Tuesday, March 31, 2009

Do Unto Others As You Would Have Them Do Unto You

Saving Money Tip #108 - Do Unto Others As You Would Have Them Do Unto You. No, this blog has not changed focus. It is still a personal finance blog, not a religious blog. But I think this is one of my favorite sayings to live by. I think the world would be a better place if everyone fulfilled this. But what does it have to do with personal finance? A lot. We are not islands in this world who exist on our own. We often rely on others and they rely on us. As we try to build up our savings, having others help us saves us money in a lot of ways. And if we want others to help us, then we need to help them as well.

Think of the old Amish order. They regularly perform barn raisings. Everyone in the community comes out and helps a neighbor put up a barn. And it saves the neighbor who needs a barn a lot of money and hard work. By doing for others, it is assumed that when it is your turn, they would do for you. Help as you want to be helped. Now, I’m pretty sure none of my readers is Amish. No, I’m positive none of my readers is Amish, so most of us aren’t participating in many barn raisings. But how about the wet basements we occasionally get or the periodic snow removal we need or the regular driving that has to get done? These are all services we may need at some point. And if we help others around us with their similar needs, they will hopefully help you with yours. And this in turn will save us money.

Sure, it would be more relaxing to lounge on the hammock while you watch your neighbor struggle with his car engine, but think about if the situation is reversed and you are struggling with your car engine. Wouldn’t you love if your neighbor came over and helped you? Or how about the times you drive your son to soccer practice and you see the stressed-out mom arrive five minutes late because she had to leave work early to pick up her son to get him to practice? Wouldn’t it be nice if you offered to pick up her son? Isn’t that what you would want her to do if you were in her shoes? Now you might not get a return on this investment of time. Maybe this woman will never offer to drive your child anywhere. But that’s not the main point. You treat as you want to be treated. And more often than not, it will come back to benefit you in the end. Carpooling with others equals money saved. A neighbor pitching in to help you work on your car equals money saved. When was the last time you helped someone and it came back around to benefit you?

In Real Life (IRL) – As I said, this is one of my favorite biblical commandments. And not because it may save me money but because the world would be a better place if we treated others the way we want to be treated. On a finance front, treating others how I want to be treated has paid off tremendously. I can think of so many examples where this has happened, that I will have to limit telling them. My first example will be with my husband. I can bet that he has helped more people 10-fold than he has been helped. He is just that kind of person. Plus he is handy, so he is often in the position to help others. Regarding our neighbors, he has helped the family across the street with his car. He has helped them mow their lawn when they are away. He has taken care of their cat and their dog. I admit I sometimes complain when he puts so much time into helping others. But then I have to eat my words because our neighbors help us, too. A few years ago when we were away on our annual family beach vacation there was a big storm. And one of our trees fell down in our backyard. We live in a 50-year old home, so you can imagine the size of these mature trees. The tree, while huge, thankfully did not hit our home, but it did hit our playhouse and our fence. Our neighbor kindly patched up our fence while we were gone! It was wonderful to come home from a week-long vacation and not have to worry about our dog escaping in the back yard

On a more regular basis, I often pick up my daughter’s friend for activities at their school. Their mom is a working mom, and it’s easier for me to just swing by and pick up their daughter than for her to stop work and drive. I don’t expect her to return the favor. But recently I had a conflict because my husband had a late meeting and I had to drive my daughter to a school activity at night while my other children were sleeping. I could have hired a babysitter to watch my children while I drove my oldest to her activity. But my daughter’s friend’s mom said she would take my daughter and bring her back for me. What a relief off my back, and a savings for me as well.

These are just two small ways that doing for others has been paid back to us in returns. Again, I’m not saying that’s you should treat others well so you get benefits in return, but it is often a nice unexpected dividend that helps save all of us money.

Monday, March 30, 2009

Prioritize Your Wants

Tip #107 - Prioritize Your Wants. When you are trying to save money, it’s easy to try not to spend money on fun things and then look at someone who is eating at fancy restaurants or going on big vacations and judge them for not being responsible with their money. But looks can be deceiving. When trying to save money, you do not want to deprive yourself of all things you like to do. But you cannot do it all. Therefore, you need to prioritize. What is most important to you? What is least? What is your budget for these fun activities?

If you have $100 per month to spend on what you want, you can buy a cup of coffee every day at a fancy coffee shop, and do nothing else. If you love fancy coffee and you enjoy drinking it at a café, then who am I to say that you are wasting your money? On the other hand, it would be downright wasteful to drink it out every day if you don’t even enjoy it that much. Your money can be spent better on something you do enjoy. So maybe a relaxing massage is more important to you than an everyday cup of coffee, so you spend $80 on that per month, while only drinking a cup of coffee at a café once per week. Or maybe you prefer fancy dinners so you spend your $100 to eat out at a fancy restaurant once a month. Or maybe travel is more important to you, so you save up the $100 per month and take a big vacation once per year with that money.

The point is, you can be responsible with your money and still do things you like. I think it’s important to write down how much money you have to “play” with for fun. Then prioritize your wants, and figure out much money you want to put toward each activity. You can use your money all on one purchase or activity or several small ones, based on your priorities. And then if someone gives you a look when he sees you eating out at the fancy French restaurant in town, you will know inside that you are there because you can afford to be there based on your priorities.

In Real Life – After all of our household expenses, kids’ expenses, and our savings, we have about $300 left per month that we can use for ourselves. Three hundred dollars per month sounds like a lot – this includes entertainment, vacations, dinners out and anything else that is not in our budget. If I were another person, I suppose I could easily spend $300 going to fancy restaurants and nights on the town each month. Or I could eat out more often at middle-of-the-road restaurants and get my hair done at a fancy salon. But I am neither of those people. While I do like a break from cooking, take-out burritos or Chinese food for relatively little money usually satisfies that need. What I do like to do, however, is travel. Without travel, I would not be as happy as I am. I love to experience different places, different cultures, and different geographic locations. And frankly, I love to just get away from it all. Oh, and I also like a break from the cold each year. So from our $300 per month, we put $200 of that toward travel. We generally take a trip to Florida each winter and to the beach each summer. And in between we often do a few weekend trips. The remaining $100 per month goes toward eating, entertainment, and any other miscellaneous activities.

For me, my priority for my leisure time and my discretionary money is travel. So that gets first dibs on our extra funds. Getting a break from cooking is probably secondary, and going out is probably last in my book. I am sometimes almost apologetic when I tell people we are going away yet again. But I shouldn’t be because I skip those Moms’ night outs and expensive restaurants to enjoy the activities that are important to me. You should prioritize your wants, too.

Saturday, March 28, 2009

Our Family's Finances - Weekly Wrap-Up

I thought it would be fun to do a post each weekend to highlight what our family did in the past week in four different areas of our finances – Expenses, Deals, Income, and Saving/Investing. If anyone wants to join me in doing a weekly financial wrap-up, please do so in the comments! Here are mine:

Expenses - Our week was pretty typical. We budget for one dinner out per week, and we kept to this schedule. Our one night out this week out was paid for from a gift card! (I did weekly baking sessions with my daughter and some of her friends every Saturday in February, and one of the moms gave me a gift card as a thank you – wasn’t that nice!) All of the activities I did with my children this week were free or in the house – playground, walks, etc. - so no extra expenses there. Who knows what my husband spent money on – he likes to keep his little purchases secret from me. I didn’t notice any glaring new electronics purchases on his bedside table, at least. :-) For me, I went to a couple of consignment sales and yard sales over the weekend and spent $40 – some items for my children and some for resale.

This week I also used up a gift card that I have been carrying around for almost two years – no lie! It was to a baby store and since my baby is my third child, there are very little baby things I need. Anyway, it was driving me crazy, and I wanted to use it before I started getting a finance charge or the store went under. I bought a few necessary things – like a bathing suit for the baby and some small containers for lunches. Then I bought a big box of disposable diapers for when we travel – I use cloth 90% of the time, but it’s too hard when we go on vacation. And we have two vacations coming up this summer, so these will be for then. With the remainder of the money, I bought a gift card for my husband’s cousin who is having a baby this summer. I just could not find anything else we really needed. Does anyone else have a hard time using gift cards sometimes?

Deals – I spent $8.50 in clothes for my son for this spring/summer including a pair of shorts, 3 pairs of pants, 4 shirts, and a one-piece shortall at above-mentioned consignment sales and yard sale. I didn’t even go grocery shopping except for some milk, so no bargains there.

Income – I started back with selling on eBay. I had been pretty lax in this area since the holidays. I bought things the previous week at a consignment sale for $50 and hoped to make back the same amount on eBay by selling some of the things and keeping the rest. I ended up getting $100 for the items I sold! I love when eBay works that way, and it motivates me to put up more. I also sold two things on Craigslist that I found at this week’s consignment sale and believe it or not, in someone’s trash pile (no I’m not above that!) for an additional $40. The rest of the items from this week’s consignment sale are now up on eBay. My husband also listed some old cell phones, which now have a few bids. Yay! Lastly, and probably most importantly, my husband negotiated with his company to get a “raise.” It’s not really extra income for us, though. His company got bought out and the new company does not give year-end bonuses like his old company did. So my husband negotiated it into his salary. I told him not to ask for too much since with the economy, I figured he’d negotiate his income so high that they’d have to fire him, but he didn’t listen to me. Thanks goodness. They gave him what he asked for, and now it’s a permanent part of his salary!

Saving/Investing – We put the last part of the 2008 contribution into my husband’s Roth IRA. Unfortunately, I screwed it up while doing it online and signed him up for a traditional IRA instead. This wouldn’t have been the worst thing except that I already did our 2008 taxes and I don’t feel like redoing them. Fortunately, our credit union was sympathetic and put it in what I originally intended. Figuring out where to invest was difficult, so I took the wimpy way out, and bought a 6-month CD at an annual rate of 2.75%, hoping that we’ll know better in 6 months which direction the economy is going.

Those are all things financial for our family this week. What did you do?

Friday, March 27, 2009

Find A Hobby That Pays

Saving Money Tip #106 - Find A Hobby That Pays. With our country’s economic crisis, I have been hearing a lot about being frugal. Cutting down on eating expenses, clothing expenses, doing things yourself, etc. Being frugal does not mean that you cannot still do fun things. Besides free parks and museums, you can still take up a hobby and be frugal. Yes, hobbies can be expensive. Collecting old cars can cost a fortune. However, if you are passionate about it, then there is more than monetary worth to your hobby. But even better, it may even pay to have a hobby you enjoy.

If you love old cars and enjoy buying them and spending hours, days, or months tinkering with them and fixing them, then your hobby may turn into a small side business. Buying a car for $2,000 and enjoying your time working on it, while fixing it for $500 worth of parts and turning around and selling the car for $4,000 can be a hobby that pays.

Of course not everyone wants hobbies on that great of scale. Suppose you enjoy scrapbooking? Most of us know how expensive that hobby can be. But how about if you use what you create as gifts that you would have bought anyway? Then the hobby isn’t so expensive. Or, even better, what if you sell your creations on eBay or at a flea market? You can often make back what you have put into your hobby, all the while enjoying your time with it.

If you are passionate about an activity or subject, then you can do more than just “collect” the item by throwing high dollars into that pursuit. Many hobbies can be taken to the next step. Becoming knowledgeable about a subject so that you can seize opportunities to collect your item at low prices – and then fix them, create them, or just hold on to them – and then turn around and sell them for a profit. Or the hobby can just pay for itself by what you get out of it. There are many hobbies that this would be true. Gardening is a hobby that pays for itself in the bountiful produce that keeps down your food bill. Sewing as a hobby can keep down your tailoring costs, as well as possibly turn into a small money maker if you sew for others.

By selling some baseball cards that you buy in lots at a garage sale while adding those that you do need to your collection is an example of a hobby that may pay for itself. Buying old furniture and fixing it up may be a passion that makes some money for you. I could go on and on and list hundreds of examples of these types of hobbies.

Yes, hobbies can cost a lot of money. If you only buy your collection at retail stores and then turn around and hold on to every item you buy, the costs will add up. But pursuing an activity you like does not have to cost a lot of money. Find ways to collect your item for cheap and fix, paint, or create the item of your desire and sell it for money or find a hobby that provides benefits for you and your family above its cost. And you will be able to be frugal and enjoy your hobbies, too.

In Real Life (IRL) – I have an American Girl doll collection. It is probably worth about $1,000 if I sold it on eBay today. People come in my house and are always surprised to see all of these dolls on display. And I suppose some of them think that they could never afford so many expensive dolls. But guess what? I paid probably about $100 for all of those dolls, clothes, and furniture. When I see people on Craigslist selling a big lot of American Girl dolls, I try hard to be the first person to buy it. By buying in lots, I can usually get a good deal. When I have this lot, I pick out what I want to add to my collection and sell the rest on eBay, often paying for the lot itself just by what I sold, and mostly making a small profit, all the while keeping some of the items for my collection. By collecting American Girls this way, I am able to build up my collection without having to spend a lot of money. Now if I wanted a collection of dolls and just ordered everything I want from the American Girl store, I would have spent a mint to build up my collection. Then it would not be a frugal hobby.

Another hobby I enjoy is writing calligraphy. Neat handwriting is just an interest of mine. Many years ago I bought a calligraphy pen and started practicing writing. I never took a course in it, so I’m not even sure I write “true” calligraphy, but the final product looks nice. Calligraphy pens and ink aren’t terribly expensive, but like everything else, the costs add up. But by pursuing this hobby that I enjoy, I have saved money in many ways. I wrote out all of the envelopes for my wedding invitations rather than pay someone to do it. I have also done it for my sister's wedding and my brother’s wedding, as well as their children’s Bar and Bat Mitzvahs. I have saved hundreds of dollars over time by doing this. I also did invitations for a few of my friends as gifts when they got married, again saving me – and them – money.

So think about what you enjoy doing and figure out if you can make that hobby pay for you – in more ways than emotional satisfaction – by providing your family with items or service you need or by selling off some of your collections or hard work for a profit. Hobbies do not have to cost a lot. Make them pay for you. For other frugal living tips, visit Life as Mom.

Thursday, March 26, 2009

The More Changes You Make, The More It Will Cost

Tip #105 - The More Changes You Make, The More It Will Cost. Years ago, people did not move around as much as we do today. They often were born, lived, and died in the same town, and sometimes even in the same house. They usually had one job throughout their lifetime. They bought things to last as long as possible and used it until it broke. Not true today. Today, our society has become such that many people are constantly changing, constantly upgrading, constantly moving and trying to improve their lifestyles. And those changes cost money.

Each time you buy a house, you have mortgage closing costs, clean-up costs for the old house, moving costs, possible storage costs, realtor fees, and maybe other costs. In addition, each time you buy a new home, you start a mortgage over again. And most of us know that the first years of paying a mortgage are primarily interest payments. So by moving, you are delaying your opportunity to build equity in your home. In short, it costs money to move.

What about your job? Many of us look for better jobs that pay more money, are better suited for us, or have better benefits. But each time you start a job at a new company, you may be losing out on other benefits from your old company. Many companies have a 401(k) match that they will pay you after you have been “vested” or working there a certain number of years. Other companies give you more vacation time when you have put in a certain amount of time. Still others offer an Employee Stock Ownership Plan (ESOP) or similar plan. And that company may provide a match once you’ve worked at the company a certain number of years. And don’t forget seniority and reputation that you have built up at a company. All of those things are lost when you change jobs. That’s not to say that you should not look for a better job or one more suited to you, just that you need to take into consideration that there are lost benefits or costs associated with starting a job at a new company.

Lastly, there are things in our life that we often upgrade or change. We may want a newer, smaller, more technologically advanced cell phone. Or maybe we want a different cable television or satellite system. Or perhaps we want to upgrade our washing machine. In addition to the obvious cost of the new product, there are other costs associated with these changes. A change to a newer cell phone may mean you need another type of replacement battery or a new charger. With the new television cable or satellite, there is often an activation fee and a setup fee. And that new washing machine you want to buy may cause you to buy a new dryer in order for them to match.

Anytime we make changes, those changes cost us money in lost benefits, extra fees, or additional associated costs. So it is important to take this into consideration when making big purchases. Is it worth it to buy a starter home and then move in five years or should we buy our long-term home now? If I take a new job, will I lose out on some vesting on my 401(k). Maybe I should wait a year until I am fully vested and then leave. Do I need to upgrade our computer/cell phone/camera/television or will the associated costs make this upgrade unreasonable at this time? These are questions you should ask yourself or consider when you are thinking about making a change to your job or when you are buying a long-term product like a house or a car or even a refrigerator or a service such as telephone or cable. If you know you will want to upgrade it in coming years, consider if it is worth it to buy the product that will last in the long-term from the getgo. It may be or it may not be. Just realize if you don't, that there are costs associated almost every time you make a change.

In Real Life (IRL) – In addition to being conscientious about saving since I graduated college, I realize that I have made other decisions in my life that have helped me save money. I didn’t necessarily do them knowingly, but it seems that is how it has worked out. Since college, I have only had two jobs. And I have been out of school for 20 years this May. Many of my friends have had five jobs or more. I didn’t have a dream job when I graduated. I was only making $19,500 in 1989 in the expensive city of Washington, DC. I had friends working at Big 8 (as it was then) accounting firms who were making $30.000 or more. But the company I worked for had good benefits. They even had a pension plan which was unheard of even in those days (they have since gotten rid of it). I stayed at that company for 9 years. Because of that, I am vested in their pension plan. I was able to move up internally to a completely new department for significantly more pay ($34,000) a few years later because I had a good reputation within the company because I had been there a number of years. I contributed to the 401(k) match after waiting the typical one year for participation. When I left that job for one better suited for me, I already had built up a nice retirement nest egg. I may not have been able to do that if I left before the vesting of the pension or if moved frequently and lost out on that one year of waiting to make retirement contributions each time I switched jobs.

For the company I am with now (I am not actually working, but I am still currently employed there on an hourly basis if they had hours to give me, which they don’t), I am not fully vested in their ESOP plan. It takes 1 year of waiting plus 5 years of full time work to be fully vested. Because I only worked there full-time for 4 years (the remainder hourly), I am only 60% vested. I hope to go back within a few years and at least get two full-time years in to get the rest of that ESOP match. Sure I can look for a job elsewhere, but the least I want to do is get the rest of that ESOP match before I do.

Another area where we have kept costs down is by buying just one house. When my husband and I (no kids) bought our house in 2000 we were looking for a home that we could live in for at least 5 years. But we knew we would like the possibility of living in it longer if we could afford a house big enough. Our budget at the time was $250,000 for a home. However, $250,000 would only buy a 3-bedroom ranch with one bathroom. I was really adamant on having a second bath so we looked at higher priced homes up to $300,000 (which we could still well afford). By doing this, we went into a whole other level of homes – bigger ones made of better materials with more square footage and that second bath. As it turned out, it was probably the best decision we've made by buying a bigger home. We now have three children and we are able to stay in this home comfortably until our kids are grown. We considered moving to a bigger house when I was pregnant with my third child, but when factoring in the closing costs, the realtor fees, and moving costs it didn’t make sense to move. Instead, turning a porch into a bedroom made the most financial sense for us, in addition to emotional sense since we love our home and our neighborhood, too.

I would say we have incurred more costs on the small electronics front than I would like. My husband is constantly upgrading his cell phone, which necessitates a new case, a new charger, etc. I know it’s a small cost compared to cars and homes, but the extra costs are there nonetheless. When we changed our cable to satellite back to cable to fiber optics over the past 9 years, we have had to pay start up fees, connection fees, service fees, etc. Fees that you don’t incur if you stick with what you have. Again, it doesn’t mean it wasn’t the right move for us, but it did cost us. So when you are thinking of making a change to a job or a new home or buying something initially like your first home, think about what extra costs you will incur from this change now or if you make one in the future and whether it is still worth it to make the purchase.

Wednesday, March 25, 2009

Speak Up!

Tip #104 - Speak Up! In today’s world, we can do so many things online – bank, pay bills, buy things, etc. – that we can avoid interacting with a person for a long time if we really want to. And the more people I encounter online, the more I find out that a lot of people prefer not to have to speak to someone – either on the telephone or in person. However, because you establish a relationship with people when you talk to them in person or on the telephone or even just because you ask, you can often get what it is you want, and if what you want is money, then it is worth speaking up.

Sometimes all it takes is to ask for something, and a person will get it for you. Other times it may take some persistence on your part to get what you want. Suppose, you receive a $35 bounced check fee from your bank and you have never bounced a check before. You are upset with yourself for not being careful with your balance and you go ahead and pay the fee, resolving to never do it again. However, did you know you could call the bank and ask them to remove the fee, especially if it is your first time bouncing a check or if it has been a long time since you bounced one? You can, and it often doesn’t take much more than asking for it. How about a finance charge you get on your credit card statement? You usually pay off your bills like clockwork but things got crazy this month – someone got sick, you were away visiting your family, and your husband was on a business trip – so you forgot to pay the bill. And then you receive a $25 late payment fee. It pays to speak up. Give the credit card company a call and explain what happened. They will look up your account and if they see that you have always been a consistent payer, they will usually forgive you the first time and remove the fee.

How about the insurance bill that came and said you are not covered for something, but you think you should be? Is it worth calling the insurance company over and over again, stating your case? You bet it is. The more people you talk to, the better chance you will have that someone will understand your point and cover the costs.

Even if you are in a store and want to buy a blouse, you can ask for a discount. There is only one left in your size and it is missing a button. Why not ask if you can receive 20% off if you buy it? Other stores sell open box items at a discount. Grocery stores sell bruised fruit at a discount. Oftentimes, the salesclerk will need to get a manager, but she will often give you the discount.

The list goes on, if you booked a cruise vacation in advance and the fees have come down since then, it pays to call and ask for a reduction in your fees. Or if you are buying a house, especially in this market, it is worth it to ask if the seller will split some fees with you or cover or partially cover the cost of fixing something. Or if you were told international calls on your phone bill are 10 cents a minute and they show up on your bill as 25 cents. Don't just pay it because they asked. Speak up.

I know it is not always easy to speak up. I have a hard time with it myself. But if hundreds of dollars are on the line, it is worth it to me. Really, the worst that can happen is the person says “no.” But chances are you will often get the fee removed or get a discount, or get your bill paid for just because you ask.

In Real Life – I do not really like asking for things from people. But if I really believe I deserve something, I will do so. Looking back, I can think of so many instances that I have gotten fees removed or avoiding paying things just because I asked. Like I said, I don't enjoy asking, but if it takes me a 10-minute phone call to have a $35 fee removed, I will do it. I force myself to because it’s worth it to me.

In 2007, when I stopped working my checking account balance fell dramatically and I was still having bills automatically paid from this account. Needless to say, I bounced a check. I called the bank and told them it was my first time (in a long time) bouncing a check and was there anything they could do? They suggested getting a credit card with overdraft protection and they would remove the $35 charge. So that is what I did. Well, last year, I bounced not one check but two on the same day. What got me angry was the balance in the account was about $200 that day. One of the checks was written for $150 and the other for $250. So in reality, only the second check should have bounced, but the transaction was such that the $250 came out of the account first and therefore the $150 check bounced, too. So when I called I was really only going to ask for one of the bounced check fees to be refunded. But then I remembered the overdraft protection credit card I had set up the previous year. I gave them a call, and they told me while yes, I did set up the credit card, the overdraft protection part of it wasn’t set up. I don’t know if it was something I was supposed to do or the bank, but in either case, the man on the other end said, “I’ll set it up for you now and the charges will be removed.” Just like that – I saved $70 in bank fees!

When we were setting up my daughter’s room a few years back, I found a comforter I really liked at Target. We needed two of them since she has two twin beds in her room. The store we went to only had two left. One was nicely folded with the ribbon and product information on it. The other was missing the tie wrapping it up and had no card. We really needed both of them. So we asked if we could get a discount on the unwrapped one. I was hoping the person would give us 10% off. The guy offered 20% off the “open” one. All it took was a bit of nerve and one question and we saved over $10.

Now other cases haven’t been so easy. My daughter who was adopted from China went through extensive blood work when we brought her home – to test for things such as lead, HIV, Hepatitis, etc. that are not uncommon in third-world countries. The testing is pretty typical for international adoptees. So I was surprised when my insurance company would not cover the $900 cost of the tests. I was not only surprised, I was livid! Nearly everyone on the adoption forums said their insurance covered it. I called and spoke to a person, then spoke to a supervisor. Then called again a month later. And again. And again until it got to a point where it was a year after the date of service. Finally, I got so sick of dealing with their staff, that I filled out a form that says I was officially challenging their claim. Well, that’s all it took. A woman called me from the company and I explained the situation. She said she understood it completely and was surprised herself that it wasn’t covered. I got a phone call back from her the following week – the full $900 was going to be taken care of. I will tell you that my blood pressure did rise on several of occasions talking to their customer service trying to get this resolved by I perservered because I was that adamant that this should be covered and it worked out in my favor in the end.

Not every thing you ask for will work out. About a year after my son’s circumcision (done by a trained person in our religion), I found out that some insurance companies cover this type of circumcision. The thought hadn’t even crossed my mind that it may be covered. So I contacted the person who did it and asked for an invoice. We then submitted it to our insurance company. It turns out that because it was “out of network” it would only be partially covered and we had to meet some deductible, which we didn’t meet. But hey, it was worth asking and it wasn’t that much effort.

In fact, out of all of the times I have asked for a discount, for a charge to be removed, or a bill to be covered, I’d guess that 9 times out of 10 I get it. I always ask nicely and explain why I think it should be discounted or refunded and that seems to be all it takes in most cases. Sometimes you may need to ask for a higher-up or be firmer in your request, but as the old saying goes, “it doesn’t hurt to try.” You may save yourself a lot of money.

Tuesday, March 24, 2009

Realize What You Can Afford

Tip #103 - Realize What You Can Afford. It’s easy to look at the people living in 4-bedroom homes, driving new cars, going on vacation each year and think, “hey if they can do it, I can do it, too.” I don’t think you have to necessarily trying to be keeping up with the Joneses to think that if everyone else does it, that you should be able to afford to. It doesn’t mean that you are trying to “keep up” – just that you think the lifestyles around you are the norm and you should be able to afford that lifestyle, too.

However, if the guy up the street is making $100,000 per year and you are making $60,000, then you have to realize that you will not be able to afford the same level of living that he does. I know this is a different way of saying, “Live within your means.” But I think it bears stating this way because learning to live within your means to some people just means cutting back on eating out or lowering their air conditioning means that you will be able to have that great lifestyle now (or in the future) that others around you have.

Not everyone will become "rich" – even if they cut back on every possible expense they have. If you make a limited income, you need to realize that you can only afford things at a certain level. Period. With all things being equal, a family of four making $100,000 will be able to afford more expensive things than a family of four making $60,000. So there is no use looking at how those around you are living. It only matters what you can afford based on your income and resources. You may never have a huge house or grand vacations or new cars based on your salary.

If the $100,000 family is living in a 4-bedroom house, taking a vacation every year, and buying a new car every few years and still maximizing his retirement and savings, then they are able to afford the things he is doing. At $60,000 you should also be saving for retirement and other large future purchases. And by doing so you may only be able to afford a 3-bedroom house, a weekend getaway, and used cars. Some people will always be able to live more extravagantly than you. You just need to realize what you can afford and stay within those parameters.

In Real Life (IRL) – I live in a very nice town outside of Washington, DC. It is not the most expensive town around. A town not far from here is home to Senators and Congressman who live in multi-million dollar homes. When we were looking for a place to buy, I didn’t even consider that town. I knew we couldn’t afford to live there. It was “out of our league,” so to speak. And I didn’t want to even try living in the cheapest house there because we’d be living among people who could afford European vacations and housekeepers. Instead we chose to live in a nice, run-of-the mill town with people who live a wide-range of lifestyles. There are plenty of million-dollar homes here. But there are even more 1950’s 3-bedroom 1-bath ranch homes. Some people go off on fancy vacations. Others never go away. It is a comfortable place where we can live within our means and not feel like “everybody else” is living differently.

My daughter’s best friend from school lives in a million-dollar home. They also belong to a country club. If that’s what they can afford, that is their business. We, on the other hand, live in a modest ranch house and don’t even belong to the public swim club. It is what we can afford and I am okay with that. In fact, I am more than okay with it. I have no desire to live in a large home and belong to a country club. We still do activities that we can afford – vacations, evenings out, and classes. On the other end there are people here who live in smaller homes and do less than we do. And I hope they are living on what they can afford. We set reasonable goals based on our income. We know our “level” of living, which includes savings. We don’t aspire to have lifestyles that exceed our income. And unless you have plans to actively increase your income, you should not either. You need to realize what you can afford based on your income.

Monday, March 23, 2009

How to Sell What Where, When Selling Used – Part 3

Tip #102 - How to Sell What Where, When Selling Used – Part 3. The guidelines for selling used items that I presented in parts 1 and 2 of this series are ones I have developed for myself based on what I have sold in the past, how much time I have, and where I live. Some of these rules may not apply for you. If you live in a very rural area, Craigslist or a yardsale may not work out well for you. In that case you may want to start directly at a consignment store or try eBay for selling the more valuable items. Or perhaps you don’t have much time to list things, take pictures, hold a yard sale or tag items for a consignment sale. Then the consignment store, again, may be your first choice. Remember, though, to first look up an item's value on eBay (completed auctions) before selling your item.

When deciding where you should try to sell an item, look carefully at it and ask yourself, would someone drive over to my house specifically to buy this item from Craigslist or would they bid on it at an online auction site such as eBay? If the answer is no, then put it into the yardsale pile. If the answer is yes, then try one of those venues first. Anything that doesn’t sell can always be put out a yardsale before it becomes a donation.

This leads to my next point, if you have utilized all of your options for selling, and the item still hasn't sold, just give up trying to make some money off it and donate it instead. There is no reason to waste time and resources on something that won’t sell. The board game that you thought would go for $10 on Craigslist that didn’t sell and also didn’t go for $3 at a yardsale is ready for the donation pile. Even if you do not get a tax write-off for the item, at least it is out of your house. And that is usually at least one of two goals for selling things (making money being the other). The benefit of donating, besides the tax write-off, is that you can decide where you donate – maybe baby clothes can go to a local women’s shelter or to someone needy in your neighborhood on Freecycle. Whatever you choose, you should feel good that you may have made a difference in someone’s life, even if you did not make money on the item.

Lastly, I want to mention that there are other places to sell items such as auction houses and flea markets. Some very valuable items may be better suited for an auction house instead of eBay. I’ve never had the good fortune to own something like this, but if you have a priceless antique, an auction house may be the right venue. And while flea markets are generally for people who are dealers in buying and selling items, sometimes you may find one that is for the general public to sell at. You can sell items at a flea market that you would normally sell at a yard sale. Or you may even be able to sell items that you would sell on Craigslist, because you may get good exposure if the flea market is well-advertised and well-attended. Finally, while I mention eBay, because that’s the biggest online auction site, there are other online selling sites out there such as Bonanzle, ioffer, SeeAuctions, and others. Also, in addition to Craigslist there is Kijiji and many kids’ classified sites, as well other online and offline classified sites. The list presented here are the most popular ones, but there may be others that work better where you are.

In Real Life (IRL) – I held my first yardsale when I was a teenager and my parents were selling their house. We were complete newbies as far as selling used things, and I’m sure we made many mistakes on pricing things. However, we really didn’t know what we were doing and we were just happy to get it out of the house so we didn’t have to move it. Since then I have become better at selling, especially because eBay has taken the mystery out of pricing so many items. I've had several yardales over the past 10 years and now know better what items to sell there. And I’ve been selling things for about five years on eBay. With eBay, I started buying items on there about two years earlier and then slowly began selling things that I owned. I did not do it on a regular basis as a business until a couple of years ago. It’s best to start out slow and learn the ropes of selling - writing a good description, taking photos, using keywords in titles, etc. For me, it started out as a way to get rid of items I owned and has since turned into a small income-making business.

After doing eBay for a year or so, I learned about Craigslist and was very excited to have a venue for selling bulky items, like big kids' toys and furniture. Plus with no fees, there isn’t much to lose by listing there, and it’s easier to do than eBay. I didn't have to worry about describing every little detail because potential buyers see the item before they buy it. And a seller can get away with not having photos if absolutely necessary (although photos improve the ad dramatically). I had great success with Craigslist and have continued selling on there at least once a month.

As I mentioned, I have never sold at a consignment sale, mostly because many of our clothes are hand-me-downs and after my kids are done with them, they often look like it. So I just pass them on to others. Also, putting tags on each individual item that may not get much money seems like a lot of work for me. And since others often give me their stuff, I like to pay it forward. However, other people do quite well selling their clothing there, and I think it's a great option for some. Since I stick to selling more expensive items and toys on Craigslist, I don’t sell at consignment stores either. But maybe one day when I go back to work full-time and don't have the time to take pictures, write up a description, and meet people to sell things, consignment stores will become a better option for me. Just like I have figured out what works for me, you need to think about what would work best for you when selling used items. Consider your circumstances – your location, amount of time you have to devote, and whether you have a camera, among other things. Then you can successfully sell your used items and maximize your sales price. Good luck!

Saturday, March 21, 2009

How To Sell What Where, When Selling Used - Part 2

Tip #101 - How to Sell What Where, When Selling Used – Part 2. In the first part of this series we discussed which items sell best on eBay and which are appropriate for Craigslist. Today we will discuss what types of items to sell at yardsales, consignment sales, and consignment stores.

First let’s discuss yardsales. Yardsales are perfect for smaller value items – generally items that are worth under $10. Anything of greater value should be attempted to be sold on Craigslist or on eBay (or similar sites). If you have tried these venues and the item didn’t sell then it may certainly be worth putting out at a yardsale. Generally, however, small value items are the best items to sell at yardsales – the random pots and pans and baking dishes you don’t need anymore, the pillows or pictures that no longer decorate your rooms, games that your children no longer play with or small toys your baby has outgrown. Low-value knick-knacks and odds and ends around your house are also examples of perfect yardsaleable items. Look at yardsales as the best venue for getting rid of a large amount of low-value things in one sitting.

Next let’s talk about seasonal consignment sales. I did a post about seasonal consignment sales here. I have to admit that while I have been shopping at consignment sales for about 5 years, I have never sold things there. But from a shopper's point of view, I do see items at consignment sales that would have done better being sold at other venues. That small Caillou toy being sold at a consignment sale for $1.50 may be a collector’s item worth $30 to the right person on eBay. That Little Tikes slide priced at $20 at a consignment sale may also get you $20 on Craigslist, but you do not have to split the proceeds with anyone. In general, any non-clothing child’s item that has value over $10 should be put on Craigslist first. Valuable collectible toys should go on eBay. Not sure what something is worth? Look up completed selling prices on eBay or check the going asking rate on Craigslist. Then you will be more informed on prices.

So what is good to sell at consignment sale? Clothing is the perfect item to sell at seasonal consignment sales. Buyers love going to these sales to dress their children for the upcoming season. If your clothes are in good condition and are priced right, a good portion of them should sell. Clothes at consignment sales are often priced at 25% to 75% of the original retail cost (depending on name brand and condition). Usually that is more than you will get at a yard sale, even with splitting the proceeds. Small toys and games, lower-priced baby items like crib sheets, bottle warmers, and mobiles also do well at consignment sales. Many sales also accept maternity clothes. Find out what items are acceptable to sell at a consignment sale that you are considering, and base your selling list on that, remembering to consider selling your higher-priced items elsewhere. Hint: find a sale that is well-advertised and well-attended to sell at. Also, look for one that gives you a greater percentage of your money (some do 70-30; others 50-50). Furthermore, if you can, attend a consignment sale before you sell at one to get an idea of what to expect.

Now let's explore consignment stores. There are many different types of consignment stores. There are general consignment stores, furniture consignment stores, clothing consignment stores, and children’s consignment stores, among others. When should you sell your things at consignment stores? Again, if the item is high-value I would consider selling it elsewhere first. Once you've done that, consider a consignment store. If it is kid’s clothing, you can choose a consignment store if it is the wrong season for a kids’ consignment sale. If it is anything else like lamps, or purses or adult clothing, check first with the consignment store for what items they accept. Also find out when they accept items to be consigned–some have specific days, hours, or times of year. Don't forget to ask what percentage of the proceeds you keep for yourself. Like consignment sales, some are 50-50 while others may be more or less. A consignment store is a great option if you want someone to do most of the work for you.

In Real Life – I make it no secret that I sell items on eBay and Craigslist. I make a small income from it that helps our family financially, since I am not working full-time. When I started doing this, I was selling things we owned. I knew to sell our kids’ kitchen on Craigslist since it was too bulky to sell on eBay. And I knew to sell some valuable salt and pepper shakers on eBay where it would get the most watchers. What I didn’t know is that some of the toys that were handed down to me from my sister and brother’s much older children were now collectible! Little Tikes dollhouse toys do quite well on eBay. Who would have known? People sell those for 25 cents at yardsales all of the time. And I’ve seen them at kids’ consignment sales for $1 a piece. Since I have gotten more experienced at selling, I always look things up on eBay first before I put them out at a yardsale. It may surprise you, like it did me, which things are worth money, like a Blue's Clues Thinking pad bought from a consignment sale for $1.50 (worth $20 on eBay). Sure you can make money if you sold it at a consignment sale (about 75 cents after splitting the proceeds), but you can make $15 on eBay (after fees).

On the other hand, I have bought seasons’ worth of clothing for my kids at consignment sales for anywhere from $1 to $5 a piece - items that wouldn't have much value anywhere else. People are making good money selling a large quantity of low-value clothing at consignment sales - probably more than others who are selling similar items at yardsales or still others who are wasting listing fees on eBay only to have the items sit there and not sell. So to make the most out of a sale, figure out which venue is best to sell an item at - eBay, Craigslist, yardsale, consignment sale, or consignment store or somewhere else.

In the last part of this series, we will discuss other less popular options for selling items, donating items, as well as other important points to consider when selling your things.

Friday, March 20, 2009

100th Post - And 100 Things About Me

I was all set to write Part 2 of the “How to Sell What Where, When Used” when I realized that it is my 100th post! When I started this blog, I didn’t know that I would make it this far or even ever have anyone read what I wrote. But I have continued writing, and a few of you are still reading. Anyway, I think the practice is to write “100 Things About Me” on a person’s 100th blog post. (I will continue Part 2 of the Selling Used series tomorrow.) So without further ado, here are 100 random, uninteresting facts about me:

1. Growing up, I was the only person in my immediate or extended family born outside New York City (I was born in Philadelphia)
2. My family often made fun of my accent
3. I am left-handed
4. So is my mom
5. No on else in my family is
6. I am Jewish
7. I haven’t eaten meat since I was 13
8. Except for a bite of a hamburger about 15 years ago
9. And some buffalo wings around the same time
10. No one else in my family is a vegetarian
11. I have given birth two times
12. I have three children
13. I do not have twins
14. One of my children was adopted
15. From China
16. I flew there to get her after having not flown for 5 years
17. Because I hate to fly
18. I mean I really hate to fly
19. I had to go to the hospital a few weeks before my trip to China because I thought I was having a heart attack
20. I wasn’t.
21. I was having heart palpitations over flying
22. They gave me some pills in the hospital to control my anxiety
23. I used those pills on all of my flights to, from, and within China
24.I haven’t flown since then
25. I once took a train from California to my home in Virginia
26. Even though my company paid for a ticket for me to fly home
27. I have known two people who were in plane crashes
28. One died
29. The other still flies
30. I love to travel
31. I take cars, trains, buses and boats
32. A lot
33. I worked on Pennsylvania Avenue for 9 years
34. I have met four First Ladies
35. And have seen two Presidents
36. I still remember my SAT score
37. I couldn’t stand my freshman year college roommate when I met her
38. She was in my bridal party 14 years later
39. My husband and I only dated long distance
40. He brought me pickles on our first date
41. A huge, huge jar (think Costco size)
42. And I didn’t even like them
43. They weren’t kosher, sour, garlic pickles
44. The only kind I like
45. I am very particular about the pizza I eat
46. And the bagels
47. Only New York pizza, bagels, and sour pickles will do
48. I have lived in 4 states – Pennsylvania, Delaware, Maryland, and Virginia
49. I am making my way South
50. Since I hate the cold
51. I’d be happy living in Florida year-round
52. I love to read
53. When I am down, I read my childhood books
54. They make me happy
55. I have read some of my books over 100 times
56. I just started baking bread in my bread machine
57. That has been sitting in my house for 9 years
58. I’m eating some now while I type – yum!
59. I haven’t worked full-time in 7 years
60. And I kinda like it, although sometimes I am bored
61. I spend my time cooking things from scratch
62. And selling things on eBay
63. I come from a family of two girls and one boy
64. I have two girls and a boy
65. My sister has two girls and a boy
66. My brother has two girls
67. And wishes he had a boy
68. I have never hired a babysitter in 7 years
69. I grew up on a cul-de-sac
70. I live on a cul-de-sac
71.I have spent hours upon hours researching my family’s genealogy
72.I am a Bruce Springsteen fan
73. When I was younger I went to about 7 of his concerts
74. We go to Cape May every summer
75. With my whole extended family
76. There are 17 of us
77. I’ve been going since I was 13 years old
78. Before that we went to Atlantic City every summer
79. Well before there were casinos
80. Nothing beats the Jersey Shore
81. I keep track of my family’s finances and investments
82. My husband has nothing to do with it
83. And I think he’s secretly happy about that
84. My husband likes to shop more than I do
85. And he is interested in sports less than I am
86. Which isn’t saying much
87. Although I do understand football and root for the Eagles
88. My husband is very, very, very handy
89. As my 3-year old says, “he can fix anything”
90. Growing up no one in my family was handy
91. So my family made me marry him because we needed someone handy in the family
92. Just kidding
93. I think
94. My parents are celebrating their 50th wedding anniversary this June
95. We are having a party for them
96. I love my family more than anything
97. I hate to see people waste money
98.I seriously get upset by it
99. And I’ve always had insomnia
100 Which is why I started this blog

Thursday, March 19, 2009

How To Sell What Where, When Selling Used - Part 1

Tip #95 - How To Sell What Where, When Selling Used – Part 1. There are so many options today for selling your used things, it’s hard to know which items to sell where. Do you put your priceless antiques out at a garage sale and your kids’ toys on eBay? Do you list your lawnmower on Craigslist or donate it to charity? How about your clothing? Do you sell it at a consignment store or a seasonal consignment sale? How do you know which venue is the best place to sell each item in order to get top dollar?

Here are my criteria. I am not an expert, but I am an experienced seller. I have been buying and selling on eBay for 7 years and on Craigslist for approximately 5 years. I have held about one yard sale per season and visit yardsalequeen.com on a daily basis to discuss buying and selling. I shop at consignment stores and at consignment sales on a regular basis and donate often to charity. So I am writing from my experience in this area (as all of my posts are).

Let’s start with when to sell on eBay: Anything that is easy to ship and appeals to a relatively select group of buyers should be listed on eBay. Examples would include an older set of a book series, name-brand boots or suits or other desirable label clothing, collectibles such as vintage Fisher-Price toys, Matchbox cars, old radios or telephones. The list goes on and on and if you check out eBay you can see there really are all sorts of things sold on there. But if you are looking to get rid of things in your home, these types of items do best.

In short, if there is a limited number of people who would be interested in your item then you want to give it wide exposure. Online auction sites like eBay (and similar ones) give you great exposure. Also, that is where most collectors are looking. Sure you can try to sell your vintage Mrs. Beasley doll on Craigslist and you may luck out and find a collector nearby, but chances are those in the market for a Mrs. Beasley doll are few and far between. Also, people who bid on eBay are willing to buy an item at a certain price, and when competing against other bidders who also want that same item, it can bid up the price of what you are selling dramatically. You generally won’t have that competition on Craigslist. Remember, though, the item should be reasonably sized for shipping. Yes, you probably can ship a vintage juke box if you had to, but would you really want to? The trouble may not be worth it. And that’s where Craigslist comes in.

Craigslist is a venue for local buyers and sellers to come together. I wrote about selling on Craigslist here. I like to think of it as online classified ads FOR FREE! Craigslist is a great place for getting rid of general use things – furniture, lawn equipment, baby gear (such as highchairs, strollers, bouncy seats), large lots of books, electronic equipment (such as televisions, computers, DVD players), household items (such as bread machines, blenders, dishes, and vacuum cleaners), and cars. Why sell on Craigslist versus eBay? First, if the item is bulky like a vacuum cleaner, then it’s difficult to ship. Second, general use items do well on Craigslist, so why not try there first? There are no fees attached with listing the item and no commission paid for what the item sells for. There is usually a wide market for the items listed above so you have a good chance of selling them. How about selling these items at a yardsale? In general, if the item is worth $10 or more, it’s worth putting it on Craigslist. People cruise Craigslist looking for specific items such as a highchair. There is a search function that people use to look for an item they want. Why put it at a yardsale where you only have a small chance that a buyer will come along looking for a highchair? Also, you will get a better price on Craigslist than at a yardsale, where people expect a real bargain. (Check out other "frugal" posts on Life As Mom.)

In Real Life – My husband sold his first item on eBay when he wanted to sell an expensive watch he owned. He saw the ‘going rate’ on completed eBay transactions for this watch and knew he could not get the same price at the local watch store. After he sold that item, we looked around the house for other items we had and no longer needed. We found some books and vintage games that we didn’t want and sold them, too. We also sold some designer label clothing that no longer fit us. Some items that we listed did not sell, while others did. As time went by and we became more experienced at selling, we figured out our niche. (We no longer just sell things we own and want to get rid of; we actively seek out items to buy low and sell high on eBay). We generally stick to items we know do well – specific dolls or toys that many people are after, name-brand clothing, and vintage collectibles. I had a large lot of Nancy Drew books I no longer wanted so I sold them online. Similarly, I sell American Girl doll clothing and dolls on eBay on a regular basis. We once sold a convection oven on eBay, but would probably save that item for Craigslist now. In general, we have no problem, trying one venue first and if it doesn’t pan out trying another. An item that doesn’t sell on Craigslist for a target price we want will often get listed on eBay.

For Craigslist, we have sold tons of our baby items. We’ve gotten rid of strollers, large play equipment like sand and water tables, play kitchens, and play yards. We have sold dining room breakfront, our kitchen table, our childhood furniture, a coffee table, and kitchen appliances. Anything that is big and bulky usually adds to much cost and work to ship so we try to sell those items locally. Also, items that would appeal to many people locally, we also put on Craigslist first before trying eBay.

In the next post we will discuss what types of items to sell at yardsales, consignment sales, consignment stores, and when you should donate the item.

Wednesday, March 18, 2009

Consider Your Circumstances

Saving Money Tip #94 - Consider Your Own Circumstances. When reading financial magazines, websites, blogs, or books, we are presented with financial advice from the writer. Some of them are experts in their field and know very well what they are talking about. However, none of them know you, the reader, personally. Therefore, financial advice is often written for the general public or for “most people.” So, maybe 85% of the advice will pertain to you, while the rest will make no sense for you. Or maybe only half will apply to you. And which advice you should accept and which you need to discard is for you to decide.

You, the reader, have to take what you read and apply it to your situation. Does it make sense for you or doesn’t it? Unless you get a personal financial advisor who goes over your goals and needs, and then gives you heartfelt, sound financial advice based on your situation, you are going have to make sense of general advice and apply it to your situation.

For example, most financial experts will advise you where to save for college. Obviously, if you do not have children, you can ignore this advice completely. But suppose you do have a child, and he happens to be a hands-on, fix anything type person who aspires to be a carpenter. Does saving for four years of college still make sense for you? College may not be the right place for him to further his education. Then what? Is it still right for you to invest in the same education accounts that financial advisors generally advise? Maybe. Maybe not.

And many of us know the general suggestion of needing about 85% of your income for retirement. But what if you already have a paid-for home that you plan to live in? Do you really still need 85% of your income in retirement? How much should you save based given this parameter? Much retirement advice given is based on how to maximize your savings for retirement. But what if you would be happy living in a fishing cabin and fishing for the rest of your life? Do you really need to maximize your savings? Probably not.

What if you have a special needs child who will be in your care for the remainder of your life? You will need to factor that into the equation. I have never seen financial advisors give information on this situation. Where does government aid fit in? How do you make sure this child is taken care of after you are gone? What extra costs does his care entail?

While I am not suggesting that everyone needs to get a personal financial advisor, I am recommending that you read all advice given to you as a general suggestion. Then take all of the information you have learned and apply it to your life, your situation, and your needs. If you have unique circumstances, seek out guides that might address them. Perhaps magazines for the disabled address finances. Or maybe there are books out there that tell how to save for non-college bound children. Perhaps you need to find the research yourself. Overall, remember that general financial advice does not apply to everyone, and all of it may not apply to you. Your needs and wants are different that other people’s. And you are the best person to know what those needs are.

In Real Life – For now I think I am one of the general masses. At this point in our lives, we don’t have too many unique needs. My husband and I hope to retire when we are in our early 60’s. We plan to live on the East Coast. We do have a condo in Florida that we hope to use in retirement, but only in winter. So while I know we have a place to live if we need it, I generally keep it out of the equation entirely, as we would like to live somewhere else the rest of the year. While many financial articles give advice on how to put away some money for college, we hope to pay for a public university education entirely for our three children. So we have adjusted our calculations appropriately. Overall, though, our situation is pretty typical of most families’ needs.
But that doesn’t mean that things won’t change in our family in the future. And if things do change, we will have to plan accordingly. Maybe one of children won’t want to go to college or maybe he will want to go to an expensive private school that we haven't planned for. Maybe we will need to help provide for an elderly parent or maybe we will get an inheritance. The truth of the matter is none of us know what the future will bring. But we do know our situations now and can make predictions based on that. And as time moves along and things change, we will have a more accurate picture of our needs, and we will adjust our finances and savings at that point. I always consider the advice of the experts and am constantly reading financial articles to keep updated on new rules and changes. But I always apply this advice and new opportunites to our current situation and what I think will be taking place in our family in the future. I won't predict it 100%, but I do know better what may work for our family than a financial advisor who doesn't know us.

Tuesday, March 17, 2009

Remember The Basics

Tip #93- Remember the Basics. I’ve been reading a lot about personal finance and investing lately. And the more I read the more I realize there is so much to learn about investing - there are many complicated investments out there. There is confusing math about what to do financially – invest in a CD or in stocks, pay off mortgages early or sock money into a mutual fund?

The more I read, the more I began to wonder how do people with little education or weak mathematic skills figure all of this complicated finance stuff out? How do they not become overwhelmed trying to get rich? And you know what the answer is? They don’t have to learn about all of this stuff. Sure if someone has an interest in finance, they can delve into the world of investments, but knowing the basics is all most people need to build up wealth. The most important things to know are:

--Live on less than you earn.
--Put money away on a regular basis for large purchases.
--Save money monthly for retirement.
--Don’t buy things you cannot afford.

All of the rest is just gravy. Whether you invest in stock mutual funds or put money in CDs at the bank is less important than simply putting money away each month for large expenses in the future, including retirement. Buying things on credit will mean you owe money, while not spending money you don’t have is the only way to avoid debt. In other words, it can all be summed up in the first bullet point. Live on less than you earn, and you will build up your savings. Simple.

Then why are so many people in this country facing foreclosure, bankruptcy, and financial disaster? Because people were buying things they could not afford. They were not saving up for large purchases – they were buying things before they had the money. In other words, they were living on more than they earned. People are facing financial crisis not because they don’t understand investments or numbers or math. They were simply living beyond their means.

If you haven’t read The Millionaire Next Door by Thomas Stanley and William Danko, you should. Check it out of the library. It is a great book detailing the life of millionaires. The authors were surprised to find out that the millionaires in this country are not the people driving fancy sports cars and living in big houses. No, the millionaires are the people next door – the plumbers and electricians who are living in modest houses because that is what they could afford. They are driving simple cars because that is what their income says they should be driving. And all the while that they are doing modest things, they are putting money away for savings. And as the years went by, the savings built up until the point that they were millionaires.

Was it complicated investments that they put their money into – you know the investments that 99% of people don’t understand? Probably not. In fact, where they invested probably wasn’t even that important. Sure, someone earning 8% on their money was better off than someone only earning 4%. But the fact that they were putting money away consistently for the long term was the main point. In general, the people who are living on less than they earn and who are saving month after month are the millionaires.

Now, that’s not to say that all people who live on less than they earn will become millionaires. Someone making $30,000 per year will have to live on very little and get some high returns in order to become a millionaire. But most people do not need to be millionaires to live comfortably. And living comfortably is knowing that your modest house is paid for, that there are no creditors knocking on your door, and that you have money put away for big expenses and emergencies. If you stick to the basics, most people should be able to do just that.

In Real Life – Many years ago, I read a question in a financial magazine about investing, and if I remember correctly, the gist of it was which investments were better to put money in for retirement. And the wise expert basically said, in the long run, the more important thing is that you put money away consistently each year. Less important is where you put it. And you know what? It’s true!

Sure the person investing in stocks may be better than the person investing in low-risk CDs in the long run. Or, who knows, maybe he will be worse off. But both people will be better off than the person who doesn’t put money away at all.

That is one of the main reasons I started writing this blog. Because I have never done anything outstanding, fancy or smart with my money. All I have done is save it. I lived on less than I made. When I was making $19,500 in an expensive city, I had roommates. And I still put money away for retirement each month. I didn’t buy things I couldn’t afford – ever. I bought used cars and clothes on sale. I saved up each month for vacations. That’s it. Granted, I didn’t have extenuating circumstances that I know some people have. And I didn’t start out with debt.

But for most people, they can do what I have done and build up their wealth. They don’t need to know about high finance or complicated investments. It helps to have people who know basic investing advise you. But beyond what I wrote about basic investments and retirement in earlier posts, nothing more is needed to help you become rich. Spend less than you earn. Put money away in savings. It's as simple as that.

Monday, March 16, 2009

Figure Out The Cost Per Meal

Tip #92- Figure Out The Cost Per Meal. In order to save money many people try to come up with a monthly grocery budget. To get their budget, they often figure out how much they spend each week at the market and multiply it by four. Then they try to cut it down from there. I think it is a great way to get started. But I have an additional hint. Why not try to figure out the cost per meal and then add it up that way? You can use it as a basis for when you are buying food.

For example, when you plan your breakfasts, figure out how long a box of cereal lasts you (and don’t go by the servings on the box. They are not accurate!). If a 15-ounce box of cereal costs $2.00 and lasts for 5 bowls of cereal, then that is 40 cents per bowl. Factor in the cost of milk for each of these five bowls. If you put half of a cup of milk into each bowl and a gallon of milk costs $3.20 then it is 10 cents for each ½ cup of milk (16 cups = 1 gallon). So, each bowl of cereal plus milk for breakfast costs you about 50 cents. If you have 4 people in your family and you each eat a bowl of cereal for breakfast every morning, then you can figure $2.00 per day for breakfast or about $60 per month.

Next, lets’ figure out lunch. Suppose you usually eat sandwiches for lunch – figure out the cost of the bread as well as the fillings you put inside. Don’t forget to factor in the drinks and sides. For example, a bag of bread might cost $2.00. There are usually about 20 pieces inside so that is 10 cents per slice or 20 cents for the two pieces of bread used in a sandwich. Let’s assume you alternate between peanut butter and jelly and deli meats for your sandwiches. Estimate that you can get 20 servings each out of a jar of peanut butter and a jar of jelly. If each jar is $2.00 then that is an additional 20 cents for the fillings in your sandwich. Therefore, the cost of a peanut butter and jelly sandwich is about 40 cents.

If you generally put an ounce of deli meat and an ounce of cheese on your deli sandwiches and deli meat is $8.00 a pound and deli cheese is $4 per pound then figure 50 cents for the deli meat and 25 cents for the cheese so the cost of the deli sandwich is 95 cents. Now add in the sides. A side of fruit such as a banana or small apple costs between 25 cents to 50 cents. Pretzels may be an additional 20 cents and a glass of juice might be 25 cents for an 8-ounce glass ($2.00 for 64 ounces). So a peanut butter and jelly sandwich plus sides and a drink cost about $1.10. And a deli sandwich plus sides and a drink cost $1.90. On average, if you alternate evenly between peanut butter and jelly sandwiches and deli sandwiches for lunch, then you spend about $1.50 per lunch per day. For 4 people that is $6 per day for lunch or about $180 per month.

Last is dinner. Since dinner is usually consumed family style, I find it easier to figure out the cost of the whole dinner and divide it by the number of family members. Dinner prices vary widely depending on whether you are eating meat with your meal or not. For example, a spaghetti dinner can be very cheap. A 16-ounce bag of pasta is $1. A jar of sauce is $2, but usually only half of a jar is used. A portion of Parmesan cheese may cost 50 cents. A head of lettuce for the family will usually cost $2. Add some homemade croutons and some carrots and dressing for an additional 50 cents. A loaf of homemade French bread costs about $1.00 to make. Water is free. Dinner is $6 for a family of 4 or $1.50 per person for a full pasta meal.

However, you may only eat meals like that for ½ the week. With the other half consisting of meat meals. A family of 4 may eat 5 chicken breasts with barbeque sauce. If chicken breasts are $1 each, that is $5 for the chicken. A jar of barbeque may cost $1 on sale. If ½ of a jar is use, then that is an additional 50 cents. Sides may include baked potatoes and butter. If each potato is 50 cents and the butter is another 25 cents, that is $2.25 total. Veggies such as steamed broccoli may cost $1 if a bag of frozen broccoli costs $2.00 and lasts for two dinners. Suppose you eat dessert of homemade cookies for a cost of $1.25. Then the total cost of your meat meal is about $10 for a family of 4 or $2.50 per person. So eating pasta-type meals for half the month (for $1.50 per person) and chicken meals for half the month (at $2.50 per person) on average, you probably spend $2 per person for dinner or $240 for dinners for the month. You obviously have a lot more variety in your dinners than that, but it is a good way to estimate what dinner costs you.

Don’t forget to add in snack foods. If each person also drinks a glass of juice and has a banana or a couple of cookies for an additional snack per day, then factor in another 50 cents per day per person for snacks or $60 per day for snacks.

Now add up the cost of your meals for a family of four for the month - $60 for breakfasts, $180 for lunches, $240 for dinners, and $60 for snacks for a total of $540 for meals. Now you have a starting place and can figure out how to cut down on the costs of the meals. You can either eat less, get a better deal on the foods you are buying, or eat the cheaper meals more often. Assuming you want to eat the same amount of food each month, then try getting a better deal on the foods you are buying or eating cheaper meals more frequently or a combination of the two.

Can you try to get your cereal for cheaper than $2 per box for 15 ounces? If you can buy them for $1.50 consistently with coupons and sales, then you can knock of 10 cents per bowl of cereal, making breakfast only 40 cents per day. This would work out to $48 per month for breakfasts instead of $60, saving you $12 per month on your budget.

Suppose you want to cut back on expensive foods, then you may decide to eat deli sandwiches only 10 times per month instead of 15. Because the peanut butter sandwiches are cheaper to make, you may cut your lunch bill down to $162 per month instead of $180, saving you $18 per month on your budget. You might want to substitute eggs for meat on some days for dinner. Because eggs are generally a cheaper source of protein than meat, you may be able to shave even money off your dinner budget. Doing a combination of shopping for better deals, buying in bulk, making your own food from scratch, growing your own food, using coupons, and substituting cheaper (but just as nutritious) foods for more expensive ones may save you $50 per month on your grocery budget.

In Real Life (IRL) –
I admit that I have tried to figure out the cost per meal for our family of five. While five people sounds like it may cost a lot, it really doesn’t yet, since two of the children are 3 and under and one is a vegetarian (me!). I have figured out that we spend about $2.00 per day on breakfast, $6 per day on lunches and snacks, $8 per day on dinners/dessert. I don’t know if it breaks out exactly that way, but it’s pretty close. We spend about $400 per month on groceries. We eat out about 4-5 meals per month, which comes under a separate budget.

We are able to keep our grocery costs pretty low using various methods. We buy 20 pound bags of potatoes from Costco. I buy cereal with coupons – aiming to spend no more than 10 cents per ounce. I compare staple items to get the best price for the quality I want by shopping at various markets – Costco for bulk purchases, Trader Joe’s and Whole foods for organic, natural foods, and regular supermarkets for items I buy with coupons. Pasta is never bought for more than $1 per pound. Chicken and ground beef are bought in bulk and frozen. Waffles, cookies, pizza dough, and breads are homemade with flour bought in bulk. Fruit is bought when it’s on sale – the majority for $1 per pound, some for up to $2 per pound. Summer fruits are bought in season and frozen for use later in smoothies, muffins, and sauces. Tomatoes are grown in our garden – and we’re planning on growing more vegetables this summer. Most dinners are meatless, with about 2-3 meals per week including meat for those who eat it. We have room in our budget to go over our $400 if we want to, but based on what we eat, we generally don’t seem to spend more than that. (By the way, the picture is some sad-looking pears we pick off my mother-in-law's pear tree. They actually taste good.) How do all of you keep your grocery bills low?

Saturday, March 14, 2009

A Home Near Your Job Is Not Necessarily The Best Home For You

Tip #91 - A Home Near Your Job Is Not Necessarily The Best Home. Buying a home is a big semi-permanent event. Most people buy homes to live in for a long time. And with the economy the way it is, fewer people will be buying them to flip in the short-term. So if you are buying a house to live in, why not buy one near your job? It will make the commute short; it will cut down on travel costs, and allow you to spend more time in the house you just bought?

Well, because the job you have now is not necessarily the job you will have next month or next year or in five years. So when you quit your job or are laid off, you are stuck with a house that is near a company that you no longer work for. And maybe this town near your job really isn’t that great. You just bought there because the commute was short. So now what? Do you limit yourself and look only for jobs nearby or do you search for jobs on the other side of town or the next town over? Then you have a long commute and live in a place you don’t love.

My advice is to buy a house in a town you love. If the town you love is 45 minutes from work, then take that into consideration when buying, but don’t let it prevent you from buying there. Remember, chances are you will live in your house longer than you will have that job. And more time is spent in your town than at your job, especially when you take into consideration the other members of your family. What is important to you in the place where you live? The schools? The other residents? The parks? The amenities? The commute to work is only one component in home buying. It shouldn’t be the basis of where you buy.

In Real Life (IRL) – This advice is really my brother’s. He has always said that you should buy where you want – not near your job. And I didn’t always agree with him, especially since I had the same job after college for nine years, I wasn’t sure that I would ever leave. But then I did and guess what? He was right. I used to work in the city (Washington, DC) and I commuted via Metro everyday. But then my next job was in the suburbs – actually not too far from where I lived. Then I got married and my husband secured his job, which was about 40 miles from my job. So we could be near one, near the other or not near either. So you know what we did? We found a town we loved and bought our house there. We took our commutes into consideration, of course. But we did not make it the only factor. I have since stopped working, although I hope to go back one day. My husband commutes 25 miles each way to his job.

But we love where we live. It’s a nice town. I meet nice people in it everyday. I like the schools. The amenities - a library, a community center, parks and stores - are all within walking distance of my house. And if my husband gets laid off next month, which I really hope doesn’t happen, then he will look for a new job. His commute may be shorter or it may be longer, but we will still like where we spend our weekends. Our kids will still be happy at their schools. And we will still have great amenities nearby to take advantage of. While I don’t think we will be in this home forever, we bought it hoping to stay here for twenty years or more because we like the town so much. And that is more important to us than the commute to our job.

Friday, March 13, 2009

Talk To Your Children About Money

Tip #90 - Talk To Your Children About Money. You don’t need to sit them down and formally teach them. You can do it through everyday living and by providing examples. Show them how you shop responsibly - by buying things you will actually use, by thinking carefully about purchases, and by comparing prices.

Let your children help you make decisions about purchases – ask them to help you come up with a shopping list of things you need. Let them look at the grocery store sale flyers side by side to see which is offering a better deal on what you want to buy. If your children are older and want to buy something, ask them to shop for the best price on the item either by searching online, by making phone calls, or looking at stores when you are already there.

Give your children an allowance. Some experts say it shouldn’t be tied to chores. Others disagree. Either way, the point is to give your children a set amount of their own money to spend. This will give them experience of spending what they have and learning about how much things cost and how long they have to save up for something. It will teach them delayed gratification when they have no money left and need to wait until the next allowance to buy things again.

Read to your children about money, and spending. There are books for every level. Alexander, Who Used to Be Rich Last Sunday by Judith Viorst is a book about a boy who received a dollar from his grandparents and spent it frivolously. The American Girl Kit book series tells the story of a girl in the middle of the Great Depression whose family may lose their house because her dad lost his job. Kit learns to be resourceful from her aunt and eventually figures it out on her own. The All-Of-A-Kind Family series by Sydney Taylor details a poor, Jewish family from the Lower East Side of New York in the early 1900’s. This book isn’t directly about money, but the family does not have much. Yet the family has lots of good times. Each child gets a penny every Friday and is allowed to do with it what she wants – candy, saving for a doll, etc. Reading it together with your child can bring up many good discussions. There are many other books out there that provide good examples of dealing with money.

Discuss money with your children. Money does not have to be a hush, hush secret. If your child wants to go to an amusement park, it’s okay to say that you don’t have the money to do so. Or give your child choices. An amusement park costs the same as two days at the zoo. Would you rather spend two days this summer at the zoo or one day at the amusement park?

On the other hand, make sure you talk about money at their level. If your spouse is in danger of losing his job, you don’t want to make the child fearful that his home will be taken away. He should understand, however, that you have to cut back because times are tough and we don’t know what tomorrow will bring.

Share stories with your children about when you grew up – what things you did, how you saved for your first car. Children love hearing stories of when their parents were young and it may give them perspective on why you spend the way you do. (Over at Life As Mom, Jessica is discussing a similar topic!)

In Real Life (IRL) – Growing up, my parents spoke about money a little. They weren’t secretive about it, but didn’t tell me exactly how much my dad made either. But if our friends were doing things – like renting a beach home for the summer or buying designer clothes, my parents told us that my dad didn’t make enough to do those things. I had a decent understanding of where we stood in relation to our friends’ families.

I received allowance every week – a few dollars per week, and I was allowed to spend it however I saw fit – toys, candy, etc. I mostly saved it and opened up a passbook account when I was quite young (maybe 5 or 7).

I read lots of books and sympathized with some of the characters. In particular the All-of-A-Kind Family books resonated with me because my grandmother lived in the same era in the same neighborhood and was of similar means – meaning she had very little. I always pictured my grandmother living in a tiny, cramped NYC apartment and marveled at how far my family had come.

I listened to stories from both my mom and dad’s childhoods. Growing up, my mom slept on the living room couch of her parents’ apartment – she didn’t have a room of her own. My dad had his Bar Mitzvah service on a Tuesday and went back to school for the rest of the day. There was no money for a big party or even a small one. I gained perspective from their stories. Everything we had – a 4-bedroom house, money for parties and vacations was much more than they had growing up

My parents told me that my dad worked nights so he could put us through college. Going to college was an opportunity he did not have. I appreciated that my college tuition was paid for, and I used to picture my dad working hard so we could go. I didn’t squander the money he gave me. In fact, I never missed a class in college (unless I was truly sick) because I knew my dad worked so hard to pay for me to attend school – that how could I just “blow off” classes. I also made sure I graduated on time, without having to do extra summer classes because that was money unnecessarily spent.
I’d like to think that my upbringing had a lot to do with how I save and spend my money. However, my siblings spend money very differently than I do. But growing up these are the things that resonated with me and I thought I’d share in hopes that your children will grow up spending their money wisely.

Thursday, March 12, 2009

Don't Be Blindsighted By Short-Term Trends

Tip # 89 - Don’t Be Blindsighted By Short-Term Economic Factors. Remember when gas was over $4 per gallon? How about when real estate was going through the roof? Or think back a few more years and try to remember when the stock market was reaching all-time highs every day.

Many people think about what is going on today. That is all they hear about on the news. That is all anybody talks about around the proverbial water cooler. And that is all anybody reacts to when they think about how they should take charge of their finances.

Gas is $4 per gallon. Buy a Smart car. Real estate is skyrocketing? Buy a house, fix it up and sell it. Stock market is going up and up? Invest in stocks. Unfortunately, people are reacting to short-lived trends in the market and the world around them - trends that won’t necessarily last.

In the early to mid 1990’s when stocks and mutual funds were returning 15% a year, that is all people spoke about – how great the market is, how everyone should be in it and the more you put in the better. Fast-forward about 10-15 years and the market is down at its lowest in years. Now all we hear is that the stock market isn’t safe; it was always risky and we need to look for safer investments.

Let’s look at the real estate market. Five years ago, the market was reaching unparalleled heights. Buy, buy, buy. You couldn’t go wrong with real estate. And people bought. Some who turned it around in the short-term did fine. Others, who did not, got caught. They were caught in the buying frenzy and now their real estate is worth much less than they paid for it.

Lastly, let’s look at gas prices. Do you remember all the talk of hybrid cars? Electric cars? Smart cars? Those were the answers to $4 and climbing gas prices. Some people got on waiting lists to buy a Toyota Prius. Others sold their SUVs, while still others bought Smart cars. Where are gas prices now? In my area they are under $2 per gallon.

My point? There are always trends, fluctuations, or happenings in the world around us that are short-term or temporary. Try not to be swayed by them. If you believe that the overall trend in gas prices is going to go up over the next 10 years (or if you care about the environment), then by all means buy a hybrid or electric car. Don’t do it because gas is currently $4 per gallon and it’s all hyped up in the news.

If you start buying stocks when they are going up, up, up, then you are buying at the highest price. If you avoid them when the stock market is looking grim, then you are missing some buying opportunities (a sale on stocks!). Instead, plan a long-range strategy with an appropriate percentage of your savings that you are comfortable with invested in stocks.

Lastly, buy a house when you are ready to buy one – not because everyone and their neighbor tells you it’s a good investment and you are missing the boat if you don’t buy one. On the other hand, don’t be dissuaded by the recent real estate slump. It’s temporary. It won’t be this way forever. If you want to buy a house and you are ready, it’s probably a very good time to do it – with so much inventory and people ready and willing to sell and negotiate.

In other words, make a plan – an investment plan, a real estate plan, even a car-buying plan. Base it on sound long-term trends and needs that fit your situation – In general, diversifying your investments will keep you from being hit too badly if any one area takes a nosedive. Be proactive, but realize that you cannot predict what will happen in the future – short- or long-term. Don’t react to current news of the day. Even if it last for months, wild fluctuations do not last forever.

In Real Life (IRL) – I started investing in the early 90’s when stock markets were going up and up. I, understandably, had dollar signs in my eyes when I calculated my future net worth based on current returns. This trend went on for a few years. And then slowly, things started changing until now when it seems we’ve hit rock bottom for the stock market. I will say, that I was never a huge risk taker, so I never moved all of my money into stocks based on how well it was doing. Fortunately, I always had a large percentage in fixed income and conservative investments. It has made me much happier in this down market. But at the time, I thought the stock market would always perform that way. It was all I knew. And now I know better.

Regarding housing, we were fortunate to buy our house before the housing sky rocketed, only because we bought when we needed a home. We didn’t really take into account the market conditions, and we lucked out because the market was relatively low when we bought. However, we did get caught up in the up, up, up housing market a few years ago. My parents own a condo in Florida and prices were suddenly going sky high on them. We tried to convince my mother-in-law to buy one, but she couldn’t afford it on her own. So we decided to buy it with her, so she could live there, and it could be an investment for us. Well, we can all guess how that turned out. The condo is worth about 2/3 or maybe less than what we paid for it. On the bright side, my mother-in-law got to enjoy the last five years there and the condo was very cheap, so we really didn’t lose too much (we don’t plan to sell anyway). But we got caught up in the real estate hype, and I have learned a lesson I don’t want to repeat.

As far as cars, I do hope to buy an electric or hybrid car someday, but because I believe they are better for the environment not because of the short-term gas prices. I wasn’t in a position to make a quick change in cars when the gas prices were going sky-high anyway.
Overall, in times of great declines and in times of large increases, keep levelheaded about why you are investing or buying or selling. Think long-term and make sure you are not reacting to short-term current market trends. You will do much better overall.