Starting a Thrift Store
The Dollar Stretcher Blog
by Gary Foreman

I would like to open a thrift store either in NY or GA. How does this work and in your opinion, is this a good business? Also, are thrift stores considered not-for-profit??? And why do some thrift stores give write off for donated items and others do not?

Arlene

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A tough economy has triggered an interest in thrift stores. Right now everyone loves a bargain! So Arlene asks a good question. Is this a good business to enter?

We’ll begin by getting a better understanding of thrift stores.

Arlene points us to the first important distinction. Some are non-profit while others are not. What’s the difference? The non-profit stores exist to raise money for a non-profit charitable organization (think Salvation Army or Goodwill). Typically the stores are owned and run by the charitable organization. Employees can be paid for their work, but many volunteer because they believe in the charity.

Because the store is a charitable operation people can donate goods and take a tax deduction for the value of their donation. So most (if not all) of the product that the non-profit thrift stores sell doesn’t cost them anything. Consequently, after paying rent and utilities, much of their sales dollars benefits the charity.

The other type of store (and presumably the kind that Arlene is contemplating) is a for profit store. In this case no charity is involved. The store is run like any other business. Profits belong to the owner and they’ll pay taxes on them.

But that also means that people won’t get a deduction for donated goods. So for profit stores have to buy much (all?) of their inventory. It also means that they labor is more expensive.

So should Arlene open a thrift store? We can’t answer that for her, but we can tell her how to answer it for herself.

Begin by setting up a business budget. Estimate what your first year expenses will be. Start with the store itself. How much will it cost to rent? How much will you spend setting up displays and outside signs. Is anything required to bring the store up to building codes? Don’t forget utilities and deposits. Insurance? Any permits or local business licenses?

Add in the labor costs. Even if Arlene is the only employee, she’ll want to pay herself (after all that is the idea here!). And, when she does, she’ll be responsible for Social Security taxes. Depending on her state she might also be on the hook for worker’s comp, other insurance or state/local taxes.

At this point Arlene will have an idea of her expenses. Next she’ll estimate how high her sales will need to be to break even. For illustration we’ll make some assumptions. Let’s say that what she buys for $1 she can sell for $4 (this is an important estimate so give it proper thought). If her expenses and salary total $40,000, she’d need to sell $53,333 worth of merchandise ($40,000 divided by the profit margin of .75 or 3 divided by 4).

Bottom line, that’s a lot of product for Arlene to sell. And, it might explain why there are so few thrift stores that are not affiliated with a charity.

But, all is not lost! There are ways for Arlene to get into the resale business with much less financial exposure.

The one most similar to opening a thrift store would be to rent space in a flea market. Instead of being responsible for a whole building, you only rent a small space within the building. That dramatically reduces expenses and increases Arlene’s chances for profitability.

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A second alternative would be to hold regular garage sales. That way she has no overhead. Any mark-up on products sold goes into her pocket. One caution. Some towns have laws limiting the number of sales you can have in a year. You’ll also want to consider your neighbors.

A final alternative is to set up an online store, perhaps on eBay.com. It costs almost nothing to get started. And, it has one advantage over a ‘real’ store. The internet attracts buyers from all over. So you can specialize if you want. Many online sellers only do old books, records, vintage clothing or collectibles. Generally these items draw higher prices than most thrift store merchandise.

So what should Arlene do? Walking through the steps needed to estimate the expenses and income should give her fairly clear idea. Fortunately, it’s not an all-or-nothing proposition. She has can select the best way to get started.

Keep on Stretching those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website</a>  and various e-newsletters including Financial Independence. Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom!

Bi-Monthly Credit Card Payments - Tips on Budgeting

The Dollar Stretcher Blog

Written by: Gary Foreman

I have heard that paying on a credit card debt every two weeks, instead of paying it once a month saves on interest and could pay off the debt faster. Is this true? I have been trying to put at least $50 on the debt, every two weeks, plus pay the minimum, once a month, but not seeing much progress. Will this help in the long run, more than the short term? Is there a better way to go about paying credit card debt off than bi-weekly? 
Sue M.

Sue asks a good question. Can paying a little extra every two weeks really reduce her credit card balance? And, the answer is (drumroll, please): sometimes…

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Sometimes??? What kind of an answer is that? It’s a truthful one. But don’t worry. We’ll show you an easy way to see if your situation is one where bi-weekly payments are a good idea.

The first thing we need to do is to learn a few facts about credit card accounts. Most of us get a monthly bill. We can pay all of it, just the minimum or something between the minimum and all of it. You already knew that.

What you might not have known is that your payment is credited to the account the day that it’s received. Not on the due date on your statement. That’s important because of the next fact.

If you carry a balance on your account, the amount you owe is racking up interest charges every single day. You may think that you’re paying 14.04% (Bankrate.com http://www.bankrate.com/credit-cards.aspx). That’s the annual rate. You’re really paying 0.03846% per day.

The bank will calculate your balance daily and also how much interest you owe for that day. Anything that reduces your balance will reduce the amount of interest charged for that day and all days after.

OK, so making an extra payment every two weeks is a good idea, right? Not necessarily. It could be that you have better options.

We’re going to do some calculations. But, let’s be honest and admit that most of us don’t like math. So if you’re math-phobic you can just skip the next two paragraphs. You don’t need them to get to the right answer.

Sue is putting in an extra $50 two weeks before she sends in the rest of the bill. So how much does that save her? To borrow $50 at 14.04% will cost her $7.02 per year or 1.9 cents per day. So paying $50 14 days early would save Sue 26.6 cents.

But the stamp to mail in the check will cost nearly twice that. Not to mention that her time is worth something. So sending in an early check actually costs her more than she saves.

So how can Sue tell when it makes sense to send in an extra early payment? Actually, that’s not hard at all.

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It makes sense to pay your credit card bill more than once a month if any of these are true:
- you can make your payments online
- you have the money now, but might spend it before your credit card due date
- the amount that you’re sending is $200 or greater
- you feel that you need the discipline/deadline of weekly or bi-weekly goals

If not, just pay your bill once a month.

The most important thing you can do to pay off a debt is to pay more than the minimum amount. Every time you do, you reduce the amount of interest that you’ll have to pay for every day in the future. So the biggest effect on Sue’s balance is the extra $50. That’s true whether it’s a separate payment or if she adds it to her regular monthly payment.

Also, remember that you can pay your bill early. If you really want to save that 26 cents, just mail the bill a week before it’s due.

Here’s hoping that soon Sue won’t have to worry about early payments. All she’ll need to do is to pay the entire balance when the bill comes each month.

Keep on Stretching those Dollars!

Gary

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Gary Foreman is the editor of The Dollar Stretcher.com and e newsletters including Financial Independence. Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom!

Facing our Financial Problems - Tips on Budgeting

Facing Our Financial Problems
The Dollar Stretcher Blog
by Gary Foreman

Most of our ‘problems’ are really nothing more than undealt with discomforts. The moment we get up the resolve to look them in the face and do something about them, they vanish. Our real problems are the ones we are afraid to look in the face.
- Rabbi Shraga Silverstein

Everyone has problems. It seems to be part of the human experience. But, if you’ll look around you it’ll become obvious that not everyone handles their problems the same way. Some are crushed by troubles. Others are relatively unaffected.

Knowing what separates the two groups could make life much easier. So with that in mind, let’s examine Rabbi Silverstein’s comments.

The natural question is why are we so reluctant to face our problems? What is it about us or the problem that causes us to avoid any confrontation? Are there any clues on how to change our behavior?

What is it about certain problems that make us afraid to look at them? Based on my own experience I’d have to say that there are some problems that seem too big to solve. For instance, owning a home that’s worth tens of thousands of dollars less than the mortgage. A big, immovable mountain of a problem.

Then there are the problems that we know how to solve but don’t want to make the necessary changes in our life. I know of families that rarely cook at home because no one who lives there has learned to cook. Facing the problem means that someone is going to become responsible for learning how to cook and then providing a homecooked meal. If you just ignore the problem you don’t have to face making a decision about cooking.

There are other problems that truly scare us. Some baby boomers are afraid to face their retirement. They’ve neglected retirement savings and now they’re afraid that it’s too late to do anything about it.

College students have a similar problem. Many of them know that they shouldn’t be using student loans and credit cards for charging pizza. But, they tell themselves that since they’re still in school that they’re not required to be responsible yet. So they don’t face up to the problem that they’re creating.

Is there an answer? Well, we can take Rabbi Silverstein’s advice and force ourselves to confront our problems head on. One way to make that easier is to not try to solve the whole problem in one day. Take the ‘too big mortgage’ as an example. You don’t need to pay all of it off now. What’s needed is the money to make the next monthly payment. Breaking the problem into small tasks makes it much easier to face. You’re not facing the whole problem. Just the little piece that you need to handle today.

Or the family cook. They don’t need to commit to preparing every meal for the rest of their life. Maybe just prepare a home cooked meal two days a week. It’s not a complete answer, but it’s better than turning away from the problem and eating out every day.

I’m no psychologist, but it’s probably true that success breeds success. So for each day that you face a problem you make it easier to face it again tomorrow. After a few days the problem is vanquished (even if you might need to keep after it for years – as in paying off your mortgage).

What do you think of being afraid to face our financial problems? Do you have a story that would be instructive or inspiring? If so, please share it with us via email.

Keep on Stretching those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website and e-newsletters including Financial Independence. Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom!

Understanding Bi-Weekly Mortgages - Tips on Budgeting

Written by: Gary Foreman

The Dollar Stretcher Blog

Dear Dollar Stretcher,

I read as article about “Biweekly Mortgage Payment Programs” and I have a question. I have read that I can do the same thing myself by just paying an extra payment every year for the same affect so why should I pay someone else to do this?

The thing that I don’t understand, is how is it beneficial for me to buy the service when I didn’t have to? I owe $276k and can do the biweekly for set up fee of $375 and $3 a month. I will shave 6 yrs and 4 months off of my mortgage. I have 27 years left. So over the course of this loan, I pay them about $1k to do this. In the meantime, I save $87k in mortgage payments and 6 yrs. But aren’t I really paying them $1k for something I could do myself?

If I didn’t go with them, I would end up paying an extra payment a year split up monthly, that would amount to about 2k a year. So if I did this, I would end up saving $87k in interest and 6 yr, but I would have paid $40k in extra payments. Am I wrong in seeing it as $40k versus $1k?

Eric

It has been said that the key to most magic is to distract your attention from what is really happening. While you’re looking one way, the real action is happening somewhere else. The same is true for many financial offerings. The salesman is so busy pulling rabbits out of a hat that it’s hard to pay attention to what’s important.

And, when you look at something like a bi-weekly mortgage plan, there does seem to be a lot of rabbits hopping around. So let’s see if we can’t trap a couple of bunnies and determine what’s really happening with a bi-weekly mortgage plan.

Rabbit #1. The length of your mortgage. Any prepayment of principal will reduce the life of your mortgage. Larger prepayments will have a greater effect than smaller prepayments. And, prepayments made in the early years of a mortgage have a bigger effect than the same prepayment made later in the life of the loan. That’s true whether you make the payments yourself or have someone do it for you.

Rabbit #2. 12 months = 52 weeks. You knew that one. Eric points it out, too. Making half of your monthly mortgage payment every two weeks is the same as adding one extra monthly payment per year. Or adding 1/12th of a monthly payment to each regular monthly payment. You don’t need anyone to do that for you.

Rabbit #3. Bi-weekly mortgage payments don’t create free money. If your monthly mortgage payment is $2k, by going to a bi-weekly program you’ll need to find an extra $2k in your budget each year to add to your mortgage payments.

Rabbit #4. Service fees. Any money paid to the company setting up the bi-weekly program doesn’t go to pay your mortgage.

Rabbit #5. Making two payments a month. Paying half of your monthly mortgage payment two weeks early will reduce the length of your mortgage. But not by a significant amount.

OK, so let’s see if we can’t help Eric to focus on what’s really happening with a bi-weekly mortgage. He’s exactly right in that by going bi-weekly it has the same affect as making an extra payment each year.

In this case about one extra $2k payment for about 20 years. And, that will be true whether Eric goes bi-weekly or just adds 1/12th ($166) to each monthly payment himself. So if he reduced the legnth of his mortgage to 20 years he’ll be putting in about $40k in total prepayments.

If he works with the bi-weekly mortgage company he’ll also end up paying them about $1k.

In either case he says that he should reduce about $87k in interest that he won’t have to pay the mortgage company.

So the real difference is whether he wants to pay $1k to have someone to perform the service for him. In fairness, companies offering bi-weekly mortgage plans do provide some services to earn their pay. The biggest one is that they make sure that the mortgage company applies the proper amount to reducing principal each month.

But you can do that yourself. Just a matter of checking your principal balance after your payment is applied and make sure that it was reduced by the amount of any prepayment plus the portion of your regular payment that goes to principal.

So to answer Eric’s question – it would cost him about $1k for something that he could do himself. Being frugal, we’d just add the extra amount to each monthly payment and skip the bi-weekly business. But, if Eric needs the extra discipline, then spending $1k to save $87 isn’t a bad deal.

Keep on Stretching those Dollars!

Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website and various enewsletters. Visit the site for more info on mortgage prepayments. Send your frugal living questions to gary@ stretcher.com.

6 Money Saving Tips on Budgeting

6 Money Savings Tips For Single Girls

Written By: Alban

Being single is not always as much fun as it is made to look by girls like Carrie Bradshaw and the like, and one of the most frustrating parts of being a single girl can be making your money stretch further from one income so you can still budget to go out with the girls in the relationships, with the pooled finances.

Saving money when you are single is very different to saving when you are part of a twosome, but one of the main advantages is that you have complete control over your budget, there is no one else to blame when the supermarket trolley is filled with chips and ice cream, and no enough stables to make dinner, and that accountability can see you taking more control and more responsibility of your finances. Following are six simple savings tips for single girls in any situation to make your money go further.

1 Have a budget

This is sound financial advice for anyone in or out of a relationship, because if you don’t know where your money is going you have little chance of diverting it to your savings. Therefore find a way which works for you to create a budget so you know exactly how much you need to set aside for bills, food and fuel, and do so that you know where your money goes during the week. Just because you have done your budget and found that you should have $100 spare at the end of each week, doesn’t mean the reality is the same because you may forget about incidentals like cocktails with girls, or lunch with a friend which can eat into the money you thought you had spare.

When you take an accurate account of what you spend in a month you can see where your money is going and you will be able to nominate places where you can save. For example you may meet a friend once a week for lunch instead of twice a week giving you more spare savings.

2 Think about your future

Saving as a single girl is not just about having money left at the end of the month so you don’t have to live from pay cheque to pay cheque, it is also is about saving for the future. As much as you may loathe managing your finances, no one is going to come along and save you from it is time to step up and implement money-saving plans for your future. Even when your Prince Charming does come along it still makes sense as an intelligent and independent woman to know how to manage your money without him. Therefore as you are doing your budget think about your long and short-term savings goals, whether you want to invest in a new computer so you can work from home and save money commuting, or you want to save money for an investment property to help offset some of the tax you’re paying. It is also important to think about your retirement plans and put in place a savings plan to build up a retirement fund.

3 Save by cooking

You don’t have to be a gourmet cooks to be able to save money by making meals at home. Even if you only have a small repertoire of recipes you can still make more than you need and use the leftovers for lunch, or freeze it for other meals. Cooking larger meals and reheating smaller portions later can also help save you money because you do not need to heat up your oven every single night. It is also very tricky to cook for one and you invariably end up with two and a half serves for example which is not always the best use of your time or money, however if you plan to cook a meal of four serves you can take some for lunch the following day and have two meals planned for down the track. In planning your meals in this way you can also save money when you go to the supermarket because you will know the exact ingredients you need and there will be no reason not to cook.

4 Avoid packaged waste

Packaged food can also cost you a lot of money in the long run because most packages are not sized for one person. Therefore you may open a packet of pasta and need just a quarter of the packet. To avoid throwing away food which you can’t or don’t eat all in one sitting, invest in a vacuum sealer or zip lock bags to keep things fresh. Also freeze what you can and if you know you’re not can eat a full loaf of bread take out a few slices and put the rest in the freezer, taking out just a few slices at a time when you want them. Also consciously buy less, or smaller packages because there is no shame in just buying two apples or one lemon if that’s all you need, and look for the smaller milk cartons so the rest of the litre doesn’t go to waste.

5 Eat healthier and save

We all know that meets, red meat in particular is good for us, but it is only good in moderation. Too much meat is not good for your diet, or your budget and rather than planning meals around meat use it as an accompaniment rather than as the star. Meat is also often not packaged for one person so you are again at risk of wastage. Plus meat is one of the most expensive items likely to be in your grocery cart and eating less can save you more.

6 Save as much as you can

Just because you can only afford to save $10 a week for example is no reason to give up on saving altogether. Instead make a conscious effort to save a portion of your uncommitted income from your budget each month and it will soon add up. Also take the time to shop around for the best interest rates and the lowest fees on dedicated savings accounts to make sure that your money works hard for you long after you have worked hard to follow these money-saving tips.

Alban is a personal finance writer. He helps people manage their budget and choose the best savings account.

Mortgage Prepayments - Tips on Budgeting

Written by: Gary Foreman

The Dollar Stretcher Blog

I am trying to find the best way to really take advantage in reducing our mortgage to save on interest paid. We are in our home for 5 years with a 30 yr fixed @ 6.1% rate. Payment is $1500 mo. We are now sending in our regular payment weekly by dividing 1500 by 4. On top of that we are sending in $400 to $500 weekly to add to principal. We did not know if dividing th original payment by 4 if it would make a big diference since it is getting there early in weekly amounts. We would sure appreciate advice and help.

TR

Wow! TR is to be congratulated on her dedication to paying off the mortgage quickly. But, let’s see if all those extra payments are reducing the length of her mortgage.

Hopefully, TR has already taken the first step. That’s to make sure that her mortgage allows for prepayments without penalty. Most mortgages do allow it, but it’s good to be certain. If not, they’ll take all her payments and just apply them to the next regular due date. Effectively making all her early payments an interest free loan to her mortgage company!

Let’s talk about what TR is trying to do. By sending one quarter of her monthly payment in each week she could be reducing the amount of interest owed and that would mean that more of her payment goes to reducing principal.

Basically it’s a math problem. We’ll break it down into easy to understand pieces. Beginning with the interest rate.

Typically we talk about interest rates on an annual basis. In this case 6.1% per year. But in reality it’s a daily rate. In this case 6.1% divided by 365 days or 0.0167% or 0.000167 per day.

So the mortgage company multiplies the principal (i.e. the amount that TR still owes on the mortgage) by 0.000167 each day. That amount is added to the amount owed.

Suppose that TR’s mortgage is $100,000 (probably not a realistic number, but a nice round one to work with). For each day TR will owe an additional $16.71 in interest. So for a 30 day month she’d owe $501.37 in interest on the $100,000 mortgage amount.

If her payment were $1500 roughly one third would go to paying the interest owed ($501.37) and two thirds ($1500 – $501.37 = $998.63) would go to reducing the principal.

What happens when TR sends in one quarter of her payment 3 weeks early? The amount she’s sending in is $375 ($1500 / 4 = $375). The amount of interest to borrow $375 for 21 days is $1.32 ($375 * .000167 * 21 days = $1.32). That’s true no matter how big or small the mortgage principal is.

The second weekly payment would save $0.88 ($375 * .000167 * 14 days = $0.88). The third weekly payment would save $0.44 ($375 * .000167 * 7 days = $0.44).

What about the extra principal that TR is sending in weekly? Let’s say that she sends in $500 per week. That $500 is worth $0.58 per week.

So sending in all those weekly payments really isn’t saving TR much money. In fact, if she’s mailing them the cost of the envelope and postage is consuming much of the savings. That, and her time has some value, too.

Now some of you will have noticed that by paying weekly TR has added the equivalent of a full monthly payment each year. But she doesn’t need to make weekly payments to get that effect. All she has to do is to keep adding extra to each payment for principal reduction.

And, in that area TR does have the right idea. By adding $400 or $500 a week to reducing the principal, she’s making a major dent in the length of her mortgage.

Calculating the effects of additional principal prepayments is a little more difficult. The reason is that they reduce the amount of interest owed next month. So the amount of next month’s payment that goes to pay interest is reduced and the amount that goes to pay principal is increased. And, that effects the next month’s payment even more. And, that the month after, etc.

Suppose that TR combines her extra principal into one $2,000 payment per month. She’ll reduce the amount of interest owed by $10.16 ($2000 * .061 / 12 = $10.16). So her next monthly payment will in effect be prepaying an additional $10.16 of principal. And, that will make the payment after that even more effective. Just that one $2,000 prepayment would shorten the life of the mortgage by one and a half years.

Unless you’re a math fiend, it’s eaiser to use a prepayment calculator you find on the net. One that I like is found here

< http://www.decisionaide.com/mpcalculators/ExtraPaymentsCalculator/ExtraPayments1.asp >.

So what should TR do? Probably skip the weekly payments. They’re having a very minimal effect and increase the chances for a clerical foul-up at the mortgage company. But, TR should continue to make monthly principal prepayments. They’ll make a major difference in the legnth of her mortgage.

Keep on Stretchin’ those Dollars!

Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website and various e-newsletters including Financial Independence.  Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom! For more on mortgage prepayments read: How Mortgage Prepayments Work.

Frugal Fatigue - Tips on Budgeting

Written by Gary Foreman

The Dollar Stretcher Blog

Recently I was approached by a reporter. They were doing a story on people who were tired of the effort it takes to control their spending. What suggestions, she asked, did I have for people who were struggling and thinking of just giving up?

A little time brought to mind some of the things that I’ve seen people do who continue when the easiest course was to quit.

The first is to make a decision. Once you’ve decided to pursue a goal, do not question it. Unless you have significant new information, you have no reason to doubt your original decision. So don’t trouble yourself with questions. Just continue along the path you chose to follow.

The second involves breaking big goals into smaller pieces. They say that success breeds success. I believe that’s true. Dividing a big goal into smaller goals allows you to have some smaller successes along the way. Each one helps to motivate you to strive for the next small goal. Pretty soon you’ve accomplished the big goal.

Rewards are the third tool to accomplish financial goals. Most of us want to know “what’s in it for me?” That’s only natural. So put something in it for yourself. If you’re paying off a credit card, treat yourself to a small reward at predetermined points along the way (i.e. after $2,500 has been paid down or when the balance is reduced by 25%). Looking forward to the reward takes your mind off of the struggle.

Reminders can also be helpful. If you’re saving for a vacation, you’ll find that a picture of the campgrounds on the refrigerator can be a great motivation. Some people put a card in their wallet to remind them of their commitment to reduce debt. They see it every time they reach for cash or a credit card. It can help you resist needless purchases.

Finally, it’s helpful to have friends to encourage you and share experiences. Most long journeys are much easier if we have one or more people to walk with us. So find a frugal living partner at work or in your neighborhood. Or join an online discussion group. Not only will you find help, but you’ll become stronger when you encourage others. In fact, we have one specifically on Frugal Fatigue.

So don’t let the length of the journey discourage you. The total distance is not that important. All you have to do is to stay on track for today. And, that’s something that all of us can do.

Keep on Stretchin’ those Dollars!

Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website <www.TheDollarStretcher.com> and various e-newsletters including Financial Independence <mailto:subscribe-fi@hub.thedollarstretcher.com>

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Your Money Tapes – Tips on Budgeting

Written by Gary Foreman

The Dollar Stretcher Blog

I’ve often heard it said that the longest distance is between the human head and the human heart. What is meant is that there are many things that we know intellectually. We understand them and have no doubt that they’re true. But, we still have trouble acting on them. In other words, our heart doesn’t know the same truth.

How many of us suffer the same thing in our financial affairs? We know we should budget or begin saving for retirement. But we can’t seem to do it. Intellectually we know what we should be doing. But we just can’t get going on it. Our heart isn’t in the program.

One way to identify when our minds and hearts aren’t in sync is to notice what financial decisions make us uncomfortable. What financial activities make our palms sweat? Our hearts beat faster? Make our stomach quesy? When we feel uneasy about a financial event that’s a clue that it’s an area that we need to examine.

So I invite you to keep a brief log. Notice those financial events that cause discomfort. Include the date, time and any circumstances that seem like they could be relevant. Don’t try to analyze it now. All we want to do now is capture the moment and make note of it and how we feel at the time.

Once you’ve assembled your journal (after a few days to a week) it’s time to study the entries.

First, were you able to recongize what tape was playing in your mind during the event that made you uneasy? For instance, I’ve often heard “You shouldn’t be spending this money. Not on some luxury.” Or “Go ahead and buy it. You’ll never find it again this cheap.” There are many messages that our minds play when we’re considering making a financial decision. Each of us has our own set of tapes. Almost like an Ipod full of messages that you frequently listen to.

Some of the messages are good. It’s true that I shouldn’t be spending money on unneeded luxuries. And I should look for bargains.

But we need to be careful about the application. For instance, if the ‘luxury’ is buying a steak to cook at home and I do it once a month is that a luxury? Sure, it’s more expensive than cooking a chicken. But, a steak with baked potato and veggie eaten at home isn’t an outrageous expense. And, perhaps that little luxury is enough to keep me from being tempted to eat at a restraurant that evening. So maybe the money tape shouldn’t apply to this situtation.

Or the bargain purchase. If the item I may buy is used and well worn, perhaps it’s not such a good purchase. Especially if it’s something that I’ll use often. Maybe it’s worn so that it is likely to break when I need it. Perhaps spending a few more dollars could buy something that’s dependable and will last much longer. In that case being the cheapest isn’t necessarily a good thing. Again, finding a bargain is good. But it isn’t always the only thing to consider.

So what does your money journal tell you? What tapes were playing when you were uncomfortable about a financial decision? Take a look at them in light of the choices you were facing. Was the tape appropriate to the situation? Or were you hearing something that could lead you to the wrong financial outcome?

Remember that these money tapes almost always have some truth in them.

But, it’s important for us to know whether the tape is true in this specific situation.

One final thought. Since these money messages have been in our heads for years and feel true to us we often accept them without any questions. We jump right to making a decision based on them. If we’re applying them to the wrong situation that can be bad. And, if we don’t stop to think before making the decision we won’t even recongize that we could be making a mistake. In fact, we’ll congratulate ourselves for making the ‘rational’ choice.

So the next time that a financial decision makes you queasy, stop for a moment. Listen to the tape in your head. Ask yourself if the message is true in this particular situation. And, only after you’ve completed these steps, then make a decision.

By doing so, you’ll move your head and your heart closer together. Close enough so that your heart will feel good about the logical decisions your head is making!

Keep on Stretchin’ those Dollars!

Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website <www.TheDollarStretcher.com> and various enewsletters including Financial Independence. Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom!

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