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.
Replies
64
Beach Fanatic
"..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/articles/2006_Issues/jfp0106-art6.cfm
Darn.
Might I suggest this for a simple, painless evaluation
of where you are and where you should be:
http://www.fpanet.org/journal/articles/2006_Issues/jfp0106-art6.cfm
Meow
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.
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.
Beach Comber
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"!
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"!
Beach Fanatic
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.
Beach Fanatic
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.
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.
SoWal ExpertAuthor
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.
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.
Beach Fanatic
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
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
Beach Fanatic
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.
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.
SoWal Insider
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.
Beach Lover
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
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
Beach Fanatic
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.:shock:
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.:shock:
SoWal ExpertAuthor
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?
Beach Lover
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
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
Beach Fanatic
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.
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.
Skunky
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/EmigrantDirectWeb/index.jsp
https://www.emigrantdirect.com/EmigrantDirectWeb/index.jsp
SoWal ExpertAuthor
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!
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!
SoWal Insider
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.
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.
SoWal Insider
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."
.
.
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."
.
.
Beach Fanatic
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.
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.
Beach Fanatic
Make it faster than you can spend it
Beach Fanatic
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?
Beach Fanatic
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.
Beach Fanatic
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.
Beach Fanatic
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.
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.
SoWal Insider
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.
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