Romancing The Coin

Eating well for your health and wealth

2009-07-21T12:12:00.000-07:00

I have been reading a lot about food additives recently and how most of the things we eat are of less nutritional values than the same product 25 years ago. This is due to the extent that chemicals, hormones, and genetically modified foods have been used.

I feel that by eating well (such as staying in the bottom of the food pyramid, whole foods, etc.) you can not only do wonderful things for your health but can also save money. When you look at the food pyramid, you will notice that the bottom of the pyramid (foods that you should eat more of) are grains, fruits, and vegetables. These foods are more affordable than the means and dairy at the top of the pyramid! By simply following the pyramid you can eat better and save money.

I am trying to eat more organic produce and would ideally eat at least half of my produce from organic farmers markets. However it is very difficult to do this where I live and it would be more expensive. I still think that if I buy whole grain pasta, brown rice, soy milk, and cheap produce like organic bananas from the local HEB, and occasionally go to farmers markets for other foods I will be eating well.

Monopoly

2009-07-15T07:34:00.000-07:00

Here is a quote which is a bit scary how true it is.

"If the bank runs out of money, it may issue as much money on its own as it may need by merely writing on any ordinary paper" - The rules of monopoly, Parker Bros, Inc.

For some videos on how the monetary system works.

Money as Debt

Fiat Empire

I like how when you leave money in a bank account the bank could literally create 10 times more money and loan it out at higher interest then they provide. And I mean I like it in a sarcastic way.

Choices

2009-07-13T12:53:00.000-07:00

I have just found out today that I will be receiving an $825 pay raise next year. I am deciding between putting this money in the Roth or to simply leave it in my savings account.

I haven't really planned on what to do with random bonuses on income. This bonus will turn out to be about $55 more a month, which is definitely not a lump sum, but something I feel like I should place somewhere automatically (so I never actually see it).

What are your thoughts? I am planning on making posts in the future on how to deal with windfalls and raises.

Stopping bad habits through habitual saving

2009-07-11T16:25:00.000-07:00

Are there things in your life where you know deep down inside you shouldnt be buying but you buy them anyway? I think that one way to stop this habit is to create an account that you put money in whenever you do not buy that item as an incentive to stop buying that particular item.

When I was about 5 years old I remember my dad smoking all the time. He told me that he used to smoke 2 packs a day! Besides the fact of not being a positive example for me, it was costing him a lot of money. My dad also was taking the train into New Rochelle to pick me up, then going back to NYC, only to do the same thing again to drop me off. What my dad did to stop smoking was to simply put the money he would have spent on cigarettes and placed it into an envelope. After about 6 months of doing this he saved enough money to buy a cheap used car that he used to pick me up whenever he came to see me. By the time he bought the car he did not feel dependent on smoking.

I have been thinking of this story for a while now, and how it relates to not only me but other peoples finances. I feel that most people have habits that do not represent their values in life and could be used in a more constructive manner. In the book, "Your money or your life", (a book I highly recommend as the first book people read for personal finance) the authors talk about how you should spend money that is aligned with your values. If you have a habit such as smoking, drinking, or gambling, I think that a good way to see the negatives of these habits is to save money in an account and see how much you are really spending.

My dad literally put money in an envelope and constantly went to the bank to get the right amount of money. Luckily in this technological age you do not have to do that. You can simply open an ING subaccount and name it for whatever your habit is. Then, whenever you feel like doing your habit, just make an electronic withdrawal from your checking account to this subaccount. Not only do you not have to put money in an envelope, but you will earn interest.

I feel that having some type of goal for this money will keep you in your plan. For instance you have a drinking habit and you put $15 in the account every time you want to drink but dont. The plan is to spend this money on a trip somewhere you want to go. With this plan you will be much more likely to keep on your plan.

As always, comments are encouraged!

Fiscal Fast Day 4

2009-07-09T10:36:00.000-07:00

The challenges of getting through the day without spending any money.

Good day. I went to Barnes and Nobles, saw a special someone, and read a bit of "your money or your life", which really is a good book. This years fast is a bit easier than last years.

An estimate of how much money I would have normally spent that day.

Housing = $13
Food = $3
Gas = $3
Total = $19

An observation (positive or negative) about my fiscal fasting experience that day.

It was another good day, as I feel that I am not completely dependent on money. The past few months I have been spending more than it seemed necessary,but I think after this fast I will be a little more responsible. I have made some subaccounts at ING, most notably for vacation and for car repairs, and I think that when I get out of debt I will add additional categories such as housing and car.

Fiscal Fast Day 3

2009-07-07T17:50:00.001-07:00

The challenges of getting through the day without spending any money.

Not a bad day today either. I mostly stayed at home, and I went to my open enrollment meeting for health benefits.

An estimate of how much money I would have normally spent that day.

Housing = $13
Food = $4
Gas = $1
Total = $18

An observation (positive or negative) about my fiscal fasting experience that day.

I made a pizza from scratch which was really fun and came out better than I expected. I read a lot of an economics book, and played some video games. The stock market went way down today, but it is what it is.

Fiscal Fast Day 2

2009-07-07T04:55:00.000-07:00

The challenges of getting through the day without spending any money.

It was a really easy day, mostly because I was treated to lunch from my principal, and dinner from a special someone. The only challenge I had was to bring lunch and dinner on the road because I wasnt planning on staying home during the day.

An estimate of how much money I would have normally spent that day.

Housing = $13
Food = $9 (if i paid for buffet, $2 is I dont count it)
Gas = $4
Total = $26

An observation (positive or negative) about my fiscal fasting experience that day.

It was an easy day considering I was treated to two meals. Money is not as important as the relationships and friendships you build.

Fiscal Fast Day 1

2009-07-05T19:47:00.000-07:00

The challenges of getting through the day without spending any money.

It was an easy day. I stayed home literally all day. Saw the wilmington final, and cooked a huge chicken casserole. I figured that the casserole cost about $6 to make and it will be about 5 meals. Really good deal and good for you.

An estimate of how much money I would have normally spent that day.

Housing = $13
Food = $3
Gas = $0
Total = $16

An observation (positive or negative) about my fiscal fasting experience that day.

It was good to start this fast after doing it last year. I thought a lot about money today and my goals for the future. I have come to realize the importance of an emergency fund, and I have also thought more about how to spend money on things I love, and not on things that I do not really care about.

Fiscally Responsible Independence Day Fiscal Fast Week

2009-07-05T05:49:00.000-07:00

This year I have decided to begin the fiscal fast the day after independence day. It just seems appropriate to do it now as a way to have stronger feelings about the dependence of money.

I encourage you to read about last year's fiscal fast by clicking on the label for it on the right side of the screen.

A few details...

Last night I filled up my gas tank at the nearest gas station to home.
I did go to the grocery store on Thursday last week and spend about $30. However, I did not plan to do the fast this week so it seems ok.
If there is a genuine emergency such as my car breaking down then I will break fast (no pun intended).
I will continue the fast until Friday.

I will be leaving a journal entry each day next week concerning the following...
The challenges of getting through the day without spending any money.
As estimate of how much money I would have normally spent that day.
An observation (positive or negative) about my fiscal fasting experience that day.

The main reason why I am doing this is to find ways to enjoy life without depending on money. Also, I want to find places where I could lower miscellaneous expenses and I think by fasting it will show me ways I have not thought of.

Please leave comments of your thoughts or encouragements.

Review of Quizzle.com

2009-06-27T07:13:00.001-07:00

By reading other financial blogs I have just completed my information on quizzle.com
This website gives you a fairly detailed financial picture after entering some basic information.

This website is great! You enter your address, your income and expenses, and questions regarding your credit history and the website provides you with your experian credit score, budget tips, and a financial score, ALL FOR FREE!

I highly recommend trying out this website. It took about 5 minutes to provide all the information. The free credit report and score was really helpful, and you could easily see how your budget holds up.

Balanced money formula

2009-06-15T20:41:00.000-07:00

Over the past few months I have not been as ridiculously analytical as I have been when it comes to my budget. I pretty much know that I will spend about $300 on food and $100 on gas each month. What I have been doing which I feel works well is to automatically put the amount of money I want to save immediately in my savings account, and then simply live on the rest.

This is a simple formula and I have been enjoying it. I also feel that I am putting more priorities in my spending this way, just like the book "your money or your life" states.

As for a proper money formula, I recommend Elizabeth Warren's balanced money formula. 50% of your income should go to needs, 30% to wants, and 20% to savings. Some expenses can be considered wants or needs (Do I really need to spend $300 on groceries? I could get by just fine on $200). Other expenses could be considered needs or savings (Is paying the minimum on your credit card all savings, all needs, or a bit of both). However, I feel that if someone can save 20% of the money they make that will give them plenty of options in the future.

Backpacking across the midwest?

2009-06-15T06:23:00.000-07:00

Im seriously considering taking a train to Dallas, Oklahoma City, Kansas City, St. Louis, and Chicago then flying back to Austin in early July. The train rides with all the stops to Chicago is about $200 using Amtrak and my AAA discount, and I could fly back to Austin using a southwest voucher I have. If I can find affordable rooms using hostels that should be about $25 a night. The whole trip would probably be about $500.

Any thoughts?

Fiscal Fast: Year 2

2009-06-11T04:08:00.001-07:00

I will be going on a road trip with Andrew to New Mexico and West Texas, and the week after I get back I will be going on a fiscal fast. For those of you who dont know what this entails, please click on the label fiscal fast on the right side of the screen. I will pretty much go one full week without spending any money. Right before the fast I will buy approximately $20 worth of groceries and fill my gas tank in my car. Unless it is a dire emergency I will refuse to spend money on anything.

Some random thoughts:
- I am already thinking of unique recipes I will make using ingredients that I already have at home.

- In hindsight my finances this time of year are much better then they were last June.

- I have some interesting thoughts on spending money on people I care about which will be explained in another post.

- I have been buying about 90% of my purchases via cash. The only times I will not use cash is when I am splitting the bill with someone and dont want to get change, or when the bill is like $9.03 or something. I refuse to carry change. It feels pretty good going to UFCU with about $8 in change every month anyways.

- I just paid off a $4000 credit card that I had waited on due to a significant other. When that fell through I felt really good paying off a credit card with a high balance without even flinching.

- My laptop is joining my mom in Florida. aka retirement. Im likely going to buy a macbook, but if I do I need to use it for at least 3 years for it to be financially worth it for me.

- My car is still going strong after hitting 160000 miles. After going 6 months without a car loan I dont see why I would ever get a car loan again (unless my car breaks down in a big way by next year, knock on metal)

- Long term, assuming lots of things most notably a lack of a significant other, I feel like once I build an emergency fund I might just want to invest fully in the Roth IRA then put more in a Roth 403B rather than save up for a house. Just a thought, and if a significant other comes around that changes everything. Thats another reason why a look at money as security in terms of having more options in life.

Ok, enough blabbering at 6 AM

Good basic investing course

2009-04-15T17:09:00.000-07:00

Here is a good website that teaches you the basics of investing, even small amounts.

http://www.extension.org/pages/Investing_for_Your_Future

10 Commandments to Live by in Your 20's

2009-03-19T08:45:00.000-07:00

Here is a good article from Kiplinger magazine about 10 commandments everyone in their 20's should follow.

http://www.kiplinger.com/columns/starting/archive/2009/st0107.htm

Its pretty basic advice, but I think that many people do not follow most of these.

Cost of Living Site

2009-03-14T08:43:00.000-07:00

Here is a cool financial calculator that shows you the different of your costs of living when you move from one city to another.

http://www.bankrate.com/brm/movecalc.asp

I like how it tells you the average costs for many different goods and services, and it tells you the equivalent income you need to make to maintain your standard of living when you move.

9 Methods to Improving your finances in 2009!

2009-01-05T17:35:00.000-08:00

2008 was a miserable year for money. The stock market tumbled, unemployment soared, the housing market continued to crumble, and retirement savings shriveled away. Whew! Here’s hoping 2009 will be better!

But hope can only do so much. Hope cannot bring change. Action brings change.

If one of your goals for 2009 is to take control of your money (instead of letting it keep control of you), this crash course in financial basics can help guide the way. Here are nine simple but effective actions you can take to build a better financial future.

Method #1: Track every penny you spend
The authors of Your Money or Your Life admonish readers to “keep track of every cent that comes into or goes out of your life.”

[This is] the best way to become conscious of how money actually comes and goes in your life as opposed to how you think it comes and goes…This is the step that somehow makes the biggest impact.

It doesn’t matter how you track your spending — the most important thing is to do it.

You can use a cash notebook.
You can use an online tool like Wesabe, Mint, or Quicken Online.
You can use a piece of software like Quicken or Microsoft Money.

Whichever method you choose, stick with it. Make it a habit. Don’t fudge the numbers. Record your transactions as soon as possible. Most of all, don’t judge yourself. Tracking your spending is an exercise in data collection; it’s not the appropriate time to change your habits.

Method #2: Develop a budget
After you’ve tracked your spending for a few weeks (or months), use the data you’ve collected to develop a budget. According to The Millionaire Next Door, budgeting is one thing that sets the wealthy apart from the rest of us — 55% of millionaires keep a budget.

Many people — myself included — fail to budget for a variety of reasons: it’s boring, we don’t think we need it, or we don’t know how. But this simple act can provide a roadmap for your money.

There are a variety of budgeting methods you can choose, from Andrew Tobias’ three-step budget to the 60% budget. My recent favorite (and a favorite of GRS readers) is Elizabeth Warren’s balanced money formula: 50% to Needs, 20% to Savings, and everything else to Wants. Simple but effective.

Tip! Spend less than you earn. This is the fundamental money skill. It’s common sense, yet many people never learn to do it. Only by spending less than you earn can you hope to build wealth. This is easier to do if you track your spending and develop a budget, but those steps aren’t completely necessary. Even if you do nothing else in this list, spending less than you earn can put you ahead of your peers.

Method #3: Optimize your accounts
Over the last couple of years, I’ve finally begun to optimize my accounts. If you haven’t already done so, consider the following:

Open an online high-yield savings account. Even in this era of low interest rates, it’s still possible to earn about 3% on your savings. Internet favorite ING Direct currently offers a 2.50% APY and FNBO Direct offers a 2.80% APY.

Method #4: Start an Emergency Fund!
For years I lived paycheck-to-paycheck. I spent everything I earned. This worked well until something went wrong. Suddenly I’d find myself without money to pay for a car repair, or facing an expensive doctor’s bill.

After you’ve optimized your accounts, make it a priority to save for emergencies. In The Total Money Makeover, Dave Ramsey explains why he believes an emergency fund should come before anything else:

Since I hate debt so much, people often ask why we don’t start with the debt. I used to do that when I first started teaching and counseling, but I discovered that people would stop their whole Total Money Makeover because of an emergency — they felt guilty that they had to stop debt-reducing to survive.

After you’ve saved $1000, then you can attack your debt. Open an online high-yield savings account and add $20 or $50 to your account ever time you get paid.

Method #5: Get out of debt
Are you struggling under a heavy debt load from credit cards or student loans? Make it a priority to unload some of this this burden in 2009.

If you have the mental discipline, you’ll save money by paying down your high-interest debt first. But if you’ve tried that method before and failed, consider using a debt snowball. Pay your debts starting with the smallest balance first. Here’s how:

Order your debts from lowest balance to highest balance.
Designate a certain amount of money to pay toward debts each month.
Pay the minimum payment on all debts except the one with the lowest balance.
Throw every other penny at the debt with the lowest balance.
When that debt is gone, do not alter the monthly amount used to pay debts, but throw all you can at the debt with the next-lowest balance.
The debt snowball can give you awesome psychological payoffs, keeping you motivated to stay in the game. It’s not mathematically ideal, but it worked for me (and for many others besides). However you choose to get out of debt, stick with it. Don’t give up.

Tip! The perfect is the enemy of the good. When you spend so much time looking for the “best” choice that you never actually do anything, you’re sabotaging yourself. And an ideal solution that you don’t follow through with is worse than a good solution that you’ll actually use. Choose a good option and act.

Method #6: Fund your retirement
The current economy gives a lot of people the jitters. But if history is any indication, now is a great time to be buying stocks for your retirement. Take advantage of any employer-matched opportunities, such as a 401(k). Also consider starting a Roth IRA.

If you’re young, you probably don’t think you need to start a retirement account. You’re wrong. No matter how old you are, now is the time to begin saving for retirement. The extraordinary power of compound interest favors the young — and in a big way! In The Automatic Millionaire, David Bach writes:

The single biggest investment mistake you can make [is] not using your [retirement] plan and not maxing it out.

Method #7: Automate your finances
I’m learning the value of automating routine transactions. When you make things automatic, you remove the human element, making it more difficult for you to mess things up.

The classic example is overdraft protection. By tying your checking account to your savings account, you have a safety net if you bounce a check. But there are other ways this can work for you. For example, I’ve set up automatic payments with my auto insurance company. I also make automatic deposits to my online savings account.

One terrific advantage to automation: when pay your bills and do your saving and investing automatically, it’s easy to tell how much you have left over to spend at the end of each month!

Tip! Do what works for you. There are few hard-and-fast rules in the world of personal finance. I can suggest methods that have worked for me (and for others), but only you can determine if these methods are appropriate for your own circumstances.

Method #8: Earn extra money
You can meet a lot of your financial goals by reducing your spending and using the right tools. But nothing supercharges your progress like a boost in income. How can you earn extra money?

- Ask for a raise.
- Switch employers. Not every employer is able or willing to offer raises, even when they’re merited. If you’re in a position where a raise isn’t possible, consider finding a new employer.
- Take a second job. Many people find that the best way to get out of a financial hole is to temporarily take a second job. Nobody wants to work more than 40 hours per week, but sometimes that’s what is needed to get out of debt or to save for a house. Just remind yourself that you’re doing this for a short time.
- Use your hobbies. Yes, it’s possible to have money-making hobbies. You’re not going to get rich playing World of Warcraft, but many people use productive hobbies to earn a little extra income.
- Volunteer for medical research.
- Sell things.
- Another effective way to increase your income is to pursue entrepreneurship. While working on earning extra income, I have been tutoring students. It didn’t generate a lot of income, but it did provide $2,000 a year that I wouldn’t have had otherwise!

Method #9: Educate yourself
Knowledge is power. Personal finance doesn’t have to be a mystery.

Visit your public library. Borrow money books and self-development manuals. Here are four of my favorites:

If you’re in debt and can’t seem to find a way out: How to Get Out of Debt and Live Prosperously.
If you’d like to know more about investing: The Random Walk Guide to Investing
If things are tight and you need to find creative ways to make ends meet: The Complete Tightwad Gazette
If you want a motivational manual to prompt you to pursue your goals: The Magic of Thinking Big

You don’t have to agree with everything in a book to get something out of it. I read a lot of personal finance books — some are good, but many are not. Even the worst books usually have one or two things I can pull from them. Learn how to read a personal finance book so that you can pick and choose those pieces appropriate for your life.

Final thoughts
Taking control of your finances can be intimidating — there’s so much to do! — but it doesn’t have to be that way. One effective solution is to take a vacation day from work: designate one specific date as your personal “Money Day”. Use this day to finally set up Quicken on your computer, to open a retirement account, and to call around for a better deal on your insurance.

The good news is that you can get out of debt. You can save for retirement. Best wishes for a prosperous new year!

Personal Finance Thoughts: October 17

2008-10-17T19:20:00.000-07:00

It seems like everyone is talking about and worried about the current economical crisis in America, so I would like to give my thoughts on the matter.

I think that people need to take care of their own personal finances above worrying about the economy or what the next president will do to make your life better. And what I mean by this is to be more concerned about your "minieconomy" of your personal finances over the worlds. Paying off debt, having an emergency fund, and having job security are obviously important things to worry about. What I am concerned about is how many people are simply worried about the stock market over these other factors that are much more important in terms of security.

I think that since the economy seems so bad it will give people a reason to worry about budgeting their finances, which I feel is probably the most important financial goal. Tracking your expenses allows many to spend less money, have short term goals, and have greater peace of mind.If this current crisis brings people to pay off debt, and not spend more than they make in the long term America will be better off.

Personal Finance Thoughts: October 5

2008-10-04T22:27:00.001-07:00

My good friend Michael Queller wrote me something which Ive put a bit of thought into. Let me preface this by stating that I dont think he is necessarily wrong as long as he is happy with his situation. He wrote, "I've learned its far more important to focus on making money than spending money. Life is better when you're making more and spending more vs. making less and spending less."

It seems that most people earn money just to spend money to get what they want (or at least what they think they want). The question is, how much is enough? Obviously you
wont work every second of your life making money because then you wont have time to enjoy it. Id rather have 3 months off during the summer than work and make a few thousand. The benefit you receive after a certain point of buying enough things wont be greater than having the time off to enjoy life. For instance I have been tutoring 2 students making $40 an hour, however it takes me about an hour commuting. Id
much rather have 2 extra hours to myself than make $40 and get frustrated with traffic. Also, I think that a lot of people spend money simply to hide other inadequate things about their life, or could replace their time and money with other more worthwhile purposes such as spending quality time with their loved ones (that doesnt need to cost anything to do). So in terms of saying life is better when
your making more and spending more vs making less and spending less I dont think is really true. I think that once you hit a comfortable point working more to spend more doesnt seem to work out.

But to focus on making money verses spending money does sound good. This past year I have been saving 20% of my paycheck, spending about 30% for wants, and 50% for needs. I dont need to count every penny in order to do this. Its also pretty simple. If I focused more on making money I can get my reasonable dreams faster, but I also like where I stand right now too.

Excellent Budgeting spreadsheet

2008-09-14T16:31:00.000-07:00

This is a really good spreadsheet, it takes less than 10 minutes to setup and it tracks where your money goes very easily.

https://www.pearbudget.com/spreadsheet

Personal finance thoughts: September 1

2008-09-01T15:04:00.000-07:00

So in May I spent less money then any month I could think so in the past 5 years. Without counting debt payments, I lived for $1,330. I ended up paying off a credit card for nearly $2000, and will put this payment into a different card with the highest interest rate.

A few of the ways I was able to do this are as follows...
- I created a budget and stuck to it. This is the most important step in order to have financial freedom. I ended up spending $80 less in gas, $40 less in food, and $30 less in miscellaneous.
- I setup a clear goal of saving at least $1000 this month so I could pay off a credit card. Knowing that I could stop paying interest on one card and placing this into additional debt payments was reason enough to follow this plan.
- I prioritized my expenses in terms of my life goals. In the excellent book, http://www.yourmoneyoryourlife.org, the authors talk about figuring out how much money you make per hour and then relate expenses to how much time you work to get enough money to do so. I find that this is helping me control random purchases that I will not see much use for.

I have continued to set realistic yet difficult goals for the rest of the year and I will save at least $800 a month until 2009.

Doing without in your 20's

2008-09-01T15:03:00.000-07:00

Here is a good article on deciding whether to be frugal or splurge away in your 20's

http://blogs.moneycentral.msn.com/smartspending/archive/2008/08/27/doing-without-in-your-20s-by-choice.aspx

Personal Finance Thoughts: August 16

2008-08-16T06:42:00.001-07:00

So I ended up paying off a credit card that was $1,800 this month. This frees up $49 a month which will go into my next credit card. I setup my payments my automatically taking out $500 from my paycheck into my money market account and leaving it there until I have $1,500, then paying off a credit card with the lowest balance, while keeping my other cards at the minimum payment. I decided to do it this way because then I sort of have an additional emergency fund for 3 months besides my regular emergency fund of $1,200. If I put the $500 immediately into the credit card I would save about $3 in interest, but I like having that extra safety just in case something big happens.

I recently bought a food processor for $30, and I love it! So far I have diced onions and garlic for a stir fry, ground beef, and made pizza dough from scratch. It is well worth the investment. I also went back to my classroom this week and noticed some of the random food items I had sitting there. It gave me quite a few good cooking ideas. Not counting eating out, I will spend about $200 this month on food (My plan is to average one night out eating a week; that will give me new cooking ideas and time with friends).

I am on pace to spend $1300 this month on living!

I.O.U.S.A.

2008-08-10T19:47:00.000-07:00

This looks like a must see.

http://www.apple.com/trailers/independent/iousa/

Spending More and Enjoying it less

2008-08-08T13:58:00.001-07:00

MSN money has a good article on how repeat purchases give less satisfaction as the first time.

http://articles.moneycentral.msn.com/Investing/StockInvestingTrading/SpendingMoreAndEnjoyingLess.aspx

Fiscal Fast every month!

2008-08-05T16:47:00.000-07:00

I am going to be doing 7 days of fiscal fasting every month. I will not do them all consecutively but randomly throughout the month.

For readers that do not know what a fiscal fast is, it is when you go a certain amount of time where you do not use any money for anything. I have already completed a fiscal fast in July, and I will be fasting for 7 days out of every month until I have no more debt.

I think that this is easily possible to accomplish in my situation. At school I am too far to go somewhere for lunch and Ive been cooking a lot more thanks to the newfound beauty of leftovers. This is all I have to do for 2 days during each week and its equal to a fiscal fast each month!

I challenge you to go 7 days out of the month where you do not spend any money. Its really not as hard as it seems and you will clearly see ways you can cut expenses and budget better.

Envelope Method to Budgeting

2008-07-30T08:11:00.000-07:00

Many of us wonder where our money goes in the end of each paycheck, and may of us find more month in the end of the money. One of the ways that I recommend to handle your budgeting is to make a zero based budget. In this budget you first start with your income for the month and then allocate reasonable amounts of money to each major expense.

Here is an example of a zero based budget. The first column is amount of money allocated to each expense, and the second column I subtracted the next expense (for example I started with 3229 in income, subtracted 150 for saving and ended with 3029

Income	3229	3229
Saving (roth)	150	3079
Housing	400	2679
Car Payment	170	2509
Car Insurance	83	2426
Debt	670	1756
Recreation	250	1506
Gas	300	1206
Food	200	1006
Extra Debt	1006	0

An important thing to notice is that I ended with 0. the $1006 I had left over went into additional debt payments, but in this case you should put your most important priority in the last column.

Right now I follow this method to budgeting and I have enough control to make sure I dont go over my limits. However, many of us always go above and then wonder why they have no money left over. I recommend following an envelope method to budgeting in this case. From the example above, you pay your fixed expenses (housing, car, debt) and you take out money for every other expense. In the example above you make 3 envelopes for recreation, gas, and food, and then write down the amount you are starting with. You put the amount of money you wrote in the envelope and you ONLY USE CASH for these expenses.

This is a good way to track where your money is going and should be used for people who are serious about tracking expenses.

Good multimedia Article from NY Times on Debt

2008-07-23T19:27:00.001-07:00

http://www.nytimes.com/interactive/2008/07/20/business/20debt-trap.html?ex=1217304000&en=fa14ac1edfcc28a9&ei=5070&emc=eta3

What would you like me to write about?

2008-07-21T06:01:00.000-07:00

Id like to make an open forum on anything that is concerning you and your finances. I try to give sensible advice on your money, and I would like to know what things are concerning you.

Are you concerned about the current economy?

Are you having trouble reaching your financial goals?

Are you looking to change jobs/careers?

Are you having trouble budgeting?

Please leave comments below. You can keep it anonymous if you like and I will answer it the best I can. Remember, I was a financial planner and I feel that I have learned a lot about money by the book and on the street.

Fiscal Fast: Day 5

2008-07-19T17:34:00.000-07:00

The challenges of getting through the day without spending any money.

Not a tough day. I waited until 12:10 to pick up some random food on Saturday just for the sake of it.

As estimate of how much money I would have normally spent that day.

Shelter = $13
Food= $3
Gas = $4
Total = $20

An observation (positive or negative) about my fiscal fasting experience that day.

It was a very positive experience going through the fast. I will start to eat healthier and not go out to eat as much. I am going to do a week long fast once a week every year, just to remember my lack of dependence for money. I will be able to save $2000 this month, and I could reasonably save $1500 a month in September. It sure feels good not being dependent on a ton of money.

Fiscal Fast: Day 4

2008-07-17T17:04:00.000-07:00

The challenges of getting through the day without spending any money.

Again, it was not a tough day at all. I became a little bored randomly in the afternoon, but no big deal.

As estimate of how much money I would have normally spent that day.

Shelter = $13
Food= $3
Gas = $3
Total = $19

An observation (positive or negative) about my fiscal fasting experience that day.

I am starting to realize that it is possible to live a pretty good life with very little money. I learned some really interesting recipes that I want to cook next week, and I am definitely eating a lot healthier during the fast than I would otherwise. Eating healthy is also cheaper than eating with a high grocery bill. The bottom of the food pyramid is grains, fruits, and vegetables, all of which you could buy for under $1 a pound, while meat and dairy is quite a bit more than that. Eating cheaper naturally seems healthier. I am lowering my budget for food by $50 a month, and I will end up eating out less due to cost and health. Today was another day where my Roth IRA made as much money as it cost to live, totally rocks!

Fiscal Fast: Day 3

2008-07-15T16:59:00.000-07:00

The challenges of getting through the day without spending any money.

There really weren't any challenges that I could think of. It was a very laid back day. If I had to bring up one challenge, it might be that I have about 2 meals of chicken left.

As estimate of how much money I would have normally spent that day.

Shelter= $13
Food = $4
Gas = $5
Total = $22

An observation (positive or negative) about my fiscal fasting experience that day.

Today was a really easy day. I didnt really feel like I had to spend money on anything today. I read a lot: mostly Diary of Anne Frank and Adrift: 76 Days Lost at Sea (great book!) I had a good day today; it looks like I dont need to spend lots of money in order to enjoy life. In other good news, I made enough money in my Roth IRA to cover my costs of living today! That is an amazing feeling, it will be even better when this happens when Im older.

Fiscal Fast: Day 2

2008-07-15T07:08:00.000-07:00

The challenges of getting through the day without spending any money.

The toughest challenge I faced today was not eating after I went to the gym. I went about 4 hours after the gym without eating, pretty much lost any gained muscle there. I also went to the library and looked about 5 minutes for a parking spot that didn''t have a meter, but I didn't have to walk much either so it wasn't that big of a deal.

As estimate of how much money I would have normally spent that day.

Shelter= $13
Food = $6
Gas = $6 (went to the simonizers and played frisbee golf)
Total = $25

An observation (positive or negative) about my fiscal fasting experience that day.

Today was definitely tougher than yesterday but I still got by fine besides my hungriness for an hour or so. There was definitely more positive than negative though; I found a tutoring client that I will tutor for 4.5 hours a week (thats about $500 a month extra!) I also went to the gym and went on the bike and traveled the same distance as my home to school just to see if I could do it. It took 28 minutes, but it might be pretty different in real life due to hills and occasional traffic. I think I am going to get a bike and occasionally drive it to school (when I don't tutor afterwards). If its reasonable doing this, then I wouldn't ever get freaked out if my car doesn't work! I also just noticed that the Dark Night starts on Friday. It would be nice if I could go to a matinee on Friday and it wouldn't be rediculously crowded, but Ill just wait until next week to go.

Fiscal Fast: Day 1

2008-07-14T12:54:00.000-07:00

This is my entry for day one of my fiscal fast. Each day I will write about the following topics highlighted in blue

The challenges of getting through the day without spending any money.

The toughest challenge was right at the beginning of the day when I drove back home from the Simonizer. I was really tired and I had to drive 30 miles back home, and I really wanted to stop and get a breakfast taco and coffee. I still made it back home, ate a good breakfast of bread, eggs and a peach, and got by pretty easily after I took a nap.

As estimate of how much money I would have normally spent that day.

Shelter = $13
Food = $4
Gas = $5
Total = $22

An observation (positive or negative) about my fiscal fasting experience that day.

In general it was a very positive day. I made a really good pasta sauce that kept me pleasantly occupied, and I read quite a bit of the Diary of Anne Frank. I feel that the fast will keep my mind thinking of creative ways to be entertained. Since it was the middle of the month I also projected out how much I will spend in the rest of the month. It looks like every category will be significantly lower than normal. Including normal debt payments but not including by Roth IRA and savings, I will spend about $2,000 this month. Really not bad.

Figuring out how much you really get paid per hour

2008-07-12T18:06:00.000-07:00

Everyone thats gets paid by the hour is not really earning the income that they think they are. Even those that get a yearly salary make quite a bit less than they think they do. One of the most important questions you should ask yourself when you are working is, if you had an unlimited income, what would you be doing with your time?

Fiscal Fast

2008-07-12T10:50:00.000-07:00

I will be going on a fiscal fast from Monday July14 until Friday July 18th. What this means is that between Monday and Friday I will not spend money on ANYTHING. I do not have any other bills for the rest of the month, so it will cost me nothing to live those 5 days.

A few details...

On Sunday night I will fill up my gas tank at the nearest gas station to home.
I will spend no more than $20 on groceries the Friday before the fast.
If there is a genuine emergency such as my car breaking down then I will break fast (no pun intended)

I will be leaving a journal entry each day next week concerning the following..
The challenges of getting through the day without spending any money.
As estimate of how much money I would have normally spent that day.
An observation (positive or negative) about my fiscal fasting experience that day.

The main reason why I am doing this is to find ways to enjoy life without depending on money. Also, I want to find places where I could lower miscellaneous expenses and I think by fasting it will show me ways I have not thought of.

Please leave comments of your thoughts or encouragements.

Financial Tips From Consumer Reports

2008-07-02T13:09:00.000-07:00

The August 2008 issue of Consumer Reports, a really helpful magazine that my dad has read all of his life, offers two articles that are very useful. The first offers tips for cutting expenses. The second gives a brief overview of budgeting.

The first article offers 6 ways for an average American to save money. These include..

Find cheaper auto insurance. By shopping around, the average person can save $65 per month.
Optimize your life insurance. Premiums have dropped in the past ten years, the article notes. It may be worth replacing an existing policy. Also, by adopting a healthier lifestyle, you can cut costs. Average savings? $110.
Shop smart for food. CR cites U.S. Department of Agriculture data indicating the average family of four can drop its grocery bill by nearly $200 per month though smarter shopping.
Stop paying bank fees. The average U.S. household pays more than $25 per month in bank fees. There’s no reason to do so.
Call up cell phone savings. According to the U.S. Bureau of Labor Statistics, the average family spends $90 on phone-related expenses. Consumer Reports suggests checking to be sure you’re not paying for too many minutes.
Pay off your credit card. If you can get out of debt, you’ll not only save on finance charges, but you’ll also free up the cash that was going to pay the principal. Estimated monthly savings: $65.

The second article includes information on how to create a spending plan. A summary of the information in the article is listed below.

Set goals. I believe that the road to wealth is paved with goals. Consumer Reports believes that long-term goals help you achieve big things, while short-term goals keep you motivated.
Track expenses. It doesn’t matter how you do it, but track your spending. You can use a notebook, computer software, or even online tools.
Plan for surprises. If you haven’t already, start an emergency fund. Most experts advise saving three to six months of living expenses, but CR suggests a “personal escrow” approach instead.
Set priorities. Know which bills get paid first. For most people, this means the big things like food and home. (If you pay yourself first, it may be your retirement.) Whatever’s left after your expenses is your discretionary money.

Finally, I noticed some really useful mobile banking at Wamu, my checking account. I could simply text a number and they will tell me account balances, nearest locations, and nearest free ATM's. I also set it up where they text me when I get my work salary each month and when my account goes under $500. This is getting pretty automatic. :)

My Expenses for First half of the Year

2008-06-28T20:49:00.000-07:00

Well the midway point of the year is creeping up and I wanted to check to see how much I am spending, and how much i can typically live on for a whole year. All of the numbers stated were what I have spent so far multiplied by 2. (I dont see many expenses really changing too much, besides rent going down since I moved and miscellaneous gifts and travel for Christmas). I did not include internet and electricity because it is included in my rent. Gas is tough to say, I factored a little higher due to higher prices.

Rent = $7,090
Car Insurance = $960
Car Loan = $2,040
Cell Phone = $840
Food = $3,850
Gas = $4,026
Miscellaneous = $6,876

Total = $25,682

I did not include my credit card payments and extra debt paid off which are still expenses and costs of living. However, since I have not used a credit card once in 2008 I simply wanted to see how much it costs to live on my current (and not past) lifestyle.

Some things of note:
- My car is paid off however I extracted out the payments for the rest of the year, obviously I will live on $170/month less.
- My miscellaneous category is too broad, I should make other categories such as clothes, gifts, and entertainment. It is also too high for my liking. It is $573 a month right now, even just lowering that $100 a month will be good for my financial outlook. I think it should go down because Ill probably not have to go out on dates nearly as much. One right women is better than many not so right ones.
- Gas costs more than food! And if I can tutor 6-8 clients a week Ill be spending even more there. Gas is wierd, the more I work the more I spend there with no way around it.. Unless I were like the Simons with their super gas saving cars!
- The rent category is quite a bit more then it will be, since I am living for $400 a month. Before I was living for $700 a month, and I had to pay a reletting fee and double rent for most of January.

So I am essentially living for $2,100 a month. My teacher pay will be about $2,700 a month, which gives $600 a month into credit cards. I am planning on building my tutoring business, which will cost a few hundred dollars but should pay back about $1000 a month. I also might deliver pizzas one day a week if the tutoring doesnt work out as planned. I will put $150/month into my Roth IRA, and the rest goes into debt.

P.S. I have a blank worksheet you can use to write down your expenses and budget. Email lancekaminsky@gmail.com for a free copy (its copywrited by me... just kidding, I didnt copywrite anything.)

P.P.S. There’s nothing inherently wrong with purchasing things that bring you joy. But problems come when you finance these purchases with debt. If you’re meeting your other financial goals and have money left over, it’s good to indulge your interests and passions. I need to remember this.

My Grandfather

2008-06-22T14:19:00.000-07:00

This is a lesson on finances from my grandfather.

Lessons from my mom on finances

2008-06-17T10:55:00.001-07:00

Well I just spent a good hour talking to my mom about how she dealt with finances and I guess I have learned quite a bit from her. (Although it seems like I already know what she did).

She worked at Con Ed, an electric company for 25 years, which she receives a pension, social security, and has a bit saved in a 401K and an IRA. She has her house paid off and makes more than enough to live on her pension and social security (when she told me how she doesnt touch her 401K or IRA and said that she will need to at 70 I know she is in REALLY good shape).

So I asked her what she did to get to this situation, and it was pretty easy. She would save up to the match on her 401K, the rest she would simply save in her checking account until it got to a certain amount, and she would buy CD's with that money. Thats it! I asked her what she invested in her 401K and she simply said vanguard. I wanted to know where in vanguard but she did not even know the answer! This is definitely keeping it automatic.

My mom turned out to be fairly conservative in her retirement accounts and super conservative in other accounts, and it worked out extremely well for her. Then again she does get a pension and social security which is extermely hard to do these days (If I teach for 30 years I would get 2/3's of my highest salary there, by then I might need a decent retirement account as well.)

The biggest thing I have learned today was that as long as you stay the course and automatically save/invest each month, its not too hard to have a secure lifestyle.

As for frugality, I could write a whole book on what my mom and step dad do. Whenever my step dad doesnt get what he wants when he buys something he will complain to the manager, the manager will usually ask my step dad, "what can I do to make up for this?" and my step dad will simply say, "I dont know, what can you do!" Simple yet extremely effective.

P.S. I have some videos of the house and the community, I will put them up when I get back to Austin in July

Personal Finance Thoughts: June 10

2008-06-10T20:45:00.000-07:00

So I have been doing some thoughts on investing or paying down debt and I think I will focus more on the debt part. I have a reasonable emergency fund now and I will be getting over $600/month more in September than I had in May, so I will not be as hard pressed to think I need a bigger emergency fund.

I would still like to max out my Roth but I feel that I will be comfortable putting in a modest amount of $150/month. Assuming reasonable expenses (like me not going out on dates all the time), I should have about $600/month left when school starts and I tutor. With the extra $600/month Id rather put this into debt over saving just to get out of debt quicker.

In other news Im going to Florida on Sunday and New York the following week. Its going to feel pretty good not having to fill up my car with gas for over a month! I just need to limit eating out while visiting family and friends.

Really good video

2008-06-09T21:07:00.000-07:00

This video is a good history on consumption. You can watch the full video here.

http://www.storyofstuff.com/

Addition: After watching this video 3 times, I feel like saving more money.

Personal Finance Thoughts: May 27, 2008

2008-05-27T04:43:00.001-07:00

Gosh why am I getting worried about this???

I will be done with teaching at the end of the week, and I have been a little concerned that with all of the extra free time I will have that I will start spending more money (going out to eat, hobbies, etc). I was considering not investing into my Roth for the summer just to have my checking account seem on a safe level.

But I know that this would be a bad long term idea... Anything I invest now will double approximately every 8 years (at 9% interest). Also, money I put into a Roth can be taken out at any time with no penalties, so it is almost like a second emergency fund if anything.

I know I should just stay the course and max out the Roth and put the rest into debt payments, I am just wondering why this new plan came up in my head. Maybe I will work a little in the summer (subbing for summer school teachers pays well).

Raises, what to do with them?

2008-05-20T17:55:00.001-07:00

This is more of a personal posting but Id just like some thoughts.

So I found out today that our school district is getting a $1000 pay raise next year. I will also get a $1000 bonus in December.

I am trying to figure out how much more per month I will get and I think that since I am in a 25% tax bracket I will get about $700 from each. Per month the raise and bonus comes out to about $120 more a month.

Since I am done with my certification and I will be getting paid on a 12 month schedule starting in September (I was paid in a 13 month schedule last year), including everything I will make about $700 more a month than I am now. I also will have my car paid off in 2 months which is an extra $870. An extra $870 a month when Im already putting $500 into debt and maxed out my Roth is balling (Save that for retirement and in 40 years and 8% interest is $2.9 million)

Crazy budgeting me, I will still max out my Roth and put the rest into debt. (I was seriously considering putting $2,000 into a 403b with no tax difference, but debt is more important right now). I just need to stop eating chinese buffet...

Good article from Kiplingers

2008-05-14T05:02:00.000-07:00

Here is a really good article on how to become a millionaire if you are 30. If you are younger than 30 it would be even more than a million.

If you're 30 years old, you need to set aside $448 per month for next 35 years to become a millionaire -- if you earn a reasonable 8% annualized return in a retirement account. Don’t have $448 to spare -- or even $248? Maybe you do and don't realize it. Let's take a look at how you can come up with the cash.

Save $219 Per Month on Taxes

Here’s How: The average refund for the 2008 filing season so far is about $2,500. If you received an average refund and you are in the 25% federal tax bracket, you could be entitled to three extra exemptions worth $3,500 each. That would boost your take-home pay by $219 a month. A couple of reasons you might be eligible for more exemptions: becoming a new parent or buying a house.

More from Kiplinger.com:

• Save More Money on Transportation

• Easy Ways to Lower Your Food Bill

• Simple Tips to Save on Entertainment

Save $100 Per Month on Food

Here’s How: Bring your lunch and snacks to work. Considering that the average meal at McDonald’s costs $5 and Dunkin’ Donuts charges $2 for a large cup of coffee, the brown-bag windfall can be substantial.

Save $80 Per Month on Entertainment

Here’s How: We're talking about one fewer dinner-and-a-movie night every month. That assumes you and your significant other pay the average $33 per person for a restaurant meal (according to a recent Zagat survey) and that you spend $7 per ticket, the average price at the movies (according to the Motion Picture Association of America).

Save $28 Per Month on Health Care

Here’s How: The typical family spends $1,321 on out-of-pocket health expenses each year, says the U.S. Department of Health and Human Services. You can pay those costs with a flexible spending account, which lets you set aside pretax dollars.

Save $10 Per Month on Auto Insurance

Here’s How: The average consumer pays $829 annually for car insurance, according to the National Association of Insurance Commissioners. Raising your deductible from $250 to $1,000 can save you 15% or more.

More from Yahoo! Finance:

• Credit Card Debt: The Next Possible Implosion

• Shift Your Savings Strategy for Inflation

• Stock Up on Food for Rich Returns
Visit the Banking & Budgeting Center

Save $8 Per Month on a Well Maintained Car

Here’s How: Keep your car’s engine tuned and tires inflated to the proper air pressure. Those minor improvements can save you up to $100 on gas each year.

Save $6 Per Month on Generic Non-Prescription Medicines

Here’s How: The average American spends $185 annually on over-the-counter medications. Generics cost up to 40% less than their brand-name counterparts and work just as well.

$451 Saved in Total!

Invest the found money every month in a retirement account that earns an average of 8% return over the next 35 years, and you'll have $1 million. That wasn't too hard, right?
Copyrighted, Kiplinger Washington Editors, Inc.

Cool chart

2008-05-11T21:09:00.000-07:00

The New York Times recently posted a cool chart showing the average spending costs for Americans. You can even look at individual items in a category.

http://www.nytimes.com/interactive/2008/05/03/business/20080403_SPENDING_GRAPHIC.html

Budgeting for my trip

2008-05-09T19:04:00.000-07:00

Ill be going to Florida and New York this summer to visit my friends and family. I will continue to record my expenses, and I will be showing both fun and informative video blogs while Im there.

Im wondering how much more I will spend during these 3 weeks, it might not be as bad as I think, but I did spend almost $400 on flights.

Im on a Low Budget

2008-05-06T16:44:00.001-07:00

...and its a pretty good solo in the beginning.

Low budget sure keeps me on my toes
I count every penny and I watch where it goes
Were all on our uppers were all going skint
I used to smoke cigars but now I suck polo mints

Saving Money grocery Shopping

2008-04-30T17:11:00.001-07:00

I think I am going to make a video blog concerning how to save money grocery shopping when I get my video camera back. You can save quite a bit from generic brands, and Ill show you how.

New Budgeting Method

2008-04-28T18:57:00.001-07:00

Im going to try out this new method from Dave Ramsey. For budgeting, take all of your income, and write down realistic numbers for your expenses. I included categories for savings, debt repayments, and blow it money. I then made a separate column which subtracts each number from the income. I made sure that after all of my expenses it adds up to 0. This makes each dollar I make accounted for.

If one of the expense categories is getting close to exceeding the allocated monthly budget, I am still not sure what I will do. I am thinking of significantly lowering this if possible or lowering in another category.

I have an excel sheet setup. If anyone would like it let me know!

Personal Finance Thoughts; April 22

2008-04-22T19:25:00.000-07:00

I have just went into a self directed think tank and figured out what I could do if I lived with only the basic necessities of life and saved the rest. I could potentially save $2000 a month starting in September when I get a pay raise! If I did that for 2 years thats an easy down payment on a house,
and I could probably save about $1000 a month when a house payment.

Thats exactly what one of my students would say, "Periodic Table: atomic numbers 56, 57."

P.S. Free random food for lunch is good for my budget.

Budgeting: Make it Fun!

2008-04-22T19:14:00.000-07:00

For people who either have credit card debt or do not have an emergency fund (which is pretty much every 20 something), I think it is NECESSARY to live on a budget. Now, what you are probably thinking is that when you hear the word budget you probably cringe, but it does not have to be that way.

I think it is important to keep your budget simple and fun. For the next month, write down EVERY expense you have (including any savings or automatic savings plans). I would recommend putting your fixed expenses down in the beginning of the month, then simply write down anytime you buy food, eat, or miscellaneous expenses. On my cell phone whenever I buy anything, I simply write down the cost rounded to the nearest dollar than F for food, G for gas, and M for misc. I then add all of these expenses each week.

You can also use your credit card for all of your expenses. Whats good about this is you will get a statement for everything you buy, but what could be troubling is if you cannot pay for everything you bought at the end of the month.

I have made an excel spreadsheet when has categories for fixed and living expenses, and automatically updates so you know exactly how much you spend each month. Leave a comment or email me at lancekaminsky@gmail.com and Ill send you a blank budget for free.

Once you see where you are spending your money you can set realistic goals for how much you can spend on variable expenses like food.

Investing in Index Funds: Keep Expenses Low!

2008-04-15T18:49:00.000-07:00

I feel that most investors can end up doing just fine with index funds. Index funds track a benchmark of stocks, and since they simply track the benchmark they are not actively managed.
Many studies have shown that most professionals in stock selecting do not even beat this benchmark consistently.

The reason why most index funds are so good is that their expenses are much lower than actively managed funds. Many index funds will charge between 3-5% of your upfront deposit. This means that if you buy $1000 of a mutual fund with a 5% charge, you are really only investing $950. Lets say that this mutual fund along with the index both earn 10% in a year. Your actively managed mutual fund will be worth $950 times .1 = $1,045 while the index fund, since it did not charge the initial 5% fee, would be worth $1000 times .1 = $1,100. This makes a BIG difference over time.

For people who want to make investing as easy as possible, I would recommend investing a percentage of their age into a bond index fund, and the rest in a stock index fund, possibly with international index funds as well. For instance, I am 27 years old, I should invest 27% in a bond index fund and 73% in a stock index fund.

Vanguard and TRowe price are 2 companies I highly recommend. If you have over $1000 to invest at once vanguard's Total Stock Market Index (VTSMX) with an expense ratio of .15% is the way to go. If you need to start slower, TRowe Price allows you to invest as little as $50/month with nothing to start. POMIX is TRowe Prices total stock index, which has an expense ratio of .4%.

In conclusion, automatically investing each month in a Roth IRA, and investing in index funds is a simple and effective way to invest.

People first, then money, then things

2008-04-15T05:13:00.001-07:00

Suzy Orman says this famous line all over the place. Its probably true, but you need to TRUST the people first before you can give money.

Little expenses add up

2008-04-13T19:44:00.000-07:00

It seems that everyone has something that they cant live without. Whether its a cup of coffee at Starbucks, cigarettes and alcohol, or going out to eat, many times these "wants" are not necessary and can hinder your future finances.

David Bach wrote an excellent book titled The Automatic Millionaire. You can find more information at the link below

http://www.amazon.com/exec/obidos/ASIN/0767923820

What David Bach states is that once you find your "Latte Factor" and eliminate this product or service, many times you can find enough money to save each month.

Dont think that $5 a day doesnt add up? $5 a day is $150 a month, and if you save this in a total stock market index for 30 years this amount is $275,403.43.

Little expenses add up.

Importance of an Emergency Fund

2008-04-13T07:30:00.000-07:00

It is vitally important to have an emergency fund that is truly used for an emergency because not having one can make for some bad financial practices. Believe me, I know from experience.

When I first moved to Austin it took me a good month to figure out that I wanted to go into financial planning. This also required an additional 4 or so months to study and pass the insurance and financial tests needed to be a planner. When I moved to Austin I had approximately $4,000 saved. During this 5 months (and another month waiting to work for Ameriprise), I have spent all $4,000 and brought upon myself quite a bit of credit card debt.

The 2 biggest problems I faced during this time was that I didnt work during these 6 months and that I was not properly budgeting my money. I wanted to explore Austin and I did have a really good time, however I will be paying for that for a while to come.

As for my lack of budgeting my money this was a problem throughout my whole life. I always thought I had a good running total of how much I made and spent each month. And I also had large credit card limits which I didnt think would be a big deal to use. Little did I know that when I wanted to switch from being a financial planner to being a teacher I would have another few months where I would at least have a decrease in pay until I was teaching. I took a job as a courier and about a month after the job my car needed a new transmission. I had to take out a car loan and get more into debt.

The moral of the story is that if I had an emergency fund and if I properly budgeted my money I would be in a MUCH better financial situation that I am in now. I could have possibly put a down payment on a house in a market where there are bargains. Instead I will need to first pay down my credit cards, then save for my down payment.

Have at least 1 month of expenses in emergency funds available if you are in a stable job (like a teacher), and at least 3 months of expenses for less than stable jobs in an extremely low risk account like a money market account. Ive been using ING since it is super easy and requires almost no paperwork.

Personal Finance Thoughts: April 12

2008-04-12T21:49:00.000-07:00

I have just started my Roth IRA and I am trying to max it out while also putting the same amount each month into additional debt payments. This means I will be saving over $800/month. On average I make $3,000 a month, which means I will be saving 27% of my salary.

I will be making almost $600/month more in September, if I end up saving that amount it would be $3,600 in income, $1,400 in saving/additional debt payment = 39% saved. My debt would go away in no time and then its house buying time.

Then again, if I ever find a girlfriend this whole post goes down to the wayside (but I should be able to save a decent amount anyway).

It might be tough saving $800/month but it can't hurt to try!

Saving Young is Awesome

2008-04-12T21:37:00.000-07:00

I just opened a Roth IRA in troweprice and they sent me a magazine about investing. they showed a chart showing how compound interest works. Starting early really works wonders.

Go to http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Under current principal put in what you are starting with. (I put $0)
Under annual addition you could put in any number you are putting into an account with your automatic savings plan.
Under years to grow it tells you how long your investment will grow if you dont touch this money.
Under interest rate you could put different numbers depending on what you are investing in.
Under compound interest time I put 3, but this seems pretty random.

I just started my Roth IRA and am maxing it out.
Annual addition = $5000
Years to grow = 35 (I want to retire when I am 62)
Interest Rate= I put a realistic number of 9%. (Getting 9% is key and my future posts will explain my philosophy on how to invest for the long term)
Compound interest = 3

Can you guess how much money I will have in my Roth for retirement if I keep this up?

$1,217,669.

Rediculous.

At that amount, I can reasonably take out $73,000 a year (6% of amount) and that money will never go away. And it will grow TAX FREE! This doesnt include the new tax law that will let you put in more than $5,000 a year (It will be adjusted for inflation). I think if I max it out with inflation it should be over 2 million when I retire.

The whole point of this? say I start doing this at 37 instead of 27. How much money would I have?

$468,016

Enough said

General Philosophy on Finances

2008-04-12T21:22:00.001-07:00

From my personal experiences I feel that the most important thing that anyone can do to improve their finances is to create a budget. Most of my friends might have a rough idea of how much they are making and saving, but when I first started writing down all of my expenses I have noticed a few things.

1) I have spent less money in general when I wrote things down
2) I was spending more than I was making even with a pretty high paying job.
3) I visually saw where my money was going.

I feel that everyone should at least spend 30 or so minutes a month and track where all of their expenses have been going.

I have an excel file that i have created which has categories for basic expenses and income, and tells you if you have saved money each month. Let me know and Ill send you a copy.

The next important thing that should be done is to have some type of automatic savings plan where you pay yourself first immediately after you receive your paycheck. A century ago the US government allowed everyone to pay everything they owed in taxes once a year. the government was smart however, and started taking payroll deductions because they know that most people do not budget their money. I feel that everyone should do the same thing and save at least 10% of their income right off the top. Many people end up spending everything they make and then have nothing left at the end of the month. By automatically investing it helps people budget their remaining money. To be honest once I started doing this I havent missed it!

After setting up a budget and automatically saving, it is important to know where to put this money you are paying yourself. Depending on your situation, I feel that in order of importance you should

1) Pay off and high interest credit card debt
2) Build an emergency fund (of at least 3 months) and leave it in a money market account.
3) Invest in a 401k up to the employee match (if available, if not go to #4)
4) Invest in a Roth IRA with low expense index funds.
5) If the Roth is maxed out and there is money left over, save for a house.

In conclusion
1) Make a budget
2) Create an automatic savings plan
3) With the automatic savings plan, pay off credit card debt, invest in a 401k or Roth, save for a house.

If you follow these steps you are well on your way to financial independence.

Many of my future blogs will explain why I believe in these steps.

What this blog is all about

2008-04-12T21:05:00.000-07:00

I would like to write my first post explaining my financial situation, what I will be blogging about, and how it might help your situation.

When I first graduated college I was a teacher making $21,000/yr but had no rent, food, car and credit card payments. In hindsight it was the best financial situation I was in in my life. I could have saved nearly $1000 a month and as I will be blogging about, it is all about how much you save.

After college with a modest savings I decided to move to Miami with no job. I ended up spending most of my savings to build a tutoring business which started with 1 music client and grew to teach chess to over 30 kids a week. I did well financially but I tried to run many businesses with little thoughts into my finances.

Almost 2 years ago I moved to Austin, again with no job. I decided to be a financial planner tring to make a living trying to help others with their finances. Unfortunately I did not agree with many of the recommendations that I should be selling to potential clients because they were not in their best interests. Oddly enough during my time as a financial planner I ended up with a ton of credit card debt and street smarts in how to handle finances. After leaving the financial planning career I decided that I wanted to go back into teaching. It might have been for the happiness in teaching others, but it also could be due to the stability of income that teaching gives. It took me many months to get the required education and training to be a teacher, and I am about to finish my first year and will continue teaching next year.

I want this blog to accomplish a few things.
1) It is a journal of my finances for the future and how I handle situations that come up.
2) It is my philosophy of budgeting and investing for young adults.
3) I will be giving common sense information and solutions for young adults in different situations.