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The stock market crash leading to the recession at the end of 2008 caught many by surprise. If you’re among those whose savings and investments were ravaged by the economic downturn, don’t despair. To lose your assets in such a manner is a traumatic experience, to be sure, but you can bounce back. The first thing you should do is explain the situation to your loved ones so they can offer their support during these trying times, then follow our 7-step financial recovery plan to reclaim your monetary standing.

1- Evaluate the damage

The first action to take in our 7-step financial recovery plan is to catalog all of your losses as well as your remaining capital. Don’t rely on your initial panicked realization. You need to look at hard numbers, which is why it’s important that you take every asset into account, including your house. The situation may not be as dire as you think. You should also contact the credit bureau or any of your financial institutions to check your credit report.

2- Set short-term financial goals

Don’t try to achieve everything all at once. Getting back on your feet is going to take some time, which is why our 7-step financial recovery plan recommends that you set temporary objectives to minimize your debt. This can include saving a modest sum every month and paying off high-interest loans. Make sure to keep your goals realistic. You may not be able to clear all of your credit cards immediately, so it’s a good idea to rank them by interest rate to determine which should be handled first.

3- Redo your budget

Given your current monetary situation, you’ll likely need to tighten your belt to achieve your short-term goals, so track your spending habits and eliminate any superfluous expenses. Be reasonable about it and avoid compromising your health. You may not have much use for cable television or a golf membership right now, but you still need to eat. As part of our 7-step financial recovery plan, we also suggest that you get rid of any unnecessary debt, such as the lease on a second car.

4- Follow your revised budget

Depending on how you typically deal with stress, this can be the most difficult part of our 7-step financial recovery plan. If you’re prone to splurging, it’s imperative that you resist your compulsive spending habits for the time being and that you always follow through on your new monetary decisions. This is not to say that you shouldn’t adjust your budget if you find you were overly optimistic about certain expenses, but keep in mind that you can’t afford your usual luxuries anymore.

5- Update your budget regularly

A key point in our 7-step financial recovery plan is the importance of revisiting your budget every few months. This will allow you to track your progress while adapting to the ever-shifting economic climate. However, be careful not to let your expense budget escalate each time you review it. A slight increase can be expected from time to time as your immediate needs change, but you should always prioritize your short-term financial goals.

6- Pad your income

The most obvious way to increase your revenue is to take on additional work. If your current occupation allows it, you can either volunteer for extra shifts or stay late to accumulate overtime. Otherwise, you may have to get a part-time job elsewhere. Our 7-step financial recovery plan also advises you to develop a passive source of income such as accumulated interest or paid advertisement on a blog. If you’re a homeowner, you can rent out a room as well.

7- Set new financial goals

Once you have achieved all of your short-term goals from the beginning of our 7-step financial recovery plan, it’s time for you to assess your overall monetary situation and formulate long-term objectives. To ensure that you can weather another market decline, your aims should include building a retirement fund (or replenishing it if you already had one), saving a fixed amount of money every month and establishing a more flexible budget. It’s also crucial that you maintain a practical lifestyle that’s adapted to your monetary means and needs.

Making a full financial recovery

Though our 7-step financial recovery plan will help you get back on your feet, keep in mind that the process can be particularly long and arduous, depending on the gravity of your situation and the extent of your responsibilities. Some days will seem harder than others, but it’s important that you never get discouraged. Try to learn from your experience. After all, what doesn’t kill you only makes you stronger — and you’re not dead yet.

7-Step Financial Recovery Plan Provided by AskMen.

Photo: Code Arachnid

I’ll spare you the environmental lecture—Just imagine your life with out a car payment. Sounds pretty nice, right? Read on to see how you can make it a reality. Even better: you don’t have to wear spandex biking shorts.

Honestly assess the cost of a car.

Of course your ride really costs a lot more than the monthly payment automatically usurped from your checking account. AAA puts out a nifty little publication yearly (http://www.aaaexchange.com/Assets/Files/200948913570.DrivingCosts2009.pdf), and has been doing so since 1950, that helps you assess the true value of a car, factoring in fuel, maintenance, tires, insurance—all of those things that seem to sneak up and empty out your savings account. (The average total cost per year is around $8,000).

If you are more digital than analog, try using this calculator, too: http://www.commutesolutions.org/calc.htm

What most avid bikers and public transit commuters say, though, is that it is a quality-of-life issue more than a financial one—though the money saved doesn’t hurt. A heart-pumping bike ride or subway ride with a paper (minus the crushing rush hour commute in a dense place like New York) simply makes for a better start to the day than inhaling exhaust fumes from the car in front of you.

Another thought: if you are exercising by commuting, you could also ditch the gym membership, at least according to one study about “active commuting”. Basically the study showed that people who walk or bike to work are less likely to be obese and have healthier blood pressure. (The researchers said more study was needed in the field, and that working out on top of an active commute is even better than the commute alone).

Find a bike-friendly city.

Most of the protests to going car-free have to do with hometown: It seems to make sense to be carfree in bigger cities with the cache for bike lanes and congestion that demands public transportation. But, surprisingly, the League of American Bicyclists conducted a comprehensive study of American cities, small and large, (http://www.bikeleague.org/programs/bicyclefriendlyamerica/pdfs/bfc_master_list_web.pdf), and square-footage, sheer size, doesn’t have much to do with bikeability. The #1 bike-friendly city in America, Davis, California is just 10.5 square miles, while the #2 bike-friendly city, Portland, Oregon, is 134.3 miles. Cedar Falls, Iowa? Tulsa, Oklahoma? Probably not at the first to come to mind when it comes to living without a car, but they’ve both recently made the bike-friendly list.

Population is also not a factor. Davis had 62,593 people in the 2008 Census, while Portland had 557,706. New York City, one the League’s list but not incredibly bike friendly, clocked in at over 8 million.

Communities are also pushing hard to promote biking, so check out the tax-dollar and charitable programs in your area. In Champaign, Illinois the Bike Project (thebikeproject.org) fixes up old clunkers and sells them on the cheap. They also offer a free class to teach people how to fix their own bikes to keep them on the road. A bike sharing program has started up in D.C. Public bikes are locked up in high traffic areas around the city. Swipe your card to unlock one, cruise for as long as your like, then drop it off at any of the docking points and you will be charged by the hour.

Choose your neighborhood wisely.

Buying or renting within a few miles of work may seem far fetched to some people, especially those in sprawling Sunbelt cities like Atlanta or Houston, but new zoning laws are looking to reverse that trend, for better or worse. Tax breaks are given in Atlanta and many other cities for new developments that are “mixed use,” meaning that homes and businesses are under one roof.

Also, a study published in August called Walk the Walk (http://blog.walkscore.com/wp-content/uploads/2009/08/WalkingTheWalk_CEOsforCities.pdf) shows that the so-called walkability of a city increases home values. Walkability here is defined by the social and shopping destinations that you don’t need a car to get to. The study ultimately found that, “Houses with the above-average levels of walkability command a premium of about $4,000 to $34,000 over houses with just average levels of walkability in the typical metropolitan areas studied”.

Consider going half-car.

No matter how many pains you go to trying to find the right place to work and live, there are going to be things that you don’t want to lug on the bike or bus, like, say, a Christmas tree or your weekly load of groceries. Clever car sharing companies, like Zipcar, are looking to capitalize on exactly that need for carless people. (http://money.cnn.com/2009/08/26/news/companies/zipcar_car_rentals.fortune/)

The idea is elegantly simple: Become a Zipcar member. When you need a ride, use an iPhone app or computer to find that closest Zipcar to you, which you reserve online. When you approach the car, touch your membership card to the window and the doors unlock automatically. The keys are inside, as is a gas card, and you are charged one flat rate per hour, about $8, depending on the city. Park the car in your hood and the process starts over.

As of January 1, 2009, Susan Sheehan of the University of California at Berkeley found that 24 car sharing programs in the United States has 309,437 members, definitely qualifying it as a trend that extends beyond one brilliant business idea. (In Canada, 15 organizations had 46,802 members).

If you really want to save more than you earn, the conventional wisdom says you’re gonna need to start a budget. It’s only by seeing where your money goes and figuring out where you can cut back that you’ll be able to get your financial act together. But conventional budgeting is fraught with danger. Here are the three main things you should avoid.

Budgeting Danger # 1: Relentless Focus on Minor Expenses

Bring your lunch to work. Cut back on your lattes. Don’t order dessert. Rent videos from your library.

All of those over-hyped strategies are sure to cut expenses, but will they make a big difference? Will such small dollar changes enable someone currently living paycheck-to-paycheck to move comfortably beyond? Usually, it will not.

Lattes, video rentals, and the like are all real expenses that indisputably leave you with less money for everything else. And, if you cut out $3 of spending every day of every week of every month of every year for several decades, yes indeed—your savings will add up to a ton of money. Such are the benefits of the miracle of compounding interest.

But do those minor expenses represent your biggest opportunities to save? Unlikely. Spending an extra few dollars on lunch a couple of times a week or meeting a friend at a café every so often is probably not what keeps you in a financial hole or prevents you from achieving your financial goals.

The more likely culprits: the size, timing, and frequency of big-ticket expenses like your car and home. Focus your energies there. Can you delay the purchase of a new car for another few months—or even longer? Can you buy a used car instead? Can you buy a house that costs less than the one you’ve been told you can “afford”? Are you willing to do your homework to ensure that when you buy or refinance your home you save a quarter or half of a point on the interest rate you might otherwise pay? Such one-time decisions can have a far greater impact on your financial fitness than nailing the latte choice every day for decades.

Budgeting Danger # 2: Reduced Spontaneity and Flexibility

Are today’s budgeting tools too powerful? You can slice and dice your personal data every which way to Sunday with minimal effort. You can categorize everything. You can create budgets based on your actual historic data and then update the numbers constantly.

But should you?

Certainly not the last part. Not only because constant updating may indicate some sort of obsession, but also because it’s utterly unnecessary. Worse, it could negatively affect your life. Like all tools, you have to use it properly. Use the budgeting tool to increase the value of the life you live, not to decrease the cost to get through it.

Say there’s a week left in the month and while you still have $50 left in your dining category, you’ve spent all of the money in your entertainment account. Then a friend calls and asks you to go to a movie that you really want to see. If you tell your friend, “Sorry, I can’t afford to go to the movies tonight but I can take you to dinner,” you’re missing the point of budgeting.

Don’t let budgeting overtake your life. Don’t micromanage. As with a few baseball statistics, just because something can be measured doesn’t make it meaningful. Understand what’s truly important and ignore the rest.

Budgeting Danger # 3: Easy to Miss the Big Picture

Instead of budgeting your spending, budget your savings.

Start with a goal like “I want to save $X per month,” or “I am going to increase the amount I contribute to my 401k plan by Y%.” Keep this goal top of mind as you undertake any budgeting process. By doing so, you establish your specific budget parameters with your eye on the prize: your savings rate.

Yogi Berra said, “You’ve got to be careful if you don’t know where you’re going because you might not get there.” You can create and live within the most detailed budget in the world—and still live paycheck to paycheck. That’s neither a happy life nor one likely to lead to financial security.

On the other hand, if you’re saving 15% of your income, who cares how you’re spending the other 85%? Don’t lose sight of the big picture.

Michael B. Rubin is the author of Beyond Paycheck to Paycheck and the blog of the same name. He is the President of Total Candor, a financial planning education company.

Before you can determine how much you should be spending within any given category such as rent, transportation or paying back your student loans, you’ll need to first get a handle on how much you are actually spending. When you first sign up for Mint.com you’re asked to add all of your financial accounts so that you can see all of your spending in a single place. You’ll get an at-a-glance view of your balances across all accounts — there’s no need to log into multiple web sites just to see your balances.

Automatically categorized transactions

Mint.com shows you exactly what you are spending and where by auto-categorizing all of your transactions. You don’t have to go through the laborious process of tagging your transactions. Mint does it for you. But it’s flexible. If you’d like to categorize your iTunes purchases as food (music being food for the soul after all), and not as Entertainment, Mint won’t stop you. You’ll be able to tell immediately what your average spending is in any given category.

It’s now possible to track your spending and income over time in order to get a true picture of exactly how much money you’ll have left over at the end of the month. Mint.com lets you compare you spending from one year to the next or from one month to the next. Your budgets roll over each month so you can make adjustments as you go along.

Charting your course

Mint.com helps you to create a budget based on your actual spending, not based on some pre-determined notion of what you should be spending. Pie and bar charts break down your spending by category so that you can see exactly how much of your income goes to mortgage or rent, groceries, dining out, and much more.

The real key to budgeting with Mint is that your budget and what sets it apart from using an Excel spreadsheet is that it is based on actuals not hypotheticals. We’ve added 16 interactive graphs that show you exactly how you are spending over time. With the graphs you can see exactly where you need to cut back in order to get your budget back on track.

Mint.com starts you out with a preliminary budget that you can adjust as needed to reflect your personal values and financial goals.

Setting goals

Mint.com’s budgeting tools are flexible enough to deal with a number of possible budgeting scenarios. Unlike with a spreadsheet or the tried and true back of the envelope approach, you can play around to see how changes in your spending or income level will affect how much money you’ll have left over at the end of the month. In other tools, you are locked into specifying a dollar amount for each category on a monthly basis.

But Mint.com lets you enter irregular expenses that don’t occur monthly. You can even see how one-time only expenses that you may not have accounted for will affect your savings plan.The ability to look forward allows you to use Mint.com as a planning tool that lets you see exactly how much money you’ll have left at the end of the month.

This works with income too. Whether you get paid each week, every two weeks, once a month, or entirely upfront, you’ll still know where you stand. Mint is also a great choice for freelancers, consultants and others who can’t count on a regular paycheck but still want to be able to budget into the future.

Monitoring Your Budget

You’ll want to make sure to log in to your account regularly to adjust for changes in your spending and income patterns. But Mint.com is also proactive in helping you with both setting up a budget and maintaining it. Not only do we give auto-categorize your transactions and provide a starter budget. We also send you either SMS or email alerts for when bills are due or when there’s been unusual spending in any of your accounts. By keeping a closer eye on your spending you’ll be able to keep your budget on track.

Mint’s approach to budgeting is simple, automatic and, above all, flexible enough to accommodate a variety of budgeting approaches.

Today I’m going to show you how to generate an extra $200/month, which you can use for savings, investments, or even spend it on something you love. But I’m going to challenge you to put aside some assumptions:

• Myth #1: We need to track ALL of our spending to save money by keeping a budget. Not true. By focusing on your two biggest discretionary expenses and relentlessly cutting them down, you reduce the Paradox of Choice and limit the overwhelming number of choices we each have every day.
• Myth #2: “There’s no WAY I can save $200/month!” Maybe, maybe not. Many people waste 20-30% of their money without ever knowing where it goes. But even if you can’t save $200, perhaps you can save $150. Or $100. Or $50. The point is not the exact amount, but the process of optimizing your financial system. (And it can be done: Thousands of my readers took the challenge to save $1,000/month.)

Every day, we wake up and have 50 financial to-dos we can tackle. Should we pay off debt or increase our 401(k) contribution? Should we adjust our asset allocation or try to get a side job? Ultimately, those choices become overwhelming and we invariably do the same thing: nothing.

Today, I’m going to show you how to focus on two areas — just two — and relentlessly cut down on them to generate significant savings. While your friends worry about 50 things (like saving a paltry $4 on lattes), I’ll show you the system I use to save hundreds of dollars each month on just a couple of expenses — letting me spend time on the important things in life.

How most people manage their money

We love to believe that more information is always better. But as behavioral psychologists have discovered, more choices are not always better. In fact, they can paralyze us with indecision. Barry Schwartz writes about this in The Paradox of Choice:

…for every ten mutual funds offered by the employer, the rate of participation went down 2%.

There are hundreds of examples in the behavioral-psychology literature of increased choice leading us to paralysis by analysis. This is why humans use stereotypes and heuristics to deal with complexity: because to systematically analyze, consider, and act on every decision we face every day would be overwhelming. This is not about being smart or stupid — it’s about adaptive human behavior.

So, what does this mean for your finances?

It means you should focus on fewer, more important things. And despite the personal-finance “experts” who have cried out for us to keep a budget for the last 50 years — has that ever worked? — I prefer to use techniques that actually work. I recommend you figure out your two biggest discretionary expenses…and then crush them and save hundreds of dollars per month.

I call this The Two-Headed Savings Approach.

The Two-Headed Savings Approach: How to use save $200/month by focusing on LESS

1. Pick the two most important areas that you need to save on. You know what they are — the ones where you overspend and it’s clear you could be spending less. For me, these are (1) eating out and (2) going out.

2. Figure out how much you spend on these areas. If you don’t already have a free Mint account, go there and import your transactions. It will take about 10 minutes to tell you how much you’re spending in any category. Remember — although this is the least-sexy part of the tip, without knowing how much you’re spending, how can you set a target for savings?

3. Pick a savings number that you want to target within 6 months. I recommend you try to reduce the costs by 25% to 33%. Those numbers are guidelines, but I’ve found that range to work well because it allows me to cut costs in a significant way while not completely depriving myself. So if you’re spending $1,000 in one category, cut it to $750. If you’re spending $200, cut it to $150 — over 6 months. Rather than trying to cut 50% of your spending in 1 month, it’s important to set smaller goals and actually achieve them

4. Set up a spending reminder to help you keep track. You can do this the low-tech way or the high-tech way.

Recommended way: If you already use Mint, click “Overview” >> “Add Budget” and enter your target savings number. If you’re over the targeted amount, Mint will automatically notify you.

Low-tech way: But maybe you don’t use Mint — no problem. Just set a calendar reminder for each Sunday to make sure you’re on track. For example, if your target spending on eating out is $375/month, that’s about $94/week. Each Sunday, just log in to make sure you’re roughly on track.

If you are, great!

If not, you know you need to cut spending in the coming week.

This way, you can consistently correct any overspending and hit your target goal.

Example: You want to cut down on eating out

Let’s say your current spending on eating out: $500/month.

Target: I want to save $125 per month, so my spending should eventually be $375/month. ($500 * 0.25 = $125. $500 – $125 = $375)
Month 2: $450/month

Month 3: $420/month

Month 4: $425/month (notice you can still hit your goals even if you don’t consistently go down each month)

Month 5: $385/month

Month 6: $375/month

You’ve just saved $125/month, which is $1,500/year. And that’s just for one head of the Two-Headed Savings Approach. Do the same for eating out, and that’s $3,000 per year. You’re now generating $250/month in cash flow that can be used to invest or save.

Invest that $250/month for 20 years and you’ll end up with around $143,000 cash (run your own calculations). Is it worth it?

The keys to the Two-Headed Savings Approach

• Don’t try to do everything at once. Nobody can manage saving money on 15 categories — you just spread yourself too thin and don’t even make a serious dent in your savings amount. I’d rather save 30% on two areas than 5% on 10.
• Why a 2-headed approach? Why not just one? I learned this from a professor at Stanford, who told me to always be working on two projects at work, so if one stalled, you’d still be moving forward on something else. Sometimes, you may have unexpected expenses come up: If you’re saving on eating out, and a friend comes to visit from out of town, it’s going to be tough to keep your costs down. But if you have two savings tracks going on in parallel, you’ll still be able to make progress on your overall goals. And because you’ve extended the timeline out to 6 months, you’ll probably be able to get back on track.
• Slow down. When people come to me and tell me they’ve cut their spending on clothes from $500/month to $10/month, I just sigh and stare at them, blinking in unwavering hatred. You can’t make rapid behavioral change that stick in such a dramatic way. I’d rather extend it out, slowly, over six months and guarantee that you stick with the savings amount. I’ve written more about this here: Set Smaller Goals, Impress Friends, Get Girls, Lose Weight. You’ll see how you can apply this approach to virtually anything that requires behavioral change.
• Stop feeling guilty! Forget about those $1 bags of Skittles you buy or $4 lattes. By focusing on the Big Wins, you’re saving significant amounts of money. As long as you’re hitting your savings goals, that’s the most important thing. Note: The biggest wins typically come from subscriptions, like cable. If you can cut $30/month off cable, that’s roughly $400/year. (How? Use the A La Carte Method.)
• This is a good example of being goal-oriented. Instead of randomly trying to save on expenses, by setting a goal, your tactics become very clear. If your four friends ask you out to dinner and you’re behind in your savings goals, you can easily say, “Sorry guys, but I’m trying to save money and I’ve got to skip this one. But I can meet you afterwards.” In other words, when it comes to dealing with others, focus on the plan and not the person — and work within the savings system that you’ve created.
• Now that you’re going to be saving $20, $200, or even $1,000/month, make sure you put that money somewhere where you won’t spend it. I recommend you store it in your savings account and consider investing part of it for long-term growth. Whatever you do, don’t leave this new-found money in your checking account.

Lots of people wonder what they would do with a 5% or 10% raise. By implementing this, you’ve just gotten yourself a significant raise. What will you do with the extra cash flow each month?

The Two-Headed Savings Approach is one part of the bulletproof financial system that I outline in my book, I Will Teach You To Be Rich.

Ramit Sethi is the New York Times best-selling author of I Will Teach You To Be Rich. He writes at http://www.iwillteachyoutoberich.com.

Photo: tannazie

Dining out is one of the great pleasures in life. Fine food, great drinks, a meal with friends and the next thing you know you’re loosening your belt. But with a troubled economy everyone is tightening their belts. You can still enjoy dining out, even on a budget. Do you know the best days and meals for making the most of your dollar? How to find a credit card that rewards you for restaurant dining? What site offers you rebate checks just for making reservations? Check out our smorgasbord of top tips for saving money when you do dine in restaurants.

1. 1. Find discount deals. Sites like Restaurant.com offer gift certificates for less than face value. Just make sure you’re getting a discount somewhere you want to eat, otherwise it’s like those uncomfortable shoes you bought on sale and never wear. No bargain.
2. 2. Use an online booking agent like OpenTable. You’ll get a rebate or thank you check for doing something you do anyway, making reservations. You’ll also find special promotions that will earn you rewards faster by dining at certain slower times.
3. 3. Some credit cards give you a bonus or rebate on restaurant purchases, decide which ones make the most sense and then use them as much as you can. Mint.com can help you with unbiased recommendations based on your personal spending.
4. 4. Go out for lunch. Sometimes the prices on the lunch menu are a fraction of what you’ll pay at dinner for almost the same thing.
5. 5. Watch what you drink! Restaurants make a larger margin on beverages than they do on food. Do you really need that bottled water or cocktail?
6. 6. Eat less. Smaller appetite? Try choosing a salad, side dish or appetizer. Let your waiter know you are looking for something on the light side, you just don’t want to end up with something so small that you end up ordering a huge dessert.
7. 7. Share dessert. Speaking of huge desserts, you may have noticed that dessert prices and sizes have steadily grown larger. Find a partner and be sure to ask for two spoons.
8. 8. Share a large entree or take half of it home for tomorrow’s lunch. The best way to do this is to visually divide your plate in portions before you start eating. If you plan on taking it home, order something that reheats well such as soup, stew or a braised dish and skip delicate foods like salad or seafood.
9. 9. Have a snack! You know what happens if you go grocery shopping when you’re hungry. Likewise if you go out to dinner ravenous you’re likely to order too much. If you skip lunch, you’ll also be tempted to order too much.
10. 10. Eat out on Tuesdays or Wednesdays, the slowest days of the week for restaurants. You’ll be much more likely to find special deals and offers, not to mention a quieter more relaxing dining experience.
11. 11. Look for early bird or prix fixe specials. Now more than ever restaurants are looking for your business and offering special promotions. Often a three course meals is just a few dollars more than the cost of one expensive entree.
12. 12. Use a coupon. Local coupon books like the Entertainment book offers hundreds of 2-for-1 and 50% off coupons for all kinds of restaurants. If you like fine dining, find a friend who likes fast food and share the cost of the book. The online version of this book may be a great deal if you are planning to travel. There is no long-term commitment, you can choose any location you wish, and the print the coupons you want for only $4.95 a month.
13. 13. BYOB. If you have a nice bottle of wine at home, look for restaurants that offer reasonable corkage fees. Just be sure you are not bringing a bottle that is on the restaurant wine list. Some restaurants offer free corkage if you buy one bottle. With a group, this is a great way to save.
14. 14. Cut a coupon. Don’t forget those coupons that come in the mail! Valpak offers coupons online as well. Be sure to do a quick search before heading off on vacation.
15. 15. Eat at the bar. Dying to try that expensive new restaurant that just opened to rave reviews? See if they have a bar menu. You may be able to get a taste of what’s being served in the dining room for much less.

Having lived through the depression, our grandparents and great-grandparents formed a lack of trust in banks and turned to burying cash in the backyard or hiding it under the mattress. Our current economic downturn doesn’t yet call for such drastic measures but there are things we can learn from those who went through this challenging era and prospered.

Food: Grow a Garden

Source: BW/Color

Growing at least some of your own food can save a lot of money and provide the satisfaction that comes from eating local, really local. Consider starting a community garden such as the Depression-era community relief gardens, or the World War II Victory Gardens. For step-by-step instructions on growing your own relief garden at home, check here, and apply those same basic ideas to any project that you can implement on someone’s vacant lot (with permission) and organize some friends, family and neighbors. If you are more interested in developing a community garden, here is an in-depth overview.

Entertainment: Enjoying the Simple Things

Source: BW/Color

Not everything about the Depression was actually depressing. In hard times, we can sometimes find a lot of pleasure in remembering to enjoy the simple things in life. During the 1930s, games like Monopoly became popular because they gave people hope and allowed them to dream of a better life. Remember some of the board games from your childhood, and plan a low-tech outing with friends and family. It will also help you remember that you don’t absolutely NEED every single gadget that hits the store shelves, and on top of that it will be a bit cheaper than spending the day at Disneyland.

Transportation: How Many SUVs Does Your Family Need?

Source: BW/Color

Hitchhiking was prevalent in the Great Depression, and this is one area that can at least offer some creativity, although Mint absolutely does not recommend that you sell your car and get to work each day by holding up a thumb next to the freeway, nor should you become a hobohemian and hop trains to get around. However, since owning a car is more of a luxury than a necessity, we can learn from the community aspect and form carpools, walk to the store if it’s only a mile away, and if you are lucky enough to have a half-decent public transportation system, Google Maps now shows your time and cost to drive relative to taking a bus or walking. Consider moving closer to where you work and walk or ride a bike instead. Like Dave Ramsey, author of Total Money Makeover, says: “If you are willing to live like no one else now, you can live like no one else later.” Essentially, by defying convention, even for a relatively short amount of time, you can save a hefty sum of money.

Housing: Downsize or Rent a Room

Source: BW/Color

We all have different situations, and this is one of the most pressing issues facing our nation and the world right now. You might be just out of college and trying to make it on your own, or you might be paying for your child’s college now, but there are definitely lessons to be learned from the Depression. In some cases, it may be beneficial to sacrifice a bit of privacy in the short-term in order to get back on track financially. Rent an extra bedroom to a friend, have your child move back home if you are struggling to send him or her rent money every month, or downsize your home. You don’t have to necessarily make a gut-wrenching decision overnight, but do yourself a favor and at least check out some listings on Craigslist for rentals, or have a real estate agent email you listings in a cheaper price range. If a great deal pops up that piques your interest, you can at least bat around the idea with your family. If you are single, just go for it!

Jobs/Entrepreneurship: Nothing Left to Lose?

Source: BW/Color

Due to the extensive public works projects in the 1930s, there was at least a bit of relief for the unemployed masses. People simply took any work they could, and often worked 12 hour days. If you are looking for employment, you might consider looking for a position that is slightly below your ideal salary, but that seems to have the most potential for advancement. If you are entrepreneurial, and perhaps have already fallen behind on bills, one positive thing about the current economic climate is that you are starting over at a time when many other people are also faced with starting from scratch financially, and perhaps you may even be in a position where you literally have nothing left to lose, which can be a great time for personal innovation and taking the risk to start in a new industry or implement an idea that’s always been in the back of your mind. It’s time for boot-strapping!

Credit: Redefining What You Can Afford and Need

Source: BW/Color

If you have credit available, you might be tempted to use it before the bank cuts the credit line. Don’t do it. Going into debt will only hurt you in the long run. Instead, remember the words of your grandmother and heed this simple, age-old advice – “if you can’t afford to pay cash, you can’t afford it.”

Money Management/Budgeting: Simplify Your System

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When you simply have no money, it is easy to keep spending under control because it is impossible to spend. In many cases, one spouse saved money in the cupboard and even hid it from the other spouse. There is a good trick to be found here that requires a lot of discipline. If, for example, you are getting hit with overdraft fees, you need to establish a barrier that you absolutely will not dip below (even if it means paying a bill late). Take the cue from the 1930s and use cash rather than debit for your petty purchases, especially when you are close to zero in your account. This will help avoid paying $36 for that pack of gum if an unexpected payment goes through your account and causes an overdraft fee.

For our grandparents and great-grandparents who lived through the 1930s, many months surely consisted of living in survival mode, and there were much fewer recurring expenses and bills to be paid, so it was possible in a lot of cases to keep track of spending without even necessarily writing it down. Today, we have several types of accounts, in many cases at different institutions, with new types of debt and monthly payments to keep track of, so take a look at Mint’s free software today and start tracking your spending automatically to find areas where you can save money.

This guest post is by Ginger, a late 20’s fashionista, wife and graduate student who strives to have it all while keeping watch over her personal budget. She is the blogger behind “Girls Just Wanna Have Funds”, a blog dedicated to the woman that wants to take charge of her personal finances. Just like Ginger, we here at Mint.com value budgeting, investing and frugality.

Admit it. Being frugal isn’t something that you look forward to; after all it means that you’ll be giving up or cutting back on some or all of your favorite activities. But what if you found a way to cut back without giving up those things completely?

What if you found a way to actually get a hold of the things you enjoy without spending a fortune?

To prove that this can be done, I’ve compiled some money saving tips and a comprehensive list of cheap alternatives to the “must haves” in our lives.

Shopping

There are a number of web sites out there that can help you stay fashionable for less! These are but a few of my favorites:

• Fashion under $100
• Frugal Fashionista
• Frugalicious
• The Budget Fashionista

Also, check out this list of stores from Fashion Under $100. These stores provide trendy options without breaking the bank:

• Go Jane!
• Goody’s
• Hot Couture
• In My Shoebox
• Kohl’s
• La Redoute
• Lady Language
• Love My Shoes
• Lulu’s Fashion Lounge
• Mandee
• Mango
• Metrostyle
• Newport News
• Old Navy
• Onatoko
• Rampage
• Reitman’s
• Shop Lush
• Smart Bargains

Money Saving Tip: Check out annual and semi-annual sales and buy clothes at certain times of the year. For example, after Christmas or New Year and at the end of every season, many department stores seek to unload their inventory, allowing consumers to benefit from the deep discounts.

Entertainment

If you’re always on the go and never at home to watch your favorite television shows, dump the Tivo and your cable company and plug in to iTunes instead. iTunes allows you to watch your favorite shows online for a small fee, $1.99. For example, Lost, Grey’s Anatomy and Boston Legal can be bought per episode for $1.99, or $24 per month. What’s great is that you get to watch them sans commercials and on your own time. Apple also now offers movie rentals for $2.99 – $3.99, and HD for a dollar more.

If this doesn’t work for you then hang out at a friend’s house, go to your local sports bar, or join a meetup.com group that gets together to hang out and watch popular network shows. This option really appeals to me as I seek ways to enjoy entertainment while maintaining a flexible schedule so that I can live more productively. This is just one way I’ve been able to keep within my personal budget.

Money Saving Tip: Most major network shows can be watched for FREE on their respective channels such as ABC, NBC and the like. Remember that you don’t need to pay hefty cable fees to catch good shows or movies on television.

Automobile

One thing I love about living in a major metropolitan area is that we have so many options for getting around town. Think of the money you can save without owning a car: car payments, insurance, gas and maintenance – all of which can be costly! Zip Car is an option for those of us who only need to use a car on occasion. Zip Car rates start at $50 per month for the extra value plan, and $9/hr or $66/day for occasional driving.

Here’s a map with their current locations:

This way you’re able to have the convenience of a car without the monetary commitment. The access fees pay for gas, parking and insurance! You can’t beat that!

Other options include biking to work, using public transportation and carpooling. The latter brings to mind an awesome service facilitated by Erideshare.com. Use the site to connect with others who are carpooling in your area. From the website: “you’ll find this service a good way to commute or travel inexpensively, and maybe even make a few friends.” If you’re new in town and looking to save money, this is a great option.

Now if you must have a car, then either buy it used or check out Beater Cars, which is another kind of used car becoming popular amongst the frugal. Why? According to Beater Review, buying new is for suckers! With a new car depreciating 20%-30% in the first year it makes perfect sense. This saves you extra money on insurance, and in most cases you won’t even have a car payment.

Money Saving Tip: Make the best choice for you and your situation. If you don’t live in a city or have Zip Car within reach, then buying an inexpensive or used car, or deciding to carpool should help you save money.

Eating Out

Cutting back on dining out takes discipline. How about these frugal alternatives?

Potluck with friends

• This is a great way to hang out with friends and try out new dishes. Keep leftovers for work or dinner the next day.
• Save money by cooking in bulk and using it for lunch and dinners during the week. Or be creative by turning leftovers into “planned-overs”.

Make your favorite restaurant meal at home

• Instead of buying drinks or food at restaurants, why not find the recipes for your favorite restaurant dishes then make them from scratch at home?

Money Saving Tip: Check out this great article from J.D. over at Get Rich Slowly, who has additional great money saving tips on how to save while eating out.

What do you think of these alternatives? Which ones do you employ in your own quest for frugality? What is the impact of these choices on your personal budget?

Budget Planning: The True Cost of an iPhone = $2,200

The iPhone will run you about $2,206. And if you live in Tennessee, where the sales tax is at a lovely 9.4%, it’ll cost you about $2,218.

Wait a minute, two thousand and two hundred dollars, for a cell phone? How did that happen?

Welcome to the concept of expenses tracking. Like with so many things in life, owning the iPhone doesn’t just end with a single purchase — it stretches on with service plans, taxes and more. By the end of the two years required contract, you’re talking real money. Let’s take a look at the math:

$599 iPhone x 8% sales tax ($47.92) = $646.92

$60 required cellular plan + $5 (taxes & fees) x 24 months = $1560

Total cost: $2,206.92.

Note: Engadget has a great compare and contrast on the iPhone vs. other smartphones.

Again, this is just for owning the phone for two years. What else can we dig up to show their true value? More than you know.

The Total Cost of Pet Ownership ~ $12,000

“All right,” you say, “what about this pet number you have going on here. Surely my dog won’t cost me $12,000?”

You may be right there, as your pet can easily cost more if you have a larger breed, or if you live in a costlier area.

Here are the budget planning numbers to owning a 50 pound dog (living in the Midwest)¹:

$1,977 first year cost

$807 yearly cost x 14 years

Total cost: $12,468.00

According to the Wall Street Journal², the average cost of ownership for a small dog that lives 15 years will cost almost $12,000 — and more than $23,000 for a larger breed that lives for 12 years. These are averages, mind you.

The Total Cost of Car Ownership ~ $42,000

Let’s take one of the best selling cars of 2007, a Toyota Camry LE (Automatic transmission, because who drives manual in America?), and punch some numbers³.

For a five year ownership, this is the cost break down:

Total depreciation cost: $11,482

Financing: $4,580

Insurance: $10,026

Taxes & Fees: $2,318

Fuel: $8,653

Maintenance: $4,310

Repairs: $689 (whew, thank goodness it’s a Toyota)

Total: $42,058

Once again, these are average numbers. They’re based on 15,000 miles per year, in a region that isn’t terribly expensive. Insurance can fluctuate from low prices to high prices depending on your situation. If you live in a costlier city, or drive more miles per year, many of these numbers can easily increase.

The Cost of Raising a Child Over 17 Years ~ $170,460

In this example, the numbers are based on a survey by the U.S. Department of Agriculture along with data from the U.S. Department of Labor⁴. They are numbers for a dual-parent family with medium household before-tax income of $39,100 to $65,800.

The cost of raising a child over 17 years:

Housing: $57,360

Food: $29,550

Transportation: $24,510

Clothing: $10,470

Health: $12,180

Child care/Education: $17,430

Miscellaneous (the occasional iPhone and pet): $12,720

Total cost: $170,460

Here’s a kicker. These numbers are updated with 2001 numbers using the Consumer Price Index. So yes, raising a child these days will most likely cost you more money.

The Costs of Buying a Home Over 30 Years ~ $1,073,000

Here are some numbers from a recent Wall Street Journal Article⁵, based on the average mortgage-interest rate in 2006. The national median home price was $222,000 during the time.

Purchase Price (typical single-family home): $290,000

Down payment: $58,000

Principal: $232,000

Interest @ 6.41%; total = $291,000 (after tax: 33% bracket): $195,000

Taxes & Insurance ($6,000 / year): $180,000

Maintenance ($300 / month): $108,000

Major Repairs & Improvements: $300,000

Total Cost: $1,073,000

Average numbers? You bet. If you live in a more expensive area and have subpar credit, expect to add quite a bit more to the price tag above.

Okay, So… Don’t Ever Buy or Do Anything?

Obviously, we can take any expenses we have, figure out its cost of ownership or its total opportunity cost in the long term, and make a big fuss.

When you see the numbers in a big picture, things will always seem a bit intimidating — and that’s kind of the point. In the world of personal finance (as in, your money), it’s common adage to focus on the long-term cost of your financial choices and expenses tracking so you can make better financial decisions today.

No one really sits down and breaks out the calculator before they buy a cup of coffee and donut (unless you happen to be a glasses-wearing blogger working at a start-up called Mint.com); most people also don’t input their night-out expenses into the spreadsheet before they pick up their date.

The point of seeing the numbers in a bigger picture is so that you understand the financial commitment you may face when you make a decision to buy an iPhone, Pet, or even a car.

Consider this: let’s say for whatever reason you have financial trouble in the future. You’re living paycheck to paycheck, and suddenly one month becomes extremely difficult.

Would you wish you’d had $2,200 so you can provide food for your family? Would you wish there’s an extra $12,000 laying around so you can take another step towards that down payment for a home? Would you wish you had an extra $42,000 so you wouldn’t have to worry about how you’ll pay your bill next month?

Wait, that’s not fair, you say.

“I love my dog and I don’t care how much he’ll cost me.”

You have a point there.

Whether you got to make your calls with a “frigging sweet iPhone,” let your child experience the joy of pet ownership, or just have a car so you can get to work — sometimes we just have to spend some extra money.

And that’s how it should be.

Money is for living. It’s a tool that we use to better our own lives and those of our loved ones.

It is, however, a tool you need to use wisely. You certainly don’t want to buy a gadget — or another financial responsibility such as a pet — if you’re between a rock and a hard place with the bank.

Even if you can afford the current monthly payment, if a purchase will hurt you financially in the long term, you may not be making a responsible financial decision.

Remember, reaching financial independence isn’t about spending all day long wondering how much money you could have or should have saved. A sensible financial lifestyle also isn’t about hoarding all your money for that rainy day.

Being smart with your money is about fully understanding the financial choices you make and seeing the entire picture – the true cost and total cost of ownership when you commit to a device, transportation, pet, or even a child.

In the end, it’s a careful balancing act — a pretty important one that you’ll need to think about occasionally, so that you can live well today and live even better tomorrow.

More to Read So You Can Make Smart Money Decisions

• 30 Free e-Books to Learn Everything You Want to Know About Your Money
• How To: Tackle Your Debt in Five Simple Steps
• How To: Stash Your Cash at the Right Places

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References:

1. Cost of Owning a Dog from PetEducation.com
2. Calculating the True Cost of a Pet from the Wall Street Journal
3. True Cost to Own Ratings at Edmunds.com
4. The cost of raising children at MSN Money Central
5. Why Your Home Isn’t the Investment You Think It Is from the Wall Street Journal

Further Reading on the Topic:

Expenses Tracking

Budget Planning

Personal Budget Plan

Budget planning is something that we care about here at Mint. Learn more with great budget planning tips in our blog article index.

What are the benefits of using fixed-rate mortgage in purchasing or refinancing your home? If you are in an adjustable-rate loan, should you consider refinancing and getting out of it while you still can or buckling down and budgeting your money before interest rates get too high and home values drop?

There’s no simple answer to that question, since so much depends on your specific home, loan, and personal financial situation. But you’ll also find that, depending on your state or county, a different type of mortgage is appropriate for you. Sound confusing? It shouldn’t be: simply put, areas with home values that are increasing (and where interest rates are low) often choose to have adjustable-rate mortgages on their properties. On the flip side, many U.S. homeowners find a fixed-rate loan to be safer and less dependent on market conditions. It also provides people with security and a sense of self-confidence in their ability to meet financial obligations.

While an adjustable-rate mortgage (ARM) might work for you if you fully understand the terms and conditions, you have to work on budgeting your money. By their nature, in an ARM, interest rate will increase or decrease – and you should be prepared. In recent years, the interest rate has risen steadily, causing many homeowners with adjustable-rate loans to see rising costs in month-to-month payments.

An ARM is a gamble – you’re gambling that the interest rate will decrease and home values will increase. If you happen to be wrong, you could face an insurmountable monthly payment and a decreased home value.

On the other hand, you could look into a fixed-interest mortgage. As you look into the best home loan option, here are three advantages of fixed-rate mortgages to consider:

• Decreased risk. Your month-to-month mortgage payments are fixed. Even if the current interest rate increases, yours will stay put, which is an essential point of security for many homeowners. This is one reason why fixed-rate mortgages are popular, particularly with first-time home buyers.
• Secure long-term planning. Since your monthly mortgage payments won’t change, you have the security of planning out your payments throughout the life of the loan. You can carefully plan for things like property taxes and insurance, and it also allows you to be financially responsible in planning out your family’s future.
• Budgeting your money. For the most part, we can’t predict the ebb and flow of interest rates. Inflation may cause interest rates to rise, which would cause you a great deal of trouble with an adjustable-rate loan. With your fixed-rate loan, though, you can ride out the storm at ease. Your mortgage rates will stay the same, even if your taxes and insurance costs rise.

Fixed-rate mortgages have been a secure way for home owners to purchase homes for decades. Over the years, loan-to-value ratios have fluctuated and interest rates have moved up and down, but the security that a fixed-rate mortgage offers has never lost its appeal to homeowners throughout the U.S.

Fixed-rate mortgages may have a timeline between 10-50 years, but a 30 year amortization period is most common. People often choose a 30 year loan, because it often gives you a reasonable monthly payment to shell out. Rising home costs, though, have increased the number of 40- and 50-year loans being accepted. While that may be a good move to make the month-to-month mortgage payments reasonable, it does increase the amount of interest on the loan by stretching those interest payments over a much longer period of time – with a 50-year loan, almost twice the amount!

Understanding closing costs. Also known as settlement costs, closing costs are fees and expenses over and above the price of the property, incurred by the buyer and/or the seller in the property ownership transfer.

During the early years of a fixed-interest mortgage loan, much of your monthly payment goes toward eliminating the interest. As the loan progresses, though, that will change: slowly but surely, most of your payments will go towards that principal, such that by the end of your loan almost all of your money will go towards principal payments.

This type of fixed-interest payment plan means that it will be harder to sell your home during the first few years. Very little of the principal will have been paid off, so the loan will still be high. If the house did not appreciate in value, the financial situation gets difficult. However, if home values are increasing, then it will be a significantly smaller problem that so much of the principal has yet to be paid.

As the homeowner, you have some choices with this, too: making a larger monthly payment and directing more of it towards budgeting your money will decrease your principal loan balance faster, and decrease the amount of interest that’s left over. Say, for example, that you paid half of your monthly mortgage every two weeks; that would pay off your mortgage about 5.25 years faster than scheduled. Paying one extra payment per year would reduce the amortization period by 5.25 years, as well. Options like these aren’t requirements, but they do shorten your payment periods significantly.

Another factor to a mortgage loan is the “point” system. Points will decrease your interest rate if you pay an additional fee – about 1% of your loan for each point. Depending on your circumstances, it could be a good idea to invest in points, but you’ll want to calculate your overall savings before you start buying them. To recover the cost of those points, you’ll want to figure out your monthly savings with the lower interest rate versus the rate without points. Divide that number into your points to arrive at the number of months it will take you to break even. Beyond that, all of your savings are yours to keep.

To give an example of that, if you decide to pay for 2 points on a $300,000 loan (for an interest rate of 5% rather than 7%), your payment will be $1610.46. However, stuck with the 7% interest rate, you’re left with the payment of $1995.91. The difference between the two payments is $385.45.

Two points will cost $4,000. To recoup that investment, $4,000 divided by $385.45 equals almost 10.4 months. By your 11th month, not even one year of payment, you will begin to profit from paying those points with a personal budget planner.

Hopefully it’s become clear now that your choices involved in a fixed-interest rate mortgage loan can be extremely beneficial to your personal financial situation. There are many ways that you can decrease the term of the loan or the overall interest rates of the loan. With smart financial planning, you can be through that loan and into financial freedom quickly.

Further Reading on the Topic:

Personal Budget Planner

Budgeting Your Money

Home Budget