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Posts Tagged ‘Financial planning’

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What a teen should do with their job earnings…

Friday, July 9th, 2010

Today’s article  is from CNNMoney.com, titled Teach you teen paycheck savvy, and gives good tips for ways to steer your teenager toward a financially sound future.  What tips does it offer?  Read on:

  • Taxes – Gross versus Net, FICA versus income taxes…it’s all confusing to a teenager.  Actually, it’s confusing to a lot of adults as well (unfortunately), so if you don’t understand the difference, look it up, then sit down with your child when they get their first check and explain the differences to them.  It’s important for them to know what they make versus what they bring home, and where what they’re not bringing home is going.
  • Bank accounts – Help your teen open up both a savings and a checking account.  It’s not only important for your teen to learn how to use a checking account, including balancing a checkbook (which you should teach them…again, learn how to if you don’t know, because you want your child to have a good financial start, don’t you??), but it’s also important for them to learn how to save money, like starting their own emergency fund, car fund or iPhone or iPad fund etc.  Delayed gratification is a very good lesson for a teen to learn, in a world of “My super sweet 16″ TV shows and teens who expect to be bought $200 blue jeans.
  • Micromanaging – The above stated, let them mess up with the first paycheck.  New fancy shoes or video games might be awesome to have right then and there, but when they have no more money because they blew it all, don’t give in and give them money from your own wallet.  Let them see what it’s like to be broke.  It needs to hurt a little. 

This is a great article, so check it out!  Don’t let the opportunity to impart good financial lessons to your teenager pass you by!!!

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Wasting money…

Friday, June 18th, 2010

I found a great article for today on Walletpop.com, titled 10 products you”re wasting your money on.  Not only is the article funny, but it does point out several things that people buy/spend money on that are unnecessary. 

My favorite item on the list has to be weddings, since I have somewhat of a personal vendetta against high cost weddings.  It’s not that I don’t want people to have a nice wedding full of memories, it’s just that I don’t think we need to spend an average of $19,000 (according to the article) to make these memories.  Friends and family make the memories of your wedding (trust me on this), not the decorations.  Use less expensive decorations/venues to cut costs.  Have a friend throw you a “stock the bar” shower as opposed to a lingerie shower, since we all know that the lingerie ends up on the floor anyway, and save a ton on booze.  Either way, cut your costs, and put that money into savings!

Another favorite off the list?  Kitchen gadgets!  We all love them and we all buy them (unless of course, you use your kitchen as a closet or can only cook 5 meals, and therefore eat our a lot), but do we really need them?  Be honest!  Do you really need that pasta maker?  Have you ever made pasta from scratch?  Or is it more likely that you bought the gadget and still buy your pasta pre-made from the grocery?  Whatever the gadget, chances are you don’t need it!  You should either save that cash, or put it toward something useful, like saving it up to buy a good set of knives or cookware!

There are 8 other items on the list, which I strongly suggest you check out!  Some are funny (electronic litter box, anyone??), and others are practical, but all are a waste of money!

We would like to take this time to wish everyone a Happy Father’s Day this Sunday, and would also like to notify you that we will be taking next week off from writing, as we celebrate the birth of our daughter.  As our regular readers know, we take family time very seriously, and think that spending time loving each other is a key element in a happy marriage, and of course, loving more and living better.  Therefore, that is what we’re going to do next week!  Have a great week next week, and we’ll see you soon!

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Tips for executing a will…

Friday, June 11th, 2010

Today, I’m writing about and article I found after being inspired by an article on CNNMoney.com titled What an executor must know before a parent dies.  Basically, I found the article on CNN Money to be lacking, and so I did some digging around and found a more in depth and comprehensive checklist (obviously not meant to replace the advice of a lawyer or accountant, but helpful for the DIY-er) for an executor (trix) of a will.

I myself am currently named as an Executrix of an estate, although I hope not to have to be saddled with the job for many, many years, and, after I got to reading the little article on CNN Money, I began to wonder what the  basics of executing a will were, and whether or not I knew any of them.  I mean, I have no doubt that I can and will carry it out to the best of my ability, but I am no expert, and therefore, would like to have some tips on the process and legal issues that might arise.  The article I found surpassed my expectations.  From contacting the funeral home to contacting a lawyer (if necessary), this checklist has a little bit for everyone.  An important question raised is how to pay for the funeral if it has not been paid in advance.  Life insurance “isn’t paid in a week” as it says, and therefore the author recommends that the owner of the estate have money set aside for these expenses if they don’t pay for them ahead of time!  What a great suggestion!

This article not only has tips for the executor of the will, but also, at the bottom of the checklist it has some tips for the person with the estate.  This is fantastic, if you ask me, because more often than not, the issues that arise from a will (other than people being petty over material mementos) are because the deceased person doesn’t have their affairs “completely” in order.  For those of you with a will, I would double check this list to be sure you haven’t missed something.  The best tip (in my humble opinion) was to have a specific folder, binder etc. that is stored in a place that the executor and another family member know of that has ALL of your important information in it, from wills to passports to divorce decrees…and not copies either!  They need to be the originals!

I suggest to all of our readers to check out the article.  This just seems like information that could be useful for most of us in the future, especially if you follow our suggestions and get yourself our of debt and start building wealth.  You could have a “nice chunk of change” to leave to your family, and you don’t want them to get a headache from your gift!  Happy reading!

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Birds of a feather save money together…

Wednesday, June 2nd, 2010

While checking out some websites the other day, I ran across a quote from a co-founder of WiseBread.com, another personal finance blog that has some good tips.  The quote says “Good money management is a lifestyle. If you surround yourself with people who share the same values, you’re more likely to stay on track”.  This is very similar to one of my favorite quotes, stating that “You are the average of the five people you spend the most time with”, by Jim Rohn. 

Obviously they both speak for themselves, but many times we either don’t think things through or apply them in our lives.  IF, for example, we are the average of the 5 people we surround ourselves with, and we surround ourselves with people who choose to be frugal and manage their money wisely, it stands to reason that we would find it easier to stick to our decisions as well.   

So, the question is, have you thought through the people you spend the most time with these days?  Are they the type of people you would want to be if you had to be someone else?  Would you let them step into your life and run your house and job/business in your stead, making all choices and decisions for you?  If you would not trust them to make the wise decisions you would make (or wiser even), then I say perhaps you need to reevaluate the friendship.  This doesn’t necessarily mean I want you to ditch all your friends that don’t “measure up”, but maybe you need to develop better relationships with friends who meet your new found requirements, or perhaps YOU need to be the role model for your friends, encouraging them in their endeavors.  Whichever of these choices you feel you were meant to do, implementing them isn’t difficult (just being aware of the choices in front of you with regard to your friends is a step in the right direction, but also, I find that deciding to be the type of friend you want to have makes a big difference as well, since so many people are NOT the type of friend they want to have), and the rewards can be plentiful, both in wealth and in personal fulfillment. 

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The lottery is robbing potential millionaires…

Friday, May 28th, 2010

In a new post on The Consumerist, the author shared that a recent study found that poor people, those making under $13,000 a year, spend 9% of their income on lottery tickets.   As sad as this fact is, it gets worse if you think about it.

So, I did a little math, and if these people, who don’t make above the poverty line, invested that 9% of their $13,000 a year, which works out to $97.50 a month, over 50 years with a 9% return over that time (reasonable rate of return), they would have a little over $1 million dollars at the end!  Yes, you read that right!  $1 MILLION dollars at the end!  That means that there is a good chance for ANYof those people earning $13,000 a year to have a million dollars when they retire, if they are disciplined enough to invest what they spend on a chance at instant gratification! 

And that’s the difference, isn’t it?  Most of us DO NOT win the lottery.  We know that it only parts fools from their money.  What truly helps people build wealth is discipline with their money and the ability to wait for the payoff over time.  Problem is, I don’t know if a poor person would believe me if I told them that they could have $1 million dollars when they retire.  However, given the study and the little bit of math above, we hope you decide that the lottery is a waste of money and perhaps saving to become a millionaire isn’t as hard as you once thought it was!

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What it truly means to live within your means!

Wednesday, May 26th, 2010

We all know that living within your means is, in its most basic form, living within your household budget.  However, I wanted to point out that there are many other ways that we overspend at work, for example, that can be adjusted and will help more people than just ourselves!

Let’s talk about being a teacher.  It’s a truly stressful job.  They have 100 students (at least) every day that need to be educated with not only the subject that the teacher is charged with teaching but also the life lessons that some of our more lackadaisical parents “don’t bother to” or “forget to” teach their children at home (FYI…it is NOT the job of a school teacher to teach your children the good morals and values of our society…that is in YOUR jurisdiction!).  Needless to say, it’s a little overwhelming.  What’s more, the money system set up around the education system (at least the parts I know about, as I am not an expert) is ludicrous.  For example, the school system allots each teacher a certain number of copies that they are allowed to make per year on the copy machine, and if they want to make more, they have to pay for them!  That puts added and undue pressure on the teacher, because let’s face it, toner and copy paper are cheap.

 However, silly as it is, it is the workplace version of “living within your means”.  But not all teachers do.  They will either spend money out of their own pocket to buy supplies, or send home a list of supplies that the parent MUST provide for all of the various projects the teacher wants to do.  All I have to say is, my oh my, what a mess!  Teachers are given a budget.  They should have to work within that budget (and yes, I am absolutely certain that their budget is too low and doesn’t help much, but it is what it is).  By buying supplies out of their own pocket, they are saying that the budget is meaningless, and that sets the wrong example for the students.  I love the generous nature, but they shouldn’t take the burden on themselves and set a bad example for the children.  And if they decide to pass the cost onto the parent?  Well, the parents at home have their own budgets and money problems to worry about, and the decision to have all of these wonderful projects impacts them too!

So, what is a teacher to do since they’re being squeezed on both sides?  Get creative!  If they figure out less costly projects and methods for teaching the same lesson, they will be able to stay within the budget the school set for them without passing the cost on to the parents!  I know that the replacement projects won’t be as full of bells and whistles, but the object of the lesson is to teach something, and that usually doesn’t require fancy projects.  Also, as long as the teacher has a computer with an Internet connection, she can show the students whatever she wants to show them!  For example…let’s say the teacher originally wanted to have the students build volcanoes for science class.  All she has to do is have them read the chapter, discuss it in class, then show the students this on the projector.  It’s not AS cool, but it works and it’s pretty much free!

I’m not trying to pick on teachers, just so you know.  I just wanted to give an example of how we have a mental disconnect between living within our means at home and at work.  We shouldn’t be frugal at home and a spendthrift at work.  Apply the same principles at both places, and get creative on your savings!

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Refinancing to save long term…

Monday, May 24th, 2010

Lots of people like to talk about refinancing your home to save money on your monthly payment, and it’s true that if you’re struggling to make your payment, this will help you in the short term, but what if you aren’t struggling to make your payment?  Should you refinance?  Well, if you’re on a 30 year fixed rate monthly payment, then yes, maybe you should.

Plugging in some numbers on Bankrate.com, a 30 year, 6% fixed rate mortgage on $150,000 runs about $899.33, whereas a 15 year 5% fixed rate mortgage (they will usually give a lower rate to a shorter term loan) on the same $150,000 is $1186.19.  Given this information, yes, it’s obvious that the 15 year mortgage is more money per month, even with a lower rate.   However, what I wanted to point out to you is that it’s a little less than $300 a month extra…to pay your mortgage off in HALF the time!  Not only will you be paying off your mortgage in half the time, but the total cost of that 30 year loan will be $323,757.28 versus $213,514.28 for the 15 year loan.  That means you save $110,243 over the life of the loan!  I bet you’d rather that money go toward retirement as opposed to lining the pockets of the bank!  I know I would!

So you say you can’t afford the extra $300 a month?  Well, what can you afford?  After making sure that you don’t have the type of mortgage that penalizes you for paying it off early, you should look into how much extra you can pay toward the principal per month (that doesn’t interfere with your retirement).  Every little bit helps, and you will save thousands more by paying it off early.  Another option, is that if you’re “Gung-Ho” about getting that 15 year mortgage, but can’t afford the payment on the loan amount, perhaps you should look at a less expensive property.  We all have to buy within our means.  This means that some people can afford a half a $500,000 house, and some can afford a $100,000 house.  You shouldn’t be upset or discouraged if you can’t afford the more expensive house…what you should be is excited when you pay off the house you can afford in only 15 years, and know that it is ALL YOURS!  I’d rather own a modest home then be drowning in debt in a nice home that I’ll never realistically own, and I bet most people would if they took the time to think on it.

So, my advice to you for saving on your mortgage is to consider spending a little more now on your monthly payment, as it will save you a bundle over the long run!

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Tools to help you figure out your financial health!

Friday, April 30th, 2010

Today we’re not talking about an article, but a really cool tool I found on CNN Money‘s website.  This tool is a Financial Health Calculator, and basically you plug in your specific money and retirement plans, and it walks you through it’s process, telling you if you’re finances are on track to retire without any problems. 

I love this tool, but I should tell you that it slightly deviates from our views in a couple of places:

  • They suggest keeping your house payment under 28% of your gross income.  We suggest you keep it under 25% of your gross income.  I know it’s just 3%, but that can add up!
  • They suggest that you keep your debt under 36% of your gross income (including house payment).  We want your goal to be no debt.  First, we want you to become debt free except for the house, then we want you to pay off the house.  Given this view, there is NO percentage that it acceptable debt to carry on a regular basis.
  • We are in agreement on the emergency fund.  3 to 6 months worth of expenses is what you should aim for!
  • Their diversification “bubble” suggests being conservative in your retirement savings, and making use of bonds and other funds that are less risky.  When you’re older, it is wise to be conservative with your money…this is true.  However, we prefer diversifying into good growth stock mutual funds. 
  • Company stock is not something that we generally talk about, but we agree with CNN Money.  You shouldn’t hold too much of one stock, even if it is your employer.  Just because YOU have faith in your employer does not mean that they are doing well in the world market.
  • Regarding life insurance, they suggest having 5 times your yearly salary in life insurance.  We suggest having 10 times your yearly salary.  This is supposed to be for income replacement.  So, if you don’t need to replace your income for anyone, then you don’t need 10 times your income, and probably not even 5.  You do, however, need enough to cover any final expenses and debt you might have.
  • The last “bubble” of the calculator is about retirement savings, but doesn’t really tell what you should be saving…it only tells if you’re on track to retire at age 65.  As we have always said, you should save 15% of your gross income (minimum, if you can).  This should put you on track to retire with a very comfortable nest egg.

Use this tool as a loose guideline for your finances, but don’t forget to replace their information with our information from this post in the appropriate places. 

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House buying when you’re learning to be frugal.

Monday, April 26th, 2010

I always wonder why people buy the size/amount of house they don’t need.  They look for 5ooo square feet (minimum?), hardwood, chef’s kitchen, marble this and that with several acres (where you can find it) of land etc. house.  This is the silliest thing I’ve ever seen.  One of the things your favorite southern couple would like you to ponder is to buy the house you need, not the house you want!

If you’re in the market for a home (hopefully your other debt is paid off, like we suggest, and you have a down payment), then you should be aware of what your family truly needs.  If there are 3 of you (mom, dad and baby), then a 4 bedroom house IS overkill.  If no one in the house cooks (or likes to), then you don’t REALLY need the chef’s kitchen now, do you?  You should get just as much house as is required by your families needs, that way, you can save more for the future and have your “comfortable” home paid off sooner. 

Struggling with your current home’s mortgage payment?  Maybe it’s time you downsized!  Many people get into houses that they can’t really afford, and then think there isn’t anything they can do about it, but this isn’t true.  If you bought more house than you can afford, chances are, you’re struggling.  Now, many people like to blame the banks (and there are some at fault), but they are not the only place to lay blame.  It’s easy to find and attack a scapegoat, but in reality, many people who bought more home than they could afford should have known they couldn’t afford them.  I know that the interest only loans and the ARM’s made it difficult to understand the EXACT terms of the loan, but let’s be honest…if you were approved for a $200,000 home, and you make $20,000 a year, sirens should have been going off in your head.  You should have been confused as to why you could afford so much.  You should have paused during your jumps for joy…if you were jumping for joy, saying “WOW, look what I can afford”, that WAS the warning sign! 

So, now you have more home than you can afford.  Sounds like it’s time to downsize!  I know that it can be hard to sell a home in this market, but as long as you keep your price competitive, and keep the home looking great, then you’ve got a good chance.  And something else of note?  Even if you have to take on a small personal loan to get out of the house, you’re still better off.  For example:  Let’s say your house is worth $225,000, and you put it on the market for $230,000.  Someone offers you $215,000, and they pay closing costs.  Well, after looking (really looking) at your finances, you realize you can’t afford more than a $150,000 home.  It’s better to sell the house for the offered price, take on a $10,000 personal loan, and find a house for $140,000.  You’re going to be better off, even if you did have to “take a hit” on the other house, because you will actually be able to make your mortgage payment now!  Sometimes, you just have to look at the bigger picture!

Remember, sometimes saving money IS the obvious choice.  Don’t buy more than you should.  Sounds simple, so try and live by it!

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And, once again, the savings rate is falling!

Friday, April 23rd, 2010

I cannot even begin to tell you how disappointed I was to discover that the savings rate for the United States has begun to decline again! Today we have a blog post about the United States savings rate, and how it has begun to decline. Visit this website to see the current rate, which is even lower than the rate stated in the blog post. Trending downward I’d say.

As most of our readers know, just a few short years ago, the savings rate in the U.S. was in the negatives, and had been for a few years. That doesn’t even seem possible, does it? No, but unfortunately it is. So, what does it mean? It means that as a nation, we were spending more than we were bringing in. We were living beyond our means. Then, the economy started to tank and many of us woke up and started to save for the future. Out of all of the bad things that came with a down economy, this was a bright point. Now, however, we’ve decided that we were saving more than enough and that it is time to blow through our money again! WHY would we be convinced of this? Did we all suddenly wake up rich? I don’t think so! We need to realize that the more we save now, and the earlier we start saving, the more we will have when we retire!

The recent 1.5% decline in savings, if continued over 30 years could mean the difference between retiring comfortably and retiring on “just enough”. It could mean the difference between taking trips to fun locations when you retire, or having a need to have a part time job when you retire. I don’t know about you, but I’d say that it’s worth a few sacrifices now to get to retire without the stress of money problems. Getting out of debt now and saving for the future should be a top priority for all of us. Read the article. Get motivated. Then get started on saving, or try and do more than you already are!

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