Friday, February 26, 2016

Ways I Cheap Out and Blame It on My Parents

Recently, I was doing some reminiscing with Mr. Frugal Rock and was waxing romantic (rambling) about my childhood when I mentioned something that my family did that I thought was totally (or mostly) a funny quirk about 80's and 90's families- like everyone wearing the same clothes in family pictures, or the desire for beanie babies. Some weird items must have been in the water that made us all go collectively crazy about these things... BUT it turns out it was just a funny, frugal quirk about MY family. Frugality was a household norm when I was a kid, and it's not a surprise that this imprinted on me (Thanks mom and dad!!). 

What happened to all the
beanie babies? Does everyone have
a hidden stash in their attic? Is there
a beanie graveyard somewhere?
I love me some research and I have been noticing more studies lately about kids and how they learn about money- both the good and the bad, and how it impacts behavior. Research has begun, unsurprisingly, to demonstrate that high debt loads of parents shows a correlation with poor child development and behavioral concerns. A recent paper, documented that this appears to be the case with what the study called 'unsecured' debt, or credit card debts (as opposed to home/student loans). Families who had a lot of credit card related debt, presumably have higher stress levels, which can result in impact on their children. This could be due to a lot of reasons- maybe parents with higher debt loads, are also working multiple jobs resulting in more time away from their families- but either way, the important take away is that money habits, even debt load, impacts children more than we think!

From looking online, it appears that more research can be done on the positive role of parental behavior on teaching kids about $$. While there are a lot of 'curriculum' ideas of activities to do with your kids around money, my gut is that it's the day-to-day interactions and behaviors that will help the most in teaching kids to be frugal adults!

While the Frugal Rock household, doesn't have any Frugal Pebbles (kiddos), I did round up my favorite financial lessons from my childhood of ways I learned about money- without knowing I was learning about money.

1. Avoiding Entitlement Traps

My parents would take us to the budget night at the theater ($2 Tuesdays, ya'll), but my siblings and I learned early that we would have to smuggle in cans of soda/candy if you wanted a snack. I learned fast that a sweat shirt held more soda cans, and that you should always wait until the movie started to pop the top (of the soda can that is). I still have been known to bring snacks to the theatre on the rare occasion Mr. Frugal and I go to the movies, much to his embarrassment probably. #noshame

Now I'm not advocating that you teach your kids to smuggle contraband or that you begin too, however there is value in teaching kids that just because something is available, doesn't mean they have to have it. This is true, even if you can afford it. Delaying gratification is a great life skill, no matter the age! We learned early to shop for deals, go on nights when events are more affordable, and that buying in bulk was cheaper than buying individually. A lot of lessons in one evening of family fun.

2. Saving is NOT optional

Birthday money? Graduation gifts? Christmas money from the grandparents? All great things, but there was a rule for as long as I can remember that 1/2 of the money was mine to do what I saw fit. I could spend all of it at the dollar store or candy store if my little heart desired but the other half went to my savings account. Non-negotiable- from birth through my teenage years. Even if it was $20, $10 went into the bank. Until I started doing the research for this post- I never realized how much of my personal finance skills was learned behavior! While the Frugal Rock Household is not at a 50% savings rate (see this post on our retirement savings habits if you're curious) but it's still a goal that I have. A common trend among early retirement folks is the high savings rates of 50%+ so I hope to move more in that direction.

3. Re-use: The Art of Hand Me Downs

My parents were into re-using before it was a trend. They really sold us on the fact that hand-me downs were cool and that they could save you money. I'm not sure how they convinced us of this- maybe it was the idea that all three of my sisters and I would pool all of our clothes in the same closet or that we got to 'shop' each others dresses for different events. Shoes and accessories could be purchased, but my parents would give us a deal- we could re-wear an already bought dress (often originally bought for over a $100) and they would pass along part of the savings of not needing to buy a new dress to us often about $40. If we declined, they were willing to take us out and purchase a new one, but no extra spending money for you! I distinctly remember wearing the hand-me down or thrift-ed dress and pocketing the cash.
In hindsight, this was a perfect strategy not only to keep the clothing costs of three teenage females in check, but it also taught a great lesson in the value of re-using what you already have. By passing along some of the savings, it made the benefit more real to us. To this day, I am much more likely to shop my closet when I have a big event coming up. I find myself looking forward to the challenge of whether I can pair something I already own in a new way, rather than purchasing something new.

So how do you teach your own family about finances? Looking back are there any money skills you learned without even realizing it?

Saturday, February 20, 2016

Frugal Rock Travel- Road Trippin' on the Cheap!

I am excited to announce a new series here on Frugal Rock: The Frugal Rock Travel Segment! The first post of this series is on the frugal road trip. I hope to post on other travel ideas throughout the year, like frugal destinations, backpacking/camping and other travel tips.  

As I mentioned in this recent post, Mr. Frugal Rock and I spent the beginning of the year on the road for a week, hoofing it (not literally) to destinations in Georgia and Florida. With gas prices being so low, and our love of road trips- it made perfect sense for us to drive and avoid the hassle of flying. 2 people, one car, 22 hours of driving (one way), and roughly 1,200 miles. What could possibly go wrong? Surprisingly little, as it turned out!

A 'sherbet sunrise, during an early start'
While I've always loved the classic American road trip- I wasn't sure how it would really measure up price wise, compared to the cost of airfare. I was particularly worried about racking up additional costs along the way. Since we were traveling for a long period of time over two days, I figured that we could end up spending more on meals and possible hotel costs.

Road trips can be a good alternative for family travel, especially when your family starts growing in number and you have to look at purchasing 3-4 plane tickets. My family is just the two of us, so while ticket prices wouldn't be THAT outrageous, my hypothesis was that we could road trip it for cheaper, while also enjoying the time together for fun and hilarity. To be fair the only thing that probably would talk me out of road trips is if it ever became more expensive than flying, so I clearly already have a 'slant'- but don't worry, I will breakdown our spending for you so you can see for yourself how it compares, and can judge for yourselves.

Cost Break Down:

$200 in gas- this came out almost exact so I rounded it up to $200 for the way there and back. Note: We had ridiculously low gas prices this January, combined with a pretty fuel efficient car, kept gas costs lower than anticipated.

$0 for meals on the road. Our goal was to not spend any money on gas station food (you can keep your dried out and stale hot dogs Citgo!) or other fast food/chain joints (what the hell is the deal with all the Cracker Barrels between here and Florida anyway??! We counted- no joke- 23. Gross.)

$46 for meal prep. So we did eat during our road trip- don't let our no fast food costs fool you! As an incurable snack-er I made sure that there were plenty of go-to munchies for the trip, as well as healthy and frugal lunch ideas.

$86 for hotel costs, 1 night on the drive. This one I'm a bit ashamed of- Mr. Frugal Rock was advocating for us sleeping in the car for a few hours and than continuing on our way. But I'll admit, it was unexpectedly cool on our drive south and I wanted a shower. Luxury won over frugality this time!

Total Cost for the Road Trip: $332
*Note, I'm not taking into account our expenses for the remainder of the trip, as in theory they would be about the same, whether we flew or drove, mainly comparing the cost of driving versus flying here!*

Flight Cost Estimator: Using Kayak (a great way to travel cheap), I was able to look for flights on a variety of airlines to try and find the best deals. The flights that matched the dates we wanted to travel ended up being about $300 a person= $600 for us total. There are ways to get cheaper flights, leave on 'off days' avoiding weekends, Mondays or Fridays, and being willing to have multiple stops en route but in viewing this, I am ready to declare the road trip, the frugal winner this time!

Traveling by car can expose you to some great views!

3 MUSTS for a Frugal Road Trip
Ready to try a road trip? Here are the three things, that can make or break your trip (or your wallet).

1. Bring your own food-  the cooler is a must...

One of the things about traveling and vacation is trying new restaurants, so you are probably already eating out more than normal. Why waste your dollars on the fast food/chain places en route? I guarantee that avoiding these places will make you feel better in the long-run as well. For our frugal road trip I stocked our cooler and snack bag with:

-Fresh fruit, grapes, apples and oranges for snacking
-trail mix and granola bars
-peanut butter/jelly and a lot of bread
-fresh veggies and hummus, for wraps
-mozzarella balls, tomatoes and basil for caprese wraps on the go
-made ahead spicy curry chicken salad

2. Avoid hotels when possible...

Obviously, didn't follow my own advice on this one! Ways you can avoid hotels, may be planning your route so that you can stop at a truck stop or camp ground to park the car and get some sleep. You can also check out vacation rental sites or couch crashing options to keep your costs lower. If you have to stop, make sure you call around. When we stopped for the night, we saw 4 hotels on the off ramp, and in calling each found a high variance in pricing between equally nice looking places. It pays to call in advance, even if it's only two minutes in advance.

3. Plan activities for your car ride!

Local library for the win!
I can honestly say that I love road trips. But, if you are going to spend 20+ hours in the car, even with your most favorite person, you better be prepared! Mr. Frugal and I went online and picked our 4 books on cd- we made it through two of them. I would highly recommend Mary Roach if you haven't read her books. She is a fascinating science author, that often focuses on the unique people behind the interesting facts she shares. We also came stocked with plenty of music (road trip playlist anyone?!) and podcasts. Since Serial just came out with their second season, we saved up the episodes we hadn't heard yet and binged listened all at once!

Are you a fan of the road trip? What's the farthest you have traveled by car? Any secrets to a good, frugal road trip?

Wednesday, February 10, 2016

Stupid Simple Ways to Be a Debt Defying Mogul (Or How to Remain Motivated Against Your Debt)

So I hope your expectations for this post are high- as I'm loving this topic! So to start us off, here's a quick test to see where you on your journey to becoming a debt defying mogul. Also there are no wrong answers so don't be afraid to pick your strategy...

Debt Repayment Quiz:
What are your strategies for handling outstanding debts (credit cards, student loans, car notes, etc.)?

A. Pay on each debt equally, hoping to slowly work on your overall debt.
B. Just pay the minimum on each item- eventually the credit card companies/student loan financers will forget about me, right?
C. Work on the lowest debts first, watch the results 'snowball'
D. Focus on your debts with the highest interest rate and work outwards from there.

Okay, so I lied to you. I know, probably not the best way to start a post, but I will argue that there is a WRONG-ish answer, which I hoped you spotted right away. B - just pay the minimum. I'll make the case for when it may make sense for that to be your repayment strategy, but let me just say- for most folks it's likely not the right one.

Where ever you are on your personal finance journey, working on paying down your debt is probably one of the biggest hurdles. According to the US Census Bureau, 69% of American households are in debt. When I read that I was surprised by the fact that 31% of Americans have no debt- not the 1% folks, but 31%! Which means there are quite a few people out there who have embraced the frugal lifestyle of avoiding credit card, or car debt. Now I personally have dreams of the day when I'm part of the 31% of Americans who are debt free. I'll be real with you, on that day I'll be all like...

Not what Ms. Frugal Rock actually looks like...

Until than, I'm continuing to work on my debt repayment strategies so I can join the ranks. According to the US Census Bureau the average debt load is $70,000, which again, while high, was not as shocking of a number as I anticipated. There was a time where we had student loans, car loans and our home loan, which altogether was easily over $100,000. Using some helpful strategies I was able to work on paying off both my student loans and vehicle loans, and as I shared in this recent post, am actively working on that home loan.

But wait, you may say, to have enough money to pay on my debt, I need to have additional income. The general strategy for paying down your debt and saving, is diabolically simple- which is why I think you can be a debt defying mogul, with even just a few changes to your current way of living. So here goes, the basic premise to save $ is... to spend less than you make. Mind blowing, right? Not really- which is why I think anyone can do it! I've been asking a lot lately, 'what's the best way to pay off outstanding debt?' and found 4 common strategies for debt repayment. I will walk you through each one and than you can decide for yourself, which strategy works for you!

Common Strategies for Debt Repayment:

'Keep it at the Minimum'- Eventually the credit card companies will forget about me, right?

What is it?

So this is the strategy that is the least effective. Student Loan repayment plans can be up to 10 or 15 years, car loans can be upwards of 5 years and credit cards will allow you to keep paying the minimum for... well just about ever. So what makes this strategy, generally the worst? It has to do with the interest rate accrual. Loans and credit cards are an effective business model because the companies lend us money, and they charge us a % of interest that we need to pay on the value of the loan until it is paid off in it's entirety. They wouldn't keep lending us money if they didn't make a killing off of us anyway!

When does it make sense?

If you are truly living paycheck to paycheck, it's better to pay the minimum than let late fees add up. It can be overwhelming to get the repayment notices in the mail (or in your inbox) but it's better to tackle them head on, than to pretend that they don't exist. As you start to take a closer look at your finances, start a budget and track where your spending is going. You may find that there are areas that you are spending more than you anticipated. You may have room to cut back- if that's the case you can you use those additional savings to try out the more 'advanced' debt repayment strategies.

The other argument for paying the minimum is often applied to Student Loans. Some careers- think public service, or in my case, social work- offer a student loan forgiveness plan if you are working in a specific type of job post graduation. The plan I qualified for required that I pay the minimum monthly payment for 10 years- without any lapses or late payments. 10 years is a long time to be perfect, Federal Government! What I found when crunching the numbers was that I would pay more money in the long-run to keep paying the minimum, even if it meant eventually the loan would be 'forgiven'. Basically, it was more cost effective for me, to work on paying it off sooner. So while loan forgiveness looked good on paper and might make sense for someone with greater debt loads, it pays to crunch the numbers to see if it would actually be a long-term cost effective option for you.

'Chipping Away'- Pay on each debt equaling, hoping to slowly work back that debt load...

What is it?

Definitely better than merely paying the minimum, this strategy means paying slightly more on all of your debts across the board. Say you've go an extra $500 to spend each month and you are putting it towards paying down your debt instead of say...going out of town for the weekend. You take that $500 and spread it evenly over all of your outstanding debts, $100 additional towards student loans, $100 extra towards your car payment, etc.

When does it make sense?

If you are trying to make sense of your debt but aren't sure where to concentrate your $, this may be a good starting point for paying over your minimum payment amounts. If you have similar debts with similar interest rates, think 3 different student loans with similar rates and similar amounts this may be a good strategy for you. If you are a hand's off personal finance person, and want to set your monthly payments and forget it- this is likely the best strategy- however it may not be the most effective, or the most rewarding plan to try.

'David Ramsey's Snowball'- Pay down your lowest debts first- watch the results 'snowball'

What is it?

If you haven't yet checked out the David Ramsey finance site, I would highly recommend it as a good place to start finding inspiration for your debt-free lifestyle. He championed a debt-payment system called the 'Snowball', which while not always the best option, is probably the most satisfying way to work on debt- particularly when you have a few loans or credit cards you are working on paying off and are overwhelmed by the shear number of them!

Here's how it works- take your lowest debt. In my case, in the not so distant past, I had 5 different student loans that I was actively trying to pay off. The highest was over $10,000 and the lowest was just over $1,500. According to the Snowball plan (and basic psychology), getting results can be one of the biggest motivators for sticking with a behavior. Achieving some sort of success give us confidence and encouragement to tackle the next endeavor. I paid the minimum on my student loans, across the board- except for that lowest debt amount, $1,500 and put all my extra cash towards that loan. In two months, I received notice that it was paid completely off, and was able to start on the next one. While my debt load was still much higher than I would have liked, I knew I was moving in the right direction and found myself pretty pumped about working on the rest of them.

When does it make sense?

One of the biggest downfalls of debt repayment, is not being able to keep the momentum going. Inevitably, you will have good months and bad months. Some months you will save more, and other months you will get hit with unexpected expenses. The 'snowball' method can make debt repayment feel a bit exhilarating as you watch your progress. If you are one of those folks who gets that 'shoppers' high, after buying a big purchase, this model may be the right one for you!

The Most Bang for Your Buck Model- Are you a debt defying mogul?

What is it?

So this one takes a little more homework on your end! Take a look at all your debts, compare interest rates, type of debt, etc. and than start paying additional on the debt that will cost you the most in the long-run. This is the debt that you should focus your attention of repayment on, since holding off on repaying it could hurt you the most financially. An example of this, again from my not so distant past, was my car loan. While if I strictly paid on my lowest debts first (my student loans) and paid the minimum on my car loan, this would have cost me hundreds over the course of a year. Why? My car loan, was not only a larger amount, but also had a higher interest rate. Yikes!

When does it make sense?

This is the all around best model (hence the name!). It takes a bit more time to sit down and compare all of your debts, loans and bills and decide where to focus your time and attention, but once you have a plan you can set your online repayments each month and forget about it. As much as you can make repaying your debts a normal, and natural part of your month to month budget- the better.

So you're committing to your debt strategy and are ready to take on your loans- are there other things to keep in mind? Sure, are!

1. Avoid getting into additional debt- if you are working on getting out of debt, avoid starting additional debts. For the credit card users out there (I'll admit to being one of them!), be sure that you can pay them off each month. Strive for a $0 carryover balance month to month in 2016.

2. But what about emergencies? How do I avoid going into debt even when there are unexpected expenses that come my way? Make sure you have an emergency fund for those unexpected expenses- experts often say 3-6 month's expenses saved on hand is sufficient, but even $1,000 in your savings account can be a good buffer for all sorts of situations.

3. Hold yourself accountable- tell your partner or family/friends that you are working on saving and paying down your debt. Just by telling someone else about it, you can ensure you stay on track. Split your finances with a significant other or a room mate? Be sure to have money conversations with them- you will need them on board to keep saving!

4. Last but not least, be patient with yourself. It will take time to pay off your debt. It's easy to get discouraged and give up, before you even begin but remember that you have control over how you repay your debt. Time to make that repayment on your terms- not someone else's!

What's your debt repayment strategy? Has one of these worked for you in the past? What's your secret to staying motivated against your debt?

Pssst. Worried about the continuing fall of stocks these last few weeks? Check out this month's featured post on How I learned to Stop Worrying and Love the Stock Market!