Simple Inspiration Interview with Paula Pant

Paula Pant

Do you have things you want but consistently tell yourself you can not afford it? I am sure you will enjoy this week’s Interview with Paula Pant from Afford Anything. Paula is a journalist-turned-blogger, speaker and media commentator specializing in personal finance, real estate, and lifestyle design. In 2008 which was the same year as the financial crisis, Paula decide to quit her job and sell all of her possessions. For the next two-and-a-half years, she decided to backpack across Asia, Europe, and the Middle East.

She has created a movement on her blog Afford Anything which is based on the idea that you can afford anything.  The movement believes that life is too short to sit in a cubicle.

Let’s hear how Paula has been able to master her money, so she could ditch the 9-to-5 and embark on an epic adventure:

What event lead you to decide you to quit your job and travel the world?

When I was in college I wanted to study abroad, but study abroad programs were prohibitively expensive. It cost $10,000 to $15,000 for a single semester at the least; some of the more expensive study abroad programs cost as much as $20,000 for a single semester. I couldn’t pay for that — so I started thinking creatively about how else I could get the study abroad experience.

I realized that I didn’t really want to study, I just wanted to go abroad. I decided that after graduation that I would work for a few years, save up some money and then quit my job and travel … and that’s precisely what I did. People are often surprised when I get to that last line of the story, the line in which I took an idea and put it into action. When I quit my job, all of my friends said “Wow, you’re actually doing it!” and all I could think was, “well, yeah, I’ve been talking about it for years. Why would you think I wouldn’t be?”

How long had you planned this?

I suppose you could say that I planned my round the world trip for five or six years, starting from the point that I was a college student with a dream. But true planning, in the sense of accumulating money into a savings account that would be used to fund the trip, began with I accepted my first job out of college.

I was earning a starting salary of $21,000 per year. I saved 20% of my income and then I freelanced during the evenings and weekends and saved 100% of that money after taxes. After three years, I had accumulated $25,000 and was ready to quit my job.

What steps did you need to take to make sure you could do it?

The biggest step that I took was saving money. I knew that I didn’t want to come back to the U.S. after only four or five months. It was important to me to be able to sustain a two-year trip and so keeping a large cash cushion was crucial to fulfilling this dream.

I took a few smaller, shorter trips for durations of about two to three weeks while I was saving this money. These short trips were a little trial run but taught me how to prepare for a big trip for example, I learned to stay at Hostel’s, I learned how to pack, I learned which guide books to read and how to access internets and got a realistic sense of what type of budget I could work with.

What was your biggest challenge or roadblock when it came making that change?

The biggest roadblock was psychological. I was afraid of quitting my job. I thought it might be career suicide. I worried that I would never get a job again. At that point in my life, I had no ambitions to become a full-time entrepreneur and so I constantly worried about how things would look on my resume. I had to give myself the mental permission to quit.

How did you feel once you reached your goal and were able to quit?

Obviously I was overjoyed, enthusiastic and excited when I quit my job. The reality of it seemed so surreal. Within one week I put in my last day of work, gave up the lease on my apartment and flew to a foreign country, that’s a pretty big week.

What are your current financial goals?

Currently I am financially free, which means that I make enough money from my investments to cover all of my expenses. I don’t have additional financial goals because I’m satisfied with my current status. My goals now focus on travel, fitness and having fun; enjoying my successes.

What tools do you currently use to manage your finances while you travel?

I keep an account with Charles Schwab bank because they don’t charge ATM fees and will reimburse other banks’ fees. Since I’m going to be pulling money out of random ATM’s all over the world, it’s nice to have a card that doesn’t charge ATM fees. I also maintain credit cards with Chip-and-PIN technology and no foreign transaction fee.

Finally, I keep a money belt on my body which contains my credit cards, debit cards and passports. I carry only a small amount for daily spending in my wallet. That way if I get pickpocketed, I will only lose a negligible amount of money.

What one thing have you done to enable you to live your current lifestyle?

The biggest thing I have done to enable my current lifestyle is living significantly under my means and investing the difference. For several years I have saved at least 50% of my income. That has allowed me to become a real estate investor and gain financial freedom. I drive a used car and I don’t shop for the latest designer clothes or handbags or anything like that. I spend most of my money on travel and of course, I invest a lot of my money into building my own businesses as well as buying passive-cash-flow real estate.

Why did you start the One Percent Challenge?

I began the 1% challenge after many of my blog readers expressed that they were having difficulties in saving enough. They understood the importance of saving, but they couldn’t figure out how to find that money within their budget.

The 1% challenge, for those of you who are not familiar with it, is a challenge in which people increase their savings rates 1% per month. If you currently save 10% of your income, save 11% next month. If you currently save 15% of your income, save 16% next month. If you earn $3,000 per month, for example, 1% equals $30. If you earn $4,000 per month, 1% equals $40, and so forth.

Each month, increase your savings by an additional 1%. After a year, your savings will have increased by 12%.

What type of feedback have you received since it started?

The feedback from the 1% challenge has been tremendous. My readers have been incredibly creative in finding ways to save, ranging from doing away with home internet completely to rounding up every purchase that they make. They share all of these tactics and tips in our Facebook group which is a great resource group to join with a community that is taking the challenge.

What three things do recommend in order to simplify your finances?

To simply your finances, adopt what I call the anti-budget. Skim your savings off the top first, and then go wild with the rest. I’m not a detail-oriented person, so I don’t like tracking precisely how much money goes towards toilet paper and cat food. I would much rather have the assurance of knowing that I’ve set aside my savings, and whatever is left over in my bank account is money I can freely spend without worry.

The second tip is specifically for couples. Live as though you only earn one income, even if you earn two. Now that I’m part of a couple with joint finances, we have a very simple budgeting strategy. We save 100% of the take home pay of whomever earns more. This guarantees that we will necessarily be saving more than 50% of our income.

My third tip for simplifying your finances is to automate all of your bill-paying. You don’t want to have continually track which bills are due on which days.

What’s your best savings tip?

The best savings tip is to focus on the big four: taxes, housing, transportation and food. Americans spend more money on those four categories than anything else. Taxes and housing collectively consume about 50-60% of a person’s pay. If you can reduce each of those by 5 percent, you will have instantly saved 10% or more — without worrying about skipping lattes.

What book, blog, or podcast would you suggest to someone who is looking to simplify or improve their finances?

Obviously I would suggest affordanything.com to anyone who wants to simplify or improve their finances. If you are a beginner, I also the Stacking Benjamin’s podcast, which takes a lighthearted and fun approach to discussing money.

What advice or thoughts you would like to share with others who are looking to simplify?

My best piece of advice for anyone who wants to simplify their finances is to pull their savings off the top first. I refer to this as the anti-budget because it’s not what people imagine when they think about budgets. Most people think about line-itemizing every expense in excruciating detail. But if you simply pull the savings off the top first, you don’t need to worry about how you are spending the rest of your money. When I say “savings,” I’m referring to money that could be used for investments, debt pay-down and literal cash savings.

Thanks Paula for sharing with us your journey to financial freedom.  If you would like to read more about Paula visit her blog  Afford Anything  or follow her on Twitter @affordanything.

To read previous interviews in the series click Simple Inspiration Interviews.

If you are interested in sharing how you have simplified your financial life, send me an email and I will follow up with you.  Enjoy the rest of your week. Til next time, take one step at a time to simplify.

 

Want to Save More This Year? Your Tax Refund Can Help

tax refund

Hopefully you have completed your tax return by now and are eagerly awaiting your tax refund to arrive. Most of us prefer to receive a refund instead of paying the IRS more of our hard earned money.

Did you know that the average tax refund is approximately $3,000 according to the IRS?

That’s not an insignificant amount of money. If you are anticipating a four figure tax refund, you may already have visualized how you will spend your refund. Instead of spending your tax refund on something you may not need why not save it.

Saving instead of spending your refund can have a long term positive impact on your finances as well as help you reach one of your annual financial goals. As I have written previously, saving money will help you simplify your financial life as well as provide you with a financial peace of mind.

Here are 5 ways you can use your tax refund to save now:

Save for an Emergency Fund 

You can use your tax refund to replenish your emergency fund.   If you don’t have one already establish, your refund can help you quickly put one in place. Having an emergency fund in place for those unexpected expenses that can occur, will provide you with a financial peace of mind knowing the money is there.  You do not have to worry about where you will find the money to cover the expense or worse maybe having to use your credit card to pay for the expense.

 Save for Retirement

You can use your tax refund to fund a retirement account. Hopefully you are already contributing to your employer’s 401k or retirement plan. However just contributing to your employer’s retirement plan may not enable you to save enough. Use this year tax refund money to open an IRA account or make your annual contribution if you have not already contributed this year. By making this contribute may provide you with a tax deduction (depending on your income level). You can beat saving for the future as well as possibly saving on future taxes.

 Save for Child’s Education

Use your tax refund to contribute to your child’s future education cost. You have probably read how education cost continue to increase every year.   If you don’t begin to save while your children are young you may have to turn to other forms of financing the cost of tuition.

The more you have saved now the less you will have to budget for in the future. It’s never too early to start saving for your children’s tuition bills. There are several types of educational accounts which enable you to save for educational purposes and have some tax advantages.

Save Medical Expenses

You can apply your tax refund to future medical expenses. Just like an emergency fund having funds set aside to cover medical related expenses can be a good use of your tax refund. Having money set aside for those medical cost, will provide a financial peace of mind knowing the funds are there when needed.

Save for Future Purchases

You your take refund to save for future purchases. I am pretty certain you will make a large purchase in the future. Why not use refund to begin saving for that next purchase. It could be the new home, car, or maybe dream vacation you always wanted. It will be less stress on you and your budget if you apply the refund to future purchases then.

As you patiently wait for your refund check think about what saving bucket you will apply your refund to. Applying to saving versus spending it, will make a difference on your long term financial picture.

What savings bucket will you apply your tax refund to?

Simple Inspiration Interview featuring Trea from Trea’s Two Cents

Trea 2 cents

Do you have student debt and want to get rid of it as soon as possible?  If you are nodding YES, this week’s interview is for you.   I am honored to interview Trea, who should inspire you to begin eliminating your student debt.  Trea’s story is one I know many can relate to.  She acknowledged some need to change and she needed to reduce her debt so she too action.

treaOn her site Trea’s Two Cents, she helps those looking to demolish their student debt.  She is all about breaking down big feats into do-able steps, and she does that for everything from setting money goals to budgeting to beating debt.  She is currently giving away a guide that breaks down how to pay off your student debt sooner. You can find 5 Steps to Beat Student Debt for free, on her website.

Let’s hear how Tres has been able to simplify her finances as well as begin to eliminate her debt:

What event lead you to simplify your finances and your life?

Trea: As crazy as it sounds, my wedding triggered a need to simplify my life (and finances). My husband and I refused to begin our marriage with wedding debt. I was already looking at $180,000 in student loans. He also had a couple of loans he wanted to pay off, so we didn’t want to add to that amount for an event that would last all of 10 hours. We simplified our needs and wants, so that more of our monthly income could go toward our wedding fund. It worked well for us because we were able to pay for our wedding and honeymoon, and have a little left over to kick-start our savings.

What area of your financial life needed the most simplification?

Trea: Definitely debt! Both of my degrees were almost fully funded by loans, so by the time I graduated, it was a massive amount wasn’t going anywhere any time soon. I’ve always had a good handle on knowing where my money was going (which does not always translate to sound money decisions!), but it took one conversation with a coworker to shift my thinking around student debt. I went from looking at student debt as just another monthly bill that would be with me for life, to seeing it as something that should and could be paid off as quickly as possible. Using other debt-free success stories like Joe Mihalic, I made a plan to pay off my $180,000 of student debt as quickly as I could, and for me that was 3 years.

How were you able to simplify your finances once you were married?

Trea: Aligning on our “core financial values” was most important to my husband and me. We talked through what was important to us financially (e.g. no debt!), what we value (e.g. travel), and what we wanted our future to look like. We were then able to set goals to help us get there. Having things like an emergency fund, travel fund, and a “date night” fund may not sound simple but they really make it easy for us to handle business and still live life.

Where did you begin to simplify your financial life?

Trea: I had always done some form of budgeting to make sure my bills were paid and that I always had spending money, but what really made things simple for me was setting goals. The fact that we paid for our wedding and honeymoon in full and the progress we’ve seen on our debt is all because we set very specific goals with very specific deadlines. When your as specific as possible, for example $200 per paycheck to reach your goal of a $4,800 emergency fund within a year, it’s much easier to follow and stick to.

What was your biggest challenge or roadblock when it came simplifying?

Trea: I’m kind of anal and orderly, haha. So I haven’t experienced a lot of challenges when it comes to simplifying. Once I set my mind to something, I’m pretty much all in. But patience is probably the greatest challenge overall when you have goals that will take years, especially when surprise expenses pop up along the way. Having to adjust my debt-free plan to cover emergencies is never fun, but a debt-free plan will quickly die without the ability to adjust.

What app or tool helped you the most when it came to simplifying?

Trea: Budgeting has been my not-so-secret weapon. I tried apps like Mint.com, but nothing gets it done like good ‘ol Excel for me. Oh, and debt countdowns or thermometers (you know, like the fundraiser thermometers)…those are really fun when your journey feels long.

How has simplifying changed your life?

Trea: Simplifying our needs and wants has freed up so much money for us to do some real damage to our financial goals. Making more money is only one side of the equation. Most of us are in a situation where we can also look at where we’re currently spending and cut back to find more money for our goals.

What has eliminating your debt enabled you to do?

Trea: My husband paid off his student debt in 2013, and I paid off one loan in 2014. That progress has allowed us to put more toward our next set of debt. We’ll continue this process until we’re completely debt free. I expect to make my final student debt payment in December 2016, and when that day comes, our priorities will shift to investing significantly.

Do you manage your finances since you have a varying income stream?

Trea: If you haven’t already noticed, I’m kind of a control freak when it comes to my finances. I like to know where every penny goes because I usually have a plan for every penny. So my husband and I definitely manage our own finances. He handles the day-to-day bills, and I handle the savings goals. We’re a great team.

How did it feel when you made your last payment?

Trea: I still have a ways to go, but I made a huge accomplishment in paying off my $80,000 Federal Loan in 2014. There was such a liberating feeling when making that final payment, and when I received the confirmation letter, I wanted to frame it (seriously!). But that was all short-lived since my focus immediately shifted to knocking out my $100,000 private loan :).

Are there any areas of your finances that you still need to simplify?

Trea: There is still a lot of opportunity for us to minimize our expenses. I’d like for us to really push ourselves to see just how little we can live off of, so that we can maximize our savings and investments once this debt is gone. I’d rather sacrifice more now, to live how I want later.

What advice or tips would you give to others who want to simplify their finances?

Trea: Start with goals. Make them as specific as possible (down to how much you’ll give per paycheck), and do what you can to visualize it and keep it top of mind. When you have that prize that you’re working toward, it makes it a little easier to make the sacrifice and persevere.

What book, blog, or podcast would you suggest to someone who is looking to simplify or improve their finances?

Trea: Man, there are so many awesome resources out there! Millionaire Next Door (Thomas J. Stanley) is always a favorite book for perspective. I’m also a fan of Dave Ramsey’s Financial Peace University for those looking to learn how to budget and take control of their money.

My favorite blogs for inspiration these days are (of course!) Simple Financial Lifestyle, as well as His and Her Money, Debt Free Divas, and Budgets Are $exy (just to name a few).

Do you have an emergency fund established, if so how did you determine the amount needed to fund it?

Trea: Yes, I highly recommend an emergency fund no matter your financial goals! We decided on a bare minimum while we pay off our debt. Once our debt is paid off we can beef it up to be about 6 months of your living expenses.

How long did it take you to simplify?

Trea: We’re still in the process of simplifying, and I see it as something that will be continuous, especially as we reach different life stages (like kids!).

What’s your best savings tip?

Trea: I’m probably sounding like a broken record, but having a specific goal has helped me tremendously. I set the overall goal (e.g. $3,000 for Hawaii trip), deadline (e.g. one year from now), monthly amount (e.g. $250) and if necessary, per paycheck amount (e.g. $125). This keeps me focused and determined.

What are your current financial goals?

Trea: Student debt is my number one goal. I started with $180,000 in January 2014, and I now owe close to $90,000 that I aim to pay off by December 2016.

In the meantime, I also have to maintain my share of our family goals like our travel fund and emergency fund.

Lastly, over the next year we’re going to want to buy a car (in cash) and start saving for baby once we’re ready (that’s still very weird for me to type!)

Trea, thanks for taking your time to share how you are simplifying and eliminating your debt.  If you would like to learn more about Trea and follow her journey, check out her site and download her free guide at Trea’s Two Cents and also follow her on Twitter @treastwocents.

If these interviews inspire you and you would like to read more interviews in the series click Simple Inspiration Interviews.

If you are interested in sharing how you have simplified your financial life, send me an email and I will follow up with you.

Enjoy the rest of your week. Til next time, take one step at a time to simplify.

 

Simple Inspiration Interview with Jeremy from Go Curry Cracker

go curry cracker

 

Do you wish you could retire in your 30s and enjoy your life?  Well this week’s Simple Inspiration Interview offers you a treat.  Learn how Jeremy and his wife Winnie retired early and are traveling the world.

Jeremy and Winnie combined, they’ve been to nearly 40 countries and have no intention of slowing down. Their blog  Go Curry Cracker shares their journey around the globe, as well as their journey to Financial and Location Independence. Their example has inspired many to increase savings and seek a life of adventure and international intrigue.  jeremy winnie

Let’s hear how Jeremy and Winnie have simplified their financial life so they can live the life they desire:

What event or events lead you to become a super saver and to live a minimalism lifestyle?

We turned on the Super Saver switch the day we decided that time and freedom are the most valuable assets. Now instead of 2 weeks of vacation a year, we have 52

But we’ve never really tried to be minimalists. We absolutely have everything we want and need; it just so happens that none of those are things. Once you have enough, more is just… well, more

What was your biggest challenge or roadblock when it came saving and simplifying?

The biggest challenge was probably overcoming poor decisions made by my younger self. I sold my car and a house that required a commute, and replaced them with a small apartment in a walkable neighborhood and a bicycle. The combination is a powerful force for building health and wealth

How long did it take you to reach your goal and you knew you could quit?

From the day we committed to becoming Financially Independent to the day I resigned, it was 10 Years and a day.

What systems did you use to save monthly? Automate it or very discipline about putting the funds in the appropriate buckets.

We don’t budget, and instead deliberately designed our lives to be efficient. The biggest categories in most budgets are housing, transportation, and food. By living large in a small space, getting about by foot and bike and public transit, and learning to cook better than restaurant food at home, we lived incredibly luxurious lives for a fraction of the cost

By designing our life in this way, we were able to save 70%+ of our after-tax income. And even if we “accidentally” spent too much one month, Oops! We still saved 60%

When you decided to quit what was your biggest fear?

Our biggest fear was probably of the unknown. It’s easy to second-guess everything when you are doing something uncommon.  We had many conversations that started with the question, “We are still in our 30’s, can we really retire?!”

How did you get over that fear?

We knew we had saved enough, and just had to rip off the Band-Aid. But to ease the transition, we started our world travels in lower cost of living countries like Mexico and Guatemala instead of England or Australia. This allowed us to have a graceful transition from saving to spending

How did you feel once you knew you had reached your goal?

It really happened through the rear view mirror. In hindsight, I probably worked 3 years too long.   When you are saving a high percentage of income, the power of compound interest can really take you by surprise

But the feeling of absolute freedom is amazing. We sleep when we are tired, eat when we are hungry, and create when we feel inspired. Often I have no idea what day of the week it is. I think this is what it feels like to be a child again

What app or tool helped you the most when it came to saving and reaching your goals?

I love to geek out in Excel, and have done some extensive modeling of early retirement and investments

I also love cFIREsim, a crowd sourced financial independence and early retirement simulator. It is a great tool to analyze how you would have fared had you retired at any point in history

Most recently I’ve been using Personal Capital. They have done a great job of analyzing if your 401k fees are too high, if your Asset Allocation is right for your goals, and even your cash flow, all with an easy to use and understand interface. And best of all, it is Free

Are there any areas of your finances that you still need to simplify?

Investment wise, we still have a few individual stocks lying around that I’ll sell when convenient. Otherwise 90% of our investments are already in low-cost index funds from Vanguard

I choose to complicate things a little as I do a Roth IRA Conversion each year, and regularly harvest capital gains as part of our strategy to Never Pay Taxes Again

How do you currently manage your finances while you travel the world?

For all of our regular spending, we use a No Foreign Transaction Fee credit card with cash rewards or award points that can be used for free flights or hotels.   Then we just auto transfer funds to pay in full each month

If we need cash, our cash card reimburses for any fees and can be used at any ATM in the world

And using Personal Capital, we can look at our entire financial picture with a single login on either our laptop or phone

What are your current financial goals?

When we come to the end of the road, we would like to leave behind a large endowment to fund charitable hospitals. We will keep our portfolio growth focused to accomplish that goal

What advice or tips would you give to others who want to simplify their finances and save more?

It is rumored that Einstein said compound interest is the most powerful force in the universe. With something so powerful, choose to let it work for you instead of against you

Focus on the Big 3 spending areas of Housing, Transportation, and Food. We became very efficient in these areas, and our quality of life and savings both soared as a result

What book, blog, or podcast would you suggest to someone who is looking to save more and improve their finances?

There are a few blogs that I really love:

Mr. Money Mustache does a fantastic job of helping people maximize their happiness. (Hint: spending more doesn’t help)

Jim Collins, the Godfather of Personal Finance Blogging, has a great Stock Series that is second to none when it comes to learning the how and why of investing

J Money of Budgets Are Sexy takes a concept that many people find boring (personal finance) and makes it fun and easy to understand. And sexy

And of course I think Go Curry Cracker  is pretty good too

What’s your best savings tip?

Aim Big. When you take on big bold goals, even if you don’t achieve them 100% you rarely fail completely.

Any other thoughts you would like to share with others who are looking to simplify?

People are often resistant to change, but remember, nothing is permanent. If you try a new way of doing things for 3 months and don’t like it, you can always go back to the way it was before. But the odds are you’ll enjoy your new simpler life and wonder why it was difficult to change in the first place

 

Thanks Jeremy and Winnie for sharing their story.  I appreciate you taking your time to share your thoughts on how you have simplified your finances.  If you would like to read more about Jeremy and Winnie visit their blog Go Curry Cracker  or follow him on Twitter @GoCurryCracker.

Here are two other recent interviews you may enjoy reading:

Forbes interview: How This Couple Retired In Their 30s To Travel The World

Interview with J Money: My Name is Jeremy, and This is How I Retired in My 30s

To read previous interviews in the series click Simple Inspiration Interviews.

If you are interested in sharing how you have simplified your financial life, send me an email and I will follow up with you.  Enjoy the rest of your week. Til next time, take one step at a time to simplify.