Eating well for your health and wealth

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

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

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

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!

Balanced money formula

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?

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

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

10 Commandments to Live by in Your 20's

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.

Personal Finance Thoughts: October 17

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

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.

Personal Finance Thoughts: August 16

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!

My Grandfather

This is a lesson on finances from my grandfather.

Lessons from my mom on finances

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

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.

Personal Finance Thoughts: May 27, 2008

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).

Budgeting for my trip

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.

Personal Finance Thoughts; April 22

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.

People first, then money, then things

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.

Personal Finance Thoughts: April 12

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!

General Philosophy on Finances

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.