Saving Money IN REAL LIFE

I am still around!

2012-01-27T01:11:00.002-05:00

We are moving this week and packing up the house, buying a house, and selling a house has proven to be a bigger chore than I expected! I've also been working part-time, and we traveled over the holidays. It doesn't leave much time for blogging, but I promise to finish my thoughts on preparing for emergencies once we get settled in our new North Carolina home.

Prepare For Emergencies - Part 3

2011-12-01T09:08:00.005-05:00

Tip #295 - Prepare for Emergencies - Part 3. In parts 1 and 2 of this series, we are talking about being prepared for emergencies - not just financially, but emotionally and physically as well. We defined that an emergency is unexpected, sudden and can devastate you financially, emotionally, and/or physically. In the last post we described how to be prepared for a job loss. Today, we'll talk about being prepared for a diagnosis of a serious illness and death of a family member.

If someone in your immediate family has a serious illness diagnosis, that constitutes an emergency - it's usually, sudden, unexpected and has financial, emotional, and physical consequences. How can we be prepared for that? While, we can probably never be fully prepared, we can do steps in advance of this happening that can make a sudden diagnosis a bit easier to digest.

First, review your health insurance plans. Know what your insurance covers, in general. Be aware of any health services that your office offers such as a Flex spending plan and counseling. Second, obtain a list of specialists from your general practitioner, so you have a place to start if you need to scout out a doctor. Third, keep up your network of friends, neighbors, and local and even long-distance contacts. If your husband is suddenly diagnosed with multiple sclerosis, it's likely that you know someone who has a family member or friend who you can contact to get the low-down of the disease, treatments, and local doctors. Fourth, be aware of time off policies for work. You will need to clarify the policy once you need to use it, but being armed with knowledge in advance helps save time when a diagnosis becomes a very busy time. Last, make sure you have that emergency fund in place. This is the time that you may need to dip into it. No matter how good your health insurance, doctors' visits may involve co-pays, gas and car maintenance costs, time off from work, special foods or other products, and greater living expenses such as food-on-the run, babysitters, etc. Once the emergency is known and the initial newness of it has worn off, this will likely become a budget category for you or cause you to raise your budget in the expense categories just mentioned.

A similar-type emergency but one more extreme is the loss of a family member. If the family member is a spouse that is the breadwinner, then the financial consequences, not to mention the emotional ones, can be devastating. What can you do before a death in the family to prepare for this unexpected event? First, you can make sure any breadwinner or the person who provides a service to your family (cooks, childcare, driver) has life insurance. This life insurance should be enough to cover the expenses - at least for a few years - that this person usually takes care of - housing, food, utilities, childcare, etc. If there are children in the picture, it should cover them for at least as many years until the children are grown. Without getting into a whole post about life insurance, just make sure that you talk to someone (hopefully an unbiased person) about your life insurance needs before you need it, and make sure you are covered before the unthinkable happens.

Another way to plan for this type of emergency is to have a will. I cannot overestimate how important this is. When someone dies, if their will clearly states where funds will go, the beneficiary will receive the money much faster than if it has to go into probate. Third, make sure other policies have the correct beneficiary status updated. If you have a 401(k) at work, for example, is your spouse your beneficiary or is it still your parents (from the time you were single an started the job)? As you get older and have more accounts, it gets harder to keep track of this. So check on this status once per year to make sure they are updated to your current situation.

If the death of a family member is not a breadwinner or does not provide any type of services that would cost money, the loss is going to be an emotional one more than anything. There is no way to prepare for such an emergency, other than to have a good network of family, friends available to you. By being a caring, loyal friend when times are good for you, will likely lead to others stepping up to help you when you need it.

In Real Life (IRL) - In September, a family in my town lost their son to a tragic, unexpected, and sudden accident. One minute the boy was happy and playing. The next minute, he was gone forever. No one would have predicted it. I did not know this family before the accident. And other than through the web and from friends and local events, I still do not know this family personally. But I have seen the outpouring of love and helpfulness by their neighbors, their church, their community, and from their online friends and even strangers that has helped hold this family up.

Their son's loss of life did not impact them financially, but the devastation that his death brought to them cannot be overestimated. I do not think there is a thing a person can do to prepare, in advance, for this type of tragedy. Other than to be a good person and friend to your family, friends, and community, as it appears this family was. Because at such a horrific time in their lives, I believe their family and friends (and their personal religious convictions) are the only things holding them up. I hope no one I know or any readers here ever experience such a loss, but to see how this family is handling it, you can read the mom's blog: An Inch of Gray. She is a beautiful writer. While it is depressing reading about their tragedy, it is uplifting to see how this woman is handling a devastating emergency.

No one will ever be fully prepared for sickness or death. But doing anything that you can in advance, like the steps mentioned above, and admitting to yourself that life involves both sickness and death and no one will ever avoid them entirely, may make it slightly easier if such unexpected tragedy strikes.

Prepare For Emergencies - Part 2

2011-10-13T23:48:00.004-04:00

Tip #294 - Prepare for Emergencies - Part 2. As I mentioned in Part 1 of this series, nowadays we hear over and over about saving for an emergency fund. But without defining what an emergency is, it's hard to know when you are "allowed" to spend that fund. I define an emergency as something that is unexpected, sudden, and catastrophic in at least one way (financially, emotionally, or physically). When an emergency strikes, it's best to have plans. But of course, we cannot prepare for every type of emergency there is. But we can do some sort of planning for typical emergencies. What are typical emergencies? I can think of some common ones:

1. Loss of a Job
2. Serious Illness Diagnosis
3. Mother Nature Strikes
4. Death of a Family Member
5. Unexpected Big Expense (Need new car, new roof, etc.)

Most emergencies fall into one of these categories. So before any of these types of emergencies happen, make a plan with how you would deal with them if one of them does. Part of this would be having the ever-so-talked-about emergency fund. This emergency fund will help out in all five of these scenarios. Clearly for number 1 and 5, the emergency is that you need money to pay for either a big expense or to cover your everyday living expenses. For scenario 2, 3, and 4, the financial emergency may be secondary to other pressing emotional and physical needs, but would clearly be needed in most cases.

So in order to plan for an emergency, you should start an emergency fund. There are articles and blog posts galore dedicated to this topic, so I won't get into them here. But you should decide on an amount you want to save - 3 months' - 12 months' salary is typical and plan a way to save up for that money either all at once or little by little. While you are working on that, come up with other plans to deal with your 5 emergency scenarios.

1. Loss of a Job. Before you lose a job is the best time to plan for the time that you might lose one. In addition to having an emergency fund, you can do other things in advance of losing a job. Keep your resume updated at all times. Why wait until you've lost a job to update it. It's harder to think back on all that you've accomplished and it takes time away from job hunting. As you accomplish things at work, add it into your resume, revise it, keep up on current style and have it at the ready.

Secondly, network now. Again, don't wait until you are without a job to contact your old fraternity brother from college. Then it will seem like you are using him. Keep up your contacts continuously. Belong to organizations that you enjoy and make contacts with. Join occupational groups. then when a job is lost, your contacts are already in place.

Third, have a plan b for a second source of income. Perhaps you are a 9-5 accountant at a big firm. If you lose your job, you want to get another similar job, but have a plan b for a second source of income. Perhaps you can do taxes on the side while job hunting. Or you can teach accounting at a community college. Before you lose your job, think about what other jobs you can do as a side income. It doesn't have to be related to your field. If you are an accountant who loves to knit, you might want think about (in advance of losing a job) where you can sell your products while you are looking for a full-time accounting job.

Fourth, prepare for any emotional stress you will be going through. Think about a counselor you might need to turn to during this time or whether you have a friend who is a good listener who can help you.

In this economy, loss of a job is not an unlikely scenario for many people. Be prepared for this possible event. So if the unfortunate happens, you have a plan in place to cover your expenses and find a new job as quickly as possible.

If you want to be super organized, keep a list of your emergency preparedness plans (not unlike what to do in a fire drill). Then when the unthinkable happens, and you may not be thinking straight, you can go to your list and follow it. So as to not make this post too long, we will discuss preparing for the other scenarios in future posts.

IRL (In Real Life) - While dishing out this advice, I don't necessarily practice what I preach. Sometimes I fly by the seat of my pants. Job loss has been an emergency that we've been dealing with over the past few months. And, honestly, I wasn't prepared for some of it. While not exactly "job loss" I had planned to go back to work part-time when my son started preschool at age 3. Fortunately, we weren't counting on my income because it turned out my company did not need me back. When I left in 2007, the economy was still in pretty good shape. By 2010 when I wanted to return - not so much. Honestly, I never considered this possibility because times were good when I left. Fortunately, we had adapted to just living on my husband's income so it wasn't a total emergency, but I did plan on using my part-time income for future expected expenses.

I came up with a plan b which was to just take any part-time job I could. And this past spring I did. It was a not-much-above minimum wage job, but it was near my house and fit my schedule. Imagine my surprise when after the summer, they let me go (supposedly temporarily until the retail season kicks back up again).

I would have come up with a plan c, except in that time period, my husband found out they were closing his office. Again, while this wasn't exactly job loss, since they offered him a job in a new location, it had many of the same qualities of it. Picking up and moving to a new locale is not an easy or cheap endeavor. So much of what I suggested above came into play as my husband considered finding a new job so we didn't have to move. Unfortunately, we weren't fully prepared. His resume was sorely out of date. And while I helped him polish it, I don't feel it was the best because it was done hastily. And while he didn't specifically network in advance in order to find a job, he did have a lot of contacts from some volunteer work he does as well as professional organizations he belongs to. And while they got him some interviews, nothing really panned out.

So we are not only dealing with sudden expenses of selling a house, moving, storing, and fixing things around the house. We are dealing with high emotions on both our parts and our kids' parts. This "job loss" has become a major life change for our family that will take months, if not years, to adjust to. We could have had better plans in place for this emergency. As going through it has made me realize that having an emergency fund is not enough to get you through when an emergency strikes.

Prepare For Emergencies - Part 1

2011-08-29T09:21:00.007-04:00

Tip # 293 - Prepare For Emergencies. In almost any financial article you read these days, you will see advice to have an emergency fund. Often it says the fund should equal 6 months' to one year's worth of expenses. But beyond that, these articles often do not give you much guidance. What constitutes an emergency? Should I have contingency plans? Do I need to consider all of my expenses? How do I deal with emergencies physically and emotionally as well as financially? What do I do after the emergency is over?

Because of these many unanswered questions, I thought I'd write a few posts with more detail regarding planning for emergencies. What is an emergency? Is the 20-year old roof leaking considered an emergency? How about your new car needing a new radiator? Your husband breaking his leg and not being able to work for a month? Are any of these emergencies? Are all of these emergencies?

I think we first need to define what an emergency is. Each person's definition may be slightly different. My definition of an emergency is something shattering that is sudden and unexpected that impacts your financial, emotional, and physical life. In that case, the 20-year old roof leaking would not be an emergency. It might be sudden and shattering but one could reasonably expect that a 20-year old roof would leak so it is not unexpected. That event could have been predicted with some certainty. A new car needing a radiator might be sudden and unexpected but it is not shattering, and therefore isn't an emergency. Your husband breaking his leg and not being able to work for a month is shattering, unexpected, and sudden and meets my definition of an emergency.

Each person's interpretation may be different on what is shattering. To someone in dire finances, the cost of a new radiator may be. So the first step in preparing for emergencies is to figure out what an emergency is. It might be the same as my definition or slightly different. Most likely it will have the sudden and unexpected component to it. The "shattering" component may be slightly different depending on your financial, physical, and emotional circumstances. To some a car breakdown even if sudden and unexpected is emotionally draining and possibly financially draining and would constitute an emergency. For others a car breakdown is no big deal either emotionally or financially. It might make sense to put a dollar amount on your shattering portion - something like any sudden and unexpected event that costs over $1000 is considered an emergency. Or any sudden and unexpected event that will cost us over $200 each week for the next month is considered an emergency.

So, our first step in preparing for emergencies is to define what an emergency is. Then we can figure out the following steps - which is meeting the emergency head-on. We'll discuss them in future posts.

In Real Life (IRL) - I've been thinking a lot about emergencies lately because we've had a lot of potential ones. At the end of July, my dad told me that he had prostate cancer. He is 74, and fortunately it is slow-growing form of cancer that is treatable. Nevertheless, the "C" word, which I hate more than almost anything, is scary. While the financial consequences for me aren't really affected by my dad's diagnosis, my emotional ones and physical ones were dramatically. I had a hard few days digesting this information, and living far away (3 hours), it has some physical constraints, too.

But that wasn't the only piece of "emergency-like" news I heard. A day after my dad told me his diagnosis, my husband called me from work and told me that he got word that his office is closing at the end of October and that he was offered a job at the home office in North Carolina. While this news wasn't totally unexpected as they gave us warning a year ago of this happening, in May they told us there were no current plans to close his office. So it was somewhat unexpected timing, and the date seemed sudden as I thought they'd give us 6 months' lead time. If my husband takes the job, then there are financial consequences of moving, packing, selling the home, travelling to find a home, renting or buying a home, etc. If we don't move, we have other financial consequences of looking for a new job or being without for awhile. Combined, my dad's news and the job news, was making me an emotional wreck.

A few weeks went by and things settled a bit as my dad found out treatment options, and my husband and I did a scout out of neighborhoods in North Carolina and considered some options locally. Then one day in mid-August, our house starting shaking and things started falling off the walls and bookshelves. An earthquake had hit Virginia. Scary indeed! And while it didn't end up being an emergency, it certainly opened my eyes to how an earthquake could easily cause one! And of course, a few days later, we were in hurricane-preparedness mode. Fortunately, it turned out to be a non-event here, but in the past we've had a flooded basement, downed trees, and no electricity as the result of a hurricane, so I know how quickly that can become an emergency.

So to say that emergency preparedness has been on my mind lately would be an understatement. It has made me evaluate our preparations for emergencies in life - not just financially but emotionally and physically, too. I'll discuss these further in my next posts.

Most Everything Is Sellable

2011-08-01T23:00:00.004-04:00

Tip #292 - Most Everything is Sellable. Back in the days before the Internet, you might try to make money by putting up a sign at the local grocery store advertising your old lawnmower for sale. Or you might put a placard in your car announcing its sale. But you would never dream of selling your extra garage door remote or the brochure or manual that came with your brand new 1972 Chevrolet Nova. Maybe you'd put some stuff out in your next garage sale and earn a quarter or two off of your old things. But most likely you'd throw away your brochure when the car was junked. The garage door opener remote would probably be thrown in the back of the drawer in case you met someone who has the same garage door opener brand and model as you.

Well, those days of the pre-Internet are long behind us. And today most everything is sellable. Things that may have once been considered junk to you are thought of as prized possessions for someone across the country or halfway around the world.

So this tip is: do not throw anything away until you have checked whether it has value or not. Do not just assume that what you have is junk. An old pen from Pan-Am Airways? It might be worth a few bucks. Your son's set of chapter books that he is no longer into? Probably has some worth to someone. An old brochure from a 1950's range - chances are someone wants it. A keyless remote to your old car? Likely that someone wants it.

Of course not everything you have is sellable, but chances are there are more things that have worth than you realize. So before you throw things out, check online - eBay is probably your best bet - to see if items like yours are selling for any money. And if they do, put it up for sale and make money on your unwanted things. Happy selling!

In Real Life (IRL) - Again, I've been away for weeks. No excuses, I just haven't made blog writing a priority. And in the past week, I've been house hunting! We finally found out for sure that my husband's office is closing this fall. And I am realizing how much I need to get rid of in my house before we sell it. So much to do! Part of what I realized when going through our things is that a lot of these things that seem like junk may be useful to someone. We have an old 2001 Dodge Caravan brochure (from our car that kicked the bucket last month). While it has no use to us anymore, I am sure there is someone out there who owns a 2001 Dodge Caravan who would like to have the glossy brochure and specs from his car. My husband also has a bunch of other brochures from different times when he was car hunting. He just handed me a pile and asked me to see if there's any worth for them on eBay. And a cursory glance shows that some of these brochures do sell. Who would have thought? Certainly not me! I would have put them right in the recycling bin.

Unfortunately looking up and selling items takes a lot more time than throwing away! But if I think they will make enough money, then on to eBay our junk will go. What kinds of things do you have laying around that may be worth money that at first glance wouldn't seem like it?

Beware of Incremental Increases

2011-06-15T15:39:00.005-04:00

Tip #291 - Beware Incremental Increases. Once you have your budget laid out and you are into a routine of spending that you are comfortable with, it is sometimes easy to take things up a notch without realizing it. For example, you may be great about eating your meals at home, bringing along water bottles in the car, and walking the one mile to school rather than driving and staying within your budget. But once you've been doing that for awhile, you might stop "just this once" to get drinks at McDonald's for the kids. Or you might start to order take out when you've had a bad day even if it's not in the budget. And while all of these things may be okay to do once in awhile, when it starts to become habit, that it becomes dangerous (to your finances anyway). Suddenly these changes become the new normal, and without realizing it, you have started spending more money than you budgeted for.

It is these small, incremental changes that you need to be careful about. It is so easy to get used to these new "luxeries" without realizing that you are spending more money. Sure, it may be just a few dollars once or twice a week, but over time, they add up with little notice. For example, suppose you are a working woman and bring your lunch from home to work each day. But one day you are running late and don't make your lunch so you buy at the office. The cost is $6 - about $4 more than it costs to make your lunch at home. The next week, you hit the snooze button one extra time knowing that you can skip making lunch again and buy in the cafeteria. Before you know it, you are buying lunch about once per week at the office. Seems harmless, no? Well, in a given year that means you spent about $200 extra on lunches that you didn't budget for. That may or may not be harmless, depending on your financial situation and your other miscellaneous costs.

Suppose you also have gotten in the habit of picking up a magazine each week at the checkout counter at the supermarket each week. Again, this is something that wasn't in the budget. At about $5 a pop, it puts another $250 dent in your finances. Add in that you start meeting a friend about once per week for a drink for an additional $250 or so. All taken together, you have been spending an extra $700 for small changes that you hadn't budgeted for at the beginning of the year. These might all become important items for you to have in your life in order to keep things going smoothly and stress-free. But, they also add up to a fairly big expense, and if they become habit without being in the budget, you will not meet the financial goals you set for yourself in the beginning of the year.

So stop and evaluate the small, incremental conveniences that may have crept into your routine that you haven't budgeted for. And see if you can put them back into their place as special purchases rather than regular ones, until you can adjust your budget and include them formally.

In Real Life (IRL) - I started this post several weeks ago, and cannot remember what event made me realize that some small habits had crept into my routine that were starting to put a dent in my wallet. It was either the quick stop at McDonald's for drinks for the kids on a very hot day (and I had forgotten to bring drinks with us) or the soda I was suddenly adding into my shopping lists when I had virtually stopped drinking it for months and months. Or maybe it was the packs of gum that my daughter was asking that I buy for her when I stop at the drugstore (with her money at least). Whatever it was, I knew that none of these purchases were expensive on their own but buying them on a regular basis as they were tempting me to do would surely take money away from targeted saving account. I knew I would have to do better.

While I do think big purchases have a greater impact on my finances than smaller ones, I realize that smaller ones occur much more frequently and without nearly as much research or notice. And I know that there is some truth to the saying "watch your pennies, and the dollars will take care of themselves." And while I don't think we should necessarily deprie ourselves of small treats when we can afford them or for special occasions, I believe it is the little things that we don't realize we are spending money on that can set us back on our financial goals. To that end I am making a concerted effort to be aware of when I am started to spend money on little things on a regular basis That I have not planned for. I hope you will, too.

Start Small

2011-05-30T15:45:00.004-04:00

Tip #290 - Start Small. Do you ever think about people who are poorer than you and feel sorry for them? You might think it's sad that they don't have money to go to the movies or the funds to take a vacations. Do you ever think about all of the things that you can do that they cannot? Perhaps. But what about people who are richer than you? Do you feel sorry for yourself that you cannot join a country club or that you do not have a personal driver? Probably not.

Do you know why? Because most people do not miss the things that they never had. Most people do not feel like they are missing out on life because they do not have a live-in maid. Just like those less fortunate than you do not feel that they are missing out on life because they cannot go to the beach each summer.

How does this relate to saving money? Well, it is harder to cut back on your lifestyle than to never have had that lifestyle at all. Therefore, you should start out small with your purchases. Here's an example: Suppose a family decides that they want to rent a comfortable apartment that will accommodate all four of them? They rent a three-bedroom and enjoy all of the space they have. But after a year of living there they realize that the extra space they have is costing them too much. In an effort to save money, the decide to cut back to a two-bedroom apartment. In doing so, they miss their extra space. They feel like they are living with less and they yearn to have their old space back. But suppose they had started small? They would not have missed the extra space because they never had it in the first place.

When someone is starting out on their own, it is best to start out with a less-costly lifestyle and gradually build it up as you are financially able. Even if you temporarily know you are living on two incomes without kids and can afford finer things, make them a special treat rather than part of your everyday lifestyle. If you gradually increase your standard of living, you will appreciate each new upgrade rather than if you start out big and need to cut back.

In Real Life (IRL) - When my husband and I were both making an income and we had no children, we had the ability to live it up a bit. We could have eaten out quite a bit, taken extravagant vacations, and lived in a fancy apartment. But we knew that in the near-future we'd be cutting back to one income when we had kids. So fortunately, we saved most of our extra money and lived a more meager lifestyle. Although, it wasn't intentional not to live large because we knew cutting back would be harder psychologically, it worked out that not getting used to a fancier lifestyle was a benefit to us. Had we been used to staying at Marriott Hotels, Comfort Inns would be more challenging for us today. Had we been used to buying new cars every few years driving one for 10 years would be difficult. Had we been used to a fancy apartment with granite countertops and stainless steel appliances, a 50-year old home with an outdated kitchen would have been hard to get used to.

There are always exceptions. When we got married and went on our honeymoon, I remember the travel agent convincing me to go for the luxurious hotel with the fancy outdoor fancy pool when I was looking into staying at a more modest hotel. As it was a once-in-a-lifetime event, I am glad we did it. But that was a special occasion. For our regular vacations those first few years we still looked for the best deal on a nice, comfortable hotel without going overboard. While I wouldn't want to look back on my life and say "Gosh, we should have flown to Paris when we had the opportunity," I think starting out small and gradually increasing your standard of living is easier and more doable financially than getting used to luxuries that you will need to later cut back on. Start small.

Instead if you start out slowly and build up your lifestyle, you will not miss what you didn't have.

Find the Right Balance to Meet Your Financial Goals

2011-05-17T13:10:00.009-04:00

Tip #289 - Find the Right Balance To Meet Your Financial Goals. There are many ways you can meet your financial goals. Some ways work well at different times in your life. And some ways work well for different people and their circumstances. But in many cases, a combination of three main methods may be the best way to meet your goals such as increasing your savings. You can earn more money. You can decrease your expenses or you can make more return on your investments. Each of these singly will increase your savings. But finding the right balance among all three of them will work better to maximize your savings.

Let's look at an example. You are a family of three - husband, wife, and an 8-year child who will go to college in 10 years. You have $100,000 saved in a retirement account that is earning 5% per year and $20,000 saved in a college account for your child, earning 4% per year. You hope to retire in 25 years. Suppose your household makes $60,000 per year after taxes. Mortgage, utility, and food expenses add up to $30,000 per year. Health and wellness expenses add up to $6,000 per year. Automobile, gasoline, and clothing expenses add up to $8,000 per year. Lastly, entertainment and travel expenses add up to $6,000 per year. This leaves you with $10,000 per year for savings. Out of that savings, you put $8,000 toward retirement each year and $2,000 toward your child's college account.

After you sit down and crunch the numbers, you realize that you will not reach your goal of saving $100,000 (in today's dollars) for your child's college fund. In fact, you realize that you will need to save a total of $4,500 per year (about $2,500 more per year than you are currently saving). Then you look at your retirement numbers and calculate that in order to earn $1,000,000 at the time of retirement, you need to be saving $14,000 per year ($6,000 more than you are saving now). And you also realize that you will most likely need to buy a car in about 5 years and need to save $5,500 per year for that. All total you figure you need to increase your savings by $14,000 per year to reach your goals. How should you go about that?

One way to increase your savings is to cut down on expenses. However, you already live a frugal life and don't have much that you can realistically cut without making dramatic changes in your life. After scrutinizing your budget, however, you calculate that you can save $1,000 per year by using coupons and shopping at less-expensive grocery stores. You decide that your family can forgo your annual vacation and cut $2,000 of your entertainment/travel budget. And by shopping at thrift stores for clothes and riding your bike instead of driving places, you think you can cut another $1,000 off your budget. So you have come up with $4,000 more money that you can put toward savings. However, you are still $10,000 short of your goal.

Another way to increase your savings is to improve your investment return. Suppose your child goes to school in 10 years, and your investment toward college is earning only 4% return. After speaking with a financial advisor, you realize you can take on slightly more risk with this investment and think you can earn an 6% return on your money. This means you need to save $4,000 per year for college (an extra $2,000 per year). For retirement, you know you can take on more risk and can probably earn an 8% return on your money. In this case, you only need to save $5,000 per year toward retirement to meet your $1,000,000 goal, which actually frees up $3,000 per year for savings elsewhere. By this example, you only need a total of $14,500 in savings to meet your goals. But you are still $4,500 short of your goal.

Realizing that there is only so much that you can cut your expenses. And while the return on investment you can make is technically infinity, it is unlikely that you want to undertake that kind of risk, you know you can increase your income to bring in more money. If you have a school-age child, perhaps you can take on a part-time job 20 hours per week earning $10 per hour. In one year, you can make about $10,000 per year ($7,500 after taxes), $6,500 short of your goal that you needed.

Now let's combine all three strategies. Increase your return on investments, and you only need to save $14,500 total per year. Combine that with cutting expenses of $4,000, and you are now only $500 short of your goal. Mix in the $7,500 you can make with your part-time job, and you now have an extra $7,000 to play around with. Add back in that vacation? Cut down your work hours to 15 hours per week? Reduce your retirement risk? It's all up to you. Find the right balance of all three strategies. By utilizing all of them, you can tailor your desires with your needs to put hold on to more money and meet your savings goals.

In Real Life (IRL) - I have been out of the workforce for 4 years. Other than selling on eBay which nets me a few thousand per year, I haven't brought in a steady paycheck of any kind since early in 2007. In order to live on my husband's income, our first line of defense was to cut back on spending. When we had two good incomes, we had extra money flowing to go out to eat when we wanted or to go on a quick weekend jaunt somewhere fun. But when I stopped working, all of that changed as we had very little extra money above our expenses. But at that point in time, staying home with my baby was more important to me than eating out in a restaurant (as if I had time. Ha!). So in order to cover our expenses, we lowered them. We cut out restaurant meals. We cut out weekends away. We cut back on shopping.

And while I was always a good saver for the future, there is something about having a baby that makes you feel a huge responsibility. Will we have enough for her schooling? Who will care for her if something happens to us? Do we have enough money for the future? In that regard, we researched saving for college, I took out life insurance, and we increased our retirement savings. We also analyzed how much risk we were willing to undertake to meet these goals.

Then child number 2 and 3 came, and we suddenly had more expenses - preschools, activities, more health insurance and dental insurance, an addition to our house. Fortunately, my husband's salary increased, which covered some of our increasing expenses. We stuck to our budget and stayed with our investment strategies. But the expenses kept coming - car expenses, braces, higher college costs, Bat-Mitzvahs in our future. And at that point, we realized, we did not want to cut out any of our other expenses or take from savings to pay for these new ones.

We live as frugally as we want to. We don't want to cut out any more restaurant eating. We don't want to stop going to the beach every summer. And we are comfortable with our investments. We don't want more risk. We weathered the economic downturn a few years ago pretty well since we mixed in low-risk investments with our high-risk ones. Sure we may be able to make more on our investments, but not without more risk and sleepless nights that we are not willing to undertake. And with our children getting older and going to school for longer hours, it makes sense that at this point, increase our income is the best way to increase our savings account.

Last week I went on my first job interview since leaving my job four years ago. And I am starting work in two weeks just three miles from my home! I am excited that with my income, we will be able to cover the expenses we will have, while still maintaining the savings that we want to do and keep our investments at our desired risk level. At this point in time, increasing our income makes sense, along with our level of frugality and investment risk that we are comfortable with. It is the right balance for us. When our children were younger, fewer expenses and less income made sense. When I was younger and single more risky investments and higher income made sense. How do you maintain your lifestyle, keep your savings and be comfortable with your investment risk? What kind of balance is right for you at this stage of your life?

Using Credit Is Okay Sometimes

2011-05-05T14:49:00.006-04:00

Tip #288 - Using Credit is Okay Sometimes. I'm going to say something on here that I don't see on many personal finance blogs. I have read dozens of personal finance and money-saving blogs over the past few years. And the almost universal theme I see in all of them is that the writer started his blog because he racked up a lot of debt and learned how to dig himself out and wants to pass his experience and advice on to others. Sometimes this advice is in the form of "Throw away all of your credit cards," "Live a debt-free life," or "Wait until you have the money set aside before you buy what you want." In fact even Dave Ramsey got started down his successful career because he was in a lot of debt at one time and pulled himself out of it.

Now here's my comparison to that line of thinking. If you are an alcoholic and want to stop drinking, then looking to alcoholics who have given up alcohol and have been living a sober life for years is a great place to start. And like alcoholics, people who have absolutely no willpower when it comes to going on a shopping spree with their credit card and no money in the bank to pay back the bill in 30 days when it comes due, that advice most personal bloggers give is probably sound.

But what if you were never an alcoholic? What if you hardly ever drink or just like a glass of wine with your meal once in awhile? Whose advice do you look for so that you won't become an alcoholic? The answer? Probably no one's. Why would you be looking at a reformed alcoholic for drinking advice since you don't abuse alcohol? Now substitute alcohol for credit cards. If you aren't out-of control with them - if you use them to make big-item purchases or to go away on vacation, why is that bad for you? It's not always. There are plenty of people out there who are just not educated in finance who just want to figure out how to best build up their savings, how to spend less, or how to invest. To those people, I say, it is okay to have credit cards. It's okay to take out a loan if you need one. It's okay to float your money for a month to earn interest - as long as you have a financial plan and a budget, and are living within your means.

Let's look at some scenarios of when using credit is okay or not okay:

Example 1: Marnie has a budget and a financial plan. One of her goals has been to buy a car. She's been saving money for 5 years for it and has $10,000 in a CD earmarked for the car. The CD is earning 6% interest, and it is coming due in 6 months at which time she will buy her car. But her car dies suddenly and she needs to buy one this week instead of 6 months from now. She can get a loan from her credit union for 4.5% interest, and she can pay it back in 6 months when her CD comes due. Should she take out a loan? Many people tell her she should never take out a loan on a decreasing asset. But if she breaks her CD, she will lose her interest. Besides, she is borrowing at a lower rate than what she is earning. Is using credit okay in this situation? My advice? Take out the loan. Marnie's story shows she is responsible with money. She has been saving long-term for a goal, and she has a budget and a plan. When her CD comes due, she can pay back the loan and all is good. If the interest she is making is greater than the loan she is taking, then by all means she should take the loan.

Example 2: Mindy has $12,000 on her credit card balance. She pays the minimum $250 each month on the card. Her dad told her, it will take her 15 years to pay off her balance by just paying the minimum, but she doesn't care. She thinks as long as she can pay the minimum she is in good shape. Plus she tells herself that she always has $350 leftover each month that she can put toward the card, but she chooses to only put the minimum amount towards it and spend the remaining $100 on a night out.

Mindy's friends call her and tell her they have found a fabulous deal on a cruise - 6 days in the sunny Caribbean for just $800. Mindy knows that she can afford it because even if it makes her minimum payment higher on her card, she can still pay it and forgo going out to dinner each month. Is using her credit card wise in this situation? I think all of us would probably agree here that Mindy is not responsible with money. She might, in fact, be termed a crediholic. She cannot give up using her credit card and has no understanding of how little she is paying back when just paying the minimums. My advice? No way! Have someone sit down with you and work on a plan to accelerate your credit card repayment instead and explain how credit cards work.

Example 3: Craig is 35 and single. He has $350,000 saved toward retirement and puts away $20,000 more per year towards it. He also has 6 months' worth of money in the bank in case of an emergency and two savings accounts set up - one for for a car and one for a house. He should meet his car goal next year, and his house goal in three years. His take-home pay is $7,000 per month and he uses his credit card buy all of his items - his groceries, clothes, vacations. He pays off his balance each month. Lately, Craig has been reading personal finance blogs and most of them say that credit cards are bad. He wonders if he should get rid of his cards and start paying cash from now on. What do you think? My advice? No. He sounds like he is set for retirement, his car, and his house. Sure, he may spend more money in the grocery store for an impulse buy that he might not do if he paid with cash. But he can limit is losses with credit cards and they give him some insurance if he uses it for air travel or car rental. And for big purchases, as long as he is deciding on how much to spend before he buys, then using credit is a better deal. It not only gives him some refund power if there is something wrong with the product, but it also gives him 1% reward with each purchase. As long as his financial plan is sound, then he does not need to live like a pauper - giving into an occasional carton of ice cream at the grocery store will only help him enjoy life more.

I can give many more examples where I think it's okay to use credit cards or take loans. Conversely, I can think of several examples, and know many in person who need to stay clear of debt of any kind. Which type of person are you?. Are you a crediholic? Can you not control yourself if you have a credit card in your hand? Do you like to buy things "above your means" such as a fancy sports car and put it on a loan? If so, give them up and follow what many financial bloggers are saying about credit cards or debt. On the other hand, are you responsible with your money? Do you have a savings account? An emergency fund? A financial plan for the future? Do you take out a loan only when you know you are doing it for the right reasons and can pay it back in a reasonable amount of time? Do you decide in advance what you will buy and then happen to pay for it with a credit card? If so, then it's okay to use credit and take out a loan. Just like an alcoholic, crediholics should stay away from debt and credit cards. But just like there are millions of others out there who can control their drinking, there are many who can use credit and debt wisely, too.

In Real Life (IRL) - Our credit union has a great deal on IRAs. From January until April you can add more money to any existing IRA CDs. For example, I have some IRA CDs. One of them is earning 4.9%. I opened it a few years ago and there are still 5 years left until maturity. If I were to put my $5000 Roth money that I invest each year into a current IRA at this credit union (or anywhere else for that matter), I'd be able to earn 2.6% for a five-year certificate. On the other hand, during January to April, I can add on to a current IRA that I already have such as the one earning 4.9%. I love this deal and only found out about it last year.

I've always wondered how much longer they will continue to offer this deal. Last year I made 2009 IRA contributions in early 2010. But this year, I started to think about whether they would even continue this deal next year and decided I wanted to make all of my and my husband's 2011 IRA contributions now while I know they still have this offer. Problem was, I didn't have the money available for it. Sure, I knew by year-end, we'd have the $10,000 saved up to put toward our IRA. But in April? We only had $3,000 of it saved. So what did I do? I took a loan. Yes, I did. We have a home equity line of credit for $50,000. We owed nothing on it so it was available, and current rates are 3.25%. So I borrowed $7000 from it with plans to pay it all back this year with the money we would have put toward the IRA.

Did I do the right thing? I think so. I'm currently making more in the IRA (4.9%)than I am paying out on the Home Equity Loan (3.25%). Yes, the home equity loan rate can change but it would have to go above 5% for it to cost more than I'm earning on the IRA since the interest is tax deductible. Also, I am getting the gift of time. Even if the bank continues this great IRA add-on offer, I would have to wait to put the money in the IRA until January 2012, and I will have lost out on 9 months' worth of interest, while the money sits in a checking account waiting to be invested. So I am earning about $262 in those 9 months and paying out about $170 (before a tax deduction) if I keep the loan for the whole 9 months. Plus I am assured of getting this great deal from the credit union that might not be available next year.

Had I said to my husband "Let's go take the trip around the world we've been wanting to take and just use our equity fund, I would not think taking a loan in that instance is wise. Each situation and each person is different - sometimes it's wise to use credit. Other times it's not. What do you think? Do you think having some debt or using credit cards and taking out loans is okay?

Please check out other financial ideas on Frugal Fridays at Life As Mom.

How well will you do?

2011-05-03T19:53:00.003-04:00

Here is an interesting game from Urban Ministires of Durham. Of course you are stuck with the scenerios they give you as well as only a few options. But it is an interesting look at how quickly someone can fall in the hole financially.

Play Spent

I'm embarrassed to admit that I came away from this game in the negative. Fortunately, I've made better decisions and have had better circumstances in real life. How did you do?

Review Your First Quarter Finances

2011-04-15T12:07:00.003-04:00

Tip #287 - Review Your First Quarter Finances. It is that time of year again (actually a couple weeks past!) when we should probably look over how we are doing with this year's finances. But, if you haven't done your taxes yet, do that first! Once those are signed and sent, sit down with your budget, spreadsheet, notebook, calculator, or other financial tools you use to figure out your finances. If you are serious about getting your finances in order and motivated to put away money or pay off debt then you should have set some financial goals and written a budget at the beginning of this year. Our first-quarter review is basically just a review of how we are doing with those goals and how successful we are with the budget that we set for ourselves.

If one of the goals you set for yourself was to accelerate your payments on a car loan of $3500 and be finished with it by year's end then look up your statement online (or in the mail) and see how much you have paid off from January 1 until now. If you have paid off close to $1000 of it, then it looks like you are on your way to reaching your goal. If you have not done any accelerating of payments thus far, then analyze why that is the case. Did you have unexpected expenses? Have you been putting it off, hoping to pay more of it off later in the year? Have you spent any money needlessly that could have been applied to this loan? Is this goal still realistic? If you find that you are slacking then look over your goals again and why you want to achieve them to help find the motivation to get back on track. If you find that you grossly underestimated another expense in your budget, and you won't be able to pay off $3500 this year on your car, then adjust the goal to what you now think is realistic.

Look over your budget and compare it to you actual expenses that you have incurred over the past three months. Did you perhaps underestimate how much gas prices would rise? Do you need to raise the budget for that category? Find another category that you perhaps overbudgeted for, and take the money from that category. Have you found that you have been doing such a good job with cooking from scratch that you feel justified in lowering your food budget? Look over your categories again and analyze if you are doing all you can do to keep your expenses as low as possible. This is especially important if you are trying to build up some savings or get out of debt. Can you put your gym membership on hold for a few months while the weather is nicer? Can you take public transportation for cheaper than gasoline fill-ups?

This quarterly review is not necessarily a time to do a whole budget or financial goals overhaul. Instead it is just a point in time to review what you have done thus far in the year to see if you are headed in the direction and at the same pace that you plan, financially. It may be a time to make some small adjustments as mentioned above or perhaps a big change if things have changed drastically since you set your financial goals and budget (new job, sudden new addition to the household, etc.) But overall, it should be a time to just review how you are doing financially 1/4 of the way into the year.

In Real Life (IRL) - I did my taxes later than normal this year (just finished them last weekend!), so I have yet to sit down and do my quarterly review that I am pretty faithful about doing. I hope to find some time this weekend to do so, however. Part of what I do each quarter is look over our budget - and I do think I may need to up our gasoline budget as I did not anticipate the approximately 50-cent increase per gallon that we've had since the beginning of the year. With my husband driving 50 miles round-trip to work each day, that works out to about an extra $20-$25 per month in gasoline for which I didn't account.

I don't usually change our financial goals but I look them over and see if we are on track to reach them or if I am putting things off. Our mortgage is our only debt, so our goals involve putting $2,000 per year into each of our children's college account and $5,000 into each of our Roth IRA accounts. Pretty much come rain or shine, this is the minimum of what I want to do. Rather than change that goal, I would likely find ways to come up with the money (by selling more on eBay or taking one less vacation).

So rather than look at my goals to change them, I calculate my net worth each quarter to see where we are - how much we have in our retirement account, how much is in each of the kids' college funds, how much we have left to pay on the mortgage, etc. I like to use it as a basis of comparison with last quarter's net worth or last year's net worth. It gives me an overall picture of how far our financial goals are taking us. For example, my daughter turned 9 at the end of last year. With her late birthday, she wont' be started college till 2020. I can look at our net worth statement and see that at this time last year we had approximately $21K in her account. Then I can look at our current net worth and see that she has $23K in her account. By looking at our net worth, I can start to use this information as part of an analysis of our long term goals, which will be a topic for another post.

For now, I am going to gather our statements and check out how well we are doing against our budget. I know we are behind on making our deposits into our Education Savings Accounts and Roth IRAs, but that seems to be par for the course for us lately, seeing as I just made part of our 2010 IRA deposits a month ago (you have until April 18 to do so this year!) I hope everyone can make time for an early-in-the-year financial review. I find the process to be very worthwhile.

Organize Your Papers for This Year's Taxes

2011-04-04T18:47:00.009-04:00

Tip #286 - Organize Your Papers for This Year's Taxes. Every year when January 1 or so rolls around, we start to think about our taxes. We begin to get envelopes in the mail on a regular basis that say "Important Tax Return Document Enclosed." And we start a pile of our tax documents. Then around February 1, the more ambitious of us start working on our taxes. And as we progress, we start searching for that little slip of paper the neighborhood trumpet player left with us that says we donated $10 to the high school band. And we start looking in our checkbook for all the checks we wrote to little Sadie's preschool. And inevitably at some point as we work on our taxes we have a nagging suspicion that we donated a desk chair to a local charity but never got a receipt for it, and we are suddenly making phone calls to organizations asking for slips of paper or lost statements. At least some of us are.

But why? It is so easy to start a folder or envelope for next year's taxes that everything tax-related gets put into as it comes in. It does not have to be sophisticated - a folder will do but something with sides like an envelope is better, so there is less chance of a small piece of paper falling out. Write on it "2011's Taxes" in big letters and keep it in an accessible place. What should go in it? Of course, each person's tax situation is different. And those who itemize their deductions would need to keep more receipts. Things that may need to be included are:

--Any donation slips you receive for donating material goods
--Any receipts you receive for donating money to charity
--Copies of your statement or checks that show you paid childcare
--Receipt of payments made to higher education
--Copies of medical payments not covered by insurance
--Travel expense receipts or a log of mileage for work you did for charity
--Receipts for home improvements that may qualify for energy-saving deductions

If you keep these all together throughout the year, it will be much easier when you sit down at tax time to do your taxes (or even if you hand over your paperwork to a tax preparer). The best time to get organized is as soon as you finish last year's taxes when tax paperwork is fresh on your mind. So if you have just finished your taxes or are about to sit down to do them this weekend, get a folder or envelope together for this year's taxes and start collecting the necessary paperwork.

In Real Life (IRL) - Organization is not one of my strong points. I tend to "keep things in my head" such as dates, activities, and such. And while I do pretty well with that system, my memory is nowhere near perfect, and I have forgotten several things from time to time. When it comes to taxes, a paper trail is more important than using one's memory, especially if it comes to getting audited. Fortunately, I have a husband who tends to be more paper organized and keeps all of our donations slips together. But there are other activities that my husband is not involved in so much (like writing checks to the kids' preschools) that I must take the lead in being in charge of.

Once I started selling enough on eBay to call it a business and declare my income I have had to be much more stringent on keeping all of my receipts and price records of what I purchase. Forgetting about trips to a yardsale or not keeping receipts from a thrift store only makes my job more difficult when it's tax time and causes me to miss out on legitimate business expenses. Having said that I am still not perfect when it comes to keeping track of all my personal charitable donations - the one I make in haste online for a friend of a friend or keeping track of my expenses that I have while working with a charity.

When I sat down to do my taxes this year, I found myself having to look up statements online to see if in fact I did make a donation to my college this year as I thought I had (I did, but misremembered the amount). And while I was looking up the statements I found another donation I made that I had completely forgotten about. Then I had to call the bank to have them send me old copies of statements that were not available online. Because of my lack of organization of paperwork, I had almost lost out on some decent tax deductions.

Also, if I had just kept track of my donations and expenses more thoroughly in the first place, I would have saved myself a lot of time and extra work. So for 2011's taxes, I have already set up a folder, and I am starting to add in receipts and log expenses in a notebook that I will keep inside so next year, my work at tax time will be much easier and more accurate.

How about you? Are you good at keeping papers organized for your taxes? Or do you wait until April to gather everything together and do some last-minute scrambling?

Be Vigilant When Buying Secondhand

2011-03-26T15:56:00.010-04:00

Tip #285 - Be Vigilant When Buying Secondhand. One of the best ways to cut down on expenses is to buy used (rather pre-owned which sounds so much nicer). Other than consumables such as food, gas, cleaning supplies, most items have a life span that can transcend two or more people. And for most things out there, the cost of the item is most expensive in the first half or less of its life than the rest of its life. Of course, we all know that's true for a car. But it's also true of electronics, movies, books, furniture, clothing, household items, and other things. This is generally the case because people pay a premium to be the first to use something, the item is the latest and newest out there, and because the chances are close to 100% that the item works, and if not, you can usually get a full refund. On the other hand, if you buy used, er, um, secondhand most people expect a discount. They know they are not the first to use the item. They are aware that it is not the most recent edition or latest fashion, but what they may not be aware of unless they are vigilant is whether the item is fully usable, fully functional, complete, and unbroken.

If you have been trying to cut down on expenses and have started to embrace buying preowned items, make sure you are not wasting money buying things that seem to be a good deal only to find out the item is damaged. In other words, do not be so excited by your screaming good deal that you forget to check the item over. What looks like a great deal instead may turn out to be a waste of money that could have been spent toward something else. Therefore, be vigilant looking over your items before you pay. Look over everything once and then do it a second time. Here are some common things to look for when buying used:

Clothing:
--Make sure that zippers zip properly
--Check that buttons (snaps, hooks, etc.) are present and accounted for
--Make sure elastic is not stretched.
--Inspect that there are no stains (or you are comfortable with the ones you see)
--Check if stitching is not coming unraveled (or you know you can fix what you see)
--Make sure the size is accurate. Preowned clothes have often been washed numerous time and may have shrunk. A preowned size 12 may be different than a new 12, for example.
--Check that no part of the item is stretched out

Electronics:
--Do not buy unless you can test it or it's returnable.
--Make sure all parts are included (blade is in bread machine, chain is in light fixture, etc.)
--If you are at a yardsale, ask the owner how it works and then ask to test it. For example, ask for a CD to test a CD player, plug in a tv or radio, test out a video game player. If you are at a thrift store, there are usually outlets to test things. And there are often DVDs laying around that you can use to test it. Lights should light up, the motor on the blender should purr, the blade in the bread machine should spin.
--If it's a battery-operated device, battery covers should be present and not corroded. Ask for batteries to test it or better yet carry batteries in your car so you can test things.
--Make sure cords are not moth-eaten or worn and are fully intact.

Furniture:
--Make sure all legs are sturdy for tables, dressers, etc.
--Check that upholstery is not ripped or stained (unless, of course, you are planning to recover it)
--Make sure drawers slide easily, doors close
--Inspect that all pieces are presents (shelves, handles, hinges, screws, etc.)

Household Items:--For glassware, run your finger around the rim to feel if there are any chips. Run it along the handle (for mugs) and along the bottom, too. Feeling is more accurate than looking
--Look for fading on pictures, decorated kitchenware, or the color on general items.
--Look for cracking of pottery, ceramics or other breakable materials such as lamp bases, vases, dishes, glass in a picture frame, etc.

Books:--Check that the spine is not cracked
--Make sure there are no missing pages or loose pages
--Check for stains or mildew
--Inspect books for curled pages that indicate it may have gotten wet

Lastly, I would be remiss if I did not add that when you get home with your purchase, look on the consumer product safety commission website to see if any of your items have been recalled. Stores aren't supposed to sell these items, but I'm sure some squeak through. And recalled items probably abound at yardsales.

The list above is not meant to be comprehensive but just some suggestions on what to look for when buying used. All of the above are typical flaws you may find when buying items secondhand. Some of the flaws may be acceptable to you or may be easily fixed. As long as you are aware of them, there are no problems. It's when you impulsively buy something secondhand only to come home and find a flaw that the purchase becomes a disappointment and a waste of money. So please when you are buying things that are preowned, allow extra time to inspect what you are buying before you pay for the item.

If you cannot check everything to your liking because you do not have the time or the right tools to do so, then only spend money on the item that you can afford to waste. Think of it as something you are willing to take a chance on.

In Real Life - I've mentioned in the past that I have joined the "buying used" bandwagon. And I have become an enthusiastic secondhand buyer. I buy most of my kids' clothes secondhand, their toys, some of my clothes, furniture, dishes, books, and, um, pretty much most everything.

This post comes from, unfortunately, a lot of experience buying preowned things that were not up to my expectations. I bought a boxed set of books at a thrift store that turned out to be mildewed and curled inside - the whole thing went in the recycling bin and about $4 in the trash (well in the thrift store's cash register). I've bought dishes that had chips that I didn't realize until I got home. They went in the trash. I've bought my children pants where I could not zip the zipper and skirts that didn't hook. I've purchased clothes that have light stains that I didn't notice. We bought a radio that we assumed would work but did not. We bought a swing that had been recalled (we were able to get a replacement through the company, though). We've bought furniture where the drawers did not slide smoothly, although it was such a good deal we didn't care nor expect it to be perfect.

And that is the key to buying used, I think. You shouldn't expect it to be perfect, because most of the items have at least been handled before or possibly used extensively. As long as price is commensurate with the wear and tear on the item and you are aware of any non-functioning or broken parts of the item before you buy, then all is good. Just make sure you look everything over before you pay.

PS. I have to apologize about my long absence. I thought I put a post up a few weeks ago explaining but I see that it is not here. I'm sure I wrote it, and thought I hit "publish post" but it's not here. Hmmm...I don't know. Anyway, I had some personal issues I needed to deal with but hope to be a more regular blogger (at least weekly) from now on. Thanks!

Set It And Forget It

2011-02-22T12:56:00.005-05:00

Tip #284 - Set It And Forget It. Once you have a plan in place for your finances, it is okay to take a step back and let the plan unfold. You do not have to think about finances for an hour every day or even spend weekends making plans about your money.

If you set up some financial goals at the beginning of the year, along with a budget then you set the stage for a good financial year. If you direct deposited your paychecks (is there any other way these days?), as well as set up money to go into a savings account or to automatically pay off your credit card debt then the process is even better. If you have your bills automatically being paid then you are probably in good shape.

Let your investments take care of themselves. Follow your budget as closely as possible, keep up with your savings and your bills and step back. Then check back in a couple of months to see how everything is going. I like to check in on my finances near the following dates: March 31, June 30, September 30, and December 31. Any more often than that and people tend to micromanage themselves. They overspent one week at the grocery market so they try to fix it the following week only to find themselves with not enough food. Or they watch their mutual funds take a dive one day and transfer their money that only to find the funds have climbed back up the following day.

That's not to say that kinks don't need to be worked out the first time you set a budget. Or that perhaps you are overspending at the supermarket on junk food that you can eliminate. But give it time. One week or horrid spending should not be bad enough to upset your financial plans. Check what you are doing over a three-month period to reevaluate whether you are consistently wasting money or if you truly set the budget too low. For investments, tracking too closely can make you crazy and generally makes for some hasty buying and selling decisions.

Instead trust that what you set up at the beginning of the year is working. Follow it how you planned and then do an evaluation in another month or so. You can make adjustments at that point based on a longer-term financial activities. In the meantime, go out and enjoy your life. You set up your finances to do what you want, so let it go for a short while.

IRL (In Real Life) - Sorry I have been away for so long. I've taken a step back from finances over the past few weeks. I think it began with our beloved rabbi passing away. And I began reevaluating my life and that of my family's. Then my interest in my finances and writing about them on this blog fell further behind with some personal issues. And the more I let it fall behind, the less time I thought about it. Sometimes planning ones finances, thinking about it all the time, reading about it, writing about it, trying to save
money or put away money can become an addiction or take control of ones life.

Of course for someone new to managing their finances, it tends to take over as one learns about saving, investing, and so forth. But once you have the basics under control and have a plan in place for you and your family, it's okay and probably preferable to put them back in their place, taken out to be reviewed from time to time but not to be obsessed with or idolized.

It is healthy to take a step back and let the plans and processes that you have in place for your finances do their work. And then there should be infrequent checkups (I like once per quarter but even semi-annually is okay) to make sure that everything is proceeding according to plan.

I took a break and have been letting the process that I set up take over. I will be sitting down with my taxes in a few weeks and then doing a re-evaluation of our budget and goals at the end of the quarter. But lately, I've been trying to just enjoy my family and our lives. And it has been okay.

When Buying Used, Compare to Other Used Prices

2011-01-25T10:06:00.003-05:00

Tip #283 - When buying Used, Compare to Used Prices. I am a big proponent of buying things used. Most of the time, buying things used will cut the cost of an item by at least 25% and sometimes as much as 95%. As long as the item is in acceptable condition and has enough life left in it, it is preferable to buy this way in order to save money. You have to find what is acceptable to you for buying used. It may include household items, furniture, clothes, toys, cars, or other things.

As with any item you buy, make sure you do the research first to find out exactly what it is you want to buy and secondly find out if you are paying the best used price for it. Most of the time, the used price will be better than the new price, but you really want to find out if the price you are paying is better than buying the item used elsewhere if it available elsewhere used.

For example, suppose you want to buy a small clock. You do your research and decide you want to buy a brand called LaPort (made up name for example). The best price you can find in the store is $79 and that is when it is on sale. However, you decide you really want to pay less than that and you scour the Craigslist ads. To your delight you find one listed on there for $40 and are thrilled. You check it out, find out that it is 3 years old and in pretty good shape. You buy it and are happy that you paid half price for this clock. So did you get a good deal or not? Well, it's really hard to say. Sure you paid 50% of retail but the item has some wear and has three years' of use on it. It would be expected that it would cost less than retail. The truth is, it's hard to tell if you got a good deal because you are comparing a used item to a new item. The best way to see if you got a good deal is to compare it to prices of the preowned items.

A good place to check out used prices for things is eBay. If you can beat eBay's price, then you are doing pretty well. Because eBay is such a large marketplace you can get a good idea of the value of the item. However, sometimes there is a bit of auction fever on there, and prices go unrealistically high. So the best policy is to look at several of your item and take the typical price your item sells for. If you are buying locally, the price should generally be a bit less than eBay's price not including shipping. So suppose after you buy the clock, you look on eBay and see that most of the used clocks are selling in the $50-$55 range plus $5 shipping, then you can feel confident that you got a good deal on your used one. But supposed the clocks are mostly selling for $25 then it appears you have overpaid a bit.

It may not have seemed that you overpaid at first because the price was better than if you had bought it new. But if you can get it elsewhere used for an even lower price, then it isn't a good deal. The reality is, used items should cost less than new ones, so the best way to tell if you have gotten a good deal is to compare it to prices on used items, not new ones. If the item is somewhat uncommon or hard to find used, then you have no choice but to compare it to new items and see if it is worth buying it at a lesser price for an item that has some wear or use on it.

Also, when buying used, there are other things to consider, how quickly you need the item, whether you can touch the item and test it out, how convenient it is to pick up the item, and the item's condition. Take all of those things into consideration, too when deciding if a used price of an item is fair. But just make sure you don't fall into the trap of only comparing the item to new prices, if it is available used elsewhere, as that is a better gauge of the true value of the item.

In Real Life (IRL) - As most of my posts come from circumstances and experiences I have had in real life, this one is no different. I am an experienced thrift store, Craigslist, and eBay buyer. I an generally a smart shopper and can gauge whether I am getting a good deal on things I buy. So I don't know what happened to me last week when I got caught up in the buying fever and overpaid for something used. Here is the story...

My son is a HUGE Thomas the train fan. All along he has been collecting the die-cast metal trains with plastic tracks. But at friends' houses and other places he has become enamoured with the wooden sets. And I was starting to see the value in the durability of these sets. So for the first night of Hanukkah I bought him a small wooden starter set (new and on 1/2 price sale) as his big present to open. I wasn't yet convinced I wanted to switch over to the wooden tracks completely but I had no other "big" gift for him, and I knew he'd enjoy it. Then one day a couple of weeks ago, my husband took my son to the thrift store. And while they were there a staff member put out a big tub of wooden Thomas tracks, bridges, and building. The price was $16 and absolutely was a steal. Needless to say, my husband bought it, and when they came home we set up all of the track on our train table.

And it was clear at this point, that we were not going to get away from collecting the wooden Thomas trains and tracks. On the next free day, I went over to AC Moore, a craft store that carries wooden Thomas trains to check out their prices. Like Michael's, they have 40% off coupons (and sometimes 50%) in the paper and on their website. I was shocked at how expensive the wooden trains were - $12.99 to $16.99 for a single train and $19.99 to $22.99 for a train with a coach. Ouch, even at half-price the cost would be a minimum of almost $7 per train with tax. The next day, I looked on Craigslist to see what people were selling. Unfortunately, most people were selling tracks or a train table which we didn't need. But one woman was selling a set that included 25 trains among other things for $100. "$4 per train?" I thought. I figured it was less than half price of the ones I saw at the store, so I went over her house and purchased them.

But after I came home I got buyer's remorse. I don't know why, as I am an experienced buyer, that I did not look around at prices of used trains elsewhere. I just compared the prices of the new trains at the store. And I only was interested in the trains. The seller included tracks and some other things that I didn't need, so while $100 was an okay price for the whole set, it really wasn't a smoking deal for just the trains. And I realized that when I started searching eBay for lots of used wooden Thomas trains. Many were going for $3 or less per train including shipping. I got a sinking feeling in my stomach that I overpaid because even though they were less than half price of the new trains, they were also significantly used. Some were missing pieces; paint was peeling on others. They should have been significantly less than new.

I was beating myself up over this purchase. How could I have been so dumb to jump on the first deal I saw? Why didn't I research the prices of used wooden Thomas trains first? I know it's because I went to the retail store first and was comparing the used prices to those prices, and it wasn't a fair comparison. If I had looked at eBay first, I would have realized that I could easily do better than $4 per used train. I feel a bit better about my purchase now because over the weekend I was able to sell off the tracks and buildings that came with that lot for $35 which brings my cost of the trains to less than $3 per train which is more in line with the going rate of used wooden trains. And I've learned my lesson when buying used.

Entertain Your Family Cheaply With Parks

2011-01-08T08:03:00.008-05:00

Tip #282 - Entertain Your Family Cheaply With Parks. Every summer and winter break I hear about my friends' visits to Disney World, Great Wolf Lodge (an indoor waterpark resort), local amusement parks, arcades, make-your own pottery places, professional theatre, and similar costly activities. All of these places are entertaining for children, are impressive to adults, and cost a fair amount of money. And if you have the money to do these types of activities every day of winter break or every week during the summer, then you don't have to worry about how your money is being spent. But if the idea of spending $60 per child per day for an amusement park or blowing $30 for an afternoon at an arcade doesn't appeal to you, look to parks for cheap entertainment.

No matter where you live, there are parks nearby, I am sure. They may be local playgrounds, county parks, state parks, wildlife areas, nature trails, or national parks. What they all share is that they all can provide low-cost entertainment and educational activities for you and your family. If you have young children, you probably know every local playground within a 5-mile radius of your house. And after a while, it might not seem like a big treat to go to the same playground over and over again. But what if you go outside your community and plan an outing to a playground in the next town? Look online for a town or city's website, and they will often describe the parks that are contained within their limits. A new place with different equipment can have a huge impact for entertainment purposes. Try to find reviews of playgrounds or talk to people who live nearby about which are the best parks around. I have found that most towns and cities have many average-type playgrounds, but there is often one playground that is a showcase of their town. It might include the latest play equipment, zip lines, water sprays, and other fancy features. Here is a town near my parents that has an amazing playground with a kids' castle in it. No admission required. My children would LOVE to spend the day here.

If you want to go somewhere for the afternoon beyond a playground, check out state or county parks in your area. Features at these types of parks may include hiking trails, water activities, and beaches. Even if you are not the outdoorsy type or if it is winter, some of them may have indoor educational buildings to explore. Just doing a quick search of state parks in my area (Northern Virginia), I came up with a wide variety of parks within an hour or two of my home: State Parks of Virginia.

Talk to people at the state or town/city parks to find out if there are any other consortium of parks in your area such as by the region. Around here there is a Northern Virginia Park Authority which is a group of parks in multiple nearby counties. These also happen to be the parks our family use the most. These parks are so varied that you don't feel like you are doing a typical hiking trail in the woods. The parks included swimming pools and waterparks for low-cost, historic homes, miniature golf, gardens, in addition to the typical playgrounds and hiking trails. Going to just one park a week from this group of parks would take us half a year!

Of course, we all know about National Parks and how great some of them are - such as the Grand Canyon or the Smoky Mountains. But even if you don't live near a well-known national treasure, there may be some smaller parks, beaches, battlefields, historic buildings, or wilderness areas near where you live that are run by the National Park Service. The best thing to do is go to the National Park Service website and choose your location to find out what is offered. When I choose my state, I see such varied locations as the Shenandoah Mountains (probably the most well-known around here) to civil war battlefields to historic homes to beaches to colonial farms to waterfalls. Even if I am not an outdoor wilderness, hiking-type person, there is so much to see through the National Park Service. What I like most about these options is two-fold:
1. most of them have indoor interpretive centers which are wonderful and educational on colder days, and
2. admission is usually by the carload - either $5 or $10. For a day's worth of entertainment, it's hard to beat that!

In Real Life (IRL) - My family and I just spent about 10 days in Florida visiting our parents. While we would have loved to have been handed a vacation package to spend a week at Disney's parks free of charge, we were not. And we wanted to keep costs down on the entertainment portion of our trip. What we did instead was look at the parks surrounding the area where our folks live. We spent under $50 to entertain all 5 us for 10 days! And we had so much fun! Most of the activities we did were the types that I mentioned above - parks of various types. We were in the Palm Beach County area of Florida. And as a quick example to show how cheap you can entertain a family using natural resources, here is what we did for 10 days and their cost:

Day 1: Visited Jupiter Lighthouse and beach - we did not climb the lighthouse because we did not have time as this was part of our drive down. This would have cost money. Cost: Free
Day 2: Went to City of Boca Raton's Patch Reef park. This park had brand new playground equipment and a splash pad with cannons and spraying palm trees. Cost: Free
Day 3: Went to City of Deerfield Beach's beach. Spent all day in the sand and ocean. Cost: Free
Day 4: Went to City Of Boca Raton's Sugar Sand Park. Spent time in the indoor science explorium and outside in their oversized, amazing maze playground. Cost: $10 for the science explorium (donation).
Day 5: Spent the day at an indoor flea market. Cost: $5 in fresh fruit purchase
Day 6: Went to Boca Children's Museum and a farmer's market. Cost: $9 for museum (with coupons - would have been $15) and $9 for fruit and jam purchase.
Day 7: Swimming in my parent's condominium pool and playing at a City of Delray Beach's playground. Cost: Free
Day 8: Went to the beach and playground on Miami Beach. Spent the day walking around South Beach and playing on the beachside playground and the sand. Cost: $1.25 to park (person leaving parking spot still had time on meter so this would have been $4).
Day 9: Went to Arthur Marshall Loxahatchee National Wildlife Refuge taking a hike and spending time in the interpretive center. We saw alligators and turtles in their natural habitat! Cost: $5 per carload.
Day 10: Went to Palm Beach County's Wakodahatchee Wetlands. We saw lots of wildlife! Cost: Free

The total cost of our activities including purchases was: $34.25 for 5 people for 10 days! My husband and I, along with our 3 children saw alligators, turtles, and birds, picked fruit, shopped, swam, built sand castles, climbed playground equipment, sprayed water at each other, played pretend in a children's size boat, supermarket, and bank, took a hike, ran around, learned about Florida wildlife and flora, and enjoyed fresh air, exercise, and sunshine for less than $5 per day. Take that, Disney!

Now that we are home, we plan to look into more of the local, state, and national parks in our area to find some more inexpensive, educational, close-to-home fun. What parks are near you that you can enjoy for low cost? For other low-cost ideas, check out Frugal Fridays.

Review your 2010 Year-End Financials

2011-01-04T11:45:00.003-05:00

Tip #281 - Review your 2010 Year-End Financials. As I always recommend every quarter or at least semi-annually, review your financial status. If you keep track of your savings, loans on financial software such as Quicken or Mint.com, it could be as easy as running some final numbers. Or if you keep things on paper, it might mean calling up your bank and other investment companies and getting your balance on each of your accounts and tallying them up. However you keep track of your finances, it is a good idea to write down a data point of your balances twice or four times per year. Year-end is an especially good time to check out your status.

By reviewing your finances at year-end, you can check on whether or not you reached the goals you set at the beginning of the year. If you had hoped to have $8000 in your 401(k) account by year-end, then it's easy enough to check your balance to see if you met that goal. If you set a goal of paying down your car loan to $6000 then you can compare it to the amount you owe on December 31.

Your goals should hopefully pretty much match up with your final balances. If they did not, you need to analyze why they did not. Did you hope to have $20000 in a home downpayment account but instead only had $16000? Figure out what went wrong. Was it the stock market that tanked rather than you not saving enough? Well, then analyze whether your down payment money should really be in the stock market. Did you simply not put enough money away? Why not? Did the money instead go to frivolous things such as cute but unneeded shoes or quick, fast-food lunches for the kids?

After analyzing where you may have fallen short you will then have the information you need to set a realistic budget for next year or to adjust your goals. For example, you may decide you will slow down the rate at which you are saving for a downpayment on a house or you may resolve to cut out impulse buys.

Whether you find out you are meeting your goals perfectly or that there is more work to be done, it is important to get an accurate gauge of your financial picture. It will be the first step to completing your budget and goals for next year.

In Real Life (IRL) - At year end, I actually get excited to see if we made the progress that we had hoped to make. Sometimes when the market is doing very poorly, the news doesn't look so great. Or when we have large emergency replace-the-furnace-type bills. But other times, I am happy to see the progress we are making.

We actually just returned from our annual visit with my parents and my husband's mother in Florida. So we still haven't reviewed our year-end financial picture. It will come as soon as the five suitcases are unpacked and the house is in order. But I have glanced at the numbers and we seem to be on track with what our goals were from the beginning of the year. One big goal was paying off our mortgage on the condo in Florida (where my mother-in-law lives). We achieved that one even earlier than we anticipated. And this freed up money to put toward our other goals. We met our children's college fund goals and our retirement goals as well.

One big goal that we didn't achieve was having me get a part-time job or increase significantly the amount I was making selling on eBay. I have a bunch of financial goals floating around in my head for 2011 as well as many upcoming expenses that I discussed in my last post. With these in mind, we will be writing out our formal budget and 2011 goals later this week. And I will come up with our exact financial figures from 2010 once I attack our mounds of laundry.

Make Your Purchase And Savings Plans For 2011

2010-12-16T11:50:00.007-05:00

Tip #280 - Make Your Purchase And Savings Plans For 2011. As 2010 is drawing to a close, it is time to start setting up your financial plan for 2011. I believe first you should come up with some general ideas of what new expenses you think you will incur in the next year, what big purchases you would like to make, and how much new savings you want to put away. These would generally be for things that were not included in your last year's budget. For example, if you are used to putting $300 per month toward home maintenance, you do not need to add this. However, if you want to add a new deck to your house, put in down on your list. During the next few weeks you can then make a formal financial plan and budget. For now, pull out a sheet of paper, and write down your general plans for next year.

Here is what a sample plan might look like:

Plans for 2011

1. Buy new dishwasher - $500
2. Preschool for son in the fall - $1200
3. Redo middle daughter's bedroom including furniture - $3000
4. Save toward older daughter's wedding - $2000
5. Start an IRA for wife - $5000
6. Put money to youngest son's ESA plan - $2000
7. Start a beach vacation fund: $600

Now that you have your new plans for next year written down, your next step will be to create a formal financial plan and set up a budget based on expected 2011 income. Both of these links are what I wrote about this topic last year, but frankly the ideas don't change from year to year, only the amount that we put in them do. This year I added this additional step of writing down your new expenses and savings as a way to get you thinking of where this money will come from when you start your formal budget. Either other line items need to come down, you need to make more income, or you need to revise your plans (decorate your daughter's room with furniture from Craigslist, for example, so the amount is only $1000 versus $3000).

Doing a simple exercise like this also starts you thinking about next year's finances and gets the ball rolling to write up your formal financial plan and budget. So why not come up with your list?

In Real Life (IRL) - Over the past few weeks I've been thinking about expenses and savings for next year. What prompted it initially was a trip to Philadelphia for my friend's daughter's Bat Mitzvah. I always knew we would have this expense down the road with our children. But the road is getting shorter now that my oldest turned 9 in November. And the reality hit home when I attended the Bat Mitzvah - a DJ, cha-ching, flowers, cha-ching, clothing, cha-ching, lunch for 100+ people, cha-ching. I am not one to go overboard with events, but even with a simple affair, Bar- and Bat-Mitzvahs cost in the thousands of dollars. And we haven't started saving a dime for it yet!

So the first thing on my list for next year's expenses is starting a fund for daughter #1's Bat Mitzvah. I haven't yet come up with an estimated amount (I think I'm scared to figure it out). But off the top of my head I'm guessing we will need about $15,000 so $3000-$4000 might be a good amount to save next year for a 2014 Bat-Mitzvah.

Next on my list is joining a synagogue. Right now we belong to one but it is not really an ideal fit for us. We went synagogue shopping in the fall but put off joining since we were unsure if we'd even be living here in a year. The good news is my husband's boss told him the plans to close the office have been pushed off a few years (YAY!). That means it's time to join a synagogue where we really fit in. We're going to wait until the summer since my girls' Hebrew school is paid off through the rest of the school year. Anyway, the cost of a synagogue for a year including Hebrew School is about $4000-$5000. Ouch! Gosh between Bat-Mitzvahs and synagogue membership, being Jewish is not cheap.

Our last big expense that we might have for next year is braces. The dentist told my daughter that she needs to visit an orthodontist for a consultation. We don't know whether that will result in her getting braces yet - I hope not! - but we know it's an eventual expense anyway. We're hopeful that the costs are spread out over a few years. Plus we have expanded dental insurance that should cover some of the costs, so I am estimating a $600 cost to us next year. Hopefully, that will be put off, though.

Oh, and one more thing, we really need to start saving for another car. Our van is pushing 150,000 miles, and we've been having work done on it more frequently. And it runs fine, knock wood. But we know it's only a matter of time before we will not be comfortable driving that thing to Florida. I hope we can hold on to it for 3 to 4 more years, but only time will tell. We really should be putting a couple thousand towards saving for it per year. Oy.

Just glancing at my list above tells me we will need to bring in about $10,000 more in income to fund these new goals. All this leads me to finding a job in 2011 as my husband's job has a pay raise freeze, so the money won't be coming from there. And I don't believe our other expenses will be going down by much. I've been talking getting a job for a long time, and I was hoping to go back to my old job this past fall, but that did not pan out. Ebay selling is going very well, but there is only so much I can make that way. I can make much more somewhere else. I have something in mind, but it might not happen until spring or summer. After the holidays I will pursue that path. In the meantime, we have a couple more weeks to formalize our financial plan and write up a budget. I hope you will do it, too. Happy planning! For other financial ideas check out Frugal Friday.

Buy Batteries Online

2010-12-10T04:34:00.005-05:00

Tip #279 - Buy Batteries Online. This doesn't sound like a money-saving tip that will get you rich. But, if your life is filled with digital cameras, MP3 players, books that play music, video cameras, or any other electronic or toy that takes batteries other than the usual AA batteries, it's so worth it to check out eBay.

If you need a button-cell battery or one for your cell phone, head on over to Radio Shack and price the battery. Then log on to eBay and you may find that the battery prices are 1/10 of Radio Shack's prices. Usually on eBay, the batteries are coming from Asia, and you may have to wait a week or two to get them. So, it's best to order them in advance of needing them. I'm not busting on Radio Shack, that just seems to be the most popular place to go to for batteries. But eBay will likely beat other stores' prices, too.

Again, it may not make you wealthy, but with all of the "toys" (adults' and children's alike) that many people have today, the cost of batteries is not inconsequential. Sometimes it's the small things that add up that prevent people from building up wealth, and the cost of batteries would fall into that small things category that people don't give much thought about, but does affect one's bottom line.

In Real Life (IRL) - Several years ago, my daughter had a toy that took a certain button cell battery. We have a Radio Shack within walking distance of our home, and my husband walked up there and priced the battery. He came back and said the cost was $9 for the battery. Ouch. I don't think the toy was worth $9. Then we looked on eBay. For under $2 including shipping, my husband ordered a whole pack of button cell batteries - about 20 of them! Over time we have used most of them for various electronic toys. Had we continued to buy them at Radio Shack, the cost to us would have been over $100! Although, I'm pretty sure we would have gotten rid of some of the toys rather than pay for overpriced batteries.

Over the years, eBay has been the go-to place for these types of batteries. Recently, my husband needed a battery for an electronic do-dad of his. I don't know why, but again he went over to Radio Shack to price the batteries. The cost was $15. Again, he came home and checked eBay. And the price was $1 including shipping! He bought two!

We have never had any problem with the quality of the batteries we have received from Asia. And I doubt they are any different than the ones that Radio Shack (or Best Buy or Wal-Mart) sells. The only difference is the lack of markup. Happy battery shopping! For other frugal ideas, check out Life as Mom.

I Am The Lamest Blogger Ever

2010-12-02T00:09:00.008-05:00

I just wanted to put a post out there that I am the lamest blogger ever. I don't know how other bloggers post on a daily basis. I'm just trying to keep up on a weekly basis and am failing miserably.

Okay, now that that's out of the way, I want to add that I haven't been thinking much about money lately specifically saving money. If anything, I've been thinking about how to spend money. It kind of goes against my nature but it is how I've been feeling. Two weeks ago, the rabbi, where my children go to Hebrew school, passed away. It wasn't sudden, as he had been ill for a few years. But he was 34 years old. Thirty-four! Gosh, it makes one stop and think. He left behind a wife and four young children. There is a website dedicated to his memory, and I have found myself looking at it from time to time, browsing pictures of him from happier days. And when I see pictures of him smiling at family events or when I read stories about him telling jokes to his congregants, I think to myself, does saving money really matter when it all comes down to this?

Well, yes I still believe it does, to an extent. But there is saving, and then there's going overboard. Put money away for emergencies. Yes. Scrimp every last dollar you make. No. Save money for retirement. Yes. Turn off the heat each night before you go to bed. No. Put money away for your children's education. Yes. Don't ever take them on a vacation. No.

None of us know how many years we have left on this earth. G-d willing, we will all live to 120. But if we die tomorrow, will we be sorry that we didn't order that steak dish that we love so much at our favorite restaurant? Will we be sorry that we never took that vacation to Paris? Will we be sorry that we didn't spend money to learn how to play the piano?

On the other hand, if we live to 120, G-d willing, we do need to live on something other than boxed noodles. And we cannot depend on the government or others to take care of us. So we do have to put money aside in case something catastrophic happens. And we need to have a plan to pay for medical expenses for ourselves. So I will always think saving money is smart. And I do think we should all be doing it. But, let's not become a hoarder of money. Once you have an emergency fund, are happy with your retirement savings, and feel comfortable with the amount you have saved for your children's education, spend freely on what you enjoy. Take that trip to Paris or bring your kids to Disney World. Eat out at your favorite restaurant on special occasions. Sign up for piano lessons.

As far as we know, we only get one chance at life on earth. And sometimes that life is short. Many times it is not. So, save wisely, but enjoy yourself, too. As none of us know which life expectancy camp we fall into. For some, the length of our life is not nearly long enough as was the case with our beloved rabbi. Fortunately, he was a great role model for living life to its fullest. He seemed to enjoy every moment on earth and every person he was in contact with. While one can certainly live a full or even fuller life without spending a lot of money, I have found myself loosening my reins a bit on our spending because of his untimely death. I don't want to regret not doing things because I didn't want to spend the money - money that we had to spend. Saving just for the sake of it is not always the best option.

So I am looking at our savings and spending with new eyes with the idea that if we can afford it, and it will enrich our lives, then we will do it. Having said all that, I know that the best things in life are free. My family and friends, and the beauty of nature don't cost a dime. Although, that plane trip to see nature's finest might. Thanks for being a good example, Rabbi Levi. We miss you.

Don't Get All Of Your Eggs From One Chicken

2010-11-21T04:26:00.007-05:00

Tip #278 - Don't Get All Of Your Eggs From One Chicken. We all know the saying, "Don't put your eggs in one basket." Well, I believe we can apply that wisdom to how we earn money. Suppose we have one very good egg-producing chicken. We rely on getting our eggs from her day after day after day. But then one day a fox raids the hen house and there goes our source of eggs. Or our hen gets an illness and passes away suddenly. Or the egg gets too old to lay eggs. Now from where do we get our eggs?

As I am sure many unemployed people today can attest, earning all of your money from one source can be pretty scary if that one source dries up. No matter how great that source was at one time, many events can happen to effect it: The economy goes sour, and the business you work for is no longer produces as much. A small company's business owner passes away, and the company closes up shop. You are fired. You become incapable of doing physical labor that your job demands. That's why it is important to find more than one chicken from which to get your eggs.

Whether you are the main breadwinner or just earning some side money, it is important to have various sources of income. Or at least various ideas of where you can earn income if your main job goes south. Sometimes it is best if your alternate sources of income are in a different area than your main source. So an English teacher who can also fix cars may be more valuable than a teacher who can also tutor. Because if teachers are no longer in demand, tutors may not be either or there may be lots of other teacher who can tutor. But regardless of what you do to earn money, it is a good idea to at least think of other ways in which you can earn money even if you do not currently do them.

In Real Life (IRL) - In real life right now, I consider myself unemployed. I stepped away from my job over three years ago when my son was born. So while it is somewhat tight, we are living primarily on my husband's income. Because of the high-cost of the DC area and because we have three children who like to do activities and two parents who like to take vacations, I try to earn some money on the side while I stay home with our 3-year old. My main source of income is selling on eBay. I have built up a small business and a routine for making money on the world's largest auction site. In the past year or so, eBay commission or fees have gone up dramatically, leaving me with less take-home pay than before. While I still find eBay to be my greatest source of income, I have tried branching out to other venues to sell my wares. I've been trying to sell some things on Craigslist before listing them on eBay sometimes. Without any fees whatsoever, it allows me to sell things more cheaply, and is a good alternative for me.

This past year, I sold clothes at a consignment sale (and made about $40)! I also sold clothes at a consignment store for the first time. I have been completing surveys online in my spare time. I've been bringing books over to my local used book store for cash or credit. And I've been selling books on Amazon.

Now all of this is chump change, of course. We're talking about additional money that we use to pay for my kids' activities or to put toward a weekend away. But the point is, several years ago, eBay was pretty much my only source of income. Then I discovered Craigslist and realized I could make money selling all of the big items that I couldn't sell on eBay. Then I learned about selling on Amazon, and single books that weren't worth listing on eBay were getting sold. Then I added the used bookstore to my list for books that weren't worth listing on Amazon. And this year, adding consignment stores and sales to my income-producing endeavors for items that are not worth selling pretty much anywhere else. Taking surveys are a nice steady source of spending money that doesn't rely on the demand or lack thereof from the buying public.

It never really occurred to me that I seek income from so many different sources until I got a few checks in the mail and some online deposits last week from many different sources - an Amazon deposit, a check from completing surveys, and a check from the consignment sale. And that's when I realized the wisdom of making money from different getting income from a variety of sources. And in this precarious economy, it is a smart thing to do.

Don't Discount Dollar Stores

2010-11-09T18:52:00.005-05:00

Tip #277 - Don't Discount Dollar Stores. Dollar stores often get a bad rap. "It's cheap stuff." "It's all junk made in China." "The things from there won't last." And most of those comments have a lot of truth to them. However, sometimes the cheap things are what we need to buy. Or we'd be buying them anyway for more money in stores such as Target, a party store, or an office supply store. And in reality, most of the stuff from these stores come from the exact same place as the Dollar Store. While I am not a big fan of disposable things and junk that piles up in our landfills, there are sometimes we have to buy throw-away items. And the Dollar Store is as good a place as any for buying this kind of stuff.

What the Dollar Store is Useful For:

--Birthday Parties - Goody bags and party supplies such as plates, cups, and napkins are the perfect items to buy in Dollar Stores. They are much cheaper than party stores, although the selection is not as good.

--Incentives - Stickers, pencils, and tattoos to be used for potty training, chores well-done, or when your children master some school-work are cheap enough at Dollar Stores and are often much less than at mass-merchandise stores.

--School Supplies - Glue sticks, staplers, tape, notebooks, folders, etc are typical Dollar Store items. There are usually great sales at the start of the school year for school supplies. But when you run out of things you need mid-year, the Dollar Store is a good place to stock up, and much cheaper than office supply stores.

--Travel - If you are taking a long car trip or plane ride and want to keep your little ones occupied, small toys that are new to them will occupy a child's attention and excite him more than his same old toys. For a few dollars, you can buy puzzles, activity books, and card games that you can dole out throughout your trip to make for some peaceful traveling.

--Costumes - If you need a cheap pirate's eyepatch or a pretty crown for a princess dress that just needs to last for Halloween night, then don't pay more than one dollar. Head to the Dollar Store first before looking to more expensive party stores.

There is a time and place to buy high-quality items that we want to last. But there are times when we need the cheapest thing possible. Cheap items may fulfill your need as well as an expensive one for a lot less money. That is when we can look to the Dollar Store.

In Real Life (IRL) - My daughter had her 9th birthday party last week. I am not one to usually buy a bunch of little, junky party favors to hand out. But we were having a game night party - bingo, charades, and trivia. And I promised prizes to the winners throughout the night. There were 10 girls total, and I estimated the girls would each win 4 to 5 games each, which meant 40 to 50 prizes. First I hunted through my party stash at home, which included goody bag items from left-over parties - mini-staplers, lip balm, and some card games. Then I headed over to our local dollar store and scoured the shelves. I found a 20-pack of decorative pencils for $1. Then I found a 3-pack of 4-color pens, as well as a 3-pack of mini-globe pencil sharpeners. I picked up a 4-pack of jack games, and a 6-pack of scented highlighters. For $5 I picked up all of the remaining prizes I needed for our game-night party.

Sure there were junky items at the store, but I tried to buy things that the kids would use, and things that would hopefully last past the night. And I think I succeeded. While I was at the store, I browsed through the whole store. And I found things there that would be helpful for other needs besides birthday parties.

At the beginning of the school year, we get a list of school supplies that we need to buy. Some of these items usually include zippered storage bags and a couple dozen glue sticks. The storage bags are used to send home simple projects and usually store pieces of paper. (I volunteer in my daughters' school once per week, and I have had fill these storage bags with small pieces of paper. Some of the bags the teacher gave me that parents had bought were high-priced, thick freezer bags that were being wasted holding pieces of paper. Thin, cheap, no-name storage bags would accomplish the same task. Those freezer bags are expensive!) Our dollar stores carries the cheap bags, which aren't good for freezing meals for the winter, but are perfect for children to bring home schoolwork. I also saw 3 large glue sticks per pack for $1. Our school generally asks that we buy the large glue sticks rather than the small ones that are always very cheap during back-to-school sales. At Wal-Mart, we paid $3 for a 3-pack of large glue sticks. They were the cheapest I could find. But I forgot to look at the dollar store. Next time I will remember.

There were other great supplies there like small staplers and rolls of tape that my kids borrow from me for craft projects all the time. For $1 a pop, it's worth it for them to have their own. I don't care if the tape is cheap when it's just used for kids' projects. There were other items there that were worth a look for future emergencies. I saw an 8-pack of cheap shower caps. Not something I'd normally use, but this past summer when we were blessed with lice, they would have been very handy to have.

So while I am not generally a fan of cheaply-made plastic junk, there are times when I have to buy these types of items. And why not spend only a dollar for them rather than more at other stores?

Sell At A Kids' Consignment Sales

2010-10-27T12:51:00.009-04:00

Tip #276 - Sell At Kids' Consignment Sales. A while back, I wrote a post series about where to sell your used things. At the time, I listed consignment sales as an option for selling your children's toys and old clothes. While I knew about this venue, and had shopped at them many times, I had never tried my hand at selling at one of them. As of last week that has changed, so I am going to go more in-depth on this topic.

In most major cities and in some smaller towns, there is a relatively new (I don't remember these when I was growing up) phenomenon of holding kids' consignment sales either once or twice per year in spring and fall. They are often held by preschools, churches, or even private companies. In small towns, there may be one big one per year, while in larger cities, there may be a half-dozen of such sales each weekend in March/April and September/October.

You might have to be a member of the particular church or preschool to sell at these sales, but many of them let outsiders sell there, too. If you have a large lot of kids' clothes, a bunch of old toys, or outgrown baby things, this is the perfect venue for getting rid of a large amount of stuff at once, while still making money.

Why sell your things at a kids' consignment sale versus other venues? As a seller on eBay, I love eBay for selling items when the item is worth at least $10. Is it worth my time and effort to list a bunch of $2 and $3 items on eBay? No way. How about Craigslist? That's another selling venue that I love for items that have wide appeal, are worth at least $10, and are too big to ship on eBay. But most buyers won't come out to a person's house for a $2 or $3 item. Yardsales? This is a great place to sell odds and ends but the chances of getting only shoppers who are looking for kids' items are pretty small. Consignment stores? Another great venue for selling some better name clothes but not so good for a bag of boys' socks.

So basically, for a large amount of items that are worth between $1 and $8 each, the kids' consignment sale becomes the perfect venue. It is a place to get rid of a lot of stuff at once. If you are interested in selling at one of these sales, check out some local moms' sites in your area or check out Kids Consignment Sales. The list isn't inclusive, but is a good place to start. Look for a sale that allows outside sellers, and contact them about how to consign at their next sale. Most consignment sales take 50 percent of the proceeds for their church, preschool, or business, but you may get as much as 70 percent at some sales if you volunteer a few hours at the sale. As a bonus, volunteers often get to attend a preview sale before the public.

Once you decide on a particular sale to sell at, you need to follow their guidelines for selling. Most only let you sell in-season clothes, some take all seasons. Some take clothes up to size 14; others do only younger kids' clothes. Some take baby gear; others do not. For most sales, you need to tag your items with an index card of some sort with the name of the item, the price, and your initials or other identifier. You also need a tagging gun or safety pins, and some tape. At the end of the sale, you usually have the option of picking up your unsold items or leaving them there to be donated to charity. After a few weeks you get a check in the mail for 50 percent (or 60-70%) of what you sold.

In order to prepare for these sales, keep two boxes in the garage, basement or out-of-the-way place. One box should be for the upcoming sale, such as the March spring/summer sales. The other can be for the sale that just passed (fall/winter). As you pull clothes from your children's drawers and closets that no longer fit, put them in the right box. Toys and other non-seasonal items should go in the upcoming sale's box. About a few weeks before the sale, start tagging your items. Price them at prices you would be willing to pay at such a sale. A non-designer pair of jeans tagged at $8 will be unlikely to sell and will end up getting donated. Instead price them competitively at $3 or $4, so they do sell. A few days before the sale, bring over your items to the church or school and then just sit back and wait for your check to arrive in the mail!

In Real Life (IRL) - I love kids' consignment sales! While prices are higher than yardsales, I don't have to drive all over town to find a sale that is selling what I want. Going to a big church multipurpose room filled with kids' clothes is the perfect shopping venue for me. And this past fall, I decided to see if it was the perfect selling venue for me, too. Since I am an experienced eBay and Craigslist seller and an avid consignment sale buyer, I have a good feel for what sells well and at what prices I can expect.

About a month before the spring sales started, I looked at all of the different sales in my area on my favorite local DC site, called Our-Kids. I had probably been to about 10 of the consignment sales in the past and knew which ones were bigger, which sold better brand clothes, and which were well-attended. Based on my experience, I picked a sale where I thought my things would do well (I actually picked a smaller sale that isn't overloaded with clothing and didn't have a consignor fee to participate).

About a week before the sale, a friend came over who was also going to sell at the same sale, and we tagged our items together. We had a fun afternoon, while our kids played, and we got most of the tagging done in just a couple of hours. Afterwards, I double-checked a few items on eBay to make sure they weren't high sellers, and I actually pulled a few things out of my box which I thought I could make more money on on eBay. I also added a few things during the week as I scoured through my children's rooms. The day before the sale, I dropped off my bags of items (about 40-50 things total) at the preschool.

The sale was last weekend. I attended during the last hour and saw that most of my items were sold. I'm not sure yet how much I earned, but I'm guessing it will be about $50 for a bunch of smaller items that I had nowhere else to sell. Not bad for a couple hours of "work" with my friend.

Find Out What Your Savings Bonds Are Worth

2010-10-13T16:45:00.009-04:00

Tip # 275 - Find Out What Your Savings Bonds Are Worth. Did your grandparents give you savings bonds for birthdays? Christmas? Special Occasions? Remember those birthday envelopes that you opened and you hated? It wasn't a present. It wasn't even cash. It was bonds to become cash one day in the future. The value on the bond would say '$25' or '$50' or maybe even '$100.' And at first you thought, "Cool, I just got a $100 birthday gift." But then your mom or dad would remind you that it's not worth $100 today. It would be worth $100 at some point in the future. "Aww, shucks," what a bummer gift, you thought.

Well, if you are now in your twenties, thirties, or older, you may be changing your tune a bit about those "bummer gifts," if you haven't yet cashed in those bonds, that is. A typical bond that was given as gifts was often the "EE" bond or "Double E" bond as they are known. While the bond may have taken 5, 7, or 10 years to be worth the face value written on the bond, they continue to earn interest for a total of 30 years. And if you got them as gifts back in the 1980's that interest may have been 6%. In the early 90's it was also earning about 4% interest. In the early 2000's, a little over 3%. Find me a place today where I can get a relatively risk-free, tax-deferred interest of 6%, and I'd be a happy woman. Problem is you can't. Which is why if you are still holding on to these bonds, and they are still earning interest, then they are the gift that is still giving (unlike that plastic toy Cousin Myrna gave you that you thought was cool that has long since broken).

So, think back to your younger years, give your mom or dad or grandparents a call, look in the lockbox and find out if you are still holding on to these savings bonds. If you find out that you still have some, then go to Treasury Direct to find out what they are worth. Key in the Series (such as 'EE'), the Denomination, the Serial Number, and the Issue Date and it will calculate the current value of the bond. Even if you do not know the serial number, it will still calculate the current value. If the bond is no longer earning interest, then the result will show a blank under "Interest Rate." If it is still earning interest, then it will show the rate that the bond is earning and will give the final maturity date of the bond (after which it will no longer earn interest).

If you find out that your bond is no longer earning interest, then head over to your local bank with your bonds and talk to a staff person there about cashing them in. If the bond it still earning interest, take note of the maturity dates of each of your bonds, so you can cash them in when they mature. You can cash them in before maturity date, but chances are you won't be able to make as good of an interest rate in other risk-free investments today, so consider carefully if you really need to cash them in.

In Real Life (IRL) - For the last several years, I have been keeping a net worth statement. At first, the amount I had written down on the staement for my EE bonds was just an estimate. I estimated the worth of the bonds based on the amount of interest I remembered that they were earning. Then about a year ago, I was curious if my estimates were really that accurate. So I pulled my bonds out of our safe-deposit box and found the Treasury Direct website, and calculated their worth. My estimates actually had been a bit low because I had forgotten about some bonds that I had gotten as gifts. More importantly than the worth, I took note of the maturity dates on the bonds and made a list of when I needed to cash them in.

Flash back to September 1980 - I celebrated my bat-mitzvah and was given a few bonds as gifts. My parents saved them for me and gave them to me when I graduated college. Fast forward to September 2010 and the bonds are now 30 years old! Not only that, they have stopped earning interest - they were earning 6% annually all of these years. Yesterday, I pulled them out of the safe deposit box again, and I am going to head over to local branch of my bank this week to cash them in. The four bonds that I have from 1980 have denominations of $100, $100, $75, and $50. Today they are worth $1088! Woohoo! The nice thing about government bonds is that you don't have to pay taxes on the interest that they are earning until they are cashed in. (Boo! That means I have to pay taxes on my cashed-in bonds this year.) I still have a bunch of bonds left that I bought in the early 1990's that are currently earning 4% interest (tax-deferred), so I am going to leave them earning interest for now.

So for all of you who think you may have bonds buried deep inside the desk drawers in your house or have them stashed away in a vault at the bank, take note of what you have. Make a list of the issue dates and maturity dates so you can cash them in as soon as they stop earning interest for you. The Treasury Direct site is a neat one, and you can play around with other features on there after you have calculated the worth of your bonds. Now go thank Great-Aunt Sophie for those bonds!

Do A Third-Quarter Review

2010-10-01T10:12:00.004-04:00

Saving Money Tip #274 - Do A Third-Quarter Review. It's hard to believe that I just ripped out the September calendar page. In some ways it seems like winter just ended. Three-quarters of the year gone by. It's true that time seems to go faster as we get older. Anyway, enough philosophizing. Today is the day I suggest looking back on the past year to see how well you are doing meeting your goals. Enough of the year has gone by to get a good take on what you have been successful with and what need more work. And there is still a bit of time to make things right again and get closer to your goals before year-end.

So look into your checking accounts, check your balances online for your mutual funds, look at your balances on your credit card loans and car loans or other loans you might have. And come up with net worth. While looking at how much your savings balances have gone up and how much your debt balances have gone down, a net worth calculation gives you a good snapshot of your overall picture.

Today is also the day that you can begin to look forward to next year's goals and plan for the year ahead. Back to school season has slowed down a bit and holiday season hasn't yet kicked in. So there is time to start thinking about next year. Specifics do not need to be written down just yet. But thinking about general goals and vision of what you want in the next year financially can be a good start to making formal financial goals and a written budget at year end. It's soon to be open season for health insurance and other benefits at your place of employment, which is another big factor in your budget and finances.

So tak ean overview of how you are doing so far with your finances, work hard to meet any goals before year-end, and make some general plans for next year.

In Real Life (IRL) - I calculated a net worth statement a few days ago. I had some free time, so I did it a bit early. I pretty much did nothing with our finances over the summer, so this was the first time I got to look at how we are doing. As is par for the course for us, we are behind on our IRA contributions. We have $8000 left to deposit before year-end according to our goals. We have about half of that saved up and need to come up with the remaining $4000. We get an extra paycheck in December so it should work out okay in the end.

Other than that, our mutual funds and stock balances seem to have improved since we last looked in June. It was nice not to worry about the drops that took place over the summer (I didn't look once at our balances), and then to look a couple of days ago and to see that they were fine. That's why I don't like to get hung up on the day-to-day price fluctuations. It saves me time and anxiety.

We're still waiting for our open enrollment information. We've heard that premiums are going up quite a bit this year, so we will have to see what my husband's company presents to us. We are also still on a wait-and-see mode with my husband's job. We haven't heard any more about his office closing, but we know it's imminent. I think we'll hear more at the end of this year/beginning of next year. In the meantime, the longer we stay here, the harder it's going to be to leave. Our kids like their schools. Our mortgage is getting chipped away each month (we celebrate 10 years in our house next month!), and we have a lot of friends.

So that's where we are as we head into the last quarter of the year. We will work on our specific 2011 financial goals closer to the end of the year, but we don't expect them to change much from this year.

Make Money In An Hour

2010-09-29T04:45:00.007-04:00

Tip #273 - Make Money In An Hour. Once all of the big financial things are accomplished such as coming up with financial goals, writing a budget, and making savings a priority, there are small things you can do to save money in an hour's time. First, I know you are busy. We all are. But even so, there should be at least a few minutes in your day at least some days per week that you can do things that help you make money or spend less. It is often the small things that help you meet the goals of your big things such as sticking to your budget. Let's look at some examples.

-If your goal is to eat out less then make food preparations in advance, especially for meals that you need to eat outside the home. Waking at 6 am and running out the door at 6:45 AM doesn't leave you much time for making lunch. Find time in your day when you don't have to be out the door in a hurry to prepare your lunch. This could mean making a sandwich the night before, washing grapes and putting them into small containers in advance on Sunday night, cooking a pot of noodles and separating them into a few meals for the week, cutting apples and soaking them in lemon juice or orange juice, filling up your water bottle, and otherwise making lunch preparations in your free time rather than when you are rushed.

-If your goal is to spend less at the grocery store, then find time in your free moments to study the weekly grocery circulars. Spend time making a shopping list. Check out your cabinets and your refrigerator to see what you actually need to buy. Cut out coupons while you are watching television or taking a car ride. If you go to the supermarket without a shopping list, without knowing what you absolutely need to buy versus what can wait a few weeks, without coupons, and without knowing which store has the best prices for what you need, you will end up spending more money than is necessary.

-If your goal is to make some money on the side, then find time to do some money-making activities. If you have a free hour, take some surveys online. The pay isn't much at all but it's better than the pay you get for watching tv. And with a few minutes here and there, it adds up to a few small checks. Sign up for Swagbucks to use as your search engine online. Just by using it on a regular basis, you should be able to build up gift cards at Amazon that can be used toward gifts, groceries, a needed appliance, etc. If you want to make bigger cash, then take time to go through your clothes that don't fit and bring them to a consignment store. Or go through your children's toys and clothing and tag them for a consignment sale. Find bigger items and put for sale on Craigslist. Or sell things on eBay. If nothing else, start a box for a future garage sale, and throw things in the box throughout the year for one big sale in the spring. These are small, but effective ways to make money without leaving the house and perfect for someone who only has a free hour here or there.

-If your goal is to cut down on spending for clothing and household items then organize your things. You might be surprised at what you already own and do not need to buy. Fill a free hour with matching sock from your mismatched sock bag. Look through your cabinets and pull from the back any leftover shampoo bottles, cleaning detergents, toothpaste, and sponges that you bought way back when but forgot about. Go through children's toys and find missing pieces. Anything that can be used that you already own will save money on not buying new ones of the same object.

-If your goal is to do more do-it-yourself work rather than hire someone, then start doing it. That 70's wallpaper in the bathroom? Spend a few minutes a day spraying it with water and peeling. It may take weeks, but it will come down if you take an hour here and there to work on it. Spend time to sew a button your suit jacket. Wash a stain out of a blouse. Start planning games, crafts, or activities for your child's birthday party next month.

Without making this post any longer than it already is, there are many things you can do in even limited spare time to cut down on costs. They shouldn't come at the expense of bigger money-making and money-saving strategies, but they can be helpful supplements to a solid financial plan that you have set out for yourself.

In Real Life (IRL) - I am as guilty as the next person for wasting time. When I have free time, I love to browse the Internet, read books, or sit on the hammock. But as a stay-at-home mom, I have many responsibilities such as making school lunches, buying groceries, planning birthday parties, and keeping the house presentable (at least somewhat). And even though I do not officially work for a living, I do help contribute to my household financially. And I do it in my spare time. I continually go though my children's toys and list them on Craigslist when they outgrow them. I put our used books, DVDs, and CDs on Amazon if it will bring in some money. This month, I've been filling a box to sell items at a kids' consignment sale.

Generally, I take up to 3 surveys a day on the computer. I use Swagbucks as my search engine rather than Google and have built up about $70 balance in gift cards on Amazon in a year's time. When we wanted to redo my daughter's bedroom and two bathrooms, I painstakingly removed wallpaper and wallpaper borders literally for a few minutes per day while the kids napped. It was much cheaper than hiring someone to do it for us. And it wasn't bad to peel for 10 minutes at a time.

At least once per week, I make shortcuts in the kitchen. I prepare peanut butter and jelly sandwiches in advance and freeze them for my kids' lunches. I cut up fruit and put in small containers, and open a bag of pretzels or other snack and dole out in small quantities for the week. It makes it much easier to pack lunch in the morning and makes us less likely to rely on school-bought lunches which are at least twice the price of what I can put together. I try to make healthy snacks such as apple muffins in my spare time rather than rely on convenience foods. I try to keep water bottles filled at all times so we bring them with us rather than have to buy drinks while we are out.

I always browse the grocery circulars and try to cut out coupons when we take long car rides. If not, I at least look through the coupons in advance and bring them with me to the store. I make a shopping list before I go. I try to buy certain items when I am at certain stores that have better deals on those items so I am not overpaying at other stores.

Of course, there are always more things I can do in my spare time to help make money. However, I tend to do the things I like (such as kitchen work) more than the ones I dislike (such as sewing). So none of us is perfect with our finances, but I find when I do take the time to make us money or save us money, I always feel better about spending on things we need to buy. All of us can spare some time here and there to make some money in order to stick to our budget and reach our financial goals. For other financial ideas, check out Frugal Fridays.

Start Off On The Right Foot

2010-09-16T15:12:00.015-04:00

Tip #272 - Start Off On The Right Foot. First, two quick notes - sorry about the lack of posting. All I can say is that I'm not as organized as I could be and the start of school is crazy! Second, this post is not meant to make people feel bad about getting a late start to finances, it's meant to encourage people to start early.

For those of you who went to college, think about the grades you got the first semester. You had your semester GPA and you had your cumulative GPA. Your semester GPA WAS your cumulative GPA. So if you got a 3.8 the first semester, your cumulative GPA was a 3.8. When second semester grades came out, they counted as half of your cumulative GPA (assuming you took the same number of credits as the first semester). So if you got a 3.4 then your new cumulative GPA is a 3.6. The first semester of your sophomore arrives and you get a 3.6. These grades contribute toward one-third of your cumulative GPA (again assuming an equal number of credits as each of the first two semesters), and you still have a 3.6 GPA. For the remainder of your sophomore year, your whole junior year, and your first semester senior year, you get a 3.6, a 3.4, a 3.8, and a 3.6 semester GPA, respectively. Now it's your last semester of your senior year, you have maintained a solid cumulative 3.6 GPA up to that point. And you slack off the last semester and get a lousy 2.0! Aaahh! How will that effect your cumulative GPA? Surprisingly, not that much. Your cumulative GPA is still a respectable 3.4.

Do grades in the early years of college count more than grades toward the end of college? No, of course not. Each semester counts 1/8 toward the total. But as time goes by, each semester's GPA contributes a smaller proportion toward your cumulative GPA (as earlier semesters' GPAs do as well). Let's look at this scenario in reverse. Suppose the college student started out with a 2.0 first semester. If he wants to graduate with a cumulative GPA of 3.4 by the time he graduates, he needs to buckle down and get a solid 3.6 GPA's each of the remaining semesters. Sounds hard, doesn't it? It can be done, but psychologically, it's harder because he's starting low and needs to improve.

How does this apply to finances? Saving money is similar to that cumulative GPA. How well you do early on sets the stage for the rest of your saving years. And it's even more dramatic because the early savings has time to compound its earnings. We've probably all heard those financial scenarios. If you put $100 away per month for 10 years in an account earning 3% interest and then do nothing for the next 20 years, you will have over $25,000.* If you wait twenty years until you start saving and put away $100 per month for 10 years you will have just under $14,000.* (The amounts are more dramatic with greater interest rates and/or longer time periods.)

In other words, sacrifice a bit now to put away savings in order to be able to sit back and not worry about it later. It's very easy to put off your savings for when you think things will get better when you are older or when you will be making more money. But why not start now, and if you are in a position to save later on, then by all means do it. But if you aren't, at least you can fall back on what you have already done. If you already have many years behind you where you weren't saving, then start now. The sooner you do it, the greater your cumulative worth will be. (And if you are responsible for a young adult, stress the them the importance of saving early. Starting them off on the right foot will set them up for many years of savings.)

In Real Life (IRL) - When I graduated college and was living on a meager salary, I managed to put away a couple hundred dollars per month, even though at the time there were plenty of other things I could have done with the money - live in a nicer apartment, live without roommates, go out to dinner more, etc. My dad taught me the importance of savings, so I stashed away that savings month after month after month. Then 12 years later when I had my first child, I stopped working (for pay), and stopped saving. That was 9 years ago. Back then in my imagined, perfect life I had planned to go back to work after 5 years and start saving again when my (not yet conceived) second child was 3 years old. In my reality now, my third child is now 3, and I still haven't gone back to work.

That savings I did for about 12 years has allowed us to make a decent-sized down-payment on a house and allowed us to do a 15-year mortgage. It also allowed us to have an emergency fund available and for me to be a stay-at-home mom. (Other things also contributed.) The fact is my early savings has paid dividends both literally and figuratively. Psychologically, it has been freeing knowing that we have that money there for emergencies. Financially, it has allowed us to pursue other savings opportunities more freely - like putting money for college and retirement. Personally, it has allowed us to pursue other things we wanted like staying home with my children.

This in no way is intended to sound like bragging. Believe me, I know I started out ahead of many other by financial benefits my parents gave me (I had no college or car loan when I got out of college.) Instead, I want to point out how freeing it was to save early when I really didn't have too many financial responsibilities. Back then the financial decision I made was whether to share an apartment with a roommate or to put away $200 per month. If I hadn't saved, my decision now would be do I put away money per month or do I pay for my child's braces (sorry, honey, crooked teeth are in style).

If you haven't started on a savings plan yet, don't despair. Now is the best time to get started. Think about what sacrifices you can make. If the sacrifices are still relatively easy (put away $50 per month versus eat out once per month or put away $100 per month versus take a beach vacation) then make them. It's better than the alternative decisions you might have to make down the road such as looking for a second job at age 70 or not be able to pay your rent. It's not too late to start off on the right foot.

*I used bankrate.com to do my calculations.

For other ideas on saving money, check out Frugal Friday over at Life As Mom.

Start Out Simply

2010-09-04T21:35:00.007-04:00

Tip #271 - Start Out Simply. When thinking about our finances, it's easy to get overwhelmed - stocks, bonds, budgets, taxes, interest rates, IRAs, 401(k)s, 529s. It's understandable that many people just throw their hands in the air and ignore everything that has to do with money. There is A LOT to learn when it comes to finances. There's also a lot to learn when it comes to cooking. How many of us cook gourmet 5-course dinners with exotic ingredients using techniques such as braising, sauteing, poaching, and blanching? Very few. Instead, most of us learn how to bake, broil, and grill and mangage to keep our families fed well. And we call it good. So why do we think we have to understand everything in order to manage our finances? Does it matter if we don't fully understand the consequences of the Fed raising interest rates by 1/2 percent? Does it matter if we can't predict what Wall Street will do after a fall in foreign markets? Does it matter if we don't quite comprehend the difference between a tax deduction and a tax credit?

Of course it doesn't. We need to know how to live on less than we earn and to build up our savings. Just like the beginning cook needs to know how to boil water and put in some dry spaghetti to feed her family. Once we've done that, we can learn how to heat up jarred sauce to add to the spaghetti. And then maybe we can learn how make the sauce ourselves with freshly bought tomatoes. And then maybe we can learn how to grow our own tomatoes to make our own sauce. But even if we never learn to make homemade pasta, we still feed our family well by starting out simply with dried spaghetti and boiling water.

Why can't we apply that same logic to our finances? We can! Don't be overwhelmed if you don't understand what affects the direction of interest rates, if 529s and 401(k)s are just numbers to you, or if the thought of losing money in the stock market sends shivers up your spine. The important thing is to learn how to put away some money month after month. This can be as simple as creating a budget, putting your money in a savings account and CDs and calling it good. Once you have conquered that, you can start contributing to your company's 401(k) plan, even if is all in guaranteed investments. Then maybe you'll start investigating various investments for your daughter's college fund. And then you might start investing in mutual funds, and then stocks. Or maybe you won't. Maybe you will never invest in individual stocks. Maybe you won't ever understand the how Greece's economic crisis affects the US economy. But if you can at least start out simply with a budget including a line-item for savings, you are doing well. You can build up from there. Otherwise, it will be like making chateau briand when you haven't mastered grilling a hamburger, you won't be able to get it right.

In Real Life (IRL) - I got my first passbook savings account when I was a 7- or 8-year old kid. I understood that if I gave my bank $100 on January 1st that they would give me about $105 back on December 31. It sounded like a good deal to me then - better than sitting in my drawer, anyway. (And 5 percent on a savings account sounds like a great deal to me today!) I also learned that if I saved my allowance week after week, I could buy something very nice after a few months. And if I blew my allowance on gum and candy, I wouldn't have enough money for a nice toy several months later.

A few years after I had that knowledge, my dad taught me about money market accounts. If I put a larger amount of money in that, I could get a greater rate of return than in the passbook savings account. But I had to keep my balance above a certain amount, and I could only make large withdrawals at a time. My knowledge of finances was quite simple back then. But it served me well. I learned if I put money away I could make back more money. And the more and longer I put it away the more I got back.

When I first started out on my own after college, I continued to put money into banks, until my dad taught me about mutual funds. I, little by little, started to add money to that account. Then I began investing in my company's 401(k). Once I maxed out on that, my dad suggested IRAs. Then I joined an investment club and learned to invest in stocks. All the while, I continued to save my "allowance" (income) so I could buy a house one day. It wasn't until we bought one that I learned about tax deductions. And when I had kids, I read up on 529 Plans. It's been over 30 years of learning to get to the piont where I am today. And I still don't know squat about selling stocks short or don't read up or care about how the Nikkei market did yesterday. But I can make a darn good hamburger. And sometimes I can even add a few tasty sides. All because I started out my financial education simply.

Make Savings A Priority

2010-08-25T10:09:00.002-04:00

Tip #270 - Make Savings A Priority. When thinking about money, many of us think about how we would spend it - a new car, a vacation, new clothes, etc. Most of us don't think about how much we would save. Saving is actually secondary in most people's thoughts with regard to money. However, if having money is one of your goals, then you need to make savings the primary thought. Many of us would like to be "rich." but if all we think about is how we would spend money, then we aren't like to become "rich." Instead, we need to make saving, rather than spending, a priority. Once savings becomes a priority, the getting rich part will fall into place.

If you were to make a budget on how you will use your hard-earned money, you would need at the top of the list a housing budget, a food budget, a utilities budget (such as water and heat), a transportation budget (to get you to and from work), and a healthcare budget. The above items are priorities in most American lifestyles. After that, you should budget for savings - how much you want to put away for YOU. You want to have some wealth to your name, don't you? Then decide how much you want to save each month for you. This money will give you the power to do things you want to do when you wan to do them.

After you decide on how much you want to save for yourself, then you budget however you want with the leftover income - cable t.v., a yearly vacation, a daily coffee, dinners out, etc. The key is to make sure you make savings a priority above your wants. To simplify, your budget should look like this:

Budget:

Needs
Savings
Wants

Once we start making savings a priority above our wants, we will, over time, have enough money to take care of our wants and other needs that arise. Depending on your income, and your expenses for your needs, you may still have enough money for wants in your monthly budget. But you shouldn't spend all of your money on wants after your needs have been satisfied. Savings should take priority over wants in your monthly budget. Then down the road when a chance to take a ski vacation comes up, you can look to your savings to do it. Or if you decide you want to add a deck to your house, you can do it. Or if your son suddenly falls and breaks his leg, and you have to pay all kinds of doctor and hospital copays and leave work early without pay to drive him to various appointments, you can do so because you have money in your savings account. You wouldn't be able to pay the doctors with the daily cups of coffee that you drank over the previous years.

In Real Life (IRL) - When I was younger I made savings a priority in my budget. I shared housing with friends when I was single. I split utilities with roommates. I limited my eating out. I didn't waste money going to bars. And I socked $200 away per month in a mutual fund. And I did this on about $20,000 per year in Washington, DC. (I was fortunate not to have a car payment or student loans.) I also budgeted for one vacation per year and going out with friends (although usually to inexpensive locales).

Over time, I saw my savings account grow because having savings was important to me. Believe me I could have spent away $200 per month pretty easily - higher-end clothing, dining out in nice restaurants on a regular basis, buying a fancier car, living on my own rather than have roommates, etc. But instead, I made saving money a priority, and after 10 years of saving $200 per month, I had more than $25,000 to show for it. (I actualy had more than this because I upped my savings as my income grew.)

Of course everyone's situation is different. Some people will have more needs to pay for than others such as medical expenses, student loans or debt repayment. And therefore, their savings will be less than others. But the key is to do the savings on a regular basis above frivolous wants that cut into your chances of attaining wealth over your lifetime. As long as savings becomes a priority, you will find you have more power to spend moeny as you please down the road.

Don't Let Deals Chase You

2010-08-18T07:43:00.004-04:00

Tip #269 - Don't Let Deals Chase You. There is a lot written in the online world about how to "save" money. However, in order to "save" money, you need to spend some, which really isn't saving money at all. There are deals being thrown at us from blogs, credit card companies, auction sites, online stores, and emails from daily deal websites. Unfortunately, often these deals often cause us to spend more money than we normally would even if we get a good buy on what we bought.

If you want to truly "save" money - that is put money away in your bank account, the only way to do it is to not spend it. Getting 50 percent off tickets to a football game is not going to save you money unless it was already in your budget to buy football tickets at full price in the first place. Driving to the drugstore to pick up yet another bottle of shampoo when you already have 10 bottles in your bathroom cabinet costs time, gas money, and wastes space for something of which you already have an adequate supply. And clipping that Buy One Get One Free Ice Cream Sundae won't save you money if you can enjoy a similar treat for less from the supermarket.

If you are truly interested in saving money - that is putting away money - then do not let deals tempt you to spend more than you would otherwise, no matter how good of a deal it is. The only way you can save money on deals is if it is an item in your budget that you had planned to pay full-price for already. Then at time of purchase you look for a better price on it. That will lead to savng money. Spending money on haphazard items that were not in your budget in the first place, will only cause you to spend more money and have the exact opposite effect that you think a "deal" will do. So, if you want a deal then go after one on something you had already planned to buy. Don't let the deals chase you and cause you buy something you weren't planning to purchase.

In Real Life (IRL) - I am bombarded on a daily basis from deal sites - some that come into my email, some that are through sites I visit, and some that come in my mailbox out at the street. While I feel I have pretty good restraint when it comes to spending money, I am often tempted to buy something that is a good deal. If I get a flyer for a hotel that is having a special, I will read through it and ponder the idea of making a quick getaway trip since it's such a good price (vacations are a weakness of mine). I am subscribed to some daily deal sites that send me emails everyday about deals in the area. I have yet to buy something from one of them, but I have been pretty close a couple of times. And I read blogs that talk about saving money and have lists and lists of items you can purchase at a good price. Problem is, I don't need most of those items.

And while I can pass on good deals or waste a bit of money frivolously without going into debt, there are many others who are struggling financially now and do not have a dollar to spare, no matter how good of a deal something is. And I am afraid a person who wants to save money - that is build up their savings account, reading all of these deal sites can cause the reader to actually go out and spend more than they even normally would. Yes, they may have more goods and/or experiences to show for it than if they had paid full price for these items, but if they are spending more money on things they normally wouldn't buy, then they are worse off than before they frequented all of these deal sites.

If you are one of those people who is struggling financially and hope to put away more towards savings each year, make sure that you are not sucked into buying things that are a good deal, thinking that you are saving money. Let your budget driving your buying decisions. If you are have $300 in your budget to spend on a hotel for a weekend getaway, then shop around for a deal. But don't let an email promising you 50% off a hotel cause you to take a vacation that you would not have taken. Your budget should control your purchases. Don't let the deals control what you buy. That will not save you money.

Don't Discount CDs For Savings

2010-08-06T13:11:00.010-04:00

Tip #268 - Don't Discount CDs For Savings. Yes, CDs (Certificates of Deposits, not the music kind) currently have ridiculously low rates, I know. But they can still be part of your savings plans. Many of us in this low-interest market want the kind of returns that only stocks and high-risk investments can possibly return. But remember that those high-risk investments with potential for high returns also can have negative returns. So that stock that you were hoping would acheive a 10 percent return for the year can return a negative 3 percent instead. While a CD can return a positive 3 percent. That's a difference of 6 percentage points.

CDs certainly aren't for every person for every savings goal in every season or for ones whole portfolio. But they do have a place in most people's portfolios for many goals. For example, if you are saving for retirement, and are 30 years old, most financial experts would tell you to put a majority of your investing into stock mutual funds or something similar since retirement is so far off. Some might follow the old rule of thumb of subtracting your age from 100 and putting that percentage in stock mutual funds (70% in this case). They may advise to put a smaller percentage in bonds (maybe 20%) and a still smaller percentage in cash or guaranteed investments (maybe 10%). Well, why not look into CDs for those guaranteed investments? My credit union is paying about 3% for a 5-year CD these days. It's not much, to be sure, but it does add some nice balance to a portfolio.

Of course you don't need to follow anyone's rule of thumb with regards to investing. You need to do what is comfortable for you. I know people who like to take on a lot of risk and put nearly all of their money for their retirement into stock mutual funds. I also know some people who are quite conservative who tend to hold more a higher percentage of CDs and government bonds than are recommended.

CDs are a good place to start out with your investments because you will earn greater returns than a savings account or money market account. You will be tying up your money for a certain amount of time, though, which is why you get the greater return. CDs are guaranteed by the FDIC so you cannot lose any money if the bank goes under. If you belong to a Credit Union, that is a great place to start with CD savings since they tend to be more flexible with penalities for withdrawing early on a CD. And if you don't belong to a credit union, you should consider joining one.

CD's might also have a place in your college fund portfolio. While many people in the past few years socked money away in their 529 plans that lost money, the 5-year CDs had rates of 4% and 5%. Doesn't sound so bad, does it? Better than the negative returns many experienced but not as good as the 10% or 12% than many hoped would be the case. Remember college savings isn't all that long of a time frame (18 years at most). And if the rates are in negative territory, there is not too much time for them to recover before your son or daughter goes off to school.

Just because CDs aren't a high-risk, high-return investment, doesn't mean that it's not right for you. Low risk, low return investments have their place in many people's portfolios, too. And while they are not as hip, cool, or sexy as stocks and mutual funds, they are sometimes a better choice.

Consider what you are saving for, how long you have to save for your investment, how much risk you are willing to undertake, and what other investments you have in your portfolio to see if there's a place for CDs among your investments.

In Real Life (IRL) - I really like CDs. I have some knowledge about stocks. I have some knowledge about mutual funds, and I am not scared or inexperienced in investing in either one of those. And during the early 1990's some stocks and mutual funds were my best friends, giving me great returns. But I never let go of the "guaranteed" CDs. Sure they were returning 5% when stocks were giving me 12%, 15% or even 20%. But they gave me some sense of stability and added balance to my portfolio.

When we started saving for college, I put a fair percentage in CDs. They were returning over 5% when I started these 5- and 7-year CDs. With only an 18 year time-frame from the first time I invested for my daughter's college to a much shorter time-frame now (only 10 years away), CDs actually seem like a good choice to me for that short time period. About 75% of our daughter's portfolio is earning 4%-5% for college. And while I know full well that I'd be singing a different tune if the stock market were soaring now rather than declining, I am still happy earning a lesser percentage in return for peace of mind.

Our retirement portfolio also has a higher-than-suggested-by-the-experts proportion in CDs. We have about 40% of our retirement in CDs and similar guaranteed investments even though our retirement is still 20 years away. It's a percentage I feel comfortable with at this stage in our lives and with the state of the economy. And yes, I know inflation can sometimes outpace CD returns, but stocks can have bad years so I pick what I consider the lesser of two risks for the time frame I am investing for. Others may choose differently.

Another reason I like CDs is because we found out we are able to "back invest" in our education and retirement CDs at our Credit Union (Navy Federal Credit Union) during a grace period, which we can invest in CDs that we already have open. This is a great option since we have some CDs with a few years left on them that are paying over 5%! (This is why I love credit unions!) It's a deal we only found out about last year, but we have been able to add to both our retirement account and education accounts this past year, and plan to do so while we still have these good rates.

So consider CDs carefully. They can be a valuable tool in many investment portfolios. For other ideas on how to spend less money or save some up, check out Frugal Fridays.

***Please note that I am not a financial advisor nor a financial planner. I am just one person who is interested in saving and investing money. My thoughts are my opinions only. You should seek qualified investment advice from a professional before you invest.

Have A Plan B

2010-07-27T05:49:00.005-04:00

Tip #267 - Have A Plan B. There are so many factors that come into play when trying to save money - where to live, where to work, where to invest, whether to take a vacation, where to shop, etc. And in each of these categories we have choices we need to make that affect our bottom line. We often plan our financial lives around the choices we make - the job we have, the house we live in, the places we spend our money. But sometimes the choices we make do not last. Then the plans we made based on those choices fall apart. So what do we do? We have a Plan B - already planned before our Plan A falls flat. Because lack of planning is often what causes us to spend more money.

Let's look at some examples. Let's say you are part of a family where the husband works and the wife wants to go back to work and needs to find care for her child. You might have a great option with a neighbor down the street who does daycare in her home for a very reasonable cost. You figure out the income you will make versus the cost of daycare and find it worth it to go back to work. Everything is great for three months when the neighbor informs you that she is going to stop doing home daycare. Now what do you do? Well, if you have a Plan B, you fall back on it. Go to your second lowest price daycare that you reseacrched and enroll there.

But what if there is no Plan B? Can you find another reasonable daycare setting in a short amount of time? Or will you have to quit your job or work for awhile with nothing to show for it because your hastily found new daycare is costing you too much? Having a plan B ahead of time will save you running around at the last minute, possibly helping you avoid paying too much for daycare, and potentially helping you keep your job that you otherwise may have had to quit.

Let's take another example where you have a good job but in a declining industry or in any industry at all for that matter. Have you given any thought to what you will do if you lose this job? Do you know where you would start scouting out jobs? Would you have your spouse take on a job? Having a Plan B ahead of time will help you find a new job more quickly than if you haven't come up with some other job options until your job ends suddenly.

Lastly, what if you are investing for college for your child. Your plan is for your child to go to State University which will provide a good education for a fairly reasonable amount. You are saving for college with a specific dollar amount in mind that would cover the cost at State U. But what if your child fails to get in to State U? What is your Plan B? Don't wait until he gets that rejection letter to come up with one. Make a plan B now. Plan B might be a community college for a year or two before reapplying to State U. Or perhaps Plan B is for him to attend a more expensive private college but have your child come up with half the cost to pay for it.

Whatever the Plan B is, the earlier you make the plan, the better prepared you are if your original plan falls through. Coming up with a hastily designed Plan B after the fact will usually result in higher costs.

Obviously, a Plan B will not solve all of the curveballs that life throws our way. There is only so much we can predict and plan. But it will lessen the financial impact if your first choice fall through.

In Real Life (IRL) - My husband is at somewhat of a crossroads in his job. He has already been informed that his company will close down in 18 months or so. So we have some time to come up with our Plan A as well as a Plan B. Our first choice plan is to move with his job. But because a move to a new city with a new job often does not work out, we are coming up with an alternative Plan B and even a Plan C becuase job searches are one of the most important financial decisions. Our Plan B is to have him look for a new job in our current city, while Plan C is to have me start working to tide us over if a new, equal paying job cannot be found.

Did we have a Plan B in place before he was told of his job closing? Well, not really. So we have been given the gift of time in that regard. But that is not always the case, and this situation has taught me the value of being prepared in case things change.

We've had to fall back on Plan Bs in the past for smaller, less important finacial choices. And it's always helped dramattically when there was already a Plan B in place rather than have to come up with one on the spur of the moment. For example, I was planning a birthday party for my little one who turned 3 last week (hard to believe!). In the unpredicatble July weather, I needed to have a plan B for the outside party I had planned. What if it rained (it didn't!) or if it was 100 degrees outside (it was!), what would I do? I could hastily find a restaurant or other indoor venue at the last minute when the weather report came out and could be considered accurate. Instead, I came up with a Plan B in advance. (I did this because of past experience has taught me that the weather never cooperates when I plan parties.) And because I did that, we were able to have a nice party indoors within our budget. If I did not have a Plan B in advance we would have scrambled at the last minute, and probably spent more money than I needed to.

Again, you cannot have contingency plans for every little choice in life, but the more Plan B's you have with regards to financial decisions, the less you will spend and the more you will save when having to utilize last-minute backup plans. (Picture shown are some boxes I spent hours last week on turning into Thomas trains for our indoor birthday party.)

Be Disciplined

2010-07-21T22:50:00.008-04:00

Tip #266 - Be Disciplined. Okay, this is a very common sense tip. But as I've been thinking over the past week what is it that really separates the savers from the spenders, I've concluded that having discipline is a big part of it. Obviously, there are certain expenses that some of us can't get away from - medical expenses and some education expenses come to mind. But, we have choices in much of our daily spending.

As we are pushing the shopping cart down the grocery store aisle, we can pick up the gourmet brand coffee, the ice cream treat that we don't really need, and the imported cheese. Or we can show discipline to forgo the ice cream altogether, put up with a cheaper brand coffee, and deal with good ole' American cheese. The difference between spending more and less at the grocery store? Pure discipline. Discipline to put up with generic products or to forgo certain foods altogether.

When we are out shopping for a car, we may feel swayed to buy a top-of-the-line luxury vehicle versus a basic model. Or we may be tempted to add in the deluxe options such as heated seats or power doors. It takes discipline to say no to these fancy cars and luxurious options and save money while doing so.

How about when renting an apartment? Do we go for the one with the washer/dryer in the unit updated gourmet kitchen with granite countertops or are we disciplined enough to deal with the apartment that has a laundry room on the ground floor and sports outdated 80's almond cabinets in the kitchen?

Maybe we have a hard time being careful with our money when we go out to eat or to a bar - it's easy to add another overpriced drink to the tab and another appetizer.

This last example is one that seems to cause a lot of problems for people. If we use credit cards, do we have the discipline to only purchase items that the amount of money in our bank account actually covers, rather than use the card to buy things that we do not have money for? In other words, do we have discipline to use credit cards wisely? Or are they used as "free money" instead?

Again, sometimes we don't have a choice on being disciplined about spending money - medical events happen, emergencies come up, and some things just have to be paid for, no matter what. But for those "optional" expenses, it's the discipline that we have that makes all the difference in our spending.

In Real Life (IRL) - Writing and doing are two different things. And while I think I am disciplined about not spending money in many categories, there are other areas that I fall short. So it takes control for me to stay out of the place where I seem to want to spend money in the first place. But if I do go there, it takes every ounce of discipline I have not to spend money on things that I don't need and wasn't palanning on buying.

For example, I love Trader Joe's. I think it is a great supermarket for many items. They have many choices of inexpensive, healthy choices. But there are other more expensive and less healthy (i.e. snack food) choices that are also available. So when I go to Trader Joe's to stock up on hormone-free cheese, frozen veggies, mini-bagles and our other TJ's staples, it takes a lot of discipline on my part to not also pick up their version of Pirate's Booty called Buried Treasure or something like that). Believe me when I say we don't need it in the house. It's usually gone in one hour flat. I don't need it on my waistline, and it's two dollars that I didn't need to spend. There are many other equally yummy snacks there that I don't need to be buying, but it takes a lot of discipline on my part to bypass them and keep the money in our pocket for more useful things.

Thrift stores are another place I need to be more disciplined about. The cheap prices are so attractive to me, that it's easy for me to spend money on things that I didn't plan on buying. It takes even more discipline for me to stay away from thrift stores in the first place, one in particular that is nearby because I really enjoy the treasure hunt. And even though I have a small eBay business, I have plenty of junk, er inventory, around here that I need to sell before I should be think about buying more stuff, so I just don't need to be going in the first place.

These are two places that come to mind that I need to be disciplined about in order to save money. On the other hand, I can freely go to a fair and not be tempted to spend big bucks on rides and games. That doesn't appeal to me that much. A new car dealership doesn't interest me that much either - I'm more of an AB car kind of gal (an AB car being one that works well enough to get me from point A to point B). And I can't tell you the last time I went to a shopping mall - well I can, it was when I went to take my son for a haircut several months ago - and we found out the Cartoon Cuts had closed. I haven't been back to the mall since. It just doesn't interest me at all. But I know some of these places, along with coffee shops, fast food restaurants, electronics stores, book stores, and others can be challenging for other folks in terms of them having a hard time not spending money there.

And the credit card crisis our country is facing? It's not because credit cards are pure evil. It's because many people are not disciplined enough to forgo buying things that they don't have the money for. And credit cards give them a way to buy these things even if they don't have the money.

What it all comes down to is that we need to figure out for ourselves where our personal weak spot is with regards to spending money. Is it the big items that we just say, "What's another $1000?" and go for extras like the bells and whistles on a new car? Or is it everyday stuff that we have a hard time controlling our spending with - coffee shops, drugstores, and eateries?

Perhaps, we are not disciplined enough to say no to salespeople - whether it be the hairdreser trying to sell us shampoo or the high school kid selling wrapping paper at the front door. If we can all identify our weaknesses, then we can work on having enough discipline in those areas to avoid going there in the first place or saying "no" when we do. Easier said than done, I know. But you know what they say? Recognizing our problems is half the battle to solving them. It just takes discipline to go the rest of the way. For other money-saving ideas, check out Life As Mom.

Sell Gold

2010-07-14T08:03:00.003-04:00

Tip #265 - Sell Gold. Gold has been at an historic all-time high lately. I am not promoting gold as an investment vehicle or not. I'll leave that to the investing professionals to advise. What I am suggesting is that you look through your jewelry boxes and find those old, gold chains that have been broken for years. Or those pairs of earrings that are missing one half the set. Or those outdated charms that have not been around your neck since 1982. Gather up all of your gold scraps and bring them over to a local gold or coin dealer and find out what they will pay you for your stash. If there is more than one place in town, then shop around.

But before you go, learn a thing or two about gold. First find out what the current rate is on gold. There are probably many sites that will tell you the current price on gold. One is called goldprice which gives you the price of gold in ounces. Or you can change the measurement to grams, which is a more measurable weight for small quantities. Currently, it says that gold is about $1200 per ounce or $38 per gram. But remember that is PURE gold - 24 Karat gold. If you have 14K gold, then it is not worth as much. To find out what 14K gold is, take 14 divided by 24 and then multiply that number by the number of grams it weighs. Then multiply that result by $38 (or whatever the current value is). That should give you a rough estimate of its worth. You can do the same for 10K or 18K.

The next thing you should do is check Ebay. If you have a bunch of 14 karat gold necklaces that altogether weigh 3.5 grams, then look up "scrap 3.5 grams gold" and you should get an idea of what they are selling for. When I did the calculation 14/24 * 3.5 * 38, I came up with about $77. Sure enough, the range this amount of gold sold on eBay was between $70 and $76. I wouldn't expect to get quite so much at the gold and coin store because they need to make a profit, too.

Even though I am a seller on eBay, I prefer not to sell gold on there. If I can find a local source for selling it that's hassle free and gives me a decent amount of money, then I prefer that. With the fees on eBay and the possibility of loss or buyer dishonesty, I would rather earn a few less dollars and not have any hassle. I'd be happy getting $60 for that amount at the gold store.

One note of caution before selling gold. Remember that what I am talking about above is scrap value. This gold is being sold for its melt down value. Gold will have more worth if it is an historic piece, a name brand, or it is intricately designed. You do NOT want to sell a piece like this for scrap value as it could be valued for much more. An example would be an old piece, one with a Tiffany name or one that has a lot of workmanship in it.

Lastly, make sure the item is free of stones before you sell or have the jeweler give them back to you.

Once you have determined that you are just selling a back of an earring, a broken chain, and a few old charms that only have scrap value, figure out its worth, compare what you found out to what they are selling on eBay, and then bring it into your local gold, coin, or jewelry dealer. If you are comfortable with the price he offers you, sell it, and put your newfound cash into your savings account. It will do better there than sitting in your jewelry box.

In Real Life (IRL) - My mother-in-law came for a visit a couple of months ago, and she brought with her some gold coins that she had stashed away in the vault. She decided that she would rather have the money then have them sit in the bank collecting dust. And since gold was at an all-time high, she wanted to sell. Because the coins were a specific type with a name, we were able to just look its worth up on eBay rather than weigh it. We found that the going rate on eBay for this particular coin was $300. The next morning my husband and his mother went over to the coin and jewelry dealer to ask him what he'd pay them. The answer? $250. We were quite happy with that price. On eBay, if we could get the $300, we'd be paying over $30 in fees plus the cost of insurance to ship, the risk of loss or the buyer being unhappy, not to mention the time it would take to take photos, write up a listing, and package it. $250 in cash was much more appealing. So she sold her coins and was happy.

Then I decided I wanted to get in on the fun. I raided my jewelry box which held a broken chain, an old charm from my sweet sixteen that spelled out "luv" and a few earrings that were missing their mates. They were a mix of 14K and 10K. We weighed it, figured out the approximate price it was worth and then brought it over to the store. We were happy with the $30 I received. I then did a second look-through and found a heavy earring that I missed the first time around along with a couple of other pieces. This time I receive $60.

For the fun of it, my husband also brought over two gold pins that I once found at an estate sale for $3 each. They are beautiful gold lilies with a pearl in the middle. The jeweler offered him over $400 for the pair! But I didn't want to sell these for scrap gold. They were too pretty, and I really didn't know much about them. So they were put back in a safe place. But it was fun to find out that I made a good purchase a few years ago. I was so excited with our gold sales that we told my parents who gave us some old cufflinks that they had and a broken pair of earrings to sell.

Remember not to get caught up in the excitement of gold because it's at its height now, but consider carefully if you you have some junk gold laying around that now might be the right opportunity for you to sell it.

Be Careful About Saying "What's Another $1,000?"

2010-07-08T22:58:00.004-04:00

Tip #264 - Be Careful About Saying, "What's another $1,000?" I know there are many people out there drowning in debt. Not including a house mortgage, I have read many people's stories about owing others $20,000, $40,000, $70,000, or even over $100,000. This might be a combination of student loans, medical debt, credit card debt, and car loans. And when one has $65,000 in loans, it is very tempting to say, "What's another $1,000? Let's go buy that large screen television."

Please, please, please don't think this way. Another $1,000 is another $1,000. And while it may seem like a drop in the bucket when you owe $50,000 or more. It's not - it's $1000 plus interest over time. When you seem like you are drowning in debt, don't keep adding to your debt because you think it's just another small drop in the bucket. Instead, work out a plan to attack the debt that you already have.

On the positive side, I've also read many stories where people have said they have paid off $35,000 in debt in two years or $70,000 debt in five years. So it can be done. Instead of adding to your debt because the amount seems insurmountable anyway, make a plan to get out of debt. Write up a financial plan for the next five years, create a budget, find ways to reduce your expenses and/or increase your income, and start paying that debt down. Every dollar of debt does count. Even if the number seems extremely high and too much to conquer, do not feel helpless and keep adding to that debt. It will only make the number that much higher when you decide enough debt is enough. So take wherever you are at today and start to tackle it. Don't throw in the towel.

In Real Life (IRL) - Several years ago I went to see a well-known designer, Michael Payne from HGTV, give a talk at a Home Show. As he was telling us about remodeling, he said the four most dangerous words when doing a room or house remodel are "While we're at it..." The audience had a giggle about that, but this phrase has always stuck with me. When redoing a room or a house for tens or hundreds of thousands of dollars, it's easy to say, "While we're at it, let's do the bathroom for another $10,000: or "Let's add a deck for $15,000," because after all, if you are already spending $100,000 on a remodel what's another $15,000? Well, it's another $15,000, that's what it is - not too different from ther person who feels overwhelmed with his debt so he keeps on spending. It's a very dangerous place to be.

I have a friend whose husband is out of work. This family has always lived pretty well - and I suspect above their means. So when the husband lost his job, I thought they would finally cut back on their spending. Instead, I see no change in their lifestyle. They recently confided in me that they spent $3,000 to send their son to summer camp. I was aghast - literally. After all, who spends that kind of money when they clearly do not have it? And that's when the idea for this post occured to me. I suspect that they have so much debt that another $3,000 just doesn't seem to mean much to them anymore. After all, what is $3,000 when they maybe owe $60,000 or even $150,000? I can't say much to her; I have tried. The best I can do is be an example.

My husband is not even out of a job, but as I mentioned in an earlier post he was told that his office will be closing in about 18 months. And because of that, I have already cut back. I cut out a $125 camp that I didn't feel was necessary this summer. And I have continued to show my friend the benefits of thrift store shopping. But she doesn't catch on or isn't interested. So I keep my mouth shut. And instead I write on here anonymously so maybe others can build up their financial knowledge and make wise choices with their money. And while you're at it...save some money up, as well. For other ideas on saving money, check out Frugal Friday.

Do A Mid-Year Review

2010-07-04T10:28:00.004-04:00

Tip #263 - Do a Mid-Year Review. It's that time of year again. Whenver Independence Day rolls around it is a reminder to me that we just passed the middle of the year. And that means it is time to review what we have accomplished so far this year with regard to our finances and to evaluate whether we are on the right track to reach our goals.

If you wrote up financial goals at the beginning of the year, pull out that paper and look them over. Are you reaching your goals or have you forgotten about some of them? Are you about halfway with your savings goals or where you wanted to be with paying off debt? A good way to evaluate this is to write up a financial worksheet or net worth page. A net worth page just tells you your financial worth at a given point in time. It can be a useful tool to write one up once or twice per year so you can compare your net worth today to that of 6 months ago, 1 year ago or 5 years ago.

If you are still following the budget that you wrote up, and you should be, look it over and see if you were off the mark on any categories or if anything major has changed that would cause you to adjust some of the amounts, such as a raise, a loss of job, a rent increase, etc.

Take some time out this holiday weekend to evaluate how far you have come so far this year and where you are headed for the rest of the year. Get yourself back on track for your goals and then at year end, you will hopefully have met more of your goals.

In Real Life (IRL) - We had a few unexepected events happen while we were away. The second to last day of our trip, we discovered my daughter had lice (YUCK!). In addition to spending lots of money at the drug store buying things to get rid of it, we got home and had to wash all of the bedding that we left behind. As if that wasn't bad enough (it was!), we found water in our basement, yet again. A call to a waterproofing company and a couple hours of cleaning it up, and we collapsed in our beds that night. It wasn't until yesterday that I realized the mid-year mark happened.

So I took out our budget and financial goals that we wrote up at the beginning of the year. In reviewing our budget, the only major category we changed was summer camp. In light of my husband's job situation, we want to try to put away a bit more if we can. If his job ends in a year and a half to two years and if we decide we want to stay here versus move to North Carolina we are not counting on him finding a job making as much money as he is now. Because of that, we want to build up our savings a bit to cover any expenses we won't be able to afford at that time. Camp and other summer activities seemed like the easiest thing to cut. They are still doing some camps but not as many, and we will try to fill in with cheaper or free activities. We didn't specifically change our food or clothing categories, but we are trying to cut down in those areas if possible.

Next I looked at our financial goals we had set for the year. One of those goals was for me to find a part-time job come September while my youngest is in preschool 3 mornings a week. Although, with him not being potty-trained yet, he might not even be going in September. And even if he does, it is very difficult to fit in a job for 3 hours a day 3 days a week, especially with how often young ones get sick, school holidays, etc. Instead, I have decided to build up my eBay business more. I am going to set up some goals for number of items I wish to sell per week and how much I hope to make. I've done this before and it worked. But then I slacked off and just sold whenever I felt like it. Come September I will set aside a certain number of hours per day to devote to this work.

Lastly, I spent an hour last night updating our net worth worksheet. I like to do this four times per year, although I think twice per year is sufficient. Because of downturns in the stock market, our net worth actually went down slightly in the past three months despite paying down 3 months' worth of mortgage payments and setting aside a few thousand for retirement. Regardless, we feel good about where we are. We will have to dig into our household savings account to pay for the basement to be waterproofed. We are expecting this will cost several thousand dollars (ouch!), but it has to be done, especially if we end up movingn in the next couple of years.

And that's where we are at mid-way through this year. I hope that my readers find themselves moving along with their financial goals. Happy July 4th!

The Savings Are In The Details

2010-06-25T03:27:00.006-04:00

Tip #262 - The Savings Are In The Details. Have you ever noticed that the small things are often what make the greatest impact? By virtue of being so small, they hardly get noticed at first until they all come together and exert their influence. When writing a budget or looking at where we can save the most money, we usually take into account the big stuff such as our rent, our car payment, and our insurance. But some of us don't bother looking at the small stuff. For example, would anyone consider a stop off at 7-11 on a hot day for a 99-cent Slurpee to have an impact on our wealth? What about that take-out you get each weekend from your favorite pizza/Chinese/burrito place? Does tossing a magazine on to the conveyer belt every few shopping trips to the grocery store make a difference to your savings?

Well, of course they do! Unless you have specifically in your budget accounted for $24 for your once-per-month $2 magazine habit, it is making an impact on your savings. And the frequent trips to the drive-thru are eating away at your savings if they are not part of the plan. Picking up small gifts for your little ones at the Dollar Store influence your savings rate as well.

If small things make a big difference, then what can we do about it? The best thing is to try to plan as best as possible all of your small purchases. How many people include greeting cards into their budget? Very few; I imagine. Yet a trip to the Hallmark store can often lead to double-digit purchases. Same thing with postage stamps. Mailing out 2 birthday cards per month will set you back over $20. But are they in your budget? Probably not. How about the last-minute stops on the way home from somewhere or when you are out? The suntan lotion you pick up on the way to the beach. The large soda at the mall because you are thirsty. These types of purchases sneak into your savings account and attempt to wipe it out.

So when you are considering how much money you can save each month or writing up a budget, make sure you take into account all of your spending - including the very small purchases you make. And on the other end, if it's not in your budget, then don't stop at Wendy's on the way home from the pool for a Frosty. Skip tossing the TV Guide into your shopping cart. And think ahead about all of the things you will need before setting out for the day or the weekend - snacks for the children, drinks for everyone, a swim diaper for the public pool. The fewer small purchases you make, the larger your savings account will be.

In Real Life (IRL) - We are packing for our annual family vacation to Cape May. And it is in doing this packing for a family of 5 that I realize the devil is in the details. Nothing bugs me more than having to purchase something while on vacation that I have a duplicate of sitting at home - a pail and shovel, bug spray, and flip flops. These small things are so easy to forget, and they can add up to a small fortune at tourist destination.

We know we will buy groceries at the higher-priced supermarket at the beach, but it's part of our vacation budget. We plan to spend a certain number of dollars on attractions and ice cream cones. But we don't budget for stops at the t-shirt store to buy a sweatshirt for a cold day. Or for the ponytail holders that we forget from home. Or for the overpriced toddler hand-holder/leash for a feisy 18-month old (which was a lifesaver!). These are all small purchases we have found ourselves buying because we didn't plan properly. Yes, we do have a catch-all category for those miscellaneous items. But truly, I'd rather have $20 in my bank account than an extra sweatshirt that I don't need in my dresser drawer.

So when budgeting, think about all purchases you make - not just the big ones. The small ones count, too. This is why experts often tell you to keep track of expenses for a month or two in order to write up your budget. Because it's so easy to forget things like stamps and drinks and sunglasses. In addition to having an accurate budget, do your best to plan what you will need when you leave your home. That is usually when you buy these small things. If you think you will be out all day, throw a water bottle in the car, bring a hat for the little ones, and pack that sweatshirt in case it gets cold. The more prepared you are, the less you will spend. And on the tail end, unless it is an emergency, resist throwing money at unbudgeted items that you can do without - the drive-thru milkshake, the cute souvenir that will sit in a drawer for years unplayed with, or the latest gossip magazine. Being aware of these small things will make your savings account bigger in the end. And that's what saving money in real life is about. We're off to Cape May for the week. I will post more when we come back unless I find that there is suddenly WiFi at our hotel. (I haven't included the Internet Cafe in my budget, sorry.)

And as a PS to our earlier post about possibly moving: my husband turned down his job opportunity. Lots of things about it didn't add up for us including the financial aspects. So we are staying put. Fortunately, we have a while to decide what our next steps will be. Thanks for your support!

Use Everyday Life Examples To Teach Money Matters

2010-06-23T08:30:00.002-04:00

Tip #261 - Use Everyday Life Examples to Teach Money Matters. As many of us struggle with our finances, we try to learn all that we can from those of us who are more knowledgeable than we are in this area. Perhaps we stop to think about what went wrong on our financial journey. Did our parents handle their finances responsibly? Did their parents? Were we taught how to manage our finances properly? How can we do better?

And for those of who are parents, we think about what we can do differently so that our children do not struggle with money as they get older. We hope that as they age that they do not get themselves deep into debt. We want them to be responsible and knowledgeable about finances. What is one way of teaching our children about money and finances if we are not that educated about it ourselves?

One way to get your children’s attention about money is to use real-life examples that they are interested in. Perhaps your son has a collection of some sort. You can talk to him about value and how it goes up and down depending on demand for it. You can look up value on eBay and discuss the possibility of selling his collection when he outgrows it. You can talk about different sales venues and which one reaches the most customers and would garner the highest price. Then discuss sales commission and how that decreases the bottom line.

For younger children, you can teach them to save for a toy that they would like to buy. Perhaps teaching them that 8 weeks’ worth of allowances will get them the toy or 6 times of helping you unload the dishwasher will make them enough money for that toy. Help them look through different toy catalogs, online, or in person to find the best price for the toy. If you buy in person, have them pay the cashier with their own money and perhaps get change.

Maybe your college age daughter wants to move out on her own. You can look up rents in newspapers online. You can go to the grocery store and discuss what a weekly grocery bill would look like. Make a list of other bills people pay when they live on their own.

You don’t need to know about stocks and bonds, interest rates and dividends to start your discussion about finances. Financial matters involves managing your money as well as trying to invest and earn money. Use the knowledge that you know to impart on your children.

In Real Life (IRL) – I remember back in the late 1980’s when the Billy Joel song “We didn’t Start The Fire” came out. It was a big hit and had lots of historical references sung very fast. Teens were interested in that song. And I remember hearing about some creative teachers who took that song and analyzed the lyrics line by line with their class rather than ban the music (on our Walkmans, I’m sure) from school. What a great way to get children to learn. Take what they are interested in and have them learn from that.

The teacher using that song to teach history got me thinking about the latest fad - Silly Bandz. When they first became popular around here I heard that they were being banned in school. They said children were paying too much attention to them rather than their studies. They were trading them in the classroom and playing with them on their wrists. I thought about this very popular fad and remembered that Billy Joel song and thought, “Why not use the Silly Bandz to teach a lesson?” Why ban them? Take advantage of them.

For younger children, the trading of Silly Bandz would make a great topic of worth. One phoenix (a “rare” band, according to my 2nd grader) is worth a cat and dog, for example. Tie this in to money topics. Two nickels are worth a dime. For older children enthralled by Silly Bandz, the topic of entrepreneurship can be discussed. Who came up with this idea? How did they market it? What do they think they can create that would become popular?

Now I know schools have their own agenda and maybe these discussions were not on the itinerary, but clearly something that captivates the children would be a great tool to teach concepts about finances. If your school isn’t taking advantage of kids’ interest in their Silly Bandz, then why not do it at home? Use their fascination with a topic to get your children more interested in and knowledgeable about financial topics. What better way to teach? For other financial ideas, check out Life As Mom.

When The Going Is Good...

2010-06-16T09:53:00.007-04:00

Tip #260 - When the Going Is Good, Save For When The Going Gets Tough. When times are good and the wine is flowing, make sure you stop and consider that things may not always be this way. There may come a time when someone gets ill and must stop working or a business goes downhill because the market changes, or a job is lost, or or or. It is very easy when things are going well to live it up and think that things will only stay the same or get better. Because, in general, that's how things work. You start a job with a small salary and then as you gain experience, the salary increases. But things don't always work that way. As we know now, the economy has gone downhill, and many jobs were lost or salaries were cut.

Since most of us are aware that things don't always stay the same or improve, what can we do about it? Well, we can live as if things aren't as good as they are. Buy the more affordable home so that if things get rough, you can still afford it. Give up putting in a "top of the line" kitchen because really do you want to pay for a new kitchen for the next 10 years when the old kitchen was perfectly acceptable? Put money away in that proverbial rainy day fund. They really, really do come in handy.

Sure none of us know what tomorrow would bring and we can suddenly drop dead. But as many similar sayings go, "I'd rather have money and not need it than need it and not have it."

Take a look around at your lifestyle and spending habits and think to yourself, "What would I do if the ball dropped tomorrow?" "Coud we still afford the rent payments or mortgage?" "For how long?" "Is there somewhere cheaper we could move if not?"

If you are using up every last dollar to maintain your lifestyle then you are living too high on the hog, even if it doesn't seem like it. Put away at least some of your income for the days when income may not come in. Some people call it an emergency fund. I call it being prepared. Be prepared.

In Real Life (IRL)- Last Monday, Tuesday, and Wednesday I spent in bed either throwing up or sick with fever. By Wednesday afternoon I started to get my energy back and was getting up and moving around a bit. But using the computer was still too much for me. So when my husband called and asked what I thought of the email he sent, I had no idea what he was talking about. I jumped out of bed to see. And what I saw were two words, "Jericho, NY" And I knew what it meant.

My husband's company got bought out a year ago, and we always knew that it would mean some kind of change. We knew his office could close and we could be asked to relocate. So when I saw those words on my computer screen, I knew what it meant. I called my husband immediately, but he couldn't really talk. I found out later that the company wants to close his office in 18 months to 2 years. And they were offering my husband a large promotion in Jericho, NY. For those who don't know, Jericho is on Long Island, outside of NYC.

At first I was excited - the thought of packing up the house and starting over has its appeal. And living near the beach would be a fun adventure. But as I thought about having my children start over in new schools and us having to make new friends, I was less enamored. We like where we live. It's nowhere near perfect. It's expensive. The traffic is the pits, and it's far from the beach. But it is where we have put down roots. My children are growing up with my friends' children. They've known each other since they were babies. We're in a convenient location to travel other places and to see family on both sides. We like our house and our street.

We're seriously considering this job offer on Long Island. After all, it is more money, and a job for the long-term. But if we don't take it, it will be partially because we don't want to uproot our family and leave friends and the only place my kids have ever called home. We know that might mean taking a lesser paying job or possibly being without a job in the short-run.

And guess what? we can only consider the possibility of staying here with low-paying jobs because we have been putting away savings from each paycheck and have been furiously paying down our mortgage. We certainly don't want to be in the position where we have low-paying jobs, but if it means living where we want to live then we will do it. But we can only do it because when things were good, we saved. We have 3 more days to make a decision. I will let you know what we decide.

2010-06-10T08:17:00.002-04:00

My family has been "bitten" by the stomach bug this past week. After taking care of my two daughters, I was laid up in bed myself so I apologize that there haven't been any posts for several days. Once I get things back in order - laundry! dishes! shower! - I promise to do more regular posts. Thanks.

Consider A Pet's Expenses

2010-06-02T06:26:00.008-04:00

Tip #259 - Consider A Pet's Expenses. A pet can be a wonderful thing to have. Pets can give you companionship and unconditional love. They can help teach responsibility to children. They can provide company to the lonely. They can help boost people's mental health. They can bring families closer together. There is no denying the many benefits that pets can give to humans. But along with these benefits come costs - real financial costs.

Most pet owners would probably agree that they wouldn't live without their pet for anything, regardless of what they cost. And I understand that feeling. However, if you are not already a pet owner, you should carefully consider the costs of a pet before you get one. It's easy to be persuaded by a soft playful kitten or a loveable puppy, but make sure that you are aware of the realistic expense of owning a pet.

Startup Costs - If you don't already have a pet, there are several products you might need when you first get one. Obviously these items vary depending on the type of pet you get. You might need a gate (or more than one), a collar, a leash, an aquarium, special lights, a cage, a pet license, food containers, and travel containers. Your pet may also require professional training if he is a young puppy.

Food Costs - This cost is a regular expense for a pet throughout his life. Nowadays, many veterinarians recommend costly pet food for the best nutrition for a pet. While deals can be found online or buying in big quantities, it is an expensive, regular cost.

Health Costs - Like people, animals have health needs. When young they may need to be spayed or neutered. They may need certain shots such as rabies and others. Dogs may need to be treated for heartworm or ticks on a regular basis. And they should have yearly veterinarian visits. In addition, they may have periodic health problems that will arise that will need to be addressed. Some find pet insurance to be worth the cost but that is another added expense.

Grooming Costs - Dogs may need regular grooming vists depending on if their fur sheds or not. Even if they don't need year-round visits, they may need haircuts in the summer depending on their coat. Dogs may need regular visits to get their nails trimmed or you may need to invest in a pet grooming kit yourself. While I know it's controversial, some people fully or partially declaw their cats. Pets often need their teeth cleaned.

Living Costs - If you are a renter, you may have a harder time finding a place to live if you have a pet - primarily a dog or a cat. This limitation can prevent you from finding an affordable place to live. If you rent in an apartment building that allows pets, there is often an extra deposit fee and many times a monthly pet charge, also. If you live in a house, you may have to invest in the cost of a fence. There may be cost of replacing carpet, sofas or other materials sooner than normal because of pet wear and tear. If you and your spouse work , you may need a pet walker to come in during the day.

Travel Costs - When acquiring a pet, you must figure in the cost of someone watching it for you while you travel. Kennel costs are upwards of $20 per day in many areas. Alternatively, you can bring pets to certain hotels, which often have an extra per night fee for a pet. You can also find local folks who will walk and watch your pat while you are away.

Non-necessities - There are little costs that may add up for pets. These are not necessities but many with pets choose to spend money on them, such as pet treats, rawhide bones, toys, catnip, pet beds, outside pet homes, dog bows/bandannas/clothing, and others.

I did not give associated costs for most of the above items because costs vary widely depending on size and type of pet and where you live. And again, I am not suggesting people should not get pets, but you should be realistic on the costs of having one. Talk to pet owners in your area to find out the price of vets and kennels. Ask those with a similar type of pet to the one you want how much they spend in food per month or regular health maintenance. Be realistic on how often you travel away from home and whether bringing your dog to grandma's is a possibility or if you need to board your pet each time you visit. If you are realistic with the pet costs, you will be a happier pet owner.

In Real Life (IRL) - It has been just over a year that we have been living without a pet. And while we miss having our dog to play with and love, I must say that I am not missing the expense that came along with her. We had a budget of $75 per month for our dog, which covered food and heartworm medicine plus a yearly vet bill. (This number may seem low as our dog was acutally on a cheaper brand dog food from before my husband knew better. The vet said that because she did fine with it that it wasn't necessary to change her diet to a more expensive food.)

Since the dog was my husband's when I met him, I don't know how much he paid for startup costs with the dog but he owned a pet bed, an outdoor igloo, a pet carrier, a gate, dog bowls, and a few other things. So, I am sure he easily spent several hundred dollars on those costs.

We had a few irregular or unexpected costs that came up periodically while we had the dog, like the time she had an abscessed tooth or the time we traveled to China for 18 days to adopt our daughter. And there was the time there was a fight between our dog and a neighbor's dog where we offered to pay for the other dog's vet bills. There was also the several-hundred dollar pet fee when we rented an apartment home. There was the medicine she went on for incontinence when she became elderly. And the cost of ridding our house of fleas one memorable (not!) summer.

At thie present time we have no plans to get a pet - not because of the expense - but because with three young children I don't want the extra resposibility that would fall mostly on my shoulders. I'm sure we will get another dog at some point, though, and we will make sure that we are realistic about the costs that will need to be added to our budget to get one. For other frugal ideas, check out Frugal Friday.

Be Moderate In Your Finances

2010-05-25T19:12:00.006-04:00

Tip #258 - Be Moderate In Your Finances. In several areas of life many of us try to categorize ourselves on one end of the spectrum or the other - "I'm a Democrat. I love the scariest amusement park rides. I hate corn-on-the-cob. I'm a morning person." Maybe being middle-of-the-road does not define us enough. Or we think it's boring to be there. I don't know.

I find the same thing is true when it comes to people and their finances. There is the frugal camp - saving every dollar for future enjoyment or a rainy day. And there is the "live life" camp - we don't know what tomorrow will bring so why not spend our money and enjoy life today? There are the high rollers who want to undertake high risk to get high returns. And there are the conservative investors who put all of their money in guaranteed interest accounts.

I read several financial forums, and there always seems to be some healthy banter about which way is the correct way to go about living financially. But why does it have to be one extreme or the other? Why can't it be somewhere in the middle? Well, it can. And being moderate in your finances is probably a good place to be - saving for a rainy day but still enjoying life today. Undertaking some risk to increase your reward but being conservative with some of your money, too. Being frugal in some areas of your life but splurging in other areas. If we approach our financial life with balance and moderation, we will be more likely to get the most out of our money.

In Real Life (IRL) - We have a family friend whose parents had a business. Their business started to do quite well, but they never changed their lifestyle. They saved everything they made. If you were to go to their house, you'd think they were poor - worn carpet, walls that hadn't been painted in years, etc. They wore clothes that were in style years earlier. They didn't take vacations. What were they watitng to spend their money on? Who knows? But when the parents died in old age, we found out that they had stashed away quite a bit of money - as in they had several million dollars to their names. But they never enjoyed any of it! Instead, they passed it on to their children and didn't get to enjoy the fruits of their labor.

I know someone completely the opposite. He lives for today. He spends lots of money on things he loves to do - trips at the drop of the hat, business ventures that he hopes will take off. He invests in "hot tip" stocks that he thinks will earn him big money overnight. He laughs at the idea of being conservative with money, and when we explain some of our financial philosophies with him, he always seems to disagree and tells us why taking risks is the way to go.

While I tend to fall on the side of the line that makes sacrifices today for enjoyment tomorrow, I don't want to leave the world before I experience things that I wanted to do. None of us know how long we will be on this earth. The man saving all his money for retirement could die tomorrow. And the man spending everything can live to 103. Since this will almost always be an unknown, why not take the middle road? Enjoy what you can . Splurge on things that are important to you, But also plan for the days when you will likely not be able to work for money. Strike a balance between saving and enjoying. When investing, keep some money safe, but take on some risk. It doesn't have to be one end or the other. The middle of the road might just be the right path for you. For other financial ideas check out life as mom.

Realize That Coupons Are Marketing Tools

2010-05-20T07:01:00.009-04:00

Tip #257 - Realize That Coupons Are Marketing Tools. Sometimes I get a little frustrated when I read what's out on the net about "saving" money because most of it revolves around how to buy things - either cheaper or how to get things for free. But in reality, the only way to save money is to buy fewer things and only the things you need at the best price possible. Then you can put more money away, which is the real definition of "saving money."

Why do manufacturers give out coupons? Is it to be nice to the consumer? Is it because they want you to get a good deal? No, they give them out because coupons make the company money. Yes, coupons make the manufacturer money. It might be in ouvert ways - the more coupons for a product that is out there, the more of a product the consumer will buy. Or, it might be in subtle ways - it gets a consumer to buy a product that she would not have bought and causes the consumer to buy that product in the future.

Don't get me wrong, I think there are some people out there getting decent deals because of coupons. There are a few good consumers who can work the system very well. They stick to a list and only buy products that are on sale at the lowest possible price. They only use coupons for something they had on their list to buy anyway. And even if an item is free, they don't get it because it's not something they would normally use, and they don't want to become attached to a product they don't need.

But I think that most people are buying additional items they would not normally buy because of coupons. And that people do not realize that when a company gives out a coupon for a free new flavor of spicy apple ice cream that it is setting the stage for the consumer to later further desire spicy apple ice cream and for it to become a regular item on the consumer's shopping list. Marketers are good like that. Remember, overall, coupons make a company money.

So next time you clip coupons, ask yourself, is this something I was going to buy anyway or am I buying it because it's a good deal? By buying a new product that cleans toilets better am I going to like the product so much that I will keep buying this product in the future? If the answer to either of these is yes, then that coupon is costing you more money than it is are saving you. So if you plan on using coupons, make sure you only use them for items on your list that you were going to buy anyway. Companies make money on the coupons overall, but they don't make money on each and every person who uses their coupons. Be one of the people who they don't make money on.

In Real Life (IRL) - I am not anti-coupon. But I do think people are giddier about them than they should be. There are better ways to save money - that is put more money away in savings. So coupons should only be a tool in building up savings, not just a way to "save" money.

Using coupons on products that were on my shopping list anyway really do save me money. But I realize that when I use one for a product that wasn't on my list, then I am buying something I was not going to buy. And that does not save me money. It costs me money. And getting a new item for free is a cheap way for a company to get me to test their item and start to like it and want to use it. I know. It's happened to me before.

Yesterday, I got in the mail a sample pack from Nabisco and other companies. Inside were free samples of a new flavor of Wheat Thins - a flavor I had never tried before and one I had about 0% chance of buying in the future. I very rarely buy Wheat Thins. And I have never bought any flavored ones. But when I opened up the package to taste them, I found them to be delicious so much so that I opened up a second package and ate that one, too - bad I know. But they were so good. Then my 5-year old ate a package and loved them as well. "Mommy, can you please buy these again?" she asked. Ah yes, the power of marketing. That free sample is going to cost me money, and Nabisco is the one who is going to make it off me.

One more example - Before last year I had never tried Honey Bunches of Oats cereal. It never struck me as a cereal I would particularly like, and I never purchased it. But about 6 or more months ago, I clipped out a high-value coupon for the cereal. And there was a great deal at our supermarket for it, so I combined the coupon and the sale and bought a box. And guess what? I really like Honey Bunches of Oats. And so do my kids. I have added it to my regular shopping list.

Now I almost always only purchase cereal when it's on sale and when I have a coupon. But a few weeks ago I bought a box that was on sale but for which I had no coupon. We were running low on cereal and it was still a decent price but not the lowest price possible. So I am not a perfect couponer or shopper. If I were, I wouldn't have been running low on cereal or I would have bought a different cereal I could get at my target price. I slipped. I bought something I wanted even though it wasn't the best price I could get it for. And that's how Honey Bunche of Oats has made money off me. And that's how they make it off you, too. So realize that coupons are a marketing tool for the company, and then use your coupons wisely.

Find A Financial Mentor

2010-05-13T09:28:00.005-04:00

Tip #256 - Find A Financial Mentor. If you are not knowledgeable about finances, investing, savings, budgeting, and other things related to money, then find someone who is knowledgeable about it. It could be a family member, a friend, a co-worker, a church member or a neighbor. Make sure the person DOES know what he's talking about - that he's not someone who boasts that he makes 20% in the stock when he really doesn't. Instead, find someone with overall financial wisdom - one who has built up savings, knows at least some about investing, is knowledgeable about tax laws. Make sure the person is someone whose investment and savings habits seem to mirror your own. And once you find that person, pick his or her brain.

Most people will be honored that you are asking for their help. If the person you are asking does not want to be helpful, then find someone else. Once you find a good person, ask questions. You don't have to get too personal with how much money he has or how much you make - you can ask general questions. What did you do to save up for retirement? What do you think my best options are for saving for college? Do you know what the benefits are for saving in my 401(k)? What should I do with 401(k) rollover money?

These are the types of questions an investing novice should ask an experienced person with finances. Not unlike questions a new mom would ask a seasoned one. When a woman has a baby she doesn't suddenly know how to be a perfect parent. She usually asks questions of experienced mothers - their own moms, sisters, aunts, friends. This is the same idea. Again, it doesn't have to get too personal. You don't need to say to your neighbor, "I make $50,000 and want to save for retirement. What's the best way?" Instead you can say, "I have a few hundred dollars left over each month after all of our expenses. What would you do with it to save for retirement?"

On the other hand, if you are close to the person, the more information you can give the better - you might be comfortable giving more detailed information to a parent, sibling, aunt or uncle, or close friend, for example. Do what you are comfortable doing. Talk in general terms if you want or specifics if you do not mind. Just find someone who you can call or ask in person when you have a money-related question or to just get some financial advice.

In Real Life (IRL) - Discussing finances with other people is often seen as one of those "hush hush" topics. And it doesn't have to be. Sure we don't need to be broadcasting to the world that we are making $100,000 per year. But there is no reason why a couple of friends cannot discuss investment strategies or how to improve savings without revealing their salaries. And there's no reason why you cannot tell some trusted folks your salary if you want more specific advice.

I am fortunate that my father is my financial mentor. He is self-taught - he never went to college or studied finances formally. But he spent many hours listening to radio finance talk shows, reading books, and talking to people more experienced than he. In doing so, he became very knowledgeable about various savings vehicles and investment choices. Whenever I have a question, I know I can ask him. In fact, he figuratively held my hand when I invested in my first mutual fund. I have gotten advice from him about where to invest, how to handle financial situations like where to put a 401(k) money after I leave a job, and just how to save money overall. Now that I am experienced, I usually decide what I am going to do ask what he thinks. But early on, I would just ask him what I should do.

For specific tax questions, I usually double-check with my brother who is a trained accountant and certified financial planner. His investment style is much different than mine (he is much more willing to take on risk and debt), though. So if I ask for his advice, I usually take it with a grain of salt. But the point is, I have found people that I can go to if I have questions. Sure, I can pay a financial advisor if I have to. But for many people that is not necessary. If there is someone close to them who knows his way around savings, that person can usually give unbiased advice for free. (Caveat: If you just inherited $500,000 or have complicated investment or tax questions, a professional, independent financial advisor is best to go to). For general questions, look to someone in your circle of family and friends who can give you guidance as you make financial decisions. For other financial ideas, check out Frugal Fridays.

Save to Be Prepared - Don't Save To Be Rich

2010-05-05T10:55:00.007-04:00

Tip #255 - Save to Be Prepared - Don't Save To Be Rich. Many people dream of being rich one day - having all of the money they want to take a trip around the world, buy expensive homes, and drive fancy cars. But most of us won't become that rich. And I don't think most of us even necessarily want to be that rich - some people, but not most. So why is it that we are saving money, if it's not to be rich? The reason we should be saving money is to be prepared - prepared for the day when we want to purchase a new home, prepared for the years that we want to stop working so we can take care of our children, prepared for the weeks that we want to take vacations, prepared for the four years that our children will be off at college, prepared for the years when we will no longer be able to hold down a job, prepared for the day when a spouse passes away, and prepared for the days that we don't yet know what they will bring.

If we prepare for these life events, we will be rich because we will be doing what we set out to do. Of course, the days you are preparing for may be different than what I listed above but if you save for them, nonetheless, then you will be prepared when you are ready to do the things you want.

So, don't set your goals to be rich. Set them to be prepared - extra savings to put away for a rainy day, savings to put away for retirement when you can't work, savings to put away for vacations, savings for a new home, savings for months or years you want to stay home to raise your children, savings for when either you or your spouse will be on your own, savings to start a business. If you are prepared for these events, then you don't need to save to be "rich," because you already will be - by doing the things you want.

In Real Life (IRL) - I'll admit that at one point in my life I had spreadsheets written out that showed at what age I would become a millionaire if I saved up x amount of dollars each month, and if I got x% of raises each year, and if the stock market went up by x% each year. Then I figured I would be "rich." Wahoo! Then what? So I would have a million dollars to my name. What does that mean? Is that really a good goal? No, not really.

When I realized that it would take longer than I expected to become a millionaire, I set more reasonable goals for myself and for my family. I did have a firm foundation in place since I had been putting away a couple hundred dollars per month into a mutual fund just to save to become that millionaire. But now that money had a purpose. Some of it was going to stay put as a rainy-day fund. The rest was going toward a house fund. I got serious about retirement and upped my contributions to my 401(k) and my IRA.

After I got married and we bought our first and current home with that house savings, we started saving so when we had children I could stop working full-time for the first 3-5 years of their lives to raise them. (Ahem, that has now turned into 8 1/2 years, but that's neither here nor there.) Then we started to get save to be prepared for the kids' college expenses. With our purchase of life insurance, we are prepared for the possibility that one of us may not be around.

That is how our savings stack up. We save for life events that we want to partake in, and unexpected things that could come our way. We haven't planned perfectly. Housing prices were higher than we expected when we bought. We had adoption expenses that we not specifically save for. And I couldn't go back to work when I thought I would. But we were still able to cover the things that we set out to do - at least much better than if we had not set out to be prepared for these events. So, I feel we are "rich" because we can do the things we set out to do. We can't set out on a cruise around the world on the drop of a dime. But we can prepare for it, if that's what we want. For other ideas to save money, check out Frugal Fridays.

Go Curb Shopping

2010-05-04T06:48:00.006-04:00

Tip #254. Go Curb Shopping. Hear me out, please. It's not as bad as it sounds. I promise. I am not suggesting you go dumpster diving or dig through people's trashcans. What I'm suggesting is much more civil - in the world of trashpicking, anyway. In the nice weather many people are doing big spring cleanings. On the curb in front of people's houses you will see bookcases, desks, large plastic toys, bikes, lawnmowers, and things of similar nature. Generally, these are things the homeowner no longer has use for and either isn't familiar with freecycle, is too lazy to donate it to a charity, or knows that someone will take it if he puts it on the curb in front of his lawn. So why shouldn't that person who takes it be you?

There are many good items on the curbs and if you see something that you have the need for, then don't be embarrassed to take it. Free is free, and you can always pass it on if it doesn't work out for you. Once you take to heart the saying, "one man's trash is another man's treasure" you will feel better about it. And when you are saving money on things you would have had to buy anyway, your savings account will be bigger. If nothing else, be glad that you are saving things from the landfill.

Even if an item is not perfect, you may have use for it. An old, broken wheelbarrow may have good wheels you can use as replacements for your beat-up ones. A broken refrigerator might have a handle that yours needs. A pile of old bricks may be perfect to line your driveway. So make sure you take notice of all items on the curb, not just the things that are in good condition.

Some word of advice, though.

--Make sure it is not illegal in your town, city, or neighborhood to "trash pick." Some areas do have laws specifically against this. Many don't, though. In fact, some communities encourage it and have specific days that are "trash shopping days" where residents are encouraged to shop around through their neighbor's curbside items. If you are unsure of your town's laws, call the town office or other authority.

--Make sure that the item REALLY is denoted for trash. A kid's bike by the side of the road is often just a toy that a child did not put away. Taking something that is not meant for the trash is stealing, and you don't want to do that.

--Don't take charity donations. Many times households put charity donations to Salvation Army and the like in bags (or not for larger items) on the curb. DO NOT take items that are meant for charity. Usually they are marked and put neatly in bags. This should be a clue that it is not trash.

--When in doubt, ask the homeowner. It's perfectly acceptable to knock on the owner's door and ask, "Do you mind if I take that bookcase you have by the curb?" Most homeowners are glad to see someone else get use out of it, and it might even save them disposal fees. Some will even put "free" signs on large items by the curb. But if you are unsure, ask. No need to be embarrassed.

--Take items with your head held high. There is no need to take things in the dark or crouch behind trees. You are saving things from the landfill and contributing to your bottom line - nothing to be embarrassed about.

--Make sure you are safe. Don't stop on major roads if there's traffic behind you. Don't take rusty, metal things. Be careful if things are piled high, so that they don't tumble over.

--Use common sense and you might just find that you have found a few treasures on the curb.

In Real Life (IRL) - My eyes light up when I drive by a big pile of stuff in front of someone's house. I admit it. And if you told me ten years ago that this would be the case, I would have laughed and laughed. As a child, I was not taught to go through people's unwanted items. In fact, the opposite is true. But nowadays, it is just too tempting. It seems people have so much extra stuff that they don't want. And many unload perfectly acceptable items on the curb.

In my town there is no law against taking others' trash. And because there are a certain number of free bulk trash pickup days, there seems to quite a bit of good trash on the curb. I don't drive around specifically looking for trash, but if I'm on an errand or walking my kids to school, I will often stop and look.

In the past several years I have found some great things - a sand and water table for my kids (I actually found a second one that I sold), a knock-hockey game (which has become a family favorite), a giant, old, plastic Christmas Santa that lights up (sold on Craigslist), a plastic climbing cube (which my kids used, and then we sold), a bike (we gave away to a co-worker), games and toys (that I donated), a plastic sandbox (sold), a wine rack (it's in our dining room), some pictures (some kept; some gave away), a door (thought we could use but wrong size, so gave away), wheels from a lawn mower (that we needed for our lawn mower), reflectors from old bikes (added to our bikes), bricks (that separate our garden), and I don't remember what else, but I know there's more that I'm not thinking of.

Most of the stuff we find is in the spring, summer, and fall. We're very careful to only take what is clearly trash. And when in doubt, I have asked. I'll finish this off with a funny story about the big, plastic Santa in the picture. I knew that these old things were collectible, but I wanted to be sure that it was okay to take it, so I asked the homeowner if he was really getting rid of it. And he replied, "It's not even mine. I had this big trash pile out for a bulk pickup, and someone came and added it to the top of my pile." That Santa lived in my garage all summer last year until the right season to sell it. And I'm sure my neighbors wondered why we'd have a giant Christmas decoration at all since we're Jewish. :-)

Does anyone else go curb shopping? Are you embarrassed by it? Or do you think it's good, clean (well, okay, dirty) fun?

Be Prepared To Make Financial Mistakes

2010-04-28T19:40:00.006-04:00

Tip #253 - Be Prepared To Make Financial Mistakes. In our quest to save money, many of us are reading all that we can about finances. We hear of others successes and try to imitate them. We start to invest in products that months earlier we may not have heard of. We may even become bold with our newfound knowledge. And then our mutual fund takes a nosedive, our house loses some of its value, and we realize that we missed the deadline to invest in last year's IRA.

It's so easy to get discouraged when things like these happen. It often clouds our outlook on other aspects of our financial life or even other aspects of our non-financial life. But these failures are to be expected. Learning about finances takes a lot of time, energy, and devotion. But taking part in managing your finances is a whole new ballgame. No one can expect to get everything right the first time they do things. There will be failures along the way - some may even be big failures. But don't let that discourage you. Each failure is a learning opportunity for the next financial decision.

One way to deal with financial mistakes is to look at the overall picture. Sure you forgot to put in $5000 for 2009's IRA, but overall you may have saved much more than you ever have in the past. Learn from it; don't miss another IRA deadline, and move on. Or perhaps you locked into a CD for an okay rate, only to find out a month later the rates have climbed. Forget about it. That CD is only one part of your overall financial picture. Expect that you won't always get the best CD rate or that you will buy mutual funds that will drop in value. Or that your house's property taxes may go up more than predicted.

Crossing the threshold from learning all that you can about finances to actually taking an active role in your finances is a big jump. And like everything else, learning and doing are two differnt things. Each financial decision you make will not be the right one, but that is okay. As long as you are making better ones than you did in the past, and your good decisions outweigh some bad ones, you will only improve.

In Real Life (IRL) - I studied finance in college, worked for a life insurance company for 9 years, belonged to an investment club for 4 or 5 years, and have always been a saver of money. So I should have known better. After testing the waters of stock investing as a member of my investment club, I decided to dive in on my own and I bought a few stocks - most of them were ones that my club invested in that appealed to me. We researched them, discussed them, and invested in them. And then I watched them, so I felt comfortable making the leap into my own investing with stocks I was familiar with.

Then one day I heard my boss talking about a stock that he was investing in. My boss was a very smart mathematician - the kind who can calculate compound interest in his head. He was also older than I and more experienced in investing. So when he mentioned this stock tip, I decided to buy some myself - no research, no discussion, no analysis. You can guess what happened next. The stock when down and down and down. Until finally, I couldn't stand it any more and I sold it. What was I thinking? I had READ all of the financial advice that says not to buy stocks on tips, to only buy after you have thoroughly researched it, and to see if it fits in with your financial goals. I did none of this. I bought on a "hot" tip. I did no research on it. And I have no idea if the nature of this stock even fit into my financial plan. This was a definite financial mistake. I sold it and moved on.

That's not to say that I wouldn't have bought some bad stocks on my own. I would and I have. But at least they would have been mistakes based on my research. Regardless, I have made this and many other financial mistakes. People more financially savvy than I have made financial mistakes. Heck, even Peter Lynch and Warren Buffett have made financial mistakes, I'm sure. It should be expected that a novice to investing and saving will make mistakes, too. But just keep on going. The most important thing to know is that you will do more things right than wrong, in the financial world if you keep on reading and keep on saving and investing. And that's what matters - not the financial mistakes you make along the way.

Evaluate Opportunity Cost - Rent or Buy?

2010-04-26T23:20:00.004-04:00

Tip # 252 – Evaluate Opportunity Cost. Rent or Buy? Should we go with Door Number 1 or Door Number 2? Opportunity Cost is a term that many business majors are introduced to in Economics 101. Others may or may not be aware of the term. Basically, opportunity cost is what you give up when you make the decision to do something else. For example, suppose you have one free hour each evening. And suppose that you are a personal trainer who can make $50 an hour in the evening training a client on exercise, but instead you decide to watch an hour of television one night. Your opportunity cost for that evening is $50 because you lost out on making $50. In other words, you chose to watch t.v. and relax so you lost out on making $50. If instead you choose to train your client and earn $50, then your opportunity cost is an hour of relaxation, which is what you lose out on.

So how do we apply this to our own lives? Well, there is opportunity cost in most everything we do. And it’s not always related to money, but since this is blog on how to save money, that is what we will discuss. Opportunity cost is helpful in making financial decisions. One particular decision that comes up in most households is "is it better for us to buy or rent?"

Let's look at an example. Suppose you have $50,000 saved for a down payment on a house. You also know that you have $2,000 available per month to put toward housing costs (rent or a mortgage payment). You can rent a 3-bedroom home in town for exactly $2,000 and keep your $50,000 in a money market account earning 5% interest. On the other hand, you can put the $50,000 toward a down payment on a $250,000 home leaving you with a $200,000 mortgage that over 15 years with principal and interest and taxes costs you $2,000 per month. The local economists predict that houses will increase in value at 1% per year in your neighborhood for the next 15 years.

If you rent the house for $2,000 per month, after 15 years, your $50,000 is worth about $105,000. On the other hand, if you buy the house, after 15 years, your home will be worth $290,000. If you decide to rent, you are giving up the opportunity cost of owning a home free and clear in 15 years that has a worth of $290,000 (and also living in a house you own and can do what you want with). If you buy the home, you lose the opportunity cost of having a very liquid $50,000 in your bank account for emergencies or other expenses plus earning $55,000 in interest during that time period (as well as the ease of picking up and moving whenever you want).

Clearly, in some cases, we don’t fully know the opportunity costs since some financials are based on estimations. Do we put our money in a CD earning a sure 3% and miss the opportunity to possibly make much more if we invest in stocks. Or do we invest in stocks and miss the opportunity to have a guaranteed rate of return. Only you can make these decisions, but make sure you evaluate not only what you will get if you choose A but also what you will lose if you don’t choose B.

In Real Life (IRL) – I’ve read many discussions online regarding whether it’s better to rent or own. Clearly, we can never 100% accurately predict whether we’ll have to up and move in the future or whether the housing market will bomb or skyrocket in the future. Unfortunately, when we make decisions, we have to work with only information we have at the time as well as our best predictions fro the future.

So, is it better to rent or own? Clearly, as my example above shows, waiting to buy is not always the best case scenario. Of course, that may not be a realistic example. Perhaps homes selling for $250,000 would not rent for $2000 per month. And maybe housing prices end up dropping by 1% every year rather than increasing by 1%. On the other hand, I have a real life example that shows why putting a down payment on a home at the right time has been better for us than to keep on renting. And I'm anxious to share it since many people are down on home-ownership today.

We bought our home in November 2000 for $290,000. We put $70,000 down, which is a fairly hefty down payment (24%). According to tax records our home was only worth $231,000 in 2000 (so it appears as if we overpaid!). Even taking that into consideration, we got a good deal. The value of our home steadily increased over the next 6 years according to tax records:

2001: $240,000
2002: $310,000
2003: $381,000
2004: $406,000
2005: $490,000
2006: $595,000

When the economy started a downturn, housing values dropped across much of the nation. But in the DC area, while prices did fall, they didn’t drop by as much as in other places.

2007: $593,000
2008: $593,000
2009: $550,000
2010: $535,000

(Note that the 2009 and 2010 values reflect a $12,000 addition we did on the house, so to be fair, the value would be lower without it). Even taking the addition into consideration, our house would still be worth over $500,000 today. And houses in our neighborhood still consistently sell for above tax assessments.

So had we rented for a couple more years we would have lost the opportunity to buy a “low priced home.” We would have never gotten our foot in the door. The difference between the rent we were paying (on a smaller place in not as nice of a neighborhood) and our home mortgage was $600 per month. Over 4 years, we would have only saved about $30,000 more had we kept renting. But in 4 years our home was worth over $100,000 more than we paid for it. Clearly, renting for longer would not have been a good decision on our part.

Our opportunity cost by buying was loss of flexibility to move fairly quickly and savings of $600 per month plus interest as well as interest on our initial $70,000 down payment which totals about $125,000 (if I'm earning 5% interest and our rent didn't go up at all in 9 years, which it has dramatically). Had we continued renting our opportunity cost would have been about $300,000 in net worth (the amount the house is currently worth minus the amount we owe on our loan minus the down payment of $70,000 which we would have had in either case).

(I can also give you an example where renting would have been better for us than buying but I’ll save that for another day.) How do you evaluate opportunity cost? Has renting or buying been better for you? Did you make the right decision?

***I used Bankrate to do some of my interest calculations.

Don't Wait For Your "Big Break" To Strike It Rich

2010-04-22T04:39:00.006-04:00

Saving Money Tip #251 - Don't Wait For Your "Big Break" To Strike It Rich. I know many people who put off savings or do not save enough because they may have low or average income. Instead, they are waiting for that "big promotion" or when they will invent the next "big thing" or start the next greatest business venture or win the lottery or or or.

Instead, they should be putting away a little bit at a time week after week, month after month, year after year. And then one day, maybe 20 to 30 years later, they will be millionaires. While other people who are still waiting for their "big break" in life will have nothing in their bank account. Most will die waiting to become rich. Very few will win the lottery, start the next Microsoft, become the next company president, etc. Most people have the opportunity, however, to skim a bit off their income on a regular basis and put it in to savings.

That's not to say you shouldn't have goals for yourself for job promotions, expanding your business, or starting a profitable venture. You absolutely should. But you shouldn't be waiting until you become very successful in money-making to start saving. Because there's a good chance you won't ever become "very successful" in money making. And then you will have no savings to show for it. Instead, save gradually. When you are earning $25,000 per year, try to put away $2,000. As your earnings grow, put away more. And if you do strike it rich one day 20 years down the road, you can spend some of that money luxuriously. And if you don't, then you will have savings that you worked hard for.

In Real Life (IRL) - I've always written how I am a saver. In the 21 years since I've been out of college, I've managed to put away quite a bit of money, even when I was making as little as $19,5000. And even though I am doing better financially than many people my age, I often don't give myself credit for saving so much because I had a good start in my financial life that others didn't have. My parents paid for my college - the full ride - tuition, books, and room and board. Many people I know have student loans. I got a car for my college graduation. Most people have to buy their own. My parents are generous with financial gifts - such as taking us on a cruise last year. Many friends' parents give them nothing.

But you know what? Many people in similar circumstances as mine still would have nothing to show for it. One of my relatives who got the same start in life that I did, as well as the same types of benefits - college tuition paid for, a car, financial gifts - has managed to spend most of what he has earned. He often talks about what he will do if he wins the lottery or when his next invention will bring his family a windfall or when he gets promoted in his job how he will buy a luxury home. I cringe each time he says those things because the likelihood of any of them happening are not very high. Instead, he could be saving a little along the way and amass a fortune by the end of his life. And it has nothing to do with his start in life. Nearly anyone can do this, no matter how much you earn as long as they are not waiting for that "one day" when they will get a big break and all of their financial problems will be solved. For other ideas on saving money, check out Frugal Fridays.

Get Ready For Next Year's Taxes

2010-04-19T20:56:00.004-04:00

Tip #250 - Get Ready For Next Year's Taxes. April 15 has come and gone, and I'm sure many of us are not sad to see it go because it means we have 365 days to worry about next year's taxes. Or do we? Well, technically we do. We can put the tax forms away, not worry about withholdings or charitable contributions or deductions or anything until nexzt year. But if we are smart and want to minimize the amount of taxes we pay, we should start planning for next year's tax return. That means getting out the tax return that we just completed and reviewing it.

Did you overpay by a lot this year each pay period and get a huge refund? Or did you underpay and owe a penalty? Then go back to your human resources department and fill out a form to change your withholding. Did you keep lousy records of your charitable contributions and therefore not take full advanatage of this deduction? Then set up a file or some kind of recording system to keep track of your charitable giving. Did you pay January's mortgage bill on December 31 to take advantage of an advance tax deduction? Make a note on your planning calendar to do so in 2010.

These are just some examples of some tax preparations that you can start to do now in advance of next year's tax return. Now is the best time to do it as your return is fresh in your mind. Write down the items that you want to change or keep better records of. Look at what areas of your tax return you think needs more research (for example, IRA deductions). Some changes can be made immediately such as adjusting your withholdings. Others may need to take place throughout the year such as paying quarterly taxes on time with more accurate estimates so you don't owe penalties. Others may involve keeping better records. Take an hour or two this week to look through your return. Take some notes or write reminders on your calendar and then you can forget about your taxes until next year - maybe not until April 15 but at least until January 15.

In Real Life (IRL) - I just finished my taxes tonight. No, I wasn't tardy in doing them. I actually did our federal taxes in late March. But in Virginia our state taxes aren't due until April 30 (which I actually think is awfully nice of them to give us two weeks after the federal is due to do them), so I just did them today. After going through the process of completing them, I came up with a list I need to change for next year.

1. We got way too much back in tax refunds. While the money is always a nice "gift" each spring, it would be much better to have this money to use throughout the year - invested and earning interest. I need to have my husband change his witholdings at work.
2. Keep better track of school expenses. Every year around tax time I need to call the school and ask them for the amount I have paid to them. If I kept better records, I wouldn't have to do that.
3. Get eBay reports throughout the year rather than just at year end. If I run them after each month ends, then it saves a lot of time at the year-end.
4. Keep track of ALL charitable contributions. I know I missed a few of them this year because I did not have receipts for them.

Those are just a few things that I need to change in the coming year as far as taxes go. Have you reviewed your taxes and vowed to make changes or improvements? If not, now is a good time to do so.

Dissect Your Budget - Part 12 - Miscellaneous, Savings, and Wrap-up

2010-04-15T11:07:00.007-04:00

Tip #249 - Dissect Your Budget - Part 12 - Miscellaneous, Savings, & Wrap-up. I"m going to wrap up this series today by talking about miscellaneous items and savings. Remember that you need to write up a budget that works for you. If you want to cover eating peanuts at a baseball game under entertainment, consider that cost when deciding on the budget amount for entertainment. If you want to consider it under the food item, then do so. Or it may happen so infrequently that you cover it under miscellaneous. If you are in schoool, you would have a line-item for tuition and books - broken out separately or combined, it doesn't matter. As long as everything is covered.

The miscellaneous category is often a catch-all for things you don't think about - like postage stamps or library fines. Bus as you use your budget more and more, the miscellaneous category should get smaller and smaller as you see a trend in items you spend. Parking meters costs can get wrapped into the transportation/auto line item. Postage stamps can get wrapped into entertainment or gifts if they are a regular occurance. Any non-regular, "surprise" expense can go in miscellaneous.

Lastly, let's talk about savings. To me, savings is one of the most important categories to have on your budget. Most people don't think to budget for savings. And because of that, people have very little saved. But if you budget $400 to spend on food and $200 for entertainment, why not have a budget for savings. Then each month you take that amount and put it away somewhere - into a savings account, money market fund, mutual fund or wherever you see fit. This savings category should cover your 401(k) savings, too as well as any IRA, education savings or other big ticket item savings you are doing.

And really my whole point of doing this dissect your budget series was to increase the amount of money that goes into your savings (or toward debt if you have any). So go through your budget with a fine-tooth comb. See where you can reduce your expenses and put more in your pocket.

In Real Life (IRL). My budget looks like this for 2010. Please note that thw two biggest categories in terms of amount after our mortgage is our IRA or retirement savings and our college education savings for our children.

Mortgage $2,300
Phone $45
Cable $45
Computer $45
Electricity $125
Water $25
Gas $200
Cell phones $35
Gasoline $240
Travel $200
Car Insurance $125
Food $400
Preschool $300
Activities $50
Religious School $50
Summer Camp $150
Entertainment $80
Vacation $200
Clothes $100
Gifts $150
Auto/Maintenance $100
Condo Loan $415
IRA $834
Education IRA $500
Misc/Giving $133

To me, making sure that all of your expenses have a place on your budget is one of the most important rules of budgeting. That's why having a miscellaneous category is important to catch all those expenses you don't expect or forgot about. And secondly, having a budget allows you to set an amount that you are putting away for savings for retirement, for a home, for college, or for the future in some other way. Without having a line item for savings, you won't save! So dissect your budget, try to cut down on non-necessities or think of creative ways to make them cost less so you can increase the amount that goes towards savings. For other ideas on how to save money, check out Frugal Fridays.

Dissect Your Budget - Part 11 - Gifts

2010-04-13T10:53:00.006-04:00

Tip #248 - Dissect Your Budget - Part 11 - Gifts. I am winding down with this "Dissect Your Budget Series" as we start getting into categories that not everyone has. The next post will be the final one in this series.

Gifts are something that most people do have as part of their expenses. Obviously it's not a need and could be slashed if desperate. But even if you are not desperate, this is a category that could probably be cut down dramatically. Gifts can be a very expensive expense if you shop at retail stores a week before an event - a birthday, wedding, anniversary, new baby, etc. But if you plan for these regular life cycle occurances, you can keep the costs down dramatically.

1. Shop thrift stores and yard sales. Now more than ever, there are dozens and dozens of products that are being sold at these venues that are new in the package or new with tags. Some of them would make great birthday gifts for your child's friends. Many are generic enough that they can be brought as a hostess gift or put into a grab bag at the office at Christmas time. Plenty are sweet, cute, practical, and perfect for a new baby. Just because it doesn't come from a retail store does not mean it cannot be given away as a gift.

2. Make something. This does not mean you need to be crafty. You don't have to know how to sew or build to make something nice and useful to someone. A batch of homemade cookies can be nice surprise for the teen boy who helped you shovel your snow. A basic, homemade lasagna would be very welcome to new parents. A handmade card to someone in pain can turn her day around. My favorite is gift baskets filled with practical items such as food or household supplies.

3. Do something. If you cannot make something then do something. Call the mom with the new baby and ask if you can pick up her child from preschool. Offer to shop at the grocery store for someone who is sick. Invite a friend's child over for a playdate. Plant someone's garden for them Or paint your mom's laundry room. Or organize your niece's closet. Don't just offer to do something, but actually do it.

4. Re-gift. I did a post on this a while back. And I'm not embarrassed by it. We get way too many gifts nowadays. If I didn't give some of them away, I would need to buy a bigger house. This is especially perfect for children's birthday parties when gifts are sometimes duplicated or don't really meet your child's interests. It's okay to pass them along as a gift to another child who likes what your child received. Once it's given to you, you own it. You can do whatever you please with it.

5. Stock up. When you find great deals, by extras to give away as gifts. Ninety percent off sales are those times when you want to buy more than one. Chances are you will find an occasion to use what you buy. And if you don't, charities are always willing to accept them with very little expense wasted on your part.

I'm not suggesting that all of your gifts should come from the steps above. A parents' 50th anniversary or a best friend's wedding warrants a special gift whether you can find it on sale or not. But even then, sometimes it's what you do that is a bigger gift than some extra stuff that they don't need.

Consider carefully what events you have coming up for the rest of the year - one wedding, a baby shower, about 5 birthday parties for your child, your anniversary, and your family's birthdays. Then as you shop and see inexpensive things that might fit these events, buy them so you are not waiting until the last-minute to purchase.

In Real Life (IRL) - This year I have a $150 per month budget for gifts which sounds like quite a lot. And it actually is, considering that I do most of the above suggestions. But last year our budget was $100 per month and we found that we were short when many unexpected events came up such as relative's weddings and Bar-Mitzvahs. It is custom here on the east coast, at least where I'm from, to give money for these events, especially if you are family. If we really didn't have the money, we could have given less or bought a cheaper gift. But we do, and I don't like to be cheap when it comes to special events for family. And with a family of 5, we give big cash gifts. This year, we have several more that we are aware of, so I upped our budget to account for it.

Having said that, I have no problem buying 10 games at the store at Christmas time when they are half-price to give away to my daughter's classmates for their birthday parties. On cyber Monday (Monday after Thanksgiving), American Girl has excellent deals on doll clothes and other accessories. I spent about $100 that day but should be able to get about 10 gifts out of them. $10 is about my target price for birthday parties, unless it's a special friend.

Lately I've been shopping at a thrift store about once per week while I have an hour to kill between a class with my son and picking up my daughter from preschool. Over the past two months I have found new, sealed Cranium games for about $2 each at this store! These are excellent games that cost abut $15 new. Whenver I see sealed items like that, I pick them up. My daughter used two of the games last week for a classmate's birthday party that she went to. We also found a cute new-in-box soft photo album for a baby that we have put away. My husband often has co-workers who have babies, and they usually make up a big package of toys, clothes, and diapers for the new parents.

I have given gifts of dinners, muffins, cookies and other homemade goodies to friends who have passed on their baby clothes to me or have driven my daughter to and from activities. They probably weren't doing it in order to get a gift but I wanted to show I was thankful for their help. These gifts were cheap to make, but they showed I was thankful.

And because I'm practical, I love giving gift baskets. Baskets are very cheap at thrift stores or I reuse ones that we receive. Then I fill with "gourmet" items from Trader Joe's, homemade goodies, or other special foods that people enjoy but probably wouldn't spend the extra money to buy. For new babies, I fill with diapers, baby wash, wipes, and other necessities. For the new house, I fill with household cleaners, paper goods, and other necessities. These can be very cheap to make if you use items you have purchased inexpensively when on sale and with coupons. And it prevents the recipient from having to run out at the last-minute and pay full price to buy things she forgot in the excitement of the event.

There are many ways to keep your gift budget down. It takes some forethought and planning but it can be done. Think of all of the events you have coming up this year and think of ideas you can use for gifts for them. You can even write them down on a piece of paper and put it in your purse so when you are out and about you can keep track of what you need and buy them inexpensively when you see them.

Dissect Your Budget - Part 10 - Medical Expenses And Health Insurance

2010-04-07T07:45:00.006-04:00

Tip #247 - Dissect Your Budget - Part 10 - Medical Expenses and Health Insurance. Okay, here comes another collective groan from my readers. And to be honest, I have put off writing this post because there are so many factors that come into play with healthcare costs; it's not the most interesting subject; and obviously things are changing in the US. Having said all that, it's a big expense in most people's budget, and it should be considered carefully.

Healthcare insurance costs are one of those expenses that you'd rather not have, but when you need it, you wish you had the best. Only individuals can evaluate the best healthcare insurance for themselves, taking into account age, risk factors, general health, and cost of premiums. The best place to look for insurance is at your place of employment. Usually, but not always, you will get the best deal from your company because they get discounts for group insurance. Often the company will pay a part of your premiums, too.

Some employers will offer a few different levels of health insurance or even health insurance from different insurance companies. When open season comes around, make sure you evaluate your choices carefully. You don't want to save a few dollars in premiums each month only to find that you are playing a lot out of pocket at the doctor's office or jumping through hoops to get to see a specialist. On the other hand, you don't want to pay for the best insurance and never use it.

In addition to offering health insurance, many companies will also offer a flexible spending account or FLEX plan. For most people, this is a great deal. The FLEX plan basically allows you to set aside money pre-tax to use for medical costs that you will incur for the year. Then when you pay for co-pays, prescriptions, any specialist visits that aren't covered or other qualified medical expense, you use this set-aside money. If you pay about 20 percent in taxes, that means that a $50 co-pay will only cost you $40.

If your company doesn't offer health insurance or other medical benefits, then you should look into a plan on your own. Sometimes organizations you belong to will offer group insurance that might be cheaper than what you can get on your own. Or, you can open a high deductible health plan on your own (or through some companies) by investing in a Health Savings Account or HSA. An HSA operates like an IRA account, in that you can contribute a set amount each year towards the account. You don't pay federal taxes on the money, and the money can stay in it year after year if you don't spend it. The money is only to be used for qualified medical expenses.

If you are lower-income, it would be wise to look into any health insurance or benefits that are offered from your state or other government sources. Health insurance and medical expenses are a topic that could have pages and pages devoted to it and never be exhausted. I am not an expert or even very knowledgeable about it other than to skim the surface. But the point of bringing up this topic is that health insurance and medical costs are expensive and often a significant part of one's budget or sometimes the cause of one's downfall into debt. It is not a topic to be ignored, but studied for your personal best interests. Where healthcare will be in the future in this country is anybody's guess, so by staying on top of your situation and what is available to you will be the best way to keep your costs down in this area.

In Real Life (IRL) - I dreaded writing this topic because I only have experience with employee-sponsored health insurance. I've never gone out and bought insurance on my own nor have I used government available insurance, but I know it's out there. Our family has been blessed to have good health insurance available to us by my husband's company. When my husband accepted his job as a branch manager of a small office for his company, one benefit we got was fully-paid for health insurance! That is almost unheard of except maybe among top executives. We were so fortunate not to have to fork over hundreds of dollars each month to health insurance.

But all good things much come to an end, they say. And when my husband's company got bought out a year ago, he lost this nice perk. Our insurance costs now total about $500 per month, which is still fairly reasonable. Luckily, his new company offers a FLEX plan which his old company did not offer. So all co-pays, prescription costs, and uncovered medical costs come out of this tax-free money that we set aside at the beginning of the year. While not perfect, since it's hard to predict how much we'll use, it does help to have this benefit.

Because we have the funds and since we have a family of five, with three young children, we do opt for the best insurance my husband's company offers. We might be wasting money each month for benefits that we won't use, but it gives us peace of mind that if something big should come up, we will be covered. Having said all that, we don't pay for some extra riders that are offered by his firm. At some point, we just have to play the numbers game and hope it works in our favor.

One last thought, I had a friend who's husband's firm offered health insurance but they company didn't kick in much help on the premiums, so they were fairly expensive. They chose to buy private insurance with a large deductible instead. And while they were living near me, it still ended up to be cheaper for them by doing that than going the company's route.

So look carefully at all of your options. If your company offers good insurance, you are good to go. If not, investigate all of your options. Talk to people who carry the insurance that you are considering. Ask friends or family who are more knowledgeable about healthcare than I, and then decide what works best for you.

Review Your Quarterly Finances

2010-04-03T08:09:00.006-04:00

Tip #246 - Review Your Quarterly Finances. We're going to take a little break from the budget series to discuss reviewing your quarterly finances. Since it is the beginning of April, the first quarter of the year has already ended. Hard to believe! It is a good idea to review your finances on a regular basis - but not too often, or you may get caught up in moving investments around too much or not seeing any progress. Too infrequently and then you cannot make appropriate adjustments in a timely manner. Checking them about four times per year is a good amount.

What you should do four times per year:

-Review your budget - find line items that you allowed too much money and areas that you allowed too little and make any necessary adjustments.

-Check your savings accounts - are you meeting your goals for how much money you want in each of these accounts, such as your car savings, retirement savings, college savings, etc.

-Do a net worth statement - figure out your net worth by writing down your assets, liabilities, and calculating your net worth. Have you seen an increase in overall net worth since the last quarter?

-Look at your investment rates of return - check out the rates of return that you are earning on your various investments. Are you getting the most you can for the amount of risk you are willing to undertake.

After reviewing your finances for the quarter, make any changes that you feel are necessary. Perhaps you realize you aren't saving as quickly as you would like and want to increase your income. Or maybe you see that your bank is offering a special on CDs that is better than the current rate you are getting. Or you may be right on track and give yourself a pat on the back for following your goals from the beginning of the year. It makes sense to take a look at your finances and make adjustments if necessary. It can get you back on course before you fall too far away from your goals or at least give you confidence that you are doing things correctly. For four times per year, it's worth it to check out how you are doing financially.

In Real Life (IRL) - I have to admit that I look forward to the end of each quarter. I enjoy seeing how much progress we have made financially. (Although it wasn't as much fun a year ago when the stock market was plummeting.) In years past, checking our quarterly finances has allowed us to make adjustments to our newly-formed budget that wasn't refined. It has enabled us to fix some budget categories to better reflect how much we were spending or to adjust our spending to meet our budget. I was able to analyze some investment returns and reallocated some of our money.

Now that we have been doing this for quite awhile, I find that we aren't making as many adjustments. Our budget is pretty set in stone based on earlier experiences. And our goals have remained fairly steady. However, I did make an adjustment in a 401(k) investment when I reviewed our investments yesterday. I'm not sure why this one investment fell under my radar for the past year, but it did. And yesterday when I reviewed it, I realized that I had $8,000 in one account that basically earned $0 in the past year. I was able to exchange it for another stable account earning at least a couple of percentage points.

In addition to that I was able to share with my husband how much our investments and savings have grown. Sometimes my husband gets discouraged when I limit our dinners out per week or tell him that it's not in our budget to do a certain activity. But when I share with him how much our savings have increased, he becomes encouraged that we are on the right track. Try reviewing your finances once per quarter, and you will find that you can better manage where you are and where you are going, financially.

Dissect Your Budget - Part 9 - Entertainment

2010-03-28T23:46:00.005-04:00

Tip #245 - Dissect Your Budget - Part 9 - Entertainment. When we began dissecting our budgets at the start of this series, we were dealing with mostly necessary items. After food, clothing, shelter, utilities, transportation to and from work, the bottom of the budget list starts to become more and more optional. Obviously, if you need to come up with another $20 per month to buy milk for your children, then taking a weekend at the beach becomes a distant second choice as a way to spend that money. Only you know your financial situation. The more leeway you have, the more you can spend on optional items. The tighter your funds, the less you can spend. Keep that in mind when dissecting your budget. But remember, even with a budget of $0, you can still entertain yourself and "take a vacation" - even if it's just camping out in your sister's living room for the night.

Entertainment is definitely a budget category that has a lot of give. The budget can range from almost nothing per month for some to probably in the thousands of dollars for others. Your job is to analyze how much you are spending in this category and how you can reduce that amount in order to put that money toward more needed categories such as paying off debt or saving for retirement.

I generally think there are about three levels of costs for entertainment for most people. On the high end, we can buy tickets to professional sports teams, play expensive sports such as golf, go to professional theatre, eat out at fancy restaurants, and go to privately run swim clubs.

But what if you want to do these sorts of things but don't have a lot of leftover money in your budget after spending on more necessary items? For less money you can buy tickets to minor league baseball games, buy a tennis racket and play on public courts, go to community theatre, eat out at inexpensive, local restaurants, and swim in county-run pools.

But for some even those types of costs might be too much. On the budget plan, entertaining yourself or your family can be nearly free. Watch a local high school football game, exercise by running in the neighborhood, attend a play at a local elementary school, cook a special meal, and turn on sprinklers in the yard.

Even if you live in the middle of nowhere, there should be free or very cheap entertainment options available around your house, if not in your neighborhood and community. Entering homemade jelly in the county fair won't cost much but might bring a day of fun to a family who gets to enjoy the sights of the fair even if they can't afford rides or games. Play old board games that are lying around the house, travel in your favorite armchair by watching a travel video or reading a travel book or blog.

As long as you don't feel like you have to see the latest concert, buy the newest bestseller, or eat at the nicest restaurnats, you can keep your entertainment budget at a minimum if it's necessary. Be realistic about how much you have in your budget for this category and spend accordingly.

In Real Life (IRL) - I always loved the phrase "champagne taste on a beer budget" because I think many people are guilty of this. Watching how others "live" on television makes us think that everyone is out having a good time, going to parties each night, dining on steak, and joining country clubs. And if we try to emulate that lifestyle without having the funds to back it up, then we will fall into debt very quikcly or get way behind on our financial goals.

I have several "real life" friends who are in similar positions as my family - we live in the same town, have 2, 3, or 4 children, and the husband works, while the wife stays home with the kids. I haven't looked at any one of their bank accounts so I can only guess at how wisely my friends are spending their money but I'll take a stab. At one extreme, one friend buys all of her children's clothes at hip stores, takes them to the latest concerts, does frequent expensive vacations, buys the latest expensive toys and gadgets such as Wii and American Girl dolls, and eats out at nice restaurants, paying for babysitters each time. Everytime I turn around I hear some other great place they are going to, thing they are doing, or item they are buying. As far as I know they do not come from wealthy families, although the husband does seem to have a good job (hopefully a very good one!).

On the other end of the scale is my family who buys clothes at consignment sales, takes my kids to see plays put on by local high schools, goes on a budget beach vacation each year and a very cheap trip to Florida, staying with family, does not own anything like Wii (although my daughters are currently pooling their money to save up for one - they are up to $48), looks for American Girl items at thrift stores and Craigslist, and goes out with husband only when parents are in town to watch the children.

I AM NOT JUDGING! I AM JUST WONDERING? Does my friend's husband make that much more money that they can afford all of this entertainment? Or are they not putting the maximum per year into their IRA and 401(k) plans and not putting money away for their kids' college funds? Do they have an emergency fund? Or are they racking up debt? It's not just this one friend. She is probably the extreme. But many of my friends will go out to eat at a drop of the hat, spending $50 for dinner and another $30 for a babysitter. Tickets to Dora Live are bought for $50 per person including the 2-year old without much thought. Is this kind of entertainment spending appropriate for them?

I don't think we all need to be waiting for grandparents to visit so we can go out to a nice dinner, but we should make sure our entertainment budget makes sense within our family's income, expenses, and debt. If in any way, shape, or form, you need to pay down a loan, save more for retirement, or add more fruits and vegetables into your diet, seriously consider analyzing your entertainment budget and finding inexpensive ways to keep you and your family amused. (You can always find last year's fad at the thrift store anyway.)

Dissect Your Budget - Part 8 - Vacation

2010-03-24T15:44:00.005-04:00

Tip #244 - Dissect Your Budget - Part 8 - Vacation. All work and no play makes Michele a dull girl. It also makes me anxious, frustrated, stressed-out, and tired. I am not alone in this. That is why I think each budget should have a line item in it for vacations. What? You cannot afford a vacation you say? You're trying to save money? That might be the case, but I guarantee that taking a break now and then from the working world will only make you more productive, more creative, and more motivated than if you do not take a break.

Besides, who said your line item on your budget has to be for trips to Europe or cruises to the Carribean? It doesn't. In fact, if you are trying to save money, this is one area where you can cut your expenses dramatically! If you are used to spending money for one big trip per year plus one trip to the beach, then make some changes. Instead of your one big trip, make it a small trip to a less expensive locale. Or drive to a cheaper beach than one you are currently going to. Maybe you go to a lake house every year. Why not budget for a camping trip instead or a no-frills cabin? There is something cozy and fun about roughing it. And the further away from your real life that it is, the more like a vacation, it will seem. Maybe you can visit a friend in another city, but make sure you extend the invitation back for a visit at your house.

Travel off season, even if it means taking the children out of school for a few days. Or visit somewhere where it is "out of season" for that location but "in season" for you. For example, in the south, schools generally resume in August while in the Northeast and Mid-Atlantic, many children are still on vacation. You can save a bundle on vacation by traveling in late August to a beach in the south rather than in July.

When on vacation, balance expensive activities with cheap or free ones. For example, a day at the amusement park might be your expensive day, and possibly the highlight of your trip. But balance the week with some cheaper activities - like a day at a zoo, nature center, or just laying on the beach. This would be much cheaper than doing four consecutive days of amusement parks. When choosing activities, look local. A local, public waterpark may be a quarter of the price of a private one.

Get creative in your planning. Visit all travel websites for the best deals. Check into any group rates such as AAA. Talk to people who live in the city or town that you are visiting. I love visiting the forums at city-data.com. You can pick any state in the US and some cities and countries abroad and post questions to residents who live there. Most people on this site are very helpful and will narrow down your must-sees and your waste-of times. They may even tell you how to get the best deals.

Vacation is anywhere that you don't live. Try not to get in a rut and visit only much-hyped cities such as New Orleans, Miami, New York, and Chicago. Places such as Cleveland, Pittsburgh, El Paso, and Kansas City surely have great sites at much cheaper prices than the well-known cities.

If your current vacation budget is $200 per month, challenge yourself to lower it to $150 per month and see where you can cut corners on your vacations without cutting out the vacations themselves.

In Real Life (IRL) - I love me a vacation. If someone told me we were going to Fargo, North Dakota tomorrow, I would be so excited. Because it's completely different than where I live. Of course, it's not a top-destination vacation spot, but I'm sure that I could find enough activities there to last me a week, have fun while I am doing it, and not spend a lot of money.

When planning vacations, I try to find spots that aren't resorts or expensive destinations. In winter, I can have as much fun on a Fort Lauderdale beach as a Carribean one, without spending money to fly to an island and spend money on expensive, flown-in food. For our honeymoon, we went to Costa Rica for the same reason. A carribean island would have been much more expensive but given us the same type of enjoyment.

When I was single and a friend of mine and I used to take trips, we often went the last two weeks in May, returning on Memorial Day weekend just when vacation season was gearing up. The result? We had nice weather, fewer crowds, and hotel rooms that were 2/3rds (or less!) of the price two weeks later.

Here is a real-life example of how I saved money on one particular trip. My friend and I were going up to New England for vacation at the last minute. On our wish list were the city of Boston, Cape Cod, and Nantucket. We had one week to do it - the last week in May through Memorial Day weekend. The way we originally had the trip planned was to drive up to Boston, spend a few days there and then head over to Cape Cod for a few days and take the ferry to Nantucket. First I called the hotels in Boston. Everything was pretty pricy as cities are the priciest during the week because of all of the business people. Then I called the hotels in Cape Cod: they were all booked! After all, it was Memorial Day Weekend! Ugh, we had a problem on our hands. I was beginning to think that our last-minute plans wouldn't work out. Then all of a sudden, it occured to me - why not reverse our trip? Go to Cape Cod first during the week - before the holiday weekend, and while prices were still relatively cheap. Then we would hit Boston on Memorial Day Weekend when all of the business people had cleared out. Brilliant! Our plans were not only a "go" but the hotel prices were much cheaper, too. (Okay, maybe it wasn't brilliant; maybe we were just being dense, but at the time it was definitely an "ah-ha" moment).

The point is, we all need a vacation at some point, but they don't always have to be big and fancy. Look for ways to make them cheaper, but still get the break and relaxation you need. For other money-saving ideas, check out Frugal Friday.

Dissect Your Budget - Part 7 - Insurance

2010-03-19T15:49:00.007-04:00

Tip #243 - Dissect Your Budget - Part 7 - Insurance. I just heard a collective groan from the readers of this blog. Because while shopping for places to live - even if it's a smaller house to save money - is a lot of fun. And going on treasure hunts in the thrift store for clothes on the cheap is often an adventure. Even finding alternative means to get to work isn't too bad of a job. But looking for lower-priced insurance is about as much fun as getting a tooth extracted, without getting the milkshake afterwards. But in an effort to examine all aspects of your budget in order to lower your expenses, looking into your insurance costs is a must.

Insurance can cover various parts of your budget - there is car insurance, health insurance, life insurance, and homeowners insurance, as well as possibly a few others. We touched on car insurance in the previous post. Today, let's discuss, property/casualty insurance also known as homeowners and renters insurance. We will discuss helath and life insurance in a post related to healthcare costs. Regardless of whether you rent or own your home, you really need to have insurance on it. Part of that insurance (property) covers the cost of replacing/repairing your items should they get stolen, lost, or ruined in a disaster. The other part of the insurance - casualty insurance covers you if someone should injure themselves on your property. A lot of renters do not bother to buy renters' insurance because they figure they don't have many expensive items to replace. But if someone burglarizes your house and steals your camera, television, and your computer, you would be spending a lot of money replacing these items. In contrast, renters' insurance is cheap. For just a few dollars per month you would have protection from big lossses. More people are likely to buy homeowners insurance as the potential for loss is much greater. Also, most mortgage lenders require the borrower to have homeoners insurance.

Regardless of whether you are a homeowner or a renter, it is a good idea to have at least a minimum amount of insurance on your home or contents. Assuming you have insurance, there are ways to bring down the costs. The first way is to take stock of what type of coverage you really need. There are numerous online calculators that can help you determine how much insurance you need. Be mindful of the ones sponsored by insurance companies, however, since they have a vested interest in your buying more insurance. After you determine the type and how much coverage you want, you need to decide how much of a deductible you are willing to pay as a deductible if something happens to your home. Some people prefer to carry high deductibles to keep costs down and to use the insurance in only catastropic events rather than small ones.

After you have decided on the amount of coverage and the deductible, it is time to shop around. Coverage costs can vary quite a bit among insurance companies. The first place you want to contact is the company that insures your car. They will usually give a discount if you have multiple policies with them. Next, you should talk to friends and neighbors. In some areas (such as Florida), there are only a few companies that will insure there, so it's best to hone in on that information. Lastly, you can search the internet or just call around for competing quotes.

Even if you have insurance and love the company you are with, it is still worth it to look into other companies' policies every few years. Prices change, needs change, and competition changes, so another company might better meet your needs at a different time. Sometimes inertia can be bad for the bottom line. Insurance is not something any of us want to spend a lot of money on, but it is something that most of us should have. Finding the best price for what you want is the best way to keep this cost down.

In Real Life (IRL) - I mentioned in the last post that my husband works in insurance. Specifically, he is an insurance underwriter. So while I am the main finance person in our household - setting the budget, deciding on where to invest, and what to save for (with his input, of course, but he's just not that interested), I defer all insurance purchases to him.

Having said that, my husband called around and found a good deal on homeowners' insurance on our condominium in Florida, which was not an easy feat due to all of the hurricanes there. When the roof on the building was recently redone, my husband found out that we could get a better deal on our insurance because of the extra protection it provides. By paying a mere $20 for some kind of certificate certifying the roof, we were able to cut our yearly insurance premium by over $100.

In the meantime, my parents who own a condo in the same complex were paying much more in insurance than we were. In addition, my husband was able to walk them through the steps to bring down their insurance premium because of the new roof. Just a few simple phone calls, a bit of back and forth, and another certificate on their part, and my parents were able to lower their bill, too. It's not fun to make those calls, bring up your insurance bill in converstation at cocktail parties, and research the best rates. But in the end, when the savings goes into your pocket or into your bank account, the extra work is worth it.

Dissect Your Budget - Part 6 - Transportation

2010-03-16T04:20:00.008-04:00

Tip #242 - Dissect Your Budget - Part 6 - Transportation. In this series, we are taking an in-depth look at each line item in our budget in an attempt to squeeze out some of the "fat" that is in there in order to put away more money. So far we have talked about housing, utilities, telephone/Internet/television, food, and clothing. Next on the list is transportation. To many people, this would be "automobile" but that would not be the case for everyone, so transportation covers this area more generally. This line item is a "need" in nearly everyone's budget (in the US). It is the very rare household that would not need a way to get them to their job or to the store to get groceries. Some people in NYC might get away with it - if they walk to work and to the grocery store - but even then they probably have a bike, take the subway, use a cab or need to rent a car occasionally, all of which have costs associated with them.

Depending on how fine you like to break up your budget categories, this area takes into consideration auto maintenance, gasoline to run your car, car payments, public transportation (if you use it), and car insurance. This can be a very big line item or many small ones. We will discuss them as a group today. So how can we reduce our transportation costs? If your household needs a car, the first thing would be to buy a car that is a good value. In other words, a Honda is probably a better value than a fancier Lexus. A Kia may be a better value than a Honda. Consider your car a way to get from Point A to Point B or as we used to say in college, "an AB car" - it gets us where we want to go and nothing more - no fancy features, expensive styling, or name brand status. If you need a car to drive you to your job, get one that is reliable and will last a long time, and that doesn't have extra features that you don't need. Find one that is good on gas and one that does not involve costly repairs (Saabs come to mind). All you need is a car to take you where you need to go.

When buying a car, find one that is most affordable to you. For many people this might be a used car. Some suggest buying one that is two years old when most of the depreciation has happened. If you go this route, make sure you have a good mechanic who can spot trouble. I prefer to buy new cars that aren't being sold after a year or two because something is wrong with them. If you are really low on funds, then find a solid used "beater" car. Whichever you choose, keep your car for 10 years or more. A good car with proper maintenance should last at least that long. The biggest expense is the initial expense. The longer you keep the car, in general, the less per year that the car costs you.

In addition to the car itself, there are other ways to reduce your transportation costs. Check out gasbuddy to find out the cheapest gas prices in your area. It probably doesn't make sense to go out of your way to get gas there, but you might find a cheap gas station on your everyday routes. Get the best insurance for the cheapest price. Call around for different insurance quotes. You can probably lower your insurance costs with a few phone calls. Some companies that are know to have low insurance rates are USAA, GEICO, and Erie Insurance. Or you may want to consider changing your policy - perhaps with a higher deductible. If the car is old enough and not worth much you might want to take the collision off your policy or lower the amount of it. Keep your car maintained - rotate tires, change the oil, keep the air pressure full on your tires, and do other routine maintenance to keep your repair costs down.

Use your car less. Look for alternative ways to travel - walk, ride a bike, or take public transportation, if available. Combine trips. Pick up milk on the way home from work - don't make a special trip. Carpool with friends when you go out or with co-workers when you go to the office. If you are a two-car household, consider whether you really need two cars. Maybe when your second one stops working, it will be worth it to not buy another car. All of these options may take an adjustment to your mindset and your schedule, as using methods besides solo driving takes longer and more creativity than jumping in your car and going. But all are good for the bottom line (and for the environment). They are worthy of consideration.

If you are one of those people who relies on public transportation, think creatively to bring your costs down. Most public transportation methods offer monthly or frequent-user passes. Try the bus instead of the subway if it's cheaper. Challenge yourself to walk ten blocks rather than take a cab. Bike to work. Or maybe you can chip in for gas for a co-worker who drives by your house on the way to work.

There are many ways to bring down your transportation costs. Many will take extra time or more effort or creativity. But when combined with savings on other items in your budget, it can be very worth the effort to put more money in your pocket.

In Real Life (IRL) - We are a two-car family. And I hate to admit that my husband commutes about 25 miles to work EACH WAY. Oy. In our defense, we picked our housing location because it was midway between both of our jobs. But now that I am not working, it seems silly that my husband works so far from where we live. But at this point, we love where we live, so we have to put up with the commute and the expenses that come with it. I, fortunately, drive my car very little during the day. As long as the weather is nice, we try to walk at least one way to preschool as well as to the library, piano lessons, and gymnastics at our local community center. I might put 20 miles on my car per week, if that. Because I put so few miles on my car, my husband and I have switched cars for the past year to put off buying a new car. His car is getting up there in miles, and mine was pretty low. By doing that, we have delayed making a huge purchase, and it is giving us time to save up for a new car.

When walking takes too long, we sometimes ride our bikes to do errands. We have a bike trailer for the kids that we bought for recreation purposes, but it works well for groceries, too. On the rare occasion that I go for a Mom's Night Out or when my kids go to activities, I try to carpool with other moms as often as possible. When we go downtown, we always take Metro. We have a stop that is just a mile from our home. And for nine years when I worked downtown, I always took public transportation. In fact, our company paid toward our Metro use. Combined with walking to the Metro stop, it made for a nearly free commute for me - almost unheard of. My husband has called around for the best insurance prices (he works in insurance so I leave this job up to him). And he is very strict about maintaining our cars. They are currently eight and nine years old, respectively. We hope to keep them for as long as possible.

Can we do better? Yes. We could bring those costs down more. I wish my husband would carpool with someone who lives relatively close to us. But because of office dynamics, he doesn't wish to do so. I wish we could cut out some unnecessary trips to thrift stores or grocery stores. I try to stop on the way home from other places, but it's just sometimes easier to go out alone at night without the kids. And lastly, I wish I didn't waste gas in the carpool line when it is raining or cold (I'm a cold-weather wimp). As I said, there's always room for improvement. How can you reduce your transportation costs?

Dissect Your Budget - Part 5 - Clothing

2010-03-13T05:54:00.004-05:00

Tip #241 - Dissect Your Budget - Part 5 - Clothing. Like food, clothing is one of the ncecessities in life. But just like we can get by with hamburger meat versus filet mignon, non-brand clothing meets our needs as well as Ralph Lauren and Versace. At a most basic level, we need clothing to keep us covered to protect us from the sun in the summertime and to keep us warm in the wintertime. In addition, depending on the climate we live in, we need outerwear to further protect us from harsh cold. Once we have these basic clothing needs met, everything else is just fluff. Being in style and wearing clothing without rips and stains are nice, but at a very basic level, they are not necessary.

Having said all that, living in the United States, we do have a certain basic clothing expectation. And unless you are truly counting your pennies for your next meal, we have a general standard to uphold. But it is not necessary for one's clothing budget to be large. As an adult, our size generally will not vary much from year to year, and most of us should be able to get by with a basic wardrobe. Now that a new season is upon us, it is a good time to go through your clothing. Pull out clothes that haven't been worn in more than a year and donate them. Parse your wardrobe to a certain number of pants, shirts, dresses or skirts, undergarments, socks, shoes, nighttime wear, and outerwear. Make sure you have enough clothing to cover one to two weeks of basic outfits. In addition, you should have a couple of occasion outfits for religious services and special events. Depending on your needs, you may also have a few outfits for exercise, outdoor activities, or other specific regular activity.

Once you have thinned out your wardrobe, take inventory of what you have and what you are missing. Do this for each person in your family. Write down what articles of clothing you need to buy in the coming year to round out your wardrobe and break it up so monthly expenses on clothing are even. For example, you might need two pair of pants, three shirts, one dress, one pair of pajamas, one spring jacket, and a pair of work boots to complete your wardrobe. Estimate what that will cost and then divide it by 12 to make that your monthly clothing budget. It doesn't mean that if you see a great deal on shirts, that you should just buy one, but you should stick to your overall yearly budget and try to spread the costs throughout the year.

Speaking of costs, I mentioned above that it is not necessary to have designer brands to meet your clothing needs. If money is tight, you can find decent clothing in discount stores such as Marshall's, TJ Maxx, Ross, Kohl's, WalMart, KMart, and Target. End of season sales are a great time to buy needed articles of clothing. And in the US, end-of-season often comes smack in the middle of the season so that you can still get use of the item during the current year. If you don't have an aversion to pre-owned clothing, then thrift stores and consignment stores are fantastic places to get deep discounts on clothing. Used clothing is especially helpful for young children who outgrow clothes season to season. In spring and summer, there are consignment sales all over the country selling used kids' clothing for much less than new. You can even score designer clothes for a fraction of the original price at both thrift stores and consignment sales. Another method of getting low-cost clothing is to swap clothing with a good friend, a sister, or at an organized clothing swap.

The main point of your clothing budget, however, is to stick with only buying what you need. If you only need two shirts, then don't buy three no matter how good the deal is. And that pair of sandals that will make your freshly painted toes look so nice? Not necessary, unless you have it in the budget.

In Real Life (IRL) - I have written many times that I am not a shopper. And to a fault, I am not, at least when it comes to retail stores. My clothing can certainly use some updating. And ever since I have stopped working nearly three years ago, I have less of a need to go shopping for clothes. So buying too many clothes or more than is in my budget is generally not a problem for me. Although I have been guilty of buying 'just one more cute dress' for my youngest daughter because there are so many of them out there and at such good prices. And I realize that is where other people go over budget on themselves for clothing, as well.

Back when I was younger in the 1970's and '80's, there were not sales year-round like there is now. And there weren't as many discount stores around like WalMart, Ross, and Kohl's. We had Sears, Penneys, and KMart for a long time until Marshall's came to our city. That was it. Thrift stores were not regular stopping points on a shopping trip for most middle class people. Today it is much more acceptable and even expected to buy used. So in a way we are lucky because there are so many "cheap" clothing options today. But they come at cost, and that cost is overbuying. Cheap prices lead us to buying more than we need. And that is why we need to keep a good inventory of what items really are necessary in our clothing budget and sticking to it. Buying more than we need because it's a good deal or beacuse something is adorable is where we waste our money. Make up a clothing budget for the year and stick to it. And when you want to hand over the $20 bill for that unnecessary cute pair of sandals that is not in your budget, ask yourself if that twenty will be better in your retirement savings account or paying off some credit card debt rather than on your feet?

Dissect Your Budget - Part 4 - Food

2010-03-10T18:53:00.011-05:00

Tip #240 - Dissect Your Budget - Part 4 - Food. Along with shelter, clothing, and water, food is the fourth item on the list of items that humans need to survive. Therefore, food must be in everyone's budget. But costs on food for the month can range from tens of dollars to thousands of dollars. Clearly, filet mignon is not a necessity but eating some kind of protein, over the long term anyway, is. So clearly we need to evaluate our food budget. Do we have money for the filet mignon or will ground beef serve the purpose? Along with it being a necessary budget line item, food is probably also one of our bigger line items. It is also one that has a lot of flexibility. In fact, there are hundreds of blogs dedicated to keeping your food budget low. Generally, the major ways to reduce your food budget is to do any combination of the following:

1. Cook from scratch
2. Plan your meals in advance
3. Buy at set target prices
4. Use coupons
5. Buy in bulk
6. Reduce meat consumption
7. Eat out less

These strategies are all very good ways to bring down your food budget. Some of these will work better for some people than others. Let's discuss each strategy as a way of lowering your food bill:

1. Cook from scratch - While cooking from scratch may sound daunting to some, it is not an all-or-nothing event. You may start small by just cooking one or two meals per week. Or perhaps start by buying cake mixes instead of the whole cake. Then once you've mastered that task, learn to bake the cake from raw ingredients. There are great websites on the Internet that provide lots of easy recipes. My favorite is allrecipes.com which has people rate each recipe, so it's easy to pick out good ones. I also like tammysrecipes which is a blog of many basic, healthy meals. And smittenkitchen is a fantastic foodie blog that will excite you to start cooking, although some recipes might be a bit challenging. Even by incorporating some "scratch" cooking into your life, you should be able to cut down on your grocery bill.

2. Plan your meals in advance - It sounds so simple, but knowing what you are going to eat will cause you to be more likely to actually cook your meal rather than grab the phone for take-out. You don't have to be formal about it. Even just having ideas in your head for dinner for the next week will be a step in the right direction to cooking meals and cutting down on cost.

3. Buy in bulk - while this may not always be the cheapest way to buy, it is usually at least a fair way to buy. Sure you may do better by clipping coupons and matching them to price sales, but not everyone has time for that. Buying in bulk at Costco or other warehouse stores might be just the ticket to bringing down your food bill. This is especially true for basic ingredients rather than processed or prepared foods.

4. Buy at your target price - As you shop for groceries, get to know what the costs are. If you know that the cheapest you can buy chicken for $2 per pound then don't buy chicken until it's $2 per pound. And then stock up on those items when you find them at your lowest price.

5. Use coupons - Clip coupons from the newspaper and online. By using coupons and matching them to sales, you can reduce your food costs dramatically. They may not be available for all products you use, but unless you are completely strict about brands, you should be able to use some coupons in your grocery shopping. There are hundreds of sites dedicated to how to use coupons to their fullest. My favorite is moneysavingmom. She alerts you to new coupons and gives weekly posts on the best deals at many stores.

6. Reduce meat consumption - If you are serious about cutting your food bill, you may have to change what you eat. Eating meat every night is expensive. And it is not necessary for health reasons to eat that way. Try cutting meat out of some of your meals by having a few meatless dinners per week. Or, reduce the amount of meat you eat at certain meals so that it's not the main course but an add-in like meat sauce instead of meatballs. Lowering your meat consumption will reduce your monthly grocery bill.

7. Eat out less - This idea may be very hard for some people because eating out is very easy. But if you only do one thing on this list of ideas, this is it. Because eating out can cost more than four times what eating at home costs.

Using a combination of the above ideas should reduce your food bill. You might not have time or want to do all of them. But I guarantee that encorporating at least some of these ideas will save you money. But remember, that food is only one part of your budget. Once you have reduced your costs here, don't spend an inordinate amount of time trying to save a few more cents. There are many other budget items that can use your attention.

In Real Life (IRL) - I use a combination of all of the above ideas to reduce our food bill. I am reasonable about it, though. Since I have stopped working part time, I have been able to cook many more foods from scratch and I see the savings. But I don't cook all of our foods from scratch. I plan our meals in advance - usually in my head. If I have six ideas in my head for entrees for dinner for the week, we are good to go. I don't have an elaborate written plan. I do bulk shopping at Costco once per month for items that we normally eat and that are sold at consistently low prices. I do not buy large bags of potato chips or similar snack foods because that does not save us money!

Along the lines of buying in bulk, I have a target price in my mind for most items we buy. That is the best price I can generally get on regular sales or in bulk for the products we use. For example, I know I can get peanut butter on sale for $1.50 on a regular basis. So I only buy when it goes that low. (Again, however, I am not militant about it, if we run out before it goes on sale again, I will buy a jar or two for $2.00 until the next sale, and buy more the next round so I don't run out at the best price again.) I also use coupons to reduce our costs. I get them from a newspaper and online. I don't spend inordinate amounts of time clipping coupons and doing price matching, but I do spend some time before I go shopping for the week to see where I can get the best deals that week using sales and coupons. Combining coupons and sales usually result in better than my target price, and I view those as extra cheap prices but not my regular target price.

Eating less meat is normal for my family because I am a vegetarian. By default most of my meals are cheap. But since no one else in my family is a vegetarian they do get meat meals - just not everyday. When I buy meat at the grocery store, I realize how much higher the costs are. I have lived healthfully for 30 years without meat and know it is not necessary for a balanced diet. By eating meat only a few times per week, our food budget stays low. Also in an effort to keep our food bill low, we only eat out once per week. When we made a commitment to do that, it was hard at first. But now that I have been cooking from scratch more, I find that the foods I make are nearly as good as some of the restaurants we used to frequent. (Now if I can just get someone to clean up after me! That is what I miss the most about eating out.) I have found that eating out less was our greatest grocery saver. Sometimes when I'm in the market deciding between the $2 canteloupe or the $4 watermelon I have to laugh because that $2 extra I might spend doesn't come close to how much we spend if we eat out for the night. It's all relative.

As with all of our budget categories, I try to be reasonable about our costs but not militant about it. Of course, if you are in dire financial straits, then being militant might be necessary. Otherwise, there are many ways to reduce your food category and it will go a long way to saving money. For other ways to save money check out Frugal Fridays.

Dissect Your Budget - Part 3 - Telephone, Television, and Internet

2010-03-06T19:26:00.007-05:00

Tip #239 - Dissect Your Budget - Part 3 - Telephone, Television, and Internet. In this series we are going beyond just writing up a budget but actually analyzing each line item in your budget in order to reduce your spending in some areas. In the first part we tackled housing, and then we tackled utilities. Today we'll discuss optional utilities such as telephone, television, and Internet. Before we do, I just want to add to the last discussion that you should make sure your appliances such as your refrigerator are running optimally. They should be kept clean and not over or underlaoded. Make sure your freezer and refrigerator are not keeping your food too cold. If so, you can lower the temperature. Dishwashers should be fully loaded before being run. you might be able to cut down on the amount of detergent you use and you can avoid things like heated dry.

Now on to telephones, televisions, and Internet. One hundred years ago these items were not expenses on anyone's budget. And just 50 years ago, people weren't paying for two of these items. Twenty years ago, we weren't paying for one of these. But suddenly all three are "must have" items on most people's budgets. But unlike housing, heat for warmth, and power for cooking food these items are truly optional. As such, we really need to take a deep hard look and figure out if they are really necessary in our budget depending on our financial circumstances. Obviously, if you are a web designer and you do some work from home, fast Internet access is necessary. And it would be rather difficult to convince someone in the United States that they do not need a telephone. But how many do we need and at what cost? Are some of theses services overlapping? Do you pay for long-distance on your landline but also get "free" long distance on your cell phone? Can you do away with a traditional landline and just use your cell phone or perhaps use Skype or Magic Jack? It's not 1985 anymore, and we have more choices than just Ma Bell.

Take a night to sit down and analyze the plans that you are on. Call around to competitors and find out if you can get on a cheaper plan when yours end. Or ask if you can bundle your plan with your current carrier. Consider getting rid of one of your telephone plans. Eliminate any options that overlap. Be honest with your needs. Do you have to have Caller ID? Are you paying for cheap calls to Canada that you do not use? Are you wasting all of your long-distance minutes on your cell phone and paying for that capability on your landline phone, as well? Chances are, there is a way you can reduce line item in your budget.

Finally, let's talk about the television bill - whether it's cable, sattelite, or other. Is this a necessary expense? If you are trying to save money, ask yourself if it's really worth it to pay $1 or $2 per day to watch t.v. Could you get away with some rabbit ears and watching videos on the high-speed Internet that you are already paying for? Could you save $40 per month by renting videos or borrowing them from the library? If your cable bill is $50 per month then you are spending $600 per year for television or could that money be put to better use in a college or retirement fund? Maybe you don't want to take such a drastic step. Maybe you can cut some of the extras such as digital video recording or HBO or the extra sports pack. Again, be honest with yourself and how often you are taking advantage of these extras that you pay for.

Remember, your budget is supposed to work for you. You have a limited amount of funds that needs to be spread around many different categories. The ones that are most important to you should get the funds. Necessities should come before wants. And wants should be prioritized. Within each category, try to get the best deal that you can and be efficient so you aren't paying for duplicate items or services unnecessarily. Your optional budget items are where you can make the biggest changes. Analyze them carefully.

In Real Life (IRL) - I am fortunate (or unfortunate) to live in a very populated part of the country. While it may be bad for some things, it is good for getting the latest and greatest technology pretty early. Along with these changes have also come competition. Years ago we had combined service for our telephone and Internet, but our cable was from a separate company. Then 3 years ago Verizon FIOS (fiber optic technology) came to our neighborhood and by bundling all three services - phone, Internet, and television with them, we would pay about $30 less than having separate cable. Two years later, we have added a second phone line to our house through Magic Jack for only $40 per year.

We are not efficient as we can be, though. We get free long-distance on nights and weekends on my husband's cell phone (which is paid for by his company), yet we also pay for this service on our landline phone. We also get "free" long-distance on our Magic Jack phone. Clearly, there is room for improvement on our part for this line item. However, we are locked into a contract now and it's not worth it to break it for this change. But when the time comes up to renew, we will need see if there is a better plan for us so we aren't paying for the same service twice.

As far as television goes, I'd be quite happy getting rid of it altogether, but my husband would have nothing to do with that. And while I would be happy spending the money that goes for television elsewhere, we are not not saving money because of this unnecessary "extra." If you are not as financially secure as you hope to be, however, please consider cutting down or at least optimizing the deal you get on these optional luxuries.

Dissect Your Budget - Part 2 - Utilities

2010-03-04T06:51:00.005-05:00

Tip #238 - Dissect Your Budget - Part 2 - Utilities. In this series we are going beyond just having a budget but actually going through your budget line by line to take it apart, analyze it, and improve upon it. In Part 1 of this series we discussed the biggest line item of most people's budget - housing. One idea I failed to mention to lower that cost is to take in a roommate or renter. If you are single, one-half of two can live more cheaply than one. In other words, half of a two-bedroom apartment is cheaper than a one-bedroom apartment. If you have a family, having a roommate is not ideal, but depending on how dire your circumstances, taking in a boarder might be the answer to cut down on housing costs. It doesn't have to be a stranger. You might have a brother-in-law, nephew, elderly aunt or other relative in need of cheap housing, so it could be the perfect solution. In addition to making your housing costs cheaper, having a roommate or two can cut down significantly on utilities, which brings us to today's topic.

The cost of housing does not stand alone. Along with that major line item in your budget comes ancillary costs, one of which is utilities. This can be thought of as electricity, gas, and water. Nearly everyone has electricity in their home. It is what controls the power to lights, air conditioning, and appliances. It might also run your gas furnace or be your heating source. Some people also have gas lines which is their heating source and possibly their cooking source. There are alternatives such as propane or wood heating as well. Many, but not all, people are hooked up to city or county water and along with it come standard fees plus cost of amount of usage. Others have a well which has more startup costs and possible maintenance fees but no monthly fees. Unless you live in the perfect climate and like to rough it, these expenses are necessary utility expenses. So because we generally have to pay these costs, how can we lower them?

For heat, regardless of the type, the best way to keep the costs down is to keep the temperatures as low as possible and still be comfortable. A good investment is a programmable thermostat that allows you to change the temperature of the home based on time of day. If family members are gone for a good part of the day then it is worth it to lower the temerpature when no one is there. Additionally, you can program it to be lower when everyone is asleep under heavy bed covers and have the temperature go up before familiy members wake up. Another trick to keeping heating costs down is to walk around your home and find places where cold air is getting in. Weather stripping can be added to doors or even putting a mat or stuffed strip of material in front of doors or windows can keep cold air from leaking in. Make sure your furnace or heat pump is in good working order and that you change air filters on schedule. Lastly, in order to keep your monthly budget balanced, get on an equal payment schedule with your gas or utility company so you don't have high bills in the winter and low bills the rest of the year. By keeping your gas bills the same each month, you won't be scrambling to find a way to make up the extra money in the winter to pay for your heat.

For lighting and power purposes, most of us have electricity. In order to lower these costs, it is necessary for you to turn off lights and appliances when they are not in use. The television should not be blaring if no one is watching it. Rooms do not need to be lit up if no one is sitting in them. And computers should be turned off or at least set to a sleep mode if they are not being used. Buy lower wattage light bulbs. Not every lamp needs to be set to 60 or 100 watts. Even better, buy compact Fluorescent bulbs which use up significantly less wattage to give off the same amount of brightness as a standard bulb. During the heat of the summer keep air on a steady, moderate temperature. You don't need to walk in from the heat to a blast of cold air. Just by having the air conditioning on, the humidity will be taken out of the air and will cool you down. Try to go as late in the season as possible before turning on the air. Use fans if you have them. And if you are going to be in your home for a long time, look into investing in ceiling fans. They can lower the temperature of a room dramatically without using up too much electricity. Lastly, install a clothes line and use it. By reducing your dryer use, you will save lots of energy and costs. Again, ask the utility company for an equal payment plan to keep your monthly electricity bills the same.

For cooking purposes, some people have all electric and some have a mix of gas or electric. Others have all gas. Again regardless of the type, the tips to lowering your costs in this area are the same. When using the oven, try to cook more than one thing at once. Most ovens have two racks. A cake and a lasagne can both be cooking at the same time. Double your recipes. When cooking a dinner or baking cookies, why not double the recipe and freeze some for later. By using an oven that is already heated up, you save money when cooking the second batch. Cut down on your cooking and baking in the summertime. At least when you cook during the winter, the heat of the oven can warm up a room, keeping the heat from turning on, even for a short while. When buying new appliances, find energy efficient ones. Use a toaster oven when making small meals or for heating up. Crockpots are also energy efficient. Lastly, plan ahead. By pulling food out of the freezer in advance or taking butter out of the fridge, you will not have to use the microwave to warm things up.

Finally, we will discuss the water bill. We all need water to drink and depending on where you live, it can be relatively cheap. But there are still ways to conserve it and save money. First and foremost, don't let the water run unless you are using it. This includes brushing your teeth, washing your dishes or taking a shower. Also, keep your activities as short as possible. A shower does not have to run for 15 minutes. Similarly, you might not need a shower everyday. Every other day may be just as good unless you work out in the field, a construction site, or at the gym. Look at weather forecasts. Don't water your grass if the weathermen say it will rain the next day. Only do full loads for both dishwashers and washing machines. Collect water, if you can. For example, use rain buckets outside to water the plants.

My final suggestion for lowering utility costs is to call your utility companies and ask them about an energy-saving plan. Many of them have plans that you can utilize to lower costs. If no one is home during the day, you may be able to go on a plan that does allow you to use above a certain amount of power or gas during the day. Depending on your areas needs and resources, there may be a plan that would work for your family to lower costs. Above all else, use common sense and conservation ideas when using your utilities. Each time you use less or use resources wisely, you will save money.

In Real Life (IRL) - I grew up with a dad who was constantly telling us to turn off lights. So, in some ways, it's ingrained in me to do so. Although, I have to admit I am not one who enjoys being cold, so I tend to keep the house warmer than I probably should and my gas bill each winter shows it. Having said that, I utilize common sense when running appliances and using electricity and gas. In fact, I use most of the ideas I suggested above. We have ceiling fans in almost every room. We have a clothes line (that gets used!) in our basement and outside. We have a programmable thermostat. My husband has added weather stripping to drafty doors. I bake double batches when I can and use the toaster oven frequently instead of the full-sized oven.

When I was single and living with a roommate, we used the energy-saving plan from the electric company. We both worked during the day and weren't home. I don't remember exactly how it worked, but I beieve we got cheaper rates because we didn't use above a certain amount of power during the day.

Utilities are not something we can easily get rid of in our budget unless we want to make drastic changes like powering our homes by solar or wind power. In the meantime, there are smart things we can do to reduce the resoucres we use and in return we will have a lower monthly bill. For other ways to save money check out Frugal Fridays.

Dissect Your Budget - Part 1 - Housing

2010-03-02T13:18:00.008-05:00

Tip #237 - Dissect Your Budget - Part 1 - Housing. The whole purpose of this blog is to show people how to save money and how my family has accomplished it. When I say "saving money" I mean not just how to buy things more cheaply or how to live on less, but how to actually put money away and build up wealth. One tool that I, and most people in financial circles, promote to save money is to have a budget - that is a line-item list of everything that you spend money on each month and the estimated amount that you spend on it.

Oftentimes people write a budget at the beginning of the year, try to follow it, and then at the end of the year they may review it in time to write up the next year's budget. But I want to take a more active approach to your budget. Let's go through it line by line and evaluate where we can cut out extra spending so less money is going to your expenses and more is available for your savings/investing line item.

Let's start with most people's biggest expense - their home. Whether you are renting or own, your apartment, house, condo, townhouse, etc. probably takes up the greatest percentage of your monthly expenses. Let's evaluate it. In general, housing is a pretty inflexible cost. However, whether you rent from a private individual or from a corporation, there are ways you can decrease it. Compare your rent to other rents in your area. Are there other less expensive places for you to rent that would give you the same amount of amenities, room, and enjoyment? Or perhaps there are similar places that may be slightly smaller, slightly older or have fewer amenenities - no pool, no exercise room, etc. If you rent from a different place that can save you money over the long run (taking into account moving costs, startup costs, etc.) then it is worth looking into to decrease this greatest line item on your budget.

If you are unwilling to move, then perhaps you might still have pull. Maybe you have been a long-term tenant who hasn't cost the management company or private owner much in move-in/move-out fees - no carpet replacement, no yearly cleanup charge, no painting charge. Talk to your landlord and see if he can give you a discount because of that. Or maybe your area is hurting for rentals and your management company has new lease specials, ask if you can get a one-year special, too. If you are renting from a private owner, perhaps you might volunteer to mow the lawn or shovel snow in exchange for cheaper rent. Look at your circumstances and see if there is any way to lower this cost.

If you are a homeowner, check your mortgage statement and see what type of rate you are getting. Is there any way you can improve upon it? If you have a 30-year loan, can you consolidate it to a 15-year loan at a lower rate without increasing your monthly payment? Are rates better than what you are locked in at for you to be able to refinance and drop your monthly payment without increasing your term? Do you belong to a credit union? Check out their mortgage rates. They are often very competitive and have lower fees than traditional banks and mortgage companies. Is it worth it to switch to them? If you don't belong to a credit union, find out if you are eligible to join one that has good mortgage rates.

Unless you are in a dire financial situation, I don't usually recommend moving. The costs of selling a house, moving, and buying a new home can be huge. However, if you overbought a home - one that is too big or too fancy or in too exclusive of a neighborhood - it might be worth considering. Many people bought homes with their eyes and not their pocketbook. If this is your case, moving to a smaller, less fancy or less exclusive home could save you thousands upon thousands of dollars. While there will be short-term costs associated with moving, it may be worth looking into depending on your situation.

If your housing costs are too much, consider making changes to them. You may or may not be successful at it. If not, we have many more line items in our budget where we can cut costs so more can go into savings. Stay tuned.

In Real Life (IRL) - My husband and I bought our home in the year 2000. The market in the Washington, DC area was high at the time. But little did we know how much higher it was going to get. We bought a home for $290,000 and put $70,000 down on the house, taking out a $220,000 mortgage for 15 years. The rate was about 5 1/2%. We were able to get a competitive rate at the time because our credit union had about the best rates out there. Also, they never resell their mortgage loans so we always pay directly to them, which we like. About a year or two later, the mortgage rates had dropped a bit from what we were paying. While there were fees associated with refinancing, we figured out that it would take about one year or so to recoup the costs of refinanciing, yet we would save quite a bit each month and overall.

We were able to secure a 4 3/4% rate that we still have today. Every so often I check the mortgage rates at our credit union to see if they are lower than what we are paying. While they are a bit lower now - about 4 1/2% for a 15-year loan, it is not worth it to make the change on such a small spread. Because we did not buy a big house or a fancy house in an exclusive neighborhood, it would be hard for us to reduce our housing costs much unless we wanted to move much farther out of the city or to a different city altogether, which we don't. We currently pay about $2,300 per month on housing which isn't high for this area. What do you pay? Do you think you can get this line-item on your budget any lower?

Do A Bit of Everything When Trying To Increase Wealth

2010-02-25T21:55:00.001-05:00

Saving Money Tip #236 - If You Are Trying to Increase Your Wealth, Do A Bit Of Everything. When trying to build up your wealth, you can try to learn about investing in hopes of being the next Peter Lynch and beat the stock market. Or you can try to be the biggest miser and live in a dark room eating beans and rice and using five squares of toilet paper per day. Or you can go out and get an extra job in hopes of bringing in more income. You can do only one of these things and hope that you become rich. But in reality, very few people become the next Peter Lynch because it’s really hard to beat the market all of the time. And living in a dark, cold room really isn’t much fun. And working hours upon hours at your job doesn’t leave a lot of time for pleasure. So what is the best way to grow your wealth?

I believe it is to do a bit of all of these things – not just one. Take the time to learn about investing. Learn what the different investment vehicles out there are. Read a few financial books about growing your money. But make sure you don’t “play” the market like it is a game. Make wise investment choices. Take on some risks where it makes sense but balance it with conservative savings as well. You won’t have to worry about beating the market as long as you are getting the appropriate reward for the amount of risk you are willing to undertake. This will help increase your wealth.

Put in a few extra hours of overtime at work if you are able. Or find a job to do after work a few evenings a week. Or perhaps learn to sell on eBay or sell crafts that you make in your spare time. These are great ways to increase your income. As long as work is not taking over your life and you have time to enjoy things you like to do, then this will help increase your wealth without sucking up all of your time.

Cut down on extravagances. Try buying generic brands, using coupons, and purchasing used. Research before you buy. Make more food from scratch. Eat out in restaurants less often. Going all out and being miserly shouldn’t be necessary unless times are dire. But decreasing your cost of living is a step in the right direction to increasing your wealth.

By partaking in many different methods of saving or growing money, you will in fact increase your wealth without going to extremes. Learn about investing, increase your income, and decrease your costs and you will be on the road to increasing your wealth without putting extreme pressure or sacrifice in one part of your life.

In Real Life (IRL) – There are people who spend a lot of time studying stock pages, investment newsletters,and listening to financial gurus in hopes of becoming one of those who strikes it rich in the stock market. While I see the value in higher-risk investments, I am a bit too conservative to put a good part of my money in the stock market. I like to balance out my investments with guaranteed CDs and government bonds.

Because I am not a high-flyer investor, I need other ways to grow my savings. Therefore I have a side job to increase our income. I spend time scouring thrift stores and yard sales in hopes of finding things to sell on eBay. In addition to enjoying these activities, I have been able to add to our family’s income while still staying at home while my children are young.

Because I don’t work my tail off on a 60-hour per week job (well I do, but I don’t get paid for that job), I seek other ways to grow our family’s wealth. And that is by cutting back on unnecessary expenses. We cut back dramatically a couple of years ago on eating out. I have spent the past year or two learning how to bake bread and cook more from scratch. I have learned some couponing tricks. We do our research before we buy things.

Each of these things taken alone can increase your wealth. But by combining all three methods, we are able to increase our savings without living a barebones existence, without putting all of our money in high-risk investments, and without killing ourselves by working all of the time. By combining all of these methods, we are able to cut our risk and enjoy our lives while increasing our wealth at the same time. For other ways to save money check out Frugal Fridays.

Learn To Resell Your Used Items

2010-02-24T19:20:00.004-05:00

Tip #234 - Learn To Resell Your Used Items. While not everyone is guilty of having too much clutter laying around their house, most people outgrow clothing, change furntiure style, finish up with books, or upgrade their electronics or appliances. And for every item that is no longer useful to you but is still in good condition, there may be many more people who would be happy to obtain it. So rather than put everything into a bag for the donation pile, why not try to sell some of these items? And I don't mean just having a yardsale and hoping that a market for the particular items you have come to you.

Instead, learn to resell your items through more sophisticated means. If you live in a big city or near one, Craigslist is an easy way to resell some of your unwanted items. And the beauty of Craigslist is that it is easy. It is as simple as going to their site, choosing a category, and describing the item that you have to sell. Your "ad" improves dramatically if you have a picture, and I do think it is worthwhile to learn how to upload pictures to this site. But even if you don't have that knowledge, you can still list your items that you no longer want. I did a detailed post on how to sell on Craigslist.

If you live in the middle of nowhere, Craiglist is not usually a good option for small things, but may still be worthwhile for larger items you no longer want, like appliances and furniture. If the items you wish to get rid of are small and not too valuable, you have a few other options. Clothes can be brought to consignment stores. Books, music, and movies can be sold on Amazon. Toys and baby things can be brought to church consginment sales in the fall and the spring. If you have valuable collectibles, it might make sense to try to unload these at an auction house, antique store or similar collectible shop. But make sure you do your homework first so that you do not get taken.

When you are comfortable selling things, you can always try your hand at eBay. The beauty of eBay is that it is a venue for selling most everything from coins to dolls to kitchen ware to DVDs. It is not just for antiques and valuables.

Taking the step to try to sell some of your unwanted items before putting them in the donation pile can yield hundreds of dollars that can be put towards savings. You will most likely still find plenty of things to donate to charity but you will help your own cause for savings, too.

In Real Life (IRL) - I slowly started selling things around my house about 8 or 9 years ago on eBay. At the time I did not know about Craigslist. At first I thought eBay was for antiques and valuables. And I spent time looking in my closet for that valuable toy that I may have saved from my childhood that was now worth something. But I never did find it. And instead I learned that selling on eBay or Craigslist or to consignment shops isn't just about selling antiques and collectible items. People like to buy useful everyday items from these venues, too. I know because I have bought these types of things on eBay, Craigslist, Amazon, and consignment stores and sales, too.

On the selling end, we have sold many of our baby things such as exersaucers, crib sheets, strollers, and even a carseat cover on Craigslist and eBay. They were no longer useful to us, but they were valuable to someone else. In the past, these items would have gone in the Purple Heart or Goodwill pile. Instead, we earned money on these items and were able to put them toward things our child needed like a toddler bed, bigger clothes, and a booster seat. We have also gotten rid of childhood furniture and bought new (to us) furniture on Craigslist.

We've also sold things like toasters, sewing machines, cameras, and cell phones when we've upgraded or not needed them. We've bought things like a computer monitor, a t.v. cabinet, and a computer armoire. I often list books on Amazon or bring them to a nearby used book store. Sports equipment and musical instruments are also good sellers on the secondary market.

Before I started buying used things, I didn't realize how many other people bought things used, too. Things that I would have just donated in the past have brought in hundreds, if not thousands, of dollars. With the economy the way it is, even more people are turning to the secondary market to purchase used goods, so it's a good time to start selling there.

Invest Slowly

2010-02-20T12:19:00.005-05:00

Tip #233 - Invest Slowly. There are salesman who will try to sell you financial products that have the potential to earn 20 percent. There are friends who brag that they are fully invested n the stock market. There are others who look down on a fixed return as being boring and not keeping pace with inflation. And to them I say, you are not making 20 percent without a lot of risk. If ALL of your money is in the stock market, I hope you sleep well at night. And while a fixed return may be boring, it's also guaranteed.

When you are starting on your financial savings journey, do not be intimidated by or invest in financial products you do not understand. Start out slowly. Putting $100 away per month into a savings account may not be the best investment ever, but it is a place to start. As you build up your savings, you can buy a CD for better returns or put your money in a money market account. And then maybe you will buy some government bonds. And then and only then when you are ready to take some real risk - that is risk that the principal that you put in can go down in value - should you start to invest in other products such as mutual funds or maybe even some individual stocks.

As with any other skill, learning about investments builds upon itself. You don't learn to do triple axles before you learn to do a single. You don't attempt black diamond mountains until you've mastered the green. Why would you start putting your money in "high flying" investments without being comfortable in the basic investments first? You wouldn't. And don't let anyone tell you differently. Sure you may not earn the highest return on your investment, but you won't fall flat on your face either. The key is to start slowly.

Stocks and mutual funds are not appropriate for all of your investment needs, and for a beginning investor, possibly not any of your investments. They do have a place as part of most people's investment portfolios - such as long-term savings for retirement. But there is no need to rush into investments that you are not comfortable with. Sure the 20% returns look great. But look at past performance and ask yourself how comfortable you would be the value of your money lost 10%. Until you are ready for that volatility, you are not ready for it. Start up a nice base savings first. It's easier to lose some of your investments when you have other investments that are stable. In the beginning, don't be embarrassed to have your money in CDs. And maybe after you have built up savings for a year or two, you can start loooking into other investments for some of your longer-term money. But start slowly.

In Real Life (IRL) - From the time I was a child, I had a passbook savings account. It was fun to watch my money grow (5% interest!) each month. As I got older, my dad talked me into putting some money into government bonds (paying 6% interest) and the interest was tax-deferred until it came out. Then as my savings accounts grew, I put some money into money market accounts for a higher interest rate. And I bought some CDs for a higher interest rate also.

It wasn't until I was in my 20's that my dad talked to me about mutual funds. Sure, I had learned about them in college - I was a finance major. But personally investing in them was something new to me. And I was scared to make that leap. At the time (early 1990s), even the worst mutual funds were making money. And yearly returns of 20% to 30% were almost common. But I was still scared. I had never "lost" money before (unless you argue that I lost buying power due to inflation by having my money earning low-yield interest). So my dad said if I lost money, he'd make it up to me. That was a nice way to ease into the world of mutual funds. I will never forget the first statement I got that was literally days after my initial investment that showed my $200 (or whatever the amount was) was now worth $197. I was devastated. But I kept at it, and sent a monthly contribution off to a mutual fund. This was long-term savings for me - money to put toward a house 10 years down the road. As I grew comfortable with that, I bought individual stocks, first through an investment club, and then on my own. And all along, I put retirement money into mutual funds offered through work.

The point is, it was a slow process. I didn't start taking on greater risk until I was ready for it and until I had a good base of money sitting in the bank and in government bonds. I also only invested in riskier investments when it was for longer-term goals. I kept my "emergency" fund or my base money in guaranteed investments. Even today, I keep a fair amount in lower yield investments. CDs paying 4 percent if fine with me as part of an overall portfolio. I am not trying to impress anyone with all of the sophisticated investments I make. I am trying to maximize my return and still be comfortable with the investments I make. You should, too.

Research The Various 529 Plans - Part 2

2010-02-16T22:30:00.006-05:00

Tip #232 - Research The Various 529 Plans - Part 2. In Part 1 of this series, we discussed how important it is to do your research before you decide whether investing in a 529 Plan is appropriate for you. Once you looked over all of your other choices for saving for education and decide that you do indeed want to contribute to one, it is time to figure out which state’s plan you want to invest in. Nearly all states offer a 529 Plan. Usually the plan is run by a financial management company such as Vanguard or Fidelity. The plan is not run by the state’s government.

It would seem that the easiest thing to do is invest in your home state’s plan. There may be benefits to going with your own state’s plan. Sometimes the state will give you a break on your state taxes if you invest in their plan whereas they don’t give you a break if you invest in another state’s plan (some do, though). However, sometimes with even the tax break, there may be better plans out there for you. That is because not all states’ plans are created equal. Some offer more and better choices. Some have lower fees. Some have sales charges. So it is important to shop around for the best state's plan to invest in. And then once you chooose that, you need to decide which investments to make your contributions to.

In general, most plans offer investments based on the age of your child. The younger he/she is, the riskier the investments are. And as the child gets older, the less risky the fund becomes. So the fund manager is always adjusting the balance of stocks, bonds, and cash in the fund to make the risk consistent with the time your child has left until college. The closer you child is to college, the less risky the account becomes. You can put all of your money into the plan based on your child’s age and not have to worry about doing any risk adjusting yourself. Of course, many people who did that were very disappointed and not prepared for the huge losses (on paper) that their accounts generated last year.

Most states also have other options where you decide how to invest that are not based on age – such as various mutual funds at all levels of risk and money market funds. These types of investments require more involvement and knowledge on the part of the investor. And it gives the investor more control.

So how do you know which state plan and which investment within that plan is the best for you? Fortunately, there is a detailed 529 site, Saving For College that can give you all the information you ever wanted to know about the 529 Plans. Read over this site and get to learn even more about the 529, its benefits and risks. And read about the different states’ plans and the different types of investments they offer. Also, check out this article in Kiplinger that compares the 529 plans. The great thing about this article is that it does a great summary of which state’s plan is best to invest in based on where you live.

If you are serious about saving for college and have decided that a 529 Plan is right for you, start doing your research. It’s not as simple as deciding to invest. You have to figure out which state is best for you to go with, and then which investment within that state is one you are comfortable with.

In Real Life (IRL) – I have mentioned a few times that I don’t yet have money invested in a 529 Plan. In some ways it seems like it was a good decision when you hear about all of the losses that people have taken with their plans. But investing and taking some losses (especially when they are just on paper) is better than not investing at all.

At this time we just don’t have extra money to sock away for college beyond the $2,000 per year per child that we are doing. At the rate we are saving, we will have enough for probably only one year of college per child. But we are not planning to invest at this rate forever, and hope to star contributing to a 529 Plan once I start back at work, which right now is looking like it will be later rather than sooner.

I have read over Virginia’s 529 Plan a few times. And according to Kiplinger and other sources, it is one of the better plans out there, especially if you are a resident since we get to deduct some of the contributions from our income for our state taxes. So if and when we gather up enough money to make some 529 contributions, that’s where the money will probably be headed. Knowing me and how I like to control my investments, I probably will not put the money in an age-based investment, or at least not all of it. But for now I am holding tight. How about you? Do any of you invest in a 529 plan for your child? Are you happy with it?

Research The Various 529 Plans - Part 1

2010-02-12T08:48:00.003-05:00

Tip #231 - Research The Various 529 Plans - Part 1. If you are desiring to save up money for your children’s education, make sure you do your research. While a 529 plan seems to be the answer for many when investing in their kids’ college funds, it is not the perfect answer for everyone. And even when it is, there are still decisions to make about which plan to join.

First things first. If you are hoping to retire, then saving for retirement should be your primary goal before saving for college. In other words, don’t miss opportunities to save in your 401(k) and your IRA in order to sock away money for your child’s college fund. Being secure in your retirement is more important. Or, as they say in the financial world, you can get loans, financial aid, and scholarships for college. You cannot get them for retirement. Once you are confident that you are maximizing your retirement and are ready to put away money for college, look at all of your options.

--You can just open an account in your child’s name. Children are generally allowed to earn up to $600 in income before having to pay taxes on it. This would work well when your child is young, but as he gets older and starts getting jobs then taxes he will have to pay. Another con to this approach is that if the money is in your child’s name, then he can withdraw his money (when he is of age) and spend it however he sees fit, not just for college or other education. There are better ways to invest for college.

--As a starting point, many people choose a Coverdell Education Savings Account (some people call it an Education IRA). Each year you can put up to $2,000 away for your child towards higher education. (The limit could drop to $500 in 2010 if the law does not extend). The beauty about the Coverdell is that you control where you want to invest. It’s not in some far-away plan being managed by a 529 Plan manager you have never met before. The money can be in your home bank in a CD or it can be in a mutual fund at Vanguard or Fidelity. You decide how conservative or risky you want to be with the money. Of course with a limit of $2,000 per year, the con to this plan is that you won’t save nearly enough money for college this way. But it can be a great starting point.

--The primary option, and the focus of our discussion is the 529 plan. This seems to be the plan most people head straight to when saving for college. There are many pros to the 529. The amount you invest each year is limitless. Most states offer a plan, and there are investing options set up specifically for children your age. Also, your state may offer some tax breaks on money invested in your home state’s plan. However, for new investors, the risks that these plans take may be too much for them to handle. And the fees that some state plans charge may be high. In my next post, we will discuss choosing the best 529 Plan for you.

In Real Life (IRL) – At this point in our lives, my husband and I have been concentrating on our retirement savings, rather than our children’s college savings. We have maximized my husband’s 401(k) at his place of employment. And each year we put the maximum $5,000 into a Roth IRA for each of us. Beyond that, we don’t have a whole lot left over to save for college. For now we are just saving $2,000 per year per child in an Education Savings Account. I’ll admit that I like controlling where the money is invested. And because I am generally more conservative than many investors, I have some of their money in CDs in our local credit union. Many financial advisors would balk at that! But I am happy with the 4-5% their money is earning there. And I have balanced out these “low” returns with some of their money being invested in Vanguard mutual funds.

Because I like controlling how their money is invested, putting the first $2,000 in a Coverdell rather than going straight to a 529 Plan made sense for us during this time in our lives. Once we have more money available (or should I say “if” we have more money available someday), then I wouldn’t hesitate to put the rest in a 529 Plan. At that point, I will need to evaluate which state’s 529 Plan is the best one for us. Therre are lots of things to consider to that end. And we will discuss evaluating the various states’ 529 Plans in my next post. For other money-saving ideas check out Frugal Friday.