Trading Up?

September 7th, 2008 LivingAlmostLarge

What happens when you trade up?  Is there a right and a wrong way to trade up a home or car?  I mentioned earlier this week that we’re “bumped up in class.”

But are we stuck on what we think we deserve or want?  That we can’t imagine living in a one bedroom condo and so we say we can’t afford a “home” but refuse to consider alternatives?  Why as a society do we pretend we can’t afford a home or car.

Truth is we can afford a home and car, but it may not be to our satisfation.  That we might have to live in a smaller home, okay neighborhood before we can “trade up” to what we really want. Same with cars.

In fact Dave Ramsey says you drive for 2 years a beater, then trade up, and keep flipping upwards until you get to the car you want.  Apparently he feels that you can move upwards slowly.  Same with homes, he preaches buying what you can afford and moving as you are able to.  Many financial gurus feel this way.

So does it mean that a person should hold off on buying the car, home, or big purchase they really want?  And whine about not being able to “afford” it?  Or are they able to afford something smaller and still save for their end desire? 

It sort of applies to retirement savings. Not everyone can save the maximum in every account.  But perhaps some people start out with 1%, then 2%, etc until they reach their final goal of savings.  And perhaps others plan on saving 50% of their income from the start.

So which is better, living at the lowest level you can stand and then making the jump to your final home, car, etc?  Or slowly trading up and still striving for something better?  I think either way is fine, as long as you realize that both ways can work. 

What way did you use to increase your lifestyle, savings, etc?

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Roundup

September 7th, 2008 Ashley

First off I would like to thank Bruce the Tax Guy, Learning the Ropes, and Yielding Wealth for their guest posts this week.  They really helped me out a bunch.  So make sure you check out their sites!

I participated in the Finance Fiesta which was hosted over at Debt Free 4 Ever.  Make sure you go for a visit.

PF Bloggers:

Living Almost Large gave a breakdown of the presidental candidates.  Make sure to leave a comment with your opinion.

Master Your Card laid out a guide of how to get out, and stay out, of debt.

No Debt Plan got his credit card fees reversed, and wrote about how you can too.

Around the Blogshpere:

The Happy Rock asked “What is your Purchase Personality?”.

Frugal Dad gives a list of free dates your wife will love.

No Credit Needed has a free spreadsheet to help you figure out your average daily balance and interest accrued on your credit card.

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Free Printable Templates: Hawaiian/Aloha Floral Print Treat Bags & Greeting Cards

September 7th, 2008 Madoline Hatter

Our freebie for this week is a Hawaiian or Aloha floral print treat bag and greeting card template. It is simple to assemble and can be used to hold treats or small gifts.

These templates are provided for your personal, non-commercial use and may not be published elsewhere. If you want to share this with your friends, please link to this page.

For more free printable templates by Madoline Hatter, visit or Freebies category page.

If you enjoy our free printable templates, please consider making a donation to help us produce more.

Hawaiian/Aloha Floral Print Treat Bag/Greeting Card Templates

Click on the thumbnail images to view full size and print. Instructions are printed on the templates.

To assemble treat bags: Cut along outside line and follow gluing instructions.

To make greeting cards: Print on card stock or heavy paper and cut off glue flaps.

Pink Treat Bag	Dusty Blue Treat Bag	Plum Treat Bag
Yellow Treat Bag	Orange Cream Treat Bag	Apple Green Treat Bag
Red Treat Bag	Pea Green Treat Bag	Rosy Treat Bag
Purple Blue Treat Bag	Mocha Treat Bag

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Retire in down market?

September 6th, 2008 LivingAlmostLarge

Is it wise to retire in a down market?  Does it hurt your portfolio and make the risk too large to overcome if you are going to survive for 30 or 40 years?  T.Rowe Price writes up a nice article about what to do if you are thinking about retiring in a down market.

The article says the first 5 years of retirement is the most crucial to maintaining your portfolio.  And in a down market the only option might be scaling back the amount you need to retire.  This is because you are potentially taking out 4% a year while the market could be sinking 20%.  And thus you are digging yourself into a deep hole.

One suggestion is keeping the amount you withdraw the same, instead of increasing your withdrawal by 3% to keep up with inflation. This gives you a 89% of success of not runnning out of money.  A second more conservative option, is to cut withdrawals by 25% for the first few years and this gives you a chance of not running out of money at 99%.  Final suggestion was to switch to an all-bond portfolio so you don’t lose money, but pretty much guarantees you won’t have enough because the returns on bonds won’t be high enough to sustain your portfolio.

The predictions in this article were done using a Monte Carlo simulation. This uses predictive algorithms to determine the possibilities of running out of money, etc as a percetange rather than a yes/no answer.

I’m surprised that the article didn’t mention two major possibilities.  One work a few more years and instead of drawing on your retirement portfolio, keep saving into it.  This will mean less years drawn on and more years saved.

Second, get a part-time job.  This will supplement the income you need in retirement and thus your need to draw on your portfolio might be halved or less.  I know many people do this out of necessity, and if the markets continue on their roller coaster ride it could be necessary for everyone.  And perhaps not everyone is ready to fully “retire” at once and instead need a gradual slowdown.

What are your strategies for retiring in a down market?  Personally I think I would continue working or get a part-time job.

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Some Great Walgreen’s EasySaver Deals This Month

September 6th, 2008 Kevin

I was up early this morning with the puppy. We went for a jog in a downpour because she needed the exercise. After we got back and I dried off, I was wide awake. Might as well get to work on my day even though it was still pretty early.

I sat down at the computer to look up the best deals for Publix and Walgreen’s. Publix sends out a flyer every week with all of their deals and discounts. We primarily look for BOGOs (Buy One Get One Free), but if you keep your eye out for more subtle discounts that can help. For example, boneless skinless chicken breasts are $2.49/lb. That could be a savings of up to $2 per pound — pretty significant for us because we eat a lot of chicken. I use the Hot Coupon World forum to find coupons to match with the deals in Publix’s ad.

I also checked out Coupons.com to see if there are any extra coupons that we might not use this week, but sometime in the future. We found quite a few — another $1 off Pert coupon for example.

The real reason I was inspired to write this post is Walgreen’s. I’ve written about the EasySaver program in the past. To catch those of you who missed those posts up: you sign up online, and each month they have a catalog (online and in-store) that has coupons for products. There are also products that have Walgreen’s rebates on them — meaning you turn in the receipt online, and they will credit a Walgreen’s gift card for the amount plus ten percent. There is a section in the middle with products that are free after rebate — which is huge if there are products you would buy and use regardless of them being free.

A Big Month for Us at Walgreen’s

This is what we’re going to buy this month from Walgreen’s, and how much money after the rebates and tax, we should receive back:

• Excedrin gelcaps 20 pack - $3.99
• Nivea for Men body wash - $4.99
• Crest ProHealth toothpaste (4.2 oz.) - $3.79
• Revlon Nail Color - $4.79
• Walgreen’s water filter replacement - $6.99
  • Sub-total: $24.55
  • Tax: $1.23
  • Total: $25.78
  • Rebates: $24.55
  • 10% Bonus: $2.46
  • Net Rebates: $27.01
    • Total Spent: -$1.23

I’ve had people comment in the past when I type something like this up. “Tell me when you learn how to save 50% on your mortgage or utility bill”, they say. I figure if I can get a bunch of products we would have used anyways — and would have cost more than $20 if I bought them without coupons — and get them for free — and make $1.23 doing it… how is that bad?

I’d love to save 50% on our electric bill, don’t doubt that. Yet I still value opportunities like this.

Money saved is money saved, no matter where or how you save it.

Secret Phrase: I Love the Tennessee Vols

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Inflation eating at retirement?

September 6th, 2008 LivingAlmostLarge

This past year inflation has been eating at everyone’s salaries.  For people on a fixed income, retirees, this hit probably has been tougher than most.  On 7/1/2008 my mom was told that the union was refused when they asked for a cost of living raise.  Instead they will continue on the set raise of 2%/annually.

What does that mean?  Well every year she gets 2% of her base pension.  Say it’s $3500/month or $42k/year, she gets $70/month or about $1k/year.  Sounds good right?  Not really.  Problem?  First her raise is not compounded. Every year she’ll get $1k more than last year, but that will likely not keep up with inflation. 

In 10 years she’ll be making $52k/year but what will it be really worth?  Since this pension is the bulk of her retirement plan, she should be concerned.  Currently in 10 years her plan is to collect social security and have that supplement the lack of purchasing power of her pension. 

But I wonder if this is a new move by pensions to save money?  That they pay you the same amount 20-30 years after you retire, and thus decrease the amount of money they need to pay in the future?

What is the solution to preventing inflation from eating into your retirement?  Right now I’m not sure. I have no answer other than save a portion of the pension and invest it for the future to make up for inflation.  Do you think this is another way pensions are getting downsized?

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My Spendthrift Wants to Come Out and Play

September 5th, 2008 Kevin

My wife and I like to walk in our neighborhood with our puppy, Maggie. It gives us more time to spend together and we get some mostly quiet time to talk.

As we walked together earlier this week the discussion came back to money. I try to avoid over-talking money, budgets, spreadsheets, and whatnot with her, but sometimes I can’t help it. (I have a very loving, very patient bride).

“I’m frustrated right now,” I said as the dog continued to lead us. “My spendthrift is annoyed with me.”

With an excellent explanation like that, it’s no wonder she needed additional details. “What do you mean?”

Let me point out here that I seem to have a poor grasp of English sometimes. My head moves faster than my mouth. Writing helps me get things out clearly because I can read, re-read, and re-read again to make sure I haven’t missed a word or misspelled things. And even then, I can still slip up.

“Well, it’s hard to explain,” I continued. “It’s like I have the little devil that sits on my shoulder, whispering things he shouldn’t be whispering into my ear.”

“Such as?” she added, still unclear.

“I guess I just get frustrated because when we have extra money at the end of the month, it is already ’spent’ by the budget. It already has a name or a savings goal to be associated with.”

“I thought that was the idea.” She noted.

I sighed. “It is the point, but I still struggle with it. There’s a piece of me that wants to travel here or go buy a TV or any of a bunch of different ideas. I know that we shouldn’t, and we won’t. But the little guy still sits on my shoulder and talks to me sometimes. It’s annoying.”

The Budget vs. The Spendthrift

This has been on my mind a lot lately. We are moving forward with our savings plan. We’re generating extra free cash flow each month on top of what we’re expecting. That extra money goes straight into the savings plan — toward a new car, toward possible future moving expenses — to push toward those goals.

It’s the smart thing to do. It’s the right thing to do. But the little spendthrift inside me — inside all of us — wants to convince me that it’s okay to go blow money on things I don’t need.

It’s the battle of stuff. It’s the battle of today versus sometime in the future. I could get a 46″ LCD TV and upgrade our satelite feed to high definition. Or I can save the money for something else that we need in the future.

It’s not an easy battle. You’ve got to keep up your defenses all of the time. Self-control is required. Don’t put it on the credit card if you don’t plan to pay it off. Don’t spend money you don’t have.

Staying the Course

That’s the beautiful thing about having a budget. Income - expenses = free cash flow. Free cash flow = savings, investing, and debt repayment. When additional unexpected income comes in, that increases free cash flow automatically. That extra free cash flow is then applied to those savings, investing, and debt repayment goals. It eliminates a lot of thinking behind “Oooo, an extra $300 this month. Time for a steak dinner!”

We already give ourselves a set percentage of income each month. We have spending money. We save up for weekend trips and vacations separately. Technically, most of our needs are covered through our savings already. I shouldn’t need to go spend money. Yet the tug remains — pulling on my wallet every so often.

I’d love to hear some comments on how people have struggled and hopefully overcome this. Leave a comment and share with everyone.

Secret Phrase: I Love the Tennessee Vols

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Comparing the Candidates?

September 5th, 2008 LivingAlmostLarge

If you are here or reading this, you are likely concerned with your finances.  Well I wanted to watch McCain speech last night and hear his policy ideas.  John McCain did not mention his policies except for one (doubling child tax exemption) and I’ll bring it up later. 

Let’s start with this mornings unemployment data.  The unemployment rate for August 2008 has hit 6.1%.  The highest rate in 5 years.  That means 84,000 jobs were lost in August 2008 alone, and 605,000 jobs have been lost in the United States in 2008 alone THUS FAR!  Last year the unemployment was 4.7% and there were 7.1 million people unemployed last year, but 9.4 million unemployed this year.

Yesterday the Dow lost 344 points yesteday, the 4th largest one day drop this year.  Expect a stock market drop today after the disappointing job numbers reported.  Economists were expecting only a 5.7% unemployment rate similar to previous months.  Also workers wages have grown at 3.6% this year, substantially below inflation.

So are we better off now 9/2008 versus 9/2000?  Are we better off than we were 8 years ago?  How about 4 years ago?  Has this current administration and government made our lives better?  Personally I think we’re in a much worse position than even 1 year ago.  But let’s look at the candidates positions on things affecting our finances.

Taxes

McCain - Will keep all Bush tax cuts in place.  He will also double the child tax credit from $3500 to $7k per child.  He will continue to give tax cuts to Big Business, especially oil companies.  He will tax employer provided health insurance, so your taxable income will increase, but he’ll try to offset it with a tax credit.

Obama - Will raise taxes on families making more than $250k/year.  Will cut taxes for everyone below $250k/year.  Will tax Big Business more, not small businesses.

Decision - Obama.  I think most of us are struggling to be financially secure, and McCains tax cuts are for the rich.  Also they mimic Bush’s current economic plan.  And how’s that working for you?  As you can see with job loss, stagnant wages, I don’t believe this current economic plan is working.  Also would you like to complicated your taxes with adding back your health insurance premiums as income and then taking off a portion as a tax credit?

Healthcare

McCain - Tax health insurance benefits from Employers while providing a $2500 or $5000 tax credit to offset this new tax.  This is to incentivize people to buy their own insurance because it will be cheaper than using employer provided plans.  But how does $5k compare to medical plans for families costing $10-15k/year?  He thinks that people will use the credit to buy insurance.

Obama - Will move towards a nationalized system. He will tax employers who do no provide insurance and will implement mandatory coverage for children.  He is looking to insuring everyone by forcing it.

Decision - Toss up.  Not sure which is better for our pockets because it depends on if you are young, healthy, and single.  Or if you are older, have preexisiting conditions, and children.  If you are young, like me McCain’s plan will really help us because we’ll take the higher salary, refuse employer insurance, buy cheap insurance and get the tax break. But anyone unhealthy, older, and with multiple dependents probably can’t take the risk of an individual plan.  So it’s really a toss up which plan is better. 

Economy

McCain - Has said that the economy doing well.  He has agreed with President Bush that the fundamentals are strong.  He also believes that he can change the economy though his policies are the same as Bush.  Tax breaks for Big Business, open trading, and more tax cuts to stimulate the economy. 

Obama - Has said we’re in trouble.  He has disagreed with tax cuts for business, and is proposing taxing businesses which are outsourcing jobs overseas.  He suggests new jobs from researching alternative energy sources.

Decision - Obama.  Unfortunately the beginning I wrote about the job loss and stagnant wages.  Well are we better off than we were 4 years ago?  No. But maybe people can weigh in and tell me that they are better off.  Because of the economy, why would we support more of the same economic policies?

Energy

McCain - Drill baby Drill.  Funny, that it’s his policy.  3 months ago he was against offshore drilling in the ANWR, however since picking Palin he’s pretty much changed his position.  In his speech last night he says they will look at other energy sources, but gave no substance as to what he would do.  Also he’s voting against renewable energy sources getting Federal funding so why is he saying he’ll look into it?

Obama - Look for alternative energy sources. Is it entirely realistic?  I don’t know.  But he did suggest creating jobs by trying to develop alternative energy sources.  He also said we all must contribute by starting to conserve and decrease our energy consumption as individuals.  He was against drilling but switched his position that we can do it in a limited basis.

Decision - Obama.  Mostly because the reality is that we can’t drill our way out of the problem and we have to look long term for a solution.  The original moratorium on drilling was started by President George HW Bush in 1990.  Why are Republicans suddenly changing their minds?  T.Boone Pickens, a Republican oil baron, says we can’t solve our problems drilling. It will help but it won’t solve the energy problem. Republican Senator Lindsey Graham has said “drilling is the easy way out and the worse thing we can do, we are not addressing fossil fuels problem“. 

I guess these are the major issues economically.  How will we handle taxes, healthcare, economy, and energy prices?  For the most part I think Obama is going to bring change while McCain will continue with our current policies in place.  So are we better off than we were 1 year ago?  4 years ago? 

If you vote on social issues then these economic policies won’t matter and they probably shouldn’t.  The candidates greatly differ on social issues.  But that’s another forum.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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Financial Goals

September 5th, 2008 Ashley

It just dawned on me that I don’t think I’ve ever written about my financial goals.  How strange that I’ve been writing a personal finance blog for 7 months and I’ve never written down my goals for my readers.  Well, patient readers, here they are…

1. Pay off cars and start a car fund so that I never have another car payment again:  We currently owe $24,857 on our cars.  We plan on having my van for at least another 9 years, so no rush there.  But we do need to stay focused on saving up for a new car for my husband.  If you can do it once and stay on top of it, there is no reason to finance another car.  Just start making that car payment to yourself.  We are going to pay off my husband’s car when we get our taxes.  Then start making the car payment into a savings account and hopefully get a good fund built before it needs replacing.  I doubt we will be able to buy a car outright this time, but the loan should be less than we would have had otherwise, which means we should be able to pay it off sooner.  Then we will have that much longer to save up for the next car.

2. Pay off the loan for the backyard landscaping. It’s at zero percent so I’m not in a huge rush to pay it off.  But getting rid of the payment would be nice.  We currently owe $7,461 and pay $162 a month towards it.  We also have $2,100 earmarked for it.

3. Fully fund our emergency fund. With our current budget we would need about $24,000 to have 6 months of expenses.  We currently have about $11,000 saved.  Of course if we didn’t have car payments or the back yard loan our expenses would be reduced quite a bit.  At that point we would only need about $15,000.  So maybe we will just shoot for $15,000 and use the rest to pay off the cars.   We currently put $100 a month into our e-fund.

4. Max out our retirement savings. Once we have the above goals met we can start really funding our IRAs.  We send about $150 a month to them right now, but I know that’s not enough.

5. Pay off the house. Oh what a beautiful day it will be when we don’t have a mortgage.  I can’t wait.  When we have fully funded efunds, car funds, and retirement accounts I will start going to town on my mortgage.  We currently pay $100 a month extra and $1,000 from our tax returns.  We owe $141,752.

I listed these goals 1 through 5 but really they are all going on simultaneously.  I don’t know if this is the best idea.  Should I ignore my other goals and attack one at a time.  Kind of a goal snowball.  Or keep working on them all at once and make a little progress in each area.  I’ve never really laid them all out like this.  It’s interesting to think about all the options.  I would like to know what you think.  What would you do?

Pic by: James Jordan

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Law Professor Says Financial Education Should Stop

September 5th, 2008 Kristy

I’ve heard some pretty ridiculous things in my lifetime – short as it has been – but this one takes the cake. And the fact that it came from a law professor, someone who’s supposed to be at least mildly intelligent, makes it worse!

According to Lauren Willis, an associate professor at Loyola Law School in L.A., we should stop trying to teach people about their finances. Apparently it’s a big waste of resources because people just don’t get it. And those who think they do get it have some false sense of understanding that cause them to make worse decisions. Then, after insulting most of the population, she goes on to say that people can’t rely on banks because they don’t have the consumer’s best interest at heart. Bank products and services need to be regulated because they’re bad for the average consumer.

Color me stupid, but how does that make any sense?

First, people aren’t intelligent enough to take simple financial education and make informed decisions with it, but then, they can’t rely on banks to help them make those decisions because banks just want to screw them. Gosh, where are people supposed to turn? Lawyers? Yeah, cause that’s soooo much better than the banking industry.

Oh, and my favorite part was when she talked about how the financial industry is always changing and that’s the reason it’s too hard for people to keep up. She then compares this to sex education. Apparently, even though sex education isn’t working and is a waste of resources as well, it’s justified because, as far as she knows, girls still get pregnant the same way they did when Willis herself was in high school.

WOW!!!

OK, if we’re talking investments, Wall Street, and complicated bonds then I’d say it’s probably a good idea to tell a person to seek advice from someone who has been thoroughly trained in those topics. The average person may not understand investments and with only a little knowledge on the subject, they know just enough to get themselves in trouble with it.

However, when it comes to basics, people NEED to have an understanding of finances. Things haven’t changed that much that the basics of balancing a checkbook, developing a budget, and knowing that you shouldn’t spend more than you make are too far over the average consumer’s head. Gimme a break! I’m still trying to figure out what possessed this woman to say that financial education was a waste of resources and should be stopped.

A basic financial education should include the following, and I’m talking bare minimums here:

- What a checking account is
- What the difference between checks and cash are
- How to balance a checkbook
- How to make a budget
- How to live within that budget
- What credit cards are
- How credit cards work

Those are the basics. The bare minimums that I think every high schooler should know when they leave school. Those things haven’t changed. Last I checked, we all still balance a checkbook pretty much the same way. Sure, we have our own ways of recording stuff, but balancing pretty much works like it always has.

This woman’s idea that financial education doesn’t work because things are constantly changing is crap – at least when it comes to the basics. I can understand her point about insurance products and investments, like I said, but when it comes to banking 101, people need to be taught and I think it should be a required class in high school.

We’re a nation crippled by our debt, both in the government and on a personal level. Willis says the government needs to step in and regulate these banking products to help consumers, which in some cases is true. But, the government can’t even regulate their own spending. We’re owned by several different countries that certainly don’t have our best interests at heart and the average household has about $30,000 in debt. Knowing that, she honestly believes the answer is to stop financial education? Yeah, ok.

This kind of stuff really irritates me. I don’t spend my days trying to turn people in financial planners, but I do think consumers should have enough financial knowledge to make informed decisions and take responsibility for their financial futures. I think it’s totally contradictory of Willis to say that financial education doesn’t work; they should seek the help of professionals, but then turn around and say those professionals are sharks.

She doesn’t offer any real solution to the problem, she only states that statistics show financial education doesn’t work; therefore it’s a waste of resources. Well, to use her own example, sex education doesn’t work either. Girls are getting pregnant earlier every year. That doesn’t mean I think the program should stop. It’s still important that these girls know the basics. Same is true of finances.

My goal in banking is to help people avoid the mistakes that I made. That’s why I got into banking. That’s why I write for this blog. To EDUCATE people because I’ve been there and made the mistakes. It makes life a lot harder. That’s why we have people like Suze Orman and Dave Ramsey. I may not agree with Ramsey’s methods, but at least he’s educating people. And look at the following that both Orman and Ramsey have. Obviously, people feel financial education is worth it and it’s beneficial to them and their situations. So, I don’t know where Willis got that financial education doesn’t work, but apparently she needs to stick to law and leave finances to those who actually know what they’re talking about!

What do you guys think? Is financial education something we as a nation should abandon?

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