Tuesday, May 25, 2010

Be Moderate In Your Finances

Tip #258 - Be Moderate In Your Finances. In several areas of life many of us try to categorize ourselves on one end of the spectrum or the other - "I'm a Democrat. I love the scariest amusement park rides. I hate corn-on-the-cob. I'm a morning person." Maybe being middle-of-the-road does not define us enough. Or we think it's boring to be there. I don't know.

I find the same thing is true when it comes to people and their finances. There is the frugal camp - saving every dollar for future enjoyment or a rainy day. And there is the "live life" camp - we don't know what tomorrow will bring so why not spend our money and enjoy life today? There are the high rollers who want to undertake high risk to get high returns. And there are the conservative investors who put all of their money in guaranteed interest accounts.

I read several financial forums, and there always seems to be some healthy banter about which way is the correct way to go about living financially. But why does it have to be one extreme or the other? Why can't it be somewhere in the middle? Well, it can. And being moderate in your finances is probably a good place to be - saving for a rainy day but still enjoying life today. Undertaking some risk to increase your reward but being conservative with some of your money, too. Being frugal in some areas of your life but splurging in other areas. If we approach our financial life with balance and moderation, we will be more likely to get the most out of our money.

In Real Life (IRL) - We have a family friend whose parents had a business. Their business started to do quite well, but they never changed their lifestyle. They saved everything they made. If you were to go to their house, you'd think they were poor - worn carpet, walls that hadn't been painted in years, etc. They wore clothes that were in style years earlier. They didn't take vacations. What were they watitng to spend their money on? Who knows? But when the parents died in old age, we found out that they had stashed away quite a bit of money - as in they had several million dollars to their names. But they never enjoyed any of it! Instead, they passed it on to their children and didn't get to enjoy the fruits of their labor.

I know someone completely the opposite. He lives for today. He spends lots of money on things he loves to do - trips at the drop of the hat, business ventures that he hopes will take off. He invests in "hot tip" stocks that he thinks will earn him big money overnight. He laughs at the idea of being conservative with money, and when we explain some of our financial philosophies with him, he always seems to disagree and tells us why taking risks is the way to go.

While I tend to fall on the side of the line that makes sacrifices today for enjoyment tomorrow, I don't want to leave the world before I experience things that I wanted to do. None of us know how long we will be on this earth. The man saving all his money for retirement could die tomorrow. And the man spending everything can live to 103. Since this will almost always be an unknown, why not take the middle road? Enjoy what you can . Splurge on things that are important to you, But also plan for the days when you will likely not be able to work for money. Strike a balance between saving and enjoying. When investing, keep some money safe, but take on some risk. It doesn't have to be one end or the other. The middle of the road might just be the right path for you. For other financial ideas check out life as mom.

Thursday, May 20, 2010

Realize That Coupons Are Marketing Tools

Tip #257 - Realize That Coupons Are Marketing Tools. Sometimes I get a little frustrated when I read what's out on the net about "saving" money because most of it revolves around how to buy things - either cheaper or how to get things for free. But in reality, the only way to save money is to buy fewer things and only the things you need at the best price possible. Then you can put more money away, which is the real definition of "saving money."

Why do manufacturers give out coupons? Is it to be nice to the consumer? Is it because they want you to get a good deal? No, they give them out because coupons make the company money. Yes, coupons make the manufacturer money. It might be in ouvert ways - the more coupons for a product that is out there, the more of a product the consumer will buy. Or, it might be in subtle ways - it gets a consumer to buy a product that she would not have bought and causes the consumer to buy that product in the future.

Don't get me wrong, I think there are some people out there getting decent deals because of coupons. There are a few good consumers who can work the system very well. They stick to a list and only buy products that are on sale at the lowest possible price. They only use coupons for something they had on their list to buy anyway. And even if an item is free, they don't get it because it's not something they would normally use, and they don't want to become attached to a product they don't need.

But I think that most people are buying additional items they would not normally buy because of coupons. And that people do not realize that when a company gives out a coupon for a free new flavor of spicy apple ice cream that it is setting the stage for the consumer to later further desire spicy apple ice cream and for it to become a regular item on the consumer's shopping list. Marketers are good like that. Remember, overall, coupons make a company money.

So next time you clip coupons, ask yourself, is this something I was going to buy anyway or am I buying it because it's a good deal? By buying a new product that cleans toilets better am I going to like the product so much that I will keep buying this product in the future? If the answer to either of these is yes, then that coupon is costing you more money than it is are saving you. So if you plan on using coupons, make sure you only use them for items on your list that you were going to buy anyway. Companies make money on the coupons overall, but they don't make money on each and every person who uses their coupons. Be one of the people who they don't make money on.

In Real Life (IRL) - I am not anti-coupon. But I do think people are giddier about them than they should be. There are better ways to save money - that is put more money away in savings. So coupons should only be a tool in building up savings, not just a way to "save" money.

Using coupons on products that were on my shopping list anyway really do save me money. But I realize that when I use one for a product that wasn't on my list, then I am buying something I was not going to buy. And that does not save me money. It costs me money. And getting a new item for free is a cheap way for a company to get me to test their item and start to like it and want to use it. I know. It's happened to me before.

Yesterday, I got in the mail a sample pack from Nabisco and other companies. Inside were free samples of a new flavor of Wheat Thins - a flavor I had never tried before and one I had about 0% chance of buying in the future. I very rarely buy Wheat Thins. And I have never bought any flavored ones. But when I opened up the package to taste them, I found them to be delicious so much so that I opened up a second package and ate that one, too - bad I know. But they were so good. Then my 5-year old ate a package and loved them as well. "Mommy, can you please buy these again?" she asked. Ah yes, the power of marketing. That free sample is going to cost me money, and Nabisco is the one who is going to make it off me.

One more example - Before last year I had never tried Honey Bunches of Oats cereal. It never struck me as a cereal I would particularly like, and I never purchased it. But about 6 or more months ago, I clipped out a high-value coupon for the cereal. And there was a great deal at our supermarket for it, so I combined the coupon and the sale and bought a box. And guess what? I really like Honey Bunches of Oats. And so do my kids. I have added it to my regular shopping list.

Now I almost always only purchase cereal when it's on sale and when I have a coupon. But a few weeks ago I bought a box that was on sale but for which I had no coupon. We were running low on cereal and it was still a decent price but not the lowest price possible. So I am not a perfect couponer or shopper. If I were, I wouldn't have been running low on cereal or I would have bought a different cereal I could get at my target price. I slipped. I bought something I wanted even though it wasn't the best price I could get it for. And that's how Honey Bunche of Oats has made money off me. And that's how they make it off you, too. So realize that coupons are a marketing tool for the company, and then use your coupons wisely.

Thursday, May 13, 2010

Find A Financial Mentor

Tip #256 - Find A Financial Mentor. If you are not knowledgeable about finances, investing, savings, budgeting, and other things related to money, then find someone who is knowledgeable about it. It could be a family member, a friend, a co-worker, a church member or a neighbor. Make sure the person DOES know what he's talking about - that he's not someone who boasts that he makes 20% in the stock when he really doesn't. Instead, find someone with overall financial wisdom - one who has built up savings, knows at least some about investing, is knowledgeable about tax laws. Make sure the person is someone whose investment and savings habits seem to mirror your own. And once you find that person, pick his or her brain.

Most people will be honored that you are asking for their help. If the person you are asking does not want to be helpful, then find someone else. Once you find a good person, ask questions. You don't have to get too personal with how much money he has or how much you make - you can ask general questions. What did you do to save up for retirement? What do you think my best options are for saving for college? Do you know what the benefits are for saving in my 401(k)? What should I do with 401(k) rollover money?

These are the types of questions an investing novice should ask an experienced person with finances. Not unlike questions a new mom would ask a seasoned one. When a woman has a baby she doesn't suddenly know how to be a perfect parent. She usually asks questions of experienced mothers - their own moms, sisters, aunts, friends. This is the same idea. Again, it doesn't have to get too personal. You don't need to say to your neighbor, "I make $50,000 and want to save for retirement. What's the best way?" Instead you can say, "I have a few hundred dollars left over each month after all of our expenses. What would you do with it to save for retirement?"

On the other hand, if you are close to the person, the more information you can give the better - you might be comfortable giving more detailed information to a parent, sibling, aunt or uncle, or close friend, for example. Do what you are comfortable doing. Talk in general terms if you want or specifics if you do not mind. Just find someone who you can call or ask in person when you have a money-related question or to just get some financial advice.

In Real Life (IRL) - Discussing finances with other people is often seen as one of those "hush hush" topics. And it doesn't have to be. Sure we don't need to be broadcasting to the world that we are making $100,000 per year. But there is no reason why a couple of friends cannot discuss investment strategies or how to improve savings without revealing their salaries. And there's no reason why you cannot tell some trusted folks your salary if you want more specific advice.

I am fortunate that my father is my financial mentor. He is self-taught - he never went to college or studied finances formally. But he spent many hours listening to radio finance talk shows, reading books, and talking to people more experienced than he. In doing so, he became very knowledgeable about various savings vehicles and investment choices. Whenever I have a question, I know I can ask him. In fact, he figuratively held my hand when I invested in my first mutual fund. I have gotten advice from him about where to invest, how to handle financial situations like where to put a 401(k) money after I leave a job, and just how to save money overall. Now that I am experienced, I usually decide what I am going to do ask what he thinks. But early on, I would just ask him what I should do.

For specific tax questions, I usually double-check with my brother who is a trained accountant and certified financial planner. His investment style is much different than mine (he is much more willing to take on risk and debt), though. So if I ask for his advice, I usually take it with a grain of salt. But the point is, I have found people that I can go to if I have questions. Sure, I can pay a financial advisor if I have to. But for many people that is not necessary. If there is someone close to them who knows his way around savings, that person can usually give unbiased advice for free. (Caveat: If you just inherited $500,000 or have complicated investment or tax questions, a professional, independent financial advisor is best to go to). For general questions, look to someone in your circle of family and friends who can give you guidance as you make financial decisions. For other financial ideas, check out Frugal Fridays.

Wednesday, May 5, 2010

Save to Be Prepared - Don't Save To Be Rich

Tip #255 - Save to Be Prepared - Don't Save To Be Rich. Many people dream of being rich one day - having all of the money they want to take a trip around the world, buy expensive homes, and drive fancy cars. But most of us won't become that rich. And I don't think most of us even necessarily want to be that rich - some people, but not most. So why is it that we are saving money, if it's not to be rich? The reason we should be saving money is to be prepared - prepared for the day when we want to purchase a new home, prepared for the years that we want to stop working so we can take care of our children, prepared for the weeks that we want to take vacations, prepared for the four years that our children will be off at college, prepared for the years when we will no longer be able to hold down a job, prepared for the day when a spouse passes away, and prepared for the days that we don't yet know what they will bring.

If we prepare for these life events, we will be rich because we will be doing what we set out to do. Of course, the days you are preparing for may be different than what I listed above but if you save for them, nonetheless, then you will be prepared when you are ready to do the things you want.

So, don't set your goals to be rich. Set them to be prepared - extra savings to put away for a rainy day, savings to put away for retirement when you can't work, savings to put away for vacations, savings for a new home, savings for months or years you want to stay home to raise your children, savings for when either you or your spouse will be on your own, savings to start a business. If you are prepared for these events, then you don't need to save to be "rich," because you already will be - by doing the things you want.

In Real Life (IRL) - I'll admit that at one point in my life I had spreadsheets written out that showed at what age I would become a millionaire if I saved up x amount of dollars each month, and if I got x% of raises each year, and if the stock market went up by x% each year. Then I figured I would be "rich." Wahoo! Then what? So I would have a million dollars to my name. What does that mean? Is that really a good goal? No, not really.

When I realized that it would take longer than I expected to become a millionaire, I set more reasonable goals for myself and for my family. I did have a firm foundation in place since I had been putting away a couple hundred dollars per month into a mutual fund just to save to become that millionaire. But now that money had a purpose. Some of it was going to stay put as a rainy-day fund. The rest was going toward a house fund. I got serious about retirement and upped my contributions to my 401(k) and my IRA.

After I got married and we bought our first and current home with that house savings, we started saving so when we had children I could stop working full-time for the first 3-5 years of their lives to raise them. (Ahem, that has now turned into 8 1/2 years, but that's neither here nor there.) Then we started to get save to be prepared for the kids' college expenses. With our purchase of life insurance, we are prepared for the possibility that one of us may not be around.

That is how our savings stack up. We save for life events that we want to partake in, and unexpected things that could come our way. We haven't planned perfectly. Housing prices were higher than we expected when we bought. We had adoption expenses that we not specifically save for. And I couldn't go back to work when I thought I would. But we were still able to cover the things that we set out to do - at least much better than if we had not set out to be prepared for these events. So, I feel we are "rich" because we can do the things we set out to do. We can't set out on a cruise around the world on the drop of a dime. But we can prepare for it, if that's what we want. For other ideas to save money, check out Frugal Fridays.

Tuesday, May 4, 2010

Go Curb Shopping

Tip #254. Go Curb Shopping. Hear me out, please. It's not as bad as it sounds. I promise. I am not suggesting you go dumpster diving or dig through people's trashcans. What I'm suggesting is much more civil - in the world of trashpicking, anyway. In the nice weather many people are doing big spring cleanings. On the curb in front of people's houses you will see bookcases, desks, large plastic toys, bikes, lawnmowers, and things of similar nature. Generally, these are things the homeowner no longer has use for and either isn't familiar with freecycle, is too lazy to donate it to a charity, or knows that someone will take it if he puts it on the curb in front of his lawn. So why shouldn't that person who takes it be you?

There are many good items on the curbs and if you see something that you have the need for, then don't be embarrassed to take it. Free is free, and you can always pass it on if it doesn't work out for you. Once you take to heart the saying, "one man's trash is another man's treasure" you will feel better about it. And when you are saving money on things you would have had to buy anyway, your savings account will be bigger. If nothing else, be glad that you are saving things from the landfill.

Even if an item is not perfect, you may have use for it. An old, broken wheelbarrow may have good wheels you can use as replacements for your beat-up ones. A broken refrigerator might have a handle that yours needs. A pile of old bricks may be perfect to line your driveway. So make sure you take notice of all items on the curb, not just the things that are in good condition.

Some word of advice, though.

--Make sure it is not illegal in your town, city, or neighborhood to "trash pick." Some areas do have laws specifically against this. Many don't, though. In fact, some communities encourage it and have specific days that are "trash shopping days" where residents are encouraged to shop around through their neighbor's curbside items. If you are unsure of your town's laws, call the town office or other authority.

--Make sure that the item REALLY is denoted for trash. A kid's bike by the side of the road is often just a toy that a child did not put away. Taking something that is not meant for the trash is stealing, and you don't want to do that.

--Don't take charity donations. Many times households put charity donations to Salvation Army and the like in bags (or not for larger items) on the curb. DO NOT take items that are meant for charity. Usually they are marked and put neatly in bags. This should be a clue that it is not trash.

--When in doubt, ask the homeowner. It's perfectly acceptable to knock on the owner's door and ask, "Do you mind if I take that bookcase you have by the curb?" Most homeowners are glad to see someone else get use out of it, and it might even save them disposal fees. Some will even put "free" signs on large items by the curb. But if you are unsure, ask. No need to be embarrassed.

--Take items with your head held high. There is no need to take things in the dark or crouch behind trees. You are saving things from the landfill and contributing to your bottom line - nothing to be embarrassed about.

--Make sure you are safe. Don't stop on major roads if there's traffic behind you. Don't take rusty, metal things. Be careful if things are piled high, so that they don't tumble over.

--Use common sense and you might just find that you have found a few treasures on the curb.

In Real Life (IRL) - My eyes light up when I drive by a big pile of stuff in front of someone's house. I admit it. And if you told me ten years ago that this would be the case, I would have laughed and laughed. As a child, I was not taught to go through people's unwanted items. In fact, the opposite is true. But nowadays, it is just too tempting. It seems people have so much extra stuff that they don't want. And many unload perfectly acceptable items on the curb.

In my town there is no law against taking others' trash. And because there are a certain number of free bulk trash pickup days, there seems to quite a bit of good trash on the curb. I don't drive around specifically looking for trash, but if I'm on an errand or walking my kids to school, I will often stop and look.

In the past several years I have found some great things - a sand and water table for my kids (I actually found a second one that I sold), a knock-hockey game (which has become a family favorite), a giant, old, plastic Christmas Santa that lights up (sold on Craigslist), a plastic climbing cube (which my kids used, and then we sold), a bike (we gave away to a co-worker), games and toys (that I donated), a plastic sandbox (sold), a wine rack (it's in our dining room), some pictures (some kept; some gave away), a door (thought we could use but wrong size, so gave away), wheels from a lawn mower (that we needed for our lawn mower), reflectors from old bikes (added to our bikes), bricks (that separate our garden), and I don't remember what else, but I know there's more that I'm not thinking of.

Most of the stuff we find is in the spring, summer, and fall. We're very careful to only take what is clearly trash. And when in doubt, I have asked. I'll finish this off with a funny story about the big, plastic Santa in the picture. I knew that these old things were collectible, but I wanted to be sure that it was okay to take it, so I asked the homeowner if he was really getting rid of it. And he replied, "It's not even mine. I had this big trash pile out for a bulk pickup, and someone came and added it to the top of my pile." That Santa lived in my garage all summer last year until the right season to sell it. And I'm sure my neighbors wondered why we'd have a giant Christmas decoration at all since we're Jewish. :-)

Does anyone else go curb shopping? Are you embarrassed by it? Or do you think it's good, clean (well, okay, dirty) fun?