Tuesday, June 26, 2007
Monday, June 25, 2007
We needed a second car (relatives got sick of us mooching rides all the time) and we got a good deal. We bought it with cash, and it is very reliable.
Plus it's fun to drive.
I've been driving a car that is a high mileage car for a while now, and this new semi gas-guzzler really has some pep, which I am thoroughly enjoying. Other than that, I'll put some air in the tires and see how long she runs.
Anyone have any first car horror stories? Post them in the comments, especially if they will help others avoid making costly mistakes.
Sunday, June 24, 2007
I won't go into the biblical reasons for tithing in this post, but I will try to cover some different strategies I've seen used to get people to the 10% mark.
Strategy 1: The BIG CHECK
This method is probably the least Biblical since you are not giving of your firstfruits. Rather, when you do your direct deposit you have 10% go into a separate account that you don't normally look at. At the end of the year you write a check for the account balance, and you've tithed your 10%. This one is the easiest to adjust your lifestyle to though, since you don't see the money ever.
Strategy 2: Month By Month
If you have a budget that tracks spending, this method is fairly easy. At the end of the month move the decimal on your total income to the left one space, that is how much you write the check for. EASY!
Strategy 3: Every Week
Same as month by month, but this time you do it with each paycheck.
Strategy 4: Help I'm in a debt crisis! I can barely afford 1%!
Now would be a great time to reevaluate your budget or spending habits. Remember, what is more important, God or eating out one more night a week?
Tithing is actually very simple, and it puzzles me why people find it so hard. If you just simplify your life, it should become easy to live off a smaller and smaller percentage of income, even now.
Saturday, June 23, 2007
His points about discussing debt, and money in point #1 are right on. Finance matters are a major player in divorce proceedings, so a happy marriage is easier if everyone is on the same fiscal front page.
Also, finding a new place to live for both people is, once again, great advice. The marriage is strengthened, both people feel a stronger sense of commitment, and you get to set up house together.
His advice about prenuptual agreements is where I take issue. It's not that it seems like one partner doesn't trust the other, or that it seems unromantic (although you wouldn't call it romantic). The reality is that if two people are at equal station in life, then they shouldn't need one. The premarital process should take care of the major issues better than a lawyer can, and most people would feel a whole lot happier if they never had to involve one in their marriage.
To go back to the original Greek, love is a verb, not a noun. You don't fall into verbs, you act them out.
Tuesday, June 19, 2007
Oh, and if you are looking for a safe investment, try CDs or Certificates of Deposit, especially if you don't have a high tolerance for risk.
I just met a person who actually invested lottery winnings $120,000 worth after taxes. She has set it up in a CD a month laddered situation. In other words every month she opens a new 12 month CD for $10,000. All her money is insured because she shops for the best rates at every bank in town. I'm not sure what her tax situation is like, but when her interest becomes her income (She'll be retiring in 11 years) it will net her $855.17 a month, which isn't astounding, but if she needs it she will have access to over $17,000 a month.
Meanwhile the winnings haven't changed her lifestyle one bit in any other way, she loves her job and will do it for as long as she can (probably won't really retire for another 20 years).
Thursday, June 14, 2007
Tuesday, June 12, 2007
1. I could talk about monetization of this blog, and how I'm trying to make extra income from it.
2. I could start reviewing other people's blogs with links so that my readers will have a greater understanding of what's available to them.
3. (most likely) I will share personal stories and discuss what financial nugget I have gleaned from each one.
If anyone would like to read something pertaining to family finances, let me know. Or share your own story.
Monday, June 11, 2007
The best way to learn these things is by doing them, and my main example today is going to be cooking, because it's something that everyone can do, and food is a universal need. Also it is a skill that is easy to start, and can take a lifetime to master.
"So, what's for dinner?"
If you've never cooked before, don't start with a 4-course meal, you quadruple your chances that something will go wrong & you will become frustrated and disappointed. Instead, find things that are really easy to make and improve on them. (store-bought macaroni and cheese is vastly improved with a spoonful of salsa mixed in for example) You are trying to establish a base of knowledge, you should be able to judge how long things will take, and what will go well with what.
Be ready to learn from your mistakes.
There are two things you can do when you make a mistake, give up, or press on. Giving up means wasted food, time, and money. Pressing on could lead to a spectacular success or a spectacular failure, this will be okay though, because you've learned a lesson you'll never forget.
Learn from others.
Do you know someone who is an excellent cook? Ask them if you could help them prepare a meal, don't expect them to reveal secret recipes, but you should be able to observe certain behaviors that lead to success in the kitchen.
All criticism is good when learning a new skill. If your son tells you that the food was a bit too salty, you know that when grandma comes you leave the salt out on the table to season to taste. Even very negative comments do have a root of truth in them, and may hold the key to perfecting your skill.
...When all else fails.
You can always order a pizza, that's what you were doing before you started cooking anyways right?
Feel free to leave any recipes here in the comments section!
Saturday, June 9, 2007
One of the best ways I’ve found to get an edge on finances is keeping myself consistently under budget. I do this by learning to do without. For example, there was a time when I would drink 3 fancy shmancy coffee drinks a day. Each one would cost me $2.00 so I was spending $6.00 a day just on coffee. That’s $42 a week, $128 a month.
And that’s just a cup of coffee.
Do you go out to eat with your spouse once a week? Going out every other week could save you $60 a month.
Do you buy name brand groceries? Trying some generic products could save you $10-$40 a week on shopping.
One big expense that saves people when they go without is alcohol. Depending on what you drink, you could save anywhere from $14-$200 a month by not buying alcoholic drinks, or even cutting consumption in half.
So how does one find out what they can cut?
This goes back to Knowing what you Spend. Save your receipts and really take a count of what you buy, what you use, and what just sits there. Does someone buy a magazine from the supermarket counter every month? It may be cheaper to get a subscription. I personally buy tools I don’t need and probably won’t use, but by making a rule that all tool purchases are a two-party decision, my wife and I save money by doing without.
I am interested in learning what other people have been able to do without, reuse, save money on, etc. If you have a good tip, post it in the comments below.
Thursday, June 7, 2007
As a quick overview, the unsecured loan was used to pay for several wedding expenses and some credit card irresponsibility on both our parts (we don't use our card much anymore and have cut up most of them after we paid them off.)
Our total debt for the long-term goal was adding what we owe on my wife's car to the unsecured loan, however I don't know the exact amount on that car because she forgot her password.
Any other suggestions on how to improve this blog would be very much appreciated.
Wednesday, June 6, 2007
We are now on part five of this series: Rewards and Punishments.
This is a difficult thing for most heads of families to deal with. You need to give your spouse some control over you for a Rewards and Punishments system to work effectively.
First let's get some definitions for this particular system to work most effectively
- Reward Something that you like, which you receive for doing a behavior that needs to be encouraged. (i.e. I just cleaned the house before my wife got home so I was rewarded with a backrub.)
- Punishment Something that happens to you as a result of failing to do an action, or doing a wrong action, intended to discourage wrong behavior. (i.e. I left dirty socks on my wife's pillow, so I got to sleep on the couch.)
The key to getting rewards and punishments to work for your finances is to have preset rewards and punishments for each person in the family who handles family money. Whether that be just the parents, or the parents and a responsible child who can do the family grocery shopping, or other adults in non-traditional families.
So let's say that there are just 2 people who have some stewardship over the family money. Set up rewards and punishments for each person, here are some examples:
Michael (who loves watching football and hates doing the dishes)
- Reward for spending less than $30 a week on lunch is: 2 hours of uninterrupted TV time.
- Punishment for going over the $40 budgeted for lunch each week is: Dish duties every night for the next week.
Julie (who will buy any clothing if it says on sale, and doesn't like to wash the windows)
- Reward for spending less than $40 on clothing for 3 months is: $200 shopping spree during a holiday sale.
- Punishment for spending more than the $180 budgeted for clothing is: "earn back" the money spent at the price of $0.35 per window before she can go shopping again.
These should be tailored for each person, but also be adjustable so that any action that's an improvement will get some kind of reward. Also, generally the rewards that cost little to no money are better off than those that cost a lot of money.
What are some kinds of rewards that you might consider using, is there anything your spouse could use as a punishment which would help motivate you to avoid mistakes?
Monday, June 4, 2007
Imagine a family with 5 credit cards, and 2 car loans. We'll say that each card has a $1000 balance and minimum payments of 2% or $20 to each card every month, so total payments of $100 a month for the credit cards. The cars both have monthly payments of $300, for a total of $600, and a grand total of $700 a month.
$700 a month in minimum payments, and this doesn't talk about a mortgage or student loans which many people will also have.
Now the average family in America makes $40000 a year, so this family with $700 in debt is spending about 21% of it's income on minimum payments. Everyone should ask the question, What could I do with that extra $700 a month?
How do I get rid of that debt? after all I'm paying the Minimum.
The key is to pay as much more than the minimum as you can comfortably afford, lets say an extra $200. Simultaneously you stop using credit cards. This prevents your debt from increasing. With that $220 ($200 + $20 minimum payment) a month you will have one card paid off in 5 months. Now you have a spare $220 to put towards the next card $240 will pay it off again in 5 months with some change left over. Your third card gets paid off in 4 months with change left over and so on.
Reward yourself after you pay off a major debt. Take the family out to eat or something, thank them for their efforts. It is important that they feel good about eliminating debt so they don't make the same mistakes you did.
Once you have all your debt paid off, you are in a great position to save, set up a CESA (Coverdell Educational Savings Account) for your kids, or set it aside in a money market for a downpayment on a new home, or make an Emergency Fund. The more money you can put towards the debt, the faster it will be gone, consider cutting back on shopping, eating out, cigarettes, and alcohol if you want to see the most dramatic results.
Thursday, May 31, 2007
My wife had an asthma attack last night.
For a family budget, expenses associated with this would fall somewhere between recurring bills and emergency fund. Most people are good at the recurring bills, you pay the same (or similar) amount every month and forget about it.
The Emergency Fund is different.
First let's get a definition: The emergency fund is an area of liquid assets that is used only for unexpected expenses in regards to health, property damage, loss of income, or other similar emergencies.
The Emergency fund should be one of your first steps towards a sound financial picture for your family. Set aside quite a bit every month until you have roughly 3-6 months income put away. Then put that money to work in a money market account where the interest is higher than a savings, and where penalties for too many withdrawals will help you to think twice about accessing those funds.
The emergency fund is also helpful during times of family transition, for example: Say a new father wants to take some time off to spend with his wife and new baby, but his company only provides leave for women. The couple could access the emergency fund to provide that extra income for a few weeks and to help with the countless new expenses associated with baby. What if they didn't have an emergency fund? Those expenses tend to make it onto credit cards, which leads to more bills, and paying later for something you no longer have (ie. food).
As far as paying down debt, some people say to pay off the credit cards and unsecured loans first, others say build the fund first. It really doesn't matter, just make sure your plan will work for you. If you have a habit of paying only minimum balances, then you should pay the cards off first. If you always pay the full amount on your card and never even have to pay interest, you don't have to worry since you don't have that kind of debt. Consolidating that debt is another option which could bear fruit for you by letting you pay off the cards completely (hide or destroy the cards for a while after this or you'll run them up again). Then you are back in the easy recurring bills part where you pay the same amount every month.
So how do we cover an emergency like asthma? We use the emergency fund!
Tuesday, May 29, 2007
Sit down and have a chat with your family:
- What do you like to do?
- Where would you like to go?
- Do you want to buy a house?
- Do you want to have children?
- If you have children, do you want to pay for them to go to college?
The Written Word is key
The possibilities are as unique as every person, and this should be a discussion where all ideas are open for consideration and get written down. Dad wants a new Porsche? Write it down. Little Jimmy wants a bicycle? Write it down. Everyone wants to take a trip to Six Flags? That's great! Write it down. New couple wants to know the joys of home ownership? WRITE IT DOWN.
So let's drum up a sample list of different financial goals.
- Jimmy's new bike
- New House
- Ice Cream every Sunday
- Go out to eat twice a month
- Retire at age 60 and be able to live to be 160
- Put Jimmy through college
Now these are 7 general goals (this is an example, you could come up with hundreds fairly easily). Obviously some of them are more pricey than others, some are more specific, some are very general. Now it's time to prioritize.
Break the goals up into short-term and long-term.
- Jimmy's Bike
- Ice Cream every Sunday
- Going out to eat twice a month
- New House
- Jimmy's education
Now you just need to use the short-term goals to drive your long-term ones. I'll use the Porsche for an example.
Let's say that it costs $60,000 (I have no clue what a Porsche costs)
$60,000 becomes your big savings goal, your short-term goals should motivate you to continue to save. Just make milestones in your savings. So, if Ice cream for the family costs $30, set a goal that everytime $130 is added to the savings account, everyone gets ice cream. The result is that everytime you've saved another $100 you get rewarded for saving.
That about sums up this article, anyone want to clue me in on how to post an excel document I could chart this for you.
Monday, May 28, 2007
You will learn things like:
How much going out to dinner costs you a month (when we did this it was over $400, or about 1 fifth of what we make in a month).
How much do we spend on groceries.
How much do we spend on things we don’t need.
Who has the most expensive shopping habits.
Categorize the expenses, make the categories important to you, and figure out the percentage of your income that each expense category covers. Compare it to my personal percentage goals.
20-30% Housing (rent or house payment)
10-20% Savings / paying off debt once you’ve saved 3 months pay.
10% Giving (church, charity, etc.)
5% Gifts (friends relatives loved ones)
25-30% Living expenses (food, bills, cars, insurance minimum debt payments)
Anything left over can go towards fun stuff, or paying off debt
This is a general guideline for an effective spending percentage, and it will be a good comparison to your own expenses.
Also, a greater income could skew these numbers a bit because there is only so much money one can spend on food, living expenses, etc.
Post and let me know how your numbers compare, I may be able to see things that you gloss over.
Saturday, May 26, 2007
Friday, May 25, 2007
My grandmother asked me this question about a week after the wedding, and I am glad that I had an answer for her, I do. Of course, she asked me why my wife didn't have control too, and in our case it is because she is afraid of money. The important thing here is that we figured this out before we got married. We tried to combine our budget about 3 months before the wedding, and had more arguments than ever before or since (So far).
What we learned about ourselves.
- Our hot button issue is money
- Our financial discussions end in stalemate (a tied argument)
- Budgets really stress my wife out
- Allowances do not.
What did we do?
Since I worked at a Credit Union at the time, I was getting a large amount of financial planning advice, budgeting tips, strategies, etc. This made it clear to both of us that when it came to handling the finances I would be the better choice, especially long-term. However, since I can decide to spend large amounts of money rather randomly, as part of this control, I am required (it's in writing) to inform my wife about these purchases and show her that we can afford it.
Before we got to this point though, my wife had to get past the idea of not having control over her money, and this should be key to any family: You don't get paid anymore, your family does. This doesn't mean give your kids everything they want, it means that your family controls what you earn. Even though one of you earns more, all the money is equally everyone's.
Once we had figured out how much we spend on things (WOW we dine out a lot!) and where our sources of conflict are, (You spent HOW MUCH? on a new computer!) we were able to get on board with the idea of a combined budget designed to meet the needs and some wants of our family.
Ways to get on board
- Have the hard money conversations immediately, letting them go leads to bad things.
- Look up statistics for divorces caused by money problems (You don't want a divorce do you?)
- Plan on doing something both of you enjoy after you talk.
- Discuss things you would both like to do and promise to plan for those things in the future
- You love each other, and this is the simplest way to get the best for each other.
- Remember, a budget is not a law it's a living document subject to change.
What are some other ways you use to get excited about budgeting?
Thursday, May 24, 2007
This is a question my wife and I were recently asked when we purchased a Nintendo Wii.
Before I get into the hows of our material gains, it's important to realize first that my wife and I don't make much money, but we do work full-time 35-40 hours a week. I will now outline our spending plan strategy for getting out of debt without losing your mind.
1. Know Yourself (Get on Board)
2. Know What You Spend
3. Know What You Want
4. Eliminate the 'Debt Factor'
5. Rewards and Punishments
6. Dealing with the unexpected
7. Learning to do without
8. Learning how to do yourself
These 8 topics are just the tip of the iceberg right now, I hope you find this blog helpful in the future. Check back often as I will update a lot on my days off and space it out over the work week.