Turn Off the Faucet
I heard an interesting story this morning and I wanted to share it with you all.
Years ago, mental institutions used a simple test to see if one of their patients was ready to be released. They had a room with a sink in it and not much more. They would plug the drain, turn on the faucet, and allow the sink to overflow.
Then, they would ask the patient if they would enter the room with a mop and bucket to clean up the water. What happened next was the true test.
If a patient walked into the room and turned off the running water before they began mopping, they were deemed to be ready for release. Sadly, however, many patients would enter the room and begin mopping the floor without turning off the water. Although they were performing the task that was asked of them, they were unable to easily identify the source of the water—the running faucet.
So many of us have financial issues that are similar to this problem. We aren’t able to identify the source of the problem, and we find ourselves mopping floor and wondering why we aren’t getting anywhere.
Many personal finance sites will hand you a mop, but my hope is that I can help you find the faucet.
An Open Letter to Journalists
One of the most monumental problems we face when it comes to pulling ourselves out of the recession is confidence. Consumers aren’t quite sure if it’s safe to spend again, and businesses large and small aren’t quite sure if it’s okay to hire new people. As long as consumers aren’t spending, businesses won’t hire (and vice versa).
Given the fact that we are now constantly absorbing headlines via Twitter, Tumblr, and TV, it’s safe to say that the media has a bigger impact on our confidence level than ever before. News outlets are businesses, too, and many of them have found that negative headlines sell more subscriptions than positive. But, as long as major news organizations keep telling us how bad things are, we can’t possibly expect our confidence levels to change.
I’m all for truth in media, and it’s absolutely necessary to report the situation as it is observed by the reporter. There is a lot of negative news out there to be reported, but I assure you, there is also quite a bit of good that is ignored.
What I’m asking is this: When there is negative news to report, let us know. We depend on you for that. But, we must be shown the good in this world, too. We need to know that there are positive signs indicating that things are improving. It might sound crazy, but if you’re going to run a negative headline on the cover of your publication, run the positive outcome in the same space when it is fixed. For example, you made sure that everyone was aware that banks took a bailout from the government. I doubt many people are aware that 99% of that money has been paid back, and that the government actually made a profit on that investment. That kind of information is pivotal to our confidence level, but it’s often buried well behind the front page.
I understand that this type of reporting won’t necessarily generate more revenue for you. But, when you take on the role of journalists, you must know that it is your duty first and foremost is to report the news as it happens, both good and bad.
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Should I Prepay My Mortgage?
You’ll typically hear two different arguments here, and I’ll sum them up quickly without getting into the math:
1. You shouldn’t prepay your mortgage. You should invest the money instead because with loan rates so low, it’s feasible to outpace the interest rate with your return. Plus, your mortgage is a tax deduction.
2. You should prepay your mortgage. You’re guaranteed to save money over the long-term, whereas funds that are invested could actually lose value. Even though you’re reducing your tax deduction, you’re still guaranteed to come out ahead.
Most people with a lower risk tolerance fall into the second group. However, there’s one thing to consider that many people overlook…
Once you use funds to prepay your mortgage, that money is inaccessible until you sell your home or take out an equity loan (which you’ll be charged interest on, of course). In the event that you lose your income, the fact that you’ve prepaid your mortgage is of no use to you. Your mortage company will still want the regular monthly payment, and you’ve got to keep the lights on and the water running. The last time I checked, the electric company still won’t accept bricks from your home’s exterior as a payment. It is much easier to sell something that is conservatively invested than it is to sell your home and find a new place to live.
But, does that mean you shouldn’t prepay your mortgage? Not at all. What I’m suggesting is that you find some balance here. Instead of going all one way or the other, considering sending in a small amount of extra cash to pay down your mortgage a little faster, and put the rest somewhere that is easier to get to in the event that you need it.
![Why do you really want a new car?
Anyone who owns a car has felt that itch to get a new one at some point. We see the newer models drive by, and our mind begins to think about how great it would be to ditch our old ride for something shiny and new that doesn’t have crumbs filling the seat cracks.
But, think for a moment about the reasons you could be tempted into trading in your car for a new one. You’re at the car dealership looking at the sun glinting off the hood. You climb into the driver’s seat and take notice of the shiny dashboard, the freshly vacuumed carpet, and the wonderful smell. You glance over at your old car and notice how crummy it looks in comparison. Sure, it drives fine, but it just seems so…meh.
Now, think about what’s actually selling you here. It’s not that the car is new. It’s the fact that it’s clean. You’re just yearning for a car that isn’t filled with dust and the smell of old french fries.
The good news is, you can have that without dropping $20,000 on a new car.
You might be surprised at how much more appealing your car is after it’s been washed, waxed, and detailed. That’s how the dealerships can buy a 10 year old car for $2,500 and then turn around and sell it for $5,000.
Many people view a car detail as an unnecessary expense. But, if spending $100 on a thorough cleaning keeps you from taking on a new monthly car payment, it’s actually one of the best financial moves you could ever make.
[image via]](http://24.media.tumblr.com/tumblr_m27y9fJa4z1qch7b8o1_r1_1280.jpg)
Why do you really want a new car?
Anyone who owns a car has felt that itch to get a new one at some point. We see the newer models drive by, and our mind begins to think about how great it would be to ditch our old ride for something shiny and new that doesn’t have crumbs filling the seat cracks.
But, think for a moment about the reasons you could be tempted into trading in your car for a new one. You’re at the car dealership looking at the sun glinting off the hood. You climb into the driver’s seat and take notice of the shiny dashboard, the freshly vacuumed carpet, and the wonderful smell. You glance over at your old car and notice how crummy it looks in comparison. Sure, it drives fine, but it just seems so…meh.
Now, think about what’s actually selling you here. It’s not that the car is new. It’s the fact that it’s clean. You’re just yearning for a car that isn’t filled with dust and the smell of old french fries.
The good news is, you can have that without dropping $20,000 on a new car.
You might be surprised at how much more appealing your car is after it’s been washed, waxed, and detailed. That’s how the dealerships can buy a 10 year old car for $2,500 and then turn around and sell it for $5,000.
Many people view a car detail as an unnecessary expense. But, if spending $100 on a thorough cleaning keeps you from taking on a new monthly car payment, it’s actually one of the best financial moves you could ever make.
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Compensation
There are those who believe that money and happiness go hand in hand. Truthfully, it does—to an extent.
At a certain level, money’s impact on your well-being begins to diminish. When you don’t have a lot of money, it doesn’t take much to make you happy. A thousand dollars can change one person’s life, while someone else might simply call it “Friday night”. The more you get, the more it takes to create the same effect. In that way, it’s like a drug.
It’s a cycle that many people find themselves in, and they constantly chase a bigger paycheck because of it. However, when you’ve identified why you earn money in the first place, it’s easier to know when your true wants are in sync with your income. At that point, you can begin looking for other types of compensation.
For example, many people will jump at the chance for a $10,000 raise, despite the fact that it means they will be working much longer hours. They haven’t identified the point at which money begins to lose its effect, so they simply follow the script in their head that says “more money is always a good thing.” Often, what they really want is more freedom—in reality, they’re actually getting less of it.
So, beyond meeting your basic needs, what purpose does money serve for you? Does it take more money to achieve that goal, or can you reach it with what you already have?
Intentions
A lot of people will repeatedly spend hundreds (or thousands) of dollars on new equipment, but they won’t spend a dime on a lesson or class that would actually make them better at whatever they’re doing. If their desire is to perform better, why does this continually occur?
Often, our actions do not coincide with our intentions. We self-sabotage in an effort to find a shortcut to avoid actual work, or because we were simply distracted by something shiny and new.
Typically, all it takes to avoid this is an awareness of our tendency to fall in the trap. So, the next time you’re thinking about dropping half of your paycheck on the latest and greatest piece of equipment, ask yourself if that is truly the best use of your money given your ultimate goal.
I just bought a lottery ticket for us.
If lightning strikes, every single one of you that follows Money Is Not Important is getting $1,000. I’m serious. Pure and simple. Straight cash (well, maybe a check, but you get the idea). Why, you ask? BECAUSE HOW AWESOME WOULD THAT BE IF IT HAPPENED?!!!
People who harp on paying a $1 for a lottery ticket every once in awhile don’t know what they’re talking about. Sure, you have a better chance of being spontaneously teleported to Pluto than hitting the jackpot, but you are guaranteed to have some fun.
If you view it as an investment in your entertainment, it’s a great deal! Compare the fun and excitement you get from buying a lottery ticket vs. any other type of entertainment that costs money. Sure, you’ll never see that dollar again, but the same can be said for the $40 you’d drop to go see a movie on a Friday night.
How Fiverr Can Launch Your Freelance Career
(UPDATE: Before you leave a comment, please read the entire post. Some of you are missing the point!)
If you’re not familiar with Fiverr, it’s basically a site that allows you to hire someone that is willing to perform a specific task for $5. Some people offer to do wacky things like record any script you’d like in a cartoon voice, or create a finger puppet show using your script. Craziness aside, Fiverr also has a serious side where you can get a logo for cheap, or have your video edited for next to nothing. Keep in mind, though, you’re only paying $5—don’t expect a masterpiece.
Fiverr is also a site that can help you get your foot in the door with potential clients. If you are currently doing freelance work on the side, or you’d like to start, you may want to consider it as a growth strategy.
For example, let’s say you’re a graphic designer who specializes in website design. You could offer a small service, such as a logo modification that gives a company’s site a seasonal vibe. Once you’ve started working with someone, you could review their site and casually suggest other things that would help their conversion rate. If you’re good at it, you can turn a $5 job into a $500 gig.
The key is to make sure the service you’re offering can be completed quickly. Keep in mind, you’re offering a small service for $5 initially, so you’ll want to think of something that can be done well in 10-20 minutes. This is just a tactic to get your foot in the door, and your ultimate goal is to introduce this person to your regular offerings, which will be quoted at your normal rates.
If you don’t get any other business out of it, at least you didn’t work for free, you created a potential source for referrals, and it didn’t take up too much time. Keep hustling and it will pay off!
Articles like this make me shake my head.
I’m all for cutting back on the amount of fuel used to help the environment, but simply posing it as a money issue is only fueling the histeria (yes, pun intended!) surrounding gas prices.
Admit it. We start to act a little crazy when gas prices go up a few cents. It’s because we face the problem every time we fill up, and we are reminded of it every time we pass by a gas station sign. Purely from a psychological standpoint, it’s no wonder that it drives us nuts (yes, pun intended again!).
We start to drive across town to save 5 cents, become driving hazards by attempting to coast everywhere, and spend precious time pouring over articles on how to improve our fuel efficiency by 7%.
The fact is, we all have bigger fish to fry. By that, I mean we all have other issues to work on that have a much greater impact on our financial lives.
Source: The Wall Street Journal
