For years, I’ve been mostly a coffee sort of guy and yes I’m ok spending $10/lb on decent coffee.  So you might think this new habit must be expensive, but I recently worked it out and no it really isn’t much more money.  I’ve spent perhaps $30 total over the last three months since I already had most of the equipment.  Instead it is a shift in spending, which actually happens fairly frequently around my house.  You see I don’t believe in being purely a creature of habit.  I change my interests in reading fairly regularly, as do I on my eating and drinking habits.  I consider it an ongoing evolution.

So the point of the matter isn’t that fact I have a not habit, but rather what am I reducing my other spending on to support the new habit (mainly through less coffee drinking).  You can have anything you want, just not all at once.  The fact of the matter is if you really want to retire early you will have to master this concept.  The overall level of your spending needs to stay fairly constant, but that doesn’t sentence you to a boring life or the exact one you have now.  Feel free to splurge once in a while on something or try something new.  Just remember that something else is going to have to give to support that.

Overall this isn’t a bad thing if you keep in mind your level of satisfaction/happiness from your spending on something.  You need to get something out of your discretionary spending, and if you aren’t getting something positive out of it you need to reconsider what you are spending it on.  Or another way to free up cash is to look at some frugal ideas around your fixed spending.  There really isn’t a wrong way to do this, but rather find out what works for you.

After all spending money is the easy part, as I can always find something to spend money on.  The trick is to keep the total the same, which involves a balancing act.

I previously wrote about problems I was having with my back.  At the time, I decided to go to a chiropractor and physiotherapist in order to attempt to rid myself of the back pain I was experiencing.  I did this for a few months, and the outcome was somewhat unsatisfactory.  Rather than continuing to spend money (well, my benefits provider’s money) I chose to go another route.

Starting about this time last year, I worked to get stronger and more flexible, rather than focus on having a chiropractor or physiotherapist work on little muscles.  I have been able to almost triple the amount I can squat, approaching almost twice my body weight (along with increasing my strength in other ancillary exercises) – in the process, my back pain has essentially disappeared.  I’m no doctor or anything, but I don’t think it has hurt me by getting stronger.

I plan on maintaining this level of strength as far into the future as possible in order to stay as mobile as possible for as long as I can.  This, along with a healthy diet will hopefully give me a good chance of being mobile into my 80′s.

Similarly, I have attempted to build a strong core financially.  I am repaying my only outstanding debt (my house) as quickly as possible, and I am going to invest as much as possible in order replace employment income with investment income.  At the core of my financial plan though is the simplicity of keeping my expenses low.

Low expenses, as a part of my financial plan has provided me with more financial independence than anything else I have done.  I make pretty good money right now, enough that I can keep my goal of retiring at 45 in my sights.  If I decide that I don’t want to do the job I’m doing right now (or something like it), I could find a job that pays minimum wage and I’d be fine financially.  Working a minimum wage job  would limit my early retirement opportunities but it does provide a certain amount of security knowing that I won’t be on the street if my company decides they don’t like something I’m doing or I decide I don’t want to work there anymore.

Much like building my core muscles in my body, I constantly maintain the core of my financial plan by monitoring my spending.  I don’t consider myself a miser or anything, I just ensure that if I’m going to spend my money on something, it’s not a waste.

What do you consider to be the core of your financial plan?  How do you maintain your focus on this over time?

After driving for an hour with that feeling I finally figured out missing: my dress shoes and my bag of all toiletries.  So I had some time to determine what I was going to do about this.

The dress shoes I determined I was just going to live without.  I had black hiking boots on in the car and some jeans.  So I’ll skip my dress pants and wear the jeans to make due.  I’m not buying a new pair of shoes for just two days.

The toiletry bag was more of a problem.  I’m not going away for two days without brushing my teeth..ick.  So I first went to the hotel to assess what they had in the room.  I was somewhat in luck that they had a little tub of shaving cream along with the standard soap, shampoo, conditioner and hand cream.  I also check the guest services list to see if they offer a program to offer a free…whatever…in case I forgot something. No luck there.

So I then tracked down the nearest drug store and went shopping.  I skipped any of my usual products and strictly looked for the cheapest thing I could get (its just for two days so I live with it).  I found a toothbrush on sale ($2) and travel size toothpaste ($1.29) and disposal razors ($4).  So including tax I covered my mistake for $8.  Overall not too bad.

Yet what stuck me about this entire event was how people tend to over pack as not to forget something when traveling.  I forgot two fairly important things and it only cost me $8 and some minor inconvenience.  If you stay flexible about your plans the reality is forgetting something is likely not a big deal.  It will certainly cost you money for the odd mistake, but really carrying every little thing you may need is more of inconvenience with overly heavy bags in my mind.

So how about you? Do you pack light and accept the odd ‘oh crap’ moment or do you pack everything but your kitchen sink?

For example, I worked with a young couple who were both employees of the provincial government. As we reviewed the information about their benefits, it quickly became apparent that they would be able to retire between age 50 and 52 with a full pension. After that conversation, they decided to increase their spending, buying a rental property, buying a vacation property and buying a new car. If they’re going to be able to retire early anyway, the thinking seemed to be that they might as well spend their excess income.

For the people that I advised, the retirement age of 60 or 65 seemed to be a constant. When they earned any extra money, they chose to use it for additional spending. In this way, once they were on track to retire at age 65, the variable was how much they spent on their lifestyle in the meantime.

When I began earning an increasing income at work, I chose to hold constant my present spending. As I earned more, I started by paying down more debt. Then I used more money to invest (given the market opportunities). Because my additional income went to increasing my net worth, my retirement date moved ever closer. For me, the variable was when I would be financially prepared to retire.

Everyone in our society has the ability to be creative with how they use their money. Many of us are lucky to earn more than we need to survive. That excess money can either be used to increase spending and current enjoyment, or to bring forward the time of retirement (while holding spending constant). Do you make a conscious choice of how to handle additional income? If so, how do you choose where to allocate it?

If I were already in the habit of buying a latte every day, I could save $3.00 (or more) each day by skipping it (or making it at home). Multiply that by 20 work days a month, and I could save $60 a month which, according to the Latte Factor, should be redirected to savings. This is a great theory for habits and subscriptions. But habits are hard to break, and some impulse spending is irregular, but still adds up.

Dr. McGonigal explains: “Most people make a fundamental mistake when thinking about their future choices. We wrongly but persistently expect to make different decisions tomorrow than we do today.” This is how we justify impulse spending. For example, I might think to myself that I’ll just buy one bag of chips today, but I won’t next week. I may think that I’ll just skip exercising today, but I’ll have enough energy tomorrow. Or I might just complete one more video game, before giving them up.

But that kind of thinking is unrealistic. It puts faith in my future self to be stronger and make different choices than my current self. The solution is to stop pretending that tomorrow will be different. If I snack all afternoon today, chances are that I will also snack all afternoon tomorrow, the next day and so forth during the coming year. The decision I make today isn’t just a one-time weakness, it’s a habit in the making that will stay with me all year.

My goal, with my finances, has been: consistency. I try to spend a similar amount on food each month. That means my shopping is fairly regular, we eat out infrequently, and I rarely indulge in more than one “treat” per shopping trip. In the past, I made an effort to pay down my mortgage consistently. That’s especially easy with a traditional mortgage. I also focused on saving consistently. Each year, I would work to maximize my RRSP contributions. The RESP is an even better example, because I made an automatic contribution in the same amount and at the same time as the government grant money that arrived in our chequing account each month.

The best way to control spending and saving is to make it a habit and to view each choice as a habit in the making. Instead of impulse purchases, spend a consistent amount each month on food, clothing, entertainment or whatever you choose. Instead of saving only when there’s money left at the end of the month, save a consistent amount each month. And when the temptation arises to spend a little extra, ask yourself if you can spend a little extra each day or week for the rest of the year.

Is your spending and saving regular or sporadic? How do you make sure your budget and savings plan don’t get off track?

Other than that I did managed to keep to my rules for the entire three months. So as much as I did fail in the end, I did still change my buying habits which was the main goal.

For example, after being completely unable to buy stuff for the last three months you might expect me to be itching to go buy a few things.  While this is true, the list is actually really short: hooks to hang bikes in the garage and a plant stand.  Yep, that’s my list as it stands right now.

I found the absence of buying stuff strangely liberating.  My life got a lot simpler for the last three months as I had to focus on everything else in my life which was great.  I finally have a plan on what I want to get done in 2012 and how I will get there.

I also got rid of a pile of crap out of my house.  My basement is actually almost clean for the first time in the five years I’ve been living at my house.  I even found some  things I forgot I had. For example, when I finally purged my half of our bedroom closet.  I found a pair of black dress pants that were tossed into the corner.  Brand new and never been worn since I still needed to get them hemmed. But given I had recently lost a pair of pants to a broken zipper this was a perfect solution for new pants for a $10 hem job.

I also realized ‘stuff’ is a damn poor word for what I was getting rid of or not buying.  Instead I will borrow a word from another language: chindogu from Japanese which means all that useless crap we buy or have.  It’s all those late night kitchen gadgets that really don’t do anything more than you already have.  For example, a slapchop, which basically does the same thing as a knife.  I like my useful stuff, I detest my chindogu.

Most of all I’ve managed to deconstruct an important thought in my head: I am not my stuff.  I like some of my stuff, but I’m not defined by it or limited by it.  Also when I no longer need that stuff I feel no guilt about selling or giving away things I never use.  For example, we gave away two beautiful serving trays we no longer us, even if they were wedding gifts.  Instead I’m now using ones I inherited from my grandparents, which mean more to me and are better size.

To help you with your war on chindogu, might I suggest the following:

1. Do Not Buy Storage.  You don’t need more shelves or containers, you likely need to get  rid of things first then buy storage after the purge.
2. Start with Garbage. Empty boxes, recycling cans, empty paint cans all need to get out of your house.  Your first job is to get rid of that crap so you can see what is left.
3. Create a Rule of Thumb.  Mine was if I haven’t used this in 12 months why do I have it?  Most items that failed that test and were tossed.  If you really want to downsize drop down to six months.
4. Get Over Getting Rid of Good Things.  I tried to give away some things that were in perfect shape and sell some things like DVD’s.  You might be able to also donate it, but if all of those methods fail in a week: trash the item.  It’s ok to toss new things you don’t need, I even did that with some Christmas gifts I got that I can’t return and I won’t use.
5. Keep up with New Stuff.  As we unloaded all the new stuff into our house from Christmas my wife and I went around with garbage bags and tossed an equal volume of stuff.

Good luck on your war.  Any questions on how my war went?

I Love New Year’s – well, not exactly this New Year’s because my wife and I were both terribly ill with some sort of debilitating flu, but New Year’s as a time of year is just amazing.  It’s one of those times of year as an adult that you can reset and take a breath, the rest of the year (to me) is just a myriad of running around and a continuation of well, life.

I am looking forward to this year – I am 32 years old as of last month and as long as I continue to pass my courses I will have completed the education requirements of the Certified General Accountant’s program.  I just started a new job late in the year that I really like, and my wife and I are getting closer to financial independence all the time.

This is the time of year that people like to make lists of things they would like to change in their life.  Some people (like in Robert’s post yesterday) resolve to lose weight, other people would like to make more money, essentially there are things that people would like to change and now is the time they are going to do it.  In the past, I have successfully followed through on several of these grand schemes as well as summarily crashed in burned within a few days on others.

What I’ve found is that the times I have succeeded in creating real change is that the following was true:

1.) I was able to track the goal:  This year I would like to get stronger.  I have a two-pronged measurement for this – I would like to be able to do Chrissy (a kettlebell workout) in under 15 minutes, as well as being able to squat 300 lbs.  These are very measurable goals, and I could test both of them today and know where I stand (although I may not be able to stand tomorrow with my lack of weight lifting over the past few weeks).

A goal that is not trackable (and wouldn’t work for me) would be something like “being nice to people in the New Year” – how could I tell?  If I was making people emotional with my meanness and could cut down the number of people I made cry per day from 3 to 1 or something like that I would be able to see the results, but otherwise how will I stay focused for the year?

2.) The result was worth it to me:    Financial goals are generally something I focus on for the year.  Paying off my mortgage is my current goal and I revisit this goal every 2 weeks (when I get paid) to track my payments.  These results, an annual reduction of my debt load, are worth it to me.  This reduction in debt is not something that I’m going to give up because it gets hard when I want to go on vacation in the summer that may be expensive.

Applying these two broad guidelines when I am attempting to institute change allows me to stay focused on the end goal and ensure I am on track while I’m doing it.

“Don’t give up what you want most, for what you want now”

I couldn’t source this quotation, but found it really applies to my early retirement plan.  What I want most is to be financially independent, to be able to leave the workforce in my early 40′s (if I choose) and do whatever I want to do after that point rather than going to work for much of the year.  Things that I want “now”(or are always in the back of my head) that would get in the way of my plan might be an expensive kitchen renovation, or the latest “cool” gadgets.

The trick for me is to keep the end goal in mind all of the time while telling myself that I don’t really need any of that “stuff” that will do nothing but put me further from my ultimate goal.

I think the problem with me, and perhaps most people is that my end goal is 13 years away – that seems like forever, and constantly saying no to myself (not out loud, although that would be somewhat amusing to see in the store) gets old pretty fast.

What solidifies my plan in my mind is a reminder from time to time of what the freedom of financial independence would mean to me.  My wife and I went to a (relatively) cheap resort ($500 each for 8 days in the sun) in the Dominican Republic last week and really enjoyed ourselves.  Partly it was because of the sun, but also it was because we didn’t have to do anything that day – we got to choose how our day went, rather than having it chosen for us.

We both enjoy our jobs, but what we like more and look forward to is the freedom that not needing a job would present – waking up with no alarm clock, having no expectations put on us for the day.  In our week of vacation, we chose to do almost nothing – we read books, got tanned, learned a new card game, and relaxed.  If there was more time off, say 40 years, I’m sure we may have accomplished something constructive, but if we told the vast majority of people we knew that this is what we wanted to do all of the time, I’m not sure if many would really understand – it just seems so boring, but it’s what we like to do.

The “stuff” that is and will get in my way seems to all be a product of perceived convenience.  I’m wondering what my wants would be if I limited my time on the internet and stopped exposing myself to advertising.*

Are things that you want now getting in the way of things you want most?  How do you balance the two?

* Writing this  paragraph about advertising reminded me of a line in the movie Fight Club “Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need” – seems to reflect the message I am trying to get across to myself perfectly.

One thing that has saved me a lot of money over the past few years is slowing down my addiction on the newest “thing”.  I haven’t stopped wanting the new iPhone 4s, or an iPad (or a myriad of other exciting new toys) I have just stopped buying as many.  My television is a 75 pound monstrosity that I bought about 8 years ago.  There are significantly nicer (and better) televisions out there, but mine works fine and I don’t really watch it enough to warrant the purchase of a new one.  The same thing goes for my cell phone – I would really like a new iPhone, but for what I use my cell phone for – texting, checking Facebook, Twitter, and e-mail at work, my  2-year old Palm Pre works fine.

The problem when you start buying new gadgets is when do you stop?  Do you (for example) upgrade your cell phone every 6 months to a year when a newer or better model comes out?  Do you continuously upgrade your computer in order to keep up with the best graphics out there to play games?

Sometimes, I’ll give in and upgrade some of my “toys” I sold my ipod touch (second generation) and bought a used 4th generation ipod from kijiji, the difference being around $100.  I tend to “allow” myself to upgrade if I will get enough use from the new gadget.  I listen to my iPod anywhere between 8 and 12 hours a day, so the $100 seemed to make sense at the time.  Most times though, I seem to want the newest toy just to have it and will not get enough use out of it to make the cost worthwhile.

I think the bottom line for me is to be satisfied with what I have – I make sure that when I make a purchase, or in the case of a cell phone sign a contract I acknowledge at the time that this purchase is for the long-term and I need to be able to use the item for a set period of time.  Where I (and most people) get in trouble is when you look at your toy and look at someone else’s and you go back to your 7-year old jealous self who wants the newest stuff.  The problem with being an adult is that you can usually afford the newest toy, or sign a 3-year contract costing you a measly $55 + tax for 3 years (over $2,000 for a term) and you can have that toy.

What’s your policy for buying new toys for yourself?  Do you just not buy them, or how do you fit them into your budget?  Admittedly, this whole conversation is completely a “first world problem” – I’m sure there are many people in the world and North America that don’t even think about cell phones, tablets and other things that really have no use other than entertainment.  These toys and the decision whether or not to buy them is a constant battle as it is an addiction to shiny gadgets, which I think I share with most people.

As I said before, I tracked every dollar I spent in November, using 3 different trackers (I started with 4, but it quickly became clear that one method was not what I was looking for).

November may not have been the best month to start doing this, as I had a week off work as vacation time, so my spending was not “usual”.  I spent $297 on groceries (I did stock up on some sale items) but I also spent $200 dining out (which is I believe is about $150 more than usual) as well as $160 on entertainment (which is usually closer to $50).

I learned some other things while doing this as well. Firstly, it is a pain in the butt. It might not be so bad if I was only using one tracker, but by using 3, I tripled my work. I also am getting a clearer picture of what I want to see in a budget spreadsheet, and what I don’t really need. The nerd in me loves the idea of knowing how much I spent at each store, how much was on fresh produce versus how much on meats and grains, but the part of me I try to keep in reality now knows that I really don’t need to be that detailed.

Another thing I learned was that I can utilize laziness for this to a certain degree. The more I spend, the more work I create for myself. If I shop less, there is less admin time spent to log the expenses. As much as I love playing with spreadsheets, I don’t want to have to do it every day.

The trackers I used were:

Spenz – This is the one I stopped using, I wanted to like it, and if all I wanted to know was where I was spending my “blow” money, this would have been perfect.

Pear Budget – Very simple and easy to use. It doesn’t allow an abundance of categories, 10 Variable and 10 Irregular (which for me might be a good thing), and keeps track of the dollars only, not where I spent them, (although I can use the Excel comment to make notes such as who the gift I bought was for and why etc). I’m going to continue playing with this one as it has a lot of what I’m looking for.

SimpleDBudget – At first, this was my favorite, I could create all the categories, and sub-categories I wanted. I entered the date, and where, and why I spent, but at the end of the month, the analysis only showed me some pie and line graphs for each category I made, but didn’t cross reference that data with anything else (except for over or under budget, and percentage of budget.

Budget Tracker 3.1 by Duck Software – This one allowed for 13 categories in total, and I didn’t I found it labor intensive to use, for example, I had to click on every field I wanted to enter data in (a new field for each day of the month) as opposed to “tabbing” my way through it. It totaled my categories, but that was the extent of the analysis.

December is presenting it’s own challenges already. My boyfriend is now making less income than he was before, so we are living on less money, plus there are the added expenses of Christmas. I don’t buy for many people (mainly my daughter and a few other small gifts) so I’m confident I can get through the season without damaging my finances too much. I’m taking a break from tracking in December (although I will be looking at some other programs, or working on my own spreadsheet solution) but will resume in January when life gets back to “normal”.