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.
Saturday, March 14, 2009
Monday, January 5, 2009
9 Methods to Improving your finances in 2009!
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!
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!
Friday, October 17, 2008
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.
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.
Saturday, October 4, 2008
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.
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.
Sunday, September 14, 2008
Excellent Budgeting spreadsheet
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
https://www.pearbudget.com/spreadsheet
Monday, September 1, 2008
Personal finance thoughts: September 1
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.
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
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
http://blogs.moneycentral.msn.com/smartspending/archive/2008/08/27/doing-without-in-your-20s-by-choice.aspx
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