Wednesday, December 30, 2009

Old Age Is Something To Save For And Look Forward To

Tip#219 - Old Age Is Something To Save For And Look Forward To. Many people do not want to save for the future because they either do not know what the future will bring or because they think the future as an elderly person is not worth saving for. But with people living longer and longer, old age is not what it used to be. Seventy years of age today is what 50 years of age used to be a long time ago.

Have you ever looked at pictures of your grandparents or great-grandparents from 50 years ago? If you are lucky enough to have photographs that are dated and notated you may be surprised that people who look like they are 75 years old are actually only in their 50s. Now compare those photographs to pictures from today of people in their 70s. Besides the hair dye and stylish clothes on the people in today's photos making them look much younger, today's elderly are generally much more active. In fact, look at all of the active adult communities springing up around the country for people 55 and older. With people's lives being extended, their active years get extended too.

So what does all this have to do with finances? If people are living longer, then they have to have money to live on when they are older. And while many people are still active well into their 70's and 80's, many are unwilling or unable to work or if they are able to work they may not be able to work full time. It is this last quarter or fifth of our lives that we are saving for. Statistically, most of us will live to our 70s and beyond. And conceivably many of us will be living active lives - going out to eat, playing tennis or swimming, traveling, and doing many of the same things that we do today. So there is no reason to deny that it is necessary to save for the old age. And it's not something to dread but rather to look forward to.

In Real Life (IRL) - I mentioned last week that we are spending our spontaneous winter vacation in Florida. Although I tried, words cannot adequately describe the people we meet, the activities we participate in, and the conversations we have. But all exaggerations aside, it is actually quite refreshing to watch octegarians who are playing tennis and spend time with people in their seventies who go dancing weekly. Observing these eldery folk living their lives to the fullest has made me realize that their lives are evidence against all of those naysayers who think we'll all be sitting around doing nothing when we're old so we shouldn't bother to save for our future. In addition to anecdotal evidence, actuarial tables show that most Americans will be around until their 70's. So we really should begin saving for our life after our working years.

This week I talked to two women in their 80s who just came back from taking a cruise. I observed women and men playing with their grandchildren in the pool, on the beach, and on the playground. I saw elderly folk going on nature walks. I saw old people taking photographs and working on stained glass artwork. I saw pictures of a couple's first great-grandchild. But the highlight of my week was meeting a gentleman who was celebrating his 70th wedding anniversary with his wife. Just watching these folks has renewed my dedication to saving money for my retirement. Getting old is not something to dread. But instead it can be a time to look forward to - to slow down and enjoy life. And having the money to spend during that last quarter of our lives will only make our elder years more enjoyable.

Wednesday, December 23, 2009

While You See A Chance Take It...

Tip #218 - While You See A Chance Take It. I've been going around singing this Steve Winwood song lately in regards to this post. I'm not usually one to be spontaneous - even when I was single I wasn't - especially with three kids and a husband who has a job. But this time I saw a chance and we're taking it.

Several years ago, when my parents were in their mid-fifties, they were deciding what to do in their retirement. My dad was not yet retired but was planning to do so in the next few years. My dad really wanted to do some traveling when he was no longer tied down to a job. My mom wasn't so sure as she likes to be closer to home. Then they agreed to look for a small place in Florida that they could visit every winter - a home away from home - a compromise of sorts. So for about 7 years they would take a two-week trip in early December and drive down to different cities and towns in Florida on the East Coast and West Coast. While they loved the beauty of the West Coast, they had more friends on the East Coast and settled on a 1-bedroom condominium in South Florida where some friends of theirs already lived. It wasn't big; it wasn't fancy, and it wasn't expensive. But it was just right. So now every December they make their journey south and spend the winter in the warmth and sunshine.

The characters that live in their development, along with the goings on of thousands of seniors playing golf, heading to the early-bird specials, and running condo boards makes for some humorous stories. In fact, I wrote a story several years ago about my parents' experiences in a retirement community in South Florida. It's an exaggerated profile of life in the golden years. I've been slowly posting my story chapter by chapter, part by part, on my other blog called "Start Packing; We're Retiring To Florida.

Now back to seeing a chance and taking it. Every year, we head down to Florida ourselves to visit my parents and my mother-in-law and to get out of the frigid cold. A week in sun is just what we need to make it through the rest of winter. This year, the plan was to leave on January 23. But a few days ago mother nature decided to dump a foot and a half of snow in our city, and I was starting to get the itch to go away. After all, we don't celebrate Christmas. Our plans for winter break were pretty nil, our New Year's plans were to stay in, and the schools decided to add an extra three days to the already long break. What's a mom to do? See A Chance And Take It. I saw the chance to hop in the car and head down to Florida ourselves and leave a foot and a half of snow behind - no school or activities to be missed and sunshine and warmth to be gained. All that was standing in our way was my husband's job. He knew he couldn't take off work for a week, so we looked into flights and saw that he could fly home for the short week of work between Christmas and New Year's and then fly back for only $269. And after about 10 minutes of deliberation, I called my parents to tell them of our plans, booked my husband's flight, and started packing.

So for the next 12 days I will be in Florida - probably with no access to the computer. If you want to visualize what we will be doing while we are there, feel free to check out my other blog. (Yes, it really is like this there!) When I get back we can do a final review of how we did in 2009 and go over making our financial plans and a budget for the upcoming year. And in the meantime, if you see a chance, financial or otherwise, take it...

Tuesday, December 22, 2009

Don't Stay The Path If It's The Wrong One

Tip #217 - Don’t Stay The Path If It’s The Wrong One. Have you ever started a project such as painting your living room and as you watch the paint go up on your walls you realize that the color is all wrong? But because you just bought two gallons of the stuff and you've already invested 45 minutes into the project you think maybe, just maybe it will be okay, and you keep forging ahead with the same paint color that you don’t care for? A week goes by and you realize you really don’t like the paint at all but now you tell yourself that it was several hours of hard work over a couple of days and you're not going to do anything about it now and decide to live with it. Years go by and you finally decide to repaint the living room and announce to anyone who is in hearing distance, “I should have done this a long time ago. I’ve always hated this paint!” You repaint the living room and love the new color and all is well except the several years you lived with a paint color you hated.

Well, finances are like that, too. We make decisions such as investing in a CD that comes due in five years. Or we put our money in a stock hoping it will go up over the next 3 years. Or we pick a bank that is convenient for us to bank with. And sometimes after we make the initial decision we realize we made the wrong one. But what do we do about it? Nothing. We live with the consequences of not making any changes even thoug we know the initial decison wasn't necessarily the best for us.

For example, we buy a 5-year CD for $1000 that is paying a 4% rate. We realize after 3 months that 5-year CDs are paying a 5% rate at a neighboring bank. We can cash out the original CD for just the penalty of interest paid so far ($10) and invest in the new CD that will earn us $250 over the course of the 5 years (assuming no compounding) versus $200 for the original CD. So for the cost of $10 you will earn you an additional $50 or a net of $40. Now $40 might not sound like a lot. But what if it was a $10,000 CD, and we’re talking about the difference of $400? Why not go for it? Why stay the wrong path just because at the time it was the right one?

How many times have you invested in a stock or mutual find thinking it would be a good one only to find out month after month or year after year that it’s just not performing to expectation? But you keep the money in that stock or mutual fund because you initially had high hopes for this particular stock or you keep it in there because it’s gone down in value and you don’t want to sell it until you’ve made your money back. The phrase, “cut your losses and move on” comes to mind with this example.

Lastly, suppose you choose a bank that is down the street thinking you can walk there any time and that the convenience outweighs other factors. But after banking there for a couple of months you realize that the tellers aren’t very friendly and the rates aren’t competitive. And frankly you drive by three other banks on your way home from work five days a week that you can stop at just as easily. But you never bother to switch banks because your direct deposit is set up with them and it’s a hassle to go through the paperwork of opening up a new bank account again. So you stick with a bank that you don’t like. And when you finally do change banks years later when you finally have had enough of the bank you don’t like you realize it’s the same amount of work to change banks now as it would have been to change years ago. And you would have saved yourself a lot of heartache and unhappiness if you had done it much earlier.

I don’t know why humans are like this, at least some of them anyway. Once we make a decision about something we have a need to follow through with our decision even if we realize it was a wrong one. It’s as if we can't admit to ourselves that we may have made a bad decision. I know I do it, and I’m sure others do to. But let’s stop that behavior. When we realize something can be improved or changed, then let’s change it. Why go down the wrong path just because at some point we thought it was the right one? If it will improve our bottom line or the ease with which we’ll get there, then make the change. You’ll probably change it eventually anyway so why not take full advantage of benefits by make the changes early on?

In Real Life (IRL) – In our family's efforts to review our finances before the end of the year, I was looking over some CDs (share certificates) that we own in our credit union. At different times we have rolled over money sitting in a regular savings account into a certificate to earn a higher interest rate. And we have also taken advantage of some 1-year specials they have had with much higher rates than their normal certificates. As some of these certificates roll over (become renewed) they may not get a competitive or special rate the second time around. When I looked over our CDs recently I noticed two in particular that were earning less than 1% interest, and they were 3-year CDs! What a terrible rate. One (worth about $500) had renewed in April and one (worth about $700) had renewed in October. I missed the renewal notices that were sent out because these particular ones were set up by my husband and the notices went to him. As he doesn’t have as much interest (read obsession) in finances as I do, I guess he ignored them. In any case, the interest being earned on these CDs stunk. And I realized this same credit union is offering 3-year CDs (really share certificates) that are paying 2.2% as long as we invest at least $1,000.

At first I was tempted to do nothing (the easy course) because I figured they were small dollar amounts, and we could just make the changes when they came due in 2 ½ to 3 years. But then I did the math. I checked the policy on cashing out a share certificate and found out the penalty is the amount of dividends paid to date since the renewal (or in the past 180 days, whichever is less). That amounted to about $4 in our case. By keeping the money in their current CDs, we would earn about $36 (not even) over the course of three years. By switching them to the minimum $1,000 CD, we would earn more than $79 over the course of 3 years minus the penalty it cost to switch, which was $4. So we would earn more than $75 with the new CD versus less than $36 if we kept the course. Now, it’s a small dollar amount difference for sure. By switching we would have an extra $39 dollars in our pocket in three years. But you know what it took to make that extra $39? A phone call that lasted not even 5 minutes. Believe me, I was tempted to do nothing because the amounts were so small. But when I looked over all of our CDs at that credit union, they were all getting relatively good interest rates except for those two, and it was bugging me.

By paying a penalty I was admitting we made a mistake initially, but the outcome was so much better. I wronged our mistake and we are on the right course again – earning a better interest rate and leading to more money in our pocket by cutting our losses early on. What is keeping you from changing the course of some of your paths that might not be the right ones?

Sunday, December 20, 2009

Some Fun Snow Pictures

Our area was dumped on with a foot and a half of snow yesterday! Lots of fun times staying indoors with the family. Sometimes it's fun to take a brief break from all of the financial stuff and just take in all the beauty life has to offer. Here are some pictures of our snow. Enjoy!

Friday, December 18, 2009

Review Your Year's Financial Goals

Saving Money Tip #216 - Review Your Year’s Financial Goals. It’s that time of year again – the end of the year when everyone wants to wrap presents for the holidays and wrap things up for the year. Added to the craziness of holiday activities are all of the last-minute things we need to get done by year end – getting all of the doctors’ appointments in to finish off your Flex Plan, losing those last 5 pesky post-baby pounds, making the last of your donations to take advantage of tax write-offs, and trying to meet all of the other goals you set almost a year ago.

One of those goals should have been a financial goal – whether it was paying off the half of you debts, saving $5000 in a retirement account, starting an education fund for your child, or simply following your budget and your overall financial plan. With only two weeks left until year-end, it is time to start reviewing the financial goals you had set for this past year. How well did you meet them? Were your goals realistic – too pie-in-the-sky or perhaps, not high enough?

When you review your goals, look at what you accomplished and try to analyze those goals you were not able to meet. Pull out your budget and study it. Were your budget categories and amounts realistic? Or do they need to be adjusted? The only way to have a good financial plan is to improve on the one you have. If most of your goals have been unmet, analyze why that is so. If you were way off on budget estimations, adjust them. By reviewing this past year’s financial plan you can be better prepared to make realistic financial goals for next year.

In Real Life (IRL) –
I’ve been reviewing my budget lately. And what I have come to realize is that I grossly underestimated spending in the gift and “unexpected” categories. Our family’s budget for gifts is $100 per month. We don’t follow budgets strictly to the dollar in any sense of the imagination. But the budget is there to give us an idea of how much money approximately is allocated to each category. One hundred dollars per month was supposed to cover birthday gifts, Hanukkah presents, and gifts for any other special events such as weddings, bar-mitzvahs, graduations, etc. This year seemed to be the year for every one of our relatives to get married or do something special. We were invited to an out-of-town bar-mitzvah and two out-of-town weddings that we didn’t know about (we didn't attend all of them). This not only dug into our gift category but also other categories since celebrations entail other expenses – driving to the event, hotels, clothing, etc. These were all expenses that we didn’t plan for this year.

In addition to the family celebrations, my husband’s only aunt found out she was dying of cancer and had only months to live. Of course he wanted to see her one last time, and she lives in Germany. But no budget would hold him back from that trip. So he and his mom made last minute plane reservations and flew to Germany. Along with the airfare, came gifts for cousins and other relatives he rarely sees. This trip entailed a big expense that we didn’t plan for.

One of our financial goals was to make a $5000 contribution to our Roth IRA plans and a $2000 contribution to each of our children’s Education Savings Plans. The children’s plans are complete. We are a bit short on our Roth IRA contributions. (I’ve made $4000 to mine and my husband has made $3000 to his). We actually have until April 15 2010 to make 2009 contributions, so we will do that. But some of these extra expenses we incurred came out of moeny that we were going to contribute to these plans.

Over the next week or two I will continue to look at where my budget categories were realistic and where they were off the mark. And then I can use the notes I make to prepare our budget for next year. Have you reviewed your financial goals and expectations from this past year? How did you do? For other financial tips, check out Frugal Fridays.

Tuesday, December 15, 2009

Get E-ZPass

Tip #215 - Get E-ZPass. If you drive along I-95 frequently, you know how bad the backups can be, oftentimes right near the toll plazas. To help avoid some of this backup, you should purchase an E-ZPass electronic toll transponder card. You put money on the card and when you go through the toll plaza, the system subtracts the correct amount of money for the toll. There’s no looking for coins, no dealing with a person at the toll booth, or waiting in line for the person in front of you asking directions. Instead an electronic sensor “reads” your transponder card as you zip through the tollbooth, and you are on your way in a flash.

E-ZPass is one of the biggest electronic toll systems in the USA – It covers the entire Northeast corridor from Maine to Virginia and also the Midwestern states of West Virginia, Ohio, Indiana, and Illinois. There are also some smaller statewide systems in other states such as the SunPass in Florida, K-Tag in Kansas, FasTrak in California, and TxTag in Texas. In the past many of the states now in the E-ZPass system were in their own state systems but integrated themselves into EZ Pass. Hopefully, in the future, E-ZPass will start to cover more states so there won’t be a need to have more than one transponder card on your windshield if you drive through many states.

The benefits of E-ZPass besides being a time-saver driving through the tollbooths is that some toll plazas give a discount on the toll charged if you use E-ZPass. The other savings come from the amount of gas and wear and tear on your car you save by not waiting in long lines with your engine running.

There can be costs associated with E-ZPass, however. The way the system works is that many state highway systems offer the E-ZPass and each one offers it for a different fee schedule. Sometimes there is an initial fee to buy the tag, an initial deposit for each tag, and then a minimum balance to establish the account. As the balance is used up, it is automatically replenished from your credit or debit card. Some places have the subscriber pay a $1.00 monthly fee or a $3.00 annual fee while others don’t place fees on the subscriber at all. Paying a $1.00 fee per month may not result in a cost savings for you so when you sign up, make sure you do so with one that has lower or no fees. When you go to E-ZPass’s site, it will ask you for your state of residence or where you drive most frequently. Then it will take you to that highway’s site and have you sign up there. Rather than do that, sign up through the following sites, which offer E-ZPass with no extra fees. Then you can enjoy the financial- and time-saving benefits without paying for them.

These jurisdictions offer the lowest fees that I could find:
Massachusetts Turnpike Authority Fast Lane Program
New York State Thruway Authority
Peace Bridge Authority (New York – must be a NY resident or Canadian resident to use this)
Triborough Bridge and Tunnel Authority (New York)
Virginia Department of Transportation
West Virginia Turnpike

None of the above had an initial cost to buy the transponder and had no monthly fees. Some of them had fees for monthly statements sent through the mail, but I’m guessing they could be waived if you do the statements electronically. Each state has a different fee structure and they seem to change with some frequency. I was able to obtain some of this information from the bottom of the Wikipedia entry on E-ZPass so if you want to read more about the E-ZPass system, check it out.

In Real Life (IRL)
– Our family often takes the scenic route without tolls to get to our destinations. We like the slower pace, the lack of tolls, and the ability to pull over easily. But the tolls are hard to avoid everywhere so on a given car trip we often pay at least one toll per way.

With my family in Pennsylvania, my husband’s extended family in Massachusetts, and us living in Virginia, we drive through toll plazas pretty frequently. Having three little children, the time and sanity the E-ZPass system saves when we drive through the tolls cannot be underestimated. When we signed up for the system many years ago, we did it through the New York State Thruway Authority. At the time, Maryland and Virginia weren’t even part of E-ZPass. When we told my parents about it the system tried to have them sign up through Pennsylvania, because when my dad went to the E-ZPass website and it asked him where he lived, that’s what he said. However, the Pennsylvania Turnpike Commission charges $3 per year for the privilege of having E-ZPass, and while I still think it would be worth $3 for all of the time savings involved, why pay $3 per year if you don’t have to? We had him sign up through the Peace Bridge Authority.

We LOVE using E-ZPass. In the past, more discounts were given through the tollbooths if you used E-ZPass – not so much anymore. But when we see a backup by any of the toll plazas, and we go through a dedicated E-ZPass lane, the discount becomes secondary. The discounts are still given in certain places in Massachusetts, New York, and New Jersey, however, so if you drive in those places often, E-ZPass is even more worth it.

If you live in anywhere from the Northeast to the Mid-Atlantic, I cannot imagine not get an E-ZPass, the time savings are great, and if you sign up smartly to avoid fees, the money savings are an added benefit.

Thursday, December 10, 2009


Tip #214 - Regift. There I said it. Regift. Ha, I said it again! In today’s overly-materialistic and ultra-crammed-with-stuff society, if you tell me that you did not receive something in the last year that you did not need I would be surprised. I would be very surprised. So what should you do with that sweater that is the wrong size but came with no gift receipt or the bath salts that you are allergic to? Uumm, why not give them give them to someone else? Is there really something wrong with that? Perhaps Emily Post or Amy Vanderbilt thinks so, but I don’t. Yes, the purpose of giving a gift is the thoughtfulness, I agree. And for someone’s special 50th anniversary or for someone who just graduated from college, I wouldn’t expect you to regift a present. But seriously, if you are doing a gift swap for your daughter’s third-grade class, a duplicate game your child received at her last birthday party works just fine. And those bath salts you received that you were allergic to would be perfectly suitable for a hostess gift for a luncheon your friend (whom you know loves bath salts) is having.

Aren’t we all just buying too much anyway? What’s wrong with spreading around what we don’t need? And while giving stuff away would work just fine that still leaves us with having to buy even more gifts when the need arises. And think about it, if you donate to a thrift store the gifts you receive that you don’t need, and then you go shopping at said thrift store for a gift for someone else, then all you are doing is buying someone else’s gift that they parted with. So you are regifting in a way anyway, just not with your gift. So why not just use one of the gifts you received in the first place, if it would work just as well. Besides, it will save you money.

The landfills are already filled up with too much Made in China junk anyway. Let’s not add to it by buying more when it’s not necessary. Don’t be ashamed to regift; lots of people do it no matter what Emily Post says.

In Real Life (IRL) - My daughter had 14 girls at her last birthday party (and I cut down the list!). Therefore she received 14 gifts. Ugh, how many craft sets, Junie B. Jones books, and Webkinz does she really need? Until I can successfully get our friends to stop bringing gifts, I will keep using some of them as gifts for others. Yes, I try to be thoughtful in my daughter’s classmates’ gifts, but frankly out of 14 girls, a large percentage of them like Webkinz, all of them like crafts, and most of them read Junie B. Jones (not us, though; she is too sassy for my tastes). So it’s really pretty easy to regift in that crowd. Furthermore, my daughter does not need to be receiving that many presents in one day and she has no use for most of them anyway. Usually, we let her keep the few gifts that she likes best. Those that have gift receipts get returned, and the others go in a gift pile in the closet to be used for future events. I personally see nothing wrong with regifting and am happy when others do it to us. It means there is one less piece of plastic being manufactured and one more inch of space available in the landfill.

In this season of giving if you are not comfortable with regifting, then why not try to cut down on the number of gifts you exchange? We put money in a bank account for all of our nieces and nephew for Hanukkah. And we stress (and warn!) the doting grandparents that we really don’t need a thing – no, our 2-year old does not need any more cars. And the 4-year old does not need any more new dresses. But if they insist on buying, guess what? It goes in the re-gift pile. And we don’t feel bad because we warned them. How about others? Do you regift? Do you feel guilty about it? If so, check out others' money saving tips at Frugal Fridays.

Monday, December 7, 2009

Saving Money Is Different Than Getting A Good Deal

Tip #213 - Saving Money Is Different Than Getting A Good Deal - Many blogs are focused on getting a good deal - where to get a free ice cream on your birthday, how to get a box of cereal for 39 cents, and how to pick up some buy one get one free glasses, for example. But there is much more to saving money than getting good deals on things.

When getting good deals on things, the focus is still on buying whereas the focus should be on buiding up your savings. So rather than trying to find out where you can get the best deals instead concentrate on how you can keep more money in your pocket. It is a subtle difference, but it is a difference.

Pick a reasonable amount you'd like to have saved by the end of the month, the end of three months, or the end of six months. then figure out how you can meet those goals - by bringing up your income, going out less often, eating in more, shopping less, etc. And if getting good deals on things you would have spent some money on anyway, then use that as a means to the end with the end being having more money in your pocket. The goal is not just to get a bunch of good deals.

In Real Life (IRL) - I've always mentiioned that I'm not a big mall or store shopper. But the online deals I read about on a daily basis are more tempting to me. They are just so easy! And who can resist very cheap or free? The problem is that "things" are more appealing when everybody is talking about the good deals they get than keeping track of how much savings you as an individual are building up.

I find myseelf getting caught up in the excitement of getting a good deal before it goes away or being one of the lucky few who got something cheaper than some others. I have to remind myself that my goal isn't to get more doll dresses for my daughter, no matter how good of a deal they are. But, instead my goal is to build up my daughter's college fund. If getting a good deal on a birthday present is one means to building up her college savings, along with making some income selling one eBay, and eatin out at restaurants less, that's fine. But my focus shouldn't be on just the best deals I can get my hands on.

This holiday season when lots of excellent deals aboound, remind yourself that your goal is to save money not to spend it.

Wednesday, December 2, 2009

Pretend You Are Making Less

Pretend You Are Making Less – With all of my tips for saving money, ideas for making money, and lists of ways to make the most of your money, the bottom line is that the only way to accumulate money is to live on less than you earn. If you have no discipline with money - that is, if money burns a hole in your pocket - then you need to pretend that you don’t earn all that you do.

This is no different than having your spouse hide the Halloween candy so you won't eat it. If you have no discipline from pigging out on candy if it is in front of you, then you need to pretend it’s not there so you cannot dig into it. Obviously some people have more will power with money than others. And if you are one of those who will spend money it if it comes into your hands, then don’t let it come into your hands. Or put it away as soon as it does. There are several ways to do that:

Use Direct Deposit – Have your work direct deposit your money into a savings account. This way you are not actually receiving a check that is begging to be cashed. Once it’s in a savings account, you can transfer a fixed amount per month to your checking account for your use for the month. Everything that remains will become your savings. Some companies or banks may even do this for you – they may automatically arrange for a percentage to go into your checking account and a portion to go into your savings account. If your company does not do this, then do it yourself as soon as you get paid!

Put the Money In a Separate Account Yourself – As soon as you get paid, whether you use direct deposit or not, put a portion of your money in a separate savings account. You can do this with every paycheck or on a monthly basis. On the day that you get paid, write out a check and send it to a savings institution, mutual fund, or other savings vehicle.

Invest In Your Company’s 401(k) – If your company offers a 401(k), then participate in it! The minimum you should put in is up to the amount that they will match. If you can swing it, put in the maximum into your 401(k) that the law and your company will allow. The 401(k) money comes out of your paycheck much like your portion of your health insurance premiums. When it comes out automatically, you don’t even miss it! Plus, because it’s coming out pre-tax (you don’t need to declare that money as income until you withdraw from your 401(k) fund so you don’t pay taxes on it), then the blow isn’t that bad.

Save Any Extras - Put any bonuses, extra paychecks, raises, or overtime pay directly into a savings account. If you are living on $50,000 per year and your budget reflects that, then any bonuses or overtime should not need to be spent. Put these extra payments right into your savings account. If you get paid every two weeks and have a monthly budget, then your two extra paychecks can be deposited right into a savings account. If you have been living on $40,000 per year and get a raise for next year of 5%, then try to put 5% of each paycheck right into a savings account.

Have A Budget Envelope For Savings – If you do an envelope system or something similar, have a budget for savings. It can be for any amount. When you put your cash into envelopes for groceries, rent, gasoline, you put a certain amount into savings, too. Then each month bring it over to the bank.

All of these plans won’t work for everyone, but you should be able to take away something to work for you. Many of us manage to find money to eat out, to go away for the weekend, or to buy a new dress, there is no reason why we shouldn’t be able to put aside money for savings. And it often works best if you take out this money before you spend it on other things.

In Real Life (IRL) – My family lives on 75% of what we earn. The other 25% comes out of our paycheck either through automatic deductions or at the beginning of a pay period before we spend it. Our budget, for all intents and purposes, is based on the remaining money.

We get the maximum allowed by my husband’s company deducted for his 401(k) contribution. Because we never see this money, we are not tempted to spend it, and we don’t even realize it is there or miss it. And at the end of each quarter we are thrilled to record that we are saving thousands of dollars toward retirement without any real sacrifice on our part.

While we don’t do an actual envelope system like some people do, I do have a category for each type of spending – true expenses categories and savings categories in our budget. If you were to see my budget, you would see a line for our monthly mortgage payment, a line for gifts, and a line for college savings, for example. For our children’s college funds – we save $2000 per year per child - $500 per month goes toward college savings. I usually like to invest in $1000 increments, so I often put the money in a holding account before I put it toward their college savings. We do something similar with our Roth IRA funds.

Currently we don’t have room in our budget for any “extra” savings anymore, but when I was younger and single, I sent away about $200 per month to a mutual fund company. As soon as I got paid on the last day of the month, I would write the check and send it off. Not only did that savings build up quickly without me every really getting a chance to see the money, it allowed me to purchase shares in a mutual fund at different points throughout the year so that I wasn’t putting all of my money in when the market was high. Years later, I haven’t touched that mutual fund and have nearly $20,000 in it just from putting a couple hundred dollars into it each month.

Lastly, because my husband's new company gives 26 paychecks per year, we take the two extra paychecks and use them for savings. This is a forced savings for us. We live on the same two paychecks per month, so those two months where there is one extra, it goes right into savings.

All of these types of forced savings are often advised by experts as paying yourself first. Wouldn’t you rather pay yourself the money than pay the guy down the street who is roasting gourmet coffee or give money to the the big box chain that is selling the latest electronics? Don’t you want and need the money more? Don't you deserve the money YOU earned? Then take the money out of your paycheck and put it in savings before you get a chance to give it to someone else for something you don’t really need. And you won't even miss it.

Saturday, November 28, 2009

Don't Get Caught Up In The Excitement

Tip #211 - Don't Get Caught Up In The Excitement. It's easy with Christmas around the corner (and Hanukkah, New Year's, etc.) to get caught up with the "buying season" and throw your budget and your money out the proverbial window. Don't. Do. It. While I certainly suggested in an earlier post to take advantage of good deals that stores are offering and to buy things for the lowest amount that you can, it does not mean blowing your budget on things you don't need.

Many of us are good all year long with setting a budget and trying hard to stick to it by not shopping, using coupons when we do, doing our research on big purchases, and setting a limit on what we will spend on frivolous items, but then Christmas comes, and all of the hard work we've done all year gets lost in a few weeks' buying binge.

At this time of year, try not to get sucked into all of these great deals. A $47 portable DVD player is NOT a good deal unless you were already in the market for one and it is the lowest price you've seen for the brand you wanted. If it's just a great deal on something you weren't going to get then it is a waste of money.

My advice? Like advice I've given earlier, just don't go shopping. It's the easiest way NOT to spend money. But if you must go because you are buying something you planned to buy, ignore the glow of the bright lights, the alluring sounds of "lowest price of the year" and the influence of everyone else throwing things into their shopping carts. Say to yourself, "I will save money this year. I've been good all year. I won't blow it now." Christmas seems to be the downfall of many people when all spending plans and good intentions go out the window. And then when January comes and brings the bills, reality sets in. And it also starts us out on the wrong foot for next year's budget.

So please this holiday season, remember what you've worked hard on all year and try not to get dazzled by all of the sales. It's all just stuff most of which we don't need. Take a second look at your budget for this year, look at the gift category and try hard not to go over it. And on December 31 when we are making a new budget for next year and calculating how much you managed to save this year, you will be happy.

In Real Life (IRL) - I had no intention of going shopping on Black Friday. We are visiting my folks in suburban Philadelphia, and we actually planned on taking the kids to some historic sights like the Liberty Bell and Betsy Ross' house. But my husband has been under the weather and the real weather was quite cold, so we put those plans on hold until our springtime visit. So as we sat around my parents' home, my oldest daughter began to look through the sale circulars. Wow, I'm glad we don't get the newspaper at my house anymore because they are tempting! My daughter had gotten a gift card to Target for her birthday. She wanted to buy something with it, and saw a craft that she liked in the Target circular. So rather than relish in our nation's history I joined the masses at Target on Friday morning.

We did NOT go at 4 am! We actually drove over there at 10 am. And while it was a very crowded parking lot, the store was prepared for the number of people it expected. We found my daughter's craft, and we should have been on our merry way. But being it was an opportunity for me to shop freely without my 2 and 4 year old and because I very rarely go to Target because it's farther from my house than I like to shop, I will admit that I succommed to the shopping frenzy that was Black Friday. All the shoppers seemed to be running around trying to find any of the great 4 am doorbusters that were still left. And it was easy to get caught up in the excitement. I admit it, I did. I ended up spending $50. Admittedly, some of the stuff were things we needed - socks, shoes, and underwear for my daughter. But some of the things were not on my need to buy list - two DVDs, two one-dollar gifts for my younger children, a very cute dress for my younger daughter (really not needed) and a gift (same craft my daughter bought) for a future unknown birthday party my daughter will be going to. And while the socks, shoes, and underwear were on my mental list for quite some time, none of the other things were.

Because of my recent experience, I can see how easy it is to buy when we go to the stores. And that's why I still stick by my earlier advice of staying out of them. But it's hard this time of year when we have presents to purchase. So, this "in real life" example follows the old adage of do as I say not as I do. Please, don't get caught up in the excitement of holiday shopping. It will only leave you with less money in your pocket. I speak from experience. I am $47 richer than I could have been, though. Target was all out of $47 DVD players. Ask me how I know. Oh, and one of the DVDs is going back.

Monday, November 23, 2009

Give Your Kids An Allowance

Tip #210 - Give Your Kids An Allowance. Giving your children money allows them to have practice with it. And their having it, using it, losing it and experiencing spending it will hopefully lead them to using money wisely when they are older. If a child doesn’t use money on a regular basis until he gets a job when he is fifteen or sixteen years old, how can we expect him to know what to do with it when he is an adult at 18 or 21 with just a few short years’ experience? It is only with practice that a child will get better at spending and managing money. Like with most other things, it takes practice and experience to learn how to handle money. If you agree with me on the above points, you might have some questions about giving an allowance to your children.

Should Children Earn Their Money? Some parents feel that allowance should be tied to chores or extra jobs around the house because that’s more realistic how adults earn money in the real world. Others say it’s okay to give them a set amount on a regular basis for nothing in return. After all, chores are expected to be done regardless, and the money is a separate learning opportunity. I don’t think there’s anything wrong with giving children money for doing nothing in return. After all we give them clothes and food for nothing in return. That’s not realistic in the real world either. But regardless of whether you decide to tie money to chores or not, the most important thing is getting your kids to start handling money when they’re young.

At what age is a good age to start doling out allowances? It seems most experts suggest about age 5 or 6. Of course some of it might depend on your child’s personality and maturity. In their younger years, the child may not have much understanding of how to use money, and it may just accumulate in their piggy bank. By the time they are 7 or 8 years old, however, I guarantee that most children will have many plans for their money. And that’s when the teaching opportunities will abound.

How much money is the right amount to give? A lot depends on your family’s income and what your spending habits and values are like. A millionaire family may feel comfortable giving their child $10 per week, while a working-class family might choose to give $1 or $2. Also, you may want to think about what your child will be buying with the money you give her. If you expect her to buy lunches at school or clothes, you might want to give more. If you are just giving it to her for extras like candy and toys, then you might give less. The younger the child, the less they need, in general. Overall, a few dollars per week is probably more than enough for most children under 10.

Should we tell the child what to do with their money? I think it’s best to guide your children in their use of it, but don’t force them in how to spend it. It’s often the mistakes we make that are the greatest learning experiences. Many people tell their children they can spend half and have to save half. Some families make their children put their money in three categories of money – spend, share, and give. While I like the concept of both ideas; I don’t think we should make our kids do anything with their money since it is, after all, their money. Instead, making suggestions of how they might manage their money is better. Teach them that saving money will lead them to having the ability to buy bigger items at a later date. Share with them that there are others who are less fortunate than we are, and that it’s a good idea to share a certain percentage with charities. Explain how you the parents manage your money – how you divide your spending, saving, and giving, and encourage them to do the save. Giving children money is a teaching opportunity. And guiding their use of it is a better teaching tool than forcing them how to spend it.

Not everyone believes in giving children allowances, but when you look at the overall expense of it – it could be less than $100 per year – the learning opportunities it presents are worth it. We give our children clothes and toys and expect them to take care of them by treating them with care. We give them jobs to do and hope they’ll learn how to properly set a table or rake a lawn. Then why not give them money and encourage them to manage it well? How else will they learn if not by giving them a hands-on opportunity to do so?

In Real Life (IRL) – Our three children are ages 8, 4 ½, and 2. We started giving my oldest daughter an allowance when she started kindergarten at age 5 ½. But she wasn’t really interested in the money, and her lack of interest led us to me less than consistent with giving the money to her. But as she approached age 7, her understanding of money increased dramatically. She started asking for things that were more than I wanted to give her. And I figured out it was time for her to have some spending money of her own. My husband and I devised a plan. Every Friday before we usher in Shabbat, we would give each of our children an allowance. Deciding an appropriate amount presented a challenge – we didn’t want to give a lavish amount but enough that she could build up her earnings to buy something nice if she wanted to or buy some small frivolous items more frequently.

We came up with a system – for each number of years old they are, they get a quarter. So our 7-year old daughter would get $1.75. Our 4-year old would get $1, and our 2-year old would get 50 cents. When our 7-year old turned 8 two weeks ago, she began getting $2 per week. Our total expenses for the year for giving allowances – about $175 – not bad for the teaching opportunity it presents us. We feel by the time she was 16, $4 per week will be more than adequate, and she can supplement it with a summer job, babysitting, or something similar. By the time she is ready to go off on her own, we will hopefully have prepared her well enough to manage her money.

Obviously, our 2-year old has no understanding of the money given him. We just deposit 50 cents in his piggy bank each Friday. Our 4 ½ year old understands that money is worth something, and enjoys receiving the dollar and putting it in her bank, but has not asked about spending it yet. Our 8-year old, on the other hand, discusses each week how she will be spending her money. She discusses her ideas with me, asks me how much things cost. She questions how long it will take for her to save for a certain item – a camera, a doll, etc. And she never forgets on Friday afternoon to remind us that it is allowance time. While I haven’t forced her how she must spend her money, I have disallowed a few items that she asked to save for that I felt were inappropriate. She has shown some interest in sharing some of her money – but to date only those she knows – like her sister or her friends. She has bought some things with the money she has earned, and she has saved a good portion of it, too. She enjoys thinking about how she will spend it someday – and her ideas of how it will get spent often changes on a daily basis.

While I am obviously not an expert on how allowance works – I haven’t done studies on thousands of children to see if those who receive allowance as children do better managing money than those who don’t. I cannot imagine that the experience we are giving her with money cannot be doing anything but helping her. If she wastes her money, she will learn how long it took to earn it only to be lost on something useless. If she saves up for something nice, she will learn the patience it took to save for that item. Having her own small amount of money to manage will hopefully teach her how to take charge of large amounts of money when she’s older. Do any of my readers give allowances? Care to share your experiences?

Thursday, November 19, 2009

Bring Your Coupons And Play The Game

Tip #209 - Bring Your Coupons And Play The Game. Today’s merchant business seems to rely heavily on different types of promotions, specials, coupons, and other gimmicks to get us to buy things. Years ago, this did not happen with the frequency that it does today. In the past, department stores had sales maybe once per season. Coupons for grocery stores equaled only 5 cents, 7 cents, or maybe a dime. Every once in awhile a grocery store would do a promotion for totaling up receipts to get a free turkey or to buy dishes. But on most days purchases were straight out purchases without gimmicks attached. Nowadays, promotions take place more often than not. And they are more confusing than ever – buy two packs of cookies, get a milk free; spend $200 over the next three months and get 10 cents off gas; 40% off sale and 25% off that with a coupon. It gets more and more confusing to figure out what to buy, how to buy, and what it will cost when you get to the register.

I did a post a few weeks ago about how to calculate percentages and I’ve done a post or two on doing research before you buy. And it is because of all of these types of promotions that stores have that these two tasks are important. Well with Christmas sales coming up the promotions, deals and specials have gotten bumped up a notch. And if you want to get the best price on an item that you’ve researched and know you want to buy, then you need to play the game the retailers are throwing at us.

Retailers like using gimmicks and promotions to drum up business and get people excited, but they count on only a small percentage of people to actually follow through with their promotion or for customers to buy enough other things in their store to make the loss on their promotion items worthwhile. If they want to play that game then we can, too. Take advantage of what they offer. Just make sure you are buying stuff that you would have bought anyway!

So, before you go to the stores, look at their flyers. Read the fine print about stores’ gimmicks so you don’t get stuck buying something that isn’t covered by a promotion that you thought was covered. Make sure you follow any games, promotions, and gimmicks correctly – sometimes the details are confusing. Bring any coupons you cut out from newspaper inserts with you to the store. Look for coupons in other places such as directly inside the newspaper, magazines and in mailers that come in your mailbox. Find out the stores’ policies on accepting competitors’ coupons.

If you don’t get a newspaper with flyers inside, then look online. Most stores have their circulars posted on their website. Do an Internet search for coupons for the stores you are considering. Look at the store’s competitors’ sites to see if they have coupons you can use. This early in the season look at Black Friday sites to see if what you want to buy will be cheaper on the busiest shopping day of the year. Go to to read about any online coupons for that store – it might be cheaper to buy it online and have it shipped to the store for pickup.

I am not one to encourage shopping for unnecessary things or to buy things because they are free or a very good price. But if you are in need of something – small appliances, gifts for family or friends, or whatever, now is the time to take advantage of some of the deals that retailers are offering.

In Real Life (IRL) – I like to get a bargain as much as the next person. But I will admit that sometimes it takes hard work. Since I don’t shop that often any more I no longer look so hard for the games and gimmicks that I liked to do when I was younger. Yes, it was time consuming to look for the coupons or get up early on Black Friday, but if it saved me money, it was worth it to me.

These days I don’t shop at retail stores so much. I rarely go to the mall. But with two daughters who like to do crafts, as a mom who likes to throw fun birthday parties, and as a Girl Scout leader of my daughter’s Brownie troop, I find myself shopping at Michael’s quite frequently. And that is one store where I refuse to pay full price. It’s amazing to me that at any time I can get 40% off most items in their store. I would be stupid to go in there and pay full price. The catch is that they don’t offer 40% off coupons every week. So if I am in need of something from the store, I either have to be patient for their next coupon offering or I have to give in and pay full price. Right?

Wrong. In our area, there is a competitor store to Michaels called AC Moore. I know in other areas Hobby Lobby and Joanne's are competitors. AC Moore is a great store, but much less convenient to where I live. But the great thing about Michael’s is that they accept competitors’ coupons. Since AC Moore competes with them in this area, Michael's takes their coupons. And AC Moore has coupons every week and online. This means I can print out a coupon every day and go to Michael’s to pick up an item. Since Michael’s is less than 1 mile from my house, it makes it worth it even factoring gas in if I decide to drive. Sometimes I bring my oldest daughter with me and we each use a coupon. For a couple weeks before a birthday party, I will shop there once a day, using a coupon for one item per day. Why not? They’re offering it, so I’ll take it.

It gets even better than that, though. Our Michael’s (and each one is different) does not accept their coupons for books. But, when I asked the cashier about it she said they WILL accept competitors’ coupons for books. Can’t beat that! This makes for some nice and pretty reasonable birthday presents. Many times, especially around the holidays, there will be 50% off coupons from both AC Moore and Michael’s. I like to save any big purchases I want from those stores for days when they offer that coupon.

Other places I have taken advantage of gimmicks is the supermarket. One of our local markets sells gas and for a while they were giving 10 cents off per gallon for every $100 spent at the store. Now I realize that is only $1.50 off a full tank fill-up for spending $100 or a 1.5% savings. But when I was shopping there anyway it made for a nice gas savings as long as I paid attention to the date it expired and used it before then. Some things they offer clearly aren’t worth it to me, so I don’t take advantage of the promotion unless I was buying certain products anyway.

But it pays to look at the various stores that you like to shop at to see what promotions they are having that do appeal to you and make sense with your needs. Especially this time of year, the gimmicks abound. If they work for you, take advantage of them. Again, only use them for things you were planning to buy anyway! For other frugal ideas, check out Frugal Fridays.

Monday, November 16, 2009

Follow Through With Your Savings Plans

Saving Money Tip #208 - Follow Through With Your Savings Plans. In one of the first Seinfeld episodes, Jerry’s friend Kramer is staying at Jerry’s apartment when it gets burglarized. Jerry and his friends cannot understand how someone could have broken in because Jerry has about 18 dozen locks on his door including the super foolproof Kryptonite lock (or something like that). But finally Jerry puts two and two together and figures out that the reason the locks didn't work was because Kramer didn’t close the door. Duh, all of the best locks in the world won't work unless we follow through and close the door.

And like the closing the door so the locks can work, we need to follow-through on our savings plans for them to work. We can have them all written out on paper so they look great. We can buy the savings envelopes to use for our budget categories. We can have the spreadsheet written up with how much we’re going to spend (and save). And we can have the best ideas in the world for income and keeping money in our own pockets, but unless we follow through with these plans, they won’t work.

We need to actually need to use the envelopes for our budget categories (if that’s our plan) and we actually have to follow our goals such as bring lunch everyday to work, and it’s imperative that we use the coupons that we cut out. Otherwise, all of our planning and ideas are just a waste of time.

Yes, this advice sounds cliché, and it is. But the reason sayings become clichés is because they are usually true. How many things do you have on your “to do” list in order to save money or make money that you haven’t gotten around to? Is one of your goals to make more money by getting a seasonal job? Then why haven’t you filled out the employment applications yet? Did you plan to only eat out once a week by having meals prepared in advance and at the ready when you get home from work? Then start cooking! Did you hope to curb spending by not shopping on the weekend? Then make plans for other, cheaper activities.

Sometimes we all have grandiose plans, but until we follow through with them, they won’t work. Take the first step and look at your plans. Organize stuff for a garage sale; make some meals; cut some coupons; apply for a job; send money away to a mutual fund account. None of your savings goals will come to fruition unless you follow through. Oh, and don’t forget to lock the door on the way out.

In Real Life (IRL) – I am as guilty as the rest of the crowd of putting off things that I need to do or not following up with some of my plans. But two events stuck out this weekend that made me think of this topic for a blog post today. First, I was checking our credit card statement when I saw a charge for $300 from a few days earlier. Thinking my husband had some work done on the car that he mentioned being needed, I asked him about it. “Oh, that’s the new lawnmower I bought,” he replied. I was shocked because although I knew our lawnmower had just died, I didn’t realize that he had gone out and bought a new one. I will admit that I am the more frugal, money saving half in our couple, and I had talked to my husband about discussing any purchases over $50 before they were bought. In addition, when I intend to make a large purchase, I like to research which one I want to buy and then find the best price. My “gotta have it yesterday” husband does things differently. He’ll check out a few stores and pick out what he likes best. We had a similar situation happen last year over a vacuum and he assured me he would consult me with future purchases so I can do research first. But he didn’t. So that’s one thing on our financial plan that we did not follow through with. Maybe we would have saved $50 or maybe we would have gotten a better lawn mower for the same price. I’ll never know. What I do know is that had we followed our laid-out plan, we’d probably be slightly better off financially.

The second thing that happened this weekend was I finally got around to listing some items on Craigslist and eBay. My written down goal at the beginning of the year was to list five items per week on eBay or similar site. And when I follow that goal, I make some decent extra money. But I will fully admit that I have been lazy lately. I bought some items that I knew I could make money on, but they were just laying around the house. I had something to list on Craigslist from our dog who died back in April. It was just taking up room in our garage. Other than pure laziness, I had no excuse not to be following through on this income-earning goal of mine. I finally got around to listing a few items at the end of last week and have already sold two and have bids on the third item. I will admit that selling some items provides motivation to sell more. So hopefully I will continue to list things.

Both of these events sparked the idea in my head for this post. If we are not following through with our plans and goals, then the outcome we want won’t happen. Just like buying the best locks in the world won’t keep the burglars away if we don't close the door. Look at your goals for saving money and then figure out which ones you have not done. Then work hard on doing what you set out to do. Follow-through is the only way to meet your goals.

Thursday, November 12, 2009

Send A Gift; Save On Postage

Tip #207 - Send A Gift; Save on Postage. It is that time of year again – the holidays are around the corner and the post office lines will be that way, too, soon. As November and December approach, more and more people are will be sending gifts to family and friends across the country and around the world. If you only send packages sporadically, it can sometimes be overwhelming on how to send it – First class? Parcel? Overnight? Which method is quickest, and maybe more importantly, which is cheapest?

As a seller on eBay, I have wrapped and sent my fair share of packages, so I will share some information I have learned over the years about shipping items. Generally, the quicker you want an item to get to its recipient, the more expensive it is. But not always. Express Mail is like overnight delivery and that is almost always the most expensive. I have never shipped anything this way, but if you need something to get somewhere in a huge hurry, then this is the way to go if you want to stick with the US Postal Service. There are other shipping options besides the USPS, such as UPS and FedEx, so you’ll want to compare prices. If it absolutely, positively has to be there overnight, FedEx might be the way to go. I used to ship items with FedEx on a daily basis through work and have been very satisfied with their service. Another time when I like to compare prices with the Post Office is when I have large, oversized packages. We have found that FedEx or UPS can often be a better deal than the Post Office in these cases.

But suppose you want to just ship a present of a winter scarf to Great Aunt Ida across the country. Let’s assume you are organized and have allowed plenty of time for it to arrive and you wish to pay as little as possible. Parcel Post is generally the cheapest way to ship a package if you have the time, but there are exceptions. If an item is 13 ounces or less (you can check it on a scale at the post office) you can ship it first class mail package. For an item that light, first class mail package is the way to go. If the item is heavier than 13 ounces, though, Parcel Post is usually the cheapest way to go.

If you are not so organized and want to get something to someone in a few days, then Priority Mail is your best bet. It should take 2-3 days to get anywhere in the country. Cost is based on weight and distance from your house. The other nice thing about Priority Mail is that the Post Office provides the box or envelope for you to ship it in. If you don’t have a box lying around or somewhere to pick one up, then this alone might make Priority Mail worthwhile. Priority Mail prices start at just under $5. However, there is another Priority Mail option that might be better. They have something called Priority Flat Rate which is what it says it is – a flat rate for a specific sized box. A small Flat Rate Box is about $5, a medium box is about $10, and a large box is about $14 to anywhere in the country. So, if you have a very heavy item that is small, a Flat Rate Box might be your best option – possibly even better than Parcel Post.

The best deal for shipping items, however, has to be Media Mail. Media Mail is reserved for sending media – books, DVDs, CDs, and other media types (no magazines or other materials that contain advertising). Media mail is a great bargain regardless of the weight. Send ten pounds of books across the county and it would cost almost $30 for Priority mail; about half that at $16 and some change for Parcel Post, while it’s just under $6 for Media Mail. So if you are considering a gift and don’t want to spend a lot in postage, think about sending media.

The last piece of advice I have for shipping items is to look to buy items online. If prices are the same or better including shipping when compared to a brick and mortar store, then it pays to buy the item and have it shipped directly to the recipient. It beats paying for shipping twice.

The cost of postage has increased quite a bit in recent years, so make sure you take it into consideration when buying a gift for someone far away. And then look at all of your shipping options at the USPS website before sending off your gift.

In Real Life (IRL) – As I said, I have a lot of experience shipping items from my eBay business. As with everything else, there was a learning curve that came along with packing and shipping. Fortunately with all shipping options being online, it is much easier to compare shipping rates. In addition to the actual packing and shipping, my experience comes in handy at the point of purchase. I have learned to look for gifts that are cheap to ship.

--Books make great gifts because I can send them cheaply. Same goes for DVDs, computer games, and CDs.
--The smaller the item, the better. Priority Mail charges extra if the size is above a certain dimension. And if it’s small enough to go Flat Rate, you can save a bundle.
--The lighter the item, the better. Shipping a souvenir t-shirt is preferable to shipping a pound of salt water taffy.

I have also learned how to save even more money.

--If you are computer savvy, set up an online account at the post office. You can get discounts by print your labels at home.
--By printing labels at home, you can often leave your packages with your mail carrier and save a trip to the post office.

So for this upcoming holiday season, make sure that if you are trying to save money, you consider the shipping costs as well as the cost of the gift. No matter how good of a deal it is, it’s not worth it if the cost of shipping is going to be astronomical. For more frugal ideas, check out Frugal Fridays.

Monday, November 9, 2009

Hold A Party At Home

Tip #206 - Hold A Party At Home. One of the main ways to keep costs down on anything is to do it yourself. But there are some things you really want to consult an expert for. Heart surgery? Probably want an experienced surgeon to do that. Rebuild a transmission on your car? Probably want an expert for that too. But how about cleaning the house, mowing the lawn, painting a room, cooking meals, or running a party? All of these things are activities that a reasonably fit, active person could do. It may take some time to do them. And there may be a bit of a learning curve, but it can be done by YOU for much less than the professionals. This is one area that most frugal people will agree – the more you do yourself the more you save money, especially if you have more time than money.

One thing you may do a lot of, especially if you have several children is hold birthday parties. And once you have thrown one party, you have thrown them all. They all follow the same general game plan. Once you have a theme, make an itinerary: a game(s) or activity, a craft, and food – either a meal or cake and ice cream. Then when you have the general layout for the party, you can plan the details.

The nice thing about giving lots of parties is the more you give them, the less cost each one entails because items can be used over and over again. Instead of a one-time use plastic tablecloth, buy a nice flannel-backed one that can be reused. Plates in general colors can be used for multiple parties – so buy a bulk package. Leftover craft supplies and party favors can be used for future parties. Games can be played more than once.

So, let’s talk about some examples. If your youngest daughter wants a Dora party, you may do an activity like a treasure hunt that Dora goes on. A craft might be one with a Mexican theme. And a piñata may round out the party. Serve some cake and ice cream on brightly colored paper goods and the party is done. Suppose your next party is for your oldest daughter and is a princess party – mix in some red paper plates from the Dora party with some pink ones. Red and pink make a very pretty, feminine combination. Use the same tablecloth from the previous child’s party. Some favors from the previous party’s goody bag might translate well into game prizes for a few of the children. Cups that are clear that were bought in bulk for the previous party can be used again. Suppose you son wants a Spiderman party for his birthday, red paper plates from the same package can still be used, along with the same tablecloth. Mix it in with some Spiderman-themed decorations, and guests are none the wiser. Use the same moonbounce for all three parties, and the cost per use is suddenly quite small. Cook food yourself in advance, make decorations on your own, and shop all year for small party favors, and you can do a party yourself quite cheaply. Best of all, parties you hold yourself are unique. Kids will enjoy going to a party that hasn’t been done over and over again. You will enjoy having more money in your pocket.

In Real Life (IRL) – We held my oldest daughter’s 8th birthday yesterday. We had 16 children at our house including my two daughters and kept our party cost to $125. Now that may sound like a lot of money. And yes, I could have done it cheaper – much cheaper, but I chose to buy pizza from a favorite, local, NY-style pizza place, and my daughter wanted a store-bought ice-cream cake, which often costs more than regular cakes, and especially more than baking one yourself. Had I done away with feeding the kids dinner and made the cake myself, the whole party would have cost about $50!

In the past few years, my daughter has been invited to several Chuck-E-Cheese parties, many Build-A-Bear parties, too-many-to-count gymnastics parties and the a few bowling and swim parties mixed in. Frankly, these parties are expensive. I know; I’ve looked into them. $250 for a gymnastics party for up to 20 children is the norm. That does not include cake or party favors. When all is said and done, a birthday party could end up costing well over $300. That’s not what I want to spend on a child’s birthday party – especially when I have three children. And if I were to spend that much, I’d want it to be unique – not a party that everyone else has.

Our carnival party was different than most other parties we’ve been to. And even though we have been to a couple of carnival-themed parties, we were able to make ours unique because we planned it ourselves, using our creativity and materials that we had on hand. We didn’t rely on a chain store, mass-produced idea. So what did we do for $125? I’ll break it down:

$0 – Invitations (I sent these electronically for the first time, saving about $7 in stamps plus the cost of the invitation)
$48 - Pizza Dinner From Local Pizza Place (could have easily been cut out if I wanted to)
$23 - Ice Cream Cake from Supermarket (could have been cheaper by baking a cake)
$1 – Plates (only needed some dinner plates; used leftover cake plates, cups, and napkins from previous parties)
$3 – Neon Poster Board for signs (bought with coupons at Michael’s)
$2 – Popcorn bags (bought with coupons at Michael’s)
$1.75 – Popped popcorn (using kernals and butter we had; cost estimated)
$0 – Goody Bags (left over from previous party)
$18 – Prizes for each of the games that became the party favors (bought throughout the year on clearance and at thrift stores. For slightly more than $1 per person, each child received a Duncan Yo-Yo, a tin box, a fancy pencil, a sheet of stickers, and some fun carnival candy buttons and Pixie Sticks
$12.50 – Bead craft (bought with coupons at Michael’s, with plenty left over to use at a future party)
$.25 – Tickets for the kids to use for each game (bought at yard sale)
$1 – Moonbounce (original cost years ago was $25 at a thrift store – been used well over two dozen times that the cost per use is now under $1)
$0 – 5 Carnival Games (Three were kids' toys we had in the house – a bowling set, a Whack-the-Mole Game and a ring-toss game. The other two were handmade – penny pitch into cut out milk cartons, and a bean-bag toss into a foam board clown with holes, made for a previous party and reused)
$3 – Tattoos
$2.50 – Face Paints
$10 – help for two hours from the teenage girl across the street

Total cost for entertaining and feeding 16 children for 3 hours - $126 or less than $8 per child. Again, I could have easily cut the cost down by not serving dinner or serving homemade food for much less, but it’s not something I wanted to do. But as you can see, food was the biggest part of our budget so it would easily be cheaper without some of it.

Parties really are much less expensive to do at home. It does take a fair amount of work along with some creativity, but as I mentioned earlier, once you do one party, you just have to change a few details to do the rest of them, and it becomes quite easy to handle. Why not try to plan one yourself? (Or you can always call Chuck-E-Cheese and spend twice as much. :-))

Thursday, November 5, 2009

Get Ready For Open Season - Part 3

Tip # 205 - Get Ready For Open Season – Part 3. In this series we are discussing getting prepared for the open season enrollment that usually occur in places of employment this time of year. In Part 1 of this series, we discussed health care options, and in Part 2 we discussed the 401(k). In this last part of the series we will discuss other insurance options you may have such as life insurance, disability insurance, or a FLEX plan.

Some companies provide a certain level of life insurance to their employees – oftentimes it’s twice the salary they are making. If you are single with no dependents, that is probably enough life insurance to carry. On the other hand, if you have a family dependent on you and you lose your life, then twice your salary is likely not enough to take care of your family if you should die. Now the question becomes, do you buy the insurance through your company at open season or do you buy a policy on your own? I think a lot depends on how long you hope to stay at your job. If you buy insurance through them and then leave in five years, you will need to pick up life insurance on your own, if you still wish to carry it. The older you are, the more expensive it is, and the harder it may be to obtain. If that’s the case, it may be more beneficial to you to buy a term policy on your own and not buy any extra through your company. On the other hand, if you plan to stay at your company until you retire and you have no reason to think they will let you go, then buying life insurance through the company might be an option for you. But before you buy, make sure you shop around on your own; you may find that you can get a better or as good of a price on your own. If that’s the case, it’s probably better to buy a term policy on your own.

Disability insurance is another option that some companies offer during open enrollment. Again, they may carry a minimum amount for you as a standard benefit, and then give you the option to buy more if you wish. Like life insurance, this is a personal decision that you have to evaluate whether it’s worth getting or not. Insurance is often described by people as a “necessary evil.” No one wants to buy it, but if something happens to you, then you are glad you have it. Each person has to do what he feels comfortable with. Obviously insurance companies make money off policyholders, and they use actuarial tables to figure out how much to charge based on the likelihood of something happening to you. In other words, the company is betting that something won’t happen to you, while the person is buying insurance is betting that something will. If you like to cover all bases, then the disability insurance might be something you want. If you feel you will be able to work no matter what happens, then don’t buy it. If you decide that you do want extra disability insurance, then again shop around before you buy through your company.

A company may also offer what is known as a FLEX plan, which is basically a plan that allows you to set aside money in advance to pay for most medical expenses or dependent coverage you incur throughout the upcoming year without paying taxes on it. The difficult thing to decide is how much you want to set aside for this plan. If you set aside too much, you lose what you don't use. If you set aside too little, then you are not taking full advantage of it. These are good plans, in general, to be a part of if you are not getting a tax break on these expenses elsewhere. And there is usually no cost to belong, other than the money you are setting aside in advance for these expenses.

In general, when open enrollment starts, make sure you study your choices carefully. Talk to others within your company to hear experiences they have had with some of the companies and types of benefits offered. Look at your budget and figure out what will and won’t fit into it. And finally, shop around outside your company. Just because your employer offers you something, doesn’t mean it will be the best deal. Whatever you do, don’t wait until the due date to decide what you want. Take time to select your options.

In Real Life (IRL) – As I mentioned many times before, my husband’s company got taken over in April. And at that time, we were presented with a whole bunch of benefits that they offered – most of them for a price. It was much more than what his old company offered, so it took a lot more work on our part to make our decisions. There were various levels of heath insurance – regular and expanded benefits, as well as optional dental benefits – regular and expanded. Ugh, how could we predict whether one of us will need a root canal in the next year? And if so, would our costs be greater than the monthly premiums?

Then we had the additional options of disability insurance and extra life insurance. After evaluating everything, and knowing our selections were only for three-fourths of the year, we declined both. On the other hand, it made us realize that we needed extra life insurance. But when we compared prices on our own to what the company offered, there wasn’t much of a difference. So we ended up getting some term policies with an outside company, And this way if my husband leaves or is let go of his job, we don’t have to worry about applying for life insurance again. And although we declined the disability insurance, we are going to reevaluate it again this open enrollment. My brother-in-law recently had to utilize his disability insurance when a car accident left him unable to do his job. While I am not one to buy insurance to cover every potential problem down the road, it is something we are going to seriously consider. We haven’t decided yet whether or not we will buy it.

We have taken advantage of the FLEX plan for medical expenses. It was hard to guess how much we would use for 9 months out of the year. But now that we've had some experience with it, we are hoping we can make a better estimate in this enrollment season. We are taking the next few weeks to do research on all of our open enrollment options so we can hopefully make the best decision for our family this season. I hope you will do the same. For other ideas on being smart with your money, check out Frugal Fridays.

Tuesday, November 3, 2009

Get Ready For Open Season - Part 2

Saving Money Tip #204 - Get Ready For Open Season – Part 2. In this series we are discussing getting prepared for the open season enrollment that usually occur in places of employment this time of year. In Part 1 of this series, we discussed health care options. Today we will discuss the 401(k). For those who are not too familiar with the 401(k), it is a vehicle offered by many companies so that their employees will put money away for retirement. In days long gone, most companies offered what was called a pension or a defined benefit plan. After an employee put in a certain number of years of service, he would be eligible to receive a certain amount of money (defined benefit) when he reached retirement age. The more years of service the employee put in, the higher his benefit would be. A generation ago, many people did not have to worry about saving for retirement because their company often did it for them and guaranteed that they would receive a set amount of money at retirement age. Employees didn’t have to worry about how the stock market was doing or what the ups and downs for the economy were, they knew they were getting x number of dollars at a certain age with which to retire on.

Sadly, those days are mostly long over. Most companies have done away with the traditional pension plan, and instead, today, offer the 401(k) plan. The 401(k) plan puts the responsibility of saving for retirement on the employee. If you don’t contribute to a 401(k) or do other savings on your own, you will not have money to retire (other than Social Security from the government). A 401(k) is considered a defined contribution plan because there is no guaranteed benefit, the system is based on contributions. By law for 2009, a person cannot contribute more than $16,500 annually to a 401(k) – a bit more if you are over 50. (A company, however, can restrict that contribution even further. They may say you can only put in up to 15% of your salary or you can put in a maximum of $10,000 per year. There are some laws the company has to follow regarding how much can you put in.) Most companies will offer some type of match as an incentive for you to make contributions. It might be a dollar for dollar match on the first 3% of your salary that you put in. Or it might be a 25% match for everything you put in. Most companies have one or maybe two investment firms that they use to handle their employees’ 401(k) investments.

When you receive your 401(k) information consider it carefully. Unless you want to be working well into your 70’s or however long you live, you really want to put money away for retirement no matter your age now. The earlier you start to invest, the more your money will accumulate. And 401(k) plans make it easy to invest. Money that you contribute to the plan comes out pre-tax just from your paycheck just like health insurance co-payments through your company do. This will lessen your tax burden at tax time. You will not be required to pay tax on these contributions until you are of retirement age or take the money out. This allows you to have more money up front for investing. In addition, any money that the company matches you is “free” money. If they offer a dollar for dollar match on the first 3% of contributions, and you turn it down, you are essentially turning down a 3% salary raise.

Don’t make the mistake of some people I know and not invest because you don’t understand what a 401(k) plan is, because you don’t trust it, or because retirement is a long time off. Once you start making the contributions you will adjust to your salary that you do receive, so that you won’t even miss the money that much. But at year-end, and especially after a few years go by, you will be amazed at how much you have saved.

Make sure you look over your investment choices carefully before making decisions. Most companies offer an a la carte selection with stock mutual funds, bond mutual funds, some money market accounts, and possibly some company stock. If retirement is more than 20 years away, you can afford to have your money in higher risk investments like stock mutual funds, but if you are not comfortable with that level of investing yet, then go ahead and put some of it in a money market account, or put only a smaller portion of it in some stock mutual funds. Some people like to be conservative with their contributions and use their company match for the riskier investments. Overall, I like a balanced approach with a mix of investment types, but for new investors, you need to do what is comfortable for you.

Many companies will offer some investment seminars so you can learn more about risk, or you can read through some other blog posts I have done on retirement topics here and here. I have also discussed it in other places in my blog - look in the retirement category. But one piece of advice I strongly give is whatever you do, invest in your 401(k), at a minimum up to the company’s match. Unless you are drowning in debt and are thousands and thousands of dollars in the hole, there is no reason not to be contributing, and even then I might contribute up to the company match.

In Real Life (IRL) –
I have mentioned many times on this blog that when I was first introduced to the 401(k) at my workplace, it held little interest for me. After all, I was 22 and retirement was very far off. But an older co-worker who was close to retirement age urged me to at least contribute up to the company match which was dollar for dollar on the first 3%. So that is what I did the first year I was eligible. After that first year, I was advised by my dad to up my contributions to the full amount I was allowed, which was 13% of my salary. And I did that, too. I will be frank with some dollar figures here. I started that job making under $20,000. I became eligible to invest in the 401(k) after one year of service. I worked at that company for 9 years, and left the company making approximately $37,000. So I saved between 3% and 13% of my salary of between $20,000 and $37,000 for 8 years. My company upped the match to 4% at some point in there. I have not done a thing with the money I put into that company’s 401(k) since I left the company 11 years ago. When I checked that account at the end of last quarter I was $18 shy of $75,000 in that account.

So by putting between $600 per year to $4800 per year into an account for 8 years and having the company match some of that money I have built up a savings for retirement of $75,000. Not bad for a quick decision at open enrollment time. Had I not done this, the hundreds of dollars I would have gotten each year minus taxes that I would have paid on it could have easily gotten eaten up in entertainment, eating out, and frivolous spending. Instead, I started a nice little nest egg for retirement.

Your company is not going to be saving for your retirement anymore, so why not start doing it for yourself this enrollment season? At the very least, put in at least as much as the company will match, and if you are able and willing, put in the maximum your company will allow.

Sunday, November 1, 2009

Get Ready For Open Season - Part 1

Saving Money Tip #203 - Get Ready For Open Season – Part 1. For those people who work at a decent-sized company, open season is coming upon us. Open season is the one time per year that you are allowed to make changes to your health insurance, your 401(k) contributions, any life insurance or disability insurance that is offered, and any changes to your FLEX plan. You may be given several choices in each of these areas. And the decisions that you make in the next month regarding open season will affect your next year's budget and expenses. So choose them wisely. Look over all of your options and make informed, educated decisions. Not everyone has all of the choices mentioned above, but many companies offer at least some of these.

Let’s start by talking about health insurance. If you have health insurance choices at your company, take the time to study each one. The most popular plans you often can choose between are an HMO (Health Maintenance Organization) and a Preferred Provider Organization (PPO). The plan you choose can make a big impact on which doctors you can visit and how much you spend.

First let’s discuss HMOs. Usually the HMO involves smaller out-of-pocket costs than a PPO. These lower costs come in the form of the monthly fee that you pay to your company to be part of this insurance plan. In addition, co-pays at the doctors’ offices are usually cheaper. However, the disadvantage of the HMO plan is that you are locked in to a smaller number of doctors who are part of your HMO plan. Also, you must select a primary care physician to act as a gatekeeper for any specialists you may need to see. For example, if you have a bad rash on your face and want to go to see a dermatologist, you first need to see your primary care physician who needs to provide a referral to you for you to see the dermatologist. If you don’t see your primary care physician first, you may find yourself responsible for all of the dermatologist’s fees – not just the co-pay. There are variations to each HMO, though, so make sure you understand exactly how yours works.

The PPO is usually more expensive than an HMO. The monthly fee deducted from your paycheck is usually higher. In addition, co-pays at the doctors’ offices are sometimes higher. The advantage is that you usually have a wider variety of doctors to choose from than in an HMO plan. A second advantage is that you do not need to see your primary care physician first in order to see a specialist. However, the PPO plan does consider only certain doctors and practices to be “in network.” And while you may see doctors that are “out of network,” you will pay higher co-pays and a certain percentage of their fees to see them. Overall, the advantage of the PPO is that you generally have more doctors to choose from and you don’t need approval from your primary care physician. The overall disadvantage is that it's more expensive than an HMO.

Overall, PPOs often have a better reputation than HMOs, but it doesn’t mean that it would be the better choice for you. If you are relatively healthy and visit the doctor once per year for a physical, then an HMO might be appropriate. On the other hand, if you have several children – some of whom might have special medical needs – then a PPO will give you more flexibility and possibly better doctor choices. And in this case, the extra expense will often be worth it.

When you get your information about your health insurance plans this month, study them carefully. Ask questions of the benefits manager. She might have good insight on the various plans offered. Then talk to some of your co-workers who were in the different plans in the previous years. You will probably get the best information from people who have already been in the plans. Gauge their satisfaction, and use that, along with your family’s needs, to help make a wise, informed decision about your health care.

In Real Life (IRL) – My husband just got his information for the Open Enrollment Season at his company. We are going to go over each of our options and choose what we think will work best for our family. In addition to health care options, we are going to be making decisions about his 401(k), extra life and disability insurance, and the company’s FLEX plan. Because his company got taken over part-way through the year last year, we need to make changes, based on looking at the whole year ahead of us rather than the part-year we did this past year.

Regarding health care options, I am of the mindset that healthcare is not an area that I want to save money on. I will look to other parts of my budget for that. I have always found the extra expense of a PPO to be worth it. But then again, I have never belonged to an HMO. I do have a friend who belonged to one and was satisfied with her level of care there. Although, she did have to travel far to see some of the doctors in her plan. Either way, it can be a difficult decision to make, because none of us knows what is in store for us in the upcoming year, health-wise. Also, what worked well in the past might not work well in the future. We can only give our best, informed guess based on what we think our needs are. With three young children, I like the option of having more doctors to choose from, making the extra expense of a PPO worth it. However, in my husband's plans, they actually have a regular PPO and an expanded PPO which makes the decision even more challenging.

Fortunately, we are only locked in to our decisions for one year, and can always make changes during the next open enrollment season. Another event that may trigger a change open enrollment options is marriage, or birth or adoption of a child. Although, your choices may be limited at that time. So again, make your decisions wisely regarding your choices; they will be with you for the whole year.

In the next post, we will discuss 401(k) options in this open enrollment season.