Life can be complicated. Even with the best of intentions, we become busy and sometimes things slip. When it comes to your finances, letting things slip can be costly.
To prevent late fees, interest, etc. automate as much as you can. Many times you can use a free online bill pay system from your bank. Many companies allow you to register a credit card to charge the balance to (just make sure you pay off that credit card every month). Variable expenses, like the electric bill, can be automated by figuring out what the average over the last year is, round it up to the nearest $5 and then automate paying that (wait until the bill is less than the average to start paying the average).
You can also automate your savings. Many banks have free, regular transfers. Set up an account for a rainy day and have it automatically pull money from your checking account each month (right after payday). Set one up for college funds, new car, etc. Whatever you know you are going to have to save up for.
Make life simpler and automate everything you can. What else have you found to automate?
Friday, October 1, 2010
Wednesday, September 1, 2010
Once again, time for a Credit Check
If you checked your credit history on AnnualCreditReport.com in January and May with just one of the three credit reporting agencies each time, it's time to get the last free report this year. Remember why it's important to check your credit history and what to look for in your credit report.
Also, if you've created an account with CreditKarma.com, make sure you visit every once in a while (at the most monthly) to update your score and see how your actions are affecting your score.
Also, if you've created an account with CreditKarma.com, make sure you visit every once in a while (at the most monthly) to update your score and see how your actions are affecting your score.
Sunday, August 1, 2010
Save your way to poverty
"Look how much money I saved!". People love a good deal, but is it really a good deal if you don't need it, or weren't going to buy it anyway? Many times it's really not such a great deal.
Just because something is bulk or store/generic brand doesn't necessarily mean it's a better deal. We've been conditioned to think that if you buy more at a time, or an off-name brand that you will get more for less money, and retailers take advantage of this by, every once in a while, making it not such a great deal.
If you actually do get more for less money when buying in bulk, will it cost you less? Will it be lost, expire or go bad before you use all of the bulk? Are you going to use it more often because now you have plenty? Cell phone minutes are a great example. For just $10 more a month you get a trillion minutes. But can you get by with the lesser plan and save $100/year? Or texting, I text occassionally. Some months I spend enough to actually add texting to my plan, but overall, I don't text enough to make it cost less to add it to my plan.
You also have to consider the time-value of money. A dollar today is worth more than a dollar next year, and for two reasons. We continually keep improving technology, making thing faster, better and cheaper. This means that even though something is on sale now, it may be less expensive in the future. The other reason is that, due to inflation, the money will be worth less in the future. That means the money in your wallet now is very valuable. If you buy enough of something to last you 20 years, not only will it probably be cheaper in 20 years, but you no longer have that valuable today money, but instead have devalued future item.
Another trick retailers pull is to inflate the price so they can advertise huge discounts. This is very apparent in jewelry sales. Walk into just about any jewelry store without the intention to buy, and start looking at what you like. Ask to try it on. Watch as they start dropping the price. The more you seem to want to buy it, and the less you seem to be able to buy it, the more they seem to discount. Look at them pull out a calculator and "figure out the best price they can get you." It was marked up high in the first place so they can either make a huge profit on those who will buy at "retail" and be able to entice those who weren't going to buy with deals too good to pass up. This kind of thing is also prevelant in auto dealerships.
In the end, the bottom line is: are you actually going to spend less than you would have otherwise?
Just because something is bulk or store/generic brand doesn't necessarily mean it's a better deal. We've been conditioned to think that if you buy more at a time, or an off-name brand that you will get more for less money, and retailers take advantage of this by, every once in a while, making it not such a great deal.
If you actually do get more for less money when buying in bulk, will it cost you less? Will it be lost, expire or go bad before you use all of the bulk? Are you going to use it more often because now you have plenty? Cell phone minutes are a great example. For just $10 more a month you get a trillion minutes. But can you get by with the lesser plan and save $100/year? Or texting, I text occassionally. Some months I spend enough to actually add texting to my plan, but overall, I don't text enough to make it cost less to add it to my plan.
You also have to consider the time-value of money. A dollar today is worth more than a dollar next year, and for two reasons. We continually keep improving technology, making thing faster, better and cheaper. This means that even though something is on sale now, it may be less expensive in the future. The other reason is that, due to inflation, the money will be worth less in the future. That means the money in your wallet now is very valuable. If you buy enough of something to last you 20 years, not only will it probably be cheaper in 20 years, but you no longer have that valuable today money, but instead have devalued future item.
Another trick retailers pull is to inflate the price so they can advertise huge discounts. This is very apparent in jewelry sales. Walk into just about any jewelry store without the intention to buy, and start looking at what you like. Ask to try it on. Watch as they start dropping the price. The more you seem to want to buy it, and the less you seem to be able to buy it, the more they seem to discount. Look at them pull out a calculator and "figure out the best price they can get you." It was marked up high in the first place so they can either make a huge profit on those who will buy at "retail" and be able to entice those who weren't going to buy with deals too good to pass up. This kind of thing is also prevelant in auto dealerships.
In the end, the bottom line is: are you actually going to spend less than you would have otherwise?
Thursday, July 1, 2010
Cash into Trash
Robert Kiyosaki (author of the best seller Rich Dad, Poor Dad) wrote in his book Rich Dad's Guide To Investing that most people "turn cash into trash." This phrase really stuck with me. The money you spent in the last six months, what do you have to show for it now? Now don't get me wrong, it's good to spend some money making memories with family and friends. I think you should spend money on good foods that improve your health. There are valuable things that you should spend money on. But was any of the money you spent in the last six months spent on anything that has that much value, or more, now? Or was it spent on things that depreciate, go to the trash heap, go down the toilet or sit in your veins and around your waist.
Start spending money on things that will retain their value. Why sell your life for a paycheck that ends up in the dump?
Start spending money on things that will retain their value. Why sell your life for a paycheck that ends up in the dump?
Tuesday, June 1, 2010
Necessities
I've noticed that I've witnessed an amazing phenomenon many times in my life. Here is the story:
1. You find yourself having less money available (pay cut, job change, job loss, investment loss, increase in debt, etc.).
2. You make cuts in your spending to where you can just get by.
3. Something else happens that further limits your cash flow
4. You make cuts in your spending to where you can just get by.
Sound familiar? I've gone through it. I've seen a lot of friends go through it. Someone gets a 5% pay cut or their car dies so they finance another car, which drops their pay 2%. The words change but the tune is the same.
The really funny part is this, you were able to make small cuts to get back within your financial comfort zone each time. Somehow we each figure out a way to make ends meet.
Now the magical question: What if we put an artificial pressure on ourselves to do the same thing before there was an actual mini-crisis? What if we took 2% of our pay and, as Robert Kiyosaki says, paid ourselves first. Put it into savings or investment and do not touch it.
Imagine finding a way, somehow, to put aside an extra 1%, 2% or even 5% or 10%. Then figure out a way to live on what is left. Maybe start small, say 1%, and then increase it 1% every four months, six months or every year. You don't think that small amount will make much of a difference? Read The Slight Edge and see if you can say that it won't make much of a difference.
1. You find yourself having less money available (pay cut, job change, job loss, investment loss, increase in debt, etc.).
2. You make cuts in your spending to where you can just get by.
3. Something else happens that further limits your cash flow
4. You make cuts in your spending to where you can just get by.
Sound familiar? I've gone through it. I've seen a lot of friends go through it. Someone gets a 5% pay cut or their car dies so they finance another car, which drops their pay 2%. The words change but the tune is the same.
The really funny part is this, you were able to make small cuts to get back within your financial comfort zone each time. Somehow we each figure out a way to make ends meet.
Now the magical question: What if we put an artificial pressure on ourselves to do the same thing before there was an actual mini-crisis? What if we took 2% of our pay and, as Robert Kiyosaki says, paid ourselves first. Put it into savings or investment and do not touch it.
Imagine finding a way, somehow, to put aside an extra 1%, 2% or even 5% or 10%. Then figure out a way to live on what is left. Maybe start small, say 1%, and then increase it 1% every four months, six months or every year. You don't think that small amount will make much of a difference? Read The Slight Edge and see if you can say that it won't make much of a difference.
Saturday, May 1, 2010
Time to Check Your Credit History Again
If you checked your credit history on AnnualCreditReport.com in January with just one of the three credit reporting agencies, it's time to pick another one and get another free report. Remember why it's important to check your credit history and what to look for in your credit report. (See the January post on Credit Reports)
Another credit resource I've found very helpful is CreditKarma.com. They will give you your credit score free (in exchange for their site being filled with offers) and even give you a report card that can help you focus on what will help improve your score.
Here are some things I learned about my credit score:
* In the first two months (November and December 2009) that I used the service, my credit score went from 757 to 771.
* While my "Open Credit Card Utilization" is rated an A, it is more like an A- as I am one percentage point from being a B
* I thought my one late payment in the last decade would haunt me for seven years, it turns out I'm still an A in On-Time Payments (although an A-)
* My two C's are Total Accounts (not enough accounts) and Average Age of Open Credit Lines
It's funny because it's a catch-22 for my 2 C's. I'd need to open twice as many accounts as I have to get an A in Total Accounts, but then my Average Age of Open Credit Lines would go down to a D. I guess my strategy here would be to slowly acquire accounts (but not use them) so both scores go up slowly. At around 20 Total Accounts, every time I open a new account, it will set back my Average Age of Open Credit Lines by one month. Currently, in about 6 months the Average Age of Open Credit Lines should reach a B-. Then another two years to reach A-. However, to reach a B- on Total Accounts, I need another ten accounts and another twenty to reach an A-. Adding ten accounts would set me back about six months. So probably the best strategy is wait six months to get a B- in Average Age of Open Credit Lines and then over the next six months add about 10 new lines of credit. Both of my C's are MEDIUM weighted in credit score, so they are not really that big a deal.
Looking at the Total Debt distribution is also interesting. The average score for my total debt is 688. It seems there are two extremes. Either have less than $5,000 debt or have more than $150,000 debt. Both those debt ranges score around 700. Between $5,000 and $150,000 of debt, you start going down in credit rating. The people with the lowest scores have between $5,000 and $50,000 of debt.
Another credit resource I've found very helpful is CreditKarma.com. They will give you your credit score free (in exchange for their site being filled with offers) and even give you a report card that can help you focus on what will help improve your score.
Here are some things I learned about my credit score:
* In the first two months (November and December 2009) that I used the service, my credit score went from 757 to 771.
* While my "Open Credit Card Utilization" is rated an A, it is more like an A- as I am one percentage point from being a B
* I thought my one late payment in the last decade would haunt me for seven years, it turns out I'm still an A in On-Time Payments (although an A-)
* My two C's are Total Accounts (not enough accounts) and Average Age of Open Credit Lines
It's funny because it's a catch-22 for my 2 C's. I'd need to open twice as many accounts as I have to get an A in Total Accounts, but then my Average Age of Open Credit Lines would go down to a D. I guess my strategy here would be to slowly acquire accounts (but not use them) so both scores go up slowly. At around 20 Total Accounts, every time I open a new account, it will set back my Average Age of Open Credit Lines by one month. Currently, in about 6 months the Average Age of Open Credit Lines should reach a B-. Then another two years to reach A-. However, to reach a B- on Total Accounts, I need another ten accounts and another twenty to reach an A-. Adding ten accounts would set me back about six months. So probably the best strategy is wait six months to get a B- in Average Age of Open Credit Lines and then over the next six months add about 10 new lines of credit. Both of my C's are MEDIUM weighted in credit score, so they are not really that big a deal.
Looking at the Total Debt distribution is also interesting. The average score for my total debt is 688. It seems there are two extremes. Either have less than $5,000 debt or have more than $150,000 debt. Both those debt ranges score around 700. Between $5,000 and $150,000 of debt, you start going down in credit rating. The people with the lowest scores have between $5,000 and $50,000 of debt.
Thursday, April 1, 2010
Great Reads
I've often heard that "the only difference between the you of now and the you ten years from now is the books you read and the people you associate with." So make sure you spend time with people who are where you want to be and actively try to acquire their habits, thinking and perspective in the areas you admire in their life, and read great books that help you think differently. Here are some books I highly recommend out of my recent reading:
Twelve Pillars
Great story that teaches twelve principles of success.
Peaks and Valleys
Another story that teaches principles that help you stay on your peaks longer and get out of your valleys faster.
The Slight Edge
Incredible book that shows how to make small changes on a consistent basis to make a huge difference in your life.
How To Have Confidence and Power in Dealing With People
Great book on how to improve your skills with people.
I Dare You
Live a life of adventure.
Twelve Pillars
Great story that teaches twelve principles of success.
Peaks and Valleys
Another story that teaches principles that help you stay on your peaks longer and get out of your valleys faster.
The Slight Edge
Incredible book that shows how to make small changes on a consistent basis to make a huge difference in your life.
How To Have Confidence and Power in Dealing With People
Great book on how to improve your skills with people.
I Dare You
Live a life of adventure.
Monday, March 1, 2010
Extra Money
I was told once, "Look what the average people do, and do the opposite." It's funny when you look at "the average person." They are unhealthy, in debt, etc., etc., etc. Well if you do what the average people do, you'll have what the average people have. This applies just as much to extra money.
There are many times in our lives when we get unexpected or extra money: Tax refunds, birthdays, Christmas, class action lawsuits, etc. This is money that is not part of our regular income. What do the average people do? Most people spend it before they get it. How many times have you heard of people planning on their income tax refunds to pay for something. Many people will use extra money to splurge, to buy something they normally wouldn't. Usually they will do this with "present" money, like birthday or Christmas money. Some people will use it to pay for the "bumps" that happen in life, like repairing the car or replacing the water heater. Very few use it to further their financial position.
I would suggest doing the opposite of the average person. Pay down debt. Build up a cushion of savings. Improve your financial standing and give a big "thank you" to the source of your new found money for helping you have more peace of mind.
There are many times in our lives when we get unexpected or extra money: Tax refunds, birthdays, Christmas, class action lawsuits, etc. This is money that is not part of our regular income. What do the average people do? Most people spend it before they get it. How many times have you heard of people planning on their income tax refunds to pay for something. Many people will use extra money to splurge, to buy something they normally wouldn't. Usually they will do this with "present" money, like birthday or Christmas money. Some people will use it to pay for the "bumps" that happen in life, like repairing the car or replacing the water heater. Very few use it to further their financial position.
I would suggest doing the opposite of the average person. Pay down debt. Build up a cushion of savings. Improve your financial standing and give a big "thank you" to the source of your new found money for helping you have more peace of mind.
Monday, February 1, 2010
Resolve to finish what you start
Many people who make "New Year's Resolutions" stop actions towards keeping those resolutions by February. What is so magical about January 1st that makes us want to make changes in our life? What is so magical about February 1st, that by the time it comes around our hopes from January 1st are but a memory?
I've been reading The Slight Edge by Jeff Olson. An incredible book on how to think about changing your life. Many people overestimate what they can do in one year and underestimate what they can do in ten. With consistent, small decisions in the right direction, over a long enough period of time, you can do amazing things. An excellent read to help get your mindset right for accomplishing your goals.
In addition to what Jeff says about making progress towards your goals, I'd like to make some suggestions. Remember the magic of January 1st? Why not treat every month as a new opportunity to set New Month Resolutions. Don't set lofty goals that will take twelve months to accomplish. Set meaningful goals that you believe you can accomplish in the next 30 days. They 1st of the following month, review your past month goals. Learn from your mistakes, celebrate your victories and set (or reset) your goals for the next 30 days. If it seems that you get about half way through the month before "February 1st" rolls around (you have lost hope of achieving your goal), then either try setting smaller goals, or have "January 1st" (the "new year" to set your goals) come every week instead of monthly.
Small goals worked consistently and persistently over time will work wonders in your life.
I've been reading The Slight Edge by Jeff Olson. An incredible book on how to think about changing your life. Many people overestimate what they can do in one year and underestimate what they can do in ten. With consistent, small decisions in the right direction, over a long enough period of time, you can do amazing things. An excellent read to help get your mindset right for accomplishing your goals.
In addition to what Jeff says about making progress towards your goals, I'd like to make some suggestions. Remember the magic of January 1st? Why not treat every month as a new opportunity to set New Month Resolutions. Don't set lofty goals that will take twelve months to accomplish. Set meaningful goals that you believe you can accomplish in the next 30 days. They 1st of the following month, review your past month goals. Learn from your mistakes, celebrate your victories and set (or reset) your goals for the next 30 days. If it seems that you get about half way through the month before "February 1st" rolls around (you have lost hope of achieving your goal), then either try setting smaller goals, or have "January 1st" (the "new year" to set your goals) come every week instead of monthly.
Small goals worked consistently and persistently over time will work wonders in your life.
Friday, January 22, 2010
Go On An Economic Diet
Chris Brady, author of the best seller Launching A Leadership Revolution, posted an excellent video on his blog talking about investments versus expenses, and how to go on an economic diet correctly and get results.
Excellent video.
Excellent video.
Friday, January 1, 2010
Check Your Credit History
Your credit history not only affects how much you pay in interest on credit cards, home loans, car loans, etc. (or even if you can get a loan) but it can also affect how much you pay for insurance and can even affect you getting a job. [1]
You can get a free credit report (but not score) three times a year (if you do things just right) by visiting http://annualcreditreport.com. The trick is to get a report from just one of the three credit reporting agencies (TransUnion, Experian, EquiFax) and keep track of which you checked and when. Then every four months, get a report from the agency that you haven't gotten a report from in the last year. This will allow you to regularly look at what is being reported about you.
It can be a little tricky getting your report. You'll be clicking a lot of "No Thanks, just the free report" links and buttons. They are trying to sell you all sorts of other services. The only service I would use of theirs is buying my credit score. Every year I view my credit score from a different agency, just to see where I stand. Once you get the report, get a "printable" version and print it out, save the HTML file or print it to a PDF (if on a Mac). That way you can compare your credit report with the report from the other agencies.
Once you get the report, you want to make sure that everything on it is accurate. Things to watch out for are accounts that you do not have (possible identity theft) or late payments (company delayed applying payments). [2] Usually if there are collections on your report, you already know about it because someone has called you to harass you about it.
So it might be a good idea to just put on your calendar to check your credit report in January, May and September (New Years, School Out, School Starting).
You can get a free credit report (but not score) three times a year (if you do things just right) by visiting http://annualcreditreport.com. The trick is to get a report from just one of the three credit reporting agencies (TransUnion, Experian, EquiFax) and keep track of which you checked and when. Then every four months, get a report from the agency that you haven't gotten a report from in the last year. This will allow you to regularly look at what is being reported about you.
It can be a little tricky getting your report. You'll be clicking a lot of "No Thanks, just the free report" links and buttons. They are trying to sell you all sorts of other services. The only service I would use of theirs is buying my credit score. Every year I view my credit score from a different agency, just to see where I stand. Once you get the report, get a "printable" version and print it out, save the HTML file or print it to a PDF (if on a Mac). That way you can compare your credit report with the report from the other agencies.
Once you get the report, you want to make sure that everything on it is accurate. Things to watch out for are accounts that you do not have (possible identity theft) or late payments (company delayed applying payments). [2] Usually if there are collections on your report, you already know about it because someone has called you to harass you about it.
So it might be a good idea to just put on your calendar to check your credit report in January, May and September (New Years, School Out, School Starting).
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