Loosening the Purse Strings

For those of us who have been lifetime savers, loosening our purse strings can be a radical act. We’ve spent our lifetime saving for retirement and now that we’re retired, we forget that we saved that money so we could spend it and live the lifestyle we wanted and earned through being frugal during our working years.

As I posted in late December 2019, my wife and I sold one of our two vehicles in hopes that having just one vehicle would work for us. For the most part it did. Scheduling the use of the vehicle between us actually worked well. However, there was one aspect of only having one car that we didn’t plan for … emergencies.

Just after the COVID-19 lockdown ended here in Ecuador, a friend of ours was in dire need of our immediate help. Of course this happened when I had the vehicle for the morning doing chores around the city and my wife didn’t have a car to attend to our friend.

In October, one of our ‘special needs’ dogs became quite ill when I was out-of-town with the car. Pets are not allowed in taxis or the public buses in our city. Fortunately, our vet was able to make a house call within an hour and a half.

We came to the realization that having just one car in the family wasn’t working as well as we had hoped … especially since we have two ‘special needs’ dogs.

So, we started looking for another car. We looked at a few used vehicles and none of them had been taken care of the way we always took care of our cars over the years. Finally, in early December this year, we started looking at new cars as it became apparent that we wouldn’t be happy buying a used vehicle.

This was a major decision for us.

Two weeks ago, we purchased a new car. Last week we traded in the old car for another new car. So, we went from have a 15-year-old car to having two brand-new cars.

A year ago we would never have considered such radical and expensive purchases. Not because we couldn’t afford it, but because it totally went against the way we have lived for decades.

But here is the point, we purchased one small SUV and another medium-sized SUV in cash. We didn’t finance them. We didn’t withdraw from our savings to pay for them — we paid for them in cash that we had accumulated over the last two years.

To put it simply, we spent some money generated from the money we accumulated over decades of saving and investing. We allowed ourselves to loosen the purse strings.

Isn’t this the way retirement should be? Isn’t this the reason we lived frugally for decades. I think so — even though it feels so strange.

Things to Keep in Mind When Saving and Investing

It is often said that hard work, with some luck, are vital to attain financial stability and success. While we have no control over luck, we do have control over how we work — physically and mentally. More importantly, we can develop the strategies and habits that will take us down the path of financial success. Things to keep in mind:

Know Yourself

There isn’t a single saving and investment strategy that works for everyone. No two people have the same philosophies, education, life experiences or financial goals. Because of this, you need to develop a strategy that works for you. Once you develop your personalized strategy, implement it. Review and adjust your strategy as needed.

Stop Looking at History

When it comes to investing, it is common to use historical returns as an assumed rate of return for the future. While this is useful, it is more important to understand today’s trends and opportunities.

Warren Buffett once said “the investor of today does not profit from yesterday’s growth.”

Be Frugal

Spend less and save more. Most people are spending more for their ‘wants’ than is rational for long-term financial stability and success. Make sure you aren’t spending money on things that aren’t useful and don’t bring you joy.

Start Early in Life

Your money should get to work early in your life and never stop growing. To maximize your wealth, you need to invest aggressively as soon as possible.

Time is the most important component in building wealth.

Know and Believe In Your Investments

Do your research before you invest in anything. Only invest in things that you believe in and are passionate about.

Ninety percent of my pre-retirement investments were in stock and bond mutual funds. The remaining ten percent was invested in companies that I knew well and believed in their operational strategies and goals. There is more to investing than dollars and cents. A company’s ‘purpose for operating’ and corporate social responsibility were major considerations in my investment choices.

Forgive Yourself and Move On

Anyone who has been saving and investing for any time at all will have made some choices that were less than stellar. That’s just reality — for everyone who is actively saving and investing. The point, however, is to learn from your mistakes and move on doing what you know is right … saving and investing per a pre-planned schedule and strategy.

Even investment professionals make some bone-headed choices. It’s just an inherent component of investing. The only mistake you can make with permanent consequences is your choice to not save and invest.

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So, You Didn’t Save Any Money For Your Retirement

You need to retire. You saved no money for your retirement. Now what?

The only money you will receive during your retirement is Social Security. Can you actually live on Social Security Retirement Benefits only? Well, that depends on the size of your monthly Social Security check, your monthly expenses and your lifestyle.

Keep in mind that the maximum you can from Social Security is about $3,000 a month if you claim benefits at full retirement age. (Based on 2020 benefits.) Most people are not eligible to receive this amount. The average monthly Social Security benefit is closer to $1,500.

So, how can you retire and live on Social Security only?

No Debt

You cannot retire with any debt. No mortgage. No car payment. No personal loans. No credit card debt. All debt must be paid-off before you retire.

Reduce your out-of-pocket medical expenses

Even with Medicare, you will end up with hefty bills for co-pays, deductibles, insurance premiums, prescription medicines and services not covered by Medicare. Here are some strategies to reduce your medical expenses during retirement:

  • Before having a procedure done, make sure your insurance covers all the medical practitioners and services to be provided and completed.
  • Attempt to negotiate high charges and fees with hospitals and practitioners’ billing offices and ask for a discount if you pay in advance … with cash.

Show Your Adult Kids the Door

If you are unable to retire due to paying the expenses of your adult kids still living at home, it’s time for them to leave. Give them adequate advance notice with a specific date they must be out of your house.

Be sure to explain to them your financial situation without giving them ‘specific’ details that they have no need to know.

You worked all your life with the hopes of having a few years in the autumn of your life to retire and enjoy some time to enjoy life. You worked all your life to make it through. Your adult kids need to do the same.

Delay Claiming Early Social Security Benefits

Don’t start receiving Social Security Retirement Benefits until you reach your full retirement age. Your monthly Social Security payment will be less if you start benefits earlier than your full retirement age.

If your life expectancy is short due to illness or disability, or you aren’t depending on your Social Security income, it can make sense to claim sooner. But for the majority of working people, waiting to start receiving Social Security Retirement Benefits until your full retirement age increases your monthly checks by 8% per year until you do claim the benefit. However, at age 70 you no longer get these increases and there’s no reason to delay.

Think About Living Where it is Cheaper

If Social Security is going to be your only source of income in retirement, it makes financial sense to live in a locale where the cost of living is lower. Keep in mind though that moving isn’t always the best solution.

Before you move, be sure to research the cost of living, health care costs and taxes in the area you want to relocate to.

Reduce or Eliminate Entertainment Expenses

Free entertainment is readily available in large and medium size cities. Books, magazines, national newspapers and music media is typically available to use at your local library. And the largest source of free entertainment is the Internet. When you are on a limited income, there’s no need to spend big dollars on entertainment.

Yes, you can live in Social Security Retirement Benefits alone. But, you’ll need to live frugally and simply.

A Simple Money Management Strategy

Do you have a money management strategy? Specifically, do you have a plan for your money (paycheck) as soon as you receive it or automatically deposited to your bank account?

In reality, the answer is yes — for everyone. You have one of two money management strategies:

  • You spend your paycheck until it’s all gone, or
  • You allocate your paycheck according to a planned strategy.

If you haven’t saved any money by the end of the month … your money management strategy is the first one listed above. This strategy leads to living paycheck to paycheck, bad debt, oppressive stress and ultimately financial failure.

Obviously, you will be a happier person if you don’t have to live under the constant stress of money woes. The solution to moving from the burden of financial stress to financial well-being is actually simple to understand and easy to implement — once you are committed to getting your financial life in line.

Financial money management goal

Your financial goal should be to get your personal financial situation to the point where you are no longer constantly living under financial stress. The days of living paycheck to paycheck will be over … forever!

To get to this point, you need to allocate your paycheck (money) to a money management strategy that has proven to be successful — in the good times as well as the bad times.

  • 50% of your bring-home (net) income should go toward your needs (necessities)
  • 30% should go toward your ‘wants’
  • 20% should go toward your savings and investments

Needs: 50%

Needs are your bills that are essential to pay and are the things necessary for your survival. These include rent or mortgage payments (principle, interest, real estate taxes and home insurance), car loan payments, groceries, insurance, health care, minimum debt payments on credit cards, and utilities. These are your “must-haves.” The “needs” category does not include items such as premium cable TV, Starbucks, concert tickets and dining out.

Half of your bring-home (net) income should be adequate to cover your needs. If you are spending more than that, you will have to either reduce the amount for wants or downsize your lifestyle.

Wants: 30%

Wants are all the things you spend money on that are not essential to your survival. This includes dining out, movies out, that new handbag, tickets to sporting events, vacations, the latest electronic gadget, and ultra-high-speed Internet. Anything in the “wants” category is optional when you honestly analyze it. You can work out at home instead of going to the gym, cook at home instead of eating out, or watch sports on TV rather than buying tickets to the game.

Savings: 20%

Finally, you need to allocate 20% of your bring-home (net) income to savings and investments. You should have at least three months of your net income in an emergency fund in case you lose your job or unable to work.

If you don’t already have an emergency fund, split this 20% between funding an emergency fund and adding to your savings. After that, focus on retirement and meeting other financial goals down the road such as an education fund for your children.

Final analysis

Saving is difficult, and life can throw unexpected expenses at you — when you are least prepared. By following the 50-20-30 rule, you will have a plan to work through the good times as well as the bad times. If you find that your expenses for “wants” are more than 20%, you need to find ways to reduce those expenses to allocate funds to more important areas such as an emergency money, education for your children or your retirement.

Start 2021 with the commitment to take control of your finances!

Retirement Money Myths

There are far too many money myths and misunderstandings that can sabotage your retirement if you don’t know the truth. Before we start addressing these myths and misunderstandings, it’s best if you have a little background information.

A 2019 GOBankingRates survey discovered that 64% of Americans will retire broke and 46% of respondents had $0 put aside for their retirement.

It’s Never Too Late To Start

While it’s always a good idea to start saving and investing early in life due to the benefits of compound interest and rate of return, it’s never too late to start. Most people in their 50s typically have more money to contribute to a retirement savings plan than those in their 30s who are raising a family and buying a home.

Medicare Will Pay for My Healthcare

HealthView Insights reports that the total projected lifetime healthcare cost for a 65-year-old retiring with Medicare coverage and supplemental and dental insurance would be $321,994, as of 2017. According to these projections, that number will grow to $404,523 when deductibles, hearing, vision, copays and dental cost sharing are added in.

If you aren’t seriously making an effort to fund a retirement savings plan now, it’s quite possible you will not have enough money saved to cover basic health care costs — even with Medicare paying for a portion of the costs.

Making Up for Missed Contributions

If you are waiting for a higher-paying job, higher interest rates for savings (CDs) or higher rates of returns on equity investments, that’s a big mistake. If you expect to generate any type of benefits from savings and investments, you need to start saving as early as possible.

The ‘secret’ of compound returns is time. The longer you wait the less benefit you will receive. Even waiting one year can make a huge a difference.

Aversion to Stocks, Bonds and Mutual Funds Due to Risk

This is particularly true if you are within 10 years of retiring. Your past history of an unsuccessful track record of investing in the equities market may have you fearful but you can still earn good returns on certain types of investments as part of your retirement planning strategy.

If you’re close to retirement, it’s likely that you won’t be interested high-risk or high-yield investments in case the stock or bond markets don’t produce the results you need by your retirement date. If you are close to retiring, you still need to make some low-risk investments to boost your annual rate of return on your total retirement fund because fixed rate saving/investment plans cannot get you where you need or want to be financially.

Thinking That You Will Be Able to Live Well On a Reduced Income

If your excuse for failing to save and invest for your retirement is that you don’t really need all that much money to be happy or to live on once you retire, you could be setting yourself up for failure in your retirement years when you no longer receive a paycheck.

Consider the effects of inflation and any changes in your spending habits in the years following your retirement. If you plan on traveling, buying a new retirement home, or relocating to a better climate, it’s likely you will need extra money to make those plans come to life.

Your Health Insurance Will Take Care of Any Serious Illness or Injury

If you are diagnosed with a critical illness (cancer, kidney failure, lung disease, etc.) or get into a serious accident, there’s a good chance that your health insurance policy will deny certain ‘unauthorized’ items of care or only partially pay for certain health care medications, treatments and other expenses.

An event like this could leave you in (medical) debt for many years to come … maybe for the rest of your life.

You’re Far Too Young to Think About Retirement

Millennials and younger generations can accumulate large retirement savings if they start early. Each year you wait costs you dearly at retirement.

It’s never too early to start saving and investing for your retirement. If you’re young, time is on your side to accumulate wealth by saving and investing faithfully and frequently. Putting away a little money often when you’re young will add up to a lot when you retire. Time makes all the difference!

A lot of the myths presented above can be overcome by being educated about the realities … and not basing your plans on assumptions or incorrect beliefs. You will never hurt your financial well-being by learning and keeping current on what’s going on with your retirement plan — during the accumulation phase and during your retirement.


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The Value of Money

What is the value of money?

That sounds like a very strange question, doesn’t it? Many people will respond that the value of money is based on the amount printed on a bill (paper money) or the amount minted on a coin.

Isn’t the real value of money based on how you use it and what you spend it on?

Let’s say that Joanne buys a blouse for $50 at a boutique. Amanda buys the same blouse on sale and a printed scarf for $45 at a different boutique down the street. It’s apparent that Amanda’s money has more value than Joanne’s because she got more for her money.

Money is nothing more than a means (tool) to have access to what you need or reasonably want. Understanding this truth is critical in realizing the importance money should have — or not have — in your life.

Another aspect to consider is that the value of money will depend on the stage of life you are in. Money is important to you as a young adult raising a family, buying a house and saving for your children’s education. During this stage of life, there never seems to be enough money. Hence, money is always on your mind.

Money will typically mean less to an elderly adult who is in the autumn of their life and are enjoying the fruit of having lived a frugal life in which wise spending and saving were an important part of their way of life. During this stage of life for the prudent person, money consumes very little of their concerns or attention.

Hence, the real value of money is having enough of it so you don’t have to worry about financial issues … ever. You can get to this point by:

  • Living a simple life
  • Frugally spending your money
  • Saving and investing faithfully and frequently
  • Being super stingy about taking on debt other than a mortgage

As a retired longtime saver, I spend very little time thinking about money. Money is simply the means to pay my frugal living expenses and health care. In fact, my retirement income is far more than I need to live on. As a result, over 30% of my retirement income is put into savings each month.

I wish that I had devoted far less time in my earning years worrying about money. I now see that there are many more important things in life than money.

My wife and I are American expats living in Ecuador, South America — a developing country. One of the life lessons we’ve learned here is that money has nothing to do with happiness. The peasants are among the happiest people you’ll find in the world. This truth humbles us frequently.

The Danger of Lifestyle Inflation

What is Lifestyle Inflation?

Lifestyle inflation is common as a person advances through their career. Lifestyle inflation is when the money you have to spend after paying all your bills for necessities increases as your income increases. In other words, you have more money left over after you pay the mortgage or rent, make your car payment, buy groceries, pay your utility bills and such.

As you earn more money, you have more money to buy the things and services you want that you could not buy when you were earning less. This could be a boat or motorcycle, a foreign vacation, a new wardrobe or taking an exotic cruise.

Lifestyle inflation can put you behind the 8-ball for the rest of your life if you allow it. It will prevent you from getting out of debt, saving for retirement, paying for college for your kids or being able to meet other financial goals. It’s also one of the biggest reasons many people live paycheck to paycheck — regardless of how large your paycheck is.

Entertainment is a good example. If you make $5,000 a month and set aside 5% for entertainment, that’s $250 a month. If you earn a promotion at work and are now making $6,000 a month, that 5% now equates to $300 a month — or $3,600 a year.

Needs versus Wants

It’s normal to want to celebrate a promotion or a raise, but it’s important to make sure not to celebrate by buying something that will increase your monthly expenses to the point of making the increase in your income moot.

As an example, you get a raise that increases their income by $500 a month and then immediately trade in your car (that is paid for) for a newer, fancier car, which results in a $600 monthly car payment.

Not only is your increase in income spent, but the amount of money available for all other expenses each month is less than it was before you got the raise. Sure, you may have a new car that you are proud of, but your financial well-being is worse than it was before you got the raise.

How to Avoid Lifestyle Inflation

Frugally celebrate a promotion or raise
If you earn a raise, you should celebrate — especially if it’s higher than the average raise of 2.9%. But to outsmart lifestyle inflation, you need to resist the urge to run to the store for that expensive thing you’ve had your eye on for the last two months. Instead, consider a small way to congratulate yourself, like a special night out with friends.

Create a new budget
Since your income has changed, you need to create a new monthly budget. Just because you will have more money to spend doesn’t mean you can quit tracking your expenses and following a budget. Savvy savers will save or invest half of the increase in their wages.

Emergency Fund
Due to the COVID-19 pandemic, I think everyone has learned the lesson of needing an emergency fund equivalent to 3 – 6 months of your living expenses. It’s even better and smarter to have 3 – 6 months of your net (bring home) income. After all, you need money for more than your basic necessities.

Avoid new debt
This might seem like common sense, but you will never get out of debt if you keep adding new debt to the pile … especially credit card debt. It’s been proven that consumers are willing to spend more money using a credit card than they would with cash.

Stopping the use of credit cards is entirely possible. A generation or so ago, our parents and grandparents lived without credit cards. Modern credit cards weren’t introduced in the U.S. until around 1950, which means that Boomers and their parents were raised on the philosophy that if you can’t afford to pay for it in cash right now, you wait until you can.

Don’t succumb to peer pressure
Peer pressure from coworkers, friends and family is a powerful incentive, but the perceived wealth of these people can be a far cry from the reality of their finances. The truth is that 8 out of 10 working Americans are living paycheck-to-paycheck regardless of their income. That’s a dramatically different reality from the impression they want others to believe.

How to spend your increase in income
So, how exactly should you spend your extra money after a promotion or raise? Depositing more money into your retirement account, paying off debts, or just saving some extra dollars towards a specific savings goal are financially wise approaches to take. 



My Other Websites

Life Under Change
Quotes that inspire, challenge and comfort us.

A Life Within (Blog)
Journal of a Highly Sensitive Introvert


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Coordinating Bills and Savings

Saving money in a week or a pay period when you also have bills due puts you between a rock and a hard place. Typically, you will pay the bills and not contribute any money to your savings.

After helping people budget, reduce their expenses and save money for 32 years; I learned that most people have their ‘big’ bills due between the 1st and 15th of the month. The first week of the month is especially brutal because that is usually when their mortgage or rent is due. For many people, this is also when their car payment is due.

What if you coordinated your bills and savings so that all bills get paid and the money you set aside for savings occurs progressively through the month so you don’t have to delay paying your bills or contributing to your savings?

The $5 / $10 / $15 / $20 Savings Plan

The whole idea is that you contribute less to your savings in the first part of the month when the bulk of your big bills are due, and you contribute more later in the month when you don’t have the obligation and pressure of your big bills. Here’s how contributions to your savings works:

  • Week 1 of the month – You contribute $5 daily to your savings or $35 for the week.
  • Week 2 of the month – You contribute $10 daily to your savings or $70 for the week.
  • Week 3 of the month – You contribute $15 daily to your savings or $105 for the week.
  • Week 4 of the month – You contribute $20 daily to your savings or $140 for the week.

Since there are 7 days in a week and most months have 30 or 31 days, there will be 2 or 3 days at the end of each month that you don’t need to make any contributions to your daily savings.

So, at the end of each month you will have saved $350. At the end of one year you will have saved $4,200!

Of course, you can choose the dollar amounts that suit your budget. You can also choose which weeks you contribute what amount. Example: You can switch Week 1 with Week 3 and so on.

You can also customize your savings plan to account for two paydays a month. All you have to do is to combine any two-week period into one. The monthly contributions to your savings will be the same.


Do you have a savings method that works for you? I’d really like to hear about it. Please use the Comment section at the bottom of this blog post to share your story.


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Buying a House During the COVID-19 Pandemic

This post is targeted to those residing in the United States.

If you have been wanting to buy a house, you are most likely asking what effect is the COVID-19 pandemic having on the real estate market? What about home values? What about interest rates? What about the process of securing a mortgage?

The first thing you need to know is that just about everything is different from what it was prior to the COVID-19 pandemic. The major changes are:

  • Interest rates are highly volatile and change frequently
  • Home selling prices are higher (sellers’ market due to low inventory)
  • The process of buying a home is taking longer

Forty plus percent of Americans are working from home. Rising home prices suggest that many who are working from home want a larger home to accommodate the new realities of working at home.

Keep in mind that the soaring market prices may be the result of misinformation, wrong assumptions and opportunism that aren’t based on actual market realities.

Concerning your personal interest, you don’t know for sure if working at home is for an extended period of time or permanent. With many businesses struggling to survive the pandemic, you don’t know for sure that you (and your position) will not be targeted for elimination.

You may come to regret buying when the inventory of houses on the market is low and selling prices are high. LendEDU, a financial information website, surveyed 1,000 mortgage holders in August of buyers who bought their home after March 2020. Many of them regretted their decision to take on a mortgage. This isn’t hard to understand having witnessed the financial devastation to many families and businesses.

Buying a house in a sellers’ market is not a smart financial decision. Many sellers are taking a once-in-a-lifetime opportunity to sell their home at an inflated price.


The Renting Advantage During This Uncertain Time

For many people, calling the landlord for repairs is a huge advantage. As a homeowner, you need to budget 2-4% of the home’s value for repairs and home maintenance. Additionally, you have to find a reputable company to do the repairs.

Many homeowners also get tired of having to mow the grass, trim the bushes and clean the gutters. They prefer to relax and socialize instead of being trapped at home doing chores.

Another advantage to renting during this time of economic uncertainty is that you don’t have to come up with a sizeable down payment. You may need a portion of this money for future financial needs if you lose your job due to the coronavirus pandemic.

If you do lose your job, it is a lot easier and simpler to move for a new job if you are a renter instead of owning a home that you have to sell.


If You Decide to Buy

If you are secure in your job and have 3-6 months of living expenses in an emergency fund beyond the money you have set aside for the down payment on a new home, then buying may be to your advantage if you’re able to purchase the house at a favorable price.

Be sure to start the process early. Start working with your lender long before you make an offer to purchase a home. The process takes longer than usual and you could end up losing the home of your dreams if you don’t get a jump start in the process.

My advice, however, is to wait on buying a home until the economy and the COVID-19 pandemic stabilize. There are too many unknowns and too many risks right now and all of these unknowns and risks are beyond your ability to control.


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Impulse Buying: Sleep On It

We’ve all heard that we should sleep on it when we are contemplating a major purchase. How many of us actually do it? What is considered a major purchase?

Whether we are in a financial bind or wanting to accumulate money, one of the actions we need to take is to spend less. One of the ways that will help us to spend less is to put a brake on buying costly products or services without really analyzing our actual need for it.

  • Is it a need or is it something that we merely want?
  • Will buying this product or service prevent me from paying my bills or not being able to save any money this month?
  • Will I need to purchase the product or service on credit?

The answers to these questions will be different for each of us because our incomes, living expenses and circumstances are different due to the amount of money we earn and the lifestyle we live. That being said, we still need to answer these three questions.

Impulse buying is very hard to overcome for many people who have not overcome that that silent voice in their head that says “buy me now” or you’re going to miss out on a great deal.

My wife and I have been married for 34 years. Our finances were tight when we married because both of us had just gone through a divorce. That prompted us to promise each other that we would:

  • Sleep on it if a purchase cost over $100.
  • We would talk it over and jointly decide on the purchase if it cost over $250.
  • We would never make a lifestyle purchase if we didn’t have the actual cash to pay for it.

We still follow this promise today … 34 years later.

Just this week I was contemplating on buying a service that cost $168. I slept on it overnight. I then slept on it for a second night. I woke up this morning knowing that I didn’t really need or sincerely want the service.

I overcame the impulse to buy. Many people would not have been so successful. A contributing factor in not being able to curb our impulse buying is advertising. It is estimated that U.S. companies spent $240.7 billion dollars on advertising in 2019. That is a lot of power we have to fight against to maintain our financial well-being. As we see around us every day, these companies are much better at getting us to spend our money than we are at not spending it. We have to realize the psychological manipulation that these companies utilize in their advertising to make us think that we need more, new or better to be happy.

I encourage you to overcome impulse buying. It’s your financial health that is at stake.


Please share your success in overcoming impulse buying. Please use the comment section below.


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