Be Careful About Saying "What's Another $1,000?"

Tip #264 - Be Careful About Saying, "What's another $1,000?" I know there are many people out there drowning in debt. Not including a house mortgage, I have read many people's stories about owing others $20,000, $40,000, $70,000, or even over $100,000. This might be a combination of student loans, medical debt, credit card debt, and car loans. And when one has $65,000 in loans, it is very tempting to say, "What's another $1,000? Let's go buy that large screen television."

Please, please, please don't think this way. Another $1,000 is another $1,000. And while it may seem like a drop in the bucket when you owe $50,000 or more. It's not - it's $1000 plus interest over time. When you seem like you are drowning in debt, don't keep adding to your debt because you think it's just another small drop in the bucket. Instead, work out a plan to attack the debt that you already have.

On the positive side, I've also read many stories where people have said they have paid off $35,000 in debt in two years or $70,000 debt in five years. So it can be done. Instead of adding to your debt because the amount seems insurmountable anyway, make a plan to get out of debt. Write up a financial plan for the next five years, create a budget, find ways to reduce your expenses and/or increase your income, and start paying that debt down. Every dollar of debt does count. Even if the number seems extremely high and too much to conquer, do not feel helpless and keep adding to that debt. It will only make the number that much higher when you decide enough debt is enough. So take wherever you are at today and start to tackle it. Don't throw in the towel.

In Real Life (IRL) - Several years ago I went to see a well-known designer, Michael Payne from HGTV, give a talk at a Home Show. As he was telling us about remodeling, he said the four most dangerous words when doing a room or house remodel are "While we're at it..." The audience had a giggle about that, but this phrase has always stuck with me. When redoing a room or a house for tens or hundreds of thousands of dollars, it's easy to say, "While we're at it, let's do the bathroom for another $10,000: or "Let's add a deck for $15,000," because after all, if you are already spending $100,000 on a remodel what's another $15,000? Well, it's another $15,000, that's what it is - not too different from ther person who feels overwhelmed with his debt so he keeps on spending. It's a very dangerous place to be.

I have a friend whose husband is out of work. This family has always lived pretty well - and I suspect above their means. So when the husband lost his job, I thought they would finally cut back on their spending. Instead, I see no change in their lifestyle. They recently confided in me that they spent $3,000 to send their son to summer camp. I was aghast - literally. After all, who spends that kind of money when they clearly do not have it? And that's when the idea for this post occured to me. I suspect that they have so much debt that another $3,000 just doesn't seem to mean much to them anymore. After all, what is $3,000 when they maybe owe $60,000 or even $150,000? I can't say much to her; I have tried. The best I can do is be an example.

My husband is not even out of a job, but as I mentioned in an earlier post he was told that his office will be closing in about 18 months. And because of that, I have already cut back. I cut out a $125 camp that I didn't feel was necessary this summer. And I have continued to show my friend the benefits of thrift store shopping. But she doesn't catch on or isn't interested. So I keep my mouth shut. And instead I write on here anonymously so maybe others can build up their financial knowledge and make wise choices with their money. And while you're at it...save some money up, as well. For other ideas on saving money, check out Frugal Friday.

Do A Mid-Year Review

Tip #263 - Do a Mid-Year Review. It's that time of year again. Whenver Independence Day rolls around it is a reminder to me that we just passed the middle of the year. And that means it is time to review what we have accomplished so far this year with regard to our finances and to evaluate whether we are on the right track to reach our goals.

If you wrote up financial goals at the beginning of the year, pull out that paper and look them over. Are you reaching your goals or have you forgotten about some of them? Are you about halfway with your savings goals or where you wanted to be with paying off debt? A good way to evaluate this is to write up a financial worksheet or net worth page. A net worth page just tells you your financial worth at a given point in time. It can be a useful tool to write one up once or twice per year so you can compare your net worth today to that of 6 months ago, 1 year ago or 5 years ago.

If you are still following the budget that you wrote up, and you should be, look it over and see if you were off the mark on any categories or if anything major has changed that would cause you to adjust some of the amounts, such as a raise, a loss of job, a rent increase, etc.

Take some time out this holiday weekend to evaluate how far you have come so far this year and where you are headed for the rest of the year. Get yourself back on track for your goals and then at year end, you will hopefully have met more of your goals.

In Real Life (IRL) - We had a few unexepected events happen while we were away. The second to last day of our trip, we discovered my daughter had lice (YUCK!). In addition to spending lots of money at the drug store buying things to get rid of it, we got home and had to wash all of the bedding that we left behind. As if that wasn't bad enough (it was!), we found water in our basement, yet again. A call to a waterproofing company and a couple hours of cleaning it up, and we collapsed in our beds that night. It wasn't until yesterday that I realized the mid-year mark happened.

So I took out our budget and financial goals that we wrote up at the beginning of the year. In reviewing our budget, the only major category we changed was summer camp. In light of my husband's job situation, we want to try to put away a bit more if we can. If his job ends in a year and a half to two years and if we decide we want to stay here versus move to North Carolina we are not counting on him finding a job making as much money as he is now. Because of that, we want to build up our savings a bit to cover any expenses we won't be able to afford at that time. Camp and other summer activities seemed like the easiest thing to cut. They are still doing some camps but not as many, and we will try to fill in with cheaper or free activities. We didn't specifically change our food or clothing categories, but we are trying to cut down in those areas if possible.

Next I looked at our financial goals we had set for the year. One of those goals was for me to find a part-time job come September while my youngest is in preschool 3 mornings a week. Although, with him not being potty-trained yet, he might not even be going in September. And even if he does, it is very difficult to fit in a job for 3 hours a day 3 days a week, especially with how often young ones get sick, school holidays, etc. Instead, I have decided to build up my eBay business more. I am going to set up some goals for number of items I wish to sell per week and how much I hope to make. I've done this before and it worked. But then I slacked off and just sold whenever I felt like it. Come September I will set aside a certain number of hours per day to devote to this work.

Lastly, I spent an hour last night updating our net worth worksheet. I like to do this four times per year, although I think twice per year is sufficient. Because of downturns in the stock market, our net worth actually went down slightly in the past three months despite paying down 3 months' worth of mortgage payments and setting aside a few thousand for retirement. Regardless, we feel good about where we are. We will have to dig into our household savings account to pay for the basement to be waterproofed. We are expecting this will cost several thousand dollars (ouch!), but it has to be done, especially if we end up movingn in the next couple of years.

And that's where we are at mid-way through this year. I hope that my readers find themselves moving along with their financial goals. Happy July 4th!

The Savings Are In The Details

Tip #262 - The Savings Are In The Details. Have you ever noticed that the small things are often what make the greatest impact? By virtue of being so small, they hardly get noticed at first until they all come together and exert their influence. When writing a budget or looking at where we can save the most money, we usually take into account the big stuff such as our rent, our car payment, and our insurance. But some of us don't bother looking at the small stuff. For example, would anyone consider a stop off at 7-11 on a hot day for a 99-cent Slurpee to have an impact on our wealth? What about that take-out you get each weekend from your favorite pizza/Chinese/burrito place? Does tossing a magazine on to the conveyer belt every few shopping trips to the grocery store make a difference to your savings?

Well, of course they do! Unless you have specifically in your budget accounted for $24 for your once-per-month $2 magazine habit, it is making an impact on your savings. And the frequent trips to the drive-thru are eating away at your savings if they are not part of the plan. Picking up small gifts for your little ones at the Dollar Store influence your savings rate as well.

If small things make a big difference, then what can we do about it? The best thing is to try to plan as best as possible all of your small purchases. How many people include greeting cards into their budget? Very few; I imagine. Yet a trip to the Hallmark store can often lead to double-digit purchases. Same thing with postage stamps. Mailing out 2 birthday cards per month will set you back over $20. But are they in your budget? Probably not. How about the last-minute stops on the way home from somewhere or when you are out? The suntan lotion you pick up on the way to the beach. The large soda at the mall because you are thirsty. These types of purchases sneak into your savings account and attempt to wipe it out.

So when you are considering how much money you can save each month or writing up a budget, make sure you take into account all of your spending - including the very small purchases you make. And on the other end, if it's not in your budget, then don't stop at Wendy's on the way home from the pool for a Frosty. Skip tossing the TV Guide into your shopping cart. And think ahead about all of the things you will need before setting out for the day or the weekend - snacks for the children, drinks for everyone, a swim diaper for the public pool. The fewer small purchases you make, the larger your savings account will be.

In Real Life (IRL) - We are packing for our annual family vacation to Cape May. And it is in doing this packing for a family of 5 that I realize the devil is in the details. Nothing bugs me more than having to purchase something while on vacation that I have a duplicate of sitting at home - a pail and shovel, bug spray, and flip flops. These small things are so easy to forget, and they can add up to a small fortune at tourist destination.

We know we will buy groceries at the higher-priced supermarket at the beach, but it's part of our vacation budget. We plan to spend a certain number of dollars on attractions and ice cream cones. But we don't budget for stops at the t-shirt store to buy a sweatshirt for a cold day. Or for the ponytail holders that we forget from home. Or for the overpriced toddler hand-holder/leash for a feisy 18-month old (which was a lifesaver!). These are all small purchases we have found ourselves buying because we didn't plan properly. Yes, we do have a catch-all category for those miscellaneous items. But truly, I'd rather have $20 in my bank account than an extra sweatshirt that I don't need in my dresser drawer.

So when budgeting, think about all purchases you make - not just the big ones. The small ones count, too. This is why experts often tell you to keep track of expenses for a month or two in order to write up your budget. Because it's so easy to forget things like stamps and drinks and sunglasses. In addition to having an accurate budget, do your best to plan what you will need when you leave your home. That is usually when you buy these small things. If you think you will be out all day, throw a water bottle in the car, bring a hat for the little ones, and pack that sweatshirt in case it gets cold. The more prepared you are, the less you will spend. And on the tail end, unless it is an emergency, resist throwing money at unbudgeted items that you can do without - the drive-thru milkshake, the cute souvenir that will sit in a drawer for years unplayed with, or the latest gossip magazine. Being aware of these small things will make your savings account bigger in the end. And that's what saving money in real life is about. We're off to Cape May for the week. I will post more when we come back unless I find that there is suddenly WiFi at our hotel. (I haven't included the Internet Cafe in my budget, sorry.)

And as a PS to our earlier post about possibly moving: my husband turned down his job opportunity. Lots of things about it didn't add up for us including the financial aspects. So we are staying put. Fortunately, we have a while to decide what our next steps will be. Thanks for your support!

Use Everyday Life Examples To Teach Money Matters

Tip #261 - Use Everyday Life Examples to Teach Money Matters. As many of us struggle with our finances, we try to learn all that we can from those of us who are more knowledgeable than we are in this area. Perhaps we stop to think about what went wrong on our financial journey. Did our parents handle their finances responsibly? Did their parents? Were we taught how to manage our finances properly? How can we do better?

And for those of who are parents, we think about what we can do differently so that our children do not struggle with money as they get older. We hope that as they age that they do not get themselves deep into debt. We want them to be responsible and knowledgeable about finances. What is one way of teaching our children about money and finances if we are not that educated about it ourselves?

One way to get your children’s attention about money is to use real-life examples that they are interested in. Perhaps your son has a collection of some sort. You can talk to him about value and how it goes up and down depending on demand for it. You can look up value on eBay and discuss the possibility of selling his collection when he outgrows it. You can talk about different sales venues and which one reaches the most customers and would garner the highest price. Then discuss sales commission and how that decreases the bottom line.

For younger children, you can teach them to save for a toy that they would like to buy. Perhaps teaching them that 8 weeks’ worth of allowances will get them the toy or 6 times of helping you unload the dishwasher will make them enough money for that toy. Help them look through different toy catalogs, online, or in person to find the best price for the toy. If you buy in person, have them pay the cashier with their own money and perhaps get change.

Maybe your college age daughter wants to move out on her own. You can look up rents in newspapers online. You can go to the grocery store and discuss what a weekly grocery bill would look like. Make a list of other bills people pay when they live on their own.

You don’t need to know about stocks and bonds, interest rates and dividends to start your discussion about finances. Financial matters involves managing your money as well as trying to invest and earn money. Use the knowledge that you know to impart on your children.

In Real Life (IRL) – I remember back in the late 1980’s when the Billy Joel song “We didn’t Start The Fire” came out. It was a big hit and had lots of historical references sung very fast. Teens were interested in that song. And I remember hearing about some creative teachers who took that song and analyzed the lyrics line by line with their class rather than ban the music (on our Walkmans, I’m sure) from school. What a great way to get children to learn. Take what they are interested in and have them learn from that.

The teacher using that song to teach history got me thinking about the latest fad - Silly Bandz. When they first became popular around here I heard that they were being banned in school. They said children were paying too much attention to them rather than their studies. They were trading them in the classroom and playing with them on their wrists. I thought about this very popular fad and remembered that Billy Joel song and thought, “Why not use the Silly Bandz to teach a lesson?” Why ban them? Take advantage of them.

For younger children, the trading of Silly Bandz would make a great topic of worth. One phoenix (a “rare” band, according to my 2nd grader) is worth a cat and dog, for example. Tie this in to money topics. Two nickels are worth a dime. For older children enthralled by Silly Bandz, the topic of entrepreneurship can be discussed. Who came up with this idea? How did they market it? What do they think they can create that would become popular?

Now I know schools have their own agenda and maybe these discussions were not on the itinerary, but clearly something that captivates the children would be a great tool to teach concepts about finances. If your school isn’t taking advantage of kids’ interest in their Silly Bandz, then why not do it at home? Use their fascination with a topic to get your children more interested in and knowledgeable about financial topics. What better way to teach? For other financial ideas, check out Life As Mom.

When The Going Is Good...

Tip #260 - When the Going Is Good, Save For When The Going Gets Tough. When times are good and the wine is flowing, make sure you stop and consider that things may not always be this way. There may come a time when someone gets ill and must stop working or a business goes downhill because the market changes, or a job is lost, or or or. It is very easy when things are going well to live it up and think that things will only stay the same or get better. Because, in general, that's how things work. You start a job with a small salary and then as you gain experience, the salary increases. But things don't always work that way. As we know now, the economy has gone downhill, and many jobs were lost or salaries were cut.

Since most of us are aware that things don't always stay the same or improve, what can we do about it? Well, we can live as if things aren't as good as they are. Buy the more affordable home so that if things get rough, you can still afford it. Give up putting in a "top of the line" kitchen because really do you want to pay for a new kitchen for the next 10 years when the old kitchen was perfectly acceptable? Put money away in that proverbial rainy day fund. They really, really do come in handy.

Sure none of us know what tomorrow would bring and we can suddenly drop dead. But as many similar sayings go, "I'd rather have money and not need it than need it and not have it."

Take a look around at your lifestyle and spending habits and think to yourself, "What would I do if the ball dropped tomorrow?" "Coud we still afford the rent payments or mortgage?" "For how long?" "Is there somewhere cheaper we could move if not?"

If you are using up every last dollar to maintain your lifestyle then you are living too high on the hog, even if it doesn't seem like it. Put away at least some of your income for the days when income may not come in. Some people call it an emergency fund. I call it being prepared. Be prepared.

In Real Life (IRL)- Last Monday, Tuesday, and Wednesday I spent in bed either throwing up or sick with fever. By Wednesday afternoon I started to get my energy back and was getting up and moving around a bit. But using the computer was still too much for me. So when my husband called and asked what I thought of the email he sent, I had no idea what he was talking about. I jumped out of bed to see. And what I saw were two words, "Jericho, NY" And I knew what it meant.

My husband's company got bought out a year ago, and we always knew that it would mean some kind of change. We knew his office could close and we could be asked to relocate. So when I saw those words on my computer screen, I knew what it meant. I called my husband immediately, but he couldn't really talk. I found out later that the company wants to close his office in 18 months to 2 years. And they were offering my husband a large promotion in Jericho, NY. For those who don't know, Jericho is on Long Island, outside of NYC.

At first I was excited - the thought of packing up the house and starting over has its appeal. And living near the beach would be a fun adventure. But as I thought about having my children start over in new schools and us having to make new friends, I was less enamored. We like where we live. It's nowhere near perfect. It's expensive. The traffic is the pits, and it's far from the beach. But it is where we have put down roots. My children are growing up with my friends' children. They've known each other since they were babies. We're in a convenient location to travel other places and to see family on both sides. We like our house and our street.

We're seriously considering this job offer on Long Island. After all, it is more money, and a job for the long-term. But if we don't take it, it will be partially because we don't want to uproot our family and leave friends and the only place my kids have ever called home. We know that might mean taking a lesser paying job or possibly being without a job in the short-run.

And guess what? we can only consider the possibility of staying here with low-paying jobs because we have been putting away savings from each paycheck and have been furiously paying down our mortgage. We certainly don't want to be in the position where we have low-paying jobs, but if it means living where we want to live then we will do it. But we can only do it because when things were good, we saved. We have 3 more days to make a decision. I will let you know what we decide.

My family has been "bitten" by the stomach bug this past week. After taking care of my two daughters, I was laid up in bed myself so I apologize that there haven't been any posts for several days. Once I get things back in order - laundry! dishes! shower! - I promise to do more regular posts. Thanks.

Consider A Pet's Expenses

Tip #259 - Consider A Pet's Expenses. A pet can be a wonderful thing to have. Pets can give you companionship and unconditional love. They can help teach responsibility to children. They can provide company to the lonely. They can help boost people's mental health. They can bring families closer together. There is no denying the many benefits that pets can give to humans. But along with these benefits come costs - real financial costs.

Most pet owners would probably agree that they wouldn't live without their pet for anything, regardless of what they cost. And I understand that feeling. However, if you are not already a pet owner, you should carefully consider the costs of a pet before you get one. It's easy to be persuaded by a soft playful kitten or a loveable puppy, but make sure that you are aware of the realistic expense of owning a pet.

Startup Costs - If you don't already have a pet, there are several products you might need when you first get one. Obviously these items vary depending on the type of pet you get. You might need a gate (or more than one), a collar, a leash, an aquarium, special lights, a cage, a pet license, food containers, and travel containers. Your pet may also require professional training if he is a young puppy.

Food Costs - This cost is a regular expense for a pet throughout his life. Nowadays, many veterinarians recommend costly pet food for the best nutrition for a pet. While deals can be found online or buying in big quantities, it is an expensive, regular cost.

Health Costs - Like people, animals have health needs. When young they may need to be spayed or neutered. They may need certain shots such as rabies and others. Dogs may need to be treated for heartworm or ticks on a regular basis. And they should have yearly veterinarian visits. In addition, they may have periodic health problems that will arise that will need to be addressed. Some find pet insurance to be worth the cost but that is another added expense.

Grooming Costs - Dogs may need regular grooming vists depending on if their fur sheds or not. Even if they don't need year-round visits, they may need haircuts in the summer depending on their coat. Dogs may need regular visits to get their nails trimmed or you may need to invest in a pet grooming kit yourself. While I know it's controversial, some people fully or partially declaw their cats. Pets often need their teeth cleaned.

Living Costs - If you are a renter, you may have a harder time finding a place to live if you have a pet - primarily a dog or a cat. This limitation can prevent you from finding an affordable place to live. If you rent in an apartment building that allows pets, there is often an extra deposit fee and many times a monthly pet charge, also. If you live in a house, you may have to invest in the cost of a fence. There may be cost of replacing carpet, sofas or other materials sooner than normal because of pet wear and tear. If you and your spouse work , you may need a pet walker to come in during the day.

Travel Costs - When acquiring a pet, you must figure in the cost of someone watching it for you while you travel. Kennel costs are upwards of $20 per day in many areas. Alternatively, you can bring pets to certain hotels, which often have an extra per night fee for a pet. You can also find local folks who will walk and watch your pat while you are away.

Non-necessities - There are little costs that may add up for pets. These are not necessities but many with pets choose to spend money on them, such as pet treats, rawhide bones, toys, catnip, pet beds, outside pet homes, dog bows/bandannas/clothing, and others.

I did not give associated costs for most of the above items because costs vary widely depending on size and type of pet and where you live. And again, I am not suggesting people should not get pets, but you should be realistic on the costs of having one. Talk to pet owners in your area to find out the price of vets and kennels. Ask those with a similar type of pet to the one you want how much they spend in food per month or regular health maintenance. Be realistic on how often you travel away from home and whether bringing your dog to grandma's is a possibility or if you need to board your pet each time you visit. If you are realistic with the pet costs, you will be a happier pet owner.

In Real Life (IRL) - It has been just over a year that we have been living without a pet. And while we miss having our dog to play with and love, I must say that I am not missing the expense that came along with her. We had a budget of $75 per month for our dog, which covered food and heartworm medicine plus a yearly vet bill. (This number may seem low as our dog was acutally on a cheaper brand dog food from before my husband knew better. The vet said that because she did fine with it that it wasn't necessary to change her diet to a more expensive food.)

Since the dog was my husband's when I met him, I don't know how much he paid for startup costs with the dog but he owned a pet bed, an outdoor igloo, a pet carrier, a gate, dog bowls, and a few other things. So, I am sure he easily spent several hundred dollars on those costs.

We had a few irregular or unexpected costs that came up periodically while we had the dog, like the time she had an abscessed tooth or the time we traveled to China for 18 days to adopt our daughter. And there was the time there was a fight between our dog and a neighbor's dog where we offered to pay for the other dog's vet bills. There was also the several-hundred dollar pet fee when we rented an apartment home. There was the medicine she went on for incontinence when she became elderly. And the cost of ridding our house of fleas one memorable (not!) summer.

At thie present time we have no plans to get a pet - not because of the expense - but because with three young children I don't want the extra resposibility that would fall mostly on my shoulders. I'm sure we will get another dog at some point, though, and we will make sure that we are realistic about the costs that will need to be added to our budget to get one. For other frugal ideas, check out Frugal Friday.