Personal Finance Blog

Tips And Stories To Help You With Managing Money

Saving Money In 2015

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31 percent of resolutions set this year revolve around money.
31 percent of resolutions set this year revolve around money.
If you are determined to save money toward a specific goal, the first step is to decide in a concrete way how much money you are really talking about.

Write down what it is you want. Then begin the process by doing some comparison shopping for the item you have in mind. Don’t forget the costs of delivery, registration, installation, shipping, insurance and possible sub-charges. Let the bottom line contain every possible element that will play into the final cost.

For instance: you want a new refrigerator, complete with ice-maker and plenty of extra freezer space. That’s the easy part, but the hard figure – what it really will cost – is the one you need to get planted in your mind.

If you intend to finance a big-ticket purchase, consider what amount you want to pay down and then realistically figure what your payments will be. A large down payment might require a longer savings period, but result in smaller installment payments. Make it work for your particular budget.

If you want to save enough to buy your item outright, say the fancy new refrigerator, and have all the costs totaled, look at the total (probably about $1,500) and then begin to set money aside. Don’t just expect that you will have $50 or so to add to the pot now and again. Develop a savings schedule that is reasonable and stick with it.

If you want to have the new fridge in six months, that means you must save $250 per month to meet the total. If you need more time, create a nine-month schedule that calls for $167 per month. You might want to divide that between two paychecks per month, or $84 per whack.

Some people find it hard to actually stick with the agenda they have set. It’s always possible to find something you want or think you need more than putting the money into your account and leaving it alone. That’s when it might be a good idea to open a dedicated savings account that is not linked with your checking account or any account that has an ATM card. Then have the amount you have settled on automatically transferred from your checking account to that savings account on a regular basis.

That’s the set-it-and-forget-it approach and, according to the experts, it’s the best way to achieve a specific savings goal. Before you know it, you’ll be sipping lemonade made cool with ice from your new fancy refrigerator – or enjoying whatever it is you set out to save for just a short time ago.

How One Couple Paid Off $118,000 In Debt

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Amy and Mat Kroezen with their daughter, Tanami.
Amy and Mat Kroezen with their daughter, Tanami. Image From USNews.com
How about this: A couple, one of them not employed, owes $116,000 in student loans and another $2,000 in car payments. What to do? The Kroezens decided to pay off the debt in four years. Impossible? No way. At the end of the four years, the Kroezens, Amy and Matt, now the parents of one child with another en route, had essentially realized their goal.

Here’s how they did it, according to an article in U.S. News and World Report. The article starts with discouraging statistics compiled by Think Finance: three in four Americans carry debt into a new year, including credit card debt (36 percent) and car loans (28 percent.) Then the story of the Kroezens is told, holding out hope for those who have a sincere desire to beat debt.

At the outset, in 2008, Amy was a new graduate of the Art Institute of Atlanta, with the huge education debt and discouraging prospects for a job in her field. She was turned down for one interior design job after another as the country slogged through a recession. One design firm suggested she wait tables until things got better.

Instead of sinking under the challenge, the Kroezens made the unlikely decision to be debt-free in four years. Eventually, she got a job and between her and Matt, a dance instructor, they were earning $32,000 to $35,000 each. They decided to live on one salary and put the other into debt repayment.

That meant that they had to move to a cheaper apartment that was closer to both of their jobs. The move provided a savings in transportation as well. Amy used an envelope method of keeping track. She cashed her checks and put money into envelopes for particular expenses, such as food, rent and other essentials. The rest of their income, at least $990 per month, went to debt.

The family was very frugal, resisting the temptation to spend for anything that wasn’t actually needed. They repaired broken household items rather than replacing them, bypassed restaurant meals. Amy built their furniture when they moved into a new home. She also makes cleaning supplies and grows some of their food. They asked family members to give them power tools for Christmas.

Attitude was everything, Amy reported. Any lapse into depression was offset with the reminder that the goals were worth the sacrifices.

A good support system also was crucial. Family, friends and a spouse dedicated to the same financial goals were essential to the program.

Amy and Matt did the smart thing by giving priority to debt with the highest interest, reducing fees and interest. Another approach is to pay off the smaller debts first to build a sense of accomplishment, but the Kroezens were determined to minimize interest.

Even after whipping their huge credit load, the family continues to live on about $19,000 per year, leaving them a nice savings pot. Frugality has become the norm in their family.

Credit card debt is usually the most expensive, followed by auto and student loans. Any loans with a variable rate can increase in cost rise quickly when interest rates go up.

The experts who contributed to the Kroezen story advise that people interested in curbing overspending create a “vision book,” with images that remind them of financial goals – for instance, a picture of a favorite vacation spot, a home or condo that is in the future, or any item on the family’s wish list. A look through the vision book is a reminder that unnecessary items eat up the money that could be going toward the desired objectives.

The Kroezens proved that achieving such objectives is possible.

5 Experts Suggest New Year’s Resolutions For 2015

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Every time you tear a page off a calendar, you gain a new day to make new ideas and progress.
Every time you tear a page off a calendar, you gain a new day to create new ideas and progress.
Deciding to do better in the New Year is a time-honored custom. But the custom also tends to become the butt of jokes when the majority of people fail to follow through. The usual resolves, such as losing weight, saving money and getting healthier, often drop by the wayside in very short order.

USA Today asked for advice from five leading national experts about how retirees can make – and keep- New Year’s resolutions. Their suggestions:

Dallas Salisbury, CEO of the Employee Benefit Research Institute: Focus on health issues by analyzing your attitude, exercise regimen, nutrition, sleep habits and quality time, including interactions with extended family. Work on the weak spots. Take a hard look at income and spending. If they are out of sync, make adjustments to fend off financial stress. Be on the watch for people who need help and do what you can to make life better for them.

Eleanor Blayney, consumer advocate for the Certified Financial Planner Board: Resolve to start early on tax issues. Don’t wait for April to plan to meet this year’s demands and to look beyond. Retirees have more leeway in managing their finances. Look at pretax options such as 401(k)s and after-tax options such as mutual funds, savings accounts and brokerage accounts. If you haven’t already opted in to Social Security, look at your possibilities. The longer you wait, the more income you can receive.

Dr. Elliott Antman, cardiologist and president of the American Heart Association: Commit yourself and those with whom you have influence to creating a health culture. Don’t wait until you have to focus on treatment when something has gone wrong. There are ways to minimize the risk of heart disease and stroke. The AHA is a resource to research these preventive steps. Visit Heart.org or the mobile app heat360 Coach, which advocates seven steps: get active, control cholesterol, eat better, manage blood pressure, lose weight, reduce blood sugar and stop smoking. Become an advocate to urge public officials to protect the environment against unhealthy pollutants.

Carol Ewing Garber, president of the American College of Sports Medicine: Resolve to sit less, do more intentional exercise. Sitting increases the risk of heart disease, type 2 diabetes and cancer. Even walking around your house can help. Get up and move at least once an hour. Try to walk at least a half an hour a day at least five days a week. Start slowly if you haven’t been exercising and do the exercise in ten-minute increments if necessary. Stretch, lift hand weights or do other resistance exercise, such as modified push-ups against a wall. Lack of exercise can contribute to loss of muscle and strength, impeding living requirements.

Vandana Sheth, spokeswoman for the Academy of Nutrition and Dietetics: Eat regular meals and snacks. Skipped meals affect energy and encourage over-eating at the next meal. Keep an eye on portions. Retirees may not need as much food as they did when they were younger. Increase protein intake by eating beans, lentils, nuts, seeds, lean chicken, fish, eggs, cheese, etc. Try for variety. Substitute whole grains for processed grains. Quinoa is an option that is as easy as rice and has more protein. Whole grain tortillas have more nutritional value than flour versions, as do whole grain breads. Stay hydrated, and no beverage beats water. Add a squeeze of lemon or a sprig of mint for flavor.

Christmas Shoppers Are Getting Smarter

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Smart phone apps allow users to scan bar codes to find the best prices for items.
Smart phone apps allow users to scan bar codes to find the best prices for items.
It happens every year. Suddenly, the shopping frenzy is upon us and the race is on.

Many Americans are taking advantage of the electronic age to get it done smarter, faster and more efficiently. They know how to find legitimate deals, avoid the fake ones and how to leave items in online shopping carts while they make sure they have the best deals they can find. To spot a shopper in the aisle of a leading retailer using a smartphone to check competing prices in another outlet is not outside the norm.

It’s this kind of savvy that took some of the energy out of Black Friday and other mega sales days this year. Many retailers who invested in huge advertising promotions before Thanksgiving apparently left customers with the impression that the deals were so big they had plenty of time to take part in the annual shopping spree without hassling the crowds.

C. Britt Beemer of America’s Research Group, reported that 75 percent of of the Black Friday shoppers were focused only on the door busters, deeply discounted specials that retailers hope will get people into the store. Last year, only 49.9 percent of the Black Friday shoppers said that the door buster was their main objective. The stores, many of whom have losses on the door busters, also lost the additional revenue generated by the impulse spending they hoped for once the customer was inside the doors.

ShopperTrak, a consumer analytics company that tracks in-store purchases, pegged the Thanksgiving weekend sales at $21.76 billion, a dip of 2.1 percent over the last holiday season. Sales rose 8.5 percent on the Monday after that weekend, an indication that more people were opting to miss the rush without feeling they might miss the best deals. Even so, before the end of the year, sales for November and December will have increase by 4.1 percent, the National Federation predicts. Most retailers see 20 percent of their sales in those two year-end months.

This is how shoppers are doing things smarter and changing the way the retailers are likely to approach the holidays in the future:

It takes more to catch the buyers’ attention now than in a less sophisticated day. If the retailer offers 20 percent off, they may ask for free shipping too. They are more savvy about the elements of retail selling and more apt to press the limits. Free shipping is, in fact, a big factor in online shopping. Merchants that don’t offer the service have 10 to 15 percent lower sales on their websites, according to analysts. Target is piloting a free shipping policy and saw online sales surge, the company reported. Their free shipping deal is available through Dec. 20.

Online buying obviously is making more inroads into store sales. Shoppers are not in such a hurry as they once were. This year has not seen any toys that are so hot people have a hard time finding them, reducing the mad scrambles that occurred in the past with such items as Cabbage Patch dolls and Tickle-Me Elmo. The shopper is willing to wait for further discounts as the season progresses. That puts the customer in the driver’s seat.

Online shoppers are learning to hold items in a shopping cart while they take time to look for better deals. They may have full shopping carts waiting for some time before consummating their deals.

In all, the 2014 shopping season may impact what happens in the future as shoppers become even more tuned in. Watch and see.

7 Financial New Years Resolutions For 2015

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“Tomorrow, is the first blank page of a 365 page book. Write a good one.” ? Brad Paisley
“Tomorrow, is the first blank page of a 365 page book. Write a good one.”
~ Brad Paisley
Keeping Resolutions Is The Hard Part

The list of New Year’s resolution stays about the same each year: Diet, exercise, quit smoking and/or drinking, save money and get out of debt. They’re right up there every January 1. For most, it’s a quick resolve and a fast forget. And does it matter?

Could be, some experts say. Especially if you put money into the deal, say buying an expensive juicer to add to the healthy diet that is soon forgotten. No refund will be offered for the fancy exercise equipment you buy and don’t use. Or if you take that first step in financial matters by consulting an expert, that money is lost.

The failure rate is high, according to a Grenny’s online survey. About half of Americans give up their resolutions just 30 days in to the New Year, while 75 percent are back to old habits within three months. Even the financial prudence that was brought on by the early-2010s recession have dropped by the wayside as the economy improved, experts say. When things were toughest, some 33 percent of Americans vowed to get financial planning under way. Now the number is down to 16 percent.

Jonathan Clements, director of financial education for Citi Personal Wealth Management, offers these suggestions that might bolster your resolve to keep the New Year resolution regarding financial health:

1. Buying items on sale is not a guarantee of saving money. Any spending detracts from savings, especially if the sale item isn’t something you really need.

2. Don’t focus overly on investment accounts. Checking every day isn’t necessary if you are a long-term investor. You may be prompted to trade too much and make panic decisions.

3. Don’t invest too heavily in employer stock. The company gives you a paycheck. Think twice before doubling your risk by tinkering with your portfolio.

4. If you want an incentive for keeping your resolution, write down where you think the Dow Jones Industrial Average, gold and the 10-year Treasury yield will finish. Email your predictions to everyone you know. Likely you’ll be wrong and you can learn from the experience that trying to time the markets is a futile exercise.

5. Get rid of wasteful spending. In this category are over-buying groceries so that they go bad before consumption, paying for lottery tickets, buying the wrong gifts for family and friends, paying for seldom-watched premium cable channels, most extended warranties, over-priced restaurant meals, clothing you don’t wear and magazines you don’t read. Make a list and check it twice, then trim.

6. Don’t look at a new car or home improvements as investments. Neither one is likely to recover the full cost. They are depreciating assets, not an investment.

7. Talk to the kids about your family finances. Guide the conversation relative to the ages of the group. Let them know early how much help they can expect with college and other goals. Explain how retirement may affect your own finances and what steps you have taken to prepare. Share the financial blunders you have made, if they will be instructive. Let them know how much they may expect to inherit on your demise.