Debit versus Credit

Top 5 Things You Shouldn’t Skimp On During Holidays
Today we’re featuring a guest post from Ally at HowtoSaveMoney.com.au

If you read personal finance blogs around the holiday season, you’d think they are more concerned about saving money and to actually enjoy the holidays. “It’s commercialization”, they said. Or, “You don’t need gifts.” Well, those are technically true but there is a line between being frugal and being cheap.

Here are the top 5 things you should not skimp on during the holidays so that you don’t cross that line:

Charity

It’s a cliché that the secret to living is giving but that doesn’t make it less true. When money is tight and the economy tanks, the first in line to suffer are the charities – simply because that’s the expense people cut out first.

But what if no matter how much you are making you contribute a certain percentage of your money to charity? Try it out this holiday season: your $10 can change a person’s life and that fact alone puts your troubles in global perspective.

Healthy Food

Studies have shown that people tend to gain weight over the holiday season because they put their diet on hold. Instead, they stuffed themselves with turkey, cookies, muffins and all the “traditional” foods.

But have you ever stopped to think that those “traditional foods” aren’t so traditional? Don’t you think the holiday season is the best time for you to get healthy? After all, all those distant relatives are coming and you don’t want them to see that new tire around your waist, do you?

Family Safety

The holiday season is also a time for parties, decorations and… accidents. So don’t try to skimp on things like child proofing your home if you have a toddler at home. And if you’re busy with the shopping, and the decorations, and your work, make sure you get someone to take care of your child – even if he seems old enough to take care of himself.

Trust me, nothing spoils the holiday mood more than accidents.

Debt

And instead of getting into more debt over the holidays, why not pay it off? Remember that debt is costing you money. A lot of people skimp on their repayments over the holidays thinking they would “get to it” when the new year dawns. But when did that ever work out?

If you add to your debt over the holidays, you’ll probably spend the rest of next year paying it off. Not only that, that $50 purse you bought with credit will actually cost you more like $70 when interests are calculated.

Gifts

Lastly, there’s never a better time to show your appreciation to the people you love. Of course, that doesn’t mean you need to spend a fortune on gifts. In fact, a handmade gift is almost always better – provided you actually put in the effort. (For example, I just learned of papercraft and I think it makes great gifts!)

And if you think you don’t have the skills to make a handmade gift, try giving your most precious resource: time. Sometime all your family wants is a weekend away, camping. Or perhaps go on a fishing trip with your long lost buddy? There are plenty of ways to gift without spending a fortune.

Ally is part of the team that manages personal finance blogs in Sydney, Australia, which feature tips about how to save money and budgeting spreadsheet . Before joining the team, she was a Media Planner in McCann Worldgroup Philippines, Inc., with award-winning executions, including the Levi’s 501 “Live Unbuttoned” global campaign.
December 16, 2011
The Results Are In On My Prepaid Cellular Experiment
Three months ago I blogged about an experiment that my wife and I would be running: switching to a prepaid mobile plan with the intent to save money. The results are in and they aren’t exactly what I expected. Three months ago I hypothesized the following:

Worst case scenario… I’m figuring we’ll usually be fine with about $60 dollars or so a month to cover all the minutes, texts and data we’ll need.

After keeping track of our expenses over the past three months I’ve come up with some numbers, I’ll throw them down here for you number geeks. Check it out:

In the month of September my phone bill (not including my wife – there is no family plan on prepaid) came out to $79.75. This was for $25 in voice (at .10 cents a minute), 600 MB of data and 1000 text messages. In October my total bill came to $38.32. This covered $25 in voice and the bare minimum in data and text (200 messages and 10MB of data). In November my total bill came to $60.22, which covered $25 in voice, 500MB of data and 200 messages. My average monthly cost? $59.43.

My wife’s phone bill came to $35.94 in September, $32.84 in October and $38.32 in November. She bought 1000 text messages two of the three months and $25 worth of voice all three months. Her average monthly bill came to $35.70.

That gives us a combined average monthly phone bill of $95.13.

My estimate back in early September when I wrote the last post on this? I’ll quote for you again:

…about $60 dollars [should] cover all the minutes, texts and data we’ll need.

Boy was I off on my estimates. Here’s what I think went wrong.

I underestimated how many of our minutes we weren’t using on the normal plan due to free nights and weekends.

I underestimated how many text messages my wife sends a month. 😛

I overestimated how well google voice would work (I tried to use it whenever I was connected to a wi-fi network for my voice calls).

What am I going to do now?

Technically the prepaid plan is still a decent amount cheaper than the postpaid plan I used to have. Our average cost has been about $95 a month. Our old phone bill used to be about $120. So we’re still saving $25 a month. Not too shabby, and honestly if you don’t mind dealing with the frustrations of a prepaid plan it’s an easy way to cut down your expenses in a place you otherwise probably wouldn’t have thought to look.

What were my biggest frustrations with the prepaid plan?

Losing visual voicemail on my iPhone

Having two monthly bills

Having to refill the feature packages (data and messaging) every month before a certain date (if you don’t you lose what you bought and haven’t yet used)

Having to estimate how many minutes, messages and how much data I’d need every single month

Having to watch my data, voice and message usage on a weekly (sometimes daily) basis

Frustrations 3 and 4 could be ironed out eventually, for the most part. If I had signed up for automatic refill on the feature packages I wouldn’t much have to worry about frustration number 3. Over time my usage would probably level out (to a certain point) as well, so I would likely be able to stop thinking about how many minutes/messages and data to buy as well, so this would lessen frustration number 4.

Frustration number 2 honestly isn’t that big of a deal, so whatever. Losing visual voicemail on top of everything though (including not cutting my phone bill in half like I was hoping) seems to have put the final nail in the coffin for me. I’m going to switch back to a postpaid cellular plan and stop worrying about counting my minutes, messages and data (and get my visual voicemail back!).

Anyone else out there try this in the past and decide to go back, or considering switching to prepaid to cut costs? I’d love to hear your experiences.
December 9, 2011
How Do I Save For My Child’s Education?

My sister-in-law told me the other day that she and her son’s father were interested in establishing some type of savings/investment account for her son’s future, meaning more than likely college. She asked me what her options were and if I had any suggestions on the best path to take. At the time I told her I honestly didn’t know the best plan for her at the moment, but I’d probably recommend some sort of tax-advantaged college savings plan and that I’d look into the different options for her.

I did a little research and was reminded of the options: the Coverdell Education Savings Account and the 529 College Savings Plan.

Here’s the differences

I don’t want to go a lot into the minor differences between these two accounts, suffice it to say that the Coverdell Education Savings Account provides you a tax-advantaged way to save for college and other secondary education expenses (boarding school, etc) and can be invested in just about anything (mutual funds, stocks, bonds, cds, etc). The Coverdell Education Savings Account also has a $2,000 a year contribution limit. The 529 College Savings Plan is also a tax-advantaged way to save for college, but is more restrictive on what qualifies as an education expense (mostly just college tuition here, folks). The 529 plan doesn’t have a maximum contribution limit but often will have higher management fees (this plan is only professionally managed — no outside investing here).

That’s your rundown of the major differences between the two plans. So what’s right for your child(ren)? It’s definitely going to depend on your financial situation, especially your tax situation. Consult a tax advisor when choosing your options. Seriously. Some things are better left to the professionals.

How to open a college savings plan

All that being said, once you know which plan makes the most sense you’ll want to go ahead and open an account. If you like your bank/credit union check with them first to see what options they have. There’s a real good chance they’ll offer it in-house or refer you to a specialist near you that can assist with the process. If you don’t like your bank then don’t talk to them; go straight to one of the investment firms. If you’re eligible call USAA; they should be able to help you out with either the 529 or Coverdell. If you’re not military check with Fidelity or Vanguard to open a 529 account and Scottrade or Edward Jones for a Coverdell. There are certainly other options besides who I mentioned, so feel free to shop around for the option that makes the most sense for you.

If you are going the 529 route you won’t get much input on how the money is invested, so take what makes the most sense based on your timeline and leave it at that. If you are going the Coverdell route you’ll still want to consider how long the money will have to grow, and based on that choose your investments. If you’ve got longer than 5 years you’re probably better off with a higher-risk investment. Don’t make it difficult and don’t bother trying to beat the market. Just invest the money in an index fund and leave it alone. If your investment timeframe is less than 5 years you might consider investing part of the money in something a little more stable, so as to avoid losing any capital. CD’s, money markets, etc would work well here. An advisor at the company you are opening the account with can certainly provide more insight on what investments make sense.

That’s really about all there is to it. Hopefully this will be helpful to those of you who are interested in opening some sort of college savings plan for your children. Let me know if you have any questions in the comments below, or feel free to shoot me an e-mail.

December 7, 2011
Why Don’t You Have An Emergency Fund Yet?

A single mom’s car breaks down and the repair is going to cost her $500 dollars. If she doesn’t have the money in an emergency fund then what choice does she have but to borrow the $500, as she can’t get to work without her car? Maybe she has good enough credit where she can get a loan from the bank at a fairly reasonable rate. Maybe she has a credit card with a high enough limit that she can get the cash off of the card (again, with a fairly reasonable rate). What if neither of these are an option though? What if a payday loan is her last and only option?

Finding yourself in an emergency situation requiring hundreds (or thousands) of dollars is never good. It’s made all the worse when you don’t have any money set aside for emergencies. If you don’t yet have an emergency fund then I have to ask… Why not?

A while back I read that saving the first $500 is the hardest. It’s absolutely true, but definitely possible. It doesn’t matter who you are and what your situation is there is no reason that you can’t start saving up for an emergency fund. Cut expenses somewhere, anywhere, if you have to. Better yet, earn more money than you make now.

Easier said than done, absolutely. It’s not impossible though. If you’re not saving an emergency fund already then stop making excuses and just do it.

I’d love to hear your successes, failures, stories, etc with regard to emergencies and emergency funds. Please leave your comments below.

I’ll end this with a bit of humor. Here’s a quote from the show 30 Rock (somehow I ran across this while doing research):

You wanna party? It’s $500 for kissing and $10,000 for snuggling; end of list. – Liz Lemon

I’ve got to ask Liz, with $500 kissing and $10,000 snuggling who exactly is your target audience?

November 30, 2011
I’m Thankful For

Happy Thanksgiving weekend everyone! I thought it’d be a nice time to publicly share the things I’m thankful for with all of you. This will probably be just a short little post, so bear with me. It’d be awesome to hear from some of you what you’re thankful for as well.

I’m thankful for my new job, my wife, my lovely house, my garden, my family and the ridiculously awesome weather this time of year in Phoenix.

I’m thankful for turkey and the nap that results from eating way too much of it in one sitting. I’m thankful for Lowe’s, Best Buy and Amazon for having so much awesome stuff (of course on the flip side I’m not too thankful that they keep draining my wallet because they have too much cool stuff). I’m thankful for Duct Tape, because it can basically do anything (including remove warts – gross!).

I am thankful for the fire pit in the back yard where I can sit around the fire, talk to friends & family and toast marshmallows (which result in Smore’s). I’m thankful for Smore’s as well, although that’s probably a given. I’m thankful for Skyrim, because it’s fun to explore new worlds where I can shoot fire and lightning out of my hands. I’m thankful for Avatar: The Last Airbender (NOT the movie though) because it’s just as much fun to watch quirky characters in an imaginative world as it is to play them.

Finally, I’m thankful for this blog and for all of you as well. I’ve learned a lot and really enjoyed myself over the past several years blogging and I can’t imagine my life without it. Happy Thanksgiving everyone and Happy Holidays as well!

November 25, 2011
Money Isn’t Worth Much If You Never Get To Enjoy It

Many things frustrate me. One of those things is that so many people emphasize earning money over everything else, including personal time for self development, hobbies, relaxation, philanthropy, vacations, family, etc. I want to talk a bit about this obsession with earning more and more money and spending less and less. Don’t get me wrong; I’m all for saving, investing, building for the future, but at what point are you too stingy with your money?

Money isn’t worth much if you never get to enjoy it.

Put simply, Money: Enjoy It.

We only live once so it would behoove all of us to take time out of our ever-busy lives to stop and smell the money. I’ve come up with a few Do’s and Don’ts that we could probably all benefit from once in a while.

Don’t be a workaholic

Ebenezer Scrooge: Rich. Lonely. Mean.

Some people have to work 80+ hours a week between two or three jobs just to get by. If you don’t have to work that often just to put food on the table and pay your bills then why would you? I’m not saying to be lazy, I’m just saying you should step away from your desk and let yourself do something else besides work every once in a while. Don’t be a workaholic, because you might end up like this guy if you are:

Don’t be too frugal

You work hard for your money. There are probably things that you really enjoy, and things you don’t care much about. Spend your money on stuff you enjoy and cut back on stuff you don’t. Why cut back on everything when it’ll only make you miserable? If you can do without your morning Starbucks but really enjoy going to the movies, bars, etc then skip Starbucks and go out!

Do take a holiday

Make it a point to see the world, or at the very least something outside of the town or city you live in. I make it a point to go somewhere I’ve never been before at least once a year. It’s not always something crazy or exotic, but for the most part I’ve managed to stick to this ‘rule,’ and I plan to continue doing so. I think everyone could benefit from a little time away from home once in a while, so that’s why I brought this up.

Do donate your time and money

While spending money on yourself is absolutely important, I think donating your time and money is of equal importance. My wife and I make it a point to donate to charities regularly (although we could do better). We also enjoy doing service through places such as Habitat for Humanity, etc. Honestly I thought about not even bringing this up, because I hate feeling like I’m tooting my own horn, but ultimately I thought philanthropy is too important (in my eyes at least) to not mention.

Would you add anything to my list of Do’s and Don’ts?

November 23, 2011
Thank you blog for keeping me in line

I finally called to start the process of rolling over my 401k and it’s all thanks to my blog. Well, sort of. I’m a wicked procrastinator, so last week I figured I’d write a post about how I need to roll over my old 401k and I set a goal for myself to do it within a week. It’s been a week now and I’m proud to report that I called USAA and got the process started. Granted it will take 2-4 weeks for the account to fully roll over, but at this point all the hard work is now out of my hands.

I couldn’t be happier.

Through all of this I was reminded how important it is to know your own strengths and weaknesses. Like I said already my weakness is procrastination. Without something to remind me or push me into doing something I know I need to do, I’ll likely keep putting it off over and over and over again.

I knew I needed to do this. I knew what I needed to do. I just couldn’t find the inspiration – if you will – to actually get it done.

Here’s where psychology comes into play, along with the benefit of recognizing your strengths and weaknesses. I knew that if I held myself accountable (which I did through my blog post last week) that I would get it done. Sure enough I did.

Human behavior (psychology) is something that personal finance bloggers don’t talk about nearly enough. As Ramit said during a speech at the financial blogger conference (I’m paraphrasing here): people know they need to get out of debt, and they generally have the knowledge on how to pay it off as well, but they just can’t find the will to actually get out of debt.

Why is that? Ultimately it’s just who we are. The best way to overcome that is to figure out what your shortcomings are and then find ways to overcome them. That’s what I did to help with my procrastinating. That’s what I’d like all of you to do as well.

November 15, 2011