Last week I visited Indianapolis and I liked it very much. The city has a nice feel to it and beautiful architecture, both old and new. If you ever make it to Indy, do stop at the public library and go inside. This is one of the best libraries I have ever seen. Not only does it seem to have a very extensive stock of books, the building itself is beautiful inside and outside.

On the flight back home I was fumbling through the magazines in the pouch in front of my seat on the airplane. After I was done with the Su-Doku I picked up the magazine/catalogue called “Sky Mall” and leafed through it. I’m sure you can imagine that I had little desire to buy a lot of the things in there. In fact, rather than making a purchase, the items offered there inspired me to write this blog post.

I find some of these offerings quite amusing. There was a remote controlled tarantula for $29.95, video recording sunglasses for $199.95, and a PupStep Plus for $39.99. I wonder who buys things like that, but I don’t really have to look that far. Sometimes I have fallen into the trap of “needing” to own such a useless thing.

The most useless thing I ever bought was a “dancing flower.” I picked it up in Japan where you can find all kinds of novelty gadgets that serve no purpose at all. (I bought some of the most beautiful toothbrushes there, too.) This dancing flower was moving its stem to the rhythm of music prompted by a sound sensor. The mechanical concept is rather simple, but hey, it was a cool thing to look at. Or so I thought. That novelty lasted for all of two weeks if my rose-colored memory serves me correctly. I still own this flower, but it has not been used in years, and a battery may have exploded inside the casing, but for some reason I still have to hold on to it. It has moved with me five times for crying out loud!

Anyway, when I bought this toy it did not break the bank. It was fairly cheap. But other items I saw in this Sky Mall were a lot more expensive. These items do not serve any real purpose, either, but they may cause some people financial problems, especially if they keep spending money on such things.

That is why it is a good idea to have some sort of budget set up. Using a free budget planner helps you keep your spending in control. If you prepare your budget way in advance of making purchases, and you don’t allow for such frivolous purchases in your budget, you are more likely to avoid making them at all. After all that work at setting up and sticking to a budget, you would not want to betray yourself like that. Worse, think of how you will feel at the end of the month when you compare your actual expenses with your budget and are again reminded of that regrettable purchase. I know I would not want to catch myself like that. That is one of the reasons why the Sky Mall did not tempt me into buying anything. Another reason is my memory of the dancing flower. I think I have learned my lesson.

The other day a big box arrived at our house. My wife knew what was in the box since she ordered it, but I did not know what was in that shipment. Lo and behold the lady of the house had ordered a huge bag of flour, the kind you only see in bakeries or pizza places. I think this was a bag of 50 pounds of gluten-free flour. Let me say right off the bat, gluten free flour is a lot more expensive than regular flour and a lot harder to find. We need this flour since we have a couple people in our household who do not function well when they eat gluten, but who still want to enjoy the pleasures of bread and baked goods. Unfortunately gluten-free baked goods bought in a store are both expensive and not that tasty. That is why the lady of the house has taken up yet another role or job. She has become the resident gluten-free baker. After some experimenting she does a swell job whipping up tasty pancakes, cookies, sandwich breads, and challah. (Well, some things can be whipped up faster than others.)

Anyway, back to the big bag of flour. As it turns out the price of this gluten-free flour mix was relatively low: $2.60 per pound including shipping (because it was on sale). This was a bargain way too good to pass up. We are fortunate enough that we have enough storage space to keep so much flour cool and dry so that we can use it up over time as wifey bakes away.

Now, how do we accommodate for such an unusual expense? We don’t really have a budget line that would allow for such an expense in our monthly budget. But we don’t care about that since we have some unusual and irregular expenses throughout the year. (For example, we pay our various insurance premiums only once a year.) This flour purchase just happens to be one that also falls into an unusual category, i.e. “groceries.” Needless to say we will exceed our budget for groceries this month, but it will even out over time. And that is the most important thing to us: not to exceed our budget over time. We would not want to pass up such an offer just to stick to a rigid monthly budget. The bigger picture is much more important.

Come to think of it, I have another idea what to do with this large expense. Our little boys used the large shipping box from the flour delivery and made themselves a “house” out of it. They colored all over it with markers, and the house has already given them many hours of entertainment. So, maybe I should split up the expense between two budget items: “groceries” and “toys”! I’m pretty sure we might get back on budget then!

Money is part of life, but it is really not the most essential part of life, is it? Let me make the point by talking about financial emergencies and preparing for emergencies, a favorite topic among personal finance bloggers.

It is a favorite topic because it is so very important. Life is full of unforeseen events. If you are somewhat prepared for surprises, you will probably weather almost any storm in pretty good shape. I don’t want to get into the details of how much money you should set aside for financial surprises and emergencies, since that would be a topic for at least one other post. Instead, I want to state that it is not that difficult to set aside some money for financial emergencies. All you need to do is put a little money into a savings account every month and before you know it, you will have a sizeable sum of money socked away for emergencies. Easy, right? – Well, some of us have difficulties doing that. Not that I would blame anybody who does not have an emergency fund, since life’s expenses and desires can indeed get in the way. Still, the idea of putting money away for emergencies is pretty simple and it can be put into practice fairly easily, too, right?

We cannot say the same about other emergencies and surprises in life. What about illness? What about the terminal illness of a loved one? There is nothing we can do to prepare for personal emergencies like these. Even when we are prepared for the death of a loved one (for example, in the case when doctors may have told us a few months prior), we are still not prepared. There is nothing that prepares us for the finality of death. No emergency pile of happiness will make up for the sadness we feel in life sometimes. And this kind of sadness hardly ever centers around or involves money, does it?

So, considering the real emergencies and surprises in life, doesn’t it look so much easier to prepare for financial surprises and emergencies? Somehow we can almost always get a handle on our money situation. So, if you’re lucky enough to have food, clothing, and shelter pretty much set, then why not focus on setting up an emergency fund? Why leave yourself open to financial surprises and emergencies? Life deals us plenty of surprises and emergencies for which we cannot prepare adequately no matter how much advanced notice we get. Let’s make sure that we at least somewhat control those easy-enough-to-deal-with financial surprises and emergencies.

A while ago we wrote about getting rid of clutter in our home office (”Lower Debt and De-Cluttering My Office”), which also serves as our library. (Yes, we each own a lot of books, so together we really do have a home library.)

At that time, we said that we found that the process of cleaning up our office was kind of like de-cluttering our finances, especially eliminating debt. In cleaning up our finances, for example, we consolidate our accounts (like consolidating stacks of papers), pay off debts (get rid of paper we don’t need), put some of our expenses on autopilot and automatically add to our savings accounts (cleaning up mess and putting in place a process for putting things away as we get them). The problem with doing all this work is that it is so very easy to fall back into old habits. That is, we once again accumulate piles and stacks of papers or we run up credit card debt again, just to later have to go back to do another major clean-up.

But recently, I took a look at our office and noticed that it is still pretty neat! I wondered how that happened! Do you know that I could not think of one single thing that kept the office pretty neat? Maybe it’s as simple as not being able to stack as much stuff anymore, because in the cleaning process we also got rid of some furniture that somehow always begged to be cluttered with papers. But maybe it’s also the case that we now go through our papers more often so that they simply do not pile up as easily. Then again, maybe it is just pure coincidence – and maybe it’s just a matter of (a very short?) time before the office is cluttered again. But for the time being I revel in the fact that we have kept the office pretty clean for a few months now.

The clean office also reminded me of the post we wrote a while ago. There’s no question that it is a good idea to de-clutter one’s life, one’s office, one’s finances, etc. But that is only part of the battle. It is just as important to keep things in the “de-cluttered state,” to not accumulate crap again. This is much easier to do with finances than it is with more intangible things like the mess in the office or in the kitchen, because much of our finances can be put on autopilot, but rooms in a home can’t be put on autopilot to clean themselves! Like I said earlier, once a personal finance autopilot is set you are all done, and you simply don’t need to touch whatever you set on autopilot again, or at least not until you have some major life changes that require you to make changes to the autopilot settings. If only more things in life could go on autopilot, right?

Unless we’re independently wealthy, or somehow doing very well even in these hard times, we’re probably on a family budget. That is, we’re trying to control our spending well enough that it doesn’t overtake our income. That process is a struggle. Sometimes I struggle with having to budget at all. Maybe it never happens to you, but every now and then I get sick and tired of having to be careful with money, worn out with being wary of overspending, and battered from budgeting.

I had a big moment of that this week as I’m working on decorating my boys’ rooms. I’ve written here a few times about my desire to do this room redux on a shoestring. Well, this week I went off the deep end of that pool we know as IKEA. I dove in, thinking about all the possibilities of making the boys’ rooms colorful little zoos or princely palaces, and I think I lost myself, or at least my mind.

I am lucky. I’m one of those people who can use a credit card wisely. I bought almost everything I wanted, charged it all on the credit card, but I will take back most of that stuff within the coming week. I don’t know where hubby got his statistics from, but I think he once told me that the majority of people who bring items home from the store (without trying them on, for example) don’t bother to take those items back if they are not quite what they wanted (or, for example, if they don’t properly fit). Whooboy, if that was me, we’d be out a pretty penny this week! After I got things home, and started moving the furniture into the rooms, I realized pretty quickly that not everything was going to fit, or look the way I expected it to. Most of my plans were realistic, but failed at the execution stage.

I wouldn’t recommend it for everyone, but this was a really great exercise in blowing off some consumerist steam. Now that I have my frugal wits about me, and my receipts, I can remedy that situation pretty easily.

Am I the only one, or does the buying bug hit any of you? What do you do about it? And how readily do you bounce back once bitten?

This fall, we’re launching anew our web application that helps you organize and make decisions about your personal finances. It will have a whole new look and a whole new name: Money Obedience! It will include a free budget planner and many other personal finance tools that create reports in plain English.

Why? We decided that we needed to get the word out that there’s a site that can serve a lot of unmet needs. Also, we thought that the relationship that many of us have to our money is like that of a much-loved but unruly dog. How many of you have known a dog to inappropriately jump on a person, or pull on the leash, or do much worse, making the dog just a bit out of control and the owner harried and suffering for it? And how many of you know that with just a bit of obedience training, dogs can really be like (wo)man’s best friend?

We all agree, I’m sure, that one can’t live without money in the good old US of A. Since money has to be our constant companion, we may as well make money our best friend. Making money a friendly companion, something we control instead of having it control us, is really our goal. And we believe that everyone can use tips on how to get his or her money to do what he or she wants it to. And we may as well learn the tips and tricks not just to handling it, but handling it well, so we can have a peaceful financial life.

So, we thought, why not market the service as a money obedience school? Just like with an obedience school, you sign up to learn new money tricks at your convenience. You get advice on your particular situation – whether you’re starting from scratch with a small money puppy, or you’re teaching a big old money dog a new trick, or trying to tame a huge and unruly money beast you’ll afraid might bite if you look too closely. Our school can do this because as you share with us your information we give you our opinion tailored to your unique situations, your specific questions and needs – all in plain English. You set up financial goals based on what you want your money to do for you and exactly how you want it to enhance your personal and family life. Perhaps your money behaved once upon a time, but is not doing what you want now – you can always seek pointers or brush-ups to find out what in your financial life could be tweaked to get you the results you want. The analogy works, don’t you think?

That’s our plan. We’re taking the first step by renaming our blog a little ahead of time so that you, our readers, won’t be caught unawares. Watch for the new site to launch in the next few weeks. And, of course, if you like what you see, please tell your friends!

A few weeks ago, my husband wrote about how adjusting our spending affects our retirement planning, and I wanted to say a few things about that. He explained that he took a look at our retirement accounts and noticed that we’re falling behind, but not by very much, and he also explained that he wasn’t that worried about it. I thought I’d explain a little more about why this isn’t so worrisome to me either.

He’s right – we did lose some of our investments in the recession. (And who didn’t?) But we cut back on our expenses, too. When we looked at our retirement accounts recently we realized that we are falling very slightly behind plan these days, but not to a worrisome extent. The reasons for this shortfall are quite obvious to me. For one, we lost a little bit of money with our investments, but that is part of the deal when you put money into anything other than federal government guaranteed things – at least for some periods of time. The other reason is also quite simple. Our household income has dropped a bit which makes it a little more difficult for us to put money away. But that is not necessarily all bad for our retirement plan. Let me explain why that might be the case.

It did take us a little while to downshift in spending but we did it. This did positively affect our retirement plan in two ways. One reason is that we’ve already figured out how to spend less on our daily household maintenance. Assuming we keep that up, we can also take down our projected expenses during retirement in equal measure. That means that we do not need to save quite as much as we needed to save before we figured this out. And that means that even if we have to digest the decline of our assets, our retirement plan is in better shape than we might otherwise think.

There’s a second reason why lowering expenses now will positively affect our retirement planning. If we adjust our daily spending downward now, we may have enough left in the budget that we won’t have to cut the allotment that we put away for retirement beyond what might hurt us in the long run. (We were putting away more than we needed to – we only ceased contributing to a supplemental retirement fund when we cut back. We still put away enough for matching funds. If your employer matches the funds you put away, the minimum you should put away is the maximum amount the employer would match, otherwise it’s like not accepting free money!)

I’m really glad that hubby keeps on top of these things like our retirement plans – he’s the one that really monitors our long-term accounts. But I’m glad that what I do to lessen household spending makes such a difference in both our short-term and long-term financial health.

Any list of 4, 7, 10, or more things is popular among writers – not just among journalists, but also among bloggers. But lists themselves don’t do that much. (1)They are most likely incomplete. (2)They may be deeply flawed. (3)They may be outright wrong. (Now, for a self-effacing question, “How many of the three problems in my lists apply to this list itself?”)

Two days ago MSNBC published an article entitled “Seven lessons from the financial meltdown.” Among these seven lessons, there were two that are really not lessons, and if they are lessons I say they are teaching us the wrong thing.

First they said that this is wrong: “A house is a great way to save money for the long term.” Nope, they’re wrong. This idea has held true for generations before this one and it will hold true for generations to come, no matter that this article wants to convince us otherwise. The underlying problem is that we have grown to view a house as a financial asset rather than a home. Those previous-generation parents who were lucky enough to buy property bought a house and made it into a home. They paid off the mortgage over time and owned it outright in retirement. The house had indeed grown into a major asset by the usual means – they accumulated their wealth one mortgage payment at a time. There were no refinancings, there were no second mortgages, there were no cash-out mortgages; there were only plain vanilla mortgages that were paid off dutifully month after month. That is how previous generations accumulated wealth with their houses. We just stopped doing that. But that does not mean that a house is not a great investment for most families anymore. We just have to go back to basics.

MSNBC also tried also to convince me that this one is false: “Asset allocation is a good defense against losses.” – This, too, has held true for generations and will also hold true in the future. Sure, the best asset allocation cannot ensure that you never have to look at any losses when you invest in risky assets, but that is not the point of asset allocation. The point is that asset allocation allows you to accumulate wealth over time in a way that fits your personal risk attitudes and that balances all financial risks against each other. There will always be up and downs with risky assets. But that does not mean that asset allocation is a silly and useless exercise. As a matter of fact, as soon as you own any assets, you have made a decision to allocate them, even if you decide to put all your assets into a savings account. If your assets are somewhere, you’ve allocated them! If they’re in a savings account, you may not face big losses like many of us faced during the decline of the stock market, but instead, you will face a steady and relentless erosion of your spending power that will make you relatively poor over time because savings interest surely never keeps up with inflation. Therefore, no matter what you decide, you are contending with economic risk. So, you should think hard about asset allocation if you want to hold onto your hard earned money.

As far as I am concerned, there is only one lesson that we can take away from the financial crisis and it’s this lesson I’m standing by: “Time honored financial principles work no matter what the circumstances.” There is no get-rich-quick scheme. There is only sound financial planning and financial management that keeps you financially safe in the long run. Oh yes, that also implies another lesson, so sorry, I have to add one more. It’s: “Don’t believe the hype,” like the hype fuelled by media companies like MSNBC, CNBC, and others during the housing bubble.