Financial Literacy

As we enter the 4^th quarter of the year, it is important to minimize or eliminate income tax refunds from the IRS, state, and city. You’ve likely heard that receiving a tax refund means that you gave an interest-free loan to these government entities. In addition, all of these government entities are becoming worse about paying income tax refunds back to you.

Each of these entities has tactics to deny, delay, and apply endless red tape to hold onto your money; and you have little recourse. The most common excuse, and they’ve all used this with me, is to claim, “We lost your return, could you send another one?” A few years ago, the state treasury kept claiming that they had lost my return, so I twice physically drove my income tax return to the state capital.

I had an unexpected credit just before the end of the last year, derailing all of my zero income-tax refund plans. I filed my taxes with my state electronically. After a month, I called them about the missing refund and their reply was (you’ll never guess), “Your return was lost somehow, could you re-send it?” Losing an electronic filing is not even a believable excuse. Anyhow, a month later, I call again to hear, “We’re having trouble with our system; just be patient.” A month later, I call again, “Ok, it just has to be approved, be patient.” Another 18 days later and the state income tax refund appeared. This was nearly 4 months after I filed electronically and made no mistakes. Note: the tax event that precipitated the refund was a mistake by the state to begin with – they withheld money they were obligated NOT to withhold.

There are many cities in my state that also have their own an additional city income tax. City income tax departments still process returns with paper for the most part, and are not known for efficiency or accuracy (the average city income tax refund takes 5 months to process). A nearby accountant made the news because: she was owed a city income-tax refund of $500 from the city where she worked. Instead, she received a bill for $5,296 in back taxes, interest, and penalties going back 12 years. Luckily, she had documents going back those 12 years to prove her innocence. Eventually, the accountant discovered that the city clerk doing her return was using the wrong social security number and the wrong marital status. But it took months, effort, and meeting several times with the clerk in person to resolve it. This experience prompted her to change jobs and move 30 minutes north of the city to avoid this problem in the future.

Through adjusting your income tax withholding with your employer, or adjusting your estimated tax payments, you can more accurately target — not over or under paying – all of your income taxes. Talk to your employer or accountant if you need it get it correct. It is a poor financial decision to hand a free loan to government entities, and now that income tax refunds of all kinds are routinely delayed and denied, there is even more reason to stop this bad money habit.

An 18-year-old receiving extra money is normally a bad combination. They could be receiving money from a lawsuit settlement in their childhood, inheritance from the passing of a relative, or some other money held in trust until this birthday. I have never heard of an 18-year-old holding onto a modest one-time payment of $8,000-$35,000 for longer than 10 days. Instead of investing the money for growth and income that could last a lifetime, they immediately blow the money. Below are just few of the examples I’m acquainted with:

• A young man spends all of it on a new pickup truck, loaded with all the extra options, although he doesn’t have a job to pay for insurance or gas.
• A young woman spends the majority of it on body-sculpting plastic surgery. A few years later, all of the weight is back.
• A young woman is scammed by “loaning” almost all of it to a close relative, based upon his word alone that he will pay her back. Two years later, when she asks for re-payment of the loan, he proudly and indignantly replies, “Prove to the court that you have a signed loan agreement!”
• A young man vaporizes all of it on electronics: gaming consoles along with a spectacular tv and speaker set; and some furnishings.
• A young woman, who had already racked up a lot of credit card debt from living on her own since 17, spent every penny of an inheritance on jewelry.

It is my experience that few 18-year-olds have any financial education, maturity, or self-discipline to handle any money, let alone a large lump sum like the examples above. A chunk of money given to someone ill-equipped to manage it appropriately (at any age) is exactly like handing a sharp knife to a toddler and hoping for the best. Money is a double-edged sword, it can benefit and support, but it can also be poorly leveraged and literally destroy everything that you have. In the examples above, the money was frittered away or lost, creating a large opportunity cost for their financial future.

The way to avoid mismanagement by an 18-year-old is to start providing them a financial education starting between age 5-7, which includes requiring them to save 50% of any money that they receive – too build a habit and expectation of saving money. Once they are age 10-12, give them some minor budgeting responsibilities, such as: school supplies for a semester or a clothing budget for the season. In this way, the kids will have a chance to build favorable money habits, expectations, and better understand the value of money. If some extra money comes their way at any point in their future, there will be a chance that they may place a portion of the money into savings and investments – instead of blowing it all.

There is a very good reason to be low-key about revealing your finances and valuables publically; it invites all kinds of risks into your life. This includes theft, home invasion, hackers, professional plaintiffs with frivolous lawsuits, kidnapping for ransom, con artists, blackmailers, slick salespeople, fraudsters, and worse.

When someone that is financially desperate overhears that you have something of value, then you may become a potential target for treachery. I’ll start with the worst case scenario. A couple years ago, someone I know well has a close friend that was successful in building up franchise restaurants. This man’s grandson, in his 20s had a buddy that is addicted to drugs. The drug addict learned of his friend’s grandfather’s wealth and hatched a plan, on his own, to murder the rich grandparents and hopefully some inheritance spillage would come his way. He actually murdered the friend’s grandparents in a gruesome manner, but thankfully, the police investigation prevented any financial benefit from reaching the murderer.

The other reason to keep valuables a secret is because no rumor travels faster than one involving money. Just a few experiences I’ve had,

• A co-worker won $12,000 on at a casino, and within hours I was hearing about it from company offices in far-away states.
• A friend’s sister told me and a few other people that she keeps $25,000 in cash at her house. Within days, half the small town knew about her “secret stash of cash.”
• I know a doctor that lives on an affluent street. A few doors down, a luxury home was being renovated with a few dozen workers. Within a couple months, everyone within 3 blocks knew that the giant home had a secret “room safe” in the basement for valuables. When the home owner heard the rumor as well, he was shocked and angry – the only one he told was his architect and his workers; and he had been instructed to keep it a very confidential secret.

Conspicuous consumption can be an advertisement to people with evil intentions that you are an excellent target. It is not a coincidence that lottery winners are hit with many frivolous lawsuits right after they win. It is in your best interest to be very low key and private about valuables, collectibles, resources, or wealth.

Every year there is at least one wealthy celebrity who passes away leaving a dysfunctional estate. You’d expect that someone with significant assets would have at least a minimal (or possibly a sophisticated) estate plan in place. However, this is rare. This past month legendary singer Aretha Franklin, the Queen of Soul, passed away at age 75. Although she has an estimated net worth of $60-80 million (plus all kinds of income from music catalogs and royalties), she didn’t even have a basic Will. This is the worst possible situation for heirs:

1. Fake creditors, fake relatives, and fake friends can now come out of the woodwork to contest and potentially grab a payout.
2. Her entire financial situation will become public information.
3. The Probate Judge must follow the state guidelines and percentages to make any distributions, no matter what her wishes may have been.
4. Full taxes will be applied at the city, state, and federal levels, plus transfer taxes.
5. The lawyers and liquidators will raid the estate leaving crumbs for the heirs.
6. Probate battles over significant amounts of money can last several years; all the while the estate dwindles, depreciates, and is likely to be mismanaged.

Whenever there is a significant event in your life (marital status, children, deaths, change in personal values), then it is best to immediately reflect that into your estate plan. Some of the goals of an estate plan:

• A thorough audit to locate all of the assets
• Confirm that financial account beneficiaries are current
• Avoid probate for privacy, speed, and needless expenses
• Holding assets in trust for a simpler distribution
• Protect and manage assets
• Guardian selection for minor children
• Ensure financial security for spouse and children
• Minimize or eliminate all the different types of taxes for the estate
• A flexible plan to adapt to changing life circumstances
• Avoid opportunistic parties attempting to steal some of the estate

Although each state handles probate differently, many people are unaware that if they fail to avoid probate, 3-10% of the estate will be consumed by a long list of fees right off-the-top. The cost to handle an estate held in a Living Trust averages around 1-2% of the estate value. The longer Probate takes, the more charges are incurred. For example, the average Probate in California takes a ridiculous 8 months. If there is a probate dispute (in any state), it can last years and sometimes destroy 100% of the estate – leaving nothing for any heirs.

To create a customized estate plan, it may cost $1,500 to $3,000 for one that is free to update, but prices and quality vary greatly. However, this is a small amount compared to the cost, effort, and drama for passing away without an estate plan in place.

Every few years, some country enters a financial crisis from government mismanagement (over spending) or a catastrophic natural disaster (hurricane, earthquake, flooding, etc.) Since these events occur periodically, we can examine what repeatedly takes place in order to adequately prepare for the future. In the last 10 years, there have been 5 financial crises that we can learn from: Greece, Argentina, Puerto Rico, Venezuela, and Brazil.

Capital Controls

1. The government closes the banks and stops or limits ATM withdrawal amounts per day. Preparation = hold a couple months’ worth of expenses in cash outside of a bank. If you don’t have cash and are forced to barter, be aware that you’ll only get around 10% of the item’s fair value. (Gold and silver coins hold the best value for bartered exchanges).
2. Government confiscates a percentage of bank deposits or financial accounts. Preparation = hold as little money in a bank as possible; have some kind of bank account in another country (that is stable and has rule of law).

Crime

1. Crime explodes when people have no money or food. Preparation = being able to defend your family and home with firearms (or at least batons, mace, or tactical knife), motion-sensor spotlights on your home, and a neighborhood security group.
2. Rioting, civil unrest, and increasing homelessness becomes normal. Preparation = stay very far away from marches or conflicts with authorities.

Emigration

There will be a flood of people leaving the country. The government will be overwhelmed with applications and will move very slow in issuing or renewing passports. Government corruption also increases at all levels. Preparation = always have a current passport to exit the country and a plan to get to a few of your top choices for your next destination.

Healthcare

Medical care plummets; operations and surgeries are cancelled. This gets worse over time. Preparation = don’t put off medical procedures; look into getting treatment overseas – some health insurance companies offer assistance for overseas procedures.

Shortages, Restrictions, or Limitations

Capital controls will stop and limit all economic activity, including imports. The result is all kinds of unexpected shortages and critical supplies are rationed. Preparation = since you cannot hoard everything, use rising prices as a signal that this is an item you may want to hoard. When the power went out in Puerto Rico, these items became very valuable overnight: backup generators, candles, water, and canned food. Meanwhile, inflation ravaged countries commonly have shortages in: milk, sugar, flour, rice, and cooking oil. This is after there are shortages in: toilet paper, meat, toys, and eggs.

Right after a crisis, what normal supplies can you no longer find on store shelves?

• Food (so you may want to acquire enough freeze-dried meals for a couple weeks’ worth of food, or just some extra canned goods)
• Hygiene (from the dollar store, get some soap, laundry detergent, hand sanitizer, toothpaste, q-tips, etc.)
• First aid (acquire first-aid kits, bandages, aspirin, and disinfectants)

Some people don’t think that could ever occur in the U.S. or first-world nations, but this has already occurred several times: The Great Depression of 1929; in 1971 (it was side-stepped by going off the gold standard); and in the fall of 2008 (the U.S. was hours away from closing down all the banks. But then the U.S. Federal Reserve decided to bail out the bankrupt banking system from real estate defaults by printing several trillion dollars). Some financial crises slowly arise over time, while natural disasters can strike without warning. Either way, you need to think about your family’s long-term future as things unfold, and it doesn’t hurt to think through some scenarios and do some advance preparation.

Current Issues:

1. This month, Turkey has begun a financial implosion from over spending. Their currency, the Lira, has lost 40% of its value in the last several weeks. It slightly rebounded when Qatar pledged to invest $15 billion in their economy (but that won’t be nearly enough for the various and continuing mis-management decisions from the government).
2. Since December 2017, Pakistan has devalued their currency, the Rupee, 3 times. And today they are in talks with the International Monetary Fund to keep them afloat.
3. The Turkey and Pakistan currency contagion is spreading as the Indian Rupee just touched an all-time low against the U.S. dollar.
4. These financial problems and currency devaluations don’t happen in a vacuum – foreign banks may hold debts in these currencies, foreign investors hold assets in these countries, many countries trade with these countries, and it adds financial instability to the world as the issues unfold.

Exactly like Aesop’s fable, The Tortoise and the Hare, billionaire stock investor, Warren Buffett, says, “The stock market is a device for transferring money from the impatient to the patient.” Understand that this same concept applies to all kinds of industries, activities, and transactions. Naturally, this also includes personal financial planning.

How far into the future do you manage your personal cash flow?

A day, a week, a month, a year, 5 years, 10 years, a lifetime, several generations?

The shorter the time frame for your decisions, the more money you are giving to others who operate on a longer time frame. Let’s examine your spending habits:

1. Do you wait and watch prices to buy and sell assets at the best time?

The patient will wait for prices to bottom before they purchase and wait for prices peak in order to sell. The impatient lose money by purchasing and selling without concern over the price movement. (There are many more examples of this: the patient buy items off season, the impatient at peak season).

2. Do you borrow money to buy personal items?

The patient will wait to save the money for an item before they purchase it. The impatient will pay interest charges and other fees to take possession immediately.

3. Are you too impatient to set long-term career goals and map out the steps to achieve them?

The patient set career goals and do the work to make them happen. The impatient do not set any goals and find themselves in the exact same career spot 10 years later, or flitting from job to job, never advancing.

4. Are you too impatient to set financial goals and plan out how to achieve them?

The patient routinely adds to savings and investments, and increases their financial knowledge. The impatient spend all of their money now and are shocked to learn that many of their income peers have a far greater net worth.

Here are two very recent examples that highlight different time-frame thinking. I was talking to a lease-renewal agent for rental homes. She said that, “Although a renter may remain for many years, they consider a 1-year lease an eternity and a 2-year lease is unfathomable. Not surprisingly, the property owners think in 10-year increments.” In another example, a teenage acquaintance buys some consumable items for just $26 on eBay. She re-sells them on Amazon for double the price she paid. How? She buys a large quantity and re-sells them in a smaller quantity. She has repeat buyers that could have bought the larger quantity at a lower price, but for whatever reason, they do not do it.

While most public companies look out 3-18 months for making decisions, visionaries perform better. For example, Jeff Bezos, the founder of Amazon (the largest retailer in the world today), doesn’t care about the next 5 years – he’s focused on the next 50 years. As a result, local retailers are struggling while Bezos’ personal net worth just passed $140 billion.

The longer your decision-making viewpoint, the more options you have for making better financial decisions. The masses are mostly about instant gratification and they struggle financially. It is my best advice that you evaluate the long-term for all of your important decisions, because all of them are also financial decisions as well.

If you, or someone you know, is nearing retirement age with no savings, no investments, and no home equity, then what are some retirement options? No: Do not buy lottery tickets or put $25 into the next hot cryptocurrency. Those are not Hail Marys, those are fantasies – let’s deal in reality by utilizing 9 ideas that may work for you.

So if there is no money at all, then there must be some big adjustment and sacrifice from your current living situation in order to survive on social security retirement benefits alone. Let’s go through them:

1. One scenario is to find part-time work for semi-retirement. Many businesses take on elderly workers for low-stress, low-skilled, low-effort positions. The Sacrifice = lower pay and you’re still working. Be sure to match your employment to your physical ability, because even part-time work can make an enormous financial difference in making ends meet.

2. Ask kids or relatives for help. For example, in exchange for living in one of their bedrooms, you agree to make contributions with either money or effort to the household that is agreeable to the other relatives involved. The Sacrifice = lack of privacy, there is no guarantee of permanence, it is difficult to ask for assistance, and you must abide by their household rules and situation.

3. Examine the details of public welfare at all levels: city, county, state, and federal. You may qualify for subsidized housing, exemption from property taxes, food benefits, lower utility rates, and too many others to mention. The Sacrifice = it takes research upfront, ongoing effort to remain qualified, and you may need to sharply downsize your lifestyle or move to another jurisdiction that offers more benefits to create a financially stable situation.

4. Move to a low cost-of-living locale. If you’re no longer working then you don’t need to live in an expensive area with lots of employers. Small townships, likely far from airports, are possible candidates for low cost-of-living. There are new lists of these places every year from retirement publications, along with low/no-tax states and cities for retirees. The Sacrifice = you’re living in the middle of nowhere, access to healthcare and transportation may be more challenging.

5. Move abroad to a low cost-of-living country. There are affordable towns in Ecuador, Panama, Malaysia, Vietnam, Spain/Portugal, along with Peru and Costa Rica, which Americans have turned to for a cheaper retirement. A modest social security income can put you in the middle class or slightly upper-middle class, depending upon which city you choose. There are books and publications that specialize in information about where to live abroad as an ex-patriot in retirement. The Sacrifice = leaving family and friends, learning a new language, learning a new set of laws and bureaucracy for banking, healthcare, travel visa, and more.

6. Reduce your largest expense, housing, by housesitting. Unlike years ago, there are housesitting platforms that match people needing house sitters with people willing to do it. As a bonus, you can get paid to do so. For some people, this is their full-time income along with getting paid per dog walk (there is another platform that matches up dog owners to dog walkers). The Sacrifice = you live out of a small suitcase, move a lot, and may not have a sitting gig 100% of the time, so you’ll need a cheap backup plan for those days.

7. Sell nearly everything and move into an RV to dramatically cut your cost of living. You’ll be able to travel on a whim, and enjoy communities of other full-time RVers. There are numerous publications and online resources for the RV lifestyle, seasonal employment, and cutting costs to the bone. The Sacrifice = cabin fever from a small living space, noise from weekend partiers at RV parks, inconvenient to run errands or wash clothes, no permanent community.

8. Create a living situation with roommates. Just like after high school or college, get a 2 or 3 bedroom apartment and rent out the other bedrooms to divide up the rent and utilities. The Sacrifice = privacy, inconvenience, and possibly conflict/drama.

9. Some cities are desperate to increase their declining population and are willing to pay people to move there. This list and their qualifications changes over time, but here are a few valid today: New Haven, Connecticut will pay new homeowners up to $80,000 to move there; Detroit Challenge will pay $1,000 to $20,000 with various programs to move there; Kaitangate, New Zealand will give you a quarter acre of land with a home worth $165,000; and Candela, Italy will pay $2,350 to lure you to live there. There are other government benefit programs if you’re willing to build a new home, start a business, or start farming.

10. Delaying social security will increase your monthly payment. However, there are hundreds of ways to play social security retirement benefits: file and suspend, rely on your spouse for optimal timing, and many other provisions. An expert will have software to map out the best filing strategy for your situation. Important Note: Do not claim retirement social security until you have gone through all the possible scenarios with an expert. Once you’ve chosen, it is irreversible and choosing poorly can cost you thousands a year in missed money for the decades to come. The Sacrifice = to delay filing, you’ll likely have to continue to work in some capacity.

Of course, if there is zero money as you face retirement, it is HIGHLY recommended that you take immediate and drastic actions to reduce your expenses and/or increase your pay, or get a side income. You’re in a crisis and this requires crisis behavior to turn things around so you’ll have a few bucks to explore or fund a change in your life going forward.

If you’re not at retirement age then now is the best time to learn the lesson: you cannot make up for lost time when accumulating money. This is why it is critical to:

• Start saving now and continue saving every time you receive any income
• Never gamble for a high return
• Never allow a large loss
• Never use money assigned for retirement on anything else
• Protect your bankroll

Before reducing your student loan debts, naturally, it is best not to incur an imprudent amount of debt in the first place. There are too many student loan horror stories already of colossal debt that can never be paid off, or having your Social Security Retirement benefits garnished for decades-old student loans that were ignored. There are countless books, publications, courses, advisors, and online resources for tuition assistance, scholarships, grants, and other financial aid. Plus, there are directories of tuition-free colleges and tuition waiver programs from state universities across the country. If you do choose to use student loans, here are two rules to follow to avoid building up an overwhelming level of debt: Never borrow any money in the first year of school and never borrow more than 75% of the annual salary you expect with your degree from your school. There are nuances for special situations (for example, a medical degree where your expecting income will grow sharply over time, however there are debt limits for every degree, including medical and law degrees.) So you must budget your degree and expected earnings to avoid being saddled with far too much debt for your degree.

Whether you have a small or colossal student debt load, the big question is, “How do I get out of this as fast as possible?” Below are tasks, assignments, and goals to make this happen.

1. Administration

• Get all of your loan contracts to learn the exact details: rate, balance, due date, consequences for late payment, possible pre-payment penalties, and deferment rules. And thoroughly understand your monthly statements. (Some lenders offer a slight rate discount if you setup automatic payments, choose paperless billing, or adding a savings account at the bank).
• Keep your contact information current with all of your lenders and/or servicers so you don’t miss important notices.
• Understand and confirm payments are being made correctly. For example, you may intend to make an additional principal payment, but the lender may process that as a payment for the following month instead.
• Follow the IRS guidelines for deducting the interest on your income taxes.

2. Loan Balance Forgiveness, Discharge, Cancellation, Waiver, etc.

• Many companies and non-profits offer some form of student loan forgiveness if you agree to work for a certain number of years; and some federal student loans qualify for cancellation through public service.
• Some special situations allow for a loan balance discharge; for example: veterans, disabled, teachers, and sometimes withdrawing from school without a degree. There are online databases that track many types of student loan forgiveness programs.

3. Loan Terms

• It may be beneficial to refinance to lower interest rates, consolidate loans, or get a longer repayment term. There are many payment plans: Standard, Extended, Graduated, Income-Contingent, and Pay As You Earn – the best plan offers you the option of a small monthly payment. This is beneficial in the event something happens, plus it allows you the most freedom to target a particular loan with extra principal payments.
• To evaluate any refinancing, you need to first list out the loan balances, rates, and minimum payments so you can employ the April 8^th blog post tactic titled, “How to choose which debt to attack.” Then map out your payment schedule to determine the date at which all of your loans will all be paid off.

4. Decide How Quickly You Want to Be Free – Maximize Extra Principal Payments

• You can make minimum payments and take a couple decades to pay your loans off, but this extracts the most interest charges from your income – money that could be used for your lifestyle spending, savings, or investing. Paying for interest represents money that you earned that you can never spend, it was pre-spent. So minimizing interest charges by paying down the principal balance on your loans is an important financial goal.
• So how aggressive with extra principal payments do you want to go? Live with parents, relatives, have lots of roommates to split costs; cut your budget to the bone; pick-up a side gig; apply 100% of any raise to principal payments; eliminate recurring monthly charge plans for movies, cellphones, gaming; apply any unexpected income, bonus, or tax refund to your principal balance.

5. Begin Payments Immediately

• Some students get a head start by making loan payments long before they graduate with extra money or part-time jobs. The faster you can hit principal payments, the faster you stop the clock on interest charges it is accruing. Tiny payments while you’re in school add up over time. You do not have to wait the 4-6 months after you graduate to begin making payments.
• Some graduates make two half-payments a month instead of one at the end. Making these bi-weekly payments will slightly reduce the interest charge each month, but you have to check with your lender to determine if they permit this type of payment (some will allow weekly payments which is even better).

6. Other Considerations

• Since you’re trying to get yourself out of debt, do not incur additional debts with credit card balances for which you’ll be charged interest.
• Don’t sink money into a new car, keep your junker or replace it with an affordable used car without a loan.
• Track your loan balances each month to watch them melt, keeping your motivation high and momentum going to extinguish all of them.
• Do not make extra principal payments until you have $1,000 set aside in an emergency fund to give you some breathing room if there is an unexpected expense.

If I had included website links on this post, it would be 16 pages long. Plus, they change as companies and rules change. But expert websites are easy to find, for example, if you’re unsure about consolidation? Look up, “student loan consolidation tips.” One great website resource to start with is StudentLoanHero.com that offers a lot of information and links to others.

Nobody wants to live within their means, but that is the financial reality in order to have financial stability. Even wealthy people can easily blow through their income. Ken Cage is a high-end repo man. He confiscates expensive assets for banks, such as private jets and luxury yachts when owners fail to pay for a few months. Cage’s best advice, “Don’t let your ego make financial decisions. Purchase what you can easily afford, don’t try to impress others and lose sight of financial reality.”

Most people equate frugality with denial – but the middle-ground is to find a cheaper substitute. This is a topic too vast to explore in a blog post, but it is easy to research for your specific needs. Use an internet search wording similar to, “How to ______ on a budget,” or “Affordable way to ______.” You’ll find endless articles, advise, and candidates for you to consider. Here is one example: Most people have a smart phone and the average person pays $120 per month. To drop that bill by a potential 80%, you could evaluate if these substitute carriers match your needs: mintmobile.com or cricketwireless.com. Instead of paying $70-$120/month, you could drop your bill to $15 per month and pocket over $600/year.

Substitutes run from DIY gifts, room makeovers, to filling out your wardrobe for cents on the dollar. Everybody has to eat, but the further out in time you meal plan, the more you can save. You can prepare your meal components and then freeze them until you’re ready for them. You can knock out preparing a bunch of meals at a time and then have portions of them once-a-week for a month. This will save you time and money to batch your preparation, buying cheaper in bulk when they are on sale. Everybody wears clothes, and it is likely that you may be able to find a local thrift store for clothing. I know a mother that outfits her family from quality brands at the thrift store but also makes a part-time income buying baby clothes on their 50%-Off day and then re-selling them on eBay for a profit. If there isn’t a local thrift store, more of them are online such as ThredUp.com. Most people need transportation, and lots of people use lease or loans to purchase a car that is more expensive than they can afford. Meanwhile, there are online communities of people that specialize in finding vehicles that you can drive for free. They do research to determine that a particular car model, a certain number of years old, with certain milage, and they are able to drive it for a year or two and then sell it for around the same price that they bought it for – making their use of it nearly free. (Many times these candidates are luxury cars that are 5-7 years old.I know one person that almost pulled the trigger on doing this with a 12-year old convertible Bentley for a year. Although it was in perfect condition, he was too afraid afraid that a single repair at the dealership might cost him over $2,000). 

So before you go straight to denying yourself for lifestyle spending, do a little research to see if there is a substitution that will fit your needs. This way you can keep the enjoyment and satisfaction while making it affordable to your budget.