Find the Right Balance to Meet Your Financial Goals

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

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?

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

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

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

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

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.