Tag Archives: personal finance

Aloysa’s Reading Picks

First and foremost: thank you everyone who supported, promoted, stopped by and commented on The Kitchen Sink while I was away. You helped me tremendously, and my Alexa ranking dropped to 372,206!!

By the way, if you want to find out more about me, read my interview @Modern Tightwad!

My article Beware of Men Counting Pennies was featured in the Carnival of Personal Finance #284hosted by Sweating the Big Stuff ,and it was one of the editor’s picks!

It took me a while to catch up with my work. Sometimes I think it is better not to go on vacation. But I am all caught up now – more or less, and I am back to blogging, writing and reading.

The following are my favorite articles of the week:

Run out of the gift ideas? No money or budget for expensive gifts? Check out 77+ HomemadeGifts – DI Chirstmas/Holiday Gifts @Wealth Informatics

Don’t like Wal-Mart? Not so sure? Figure it out with Things that Walmart Does Well @First Gen American

Going abroad? Read Are you a Member of the Global ATM Alliance @Green Panda Tree House

Not sure if you love what you do? Sort it all out with Doing What You Love, Or Loving What You Do?@Everyday Tips And Thoughts

Figure out how blog grading works by reading How Mozrank is Filling in the Gaping Hole Left By the Departure of Pagerank @Invest It Wisely

This post inspired me too write my financial summary article (coming soon) My Money at 20 @Minting Nickels

Wondering how to prepare a cheap but delicious Thanksgiving Dinner? Get a clue with Thanksgiving Dinner on The Cheap @Yes, I am Cheap.

Family Lessons in Frugality

I learned the word “frugality” from my American friend. We were at lunch talking about shopping. She said that she likes good bargains, thinks about herself as “frugal” and doesn’t settle for “cheap.” Even though my English was really good by then, I still didn’t know what “frugal” meant. My friend explained that it meant “spending wisely.”

Lately the life style of being frugal has become somewhat of a phenomena. Everyone is having heated discussions about it. Bloggers passionately write about it. People try to accurately define it. Why being frugal is such a popular notion? Probably because it is very difficult to be frugal in a consumerist culture (read about my financial discoveries in Saving Money Today). Then I thought about my own life experience and decided to compare my Russian definition of frugality with American definition.

Russian Frugality

I grew up in the family that was frugal by default. We were poor and used to live from paycheck to paycheck. My grandmother and mother were teachers and got paid twice a month: a small advance in the beginning of the month and a bigger lump amount three weeks later. My family was not cheap by any means. If we needed new shoes or coats, we would invest in quality goods. You have to realize that in the Soviet Union we did not have bargains, coupons or sales.

My grandmother and mother tried to stretch their paychecks as much as they could but the money would usually run out by the end of the month. We would eat better in the beginning of the month, and a little bit worse by the middle of the month. If something broke, it could become a big problem because it meant taking a good chunk of money away from what we usually spent on food. My parents used to borrow from close friends who were a little bit better off then we were. In fact, borrowing money from friends was a very common practice. Majority of the people in the former Soviet Union lived this way.

My family taught me four very important lessons about the ability to stretch money:

1. Get the best quality of clothes and shoes because they will last longer.

2. Don’t invest in cheap products because they will fall apart faster.

3. Try to save a little bit at a time because you will have an emergency spending sooner or later.

4. Evaluate your needs, wants and spend wisely.

Applying these rules are not easy, especially in the US where the consumerist culture encourages spending.

American Frugality

I asked my American friends what their definition of frugality was and this is what I heard back:

– Not being extravagant, spendy or wasteful;

– Balance your lifestyle: get what you need and want without overspending; look for deals and bargains; cut coupons and shop wisely; repair and re-use as opposed to buying new and discarding;

– Live within your means;

– The practice of acquiring goods and services in a restrained manner, and resourcefully using already owned economic goods and services , to achieve a longer term goal (when I heard this I wondered if it was a text book definition);

– Living a bare bones lifestyle (Really? This one made me depressed instantly. Even back home I never lived a bare bones lifestyle);

– Being cheap (I don‘t even want to comment on this one);

– Being mindful and practical (just like my grandmother!);

– A habit of choosing not to spend money that you theoretically could.

No matter how you look at it, frugality is a word with a controversial meaning. But it definitely has a lot of similarities no matter what culture you are from. For some people it means saving, being financially smart with your money, finding a good bargain. For some people it means being cheap, stingy, boring and having no life. Some defend frugality by saying that they enjoy quality and a respect for value. Some attack frugality by saying that a frugal lifestyle means saying “no” to everything that brings enjoyment to your life such as eating out, drinking lattes, shopping and traveling.

Sometimes I am still wondering if frugal people live for bargains or do they simply spend smart? I prefer to think that I practice the latter.

EDIT: This post was included in Festival Of Frugality #253 – Frugal Halloween Costume Edition hosted by Budgeting in the Fun Stuff.

Personal Finance in a Non-Confrontational Way

What kind of blogs do you read? I like to read a wide variety of blogs from writing blogs, travel, photography to personal finance. One of my favorite blogs is The Simple Dollar: Financial Talk For the Rest of Us. Some of you already know him. Some of you never heard of him. His name is Trent Hamm, and he writes about finance and self-development from a personal angle. I was lucky to get his time and attention. Trent is a busy family man, a writer, a blogger and much more.

Trent, thank you so much for agreeing to this interview and finding time to answer my questions. I know it wasn’t easy. Your blog idea was born out of your personal struggle with finances. Your desire to be a writer and desire to share your story created The Simple Dollar. You could have realized your desire to be a writer in some other different way. Why a blog?

Two reasons.  First, the production costs of starting a blog are very low, much lower than publishing a book.  Second, blogging is such a flexible format, allowing you to write anything from a single paragraph five times a day to a book-length article once every few months.

Fair enough. We all have plans with our blogs. What did you expect out of your blog initially?

I expected it to be read by a few of my friends, nothing more.  I was mostly seeking a way of telling them about the personal finance material I was discovering in a non-confrontational way.

Why The Simple Dollar? I don’t think that a “dollar” is that simple after all.

It was the best name out of the ones my wife and I brainstormed one afternoon. We wanted it to seem accessible and non-confrontational and not confusing to people who aren’t confident about their finances.

You openly told your readers your personal financial life story. Have you ever regretted doing it?

I don’t regret telling my story.  I do regret how I have told it at times in the past, mostly when my story overlaps with the privacy of people I care about.  I don’t want to violate their privacy, and I’ve had to make some difficult and awkward decisions because of that, and readers have become angry with me over such issues more than once. They see an incomplete story where a particular piece has been excised and get quite angry!

You talk and write about being frugal and frugality a lot. Why do you think this word has a negative connotation for a lot of people?

For a lot of people, frugality means not having the things that you enjoy in life.  They think of cutting back, and they imagine the knife plunging into the things that they value.  Of course, that’s not how it works at all – you actually focus the cuts on the areas you don’t care about, like the specific brand of detergent you use.

Do you think students loans exist to help students or to drown them in debt?

The idea of student loans is great.  In practice, they’re not so great.  America’s obsession with the idea that everyone needs a college degree is the real problem.  What America needs is more skilled tradespeople that take pride in their craft.

The biggest mistake that people commit with their finances is that they spend more than they earn. I am guilty of it! Is there a second biggest mistake that we all do with our money?

We spend to please other people instead of pleasing ourselves. We buy things to impress others and to prop up our own feelings for a short time, but it’s a fragile prop and we find ourselves right back where we started except with more debt.

People write to you asking for your financial advice. How comfortable do you feel giving your advice to them? Have you ever had anyone come back blaming you for their financial debacles?

I typically don’t like giving advice.  When I do, I stick to a handful of core principles that I reiterate all the time.  Keep costs low. Seek debt freedom.  Spend less than you earn.  Give to others when you can.  Those principles have worked for me and for many others.  I’ve never had someone come back at me with rage over bad advice because I don’t ever give advice that goes outside of those guidelines.

I believe that behind every successful person there is a talent and a  huge amount of hard work. What do you think made your blog so popular?

My guess is that it’s popular because there’s a constant flow of solid material that pushes people to think about their own situation and to improve it.  That’s what I focus on with every single post and I think others find value in it, warts and all.

I have to ask you this – it came to me as a shock (in a good way) when you recommended my articleInvesting Fiasco or Reminiscences on the Past for your blog readers. Why did you pick it as one of your recommendations?

The story it told was interesting, particularly in how it related social concerns and social changes to the personal finance moves that people choose to make.  We all do that, and it’s brave to recognize it in yourself.

What are your thoughts on 401K?

It’s a good investment vehicle for retirement purposes.  The big advantages it has is the ease of use because it’s facilitated through the workplace and the fact that many employers offer matching contributions, which amount to free money for the retirement saver.

My last question but definitely not the least… Can you share with us the best financial advice you ever heard?

For me, it was the idea that every dollar you earn represents some amount of your life invested – five minutes, ten minutes, an hour. When you spend that dollar, you’re essentially trading some chunk of your life for whatever you’re buying.  So, if I earn $10 an hour and then go out for a $60 meal, I’m trading at least six hours of my life for that meal.  Is that a trade I want to make?

How I Got Overeducated and Loaded with Debt

My first culture shock was when I got admitted to an American University. It was not an Ivy League school, not a private college. I got admitted to a small town University with a good name and decent reputation. I came as a foreign student on a scholarship. The scholarship that I was awarded barely covered half of the cost of the tuition. It did not cover textbooks. As a foreign full-time student my tuition was a little over $4,500. The scholarship was a little bit under $1,500. The first year in school my stepfather generously covered the difference. He also bought me the textbooks.

First time I saw the prices of the textbooks and supplemental study guides I needed for my courses, I became flabbergasted. Scattered thoughts raced through my mind. Who in the world could afford to pay the full price of the tuition and, on a top of that, throw in an additional $400-500 for the textbooks? That day, standing in the middle of the bookstore, I understood those people who said that education was not important in order to succeed in life. I also realized why I saw a lot of students from Saudi Arabia and Kuwait on the University’s campus.

Back home I graduated from the local University with a Master’s degree in Library Science and Information Technology (I still don‘t understand why it was called Information Technology as we never had any computers). I never had to pay a penny for education or for the textbooks. Free education was one of the greatest perks living in the former Soviet Union. In fact, I got paid for good grades. The payment was called a stipend. The rules were simple: a student should maintain a certain GPA level and once a month a stipend would be paid to provide for one’s food and living expenses.

There was neither need nor time to work. The classes would start at eight o’clock in the morning and go on till five or six o’clock at night. In the evenings, I had to do homework. I was paid to go to school and study hard. Our textbooks were used but they were at no cost to us. Every semester a student would check out a textbook from the library and give it back after the finals. Free was the price tag.

After a year of attending the University in the states, I finally figured out my new “be strong, be tough” rules. I was to study hard in order to earn good grades because a good GPA determined not just scholarships but also my future ability to get a good job. I also was supposed to work hard to pay for the classes, books and supplies. It wasn’t easy. However, I was one of those lucky students who lived with their parents. I had a home and home cooked meals.

During the first few years in the states student loans weren’t an option for me. However, I managed to get a second scholarship that helped immensely to cover the international cost of education. Still, making $6 an hour on a part-time job wasn’t enough. But I had a vision for myself. I had a goal. I wanted to get a degree in the United States, get a good job and start making money. This goal kept me determined, persistent and motivated.

My credit card balances grew like weeds in a field while I was pulling myself through the school. Later on a top of my current credit debt I added student loans. Six years and a boat load of debt later I finally graduated with my second Master’s degree in Accounting. I am still paying off my student loans but I can see the light at the end of the very long tunnel. Sorry for using such a cliché but I do see this light!

The cost of education still bothers me. Maybe it is my upbringing, maybe it is my student loans, maybe it is my human belief but I have to say this – education should not cost a penny.