Money Screw Ups: And the Frugal Living Lessons that Will Save You - 1

2015 was quite a money ride.  Some of the progress toward financial freedom made following my own frugal living tips (outlined in this post "Can I make it on $3k per month?"  got tossed overboard.  
  

Cushion the Body Blow with Frugal Living 

I can recover because my frugal living ways helped me saved.  That and the personal finance software addiction and fascination with minimalism and aggressive downsizing. 

But my pride and confidence hit the surf and it felt like I slammed into concrete.   Worse, it may have derailed complete financial freedom by a year or more.  

And some of it I could have avoided by listening to those much wiser than myself.     

Surfing Lessons From the Sages

1.  Retirement really is a psychological journey and you might want to prepare for that.

The first time I retired was about 15 months ago.  

As the retirement sages on www.earlyretirement.org said might happen,  I experienced a sudden depression. 

I wasn’t ready psychologically or emotionally, which affected how I dealt with the other surprises to come (i.e., not great). 

Just like every one said -- a great deal of your self ­perception can be tied to your work identity and title.  

In the past party talk - "So, what do you do?"  

My answer  - "Oh, I am a marketer and public relations professional."  

Notice - I didn't say what I do.  I said "this is who I am."   

It took about a year to adjust.  Therapy helped.  So did part-time work and volunteering for professional associations.  

There are plenty of resources on the web about transitioning to a new life phase, even AARP has a coaching service available.    

2.  Sound financial planning is not an exact science.  

I asked all the wise ones on the early retirement forums for advice as to "don't I have enough to pull the plug on this job?"  

The answer wasn't as positive as I expected.  As much as I had saved, they still said, "you need more of a safety cushion, nobody gets this stuff right on the money.  Hold on!  Give yourself a 5-10% margin of error." 

SmartyPig Savings Pay 1.75%

SmartyPig Widget: "Check out my SmartyPig goals."

Have you used the SmartyPig website yet to save money toward a goal? 

I'm trying out SmartyPig now because I need new carpeting and have had no inspiration toward saving for it.  My household savings account in INGDirect was depleted down to $500 by roof and air conditioner repairs this year.  There isn't any money left over for the fun stuff, such as a new refrigerator, washer/dryer, carpeting.  Carpeting is top of my list! 

Smarty Pig is FDIC insured and the savings account work like any other online direct bank savings.  But
Smarty-Pig gives a great interest rate now, 1.75%.  Also, you can redeem for account a gift card at retailers, such as Lowe's and get additional cash back.

Have you saved for any goals using SmartyPig?

Other popular savings posts:

Save on Bounty Paper Towels
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It’s A Wonderful Life. Save a Little.

I don’t think it’s a coincidence that the main character in the movie “It’s a Wonderful Life” is a banker. Okay, so he’s a poor, failed banker. That’s true enough. And the bad guy is a rich, miserly banker.

One of the many messages I hear in the movie is that it’s the little things that make up the purpose of your life. It’s not a huge act that you commit one afternoon. With a bang. Accompanied by white lightening. In front of a arrow that points to a sign that says “oh! This is why I was born!”

Rather it’s the smaller acts of kindness that ripple on without us knowing where they go or how far. Money is a little like that. You never know how much good you could be doing with spending that $10 in just the right way.

Saving that $10 for tomorrow or the next day just gives you more choices that you will exercise later. You will spend it eventually. It will either go to the mortgage, or it will go to your heirs. Or to a latte that might make the day better. Or a gift that might make a friend or a stranger’s day. Or to paying off a student loans. Or it will go to your favorite charity.

That’s why we try not to spend it on things that don’t matter. Because it is a wonderful life. And money can be our ticket to the next great memory.

Uncle Sam Pays You to Save

If you are new to personal finance and retirement savings, then you might not know about the incredible tax savings that you can experience using auto deduction into your 401k, 403b, and IRA accounts at work.

I started out deducting $25 a paycheck 18 years ago and couldn't imagine how I would be able to live without that extra $25 every two weeks. Fastforward 18 years and I managed to get by quite well! I own my own car, have more clothes and shoes than I know what to do with, go out to dinner with friends, and have a retirement porfolio - invested mostly in cash and bonds - that is worth $100,000+. And this year I bit the bullet and began putting away the full $20,000 a year. How?

Being thrifty, living below my means and most importantly, saving on taxes. The new 2009 tax tables are available on the irs.gov website and here at a this personal finance blogger site No Credit Needed

As a single Mom, head of household, making $73,000 per year, my taxes are figured like this

If Taxable Income Is:

Not over $11,950
The Tax is 10% of the taxable income

If Taxable Income is over $11,950 but not over over $45,500
The tax is $1,1950 plus 15% of excess over $11,950

If Taxable income is over $45,500 but not over $117, 450
The tax is $6,227.50 plus 25% of the excess over $45,500


If Taxable Income is over $117,450 but not over $190,200
The tax is $24,215 plus 28% of the excess over $117,450

If Taxable Income is over $190,200 but not over $372,950
The tax is $44,585 plus 33% of the excess over $190,200

If Taxable Income is over $372,950
The tax is $104,892.50 plus 35% of the excess over $372,950

So my tax burden is $6,227.50 plus $6875 = $13,102.50

Whoa! I didn't itemize taxes last year, because I don't own a home, but I only paid abut $5,000 in taxes. (legitimately!)

By contributing $20,000 to my 403B this year my tax burden drops to $1875 + $6227.50 = $8102 or by $5,000.

(More correctly, I would say that my tax burden is deferred to when I begin withdrawing funds from the 403B and supposedly, my tax bracket will be lower.)

With various other tax savings such as insurance premiums taken out of my check before taxes, I am able to reduce my tax burden even more each year.

If you haven't started taking advantage of your workplace retirement auto deductions, don't fret too much (this is the Real Life Money blog and I get it!). It took my 10 years to convince myself that I could afford to put away the maximum amount into retirement. And it was easier when I began putting money into bond funds, rather than compound the fear with trying to figure out stock fund purchases that were offered to me.

Baby step of the week: investigate your employer's 401K/403B accounts and defer AT LEAST $25 a paycheck. It's a great habit to get into and it's Fun To Watch it Grow...