Note: This is a guest post from John Suter of Money Saving Challenge

Every now and again the media goes crazy when a new fad diet arrives onto the scene and regardless of whether it is the Atkins Diet, the Scarsdale Diet or the South Beach Diet, each one seems to represent a desperate attempt to very quickly lose weight and obtain the ideal body.

Unfortunately the effects of these diets are often very negative and fad dieters tend to lose enthusiasm as the initial weight loss caused by the extreme diet begins to level out and the cravings for decent food settle in.

Disappointed with the results, most fad dieters return to their old eating habits and often end up putting on more weight than when they started.

Now I am sure you are asking what all this has to do with personal finance? Well, in the same way that extreme dieting can hurt your health, extreme saving can have an equally negative impact on the health of your finances.

Extreme Saving

To me, extreme saving is the financial equivalent of a crash diet and extreme savers will do anything they can to cut out every non-essential cost from their monthly spending, even if it means living a miserly existence.

This means eating the cheapest of cheap foods, not socialising with their friends, wearing their clothes until they are threadbare and giving up on any other little luxuries or hobbies.

The main problem with extreme saving is that it is very difficult to sustain this way of life over a long period of time. Monotony and boredom can easily niggle away at the best intentions of any extreme saver and drive them back to their old spending habits, in the same way that a fad dieter will go back to eating their favourite treats with a vengeance.

Create a Healthy, Balanced Savings Diet

Rather than following fad diets, most health experts advocate that the best approach to weight loss is a healthy and balanced diet, combined with plenty of exercise, and those same principles apply to successful saving.

Let’s face it, eating beans on toast for dinner every day may be cheap, but it is going to make you miserable. So too will staying in all month whilst your friends are out partying and having a good time.

The best approach then is to create a healthy, balanced savings diet where you review your spending, identify areas of high expenditure and find ways to make savings, without necessarily having to cut back completely on everything. This might mean just going out with your friends twice a month, rather than every week or supplementing some expensive dinners with cheaper dinners in your weekly shopping.

By balancing your savings against your spending, you do not then deprive yourself completely, making it much easier to continue saving in the long-term.

Creating a Sustainable Savings Plan That Will Grow Your Wealth

Whilst the secret to weight loss is to consume less calories than you burn, the secret to wealth building is to spend less money than you earn. You can maximise the amount you save by following these three steps:

• Decide on your savings objectives – For example are you saving to get out of debt, to buy a new home, to go on holiday, to pay for a wedding or to pay for your children’s education?
• Understand your current situation – Create a budget to show how much money you earn, how much you have in savings, how much you owe, how much you spend and where you spend it.
• Identify savings – Review your spending and earnings to see where you can make cut backs and try to identify any opportunities to increase your income.

If your objective is to save £10,000 for a deposit on a new home, you can begin to break that down to identify a monthly savings target. So £10,000 divided by 36 months will give you a monthly savings target of £277.

By finding cheaper alternatives for essential spending and reducing your non-essential spending, you can ensure that you are able to pay £277 into your savings account each month. And because you are not completely cutting out all fun spending items and know that you will be able to meet your goal of buying a house in three years time, it makes saving much less painful.

Monitor Your Progress

One of the biggest problems that dieters have is staying on track, so many people weigh themselves on a regular basis to monitor their progress. If they have slipped, then they can increase the amount of exercise or decrease the size of their food portions to try and get back on track.

The same approach needs to be taken with your spending to ensure you are not over-spending and missing your monthly savings target. Ideally you should review your bank balance and spending at least twice a month, if not more, and if it looks like you have overspent in one area then you will see that you need to cut back in other areas.

Sustainable Vs Fad

So whether you are slimming or saving (or maybe both!), selecting a sustainable and balanced approach should help you become much more successful in meeting your goal.

John Suter writes for moneysavingchallenge.com and challenges his readers to save up to £250 a month without compromising their current standard of living. Visit www.moneysavingchallenge.com for money saving ideas and advice on clearing your debts and growing your wealth.

Photo by annia316

A few months ago I wrote a post on personal analytics. There I discussed how more and more people make their life decisions based on numbers. They don’t make their decisions based on what they feel but based on facts. This way their decisions are well-informed and based on strong foundations.

How can we apply personal analytics to our lives? The key is to track your life metrics. Only by tracking them can you get the numbers upon which to make informed decisions.

Unfortunately, the tracking process is still mostly manual these days (with a few exceptions like Nike+ that can automatically track your running speed and distance). Because of that, if you track too many metrics you risk spending too much time on the tracking process at the expense of doing real work.

So the best thing to do is to track just a few important metrics. This way you can get the benefits without spending too much time on the tracking process. Here are three essential things you should track:

1. Income and expenses

You should know how much money you make and how much money you spend on different things. Many people aren’t aware that they have financial problems until everything is too late. Or perhaps they’re aware, but they don’t know how it happened. Consequently, they have no idea how to solve it.

That’s why it’s important that you take note of your income and expenses. Doing that helps you spot the weak areas in your personal finance so that you can take the necessary actions.

To track your income and expenses, you can use a spreadsheet or a personal finance application. Here are a few personal finance applications you can use:

• Quicken
• Mint
• Wesabe
• GnuCash

One simple rule on money management that I find useful is to spend your money to buy assets whenever possible.

2. Time

Have you ever had days where you wondered why you’ve accomplished so little? That’s one reason why you need to track your time. You need to know where your time went.

There are many ways to do this. You can create a time log where you record all your activities during the day along with the time and duration. This could be burdensome though. A simpler way is to just track how many productive sessions you have in a day. The Now Habit (here is my review) suggests a session to be thirty minutes long but it’s up to you. The important thing is to make sure that the productive session is indeed productive. Reading e-mails and random browsing don’t count. Alternatively, you can track your time indirectly by tracking your goals for the day or week. If you achieve your desired goals then you know that you’ve used your time productively.

To track your time, you can use a timer and spreadsheet or use a dedicated time tracking application like Klok and RescueTime. If you choose to track your goals, you can use a to-do list application like Remember the Milk or even just a text file.

3. Habits

Do you have a good habit that you want to build or a bad habit that you want to break? As Peter Drucker said, what get measured get managed. So tracking it is a good way to reach your goal.

You can do it simply by taking notes of how many times you do the habit in a certain period of time. You can then see how your score is for that period of time. With good habit, the goal is to maximize the score while with bad habit the goal is to minimize it. If you want to, you can reward yourself whenever you make an improvement. A spreadsheet or a text file is enough for tracking your habits.

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The first and second metrics deal with your personal resources: money and time. They are limited so you must make sure that you use them wisely. There’s still one more important resource actually, which is your energy, but I don’t know how to track it (any idea?). The third metric deals with your habits which, of course, are essential for an effective life.

By tracking your personal finance, time, and habits, you increase your awareness of your life. This helps you not only to figure out what problems you might have but also to take the necessary actions to solve them.

Photo by Pink Sherbet Photography

I’m currently reading Hot, Flat, and Crowded 2.0 by Thomas Friedman. The book mainly discusses the ecological crisis we are facing, but the first three chapters also discusses the 2008 financial crisis. Ecological crisis and financial crisis may seem unrelated to each other, but Friedman argues that they actually have the same cause:

The way we were creating wealth had built up so many toxic assets in both the financial world and the natural world that by 2008/9 it shook the very foundation of our markets and ecosystems. That’s right, while they might not appear on the surface to have been related, the destabilization of both the Market and Mother Nature had the same root causes… The same recklessness undermined all of them.

Friedman explains the causes in more details, but they actually come down to just one thing: greed – the desire to get as much as possible for oneself without thinking about how things would be for other people or future generations.

Greed is the reason why people made irrationally risky investment in subprime mortgage assets. Greed is also the reason why people are depleting natural resources at an unprecedented rate. They want to increase their quality of life without thinking about whether or not they do it in a sustainable way.

The problem is people usually aren’t aware of the coming danger until everything is too late. Greed blinds them. Here’s what they might think:

1. Nothing could go wrong. We have done this for years and nothing negative happens. Besides, the probability that things could go wrong is small so there’s no reason to stop doing it.
2. Everyone is doing it. If I didn’t do it, I wouldn’t enjoy the rewards that everyone else is enjoying.

The scary thing here is this kind of thinking also caused the collapse of many civilizations throughout the history. The book Collapse by Jared Diamond has many such stories. Here’s one of them:

The overall picture for Easter is the most extreme example of forest destruction in the Pacific, and among the most extreme in the world: the whole forest gone, and all of its tree species extinct… The further consequences start with starvation, a population crash, and a descent into cannibalism.

But why did the deforestation happen? Here it is:

… competition between clans and chiefs driving the erection of bigger statues requiring more wood, rope, and food.

This, again, is greed at play. Greed made the people exhaust their resources despite the apparent danger. Didn’t they realize that exhausting their resources would cause their civilization to collapse? Greed had blinded them, obviously.

The same thing applies to individuals. A greedy person may become obsessed with money or prestige at the expense of his health or relationships. Greed blinds him to the coming danger until everything is too late.

This is an important reminder for all of us. Beware of greed. Here is a simple rule:

Where there is greed, there is a silent danger.

Photo by NeoGaboX

Do you want to make extra money? I believe knowing a few ways to supplement your income won’t hurt. You might not need them now, but when you needed them it’s nice to know the available options.

There are many ways to earn extra income, but here I make a few restrictions to prevent this post from being too broad:

1. I only cover how to make extra money online. This way you can work wherever you are in your spare time.
2. I only cover ways to make money in relatively short time. I don’t include anything that takes weeks or months to get results. That’s why I don’t cover things like blogging or revenue sharing with article sites (because building the necessary traffic could take a long time). On the flip side, most of the ways I discuss here won’t give you passive income. They require you to actively work to earn.

For each of the ways I’m about to share, I list some relevant web sites you can use. I don’t test all of them, so please read their terms before you decide to use them.

Without further ado, here are 9 ways to make extra money online:

1. Writing

Writing is a popular way to earn side income. The world is always hungry for good content and if you have writing skills you will find many opportunities online. Here are some sites that offer article writing jobs:

• Associated Content
• Demand Studios
• TextBroker
• Constant Content

You can also write tutorials. Tutorials are more difficult to write than ordinary articles since they contain step-by-step guide on a topic. But they also pay more. The sites below pay between $150 to $300 for each published tutorial:

• Tutorial9 (design and blogging)
• Tuts+ (design, photography, web development)
• Gomedia (design)

2. Designing

Graphic design skill has a lot of demand these days. You could design logos, posters, or even entire web sites. Browse the sites below to find design jobs:

• Envato Marketplaces
• Graphic Leftovers
• 99Designs

3. Programming

Do you know how to program? Then what about taking some programming jobs online? You can find them at:

• Rent A Coder
• ScriptLance

4. Tutoring

If you liked to teach then online tutoring is perhaps the way to go. The nice thing here is you don’t need to physically go to a certain place to tutor. You can do it in the comfort of your home. Here are some web sites that offer the opportunity:

• Tutor.com
• TutorVista
• TransWebTutors

5. Selling stock photos

Many people like photography. If you happen to be one of them, why don’t you sell your photos for profit? These sites help you sell your photos:

• iStockPhoto
• Fotolia
• Shutterstock
• Dreamstime

6. Microworking

With microworking, you make money by doing simple tasks that you can usually finish in a few minutes. They pay you a little for each completed task, but because the tasks are simple, you could complete a lot of tasks in a day. Here are two sites for microworking:

• Amazon Mechanical Turk
• Microworkers

7. Selling stuff

Obviously, you can make money by selling stuff. Do you have items in your home you no longer need? Other people may want to buy them from you. Just list them at:

• eBay
• Craigslist

On the other hand, you can also sell your own creations. They could be T-shirts, post cards, bags, and pretty much anything you can imagine. Here are some places to sell them:

• Etsy
• CafePress
• RedBubble

8. Website flipping

If you’re good at making web sites, you can sell them for profit. It could make you more than $100 for a few hours of work. Here are two popular places for website flipping:

• Flippa
• Digital Point

9. Translating

Do you master foreign languages? If you do then translating is something you might want to consider. There are a lot of translation jobs online. Here are some sites that offer them:

• ProZ
• TranslatorsCafe
• Translatorsbase

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In addition to the specialized sites listed above, there are sites that offer opportunities in more than one category. Browse them to find various opportunities:

• Guru
• Elance
• Freelancer

Do you know other ways to make extra money online? Feel free to share them in the comments.

Photo by Don Hankins