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May 2014 Newsletter: Stop Spending Money and Suggestions for Making Use of Wealth
May 30, 2014
Hello to all my frugal friends:

It's spring in Wyoming, so we're busy getting the garden in. There isn't anything that we like more (or feeds the chickens better) than summer squash. It will certainly be a part of our vegetable garden this year.

The photo above shows me holding a large summer squash and a large patty pan squash, both of which went unnoticed in the jungle of my second greenhouse a few years back. When squash get this large, we make "boats" out of the summer squash and fill them with a ground beef concoction and bake in the oven. With large patty pan squash, we slice them to make large "saucers" that serve as platforms for pizza toppings...it's pizza without the bread dough.

Whatever is on your list for vegetables this year, I hope your gardens provide you with whatever you desire for your table, your canning interests, your cellar, and perhaps something for the freezer or drying racks.


This month I'm providing you with two articles that you won't find on the site. As promised, the first article discusses how some people view the term "stop" when it comes to the phrase "Stop spending money!" As with just about everything, this article is born out of my personal knowledge and experience, it's not just a story I dreamed up...all of this really happened to people I know. I share it with you because there most certainly are people out there who are dealing with others who have a spending addiction and who pretend not to understand the dire consequences of not getting their destructive behavior under control. This story tells of two couples who struggled with curtailing spending because it was affecting their relationship as well as their personal finances.

The second article continues with what might become a 40-part series on economic and financial preparedness. (I can't say exactly how many articles it will be, because I'm still writing the series.) In this article, I want to introduce the third of three main ideas for being better prepared from an economic and financial standpoint: making good use of your wealth, specifically money. Having money means nothing until you do something with it. You need to turn it into something else before it has anything more than potential value.


Stop Spending Money – It All Depends on Your Definition of STOP!

by Clair A. Schwan

Our words influence our beliefs which in turn influence our actions. In this article, I want to discuss the words and actions of two people who had trouble understanding the word “stop” in the phrase, “Stop spending money.” They thought it meant something other than quit, cease, end, discontinue, terminate, or bring to a halt.

It’s funny in a way. Who doesn’t know what “stop” means – really, come on, you have to be kidding. How might you explain to law enforcement that the meaning of “stop” on that large red sign back there just wasn’t abundantly clear in your mind?

Anyway, here are stories of two people who just didn’t “get it” when they were told to “stop spending money.”

Before we dive into the personal lives of others, let me be clear about my intentions. I’m not here to embarrass anyone, find fault or make fun. My intention is to use examples from real life situations that will help some of this “soft technology” stick better, so we can improve our chances of success in personal financial matters based on insights from genuine experience. If we keep these “dirty little secrets” in the closet, they do no one any good at all. And, if you think the truth is uncomfortable, just wait until you proceed unaware into the swift and deep waters of financial irresponsibility. It’s no fun, so let’s learn from others to the extent that we can.

An acquaintance of mine went through bankruptcy because their spouse didn’t know what was meant by, “stop spending money.” It seems clear to me, but it wasn’t to their spouse at the time. When I spoke with them later on, oddly enough, the spouse explained that they thought what was meant was something akin to a stop sign. The idea was they needed to stop, and then go again. They even held their hands up to gesture as if they had a hold of a steering wheel when explaining their understanding of the concept of “stop.”

The doubter inside me believes that this was simply a cover story to save face. Okay, be that as it may, perhaps my acquaintance should have used other, more specific instructions. How much more specific does it need to be? I think “stop spending money” is quite clear.

As near as I can tell, our bankrupt couple are still together, but I can’t say that for the next couple who also had their share of money problems.

This story is similar. A friend’s spouse was spending tens of thousands of dollars each month, and after many failed attempts to highlight how they were being dragged down a financial hole, my friend demanded that their spouse “stop spending money.” Again, it’s pretty clear to me what that sentence means. Nevertheless, the spouse pleaded misunderstanding of the word “stop” by explaining that they thought it meant, “stop spending money on me.”

Okay, this is a plausible explanation, but again, it’s likely just another excuse being offered to save face and justify all of the “fun” that spending gobs of money can be. Well, my friend solved the problem through divorce after they both had been brought to their financial knees. In other words, their relationship ended, it was terminated, it was discontinued – all good synonyms for the word “stop.”

Enough of the stories. Let’s get down to the business of seeing what we can learn from the behavior of these couples. From what I know, here is where I think they went wrong, and where others have an opportunity to learn from their poorly managed financial and personal affairs.

Mismatched values – something that is essential for individuals to get along. The values don’t have to match perfectly, but they should be close. We need to keep our eyes open with respect to the values others exhibit when it comes to financial matters, especially if we’re going to marry, go into business, or otherwise share financial assets and interests with them.

Never established a clear understanding of how household finances would be handled. Money is perhaps the single most troublesome topic for couples. The issue of personal finance needs to be placed out on the table so it’s clear how things will be managed.

Failure to resolve problems in the formative stages. Problems can be a lot like a leaky pipe – they don’t get better on their own. Problems need effective solutions if you expect to put them to bed.

Lack of “skin” in the game. It’s easy to engage in “guilt-free” spending when you don’t have an appreciation for how much effort is involved in creating income in the first place. Requiring all parties to contribute creates shared risk and helps everyone better appreciate how their collective actions create outcomes.

This discussion has been about a kind of “soft technology,” the very type of know-how that just doesn’t seem to pass on very well from one generation to another. The world is full of examples of poor decision-making, lack of foresight, failure to pay attention, and downright goofy stuff when it comes to money matters. We need to make good use of these examples to help us formulate a better understanding of personal finance, seek to implement what works, avoid what doesn’t, and at the very least, avoid repeating the mistakes of others.

Every time I hear someone say, “I learn from my mistakes,” I can’t help but think that that’s aiming rather low. We ought to be able to learn from the mistakes of others. And, better yet, simply learn from the experiences of others, be they good, bad, or somewhere in between.


Economic and Financial Preparedness – Making Good Use of Your Wealth, The Third Step

by Clair A. Schwan

The third step in economic and financial preparedness is making good use of your wealth. It’s one thing to have a big pile of money, but as I mentioned in the introductory article, you can’t eat money. You also can’t find shelter in money or ride around in it. In order to make good use of your earnings, you need to convert at least some of it into something useful, something you can appreciate and enjoy. And, something that helps you be better prepared in terms of the economy and your personal finances.

Preferably, some of what you acquire will also appreciate in value and provide additional payback in terms of a comfortable life or otherwise promote enhanced income.

Let’s look at how we can be better positioned in terms of economic and financial preparedness by using some of our financial resources to acquire things, and create more choices for ourselves in the event of a reduction in income, living on a “fixed” income, rising prices, shortages or other interruptions in the marketplace.

Make Good Use of Your Wealth

Once we have a decent stream of income and a mindset to preserve our earnings, it makes sense to convert a good portion of our wealth into something other than a pile of paper currency or numbers in an account. Staying with the idea of being prepared, and assuming we’ve allocated our financial resources to instruments of investment and wealth preservation, there are a number of things that one might do with their wealth to provide higher assurance of being ready to deal with mishaps in the marketplace and challenges to their personal finances. Here are some ideas to consider, generally prioritized in the order of importance:

Have a reliable vehicle – a vehicle is essential in the daily lives of most Americans, as it’s primarily used for going to work and shopping. If you expect to have a wide range of potential for employment and business and marketplace interactions, you’ll need to maintain a reliable vehicle. It’s difficult operating without one.

Keep cash on hand – it’s been said that “cash is king” and when a disaster strikes, it’s likely the only thing that merchants will accept.

Invest in your health – being healthy adds value to your life, it reduces unnecessary costs, and it keeps you better prepared for physical, mental and emotional challenges that might come your way.

Acquire basic tools and experience – having tools and know-how to repair and maintain things around the house can be a great way to save money on service calls and labor, and it adds convenience to your life as well.

Buy tools and equipment instead of renting – with a little calculating on your part, you might find that purchasing certain items is more cost- effective than renting them. And, if you rent out what you own, you’ll create an additional source of income.

Have housing or an alternative that you own outright – my first priority in any emergency is shelter, and owning it outright is a great way to preserve your wealth as well. As a man said once, “Owning a small cabin in the woods is better than a mansion with mortgage payments.”

Stock your pantry with adequate food – preparedness for any sort of event usually involves stocking up on food as the first measure. Oddly enough, it’s fifth in priority on my list, but a good use of money since inflation will take a bite out of your food buying dollar. Just be sure that what you buy will be consumed before it spoils or degrades in quality, or take action to preserve it.

Stock up on consumables – like food, inflation will diminish your ability to pay for things you normally use, like soap, toilet paper, and other consumables. Buy in bulk at savings and you’ll be using less expensive goods over the long haul as prices continue to rise.

Buy land – a piece of land can easily be seen as an investment to preserve wealth, but I prefer to see it as a resource for generating marketplace alternatives, especially when it comes to food. As a man once said, “Growing food is like printing money.” It’s a good concept because the food you grow and raise represents money you’re not spending, and it can also provide you with a source of income. In addition, land can be a great way to create income through leasing it out, selling it after it appreciates, or growing firewood and cash crops.

Have a reliable source of water – an excellent use of your money is to have a reliable source of water. To make good use of your land, water is a must. In general, it’s a very high priority for being prepared. In addition to hydration and hygiene, water is essential for growing crops and raising animals.

Plant fruit trees, vines and bushes, and cash crops – once established, it’s often possible for some plants to fend for themselves with little attention. Fruit can be used for many purposes and produced for many years to come, and some cash crops can provide a good return on investment over the long haul.

Acquire a broad collection of seeds – if growing food is like printing money, then a collection of seeds is like having engraved plates, special paper and ink, and a printing press for printing currency. In addition to traditional commercial sources of food, I think it’s a great idea to have your regular and emergency food supply growing just outside your home.

Create infrastructure to feed yourself – whether it’s a chicken yard, goat pen or greenhouse, using your wealth to create more sustainability around you is generally a good use of your money. And, it improves the resale value of your property as well.

Stock up on fuel – tell me what doesn’t operate on some sort of fuel. When you consider vehicles, power equipment, heavy equipment, a barbecue grill, a water heater, a space heater, or just a wood stove, they all need fuel. Having plenty on hand is a good use of your money, especially if you can buy in bulk when prices are at their seasonal low. Like a woman once said, “Our stack of firewood is like money in the bank.”

Be capable of creating your own energy sources – whether it’s an off-grid situation or you just want to be better prepared for emergencies and rising costs, being capable of creating your own energy is often a worthwhile use of your money because you get something very useful in return. Focus on electricity, heat, and hot water, as these are essentials for comfortable and convenient living.

That’s a good healthy list of things that one might do with their money to create the third leg of the financial and economic milking stool: converting money into resources that provide better positioning with respect to economic and financial preparedness.

The Details

Now that we’ve taken a 30,000 foot view of the three basic steps of economic and financial preparedness, let’s take a closer look at some of the details. I’ve presented 6 ideas associated with creating wealth, 7 ideas associated with preserving wealth, and there are 15 ideas presented here about making good use of wealth, so it looks like I have a lot of ground to cover in future editions to this series.


Next Month

I'll continue to provide more articles that I think are of interest to those with a frugal mindset, and at least one of the articles will be a continuation in the economic and financial preparedness series.

In next month's newsletter I'll provide an article about achieving freedom in the arena of personal finance. I call this my 30 second explanation. It's only one man's approach, but I think you'll find it interesting. As most everything I write, it comes from my own personal experience...some guy quipped "If you know how to become financially secure, I'd sure like to hear about it." I told him, "If you have 30 seconds, I'll tell you how to do it." He looked at me rather surprised but ready to listen, so I gave him a step-by-step explanation in about 30 seconds. If you'd like to know one approach that works, stay tuned because that's what I'm going to offer in the first article in next month's newsletter.

I'll also provide another article in the economic and financial preparedness series that focuses on providing details about the first leg of the financial milking stool: creating wealth. This detailed article will provide suggestions about challenging yourself at work to make more money. Since most of us are employed by someone else, it should be quite useful. My suggestions worked well for me when I was an employee, so they might also serve you well.


Thanks for being along for the ride here at Frugal Living Freedom. It is my hope that you enjoy the articles in the newsletter, learn something new and have an opportunity to put some of the ideas to good use.

All the best to you and yours,

Clair

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