Helpful financial tips

[scooterbug44]

Thought it would be helpful to have a thread for folks to share their tips for saving money/financial planning.

This is NOT the thread for you to comment on other's fiscal irresponsibility, your stock picks, share recipes, or crow about your frugal lifestyle - many others available for that!

The best pieces of advice I've gotten:

1) Set up your paycheck so that a fixed percent of every check goes to a savings or money market account.
(This is great because you never have to make a concerted effort and you don't spend the money because it never shows up in your checking account.)
A friend also does this percentage system, but has her percentage sent to a "fun" account that she withdraws a fixed amount of cash from every week and gets to do whatever with it - until it's gone, then she's SOL.

2) Max out your IRA every year. No major luxury purchases allowed until you've maxed it out for the year.

3) Keep a "forgotten" savings account. Never consider this money as an asset when figuring out your budget and only use it for a "true" emergency. Then you have a cash cushion for major unexpected expenses instead of an emergency credit card that will compound the financial problem.

4) Pay off your credit cards every month - finance charges and interest payments are the fastest way to have money go out the window.

[Capricious]

"..This is NOT the thread for you to comment on other's fiscal irresponsibility..."



Darn.


Might I suggest this for a simple, painless evaluation
of where you are and where you should be:

http://www.fpanet.org/journal/articl...p0106-art6.cfm

[Miss Kitty]

Let Miss Kitty pay the bills and let Mr. Kitty balance the checkbook!

Put the fear of God in your children about credit card interest rates and debt. Worked for us...neither one of them will use anything but a debit card.

[canoehead]

I took a financial seminar several years ago, and the most useful thing that I heard there was "you don't have to deny yourself anything, just make sure you budget for it."

I find in budgeting that it's a lot about mindset - never having to tell myself I "can't" have anything makes perspective quite different. Instead I recognize that the thing I want to buy right now (depending on the size of it) means I will have to give something else up for it (I always try to think about what that might be) and/or wait longer for something else I might also really want.

My budgeting strategies changed drastically when I incorporated the word "prioritization"!

[NotDeadYet]

Keep a written record of every dime you spend for an entire month. That means absolutely everything, including stuff that seems small, like a newspaper and a cup of coffee, or that quart of ice cream or couple of beers, that pair of shoes you found on sale, whatever. And including your regular big bills too. The point of this is not to identify pleasures you will deny yourself in the future. It is to get a true realistic picture of exactly where your money is going. Then if you want to change it, you can. If you are satisfied with it, that's fine too. However, many people who do this are quite surprised at their true spending.

[Capricious]

This is a bit of dry reading, but page 1 pretty well
sums up how your cohorts are planning for their
retirments


http://www.ebri.org/pdf/briefspdf/EBRI_IB_04a-20075.pdf


I love to curl-up by the fire on a chilly winter's night with
a big cup of hot chocolate and read this stuff.

[scooterbug44]

Thought of 3 more:

1) Be VERY careful allowing your kids to get credit cards. Them not being responsible can really damage your credit rating and the bank will not allow your name to be taken off that account until it has been completely paid off.

My mother's credit rating took a major beating because she was listed on my brother's account! She was trying to teach him good money management/give him an emergency card and didn't realize the pitfalls.

2) Treat every credit card solicitation, bank statement etc. as the financial equivalent of raw chicken - shred or burn all financial documents, even the "junk mail" credit card offers before discarding.

3) Check your credit report every year - it's free by law.

[Capricious]

How Ironic.

The Oct. 2007 issue of "Boating Industry" magazine just arrived
and there on page 10 is the following:



"the majority of the American population falls into the "spender" category, and our economy is forever grateful. Spenders are not afraid to leverage and don't tend to wait to jump on a great deal or a possible opportunity. They will spend money without reserve and that is where things can become dangerous. Spenders may not look at all the factors involved, including whether or not they have the money to spend or if now is the time to spend it. They are usually very willing to use credit to get immediate gratification."


"The polar opposite of this is, of course, the "Saver." the saver tends to be responsible, stable and secure. These people often have cash available to use if they are convinced to invest it and, if they must finance, they usually qualify for excellent terms. Savers are often able to sail through setbacks and slow seasons without losing much sleep. After all, they are prepared.
The downside is that they may hesitate to jump on opportunities or wait until it is not such a good deal, and their returns can reflect this slow, small, albiet steady growth."




What is being discussed here is boat dealerships, but it all rings true for
individuals as well.

Find your own balance

[seaside2]

Protect your identity with a vengence.

Shred financial documents that might allow an identity thief to gain access to your accounts.

Take or leave it but Granpa used to say: save 10%, give 10% and spend the rest with thanksgiving.

[Bob]

Help others get what they want...so that your business will flourish....keep a budget tally on a bulletin board so your kids, but not neighbors, can see it. When you give your kids any amount of allowance, or if they have a job, have them hand you back 20 percent and put it in their savings account. Show them their money growing by giving them bank statements to file. Let your kids hear you deciding how to allocate income. Turn off the TV.

[Little Fish]

All:

The first step in the financial planning process begins with an assessment of your current financial condition. For a term of three months, one should track all expenses and categorize them as either Fixed, or Variable expenses. Fixed expenses are those that do not vary from month to month, examples include mortgage payments, car notes, utilities, etc. Variable expenses are those that you can vary, examples include food, clothing and entertainment. This allows you to determine on any given month, not only what you are spending, but whether or not you have excess cash given current earnings.

Once you've tracked expenses, you should develop an emergency fund consisting of 3-6 months of Fixed plus Variable expenses. Generally, the correct amount of savings depends on risk. If married and both spouses work, you typically don't need 6 months of expenses in the Bank; rather, 3 months should suffice. Conversely, should you be a single parent, there is much more risk; therefore, 6 months is necessary.

IMO, the Emergency Fund is most often overlooked as most folks want to jump in and start investing. Yes, I know an Emergency Fund isn't sexy, but it is crucial. In fact, it is inappropriate to begin investing prior to building your cash reserve.

Little Fish

[seaside2]

LF is right on.

Also, if you are in a profession where finding a new job takes a while, 6 months may not be enough, especially in today's economy.

[scooterbug44]

Does the "emergency fund" have to be a dedicated cash reserve that would last you 3-6 months or do you just need to always have that amount liquid?

[Little Fish]

Scooterbug:

To answer your question, you should always maintain a dedicated cash reserve of 3-6 months of Fixed/Variable expenses. The reserve must be in highly liquid short term securities, such as money market funds. It is also possible to create a short term CD ladder for a portion of the funds, but that gets a little technical.

If ever you dip into the reserve, your first priority should be to bring your balance back to target.

Little Fish

[seaside2]

And this is why a budget is so critical so you know how many $ you need to have to cover at least the fixed expenses and most of the variable.

When you are out of work, some of the variiable can be eliminated, but yopu also have to think ahead for things like insurance, job hunting expenses, etc.

For example COBRA requires (under most circumstances) that if your former employer had health insurance that they have to offer it to you for a period of time, but not at the rate you were paying earlier. In most cases, the employer pays a large portion of the insurance, typically 80%. Now all of a sudden, your insurance goes from 20% of the premium to 100%, a 5 times increase. $200/month before, $1000 per month after.

[30A Skunkape]

Scooter-this is where I set up our emergency fund. I got turned on to it by Clark Howard. 4.75% savings account, all online, FDIC protected, hooked-up to your checking account so you can transfer at will, no minimums or fees. Makes it easy to have a little cash on hand if needed!
https://www.emigrantdirect.com/Emigr...tWeb/index.jsp

[scooterbug44]

My parents and grandparents were very good about teaching us to plan for the future/outright planning for us.

Grandpa & grandma got us life insurance when we were little and our Xmas gift every year is that the premium is paid. Very cool present once you're old enough to realize the financial implications of it - not so much when you're 8 and they're telling you one day you can borrow against it for your first home or cash it in in an emergency etc!

[Beachbummett]

Best financial advice I ever got was from my Grandfather who raised me (this will come as a shocker for those that know me, believe or not...I try to go by these) he never owed a dime in his life and raised 4 children, 2 grandchildren and ran a succesful business.


1) If you don't go shopping you won't spend any money.

2) If you can't pay cash for it you can't afford it.

3) Don't worry about what anyone else has or does not have, just work hard and take care of your own.

4) Most things in life you dont' really "need"

FFF goes by the same rules, I guess that is why we get along....most of the time.

[SHELLY]

Since Gore invented the internet, there is no reason for folks to claim finanical ignorance anymore.

ALWAYS be a skeptic in matters dealing with your money. Research, research, research....before--(repeat)--BEFORE you jump into any financial dealings and sign your name on the dotted line.

Understand how the terms on your credit card work.
Understand how your bank applies interest to your savings.
Understand how your mortgage works.
Understand how your loan rates are computed.
Understand how your IRAs/401k and other retirement plans work.
Understand how mutual funds/stocks/bonds work.
Understand how your mutual fund company/broker charges expenses.
Understand how you can be scammed by "financial advisors"
Be wary and question the latest "investment du jour."
Don't take financial risks that are outside your comfort zone.
Upon reaching a financial comfort zone, spend on experiences...not "things."

.



.

[fisher]

In addition to all the advice above, most of which is good--

If you are a person of means, don't limit yourself to giving 10 percent to charity.

Ditch the debit cards and use a credit card instead, BUT pay off the credit card each month to avoid all interest charges. Credit cards provide much more legal protection than debit cards.

[elgordoboy]

Make it faster than you can spend it

[Babyblue]

How Ironic.

The Oct. 2007 issue of "Boating Industry" magazine just arrived
and there on page 10 is the following:



"the majority of the American population falls into the "spender" category, and our economy is forever grateful. Spenders are not afraid to leverage and don't tend to wait to jump on a great deal or a possible opportunity. They will spend money without reserve and that is where things can become dangerous. Spenders may not look at all the factors involved, including whether or not they have the money to spend or if now is the time to spend it. They are usually very willing to use credit to get immediate gratification."


"The polar opposite of this is, of course, the "Saver." the saver tends to be responsible, stable and secure. These people often have cash available to use if they are convinced to invest it and, if they must finance, they usually qualify for excellent terms. Savers are often able to sail through setbacks and slow seasons without losing much sleep. After all, they are prepared.
The downside is that they may hesitate to jump on opportunities or wait until it is not such a good deal, and their returns can reflect this slow, small, albiet steady growth."




What is being discussed here is boat dealerships, but it all rings true for
individuals as well.

Find your own balance

Who read about a depreciating asset like a boat?

[spinDrAtl]

My parents and grandparents were very good about teaching us to plan for the future/outright planning for us.

Grandpa & grandma got us life insurance when we were little and our Xmas gift every year is that the premium is paid. Very cool present once you're old enough to realize the financial implications of it - not so much when you're 8 and they're telling you one day you can borrow against it for your first home or cash it in in an emergency etc!

I have to disagree with this. Life insurance for children is a bad 'investment', if it can even be called that. There is never a need to insure children with life insurance as life insurance is for replacing lost income. Typically the fees are high on that type of insurance and the 'investments' do not necessarily offer the options that may be best. The time for life insurance is when an adult is earning an income that would need to be replaced should something happen. Many financial planners do not even recommend life insurance for single income earning adults who have no families or dependents.

Better to invest in a no-load indexed mutual fund or set up a custodial account. Even something like buying shares of companies the children will understand - McDonalds, Hasbro, yadda yadda (throwing out names - do your own research) is way better than insurance.

Disclaimer: This is not financial advice, only my opinion. Do your own due diligence.

[beachmouse]

In terms of emergency funds, if you live down here or in some other hazard-prone area, keep the first $1,000 in an account where you can turn it into cash in less than 15 minutes' notice (ie. some sort of standard bank account where you can pull it out of an ATM) Because there may come a time when you really do need it that quickly.

[seaside2]

I agree about the life insurance for kids, etc. If you buy life insurance, by term life, not whole life and invest the difference. Shop the stuff on the net and you can get it for 30 ents on the dollar as compared to local agents.

Use due diligence in all that you do.

Don't let things just lay there, look at them constantly to make sure things haven't changed. React to those changes.

Leave information regarding your finances where a responsible party can deal with them if you are incapacitated. Durable power of attorney and all that.

[Beachbummett]

Always copy your credit cards, front and back, and keep them in a safe place (we put ours in a fireproof safe) in case you ever lose a purse or wallet.

[dsilvar]

"Upon reaching a financial comfort zone, spend on experiences...not "things."
said Shel....
Off to Australia for X'mas and New Year!!
Nice being at zero debt. Highly recommend it!

Of course I could be living on 30-A and be in debt!

[pmd8]

I try not to buy anything new. It saves money and helps reduce the use of our dwindling resources and the amount put into a land fill.

It's great when I get something like my HDTV and almost new couch for 20 cents on the dollar because the previous owner had to have the latest model. eBay and Craigslist have saved me a lot of money.

Same goes for cars. You take a huge hit if you buy or lease a car and get rid of it in 2 years.

You can also get new and used clothing off eBay. I hate going shopping and it saves on the gas.

Don't have kids. They're very expensive.

Lastly, read "The Millionaire Next Door".

[Smiling JOe]

cut up those fake credit cards, aka - debit cards. If a thief gets the numbers, you are screwed until you sort it out with the bank, and all of your other checks will bounce, then you will pay insufficient fund charges for each bounce. By using a real credit card or charge card (like the traditional AM EX), your checking account is protected, because you can contest any credit card charges prior to paying them. Pay off the full balance monthly. Also, many credit cards like Am Ex will double the manufacturer's warranty on many items purchased, and will also cover the purchases from theft or loss with certain limitations.

Go with an awards card which puts cash back in your pocket. You should be able to find them without annual charges.

From ClarkHoward.com:

Oct 15, 2007 -- J.D. Power names best and worst credit cards
Several weeks ago, Clark told you that Consumer Reports rated the best and worst credit cards in America. The single best card was the USAA Federal Savings Bank MasterCard, while all cards issued through credit unions came in at No. 2. Meanwhile, the big banks that issue the bulk of cards in America got stinky scores. Now there's a new survey out from J.D. Power and Associates that corroborates the findings of Consumer Reports. The J.D. Power tally focused on the big names only and is topped by American Express and Discover. On the bottom of the heap, J.D. Power says HSBC is the worst, followed by Bank of America and Capital One. That's very similar to what Consumer Reports said in ranking Capital One as the worst followed by Bank of America. Meanwhile, Citibank, Chase, Washington Mutual and Wells Fargo all got lousy scores from J.D. Power even though they came in near the top of the tally. So the important thing to note is that you should get your credit card through a credit union if you have access to it. Don't go through one of the giant monster mega-banks. Size does not equal quality in the world of credit cards.

[rancid]

cut up those fake credit cards, aka - debit cards. If a thief gets the numbers, you are screwed until you sort it out with the bank, and all of your other checks will bounce, then you will pay insufficient fund charges for each bounce. By using a real credit card or charge card (like the traditional AM EX), your checking account is protected, because you can contest any credit card charges prior to paying them. Pay off the full balance monthly. Also, many credit cards like Am Ex will double the manufacturer's warranty on many items purchased, and will also cover the purchases from theft or loss with certain limitations.

Go with an awards card which puts cash back in your pocket. You should be able to find them without annual charges.

From ClarkHoward.com:

Oct 15, 2007 -- J.D. Power names best and worst credit cards
Several weeks ago, Clark told you that Consumer Reports rated the best and worst credit cards in America. The single best card was the USAA Federal Savings Bank MasterCard, while all cards issued through credit unions came in at No. 2. Meanwhile, the big banks that issue the bulk of cards in America got stinky scores. Now there's a new survey out from J.D. Power and Associates that corroborates the findings of Consumer Reports. The J.D. Power tally focused on the big names only and is topped by American Express and Discover. On the bottom of the heap, J.D. Power says HSBC is the worst, followed by Bank of America and Capital One. That's very similar to what Consumer Reports said in ranking Capital One as the worst followed by Bank of America. Meanwhile, Citibank, Chase, Washington Mutual and Wells Fargo all got lousy scores from J.D. Power even though they came in near the top of the tally. So the important thing to note is that you should get your credit card through a credit union if you have access to it. Don't go through one of the giant monster mega-banks. Size does not equal quality in the world of credit cards.

Why are credit union cards better? I pay off the balance every month so interest rate is not a concern. Are there other benefits that make credit union cards more attractive ( custimer service, more cash back, better warranty coverage)?

[Capricious]

Anyone mention that buying lottery tickets is a waste of a dollar?

http://portofmissingmen.com/idiot_tax.htm

[Mango]

Mangy's financial tip of the day:
"Don't forget to take the quarter out of the shopping cart. Then use it to buy bubble gum."

[Smiling JOe]

I've never found money in a shopping cart. BTW, doesn't gum cost around $1.06 a pack?

Mangy's financial tip of the day:
"Don't forget to take the quarter out of the shopping cart. Then use it to buy bubble gum."

[Mango]

I've never found money in a shopping cart. BTW, doesn't gum cost around $1.06 a pack?

Some grocery stores make you put a quarter in a slot to release the shopping carts. When you return it, you get your quarter back.
The bubble gums machines near the doors are a quarter for a big blob of gum.

[Miss Kitty]

Some grocery stores make you put a quarter in a slot to release the shopping carts. When you return it, you get your quarter back.
The bubble gums machines near the doors are a quarter for a big blob of gum.

You are back in Yankee land, aren't you?

[Beachbummett]

You are back in Yankee land, aren't you?

They have to pay for a shopping cart in Yankee land?! WTH?!

[Miss Kitty]

They have to pay for a shopping cart in Yankee land?! WTH?!

...we need to give Mango a wide berth!

[bdc63]

There is a real likelyhood that this 'credit crunch' in the US could turn into the real-deal crisis that many have been prediciting. In addition, it is a near certainty that the US$ will continue to depreciate.

Given those two assumptions, these are my recomendations for financial prudence:

1). In the event of a banking crisis, you will not be able to access you money in the bank for some period of time. Keep 4 to 8 weeks worth of expenses in cash in a waterproof/fireproof safe in your home.

2). Have $10K in physical gold for each person living in your household.

3). When people like Greenspan are saying that the US$ could depreciate by 50%, take note. Diversify your savings into a basket of foreign currencies (currency ETF traded like stocks make this easy). This may be the only way to keep your money's purchasing power.

And other more generic ideas:

- have a large vegetable garden in the summer, and can/freeze.
- plant fruit trees in your yard.
- become obsessed with turning out lights in rooms in your house that aren't in use
- try to wait longer in the spring without turning your air conditioner on by installing ceiling fans and table fans in each room.
- either walk or bicycle to run errands when you can, and always try and combine atleat two trips/tasks in one when you drive
- if you have young kids, start a program with other parents where you pass down hand-me-down clothes and toys rather than buying everything new
- become less dependent on premade food items (ie. cook from scratch)
- spend a weekend going to yard sales and thrift stores -- it takes alittle effort but you'll be amazed at what you find
- instead of dropping off your junk at Goodwill, have a yard sale
- get a library card and use it, rather than going to the bookstore (or video store)
- always buy Craftsmen tools and other things with lifetime warrenties (my mother just returned a broken rake and garden hose to Sears, and they replaced them for free because they were Craftsmen).

[SHELLY]

Damn, BDC, your dire predictions make mine look like a skip down Sugerplum Lane.

10K in physical gold for each person in your house?

Kinda makes my suggestion of just donning Tinfoil hats seem a bit impuissant.



.

[elgordoboy]

At least for the real estate leveraged and over leveraged the falling dollar is hedged. Hopefully jobs stay okay. No need to post the most recent jobless claims..saw 'em.

[Bobby J]

Buy a new surfboard every quarter!

[Pirate]

Why would you need 10k in physical gold for the Goodwill store or the vegetable garden?

[InletBchDweller]

Upon reaching a financial comfort zone, spend on experiences...not "things."

I have to say I LOVE this statement. Can I put it on a t-shirt???

In terms of emergency funds, if you live down here or in some other hazard-prone area, keep the first $1,000 in an account where you can turn it into cash in less than 15 minutes' notice (ie. some sort of standard bank account where you can pull it out of an ATM) Because there may come a time when you really do need it that quickly.

I always keep cash hidden on my property somewhere... (wolley swamp)

Why are credit union cards better? I pay off the balance every month so interest rate is not a concern. Are there other benefits that make credit union cards more attractive ( custimer service, more cash back, better warranty coverage)?

I wonder this as well?? I pay my cards off so I avoid fees and I feel I get great points to use on merchandise. What do credit union cards offer that is better for me ??

You are back in Yankee land, aren't you?

That is what I was thinking...I have never had to put a deposit in on a grocery cart!!!

[Mango]

That is what I was thinking...I have never had to put a deposit in on a grocery cart!!!

Only had to once in New Jersey at a large grocery store.
I said Mahna Mahna.

[SHELLY]

I have to say I LOVE this statement. Can I put it on a t-shirt???

A T-Shirt is a "thing"...If you must, just print the statement on your chest with a Sharpie and use the $12 to rent a good movie, buy popcorn & soda and enjoy an evening with friends & family.


.

[bdc63]

Damn, BDC, your dire predictions make mine look like a skip down Sugerplum Lane.

10K in physical gold for each person in your house?

Kinda makes my suggestion of just donning Tinfoil hats seem a bit impuissant.
.

Yeah, there is a real good chance that I read too much Peter Schiff, and definately need to stop tuning into Alex Jone's radio show. But If you know of any way for the US to reverse course and avoid this economic "perfect storm" ahead, I'd love to hear it. The oh mighty dollar is taking on water, and I fear that ship is going down.

If we get to a point where nobody wants to accept devalued dollars anymore, it just might be nice to have some gold coins in your pocket.

[Bob]

Yeah, there is a real good chance that I read too much Peter Schiff, and definately need to stop tuning into Alex Jone's radio show. But If you know of any way for the US to reverse course and avoid this economic "perfect storm" ahead, I'd love to hear it. The oh mighty dollar is taking on water, and I fear that ship is going down.

If we get to a point where nobody wants to accept devalued dollars anymore, it just might be nice to have some gold coins in your pocket.

What's the better alternative to the dollar. Who has the perfect economy and currency. What country using the Euro has solid GDP growth? The doom/gloom thing is caused by mass emotion as much as fundamentals. Three quarters of our economy is determined by individual buying decisions influenced by the greed/fear tug of war.

[SHELLY]

Yeah, there is a real good chance that I read too much Peter Schiff, and definately need to stop tuning into Alex Jone's radio show. But If you know of any way for the US to reverse course and avoid this economic "perfect storm" ahead, I'd love to hear it. The oh mighty dollar is taking on water, and I fear that ship is going down.

If we get to a point where nobody wants to accept devalued dollars anymore, it just might be nice to have some gold coins in your pocket.

I enjoy Peter Schiff too.

I think we have indeed hit on the fringes of economic meltdown--with more to come--and we'll see a lot of people financially crushed. The only thing I think will turn this ship around is a finance renaissance where a majority of folks decide they will no longer be slaves to debt, greed, want and "keeping up with the Jones'" (ala the hippy movement in the 60's).

There is currently a move away from McMansion-style housing--it is a start.

.

[Capricious]

"..But If you know of any way for the US to reverse course and avoid this economic "perfect storm" ahead, I'd love to hear it. The oh mighty dollar is taking on water, and I fear that ship is going down...."


"...I think we have indeed hit on the fringes of economic meltdown--with more to come--and we'll see a lot of people financially crushed. The only thing I think will turn this ship around is a finance renaissance where a majority of folks decide they will no longer be slaves to debt, greed, want and "keeping up with the Jones'" (ala the hippy movement in the 60's)..."





Geeez

I hate to be the optimist here but
I don't see this as armagedon but rather just part of
the continueing cycle of boom and bust that is an old, old
story in American finance.

Now, the bigger the boom, the bigger the bust. And we have
been through one heck of a big boom so we can expect one
god-awfull bust but at some point (don't know when) things
will get back to boom again.

Just a never-ending cycle of cycles.

A pendulum swings both ways.

(But I do not)

[SHELLY]

Geeez

I hate to be the optimist here but
I don't see this as armagedon but rather just part of
the continueing cycle of boom and bust that is an old, old
story in American finance.

That's the rub...it's not "Old American Finance" anymore--it's Global Finance now.

America pulled itself up by its bootstraps after the depression because we were an industrialized nation....that's gone. (Instead of manufacturing goods, we're now the global suppliers of debt.)

America was able to get over housing setbacks with just a few banks and individuals going under (because banks held the mortgage notes in-house)...that's gone.

Americans used to get by in bad times between jobs by living off their savings.....that's gone.

Americans used to work for a company for years and years and receive medical benefits and a pension....that's gone.

Financially speaking, THIS TIME--it REALLY is different. We're entering into uncharted financial territory. If America is going to pull out of this economic mess quickly, Americans are going to have to change lifestyles first.
.