In a January 18 article at CNBC.com titled “How the Financially Disorganized Can Budget and Save,” financial writer Dinah Wisenberg Brin has some suggestions for keeping track of your spending without a detailed budget. She cites Rick’s suggested strategy to “remove everything of importance — taxes, insurance, car and house payments, vacation and emergency savings, retirement funds — from the paycheck before it hits the bank.”

You can read the entire article here.

The secret? They don’t budget.

Your first reaction might be, “Of course these people don’t budget! They have so much money, they don’t need to.”

That may be true for some of those who have money today, but I’m referring to people who want to remain wealthy or those who are “wealth accumulators.” These are people who don’t start out with money, but who build up significant wealth over time.

Many successful wealth accumulators don’t follow a detailed budget in the traditional sense. Instead, they develop the habit of living on less than they make. They do this by setting clear priorities. Here is how it works:

1. Out of every dollar earned, take taxes out first. If you receive a paycheck from an employer, this is done for you. On any earnings where taxes aren’t withheld, estimate the amount of tax you’ll owe and stick it into savings.

2. Take out 15% to 30% to invest for your future. When you’re just starting out, you may have to begin with a much lower percentage, but begin and be consistent. Research tells us if you have 30 years until retirement and you plan to live for 30 years after retirement, you need to save 17% of your salary to maintain the same standard of living upon retirement. When you get a raise, contribute two-thirds of it to your investments and use one-third for increasing your lifestyle. If you want to become financially independent, this step is essential.

3. Save another 10% to 20% for emergencies and short-term needs like vacations, Christmas, and replacing vehicles. Again, you may have to start with a lower percentage, but begin with whatever you can, and be consistent.

4. Take out 5% to 10% for giving.

5. Live on the rest. Pay the bills as they come in, and use what’s left over for discretionary lifestyle spending.

Sounds simple, right? Of course, “simple” isn’t necessarily the same as “easy.” By now, if you’ve done the math, you can see that following this plan means living on as little as one-half to even one-third of your gross earnings.

If you’re living from paycheck to paycheck, just barely managing to pay the bills, the financial advice to live on half of what you make goes beyond absurd. It probably seems impossible. It may, in the short term, be impossible.

Yet there are ways to live on less than you earn, even if to begin with it’s only a little less. Share a cheap apartment with a roommate. Drive an old car that you don’t have to make payments on. Eat at home. Buy used furniture and second-hand clothes. Get a temporary second job solely for the purpose of building up some savings.

What is most important is developing the pattern of living on less than you make. Fostering a frugal mindset is absolutely essential if you want to achieve financial independence. When you commit to saving first—even if you can only save a small amount—you have made one of the wisest financial decisions you can ever make.

This non-budgeting spending style takes away much of the pressure of trying to follow a rigid budget. There’s no need to keep track of envelopes or categories. You’ve made the hard decisions first, and you get to spend everything in the checkbook.

Budgeting without a budget can turn you into a wealth accumulator. It works because you take your future off the top.

Read the entire article here.

This time of year, the spirit of giving gets a serious workout. For some of us, it can quickly turn into a spirit of frustration as we feel overwhelmed by requests and obligations.

Maybe one answer to make the season more manageable is to become more conscious about your giving by creating a “giving portfolio.”

As regular readers know, one of my constant themes when it comes to investing is diversification. Don’t put all your eggs in one basket. More than that, don’t put all your resources into eggs in the first place. It’s essential for a portfolio to have a good mix of investments in a variety of asset classes.

Thinking along those same lines, what are some of the “asset classes” that might be part of a diversified portfolio of giving? Here are a few:

Family. Giving to family could include direct gifts for birthdays, Christmas, and other occasions. It might also involve financial support to family members, such as helping elderly parents with expenses or paying part of kids’ college costs.

Charities. Pick any cause, and there’s probably an organization for it. You can give locally, nationally, or internationally to organizations such as food banks, homeless shelters, the Red Cross, Save the Children, and others that help provide basic help for the poor and victims of disasters. Local groups do everything from buying school supplies to providing help for individuals with serious illnesses.

Arts Organizations. In Rapid City and the Black Hills area, as an example, we have community theatres, summer theatre, the symphony, concert associations, and fine arts centers.

Religious Organizations. This isn’t limited to churches, but might include retreat centers, mission organizations, and other ministries.

Community Organizations. This might include service clubs and other groups that aren’t primarily charities but that support their communities in various ways.

Educational Organizations. Everything from baking cookies for the PTA bake sale to sending money to your alma mater would fit here. So might supporting agencies that provide tutoring, summer camps, or scholarships.

Health Organizations. You might donate to groups such as the American Cancer Society that fight specific illnesses, support efforts to eradicate diseases like malaria, give to research organizations, help with housing for family members of hospital patients, or support a local hospice center.

Just reading this list is probably enough to give you a strong urge to grab your wallet and run. Trying to choose among so many worthy causes can feel as overwhelming as trying to pick the right mix of mutual funds for your investment portfolio.

Well, here’s something that might make you feel a little better. Unlike investing, wise giving doesn’t require you to be diversified.

You certainly can give in a diversified way if you wish, selecting a mix of giving asset classes just as you might choose investment asset classes. Maybe you want to allocate half your giving dollars to family, 20 percent to your church, and 10 percent each to a health research agency, a food bank, and your community theatre.

Maybe, on the other hand, you want to dedicate all of your giving budget to family. Or 75% of it to a local homeless shelter. Or give primarily through your church.

All those are perfectly valid options. The key is to make your giving choices deliberately, not impulsively or out of guilt. Creating a conscious giving portfolio helps you give in ways that match your values and support the causes you care about.

Sometimes, however, “early retirement” can throw us a curve ball before we’re prepared for it or ready to become financially independent. This often comes in the form of a job layoff, termination, or health issues that require we no longer work for an income.

Here are some action steps for an unexpected early retirement:

1. Immediately become aware of your monthly expenses. If you don’t track expenses, now would be a good time to go back over the last 12 months of expenditures and set up a cash flow tracking program like mint.com or quickbooksonline.com.

2. Create a spending plan for the next 12 months. Don’t forget to include savings for large purchases (cars, repairs, travel, Christmas, etc.) as a part of your annual expenses. Make sure you reduce or eliminate past expenses related to your work life and add expenses that come as a part of retirement, like increased travel or health care.

3. Estimate your sources of income. Include Social Security, employer pensions or severance packages, and your personal investments. For personal investments, use an income estimate of 4% of the principal. One million in investments will give you $40,000 a year in income.

4. Match your estimated annual retirement income with your spending plan expenses. If the expenses exceed your income, begin deciding where you can cut your spending. It is often helpful to enroll another person to help with ideas on reducing expenses. This is an area where we all have “blinders” on, and others can suggest creative cost savings we would never have thought of ourselves.

5. Don’t give up on finding part time employment. There are many opportunities to create some income in retirement, and even a little paycheck can go a long way to preserving your investment savings. Check your ego at the door—this is not the time to let false pride keep you from taking a part-time job that’s less “professional” than what you’ve been doing.

6. Consider reducing monthly expenses by using savings or investments to pay off debts like car loans or credit card bills. Often your best investment is paying off debt. This can be especially true when your savings is earning 0.5% and your credit card is charging you 15% on the outstanding balance.

7. Consider downsizing by selling your house. This can be an especially good move if you have enough equity to pay cash for something smaller or at least end up with no mortgage or a smaller mortgage payment.

8. For couples, talk seriously about what both of you want, separately and together, in the next few years. Brainstorm creative ways—volunteering at state parks, for example—to carry out retirement plans inexpensively.

9. Take time to deal with the emotional side—anger, fear, depression, etc. It’s especially important to surround yourself with supportive friends and family and to talk about what’s going on.

Unexpected retirement can be a life-changing blow, both emotionally and financially. Coping with it will require resiliency, courage, persistence, creativity, and support. You’ll be most successful when you take advantage of not just your financial resources, but all the resources at your disposal.

Start with finding out what your current interest rate is on your mortgage loans. Let’s assume you currently have a mortgage with a balance of $200,000, with principal and interest (P&I) payments of $1264 at an interest rate of 6.5%.

Next, do a little shopping. Call two or three mortgage brokers and find out the interest rate you could obtain on a new loan. You will need to give them your household income, the value of your house, and the current balance on your mortgage. If you don’t know the current value of your home, call your county Director of Equalization and find out its assessed value.

Ask the broker to give you the interest rate and payments on a mortgage that is almost equal to the number of years you have left to pay on your loan. Also find out what the interest rate and payments are on a shorter-term loan than your current mortgage, maybe comparing 15-year and 30-year mortgages. Usually, a shorter term has a lower interest rate.

Next, get the broker’s estimate of your closing costs. These are the expenses you will need to pay to close the loan, such as title insurance, the cost of an appraisal, closing fee, points, and other various fees. Lenders sometimes charge points, also known as origination fees, which are included in your closing costs. One point equals one percent of the loan’s value. Mortgages described as “no-cost” or “zero points” do not carry this cost, but the interest rate may be higher, thus increasing the long-term cost of the mortgage.

Now you are ready to analyze whether getting a new loan makes financial sense. Let’s assume you find out you can obtain a new loan with a similar term at 5%, with monthly payments of $1,074 and closing costs of $1,900. The new payment is $190 less than your current $1264. Dividing the closing cost by the monthly savings ($1,900 / $190 = 10) gives you the number of months—ten—you need to keep the house in order to “break even.”

If you intend to sell your home in the next few months, it may not be advisable to refinance. I also typically advise against refinancing if the months to break-even are much over 24. Few of us know what curves life may toss us, and looking two years ahead is my comfort level. If your break-even point is 24 months or more, either wait for interest rates to fall further or shop for a loan with lower closing costs.

When shopping for a new mortgage, you may be tempted to reduce your payment even more by lengthening the term of your new loan. While the benefit is more short-term spending money, the downside is many more years of having a house payment. You will also pay more in both points and interest rate. My strong suggestion is to obtain a new mortgage that is equal to or less than the number of years you have left to pay on your current mortgage.

Remember that a lower interest rate doesn’t automatically mean refinancing is in your best interest. The amount of money you save monthly, the amount of your closing costs, and how long you plan to live in your home are key variables that influence whether you should refinance your mortgage.

Catey spoke with me about whether the 4% rule was dead.  I told her that not everyone is ditching the 4% rule.  “A large number of people can still use it and have a 90% confidence that they will not run out of money.” To get the best results, clients need a diversified portfolio (I recommend an equal mix of stocks, bonds and alternative investments like commodities and real estate), as well as both international and domestic stock and bond exposure.)  Read the entire article here.

Did you know that the average cost of a wedding is $25,000? For those that are financially established, this may not seem like a very daunting price tag, but for a young couple, this amount could hurt their new relationship.

Based on personal experience, most young couples don’t have $25,000 in the bank for pay for their wedding, and some may end up borrowing the money.

I knew one young woman who figured since it was the most important day of their lives that they could spend whatever they wanted and pay for it over time.  She surmised that regardless of the cost, it would all be worth whatever they had to borrow.

After the big day had come and gone, she wasn’t able to find secure employment.  She began waiting tables, which is where I met her;  that was how I put myself through college.  She was 33 and it was the only job she could find. The $33,000 they had borrowed was still unpaid and accruing at double digit interest rates on her credit cards.  The chances are it may not be paid off for many years to come. This is not how I would recommend newlyweds get started on their new life together!

My wife and I were married last year.  Someone gave my wife a very good piece of advice, “pick the one thing you have to have, and get it. Let everything else go.” This meant we spent a little extra on the Chapel of her dreams, and saved money by getting help from our network of friends and family. Our “wedding day organizer” was a friend of her mother. My mother catered the reception, and the DJ was a local college kid that didn’t wear a tux, but played all of the music we requested. All in all, we spent less than 40% of what the average wedding costs, and it was a perfect day.

Society has ingrained into us the money script that weddings must be perfect, and in order to achieve that perfection, you must spend tons of money. Suzanne Cole pulled together a great list of tips on what to do with any savings from their wedding budget a young couple can manage. This would be a great resource for any young couples planning their wedding and new life together.

We are happy to have Alan Moore, Financial Analyst with the Kahler Financial Group guest blog for us today.

According to a recent study, 45% of Americans didn’t pay any federal income tax last year. Many of those Americans not paying any income tax actually received money from the government through refundable income tax credits.

I was shocked at the number of Americans not paying tax largely because I sent Uncle Sam a check for $1,463, even though my wife and I were students last year. According to the Bureau of Labor Statistics, the average household in 2009 (2010 numbers aren’t available yet) earned $43,460. In 2010, my wife and I were graduate students earning $1,000 each per month, plus some money for additional summer work, totaling $35,664. We made less than the average household, and yet did not qualify to be in the 45% group that didn’t pay federal income taxes.

It is important to note that it isn’t that the bottom half of wage earners didn’t pay tax, and the upper half did. The fact is people throughout the income brackets were able to avoid paying federal income tax.

This doesn’t make a lot of sense to me.  We were two struggling students putting ourselves through graduate school and we were not able to pay our rent without the use of 6.9% interest student loans.  Still, we paid more tax than at least 45% of Americans! If we had a child, we would have gotten a refund of not only the $1,463 we paid, but also several thousand for the child tax credit and the earned income tax credit.

This is just another interesting point in a long history of our countries baffling tax code.  Maybe one day Washington will decide to stop picking winners and losers based on campaign donations and votes, and instead get this country’s finances back on track.

The teleclass will provide a gentle walk through of:

• How to build your financial house on a foundation of clarity, intimacy, and ease
• Find out which money tools can help you end your unconsciousness around money
• How to do self-guided Financial Therapy to transform your relationship to money
• 3 ways to turn boring bookkeeping into an enlivening spiritual practice
• Secrets to making finances fun (hint: your values will guide your spending)
• How to get clear on the big vision for your life and how to align your finances to make it happen
• How a healthy relationship with money can make the other areas of your life glow

I highly recommend Bari to anyone who is wanting to get more our of their money.   To sign up, click here.