher healthcare costs. Are you surprised? Probably not, but often seeing the results in black and white helps to make it real.

It’s not just work that causes stress either. Financial problems in general are a major source of stress for many people. Debt is one such example, maintaining a high cost lifestyle is another. Both require a high-paying and often high stress career to sustain, and that can be a double whammy.

Part of the problem with identifying stress is that we often accept it as a given, as if its part of the price we have to pay to have the lifestyles we want. I’m not so sure. It can also be an example of the frog in the pot of boiling water—the frog acclimates itself to the slowly rising water temperature until it’s too late to jump out and then…well you know how that story ends.

So what am I proposing here? Only that your life, health and happiness are worth more than a high stress job, a crippling house payment, a high cost lifestyle or a mountain of debt. Life throws enough stress at us that’s completely beyond our control that we need to control any stress generators that we can.

What does that mean? Leave the high stress career and do work that fits your personality, preferences and stress tolerances better than the one you have. Sell the house with the outsized mortgage and move to a more modest one. Adopt a lifestyle that provides more meaning but costs less money. Do what ever it takes to get out of debt. Pick the single biggest stress generator in your life and be purposeful about eliminating it. Then go for the next one!

The stress you eliminate will lead to better health AND lower health insurance costs.

What do you think about the connection between stress and health/healthcare costs?

The post 5 Ways to Cut Your Health Insurance appeared first on OutOfYourRut.com.

A Gallup Survey came out recently that listed America’s five most contented cities (actually it listed ten, as well as the ten least contented cities). There was a common theme in the most contented cities that people had a high level of job satisfaction.

Among the top ten cities in contentment, five ranked high in various categories of job satisfaction. In Lincoln, Nebraska – rated the most contented city in America – residents were “the most likely Americans nationwide to enjoy their work environment. More than 94% of survey respondents were satisfied with their job and work, almost 68% felt treated like a partner at work and nearly 86% felt they worked in a trusting environment.”

Job Satisfaction and Happiness – There IS a Connection

If you think about it a bit, it all makes sense. For a variety of reasons, it’s almost impossible to be content in your life without a solid measure of job satisfaction.

Work is your primary activity in life

With the possible exception of sleeping, work is the primary activity that most people engage in. Using the 40 hour work week, we spend approximately 25% of our lives (168 hours per week total)) working. If you base it on waking hours alone, work easily consumes more than one-third of our lives, and that doesn‘t even reflect commuting time or the extra hours that many people spend on the job.

Given that we spend so much of our time working, and that is usually the primary activity in our lives, it’s perfectly logical that if you are not happy on the job you will not be happy in life either. Whatever misery that you endure in your work will almost certainly carry over to the everything else that you do.

Knowing that what you do in your work matters

As human beings, we need to know that what we do matters – that it makes a difference in the world. While we often think of compensation and working conditions as the most basic elements of job satisfaction, if we don’t believe that what we actually do matters, we may not be particularly happy about our work.

Since most of us today are so removed from the final product, the customer, and the decision making center of the organization, we may experience a considerable amount of confusion about our contributions. Work can take on an assembly line nature, causing us to question what we’re doing and even who we are as people.

A sense of accomplishment

In career planning, we are naturally concerned with income level, job stability, and the likelihood advancement. But I think the human spirit has a built-in desire to accomplish. While other factors measure our external progress, accomplishment is a measure of what we can do and even who we are.

Accomplishment is highly underrated when it comes to work, and it is one of the reasons why so many people don’t like the jobs they have.

I like to use the analogy of growing a vegetable garden when it comes to work. If you’ve ever had such a garden yourself, you’ll probably quickly recognize the point I’m trying to make.

We all need food, and we all consume food. We buy our food at the grocery store – or already prepared in a restaurant – then eat it, and our need for food has been filled.

But let’s say that you have a vegetable garden. In the spring you till the soil and add fertilizer in preparation for planting. Then you plant your seeds and begin watering the garden as needed. Plants begin to grow, and as they do so do the weeds. You begin meticulously pulling the weeds out of your garden to allow your vegetables to grow healthy and strong.

By late summer, your plants have grown and are producing vegetables – corn, tomatoes, peppers, lettuce, beans, and other foods. You pick them, prepare them, and eat them. And when you do, there is a deep satisfaction that comes from knowing that you grew your food from out of the ground. That sense of satisfaction goes well beyond merely satisfying your need to eat.

That is a sense that we all need to feel in regard to our work.

What happens at work spills over to your personal life

When you are at work, if you live for lunch breaks, for 5 o’clock, for weekends, and for vacations, in reality you are wishing away a big chunk of your life! This is damaging enough by itself, but I also think that there is a strong likelihood that you may carry this attitude into your private life. It’s easy to do because wishing away the time is a habit, and all habits tend to have universal application.

Taken to the extreme, there are even people who wish away the time in their lives in the expectation of retirement. I’m going to stick my neck out here and say that I think this may have something to do with the current obsession with retirement planning. So many people are unhappy with the work that they do, that they are using retirement as the final escape hatch.

Would escape even be necessary if you like what you do for a living? I took that chance myself and found work that I really like. Your entire perspective on life changes when you do.

What to do if you don’t like – or even hate – your job

To some this may sound idealistic, but I think it is important not only to work, but also to like what you do. We all spend too much time working for it to be any other way. If you enjoy your work, there’s a greater likelihood that you will enjoy your life.

This has applications beyond work too. Living in even a low level of perpetual misery has a way of breaking your health, your relationships, and even your will. This happens not only because you are not happy with the work you’re doing, but also because you may feel trapped by it. This is common among people who work primarily for the money, the benefits, or the perception of security. Satisfaction is not found among those perquisites, but misery often is.

Each of us needs a certain sense of control over the work we do, over our future direction, and over our levels of contentment. You cannot achieve any of that when you feel beholden to a job you don’t like.

Not everyone can up and quit a job that they don’t like, and it isn’t even advisable. But there are steps that you can begin to take that can gradually improve your situation:

• Decide what kind of work will really make you happy
• Begin to gradually move in that direction – start with some research, get some training, and begin apprenticing through part-time work or a part-time business
• Take as much time doing this as you need to get comfortable with your chosen work
• While you are doing that, you should also begin rearranging your finances – save money and pay off debt so that you will be fully prepared to make the transition when the time is right
• Reduce your standard of living to accommodate the work that you will be doing – that might involve getting rid of a few toys, such as an oversized home or one or two late-model cars

Pay close attention to that last point. People often try to insulate themselves from the misery of a distasteful career by padding their lives with luxuries. You may have to decide that those luxuries will be part of the price you have to pay to find truly satisfying work. But if you find work that you love, you won’t need those luxuries anyway.

Have you ever thought about doing something this radical?

The post Job Satisfaction and Happiness – There IS a Connection appeared first on OutOfYourRut.com.

Back then it seemed that all of humanity would eventually be going to space—to find resources, to conquer new worlds or at least to alleviate overpopulation here on earth—and astronauts would lead us there. High minded and exciting, yes, except that it never happened!

If a career as cutting edge as astronauts is no longer secure, what can we say about the far more ordinary fields most of us regular folks work in?

You’ve heard it and read it before, and perhaps you’ve even been a casualty of one of the biggest phenomena of our time–the end of job security.

Income Security VS Job Security – Does it Matter?

What is job security? What is income security?

Let’s face it, in order to function everyday and to have some sort of certainty about the future we need some measure of security when it comes to earning a living. For at least the past couple of generations that meant having a stable job, but the times they are a-changin’. Fast.

Job security implies that your job is safe for the foreseeable future and hopefully clean through to retirement. Your job IS your income—as well as your source of health insurance, retirement and other benefits, and even your self esteem and your standing in the community. All is well, and you even have income security, as long as your job is secure.

Most people seek job security because it’s a simpler way to earn a living—your employer has your job and your income “covered” freeing you to go about living your life. The downside is when your job is suddenly in jeopardy, because the entire financial component of your life is also at risk. It’s a classic case of having all of your eggs in one basket.

Income security means your income never comes from a single source. If one source fails, you have others to tap, and you can eventually replace the failed sources with new ones. You’re not overly concerned with any one income source, but with creating and maintaining a portfolio of income streams.

In the economic and employment conditions of our time, I think income security is the logical security to pursue.

Creating income security

Its one thing to know the difference between income security and job security, but ultimately it all comes down to making it happen and that’s not as easy. There are various ways you can begin creating income security and that can include just about any revenue sources you can think of.

Self-employment. This is the obvious first choice for providing an additional (or alternative) income source beyond a job. By its very nature, being self-employed is all about creating new revenue streams. If your business income is derived from several or many clients or customers (which it should), you’ll actually have a portfolio of income streams, and that’s the best income security you can have. Even if your income drops, you can still have at least some income from your business, as opposed to a job where your entire income will cease the day you’re let go.

Fortunately, the internet has made self-employment easier than ever and because it’s here and now and growing, that’s probably the first place you should look. It’s where I’ve decided to camp out and it’s working for me—and I’m not exceptional in any way, believe me.

Investment income. In an era of record low interest rates, this is more about turning small amounts of money into larger ones. There are various ways to do this and you should start investigating them. This is not about plunging into the stock market per se, but about developing the ability to identify under-priced securities that have the potential to grow well beyond conventional rates of return—then having the willingness to wait it out. It has nothing to do with get-rich-quick. It’s a skill, just like business- or job-skills are, and once you master it you’ll have created a whole new way to earn a living.

Forming business partnerships or investing in small businesses. One of the things you can do if you have a business is to partner with other businesses in ways that will enable both entities to grow. There are as many ways to do this as there are small businesses and people who own them. It can also be the middle ground between starting your own business and investing. And you can do this with skills as well as with capital.

Let’s say you have some capital but you’re spooked by the stock market; as an alternative you can invest some money in an existing small business (or several) as a way of taking partial ownership of a growing business. Small businesses always need capital, but never more than now when getting a bank loan is harder than ever. Conversely, if you have certain skills needed by a small business, you may be able to join that business as an owner/partner. Marrying capital with management and skills is a time honored way for all parties to make money, and very the foundation of free enterprise.

Lowering your cost of living. Not many people think of this as an income source but it really is. When you lower your living expenses, you’re lowering the amount of income you need to earn—that’s the equivalent of a fresh income source, but it gets even better.

The less income you need to live on, the less you need to earn, and the less you’ll need to pay in income taxes. That’s a double benefit. The biggest advantage here will come from lowering your biggest expenses, the ones that represent the biggest drain on your income. Less need for income means more freedom to pursue other income sources.

Jobs. I gotcha on this one, didn’t I? If there’s no job security and we need to pursue income security instead, why discuss jobs? Because jobs are, first and foremost, a source of income! The topic of income security isn’t a self-employment is good/having a job is bad debate—any legal income source is a valid one. That includes jobs.

Income from a job is good, it’s the complete reliance on it that creates problems. If you can keep a job while developing additional revenue streams, you’ll achieve income security in addition to having a job. Your job is then part of the income mix, but not the sole source.

One more point about jobs: if you intend to keep one in an era where there is no job security, it’s important that you emphasize skills over the job itself. Transferability is the key, and only a strong set of skills can give you that.

 
You’re creating income security in your life when you start receiving income from sources other than your employer. That point is important in itself—you shouldn’t quit your job to create income security—you can and should do it while you have a job. In fact it will be easier to do it this way, and your job itself can be part of the security you’re working to build.

At a time where there isn’t much in the way of job security, what steps are you taking to build your income security? Are there any ways I didn’t mention?

The post Income Security VS Job Security – Does it Matter? appeared first on OutOfYourRut.com.