6 Steps to a Simple and Successful Financial Life

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I think we can all agree that finances play a key role in our married lives. It’s the need to provide a quality life for our family that drives most of us to work, and we know that the way we spend our resources directly affects our lifestyle now and down the road.

Money stuff is important.

That is not to say that money is the center of life or that managing the family finances must be an oppressive burden. In fact, financial success is really just a matter of making good choices consistently. And as readers of Simple Marriage, do you know the best path toward achieving your financial goals?

Keep it simple.

Really. In a world dominated by consumerism, credit card commercials and crazy derivative stock options, you will be well-served to take a deep breath and consider what you really want from life. If you are wise enough to be a regular reader of Simple Marriage, I’m willing to bet that your true priorities fall close to home and close to your heart.

If so, I have some advice that I trust you will value. This isn’t earth-shattering and it’s really not original. In fact, it is the same advice we have heard from our grandmothers our entire lives. It’s not complicated, but it sure is effective.

Six Simple Steps for Financial Success

1. Build a basic budget…together.

OK, so maybe you hate idea of having a budget and counting every penny. Honestly, I don’t care how detailed and meticulous you want to be with this. In fact, simple is better. The two key components of a meaningful family budget are: (1) to proactively plan ahead for how you will spend your money and (2) to create it with your spouse. And the real beauty lies in the latter.

You and your spouse must create your budget together and you must agree to follow the same budget, pinkie-swear and spit-shake. When you take this approach, a budget can become a surprisingly valuable tool in your marriage. Real communication is needed to formulate a plan, and real trust is developed when you both stick to it out of respect for your spouse.

2. Work together from a single account.

Do you and your spouse operate with separate checking accounts or a “yours, mine and ours” approach to your family finances? I would strongly encourage you to consider simplifying your life by consolidating everything into a single checking account. Not only will it be easier to keep track of, but you will benefit by shifting your mindset to one of unity with your money. As a bonus, you can expect that the openness and communication required to make a single account a success will carry over and enhance other aspects of your married life.

3. Eliminate your debt.

None of us enjoy sending out those payments to the bank, car finance company or student loan office each month, right? In fact, I think we can all agree that it sucks to have your income spoken for by debt payments before you even receive a paycheck. So, if we all hate the payments, why do so many families have them?

It’s a matter of mindset. If you feel like you’ll never have anything of value without an accompanying payment book, you’re probably right. However, if you are fed up with being normal (i.e., deeply in debt), you can shed the debt and achieve financial freedom. You set the priorities, and you make the decisions that will allow you to dumb the debt. My wife and I paid off over $53,000 in debt in around three years, and I can tell you that it’s not easy but it is worth it. And the lack of payments really simplifies your financial life.

4. Stick with simple (and effective) investments.

As a rule, if you don’t fully understand something, you should not invest in it. If you chase the latest hot trend and buy what everyone is recommending, you are almost assuring yourself of poor returns. Keep in mind that if thousands of highly-paid professionals spending their entire lives studying the market cannot beat it, neither can you.

Instead, take a simple approach and focus your investing in areas with a long track record of success. Personally, I think it is tough to beat a diversified mix of index mutual funds for retirement investing. They are not sexy or flashy. But they are very effective, low in cost and easy to understand. That’s a formula for long-term success.

5. Enjoy the simple things in life. Live within your means.

At the end of the day, it really does come back to living on less than you make. I hope you make a lot of money and love what you do to earn it. However, the critical point here is that you really don’t need a ton of money to be financially successful.

The key is contentment. Quit placing your value in material things and trying to maintain a high-cost lifestyle. When you learn to appreciate your family and value the simple pleasures in life, your need to impress the neighbors really does start to fade.

6. Pass it on.

In my opinion, the best part of simplifying your financial life and finding contentment with your lifestyle is the impact it has on your relationship with your spouse and the example it sets for your kids. When you break the cycle of debt dependence and fights about money, you set the stage for financial success for generations to come. You literally have the ability to change the future shape of your family tree.

Were these suggestions brilliant, original and completely unexpected? Of course not. I’d venture to guess that you knew these things, but you may not be living them. The key is to take action.

Simplify your financial life and invite new success with your money and, most importantly, your marriage.

How do you feel about these suggestions? Where can you improve your finances by taking a simpler approach?

Photo courtesy kevindooley

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A Guide to Escaping Materialism and Finding Happiness

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Editor’s Note: This is a guest post taken from Leo of Zen Habits.

Money can’t buy you love. It can’t buy you happiness either.

Today’s materialistic world often urges us to buy the coolest gadgets, the trendiest clothes, bigger and better things, but research shows that possessions and purchases don’t buy us happiness. According to an article on CNN:

By and large, money buys happiness only for those who lack the basic needs. Once you pass an income of $50,000, more money doesn’t buy much more happiness, [according to a happiness studies].

So while we are being pushed towards materialism, it’s for monetary gain by corporations, not for our own happiness. Unfortunately, it’s hard to escape the trap of materialism, and find happiness in other ways than buying stuff online or finding joy in the mall.

But it’s possible. Here’s a guide to finding a materialism-free life and discovering true happiness.

Escaping Materialism
All around us, there are messages telling us to buy stuff. On the Internet (blogs included), we see continuous advertising trying to get us to purchase a product or service. It’s the main reason for television, and movies are continually made with products placed throughout, so that we aren’t always sure what is advertising and what was put in there by the director.

Flip on the radio or open up a newspaper or magazine, and you’re bombarded my more advertising. Go to a shopping center/mall, and the urge to buy comes from every direction.

This message to continually buy, buy, buy … and that it will somehow make us happpier … is drilled into our heads from the days of Happy Meals and cartoons until the day we die. It’s inescapable.

Well, almost. You could go and live in a cabin in the woods (and that actually sounds nice), or you could still live in our modern society, but find ways to escape materialism.

Here are some suggestions:

  • Limit television. Do you really enjoy watching TV for hours? Think about which shows you really, really love, and only watch during that time. When the commercials come on, go do something else. Or use Tivo to watch TV. You can even give up cable TV entirely, if you’re brave — I have, and it’s one of the best things I’ve ever done.
  • Eschew the news. Journalists will never tell you this, but if they’re completely honest, they’ll confess that the most important part of any news company, from TV or radio news to Internet or print new, is the advertising division. It’s the division that pays the paychecks of the rest of the company. The news is important in driving traffic to the advertising. So when you’re watching or reading news, you’re really being sucked in to advertising. Try this instead: boycott the news for a week. I’ve done it for about two years, and it hasn’t hurt me a bit. In fact, it’s helped me a lot.
  • Limit Internet reading. I’m not saying you should cancel your cable Internet subscription or anything. I love reading blogs. But find just those that you truly love reading, that give you the most value, and limit your reading to those. And just do it once a day, for 30 minutes or so. If you can do that, you’ve gone a long way towards tearing yourself away from advertising.
  • Give up magazines for books. Magazines are also designed with advertising in mind. And they rarely give you much value. Try reading an ad-free book instead. It’s a much better use of your time.
  • Don’t go to the mall or Walmart. The only purpose of these places is for you to spend money. If you just want a place to spend your Saturday afternoon, find a place where you don’t need to spend money to have fun — a park or a beach, for example. If you need to buy something, go to a single store (not the mall) and go in and get what you need. Don’t browse and walk around looking at stuff. You’ll get sucked in.
  • Monitor your urges. When you’re online, or watching TV, or at a store, keep track of the number of times you want to buy something. Keep a little notebook or index card, and just put tally marks. Once you become more aware of your urges to buy things, you can start to control them. If you could control them, limiting your consumption of media (see above tips) isn’t really necessary — although I would argue that it still gives you a better quality of life.
  • Use a 30-day list. If you still really want to buy something, put it on a list, and write down the date you added the item to the list. Now tell yourself you cannot buy that item for 30 days. It might be difficult, but you can do it. When the 30 days have passed, if you still want it, then buy it. But you can’t buy anything (besides essentials like groceries) without putting it on the list for 30 days first. Many times, our urges to buy something will pass during this waiting period.
  • Declutter. I find it pretty amazing to see all the crap I buy over a period of years, when I go through my closets and other possessions and start getting rid of stuff I don’t use or want anymore. It’s a gratifying process, and at the same time, it makes me realize how useless all our consumer shopping is. I don’t need any of the stuff! When you do this, you may be less likely to buy more stuff. Especially if you enjoy the decluttered look of your house as much as I do.
  • Find other forms of entertainment. There are other things to do besides watch TV or movies or read magazines or newspapers or the Internet. Try playing sports or exercising, or playing board games or creating art or writing or reading a book. Try doing fun things with your kids or visiting relatives and other loved ones. Try volunteering with a charity. I’m sure you could come up with 100 free or cheap things to do.
  • Buy used. When you get the urge to buy something, and you’re convinced that it’s needed, try finding it used instead of new. Look in thrift shops or garage sales or flea markets or similar places.

A True Path to Happiness
So, if you’re able to escape materialism, how can you find true happiness? There are many ways, and each of us is different, but here are some things I suggest trying:

  • Grateful list. Make a list of things about which you’re grateful in your life. Give thanks for them daily.
  • Think positive. Try eliminating negative thinking from your life, and thinking positive instead.
  • Small pleasures. Make a list of small things that give you great pleasure. Sprinkle them throughout your day. Notice other small pleasures as you go through your day.
  • Kindness. Practice random acts of kindness and compassion. Do it anonymously. Help those in need. Volunteer. Make someone smile.
  • Love. Make an intimate connection with your loved ones. Develop your friendships. Spend time with them, converse, understand them, make them happy.
  • Health. Exercise and eat healthy — it sounds trite, but it can bring great happiness to your life.
  • Meaning. It’s often useful to find meaning, either through a church or spiritual way, or through those we love in life or through the things we’re passionate about. Give yourself a purpose.
  • Flow. Eliminate distractions, and really pour yourself into whatever you’re doing. If it’s writing an article, like this one, really put yourself into it, until you forget the outside world.
  • Know yourself. Become attuned to what brings you happiness. Study yourself. Learn about what you love, and about your ability to love. Increase your capacity for compassion.

What brings you happiness? How do you feel about materialism, and is it worth trying to escape it? Share your thoughts in the comments (right after the advertisement :) ).

Photo courtesy bowena

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Budgeting For Lazy People

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A year ago on Simple Marriage: originally posted July 20, 2008 and considering all the news about the economy this can be a good refresher.

I married a CPA. At the risk of offending the CPA society, your brains are just wired differently than the rest of us. That is definitely the case with my wife.

I consider myself to be fairly good with numbers, and I did well in Math back in school, but I’m not in the league of the CPA. Although I do find great pleasure when my checkbook balances and hers is off a few cents. She returns the joy by poking fun at how long it takes me to complete the 1 star Sudoku puzzle.

For the life of our marriage, she preferred to live within a budget. In the early years of our marriage I would enter the discussions kicking and screaming. I always felt a budget was far too limiting. I didn’t want to cramp my style.

Needless to say, my attitude helped get us in a financial hole.

The two most common topics fought over in marriage are money and sex. I’ve written plenty of times on the sex topic, now it’s time to tackle the money.

When it comes to budgeting, there are those that live by one and those of us that swear tomorrow we are going to sit down and write one out. The intention is honest, we just have trouble following through.

So how do you set up a budget you’ll actually follow?

Glad you asked. To begin, remember this one simple rule: Spend less money than you make.

Now that we covered the main idea, let’s create a simple budget that even the greatest procrastinators can follow (if they ever get around to it).

Step 1: Have a conversation with your cash.
We place meaning on the things in life. Money is no different. What does your money mean to you? What value does it provide? Beyond money’s providing of the basic necessities like food, shelter, and keeping Mr. Tax Man from visiting, what’s your money for? Security. Fun. Power. Fame. Understanding the meaning we place on money can go a long way in helping you get your money under control.

Step 2: Where’s you money go?
Every budget begins with an understanding of where your money goes on a day-to-day basis. Don’t skip this step. If you don’t know where it all goes, you won’t be able to determine where you want it to go.

There are two ways to go about this step: the CPA way, where you track your spending for at least three months, inputting every penny in a multi-category, macro-enabled Excel spreadsheet, then pouring over every debit and credit each night, or can do this the lazy person’s way.

Lazy it is! For those who use credit cards for most of their spending (paid off in full each month of course) or if you use a debit card, review the monthly statements and categorize your spending areas. Some cards will do this already.

If you live on cold hard cash, write down all your expenditures for one week. You can then multiply these numbers by 4 (there’s that pesky math again) in order to get a rough idea of where your cash goes. This method obviously is leaving out the major monthly expenses like house, car, insurance and the like. Simply add these numbers to the monthly estimate. Simple eh?

If you chose the CPA way, at this point you would add up each column of the spreadsheet, run the macro/algorithm you’ve created in your spare time on Friday night, and analyze the results by running the final numbers through the statistical program you’re bound to have on your laptop.

Step 3: Plan to spend your cash.
Now that you have an idea where your money goes, it’s time to spend your hard earned cash. Not literally yet. Sorry. Instead, make a list of expenses for the upcoming three to six months. Things like vacations, car tune ups, or planning for paying off debt, saving, or investing in your favorite mutual fund. Do the same for long-term plans, two to five years out.

You now have a spending plan. Be sure to leave a little room for the unexpected cash you’re sure to need at times. Like when your car breaks down or your in-laws decide to move in for a few months.

Step 4: That pesky math again.
With your spending plan in front of you, add in items from your “wish list.” Then calculate what these items would run you on a monthly basis. For instance, for the upcoming family vacation, divide the total cost of the trip by the number of months until the trip. Viola, you have a way to prepare for the trip and pay for it as you go.

Step 5: Save money the no-brainer way.
This is really simple. Visit your bank and set up an automatic monthly transfer of money from your checking account to savings. This could be as little as $20 a month. No worries. Put something into savings every month.

Step 6: Cut out the frivolous spending.
The list of “must have” items is endless. In order to curb the frivolous purchase’s impact on your overall spending plans, try the “envelope” system. It’s easy:

  • Come up with a reasonable weekly amount you’ll allow yourself to spend in your biggest categories. (Those are typically “food” (or, depending on your lifestyle, get more specific such as “lunch,” “family dinners out”), “entertainment” (e.g. happy hours, movies, tabloids to pass the time), “transportation” (gas, parking, taxis, public transportation), “apparel/services” (dry cleaning, bangs trim, cute shoes.)
    For guidance, consider that the four biggest budget categories for typical American household are housing (34%), transportation (18%), food (13%) and entertainment (4%).
  • Create envelopes for each of those categories.
  • Put the allotted amount of cash to cover a week’s or month’s worth of expenses into each envelope. (You don’t have to carry the entire wad with you every day, but do make sure you don’t cheat with extra visits to the ATM.)
  • Once the cash is gone, so is your weekly stipend.

Remember, once you get a handle on your finances, you’ll free up more time to worry and fight about other things. But look at this way, you’ll have more money to go out on a nice date in order to make up.

Thanks to the Motley Fool for the steps to this plan.
Photo courtesy auntsmack4u

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