When I was in high school, I wanted to get a computer. Computers weren't nearly as inexpensive as they are now days. The one I wanted represented about 15% of my fathers yearly salary at the time. It was much more expensive than what I could reasonably expect to save during the summer--even with taking on some extra odd jobs and saving every penny possible. I really wanted to have a computer when I started the next school year, so I decided to make that my primary goal for the summer. To help me focus on my goal, I set aside a savings account specifically for the purchase. Using my parents' typewriter, I created a thermometer style graph showing how much money I had saved and taped … [Read more...] about Setting Goals and Making Them Visible
Money
Free Tax Preparation Sites
With April 15th rapidly approaching, many will start looking for fast, efficient ways to file taxes. The IRS has partnered with a number of sites to provide free online filings. This helps the IRS by decreasing the number of paper forms they have to process. In most states you are still going to have to file a state return. If you plan to use software, it may be easier to do the Federal and State together at the same time. Still, for states without an income tax, this is an easy way to do your taxes and get them submitted for free. Here are a few free sites that offer free filing … [Read more...] about Free Tax Preparation Sites
Diversified Income
Nearly everyone knows that, when it comes to investing, you shouldn't put all of your eggs into one basket. Investing in many different types of investments helps lower the risk that a downturn in a particular area will wipe you out, financially. (See the story about a man who only invested in street cars.) Most people don't take what is common knowledge about investing and apply it to other areas. In particular, they don't apply it to their income. When you are in a position where all of your income is determined by a single employer, you are just like the guy who had all of his money in street cars. Many dual-income families have some level of diversification by having two adults … [Read more...] about Diversified Income
Money Thoughts
Here is a short collection of money tips and thoughts as we reach the April 15th tax deadline. Homebuyers credit The home buyers credit expires after April 30. First time home buyers can get a $8,000 refundable credit and there is a $6,500 credit available for current home owners to buy a different home. April 30th is the deadline to sign a binding contract, but you have until June 30th to completely close the deal. Claiming the home buyers credit will force you to file on paper and your return will be subject to much closer inspection. The IRS plans to audit some 200,000 returns of people who took the home buyers credit so be sure to do your best to provide all the necessary … [Read more...] about Money Thoughts
Income Diversification
Most people make money from their job working for someone else, and that is it. This is an extremely precarious situation, because if the job goes away, it takes away 100% of their income. The ideal situation is a number of different income sources that can all be ramped up, if necessary. In this post, we are going to look at several different sources of income. Job This is where most people make their money. They work for an employer that pays them for their time. An advantage of this type of income is that the employee doesn't have to know much about running other parts of the business. They can concentrate on their portion of their job. A janitor at Google doesn't have to … [Read more...] about Income Diversification
10 Stages of Financial Freedom
0. You Earn Less than you Spend This is obviously a good place to avoid and represents the least amount of freedom. No one should be here, but I added it because I know many people (particularly in the US) operate regularly in this stage. 1. Your Job Covers Your Expenses This is where a lot of people are. You spend everything you make. At this stage, losing your job is a terrifying prospect because you are only a week or two away from being back in stage 0. A few more weeks, (depending on how long you can string out your credit cards) and you'd be looking at bankruptcy. At this stage, changing jobs is very risky because, if it doesn't work out, you have very little cushion to let … [Read more...] about 10 Stages of Financial Freedom
Email Receipts
Some people are going to consider this an ugly hack, so I've been hesitant to share it. However, it works very well, so here it is. When I get an email receipt, I simply leave it in my inbox. (As I've said before, I don't worry about trying to delete everything out of my inbox--I just keep everything I might need in there where I can easily search it.) So, all of my email receipts are in my inbox. When I import my credit card statement into my financial software, I like to add a note on each item saying what it was for. I've found that the most efficient way to find the receipt is to do a search in my email program for the price. Most of the time this is a unique number, and I … [Read more...] about Email Receipts
Reducing Expenses vs. Being Productive
We usually think of being more productive as a way to make more money, or at least make the same amount of money with less effort. This is a short sighted approach. Being more productive really means doing things that will give you more time to pursue the things that are really important to you. If I am able to maintain my same level of pay and cut my work time in half, I've made some pretty significant improvements in my productivity. But what if, instead of maintaining the same level of pay, we just try to maintain the same standard of living. Or better yet, just maintain the same standard of living on things that are important to us. This type of thinking suddenly opens up … [Read more...] about Reducing Expenses vs. Being Productive
Cost of a New Computer
It is very easy to underestimate the cost of a new computer. The cost of purchasing a computer is relatively straightforward. You pay the price that on the sticker. However, there are two other areas of cost that are often overlooked. Let's briefly look at each of them. Maintenance costs Computers are like cars. They have a finite life and at some point it is very likely that they will both need repair. The older they are, the more likely it is they will need repair. When people buy computers, they often focus on the sticker price and not the total lifetime cost. The one year warranty that comes with a computer automatically may be a lot cheaper than the three-year coverage, but how … [Read more...] about Cost of a New Computer
Why You Need Personal Capital
I've been exploring several business opportunities recently, so I've been thinking a lot about capital. If we want to do X it will take $1500 of capital. If we want to do Y it will take $4000 of capital. Our options in business greatly depend on the amount of capital we control. Capital represents the ability to do something. Better yet, it creates an option for you to choose a particular path. Without enough capital, that particular path is not available to you. When it comes to our personal performance, capital is an important concept. True, we don't usually call it capital, but if you think in terms of that which gives you options, it functions in the same way. You have to … [Read more...] about Why You Need Personal Capital
Cost Savings Options
In today's economy, there aren't a whole lot of jobs that are completely safe from company cut-backs and layoffs. Though your job may be safe, saving extra money for emergencies is always a good idea. Here are some frugal ideas that might help with the saving: Food Try not to eat out. Food prepared at home is often better for your health, anyway. Turn leftover food into new dishes everyone will like. Lots of things can be made into soups or stews. Learn to make your own coffee/lattes instead of having to pay $4. Try drinking water instead of other beverages. It is much cheaper and can help prevent some health problems, helping you save on future medical bills. Angel Food … [Read more...] about Cost Savings Options
Wrong Side of the Tracks
The town where I live has a railroad track running through middle. In general, the nicer houses are on the West side of the town and the older, more run down houses are on the East side. Our evening entertainment usually consists of going for walks down the brick-paved streets. The town is small, so you can cover a significant portion in a few 3 mile walks. One thing we've noticed is that the average number of dogs per house on the less affluent side of the tracks is much higher than on the wealthy side of the tracks. On the East side, it is common to see 3 or 4 dogs staked out together in a small yard. On the West side of the tracks, people still have dogs, but it is rare to see … [Read more...] about Wrong Side of the Tracks
Layoff Preparation
With knowledge of our country's current economic situation being broadcast ubiquitously across the news, it is hard to ignore the fact that the economy is slowing down. Jobs that seemed secure are now not so solid, and many employers are beginning to cut costs in any possible way they can. Unfortunately, one of the top trends seems to be downsizing with regard to personnel. Though it is always hard to deal with layoffs, there are ways to prepare for one and devise a strategic plan in case the worst happens. Recognizing the signs Though it may not always be the case, sometimes employers give unintentional information about who they are going to have to let go. Here are a few that … [Read more...] about Layoff Preparation
Expect Change
Years ago there was a millionaire who was getting old. He decided he wanted to provide for his heirs, but he wanted to protect them from poor investments that would make them lose the fortune he had built up. He had his lawyer draft his will in a way that would provide for his heirs, but only allow his money to be invested in a reliable, solid industry. The industry he chose was electric street cars. Within a generation, his descendants were pumping gasoline at service stations. The millionaire had good intentions, but he was short-sighted. His basic failure was that he didn't expect change. He correctly assumed that people would always need cheap transportation. He incorrectly … [Read more...] about Expect Change
Investment allocation
Usually when people talk about properly allocating investments, they refer to money. Even more important is how you allocate your time. With money you usually want to have some investments in areas that will pay off over time, some investments in areas that will pay off quickly, some risky, and some safe. This strategy is to protect you from future events that are outside of your control. Your time needs to be allocated with the same type of care. For example, if you put all of your time into earning money at a high paying job, that does nothing to develop your skills or talents as a person and you could be wiped out by a lawsuit and be left with nothing. On the other hand, if you … [Read more...] about Investment allocation
Gift Cards and Bankruptcy
I've seen people talk about using gift cards as a way to save for large purchases. Where I live this doesn't make sense because of the fees that chip away at the value, but some states like California don't have that limitation. Regardless of where you live, gift cards become pretty much worthless if the company goes bankrupt as people who hold gift cards from Sharper Image and The Bombay Company are learning. If you want to save money, the best place to keep it is in a bank. … [Read more...] about Gift Cards and Bankruptcy
Math Impaired
I've been following the news about the sub-prime markets and foreclosures in the US. In a nutshell, here is what has happened. Companies that lend money for house loans had been doing very well, but their customer base was shrinking--there are only so many homes you can sell to one person.To compensate they started trying to sell to people who wouldn't normally qualify for a home loan. For example, some companies would get a list of people who had recently had their cars repossessed and use that as a list of potential clients. (I've written a more detailed explanation of the subprime mess in a previous post.) This is kind of what Citibank did in the 90s by offering credit cards to … [Read more...] about Math Impaired
International Travel and Credit Cards
If you are traveling out of the country, be sure to call your credit card company and have them place a note on your account regarding your trip. If their computers suddently see a bunch of activity internationally it is likely to trigger the fraud alerts. Letting them know ahead of time won't guarantee that it won't get cut off, but it can help. In my experience American Express is less likely be cut off than Visa or Mastercard. … [Read more...] about International Travel and Credit Cards
Benefits of Expensive Oil
Most people are concerned about the high cost of gasoline. The countries that produce oil are, of course, thrilled. In the Middle East, people are paying millions of dollars on car license tags with unique numbers. Evidently, having a Rolls Royce isn't enough to make you stand out over there. Saeed Khouri paid $14 million dollars to be able to put a license tag containing "1" on his car. People living in the US and other countries that are primarily consumers and not producers of oil are less fond of the current pricing trend. However, in an effort to always discover the silver lining, we are going to look at some of the potential benefits of expensive oil. Technological … [Read more...] about Benefits of Expensive Oil
IndyMac Bank Failure
With the IndyMac failure, we've had quite a few people reading a previous post about the NetBank failure. If you had money in IndyMac, it would be interesting to hear about what the procedure was to get your money from FDIC. … [Read more...] about IndyMac Bank Failure
Credit Cards as a Productivity Tool
Credit cards are an important part of how I manage my finances efficiently. I don't recommend them for going into debt, but the can make it much easier to track expenses and do things in a paperless manner. One big time saver is the ability to give an assistant their own card on your account. You can setup whatever limits you need (if you don't trust them completely) but it sure is easier than trying to deal with giving them cash to run errands for you. … [Read more...] about Credit Cards as a Productivity Tool
Michigan’s Big Bet
Recently the state of Michigan made a big bet. The government decided that they could spend money more efficiently than businesses could, so they raised business taxes. I don't understand the logic making it harder for businesses when a good percentage of your work force is looking for jobs. The result is that businesses are moving out of Michigan. This along with a number of companies simply shutting down is putting a strain on the economy. The thought of "if we only had more money we could fix our problems" is prevalent in government, business and personal life. If your focus is on getting more money you will often overlook solutions that actually solve the problem. Worse still, … [Read more...] about Michigan’s Big Bet
Lowering Gas Prices
While visiting relatives last week I saw some television. Since we don't have a TV hooked up to watch any type of broadcast programming, it was interesting to see some of the things that are on now days. On one show (I think it was the O'Reilly Factor) the host was interviewing someone who had written a book about oil, oil prices or something like that. The host kept asking the guy "so who sets the price of oil." The author tried to explain that it was a market, but the O'Reilly didn't seem to get it and asked, "so does OPEC set the price of oil?" Then I saw on the news that several presidential candidates are contemplating a gas tax holiday during the summer months. This leads me to … [Read more...] about Lowering Gas Prices