Archive for March, 2011

Practical: Pay Yourself First

Personal finance writing is full of the saying pay yourself first.  This made sense to me theoretically since you need to save, to build wealth.  However, from a practical sense I didn’t know what that meant: How exactly do I pay myself before I pay a bill?

After further inspection, I came to the conclusion that sticking to a budget is a way to pay yourself first.  The idea of a budget is to set an upper limit, the most you will spend for a time period.  The complement of the budget is the minimum saving you will accrue in that period.  In this sense, the budget allows you to pay yourself, with the remainder.

Finally after deliberation and a moment of eureka, I came to the conclusion that you could rearrange your bank accounts so that the only cash flow inlet your expense account sees is the budget.

This flow ensures that you invest a minimum amount, which is the mathematical complement of the budget.  This is a way to ensure that you pay yourself first, at least as I understand the statement.

My pay goes into a high interest savings account, which then gets separated into investing and an expense budget.  With the investment income going to expenses, my flowchart has a Rich Dad, Poor Dad influence.  The arrow doesn’t necessarily need to go there, depending on personal interests.

For setting budgets, my personal favorite book on the topic is Your Money or Your Life.  I like that book because it provides a rational way to set up a budget and ensure that you are not over nor under, on spending.  The method is subject to change, scale, and variation, not a one time recipe.

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Car-Free (Mostly)

While I prefer the book, there is an entertaining scene in the movie version of Never Cry Wolf. The bush pilot Rosie responds to his passenger’s concern about the engine quitting during mid-flight, while climbing out of the cabin, with the following quote.

What’s wrong?!  I’ll tell you what’s wrong: Boredom!  And do you know the cure for boredom? Adventure!

–Rosie, in Never Cry Wolf

While nothing interesting comes from the mundane and normal, maybe safety should hold a higher ranking than Rosie is giving it.  Nonetheless, I like the counter-intuitive logic involved.

I sold my car about a month ago.  I sold it because my car felt like more of a liability than a joy.  It has nice environmental implications.  Going car-free has nice financial advantages.  Going car-free means less hassle too.  Those are some nice effects, and they factored into my decision.

I ultimately made the decision based on the fact that I like cycling, as a form of transportation, more than driving; I don’t need a car in my current situation; AND, I have a back-up car I can use, Dre’s.  So, I’m mostly car-free.  I use her car regularly about twice a week.

It took me a month and a half to sell my car (and about 2+ years of mental deliberation and motivation-mustering).  I followed the advice I found on the internet: make sure the car is mechanically sound, clean it, detail it, and then list it for sale using multiple mediums.

  • Mechanically sound: After having a (false) low-tire pressure sensor on my dashboard for about a year, I finally figured out that my full-size spare was setting off this alarm.  (The alarm system works with each tire with RF technology: good to know.)  $0.75* of compressed air fixed the problem.  I also had two dents removed for $150.  To me, watching this guy remove the dents was the equivalent to what others find from watching football or baseball while sitting in the front row.  The artisan, if you will, had such an impressive technique and a depth of knowledge from his years of experience that he made it look simple.
  • Clean it: I spent two weekends in a row cleaning for about 6 hours from each session.  This was the genesis to my recent cleaning as a workout, as it is both gratifying from both an endorphin perspective as well as from a visual accomplishment.
  • Detail it: Even though I cleaned it thoroughly, I had a professional detail my car for $150.  I took the day off work and spectated.  Another artisan full of tricks.  I truly enjoyed this experience too.
  • List it: I used autotrader, craigslist, and parked it with a sign next to a busy street.  I had the most interested buyers from autotrader; the most communication from craigslist; and, a big goose egg from the sign.

*I recently filled up Dre’s tires from 30 psi to 35 psi with 20 cycles from my (bicycle) floor pump.  So going forward, I think it’s easier to pump 4 tires x 20 cycles = 80 times than it is to find 3 quarters and drive to the gas station.

I ended up selling the car to a millwright who needed a new vehicle to get to work.  I like to think he will be more excited about using it than I will.  (I also believe I recouped the $300+ I put into the effort as I pulled in $1000 more than I was expecting for the sale based on Kelly Blue Book information and gut feeling.)

The key learning I had from this experience was that 1) cleaning is a good workout and 2) it’s more fun to drive something clean and mechanically sound.

There’s some coordination involved, for times I want to use a car — using Dre’s, bumming a ride, or renting a car  — but it’s not boring!

In fact to generalize, I think the easiest way to add adventure is to take away comfort (and may I suggest not compromising safety ;)).  One way to do this is to plan “next time” to do it yourself.  There’s lots of areas where you can remove service costs: cooking, repair, entertainment, vacation plans, etc.

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