Category: Saving

Why should I keep a financial journal?

New Years is often the time we start thinking about resolutions and goals – and reflecting on the year gone by.

For several years, while we were working towards our financial independence, I kept a Financial Journal in which I would write down all of my savings goals, and notes from the (many!) finance books I read. Of course, you can use an online solution, but studies have showing that writing down your goals leads to greater conviction, and handwriting what you learn helps you to remember it.

I kept my Financial Journal in a gorgeous ‘Money Planner’ I had been eyeing off for some time (although naturally, I waited until I found a slightly dented copy reduced to half price!) but you can use pretty much any notebook you have on hand.

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Why does a shilling bun cost more than a shilling?

Walking past a bakery in Bergen, Norway today, I was consumed by the sweet aroma of hot cinnamon.

In to Baker Brun we went, to buy a Skillingsbolle, described as ‘the all-time favourite Bergen treat’ with a name originating from its original price of one shilling. In fact, the word ‘shilling’ itself derives from the Old Norse scilling meaning ‘division’, and was a division of the old Norwegian Rigsdaler.

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Why should I pick up pennies?

‘Look after the pennies, and the pounds will take care of themselves’ my grandmother used to say. But perhaps you’ve heard the old story that if Bill Gates sees $100 on the ground, it will cost him more to bend down and pick it up than to keep on walking?

It’s the same kind of logic used to justify domestic services:

‘I earn $30 an hour. Why should I clean my own house when I can pay someone else $15 to do it?’

On the surface, this seems to make (financial) sense – You earn $30, give half to the cleaner or the lawn mower, and still come out with a profit.

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How can I calculate my energy use and save?

We’re suckers for research, and enjoy running our home as a personal research lab. One of the biggest things you can experiment with is energy use. Reducing our electricity, water, and gas usage is one of those many intersections between frugality and conservation.

Before we started this experiment, our average usage was 8.22kWh per person per day (lower than the American average of 10.9kWh, but higher than the Australian average of 7.26kWh). I found this ridiculous, given the tiny size of our apartment, the fact that we don’t have airconditioning, a washing machine or a large fridge or a big TV or many other power-hungry appliances that a lot of households do. And we have (unmetered) gas for our cooking. Certainly, there are efficiencies of scale (a family of five and a single person both need to run a refrigerator, it costs no more for eight people to watch a TV than for it to have only one pair of eyes fixed on it). But perhaps the secret was buried in the design of our tiny apartment?

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How much should I save?

The national personal household savings rate has recently increased from 7.6% to 8.1% – still a far cry from the all-time high of 20.6% in 1973.

We often hear 10% floated around as a savings goal to target. But Jacob Lund Fisker, of Early Retirement Extreme, has a unique perspective on savings.

If you save 10% of your income each year, meaning you spend 90%, at the end of 9 years, you will have amassed the equivalent of 1 whole years’ expenditure.

Effectively, you can buy your own long service leave through this plan – imagine a year off work, all expenses paid, every 9 years!

Let’s take it to the next step though.

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How much is enough?

‘How much is enough?’ is something we ask ourselves in relation to lots of things – how much money do we need? How much free time? How much should we eat or drink? These are the sorts of questions I ponder a lot, so it was with great excitement that I encountered Arun Abey and Andrew Ford’s book How Much is Enough.

One of the first reflection questions in the book is ‘How much money is enough? Why? And how do you know?’

This is a question I could not have answered when I first started reading the book over five years ago, but now is one I feel I can do some justice to – ironically, thanks to yet another book.

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How can experts influence our money decisions?

Our ways of speaking about money, and using money, are intimately tied. So can the language of financial experts influence our money decisions?

Linguistic Relativity, also known as the Sapir-Whorf hypothesis, states that the structure of a language influences its speakers’ world-view.

The philosopher (of mathematics, mind and language) Ludwig Wittgenstein’s theory of language as the means by which people both picture reality and reason famously concludes ‘Whereof one cannot speak, thereof one must be silent’.

In other words, in order to be able to talk about money, and make effective decisions about money (key aspects of financial literacy), we need to understand the language of money.

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