Sunday, August 30, 2009

Here's a simple article in Yahoo! Finance that explains why many people live beyond their means or cannot get out of debt:

7 Expenses That Are Keeping You In Debt

Friday, August 28, 2009

Don't Be Reactive

Money Saving Tip #180 - Don’t Be Reactive. All I hear about nowadays is the economy and how bad it is. And conversations abound in real life and on Internet forums about what everyone is doing in response to the economy. Are we eating out less? Have we stopped putting money in the stock market? Are we increasing our emergency savings?

All of these are conversations are reactions to the “depressed” economy. And while I think the poor job market and the high rate of foreclosures has served as a wake-up call to much of the US population, people shouldn’t be making long-term financial decisions based on the current poor economy. Instead they should be making financial decisions in spite of the poor economy. Otherwise they are just reacting to what is happening today. What the financial world will look like in 1 year, 5 years, or 10 years is anybody’s guess. So we need to make our financial plans for all types of markets. Following solid fundamentals will get us through bad times and good ones. The stock market will go up again. And it will go down again. The unemployment rate will be lower than it is today. And one day it may be higher. Mortgage rates may reach double digits one day or maybe they will be steady for several years. Inflation will go up. These things will happen. We will not always be in a recession, although it seems like it right now.

So rather than react to market conditions today, why not plan your finances around any type of market scenario. Have a solid emergency fund for realistic emergencies. One need not go overboard in saving for emergencies unless you really feel like there is a good chance you will lose your job or have something similarly disastrous happen. Financial experts have always recommended 3-6 months’ emergency fund. Now in the recession many recommend a one-year emergency fund. But a one-year emergency fund may be too conservative, especially if by the time you save for it the recession is over.

Pulling all of your money out the stock market because it has gone down a lot is just a reaction to the poor financial markets. However, if you stuck with solid fundamentals going in, there should have been no reason to panic. The market will go up again. And pulling stocks out when they fall is the worst time to pull it out. In the same vein, investing in the stock market when it has gone up a lot is just reacting to what has already taken place. Instead, figure out what percentage you are comfortable with in the stock market and invest that percentage in it. No need to react each time the market takes a hit or goes sky-high.

The same goes for the real estate markets. Everyone was buying real estate when it was going up, up, up and we all know what happened. Many people got burned. Now many people are scared to invest or buy real estate because it has fallen so much. But real estate can be an important part of some people’s investment portfolio. And even if it’s not part of yours, you still will want a place to live. Buy a house that you like in a neighborhood that you love, and don’t worry about the real estate market. Over the long-term, chances are that housing will go up. Don’t just make decisions on what has happened in the past few months or couple of years. That is very short-sighted.

While I think this recession, has made many people aware of their lack of financial planning. I think many are not going to plan for the long-term, instead make decisions on what is happening today. And then when things happen tomorrow, they will reaction to those conditions. While we can’t predict what will happen in the short or long-term, one thing is certain, financial markets rise and fall all of the time. Our economy won’t always be like this, so don’t base all of your financial decisions like it will be.

In Real Life (IRL) – I am a pretty conservative investor as far as investors go. I have a smaller percentage in the stock market than most other people who invest in the market. But, I am comfortable with the percentage that I have in there. I can sleep at night knowing that I have 20% (or 30% or 40%, whatever the case may be) of my assets in the market. When the markets dropped tremendously last year, I didn’t do much of anything. Oh, I may have checked a few balances once or twice, but that’s it. I did not move one dime out of the market. I know one person, who I’ll call my dad for this story, who got scared by the big declines in the market and started moving stuff out as they were falling. He was being reactive, probably because he had a higher percentage in the market than he should have had or was comfortable with. Seeing that markets are starting to go up again, it was probably the wrong thing for him to do.

In the same regard, we have bought two pieces of real estate in the past 10 years. One was in 2000 just as the market was going up. It was time for us to own a home because renting wasn't conducive to our lifestyle while owning a large dog and wanting to grow our family. As luck would have it, it was the right time to buy. While real estate has come down from its high two years ago, it is nowhere near the lows when we bought it, at least in this area. On the other hand, when we wanted to invest in a condo in Florida with my mother-in-law in 2004, we bought as prices were already starting to climb. While we didn’t buy at the peak, prices have come down to below what we paid for it. Was it still a good investment? Maybe. Maybe not. We bought for the long-term, until our retirement. And in the meantime, it has provided a vacation spot for my mother-in-law each winter. And even if it didn’t, I wouldn’t sell now when prices are low, and inventory is high. Again, that would be reactive.

No one can predict when things will go up, go down, or stay the same. But if you base your investments on a long-term view knowing that things in all areas of your investments will change, probably more than once, while you own them, you will do okay. So plan your finances knowing that things will change from what they are now. Set it up so they make sense in the good times and in the bad, in periods of inflation and deflation, and in up markets and down. For other financially-inspired ideas, check out Life as Mom.

Wednesday, August 26, 2009

Tip #179 - Magic Jack Is Magic. In today’s high-technology world, fewer and fewer people are relying on traditional landline phones to communicate. Many people supplement their traditional phone with cellular phone service, while others completely abandon their landline phone and exclusively use cellular service. But even beyond cellular technology, another popular method of telephone communication is through the Internet – services such as Skype and Magic Jack. While I cannot comment personally on Skype, we are marveling at how “magic” Magic Jack is. Before I do, I just want to point out that I am not associated with this company at all and am not being paid to talk about it. I also am not one who buys into latest fad things very easily.

Essentially, what Magic Jack does is make phone service through your high-speed Internet. The costs are very cheap. It costs about $40 to buy the unit and includes one year of telephone service. This service includes free local calls and free long distance calls to the United States, Canada, Puerto Rico and the US Virgin Islands. You can call other countries for an additional fee. Each year of service after the initial year is $20.

Set up is very easy. You just need to plug the unit into the USB jack in your computer, and then you plug your phone into the unit. It’s that simple! Some qualifiers: your computer needs to be turned on at all times if you want to make or receive calls. And of course you need to pay for your high-speed Internet service. However, it seems to me that most people – even those trying to save money – will cut most things out of their budget before they would even consider cutting out their Internet service, so that seems to be a small qualifier. Another qualifier is that their 911 Emergency Service is different than 911 service offered on traditional phone lines (you have to preprogram your address). It will not work during a power or Internet outage.

So, if one of the ways you are thinking about saving money this year is by getting rid of your landline phone, consider Magic Jack. Even if you have a cellular phone, this is cheap enough to run, and probably has a better connection than a cell phone does.

In Real Life (IRL) – My husband bought a Magic Jack Phone a few months ago. Our daughter was often tying up our phone talking nonsense with her 7-year old buddies. Since my husband is much more aware of new gadgets than I am, he promptly went out and bought a Magic Jack for our kids’ computer. We already have high-speed Internet, so for $40 for the year (and $20 per year thereafter), my daughter could talk to her friends till her heart’s content (within reason, of course). My husband hooked it up, and he and my daughter had fun testing it out.

The Verdict? The voice reception? Perfect. You cannot tell you are not talking on a traditional phone. Ease of use? Simple. It’s just a regular phone that’s hooked up near the computer. Benefits? Our daughter can use the phone without tying up our line. We can now call my husband’s friend in Canada for FREE. We never spoke to him very often otherwise because he’s the only person we know in Canada, so it seemed silly to get a special voice plan just for him; therefore our infrequent calls to Canada weren’t cheap. Negatives: So far none. As it is our second phone, we don’t have to worry much about the 911 issue, although frankly, it’s really not much different than our “traditional” phone through Verizon FIOS which also uses some kind of voice over Internet technology, and also wouldn’t work after a few hours after the power has gone out. Additional benefits? My husband has figured out that when we travel to hotels with wireless Internet, we can bring the Magic Jack with us as well as a small phone and make free phone calls.

Will it replace our cell phones? No. Will it replace our traditional phone? For us, not now, but perhaps one day. It certainly makes the $50 per month that we currently pay for unlimited local and long distance seem awfully expensive. Right now Magic Jack has a free 30-day trial if you want to try it out yourself. It might be worth it.

Monday, August 24, 2009

Set Limits

Saving Money Tip #178 - Set Limits. Most of us like to do fun things. Most of us like to spend money. Most of us like to eat out, go on vacations, and do other things that we enjoy. And most of us can do what we want to do - as long as we set limits. If we enjoy collecting mystery books for example, there can be a place in your budget to buy some books. But collecting mystery books doesn’t mean that you need to buy every new mystery book that comes out each year. Set your limit at one mystery book per week or one per month and you can still have fun with your hobby without breaking the bank.

Same thing for eating out. If you like to eat out, put it in your budget. You can eat out once per week or only once per month if that’s all you can afford or even only for special occasions if money is really tight. It doesn’t mean you need to eat out every night just because you want to or would enjoy doing so. Set some limits and you can enjoy the things you like to do.

Without these limits, people tend to overspend. They go to the record store (are they still called record stores these days?) and buy as many CDs as they want. When instead, they should have a preset limit of how much they can spend. Then they should buy accordingly within that limit. If you go to the store not knowing how much you “can” spend, what will stop you from spending more than your budget allows? Nothing. Instead, go to the store with a plan in mind. Or go to the wine-tasting event with a set dollar amount that you have left in your entertainment budget for the month. Or pick the cheaper restaurant over the more expensive one unless you want to go over your dining out limit for the month. Activities can still be enjoyed. Hobbies can still be done, and life can still be lived. You don’t need to “go all out” to have fun.

In Real Life – We went to a county fair this past weekend with our three children. We were fortunate because my husband’s company insures the event, so the person in charge had given him free tickets for ten rides. Otherwise, we probably would not have gone as the county fair is not even in the county where we live. When we got there, we ran into one of my husband’s good friends, who happens to live in that county. It was great to run into friends – especially ones who have two children the same ages as ours. When we got there, I told my girls they could go on four rides each and that was it. And I figured I would put the baby (our 2-year old) on two rides. I figured that would make for a nice day without having to spend any money of our own.

Ride tickets were not cheap for this event. Each ride was between three and five tickets with each ticket costing $1, although you could buy 24 for $20, making each ride cost slightly less. Our friends had a sheet of the 24 tickets and we proceeded to put our kids on the rides they wanted to go on. As I watched my husband’s friend dole out the tickets, I didn’t hear any kind of limits put on his kids. Neither he nor his wife said their kids could only do four rides each or even eight rides each. Instead, they handed out the tickets as each child chimed in he/she wanted to go on a particular ride. After about six rides, they ran out of tickets and the husband went and bought another sheet of 24 tickets, again handing them out as the children wanted them.

In the middle of going on rides, we passed a few games that of course our children wanted to play. Now I am not against spending a couple dollars here and there for a ride or two or a game or two, but I was aghast at the prices. This particular game our children wanted to do cost $5 each! I was shocked. I told my kids in no uncertain terms that I was not going to pay $5 for them to play a game to win a stuffed animal that would just clutter up our house. My husband's friend surprisingly didn’t say no and handed over a $10 bill for both of his kids to play, and for each one to win a small stuffed animal.

It is easy for me to be judgmental about the situation after what I observed. But in reality, I didn’t have any idea if this fair was in their “budget” or not. This fair was in their neck of the woods after all. So maybe it is something they look forward to year after year and budget $100 for the event. I know we go to a fair in our Town every year, and we set a budget for it, so this very well could have been the case for them, too. (This fair was an “extra” for us, though, which is why I didn’t feel the need to spend anything there.) However, just when it started to pour down rain and we were parting company, my husband’s friend turned to him and said, “Wow, I just spent $60 there!” He seemed pretty surprised by it, according to my husband. When my husband told me this later, it confirmed my suspicions – that they hadn’t set limits on what they were going to spend there.

I think our kids had a fine time at the fair even with the limited number of rides we allowed them to do. It might not make me the most popular mom, but hopefully the kids will thank us later (probably not!) because we have enough money to put them through college due to limits we put on other things. What does everyone think? Does anyone else do this?

Friday, August 21, 2009

Being Disorganized Will Cost You Money

Saving Money Tip #177 - Being Disorganized Will Cost You Money. There are very popular television shows that focus on organizing people’s homes. Not only because clutter makes one’s home look, well, cluttered but because it also wrecks havoc on people’s lives. And doing things like having to clear off the dining room table every time you want to eat will not only be a hassle, but it will also cost you money.

How? You ask. Well, setting a proper dinner table is difficult when the table surface is covered. And eating dinner out of paper cartons then becomes that much more appealing. So clutter might lead to more take-out food or more dinners out.

What if you have taken the time to cut out supermarket coupons for your next grocery trip? But then when it’s time to go food shopping, you don’t know where you’ve put them, but you have to get the groceries anyway. Well, there goes several dollars that you would have saved.

Having your bills disorganized might lead you to pay some of them late leading to late fees and finance charges. Dave Ramsey, a popular financial planner likes to call this a "stupid tax." I think it’s a tax on the disorganized.

Maybe you are heading to the beach on vacation. But you have no idea where you put your goggles from last summer. Or your flip-flops. Well, for just a few dollars, you can stop at the store and pick up a new pair. Again, costing you several dollars for your disorganization.

Other examples might be more extreme. Suppose your disorganization leads you to misplacing your keys many mornings. That might lead to your being late to work, which may in turn lead to fewer or lower pay raises.

I can list pages’ worth of examples, but it won’t accomplish much more than what I’ve already done. If you are not organized, it is not only costing you some chaos in your life. It is also costing you big bucks.

In Real Life – I would love to be one of those super organized people. You know the type – those who have everything filed away and labeled and know where things are at a moment’s notice. Unfortunately, I am not. While I am not disorganized enough or my house cluttered enough to be featured on a television show (thankfully), I am not as organized as I would like to be. There are toys in pretty much every room of my house. There are papers piled up on my counters. And I have piles of clean laundry waiting to be put away. (My kitchen and dining room tables are clear, though!)

And this disorganization, although not as bad as some, has cost me. I have been known to not be able to find the car keys once or twice or ten times in the past year, causing me to get my daughter late to school and leaving me to rush through my errands. Surely, I could have gotten better deals if I had time to shop more leisurely. I have paid a bill late because I don’t have an official filing system for my bills, although that has only happened a few times in all my years. (Online or automatic payment are great remedies for this, by the way.) I have paid many a library book fine, and just last month had to pay for a book that we just plain couldn’t find. (We still never did find it, and I’m guessing my 2-year old son threw it in the trash, but the blame still lies with me.)

I have a friend who is very disorganized and sadly can probably be featured on one of those clean up the clutter shows. Her husband has told us how they’ve had to buy a new camera when they couldn’t find theirs, only to find it several weeks later. Or they’ve had to buy a new toy when their child misplaced one – again only to be found in their cluttered house months later.

So, while I don’t necessarily have any advice on how to become clutter free or the best organization system to use (there are many good books in the library for this), my point is for you to realize that being disorganized does more than just cause you to have a chaotic life. It leads to higher costs in many forms. Cleaning up your home and organizing your things can give you more money to save or live on. For other frugal tips, check out Life As Mom.

Wednesday, August 19, 2009

How Much You Pay Depends On Where You Shop

Tip #176 - How Much You Pay Depends On Where You Shop. We all know that a house in the middle of Nebraska is a fraction of the cost of a house in the middle of Manhattan. And generally prices in suburbs are cheaper than prices in a big city. But did you know that prices on things such as food, clothing, gas, and other things can be much cheaper just a few miles away from where you live? It’s true.

Gasoline is probably the most obvious one. You might notice that prices on gas are less in a different neighborhood than your own. But is it cheaper to go out of your way to get cheap gas? Of course, it depends on if the price different makes up for the distance and amount of gas you would use to get there. The best solution is to get gas when you are in these neighborhoods that sell that sell them cheaper.

As far as clothing and miscellaneous items go, I have often found that there are certain neighborhoods that do not cater to discount stores or cheaper shops. So, while it may be convenient to shop in your neighborhood, it is not necessarily the least expensive. Your area might consist of independent shops with higher overhead costs, while a different area might sell similar products in big box stores for much less. And while I like to encourage people to buy local as much as possible, and I try to do it myself. Sometimes it’s just not economically feasible to do so.

Since food is a big part of anybody’s budget, it might make financial sense to find a supermarket that might be cheaper than your neighborhood market, and buy the bulk of your food there. This can be done easily by doing one large shopping trip per month, so you are not wasting gas on many smaller trips to a faraway neighborhood. Sometimes, even the same supermarket chain has different prices in different neighborhoods. Or an older store may be cheaper than a new, sparkling one.

My point is, that sometimes you have to look outside your neighborhood to find the bargains or just plain cheaper prices. Once you explore other areas and learn where the good deals are on gas, clothing, food, and other items, you should figure out if it is worth it to drive there, and if so how to best maximize your trips to buy these cheaper products efficiently. Overall, you could save yourself a lot of money on a weekly basis if you do it right.

In Real Life (IRL) – Gas has always been at least 10 cents cheaper where my husband works than where we live. It makes it nice and convenient for us for him to fill up his tank where he works. Since he has a far commute (25 miles each way), it saves us about $1 per week or more. It won’t make us rich, but it’s no extra effort to take advantage of their cheaper gas prices.

As far as clothing and household items, I try to take many things into consideration such as my time, gas to travel there, and whether I have my kids with me or not (I usually do). I am sometimes willing to pay a bit more for things in my local neighborhood rather than travel 10 miles to a largest big box store to get a discount. I’m not a big fan of shopping so when I do travel far, I try to anticipate future needs so I can buy more things that we need at a better price. School supplies come to mind. I can overpay for many things at my local CVS that I can walk to. Or I can drive 10 miles to Wal-Mart and save about $20 for a year’s school supplies. For that big purchase, I would make the drive. However, if I just need a box of tissues because I’ve run out, I’ll head to a neighborhood store. Of course, better planning on our family’s needs would cut down on wasted trips to local, overpriced stores. Then again, it's impossible to anticipate every need, so overpaying for some things is to be expected.

But what I’d really like to point out today is the difference in prices in food stores in different neighborhoods. And not just a ritzy grocery store versus a discount one, but the differences in prices in stores within the same chain. I went into my local Safeway the other day with the circular from my mailbox in hand. I was excited to buy some Ritz Crackers they were advertising for $1.50 per box (2/$3). But when I got to the cracker aisle, I noticed that the crackers were priced at $2.09 per box (Buy one get one free with the price of one being $4.19). I asked at the customer service desk about it, thinking they made a mistake somewhere. But instead, the employee told me I had a circular for a store in McLean, Virginia and not the one for the store in Fairfax, Virginia where I was currently shopping.

My reaction was one of surprise. First, I found it odd that I would even be mailed a circular from the store in McLean because I live much closer to the Fairfax store. But I was even more surprised at the difference in prices because McLean is generally a very expensive area to live, much more so than Fairfax. I would have the expected price differential to be reversed. Well, in any case, I bought the crackers, because it was still a good price and when on my way.

It wasn’t until I got home with both flyers in hand (one from McLean and one from Fairfax) that I studied the front pages of both of them. The ads looked identical! See photo above. but the prices for the Fairfax store were more expensive on many foods! Wine was $2more per bottle in Fairfax than in McLean. Ground beef was 99 cents in each place but in McLean it was for 80% lean beef, while in Fairfax it was for 73% lean beef. Salmon was $5.99 per pound in Fairfax versus $4.99 per pound in McLean. I don’t understand their pricing strategies and why McLean would be cheaper than Fairfax, but I know before I go to Safeway next time, I will look at both stores’ circulars online to see if it’s worth it to me to make the longer trip to McLean to get the better prices. Since I only spent an extra dollar on crackers, and I was in that shopping center for something else anyway, it wasn’t worth the price of gas to make a special trip to McLean. But had I wanted several things on their front page, it probably would be.

So I learned my lesson. It's worth it to look beyond your neighborhood boundaries. It might not be worth it all the time, but you could save yourself a lot of money overall if you find prices consistently cheaper than where you normally shop and plan your trips right.

Monday, August 17, 2009

Beware The Hidden Costs of Cruising

Saving Money Tip #175 - Beware The Hidden Costs of Cruising. Taking a cruise can be a fabulous vacation. It may even be an economical vacation. But when you plan one, make sure you figure in ALL costs related to the cruise, not just the $299 special that the ads throw at you. There are specials for cruises going on all of the time – especially right before a ship sales you can get some good deals. Remember, however, to add in port charges and fees, insurance if you want it, tips, transportation to the port, tolls and parking if you drive, extras while you are on board such as drinks or photos, and any excursions you plan to take once you reach port. These prices can double the cost of the amount you expected to pay.

Cruising might still be a good deal if you are going to spend a lot of money on a vacation anyway – by going out to fancy dinners each night, participating in lots of activities, or by staying at a fancy resort hotel. It would not be a good deal, if your idea of a dinner out on vacation would usually be a Shoney’s or a fried chicken joint. It probably won’t be economical for you if you normally just lie at a pool or a beach when you travel, and it probably won’t be comparatively cheap if your idea of vacation is driving to a destination and sightseeing.

On a cruise, you are paying for all-you-can eat food, activities ‘round the clock, entertainment in the form of nightly shows, pampering in the form of twice-daily makeup of your rooms, and service with a smile. If those are normally things you pay for on vacation, a cruise could very well make sense for you from a financial standpoint. If you don’t regularly do these things on vacation, then you will be paying for a lot of things that you don’t normally like or do.

Overall, I think you need to seriously consider whether the costs involved in a cruise vacation are right for you. I know many people who swear by cruising, and I can completely understand that. On the other hand, I think a lot of people would be wasting their money by taking a cruise.

In Real Life (IRL) – As I mentioned in my post last week, I am new to cruising. However, my parents have been cruising for many years – going on about one cruise each year. They completely feel like they get their money’s worth and that they would pay a lot more for a similar vacation that is not a cruise. And to some degree I agree with them. When my parents offered to take the whole family on vacation, I offered to do the research. I looked into many resorts on the East Coast that we could drive to. These were hotels with meals and some activities included. And when compared to a cruise, they were much more expensive. Once we decided that a cruise would be the most economical yet still fairly luxurious vacation, we researched all of our local options. By eliminating the cost of airfare, we figured we’d cut the price down considerably. In some ways, that was true. However, prices in less busy ports than Fort Lauderdale or Miami have more expensive cruising price tags. Many of the great deals on cruises leave out of Florida. But once you have to factor in flying there, all cost benefits are negated.

We ended up considering Baltimore, Philadelphia, New Jersey, and New York as our departure port. And because of timing constraints, the only cruise that really fit our bill was a 5-day cruise out of New York to Nova Scotia and New Brunswick, Canada. As I mentioned my father footed the bill (Thanks, Dad!) for most of the cruise. It was up to us to pay for our transportation, tipping, and drinks or incidentals on board, and any excursions we did. Our “free” cruise ended up costing us over $500! And frankly, the cost of the cruise wasn’t all that cheap either. Our staterooms cost about $700 per person for the first two people plus about $100 each for port charges and fees. Fortunately, the $9 per day per person fuel charge was dropped from the initial estimate. Third and fourth people in the room were about $500 including fees. So for a family of 4, it cost about $2600 for the basic cruise. But once you factor in parking at the New York port ($150), tips (suggested at $10 per day per person for a total of $200), an excursion to Peggy’s Cove in Nova Scotia ($150), a couple of family photos on board ($30), and gas and tolls from Washington, DC ($50), you can see how the hidden costs really add up. That’s over $3,000 for a 5-day cruise for 4 people (we actually have 5 people in our family, and my dad paid for a second stateroom, since it ended up being only about $600 more, but I thought a family of 4 was a more generic example). Furthermore, we cruised on Carnival Cruise line, which is generally considered to be one of the less expensive cruise lines. In fact, when we did our research, the only other cruise that fit our criteria was a Royal Caribbean cruise, and it was much costlier.

For me, I think I would have been disappointed if I paid that much money for what we got – only because a lot of what comes with the cruise is wasted on me. I don’t care for fine dining. I’m a vegetarian, so there was only one option per meal in the dining room. I’m not a huge fan of evening entertainment. While I enjoyed the magician and other show I saw, it’s not something I would normally do or pay for on a vacation. Two of my children (2 and 4 years old) were too young to enjoy many of the activities on board, yet we paid the same price for them as if they were adults. There was a camp available, but both of them cried when we put them in. I mostly enjoyed visiting the port locations and had we done a driving vacation to those places, I’m sure our cost would be half of what the cruise cost us, err cost my dad.

So all in all, I think a cruise could be a good deal for a certain type of vacationer. But for my family, I felt like we didn’t get to utilize all that was offered on it, and when we factored in all of the extra expenses, it wasn’t worth the total cost.

Monday, August 10, 2009

I Am Taking A Week-long Break

My parents who are getting up there in years have been wanting to do a family vacation for several years now. After a few plans have fallen through, we have finally been able to get the whole family together to take a 5-day cruise to Canada. We are very excited! It's my first time taking a cruise, so I am anxious to see what it is like. My children are very excited, too. Since the Internet connection onboard is pretty steep, I am going to take a break from blogging until I get back next weekend. Hopefully, I can do a post in the near future about the cost of cruising. Have a good week!

Saturday, August 8, 2009

You Don’t Need To Be An Entrepreneur to Be Wealthy

Tip #174 - You Don’t Need To Be An Entrepreneur to Be Wealthy. There are many people in the world who make lots of money by starting their own businesses or inventing something great. These people are often go-getters and have a natural entrepreneurial spirit. Being this type of person can lead to a successful business and can be a great way to make a lot of money. But is that the only way to become rich? What if you don’t have the entrepreneurial spirit? What if you have no desire to start a business, take risk, or talk people into buying encyclopedias? Does that mean you are stuck at the bottom of the wealth ladder? NO!

Anyone can become wealthy. You don’t have to start your own company or risk a lot of money to do so. You can do it quietly, little by little. A person in an office job making $60,000 per year can become wealthy. Maybe he will never be Bill Gates (but really how many entrepreneurs will be either?), but he can build up his savings and acquire wealth if he works hard at it. Some of us are not cut out to be business owners or risk takers. But you can still become rich. Really. If you earn $60,000 annually, live as if you earn $40,000. Put the $20,000 away year after year. After 10 years you will have $200,000 plus interest. If that money is earning 8% interest per year, you would have about $300,000*. If you save that amount each year for 20 years, you will have close to a million dollars. Seriously. Now imagine if you start that kind of savings when you are fresh out of college. Think about what you will have after 30 years or around the time you are 50 years old (about $2.5 million) or after 40 years (about $5.5 million). Those are some pretty impressive numbers for someone making $60,000 per year. No entrepreneurial spirit required.

Of course, not everyone makes $60,000 per year. Or you might not be able to consistently save $20,000 per year throughout your lifetime, but you can see that it doesn’t really take a go-getter, risk your shirt off your back attitude to become wealthy. It takes a desire to accumulate money by living on less than you earn and putting that money away regularly. Between that and the “magic” of compound interest, you can become rich.

In Real Life (IRL) – I have never been a big risk-taker. I am always afraid of what I might lose. I don’t think I have it in me to start a coffee-shop or even go door-to-door selling something. That is just not my personality. But I am willing to work hard to make money. Even if that means working for someone else. My income may not be as big as the person who started the company I work for, but the risks on my end are much smaller as well. That’s the way I like it. So what I have done is work hard for twenty years. Even when I was making under $20,000 per year in 1989, I put away money month after month. When I stopped working a couple of years ago, I was making $60,000 – hardly a wealthy person’s salary, especially in the DC area where I live. But I was still putting money away. In twenty year’s time, we have saved a few hundred thousand dollars – most for retirement, some for our children’s education, and some for emergencies.

Anyone can do this. Just live on less than you earn and invest the difference – year after year. No need to start a business. No need to put out any funds. No need to try to be a salesperson. Just a bit of discipline and most anyone can accumulate wealth. Really.

*I used the savings calculators at bankrate to help with the interest rate computations.

Thursday, August 6, 2009

Find A Role Model

Tip #173 - Find A Role Model. Many people have a hard time taking control of their finances because they were never taught how to do it properly. Perhaps they grew up in a household where their parents lived paycheck to paycheck or one where money was never discussed or good habits taught. Just like when you become parents, it helps to have good role models to teach you how to do it well. So what should you do if you didn’t have good financial role models growing up? And you feel that your finances are a mess that you cannot control? Or perhaps you are young and just starting out and want to get off on the right financial footing?

Look for a role model who can show you the ropes to financial success. Perhaps you have an uncle or aunt who was always on track financially. Or maybe you have a family friend who had a successful business and put all of his children through college on his dime. Or maybe you have a grandfather who is living comfortably in retirement. Talk to them and ask them how they did it. There is no need to get too personal and ask them how much they made. And really whether they lived successfully on $25,000 per year or $80,000 per year is inconsequential. The point is that they managed to live on what they earned and save some money to do things they needed or wanted to do. Many people are happy to give advice to the younger generation. Perhaps they can give you some tips on what they did to become that way. Or perhaps they can help you set up your own plan to become financially stable.

Another option is to perhaps talk to your parents or older siblings who may not have financial security even at an advanced age. Ask them what they would have done differently. If the person has matured enough to realize that he may have screwed up somewhere along the way, he may offer helpful insight into where he went wrong. So even if you saw your parents struggling to make ends meet, they may be able to direct you on a different path. Of course, very few people did everything perfect or did everything wrong, but if you can get some real life insights from those who made themselves financially successful, you will have a better chance of doing the same thing yourself. You can read all of the personal financial blogs, magazines, and listen to all of the money advice shows that you want, but nothing beats an honest person to person conversation with someone who has “been there and done that” as far as taking control of his or her finances. Do you know someone in person like that?

In Real Life (IRL) – I have often mentioned that I had a great financial role model in my parents. My dad raised himself up from someone with just a high school degree, who grew up in a small apartment in Brooklyn, and with no financial role model himself (his dad died when he was young) to someone who bought a house in his early 30s, put three children through college, bought three children cars, and retired in his early 60’s with a small condo in Florida.

My mother who grew up in a similar background saved a large percentage of every paycheck she ever earned before she settled in as a stay-at-home-mom. She managed the household efficiently by doing things herself – cooking the family’s meals, having no cleaning help, and not spending money lavishly on name-brand clothing, furniture, or other things.

My parents taught me to never spend money I didn’t have and to save some of everything I made for a rainy day. When I got older, my dad told me a bit about investing. Beyond that most of what I learned from my parents was learned through modeling behavior. They never sat me down and said, “You must save 10% of your income for the future.” Nor did they teach me to write up a budget or have a financial plan. In fact, I’m pretty sure they never had a written one themselves. But I did observe my dad working hard to give us things that he never had as a child, and I saw my mom on her hands and knees cleaning the kitchen floor while most of my parents’ friends had cleaning ladies. They had a few vices, of course, but for the most part they did not spend everything they earned to live the good life. They saved much of what they earned so they would have a good future. They both knew what it was like to be poor, and they didn’t want to live that way. Those were the lessons I learned from my role models. I was lucky. I know not everybody is. If not, seek out a role model or two who can teach you how to handle your finances. Ask them for their stories about how they became the financial successes that they are. You might learn the key to become one yourself.

Monday, August 3, 2009

Be Honest

Tip #172 - Be Honest. On our quest to acquire money, it is sometimes tempting to buck the system. After all, it will get us to our goal faster. Won’t it? Why pay for an extra person in the hotel room when the people at the front desk won’t even know they are there? Or why not add some extra mileage to your expense account to pad it? After all, it’s money in the bank. Or is it?

The truth of the matter is, the more honest we are when it comes to paying what we owe, the more everybody saves. How many times do you hear people complain about people who take advantage of the welfare system? And rightfully so. If people didn’t take advantage of it, there would be more money available for people who really need it. Right? How about shoplifting? Do you know how much that costs our bottom line when we pay for things? A lot. Stores need to figure into their prices the percentage of items that will be stolen, which raises prices across the board. Doctors’ bills would be less if they didn’t need to buy so much malpractice insurance. The same is true for almost any serviceperson. Most service people need to buy insurance to protect themselves from lawsuits. Of course, the consumer pays for that insurance through higher costs. I’m not saying that a certain percentage of lawsuits aren’t legitimate; they are, but there are certainly a fair number that are blatant lies that cost everyone around them more money. How many people take pens or copy paper from their place of employment? That costs the company money and brings down salaries since it raises overhead. I could go on and on with examples, but I'll try not to bore you.

If each of us took our personal responsibility, and didn’t cheat the system, then things would cost a lot less than they do. I’m not suggesting that any of my readers is a liar, thief, or dishonest in any way. I just know how tempting it is to try to get off paying less money if one can get away with it – trying to pass your child off as a younger age to get a cheaper rate, cramming more people into a hotel room than without paying for all of them, printing more coupons from your computer than are allowed, etc. Each of these brings the prices up for customers who do pay their fair share. And while it is tempting to save ourselves a little bit of money, if each of us were truly honest and paid what we owed, didn’t scam anyone, steal anything, or try to pull one over on the company, we would all save money. We’d also live in a much nicer world. Of course, it’s never going to happen. But if each of us did our part, we might eventually see a difference in the way of lower costs. And even if we don’t, we can at least feel good about ourselves that all the money we have saved up was gained honestly and morally.

In Real Life (IRL) – It’s funny how sometimes I am thinking about what I will post about next on this blog, and an opportunity presents itself to me on what to write about. Earlier this week I went to the grocery store to pick up a half-gallon of ice cream (or is it 1.5 litres now?) that I was craving (no, I’m not pregnant – just a piggy!). I walked into the store and the whole ice cream section was empty as there was something wrong with their freezers. Ugh, it was truly the only thing I went to the store for. So, I found a substitute in a much smaller freezer and picked up some ice cream pops. I debated about it for five minutes, since they are pricier than I usually spend. But I really didn’t want to go over to another supermarket, and I really was craving them. So I bit the bullet and took them to the checkout line.

Since I only had one item, I went to the self-checkout line. I scanned the item, and then looked down and in the change slot was a $5 bill and two $1 bills. “Whoopie!” I thought, I actually made money on this ice cream rather than spent more than I should have. Of course I knew it wasn’t really my money. It was the person’s who checked out before me. I held it for a minute or two, thinking about it. Who is to say the customer ahead of me will realize she’s missing the money and come back? If I brought it to customer service, the guy behind the counter might take it, especially if the customer does not return. And that’s when all of my moral lessons came back to me. If I were the one who left it behind, I would hope that the person who was after me in line would turn it in. So that’s what I did. I brought it to the customer service man and told him where I found it. And then I left the store with a good feeling in my heart and a box of overpriced ice cream in my hand.

Sunday, August 2, 2009

Take Advantage Of Local Parks

Saving Money Tip #171 - Take Advantage of Local Parks. Did you ever notice that if you go away for the day that it sometimes feels like you went on vacation even though you were less than hour from your home? Going to local sites and bringing a picnic lunch is a wonderful and cheap way to spend summer day. Do a Google search for local parks in your area. You may be surprised at how many there are near where you live. In Northern Virginia where I live there are county-run parks, state parks, regional parks and even a few National Parks nearby. Some have greater amenities than others, but each one has its own traits and amenities. We could probably go to a different park all summer long and not cover all of them in the DC metro area.

The nice thing about parks is the entrance fees are often very low or often free. Compared to going to commercial entertainment venues, they are a great bargain. Why pretend you are navigating your way through the water playing a video game when you can rent a rowboat at a park and do it for real? Why climb in a plastic play area at the mall when you go do real climbing in the woods? Parks are often underutilized, when in fact they provide great entertainment and educational value for very little money. And often after spending the day at one of them, it fees like you were on a vacation in a faraway place. You would be surprised at all of the fun things parks can offer:

--hiking and walking trails
--scenic vistas
--sporting fields
--biking trails
--ranger-led talks
--picnic areas
--cabins and campsites
--and many others

Find a park near you that offers amenities that you like. Pack a lunch or dinner and go spend an afternoon or evening there. One day at the park often won’t even be enough to cover everything they offer. You may find yourself going back again and again or maybe inspired to check out other parks in your area when you realize what a great value they are.

In Real Life –
We spent the day at a local park yesterday. We had been there twice before – once to check it out and play on their playground and once to go swimming at their waterpark. The park itself is huge and offers hiking trails, a shooting center, a waterpark, camping, cabins, sporting fields, equestrian fields, and playgrounds among other things. We could have spent several days at the park and not have done it all. But we were there to do a mini camping getaway and to take advantage of some of the park’s amenities.

Entrance to the park was free since we live within its jurisdiction. Even if we hadn’t, it would have cost a mere $7 for the whole carload. The first thing we did when we got there was participated in a ranger-led event that was both educational and fun. It included a talk by a naturalist about water critters and a walk along a pond with nets trying to catch crawfish and other water creatures. My daughter loved it (even though she didn’t catch anything). After that talk we grilled dinner of hamburgers, hotdogs, and chicken that we brought from home. The park also provided a scavenger hunt game for kids that my children played. A simple brown paper bag with a list of items written on a piece of paper stapled to it that the children should find. And if they found them all, they would get a small prize (we didn’t find everything, unfortunately). Still it was a fun activity for kids. There was also a large playground with updated equipment much different than the typical swings and monkey bars that many playgrounds offers that my children enjoyed playing at. At night there was another nature walk and talk led by a park ranger. We learned about nocturnal animals and their mating calls. We even got to hear their calls and see such animals as owls, toads, and frogs up close. We rented a campsite for $23 for the night. And toasted marshmallows and made s’mores before going to sleep.

In the morning we planned to go to the waterpark for the day. Campers get discounted rates, so for a family of four, it would only cost $16. Unfortunately, we awoke to fairly heavy rain, so we ditched the waterpark and headed home. If the rain had not gotten in the way of our plans, we would have spent a total of about $40 plus the cost of our food to spend two full days at a local park less than 30 minutes from our home. Even if we did not want to camp, we could have easily spent the day and spent absolutely nothing but the cost of our food, or we could have gone to the waterpark and spent under $30 total. Every member of our family, as well as our friends who went to the park with us, had a great time. We enjoyed it so much that we are planning to do it again in a few weeks at another local park. Besides the entertainment, we got exercise and learned a few new things, as well. And each time we go, I wonder why we don’t use our parks more often. They are a great, cheap resource to take advantage of.