Wednesday, October 28, 2009

Don't Live Like The Rich

Tip #202 - Don’t Live Like The Rich. I just finished reading Thomas J. Stanley’s new book, Stop Acting Rich and Start Living Like A Real Millionaire. I hade been reading it over the past three weeks, squeezing in a few paragraphs here and there when I hade free time. For those who haven’t read his most famous book The Millionaire Next Door, I will give you a brief summary. Dr. Stanley is a researcher and conducted surveys on millionaires. What he found out was that most of those people who look like millionaires – the ones in the big houses, driving luxury cars, and belonging to country clubs actually aren’t. And that there are many millionaires probably living “next door” to you who don’t look like millionaires. They became millionaires by using their money wisely by doing things such as driving cars for 10 years rather than leasing. They often do not have “elite” professions such as doctors and lawyers, many of whom feel they have a certain image to uphold and spend a lot of money maintaining that image. Instead, many of the millionaires next door were small business owners who lived life like regular, ordinary people.

In his latest book, Dr. Stanley gives advice on how the average person should act if he wants to become a millionaire. His advice is to emulate the real millionaires not merely those who appear rich. For example, people who act rich buy expensive wine and top shelf liquor, while most millionaires are quite happy with less expensive brands. People who act rich but aren’t often buy status cars such as BMWs, while real millionaires often drive dependable cars that hold their value like Toyotas. People who pretend to be rich often buy million-dollar homes in luxury neighborhoods while millionaires often live in regular neighborhoods, you know, next door to you and me.

While a few of the chapters droned on a bit too much for me about liquor and wine, the overall book was confirmation from his first book of the habits of what I will call everyday millionaires – not mega millionaires. They are an ordinary group of people who spend wisely, live below their means, and aren’t out to impress others with their wealth because they don’t need to. Knowing they have money is often satisfaction enough – there is no need to flaunt it.

So, the basic moral of the story is, if you want to actually become rich, and not merely look rich, you should stop buying top-of-the-line anything. By buying products within your means, you will have a better chance to become wealthy. Buying status symbols will make you appear wealthy to others, but they will not make you wealthy. Furthermore, those who try to act rich but don’t have the money to support their habit aren’t generally happy because they are always looking for the next materialistic item that they may not be able to afford. So in order to become rich, live within your means and buy products such as a car and a watch that are suited to your income level. Live in a neighborhood that matches your wealth. Then you may become a millionaire, too. Live like real millionaires and you will likely be happy since real millionaires don’t base their happiness on status symbols.

In Real Life (IRL) – I enjoyed reading most parts of this book. It seemed, in a lot of ways, a continuation of The Millionaire Next Door. And while I, unfortunately, don’t fit Dr. Stanley’s definition of a millionaire, I do live a similar life as those he profiled. Our family has been able to build up a sizeable amount of money because we don’t live in a flashy neighborhood, we don't try to keep up with the Joneses, we don't buy brand names to impress others, and we don't live beyond our means. Just by not putting much importance on material things or brand names, we have been able to put savings away each month to build up our wealth.

I see people all around me spending way more money than we do. While I don’t know anyone’s income, I can guess that many of them are in a similar income range that we are. Yet, some of them are leasing BMWs, living in $700K to $1 million homes, going on exotic vacations, and shopping at fancy stores. I imagine they are the typical rich wannabes that Dr. Stanley is writing about. Our family tries to focus on other things to bring us happiness. Driving to Florida in a Mercedes will not make us any happier than driving in our Chrysler. Sure, we might get a few envious glances from other people, but that wouldn’t make us satisfied either. We are happy knowing that we can afford the things we buy, and that one day maybe we will have saved up enough to be profiled in Dr. Stanley’s future book as one of the real millionaires.

Tuesday, October 27, 2009

Quick Note

Just a quick note that I realize that I haven't updated my blog in several days. I've been running around quite a bit from activity to activity for my children and spent 5 hours in line today getting my middle child the h1n1 flu shot. (I went yesterday with my youngest child, but it only took about 30 minutes!) I hope I have some free time tomorrow or Thursday to sit down and write a post. Writing while tired and with a headache usually equals disaster, at least for me.

Thursday, October 22, 2009

Get Your Free Credit Report

Tip #201 - Get Your Free Credit Report. Up until a few years ago you had to pay to see your credit report. And then a law was enacted that allowed you to see your credit report once per year from each of the three top credit reporting agencies. There is one website to check those credit reports for FREE. The website is:

Ignore the catchy commercials for another site that supposedly offers free credit reports but then ropes you into a monthly service charge unless you opt out in a timely fashion. Instead use to check out your credit reports. You may only look at your credit report once per year per each of the three credit agencies – Equifax, TransUnion, and Experian. You can look at them all on the same day. If you do, you will have to wait a full year before you can look at any of your credit reports for free again. Or, you can look at your credit report from just one of the agencies and wait a few months to look at the second one, and then wait a few months more to look at the third one. By doing it this way, you can stagger looking at least one report throughout the year. Either way, you have to wait one year before looking at the credit report from the same agency.

If you have never looked at your credit report before, it shows how many open accounts you have such as mortgage and credit card. It shows the balance on these accounts. It also shows recent inquiries into your credit history. It shows any negative information such as bankruptcies, or liens. Then it gives some personal information including name address, and employer. It then gives you steps on how to dispute any information you find in the report that you think might be wrong. Then it gives you a summary of some of the laws associated with your credit and your rights.

You can look at the information online in one session. Once you close it out, you may not look at it again for another year (unless you pay). You can, however, print out a copy for your records, which I suggest you do.

Overall, it is useful to look at your credit report if you think you will be applying for credit in the near future such as a mortgage. Or, if you are the type of person who is just curious to see what your credit summary looks like. Or, if you are worried there may be an error and want to take the first steps to correct it. Remember, to go to to check out your credit. Don’t pay for information you can get for free from this site. Note, that this site does not give you your credit score for free. They charge $7.95 for that. I don’t think it’s necessary for you to pay to get your score, especially if the reports look good. If you are applying for a mortgage and they don’t give you the best rate, then you may know something’s up and might want to check it out. But if the credit report looks good, your score should be good, too.

In Real Life (IRL) – I had never checked my credit before. We bought our house in 2000. My husband already had a mortgage through his credit union on a home before I met him. So he knew that he qualified for a good rate. I assumed mine was good, even though I may have been late for a bill here or there, I had never not paid my bills or done anything horrendous to ruin my credit score. And at the time, you had to pay the credit agency to get your report. It wasn’t free until a law passed in 2003. When we bought our home, we qualified for the best rate so I assume my score it decent. I have never paid to find out what the actual number is. And although I am slightly curious (what can I say, I am a math and numbers geek. I like getting high scores!), it’s not worth it to me to pay to find out my score if it’s not necessary.

But recently I became curious to see what my credit reports looked like. After all, I have bounced a few checks. And I have been late to pay my phone or gas bill once or twice when I’m on vacation. I was wondering if that had any effect on my credit. And although we are not planning to take on another mortgage any time soon, we still wonder if my husband’s new company will close his office and move him elsewhere. So the other night, I finally went to and gave them the necessary information to find out my credit report from Equifax. That seems to be the biggest or most well-known credit agency, so I chose to look at that one. I figured I would wait to look at the other two at different times of the year.

And what did I find? Nothing bad was in my credit. It listed all of my credit cards, when they were opened, and how much the credit limit was. It also listed my credit card accounts that had closed. The information seemed accurate until I got to my personal information. For my employment, it listed a company I worked for until 1998. I was employed by another company from 1998 until 2007 (and technically am still employed there, I think even though they have no work for me), yet Equifax has no record of me working there. Other than that, it all seemed accurate, and since there was nothing negative on the report, I am just filing it away until next year.

Do I think it’s a good idea to check out your credit? Sure, why not? It won’t hurt you to see what the agencies have on you. And if you find something negative, it will give you a chance to correct it (if it is in fact inaccurate) before you need to apply for some credit. Or, at least it will keep you from being surprised when you are not offered the best interest rate. Why not go check it out?

Tuesday, October 20, 2009

Think One Step Ahead

Tip #200 - Think One Step Ahead. In today’s economy, many people are trying to make more money or cut down on expenses. In this blog I have talked a great deal about ways to cut back on expenses and have given some suggestions on how to earn income. However, our world is changing rapidly. What works today may not be feasible tomorrow. Or it might be passé. In order to continue to keep our expenses low or to earn more income, we need to stay on top of technology, come up with ideas for future earnings, and think one step ahead of where we are today.

Fifteen years ago, who would have thought that making money writing a blog was possible. Yet many people who got in on the ground floor of blog writing are the ones who are making good incomes at it. As new technologies become available, those who become adept at it quickly are the ones who are making money. Being flexible and eager to learn new things are skills that will help put money on the table.

Think of women who take time off when they have children. Many want to go back to work when their children are grown but they find that their skills have gotten rusty or they have failed to keep up new technology, laws or other changes in their field. Those who are thinking ahead and keeping up with skills will have an easier time getting and keeping a job.

What about cutting expenses? Right now, in addition to paper copies, coupons are available on dozens of websites. Drugstores have rebate and cash back programs that many of people take advantage of to save hundreds of dollars each year on household goods. These types of programs could end tomorrow. Where or how will you start to economize in this area in the future? Will cutting back on some of these items be another way you can save money? Or buying larger quantities for less price per unit be the way to go? Or maybe making some of these things yourself will be the best cost saver. Remember the old saying, ‘There’s more than one way to skin a cat’? Well, there’s more than one way to save money. You might need a different method in the future than what you are using today.

Continue to do what you are doing today to earn money or to save money. But take time to read up on new technologies and try them out. Learn a new skill that might save you money in the future or become a potential business for you. Try to do several different things to make money. Then if one area becomes no longer viable, you still have the others to fall back on. Apply the same concept to cutting costs. Consider what you think the world will look like tomorrow and start to implement ideas that may work as income or cost-cutting measures in that world. You will be better off than if you are stagnant and relying on only things you are doing today. They may not be around or may not be money makers tomorrow.

In Real Life (IRL) –
I have been thinking about ways to generate some income, and realize that things that I considered just a decade ago no longer have direct relevance or have changed dramatically. Many years ago I considered doing a business organizing peoples photo albums (not scrapbooking) because I was very good at organizing my pictures and getting them labeled and in books. I had many people ask me if I would do the same with their photos. While I never followed through with that plan, I look at how much has changed in the past 20 years regarding photo albums. Scrapbooking became the rage for a segment of the population with many expert scrapbookers offering their services to organize people’s photos. Then came digital pictures with digital photo albums that seem to be very popular today. Do people still put photos in a sleeve of a photo album anymore? If I had gone into that business, I would have had to adapt, at least for some clients to fancier scrapbooks or digital books like the ones available online. What will be the next wave for photos? People making a living in that industry should know and be on top of that.

Two years ago I was only clipping coupons out of the newspaper inserts. I was unaware that coupons could be had online. I have been able to cut expenses much more dramatically using these coupons that are available on the computer. Will they always be around? Will my stores stop taking them? If so, what will be my next plan to keep my food expenses down? I have been trying to get away from buying so much processed food, not only as another plan to save money but for the health benefits, too. If my supermarkets stop taking Internet coupons, my step up in scratch cooking will help control that area of the budget.

I have been selling on eBay for several years now. I am happy with them and I am comfortable there. But the fee increases have cut into my profits and I am starting to search around for other alternatives to selling. Lots of other sellers have jumped ship and are already selling on other venues. Who knows if eBay will always be the largest online auction site. It makes sense for me to explore other sites as potential selling sites for me.

I am constantly reading about finances and various ways to make money, save money, and invest money. By connecting with other like-minded individuals, I am able to hear about other ideas that people are implementing, which helps me come up with my own ideas. I stay on top of what technologies are out there – even if I am not yet using them, and it makes me think ahead to what will be in the future. No matter where I look to make or save money, keeping on top of what is going on in the financial and business world is the only way to keep up.

Sunday, October 18, 2009

Learn The Math - Part 3

Saving Money Tip #199 – Learn The Math – Part 3. In parts 1 and 2 of this series, I discussed why it is important to learn some basic math concepts in order to help you save money. In part 1 we talked about calculating percentages, and in part 2 we discussed figuring out fractions. Today, we are going to talk about figuring out compounding interest rates on investments. Interest rates are calculated by multiplying the percentage by the original number. Compounding simply means that you get interest on the interest.

Suppose you are looking at investing some money – let’s say $1,000 – for the relative short term of 1 to 3 years. You look at some banks to compare interest rates. The bank says they will pay an annual interest rate of 1% if you put your $1000 into a savings account. For the sake of simplicity, let’s assume the interest is compounded annually. And then you find an online bank that is running some special rates to get you to become a customer. Their savings account will pay a 2% annual rate. How much will you get if you keep your money there for three years?

Well, we already discussed in Part 1 of this series how to figure out the percentages, so let’s use that knowledge. One percent of $1,000 is $10. That means if you invest $1,000 for one year, you will have $1,010 at the end of year one. If you keep the money in there for a second year, you will have $1020.10. That is because you now have $1010 earning 1% interest. One percent of $1010 is $10.10. Add $10.10 to the $1010 that you had at the end of year one and you will now have $1020.10. If you keep the money in the bank for a third year, you will have $1030.30 ($1020.10 x 1% is $10.20. Add $10.20 to the $1020.10 that you had at the end of year two to get $1030.30). By keeping the money in the bank for three years and earning 1% interest per year, your $1000 has grown to $1030.30.

Now, let’s look at the online bank. They are promising you a rate of 2% annually. Let’s figure out your interest. At the end of year one, you will have $1020 (1000 x 2% = $20 in interest + the original $1000). At the end of year two you will have $1040.40 ($1020 x 2% = $20.40 + $1020 that you had at the end of year 1). At the end of year three you will have $1061.21. (1040.40 x 2%=$20.81 + the $1040.40 you had at the end of year 2). So now you were able to calculate the interest and the final amount you will receive after three years. Keep in mind that many banks compound interest more often than annually (maybe daily or monthly) so the final amount may be a bit higher, but this should get you close enough comparison.

Let’s compare. If you put your money in a savings account for three years earning 1% interest compounded annually then you will have $1030.30 at the end of year 3. Or if you put it in a bank account earning 2% interest compounded annually, you will have $1061.21 at the end of three years. Now of course, this assumes that rates don’t change at either bank during the course of three years. But regardless this example shows how to calculate interest rates.

Everyone should be able to figure out the approximate interest rates that a bank savings account or CD is paying. You can use a calculator to do the calculations, but it is a good idea to understand how to compute the numbers manually.

In Real Life (IRL)
– When I was younger I used to set up spreadsheets on the computer figuring out how much my money would be worth at some future date if it was earning x% each year. It was neat to see how the compounding made my money grow so much faster. By inputting the amount of money I was putting into an account and estimating the percent interest I was getting, I would get excited by how much money I would have at a far off date in the future. This served as a motivating factor for me to keep saving my money. By changing the interest rates, I could see the difference in the amount my money would be worth if I earned a higher percentage or lower percentage.

This sometimes led me to look for CDs that paid higher interest rates or savings accounts that offered more competitive rates. Of course, with the CDs, the rates were guaranteed for a set period of time, whereas the savings account rates could change at any time, but it still gave me an idea of how striving to find higher returns on my money could make my money grow faster.

There are many online programs and calculators that can do the same thing for you. And they are good motivators to keep up your savings pace and earn the best interest rate that you can. If you don’t have a computer near by or a calculator handy, then you can calculate the interest rates with paper and pencil using the method above to figure out the approximate amount of money you will make at a certain interest rate. Don’t get scared by the numbers or the percentages. The nice thing about being able to figure out the math is that there is only one correct answer. And if you practice enough with it, you will have a good understanding of how interest rates work and see how higher ones will work faster to grow your money.

Wednesday, October 14, 2009

Learn The Math - Part 2

Tip #198 - Learn The Math – Part 2. In the last post, I was discussing how important it is to learn how to do some basic math to help you save money. Last time we discussed calculating percentages so that it is easy to figure out how much you will save on sale items in a store. In the past, I’ve discussed calculating price per unit. Today, let’s discuss fractions. Think back to fourth grade or so. Fractions are made up with a numerator (the number on top) and a denominator (number on the bottom). So in the fraction ½, 1 is the numerator and 2 is the denominator. Fractions are useful when we are using recipes. Cooking from scratch is a great way to save money. And bulk cooking is a great way to save time and money. So suppose you decide rather than going to the bakery to buy a dozen muffins for your daughter’ soccer breakfast, you are going to make them instead. By making them from scratch, you will save several dollars.

The recipe you choose makes one dozen muffins. But you decide since you are already heating up the oven and have all of the ingredients out, you will make some muffins for your family as well to have for breakfast over the next few days saving more time and more money. So you need to double the muffin recipe. How do we double ¼ teaspoon of something? What is twice 2/3rds of a cup? Let’s attack those fractions.

When adding fractions, it can be very simple. If the denominator is the same, all you do is add the two numerators together and the denominator stays the same. Luckily in recipes, since we are doubling, tripling, or quadrupling measurements, the fractions we are using are the same and therefore have the same denominator. So if the recipe calls for 1/3 cup milk and we are doubling the recipe, then we do 1/3 + 1/3 which equals 2/3. Of course we could always fill a measuring cup to the 1/3 line two times but that takes longer than filling it to the 2/3 line. And when doing bulk cooking every time cutting step helps.

If the recipe calls for ¼ teaspoon of salt and we are doubling the recipe then we would add ¼ plus ¼ to get 2/4. Huh? There is no measurement for 2/4. Aaah, think back again to fourth grade. This is where we reduce the fraction. Since the numerator and the denominator are both divisible by 2, we can reduce the fraction by dividing it by 2/2. (any number over itself is the same as 1. So 3/3 is the same as 1; 4/4 is the same as 1, etc. And any number divided by 1 is the same as the original number so it’s always safe to divide a fraction by a number over itself.) Two divided by 2 is 1 for the numerator and 4 divided by 2 is 2 for the denominator so we get ½. Therefore, ¼ + ¼ becomes 2/4 which becomes ½. Again we can do a ¼ teaspoon two times but that takes longer than doing ½ teaspoon once. Also, if you are going to triple or quadruple a recipe, it would become too laborious to do ¼ teaspoon three or four times, not to mention the chance of losing count and messing up the recipe.

Let’s do one more example. Suppose this muffin recipe calls for 2/3 cup of oil and again we are doubling the recipe. We add the numerators 2 + 2 to get 4 and we keep the denominator the same. So the answer is 4/3. Now I know there is no 4/3 line in a measuring cup. What do we do? Whenever the numerator is bigger than the denominator we divide the numerator by the denominator. So 4/3 is 4 divided by 3. Three goes into 4 one time with 1/3 left over. So 4/3 cups is the same as 1 cup plus 1/3 cup.

We’re going to do one more, harder example, and then we’ll be ready to quadruple those brownie recipes! Suppose you have a recipe that calls for ½ cup of white sugar and ¼ cup of brown sugar. You pull out your ingredients and realize you don’t have any brown sugar on hand. But you know from past experience that you can substitute the white sugar for the brown sugar. How do you add fractions with two different denominators? Well, you need to make the denominators the same before you add them. Just like you reduced the fraction 2/4 in the earlier example (by dividing the numerator and denominator by 2) to get ½, you can do the opposite now. So you are actually multiplying the fraction by any number to get a new fraction of the same worth. When multiplying you multiply both the numerator and the denominator. So ½ times 2 is 2/4. (1 x 2 = 2 for the numerator and 2x2 = 4 for the denominator). ½ times 3 is 3/6. ½ times 4 is 4 /8.

Now back to the problem. You want to add ½ cup sugar plus ¼ cup of sugar. We need to look at the denominators. Since they are not the same we cannot just add the numerators. We need to make the denominators the same. We do this by finding a number that both denominators divide into evenly. Two and 4 both divide into 4 evenly. So we will make the denominators both 4. Since one of the fractions already has a 4 in it, we only need to change the other. We need to make ½ have a 4 in the denominator. To get 4 on the bottom we need to multiply the fraction by 2/2. Remember any number over itself equals 1. And any number multiplied by 1 is itself so we can multiply any fraction by any number over itself to keep the original number have the same worth or meaning. So to change ½ to have a 4 in the denominator we will multiply ½ by 2/2 and we get 2/4. Now we can add the ¼ cup of brown sugar (which we are using white sugar instead) plus 2/4 cups of white sugar to get ¾ cups of white sugar.

In Real Life (IRL) – I hope I didn’t make this fraction lesson too complicated. I wanted to spell everything out in case some readers completely forgot how to add, multiply, or divide fractions. But once you do it several times, it really becomes second nature. When I am adding ½ cup of sugar plus ¼ cup of sugar I instinctively know that it is ¾ of a cup. And I don’t need to sit down with paper and pencil to calculate it. And the nice thing is that recipes always use the same measurements over and over again. It’s always ¼, 1/3, ½, 2/3, and ¾. And once in while there’s a 1/8 in there. But it makes it really easy and second nature to add them together and do one big measurement when doubling, tripling, and quadrupling measurements.

My real life experience hint is that when you are doubling (or higher) a recipe, make sure you write down the new measurement you are using. I often get lazy and just say in my head, “oh, I’ll just double it without writing it down.” And it never fails I always use one of the original measurements in the recipe rather than the doubled amount. And then I have flat muffins with half the baking powder used. Not good! Of course, if you catch the mistake in time you can always add in the extra amount of the ingredient. It’s when you halve a recipe and you throw in too much of something that you are in trouble. So be careful and write down the new measurements for the doubled recipe. And let’s go bake!

Monday, October 12, 2009

Learn The Math - Part 1

Saving Money Tip #197 - Learn The Math – Part 1. I know many people groan when they hear the word “math.” Something about numbers seems very overwhelming for some people. While I might sound like an elementary school math teacher, I have to say, if you don’t understand some fundamental math skills, then it is time to learn them. I am not talking about higher order math here – no geometry, trigonometry or calculus – just basic bath. Learning these basic skills will help you in saving money. For example, calculating percentages are important to figuring out sales prices and stock price changes. Being able to do division helps you figure out price per unit on items you are purchasing. Being able to calculate fractions allows you to double, triple, or halve recipes. Understanding multiplication can help you figure out interest rates and how much your money will be worth in the future on bank CDs.

So let’s learn the math. First up is calculating percentages. Let’s say you walk into a store with two coupons – one for $5 off any $15 item and one for 20% off any one item and. You see a teapot you need (and you cannot find one at the thrift store) for $20. Is it better to use the $5 off coupon or the 20% coupon? Let’s see. Obviously, the $5 off coupon will result in the teapot costing $15. The math is $20 - $5 = $15. But how about the 20% off coupon? Do you remember how to calculate percentages? The mathematical way to do it is move the decimal point of the percentage two places to the left. So 20% would become .20. (Remember 20% is 20.00% so the decimal place is at the end of the whole number). Now we take .20 and multiply it by $20. Do the long multiplication. (Multiplying 20 x .20, the first line is 00. The second line is 400. Add them together to get 400 and then move the decimal point two places to the left because there are two decimal places in the original number.) We come up with 4 or $4. Subtract $4 from $20 and we get $16. So clearly, the $5 coupon is more worth it in this case.

Now unless you bring a calculator with you to the store, which you could do, you might not have the time or materials to write out the problem on a piece of paper. How about we calculate a percentage a quick and dirty way? Did you know you can generally figure out percentages by dropping off the last digit or two digits of the number? When taking 10% of a number, you can generally drop off the last digit. For example, 10% of $200 is $20. 10% of $50 is 5. See all I did was drop off the last digit. But that only works perfectly if the last digit is 0 (zero). If the last digit is anything but 0 (zero) then you will only get an approximate percentage or you can use a fraction to get the exact percentage. Ten percent of 205 is not exactly 20. It’s actually 20.5. Ten percent of $518 is $51.8 or $51.80. (Remember the long way to do this would be to take the percentage and move the decimal two places to the left so 10% becomes .10. Then multiply .10 by $518 and voila you get the same number I did as in the quick and dirty way – $51.80.) Luckily in stores, most items are rounded to the dollar or if they are priced at $4.99 you can just pretend it’s $5.00 to do the quick and dirty percentages.

Okay, so figuring out 10% is easy. But how about we want to do 20% or 15% or 45%? Well 20% is just dropping off the last digit and doubling. So in our example above, 20% of $200 is $40 (start with $200, drop the last digit so that it’s $20 and then multiply by 2 or double to get $40). Twenty percent of $50 is $10 (drop the last digit to get $5 and then multiply by 2 to get $10). Forty percent would be four times the 10% number. So 40% of $200 is $20 x 4 or $80. Forty percent of $50 is $5 x 4 or $20. Easy, huh? Now let’s say you want to figure out 5% of something. Just take half of the 10% number. Five percent of $200 is half of the 10% figure. So drop the last digit and then divide by two or cut in half. So you have $200 and drop the last digit to get 10% or $20 and then divide by 2 to get $10. So 5% of $200 is $10. If you need to figure out 25%, which is a common sales figure then double the 10% figure and then add half the 10% figure. Twenty-five percent of $200 is $40 (20%) + $10 (5%) or $50. See, I doubled the 10% figure ($20) to get 20% ($40) and then I took half of the 10% figure ($20) to get the 5% ($10) and then added them together.

Generally in stores there usually isn’t less than a 10% sale or sales for odd numbers other than those ending in 5s – such as 25%. But sometimes there are rebates of 1% or 3% or sales of 1/3 off which is 33.3% off. And for sake of being complete, let’s figure out how to figure out 1% of something and more. Remember, I said that the quick and easy way to figure out percentages is to drop the last digit or two digits. Well, we’ve seen we drop the last digit, in general, to figure out 10%. To figure out 1%, we drop the last two digits. So 1% of $200 is $2. One percent of $50 is uh oh, we only have two digits. Okay, let’s do these smaller numbers another way. To get 1% of smaller numbers take 10% off first. 10% of $50 is $5. To get 1%, move the decimal one digit to the left to get .5 or 50 cents in money terms. So 1% of $50 is 50 cents. Let’s try another small number like $3.50. Ten percent of $3.50 is 35 cents or .35. So 1% of $3.50 is 3.5 cents. I just moved the decimal point from .35 one digit to the left to get 3.5.

If you want to check your work, just remember that 10% of something is a number divided by 10. So there would be 10 equal parts to get to the original number. I like to think of it in terms of money. 10% of $2.00 is 20 cents. If we did 20 cents 10 times we’d come up with the original $2.00. Ten percent of $1.00 is ten cents or .10. And there are 10 dimes in a dollar. To get 1% of something, divide by 100. That is, 1% times 100 is the original number. There are 100 pennies in a dollar. And 1% of $1.00 is 1 cent or .01. Twenty-five percent of something is also the same as taking one quarter of it or ¼ of a number of dividing by 4. Just like a quarter is 25% of a dollar (.25 x $1.00 = 25 cents). Twenty-five percent of $50 is $12.50. If we did $12.50 four times then we’d come back with our original $50. Of if we divided 200 by 4 we'd get 50. It’s all very logical. And if you practice with percentages over and over, it will become second nature to you, that you won’t even need a calculator or pencil and paper. Good luck!

In Real Life (IRL) – I’ve droned on and on about numbers, that you probably don’t want to hear about any real life stories. So suffice it to say that I am a math geek and always loved figuring out easy ways to come up with the correct answers in math class. I think I like it so much because there is only one correct answer to mathematic problems. And if I can go back and check my work like I did in the last paragraph above then I can be confident I did the problems correctly.

Recently I was in Old Navy exchanging a birthday gift my son received. I happened to time it when they were having a big sale. And while I was waiting in line the person in front of me had a couple of coupons. And it was one of those either/or scenarios that I addressed earlier. She was able to get 20% off an item or a certain dollar amount off an item. And I cringed when the person behind the front desk had to ask the other person behind the desk which one was better for this woman to use. She could not figure out the percentage problem. Actually, that is what gave me the idea for this post. I figured if the two people behind the desk and the person using the coupon were having trouble doing this math, that there were probably a lot more people out there who have trouble with percentages. And, it really is a good skill to know off the top of your head to make wise decisions in your purchases. If I didn’t explain anything clearly, please ask me in the comments. In the next post, we’ll do some other math problems to help us save money.

Friday, October 9, 2009

Don't Underestimate The Power of Networking

Saving Money Tip #196 - Don’t Underestimate The Power Of Networking. We all know the saying “the rich get richer and the poor get poorer.” Part of that is due to networking. The more you know, the more doors open up for you and the more money you make or save. A prominent lawyer may give some legal advice to a family friend who happens to be an orthodontist. The orthodontist in turn may do some orthodontia work for the lawyer’s daughter for free or at a discount. Or maybe, there isn’t a formal exchange of services. A stay at home mother may be on the steering committee for a community project and works with some movers and shakers in town. The movers and shakers let her know about a job opportunity that has opened up that she'd be interested in. While the sole purpose of having friends, networking, and having a social circle isn’t so you can get things for free or make money, it is a side benefit that should not be underestimated.

This networking happens on all levels of society, but the rich seem to benefit the most since they receive the most costly benefits. In the upper middle class a doctor might be hobnobbing with a building contractor, giving him some medical advice while the builder puts an addition on his home for a discount. While in the working class, a nurse who is friends with a construction worker might “open up a door” to get the construction worker a doctor's appointment that has the longest waiting list in town.

No matter the socioeconomic levels, however, we can gain knowledge, save money, or earn money by opening ourselves up to networking opportunities. Volunteering at your child’s school may give you the chance to meet another parent who paints murals for a living. As an acquaintance of hers, you may get a discount. Being in a mom’s club may allow you to be friends with women in your town you wouldn’t have otherwise met. Through them you may learn the best plumber, the cheapest tailor, and the most reasonable lawn service in town. Offering to work in a community garden may allow you to meet other gardeners who share their produce with you. Making dinner for a sick neighbor may turn around and benefit you when her daughter becomes your babysitter.

Again, the purpose of this networking shouldn’t be just to receive things. You must give as well – your time, your friendship, or your knowledge. And in return you may get a job, get a discount on goods or services, or receive some free advice. Don’t discount networking.

In Real Life (IRL) – In my former, single life in another state, I was a pretty social person. I had a large circle of friends, and they were all professionals. At the time I didn’t think much about it. But looking back, it came in quite handy. A good friend of mine was a computer programmer, and a darn good one. He came over many times to fix my computer and give me advice on some programming classes I was taking in graduate school. The cost of that help would have been pretty hefty if I brought my computer in for repair and hired a tutor. I also had a friend who was a dentist who once was able to give me some dental advice, saving me the expense and inconvenience of a dental appointment. I had another friend who was a doctor who wrote me a prescription once when I was feeling way too ill to go to the doctor’s office. He later gave me two epidurals (for free!) when I delivered my children in his hospital. He’s a handy friend to have! We didn’t necessarily do an even exchange of services. In some cases, I have only offered my friendship in return. Other times I have given financial advice and relationship advice or at least a listening ear. In fact, I never really thought about it as networking as these folks were my friends. But, they actually became my friends through some social networks.

In my current married life, I am not as social, as I am mostly busy with my children. But I do have mom friends who I see on a fairly regular basis. Most of us are out of the working world so we don’t necessarily “talk shop” so much or exchange professional services. But I have helped list items on eBay or Craigslist for several moms and have notarized documents (I am a notary) for free for members of my Mom’s Club. Doing these kinds of favors makes me feel more comfortable asking for help when I need it. And I’ve gotten some baked goods or small tokens of appreciation for the help I’ve given. As I try to analyze how some people are able to keep expenses low and save money, I realize more and more how networking and socializing benefit people. For other tips on saving money, check out Frugal Fridays.

Wednesday, October 7, 2009

Consider The Resale Value

Saving Money Tip #195 - Consider the Resale Value. It used to be back in the day, people would consider the resale value on their car but not much else. After all, there weren’t that many avenues to resell your stuff. You could put an ad in the classifieds for your used sewing machine and hope that someone found it who was looking for one. Or you could try to sell your old lawnmower by word of mouth. But when people bought something, most of them did not take resale value into consideration unless t was a big item like a car. Nowadays, however, with the plethora of reselling avenues out there – Craigslist, eBay, and other online auction sites, this is no longer the case. Now when buying purchases, you should consider the resale value. Because chances are, when you outgrow the need for this item, you can resell it – sometimes for almost as much as you paid for it.

In general, “better” brands hold their value than lesser brands. This is almost universally the case across all types of items – cars, toys, electronic equipment, and clothes, among other things. So next time you are buying something think about what it will sell for when you no longer need or want it. Let’s look at some examples. My daughter loves American Girl dolls (and I must admit, so do I). But at $95 a pop, they are not cheap toys. However, in the past 20-plus years that this company has been in business, these toys have held more than 50% of its value. That means, if I bought a doll seven years ago for the then-price of a doll at $87, I could probably turn around and sell a used, played with and loved doll that my daughter enjoyed for several years for about $45. So really, that doll wasn’t too big of an expense. For seven years’ worth of play, it cost us about $6 per year. On the other hand, I could have bought my daughter a knock-off 18-inch doll for $40. It maybe would last seven years if the quality holds up. The resell value would be next to nothing costing me nearly $7 per year as well. Wouldn’t you rather enjoy the real thing for about the same price? This is the case not just for collector-type dolls.

Let’s consider things like designer jeans. Now I am not one drop over $100 on a pair of jeans. But let’s say I do. There is a brand of jeans called 7 for all mankind that sells for over $100. If your teen convinces you that she absolutely needs this brand of jeans (with her chipping in some of the money, of course), don’t be discouraged. She can likely sell them on eBay when she outgrows them a couple of years later for half her purchase price. Of course things like electronics, where technology goes out of date quickly might not hold the same retail value as other things do – think vacuum tube televisions or film-type cameras. Then again, many items that aren’t available anymore can become valuable again.

The point is, in this day and age of reselling on the Internet, many things you have laying around the house might have some value. And in five years, some of the things you are buying today will have value. Of course, not everything will retain value, but generally, the better quality stuff you buy, the more value it retains.

In Real Life (IRL) – Growing up we were never the family with the cool designer jeans (Toughskins for us!). Nor were we the ones with the brand name clothes or other quality things that other families in our neighborhood had. I remember distinctly owning imitation Dr. Scholl’s sandals and other off-brand merchandise. But as I got older, I recognized that it was sometimes worth it to buy brand names that were of good quality. About 15 years ago I bought a Sony brand Walkman headset. I’ve carried it around with me and moved it all of these years, because it was a good quality purchase, and I figured maybe one of these days I’d get back into running (ha!). Well today my two-year old picked them up and wanted to wear them when it occurred to me, “hey these might be worth something.” So I checked eBay and sure enough, the model I own routinely sells between $30 and $60. Not bad for something I paid about $40 for many years ago. Now I’m sure the Sanyo brand or other lesser-name brand are not commanding the same type of prices.

Today when I buy things I realize that better quality brands may not only last longer for me, but hold its resale value for when I turn around and sell it on Craigslist or eBay. This applies to strollers, dolls, toys, and clothes. By buying good quality brands and reselling them, I can often enjoy a higher quality product for the same price as a cheaper brand. (Unfortunately, it doesn't always hold true and doesn’t help me with the 35mm film camera I still own.)

Monday, October 5, 2009

Be Persistent With Thrift Stores

Saving Money Tip #194 - Be Persistent With Thrift Stores. If you are hoping to save money by buying used but have have never shopped at a thrift store, do not be discouraged if the first time you go in one, you do not see anything you like, anything worth buying, or just a bunch of overpriced, dirty junk. The truth is with thrift stores is that some are good most of the time and some are bad most of the time. Others are good sometimes, great every once in awhile, and horrible other times. The reality is you never know what you will find when you enter through those doors. So try not to form an opinion about them after just visiting them once. You will not walk in to one and find the exact same pair of jeans you were searching for, in your size, and one-quarter of the price of a retail store. You may find a pair that is a different pair in your size for half the price that will do or you may find absolutely nothing that fits you very well at all or only jeans that are close in price to retail.

The strategy with thrift stores is that you have to keep going and going if you want to find the goods. Sometimes you hit them at the right time, and sometimes you don’t. If you just go once or twice a year, chances are you won’t find any great treasures. It takes going over and over again before you start to “get lucky” with fantastic finds. My other recommendation is that you should check out various stores in your area. There are those stores that are always overpriced, and it may not pay to shop there. You may find better stores that have great prices or do sales on special days that are worth going to. In other words, do the thrift store circuit. Check out a lot of the stores several times before deciding which ones are worth repeat visits. And then go frequently to those stores to find the best deals.

Remember, there is competition in thrift store shopping. You are not the only one looking for bargains and treasures. There are other people who are searching for the great brand name jeans for their teenage children; others searching for rare pieces of pottery to sell on eBay. The more stores you go to and the more often you go, the greater number of treasures you will come home with.

In Real Life (IRL) – I was not a thrift store shopper growing up. In fact, I’d go so far to say that I was anti-thrift store shopping. It wasn’t until I married my husband that I even set foot in one, and I wasn’t impressed. Everything seemed dirty, had a smell to them, or just seemed in poor shape. I wasn’t anxious to go back. But every time we passed a new store my husband would want to check it out just to see if there was anything great inside. And every once in awhile he’d find something – a vintage Coleman lantern he could use on his camping trips, a nice name-brand shirt with the tags on it, or a video we could watch for only a couple of dollars. It wasn’t until after we visited the stores over and over again that I started to see our visits pay off. And I learned which stores we generally found better stuff in than others.

I have since become a regular thrift store shopper. I look for clothes or toys for my children, books or videos for us, and rare, unique finds to sell on eBay. Many times I walk away empty-handed, but several times I find great bargains that are worth all of the wasted trips. When my parents come to visit I will sometimes take my mother, another anti-thrift store shopper, with me. And each time, she says, “I never find anything. You always find such great things.” Well, that’s because I go over and over again. And maybe one in ten times I do find a great item. And that really is the key to finding good stuff. You have to be persistent.

Friday, October 2, 2009

Review Your Third-Quarter Financial Picture

Saving Money Tip #193 - Review Your 3rd Quarter Finances. We’re three-quarters of the way through the year! It’s that time of year again to review your finances. I advocate not looking over your finances every chance you get. That leads to temptation to move money around if some investments are doing poorly. Personally, I think even once per month is a bit too often. I think twice per year is an adequate number of times you should look at it – once mid-year and once at year-end. At mid-year, you get a chance to evaluate what you have set up at the beginning of the year to see if things are progressing the way you had anticipated. Or if your allocations are out of whack, it gives you a chance to adjust them (generally, changing the percentage of your money that is in low-risk investments versus high-risk to be more in-line with your goals). Making allocation changes more often than that and I think you are reacting to short-term market fluctuations. Having said that, I think a check each quarter is the perfect frequency to do a review on your finances.

Since it is the end of the third quarter, it is a good idea to take a look at how things are moving along this late in the game so you can try to make any last-minute changes in order to reach some year-end goals you may have set for yourself. At this late date, you may want to wait until year-end to make any adjustments to allocations. But suppose you were hoping to save $10,000 toward a new house and you only have $3,000 saved to date, then it is time to get your butt in gear and make some changes to improve your savings before year-end. Or maybe you have already reached some of your goals and aren’t aware of it until you check your finances. This may free up some money for you to save somewhere else or to give yourself a well-deserved treat. Lastly, open season is often in November at many companies, and looking over your finances now will guide you in thinking about any changes you need to make in that area of your finances.

Remember, your quarterly checks on your finances are supposed to be tools to see how well you are meeting the goals you set at the beginning of the year. Unless some major life changes have occurred, you need not set new goals or make any drastic changes to the ones you have. Just a simple check of where you are and how to reach your goals by year-end are all you need.

In Real Life (IRL) – In the past year I have been pretty methodical about checking our finances on March 31, June 30, September 30, and December 31. When my husband and I were both employed full-time and there was more money floating around (and fewer expenses) I wasn’t as precise. But now, with each dollar that we are making having a specific use waiting for it, I want to make sure we are doing things the best way we can.

Having said all that, I calculated our net worth last night with updated figures on all of our investments. And I am pleased to report that in spite of the all of the market downturn this country has taken in the past two years, things are looking up. As a conservative investor, I did not take as big of a hit as some others who are more heavily invested in the stock market or invested in higher-risk mutual funds, but make no mistake about it, we still took some hits. Here is an example: I have a fairly risky mutual fund account that I opened many years ago in an IRA for retirement. In mid-year 2008, it was worth $14,000. At year-end 2008, it was worth under $10,000 for about a 30% decrease in value in six months’ time. I haven’t done anything with that account – didn’t add any money to it or take any out. Instead I checked it quarterly this year and watched it climb its way back up. At the end of third-quarter, the same account is now worth over $12,000 – gaining 20% in the first 9 months of the year. For those people who are checking their accounts monthly, weekly, or even daily, I’m sure many would have been tempted to take some of that money out to put in a “safer” account. By checking it only quarterly, I wasn’t tempted. And I told myself, that it doesn’t matter how well this long-term investment (won’t be using this money for 20 years or more) is doing this year. By waiting patiently, I have seen it climb part-way back up to its original value. And as they say on some flood clean-up commercials around here, “It’s like it never even happened” (the huge market drop in this case). Most of my other accounts have mimicked what that account did. And other than our condo in Florida, which surely lost value, most of our other investments – even our house - have climbed back up.

We still have some goals to meet by year-end, some of which we may not make. But after looking over our third-quarter finances and having a discussion with my husband a few weeks ago about our spending in the last quarter of the year, we have made a few changes, cut a few things out, and are generally pretty happy at where we stand. How is everyone else doing meeting their goals? If you need to find some ways to save some money to meet those goals, check out Frugal Fridays.