Matt Bell's Blog, page 19

Profitable Ideas: Raising Kids in a Consumerist World, How to Talk Money With Your Spouse, and More

Weekly list of curated personal finance articles from around the web.

Your new $3,000 couch might be garbage in three years. This is why. (Wall Street Journal). Planned obsolescence is everywhere these days.

How to raise kids in a consumerist world (Becoming Minimalist). Good ideas for helping our kids live in the world without becoming of the world.

Fracking eyeballs (Asterisk). I always find it fascinating and helpful (and sometimes scary!) to get a peek inside the science of advertising. 

Forced (Finding Joy). Practical applications of physics, with lots of implications for how we manage money.

Respect the accomplishments, don’t envy the person (A Wealth of Common Sense). Stay for the Michael Crichton quote.

This is how to spend your money to maximize happiness (Barking Up the Wrong Tree). Helpful insights for how to best orient our use of money.

10 steps for having better money conversations with your spouse (Kiplinger). Just in time for Valentine’s Day.

How teen online gambling is a growing concern for parents (Psychology Today). Definitely an area where parents should be proactive in teaching and setting healthy boundaries.

What’s a dark pattern and has it already cost you money? (US News). More insights into how marketers get us to part with more money.

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Lessons From the Mulch Pile – How to Save Money and Build Community Along the Way

Have you ever walked through your neighborhood on a warm day and looked inside other people’s garages? Didn’t the contents look familiar? Didn’t they look remarkably similar to the contents of your own garage? I’m not suggesting that we all start forming communes, but couldn’t we do a better job of sharing?

On a memorable out of town trip, I had dinner at the home of some new friends. In their yard stood a pile of mulch. A big pile of mulch. It turns out they had gone in on the purchase with their neighbors. In part, in was a money-saving idea since they split the cost of delivery. But it was also an opportunity to build relationships—“an opportunity for us to meet at the fence” is how they put it.

I love that, and it’s prompted me to think more proactively about sharing with our neighbors.

When I decided to aerate our lawn a few years ago, my first thought was to just rent the machine and do the work. But then I decided to ask a neighbor if he wanted to go in on it with me, which he did and he seemed to appreciate. It saved us both some money, and it helped us connect on a different level.

Another time, one of our kids got a ball stuck in our gutter. I don’t own a ladder tall enough to reach that high, and for several minutes I entertained the thought of driving to the store to buy one. Then I thought, “That’s crazy. I’m sure a neighbor has one.”

Sure enough, the first one I called had one and was more than happy to let me use it. A few months later, I was really pleased that he felt comfortable calling me to ask for help getting an unusually wide Christmas tree out of his home. Our openness to helping each other has saved both of us some time and money, but more importantly it’s opened up lines of communication and is fostering a nice friendship.

More recently, another neighbor and I went in on the purchase of a power washer. Once again, it saved some money and has led to more communication and connection.

What if we all started looking for more opportunities to “meet at the fence?” Instead of every family buying its own swing set or snow blower, what if several families went in on such purchases together? Instead of every gardener on the block renting their own rototiller to work on their vegetable patch, what if we rented one together for a day and shared it?  We’d all save a little money and we’d build community along the way.

I’m not sure the apostle Paul had all of these examples in mind, but it reminds me of his teaching:

Each of you should look not only to your own interests, but also to the interests of others. – Philippians 2:4

What are some examples of how you’ve shared with neighbors and built community in the process? Or, is there something you’re now thinking of buying that you could consider buying with a neighbor?

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Profitable Ideas: Why We Buy, Virtual Credit Cards, and More

Weekly list of curated personal finance articles from around the web.

Why we buy: the role of comparison in our spending choices (Becoming Minimalist). “Social indifference” is a good goal — actively not caring how other people are spending money (I didn’t say it would be easy!).

Virtual credit cards: what are they and should you use them? (Wall Street Journal). Your issuer might offer this. It takes a little more effort, but adds a layer of ID theft protection. 

Legal documents you should sign when you turn 18 (US News). If you have a young adult in your family, these documents are really important. See also, It may be time to review your estate-planning documents (Sound Mind Investing).

Tax identity theft “continues to be a huge problem,” expert says. Here’s how to protect yourself (CNBC). It isn’t just you who’d like your refund. See also, Identity theft victims waited 19 months for tax refunds (Washington Post).

Burn after wearing (Grist). One small step we can all take: buy fewer items of clothing—higher quality items—and keep them a long time.

The real reason you’re paying for so many subscriptions (Wall Street Journal). Are you spending money on something simply because you forgot to cancel?

How can I get better with money in 2024? (Morningstar). More encouragement to use the single most powerful personal finance tool available—the lowly budget. See also, The search for a Mint replacement (Sound Mind Investing).

You’re completely debt-free. No mortgage. No car payments. No student loans. Does your credit score even matter? (MarketWatch). In a word, yes. Here’s why.

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Radical Ways to Accomplish Your Financial Goals

One of the most common questions I get in workshops is, “Where can I possibly find the money to…” save, give, get out of debt, or simply make ends meet? The answer is often found in questioning our spending assumptions.

I recently worked with two couples and recommended that they go from two-car households to one-car households. Neither couple had ever considered such a move, but both fairly quickly realized that they could make it work with just one car, especially in light of all the money they’d save.

The most radical money move of all

Quite possibly, the most dramatic step I’ve heard of anyone taking to get his or her finances right is going on a spending fast.

(Also read How Serious Are You?)

Julie has gone on several spending fasts over the years. Her most recent one lasted six months. Of course, she didn’t stop spending completely. She just didn’t spend on anything that seemed optional. That meant no new clothing, shoes, jewelry, household items such as towels or pillows, movies, music, hair products other than essentials, and take-out meals.

Applying the “no discretionary spending” rule to groceries, she whittled her shopping list down to twelve essential items. She kept her cell phone, but took it down to the least expensive plan.

It wasn’t debt that motivated Julie to go on the fast. She saw it as an experiment to see how much money she could give away. The fast enabled her to give away nearly 50 percent of her income, whereas she used to give away around 20 percent.

The early days are the toughest

At first, Julie felt deprived. Gifts were the hardest thing to give up. She said, “I love to give gifts and I’m big on hospitality. Clothing was tough, too. But it taught me to get creative and put together new combinations of clothing.”

When her fast ended, she no longer felt deprived. In fact, she found it difficult to spend money. To celebrate the end of her fast, some friends took her — where else? Shopping! At midnight they went to a discount retailer that’s open 24 hours. Even though the store had thousands of items to choose from, she left there with just a couple of inexpensive clothing items.

Redefining normal

While Julie has gone back to spending money on gifts, many of her spending habits have been forever altered. She now gives away about 30 percent of her income.

She says the fast helped her see with new eyes the influence of our culture. “I had allowed my sense of normal to be shaped by the behaviors of people around me. People think they don’t have any margin, but it’s because their ‘normal’ is so out of whack. From the food we consume, to the clothes we wear, to our choices of entertainment, to the frequency with which we buy shoes or pillows or winter coats. Who said that we need new stuff every year?”

The power of a partial spending fast

If this idea intrigues you but a complete spending fast feels too overwhelming, try a partial spending fast. You might go on an entertainment spending fast, for example, looking for all the free things to do in your community for a period of time. Or try a clothing fast, buying only what is truly essential, while, as Julie did, creatively coming up with new combinations from the clothing you already own.

A spending fast is arguably the most effective way to free up money for whatever it is you’re trying to free up money for – whether speeding the process of getting out of debt, building savings, or increasing generosity. And you may just find that the fast helps reshape your sense of normal.

What’s the most radical thing you’ve ever done to free up money for a goal that’s important to you?

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Profitable Ideas: More Money in Your Paycheck, Uncommon Advice on Choosing a College, and More

Weekly list of curated personal finance articles from around the web.

You may see more money in your paycheck this month. Here’s why (CNN). Revised tax brackets may mean you’ll owe Uncle Sam a bit less.

Cell phones in school: a conversation starter (Screenagers). This site is worth following for help managing screen time in your household. See also, Schools in 41 states have spent millions on pouches to lock up kids’ phones (NBC News).

New Year’s resolutions (The College Financial Lady). Specifically, for parents of college-bound children. See also, On choosing a college (Seth’s Blog). Solid advice — so simple, so uncommon.

Don’t get caught like the SEC: protect your online accounts with two-factor authentication (Wall Street Journal). Pretty shocking that a regulatory body like the SEC wasn’t taking this basic precaution. Are you?

More Americans are racking up credit card debt (Fox Business). If you need help with this, see if your church has a stewardship ministry. Or review the articles on my site in the credit/debt archives.

Historical U.S. stock market returns through 2023 (A Wealth of Common Sense). Good to keep the big picture in mind whenever stocks hit a rough patch.

The financial fundamental most people overlook (Best Interest). Yay! Another writer who believes in the value of budgets! Now that Mint has announced plans to shut down, here’s the budget tool we’re starting to use in our household.

You don’t need everything you want (VOX). It’s important to keep in mind the distinction between wants and needs.

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The Happiest Uses of Money

If you want to know the secrets to happiness, you’ll find plenty of suggestions online. But there are quite a few serious studies on the topic as well, and one of the most authoritative is the Harvard Study of Adult Development.

Some 85 years ago, the school started tracking and analyzing the lives of 724 men (women weren’t included because many of the participants were Harvard students and the school was all-male when the study began). Researchers were hoping to discover what makes people healthy and happy as they go through life. It may be the longest study of adult life ever. Very few of the original participants are still alive.

The study’s overall finding is incredibly simple. In a Ted Talk, Robert Waldinger, the current director, said it all boils down to developing and maintaining good relationships.

“People who are more socially connected to family, friends, and community are happier, healthier, and they live longer. It’s not just the number of friends you have, but it’s the quality of your close relationships that matters.”

None of this is new news. When Jesus was asked what matters most he said it’s all about relationships—loving God and loving others. Still, it’s noteworthy that such a long-running secular study of health and happiness would focus on the importance of relationships as well.

What does this have to do with money? A lot, since money is often a source of stress and strife between husbands and wives. It points us to a worthy question: How can we use money in ways that foster stronger relationships with our spouses, our kids, and others? Here are a few suggestions.

Get on the same page. If you want to relate well—financially and otherwise—to your spouse, one of the best approaches is to understand his or her temperament, as well as your own. A great starting point is the four-temperament classification system: Choleric, Sanguine, Melancholy, and Phlegmatic.

On the Resources page of my site, you’ll find a simple tool for identifying your temperament and understanding some of the financial tendencies associated with it. It’ll give you invaluable insights into each temperament’s financial strengths and weaknesses.

Spend wisely. I read recently that by the time our kids turn 18 we will have spent 95 percent of all the time that we will ever spend with them. It was a stunning reality, especially given the fact that our kids are now 20, 17, and 15.

I deeply enjoy the rhythm of day-to-day family life, and I’m thankful for a job that enables me to be home for dinner with my family most of the time. I’m also thankful that my wife, Jude, and I are on the same page in choosing to keep our vehicles a long time so that we have money available for family trips. Some of my fondest memories are of our family vacations.

By now, it’s become common knowledge that spending money on experiences tends to make people happier than spending on stuff. Still, I think we need frequent reminders.

It’s easy to overspend on a house or vehicles or other stuff, only to find that we don’t have enough for the experiences we will cherish long after all that stuff loses its appeal.

Invest in people outside your family. I love the story of Jason that Donald Miller tells in his book, A Million Miles in a Thousand Years. Jason’s daughter had started dating a guy who was bad news, which made Jason realize he hadn’t drawn his daughter into a compelling enough story. His spontaneous decision to raise a crazy amount of money to fund the building of an orphanage in another country didn’t go over very well with his wife or daughter—at least, not at first. But eventually it became something they all wanted to do, and taking on something so big—so beyond themselves—was transformative.

How well would you say your use of money is strengthening your most important relationships? What are some of the key ways your use of money has been purposely designed around relationships? Are there any ways you sense that some changes may be in order?

Arranging our use of money around relationships is a key way we can design a great new year.

Profitable Ideas: Your Money Or Your Life, How Young People Are Buying Homes, and More

Weekly collection of curated personal finance articles from around the web.

Your money or your life (Of Dollars and Data). Helpful ways of thinking about what money is really worth to you.

Millennials have found a way to buy houses: living with mom and dad (Washington Post). People may criticize this trend as a “failure to launch,” but maybe this is a very practical way to launch well.

How social media influences us to buy (Becoming Minimalist). It has done much to weave consumerist messages into the fabric of daily life. See also, this interview with Senator Katie Britt, who is advocating for stronger parental involvement in their kids’ use of social media. 

The sports gambling industry needs reform (Slow Boring). “Having a highly addictive vice like mobile sports gambling sitting in your pocket all day is a real problem.”

The worst house emergencies that come without warning (and how to prepare for them) (Lifehacker). It’s impossible to get ahead of every potential problem before it becomes an actual problem, but it’s worth the effort to be on the lookout for some.

Why we pulled our kids from club sports (The Gospel Coalition). How one family swam against the strong current of our culture.

Stewardship tips for a happy New Year (Crown). Good ideas for setting financial goals for the new year in faith.

7 tips for how to deal with sentimental items (No Sidebar). When decluttering, these can be the most difficult items to let go of.

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The Single Most Powerful Personal Finance Tool

If a tool existed that would give you a strong sense of control over your finances and help keep your financial stress low, wouldn’t you use it?

If this tool served as a financial road map, showing you clearly how you could live within your means, generously support the causes you care about, and save or invest for future goals, wouldn’t you use it?

If this same tool helped create a sense of financial teamwork and trust in your marriage, wouldn’t you use it?

And if you knew that this is the absolute perfect time of the year to begin using such a tool, wouldn’t that seal the deal, telling you that you absolutely need to begin using this amazing tool?

What is this magical tool?

Why, of course, it’s the lowly, much maligned, much misunderstood budget — or, as I prefer, Cash Flow Plan.

What rich people know

When some people think of a budget, they think only certain types need one. People with lots of debt. People with a low income.

The wealthy? No way, or so they think.

In fact, one of the most interesting findings from the classic book, The Millionaire Next Door, is that over half of all millionaire households use a budget to guide their finances.

As authors Thomas Stanley and Wiliam Danko explain, “Planning and controlling consumption are key factors underlying wealth accumulation…Operating a household without a budget is akin to operating a business without a plan, without goals, and without direction.”

Plan to succeed

Haven’t ever used a budget? You could start today.

A good starting place is to read the article, Zero-Sum Budgeting: Giving Every Dollar a Job. (Note: The popular Mint budgeting tool shut down in late March. For alternatives, read this article.) On the Resources tab of my site, you’ll find my Recommended Cash Flow Guidelines, which will help you develop your plan.

The Guidelines cover households earning from $75,000 to $200,000. Just use the income level that’s closest to yours.

You’ll see that these are ideal plans, meaning they assume no debt other than a reasonable mortgage.

If you have other debts, you’ll have to adjust your spending in other categories to allow for the debt payments.

But, but, but…

Whenever someone comes to me with a financial dilemma — they’re deep in debt, can’t find any money to save, can’t stop fighting about money with their spouse — I always ask whether they’re using a Cash Flow Plan to guide their household finances. Most of the time, the answer is no.

And the “no” is often accompanied by a quizzical look as if I didn’t understand the question. “But what I was really asking…”

I did understand. It’s just that I need more information. Objective, factual information.

To be sure, there’s a ton of emotional stuff involved in managing money — temperaments, moods, stressful circumstances, the emotional imagery used in advertising. We often get in trouble with money when emotion overrides logic.

A well-designed Cash Flow Plan gives us the logical, factual information we need to live within our means, be generous, save and invest, avoid debt, and spend smart. Assuming there’s enough income to meet basic needs, that’s true for every income level and household size.

Are you the type?

I firmly believe everyone would benefit from the use of a budget. Rich or poor, young or old. Everyone.

It isn’t drudgery, and it isn’t something you go on like a diet. It’s simply the single most powerful tool available for successful money management. Why not start putting this tool to work in your life today? And why not teach your kids about budgeting. You may be surprised to know that even very young kids can be taught some of the essentials about budgeting, and the sooner they learn these lessons, the better. I explain how to do this in, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management.

What questions do you have about using a budget?

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Profitable Ideas: Confessions of a Phone Thief, An Unsafe Way to Spend, and More

Weekly list of curated personal finance articles from around the web.

He stole hundreds of iPhones and looted people’s savings. He told us how. (The Wall Street Journal). Of course, our phones are about so much more than making calls. That’s why there’s so much at stake in keeping track of them.

Revealed: US utility firms offer builders cash and trips to fit new homes with gas appliances (The Guardian). It’s always interesting to me (and less and less surprising) to see some of the behind-the-scenes influences that impact out lives.

Charted: car ownership costs in America skyrocket (2020-2023) (Visual Capitalist). This is one reason why I recommend that teen drivers hold off on buying a car. When you’re not making much money, owning a car makes it very difficult to save.

Consumerism is exhausting: the “choresumption” phenomenon (Money With Katie). Shopping costs us much more than money.

$5 million is nothing (A Wealth of Common Sense). Even those with all the money in the world are tempted by the siren song of “more.”

Forget the check (Humble Dollar). Checks are stunningly unsafe.

When you should (and shouldn’t) book your travel through Costco (Lifehacker). It depends on whether you’re looking for a package or just a plane ticket.

Here are the most important questions to ask when buying a used car from a private seller (MarketWatch). Ask, but if possible, also verify with receipts.

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How ‘Anchoring’ Can Mess With Your Mind and Money

This weekend, I bought new shoes for two of our kids at a Nike Outlet store. When I got home, I told my wife what a “great deal” they were. The shoe boxes told the tale. In both cases, they showed a “suggested retail price” of $85 and listed “our price” at $64.99. But I got them for $35.

Wow, what a steal! Or was it?

Seen through the lens of psychology, the “suggested retail price” was the anchor—the all-important point of comparison. “Our price” was — or at least implied — how much the store normally sells the shoes for. Since I paid even less than that, it served as another anchor—another important reference point.

Compared to the “suggested retail price” and “our price,” the actual price I paid seemed like a bargain. And that’s the whole idea.

According to Wikipedia, anchoring is “a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions.” Psychologists Daniel Kahneman and Amos Tversky were the first to identify this so-called “cognitive bias.”

Anchors away

Anchoring is such a common marketing practice that we hardly notice it.

When a restaurant menu highlights an especially expensive item, other lower-cost items seem reasonable, even if they cost more than we had planned to spend. Car dealers routinely list the “MSRP” (Manufacturer’s Suggested Retail Price). By comparison, the dealer’s price seems like a deal. And again, that’s the point.

You probably know of some retailers that always seem to be having sales. That’s anchoring in action. We love feeling like we’re getting a deal.

JCPenney once declared an end to “fake prices” — those designed to make their “sale” prices seem irresistible. Apparently, upper management thought its shoppers felt duped by their constant sales. So, in place of artificially inflated “regular” prices, the retailer introduced “fair and square” prices — its form of everyday low prices. It failed.

Apparently, what’s far more effective is to make people think they’re getting a deal, and the way to do that is to highlight the difference between a “sale” price and a “regular” price.

More recently, some retailers have been accused of taking this practice too far, falsely using high “list” or “retail” prices as points of comparison to their “sale” prices when the products never actually sold for the “list” or “retail” prices. Interestingly enough, JCPenney was one of those retailers.

Getting to ‘yes’

Anchoring is an especially important tactic in negotiations. Usually, whether selling or buying a home, or hiring or trying to be hired, the first person to mention an amount gains control. The first salary or price mentioned seems to have a magnetic force that keeps any counter offers relatively close.

Whose anchor is it?

The best way to resist the force of an anchor is to establish your own.

For example, the only way I know of to get past someone else being the first to mention a salary figure or home price is to be willing to walk away from the deal. It takes boldness, an unemotional detachment from the job opportunity or house or whatever else in order to establish a different anchor.

I know someone who got a job at a much higher salary than the one initially offered through that exact process. He was truly willing to not get the job, indicated the salary it would take in order for him to join the company, made the case for the salary, and both sides ended up satisfied with the deal.

Let’s go back to my shoe purchase. Before we left our home, I told our kids I didn’t want to spend more than $50 per pair. If our kids found shoes they loved that were anchored to a “suggested retail price” of $200 but were “on sale” for just $75, I would not have bought them. I had established my anchor and clearly communicated it to our kids, which helped manage their expectations.

What are some other examples of anchoring you can think of?

Take it to heart: “I am sending you out like sheep among wolves. Therefore be as shrewd as snakes and as innocent as doves.” – Matthew 10:16 (The context here is about the suffering the disciples should expect, but I think it’s acceptable to take this warning to heart as we go about stewarding the resources entrusted to us. In our consumer culture, incredible efforts are made to separate us from our money. We need to be shrewd.)

Take action: The next time you plan to buy anything remotely expensive, decide in your mind what you’d be willing to pay before checking on prices. That way, you’ve set the anchor, not the seller.

Read more:  Four Blind Spots to Watch Out For When Investing

If you haven’t done so already, why not sign up for a free subscription to this blog? Twice a week, you’ll receive ideas and encouragement for using money well.