Archive for the ‘Saving Money’ Category
Sunday, December 14th, 2008 |
Saving money around the holiday season is a very common theme this year and retailers are doing their best to entice consumers to open their wallets with sales and discounts that many thought we would never see.
Many, if not all, online stores are offering free shipping and the savings on non-essential items like video games and electronics is virtually unheard of.
Holiday Incentives
Many traditional retailers are offering incentives on financing. Just what a nation that has lived on credit for the last ten years needs – more debt. I do believe that the main stream media, with a the constant barrage of negativity toward the economy, has scared the average person into saving more money. (The only good thing the media has accomplished over the last few months.)
Some recent statistics show that many Americans are not taking on any credit card debt this holiday season and that is certainly something that has changed from recent years. With mortgages getting harder to qualify for, the importance of a good credit score has finally hit home with American consumers.
Many consumers have also said that they are planning to spend significantly less money this holiday season overall. Again, a profound change from the overspending that plagued recent years.
Will this Be Lasting Change?
One has to wonder if these changes will become habits that will last and be ingrained in the generation like the spendthrift and frugal survivors of the great depression era, or if the ideals of the recent “have it now” ideology will return with a vengeance at the end of this economic downturn.
I must say that I personally do not know which one is the lesser of the two evils? There must be a reasonable balance between spending and saving that will both benefit the economy and businesses as a whole and the individual. That is the balance that we seek as a society.
Today’s Investors Will Benefit
I am certain that this economic downturn will offer today’s young investors, who continue to buy stocks, an opportunity at wealth in their later years.
No matter how much money you spend this holiday season, I urge you to not only look in your favorite stores, but look at them as well. Who knows, the best bargain you find this season may be that beaten down retail store stock you’ve always shopped at!
Posted in Saving Money | 3 Comments »
Tuesday, October 21st, 2008 |
I recently came across an old article from the New York Times offers us a view of retirement planning that we don’t often hear…are we saving too much?
According to them, the financial industry, with its ostensibly objective online calculators, overstates how much money someone will need in retirement. Some, in fact, contend that financial firms have a pointed interest in persuading people to save much more than they need because the companies earn fees on managing that money.
The more realistic amount could be as little as half the typical recommendation made by Fidelity, Vanguard or any number of other financial institutions.
For a middle-income couple, that could mean trading $400,000 in retirement money for about $3,000 a year more during prime working years to spend on education or home improvement. For a middle-class household, that’s a lot of money, said Laurence J. Kotlikoff, a Boston University economics professor, who is on the forefront of this research into spending and savings, and is selling his own retirement calculator.
Andrew Behla is a case in point of someone who is not saving enough. Mr. Behla, a Los Angeles graphic designer and consultant, is at age 38 just starting to think about retirement. He and his wife, Michele Krolik, a payroll manager, together have just $70,000 squirreled away for their old age.
I think we will have to save a lot more, he said, a point on which the economists and the financial planning industry would agree. Even so, the couple recently bought a house and put extra money they had into improving it, figuring that over their lifetimes it will add handily to their net worth.
But other people like Beverly Alexander, 49, an energy consultant in Marin County, Calif., might be able to slow down. Her financial planner has her retirement finances mapped out to age 105 (her parents are still alive in their 90s), a plan that gives Ms. Alexander, a former utility executive, the freedom to quit her corporate job and live on her consulting income.
One reason I could retire, she said, was that I saved and I always lived below my means.
The findings of the economists are being met as most challenges to orthodoxy are: with stony silence or extreme umbrage.
I count myself as deeply skeptical, said Christopher Jones, the chief investment officer at Financial Engines, a financial planning software company.
The big financial services companies refused to comment on the research but they did say that their use of simple rules of thumb keeps the process of retirement planning less complicated, and thus, less daunting.
After the recent events in the market, we might be hard pressed to find anyone who thinks they have saved too much for retirement.
Nevertheless, I think the key factor in the entire article was the quote from M. Alexander who simply stated the most basic tenet of financial success…”I saved and always lived below my means”.
I don’t think that we need a “professor” to tell us that!
Posted in Saving Money | 8 Comments »
Thursday, September 18th, 2008 |
I certainly consider myself to be a frugal person. Not obsessively frugal, but my money and I are fairly close. From time to time in my life I have been called cheap, a term which I have some dislike for. My belief is that there is a difference between being cheap and being frugal.
Putting my personal ideas of ”cheap” and ”frugal” aside, I’d like your opinion on whether or not I crossed the line on this one.
In the interest of fairness, let’s visit Wikipedia to get neutral definitions for both terms.
Cheap: Wikipedia re-directs the word “cheap” to Miser
A miser is a person who is reluctant to spend money, sometimes to the point of forgoing even basic comforts. The term derives from the Latin miser, meaning “poor” or “wretched,” comparable to the modern word “miserable”.
Frugal:
Frugality includes the reduction of waste, curbing costly habits, suppressing instant gratification by means of fiscal self-restraint, seeking efficiency, avoiding traps, defying expensive social norms, embracing free (as in gratis) options, using barter, and staying well-informed about local circumstances and both market and product/service realities.
The Scenario
Yesterday my office had a guest speaker in during lunch hour to discuss a product that we have been under utilizing in our office. It was very apparent that the product provides the company with significant revenues and provides great value to a certain number of our clients. One of the rare instances that these “learning” sessions provide significant value.
Due to this session being held over lunch hour, the company picked up the tab for lunch and had sandwiches and refreshments delivered to the board room for the meeting. We all enjoyed the food and refreshments as well as the information that was delivered during the meeting.
Honey, Supper Is On Me Tonight
At the end of the day I noticed a few sandwiches left over and asked our administrative assistant what she was planning to do with them. When she responded that they were likely going to be thrown away, I asked (maybe too quickly) if I could take them home.
To make a long story short, my wife and I enjoyed sandwiches (me for the second time that day) for supper yesterday evening.
It wasn’t until after we finished eating that I told her how I had obtained the sandwiches, to which she responded “you are soooooooo cheap”!
(Expletives have been removed in the interest of good taste)
I pose this question to you
Did I cross the line from being frugal to being cheap?
Tell me your cheap vs. Frugal stories or leave a comment and let me know if I crossed the line.
Posted in Saving Money | 12 Comments »
Saturday, June 14th, 2008 |
Saving Money On Groceries
My wife and I made our weekly trip to the grocery store last evening. We normally shop for groceries on Sunday evening, but this week was different.
It is important to take advantage of sales on items that we purchase on a consistent basis, especially those that do not spoil. The Simple Dollar has a nice coupon strategy for this type of shopping that can often allow you to get items for free by using multiple coupons on a sale item.
No Tax!
Yesterday evening from 5:00-9:00 PM our local grocery store was having a no-tax sale. This even happens maybe a couple of times per year and we always make sure to take advantage of it.
Our grocery store also has a gas program whereby each gas purchase gives you $0.05/liter in store coupons. We have been saving these coupons for the last couple of months in anticipation of the no-tax sale.
When we heard that the no-tax sale was coming up, we made sure to add up our gas purchase coupons and search for additional coupons on staple food items during the month prior to the sale. (See coupons.com etc.)
With the arrival of our new baby, we have been intensely developing a price list at several stores for essential items such as diapers, baby wipes and baby clothing. We buy most of our baby clothing used from a local classifieds site or garage sales, but diapers and wipes are constantly on our watch list and my wife is always getting diaper coupons in the mail!
The Perfect Savings Storm!
With crippling gas prices hitting the nation, even my household with our two gas-sipping Honda’s is starting to feel the pain!
Enter the best coupon we’ve had to date!
We just received a coupon in the mail last week that offers double the cash back on one fill per month from our grocery store gas bar. Sweet! That means instead of $0.05 per liter of gas, we will get $0.10/liter for one fill only.
Knowing that the no-tax sale was coming up, drove both of our vehicles until they were bone-dry and proceeded to use the double savings coupon.
I know what you are thinking- “I thought you said it was only good for one fill”?
The coupon actually states that it is good for one gas “purchase”. So, without hesitation I filled both vehicles from the same pump so that it read one transaction of ~88 liters, or $8.80 of store credit.
I view gas purchases as somewhat of a necessity, so the additional $4.40 in grocery store credit was certainly worth it to me.
Adding Up The Savings
When all was said and done, our grocery bill shrunk substantially from $86.48 all the way down to $53.11.
A savings of $33.37 just by using some simple planning and being aware enough to combine a few savings strategies into one shopping trip.
One of the many complaints that I hear about people who don’t use coupons is that it takes too much time in comparison to the savings that can be had. While I did not count the minutes that it took to decide on the choices to make in order to make this shopping trip, I highly doubt it exceeded $33.37 worth of my time.
Do you have any favorite money saving tips or tricks? If so, please leave them in the comments…I’m always up for saving a few bucks!
Posted in Saving Money | 1 Comment »
Monday, April 21st, 2008 |
As many regular readers know, I have just become a father for the first time. When my wife and I first found out about the pregnancy, the “financial manager” in me quickly listed the following things off in my head as financial “to do” items:
- Update estate plan and will
- Increase life insurance policies
- Start education savings plan for child
- Increase monthly expense budget
- Increase emergency cash fund
Where To Start?
The biggest thing on my list of to-do items was to increase the amount of money that we saved in our ING Orange Savings Account 
cash reserve fund each month.
The reason that this was the most important thing was because the money in a high yield savings account could be easily re-directed where it was needed most. There were several larger items that we had to purchase. We tried to purchase the majority of the required items second hand (except for a car seat for safety reasons).
In addition to physical items for the baby’s care; we also had to do some minor renovations to our house such as painting the nursery room, decorating and updating the air exchange system. All of these require cash!
New Financial Territory
While I am OK with the increased spending due to the addition of another member to our family, it is very unfamiliar territory to me financially. Because it is such new territory for our family, we are going to begin tracking our monthly expenses even more closely(using Quicken) until we can determine the actual additional requirement. Prior to that, we have decided on a relatively arbitrary amount to add to our cash reserve.
We decided to add an additional 5% of our net income to our emergency fund due the arrival of the baby. This figure was arrived at by using a rough estimation of the added cost of the baby’s essentials to our own essentials. Of course everyone has a different interpretation of “essentials”, but I am still wondering if this amount is enough?
I will certainly find out how close my estimates have been after a couple of months of tracking the expenses in our new catgories…What do you think of my estimates?
Posted in Saving Money | 9 Comments »
Wednesday, March 19th, 2008 |
There is but one constant in building wealth and that is to spend less than you earn. If we boil it right down to the simplest of forms, you can never be rich if you spend more than you make.
How Much To Save?
Every financial book out there will throw out a number or percentage of your pay that you should save and invest for retirement etc. but there is no magic number that works for everyone.
Some have said that saving or investing 20% of your income is a great amount and this is attainable by most folks if they make the correct lifestyle choices.
Some have loftier goals, such as Trent over at the Simple Dollar, who recently advises newly graduated workers to save 50% of their take home pay! While that may seem unattainable, let’s look a little closer at the idea.
Buying Freedom
If you are reading this blog, then you are looking to make more money, save more money, or find a way to retire earlier. Now that we have agreed on that point, let’s examine another point.
When I recently wrote about automatic savings accounts like ING Direct and why I believe they are essential, I also mentioned that they are useless unless there is a goal attached to it. The reason that they are useless without a goal is that there is really nothing stopping you from spending that money unless the reason that you are saving it is stronger than your desire to fulfill your “need” for immediate gratification.
For most of us, saving 50% of our income seems unrealistic. I’ll admit that it seems daunting to me at the moment as I am expecting my first child in a few weeks (kids are expensive pregnant wives are expensive).
Making Choices
The amount that we save really just depends on our choices. This is no secret, but it has been the basis for many successful personal finance books, from the Automatic Millionaire to the Wealthy Barber, it’s really all about choices.
I made the choice to save more than 50% of my income for nearly two years as I saved in order to write that big cheque that paid off my $40,000 in student loans less than a year after leaving college.
What was the trick?
I lived like I was still in school (I was still in school for one of those years, but working full-time too).
Back to the conversation at hand.
We must have a certain level of income to provide us with shelter, food, water, and clothing; everything else is optional.
The Options Make The Difference
The optional items that we choose to purchase with our disposable income are what make the difference in our wealth. Again, a simple concept that has sold many millions of books.
The optional items that we choose in order to increase our comfort cost us money. That is the surface of the conversation. However, when we look deeper into what it is really costing us is time/freedom.
The argument for saving 50% of your income translates into buying one year of freedom for each year worked. In addition to this, the effects of compounding also come into play.
For each year that we save and invest 50% of our income, we are earning more and more freedom – assuming we keep our expenses at the same level relative to inflation (annual salary raise).
Going Overboard
This example is very extreme and may be viewed by some as going overboard. However, it does prove the point that it was intended to make.
At some point in your quest to save more money, you will reach a crossover point where you begin sacrificing your basic lifestyle for savings. This is not healthy either because you can never tell what tomorrow will bring.
I believe that each person or family must find that delicate balance between a comfortable and enjoyable lifestyle and the emotional and psychological benefits of a secure financial future. I am sure you will agree that this is much easier said than done.
How To Start Saving
The way I started automatically saving money was to set up a separate high interest savings account to which I began having automatic transfers made on each pay day. I have since kept increasing that amount as I find new way to make more money or spend less. Some months I am able to increase the transfer by just a few dollars, while other months I find ways to make a significant increase in the automatic transfers.
Try it out for yourself and see how far you can push yourself and just how much you can save when you are consciously thinking about it.
If you don’t already have a high interest savings account, you can sign up here at ING. They even offer sub-accounts so that you can compartmentalize your savings. I have a sub account strictly for the new baby and another for funding my brokerage account. I find that sub-accounts make it easier for me to organize my saving goals.
There is no “one size fits all” solution, but I hope that this example will help you to find yours!
Posted in Saving Money | 2 Comments »
Friday, March 14th, 2008 |
Over the years I have encountered many people who swear by the “paying yourself first method” and setting up an automatic savings account where money is transferred from each paycheck to a savings account like The Orange Savings Account at ING Direct. 
that is to be used for a specific purpose. I too have automatic transfers to my investment account and I try to make it hurt!
What I mean is that I transfer more and more money each month to my savings and investment accounts until I am literally down to my last few dollars at pay day. Yes, I do have a line of credit set up and an emergency fund of cash just in case. However, I actually enjoy challenging myself each month to save and invest more than the previous month.
The whole idea behind this strategy is to have the money move automatically so that you don’t “see” it and therefore will not miss it. In theory, this is a great idea but it does have a downfall for those who are first beginning the strategy.
Commitment Requires Goals
The downfall of this strategy is that you must be committed to a certain goal. That is, the savings account must have a purpose that is so strong that it will allow you to have the will power not to touch it except for that purpose.
You see, setting up this automatic savings account is well and good, but it doesn’t reach the root of the problem. If you are currently unable to save money, what exactly is having the money “automatically” sent to a savings account going to do? It is a start, but the key is not to succumb to your ingrained desire to spend.
You must set a goal that is powerful enough for you to want to save for it above anything else. I recently told you the story about my brother wanting to save for a house, but ended up succumbing to his desires, purchasing a car that he can’t afford.
Avoid The Quick and Easy
In order to reach in goal in life, you must be willing to sacrifice something.
Please read the previous sentence again. When you truly understand this concept, you will be substantially further ahead than the majority of your peers.
This doesn’t apply just to saving money, it can apply to every goal that you have. If you want to get better grades in college, then you might have to sacrifice going to that killer party on Saturday night.
In my brother’s case, he wanted to buy a house but he wasn’t willing to sacrifice driving a new car in order to save for the down payment for the house. He knows he can’t have both and he could get financing for the car now and he would have to wait a year or two for the house. He had an automatic savings account set up for the house, but when he saw the car and realized he had enough for the down payment on that…you get the picture.
It is quite simple. Nothing is going to be handed to you; you must make choices and decide what is most important to you. However, if you keep taking the easy way out and letting the daily temptations get the best of you then you are doomed.
Making Tough Choices
Trent over at The Simple Dollar just posted a nice article on how to make financial choices in order to start your automatic investing account and watch it grow. I suggest you read that article and decide what you can do without in order to start saving automatically and reach your goal.
No matter what you decide, please remember that there will be temptations along the way. It is up to you to figure out what is most important for your future.
I suggest opening an Orange savings account at ING Direct for building an emergency fund or saving for a specific goal. I also automatically transfer funds each month to an investment account for purchasing stocks or ETF’s. For low fees and great flexibility for purchasing dividend paying stocks, I recommend ShareBuilder
for your 401K and /or brokerage account.
Posted in Saving Money | 4 Comments »
Friday, January 4th, 2008 |
Every adult could cut down on their spending somehow. Almost everyone’s guilty of overspending on themselves at some point, be it through new clothes, weekend activities, or an expensive holiday. However, it’s not just on leisure time where people are guilty of the most wastage. In fact, some of the most significant and incomprehensible waste comes through not shopping for financial products thoroughly. People often agree to loans through their bank, often which could be cheaper elsewhere, while many people take the first insurance policy they see just to be done with the whole boring procedure of shopping for it. But saving money is not boring, especially when it’s potentially hundreds of pounds a year.
Car Insurance
Like many things, your car insurance renewal appears at a time of the year when you need it the least. If you’re really unfortunate, then it will come at the same time that you’ll also need to pay out for your car tax and M.O.T. It’s common for many people to stay with the same insurer year on year because they think they’re getting the best deal, they don’t want to take time to shop for another, or because of customer loyalty. All of these reasons are really quite absurd when you think of the potential money saved by switching insurer. If you’re thinking of sticking to a brand out of loyalty, and you’ve never made a claim, just think – what have they ever given me? If your insurance renewal date is coming up, then take a look at ASDA Finance car insurance quotes from a panel of insurers. Co-operative insurance is also a great site to check for affordable car insurance.
Bank Account
A lot of banks give risible rates for AER on their bank accounts. Worse still, they then charge for the privilege of having an overdraft facility. Banks get away with this kind of poor service because few people want to go through the apparent effort of switching bank. However, all it now takes is a ten minute internet form with Alliance and Leicester, and you’ll get the best of the bank accounts on the market. It has a 0% overdraft facility of up to £2,500 for 12 months upon opening the account, along with an 8.5% AER on balances up to £2,500. This could either make or save you hundreds of pounds a year, and they take care of switching all of your direct debits and standing orders.
Rates correct at the time writing (20/03/08).
Gas and Electricity
Switching gas and electricity may seem like a big job, but thanks to comparison websites such as Simply Switch it’s really not that difficult. By following easily filled forms, it can just take minutes. Before you do this, however, it’s well worth checking on a provider’s customer service, and if they provide discounts for account holders or other services. British Gas has a good homecare service that can take care of your boiler and drains for a low fee every month.
Posted in Saving Money | No Comments »
