Stay on Track Financially Even When You Don't Really Have To

Tip #300 - Stay On Track Financially Even When You Don't Really Have To - There will hopefully come a point in your life time when all the hard work you put into saving money will start showing some results. One day you'll have $200 in your bank account, and then the next year you'll have $2000 in it, and then a few years after that, you'll find $20,000 in there. It really does happen that way. And you might realize at that point that you have reached the financial goals you have set for yourself. What then? Do you throw your frugal lifestyle and your good financial habits out the window and start living the wild life? Or do you continue on the path you have worked diligently at of keeping expenses low, putting away savings, and investing your money? Continue the path, of course!

I liken this situation to weight loss. If you were overweight and have spent the last year exercising, cutting down on your food intake and eating healthier and are now at the ideal weight, do you just stop what you have done? No! You continue with a maintenance program with a treat thrown in here and there. The same is true for finances. Once you reach your goals, it doesn't mean you can suddenly spend frivolously, although you can probably loosen the reins on your wallet a bit. Like diet and exercise, being careful with your spending and savings is a lifestyle change for the long-term.

Now this may seem like a topic that is not important to you right now. You may not reach your goals until a date in the far-off future. So you may be thinking that this topic doesn't apply to you yet. But it does. Because when you start taking control of your finances, you need to approach it as a life-long goal. It is not a temporary plan that you do once and then go back to your old financial ways. Instead, they way you spend your money, how much you put away for savings, and where you invest should become part of your regular routine like brushing your teeth, eating breakfast, or getting dressed in the morning. You may tweak things over the years, but your overall plan should not change drastically.

Also, as time goes by, you will likely come up with more financial goals or bigger goals. Perhaps your goal of saving for a state college for your daughter changes to that of saving for a private school. Or after you have saved up for your first home, perhaps you want to start a vacation home savings fund. Realizing that your approach to personal finance that you are developing now is a lifetime plan rather than a temporary one will go a long way to making sure that you are successful in your financial endeavors throughout your life.

IRL (In Real Life) - I am already 46 years old! I began saving money in earnest at about age 22 when I started to dutifully put away $200 per month into a mutual fund account. It was primarily to save money for a downpayment on a house, but it was also an emergency fund of sorts. About the same time, I also started putting 3% of my $20,000 salary into my 401k. So I was putting away $2400 per year for savings and about $600 per year into a retirement account. I was pretty much on autopilot. I got paid from my employer minus my 401k contribution. Then I wrote a check to the mutual fund company and mailed it in (yes I'm dating myself here!). Then I paid rent and other necessities. Anything left after that I was free to spend. That was the beginning of my savings habit - pretty simple, and for the most part is hasn't changed since I started.

Now that 24 years have gone by, I have reached or am on track for most of my financial goals. We bought a house and don't need to save for a downpayment anymore. We have a separate emergency fund that has been in place for over a dozen years. Our retirement savings still gets an automatic contribution, and we're on the way to a decent retirement. So now what? Are we done? Can we be frivolous with our extra money now? Trips to Disney every year for my kids? A larger home? A new car every two years? No. We are still putting away money into savings for new, yet undefined goals.

We are a bit "freer" with our money and we have upgraded our lifestyle a bit - staying at slightly nicer hotels when we travel. We give in a bit more on buying treats for our kids than we used to. And we're going on a one-time trip to Disney World with our kids this spring. But our overall financial strategy has not changed. We put away a specific amount each month into savings, continue with our retirement savings, pay our fixed and necessary expenses, and then do what we want with the leftover. That method has served us well so far. We see no reason to change it now even though some of our goals have already been met.

After the Emergency is Over - Prepare How Life Will Go On

Tip - 299 - After the Emergency Is Over, Prepare How Life Will Go On - In my recently completed series on emergencies, I discussed a lot about how to prepare for emergencies - financially, physically, and emotionally - and what you need to do to get through the emergency situation. What I did not discuss is how to prepare your life for when the emergency is over. We may prepare for the emergency itself, but not necessarily the aftermath of it and how your life will change from it. The popular term for this is "the new normal." What will your life look like after the emergency is over? After the earthquake is over and you have picked up the pieces of your shattered home, how will your lives change? Or after your sick spouse passes away, and a year down the road you realize you need to make adjustments, what will you do? Or for those dealing with a job loss who finally lands a job in a new field or for much less money, what then? The sudden emergency has passed - the act of mother nature, the devastating illness, or the loss of a job. And the "new normal" is in its place - a new home location, a widowed spouse, or a period of time earning much less income.

Be Flexible. First and formost, as with many things in life, we need to be flexible. After the death of a spouse, you may no longer be a stay-at-home-mother. The kids might need to go to aftercare. Your income may drop considerably, and activities your family once did will no longer be the norm. Your days of working part-time and being scout leader may end for quite awhile as you put in long hours at a full-time job, and adjust to your new schedule.

Communication is key. Again, as in many aspects of your life, be open with communication. Explain to children why things have changed. Why, after your house burned down in a fire, you will no longer be living on the same side of town for awhile. Or after the hurricane that flooded your city, why you needed to start over in a new city and may not return to your old city for a long time, if at all. Be open with yourself that you now have to take on new responsibilities.

Learn from the Emergency. Sometimes the worst things in life become the greatest teaching tools. There is no rule in life that an emergency will happen to you once. You may get hit by an earthquake twice or more. Or someone in your family who gets sick and recovers may get sick again down the road. Or perhaps a person will be hit with two differrent emergencies, a job loss one year and several years later, a natural disaster. Use what you learned from how well you handled the first emergency to prepare you for the next possible one. Was your emergency fund big enough? Did you find support groups helpful? Which friends and family members were you able to count on? What would you do differently to prepare for another emergency?

Move On With Your Life. Easier said than done, I know, and more simple with certain types of emergencies like a job loss than with others like the death of a spouse. But after a period of time of grieving what you lost - your spouse, your old home, your former city, or your old job - there will come a time, when you just need to move forward and look toward the future. Unforunately, there is no way to turn back the hands of time, so you must learn to accept your new life as it stands. Nothing will ever be the same (and even without an emergency situation, nothing stays the same), but along with the challenges of your new life, there will be new relationships, more self-reliance, new experiences, more confidence and yes, even new joys.

In Real Life (IRL) - Most emergency situations don't afford the gift of time. Emergencies often hit swiftly. Although with prior planning, the upheavals after the emergency can often be delayed, most people's lives will still change afterwards, sometimes dramatically. Growing up, my close friend lost her father suddenly to a heart attack. My friend's father was a successful businessman, while her mom was a stay-at-home mother, so financially, their lives changed considerably. They were, because of prior financial planning, able to maintain their lives as close to the norm as possible for a couple of years after his death. But even with that, the mother had to return to work; the regular vacations they used to enjoy ended; and the large house they were living in became a burden, so they moved. Within a few yeas, their former lives changed into their new lives - working mom, condo living, and frugal vacations. Even with their prior planning, their lives still changed dramatically becuase of a sudden death.

In most emergency situations, the life you knew before the emergency will change into a different life after the initial emergency has passed. We should realize that while we can prepare in several ways to handle the emergency, we may still be faced with a completely different "normal" in our lives after the emergency situation is over. In fact, an emergency often isn't a one-time event that ends, but one that will likely impact our future lives. We should be prepared to accept that our lives will change, sometimes dramatically.

Preparing for Emergencies - Part 6 Summary

Tip #298 - Preparing for Emergencies - A Summary. I woke up this morning from a dream that I had started a blog a few years ago but somehow in the busyness of life pushed so far back in my mind that I kind-of, sort-of forgot about it. So this morning I checked and found out that it wasn't a dream at all, but that I really had started a blog and had not updated it for over 6 months! And the topic of emergencies that I left off with has been on the forefront of my mind, that I thought I'd do a summary of what I posted and what else I've learned lately.

I summarized in the first 5 parts of this series about what constitutes an emergency and how you can deal with it. Reading back over what I have wrote, I can heartily say I agree with my earlier thinking and continue to strongly emphasize the importance of being prepared more than just financially. While the money is a very big part of being prepared for an emergency, I know many people aren't in a financial position just yet to have a big fund put away. For them, they might not do any preparedness for emergencies because they think money is the only thing they can do. But as I've written about earlier and more things I've experienced over the past year dictates to me that being as ready as you can be for an emergency is much more than having an having an emergency fund. These other things are just as important:

1. Keeping up with your family, friends, and community. If an emergency strikes your family, the first ones who will likely help you whether you have emergency money or not are your extended family, your friends, and you community. While a recluse might garner the sympathy of a few neighbors or strangers, a person who keeps in contact with his family, surrounds himself with friends, and is a contributing member to his church, synagogue, mosque, knitter's group, book club, soccer league, professional group, etc. if much more likely to have lots of support during an emergency, whether it's emotional, financial, physical or any other needed kind.

2. Have a written plan. We discussed the most typical type of emergencies. Of course things rarely happen the way you plan, even emergencies, but taking note of the ones that are common and having a plan on how to deal with them is a big step in being able to handle what comes your way. This could include things like having a will, having a fire espcape route, a place you would go if a hurricane/earthquake/tornado hits your area, where you would store precious items if your damp basement floods, what you would do if you lost your job, etc.

3. Be emotionally ready. Today, with the presence of nearly instantaneous news, it's hard not to be reminded of all of the things that could go wrong in our lives. We are exposed to earthquakes on the other side of the world, floods in anothe region of the country, health scares in a neighboring state, and dangers in our own town. We witness the upheavel that people have experienced due to these events. And while we are sometimes quick to think, "that cannot happen here or that won't happen to me" the more we see these types of events, the more likely we are to realize that at some point, something emergency-like IS going to happen to us. And while we might not know what that emergency will be, we should be prepared to expect the unexpected. It might just mean doing some talking to your self to build yourself up that you can handle anything, it might mean turning to your religion to help you be preapred for anything emotionally, or it might mean that having taken all of the stpes I outlines in the other posts will be enough to help you deal with most any emergency that comes your way.

Of course nothing can fully prepare you for a devastating emergency, but the first step to meeting it head on is to be as prepared as you can be in advance.

In Real Life (IRL): It has been just about 1 year since we moved away from our home in Virginia and we are settled in our new home and no longer in emergency -preparedness mode with regard to having a job or a place to live, at least for now. However, I feel like with better communication with old friends through Facebook, and the instantaneous and constant news we receive has done a lot to open my eyes to emergencies that people face every day in their lives. We were exposed to almost daily news reports of Hurricane Sandy for several weeks this past fall along with posts from friends and old classmates about flooded homes, loss of power, and downed trees. Living not too far south of where the storm hit, it's easy for us to say, "it could have been us." And it could have been - easily. And next time it might be. Will we be prepared for it? We've take precautions. We have a generator, we have family to turn to if we need a place to stay. We have insurance. We have an emergency fund. We will take warnings seriously. Our home and possessions are important to us, but our lives are much more important.

As I cam getting older - mid-40's now! - I am starting to hear more from friends and former classmates about diseases and illnesses. We are no longer in our 20's when we think we will live forever. People my age are getting high blood pressure, high cholesterol, cancer, and other devastating illnesses. A good friend of ours just received a second cancer diagnosis within 1 year's time. I see him and wonder how prepared is his family - financially, emotionally, and logistically to deal with this? What plans do they have in place? And I realize the importance of our health before even dealing with any thing else on this earth. Through social media, I also learned of an old college friend who recently lost her husband suddenly to illness. I noticed in the obituary that in lieu of flowers they asked for a donation to their children's college fund. In the midst of tragedy, that seems like a logical way to prepare for her children's future.

The economy seems to be improving, so I am hearing less and less of job loss, and more about increases in home prices, so that is good news for many people. But the recession of the last four years is still at the forefront of my mind. The economy we left in Washington, DC is much better generally than where we live now in North Carolina, so for me, it hasn't been as easy to find a part-time job. And I realize what I lost when I gave up my career 5 years ago (although I don't regret for one minute staying home with my children). I am now behind on skills, have a gap in my employment, and I have few contacts in this area. We are fortunate with my husband's good job. And while his company is doing well now, one round of layoffs or another buyout could end his job and leaves us in an area of the country that isn't as well off. We do have our emergency fund should that situation arise, and we aren't expecting it anytime soon, but after what we've witness since 2008, we are definitely aware of the possibility.

Emergencies come to us in many different ways. And often the emergency we get is not the one we predict. But being prepared for it financially by having an emergency fund, emotionally by having friends and being part of a community, and logistially by haivng a written plan and procedures in place, we will be better off to deal with an emergency that comes our way.

Preparing for Emergencies - Part 5

Tip #297- Preparing for Emergencies - Part 5 - We've discussed financial, job loss, and health-related emergencies in Parts, 2, 3, and 4, of this series. . Today we're going to discuss natural or large-scale community emergencies. One area of our lives that we have little control over is weather or wide-scale emergencies. They come in the form of hurricanes, earthquakes, tornaadoes, and terrorism. When they hit, the whole community is often going through the same emergency as you. Unlike with the other emergencies we mentioned - job loss, health issues, and large expenses when there are other people around you who are living their lives ordinarily and can stip in to help - in this type of emergecny, most everyone around you is in the same circumstances. Most likely, the only thing that will help is having prepared in advance.

What are the types of things you can do to prepare for this type of emergency? First, try to figure out what is the most typical emergency that could happen based on where you live? If you live in Kansas, a tornado would be a common possibility. If you live in Florida, a hurricane would me the msot likely. While things are calm, plan an emergency preparedness kit. For example, if you live in Florida, have hurricane shutters installed on your windows or have wood boards sized to your windows for your use. Keep your gas tank full from August until November so you can get out of town without stopping or waiting in long gas lines. Keep gallon bottles of water in your hosue. Have flashlights ready and batteries charged or new in the package. Keep packaged food that you can take with you if you need to leave or if you lose power, if you decided to stay. Have a plan on where you would go if a hurricane hits - Aunt Sue's in the northern part of the state or a hotl in Georgia? Most people will be scrambling once they hear the news of a hurricane coming on the television.

By being prepared, you can be one step ahead of the rest of the community who are in need of necessities or are fleeing. Also, having these things in place before the emergency strikes assures you that you will not be paying top dollar for necessities, and the cost will have already been mostly spent and spread out. If you have to flee, the hotel and food costs while you are away can fall under your emergency fund. The more prepared you are in advance, the less impact you will have of the emergency.

IRL - We often think of Mother Nature-type emergencies as very infrequent events. But, in reality, depending on where you live they can happen more often. Even if they don't turn out to be as devastating as Hurricane Katrina, we are often in emergency mode before we know the extent of the impact. In the past 15 years alone, I have dealt with two hurricanes, 9/11, and some smaller-type emergencies such as a flea infestation, and sniper attacks in our city. While none of them left me homeless, each of them caused extra expenses, sudden change of plans, and had emotional consequences.

One hurricane happened while we were visiting in Florida. After a hasty packing job and closing of hurricane shutters, we needed to get home to Virginia. We had tickets to return home on the Auto Train, but with a hurricane forecast, the train was cancelled. We suddenly had to drive home, along with the thousands of other people escaping South Florida. What is normally a 5-hour ride became 9 hours. Looking for gas on the overpacked highways became a search in futility. Using our cell phone, we were able to call ahead to hotels in Georgia for a place to stay. And luckily we made it out of the path of the storm. While it wasn't as devastating as other hurricanes, it caused a lot of damage to our condo community. Some buildings were left without electricity and roofs, while others, including ours, were spared. But trees had to be replaced, condo and isnruance fees went up, so we paid for the mess for years afterwards.

The other hurricane, Hurricane Isabel happened in Virginia. It totally flooded our basement because the electricity went out and our sump pump stopped working. We had just months earlier put down brand new carpeting that needed to be replaced. A huge tree fell in our backyard in the storm, too. We were without electricity for just about half-a-day, while friends of ours were without it for 3 days! We had carpeting costs, tree removal costs, stump-grinding costs, cleanup costs, last-minute pay-whatever-they're-asking costs, in addition to the emotional upheaval it caused our family. We ultimately bought a battery-backup sump pump and a generator as a result of that storm so we could be prepared for the next one.

Living in the DC metropolitan area on 9/11/2001 was an emotional time. On top of that, I was 7 months pregnant. Nothing could prepare anyone emotionally for that tragedy. As a result, though, a lot of people came up with disaster preparedness plans - for when the unthinkable happens. My good friends wrote out a plan about how if something similar happened, they would meet up at their church, with her husband walking from work to get there. Our county came up with brochures on what do if tragedy strikes close to home.

While we never can be fully prepared for anything that Mother Nature or an enemy throws at us, we can definitely take some steps to ease the effect the destruction places on us. Having money in an emergency fundy is one large step toward that goal.

Prepare for Emergencies - Part 4

Tip #296 - Prepare for Emergencies - Part 4- One of the most common emergencies is an unexpected big expense. Sometimes we're sailing through life and paying our monthly expenses, and everything seems to be going smoothly, financially. Then you walk into your house to find the furnace has blown out. Or your car's transmission suddenly dies, to the tune of $3000. Both of these big expenses, however, are probably not totally unexpected. If you have a 30-year old furnace, you should probably expect that it will not last much longer. If your car is 15 years old and has never had a new transmission put in, it's likely time. I wouldn't constitute either of those events as true emergencies. They are expenses that should be planned for and saved up for.

However, sometimes we are faced with an expense from out of the blue. For example, suppose your car is parked on the side of the road and is "totaled" by another car. Even though you have car insurance, the value they offer may not be enough to replace your reliable car. Or suppose your son throws a ball and breaks your window. Your insurance deductible is too high to use it, so you pay out of pocket. That may be a $500 expense that you didn't see coming. What if a tree falls down in your backyard, not hitting any part of your house or fence? Insurance doesn't cover that. Instead, you will be paying the cost of having the tree removed. Add a stump grinding to it, and you expense could be close to $1,000. These are the types of expenses that are unexpected, sudden, and costly that we can't truly plan for. Instead, these fall under our emergency category as a means to pay for them. If you don't have this category, you will be scrambling at the last minute to try to find funds to cover these unexpected costs. Eat less? Skip a vacation? Go in debt? None of those choices is idea. Instead, having a fund set aside for these unexpected, sudden, costly expenses can cover you when you need it.

IRL - One day two winters ago, it had snowed several inches. My husband went out to shovel the pathway to our house when he found that the front patio had sunk literally into the ground. What he found out, after investigating, is that the patio was built on top of a big hole in the ground. It was definitely not built to code (although code was likely different in 1953) and was unsafe. Our insurance wouldn't cover it. We needed a whole new patio put in. Mind you , this was in the winter under snow - not exactly the time contractors are building patios! Fortunately, it warmed up soon after. My husband, who is quite handy, actually decided to tackle this project himself. Even though we have money in our emergency fund, we prefer to still be frugal with our expenses when we can. He still ended up spending several hundred dollars to rebuild our patio, but less than if had hired someone. And we were able to breathe easier knowing that our emergency fund covered our expense and the ground, too!

I am still around!

We are moving this week and packing up the house, buying a house, and selling a house has proven to be a bigger chore than I expected! I've also been working part-time, and we traveled over the holidays. It doesn't leave much time for blogging, but I promise to finish my thoughts on preparing for emergencies once we get settled in our new North Carolina home.

Prepare For Emergencies - Part 3

Tip #295 - Prepare for Emergencies - Part 3. In parts 1 and 2 of this series, we are talking about being prepared for emergencies - not just financially, but emotionally and physically as well. We defined that an emergency is unexpected, sudden and can devastate you financially, emotionally, and/or physically. In the last post we described how to be prepared for a job loss. Today, we'll talk about being prepared for a diagnosis of a serious illness and death of a family member.

If someone in your immediate family has a serious illness diagnosis, that constitutes an emergency - it's usually, sudden, unexpected and has financial, emotional, and physical consequences. How can we be prepared for that? While, we can probably never be fully prepared, we can do steps in advance of this happening that can make a sudden diagnosis a bit easier to digest.

First, review your health insurance plans. Know what your insurance covers, in general. Be aware of any health services that your office offers such as a Flex spending plan and counseling. Second, obtain a list of specialists from your general practitioner, so you have a place to start if you need to scout out a doctor. Third, keep up your network of friends, neighbors, and local and even long-distance contacts. If your husband is suddenly diagnosed with multiple sclerosis, it's likely that you know someone who has a family member or friend who you can contact to get the low-down of the disease, treatments, and local doctors. Fourth, be aware of time off policies for work. You will need to clarify the policy once you need to use it, but being armed with knowledge in advance helps save time when a diagnosis becomes a very busy time. Last, make sure you have that emergency fund in place. This is the time that you may need to dip into it. No matter how good your health insurance, doctors' visits may involve co-pays, gas and car maintenance costs, time off from work, special foods or other products, and greater living expenses such as food-on-the run, babysitters, etc. Once the emergency is known and the initial newness of it has worn off, this will likely become a budget category for you or cause you to raise your budget in the expense categories just mentioned.

A similar-type emergency but one more extreme is the loss of a family member. If the family member is a spouse that is the breadwinner, then the financial consequences, not to mention the emotional ones, can be devastating. What can you do before a death in the family to prepare for this unexpected event? First, you can make sure any breadwinner or the person who provides a service to your family (cooks, childcare, driver) has life insurance. This life insurance should be enough to cover the expenses - at least for a few years - that this person usually takes care of - housing, food, utilities, childcare, etc. If there are children in the picture, it should cover them for at least as many years until the children are grown. Without getting into a whole post about life insurance, just make sure that you talk to someone (hopefully an unbiased person) about your life insurance needs before you need it, and make sure you are covered before the unthinkable happens.

Another way to plan for this type of emergency is to have a will. I cannot overestimate how important this is. When someone dies, if their will clearly states where funds will go, the beneficiary will receive the money much faster than if it has to go into probate. Third, make sure other policies have the correct beneficiary status updated. If you have a 401(k) at work, for example, is your spouse your beneficiary or is it still your parents (from the time you were single an started the job)? As you get older and have more accounts, it gets harder to keep track of this. So check on this status once per year to make sure they are updated to your current situation.

If the death of a family member is not a breadwinner or does not provide any type of services that would cost money, the loss is going to be an emotional one more than anything. There is no way to prepare for such an emergency, other than to have a good network of family, friends available to you. By being a caring, loyal friend when times are good for you, will likely lead to others stepping up to help you when you need it.

In Real Life (IRL) - In September, a family in my town lost their son to a tragic, unexpected, and sudden accident. One minute the boy was happy and playing. The next minute, he was gone forever. No one would have predicted it. I did not know this family before the accident. And other than through the web and from friends and local events, I still do not know this family personally. But I have seen the outpouring of love and helpfulness by their neighbors, their church, their community, and from their online friends and even strangers that has helped hold this family up.

Their son's loss of life did not impact them financially, but the devastation that his death brought to them cannot be overestimated. I do not think there is a thing a person can do to prepare, in advance, for this type of tragedy. Other than to be a good person and friend to your family, friends, and community, as it appears this family was. Because at such a horrific time in their lives, I believe their family and friends (and their personal religious convictions) are the only things holding them up. I hope no one I know or any readers here ever experience such a loss, but to see how this family is handling it, you can read the mom's blog: An Inch of Gray. She is a beautiful writer. While it is depressing reading about their tragedy, it is uplifting to see how this woman is handling a devastating emergency.

No one will ever be fully prepared for sickness or death. But doing anything that you can in advance, like the steps mentioned above, and admitting to yourself that life involves both sickness and death and no one will ever avoid them entirely, may make it slightly easier if such unexpected tragedy strikes.

Prepare For Emergencies - Part 2

Tip #294 - Prepare for Emergencies - Part 2. As I mentioned in Part 1 of this series, nowadays we hear over and over about saving for an emergency fund. But without defining what an emergency is, it's hard to know when you are "allowed" to spend that fund. I define an emergency as something that is unexpected, sudden, and catastrophic in at least one way (financially, emotionally, or physically). When an emergency strikes, it's best to have plans. But of course, we cannot prepare for every type of emergency there is. But we can do some sort of planning for typical emergencies. What are typical emergencies? I can think of some common ones:

1. Loss of a Job
2. Serious Illness Diagnosis
3. Mother Nature Strikes
4. Death of a Family Member
5. Unexpected Big Expense (Need new car, new roof, etc.)

Most emergencies fall into one of these categories. So before any of these types of emergencies happen, make a plan with how you would deal with them if one of them does. Part of this would be having the ever-so-talked-about emergency fund. This emergency fund will help out in all five of these scenarios. Clearly for number 1 and 5, the emergency is that you need money to pay for either a big expense or to cover your everyday living expenses. For scenario 2, 3, and 4, the financial emergency may be secondary to other pressing emotional and physical needs, but would clearly be needed in most cases.

So in order to plan for an emergency, you should start an emergency fund. There are articles and blog posts galore dedicated to this topic, so I won't get into them here. But you should decide on an amount you want to save - 3 months' - 12 months' salary is typical and plan a way to save up for that money either all at once or little by little. While you are working on that, come up with other plans to deal with your 5 emergency scenarios.

1. Loss of a Job. Before you lose a job is the best time to plan for the time that you might lose one. In addition to having an emergency fund, you can do other things in advance of losing a job. Keep your resume updated at all times. Why wait until you've lost a job to update it. It's harder to think back on all that you've accomplished and it takes time away from job hunting. As you accomplish things at work, add it into your resume, revise it, keep up on current style and have it at the ready.

Secondly, network now. Again, don't wait until you are without a job to contact your old fraternity brother from college. Then it will seem like you are using him. Keep up your contacts continuously. Belong to organizations that you enjoy and make contacts with. Join occupational groups. then when a job is lost, your contacts are already in place.

Third, have a plan b for a second source of income. Perhaps you are a 9-5 accountant at a big firm. If you lose your job, you want to get another similar job, but have a plan b for a second source of income. Perhaps you can do taxes on the side while job hunting. Or you can teach accounting at a community college. Before you lose your job, think about what other jobs you can do as a side income. It doesn't have to be related to your field. If you are an accountant who loves to knit, you might want think about (in advance of losing a job) where you can sell your products while you are looking for a full-time accounting job.

Fourth, prepare for any emotional stress you will be going through. Think about a counselor you might need to turn to during this time or whether you have a friend who is a good listener who can help you.

In this economy, loss of a job is not an unlikely scenario for many people. Be prepared for this possible event. So if the unfortunate happens, you have a plan in place to cover your expenses and find a new job as quickly as possible.

If you want to be super organized, keep a list of your emergency preparedness plans (not unlike what to do in a fire drill). Then when the unthinkable happens, and you may not be thinking straight, you can go to your list and follow it. So as to not make this post too long, we will discuss preparing for the other scenarios in future posts.

IRL (In Real Life) - While dishing out this advice, I don't necessarily practice what I preach. Sometimes I fly by the seat of my pants. Job loss has been an emergency that we've been dealing with over the past few months. And, honestly, I wasn't prepared for some of it. While not exactly "job loss" I had planned to go back to work part-time when my son started preschool at age 3. Fortunately, we weren't counting on my income because it turned out my company did not need me back. When I left in 2007, the economy was still in pretty good shape. By 2010 when I wanted to return - not so much. Honestly, I never considered this possibility because times were good when I left. Fortunately, we had adapted to just living on my husband's income so it wasn't a total emergency, but I did plan on using my part-time income for future expected expenses.

I came up with a plan b which was to just take any part-time job I could. And this past spring I did. It was a not-much-above minimum wage job, but it was near my house and fit my schedule. Imagine my surprise when after the summer, they let me go (supposedly temporarily until the retail season kicks back up again).

I would have come up with a plan c, except in that time period, my husband found out they were closing his office. Again, while this wasn't exactly job loss, since they offered him a job in a new location, it had many of the same qualities of it. Picking up and moving to a new locale is not an easy or cheap endeavor. So much of what I suggested above came into play as my husband considered finding a new job so we didn't have to move. Unfortunately, we weren't fully prepared. His resume was sorely out of date. And while I helped him polish it, I don't feel it was the best because it was done hastily. And while he didn't specifically network in advance in order to find a job, he did have a lot of contacts from some volunteer work he does as well as professional organizations he belongs to. And while they got him some interviews, nothing really panned out.

So we are not only dealing with sudden expenses of selling a house, moving, storing, and fixing things around the house. We are dealing with high emotions on both our parts and our kids' parts. This "job loss" has become a major life change for our family that will take months, if not years, to adjust to. We could have had better plans in place for this emergency. As going through it has made me realize that having an emergency fund is not enough to get you through when an emergency strikes.

Prepare For Emergencies - Part 1

Tip # 293 - Prepare For Emergencies. In almost any financial article you read these days, you will see advice to have an emergency fund. Often it says the fund should equal 6 months' to one year's worth of expenses. But beyond that, these articles often do not give you much guidance. What constitutes an emergency? Should I have contingency plans? Do I need to consider all of my expenses? How do I deal with emergencies physically and emotionally as well as financially? What do I do after the emergency is over?

Because of these many unanswered questions, I thought I'd write a few posts with more detail regarding planning for emergencies. What is an emergency? Is the 20-year old roof leaking considered an emergency? How about your new car needing a new radiator? Your husband breaking his leg and not being able to work for a month? Are any of these emergencies? Are all of these emergencies?

I think we first need to define what an emergency is. Each person's definition may be slightly different. My definition of an emergency is something shattering that is sudden and unexpected that impacts your financial, emotional, and physical life. In that case, the 20-year old roof leaking would not be an emergency. It might be sudden and shattering but one could reasonably expect that a 20-year old roof would leak so it is not unexpected. That event could have been predicted with some certainty. A new car needing a radiator might be sudden and unexpected but it is not shattering, and therefore isn't an emergency. Your husband breaking his leg and not being able to work for a month is shattering, unexpected, and sudden and meets my definition of an emergency.

Each person's interpretation may be different on what is shattering. To someone in dire finances, the cost of a new radiator may be. So the first step in preparing for emergencies is to figure out what an emergency is. It might be the same as my definition or slightly different. Most likely it will have the sudden and unexpected component to it. The "shattering" component may be slightly different depending on your financial, physical, and emotional circumstances. To some a car breakdown even if sudden and unexpected is emotionally draining and possibly financially draining and would constitute an emergency. For others a car breakdown is no big deal either emotionally or financially. It might make sense to put a dollar amount on your shattering portion - something like any sudden and unexpected event that costs over $1000 is considered an emergency. Or any sudden and unexpected event that will cost us over $200 each week for the next month is considered an emergency.

So, our first step in preparing for emergencies is to define what an emergency is. Then we can figure out the following steps - which is meeting the emergency head-on. We'll discuss them in future posts.

In Real Life (IRL) - I've been thinking a lot about emergencies lately because we've had a lot of potential ones. At the end of July, my dad told me that he had prostate cancer. He is 74, and fortunately it is slow-growing form of cancer that is treatable. Nevertheless, the "C" word, which I hate more than almost anything, is scary. While the financial consequences for me aren't really affected by my dad's diagnosis, my emotional ones and physical ones were dramatically. I had a hard few days digesting this information, and living far away (3 hours), it has some physical constraints, too.

But that wasn't the only piece of "emergency-like" news I heard. A day after my dad told me his diagnosis, my husband called me from work and told me that he got word that his office is closing at the end of October and that he was offered a job at the home office in North Carolina. While this news wasn't totally unexpected as they gave us warning a year ago of this happening, in May they told us there were no current plans to close his office. So it was somewhat unexpected timing, and the date seemed sudden as I thought they'd give us 6 months' lead time. If my husband takes the job, then there are financial consequences of moving, packing, selling the home, travelling to find a home, renting or buying a home, etc. If we don't move, we have other financial consequences of looking for a new job or being without for awhile. Combined, my dad's news and the job news, was making me an emotional wreck.

A few weeks went by and things settled a bit as my dad found out treatment options, and my husband and I did a scout out of neighborhoods in North Carolina and considered some options locally. Then one day in mid-August, our house starting shaking and things started falling off the walls and bookshelves. An earthquake had hit Virginia. Scary indeed! And while it didn't end up being an emergency, it certainly opened my eyes to how an earthquake could easily cause one! And of course, a few days later, we were in hurricane-preparedness mode. Fortunately, it turned out to be a non-event here, but in the past we've had a flooded basement, downed trees, and no electricity as the result of a hurricane, so I know how quickly that can become an emergency.

So to say that emergency preparedness has been on my mind lately would be an understatement. It has made me evaluate our preparations for emergencies in life - not just financially but emotionally and physically, too. I'll discuss these further in my next posts.

Most Everything Is Sellable

Tip #292 - Most Everything is Sellable. Back in the days before the Internet, you might try to make money by putting up a sign at the local grocery store advertising your old lawnmower for sale. Or you might put a placard in your car announcing its sale. But you would never dream of selling your extra garage door remote or the brochure or manual that came with your brand new 1972 Chevrolet Nova. Maybe you'd put some stuff out in your next garage sale and earn a quarter or two off of your old things. But most likely you'd throw away your brochure when the car was junked. The garage door opener remote would probably be thrown in the back of the drawer in case you met someone who has the same garage door opener brand and model as you.

Well, those days of the pre-Internet are long behind us. And today most everything is sellable. Things that may have once been considered junk to you are thought of as prized possessions for someone across the country or halfway around the world.

So this tip is: do not throw anything away until you have checked whether it has value or not. Do not just assume that what you have is junk. An old pen from Pan-Am Airways? It might be worth a few bucks. Your son's set of chapter books that he is no longer into? Probably has some worth to someone. An old brochure from a 1950's range - chances are someone wants it. A keyless remote to your old car? Likely that someone wants it.

Of course not everything you have is sellable, but chances are there are more things that have worth than you realize. So before you throw things out, check online - eBay is probably your best bet - to see if items like yours are selling for any money. And if they do, put it up for sale and make money on your unwanted things. Happy selling!

In Real Life (IRL) - Again, I've been away for weeks. No excuses, I just haven't made blog writing a priority. And in the past week, I've been house hunting! We finally found out for sure that my husband's office is closing this fall. And I am realizing how much I need to get rid of in my house before we sell it. So much to do! Part of what I realized when going through our things is that a lot of these things that seem like junk may be useful to someone. We have an old 2001 Dodge Caravan brochure (from our car that kicked the bucket last month). While it has no use to us anymore, I am sure there is someone out there who owns a 2001 Dodge Caravan who would like to have the glossy brochure and specs from his car. My husband also has a bunch of other brochures from different times when he was car hunting. He just handed me a pile and asked me to see if there's any worth for them on eBay. And a cursory glance shows that some of these brochures do sell. Who would have thought? Certainly not me! I would have put them right in the recycling bin.

Unfortunately looking up and selling items takes a lot more time than throwing away! But if I think they will make enough money, then on to eBay our junk will go. What kinds of things do you have laying around that may be worth money that at first glance wouldn't seem like it?

Beware of Incremental Increases

Tip #291 - Beware Incremental Increases. Once you have your budget laid out and you are into a routine of spending that you are comfortable with, it is sometimes easy to take things up a notch without realizing it. For example, you may be great about eating your meals at home, bringing along water bottles in the car, and walking the one mile to school rather than driving and staying within your budget. But once you've been doing that for awhile, you might stop "just this once" to get drinks at McDonald's for the kids. Or you might start to order take out when you've had a bad day even if it's not in the budget. And while all of these things may be okay to do once in awhile, when it starts to become habit, that it becomes dangerous (to your finances anyway). Suddenly these changes become the new normal, and without realizing it, you have started spending more money than you budgeted for.

It is these small, incremental changes that you need to be careful about. It is so easy to get used to these new "luxeries" without realizing that you are spending more money. Sure, it may be just a few dollars once or twice a week, but over time, they add up with little notice. For example, suppose you are a working woman and bring your lunch from home to work each day. But one day you are running late and don't make your lunch so you buy at the office. The cost is $6 - about $4 more than it costs to make your lunch at home. The next week, you hit the snooze button one extra time knowing that you can skip making lunch again and buy in the cafeteria. Before you know it, you are buying lunch about once per week at the office. Seems harmless, no? Well, in a given year that means you spent about $200 extra on lunches that you didn't budget for. That may or may not be harmless, depending on your financial situation and your other miscellaneous costs.

Suppose you also have gotten in the habit of picking up a magazine each week at the checkout counter at the supermarket each week. Again, this is something that wasn't in the budget. At about $5 a pop, it puts another $250 dent in your finances. Add in that you start meeting a friend about once per week for a drink for an additional $250 or so. All taken together, you have been spending an extra $700 for small changes that you hadn't budgeted for at the beginning of the year. These might all become important items for you to have in your life in order to keep things going smoothly and stress-free. But, they also add up to a fairly big expense, and if they become habit without being in the budget, you will not meet the financial goals you set for yourself in the beginning of the year.

So stop and evaluate the small, incremental conveniences that may have crept into your routine that you haven't budgeted for. And see if you can put them back into their place as special purchases rather than regular ones, until you can adjust your budget and include them formally.

In Real Life (IRL) - I started this post several weeks ago, and cannot remember what event made me realize that some small habits had crept into my routine that were starting to put a dent in my wallet. It was either the quick stop at McDonald's for drinks for the kids on a very hot day (and I had forgotten to bring drinks with us) or the soda I was suddenly adding into my shopping lists when I had virtually stopped drinking it for months and months. Or maybe it was the packs of gum that my daughter was asking that I buy for her when I stop at the drugstore (with her money at least). Whatever it was, I knew that none of these purchases were expensive on their own but buying them on a regular basis as they were tempting me to do would surely take money away from targeted saving account. I knew I would have to do better.

While I do think big purchases have a greater impact on my finances than smaller ones, I realize that smaller ones occur much more frequently and without nearly as much research or notice. And I know that there is some truth to the saying "watch your pennies, and the dollars will take care of themselves." And while I don't think we should necessarily deprie ourselves of small treats when we can afford them or for special occasions, I believe it is the little things that we don't realize we are spending money on that can set us back on our financial goals. To that end I am making a concerted effort to be aware of when I am started to spend money on little things on a regular basis That I have not planned for. I hope you will, too.

Start Small

Tip #290 - Start Small. Do you ever think about people who are poorer than you and feel sorry for them? You might think it's sad that they don't have money to go to the movies or the funds to take a vacations. Do you ever think about all of the things that you can do that they cannot? Perhaps. But what about people who are richer than you? Do you feel sorry for yourself that you cannot join a country club or that you do not have a personal driver? Probably not.

Do you know why? Because most people do not miss the things that they never had. Most people do not feel like they are missing out on life because they do not have a live-in maid. Just like those less fortunate than you do not feel that they are missing out on life because they cannot go to the beach each summer.

How does this relate to saving money? Well, it is harder to cut back on your lifestyle than to never have had that lifestyle at all. Therefore, you should start out small with your purchases. Here's an example: Suppose a family decides that they want to rent a comfortable apartment that will accommodate all four of them? They rent a three-bedroom and enjoy all of the space they have. But after a year of living there they realize that the extra space they have is costing them too much. In an effort to save money, the decide to cut back to a two-bedroom apartment. In doing so, they miss their extra space. They feel like they are living with less and they yearn to have their old space back. But suppose they had started small? They would not have missed the extra space because they never had it in the first place.

When someone is starting out on their own, it is best to start out with a less-costly lifestyle and gradually build it up as you are financially able. Even if you temporarily know you are living on two incomes without kids and can afford finer things, make them a special treat rather than part of your everyday lifestyle. If you gradually increase your standard of living, you will appreciate each new upgrade rather than if you start out big and need to cut back.

In Real Life (IRL) - When my husband and I were both making an income and we had no children, we had the ability to live it up a bit. We could have eaten out quite a bit, taken extravagant vacations, and lived in a fancy apartment. But we knew that in the near-future we'd be cutting back to one income when we had kids. So fortunately, we saved most of our extra money and lived a more meager lifestyle. Although, it wasn't intentional not to live large because we knew cutting back would be harder psychologically, it worked out that not getting used to a fancier lifestyle was a benefit to us. Had we been used to staying at Marriott Hotels, Comfort Inns would be more challenging for us today. Had we been used to buying new cars every few years driving one for 10 years would be difficult. Had we been used to a fancy apartment with granite countertops and stainless steel appliances, a 50-year old home with an outdated kitchen would have been hard to get used to.

There are always exceptions. When we got married and went on our honeymoon, I remember the travel agent convincing me to go for the luxurious hotel with the fancy outdoor fancy pool when I was looking into staying at a more modest hotel. As it was a once-in-a-lifetime event, I am glad we did it. But that was a special occasion. For our regular vacations those first few years we still looked for the best deal on a nice, comfortable hotel without going overboard. While I wouldn't want to look back on my life and say "Gosh, we should have flown to Paris when we had the opportunity," I think starting out small and gradually increasing your standard of living is easier and more doable financially than getting used to luxuries that you will need to later cut back on. Start small.

Instead if you start out slowly and build up your lifestyle, you will not miss what you didn't have.

Find the Right Balance to Meet Your Financial Goals

Tip #289 - Find the Right Balance To Meet Your Financial Goals. There are many ways you can meet your financial goals. Some ways work well at different times in your life. And some ways work well for different people and their circumstances. But in many cases, a combination of three main methods may be the best way to meet your goals such as increasing your savings. You can earn more money. You can decrease your expenses or you can make more return on your investments. Each of these singly will increase your savings. But finding the right balance among all three of them will work better to maximize your savings.

Let's look at an example. You are a family of three - husband, wife, and an 8-year child who will go to college in 10 years. You have $100,000 saved in a retirement account that is earning 5% per year and $20,000 saved in a college account for your child, earning 4% per year. You hope to retire in 25 years. Suppose your household makes $60,000 per year after taxes. Mortgage, utility, and food expenses add up to $30,000 per year. Health and wellness expenses add up to $6,000 per year. Automobile, gasoline, and clothing expenses add up to $8,000 per year. Lastly, entertainment and travel expenses add up to $6,000 per year. This leaves you with $10,000 per year for savings. Out of that savings, you put $8,000 toward retirement each year and $2,000 toward your child's college account.

After you sit down and crunch the numbers, you realize that you will not reach your goal of saving $100,000 (in today's dollars) for your child's college fund. In fact, you realize that you will need to save a total of $4,500 per year (about $2,500 more per year than you are currently saving). Then you look at your retirement numbers and calculate that in order to earn $1,000,000 at the time of retirement, you need to be saving $14,000 per year ($6,000 more than you are saving now). And you also realize that you will most likely need to buy a car in about 5 years and need to save $5,500 per year for that. All total you figure you need to increase your savings by $14,000 per year to reach your goals. How should you go about that?

One way to increase your savings is to cut down on expenses. However, you already live a frugal life and don't have much that you can realistically cut without making dramatic changes in your life. After scrutinizing your budget, however, you calculate that you can save $1,000 per year by using coupons and shopping at less-expensive grocery stores. You decide that your family can forgo your annual vacation and cut $2,000 of your entertainment/travel budget. And by shopping at thrift stores for clothes and riding your bike instead of driving places, you think you can cut another $1,000 off your budget. So you have come up with $4,000 more money that you can put toward savings. However, you are still $10,000 short of your goal.

Another way to increase your savings is to improve your investment return. Suppose your child goes to school in 10 years, and your investment toward college is earning only 4% return. After speaking with a financial advisor, you realize you can take on slightly more risk with this investment and think you can earn an 6% return on your money. This means you need to save $4,000 per year for college (an extra $2,000 per year). For retirement, you know you can take on more risk and can probably earn an 8% return on your money. In this case, you only need to save $5,000 per year toward retirement to meet your $1,000,000 goal, which actually frees up $3,000 per year for savings elsewhere. By this example, you only need a total of $14,500 in savings to meet your goals. But you are still $4,500 short of your goal.

Realizing that there is only so much that you can cut your expenses. And while the return on investment you can make is technically infinity, it is unlikely that you want to undertake that kind of risk, you know you can increase your income to bring in more money. If you have a school-age child, perhaps you can take on a part-time job 20 hours per week earning $10 per hour. In one year, you can make about $10,000 per year ($7,500 after taxes), $6,500 short of your goal that you needed.

Now let's combine all three strategies. Increase your return on investments, and you only need to save $14,500 total per year. Combine that with cutting expenses of $4,000, and you are now only $500 short of your goal. Mix in the $7,500 you can make with your part-time job, and you now have an extra $7,000 to play around with. Add back in that vacation? Cut down your work hours to 15 hours per week? Reduce your retirement risk? It's all up to you. Find the right balance of all three strategies. By utilizing all of them, you can tailor your desires with your needs to put hold on to more money and meet your savings goals.

In Real Life (IRL) - I have been out of the workforce for 4 years. Other than selling on eBay which nets me a few thousand per year, I haven't brought in a steady paycheck of any kind since early in 2007. In order to live on my husband's income, our first line of defense was to cut back on spending. When we had two good incomes, we had extra money flowing to go out to eat when we wanted or to go on a quick weekend jaunt somewhere fun. But when I stopped working, all of that changed as we had very little extra money above our expenses. But at that point in time, staying home with my baby was more important to me than eating out in a restaurant (as if I had time. Ha!). So in order to cover our expenses, we lowered them. We cut out restaurant meals. We cut out weekends away. We cut back on shopping.

And while I was always a good saver for the future, there is something about having a baby that makes you feel a huge responsibility. Will we have enough for her schooling? Who will care for her if something happens to us? Do we have enough money for the future? In that regard, we researched saving for college, I took out life insurance, and we increased our retirement savings. We also analyzed how much risk we were willing to undertake to meet these goals.

Then child number 2 and 3 came, and we suddenly had more expenses - preschools, activities, more health insurance and dental insurance, an addition to our house. Fortunately, my husband's salary increased, which covered some of our increasing expenses. We stuck to our budget and stayed with our investment strategies. But the expenses kept coming - car expenses, braces, higher college costs, Bat-Mitzvahs in our future. And at that point, we realized, we did not want to cut out any of our other expenses or take from savings to pay for these new ones.

We live as frugally as we want to. We don't want to cut out any more restaurant eating. We don't want to stop going to the beach every summer. And we are comfortable with our investments. We don't want more risk. We weathered the economic downturn a few years ago pretty well since we mixed in low-risk investments with our high-risk ones. Sure we may be able to make more on our investments, but not without more risk and sleepless nights that we are not willing to undertake. And with our children getting older and going to school for longer hours, it makes sense that at this point, increase our income is the best way to increase our savings account.

Last week I went on my first job interview since leaving my job four years ago. And I am starting work in two weeks just three miles from my home! I am excited that with my income, we will be able to cover the expenses we will have, while still maintaining the savings that we want to do and keep our investments at our desired risk level. At this point in time, increasing our income makes sense, along with our level of frugality and investment risk that we are comfortable with. It is the right balance for us. When our children were younger, fewer expenses and less income made sense. When I was younger and single more risky investments and higher income made sense. How do you maintain your lifestyle, keep your savings and be comfortable with your investment risk? What kind of balance is right for you at this stage of your life?

Using Credit Is Okay Sometimes

Tip #288 - Using Credit is Okay Sometimes. I'm going to say something on here that I don't see on many personal finance blogs. I have read dozens of personal finance and money-saving blogs over the past few years. And the almost universal theme I see in all of them is that the writer started his blog because he racked up a lot of debt and learned how to dig himself out and wants to pass his experience and advice on to others. Sometimes this advice is in the form of "Throw away all of your credit cards," "Live a debt-free life," or "Wait until you have the money set aside before you buy what you want." In fact even Dave Ramsey got started down his successful career because he was in a lot of debt at one time and pulled himself out of it.

Now here's my comparison to that line of thinking. If you are an alcoholic and want to stop drinking, then looking to alcoholics who have given up alcohol and have been living a sober life for years is a great place to start. And like alcoholics, people who have absolutely no willpower when it comes to going on a shopping spree with their credit card and no money in the bank to pay back the bill in 30 days when it comes due, that advice most personal bloggers give is probably sound.

But what if you were never an alcoholic? What if you hardly ever drink or just like a glass of wine with your meal once in awhile? Whose advice do you look for so that you won't become an alcoholic? The answer? Probably no one's. Why would you be looking at a reformed alcoholic for drinking advice since you don't abuse alcohol? Now substitute alcohol for credit cards. If you aren't out-of control with them - if you use them to make big-item purchases or to go away on vacation, why is that bad for you? It's not always. There are plenty of people out there who are just not educated in finance who just want to figure out how to best build up their savings, how to spend less, or how to invest. To those people, I say, it is okay to have credit cards. It's okay to take out a loan if you need one. It's okay to float your money for a month to earn interest - as long as you have a financial plan and a budget, and are living within your means.

Let's look at some scenarios of when using credit is okay or not okay:

Example 1: Marnie has a budget and a financial plan. One of her goals has been to buy a car. She's been saving money for 5 years for it and has $10,000 in a CD earmarked for the car. The CD is earning 6% interest, and it is coming due in 6 months at which time she will buy her car. But her car dies suddenly and she needs to buy one this week instead of 6 months from now. She can get a loan from her credit union for 4.5% interest, and she can pay it back in 6 months when her CD comes due. Should she take out a loan? Many people tell her she should never take out a loan on a decreasing asset. But if she breaks her CD, she will lose her interest. Besides, she is borrowing at a lower rate than what she is earning. Is using credit okay in this situation? My advice? Take out the loan. Marnie's story shows she is responsible with money. She has been saving long-term for a goal, and she has a budget and a plan. When her CD comes due, she can pay back the loan and all is good. If the interest she is making is greater than the loan she is taking, then by all means she should take the loan.

Example 2: Mindy has $12,000 on her credit card balance. She pays the minimum $250 each month on the card. Her dad told her, it will take her 15 years to pay off her balance by just paying the minimum, but she doesn't care. She thinks as long as she can pay the minimum she is in good shape. Plus she tells herself that she always has $350 leftover each month that she can put toward the card, but she chooses to only put the minimum amount towards it and spend the remaining $100 on a night out.

Mindy's friends call her and tell her they have found a fabulous deal on a cruise - 6 days in the sunny Caribbean for just $800. Mindy knows that she can afford it because even if it makes her minimum payment higher on her card, she can still pay it and forgo going out to dinner each month. Is using her credit card wise in this situation? I think all of us would probably agree here that Mindy is not responsible with money. She might, in fact, be termed a crediholic. She cannot give up using her credit card and has no understanding of how little she is paying back when just paying the minimums. My advice? No way! Have someone sit down with you and work on a plan to accelerate your credit card repayment instead and explain how credit cards work.

Example 3: Craig is 35 and single. He has $350,000 saved toward retirement and puts away $20,000 more per year towards it. He also has 6 months' worth of money in the bank in case of an emergency and two savings accounts set up - one for for a car and one for a house. He should meet his car goal next year, and his house goal in three years. His take-home pay is $7,000 per month and he uses his credit card buy all of his items - his groceries, clothes, vacations. He pays off his balance each month. Lately, Craig has been reading personal finance blogs and most of them say that credit cards are bad. He wonders if he should get rid of his cards and start paying cash from now on. What do you think? My advice? No. He sounds like he is set for retirement, his car, and his house. Sure, he may spend more money in the grocery store for an impulse buy that he might not do if he paid with cash. But he can limit is losses with credit cards and they give him some insurance if he uses it for air travel or car rental. And for big purchases, as long as he is deciding on how much to spend before he buys, then using credit is a better deal. It not only gives him some refund power if there is something wrong with the product, but it also gives him 1% reward with each purchase. As long as his financial plan is sound, then he does not need to live like a pauper - giving into an occasional carton of ice cream at the grocery store will only help him enjoy life more.

I can give many more examples where I think it's okay to use credit cards or take loans. Conversely, I can think of several examples, and know many in person who need to stay clear of debt of any kind. Which type of person are you?. Are you a crediholic? Can you not control yourself if you have a credit card in your hand? Do you like to buy things "above your means" such as a fancy sports car and put it on a loan? If so, give them up and follow what many financial bloggers are saying about credit cards or debt. On the other hand, are you responsible with your money? Do you have a savings account? An emergency fund? A financial plan for the future? Do you take out a loan only when you know you are doing it for the right reasons and can pay it back in a reasonable amount of time? Do you decide in advance what you will buy and then happen to pay for it with a credit card? If so, then it's okay to use credit and take out a loan. Just like an alcoholic, crediholics should stay away from debt and credit cards. But just like there are millions of others out there who can control their drinking, there are many who can use credit and debt wisely, too.

In Real Life (IRL) - Our credit union has a great deal on IRAs. From January until April you can add more money to any existing IRA CDs. For example, I have some IRA CDs. One of them is earning 4.9%. I opened it a few years ago and there are still 5 years left until maturity. If I were to put my $5000 Roth money that I invest each year into a current IRA at this credit union (or anywhere else for that matter), I'd be able to earn 2.6% for a five-year certificate. On the other hand, during January to April, I can add on to a current IRA that I already have such as the one earning 4.9%. I love this deal and only found out about it last year.

I've always wondered how much longer they will continue to offer this deal. Last year I made 2009 IRA contributions in early 2010. But this year, I started to think about whether they would even continue this deal next year and decided I wanted to make all of my and my husband's 2011 IRA contributions now while I know they still have this offer. Problem was, I didn't have the money available for it. Sure, I knew by year-end, we'd have the $10,000 saved up to put toward our IRA. But in April? We only had $3,000 of it saved. So what did I do? I took a loan. Yes, I did. We have a home equity line of credit for $50,000. We owed nothing on it so it was available, and current rates are 3.25%. So I borrowed $7000 from it with plans to pay it all back this year with the money we would have put toward the IRA.

Did I do the right thing? I think so. I'm currently making more in the IRA (4.9%)than I am paying out on the Home Equity Loan (3.25%). Yes, the home equity loan rate can change but it would have to go above 5% for it to cost more than I'm earning on the IRA since the interest is tax deductible. Also, I am getting the gift of time. Even if the bank continues this great IRA add-on offer, I would have to wait to put the money in the IRA until January 2012, and I will have lost out on 9 months' worth of interest, while the money sits in a checking account waiting to be invested. So I am earning about $262 in those 9 months and paying out about $170 (before a tax deduction) if I keep the loan for the whole 9 months. Plus I am assured of getting this great deal from the credit union that might not be available next year.

Had I said to my husband "Let's go take the trip around the world we've been wanting to take and just use our equity fund, I would not think taking a loan in that instance is wise. Each situation and each person is different - sometimes it's wise to use credit. Other times it's not. What do you think? Do you think having some debt or using credit cards and taking out loans is okay?

Please check out other financial ideas on Frugal Fridays at Life As Mom.

How well will you do?

Here is an interesting game from Urban Ministires of Durham. Of course you are stuck with the scenerios they give you as well as only a few options. But it is an interesting look at how quickly someone can fall in the hole financially.

Play Spent

I'm embarrassed to admit that I came away from this game in the negative. Fortunately, I've made better decisions and have had better circumstances in real life. How did you do?

Review Your First Quarter Finances

Tip #287 - Review Your First Quarter Finances. It is that time of year again (actually a couple weeks past!) when we should probably look over how we are doing with this year's finances. But, if you haven't done your taxes yet, do that first! Once those are signed and sent, sit down with your budget, spreadsheet, notebook, calculator, or other financial tools you use to figure out your finances. If you are serious about getting your finances in order and motivated to put away money or pay off debt then you should have set some financial goals and written a budget at the beginning of this year. Our first-quarter review is basically just a review of how we are doing with those goals and how successful we are with the budget that we set for ourselves.

If one of the goals you set for yourself was to accelerate your payments on a car loan of $3500 and be finished with it by year's end then look up your statement online (or in the mail) and see how much you have paid off from January 1 until now. If you have paid off close to $1000 of it, then it looks like you are on your way to reaching your goal. If you have not done any accelerating of payments thus far, then analyze why that is the case. Did you have unexpected expenses? Have you been putting it off, hoping to pay more of it off later in the year? Have you spent any money needlessly that could have been applied to this loan? Is this goal still realistic? If you find that you are slacking then look over your goals again and why you want to achieve them to help find the motivation to get back on track. If you find that you grossly underestimated another expense in your budget, and you won't be able to pay off $3500 this year on your car, then adjust the goal to what you now think is realistic.

Look over your budget and compare it to you actual expenses that you have incurred over the past three months. Did you perhaps underestimate how much gas prices would rise? Do you need to raise the budget for that category? Find another category that you perhaps overbudgeted for, and take the money from that category. Have you found that you have been doing such a good job with cooking from scratch that you feel justified in lowering your food budget? Look over your categories again and analyze if you are doing all you can do to keep your expenses as low as possible. This is especially important if you are trying to build up some savings or get out of debt. Can you put your gym membership on hold for a few months while the weather is nicer? Can you take public transportation for cheaper than gasoline fill-ups?

This quarterly review is not necessarily a time to do a whole budget or financial goals overhaul. Instead it is just a point in time to review what you have done thus far in the year to see if you are headed in the direction and at the same pace that you plan, financially. It may be a time to make some small adjustments as mentioned above or perhaps a big change if things have changed drastically since you set your financial goals and budget (new job, sudden new addition to the household, etc.) But overall, it should be a time to just review how you are doing financially 1/4 of the way into the year.

In Real Life (IRL) - I did my taxes later than normal this year (just finished them last weekend!), so I have yet to sit down and do my quarterly review that I am pretty faithful about doing. I hope to find some time this weekend to do so, however. Part of what I do each quarter is look over our budget - and I do think I may need to up our gasoline budget as I did not anticipate the approximately 50-cent increase per gallon that we've had since the beginning of the year. With my husband driving 50 miles round-trip to work each day, that works out to about an extra $20-$25 per month in gasoline for which I didn't account.

I don't usually change our financial goals but I look them over and see if we are on track to reach them or if I am putting things off. Our mortgage is our only debt, so our goals involve putting $2,000 per year into each of our children's college account and $5,000 into each of our Roth IRA accounts. Pretty much come rain or shine, this is the minimum of what I want to do. Rather than change that goal, I would likely find ways to come up with the money (by selling more on eBay or taking one less vacation).

So rather than look at my goals to change them, I calculate my net worth each quarter to see where we are - how much we have in our retirement account, how much is in each of the kids' college funds, how much we have left to pay on the mortgage, etc. I like to use it as a basis of comparison with last quarter's net worth or last year's net worth. It gives me an overall picture of how far our financial goals are taking us. For example, my daughter turned 9 at the end of last year. With her late birthday, she wont' be started college till 2020. I can look at our net worth statement and see that at this time last year we had approximately $21K in her account. Then I can look at our current net worth and see that she has $23K in her account. By looking at our net worth, I can start to use this information as part of an analysis of our long term goals, which will be a topic for another post.

For now, I am going to gather our statements and check out how well we are doing against our budget. I know we are behind on making our deposits into our Education Savings Accounts and Roth IRAs, but that seems to be par for the course for us lately, seeing as I just made part of our 2010 IRA deposits a month ago (you have until April 18 to do so this year!) I hope everyone can make time for an early-in-the-year financial review. I find the process to be very worthwhile.

Organize Your Papers for This Year's Taxes

Tip #286 - Organize Your Papers for This Year's Taxes. Every year when January 1 or so rolls around, we start to think about our taxes. We begin to get envelopes in the mail on a regular basis that say "Important Tax Return Document Enclosed." And we start a pile of our tax documents. Then around February 1, the more ambitious of us start working on our taxes. And as we progress, we start searching for that little slip of paper the neighborhood trumpet player left with us that says we donated $10 to the high school band. And we start looking in our checkbook for all the checks we wrote to little Sadie's preschool. And inevitably at some point as we work on our taxes we have a nagging suspicion that we donated a desk chair to a local charity but never got a receipt for it, and we are suddenly making phone calls to organizations asking for slips of paper or lost statements. At least some of us are.

But why? It is so easy to start a folder or envelope for next year's taxes that everything tax-related gets put into as it comes in. It does not have to be sophisticated - a folder will do but something with sides like an envelope is better, so there is less chance of a small piece of paper falling out. Write on it "2011's Taxes" in big letters and keep it in an accessible place. What should go in it? Of course, each person's tax situation is different. And those who itemize their deductions would need to keep more receipts. Things that may need to be included are:

--Any donation slips you receive for donating material goods
--Any receipts you receive for donating money to charity
--Copies of your statement or checks that show you paid childcare
--Receipt of payments made to higher education
--Copies of medical payments not covered by insurance
--Travel expense receipts or a log of mileage for work you did for charity
--Receipts for home improvements that may qualify for energy-saving deductions

If you keep these all together throughout the year, it will be much easier when you sit down at tax time to do your taxes (or even if you hand over your paperwork to a tax preparer). The best time to get organized is as soon as you finish last year's taxes when tax paperwork is fresh on your mind. So if you have just finished your taxes or are about to sit down to do them this weekend, get a folder or envelope together for this year's taxes and start collecting the necessary paperwork.

In Real Life (IRL) - Organization is not one of my strong points. I tend to "keep things in my head" such as dates, activities, and such. And while I do pretty well with that system, my memory is nowhere near perfect, and I have forgotten several things from time to time. When it comes to taxes, a paper trail is more important than using one's memory, especially if it comes to getting audited. Fortunately, I have a husband who tends to be more paper organized and keeps all of our donations slips together. But there are other activities that my husband is not involved in so much (like writing checks to the kids' preschools) that I must take the lead in being in charge of.

Once I started selling enough on eBay to call it a business and declare my income I have had to be much more stringent on keeping all of my receipts and price records of what I purchase. Forgetting about trips to a yardsale or not keeping receipts from a thrift store only makes my job more difficult when it's tax time and causes me to miss out on legitimate business expenses. Having said that I am still not perfect when it comes to keeping track of all my personal charitable donations - the one I make in haste online for a friend of a friend or keeping track of my expenses that I have while working with a charity.

When I sat down to do my taxes this year, I found myself having to look up statements online to see if in fact I did make a donation to my college this year as I thought I had (I did, but misremembered the amount). And while I was looking up the statements I found another donation I made that I had completely forgotten about. Then I had to call the bank to have them send me old copies of statements that were not available online. Because of my lack of organization of paperwork, I had almost lost out on some decent tax deductions.

Also, if I had just kept track of my donations and expenses more thoroughly in the first place, I would have saved myself a lot of time and extra work. So for 2011's taxes, I have already set up a folder, and I am starting to add in receipts and log expenses in a notebook that I will keep inside so next year, my work at tax time will be much easier and more accurate.

How about you? Are you good at keeping papers organized for your taxes? Or do you wait until April to gather everything together and do some last-minute scrambling?

Be Vigilant When Buying Secondhand

Tip #285 - Be Vigilant When Buying Secondhand. One of the best ways to cut down on expenses is to buy used (rather pre-owned which sounds so much nicer). Other than consumables such as food, gas, cleaning supplies, most items have a life span that can transcend two or more people. And for most things out there, the cost of the item is most expensive in the first half or less of its life than the rest of its life. Of course, we all know that's true for a car. But it's also true of electronics, movies, books, furniture, clothing, household items, and other things. This is generally the case because people pay a premium to be the first to use something, the item is the latest and newest out there, and because the chances are close to 100% that the item works, and if not, you can usually get a full refund. On the other hand, if you buy used, er, um, secondhand most people expect a discount. They know they are not the first to use the item. They are aware that it is not the most recent edition or latest fashion, but what they may not be aware of unless they are vigilant is whether the item is fully usable, fully functional, complete, and unbroken.

If you have been trying to cut down on expenses and have started to embrace buying preowned items, make sure you are not wasting money buying things that seem to be a good deal only to find out the item is damaged. In other words, do not be so excited by your screaming good deal that you forget to check the item over. What looks like a great deal instead may turn out to be a waste of money that could have been spent toward something else. Therefore, be vigilant looking over your items before you pay. Look over everything once and then do it a second time. Here are some common things to look for when buying used:

Clothing:
--Make sure that zippers zip properly
--Check that buttons (snaps, hooks, etc.) are present and accounted for
--Make sure elastic is not stretched.
--Inspect that there are no stains (or you are comfortable with the ones you see)
--Check if stitching is not coming unraveled (or you know you can fix what you see)
--Make sure the size is accurate. Preowned clothes have often been washed numerous time and may have shrunk. A preowned size 12 may be different than a new 12, for example.
--Check that no part of the item is stretched out

Electronics:
--Do not buy unless you can test it or it's returnable.
--Make sure all parts are included (blade is in bread machine, chain is in light fixture, etc.)
--If you are at a yardsale, ask the owner how it works and then ask to test it. For example, ask for a CD to test a CD player, plug in a tv or radio, test out a video game player. If you are at a thrift store, there are usually outlets to test things. And there are often DVDs laying around that you can use to test it. Lights should light up, the motor on the blender should purr, the blade in the bread machine should spin.
--If it's a battery-operated device, battery covers should be present and not corroded. Ask for batteries to test it or better yet carry batteries in your car so you can test things.
--Make sure cords are not moth-eaten or worn and are fully intact.

Furniture:
--Make sure all legs are sturdy for tables, dressers, etc.
--Check that upholstery is not ripped or stained (unless, of course, you are planning to recover it)
--Make sure drawers slide easily, doors close
--Inspect that all pieces are presents (shelves, handles, hinges, screws, etc.)

Household Items:--For glassware, run your finger around the rim to feel if there are any chips. Run it along the handle (for mugs) and along the bottom, too. Feeling is more accurate than looking
--Look for fading on pictures, decorated kitchenware, or the color on general items.
--Look for cracking of pottery, ceramics or other breakable materials such as lamp bases, vases, dishes, glass in a picture frame, etc.

Books:--Check that the spine is not cracked
--Make sure there are no missing pages or loose pages
--Check for stains or mildew
--Inspect books for curled pages that indicate it may have gotten wet

Lastly, I would be remiss if I did not add that when you get home with your purchase, look on the consumer product safety commission website to see if any of your items have been recalled. Stores aren't supposed to sell these items, but I'm sure some squeak through. And recalled items probably abound at yardsales.

The list above is not meant to be comprehensive but just some suggestions on what to look for when buying used. All of the above are typical flaws you may find when buying items secondhand. Some of the flaws may be acceptable to you or may be easily fixed. As long as you are aware of them, there are no problems. It's when you impulsively buy something secondhand only to come home and find a flaw that the purchase becomes a disappointment and a waste of money. So please when you are buying things that are preowned, allow extra time to inspect what you are buying before you pay for the item.

If you cannot check everything to your liking because you do not have the time or the right tools to do so, then only spend money on the item that you can afford to waste. Think of it as something you are willing to take a chance on.

In Real Life - I've mentioned in the past that I have joined the "buying used" bandwagon. And I have become an enthusiastic secondhand buyer. I buy most of my kids' clothes secondhand, their toys, some of my clothes, furniture, dishes, books, and, um, pretty much most everything.

This post comes from, unfortunately, a lot of experience buying preowned things that were not up to my expectations. I bought a boxed set of books at a thrift store that turned out to be mildewed and curled inside - the whole thing went in the recycling bin and about $4 in the trash (well in the thrift store's cash register). I've bought dishes that had chips that I didn't realize until I got home. They went in the trash. I've bought my children pants where I could not zip the zipper and skirts that didn't hook. I've purchased clothes that have light stains that I didn't notice. We bought a radio that we assumed would work but did not. We bought a swing that had been recalled (we were able to get a replacement through the company, though). We've bought furniture where the drawers did not slide smoothly, although it was such a good deal we didn't care nor expect it to be perfect.

And that is the key to buying used, I think. You shouldn't expect it to be perfect, because most of the items have at least been handled before or possibly used extensively. As long as price is commensurate with the wear and tear on the item and you are aware of any non-functioning or broken parts of the item before you buy, then all is good. Just make sure you look everything over before you pay.

PS. I have to apologize about my long absence. I thought I put a post up a few weeks ago explaining but I see that it is not here. I'm sure I wrote it, and thought I hit "publish post" but it's not here. Hmmm...I don't know. Anyway, I had some personal issues I needed to deal with but hope to be a more regular blogger (at least weekly) from now on. Thanks!