Wednesday, September 29, 2010

Make Money In An Hour

Tip #273 - Make Money In An Hour. Once all of the big financial things are accomplished such as coming up with financial goals, writing a budget, and making savings a priority, there are small things you can do to save money in an hour's time. First, I know you are busy. We all are. But even so, there should be at least a few minutes in your day at least some days per week that you can do things that help you make money or spend less. It is often the small things that help you meet the goals of your big things such as sticking to your budget. Let's look at some examples.

-If your goal is to eat out less then make food preparations in advance, especially for meals that you need to eat outside the home. Waking at 6 am and running out the door at 6:45 AM doesn't leave you much time for making lunch. Find time in your day when you don't have to be out the door in a hurry to prepare your lunch. This could mean making a sandwich the night before, washing grapes and putting them into small containers in advance on Sunday night, cooking a pot of noodles and separating them into a few meals for the week, cutting apples and soaking them in lemon juice or orange juice, filling up your water bottle, and otherwise making lunch preparations in your free time rather than when you are rushed.

-If your goal is to spend less at the grocery store, then find time in your free moments to study the weekly grocery circulars. Spend time making a shopping list. Check out your cabinets and your refrigerator to see what you actually need to buy. Cut out coupons while you are watching television or taking a car ride. If you go to the supermarket without a shopping list, without knowing what you absolutely need to buy versus what can wait a few weeks, without coupons, and without knowing which store has the best prices for what you need, you will end up spending more money than is necessary.

-If your goal is to make some money on the side, then find time to do some money-making activities. If you have a free hour, take some surveys online. The pay isn't much at all but it's better than the pay you get for watching tv. And with a few minutes here and there, it adds up to a few small checks. Sign up for Swagbucks to use as your search engine online. Just by using it on a regular basis, you should be able to build up gift cards at Amazon that can be used toward gifts, groceries, a needed appliance, etc. If you want to make bigger cash, then take time to go through your clothes that don't fit and bring them to a consignment store. Or go through your children's toys and clothing and tag them for a consignment sale. Find bigger items and put for sale on Craigslist. Or sell things on eBay. If nothing else, start a box for a future garage sale, and throw things in the box throughout the year for one big sale in the spring. These are small, but effective ways to make money without leaving the house and perfect for someone who only has a free hour here or there.

-If your goal is to cut down on spending for clothing and household items then organize your things. You might be surprised at what you already own and do not need to buy. Fill a free hour with matching sock from your mismatched sock bag. Look through your cabinets and pull from the back any leftover shampoo bottles, cleaning detergents, toothpaste, and sponges that you bought way back when but forgot about. Go through children's toys and find missing pieces. Anything that can be used that you already own will save money on not buying new ones of the same object.

-If your goal is to do more do-it-yourself work rather than hire someone, then start doing it. That 70's wallpaper in the bathroom? Spend a few minutes a day spraying it with water and peeling. It may take weeks, but it will come down if you take an hour here and there to work on it. Spend time to sew a button your suit jacket. Wash a stain out of a blouse. Start planning games, crafts, or activities for your child's birthday party next month.

Without making this post any longer than it already is, there are many things you can do in even limited spare time to cut down on costs. They shouldn't come at the expense of bigger money-making and money-saving strategies, but they can be helpful supplements to a solid financial plan that you have set out for yourself.

In Real Life (IRL) - I am as guilty as the next person for wasting time. When I have free time, I love to browse the Internet, read books, or sit on the hammock. But as a stay-at-home mom, I have many responsibilities such as making school lunches, buying groceries, planning birthday parties, and keeping the house presentable (at least somewhat). And even though I do not officially work for a living, I do help contribute to my household financially. And I do it in my spare time. I continually go though my children's toys and list them on Craigslist when they outgrow them. I put our used books, DVDs, and CDs on Amazon if it will bring in some money. This month, I've been filling a box to sell items at a kids' consignment sale.

Generally, I take up to 3 surveys a day on the computer. I use Swagbucks as my search engine rather than Google and have built up about $70 balance in gift cards on Amazon in a year's time. When we wanted to redo my daughter's bedroom and two bathrooms, I painstakingly removed wallpaper and wallpaper borders literally for a few minutes per day while the kids napped. It was much cheaper than hiring someone to do it for us. And it wasn't bad to peel for 10 minutes at a time.

At least once per week, I make shortcuts in the kitchen. I prepare peanut butter and jelly sandwiches in advance and freeze them for my kids' lunches. I cut up fruit and put in small containers, and open a bag of pretzels or other snack and dole out in small quantities for the week. It makes it much easier to pack lunch in the morning and makes us less likely to rely on school-bought lunches which are at least twice the price of what I can put together. I try to make healthy snacks such as apple muffins in my spare time rather than rely on convenience foods. I try to keep water bottles filled at all times so we bring them with us rather than have to buy drinks while we are out.

I always browse the grocery circulars and try to cut out coupons when we take long car rides. If not, I at least look through the coupons in advance and bring them with me to the store. I make a shopping list before I go. I try to buy certain items when I am at certain stores that have better deals on those items so I am not overpaying at other stores.

Of course, there are always more things I can do in my spare time to help make money. However, I tend to do the things I like (such as kitchen work) more than the ones I dislike (such as sewing). So none of us is perfect with our finances, but I find when I do take the time to make us money or save us money, I always feel better about spending on things we need to buy. All of us can spare some time here and there to make some money in order to stick to our budget and reach our financial goals. For other financial ideas, check out Frugal Fridays.

Thursday, September 16, 2010

Start Off On The Right Foot

Tip #272 - Start Off On The Right Foot. First, two quick notes - sorry about the lack of posting. All I can say is that I'm not as organized as I could be and the start of school is crazy! Second, this post is not meant to make people feel bad about getting a late start to finances, it's meant to encourage people to start early.

For those of you who went to college, think about the grades you got the first semester. You had your semester GPA and you had your cumulative GPA. Your semester GPA WAS your cumulative GPA. So if you got a 3.8 the first semester, your cumulative GPA was a 3.8. When second semester grades came out, they counted as half of your cumulative GPA (assuming you took the same number of credits as the first semester). So if you got a 3.4 then your new cumulative GPA is a 3.6. The first semester of your sophomore arrives and you get a 3.6. These grades contribute toward one-third of your cumulative GPA (again assuming an equal number of credits as each of the first two semesters), and you still have a 3.6 GPA. For the remainder of your sophomore year, your whole junior year, and your first semester senior year, you get a 3.6, a 3.4, a 3.8, and a 3.6 semester GPA, respectively. Now it's your last semester of your senior year, you have maintained a solid cumulative 3.6 GPA up to that point. And you slack off the last semester and get a lousy 2.0! Aaahh! How will that effect your cumulative GPA? Surprisingly, not that much. Your cumulative GPA is still a respectable 3.4.

Do grades in the early years of college count more than grades toward the end of college? No, of course not. Each semester counts 1/8 toward the total. But as time goes by, each semester's GPA contributes a smaller proportion toward your cumulative GPA (as earlier semesters' GPAs do as well). Let's look at this scenario in reverse. Suppose the college student started out with a 2.0 first semester. If he wants to graduate with a cumulative GPA of 3.4 by the time he graduates, he needs to buckle down and get a solid 3.6 GPA's each of the remaining semesters. Sounds hard, doesn't it? It can be done, but psychologically, it's harder because he's starting low and needs to improve.

How does this apply to finances? Saving money is similar to that cumulative GPA. How well you do early on sets the stage for the rest of your saving years. And it's even more dramatic because the early savings has time to compound its earnings. We've probably all heard those financial scenarios. If you put $100 away per month for 10 years in an account earning 3% interest and then do nothing for the next 20 years, you will have over $25,000.* If you wait twenty years until you start saving and put away $100 per month for 10 years you will have just under $14,000.* (The amounts are more dramatic with greater interest rates and/or longer time periods.)

In other words, sacrifice a bit now to put away savings in order to be able to sit back and not worry about it later. It's very easy to put off your savings for when you think things will get better when you are older or when you will be making more money. But why not start now, and if you are in a position to save later on, then by all means do it. But if you aren't, at least you can fall back on what you have already done. If you already have many years behind you where you weren't saving, then start now. The sooner you do it, the greater your cumulative worth will be. (And if you are responsible for a young adult, stress the them the importance of saving early. Starting them off on the right foot will set them up for many years of savings.)

In Real Life (IRL) - When I graduated college and was living on a meager salary, I managed to put away a couple hundred dollars per month, even though at the time there were plenty of other things I could have done with the money - live in a nicer apartment, live without roommates, go out to dinner more, etc. My dad taught me the importance of savings, so I stashed away that savings month after month after month. Then 12 years later when I had my first child, I stopped working (for pay), and stopped saving. That was 9 years ago. Back then in my imagined, perfect life I had planned to go back to work after 5 years and start saving again when my (not yet conceived) second child was 3 years old. In my reality now, my third child is now 3, and I still haven't gone back to work.

That savings I did for about 12 years has allowed us to make a decent-sized down-payment on a house and allowed us to do a 15-year mortgage. It also allowed us to have an emergency fund available and for me to be a stay-at-home mom. (Other things also contributed.) The fact is my early savings has paid dividends both literally and figuratively. Psychologically, it has been freeing knowing that we have that money there for emergencies. Financially, it has allowed us to pursue other savings opportunities more freely - like putting money for college and retirement. Personally, it has allowed us to pursue other things we wanted like staying home with my children.

This in no way is intended to sound like bragging. Believe me, I know I started out ahead of many other by financial benefits my parents gave me (I had no college or car loan when I got out of college.) Instead, I want to point out how freeing it was to save early when I really didn't have too many financial responsibilities. Back then the financial decision I made was whether to share an apartment with a roommate or to put away $200 per month. If I hadn't saved, my decision now would be do I put away money per month or do I pay for my child's braces (sorry, honey, crooked teeth are in style).

If you haven't started on a savings plan yet, don't despair. Now is the best time to get started. Think about what sacrifices you can make. If the sacrifices are still relatively easy (put away $50 per month versus eat out once per month or put away $100 per month versus take a beach vacation) then make them. It's better than the alternative decisions you might have to make down the road such as looking for a second job at age 70 or not be able to pay your rent. It's not too late to start off on the right foot.

*I used to do my calculations.

For other ideas on saving money, check out Frugal Friday over at Life As Mom.

Saturday, September 4, 2010

Start Out Simply

Tip #271 - Start Out Simply. When thinking about our finances, it's easy to get overwhelmed - stocks, bonds, budgets, taxes, interest rates, IRAs, 401(k)s, 529s. It's understandable that many people just throw their hands in the air and ignore everything that has to do with money. There is A LOT to learn when it comes to finances. There's also a lot to learn when it comes to cooking. How many of us cook gourmet 5-course dinners with exotic ingredients using techniques such as braising, sauteing, poaching, and blanching? Very few. Instead, most of us learn how to bake, broil, and grill and mangage to keep our families fed well. And we call it good. So why do we think we have to understand everything in order to manage our finances? Does it matter if we don't fully understand the consequences of the Fed raising interest rates by 1/2 percent? Does it matter if we can't predict what Wall Street will do after a fall in foreign markets? Does it matter if we don't quite comprehend the difference between a tax deduction and a tax credit?

Of course it doesn't. We need to know how to live on less than we earn and to build up our savings. Just like the beginning cook needs to know how to boil water and put in some dry spaghetti to feed her family. Once we've done that, we can learn how to heat up jarred sauce to add to the spaghetti. And then maybe we can learn how make the sauce ourselves with freshly bought tomatoes. And then maybe we can learn how to grow our own tomatoes to make our own sauce. But even if we never learn to make homemade pasta, we still feed our family well by starting out simply with dried spaghetti and boiling water.

Why can't we apply that same logic to our finances? We can! Don't be overwhelmed if you don't understand what affects the direction of interest rates, if 529s and 401(k)s are just numbers to you, or if the thought of losing money in the stock market sends shivers up your spine. The important thing is to learn how to put away some money month after month. This can be as simple as creating a budget, putting your money in a savings account and CDs and calling it good. Once you have conquered that, you can start contributing to your company's 401(k) plan, even if is all in guaranteed investments. Then maybe you'll start investigating various investments for your daughter's college fund. And then you might start investing in mutual funds, and then stocks. Or maybe you won't. Maybe you will never invest in individual stocks. Maybe you won't ever understand the how Greece's economic crisis affects the US economy. But if you can at least start out simply with a budget including a line-item for savings, you are doing well. You can build up from there. Otherwise, it will be like making chateau briand when you haven't mastered grilling a hamburger, you won't be able to get it right.

In Real Life (IRL) - I got my first passbook savings account when I was a 7- or 8-year old kid. I understood that if I gave my bank $100 on January 1st that they would give me about $105 back on December 31. It sounded like a good deal to me then - better than sitting in my drawer, anyway. (And 5 percent on a savings account sounds like a great deal to me today!) I also learned that if I saved my allowance week after week, I could buy something very nice after a few months. And if I blew my allowance on gum and candy, I wouldn't have enough money for a nice toy several months later.

A few years after I had that knowledge, my dad taught me about money market accounts. If I put a larger amount of money in that, I could get a greater rate of return than in the passbook savings account. But I had to keep my balance above a certain amount, and I could only make large withdrawals at a time. My knowledge of finances was quite simple back then. But it served me well. I learned if I put money away I could make back more money. And the more and longer I put it away the more I got back.

When I first started out on my own after college, I continued to put money into banks, until my dad taught me about mutual funds. I, little by little, started to add money to that account. Then I began investing in my company's 401(k). Once I maxed out on that, my dad suggested IRAs. Then I joined an investment club and learned to invest in stocks. All the while, I continued to save my "allowance" (income) so I could buy a house one day. It wasn't until we bought one that I learned about tax deductions. And when I had kids, I read up on 529 Plans. It's been over 30 years of learning to get to the piont where I am today. And I still don't know squat about selling stocks short or don't read up or care about how the Nikkei market did yesterday. But I can make a darn good hamburger. And sometimes I can even add a few tasty sides. All because I started out my financial education simply.