I spent a significant amount of time preparing this PDF, essentially compiling the information available at that URL into a single, well-formatted document, designed for easy reading. It ended up being nearly a small book in length – 60 pages, in fact. If you print it out like a book, it would take up 15 sheets of paper and form a 60 page booklet – a nice sturdy pair of staples in the middle would do the trick! In other words, it’s basically a personal finance book in electronic form.

Great! How can I get it? If you would like this file, click this link. It will take you to a special PayPal page, where you can pay $2 securely and safely and download the file.

Why are you doing it this way? First, I spent a significant amount of time preparing the document so that it is easy to read and also so that it will print well in a booklet format – not exactly a task I enjoy. Second, I don’t want to place it up on the server for anyone to download because I’m concerned that it may become very popular and devour all of my bandwidth very quickly. Third, I’m interested in seeing whether or not there is any merit to the concept of micropayments and micropatronage as a method of ensuring content that people enjoy on the internet. On the other hand, I also want information to be free. This is the best concept I had for balancing all of these facts and ideas.

What’s the catch? There is no catch. Once you have the PDF in your hands, you have my full permission to give it away in whatever way you’d like. Mail it to everyone in your family who may be having financial problems. Send it to all of your friends. You can even post it as a free download on your own site as long as you also include a link back to The Simple Dollar. The only thing you may not do with it is sell it on your own, as this information is meant to be free.

Be sure, though, that the HTML version of 31 Days will always be free to anyone who wants to read it. This method of distributing a PDF copy of it is merely an experiment. I will never, ever distribute any content via a paid PDF that isn’t already available for free on the site.

Again, if you want a PDF copy of “31 Days To Fix Your Finances,” just click this link and pay $2 via PayPal.

During the month of January, The Simple Dollar has been running a series entitled “31 Days To Fix Your Finances,” a series of activities that can enable anyone to improve their financial status by centering your financial life around your own core values. Instead of supplying a bunch of budgeting sheets and asking you to commit yourself to a program, this series is about figuring out what you want out of life and reorganizing your finances so that you can have it.

What follows is a summary of the entire month’s activities, with links to each individual day. If you’re at all concerned about your personal finances or find yourself often feeling strangely guilty about the money you spend, you’ll find some value in the activities of the month.

Let’s get started.

Stage 1: Figuring Out Your Goals And Values

Day 1: Your Five Main Values
Day 2: Defining Your Goals From Your Values
Day 3: Create A Plan For Each Goal

The underlying challenge that most people have with their finances is that they see money as distinctly separate from the rest of their life. Money is an antagonist, an enemy that keeps you from doing what you want to be doing. The truth is that money is merely a tool, and when you find yourself feeling as though money is an antagonist, it is no different than a person attempting to learn how to use a heavy sword; it’s unwieldy and dangerous.

The first step for learning how to integrate money into your life and use it successfully as a tool is to figure out what exactly you wish to build with that tool. Without underlying values, goals, and plans, money is no different than swinging a hammer around without building something. Thus, this first stage is crucial: what exactly is most important to you, and what will it take to adequately support those values?

Stage 2: Evaluating Your Situation

Day 4: How Much Did You Earn Last Year?
Day 5: How Much Did You Work Last Year?
Day 6: Your True Hourly Wage

Once you’ve figured out what is central in your life, it’s time to take a serious look at what you have to work with. How much do you make, and how much time do you spend making it? This seems like an easy question, but it’s not. How much of your income do you spend maintaining your job, via transportation, career development, clothing, and so forth? And how much time do you spend doing things devoted to your job, such as going to work, coming home from work, attending work-related functions, and so on?

When you calculate these new numbers, you might be shocked both at how much time you actually spend working in an average week, as well as how little you actually earn. You can drive this point home especially clearly by calculating a number that we’ll use throughout the month, your true hourly wage. How much do you really make for each hour that you spend devoted to your job? It’s not nearly what you might think, and that alone might shock you into considering some different avenues.

Stage 3: Building Your Own Life Budget, Not Following Someone Else’s Prescription

Day 7: Work For Your Dreams, Not Your Money
Day 8: Breaking Down Your Expenses
Day 9: Cleaning Up Your Expenses
Day 10: Fitting Your Expenses Into The Bigger Picture
Day 11: Dividing Up The Rest and Finishing Our Time Budget
Day 12: A Flexible “Budget” That Reflects Your Reality

Once you’ve taken a hard look at what you actually earn, you can begin to set up the basic framework of how to spend that money that is in line with your personal goals. This isn’t about printing out worksheets and trying to jam your life into the pigeonholes that someone else has created for you; instead, this is about defining how you spend money and working from there.

It’s almost unfair to refer to this as “budgeting,” because budgeting carries with it some very bad connotations, much like putting on an uncomfortable suit. This process is much more like going to a tailor, who uses you as the basis to construct a custom suit that fits you. This process will create a custom budget that fits your life with your values and goals as a basis. We’re not talking about restricting you to spending $20 a month on “dining expenses,” but instead creating a structure where you can decide what’s appropriate because you can see how it relates directly to your dreams.

Stage 4: Looking At Your Life, Piece By Piece

Day 13: Pay For Your Dreams First
Day 14: Get Rid Of Debts (Slowly But Surely)
Day 15: Coming In Under Budget and An Emergency Fund
Day 16: Evaluating Your Expenses – Home and Auto Insurance
Day 17: Evaluating Your Expenses – Life Insurance
Day 18: Evaluating Your Expenses – Energy
Day 19: Evaluating Your Expenses – Automobiles
Day 20: Evaluating Your Expenses – Food
Day 21: Evaluating Your Expenses – Housing
Day 22: Evaluating Your Expenses – Monthly Services
Day 23: Evaluating Your Expenses – Bank Fees
Day 24: Evaluating Your Expenses – Entertainment and Hobbies
Day 25: Evaluating Your Expenses – Credit Cards

Once you’ve got a basic budget in place, it’s well worth spending some time carefully evaluating those numbers that represent you and see if there are any places where there is excess fat – and simply trimming it away. Is your electricity bill pretty high? Maybe there are a few simple ways to reduce it. Getting tired of paying that life insurance bill? Maybe you don’t need it at all – or can utilize something less expensive. Getting dinged over and over again with bank charges? Look at what they’re charging and do something about it. Credit card finance charges eating you alive? There are some easy ways to reduce them.

We’re looking for ways to trim away fat (things that make you uncomfortable when you look at them) so that the meat (your goals, dreams, and values) have room to thrive. You don’t have to eliminate that daily latte if it brings you joy – just look for the many things you can do without or that you can reduce without significant pain and you’ll have the money to chase your dreams.

Stage 5: Setting The Stage For Lifelong Success

Day 26: Refining Your Budget
Day 27: Keeping Good Records
Day 28: Preparing For The Inevitable
Day 29: Paying Cash
Day 30: Live What You Love
Day 31: Keeping It Up

Now that the complete package is coming together, there are some basic methods for keeping the momentum going. What do you do with the fat you’ve trimmed away? How do you keep track of all of your financial information so that it’s not chaotic and incomprehensible? How do you ensure that you’re not ensnared in loan debt over and over again? How do you keep this good thing going?

If you follow this plan and keep these principles in mind, you can easily live your dream. It’s all up to you, and it takes just an hour a day for a month to get things going.

Now that the end of the month has come, one final challenge remains: how does one keep up the momentum once you start with it? The day to day challenges of life are difficult and uncertain, so how can this plan ever deal with an ever-changing life?

Unlike most financial plans, this one has something intimately familiar at its core: you. Because you’re at the core of this plan and not some form that you fill in and try to constrain your life to match, this plan can easily grow and change with you with just a few simple steps.

Once a week, make sure you’re making some sort of progress towards your short term goals. You don’t have to accomplish something every week, but keep them in mind – and regularly take the time to make forward progress towards your dreams.

Once a month, diligently update your life budget. You can do it with just money, but it’s often useful to re-calculate the hours of your life spent working for each item each month, as it is a healthy reminder of where your time goes.

Once every few months, evaluate your progress towards your long term goals. I like to do this on the first day of each season – not only does this keep me on an “every three months” pace, it keeps me in mind that time is passing and the seasons are changing, so I’d better keep up with it. This usually results in a flurry of new activities for a short period with a gradual slowing down – but it does keep me always moving towards my goals while many others stay stuck in place.

Once a year, reevaluate each of your life’s values and ask yourself whether they match your life now. When I first looked into my child’s eyes, the values of my life changed quite a bit, and thus my goals changed substantially as well. From that, unsurprisingly, my budget changed, too: I suddenly found great value in buying diapers, but also great value in buying books and educational toys for infants and toddlers. My values used to be such that buying software was in line with my life goals; now, buying wooden alphabet blocks for stacking is much more in line with what I want to be doing.

Even if you fall off, there is never a day where it’s too late to get back on. Even if you find yourself starting to fall back into your old ways, that doesn’t mean it’s time to abandon the plan. Old habits are hard to break. Try going through this entire process again to remind yourself where your values lie and what your goals are.

Good luck.

If you’ve followed this plan all the way to this point, congratulations. Even if you’ve chosen to not follow every point, you have at least spent some serious time evaluating your finances and your spending and put them in the context of your overall life, which puts you already far ahead of many of your peers.

However, the reality of the world leads many of us to forget what our overall goals are in a desire to be accepted and to feel good. Our society tries to convince all of us to spend endlessly. We’re constantly bombarded with enticements and reminders of how “great” it is to spend.

Here are seven useful tips that can help you keep your mindset in the right place, enabling you to live what you love every single day. Some of these might not work for you; just use the ones that seem as though they would be a powerful motivator.

Wrap your credit cards in a slip of paper that lists your life goals that you defined at the start of the month. It shouldn’t take more than a little slip of paper. This way, every time you go to pull out your credit card, you see your goals right there – and it becomes a reminder that by using this card, you are likely pushing away those goals.

Reevaluate your social situations. Is an evening with friends always expensive? Is a day with the girls involve a big pile of shopping bags? If these things are true, your social situations may be causing you big problems. You have several options: suggesting other activities and seeing what happens, going along and capping your own spending, or simply “dropping out” of the social club and instead investing yourself in new activities – and perhaps new friends that better match your life goals.

Engage in inexpensive activities that match your life goals. If you dream of becoming a writer, don’t spend your time at the mall buying stuff. Engage in online writing communities and look for ways to spend your time practising your writing. For almost any life goal or dream you have, there are inexpensive activities you can become involved in that synergize with that activity. For me, I’ve started this blog as a way to channel my writing and also educate myself about financial issues instead of spending my time doing the same old thing; it’s a great way to spend my time that’s much more in line with my life values, plus it’s very inexpensive.

Use the ten second rule. Whenever you find yourself about to buy anything, count to ten and ask yourself whether or not this purchase really meshes with your life goals. Quite often, you’ll find that it doesn’t, and this will be enough to cause you to put that item back on the shelf or to close the browser window.

Keep a laminated “life goals” card in your pocket. This way, every time you reach into your pocket, you’ll feel that laminated card. It will serve as a constant reminder of your goals and help keep your mind on a strong path.

Keep yourself clean. This seems bizarre, but a healthy personal appearance is well worth the money. By this, I don’t mean investing money in clothing. I mean that investing adequate time in keeping yourself clean. You’ll feel more confident and in control, and this will enable you to more easily resist the siren’s call of spending.

Live what you love. Every single day, do something that is directly in line with your lifetime goals, and as you go to sleep that night, think back on it. Very few things make me feel better as I’m going to sleep than reflecting on my day and realizing that I spent today not just doing things, but actually living my life.

Ready? Let’s continue on to the next day.

There is one final point that merits discussion before we close out this month, and that is the logic behind paying cash for any purchases smaller than a home purchase. This includes automobiles, appliances, furniture, electronics, and so forth. To most Americans, this concept is almost alien, but if you take nothing else away from this month, this is the concept to remember.

Why pay cash? To put it simply, instead of paying some company an interest rate, you can invest that money yourself and earn some interest. This might seem like a minor issue, but in actuality it is thousands of dollars that you’re throwing away, more than enough to keep companies like GMAC in solid financial shape year after year after year.

How much can I actually save? In this example of a late model used car costing $10,000, you can pocket about $3,000 simply by paying in cash rather than financing the car. That’s how much you will pay in interest, plus the amount that you can earn in interest in a savings account. Do that three times and you’ve literally netted a free car.

How am I supposed to pay cash for a car? The next question that many people ask is how they can possibly pay cash for a car. If you’ve followed this plan from the beginning, the answer should be pretty clear: your emergency fund. If you see that an auto purchase is coming, start rolling money into your emergency fund instead of into other investments or uses, building it up to the point of having several months of salary in it. I recommend making car payments into the emergency fund at this point, preferably for a couple of years. Then simply walk into the dealership, negotiate a price without saying that you’ll use their financing, then write a check. After that, you’ll probably need to build up your emergency fund again, but you won’t be making payments on your car.

I can’t do that right now! That’s true, you probably can’t do that immediately. But you can set it as a goal. One big step towards achieving that goal is to stop leasing, because auto leases as they allow you to effectively rent a more expensive car than you can afford, but leave you with nothing in the end. If you already don’t lease, then buy a late model used and drive it for years past the end of the financing. While that’s happening, continue to make your car payments into your emergency fund. Then, when the time comes, you can simply buy a car, no questions asked.

So what can I take away? Spend some time and plan out when your next auto purchase will be and what type of car you’re aiming to buy. Then, calculate the numbers and see if you can put yourself in place to pay in cash. Can’t swing it? Could you swing it if you drove that car for another year? Remember, this does fit into your budget if you just transform your car payment into payments into your emergency fund, and in a few years the dividends of seeing interest build up on your car “payments” will really start to show.

Now that the month is almost complete, we’ll spend the next two days tying up some loose ends.

Ready? Let’s continue on to the next day.

Today, we’re going to talk about planning for your passing in the form of a will or a trust, something that many people haven’t done. The truth is that it’s not something that’s necessary for everyone – but if it is necessary, you need to set aside a bit of time to get it done.

First of all, determine whether or not you need such a thing at all. I usually ask two questions: do you have any dependents besides yourself? and do you have any relatives or friends that you wish to have your things or money when you pass on? If you answer yes to either question, then it’s time to get legally binding plans set in place. If you answer no to both (many young people will, in fact), then don’t get one, as intestate (the state’s default method for handling your leftover assets) will take care of things for you.

If you do need to make a plan, though, don’t go cheap and get a kit – contact a lawyer and do it right. Ask around for references to one who can handle your will or trust preparation easily and clearly and can make sure that it is in fact legally binding in your locality. The fee for this is usually not too high, but knowing that the document is properly prepared makes it worth all of the effort.

There are a few basic things you should know before you go, though:

First, a will is the actual document that lists what you wish to happen to your estate upon your passing. There is one big drawback to a will: in most jurisdictions, for a will to be legally executed, it must go through a legal process known as probate to ensure that the statements in the will are actually carried out, which can be expensive.

Thus, some people choose to set up a trust (often called a revocable living trust), a legal entity to which a person can assign all of their assets while they are alive. This trust is legally bound to follow the rules of the trust, which usually kick in when the person who set up the trust passes on. Since these assets are owned by the trust and not by the person, they’re often not subject to probate. The only drawback is that it can be expensive.

Again, to make sure that everything goes right, ask for appropriate legal advice to ensure that you know what you’re doing and the document is in fact legally binding. For me, it was the best money I ever spent.

Spend an hour piecing together what your wishes are for your estate, then contact a lawyer. Knowing that things are taken care of when you enter the afterlife is a huge relief to many people.

Ready? Let’s continue on to the next day.

Now that you’ve built a value-oriented budget and evaluated your life in terms of your rediscovered central values, it’s time to take care of a little bit of housekeeping. The first part of this is keeping good records, something that seemed overwhelming and unnecessary to me at first. Once I finally broke down and did it, though, I found it to be a fantastic way of feeling more in control of my finances and my life as a whole.

Why keep good records? First of all, good records can protect you against errors. If you have adequate financial records, you’re prepared for an audit, prepared to apply for a home loan, and prepared to verify anything that anyone might claim. Second (and actually more interesting most of the time), good records enable you to analyze your financial life. With everything organized, you’re prepared for any sort of spending analyses you may wish to do.

How do I organize them? There are several strong organizing systems out there; spend some time looking at several of them and choosing one that works for you. Popular ones include David Bach’s FinishRich filing system and the LifeFolio filing system. I also describe my own system. You might also want to use this handy checklist of items that you should file.

What materials do I need? If you’re just getting started, a pile of folders and a box will do the trick; later on, if the system is working for you, you might want to invest in a filing cabinet. I wouldn’t invest in one, though, until you’re sure that you’re actually using the system with regularity.

I don’t know where to start! Help! When I started, I was completely overwhelmed with all of the papers stuffed into dresser drawers, desk drawers, and boxes. Whenever I thought about getting it done, I would quickly come up with something else to do. But when I finally sat down and did it, the process wasn’t too bad. Here’s what you do:

Set aside a block of time to do it. This is a great afternoon activity, so just pick an afternoon to get your items in order. Make sure you have a large box and plenty of folders before you begin.

Find a place with plenty of space to spread out. I used the living room floor.

Make a pile for each different type of record, and use the opportunity to discard everything inessential. You’ll probably wind up with a lot of piles. Don’t worry about any sorting within a pile, just get through all of the things you have built up. You should also be throwing away all inserts, envelopes, and other unimportant things.

Sort each pile by date. I like to have the newest on top, so I sort them in reverse chronological order.

When you’ve sorted a pile, put it straight in a folder, label it, and put it in the box. As you see the box filling up with organized records, you’ll feel a lot better about things. For me, it was rather exhilirating to watch things slowly becoming ordered where there was only chaos before.

Tomorrow, we’ll look at a topic that no one likes to think about.

Ready? Let’s continue on to the next day.

For the last several days, we’ve been focused primarily on digging through our monthly expenses and looking for places to trim away some fat. It will take some time for this to become clear, so today we’re going to look at how you can refine your life budget each month as the expenses begin to move downwards – and the available cash goes upwards.

First of all, at the start of each month, you should refine your “life budget” a bit. What this means is that you should take out the budget you prepared the previous month and use that as a starting point to develop the next month’s budget. Since we’re nearing the end of the first month, I’ll walk you through this process once so you can get a feel for what should be done.

At the start of the month, take out your budget from last month and all of the statements you got in the intervening month. You’ll also need a clean piece of paper for the budget for the upcoming month.

The first thing to deal with for the coming month is your overall income. If your income this month is the same as last month, just carry the amount over to the new budget. If you got a raise that will start taking effect in the coming month, enter that amount on the new budget instead.

Next, deal with the expenses. Copy each expense (but not each expense amount) over to the new budget. Then, copy over each expense that you didn’t get a statement for in the past month. These expenses will remain unchanged.

Now let’s deal with the expenses with new statements. Rather than confusing you too much, I’ll give you an example of what to do to start with. Let’s say your past budget had an electricity bill for $100, but in the intervening month, you installed CFLs and did a few other things, and the new bill is only $80. Rather than celebrating and immediately writing the lower amount into the new budget, hedge your bets a little. Take the amount from the old budget and multiply that by 4, then to that add the amount of the new bill. Divide that number by 5. That’s the number you should write in for your energy budget for the coming month.

This trick is called weighted averaging, and it protects you from making significant changes based on one data point that may or may not be unusual. Over time, your energy budget will go down. For example, let’s say that for the next six months, your energy bill stays at $80, and then summer kicks in and your bill goes back to $100. If you use weighted averaging, the bounce back won’t hurt you at all, because you’ll have a bit of a surplus from months of slightly overbudgeting and it’ll be no problem at all to pay the bill. However, if it bounces back suddenly, your budget will be damaged by this sudden change.

If you’ve been diligent about doing trimming, you’ll probably notice that after a few months, your numbers for expenses are either staying the same or trending downwards. Even better, you’ll probably be seeing some surpluses at the end of the month beyond your budget. That’s great; just move those surpluses into a savings account so they can earn some interest, and then move them back out if you need them. Even better: your budgeted total for expenses for the month is also lower than it was before. What does that mean? More money to eliminate debts and dreams!

Now that you’ve seen a little drop in budgeted expenses over the previous month, you can allot that money towards the debts and the future plans on your budget. My advice is to channel them into more extra debt payments, but you might also want to bolster a long-term plan as well. At the very least, take half of that extra money and add it into paying off debts, because the freedom of being debt free is incredible.

So just copy over the debts and plans from the previous month, except add in the reduction in other expenses to the debt you’re focused on or perhaps also put part of it into one of the dreams. And you’re done for another month.

I like to keep my current budget posted in a place where I see it regularly, along with another big reminder: I use Excel to create a chart showing my expenses and debts going down each month. Seeing both of those lines heading south is a big reminder that I’m living a financially healthy lifestyle.

Tomorrow, we’ll look at some ways of managing your financial records.

Ready? Let’s continue on to the next day.

Today is the final day of expense evaluation before we begin to tie things up (the month is nearing an end, after all), so today we’ll tackle what is perhaps the biggest financial rough patch in the United States: credit cards. As anyone who has ever faced a big pile of credit card debt can tell you, credit cards are nefarious little devils that can sneak up on you and destroy all of your financial planning if you’re not careful. Thus, here are some tips for managing that month-to-month credit card debt; spend some time today implementing them to reduce your monthly credit card spending.

Look into moving your balance to another card. If your credit is strong, you can easily obtain a 0% APR on balance transfers for as long as 18 months. Doing this can transform high interest debt into no interest debt, meaning that each payment will go straight towards eliminating the balance. Be sure, though, that you have eliminated a lot of the balance during this period, because it will be painful when the interest payments come back.

Ask for a rate reduction. Another potential avenue for reducing the monthly interest on a card is to call the number on the back of the card, get to a live operator, and ask to speak to a supervisor. At that point, tell them you’re tempted to take a balance transfer offer in order to consolidate your debt and request that they reduce your interest rate. Quite often, they’ll be happy to oblige because earning less interest on a credit card is better than earning nothing at all.

Look for lower interest methods to consolidate your credit card debt. You may have available to you a home equity line of credit that is at a much lower interest rate than your credit cards, so it might be worthwhile to pay off the cards with the HELOC. Another possibility is discussing a personal loan with your local bank; you might be able to consolidate a lot of the debt into a relatively low interest loan. However, these tactics don’t mean you have a clean bill to spend again! Put the credit cards up for a while and learn how to live on the money you have.

Stop using credit cards for day to day expenses until you can eliminate the debt. Until I got my credit cards under control, I moved to using checks and cash wherever possible, supplemented by a debit card. I treated the credit card bills as a loan that needed to be paid off, not as a tool to buy more stuff I couldn’t afford. I didn’t cut them up, though; I just put them in a place that was hard to access. Why? Canceling a bunch of credit cards all at once can be severely detrimental to your credit health.

Tomorrow, we’ll begin to finish out the month by re-evaluating where we’ve been and looking at ways to keep the momentum going.

Ready? Let’s continue on to the next day.

If you’ve been following along with this series and have been participating in the expense evaluations of the last week, you’re probably feeling pretty good about your financial direction. Now we come to the part that is the hardest for people to give up – and the one that makes most people relapse: entertainment and hobbies. In other words, all of the consumer joys you have in life, from television to gadgets to video games to clothes shopping.

I’m going to say something shocking here: if you really want to commit to this plan long term, you should not give up most of these things. They bring a lot of day to day joy into one’s life and the guilt that they bring is due to excess, not due to the spending itself. The key is not to trim out all the lattes you drink, but instead trim back a few lattes a month. That way, you can still get the simple pleasure of enjoying a latte, but you also get the pleasure of skipping one every once in a while with the realization that you’re skipping it for good reasons. It turns something that can be a big negative (and thus makes it very easy to quit and give up on) into something that is a net positive.

With that being said, take some time today and go through your more frivolous expenses in a given month. You can start by digging out your last month worth of credit card and checking statements and highlighting everything you bought for pure entertainment, simple pleasure, or for a hobby. This might take a little while, but it’s worth the effort.

Once you’ve highlighted all of them, go back and make some approximate groupings. For example, group all of your coffee shop visits together, or all of your book purchases together, or all of your music purchases together. Use groupings that make sense to you; if you try too hard to use what someone else thinks should be grouped together, it will have no meaning for you.

Now, go through these groupings one at a time and ask yourself whether it would detriment your life to trim back spending in this area. Let’s say you buy a grande latte each morning at the coffee shop. Maybe you could cut this back to four times a week, with two of them being regular lattes? That way, you could still enjoy your big latte on Monday morning and Friday morning and still have some on Tuesday and Wednesday, and just drive into work with a smile on Thursdays knowing you’re working for a great future. You might also pledge to go to the library and mill around every other time instead of going to the bookstore or the music shop. Remember, if cutting back at all makes you feel really unhappy, then don’t cut back.

These little changes are the ones that quietly make a big difference; if you try to make a big change, it will be no different than a New Year’s resolution where you decide to diet and spend the first week eating salads. By the end of January, you’ll be knocking back the proverbial poundcake and it will have all been for naught. The key is to find those places where you can cut off some fat without damaging the meat.

Tomorrow, we’ll look at credit cards, their fees, and what we can do to reduce them.

Ready? Let’s continue on to the next day.

The vast majority of Americans do their primary banking with one of several very large bank chains. Unfortunately, these large chains are often almost insulting in how they treat their average customers, charging numerous fees and other crazy charges that, over a year, can add up to quite a lot.

Today, we’re going to take a serious look at how your bank (or banks) treats you. Pull out a blank sheet of paper and a copy of your last bank statement. We’re going to see what the fees are costing you – and see if there’s anything you can do about it.

First, copy every single charge that’s not a purchase from your statement to your blank sheet of paper, along with the amount. Leave plenty of white space over to the far right so we can do a few simple calculations. If you earn interest on the account, include that amount as well.

When you’re done, total these charges up (don’t include any earned interest – we’ll deal with that separately) and find out what your account is really costing you a month. The first time I did this, I discovered that I was losing about $25 a month in small fees. Each fee seemed tiny, but when I spent the time to add them up, I was flabbergasted.

Want to surprise yourself even more? Multiply that total by twelve to see how much you’re being dinged for in a year. You should also figure in another 2.5% beyond that total because you could easily earn that much in savings over the course of a year. For me, I saw a total charge of over $300, meaning for the opportunity to use my money for their investments, the bank was charging me $300 in fees a year.

So what can you do? If the charges are appearing in your savings account, look at getting an ING Direct or HSBC Direct savings account. Both are basically charge-free and both earn a stellar interest rate (4.5% and 5.05% respectively). I went from earning about 0.5% on my savings account with occasional fee charges to earning 4.5% with no fee charges ever, putting a lot more money in my pocket.

If the charges are appearing in your checking account, take a look at some local credit unions. Credit unions generally have very strong checking accounts with almost nonexistent fees, though of course your mileage may vary. I found a local credit union that doesn’t charge me any fees at all while offering me all of the same services as my own bank; the only time I’m ever dinged is when I use an ATM in a strange place, and even then the fee is very small. I now probably spend $10 annually in fees versus $300.

If you’re worried about the process of switching primary checking accounts, I’ve written a guide to aid you in this process. It takes less work than you think and over time the savings can be tremendous (if you can save $300 a year like I am, it’s well worth the switch).

Ready? Let’s continue on to the next day.

Most of us have a set of monthly bills that we pay as part of our regular routine. They constantly chip away at our monthly and annual budget, eroding how much we can spend on a regular basis. Some of these are essential (electricity), while others are maybe less essential (Netflix). Today, we’re going to take all of these monthly expenses and see whether or not any of them can be reduced or eliminated.

First, make a list of every monthly bill you pay. Cell phone, cable, internet, electricity, mortgage, rent, insurance, and so on. Write the approximate amount you pay each month next to them, but leave some space over to the right for some more calculations.

Once you’ve made this list, cross off the ones that are fundamental for day to day life. Electricity is fundamental, while internet access is not. The mortgage is fundamental, while Netflix is not. Loan payments are fundamental, while cable or satellite television is not.

Now multiply each of the remaining elements by twelve so that you can see how much the bill is costing you in a year. You should also multiply that yearly amount by 1.025 (2.5% more, in other words), because that’s how much you’d have if you put that bill amount into savings each month. Multiplying out the bill amount like this can often make a reasonable bill seem crazy. For example, if you pay $19.95 a month for Netflix, that’s $245.39 a year towards your life dream that’s going away. Spend $50 a month on cable? That’s $615 towards your dream gone forever. Got a $200 country club membership fee? $2,460 a year goes poof.

At this point, go through each item and ask yourself whether it’s worth what you’re paying for it. It might be worth it to you right now, or you might realize that it’s something you rarely use so it’s not really helping you build towards your dreams. Most likely, you’ll find ways to reduce that bill without eliminating it. Maybe you can go to a cheaper plan on Netflix ($61.50 saved a year), or you could eliminate $15 worth of premium channels from your cable bill ($184.50 saved a year), or you could get a less expensive calling plan from your cell phone provider.

It’s important to remember that even though each cut seems tiny, if you’ve been following the plan this month, you’ve trimmed away a lot of fat from your budget without really affecting your way of life all that much. Depending on your choices, you may have dropped ten percent of your expenditures already; if you take that ten percent and use it to pay off debts now and later invest it in your dreams, you’ve literally taken a dream that seemed impossible and transformed it into something possible.

Tomorrow, we’ll look at some effective mechanisms for battling bank fees.

Ready? Let’s continue on to the next day.

Most people, once they’re locked into a home mortgage or have moved into an apartment, feel as though that is an amount that they are simply down each month, with no real way to reduce that amount. It’s simply not true; it’s just a psychological trick within your mind. The real truth is that there are ways to effectively reduce that amount each month without adding any significant risk to your situation.

Here are five avenues to explore in terms of reducing your monthly housing bill. Spend some time considering each one and actually ask yourself whether or not these things are feasible for you.

Rent out a room. Some people feel very uncomfortable doing this, but it is definitely a great way to reduce your monthly housing costs. If you have a close friend or relative who is in need of inexpensive housing, offer to rent them a room at your home for a good rate; you could even offer to give them board as well for a higher rent rate. When I was in college, a friend of mine used to pay $500 a month to one of his parents’ friends in order to have space in their basement and free meals. We are also considering renting out a room in our own home after we make the big purchase.

Consider a home downgrade. If you’re a married couple with no children left in the nest but a lot of bills to pay, it might be worth considering buying a smaller home or an equal sized one in a less expensive area. This is especially true if you cah sell your current home and move into a smaller one that’s already paid off; it puts you in great position for the final push to retirement.

Negotiate. If you’re living in a rental situation, negotiate with your landlord. Offer to sign a longer lease in exchange for lower rent if you know you’re going to live there for a while. If you have a bit of money in the bank, you can also offer to pay several months of rent at once in exchange for a discounted rate. A close friend of mine was able to write a check for a year’s worth of rent at once and her landlord gave her a 40% reduction in the rent level, simply because there was no risk on the landlord’s part.

Practice preventive maintenance. Here’s an excellent checklist for basic home preventive maintenance. It can seem like a lot of work, but it’s a great way to save money. Set aside a few hours each month for these routine tasks and things will be much less likely to break down or cause major unexpected expenses.

Refinance. This is a carrot dropped in front of many people – and some jump for it without thinking about it. Spend some time and run the numbers to see whether a refinancing might improve your month-to-month financial situation. Don’t just jump on a refinance because it offers lower rates now, though; only get into a fixed rate refinancing.

Ready? Let’s continue on to the next day.

For many of us, food eats a much bigger portion of our monthly budget than we even realize. We grab some fast food a few times a week, grab take out a few more times a week, and dine out at expensive restaurants here and there. The thing is, though, that it is very easy to cut down on this expense. Here are a few simple strategies to employ.

Eat out less; prepare more food at home. This is the single biggest key to reducing your spending on food over any period of time. I tend to find that it’s more worthwhile to find simple replacements for fast food and to make stuff at home rather than getting take out than giving up a weekend dinner out with my wife.

If you don’t know how to cook, teach yourself, starting with simpler recipes. There are a lot of books out there that can teach you how to cook (trust me, I’ve read a lot of them). The three that stand out (for me) are How to Cook Everything (probably the best overall for learning), The New Best Recipe (probably the best recipes), and The Joy of Cooking (probably the best reference and easiest to find used). Get one of these three and make a commitment to cook. In fact, if you stick around until February, I’m going to somewhat give into my desire to have a cooking blog and do a four week crash course on learning to cook at home with an eye towards the pocketbook.

Give leftovers a try. I used to think leftovers were the epitome of nasty, but then I figured out a few key secrets about making leftovers better: keep the foods rotating and make sure to spice the leftovers themselves. If you prepare a bit extra at mealtime, leftovers make for extremely cheap dining.

Buy a deep freezer. This allows you to buy some foods in bulk at a very cheap rate. Once you have the freezer, check with a local butcher to see what kind of deal you can get on bulk meat; you’ll be amazed how much of a discount you can get on bulk orders. You can also move to a system of preparing many meals at once and freezing them for later use; it’s a lot easier after a busy day to come home and pop a meal in the oven than it is to stop at the take-out place, especially when you realize how much cheaper the first option is, too.

Organize a series of potluck dinners. If you have a group that regularly dines out together regularly, suggest that you have a rotation of potlucks or backyard barbecues instead. If everyone is on board with this, it can be vastly cheaper and often more fun. Some of my best memories of dining with friends are not from restaurants, but from sitting on back porches watching the moon rise and enjoying a bottle of wine in the gentle warmth of a summer evening.

Ready? Let’s continue on to the next day.

Almost all of us have an automobile. Many of us have two or more in our family. We all know that they’re money pits, requiring maintenance, gasoline, and repairs, but we need them to get around, so we often just feed the beasts without thinking about it.

Yet there are several simple things you can do that can reduce the monthly cost of your automobile usage. The biggest key is raising your gasoline efficiency, but other tactics work as well. Take a look:

Go easy on the brakes. Braking is incredibly inefficient. Coast to a stop when you see a red light instead of speeding up to it and then braking. Choose routes that have fewer red lights. Try to time your driving so that you hit all green lights, even if this means driving slower. You can easily increase your efficiency by 20% by doing this, which in a car that you drive 10,000 miles a year and gets 15 MPG can save up to $250 a year (depending on your normal driving conditions). Yeah, just by laying off the brakes.

Don’t speed. Keep it at 60 MPH or under, even if you feel like an old man on the interstate. Why? Every 5 MPH over 60 costs about 7% fuel efficiency. If you normally drive 75 on the interstate, trimming that back to 60 not only avoids tickets, but it also increases your fuel efficiency by about 20%.

Clean out your air filter. I do this once a month or so, but I suspect this will be the one tip that most people will avoid. It’s quite easy, though; for most cars, it’s simply removing a nut, lifting up a plate, pulling out your air filter, blowing the dust off of it and tapping it a bit to get rid of the dust, and then putting the filter, plate, and nut back into place. This increases your fuel efficiency by about 8%, which in a car that you drive 10,000 miles a year and currently gets 15 MPG can save about $110 a year.

Inflate your tires up to the manufacturer’s recommendation. If you don’t know what this is, go out and find out what tires you have, then research them on the ‘net. Airing up your tires is really simple and can be done at most gas stations for free. For every two PSI that your tires are below the maximum recommendation, you increase your fuel consumption by nearly a percentage point. Many people have tires that are 10 PSI or more below their maximum, which reduces fuel efficiency by at least a mile per gallon. How much will that save? If you drive 10,000 miles a year and your auto currently gets 15 MPG, just keeping your tires inflated will save $93.75 a year (assuming $2.25 a gallon for gas).

Keep your car clean. Excess weight reduces your fuel efficiency, so cleaning out your car (especially of anything heavy) will save money on gas.

Turn off your car during long waits. Stuck in traffic and nothing’s moving? Turn off your car. If it’s off for more than thirty seconds, you’re saving money. If it’s off for several minutes, you’re doing really well.

Keep an eye on gas station prices. Stations can vary quite a bit, even from day to day. Keep an eye open on your way to work to see which is cheapest, then hit that station on the way home. This variation is especially true if you cross state lines, as most states have a pretty strong variance in gas prices. For example, Iowa’s gas prices are much cheaper than in Illinois, so if I go to Illinois, I fill up before crossing the border. I can save $0.15 a gallon or so by doing this.

If you start adding up these numbers, you’ll realize quickly that you can save some serious cash, especially if you’re driving a fuel-inefficient vehicle. If you’re able to get your SUV from 10 MPG to 14 MPG using these tips, over a year of driving 10,000 miles and with gas averaging $2.25, you’ll save $650. That’s more than $50 a month just for keeping an eye on your car and driving a bit more cautiously.

Tomorrow, we’ll look at cutting down on food costs.

Ready? Let’s continue on to the next day.

I’m often surprised how many people are extremely inefficient with their energy usage, and when they think of fixing problems, they put in tremendous effort to do things that aren’t much of a benefit, like neurotically keeping their lights off while having inefficient lighting which costs them more for one hour of use than efficient bulbs would cost in four hours of use.

In short, an hour’s worth of effort and a few small tasks can cut a solid chunk out of your home energy usage.

Replace your regular bulbs with CFLs. CFLs are those bulbs that look like small spirals, the ones most people skip by because they’re “expensive” and they’re “saving” because they buy the cheap ones. The truth is that the “expensive” bulbs are the ones that save a lot of money: if you have 15 bulbs in your home (many homes have many more than that) and use them an average of only four hours a day (again, some houses will use even more), you can save $100 a year including the comparative bulb cost if you switch to CFLs. Even better: CFLs rarely need to be replaced once they’re installed.

Install programmable thermostats and learn how to use them. Letting the ambient temperature take over in unused rooms is a fantastic way to save energy; the only problem is that it’s very easy to forget to do it if you’re even doing it at all. If you replace your thermostats with programmable thermostats and spend the time to program them appropriately, you can easily trim hundreds of dollars from your energy bill each year.

Install surge protectors for all of your electronic devices. Not only will these protect your devices during a storm, they also prevent electrical “drag.” “Drag” refers to the small amount of electricity (5 watts or so) that all electronic devices continuously pull out of your sockets when they’re powered off, which can seriously add up if you have a lot of electrical devices.

Turn off your home computer. People who make claims about how powering up your computer uses tons of energy are living in the 1970s. The truth is that modern PCs don’t use any extra energy when powering up, so you’re better off powering down your computer when it’s unused. But if you’re like me, you tend to leave it on and forget about it, so set up your PC to turn off every evening automatically.

Air seal your home. This will take a few hours, but the Department of Energy has a very nice guide for making this process as easy as possible. Make sure you don’t have any drafts that can just slowly drain the heat (or the coolness) out of your home and you’ll save a lot of money.

These four tasks will reduce your energy usage significantly and any reduction in energy usage will bring about some serious savings in your monthly energy bills. In a large home, these tips can save $50 a month easily, a pretty good deal for things that you can do once and forget about them.

Ready? Let’s continue on to the next day.

Life insurance is a question that most of us simply avoid thinking about too much, especially when we’re young. However, if you have more than yourself as a dependent on your income tax forms, life insurance is something you need in order to ensure that if something happens to you those dependents don’t wind up in the street.

This is going to be the only expense evaluation where I might end up encouraging you to spend more money than you already are, but you will be able to sleep better at night knowing that those who depend on you are secure even in the event of something terrible happening to you.

First of all, your best option for life insurance is term insurance if you’re under fifty. Rather than regurgitating, this earlier post makes the case why term insurance is the best bet for younger people with their financial head on straight. An insurance salesman might try to coax you into whole life insurance or universal life insurance; don’t let them!

If you have one of the other types, you should strongly consider cashing it in and buying term insurance. Term insurance is substantially cheaper per month, enough so that it’s worth cashing in the other policy, removing the cash value, and instead start a term policy. You can take that cash value and use it to pay off debts; that’s more worthwhile to a healthy financial future for you and your family than universal or whole life insurance (note that I am not a professional financial advisor – I am not liable for any choices you make based on what you read here. Do your own research if you’re considering making a major choice that you might regret.).

Okay, so how much life insurance do I need? If you have no dependents besides yourself, you don’t need any at all. In fact, if you see little chance at having dependents in the future, just skip the rest of this entry because it really doesn’t apply to you.

I recommend getting insurance that will cover you until you’re 70 (or close to it), but if you’re very young, you may just want to get a 30 year term. Why? At that point, if you’re financially responsible, your estate should be in good enough shape that your life insurance isn’t necessary, and you can take that premium and do something else with it.

If you have only adult dependents, you should only need two or three years’ worth of salary in life insurance. If you’re under 35, a term policy for an amount equal to three years of your salary will be a trivial amount each month.

If you have child dependents, though, that’s when you really need good life insurance coverage. Take out a sheet of paper, find your last Social Security benefits statement, and do this calculation: calculate 90% of your salary, subtract your dependent Social Security benefit from that, then divide that amount by 0.08. That number is roughly what you should have in life insurance if you have any dependent children.

Here’s an example. Freddy has a wife, a child, and an $85,000 a year job. His Social Security statement reveals that his dependent benefit is about $11,000 a year. So Freddy calculates 90% of his salary ($76,500), subtracts his dependent’s benefits (leaving $65,500), and divides that amount by 0.08 to get $818,750 in term life insurance.

Why so much? You want any dependents to be able to invest that money and have the proceeds match your current salary with some breathing room. This calculation assumes a small 8% return on investment, which hopefully they can beat, but that’s not something you really want to bet on.

If you don’t have enough insurance, call your agent and discuss an increase in benefits. Most insurance companies will happily revise policies upwards for you because it means more money for them.

If you don’t have any insurance (and need some), start doing some research. Get some quotes on 30 year term policies and see which company has the best numbers. Then go ahead and make a purchase. This is something well worth fitting into your budget.

Tomorrow, we’ll go back to evaluating expenses with an eye towards cutting some money.

Ready? Let’s continue on to the next day.

During the first half of the month, we’ve created a real “living” budget that is built around your life, not forcing your life to live up to someone else’s idea of a budget. Now that this budget is in place, we’ll use it to see where we can trim some of the fat from expenditures. The next several days will focus on a specific expenditure area, with a discussion of things to think about when evaluating those expenses, along with some tips for reducing those expenses. This is not a rulebook. Spend an hour considering these tips, gathering information, and deciding what works for you, not what works for someone else that you’ll try to shoehorn into your life.

Everyone who owns an automobile faces auto insurance, and everyone who owns a home pays homeowner insurance. It’s a fact of life for most of us, so we just pay it and move on. What we often don’t consider, though, is how much we can save on this insurance with just a little bit of legwork.

Look at other providers It doesn’t hurt to shop around a bit. Take fifteen minutes and get a few quotes on your home and auto insurance from other carriers. I was surprised how much of a difference there was between various insurance carriers – depending on the factors they used, the rates varied quite a bit.

Raise your deductible The largest slice of Americans have a home insurance deductible of $500, but they very, very rarely make claims on that insurance. If you raise your deductible to $1,000, you can save as much as 25% on your insurance. How often do you make claims on your home insurance? If it’s rarely, you might consider raising your deductible to reduce your payment. The same goes for auto insurance; if you don’t make claims very often, look at raising your deductible to reduce your payments.

Look for package deals The majority of Americans have different providers for their home and automobile insurance. See whether or not you can get a reduction in your premium if you take all of your business to one provider. My parents did this a few years ago (they moved their home insurance to their auto insurance provider) and their overall premiums dropped about 18%.

Install a deadbolt and smoke detectors Call up your insurance provider and ask for their recommendations for deadbolts, smoke detectors, security systems, and other equipment that might reduce your premium. If they’re cheap (often, smoke detectors are a great investment here), go buy them, install them, and get that reduction in your premium.

Check for other discounts Many insurance companies offer reduced home insurance rates if someone works at home (or doesn’t work at all). Auto insurers will offer lower rates if you have a stable, socially responsible job. Both will offer a lower rate if you have a good credit rating. Explore these avenues with your insurer.

If you have an insurer you’re generally happy with, don’t switch. This is especially true if you’re approaching the three year or six year mark with the same insurer, as they often reduce rates a bit (5%) at each point. That doesn’t mean you shouldn’t compare rates on occasion, but insurance companies look for stability.

You can evaluate all of these points with just a few telephone calls and web site visits, well worth an hour of your time if you can trim 10% (or more) from your premiums. If you pay $200 a month for insurance and can see that go down to $180 every month, you’re suddenly looking at $240 extra per year for an hour of work.

Ready? Let’s continue on to the next day.

When you get rolling under the plan you’ve developed, you’ll discover that (almost always) you’ll come in under budget for the month if you stick to your guns on the nonessential spending. This is a good thing, of course, as it means that you’re being financially responsible.

So what do I do with that excess? Obviously, it’s not a big help if your checking account doesn’t earn any interest and the balance just builds up over time, as it makes it much easier to simply spend it on unnecessary things. Instead, you should move it somewhere where it’s accessible, it earns a little bit, and it’s out of sight and out of mind until you need it. Here’s the game plan.

First, don’t give into temptation and spend it – yet. Although it might seem that this money is a “reward” for being fiscally responsible, it’s actually just a result of the flexible budget you made. The flexibility actually has a purpose: protecting you from the unforeseen events that can happen in the future.

Second, get a high-interest savings account in which to put the money. Why get another account? Several separate accounts make it easy to partition your money and keep money for different purposes separate from each other. This money has a very specific purpose, so we’ll keep it separate.

Now, at the end of each month when you have extra money left over from your budget, just deposit it into this new account. This account will serve as your emergency fund. Every once in a while, life will deal you a hand that is very difficult to play within the constraints of your monthly budget: a car breakdown, medical needs, or so forth. This fund will make it possible to just roll through those emergencies without breaking a sweat – just go withdraw the money you need to cover the emergency and it’s taken care of.

How big should this emergency fund get? You should let your emergency fund continue to grow with budget leftovers until you have six months worth of take-home salary in it. After that, you have some options: I’d recommend paying off more debt with your budget leftovers at that point.

Remember, this is not an account for big-ticket purchases! If you’re tempted to use it to buy an LCD television, you should instead reevaluate what your goals are and perhaps change one of those if you feel that a big screen television is more in line with your values. Leave this money alone; some day, you will be incredibly glad you did (like when your son comes home with a dented-up car, for example).

Tomorrow, we’ll begin looking through your expenses for places to trim out more fat without altering your lifestyle.

Ready? Let’s continue on to the next day.

Yesterday, we took our “true” budget and set it up so that we paid ourselves first through an automatic investment into a “dream” fund (or series of funds). Today, we’re going to look at the debts section of the budget – and see how we can go about paying down our debts, so that we have more money to direct towards our dreams.

The “debts” section of your budget should list a number of debts that indicate all of the money that you owe to others. This doesn’t include the minimum payment for each one; we are listing those as “expenses” until each one is gone. You should also have a zero balance in the debt section for all but one of your debts.

Each month, when you go through your monthly bills, all you have to do is pay that amount extra on that expense. Let’s say the only debt you have listed with an amount next to it is a credit card with the amount of $200 next to it. You also have an expense for that credit card, which has a minimum payment of $40. When you go to write the check to pay for that card, write the check for $240.

It will take several months, but soon you will pay off that first debt. When you do, it’s worth celebrating, because you can eliminate both an expense (the minimum payment) and a debt (the extra payment) from your budget. When you do that, take that combined amount (the sum of the minimum payment and the extra you were paying each month) and apply it to the next smallest debt amount. So, let’s say that after you paid off that credit card, your next smallest payment was an auto loan. In your “debts” section, you would put in $240 next to that auto loan. You’ve already budgeted for it, so it will make no difference in your day to day life other than the good feeling of knowing your debts are disappearing.

This technique is commonly known as the “debt snowball,” a term coined by the popular radio host and author Dave Ramsey. I’m actually using a variation of the debt snowball in my own life, modified a bit to leverage risk.

You might want to take some time and calculate how long it will take for your “debt snowball” to roll through all of your debts. Figure out the month when each debt will be paid off, then add on that payment to the next debt and see how many months it will take to pay that one off. Before long, you’ll have a very solid idea of an approximate time in which you’ll be debt free – and debt free is a place where you can take that debt snowball and apply it directly to your dreams.

Tomorrow, we’ll look at what to do when you come in under your budgeted expenses in a month (the system is set up so that you can do this regularly, in fact!).

Ready? Let’s continue on to the next day.