Updated on 09.17.14

Turning Things Around: The Basics

Trent Hamm

Tessa, an email subscriber, wrote to me recently with the following thoughts:

I signed to receive your emails last year and I like them very much.

But I need the basics, and you have so much in your blog I cannot find it.

I don’t know how to live within my means.

I don’t know how to make a budget, that’s what I call the basics.

I don’t have a credit card, so I don’t have any debts.

But my salary finishes before the second week every month.

Let me know where the starting lessons are. For beginners.

This entire situation sounds quite familiar to me. I remember that dreaded sense that it was all out of my control and that I didn’t have a clue how to even begin fixing the problem.

My immediate response was to start digging into personal finance books at the library, and I found several to be incredibly helpful. Dave Ramsey’s The Total Money Makeover laid out a basic gameplan and forcefully pointed out the error of my ways, and Dominguez and Robin’s Your Money or Your Life really opened my eyes to the role of money in my life. Later books, particularly Jane Bryant Quinn’s Smart and Simple Financial Strategies for Busy People and Ron Gallen’s The Money Trap, contributed more ideas that I wish I had when things were at their worst.

8 Tactics I Wish I Had Known During My Financial Meltdown

1. Whenever you go to buy anything, give yourself ten seconds to ask whether you actually need it or not

I call this the ten second rule, and it’s helped me countless times. Spend those ten seconds trying to convince yourself not to buy the item. In the end, you’ll begin to train yourself to spend less and less by peeling out the stuff that you don’t authentically need.

2. Wait thirty days (at least) before any major purchase

I define “major” as being any purchase that costs more than, say, $20. Almost always, such purchases deserve more thought, and quite often you’re making that purchase in the heat of the moment. Put the item back on the shelf instead and wait thirty days on it. Likely, you won’t even remember it in thirty days, and if you do, the odds are you will have realized that you didn’t really need it after all.

3. Keep track of every single dime you spend for two months

Everything. Then, when you’ve got two months’ worth of information, try to categorize that spending by groups that make sense to you. Lots of budgeting books offer categories, but it usually works better to define your own – things like eating out, music, video games, groceries, and so on. When you know how much you spend over two months in each category, you’ll usually quickly see some things that need to change. This is budgeting.

4. Set some short term goals – a week or a month worth at a time

Make it your goal to cut in half the amount of money you spend eating out. Make it your goal to not shop this month for solely social reasons. Make it your goal to spend $100 less than you earn this month. State it clearly and don’t forget about it! Put a reminder of that goal somewhere where you’ll see it and think about it often.

5. Start an emergency fund – and make it automatic

I talk about emergency funds all the time. It’s because they’re invaluable, and I’m shocked how often people don’t have them. An emergency fund is a savings account that contains enough cash so that you can immediately and easily handle most emergencies in your life – the more you have, the more protected you are from disaster. Yet, for many people, it’s hard to find the money to set one up. The best solution I’ve found is to get an online savings account, like one through ING Direct (the bank that I use), and set that account to automatically pull a small amount from your primary checking each week – say, $20. Then, if your car breaks down six months later, it’s not panic time. You just go to your emergency savings account, pull out that $500 you have saved up, and the problem is solved. The real key is automating it.

6. Focus on spending time without spending money

Most weekends, my wife and I try to spend “money free weekends,” where we don’t spend any money at all on Saturday or Sunday. Most people think this sounds boring, but my wife and I have found tons of things to do. In fact, we’ve made three lists of them: 15 things, 15 more things, and 15 fulfilling things. Another surprising tactic: turn off your television and find something else to do.

7. Take a dive into less expensive hobbies

Golf is an expensive hobby. Reading classic literature off of PaperBackSwap is not. Shopping for clothes is an expensive hobby. Learning how to cook well is not. Look at your hobbies through the filter of how expensive they are for the time that you spend, and then start focusing more on the less expensive hobbies – and perhaps try out a few new ones.

8. Figure up your true hourly wage – and think about what that means

Many people work themselves into misery by working at a job that seems to pay well, but is laden with so many extra financial and time costs that it ends up being quite poor. Spend some time figuring up your true hourly wage – it might put a low-stress job at the local 7-11 into new perspective, as well as change your ideas about how you’re spending money. I found this exercise to be one of the most profound things I’ve ever done.

If you walk carefully through these eight steps and think deeply about what you’re doing, you will be on a much better financial track. You’ll start being money ahead instead of just barely breaking even, and life will begin to feel more secure. The best part is that anyone can do these things – it just takes a desire to make a change.

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  1. Great tips, Trent. I think tracking your spending is the most important of these – it’s the first thing I started doing to turn myself around, and it makes a big difference. It’s a base habit that will help everything else you do to help yourself financially.

  2. I think people like Tessa need more of a lifestyle check. What book would you recommend to someone who isn’t looking for a “how-to” tips but for something that will inspire them to change the way they’re currently living?

    For me, it was Rich Dad, Poor Dad, even though I disagree with a lot of what he now writes.

  3. Jason says:

    The 10-second rule has saved me many times, too. I usually go through the following routine in stores. I have a list in hand and head to the aisle(s) I need to shop. Oh look, a new toolbox on sale with 47 compartments. I look at it, I justify it, I salivate, throw it in the cart and off I go. By the time I hit the next aisle (sometimes 10 seconds, sometimes less) the frugal persona kicks in. Do I really need a new toolbox? What’s wrong with my old toolbox? How else could I better spend this $32.00? I put it back on the shelf and run!

  4. BigRed says:

    Regarding new hobbies–a library card costs nothing and opens a world of classic literature, new works, poetry, how-dos, financial planning books, as well as cultural events (story time for kids, book clubs for all ages, music and politics, workshops for tax and retirement, etc.), and, in some areas, inexpensive rentals for movies, music, and games.

    Your tax dollars are already paying for this service, and there’s more there than you can probably ever take advantage of.

    It’s funny that this blog doesn’t talk much about libraries, or maybe I’ve missed it.

  5. Jen says:

    I love the turn of the television option. My husband and I have done this once before early in our married life (which was 12 years ago). At that time it wasn’t a financial issue but one of wasting time. This time we’ve decided to turn it off because we are tired of paying increasing fees for diminishing services. In our area there are one cable company and two satellite options. We have cable and don’t want satellite (too many options still with too many time wasters! and too much junk for our kids to get into). So, since the cable company removed another channel from the lineup last month, we thought it was a mistake that it had just for some reason gone out on our television and they would come and fix it. When we called them they said, no you don’t get it anymore. And no, you still have to pay the same amount. This amazes me. I wouldn’t go to the grocery store and pay for 13 items and come home with 12 and be ok with that. And nobody else would expect me to be either. Yet, many many people in my area complain about the fees and diminishing services, yet continue to pay the bill every month. I don’t understand that. Our service is scheduled to be stopped on Monday. I’m so excited because I’m sure this will be a positive experience for everyone in our family. And, I’m not paying for something that is not satisfying to me. And, I can use that money for something else.

  6. Ben says:

    I’ve been coming to this site daily for about a month now. It truly has changed my life. My wife, since we’ve married, has been in control (if that’s what you want to call it) of our finances. For the most part she did an okay job. She paid the bills on time without any written budget. We have a few credit cards (maxed out) and have been paying the minimum payments each month. Since I started reading “the simple dollar”, I’ve played more of a role with our finances. I went through some old credit card bills, and I WILL NEVER BUY UNNECESSARY THINGS ON CREDIT EVERY AGAIN. I saw how much was going towards the principle and the rest towards interest. I NEVER realized it until I actually paid somewhat attention. I might as well have been throwing money in the wind. I’m working on a budget now and plan to 1st Pay off credit cards and 2nd Build a sufficient savings. I want to thank Trent for “the simple dollar”. If it wasn’t for this site, I’d still be digging myself a larger hole. Oh I thought I’d also mention the “homemade laundry detergent” is fantastic. I’ve already made 2 batches and intend to make many, many more. I would like to see more “homemade” suggestions, to help save money. Thanks again!

  7. tubaman-z says:

    Using the search box at the top for “libraries” I got:

    Results 1 – 10 of about 45 from http://www.thesimpledollar.com for libraries.

    Admittedly not all of these are from Trent, some are from comments.

  8. Cat-Daddy says:

    I totally agree on the library. Books, movies and music, I get them all from my library (it’s pretty big, though).

    Here’s another one: PAY CASH for everything. I know this is gauche, but before I had my $$ head on straight, it really forced to feel it when I wanted to spend money. Credit cards and checks are too free-n-easy.

    Bad idea: in college I used to hide money from myself, in books etc. I found 20 bucks the other day in a book! Should have been in a continuous compounding book.

  9. I would add one more tip from your archives:

    Just for today, don’t spend any money. Eat from your pantry, walk or ride your bicycle instead of filling the gas tank, borrow a book or DVD from the library, or get outside and enjoy a local park.

    Tomorrow, rinse and repeat. See how long the streak can continue.

  10. For those living beyond their means and are struggling, I’d advise to stop buying non-essential items for a while. Basically, no coffee, no snacks, no extra clothing, no movies, no beer, nothing until spending was under control. Once things have stabilized than you can slowly start adding the luxuries back in.

  11. Kate says:

    Regarding money-free weekends, I’ve rediscovered the joys of doing giant jigsaw puzzles. This was something my aunt always used to do with us as kids. Jigsaw puzzles are pretty cheap, and you can use them over and over again. Plus, many of them are just beautiful. Get the kind with a LOT of pieces. You’ll find that spending that much time with another person or two is deeply satisfying. It takes your mind off other things and opens up room for nice conversation. To make it really free, ask for a jigsaw puzzle for your next birthday.

  12. LC says:

    Figure out what you really make after taxes. Look at your last paycheck. Add up what you spend for for rent or mortgage, homeowners or renters insurance, and all utilities. If it is more than 25% of your take home pay, you should think about moving to a place you can more easily afford. Or you can cut back in other areas.

    Your car payment, insurance, gas, maintenance and repairs should be less than 15% of your pay. Look for ways to reduce your insurance – increase your deductible or look for discounts. Ride a bike to places that are close enough.

    Your total for food and household items should be less than 15% of your pay. I think that $150/month is a typical amount for a single person (~$300 for a family). If this is where you overspend, try eating out only once a month or less, learn how to cook without convenience foods, bring your lunch to work, etc.

    No matter how low your income is, put a MINIMUM of at least 10% of your pay into a retirement account and another 10% into a savings account. Open one online that pays over 4% interest (HSBC, ING, etc) Do this automatically so you won’t miss the money.

    Those are the basics, and you should still have about ¼ of your paycheck left. So 25% is the maximum that you should be spending on entertainment, books, movies, clothes, etc. I also suggest writing down every penny you spend for a few weeks to get an idea of where you are going over. It is easy to ignore the small expenses that add up. If you find that you are spending too much on “luxuries, determine which of these are most important to you. Maybe you don’t care about having a new wardrobe every 6 months but you do really enjoy a nice vacation. Or you don’t mind eating leftovers but you enjoy a few lunches out with your friends. Unless you have a very low income, chances are you are able to afford little things like that if the rest of your spending is in check, but you get into trouble when you do all of them.

    If you still have trouble and need basic budgeting advice, an envelope system might work for you. Using the percentages above as guidelines, figure out how much you will allow yourself to spend on each category, then put that money into an envelope and when that money is gone, you can’t spend any more in that area.

    Good luck!

  13. Rob Madrid says:

    Thank You Trent. for the first time ever we ran out of month before we ran out of money. It is such a wierd feeling having money in the bank and knowing payday is just around the courner. It’s going to take a while to get used to not having money worries.

  14. JB says:

    I would recommend the cash envelope system for gas, groceries, entertainment. Once it’s gone for that month, it’s gone and it’s time to get creative.

  15. Rob Madrid says:

    I want to second Trent’s comment about cooking. My epiphany moment came when coming back from the market I decided to skip McDonalds and try cooking a meal at home. I was a blast, my biggest problem has now become eating all the food I cook. Thankfully a rash of births at church has keep me busy cooking meals for all the new moms.

    Another time the Wife decided she wanted pancakes for breakfast and since pancake mix costs a fortune over here we decided to make it ourselves, easy as pie, why did I spend years buying pancake mix (needs only water and an egg). Never again

    Also for shopping start using a price book (basically a list with prices noted) it should help shave 10-15% a week off your food budget.

  16. SammyG says:

    I have a question about the emergency fund. I kept one until just recently.

    We bought our first house about three years ago. It occurred to me one day while I was putting my monthly “emergency” fund into ING that I was still paying interest on a home equity line of credit that we opened when we bought the house. (We did an 80-10-10 mortgage – which I can explain if anyone cares).

    I decided to empty my ING account to pay down the equity line of credit. Now my “emergency” fund goes into the equity loan. A couple more months and that will be paid off and we’ll start on ING again (or maybe pay extra on the first mortgage).

    I consider the equity line of credit as my emergency fund since it’s as fluid as the ING account. I can transfer the money back to checking at any time.

    Does anyone see anything wrong with
    this strategy?

    I’m actually “earning” more because the interest on the credit line is a little higher than ING.


  17. Cat says:

    Maybe an idea is to go through some of your archives and add a new tag like “basics” or “beginners” as part of the impression I received that due to the vast amount of (terrific!) content, the reader had trouble actually locating the info she needed.

  18. ghogiel says:

    Hello Sammy,

    Pretty much I’m in the same boat as you are.
    No, I do not think what you (we) are doing is wrong. There’s nothing wrong w/ viewing the Extra Repayment on Mortgages as an emergency fund, (providing it’s got good liquidity that you can make withdrawals anytime

    The way I see emergency fund is nothing more or less than just another asset, except that it’s:
    – low risk
    – high liquidity
    – dont care about yields (it’s emergency anyway !)
    – preferably: low on costs (bank fees or.. taxes)

    ING Direct fits all four attributes above… except that (in my case) the extra repayment on my mortgages offers more: interest from ING is taxable. Suppose ING’s interest is 7% and the government takes 30% of it (mid-high range bracket in Australia), the nett is 7% * 0.7 = 4.9% interest only.

    So for me~ rather than having to receive a smaller interesets on savings, I’d rather have my money in the mortgage account for the following reasons:
    – it offsets the loan interest.
    – i agree w/ you on the liquidity, my mortgage extra repayment has the same liquidity as ING (=high liquidity, good for emergencies)
    – dont have to pay for the taxes. Let the taxman asks for it from your lender instead !

    Yes, I am pleased if you care to explain more about 80-10-10, Sammy — I’m from Australia and have no knowledge of that lingo.

  19. Mrs. Micah says:

    I’ve found the 10 second and 30 day rules work wonders. I just put things on lists and then when I’ve lived without them for some 30 days I ask whether I still really need them. And I ask if there are other ways to get them (libraries…which I might look into in the interim) or alternatives or if they can go on a Christmas list.

    Oh, and I plan my grocery shopping and weekly menus. Food can add up!

  20. Tim says:


    Perhaps you should take a leaf out of Ramit Sethi’s book and make a ‘directory’ post with links to your best and most useful posts.

    When he gains new readers from somewhere, he just has to post that list and it gives them a great starting place.

  21. SammyG says:

    I used to use envelopes all the time.
    Now that I have a house and bigger payments, I got nervous have so much cash around each month. Plus it wasn’t earning interest. Now I have envelopes on paper.

    I don’t like the solution so much since my wife and I both take from our “envelopes” and so it’s hard to keep track of.

    Just yesterday I thought of an online solution I’m going to try.

    We funnel most of our purchases (gas, groceries, etc) through our credit card for the rewards and then pay it off at the end of the month. We get 1% or more toward our sons’ college fund. So all of our dips into the envelopes are being tracked.

    I’ve been playing with mint.com. It doesn’t do everything but it let’s you set up budgets with e-mail reminders. I’m going to set just a few budget items (like groceries) and have mint.com e-mail me (and my wife) when our “envelope” drops to 80%

    I don’t know if it will work, but it’s worth a try.



    Those are good general comments on the emergency fund – thanks! Makes me feel better.

    An 80-10-10 is a mortgage strategy in which you make a 10% downpayment on a house and then immediately borrow another 10% using your first 10% as collateral. This usually takes the form of an equity line of credit. You then take the borrowed 10% and use that to increase the total downpayment on the first mortgage to 20%.

    So what you end up with is a first mortgage of 80%, a second mortgage of 10%, and it cost you a 10% downpayment out-of-pocket. Plus all of your house tied up as collateral for the loans.

    You might ask, “Why in the world would anyone do such a thing?”

    In the states, if your downpayment is less than 20% then you must also buy mortgage insurance. I don’t remember the exact cost, but I recall that it was more then the total interest on the second mortgage – much more if you pay off the second mortgage fast.

    Of course, it’s better to save up a 20% downpayment to begin with. But we had the 10% and were about to start better jobs where we knew we could pay off the second mortgage fast. At the time, interest rates were low and so we jumped.

  22. deRuiter says:

    Lovely post Trent! Thank you. Suggest you make list of ten! 9. SELL, SELL, SELL ALL POSSESSIONS WHICH ARE NOT NAILED DOWN, I MEAN EVERYTHING! Have yard sale, post on Craigslist, rent one day booth at flea market (no, no, must draw line at selling the kids!) Take the money and pay on worst debt. THIS IS ALL USED STUFF AND YOU CAN REPLACE IT CHEAPLY LATER AT OTHER YARD SALES. #10. Get part time job. You’ll be busy working and not have time to spend frivolously, no recreational shopping. Get job as waitress or bus boy, and you’ll get a free meal at each shift. I worked at a steak house for years, and took home the uneaten partial steaks for the dog instead of tossing them into the trash. Dog was happy and healthy. I spent very little on commercial dog food which is all corn meal anyway.

  23. ablemabel says:

    @Writers Coin – I think his recommendation of Your Money or Your Life handles lifestyle issues exceedingly well.

    I think the most important first step is writing down everything that you spend. And then you take stock and see if there’s anywhere you can easily cut expenditures (e.g no more movies), make hard cuts (e.g. move to a cheaper place/get a roommate) or if you should start looking for a new/second job.

    I’m also curious about how Tessa lives with no credit cards and no money for the last 2 weeks of the month? If she’s taking payday loans and paying those fees/interest rates, that could explain how she can never get ahead.

  24. Nicole says:

    Learning how to cook well is not an expensive hobby? I don’t know about that. The more new things you try to do in the kitchen, the more it costs. The ingredients (and it is often the case that a recipe calls for a small amount of something that you can only buy in big quantities), the equipment and utensils, the cookbooks, the storage containers, the time involved in the trips to the store and the preparation itself… Not to mention when you learn new things, ingredients and equipment often get ruined.

    Cooking is easier to justify as an expensive hobby, because we need food more often than clothes, but it certainly can be just as costly to have gourmet skills as it can to have designer tastes. When I made a commitment to frugality, I also made a commitment to Ramen noodles and Michelina frozen dinners.

  25. Cat-Daddy says:

    LC, I do and I don’t agree with your suggestion of doing a financial self-assessment. At some point we all need to do it.

    But for people who just feel overwhelmed by their disappearing paychecks, I think setting simple rules, like the 10-sec. or spending fasts, work better.

    If you already feel hopeless about money, doing a detailed self-assessment will just make you feel worse.

    I for one stayed away from money planning like the plague. I didn’t understand it, but I also didn’t want to. It takes a certain mental discipline to sit down with the pen, paper & calculator, and we don’t all have it. It’s better to start after a small victory.

  26. Jen says:

    As a lifestyle/quality of life issue, I would suggest picking up some volunteer work. Especially if she’s cutting out things that she normally spends money on, she’s going to need to do something with that time so she’s not driving herself crazy.

    She could volunteer at her local symphony, ballet, opera, the zoo, botantical gardens, or museums. Things that are social to replace the social activities that she can no longer afford. It’ll get her out of the house, not cost her money, and she’ll learn something and enjoy herself in the process. Our baseball stadium has volunteer positions. You get to see a baseball game for free for stopping people from walking up and down the isles when the ball is in play.

    Just a thought.

  27. KellyKelly says:

    I had a yard sale and made a whopping $27.

    Where is all this STUFF that people sell for hundreds of dollars? Do they sell their kitchen table (got mine for $20 many years ago) or similar things?

    I don’t have toys! Really, I don’t!

  28. KellyKelly says:

    OH, and as for a useful technique, here’s one:


    I heard once of someone motivating themself to keep their checkbook balanced by putting “Atta Girl!” and “Great job!” and “Way to go!” stickers all over the outside of their checkbook.

    It’s so easy to berate yourself when you are trying to change a habit. Over the long term, most people respond better to praise than to punishment (managers and parents, take note!)

  29. Ginger says:

    I just had to comment on the library thing. I’ve been following this blog for months now and it has helped me quite a lot. But I live out in the county and the city library here charges people like me SIXTY dollars per year for a library card. I paid for one year and was very disappointed, not just at the high cost, but at the library itself…antiquated books, some very non-PC, no videos, interlibrary loans are FIFTEEN dollars, late fees are 50 cents per day per item. I won’t be getting another card. In defense, I suppose because of this situation, there is a ‘library’ out at a feed store near me. It is entirely donor run, has videos, encyclopedias, music and lots and lots of books. For anyone in this situation, consider starting a book exchange of some sort.

  30. Paul says:

    “Anyone who lives within their means suffers from a lack of imagination” – Oscar Wilde

  31. Adrian @ Path to Your Destiny says:

    While not a money tip per se, I do love your suggestion to “take a dive into less expensive hobbies”. There are so many things to do out there that cost nearly nothing that people don’t take advantage of – such as exercising, reading, and inviting friends over for a social event. It’s just too bad we all have to think spending more money = being happier when it obviously isn’t true.

  32. Sharon says:

    KellyKelly has a good idea with the stickers. It sounds childish, but for me it helped to remember that even if I screwed up today, well, you can’t take away yesterday or the day before’s good performance. And then you need to have more good days than bad and then almost all good days…etc.
    And no one can take away what you have accomplished so far…

  33. Hal says:

    Okay, so what a first comment… But, I’ve been reading your site for, oh, something like 7 months and have gotten lots of ideas, including turning your hobby into another source of income… Still working on that, though :-

    I love these basics articles because they just reinforce and remind me of what I need to do to stay above water. Fortunately, I’m doing okay, though I suppose I could be doing a ton better. One step at a time, I suppose.

    I’m sure there are some features on my site you might find useful for here (i.e. Frugal Friday), and I’d love to have some suggestions, if you have them, from one foodie to another.

    And, finally… Tag (check out the website link… would make a good post to talk about the man behind the curtain).

  34. There are a lot of great ideas here, but I think it has to be a fundamental lifestyle change if anything is going to succeed. Anyone who wants to live better, and live debt free must want to do so enough that they will make the effort and take the time it takes to do it right. Far too many people are looking for a quick way out: more money, a better paying job, debt consolidation services, bankruptcy, etc… but without changing their lifestyle and the way they think about money they will almost certainly end up in the same place at a later point in their life.

    2 books that got me starting to think about the basics and motivated me to learn more are Rich Dad, Poor Dad and The Richest Man in Babylon. Those are easy reads. If you’re looking for something broader based, with great detail and something that will really change the way you think about money then I strongly recommend Ben Graham’s (Warren Buffet’s mentor) book: The Intelligent Investor.


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