Beating Broke

Personal Finance from the Broke Perspective

Take a Challenge To Start the New Year Off Right

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If you would like to start 2012 on the right financial footing and want to do something that is attainable, consider taking a challenge.  Two of my favorite challenges are spending challenges and pantry challenges.  Take either or both of these challenges, and you will find extra money to do with what you please—to save for a new vehicle or home, to bulk up your emergency fund or to snowflake on your debt to get it paid off faster.

I have already spoken about the spending challenge, otherwise referred to as the No Spend Month as an excellent way to raise money for Christmas gifts, but it is also good to
do another time of the year.  Choose one month when you limit your spending for disposable items such as groceries, entertainment and gas by as much as 50% of what you typically spend.  You will find yourself being mindful of what you spend money on because there is very little money to spend.  If you normally spend $800 a month on groceries, entertainment and gas and you vow to slash that amount by half for one month, you now have an extra $400 available to meet your financial goals.  (I often have a no spend month in February.  The psychological boost of knowing it is the shortest month of the year makes it easier to stay the course.)

Save MoneyAnother challenge I try to take at least one month a year, but ideally two months a year, is a pantry challenge.  All of us have some extra items lurking in the cabinet.  I often buy ingredients for a certain recipe, but then if I don’t get a chance to make that recipe, I often still have the non-perishable items on the shelf a few months later.  With a pantry challenge, you try to use up what you have.  A common misconception is that you are not allowed to grocery shop at all.  That is not true.  Just like a spending challenge, you set a designated amount you want to spend.  Say you spend $600 a month to feed your family of five.  During a pantry challenge, you decide you will only spend $200 for the month.  That means you must try to make meals from ingredients you already have on hand.  This is a great way to not only save money but also to use up food that may be nearing its expiration date so it doesn’t go to waste.

If you would like a little extra money for your financial goals this year but you don’t have the time or inclination to work more hours, having a spending or pantry challenge may be the perfect solution to generating more money in a limited time frame.

Have you taken part in a challenge before?  Were you successful?

photo credit: 401K

Making New Years Resolutions That Will Stick

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HAPPY NEW YEAR !!!!
It’s that time of year again!  That wonderful time when everybody is all hopeful and cheery and bright.  We go about spreading our cheer and hope and then declaring it to the world by making New Years Resolutions. Each year we resolve to lose the weight, quit the smoking, work less, and so on.   And each year, we all make it to about the 15th of January before we give up on those resolutions.  Not only do we go back to where we were before the new year, but some of us get even worse!

The problem isn’t that we’re weak.  It isn’t even that we make bad resolutions, although that sometimes is part of it.  What really, really kills those resolutions is the scale.  We fumble and stumble over the sheer breadth of our resolutions.  And that is almost directly a response to the overwhelming hope that we feel going into a new year.  Hope is good, don’t get me wrong, but we have to learn to channel it and control it so that it works for us, instead of against us by laying traps.

Think carefully about the resolutions you’ve made before.  They almost always go something like this: “I resolve to lose 100 pounds this year!”.  And they almost always fail.  But, like I said, it’s all about scale.  Instead of resolving to lose all 100 pounds this year, try making the resolutions scalable.  Something that has smaller increments and can be used as a checkpoint through out the year.  When you haven’t lost 10 pounds by the middle of January, you aren’t as disappointed, and you can keep working instead of giving up and going on a binge.  Try something like “I resolve to eat less this year”, or “I resolve to lose a pound a week this year”.  If you miss a day or two, or even a week or two, you can still catch up.  Or, you can just forgive yourself those few days or weeks and continue on the next day or week.  The same can go for smoking.  Instead of resolving to quit smoking entirely this year, and then giving up the first week, because you tried to go cold turkey, resolve to smoke one less cigarette each week than you did the previous week.  You might not quit as quickly, but it helps you taper, and it gives you goals that are achievable.

Use these same principles to modify the resolutions that you give yourself for your finances.  Instead of jumping right to the max contribution to your 401(k), maybe increase it a percentage or two so each quarter so that you’re at the max by the end of the year.  Instead of trying to save the full amount you want to out of your paycheck, do the same and increase it slightly each paycheck.  Not only will it still achieve your goals, but because you’re doing it gradually, it won’t produce the same shock to the system that it would if  you tried to do it all at once.

This new year, give yourself a fighting chance.  And remember, just because you want something, and you make a resolution about it, doesn’t mean it’s gonna just fall into your lap.  You’ll still have to work for it in any case.

photo credit: jazzlog