The Coin Jar: A personal finance blog

Stop lying, debunk those myths, and save money

2009-08-11T06:01:00.000-07:00

Almost Frugal hosts this week's Carnival of Personal Finance. My top picks from the world of personal finance blogging:

Stop lying, 5 ways to stop overspending. Maybe I should have read this by Adam of Rabbit Funds before I wrote my previous post on how M and I overspend...

12 crazy myths of personal finance. I'd never heard this one before: "Myth 8: I couldn't possibly learn anything about money from a plane crash." But Gary from Total Candor proves that financial lessons are everywhere--even when a plane landed safely on the Hudson River earlier this year.

Grocery Hacks--how to save money on groceries. Matt Jabs at Debt Free Adventure gives a very comprehensive list on how to trim the grocery budget. Plus, as a result of his frugality and health-consciousness, he and his wife lost 60 pounds combined! What more motivation do we need?

Our spending plan is working...I think

2009-08-11T04:18:00.000-07:00

“We broke the budget,” my wife M said to me recently with a sigh. “This system isn’t working.”

She gave me a frustrated glance as she scribbled in the checkbook register we use to track our expenses. June and early July are heavy spending months in our household, with birthdays, Father’s Day, and trips to the beach all in the mix. Plus, with all the additional fun-n’-sun activities, the little pile of receipts on our kitchen counter grew relatively big before we got around to logging them. Who wants keep track of your budget when a nice, hot summer day beckons?

As a result, we’d overspent our monthly spending plan to the tune of about $150. And consequently we had less to save toward the down payment we’ve been building to buy a new home.

“Maybe we should try something different.” M said. “This is becoming a habit.”

It’s not broke because it does work

She had me there. It wasn’t the first time we’d “broke the budget.” In truth, our budget is fairly “fluid;” we may overspend one month, and catch up (or almost) in another. August, for example, is a great month for us, with no family birthdays or holidays with gifts we have to wedge into our spending plan.

But our system isn’t broken. In fact, I think it’s working quite well. Here’s why.

We aren’t overspending with credit cards. Our discretionary spending budget—how much we plan to spend on gas, groceries, gifts, entertainment, etc.—is fairly low, while our goal to save each month for our house down payment is fairly high. So any overspending simply reduces our savings amount that month. If our overspending resulted in racking up credit card debt, I’d be very worried.

(My sister commented to me that it may actually be harder to spend less if you’re saving more, and, ironically, she may be right. I find it easier to agree about to going out to dinner or to the movies when I know we have the money on hand to do so.)

We know when we’re overspending. Since we’ve been on this tighter discretionary spending budget for several months now, we have a good feel for when we’re exceeding our limit—even before we log in the receipts. And our spending behavior naturally slows down and causes us to question additional purchases when we think we’ve gone over. That’s the whole point of having a budget, to keep our spending under control, and our system is helping us do that.

We know why we’re overspending. A budget is about making choices, deciding what dollar goes where. In times that we spend more, we save less, and that’s not necessarily a bad thing; neither M nor I want to be so focused on saving that we become misers. Plus, we’re still making steady progress in building up our down payment, so it feels like we have a good balance between the two.

Doubts in the back of my mind

One thing about our overspending does gnaw at me a little; if, for some reason, we had to strictly follow a tight budget, would we have the discipline to do it? I’m not sure. Our record says we wouldn’t, but it doesn’t take into account a big change in mindset. It’s one thing to spend money you have. It's quite another to spend money you don’t.

We could find out soon. Some of the houses we’re seriously considering purchasing will stretch our budget even more and put our discipline to the test. If anything, it could make for some interesting blog posts.

So am I fooling myself that our budget system is working? I’d love to hear from you. Leave a comment and let me know.

Ally Bank: The saver's "friend"

2009-08-06T12:23:00.000-07:00

If the folks at Ally Bank were looking to catch some attention, they succeeded. Time will tell if it’s truly warranted.

Ally Bank, if you haven’t heard, is the new name of the old GMAC. That’s right, that GMAC, the former financing unit of General Motors. Ally is not owned directly by the troubled car company. Instead, it’s held by parent bank holding company GMAC Financial Services, of which GM still owns a large piece.

Ally caught my eye with its recent marketing campaign. Suddenly, I saw its ads popping up everywhere; on The Wall Street Journal’s website, during The British Open broadcast a few weeks ago. The TV ads were particularly catchy, with a schmarmy salesperson representing the “typical” bank using fine print and broken promises to hoodwink young kids out of a toy truck and a real pony. Ally, in contrast to other banks, “values integrity as much as deposits,” according to its website.

A good story
Sounds pretty good, especially today when consumer trust in financial institutions is pretty low. But make no mistake; Ally does value deposits pretty highly. It’s looking to grow, and grow fast, by offering very attractive interest rates on its products—among the highest around. Its online savings account, for instance, has a 1.75% rate, better even than traditional market leader, ING Direct (1.40% for its Orange Savings Account).

More competition is a good thing, but it’s also good to question just how real higher rates are, or how long they will continue. One thing Ally doesn’t highlight in ads or currently on its website is that parent GMAC Financial was one of the institutions to receive government bailout money for being undercapitalized. The institution is secure now, but that wasn’t necessarily the case at the end of last year.

And in recent weeks, the American Bankers’ Association cried foul to the Federal Deposit Insurance Company (FDIC) about Ally’s high-growth through high-deposit tactics, which it alluded to as “unsafe and unsound.” Like any bank, Ally loans out depositors’ money and if they depart the bank en masse for higher rates elsewhere, it could conceivably be caught short-handed. An unlikely scenario, but it’s why banks have to have a certain amount of capital on hand in the first place.

The FDIC also required Ally to get written approval to issue debt secured by bank deposits, as well as to keep the regulator informed on just how high above the market average its product rates are. Ally reduced the rates on its savings products from some much higher initial levels it started with in May.

Moral of the story
With savings accounts, like anything, an old rule still applies: If it sounds too good to be true, it often is. Chasing interest rates from one bank to another requires a lot of time and effort for what can often be very little gain. No one’s going to build wealth by getting an extra .25% interest on their emergency cash.

And despite the banking industry’s woes, another old rule also applies: Marketing prevails over common sense. “Valuing integrity” sounds great in a TV commercial. But it’s how actions demonstrate that integrity that really counts.

The true point of living by a budget

2009-08-04T02:57:00.000-07:00

In a recent post, Matt at the blog One Million and Beyond describes the fluid budget. I was glad to see it because the "fluid budget" sounds a bit like the one my wife M and I are on.

We've gotten to the cash register at the grocery store and had to take things off the conveyor belt because we exceeded our spending limit for that trip. But at times we've also shifted money from one category because we suddenly decided to spend more in another category. As Matt points out, a "fluid" budget that has some give can work.

Most people think of a budget like a pair of financial handcuffs, very tight and uncomfortable. But the point of a budget is not to determine ahead of time exactly what you are going to spend in every category of your life and then rigidly spend only that amount. A budget is just a tool to help you control your spending so that you are living within--or even better, below--your means.

When your budget is working, it feels good. You know how much you have to spend, you're making conscious decisions about what dollars go where, and most importantly, you're not piling up debt.

Accomplish those things--whether using a rigid or fluid budget--and you'll take a big step toward reaching your financial goals.

More fun at the Carnival of Personal Finance

I saw Matt's post at this week's Carnival, hosted by Christian Personal Finance. Here are couple more of my (and the editor's) picks from the week's selection:

The whole armor of personal finance. At Debt Free Adventure, Matt draws an analogy between the armor of God described in Ephesians 6:10 and the "armor of personal finance." It's a cool and very appropriate parallel (though I prefer the more plain-English version of the verse, instead of ye olde King James version). After all, every financial decision is a spiritual decision.

Buy on the rumor, sell on the news. Dorian from The Personal Financier gives his take on the link between investing and psychology, my favorite aspect of money. One interesting thing he discusses here: How the expectation of getting money, in our own minds, is actually more satisfying than actually getting it. Go figure!

My biggest health care mistake: Choosing the wrong plan

2009-07-23T03:20:00.000-07:00

The costs of health care are top of mind lately, and like everyone else, we've felt the effects. I remember the days 10 to 15 years ago of $5 copays for doctor's visits . As a full-time elementary school teacher before we were married, M's doctor visits were completely covered by her paycheck deductions.

Now copays under my current employer's plan are $20 to $25 (though routine physicals and annual checkups are "free"). Meanwhile deductions from my paycheck have increased as well, relative to just a few years back. I don't know if the federal government has the right answer, but at least President Obama is asking some tough questions.

A sweet choice
Rising costs, in fact, led me to make one of my biggest personal finance mistakes: choosing the wrong health care plan. Two years ago, my employer revamped its insurance benefits to reduce its own escalating costs. I opted for the "middle-of-the-road" plan, one with medium-sized paycheck deductions but with higher deductibles and potential out-of-pocket costs. To sweeten the deal, my employer made a $1,000 contribution to a savings account that could help defray any costs we might have to pay on our own.

I'd considered the plan with the highest paycheck deduction and the most coverage, but no $1,000 contribution. I decided against it because we're a pretty healthy family, M and I are through having babies, and our kids aren't in day care and thus prone to bringing home the "virus of the week." I figured the middle plan's $1,000 contribution could get us through half of the year at least.

Best laid plans go awry
Then in February--just a few weeks into having the new plan--my stepdaughter had to make an emergency room visit in the middle of the night. A slew of tests and doctors confirmed that she was, thankfully, okay (and, ironically, that her symptoms weren't an emergency at all, but could have waited for a visit to the doctor in the morning). But that $1,000 which was supposed to help us pay for out-of-pocket costs for several months? Effectively wiped out in one fell swoop.

This year, I bit the bullet and chose the plan with the highest coverage. Naturally, we've had no trips to the emergency room and relatively few visits to the doctor. If that remains true through December, we'll have effectively overpaid for insurance coverage this year after underpaying last year.

Needless to say, that's frustrating. A colleague of mine with several kids who also chose the middle-of-the-road plan last year and the highest coverage plan this year has had a similar experience. We both shared a laugh at life's little ironies.

High coverage a better choice
But I still think the high coverage plan is the right one for us, and what we'll choose again for 2010. Our insurance covers two adults, plus four children ages 2 to 21. Based on that information, the chances that we'll have some significant health care costs throughout the year are probably fairly high. I may end up paying more out of my paycheck compared with a lower coverage plan, but I'll be more certain that no matter what, I'll pay a minimal amount out-of-pocket (and can redirect money I would have saved to pay for deductibles to other goals).

My mistake was trying to be cheap and pay the least amount out-of-pocket possible, and picking a plan based on a prediction of our typical health care costs (which turned out to be wrong, both times). Insurance is about replacing the uncertainty of risk with the certainty of fixed costs. The high coverage plan may mean a little less in my paycheck each month, but it also means a lot more peace of mind.

Back in the saddle...yet again

2009-07-22T14:42:00.000-07:00

Wow...has it been three months since my last post? That's a little shocking. I may have to turn in my blogger license.

Today a former boss mentioned in a large meeting at work that I have a blog, which sparked a lot of questions from co-workers. "What's your blog about?" "Where can I find it?" "YOU have a blog?" (I particularly like the disbelief in that last question.)

Not that I've been hiding it--in fact, I can't hide it; being in the financial services industry, I had to get my employer's approval to start it (don't worry, I have complete control over content). I just haven't done a lot of self-promotion, particularly because I'm now in a department full of financial planners. Not exactly a target market for basic articles on personal finance.

Still, I'm a little ashamed that I've been tagged as a "blogger" yet haven't blogged anything in quite some time. Three months is like three centuries on the Internet.

But I'm now also motivated. Today's meeting re-energized me to start posting again. I hope it can last.

Move from NJ because of taxes? Were it that easy...

2009-04-22T23:00:00.000-07:00

Next Wednesday, April 29, is Tax Freedom Day in New Jersey. That's the day state residents have earned enough money to pay their total tax bill for the year.

Forgive M and me if we don’t celebrate.

Several times in the past, we’ve discussed getting out of New Jersey because of the tax burden—the biggest in the country. According to the Tax Foundation, Garden State taxpayers give an estimated 11.8% of income, $6,610 per person, to state and local governments.

Stiff price for a back yard
For us, high taxes hit home—literally. We’ve been looking for a while to move up from our three-bedroom townhouse to a four-bedroom, single-family house (“with a back yard,” as my 4-year-old son likes to point out). Higher property taxes mean less house that we can comfortably afford.

Obviously, we’re not alone in our frustration. On Tax Day this year, pseudo-“Boston tea parties” were reportedly held in all 50 states, with participants criticizing the federal government’s proposed tax increases and rash of recent spending. Emotions ran high enough that, at some gatherings, the word “secession” was facetiously hinted at.

Our home, for better or worse
M and I would love to “secede” on a more personal level by moving to lower-tax neighbor Pennsylvania (where I commute to and from for two hours each day). But in reality, we’re not going anywhere soon. New Jersey, whether we like it or not, is home.

The first and foremost reason is that we’re surrounded by family. My stepdaughter’s father lives and works within an easy drive of our house. My parents are five minutes away, M’s father and stepmother perhaps 10 minutes. My brother moved in literally down the street, after spending several years in Boston. Life is (most days) better and easier with family close by.

Second, M worked as a teacher for more than a decade in the New Jersey public school system. In a few years, she’ll go back to work and eventually be eligible for a nice state pension (paid for by those state taxes, and as long as it still exists). Since our only other source of retirement security is a 401(k) plan—which has been slammed in the past several months like everyone else’s—that’s a big incentive to stay put.

Accept what you can't control
We’ve talked round and round about other options, such as moving to one of the Pennsylvania towns just across the Delaware River. In the end, though, we always come back to the same conclusion: The best option is where we are.

It’s easy to get worked up over things you can’t control, like high taxes or the direction of the stock market. But after weighing the pros and cons, both financial and non-financial, you may find you’ve already made the right decision. The next step is to accept it, and move on.

To make it work, make money management personal

2009-03-26T06:24:00.000-07:00

A couple posts related to money and behavior stood out in this week's Carnival of Personal Finance at Four Pillars. As JT at The Smarter Wallet and NCN at No Credit Needed point out, the first step to changing poor financial habits is learning what works for you.

JT tried different budgeting software with lots of categories, which worked okay. In the end, though, he found his own three-category system more effective for living within his means.

NCN, on the other hand, realized just seeing his credit cards increased his temptation to overspend. Simply moving his cards from the front of his wallet to the back increased his willpower and curbed his spending appetite.

Our "checkbook register" system
M and I struggled to manage our money until we went "old school"--using a paper checkbook register to track expenses. The register has no connection to our checking account (which I balance using Quicken). Instead, M simply uses it to log our non-fixed expenditures (groceries, gas, eating out, etc.) each month, which were the biggest culprit in getting us off track.

The register works well because it's the same method M used to manage her money years ago as a single mom. Back then she didn't necessarily balance her checkbook, but she used her register to figure exactly how much "extra money" she had beyond her rent, utilities, etc. to spend.

To M's credit, when we got married, she had little credit card debt and had even started saving for her daughter's college. And today our non-fixed expenses are far less than we ever thought they could be, helping us as we save toward our goal of someday buying a larger home.

The right method will stick
If your previous attempts at money management have crashed and burned, don't give up hope. You just haven't found the right method yet. Keep trying. If spreadsheets or software don't work, try paper, or vice versa. Experiment with different methods. Think "out of the box." An effective money management system is as personal as you are. When you find the right one, it will stick.

Scaring Wall Street straight

2009-03-20T13:23:00.000-07:00

Wall Street is "shuddering" as Congress moves to change the tax law and "claw back" those big bonuses to AIG employees. And they're not the only ones.

"If the government decides they don't like a guy, all of sudden they are going to tax you, and, boom, and it passes, that's seems a little scary," said Jay Leno while interviewing President Obama late night on Thursday.

It is scary, Jay. That's precisely the point. If you're a CEO, trader, or broker of a bank or insurance company in the "too big to fail" category, the message is loud and clear:

You DO NOT want the government involved in your business. So mind your risk exposure.

Some pundits have called all the outrage and Washington hoopla over the AIG bonuses shameful. And to be sure, there's plenty of political grandstanding going on for the constituents back home. Don't lawmakers have bigger things to worry about right now?

But turns out it's not such a waste. Congress is doing a fair job of, as one of my financial planning colleagues put it, "scaring Wall Street straight."

A big risk of government intervention is creating what's called "moral hazard." That's when a company has no incentive to guard against risk when the company is protected against it. For "too big to fail" institutions, that's understanding the government could step in to pick up the pieces if a high-risk venture they've embarked upon leaves their balance sheet and the financial system a mess.

The drastic step of instituting a 90% tax on bonuses for individuals in companies that take taxpayer money to get above water is a good one. That should at least provide some incentive for CEOs and CFOs to look at their business risks more prudently. "Too big to fail" companies are, and should be, more responsible to the public interest, not less.

I don't want Washington running private businesses. Washington doesn't want Washington running private businesses. ("Generally, government historically hasn't done that very well," President Obama said on "Meet the Press.") Now Wall Street has realized that it really, really doesn't want that either.

Hopefully in the future, that will help financial companies executives think just as much about the extent of their risks, as the size of their potential rewards. And we can avoid getting ourselves in this mess again.

Physical and fiscal fitness: More alike than you think

2009-03-16T10:23:00.000-07:00

I don’t like exercise. Many people get a lot of satisfaction from jogging or lifting weights. I'm not one of them. In fact, I hate exercising just to exercise. It’s boring.

I understand the importance of exercise, especially the long-term benefits. But that doesn’t motivate me much to hit the gym or the track.

You may face the same issue managing your money. You dislike budgeting. You think investing is boring. You even understand their importance and long-term benefits. Still, you haven’t been able to build your savings, reduce debt, or make much progress on your financial goals.

Habits and goals go hand-in-hand
Being physically or fiscally fit is about developing good habits that last. That’s most likely to happen if you tie those habits to a specific goal or purpose.

A couple years ago, I set my sights on summiting 14,410-foot Mt. Rainier. For six months prior to my climb, I strength-trained in the gym three times a week. I hated just about every minute of it, but I rarely missed a workout. Every leg press and stomach crunch gave me a better chance of checking Rainier off my “bucket list.”

I’ve noticed the same thing when it comes to our household budget. M and I are aggressively saving to build up a large down payment so we can move up from our townhouse to a single-family home. We’ve cut our discretionary expenses by about a third, and things feel pretty tight. But we’ve stuck to our plan—as painful as it has been. We know that every extra dollar we spend takes away from our larger goal.

“Good for you” isn’t good enough
If good money habits haven’t stuck for you, get specific. Instead of “paying off the credit cards,” for example, identify a direct, tangible benefit of reducing your debt. Maybe it will give you the cash to go on that trip to Italy you’ve always talked about. Or to get the mountain bike you’ve been eyeing. Or help get you and your spouse out of marital counseling.

Whatever the benefit, go beyond just dollars-and-cents logic. The more personal, the better. Good exercise and financial habits are tough beasts to master and maintain, even for those who do them well. If you struggle, find an emotional connection. That will turn your initial steps into ongoing habits that you’ll stick with when the going gets tough.

Do you think like the middle class or the wealthy?

2009-02-24T03:31:00.000-08:00

Among this week's Carnival of Personal Finance at Broke Grad Student is a short, yet impactful blog post. Blogger Moneymonk compares the thoughts of the middle class with the thoughts of the wealthy. And all four points related to the middle-class mindset apply to (gulp!) me.

In essence, Moneymonk (and one of the post commenters, Finance Girl) highlights that the middle class focus primarily on financial security. Those who build wealth successfully focus on financial prosperity.

It's a subtle but important difference. Wealth-builders are more willing to take on greater risks, such as starting their own businesses or buying investment properties. Those in the middle-class take on less risk, by working for someone else (which, admittedly, doesn't seem that less risky in these days of mass layoffs and rising unemployment) or putting their money in a tangible, relatively low-risk asset, such as their home.

I work at a large company, and M and I are diligently saving to move up from our townhouse into a single-family home. The one place where we are taking greater risk is in our 401(k), which is invested 80% in broadly diversified stock funds. Essentially, we have a middle-class mindset, with just a pinch of wealth-building. This realization isn't quite enough to make me want to change what we're doing. But it does get me thinking.

Personal finance served family style

2009-02-17T03:37:00.000-08:00

Canadian Personal Finance Blog serves up this edition of the Carnival of Personal Finance. It was Family Day in Canada this week, so his blog is themed accordingly: advice that might come from a member of your family. My three fave posts:

What we learn from tragedy. Jason of MyMoneyMinute offers some heartfelt "practical applications" and "fundamentals" to think about. I'd add that make sure you also have powers of attorney in place.
A macroeconomic look at credit cards, by David of Davidonfinance. Read the post, and the first few comments. David initially characterizes credit cards as "inherently evil," but then seems to be persuaded otherwise by some readers.
Valentine Day flowers a rip-off? by MoneySmartLife. Valentine's Day flowers are worth the gouging by flower shops because" they perform a valuable service," according to the unnamed blogger. It made me wish I'd spent a little more on the flowers I got M, which I gave her a few days ahead of Valentine's Day. After her initial surprise and gratitude, she said knowingly, "Were they on sale?" Guilty as charged.

When having a land line and cell phone makes sense

2009-02-12T16:59:00.000-08:00

I used to think M and I paid too much for our phone usage. Not anymore. I discovered the costs—largely non-financial—of moving to a cheaper plan actually outweigh the benefits.

We pay how much??
For the past five years, we’ve resented paying more than $100 a month for a cell phone plan and unlimited long distance on our home phone. We’d go back and forth about getting rid of either service to reduce our costs, but honestly, we're hooked on the convenience.

I use the cell during my two hours of commuting time to catch up with family or do “chores,” such as scheduling appointments. M uses the land line while at home with the kids to keep in touch with her mother and best friend, both who live out of state. She also likes not having to keep track of her minutes to avoid overage charges, or having to call late in the evening or on weekends.

But last November, we took a first step and went with a pay-as-you-go land line plan. We expected some small savings, maybe $10-$20 per month, as we better utilized the unused minutes we had each month in our current cell plan to make long distance calls, and took more advantage of the ability to make free calls to each other. Maybe we’d even get rid of the home phone altogether.

Old habits die hard
This week, we went back to unlimited long distance. In the three months, we spent more—not a lot, but still more—for phone calls instead of less. Changing our behavior was not quite as easy as changing our calling plan.

We tried hard to break the habit of reaching for the home phone. At one point, M stuck a “Use cell phone” Post-It on the cordless handset as a reminder.

But obstacles stood in our way. We have phones on three of our townhouse’s four levels, so the temptation to simply make a call, especially a quick one, from the land line was great. M also wasn’t keen on always having to remember to keep the cell phone at her side.

Most importantly, phone calls became a source of friction. I tired of reminding M to call me back on the cell instead of the land line, and she tired of me reminding her. We may have eventually ended up with a lower phone bill by not speaking to each other, but that hardly seems the point.

If we’d stuck with it, we probably would have developed phone habits that could have saved the few bucks each month. But for us, it’s just not worth it. We can find other, less wearisome, ways to trim the budget. And our once “high-cost” phone bill now seems like a pretty good value.

There's no place like...the Carnival of Personal Finance #191

2009-02-10T18:15:00.000-08:00

Dollar Frugal hosts this week's Carnival, with a Wizard of Oz theme. So follow the yellow brick road to these cool posts:

Being married seven years has taught Mighty Bargain Hunter seven lessons about money. Nothing real surprising here, but some good reminders, such as listening to your spouse is key and don't keep secrets!

Bible Money Matters shares why good financial decisions don't always make financial sense. Amen, brother!

Michael James offers an interesting analogy between playing poker and successful saving. Deal me in, Michael!

A coin jar adds up to more than just saved pennies

2009-02-06T04:48:00.000-08:00

Given my new mission, I was mulling over changing the name of this blog to better reflect my goal of linking behavior and spirit to building wealth. Then as I thought about it, I realized that a coin jar is actually a pretty good example of that alignment. Here’s why:

It’s easy to start. You can use just about any container you find hanging around the house to hold your coins, which removes a big barrier to saving and building wealth: Just getting started. I use a medium-sized white porcelain bowl we got as a Christmas gift one year, and I’m not even sure how it ended up being my container. But I need something bigger because it's overflowing.

It’s habitual. Many people keep their containers close to the place where they empty their pockets each day, so they can toss coins in automatically. My bowl is in my nightstand, where I put my cell phone, Ipod, and employer security badge each night after work. When you make saving part of your normal routine, you give yourself a great chance of being a successful saver.

It builds up over time. Coin jars teach a valuable lesson: Wealth-building requires action and patience. You won’t get rich quick by saving pennies a day, but you'll be surprised at just how much your spare change adds up to over a long period of time. And that’s true for any type of saving, whether it’s a down payment on a house or your 401(k). Little things mean a lot.

So nothing's changing: The Coin Jar is here to stay. (Good thing, too, otherwise I’d have to write off as a loss all those Coin Jar t-shirts I printed up…just kidding. ; )

How much money have you saved using a coin jar? Have you ever used the savings to purchase a big-ticket item, like a TV or computer? E-mail me your story and make The Coin Jar Honor Roll.

Carnival of Personal Finance offers good reading

2009-02-03T12:49:00.001-08:00

The Carnival of Personal Finance for the week is up at Funny-about-Money. A few favorites related to behavior and money:

Financial lessons learned from my younger self at Monogamoney.
Why I never budget (though he does in a way) at Bret Frolich.com
Biggest financial lesson learned from the bear market at personalfinancestartup.com.

Check 'em out!

Pay off your mortgage? Look at more than just numbers

2009-01-28T12:09:00.000-08:00

In financial planning, the first answer to most questions is, “It depends.” And as frustrating as it is for folks to hear, it’s the truest initial answer for most situations. It’s not the final answer—ultimately there is a "Yes" or "No" that makes sense for the individual. But when it comes to money questions, there's usually a lot more gray in the answers than black-and-white. And much of that gray is created by an individual's financial spirit, as well as situation.

Logic versus spirit
For example, you might come to me for advice and ask, “Should I pay off my mortgage?” Personally, I'd like to be able to spend money on something else other than a mortgage payment and have the security of a paid-off home. I’m willing to forego other things in the near-term, such as replacing an out-of-fashion suit for work or enjoying a night out with my wife, to pay additional principal on the mortgage balance each month.

But we’re not talking about me, we’re talking about you. You go on to tell me that your mortgage has a fairly low interest rate of 6%. Wouldn’t it make sense, you ask, to pay the minimum amount of principal on the mortgage each month, and use any additional money to invest in the stock market, which over the long term has grown on average 10% per year?

At face value, your question is financial and logical: If you borrow money at 6% and invest it at 10%, aren’t you making 4%? On a deeper level, though, it’s spiritual: Should you pay off cheap debt when you can conceivably make more money over the long run by investing it?

Align your strategy and goals
Naturally, my initial answer would be, "It depends." But it doesn't depend on whether stocks will earn more than your 6% interest rate, which may be what you want me to focus on. It depends on why you're asking the question in the first place.

For example, you might want a wealthier lifestyle in retirement that requires you to save a substantial amount between now and then. In that case, directing extra money to the stock mutual funds in your 401(k) plan or IRA can make sense. Or being completely debt-free might be extremely important to you, in which case paying extra on the mortgage would be a good approach.

Stop thinking the right answer has to do with just numbers, where the stock market is going or not going. The right answer is the one that best aligns your strategy with your goals and values--essentially, your financial spirit. Get in the habit of answering questions that way, and you'll improve the odds of having financial success.

But really, just pay it off
In actuality, the answer to the money aspect of mortgage question is fairly black-and-white: Pay it off. Financially speaking, the amount you could gain from the excess return of investing in stocks doesn’t justify the high risk, when compared with the certainty of having a paid-off home.

If you’re making good progress on other financial goals, like retirement or college savings, and still have money left over, paying down your mortgage is a smart choice. The real question to ask yourself is, do you think it’s smart, given what you're trying to achieve?

Back with a new mission

2009-01-23T03:53:00.000-08:00

I'm back. Did you miss me? Or maybe even more telling, did you even realize I was gone? (Don't answer that.)

It's been nearly a year since my last post, but I've used the time away well. In fact, by the grace of God, my life's gone through a big change. Instead of writing blog posts this past year, I used the time studying to get my Series 7 and Series 66 licenses, and to pass the very tough CERTIFIED FINANCIAL PLANNER (tm) comprehensive exam. Today, I'm no longer writing about personal finance and investing; I'm working with individual clients and advising them as an official financial planner.

I've been three months on the job and I love it, which is saying something given the financial state of mind of people today. I started advising on October 7, less than a week before the Dow Jones plummeted 11% in a single day. If I can love this job after advising clients in what's been the worst financial meltdown in 80 years, I'm guessing it was a pretty good career choice.

A cool revelation
And this brief time in my new role has helped confirm something in my mind. Financial success comes down to this: You are how you manage your money.

Plenty of books, blogs, videos, etc. exist on how to build an investment portfolio, how to save, how to spend wisely, what vehicles to invest in to reach your financial goals. But I'm realizing more and more that you can know everything there is about stocks and bonds, savings accounts and 401(k)s, and still make poor decisions that leave you poorer.

When it comes to money, the most important thing to understand is you. How you act. How you think. What motivates you, what deflates you. Only by discerning the inner-workings of your own mind, and particularly your spirit, can you effectively create a sensible financial plan. You have to know what fits, what doesn’t, and then what that means in the financial vehicles and strategies you use to pursue your own goals.

It's really what I love about my job, getting to know people, helping them to know themselves, and then applying those findings to their investments . Much to my surprise (and thrill!), being a financial planner is as much about helping people understand themselves as it is about understanding correlation coefficients, betas, and other complex math formulas (which make me say yuck! as much as any non-financial person).

My new mission
And that's what I'm hoping to bring you here at The Coin Jar: Ways to help you think about who you are, how you relate to money, and how you can use those findings to achieve success. It'll be a journey we go on together, because I'm applying these ways in my own life today, as I've written about in the past, and will continue to do so.

So please forgive the lengthy absence. I hope we both find it ultimately rewarding.

Posts in the Carnival of Personal Finance

2008-03-11T12:31:00.001-07:00

This week's Carnival is up at the Quest for Four Pillars, a Canadian blog, eh? So don't be a hoser...check it out, especially these posts:

Ten financial lessons I learned from my dog, at squawkfox.
How to make a budget work, at beingfrugal.net.
How Wide Open Wallet teaches her kids about money.

A breakthrough: We're staying in our townhouse

2008-03-07T06:00:00.000-08:00

The past three years haven’t been easy for M and I when it’s come to discussing our housing situation. We’ve struggled with whether we should stay in our 3-bedroom townhouse or move up to a larger house. Finally, last weekend, we had a breakthrough: We’re staying in the townhouse.

That might seem odd, given all the reports that housing prices are on the decline. But I think it’s the right decision, and most importantly, both M and I do. For the first time, we are on the same page regarding a topic that has been a steady source of conflict. And really, the credit belongs to M, for whom letting go the idea of a bigger house—at least for the time being—was emotional and difficult.

Still a big stretch
The decision is hard for me, too, but for different reasons. It is a good time to buy, or at least better than it was a few years ago. M’s regular monitoring of websites like Realtor.com indicates that single-family home prices in the Burlington County, New Jersey, area have fallen anywhere from 10% to 15% from their highs in 2006.

However, they still ain’t cheap. While we have a fair amount of equity in our townhouse, it would be a financial stretch to buy the kind of home we really want—a contemporary four-bedroom house that we envision living in for the next 20 years or longer.

We toyed with the idea of killing ourselves with extra jobs and belt-tightening over the next 12 months to save for a bigger down payment. But with M juggling full-time mommy duties for a toddler, an infant, and a teenage daughter, and my daily two-hour work commute, our schedules are already tight. And our $500 per month grocery budget is considered “thrifty” by many standards.

A focus on other goals
So instead, we’re going to concentrate on modestly improving our townhouse more to our liking, and saving for our kids’ college. For instance, our 3-year-old son’s basement play area is half-finished (our friends half-kiddingly call it “the dungeon”) and too close to sharp tools and old paint cans for comfort. Plus, my stepdaughter graduates high school in 2012, and we are far short of having the money we’ve agreed to provide for her college (the actual amount requires some explanation; I’ll get into that in another post sometime).

Without the specter of a new house looming in the back of our minds, we can focus on achieving those goals.

Can’t do it all
I asked M what the turning point was for her in deciding it was best to stay where we are. Her personal sacrifice is enormous, on multiple levels: As a young girl, she always envisioned marriage and family life with having a house and a yard in a neighborhood—a far cry from our multi-unit, parking lot-covered townhouse complex. She also knows we could afford that house if she returned to full-time teaching, a job she loves, is good at and well-paid for, and finds much more appealing than cooking and cleaning.

I imagine many women today, balancing work and family, can relate to her response (which I’ve paraphrased).

“It was a combination of things,” she said. “The kids being sick so much this winter. Trying to keep up with doctor and orthodontist appointments and cheerleading practice, while also tutoring just a few hours a week on the side. It’s overwhelming.

“I think God has been showing me that I can’t do it all, that I have to decide what’s really important. And I want to be there for my kids when they need me. I don’t want someone else raising them. If that means waiting to have the bigger house, so be it.”

Peace in exchange for a bedroom
I’m confident we will someday have the house of our desires, probably in about five or six years, when M does return to work. And we are still passively “in the market” if an opportunity arises. We’ll take any miracles God wishes to send our way.

But we’re not counting on a miracle to make us happy. We are hopefully putting to rest our discontent with the blessings He’s already provided, removing it as a flashpoint in our marriage. I’ll trade an extra bedroom for marital peace any day.

A good week to jump on the saving bandwagon

2008-02-27T05:12:00.000-08:00

Need a reason to start saving? Here's one: It's America Saves Week, which started February 24 and runs through March 2.

America Saves Week is a national campaign organized by various nonprofit, corporations, and government groups aimed at reaching increasing awareness that people need to save money and reduce debt. Its primary focus: encourage people to act by making a commitment to save, invest, and build wealth.

"This year, the focus is on making saving automatic," said Nancy Register, associate director of the Consumer Federation of America in Washington, D.C., and national director of the America Saves campaign. Here are three ways to do that:

Sign up for or increase the amount you’re putting into your employer’s tax-deferred retirement plan (commonly called a 401(k) or 403(b)). The money comes right out of your paycheck, so after the first one or two pay periods, you’ll never even notice that you’re putting it away.

Open an individual retirement account (IRA) and set up regular deposits from your checking or savings account. The maximum amount you can contribute to an IRA in 2008 is $5,000, which comes to $96 a week.

Build an emergency fund by setting up automatic deposits into a money market mutual fund or savings account. A well-funded emergency savings account has three to six months of living expenses.

If you still need a little encouragement, visit America Saves.org. You can sign up for monthly saving “pep talks,” get tips on how to save, and see how others have turned their lives around by becoming “Savers.” You can even connect with Savers in your local area.

Check out Carnival of Personal Finance #140

2008-02-20T06:15:00.000-08:00

Lots of great personal finance articles in this week's Carnival of Personal Finance, hosted by The Financial Blogger. My favorites:

Emotions and money: Thanks to Suze Orman's new book, A Dollar a Day discovers if she's going to be generous, she also needs boundaries.
11 ways to save money: The first one is using a coin jar; how could it not be one of my favorites?
What is a Certified Financial Planner?: If you don't know, you should. Hint: It's different than a CPA.

Consumers' credit card pain may be a long-term gain

2008-02-15T06:00:00.000-08:00

One positive coming out of the current credit crunch: people may be thinking twice about using their credit cards.

The Associated Press recently reported that growth in consumer borrowing slowed sharply in December (holiday shopping season, even!) and was at its weakest level since last April. Meanwhile, credit-card delinquencies and defaults in December were up substantially from a year earlier, The Wall Street Journal noted.

To some, that’s a bad sign. The drop in credit-card use shows that consumers are "in trouble," according to one gloomy investment firm executive quoted by MarketWatch. "It reinforces the view that consumers are struggling with the bad housing market and tight credit. It doesn't bode well for the economy."

Maybe in the short run. But long-term, more consumers paying cash and being more cautious about debt is a good thing. How truly healthy can our nation be financially if the economy tanks because consumers stop buying things they can’t afford?

Not that I am completely anti-credit card. M and I still use a Chase Travel Rewards card for non-impulse items, such as gasoline, and planned purchases we fund with cash from our savings accounts (for which we don’t have a debit card).

But it’s a big change from more than a year ago, when we used our rewards card to buy just about everything, then paid off the full balance each month. I haven’t done any hard calculations, but I do believe that using a debit card connected to our checking account causes us to spend less in general and helps us stay within our means.

No doubt, a lot of people with overdue credit card and mortgage payments will experience a lot of pain in the months ahead, pain which will continue spreading to the economy and financial markets overall. But if that pain also teaches us something, maybe we’ll all be the better for it.

Have you cut your credit card spending recently because you are struggling financially? E-mail me your story at coinjar@yahoo.com.

Thanks, Washington, but the economy doesn't need your help

2008-01-19T07:30:00.000-08:00

I have a few cherished Philadelphia Phillies bobblehead dolls on a bookshelf in my basement. When M and I aren't looking, our 3-year-old son likes to play with them. So not surprisingly, one day I came home to find Mike Schmidt with his arms snapped off.

"I've told you before: DO NOT TOUCH," I admonished my son while super-gluing Schmidty's limbs back into place. "It's not your toy to play with. Now leave it alone because you'll break it even more."

The "broken" economy
I find myself saying the same things today--except directed at President Bush, Bernard Bernanke, Nancy Pelosi, and all the others in Washington scrambling to "fix" the economy. The stock market is swooning, economic growth is slowing, and people--make that voters--are screaming: "The economy stinks and Washington doesn't care!"

So to show they have a heart, our government officials will offer up what many want: $150 billion to spend in the form of tax rebates, and lowered interest rates for borrowing money "more affordably." But isn't spending and borrowing how we got here in the first place?

As I see it, economic and investing forces aren't broken; they're working quite well. For example, when demand exceeds supply, prices drop (as with the housing market today). And with high risk can come punishing losses instead of soaring gains (as banks and mortgage companies have had to relearn).

No short-term fixes
What is broken is general perception: that Washington must do something to fix the economy. No, it shouldn't. Tax rebates while fighting a multibillion dollar war fought on two fronts and running up a monstrous federal deficit is a bad idea. Making borrowing more attractive while more people are struggling to pay the debt they already have is a bad idea.

No doubt, things look bleak right now. They will likely get worse in the months ahead. Unwinding the housing bubble of the last few years will take some time and involve some pain. Believe me, I don't enjoy seeing that M's and my 401(k) is down about $13,000 since the end of the year alone, and that our townhome has lost about $15,000 in value over the last several months.

But I have little faith that Washington's short-term fiscal band-aids will make things better in the long term. They won't change $90-$100 per barrel oil or fast-rising health care and education costs. Or Americans' general tendency to spend more than they earn.

Instead, the President and Congress should just leave the economy alone. "Don't touch it. It's not your toy to play with. You'll just end up breaking it even more."

Then again, those warnings don't really work with my son, either.

A dose of humility on a Sunday morning

2008-01-13T05:02:00.000-08:00

I was just lamenting this morning to M about our disposal income--or lack of it. After paying all our fixed bills, accounting for groceries and household expenses, there isn't much breathing room left each month for for additional saving, such as for a down payment on a new house or our kids' college (we're pretty well-covered for retirement, primarily thanks to generous contributions from my employer).

And then I came across this headline in today's Philadelphia Inquirer:

Donor built millions on $11 an hour

Paul Navone is a retired mill factory worker from Vineland who made a fraction of what most people make today. Yet he just gave $2 million to a community college and a prep school.

Granted, Navone has never been married, is childless, doesn't own a TV, and shops in thrift stores for his clothes--a lifestyle that isn't exactly appealing and has definitely contributed to his stored-up wealth. It's a tradeoff I'd never want to make.

But it's still humbling to think about. I'm fortunate to have a stable job that produces a good income--well-above $11 an hour. Why the heck am I complaining? And what could I be doing differently to change the situation?

Is it better to save, or invest in your business?

2007-12-27T06:00:00.000-08:00

A reader recently sent me this e-mail:

"My daughter-in-law wants to save, but cannot convince my son. He thinks that every dollar she tries to save would be better off going straight into his business.

She and I have talked about the importance of saving. I would love to show her the plan to save $1 million by the time she is a certain age. She is 34 now. How much per month will she need to save to reach $1 million by age 50 or 60?"

Figuring out how much to save per month to reach $1 million can be a good motivational tool, especially if someone is young. (In fact, I recently used it with my daughter.) But to get the reader's son onboard with a plan to put away some money for the future, it may work better to focus less on the potential reward of saving and investing, and focus on the potential risk of small businesses instead.

Not much motivation

The sacrifice required to reach $1 million by age 50 won't sway the son (or encourage his wife) to start saving. To reach that goal, the couple would have to sock away nearly $2,300 per month for the next 15-1/2 years (assuming a 10% average annual return, which you can get with a well-mixed portfolio of stock and bond mutual funds).

Waiting a decade or so makes the amount more palatable, but still tough to swallow: $725/month to reach a million by age 60, and $427/month to get there by age 65 (such is the magic of compounding). Doable, but still unlikely to convince Sonny Boy that the money is better off invested in stocks and bonds than in his own business-building skills.

Offsetting a huge risk

Which is where risk comes in. Investing solely in one's own business is a lot like investing in the stock of an individual company--except, if you're just starting out, even riskier. Many small businesses fail within the first five years (depending on the source, between 50% and 80%). The son may invent the next Google, but he may not. Saving money for the future to offset this huge risk isn't a comment on his business idea or abilities; it's good financial sense.

Come together on a plan

That said, my e-mail friend should encourage her son and his wife to sit down together and establish a concrete plan. It should have room for both saving for tomorrow and investing in the business, with well-defined and mutually agreed upon goals and definitions of success.

Since they are relatively young, the couple could put more money toward the business initially, with the caveat that they evaluate the return on their investment in a year or so. If the business is showing signs of progress, they may even be able to increase the amount they're putting toward both goals. If not, they could evaluate whether it's time to shut the operation down. Either way, the decision should be theirs--not his or hers.

Potential reward is the aspect many people consider first about investing, but don't forget about risk. Understanding your own comfort with it--as well as that of your spouse--can go a long way toward making you a wise investor.

Mortgage bailout is the object of my ire

2007-12-06T18:00:00.000-08:00

Ok, I know it's been a while--more than three months since my last post. In that time, I've welcomed a new daughter into the world, passed another test on my way to a Chartered Financial Consultant designation, and scrambled to find and buy a replacement car for my Sentra, which unexpectedly died on the Pa. Turnpike. So I've been busy.

What prompted me to write today? Outrage. The culprit? The Bush mortgage bailout plan. It's even made me do something that I've never done before: write to my congressman and senators. (That would be Jim Saxton, Frank Lautenberg, and Bob Menendez--and you didn't even think I knew who they were, did you, Dad?)

Wish I had the government in step in to freeze the rate on the ARM I took out on my first house back in 1999, when I didn't know any better. Would have been nice to pay the low initial rate I got for an extra five years.

Better yet, wish M and I had used an ARM to buy that oh-so-nice $464,000 house we looked at a few years ago. We knew we could never afford it with a fixed-rate mortgage on our five-figure income. What were we thinking? We could still be living there, sitting pretty with an affordable rate until 2012. And who knows, by then I could have turned this blog into a money-making machine, become CEO of my company, or hit the lottery, so we could afford the payments when the rate resets then.

One anonymous poster on Real Time Economics sums up my feelings about the Bush plan pretty well, plus gave me a chuckle:

"I would like the government to help me out with my gambling debt in Vegas. The casino didn’t explain the rules very well. And I didn’t realize that the house had the advantage. I would like my life savings back. If you could just give me a little more time, I think I could win it all back. Please help me!"

Shhhh, anonymous...Don't give Washington any more bright ideas.

When should I get rid of my high-mileage car?

2007-08-31T05:11:00.000-07:00

I’m approaching 193,000 miles on my 1998 Nissan Sentra GXE, and I’m in a quandary. When should I buy another car with lower mileage?

My Sentra, unlike the one shown here, is in fair condition. It runs a little more sluggishly and loudly than it used to. A small dent from backing into a friend’s car is noticeable, but not terribly so. The interior is clean and tear-free, with a few minor upholstery stains that I could scrub out.

My wife and stepdaughter see my Sentra as a “junker.” I see it as a wise choice for my driving needs. I’ve logged 100,000 miles in about four-and-a-half years traveling 105 roundtrip miles daily to work and the car has required just one non-maintenance repair of over $500. It’s 30 miles-per-gallon has been nice in this era of $2.50-plus per gallon gas prices. And I could conceivably sell it for about $2,800, according to Kelly Blue Book—an amount that’s held fairly steady even as the miles have piled higher.

Sell the car now or later?
With 200,000 miles approaching, I’m actually a little excited. Just how many miles can I get? But I also know I’m living on borrowed time. If the car does die, it will be worth nothing.

I’ve been watching the market for used Nissans, Toyotas, and Hondas on phillycars.com, a local car-buying site. I could get something similar to my Sentra with less than 100,000 miles for $4,000 to $7,000. M and I have some cash saved to get another car for me, but we also dip into that reserve when our monthly cash flow gets tight. A part of me wants to use that money for the car sooner rather than later, before we drain it completely.

Going to keep driving—for now
Still, I’m tempted to keep wringing as many miles as I can out of my trusty Sentra. There’s a good chance that it will die a slow death, with steadily increasing repair bills, rather than suffer a sudden automotive cardiac arrest. Then I could keep it running until I find a car and a deal I like, which is better than being forced to take whatever cars and deals are available at the time because I need a car to drive.

What would you do?

The truth about budgeting

2007-08-27T23:00:00.000-07:00

Research has shown that about 40% of all households maintain a monthly spending plan, or budget. While they make up less than half of us, do budget-users know something non-budgeters don’t? Have they discovered a secret to make budgeting less of a chore?

Unfortunately, no. Here are three truths that I've learned about using a spending plan, and that other users would likely agree with:

Planning ahead is hard. Unexpected expenses come up every month and prices on most things (not just gas) continue to rise. Sometimes spending predictions are off—even way off.

Tracking spending is a pain. A purse or wallet stuffed with receipts is annoying. And even with budgeting software, logging all the information can be time-consuming.

Budgets are "restrictive." Yes, a budget will restrict you from buying what you want--especially if you can’t afford it.

So now you know: Budgeting isn’t fun. But that's true about many things in life that are good for us. Watching what we eat and sweating it out at the gym aren’t easy, for example. But the satisfaction you can get from a trim, healthy body makes the effort worthwhile.

Financial talk-show host Dave Ramsey likes to say that folks who get on a monthly budget often feel like they’ve gotten a raise. Such can be the power of planning and knowing where your dollars are going each month. And that can lead to some fun--that you really can afford--in the long run.

Financial emergency brings one couple closer together

2007-05-12T13:42:00.000-07:00

A financial crisis like a job loss can put enormous stress on a marriage and a family. But it can also bring deeper problems to the surface that can turn it into a blessing in disguise.

For instance, Sara and Tom always considered themselves a typical American family when it came to their household finances. They each worked full-time, carried some credit card debt, and generally lived within their means.

But in the back of her mind, Sara knew something wasn’t right. Whenever she sat down to pay the bills, she felt a sense of fear and insecurity. “We’ve always been okay financially. We didn’t overspend and we are not extravagant people, but we didn’t have an emergency fund,” she said.

In a financial bind
Like many people, Sara and Tom [I’ve changed their names to respect their privacy] felt there was no reason to expect a financial crisis. They both have good jobs—Tom is in the New Jersey state government, Sara is a sixth-grade science teacher—where they’ve worked for more than 20 years. But in the spring of 2004 Tom had to stop working due to a serious illness, putting the family in a bind.

“We needed to learn how to live on one salary when we were just doing okay on two salaries. We didn’t know how we were going to do it,” Sara said.

I met Sara and Tom through Good $ense, a financial counseling ministry I serve with through our church. While a crisis had prompted them to seek counseling, it was evident that Sara and Tom often were not on the same page financially. Sara is more of a saver, Tom more of a spender. Money was often a source of conflict in their marriage.

Accountable to their budget
As their counselor, I helped Sara and Tom examine their income, assets, and spending patterns. They learned how to create a spending plan for their family each month, something they had never been able to do before. Each time we met, they stayed accountable as to how well each was sticking to the plan. As they began to monitor their budget and plan together how to pay their bills with less income, the stress and conflict caused by the money problems subsided.

“[The counseling] put us on the right track,” said Tom. Sara agreed, “It helped me to feel secure and safe when everything felt out of control.”

A catalyst for positive change
Thankfully, Tom has since recovered from his illness and is working again. Though the emergency is over, the lessons on budgeting and getting on the same financial page have stuck with them. A crisis turned into a catalyst for positive change in their marriage and financial life.

“The funny thing is, we were more financially together during that time of our lives than ever before,” Tom said.

My daughter's millionaire dreams aren't far from reality

2007-05-01T18:00:00.000-07:00

Our oldest daughter Jessica said she wants to be a millionaire someday. At age 19, she’s off to a good start, and that substantially increases the odds of achieving her goal.

A few weeks ago, Jess took about $1,600 she’d saved from after-school jobs and opened a Roth IRA. With a Roth IRA, Jess can save and invest for her future, such as retirement. The money she puts in will grow without being taxed, just like a traditional IRA or a 401(k) plan. However, unlike those types of retirement savings vehicles, when she starts taking money out of the Roth IRA down the road, her earnings likely will be tax-free.

$100 a month to start
Naturally Jess isn’t thinking as much right now about retiring from her career as starting it. She’s in her second year at Northeastern University in Boston, majoring in journalism and cinema studies. Part of her education includes a semester working full-time at a local newspaper, so she’s been getting a weekly paycheck since January. Her plan is to put at least $100 a month into her Roth account for the foreseeable future, and beyond.

No school debt and lots of time
Jessica’s opportunity to build substantial wealth is enormous thanks to two huge advantages she has. First, she attends Northeastern on a full scholarship. She will graduate in a few years with no school debt whatsoever, which should help to keep her plans to save on track even while pursuing a career field where starting salaries often almost feel like minimum wage.

The second advantage is time. With a savings horizon of 40-plus years, Jess’ sacrifices of trendy clothes, late-night pizzas, and morning ice coffees in these college years could mean financial freedom and security in her retirement years. I’d bet some Baby Boomers today wish they had made the same decisions when they were her age.

It sure adds up
Not that Jess needs any motivation, but I e-mailed her these numbers to show just how wise she really is to start a meaningful saving plan at age 19:

(For simplicity, I based my calculations on a 10% average annual return on the IRA investments.)

By saving just $100 a month in a Roth IRA, Jess stands an excellent chance of being a millionaire by the time she is 63 years old.

If she increased her savings to $168 a month, she has a great likelihood of being a millionaire by her 60th birthday.

If she starts saving the maximum amount allowed for an IRA ($4,000/year in 2007, or $333/month), she could even have her first million by the time she turns 52 (not even “retirement” age).

Granted, $1 million in 2047 won’t get Jessica a retirement that is 100% financially secure. But unlike many kids her age, she already understands the value of saving and sacrifice to reach a long-term financial goal, and that will serve her well.

I couldn’t be prouder.

Lessons learned from buying a used van

2007-04-20T16:15:00.001-07:00

The search is over. I wrote in January that M and I were in the market for a minivan and we finally bought one: a silver-blue 1999 Honda Odyssey EX that has just 89,000 miles. It’s already proven a nice addition to the family; on a road trip last weekend, we buckled CJ Jr. into his carseat and peeled off wet jackets while staying warm and dry within its spacious interior, as a Nor’easter raged outside our windows.

As an added benefit, we saved about $1,000 on the purchase price—money we plan to shift toward our goal of building an emergency fund of three months cash reserves.

As thrilled as M and I are with our purchase, it wasn’t easy. At times, we both longed for the convenience and security of buying brand new. But I did learn a few good lessons from our Odyssey-shopping “odyssey.”

Be patient
The search was slow, lasting six weeks start to finish. Along the way, I visited nine dealerships within a 50-mile radius of our home. I responded to four private ads, even test driving one vehicle while on the way to a family function (for which we ended up being late). And I spent many evening and weekend hours hunting for prospects on cars.com, kbb.com, and phillycars.com.

Even more maddening than the time spent was the time wasted, checking out vehicles that didn’t live up to their billing. Opening the hood of an Odyssey at one small dealer revealed what looked like actual tumbleweeds lodged in a grime-covered engine. A 2001 Nissan Quest advertised as “well-maintained” vibrated unnervingly as M eased it out of the driveway on a test drive.

Was the time and effort worth the ultimate benefit? It didn’t always feel like it. More than once we considered throwing in the towel and diving deeper into savings to increase the $10,000 maximum pricetag we wanted to pay. Now, as we enjoy the extra space and the automatic sliding doors (which CJ Jr. opens with an enthusiastic “Abracadabra!”)—all within our original budget and requirements—I’m glad we patiently stuck to our plan.

Be skeptical
I’m smart enough to raise an eyebrow when a vehicle’s seller says the emergency brake-indicator that continually stays on during my test drive “doesn’t mean anything.” But I almost gave in on one of my key buying criteria—having my own mechanic inspect the vehicle I wanted to buy—because I wasn’t skeptical enough.

Several used car dealers told me I couldn’t drive their vehicle to my mechanic before buying it. The reason? Insurance wouldn’t cover it (my mechanic is near my home, so it usually meant a trip of several miles). After the first few dealers threw up the same roadblock, I was almost ready to concede the point.

But my father, an attorney with lots of experience suing car dealerships, said the dealers’ rationale was nonsense. It was unlikely the vehicles weren’t insured, and even if that was the case, I had coverage as a driver. Most likely, the dealers didn’t want to take the chance that my mechanic would find something wrong.

Sure enough, the dealership that eventually won my business had no problem with me driving the Odyssey the 25-plus miles to my mechanic before I paid a cent. Jason, the salesperson, didn’t ask for a deposit or even the keys to my car. “We’re confident that our guys found everything and anything, so have at it,” he said. My mechanic gave the van a nice thumbs-up (“It’s got a lot of life left in it,” he said) and I had some much-needed peace of mind.

Make an offer
Like many people, I don’t like haggling over a car’s price. But I know that haggling can mean money in my pocket, and I am cheap by nature. So I haggle.

And it works. In buying our Odyssey, I made an initial offer of $8,000, 20% below the dealer’s $10,000 advertised price. I thought it absurdly low for one of the best vans I’d seen, and Jason seemed to confirm it by quickly shaking his head.

“No way,” he said. “There might be some wiggle room, but not that much. We don’t price our cars artificially high and then discount them thousand of dollars during the sale to make buyers think they got a great deal. We advertise what we feel is our best price.”

I took a breath. The Odyssey’s price was certainly in line with others I’d seen advertised for similar vans, I said. But it wasn’t the lowest either, and besides, we had no real idea what other vans were actually selling for. It was probably less than $10,000, I concluded.

“Let me take it to my sales manager and see what we can do,” Jason said.

Five minutes later, he came back with a $9,000 offer. I shook his hand and sealed the deal. Looking back, I wonder if I my “absurdly low” offer was really too high.

The path to wealth is usually a slow one

2007-04-04T18:28:00.000-07:00

There are no shortcuts to financial success, but you wouldn’t know it by the Internet. Just Google the phrase “get rich quick” and you get advertisements like these:

“Bring in $100,000 a month: I can teach you how!”

“Turn $600 into $39,000 with the Forgotten Commodity!”

“Earn money fast and LEGALLY!”

Seeking quick riches can spell trouble
The absurdity of the ads’ claims is worth a chuckle. And maybe you've never felt tempted to click one just to “see what it’s all about.” But someone is clicking, and buying into the ads’ promises—otherwise they wouldn’t exist.

“Quick and easy” is a good description for making a box of Mac n' Cheese, not building wealth. After all, “The trustworthy person will get a rich reward, but a person who wants quick riches will get into trouble.” (Psalms 28:20)

Overnight wealth, or lasting peace?
In their research for the bestselling book, The Millionaire Next Door, Drs. Thomas Stanley and William Danko found that “building wealth takes sacrifice, discipline, and hard work”—hardly the stuff offered by the Internet ads above. But chances are most folks wouldn’t click on ads like these:

“Learn the secret to financial success: Spend less, save more!”

“Retire a multimillionaire—in just 30 years!”

“Be content with what you have. Find out how!”

Living below your means, using a monthly spending plan (budget), setting aside money for the future, and avoiding debt won’t you get rich overnight. But they can vastly improve your chances of accumulating wealth in the long run. More importantly, they offer the promise of something much better: lasting peace and contentment.

Woman's good financial sense leads to windfall

2007-02-09T06:00:00.000-08:00

Making wise personal finance decisions can be hard because they often require short-term sacrifices for long-term benefits. But they do pay off--and as one California woman found--even quite handsomely.

Hoping to help pay for her oldest daughter's tuition to the University of California, Berkeley, the woman decided to auction off a painting that once belonged to her grandmother, according to an Associated Press report. Instead of the few thousand dollars the woman was expecting the painting to fetch, she was stunned at the picture's final bid: a whopping $620,900.

A possibly difficult choice

Not having the needed funds for her child to attend a terrific school like Berkeley, Mom could have easily required the daughter to load up on student loans. As colleges go, Berkeley is a nice value; in-state undergraduate tuition for 2006-2007 averages only $7,800. Commuting to school from home, the daughter could conceivably graduate in four years with a "reasonable" $70,000 in debt.

But Mom faced head-on what may have been an emotionally difficult choice: Part with a painting that hung on the wall for years in her grandmother's home in Italy? Or strap her child (or the family overall) with a debt-load that might take years and years to pay off?

By choosing to sell the painting, the family can now afford to provide all of their children with higher educations without putting themselves behind the financial eight-ball. Maybe they can even have a more secure retirement.

The wisdom of avoiding debt

To be sure, the woman's experience is rare. The sold painting was unsigned, rumored to be the lost work of 17th-century Italian art master Pier Francesco Mola. Who knows if it is worth the price that the unnamed art dealer paid for it.

I won't be searching my parents' basement anytime soon for family heirlooms that could help pay our kids' college costs. But, like the mother in this story, I will do whatever I can to avoid overloading our family and our children with substantial student loan debt. That approach may not get us a cool $600,000, but I know that it, too, will have its rewards.

Want that bank fee waived? Then ask

2007-01-24T18:00:00.000-08:00

The ATM receipt I held gave me a sickening feeling. A negative sign showed next to the balance amount.

M’s and my checking account was overdrawn, and I knew exactly why. I’d forgotten to deposit a check I had put in my wallet earlier in the week, which was why I had gone to the ATM in the first place.

The good news is that I didn’t have to pay an overdraft fee, and not because Commerce Bank didn’t charge one (a nice, hefty $35). In fact, it was because I asked them not to.

A benefit of competition
You might be surprised to know that fees at banks, credit card companies, and other financial institutions are often negotiable. Many times—but not every time—you can avoid paying a charge that’s been levied on you for whatever reason simply by contacting the company and asking them to waive it.

Over the years I’ve saved by having the annual fee on my credit card waived, as well as charges for making a payment by phone (when I’ve been a little late mailing the check). Buying my first house, my father encouraged me to push the mortgage companies competing for my business to remove the many extraneous charges ($35 for courier services, $25 for faxing paperwork, etc.) that they like to tack on to provide the loan. Not every company waived every fee, but some did.

The reason financial companies are willing to let you keep your money? Competition. Losing your business to another bank or credit card company costs them much more than losing the revenue from a one-time $20 or $30 fee. Besides, for every person who asks to have a charge removed, there are many more who simply pay it, no questions asked.

Good financial habits help
That said, financial companies are only willing to go so far. If you make a habit of bouncing checks or paying your credit card late, you have little chance of avoiding the resulting penalty charges, no matter how nicely you ask.

In the years M and I have been customers at Commerce, I can’t recall being overdrawn any other time. We also were never late with a payment on M’s car loan, which they financed, and paid it off several months in advance. So the tedious chores associated with being a good financial steward—balancing the checking account, tracking where our money goes—do have their rewards.

Still, being temporarily overdrawn has shown me that I keep the cash level of our checking account lower than I should. I don’t like the idea of keeping a hundred or so “extra” dollars in the account—money that isn’t accounted for in M’s and my monthly spending plan—where it can be easily tapped. But it’s probably better than relying on my memory to make sure I always make our deposits on time.

Charged up about the cost of a cell phone battery

2007-01-09T04:49:00.000-08:00

I've been debating getting rid of M and my cell phones. Buying a cell phone battery has pushed me a little closer to hitting "End Call" permanently.

I've had my LG VX3300 cell phone for about 15 months--not that long, in my estimation. I use it only moderately; I rarely go over the minutes in my service plan and I turn it off when I'm at work. So the fact that the factory model battery recently stopped holding its charge for any length of time was annoying enough.

Then I went to my friendly local Verizon accessory dealer for a replacement. The pricetag: an appalling $49. More than twice as much as I expected. As M pointed out after I got back, "For that, you could have gotten a whole new phone."

I want what I want
Yes, I could have. But I didn't want a new phone. My phone serves my purposes well enough. I don't need a cameraphone, a webphone, or a phone with the ability to answer e-mail.

And I definitely don't want a new cell phone plan, which cheap new phones often come with. I can't wait for our current two-year contract to run out so we can unload it from our monthly budget. I'd rather put $82 toward CJ Jr's college fund--which we've temporarily stopped contributing to, since we went to one income--than give it to Verizon.

I've considered paying the cancellation fee. Dishing out the $150 for each of our two phones is less than half than amount we'll pay ($738) for the next nine months to finish out the contract. But I just can't stomach putting out that kind of money for absolutely nothing.

Two big errors
I do shoulder some of the blame for my battery "overcharge." I didn't shop around beforehand, as I normally do. Afterwards I found one online for half the price.

I also took CJ Jr. with me on my little errand. I may have been more inclined to go to a couple different places, or even ask the Verizon guy about other options, if I had been able to keep both eyes on the cash register instead of one eye on CJ.

Now M and I have to revisit our January spending plan and figure out where that extra $30 or so will come from. That may not sound like much, but it eats up a little chunk of our expected household expenses for the month, which we try to keep as fixed as possible.

Besides, I just wanted a battery, at a reasonable price. Is that too much to ask?

Time to shop for a van

2007-01-04T18:00:00.000-08:00

The CJ family is growing. M and I have just found out she’s pregnant, God bless, due in late summer.

While we still have to get through that crucial first trimester—as M cautions, she is 39, which means a greater chance of complications—I’m throwing caution to the wind and proceeding full-speed ahead to prepare for the new arrival. So this weekend I’ll start shopping for a minivan to replace M’s 2002 Honda Civic.

A new experience
I bought my last car, the slightly used 1998 Sentra I drive to this day, eight years ago. Back then I traded in my 1988 Ford Festiva, took out a five-year loan, and made all 60 payments.

This time, I’ll be putting some of the personal finance wisdom I’ve learned to the test. I’ll be selling M’s car privately instead of trading it in. I’ll be looking for a vehicle around three to five years old and between 75,000 and 100,000 miles on it, instead of just slightly used. And I’ll be paying cash instead of carrying around a car loan for half a decade of my life.

Private sale means more cash
The advantages of this approach: First, by selling M’s car privately, I should be able to get more money for it than I would as a trade-in. According to Kelley Blue Book, a good condition Civic like M's sells privately in my area for about $9,400, nearly $1,400 more than its trade-in value. It’s also paid off, so every dollar we get for it goes to us.

Sure, showing the car to buyers will probably be a hassle and it may cost a few bucks to run some ads. But will the time and money be worth another $1,400 that we can apply to the van purchase? I think so. We’ll see.

Used doesn’t mean unreliable
Second, we can in no way afford a brand new Honda Odyssey—the van M prefers—which currently has a minimum pricetag of $26,000. Even if we could, I’d have a hard time shelling out that kind of money for something that will likely worth about half that amount in a couple years.

A high-mileage Odyssey is still relatively pricey—around $9,000 to $12,000—but much of that cost should be covered by the sale of M’s Civic. And while we do run the risk of buying something with unforeseen mechanical problems, Honda and Odysseys have a great reputation for reliability. I also plan to check certified pre-owned vehicles first to see if they are in our price range.

In the end, I expect we’ll pay an additional $2,000 to $4,000 for the luxury of not having to hear my teenage stepdaughter complain about being wedged between two carseats. That’s family peace at an affordable price.

No borrowing costs, less risk
Lastly, I’m looking forward to telling a car salesperson that I want to pay by check instead of taking out a loan. Financing mostly benefits the dealer, since loans are often where auto retailers make their biggest profits.

For buyers, however, a new car’s value drops like an anvil in its first couple years on the road. Used car values still lose ground each year, though not as quickly. Having a car loan is like borrowing money to buy a stock you know is going to lose money. It doesn’t really make sense.

Plus, say M and I hit dire financial straits down the road and had to sell the van. We may owe more on it than we can sell it for—what’s known as being “upside down” in a loan. That would likely make our tough money situation only slightly better.

Paying cash might mean a dealer and salesperson are less willing to negotiate on a van’s price, since that’s where their only profits will come from. But I’m willing to take that chance. Last I checked, there were lots of used Odysseys for sale in my area.

Stash some cash for emergencies

2006-12-27T12:00:00.000-08:00

As I mentioned in my last post, I knew the personal finance books I received for Christmas would yield some good fodder this blog. Here's the first interesting tidbit to share.

In The Wall Street Journal Complete Personal Finance Guidebook, Jeff Opdyke recommends stashing a few hundred dollars cash in a very secure spot in your home, just in case the power goes out in your area for an extended period of time. Though M and I have started using cash on a more regular basis, we get that cash from an electronic ATM. Plus, we're still pretty tied to using our debit card to pay for things.

Other than big snowstorms or the occasional flooding, natural disasters are rare in South Jersey, but having some cash around to pay for groceries in an emergency isn't a bad idea. Now I just have to find a secure place in my home to keep it (something I won't be writing about here).

By the way, the Carnival of Personal Finance is up at My Personal Finance Blog. Check it out if you have a chance.

Personal finance books under my Christmas tree

2006-12-22T06:00:00.000-08:00

In our house, celebrating Christmas has become a month-long affair. With in-laws and siblings down south, a daughter attending college in Boston, and a blended family in general, M and I have been involved in family gift exchanges the last two weekends. We have three exchanges to go before the year is through (counting Christmas morning).

All the early exchanging makes the holidays a little more hectic , but it has perks. For instance, I've already gotten two things on my gift list: Jane Bryant Quinn's Make the Most of Your Money, and The Wall Street Journal Complete Personal Finance Guidebook, by Jeff Opdyke.

Author, author
Both books are tremendous resources for just about everything personal finance-related, from excellent writers. Jane Bryant Quinn is one of the most well-known personal finance experts around. I interviewed her once for my job, and she's as classy as she is money-smart. (Interesting notes I didn't know about her until now: She helped develop Quicken, the personal finance software I use, and her stepdaughter is Martha Quinn, one of the original MTV video jocks. Source: Wikipedia)

Jeff Opdyke is The WSJ's Love & Money columnist. He doesn't have the long list of credentials of Jane Bryant Quinn, but he has been covering personal finance and investing for The WSJ for more than a decade and has a real knack for clear, non-intimidating finance writing. (Interesting note about him I didn't know: He works for The WSJ but lives in Baton Rouge, Louisiana.)

Everything personal finance
I'm already halfway through the guidebook. It's a "lighter" read than JBQ's book, both in tone and weight. Mr. Opdyke covers all the basics of personal finance, from banking to investing to insurance, in less than 250 pages. My daughter Jess got it for me (because she "admires my passion for finance"), an irony because I think it's ideal for someone like her--young, busy, and just starting out in life. It also has a companion workbook (sold separately).

Ms. Quinn's book has been staring at me from the top of dresser the past two weeks. It covers the same ground as the guidebook and much, much, more, and in greater detail. It's more than two inches thick and 1,000 pages, including appendixes. However, it's well-organized and easy to navigate. Just don't try to stuff it in your special someone's stocking.

For me, perhaps the greatest gift from both of these books: Fodder for an abundance of personal finance ideas and thoughts to share with you here at The Coin Jar in the months ahead.

Good personal finance advice for your ears

2006-12-20T06:00:00.000-08:00

I love my iPod. Listening to podcasts of radio shows from Dave Ramsey, Crown Financial Ministries, and Charles Stanley make my hour-long commute to and from work an education rather than just a grind. (In fact, I rarely listen to music.)

I'm going to add another show to my podcast favorites: "The Color of Money" from National Public Radio (NPR). It airs every week on NPR's "Day to Day" show. Michelle Singletary, the personal finance columnist for the Washington Post, is the primary contributor. The segment covers the usual range of topics, from saving for retirement, college, etc. to tips on starting a business.

Maybe the best part about it: It's informative and short, about four minutes long. Plus, with the podcast, no endless NPR fundraising segments to sit through in the fall and spring.

A Penny Saved hosts Carnival
The list of submissions to the weekly Carnival of Personal Finance seems to get longer and longer. This week's carnival is at A Penny Saved, and since there are so many choices, here are a few from the bottom of the list you otherwise may not have seen:

The pursuit of the perfect savings rate at "My financial journey."
13 ways to save on gasoline, at "How to save money" (though you need to live near an Indian reservation for one tip).
How persistence will make you rich someday, on "Money Smart Life."

Red storm rising for many homeowners

2006-12-14T06:00:00.000-08:00

The predictions are coming true. And faster than many financial experts expected.

People are losing their homes. In droves.

"Americans who have stretched themselves financially to buy a home or refinance a mortgage have been falling behind on their loan payments at an unexpectedly rapid pace," The Wall Street Journal recently reported. "The surge in mortgage delinquencies in the past few months is squeezing lenders and unsettling investors world-wide in the $10 trillion U.S. mortgage market.

The article notes that most of the defaults stem from people that had a questionable ability to pay from the start. However, it appears that the trend is spreading to other parts of the mortgage market as well.

A report on ABC's Good Morning America said that more than a million families have lost their homes to foreclosure in the first 11 months of this year. That's up a whopping 43% from the same period a year ago. In the state of Georgia alone, foreclosures have increased 100%.

An early increase
The apparent culprits of much of the foreclosure activity: non-traditional loans, such as interest-only and adjustable rate mortgages. As housing prices soared through 2005, millions of homebuyers took out these mortgages--which have low monthly payments in the beginning, but that can jump substantially after a few years--to keep their home purchase "affordable."

I remember watching a news report about a year ago that cautioned about the risks of all these homebuyers taking out non-traditional loans. The reporter brought up the possibility that, when homeowners' payments increased in three, or four, or five years, we could see many people losing their homes because of an inability to pay.

Well, the increase has come early. For instance, $1.2 trillion in adjustable rate mortgages will adjust upward in the coming months, the Good Morning America report said. The impact on already stretched homeowners is proving to be pretty big.

Evaluate other options
If you've been able to make your monthly payments on an adjustable rate or interest-only mortgage, now's the time to evaluate other options. Consider refinancing to a 30-year fixed-rate mortgage, which currently runs at about a 6% interest rate per year--historically, still a very good deal. You'll surely face some upfront refinancing costs--and make sure there isn't a pricey prepayment penalty in your mortgage contract--but those costs can be worth it over the long run.

However, you may find that going to a fixed-rate loan--even a 30-year one--means you can no longer afford your house. Generally, housing costs (mortgage, interest, taxes, and insurance) should be 25%-35% of your household's monthly net income. If refinancing causes your mortgage payment to eat up 40% or 50% of your net income, you've bitten off more than you can chew.

In that case, it may be time to call your realtor. Which is better than dodging calls from creditors and eventually seeing your family's home auctioned off in a sheriff's sale.

Not too early to think of 2007 personal finance goals

2006-12-11T18:00:00.000-08:00

2006 is almost in the books. So what are your personal finance goals for 2007?

More than one-third (37%) of American workers said they plan to pay off credit card debt next year, and a third plan to put a set amount of money into savings each month. That's according to latest Principal Financial Well-Being Index, a survey of U.S. working adults at businesses with 10 to 1,000 employees and sponsored by the Principal Financial Group®.

Those are great goals to have. Add to those starting an emergency cash reserve, or increasing your reserve amount to six months of living expenses. Or keeping better track of how you spend your money. Or making sure you and your family have enough life insurance.

For my wife M and me, I'd like to see us get better at setting and living within our monthly cash budget. We did great our first month in October, but weren't as disciplined in November and through this month so far. Next year, I'd like to shoot to stay within our monthly budget for at least six consecutive months.

I also want to finalize our wills. This was a 2006 goal that I set just a few weeks ago , and I made a good start using my company's online estate planning document service. But I ran into a couple snags, so completing it will have to wait a little longer (sorry, M my sweet!).

Two other big objectives: Paying off the last of our student loans and a personal loan we took when we had CJ Jr. If we reach those goals--a good possibility--then we could start up our kids' college savings contributions again and making extra payments on the mortgage--two things we cut back on when we went to one income last June.

Last, but not least: Buying a highly used but reliable van (with cash, of course). This goal is heavily dependent on whether our family size shows signs of increasing in the next couple months, Lord willing.

Yes, I should have plenty of personal finance experiences to blog about in 2007.

Research: Thinking about money increases selfishness

2006-12-05T18:00:00.000-08:00

I didn't have to go far to find an intriguing post in this week's Carnival of Personal Finance, hosted by Money and Values. Just the second one listed, actually.

Laura Young, host of "The Dragon Slayer's Guide to Life" blog, highlights some interesting research featured in the November Science magazine on "The Psychological Consequences of Money." A study conducted by a team from the University of Minnesota shows that just the thought of money tends to make folks more self-centered, selfish, and less willing to help others.

I feel like I've known this fact for years, especially being a sports fan. As the contracts for professional athletes and televising events have gotten bigger, so have the egos and self-centeredness of the players and league executives, across all sports. It's nice to see some solid scientific data to back it up.

A holiday gift for your kids that will last a lifetime

2006-12-04T06:00:00.000-08:00

I'm probably missing a marketing opportunity here somewhere.

Occasionally I notice that people find my blog by googling "coin jars." Which got me to thinking, if you're looking for one last small gift to round out your child's holiday goodies, why not consider giving him or her a coin jar?

A search of Amazon.com produces a choice of four kid-friendly coin jars, ranging in price from $12.99 to $49.95. (I'm not counting the Qing porcelain coin vase included in the search results as fit for children. Also, note that two of the jars are virtually identical; one just costs $2 more because it's endorsed by Discovery Channel.) All are electronic, counting the coins as your child puts them in and displaying the total amount saved. One even counts and wraps the change for you.

I like the idea of motivating kids to save by showing them immediately how much their quarters and pennies have added up to. But I also think you get a big bang for the buck with children by dumping a bunch of coins out on the floor and helping them patiently count up their loot (reinforcing their math and money skills along the way). Either way, you're sure to get a "Whoa!" or an "Awright!" when they see the total in the end, which will leave a good impression of the value of saving on their minds.

Granted, an electronic coin jar isn't as fun as TMX Elmo or Nintendo Gameboy Advance. But those gifts will last from maybe a couple weeks to a year. The benefits of being a good saver will have the shelf-life of a lifetime.

Kids and money, loose change, and turkey leftovers

2006-11-27T14:53:00.000-08:00

Carnival of Personal Finance #76 is up at My Financial Journey, with 47 entries. My personal highlights:

Finance-4-Kids gives some tips on how to teach your kids about money. One or two seem a little pie-in-the-sky--I'm not sure how you can "Eliminate fear and greed" in anyone, let alone children--but generally his points are well-taken.

(Incidentally, I've started CJ Jr. putting money in his piggy bank. At two-and-a-half years old, he is more interested in the loud "clunk!" sound from dropping the coins into the pig's belly than the value of saving today for something tomorrow. Hopefully, someday that will change.)

Jenna Coffee at Moneybucks Coffee writes about something dear to my heart, given the name of my blog: what she calls "nuisance money," or the coins at the bottom of her purse and in a jar on the counter. I didn't know Coinstar charged 8.9% for their automated machine to count your pennies (it's also free if you use the money to buy a gift card). Nice work if you can get it.

Finally, here's a post in the spirit of the season that I wish I wrote: What can you learn about money from a turkey dinner? at Money Smart Life. You'll be looking at your Thanksgiving leftovers in a new way.

Calculator gives you the basics for creating a budget

2006-11-27T06:00:00.000-08:00

The thought of creating a family budget stops many people dead in their tracks. They look at the stack of bills and receipts on their desk, and suddenly cleaning out the garage is more appealing.

Often the reason is because folks don't know where or how to begin. But when it comes to setting up a budget, you don't have to recreate the wheel--there are any number of tools out there to get you started.

Take the "Ideal Budget" calculator on CNNMoney.com, part of its Money 101 series on the basics of personal finances. The "Ideal Budget" doesn't quite live up to its name in my book, but it's a quick and easy way to give you the basic framework for your own budget.

A broad financial picture
With the Ideal Budget calculator, you first input the amount of your income. Then you enter your expenses, in five broad categories: Housing & Debt, Taxes, Insurance, Savings and Investment, and Living Expenses. The calculator shows the percentage of your income going to each specific category, and provides an "ideal" budget allocation to see if you're spending too much or too little in one area.

It took me all of about 10 minutes to enter my family's information, though admittedly I have most of that information available at my fingertips. If you don't keep track of your expenses regularly or can't remember what you did with your last paystub, it will take you a bit longer.

I liked the fact that the budget was organized into just five expense categories. If you're just starting out making your first budget, simplicity is key. You need to have enough categories to make the personal financial "data" you're gathering and tracking helpful, but not so many that it's an administrative headache.

Not perfect categories
But I question a couple of the specific categories the Ideal Budget uses. For instance, I don't see a whole lot of value in budgeting your taxes. True, taxes are a big expense, but they are what they are. Most people with a steady paycheck or mortgage payment pay the same amount each month. If you're overspending in one category, you wouldn't be reducing your taxes to make up the difference. M and I base our monthly spending plan on after-tax income, which is truer to the actual income we have to spend.

I also don't like grouping Housing & Debt together. Yes, your home mortgage (if you have one) is debt, but it's also an investment--much different than the credit card balance you have for that plasma screen TV, or your new car loan. It's much more revealing to give your consumer (i.e., non-mortgage) debt its own place in your budget, and see just how much of your monthly income it's consuming.

Percentages can be questionable, too
The "Ideal budget allocation" percentages provided with the calculator are helpful. Some of the most common questions folks have about their finances are, "How much should I be spending per month on my house? On groceries? On entertainment? etc.," and the calculator gives a basic idea.

But like the categories themselves, the percentages come with some caveats. The calculator lists 25% as the ideal amount that should go for taxes, an amount which realistically could vary by the individual. It lists just 26% of income going for living expenses, but includes everything from food and clothing to gasoline and utilities. I don't know where the folks from CNNMoney live, but in New Jersey, the cost of living is probably higher than 26 cents of every dollar.

One "Ideal budget allocation" I agree with: 15% for Savings and Investment. That's truly an ideal figure, based on the fact that the U.S. savings rate has been negative for the past year, but one well worth striving for.

A first step worth taking
Judging by the "Ideal Budget," my family's in pretty good shape. We have little debt, so we're well below the 30% ideal allocation in that category. Our living expenses are running about more than a third of our income, which makes me question the cost of my 105-mile roundtrip daily commute--but since I love where I work and where I live, that's probably not changing.

If you've never created a budget before, the Ideal Budget calculator is worth a try. At least you'll get to say, "So that's what a budget looks like...!" But keep its limitations in perspective and think about how you could tailor it to your own needs. Hopefully, it will encourage you to put off cleaning the garage for another week.

How to save $1,000,000 and have your own jet, too

2006-11-27T04:23:00.000-08:00

My friend Tim, hero of my recent "Shopping tips from a savvy online bargain hunter" post, proved again that he really knows how to find good deals online. Check out this one he found advertised a couple weeks ago on Dealnews.com for a Cessna Citation Mustang Light Jet from Sam's Club.

Sure, the $2.7 million pricetag might seem a bit steep. But consider that it's $1 million off the list price and comes with a Sam's Club lifetime membership. Chances to be a wise spender like that just don't come around every day. No wonder Sam's Club is already showing the jet as "sold."

High taxes may be the least of your problems

2006-11-21T18:00:00.000-08:00

The politicians here in New Jersey are at it again--trying to figure out a way to lower the highest state taxes in the country. Few Jersey residents believe they'll make much headway, as this Philadelphia Inquirer article points out, and I, too, will believe it when I see it.

But if you think that lower taxes will make a big difference in your personal finances, think again. If you're complaining that taxes are too high and are a big reason you don't have enough money to live, you just might be looking at the wrong side of the equation.

It's not the taxes that are killing you

I was struck by this quote at the end of the Inquirer article linked to above:

"I just spent $200 on beauty products and makeup and had to pay $14 in sales tax," said Elisa, a woman shopping in Atlantic County. "I think that's ridiculous. They better start giving us something back or people are going to start moving to states where they have to pay out less money in taxes."

Now I'm trying hard not to rush to judgment. I've been with my wife M when she's bought makeup and I know it can cost a pretty penny (even at our local drugstore). Plus, I know that M wears makeup to look nice, mostly for me, and so I can be held responsible for the lipsticks and eyeliners in her purse. Guilty as charged. (Though she looks beautiful naturally, too--seriously.)

But $200? For makeup? And then complaining about $14 from a 7% state sales tax?

I can't make that kind of logic add up.

Taxes are a good, not great, deal
No one likes a big tax bill. And I've done my share of griping about the big chunk of our family income that goes to our federal and state governments.

But taxes are a fact of life. They pay for things our country and states couldn't do without, like roads, schools, and the protection of our homes and families. In the big scheme of things they might not be a bargain, but they could be considered a pretty good deal.

Being money-wise is less taxing
I don't know if Elisa is rich or poor. I don't know if that $200 in makeup will last her a year or a month. I don't know if she carefully included the expense in her monthly spending plan.

But if she's in a financial mess, I know one thing: Paying $14 less in taxes--or moving to another state with no sales or income tax--isn't going to get her out. Her best chance at financial redemption is to change how she thinks about her money, and how she behaves in regards to it. Save more, spend less, know where every dollar goes. That's taking a wise approach to managing your money.

It's good advice for every person to follow. And come to think of it, for every legislator too.

We've been "crammed!"

2006-11-20T06:00:00.000-08:00

That's right, crammed. And I didn't even know it.

"Cramming" is the practice of unethical companies burying charges in the pages of your phone bill for services you never authorized or even used. The charges can range from a few dollars to double-digit amounts--but often not large enough for you to notice and question the total amount of your bill.

My family was fortunate because the charge was small, we picked up on it right away, and it took just one call to get it removed. But others haven't been as lucky. Cramming can mean shelling out quite a few bucks, wasting a lot of time on the phone, and dealing with a big headache.

Getting a name pays off
I discovered we'd been crammed thanks to writing this blog--specifically the "To get better service, get a name" post a few weeks back. I was going to write about my experience following up on a $7.64 "miscellaneous charge" included in our August phone bill from a company named OAN Services, Inc. The charge was for a call from our home phone line to a strange-looking, 9-digit number, one that neither I nor my wife M could recall making.

I called the 800-number provided on the bill for OAN and told their representative that the charge was either a mistake or bogus, and we wouldn't be paying it. The OAN woman briefly tried to explain what it was for--which I still don't know, but it was something having to do with the Internet--but I stood my ground. When she finally said she'd have the charge removed, I dutifully wrote down her first and last name--just like I advise in my post--and confirmed that it had been done a few days later by checking my bill online.

I couldn't recall the woman's name, so I couldn't use the experience for my "Get a name" post. But in looking up OAN on the Internet to try and jog my memory, I discovered that the company's business is scamming people through unauthorized phone charges.

Rip-off reports galore
According to posts on www.ripoffreport.com, OAN billed one person in Illinois $53 for "non-basic service charges." "After calling the numbers provided on the Verizon Bill...we were placed on hold for a period of time, then when we disputed the call they said we had said yes to this service. Verizon would not address this issue, only tell us to call the numbers provided," the Illinois resident said.

"This company is charging me for Directory assistance in Nevada that I never used. My phone Company...said that there was nothing they could do...My charge was $7.14. Imagine multiplying that by all the phones and cell phones in the United States and you have a MULTI_MILLION dollar business," wrote Patti from Missouri.

And blogger Brian Patton had to make five calls and spend a couple hours on the phone to get a $50 charge removed from his bill.

If you're a victim, too
The Federal Trade Commission (FTC) and Federal Communications Commission (FCC) are well aware of cramming. Here are a few tips from the FCC to protect yourself:

Review your phone bill every month (as you should do with every bill and account statement you receive). Keep an eye out for calls to unfamiliar numbers, or for services that you don't recall ordering or using.

Make sure you know what service was provided, even for small charges such as $2.00 or $3.00.

If you can't explain what a charge is for, call your phone company or other service number provided and question its authenticity.

Keep a record of the telephone services you have authorized and used – including calls to 900-numbers and other types of telephone information services.

Read the fine print in promotional materials before signing up for telephone or other services to be billed on your phone bill.

If you have been crammed, immediately call the company that charged you and request to have the charges removed. If that doesn't work, you have several options: contact your state Attorney General's office, enlist the help of your local Better Business Bureau, or escalate your complaint to the FTC or FCC. The FTC, in fact, has a special cramming hotline at 202-326-3134.

One theme consistent in "cramming resolution" success stories: Be persistent. It may take several calls and some time, but you should be able to stop it and even have your money refunded.

And if OAN is the one you're after, here's where I reached them: 800-731-7777.

Visit this week's carnival of personal finance
Everybody loves the carnival, and Everybody Loves Your Money is the host of Carnival of Personal Finance #75. The list of personal finance articles seems to grow every week. Here are my favorites:

It's Just Money: "How much do I say?" The LAMoney Guy struggles to decide whether he should speak up to help his sister and brother-in-law avoid a financial train wreck.
Art of Money: "Micro-lending and the art of poverty" Jon profiles Muhammad Yunus, who will receive the Nobel Peace Prize in December for making loans to the poor.
FIRE Finance: "All is well if our HEART is well" Here's an interesting and creative way to think about the things that make for a good retirement.

New cars may be more affordable, but still don't buy one

2006-11-16T06:00:00.001-08:00

Cnnmoney.com ran an article recently that cars are at their most affordable levels since 1980. According to Comerica Bank's "Auto Affordability Index," better productivity in the auto industry combined with intense competition has driven the cost of a new car downward since its high in 1994. Meanwhile, the average family income has risen five percent over the same period.

"It's a pretty happy story for the consumer," Dana Johnson, chief economist at Comerica, is quoted as saying.

Not this consumer. Including finance charges, Comerica estimates the cost of the average passenger vehicle sold in the third quarter of 2006 at $26,500. That's about five percent less than the same period a year before, but still an awful lot of money to pay for something that's going to be worth about half that amount in a year or two.

If you are trying to get your finances on track--working to pay off debt, amass funds for your retirement or your kids' college, build up an emergency cash reserve--then a new car is a sure way to run yourself off the road. Just say no to buying one.

Used cars are a lot better deals than they used to be. I saved a few thousand dollars buying a 1998 Nissan Sentra with 12,000 miles on it eight years ago. It just passed the 170,000-mile mark. Best of all, it's completely paid for, giving M and I the freedom to work on our other financial goals--like trying to move up to a single-family home without mortgaging our life away.

How much does your morning coffee REALLY cost?

2006-11-12T06:00:00.000-08:00

I recently wrote that I switched from buying donut-store coffee to grocery-store coffee to squeeze as much savings as I can out of my 1-cup morning habit. I self-brew and don't bother to invest the few dollars that buying coffee in a can saves me, so the switch isn't helping M and I pay off the house any quicker. But if you buy a $3 cup of gourmet coffee every morning before work, a cool little online calculator can show you how much it's potentially costing you over the long haul.

Hugh Chou isn't a financial planner. He isn't even in the financial services industry; he's a system administrator at Washington University in St. Louis, and self-proclaimed "geek." But he is a geek that makes great financial calculators.

Among the many--and I mean many--calculators you can find on his no-frills calculator webpage is the "Stop buying coffee and save" calculator. Just plug in the daily cost of your coffee (don't forget tax and any extra treats to go along with it) and see how much you could save by drinking a 25-cent cup from the office coffee machine. What's more, Hugh's calculator will show you how much those savings could potentially turn into if you invested them for a few years or decades or so.

You'll have to decide what's harder to stomach--the office coffee, or the smaller bank account.

Thanks to My 1st Million at 33, Frugal Duchess, and pfblogs.org for highlighting Hugh and his work. And thank you, Hugh!

A year-end goal: Get a will

2006-11-08T18:00:00.000-08:00

It's "open enrollment" time for my employer's benefit plan. While making the selections for my family, I discovered a nice benefit I didn't know I had: As a participant in my provider's life insurance plan, I have access to a free service that will create basic estate planning documents, such as a simple will and healthcare power of attorney.

M has been after me for some time to have our will drawn up. I like to climb mountains occasionally as a hobby, and it makes her nervous. I point out that statistically a greater percentage of people die on the nation's highways than climbing up the likes of California's Mount Whitney or Granite Peak in Montana. But that gives her little solace since I have a two-hour roundtrip daily commute that includes the Pennsylvania Turnpike.

"Get a will" was going to be one of my New Year's resolutions for 2007. But since this service looks like it could be a pretty easy task, I'm going to try and get it done in 2006. I'll write a post on the whole experience a little later.

A handy checklist
Related to estate planning, I came across a handy tool on SaveAndInvest.org, a personal finance website for military personnel. The Family Financial Checklist puts on one page all the major financial areas you need to consider (e.g., Where does the mortgage payment get mailed to? How much is our life insurance?, etc.) in preparing your spouse and family financially for the time you may no longer be able to take care of them.

The list is very broad and basic, and doesn't provide explanations for terms it uses, such as a living will. However, it can serve as a good starting point for a heart-to-heart discussion with your spouse or family about a difficult topic. Plus, as you gather and document the information, you can check off each item upon completion (something I personally find very satisfying).

Having just celebrated M's and my third wedding anniversary, I'm about two years late in completing this extremely important aspect of family financial planning. But hopefully before New Year's Day, 2007, I'll be able to check it off.

Shopping tips from a savvy online bargain hunter

2006-11-06T06:00:00.000-08:00

You couldn't drag my friend Tim to the mall for an all-day shopping trip. But he admits it can be tough to drag himself away from shopping online.

"I kind of like it just for the sport of it," he says.

Tim has a knack for finding good deals via the Internet, particularly electronics and technology. For example, he got all the components of his surround-sound home theater system--six speakers, one subwoofer, and a 7-channel receiver--online for less than $1000. "I was surprised at how good they sounded," he says.

Here's how Tim does it.

An informed consumer
Tim starts out by doing his homework. His first stop is usually Cnet.com, which provides product reviews and price comparisons for everything from camcorders to web hosting. "It's like an online 'Consumer Reports,' " he says. (He also subscribes to Consumer Reports, the magazine.)

He uses Cnet to check out a product's specifications and find out which ones offer the features he wants. For instance, he recently was shopping for a digital camera with ultralong, "12x optical zoom" and was able to quickly narrow down his choices to the few models that had that capability.

(One thing I like about Cnet is their video reviews, where an editor gives you a brief video tour of a product. When I was shopping for a digital camera, a video review helped me decide against one model because I could see that the buttons weren't placed very well on the body.)

Tim also browses through other sites to gather information. "Amazon has a lot more people using it, so you get a much broader number of reviews," he said.

On a price-hunt
Once Tim has a specific product in his crosshairs, he'll hunt for the best price. He prefers dealnews.com, a site which provides daily reports on the best product deals from established stores (It's slogan: 'How to go broke saving money'). "I'll search for prices by product or subscribe to e-mail alerts," says Tim.

Dealnews emphasizes that the deals it reports come from "reputable stores," because not all deals out there are as good as advertised, Tim cautions. You can get gypped by purchasing "grey market goods"--those not intended for use outside the United States and marketed by unauthorized resellers. While these products can be steeply discounted, you often can't get technical support or make a warranty claim if something goes wrong.

On the occasions when Tim questions a reseller's authenticity, he heads to resellerratings.com, where other users rate vendors they've used on a scale of 1 to 10.

Using loyalty as an advantage
Once Tim's found the right product at what he thinks is a good price, he pays a visit to JR.com, the website for J&R Electronics a brick-and-mortar store in New York City. If JR.com has the product he wants but at a higher price, he'll give the store a call.

"They have a price-match policy, and more often than not, they'll match a lower price somewhere else if it's within reason," he says. He's become a fairly regular J&R customer, though he's never set foot inside their unique structure at Park Row and Broadway.

"I have a comfort level with them, because they're reputable, they've always given me great service, and they have good prices," he says.

Weigh benefits versus costs
Shopping online, for all its conveniences, can take a lot of time and effort, which can outweigh the benefits of saving a few bucks on a printer. Despite the satisfaction he feels at getting a great product at a low price, Tim also knows that the point of shopping online isn't just to get the cheapest price out there.

"What's important is, are you happy with what bought, and the price you paid?" he says. "My brother could care less how much something costs, so he doesn't shop around much at all. I'm more frugal, so I'll do the legwork. But some people don't care and that's fine."

Perhaps his biggest tip: "Don't buy stuff you don't need," he says. "I saw these plastic freezer molds to make ice cube shot glasses for about $6. I thought, 'What a deal!' Then I caught myself; what the heck did I need them for? Fortunately, they were sold out."

Overspending? Maybe you need a smaller "bowl"

2006-11-01T06:00:00.000-08:00

Life is like a box of chocolates. And a credit card is like an open bag of potato chips.

I love chips. Potato chips, nacho chips, corn chips. It doesn't matter. Like the ad says, I can't stop at eating just one.

And I've learned something about the way I inhale chips that also can apply to spending money: We need boundaries. In fact, boundaries can be very good.

Eating more than my fill
Here's what I mean. In the past--more often than I care to admit--I've sat down in front of the TV with a half or full bag of chips at my side. I'll begin munching, and before I know it, I'm shoveling the shards at the bottom of the bag into my mouth and feeling a little queasy to my stomach.

However, on occasion, I've caught myself heading to the couch with a chip bag tucked under my arm and stopped dead in my tracks. I then go over to the kitchen cabinet, pull out a medium-sized bowl, fill it to the rim with chips, and put the bag safely back in the pantry. Usually after the bowl is empty, I've satisfied my chip craving, I have a pleasant feeling in my stomach, and have no desire for a refill. (Besides, the kitchen is waaayyy over there...)

Cash surplus
What does this have to do with money? In October, M and I stopped using a credit card to pay for everything. My theory (supported by academic research and financial experts a lot smarter than me) was that making purchases with cash--especially for discretionary expenses, like videos, household stuff, even groceries--would help us stay within our spending plan and manage our money better.

I haven't tallied the final numbers yet but it looks like the theory held true. M and I went over our spending plan at the beginning of the month, paid cash (or used our debit card) for the majority of our non-fixed expenses, and ended up with a modest surplus. We were even able to pay an unexpected $127 for my stepdaughter's tumbling lessons that I forgot to account for in our plan.

Behavior change
What was the difference? Our behavior. With an $18,000 limit, our credit card was the equivalent of a huge, seemingly bottomless bag of potato chips. We never came close to using all of that credit each month, but with such a large boundary, we naturally tended to "consume" more than was really good for us.

Spending within the boundaries of our cash limit--which really, by comparison with our credit limit, is equivalent to a small bowl of chips--made us more focused on how we spent our dollars and used what we purchased. For example, when we ran out of ice cream--another food which, for me, is best served in a bowl--M made up the brownie mix in the cupboard instead of adding it to the weekly grocery list. Thus, we stayed within our shopping budget but still had a tasty dessert.

Many people argue that boundaries are bad. And they can be, if they are unreasonable or too stringent. But use them well and they can save you from feeling a lot of discomfort.

Now, if you'll excuse me, it's November 1. There's a bowl of ice cream with my name on it.

To get better service, get a name

2006-10-30T06:00:00.000-08:00

Getting good customer service from a company, especially by telephone, can be a challenge these days. But here's a piece of advice, courtesy of my father, that can literally pay off:

Always get a name.

A name isn't typically the first thing I'm thinking about if I have to call some place like the phone company or my bank. It's usually because I'm unhappy about some incorrect charge or item on my statement and I want it fixed, and pronto. As soon as I can get a live voice on the other end of the phone--after punching "0" as many times as necessary to get around the automated service menu--I jump right into what's been done to me, and what the company should do to make it right.

Sometimes the first service representative I talk to can fix the problem, sometimes he can't. But here's why pausing my monologue long enough to get that person's name is important.

Establishes a relationship
Starting your call with "Hi, I'm NAME...who am I speaking with?" takes away some of the anonymity on both ends of the phone. A name helps the service rep (and you) remember that you're dealing with a real person, not just some faceless voice that you'll quickly forget as soon as you hang up.

Provides accountability
Information is only as good as its source. Getting the service rep's name makes him accountable to the information he's providing. If he's promised to remove the fee you're questioning, look into your issue further, etc., a name is essential to follow up on the conversation for a status report or if you're not satisfied with the result.

What's more, talking to different people can mean getting different information. If you call back about a specific problem and speak with a second or third service representative, you may get two or three differing perspectives on how it should be resolved. With a name to refer to, you won't be as vulnerable to the "You must have been mistaken" or "We'd never tell you that" defenses that bad-service companies employ.

Saves time and frustration
Having to explain your problem over and over again to multiple service people is time-consuming and frustrating. Working with the same person builds a history of what the issue is, what's been tried to fix it, and what else needs to be done. If you've ever called for technical support on your computer, you know what I mean.

Introducing yourself and getting a person's name isn't just good manners. It can be good business, and wise consumerism.

"It's Just Money" hosts this week's Carnival
Hungry to learn more tips and ideas to help you manage your personal finances better? Then check out this week's Carnival of Personal Finance at the blog, It's Just Money. A blog "carnival" is an easy way to discover other personal finance blogs that you might find helpful; it's essentially a compilation of dozens of recent blog articles all in one place. Check it out when you get a chance.

Three ways to balance your income and your expenses

2006-10-24T06:00:00.000-07:00

You've been tracking your spending and what you once suspected is now backed by cold, hard fact:

You shell out more than you bring in.

So what do you do next? Well, the hard truth is that you have only three options when expenses exceed income.

The best option: Spend less
I can hear you now: "Gee thanks, CJ, why didn't I think of that?" And I'm sure you did think of it, but let's take it to the next level: "Spend less on what?"

First, start small. Evaluate every item you purchase and bill you pay for ways to cut back. You'll likely be surprised at what you'll find, and at how far you can go.

For example, I used to pat myself on the back for making my morning coffee at home instead of buying it. But I also was paying $11 for two pounds of Dunkin' Donuts coffee grounds (on sale, even!). When I bought a $2 can of Folgers (also on sale) I found that, to my unsophisticated palatte at least, it tasted no different. Over the course of a year, Folgers and Maxwell House have probably saved my family $50. Sounds small, but when applied over lots of different purchases, it quickly adds up.

Next, think bigger. Are your monthly transportation expenses (car payment, gas, maintenance) more than 15% of your household net income? Do your credit card payments exceed 10%? Are your housing costs (mortgage, taxes, electric, phone, cable TV) more than 40%?

If so, you're likely living beyond your means. To get on track, you may need to take radical steps, like moving to a less expensive home or selling your car. In the short run, such steps are difficult and emotionally painful. In the long run, though, they'll pay off in more peace of mind and less stress.

A good option: Sell stuff
Yard sales, consignment shops, ebay , and craigslist. There is no shortage of marketplaces to convert the kitchen table and chairs stored in your basement or the clothes cluttering up your closet into cash, which can go to eliminating those pesky monthly credit card payments.

You probably walk by something you own everyday that you or your family don't use or need anymore. Make a point to go through every room in your house every month or so with the specific purpose of finding items you can sell. M and I just recently received $100 from our consignment dealer for clothes our kids never wore and toys they never played with.

A costly option: Make more
I've listed this option last for a reason: It's usually first in people's minds.

The fact is, earning more doesn't solve overspending. When you bring in more, the tendency is to spend more--often resulting in more financial trouble, not less.

Plus, consider the costs. A higher income may require working longer hours at your current job, or in a second job. Time away from things you enjoy, or your personal and family relationships, is a steep price to pay for not being a little more disciplined in managing your money.

That said, it doesn't hurt to find out if you are making less than you are worth, an easy task at a website like www.salary.com. It pays to invest time in your education or job training to increase your income-earning skills. And if you can turn a pleasurable hobby into a money-making venture, all the better. But weigh the costs and benefits before you make a change.

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Pay off the house or have another child? No contest

2006-10-17T18:00:00.000-07:00

Not everything comes down to money. At least it shouldn't.

Many times the people I counsel through my church's financial ministry face hard, but fairly clear-cut, choices regarding their finances. Serious about getting rid of that $40,000 in credit card debt? Then consider selling the brand new car with the $400 monthly loan payment, I might say.

But not all decisions come down to just money. Some things in life aren't meant to be about money very much at all.

Family decisions
Terri Cullen, the "Fiscally Fit" columnist for The Wall Street Journal, wrote in the October 5 edition about the process she and her husband undertook to decide on having another child. Both approaching the age of 40--their mutually agreed upon cutoff for having more children--they felt time was running out for the chance to give their eight-year old son a brother or sister.

Together, they made a list of pros and cons to help them decide. The pros list was "short, but powerful," Terri wrote, starting with giving their son (hopefully) a lifelong companion. The list of cons was longer, not surprisingly, and largely money-related. Another child, Terri pointed out, would cut into their ability to save for retirement and pay off the mortgage early. Plus, there were the added costs of things like formula, diapers, and day care to consider again.

Sure, having kids costs a lot, as Terri says. But I was surprised at their ultimate decision. "I'd love to have one more child, but it doesn't make sense for our family," she wrote. "So it's official: Gerald will be an only child."

Kids not worth the cost?
M and I are both approaching 40. We have a 2-year-old son together, in addition to one daughter each from first marriages. For the last several months, we've been weighing the decision to add to our family, so I took special interest in Terri's viewpoint.

And I can't disagree with her and her husband more. When it comes to deciding whether to have a child, money and financial goals are fair considerations--but keep them in perspective.

My father is fond of saying that M and me are the kind of folks who should be having more kids. His point--aside from the fact that he'd love more grandchildren--is that today's world needs as many children with stable homes and loving parents as it can get. Instead, like Terri and her husband, many couples with dual careers and good incomes are deciding that the "cost" of kids is just too high.

Let your heart be your guide
Having a child, whether your first or fifth, is a very personal decision. No one--last of all me--has the right to judge the choice anyone makes. But I would encourage that it's a choice to be made mostly from the heart.

If you would love to experience the joys--and honestly, the many, many trials--of parenthood once again, go for it. Learn to manage your money well and your mortgage will get paid. You will find a way to finance their college somehow. You will retire someday, maybe with the financial means to live out more dreams than you thought possible.

Apples-to-oranges comparison
M and I will be fairly close to retirement age by the time our son graduates high school. We've adjusted to living on one income, but don't have much money to spare. We can't afford a single-family home in our area, and we might never be able to. And we'll need to replace our Honda Civic with a van if our family gets any bigger.

We don't relish these thoughts. Still, are they good enough reasons to hold us back from creating another child for our family to love, and be loved by?

Money is money. A child is a child. You can't make a more apples-to-oranges comparison.

So it's official: M and I are going for it. We're not expecting yet, but God willing, we hope to have to buy that van very soon.

Paying cash leads to an early clash

2006-10-04T18:00:00.000-07:00

It's Day 4 of paying with cash instead of credit card in my household, and it's already caused a "fight."

In my September 22 post, "Three months on one income prompts a change," I told how M and I would no longer use a credit card to buy things like groceries, gifts, and household purchases, and use a cash-based approach instead. Even though we've always we paid off our credit card each month, I expect (and hope) that using the monthly cash we have—which is far less than our credit limit—will help us stay within our spending plan boundaries, and even spend less overall.

Last Sunday, October 1, I withdrew a modest amount of cash for this week's purchases. The approach tripped M and me up right from the start, but I've already learned a few things, and can see how it has the potential to have a positive impact on our spending behavior down the road.

A week’s spending in two days
We had been waiting for October 1 to arrive so M could do some grocery shopping. Our freezer had gotten so empty that it looked like we just moved into our home.

M left for the Acme immediately after church and loaded up the shopping basket from the list she'd carefully prepared. But when she got to the checkout counter, she discovered something: She'd left the cash at home. So she did what we've always done—pulled out our credit card.

She used the card again at Shop Rite for some more groceries. Later, she paid cash at Target for several other items in our monthly budget, such as socks, diapers, and toiletries. Not surprisingly, the combined total of the credit card and cash purchases exceeded the money I'd expected us to spend for the week. Let the finger-pointing and raised voices begin.

Communication is key
I thought I had told M that the cash I’d withdrawn wouldn't cover everything we wanted that week and she'd have to prioritize what to buy and when. At the time, she said she understood—but later admitted she really didn't know what I meant, or how this whole process was going to work, because I really hadn't explained it.

I'm guilty as charged. I'd spent a lot of time figuring out how we were going to do this, but not nearly enough discussing it with M. Good communication is critical to making this approach work, otherwise we risk spending too much of our cash before we have everything we need (a worry the credit card “conveniently” removed). So going forward, I think having money discussions will be more of a priority for us. We know they have to be.

More planning is required
M and I think ahead as much as we can already, but the cash approach makes it that much more important. For instance, as M found out, we have to get in the habit of making sure we have the money we need in our pocket—or at least have access to it—when we’re out.

We also have to account for every purchase we want to make as best as possible, or it has real consequences. For example, we’re going to a wedding this Friday and still need to buy the gift (which we did include in our monthly spending plan). Since we surpassed this week’s spending boundary, we’ll be paying for it out of next week’s allotment—not an ideal solution, but still better than putting it on the credit card and paying for it next month.

But a wiser way of thinking
I take two positives out of our troubles so far. First, M and I actually handled the trip-ups together pretty well. Our tensions rose quickly when discussing the shopping receipts, but we managed to walk away before things got ugly. When we revisited the topic later, the discussion started with apologies for mistakes on both sides. By the end, we felt a lot more on the same page.

Second, I see signs that this approach is going to help us be wiser, more disciplined spenders. We’re thinking a lot more about whether we really can, or need to, purchase an item before follow through. We know there is a very real limit to what we have, which always has been the case—but using a credit card, it just didn’t seem like it.

Carnival of Personal Finance is in town
Punny Money has "hit the trail"--creatively speaking--for the 68th edition of the Carnival of Personal Finance. Take a trip back through history and check it out. (At posting, it appeared Punny Money's site was down. Hopefully the situation will be corrected soon.)

SNL and a "lighter" side of accumulating debt

2006-09-28T14:28:00.000-07:00

If you missed it, Jason commented that my last article, "One question that leads to financial wisdom," reminded him of an old "Saturday Night Live" skit about buying stuff that you can't afford. Check it out. And many thanks for the chuckle, Jason.

One question that leads to financial wisdom

2006-09-28T06:00:00.000-07:00

Want to get better at avoiding financial trouble? Make a habit of asking yourself a simple question:

Where’s the money coming from?

That may seem like an obvious question to ask whenever you buy anything, from groceries to a car. But it’s one people tend to avoid because they don’t know—or don’t like—the answer. Being financially wise means knowing exactly how you’re going to pay for something before you buy it—besides putting it on your credit card.

No vacation from financial stress
A couple I once counseled had committed to going on a family vacation they could no longer afford. The husband had unexpectedly been unable to work and they were struggling to make ends meet on the wife’s schoolteacher income alone. However, they had made plans months before to spend a week at a friend’s North Carolina beach house, rent-free, with several other families.

Canceling the trip was not an option, the couple had firmly decided. They’d already told their two kids they were going and were reluctant to disappoint them. With the free lodging, they actually considered the vacation “a good deal.” They also were embarrassed at the thought of backing out on their friends, especially for financial reasons.

With the trip just weeks away, the couple had not estimated the other potential costs, such as food, gas, tolls, and activities. They also had no idea how they would actually pay for the trip, other than knowing what credit card they’d use.

A change in thinking
Their perspective began to change when I asked point-blank: “Where is the money for your vacation coming from?”

Once they admitted to me—and themselves—that they didn’t know, the wheels were in motion to find an answer. With a little help, they came up with an overall budget for the trip that included every possible expense they could think of. We totaled up the driving distance and divided it by their van’s miles-per-gallon to get a decent estimate of the travel costs. They set a limit for their recreational spending money—miniature golf was fine, but jet skiing was out.

Scraping up the cash
With a rough idea of the vacation’s cost, the couple turned their attention to finding the cash to pay for it. The wife, who managed the household bills, determined to tighten the family’s belt over the next few weeks and scrape together some surplus dollars. The husband agreed to sell his barely used racing bike that was gathering dust in their garage. They’d also pay for a portion with their modest amount of savings—though not enough to deplete their entire account.

When they returned from the trip, the couple said that sticking to their budget wasn’t easy, but they’d managed. Knowing that the vacation was paid for freed them from worry, if only for a while, and helped them enjoy a little family fun during a difficult time.

“Where’s the money coming from?” It’s a simple question that may require a hard answer. But asking it before you head to that beach house will help keep you out of the poor house.

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Carnival of Personal Finance at Canadian Capitalist

2006-09-25T18:00:00.000-07:00

Check out the articles in the 67th edition of the Carnival of Personal Finance, hosted this week at Canadian Capitalist. There are 53 entries, but here are a few that I liked to help you narrow them down:

The Ideal Budget, at www.bargaineering.com, provides a breakdown of budget categories from the Money 101 classes at www.cnnmoney.com.
The Life Training Blog shares some principles of being financially secure that are true no matter what the situation of the economy or your income may be.
A blogger called 2million found a creative way to "save money the MacGyver way" and fix his car using a roll of duct tape and some pliers.

My recent article, "Three ways to help achieve your savings goals" was also among the entries.

The next Carnival will be held at Punny Money, on October 2.

Three months on one income prompts a change

2006-09-22T06:00:00.000-07:00

This week marks a notable anniversary in M’s and my household: three months living on one income. All in all we’ve managed well, but I can see things getting more difficult in the months ahead. So we are planning to take steps now to avoid trouble later.

Living smaller
While it hasn’t been easy, living from my income alone hasn’t been too difficult since M left her teaching job last June. The bills are paid. The pantry is stocked, though the shelves get a little more bare before the next trip to the Stop ‘n Shop. We’re surviving without cable television (though disappointed to discover that there’s just as much junk on regular TV from which to shield my teenage stepdaughter as there is on digital TV).

We’ve also achieved a couple goals. We used savings to pay off all of M’s remaining undergraduate school loans. That put us in position to apply for a special federal grant that M qualifies for, which will pay for her recent grad school classes—thus freeing us completely from student loan debt. M also tapped into some of the last cash we received from our wedding (three years ago) to have our kitchen finally painted a color she likes, rather than despises.

Worth the sacrifice
The best part of our one-income life has been seeing M happy and enjoying her new job as full-time mom, which has benefited us all. For example, the start of the school year usually brings a lot of stress, with frantic shopping trips for school supplies in crowded stores and stacks of school forms going unsigned days past their deadlines. This year, my stepdaughter had all her supplies before her first day in seventh grade, and the forms she dumped in a pile on our dining room table were returned the very next day.

It’s all been well worth not being able to watch my beloved Phillies on TV every night—even though they are in the hunt for their first baseball postseason appearance in 13 years.

Drain on savings
Still, I can see clouds on the financial horizon. M and I continue to create a spending plan prior to the start of each month—as we have for the last year—but have yet to stay within the plan’s boundaries. We haven’t overspent by much, mostly on things that have “just popped up,” but to compensate we’ve dipped more heavily into our cash reserves than we should be doing at this point.

Those reserves have been further drained by our house and cars. In July the dishwasher died, followed quickly by the basement dehumidifier, and a sporadically leaking toilet. Both vehicles stopped working at different points this summer. Apparently, these material things don’t understand the limits of our resources.

And needless to say, we have ceased saving—for college, the kids’ clothes, Christmas. I still contribute to my retirement plan, though only to the amount my employer matches. In retirement, M and I should actually be in very good financial shape—when we get there in 25 years.

Kickin’ things up a notch
So what to do? In October, we’re taking an Emeril Lagasse approach with our finances and “kickin’ it up a notch.”

Today, we purchase almost everything by credit card. We pay off the entire card balance each month and get rewards points have that helped us save a good amount of money on plane tickets and on our recent Disneyworld trip.

Next month, we’re moving to a cash-based system. We won’t be keeping envelopes stuffed with twenty-dollar bills around the house, but we will be using old-fashioned hard currency for things like groceries, gifts, entertainment, and household purchases.

I expect the move will help us stay within our spending plan’s boundaries—if something “pops up,” we’ll have to decide where the money is coming from to pay for it, or run out before the next payday. But it should also help us spend less. Research says that credit card users spend approximately 30% more than those who make cash purchases. It will be interesting to see if that bit of data holds true for us.

I’ll let you know how our experiment is going, and whether it’s worth trading off the savings from our reward points. In the meantime, keep us in your prayers.

Check out the latest Carnival of Personal Finance

2006-09-20T06:00:00.000-07:00

If you're looking for a quick way to get more personal finance tips and helps, take a trip to the carnival.

The blog Free Money Finance is the host of Carnival of Personal Finance #66, elevated earlier this week. If you've never heard of a blog carnival, it's essentially a list of recent postings from a variety of blogs on a specific topic (in this case Personal Finance, but blogs host carnivals on many other topics). The blogger hosting the Carnival vets submissions and posts those selected posts on his or her blog. Free Money Finance was kind enough to include in this Carnival my post from last week, "Money does contribute to happiness, but..."

A blog carnival is a great way to find other blogs on a topic you're interested in. (The whole purpose of a carnival is to help readers find blogs of interest, and to help blogs find readers.) For instance, I visited the blog My Wealth Builder for the first time through this week's Carnival to read his (or her) post, "Getting motivated to save."

So check out the weekly Carnival of Personal Finance when you get a chance. You can find out when and where the next one will be held at www.carnivalofpersonalfinance.com. Best of all, you don't have to bring the kids and it won't cost you an arm and a leg for some cheesy carnival ride.

Three ways to help achieve your savings goals

2006-09-18T06:00:00.000-07:00

Building up savings, whether for a short-term goal like a car or holiday shopping, or a long-term one like retirement, is hard. So how can you make it easier? A conversation with my friend Alex, while picking up our kids at church last Sunday, brought to mind these three tips.

Aim to save a specific amount
The YMCA I belong to is in the midst of a massive reconstruction. Walking past the bulldozers into the Y's main building, it's hard to miss the big sign showing the organization's goal for contributions to fund the project: $11 million.

While you don't have to put a big sign by your front door, you should state your own savings goal just as clearly as the Y. Just having an exact figure in mind will help motivate you to take the necessary steps to start and maintain your savings program.

For instance, when Alex started a savings program several years ago (back when he was single), he fixed in his mind to contribute the maximum annual amount allowed to a Roth IRA. At the time, he recalled, that translated into a goal of $2,000 per year. (In 2006, the IRA contribution limit is $4,000 if you're under age 50, or $5,000 if you're age 50 or over.)

Make it automatic
Knowing just how much he had to save, Alex made his IRA contribution a part of his monthly budget. He then took the wise step of having the money withdrawn from his bank account and deposited into his Roth IRA automatically.

If you’re not a disciplined saver, automatic deposits can be huge in moving you toward your savings goal. When you’re making deposits yourself, it’s all too easy to skip one because things are a little tight in a particular month.

Setting up an automatic withdrawal service takes little effort through most financial institutions. You usually get a variety of options—weekly, bi-weekly, or monthly withdrawals, at amounts that can be as little as $25 or $50. You can also usually choose the day in the month you want the withdrawal to occur (to correspond with when you get paid, for instance). And once the service is in place, you’ll be surprised at how quickly you’ll learn to live from your remaining income.

Don’t stop
Because he was contributing to his IRA monthly, Alex divided his $2,000 goal by 12, which comes out to roughly $167 per month. But rather than withdraw a rather odd amount from his account, he saw an opportunity to reach two goals with one plan.

Alex started making his IRA contributions at the beginning of the year, so he bumped up his monthly savings to $200. When he reached the IRA annual contribution limit in October, he didn’t stop saving. He continued to make his “contributions” for November and December—except this time into an account for his Christmas gift budget. The following January, instead of paying off a credit card loaded with holiday shopping bills, he went right back to funding his IRA each month.

Saving for the future takes vision and discipline. As Alex found, whatever you can do to build each into your own savings program will pay off in the long run.

Money does contribute to happiness, but...

2006-09-12T06:00:00.000-07:00

"If I only had more money...."

It's a common wish. People often feel that the answer to personal and financial problems is having more money. (I include myself in this category, mostly when I'm checking out the prices of single family homes in my area these days.)

But is it true? Would our problems be solved--would we be happier--with more money? Well, yes...and no. Studies show that money does, in fact, contribute to happiness. But I believe being happy takes being money-wise as well.

The wealthy still have bad days
The Wall Street Journal recently explored the money/happiness connection in a couple articles. Columnist Jonathan Clements concluded that money alone can't buy happiness, while "happiness blogger" Gretchen Rubin wrote that "money, spent wisely, can contribute greatly" to being a happier person.

Clements and Rubin used some academic research as the basis for their conclusions. One study found that people with relatively high incomes were twice as likely to say they were "very happy" with their life situations as those with fairly low incomes. No shock there. It's hard to feel happy if you are struggling to pay the rent and put food on the table.

Another study, however, showed that wealth didn't translate into prolonged states of euphoria. People with lots of money were just as susceptible to being in a bad mood or feeling sad during the day as people who have less wealth. A boatload of money, evidently, doesn't insulate you from getting frustrated at a traffic jam or angry with your spouse or kids.

It's not just having money...
But money can contribute to happiness overall, both authors noted. Having money removes the worry of not having money, Rubin said. It also allows us to afford trips to the doctor and hire a housekeeper, thus keeping us healthier and buying us time. If we spend our money on experiences rather than just things--a good vacation with friends or family, rather than a shiny new car, for instance--we are more likely to get more enjoyment out of life, Clements pointed out.

Clements and Rubin are both right, in my view. However, they don't mention an important point: No matter how much money you have, you won't be happy unless you know how to steward it well.

...it's how you manage it
In the financial counseling ministry I serve in, we have "red" cases and "green" cases. "Red" cases are people in dire financial straits, who have little income and can't pay their bills. "Green" cases are those who have plenty of income...but through poor management and financial decisions, still can't pay their bills.

"Green" clients are no happier than "red" clients when they come for counseling. They aren't free from financial worries or much enjoying the life and resources they've been blessed with.

Neither are big-money lottery winners. There has been more than one story of lottery winners who have ended up in divorce, in rehabilitation centers, or bankruptcy court after being showered with more money than they ever imagined having.

That's why it's so important to learn, and apply, basic principles of financial wisdom. Without them, chances are you won't find much happiness, no matter how much money you have.

So strive to avoid or pay off debt. Take steps to save regularly. And make a commitment to give generously. Chances are, you'll be happy that you did.

How to create a household budget

2006-09-07T06:00:00.000-07:00

Summer's over, and you've decided you really need to get on a budget. You're serious this time. You're really going to do it. But just how do you go about creating one?

Setting up a household budget is easier than you think. Here are three basic steps to getting started.

Track your expenses
To get a handle on your money, you need to know where it's going. So for 30 days, write down every transaction you (and your spouse, if applicable) make and bill you pay. That will provide a realistic idea of just how you are spending your money.

You can use any method you choose. Jot the transactions down in a pocket notebook you carry with you, keep receipts and list them in a spiral notebook or accounting ledger at the end of the day, or use a computer program or spreadsheet. A friend of mine uses his Daytimer. The key is to find something that is easy to do and makes expense-tracking a habit. (To find some expense-tracking tools, Google "track expenses.")

I use Quicken, which is great for totalling up the amounts and sorting purchases into categories (the next step). But because it's not as accessible as a notebook or sheet of paper, receipts I need to enter can quickly pile up. I think it's better to start out using plain old pencil and paper.

Categorize your spending
As you track your money, begin thinking about how to sort the different transactions into categories. Obvious ones are Mortgage/Rent, Utilities, Food, Clothing, Entertainment, and Debt (credit cards, car payments, student loans, home equity payments, etc.). However, also be sure to include a Savings bucket that covers money set aside for emergencies, holiday shopping, vacation, etc. Every transaction you make should fall into an appropriate category.

You can create as many categories as you need, and even break them down into subcategories. For instance, you might put DVD rentals, pizza take-out, and tickets to the ball game under the single heading of Entertainment. Or you could put them in separate categories of Videos, Dining Out, and Events. It all depends on what you want to track. M and I bundle things we purchase from the grocery store into a Grocery/Personal Items category, but have a separate bucket for Baby Items (just because I'm interested to know how much diapers, wipes, and the like increase our monthly spending).

Bear in mind that the more categories and subcategories you have, the more complicated your system gets. If it gets too hard to maintain, simplify it. Sticking to your system is more important than determining how much you spent on Starbucks coffee every month.

Set spending goals
Once you've tracked real monthly expenditures and sorted them into your spending categories, total up the separate amounts. You now have a clear picture of your basic monthly budget, and are ready to set goals for how much you can spend in each category each month.

Goals for fixed expenses, like rent or gym memberships, are easy to determine because they are the same each month. Much harder are areas like Groceries, Clothing, and Entertainment, which are almost completely determined by how much you choose to spend each month. Use your expense-tracking record as the basis for these amounts.

Remember, though, that your monthly expenses shouldn't exceed your net monthly income (the amount you have left after taxes). If your budget shows that's the case, you are overspending and you're going to have to make some adjustments to avoid further trouble.

The good news is that you've taken the first step to getting on the road to financial stability. Once you adjust your spending, keep tracking your expenses, and compare them regularly to your budget. In a matter of time, you'll have things under much better control.

Do you use a budget?
How about you? Do you use a budget for your personal finances? If not, how come? How many times have you tried to start one? Why do you think it didn't work?

Credit card deals from the King and more

2006-09-04T06:00:00.000-07:00

What do Elvis and Yankees' great Don Mattingly have in common?

They both have their own namebrand credit cards.

That's just one of the interesting things I found at indexcreditcards.com, a website devoted to being a resource for just about every credit card deal that's currently out there. Tim M. of indexcreditcards.com emailed me recently and asked me to take a look.

They're trying to spread the word about the site through personal finance bloggers, interestingly enough. (And, in the interest of full disclosure, the blog that sends them the most traffic in the next couple weeks wins an Ipod Nano or Amazon gift certificate.)

Pretty comprehensive list
Tim's email said that indexcreditcards.com is the "most comprehensive online source for credit card information, including extensive lists of apples-to-apples comparisons of credit cards, helping consumers and small businesses find the best deals for their needs." And it is a comprehensive list, with more than 1,000 cards represented, including those for the King of Rock n' Roll and "Donny Baseball" Mattingly.

But how many people are in the market for a credit card like the one for Ducks Unlimited, which uses money from purchases to preserve wetlands? Or a "Wizard of Oz" card, which uses purchases to support the expansion of the Wizard of Oz museum in Wamego, Kansas? So while it's comprehensive, all that information isn't necessarily useful.

All types of cards
Indexcreditcards.com does include a wealth of information on more traditional cards from the big-name banks and card providers--low-interest cards, rewards cards, 0%-balance transfer cards, and a bunch of others. The site provides interest-rate, annual fee, transfer restrictions, and other details in a few lines for each card that are easy to scan and digest.

But unlike other sites, it doesn't offer a "compare" feature that allows you to look side-by-side at two offers. It also doesn't have a search engine that enables you to look for a specific card.

Easy to navigate
What I do like about the site: It's has a plain, easy-to-navigate home page; you can get wherever you need to go on the site from there. And it doesn't have any annoying advertisements. Though the site does get paid for card signups that originate from their listings, it doesn't try to draw your attention to one card or another.

The site also features credit card news and facts. One disturbing fact: Based on the site's estimates this year, U.S. credit card debt on average tops $3,500 per adult and $7,200 per household.

If you're in the market for a credit card, indexcreditcards.com is worth a look. Then again, if you are have as much credit card debt as the average American, it's a wise idea to consider taking yourself out of the market and paying off those you already have.

Michael Noer was only half-right about careers and marriage

2006-08-31T06:00:00.000-07:00

Michael Noer of Forbes.com in a recent article advised men who wanted a stable marriage not to marry a career woman. Naturally, his position sparked a firestorm of outrage and protests from working women everywhere. But in all the controversy, don't miss a bigger point. Mr. Noer was actually only half-right. Man or woman, husband or wife: A person focused solely on his or her career spells trouble for a marriage.

The "Me" over the "Us"
Marriage, as M and my marriage counselor recently reminded us, is a partnership. To work, it requires following basic rules of teamwork and cooperation. It has to be grounded in values such as mutual trust and self-sacrifice. It necessitates that two people become one mind, one heart, in just about everything that they do.

Our careers, on the other hand, tend to focus on ourselves. We leave home each day for an environment where our own status and worth--financially, socially, psychologically--is typically elevated by those outside our family or marital relationship. When achieving higher and higher levels of status and worth become our focus, the career can easily become the priority. The "me" takes precedence over the "us," and the marriage suffers.

What we give up
Keeping the "us" at the top of the priority list isn't easy. Not long after we were married, M came to me with the new salary scale for her teaching job. "Look at how much I'll be making in a few years when I'm at the top of the guide [for those non-teachers, that means reaching the highest salary level]!" she exclaimed.

Before getting married, M and I had talked about how we would maintain careers and family and mutually decided--I thought--that M would stay home and I would continue working. So not surprisingly, my first thought was, "Who will be taking care of our kids?" But for M, seeing how much a person with her skills and experience would be worth to her school district--a value that M perhaps never imagined achieving--suddenly brought into stark relief how much she would be giving up by our decision.

My turn to give something up came shortly after we had our son. When M had to go back to full-time teaching for a year, we decided that I would approach my employer about working part-time so I could take primary responsibility for managing the household. While the move was arguably risky from a career standpoint, I am fortunate to work for an employer who was gracious enough to grant me the time and then take me back in my old position when M's work obligation ended.

A relatively sane life
Today, M is home full-time, redoing our kitchen, taking our two-year old son to the pool and my preteen stepdaughter clothes shopping. She attacks the household chores with the same intensity and focus that I saw her have creating lesson plans for her students. And a couple weeks ago, we found ourselves with a Saturday afternoon that didn't have to be crammed with running out for birthday gifts or doing the weekly food shopping.

It has, admittedly, been a rocky road getting here. There were no "easy" decisions that didn't produce arguments. But the relatively sane life we're experiencing today probably wouldn't be possible if either M or I had dug in our heels and fought relentlessly for what was best for our own careers and incomes, instead of jointly determining what's best for each other, and for our family.

Self-centeredness isn't a trait exclusive to either sex. Recognizing that quality in yourself, as well as in your choice of a spouse, gives you the best chance of achieving a marriage with long-term harmony and stability.

A surprising way to get better control of your money

2006-08-18T06:00:00.000-07:00

Want to get a better handle on your money? Then give some of it away. Regularly.

In my last post on teaching kids about personal finances, I included "giving" as one of the four basic components they should learn about. Sure, generosity is an important trait to cultivate in children. But it's an important concept to apply in our lives as adults as well. Believe it or not, giving away your money can help you better manage it.

Break the hold
Why? Not only because it feels good to help others, or because you can get a tax deduction for gifts to qualified charities.

Regular giving helps break money's grip on our hearts and spirits. Let's face it, we give money a lot of control in our lives. Every major decision we make naturally involves some consideration of the monetary cost to ourselves versus the benefit we'll receive. The result usually dictates our actions.

Giving, by contrast, is very "unnatural." We exchange our money, which represents the sweat of our hard work or what we believe we deserve, for a benefit that may be intangible, or that we may never even see. It gets us in the habit of seeing how our resources can be used for much more than just meeting our own immediate needs and desires, which ultimately are the basis for money's stranglehold.

Monthly reminder
M and I give 10% of our gross income--that's before taxes--to our church. Our monthly tithe is the second-largest bill we have, after our mortgage.

I'll be honest, it isn't always the easiest payment to make, especially since going to one income. But it has changed my perspective. It's a regular reminder that many of life's blessings don't just come from what I own or can buy.

How to (gulp!) start
Here are three tips for using the act of giving to break money's grip:

Give first. Make gifts the first "bills" that you pay, to avoid basing your decisions on what's left over after meeting your own needs.
Give consistently. Give a set amount at regular intervals--weekly, monthly, bi-monthly-- to make it a habit.
Give so it hurts (at least a little). Does the amount of your gift pass the "gulp" test? If you find yourself going "Gulp!", when you think about just how much you're giving away, you're on the right track.

Three tips for teaching your kids about money

2006-08-15T02:52:00.000-07:00

School will be starting soon for kids around the country. However, one of the most important life lessons kids need to learn won't be taught in the classroom: how to manage their own money.

As a parent, you have the most impact in shaping your child's money habits. How are you doing so far? If you give yourself a failing grade, you're not alone. According to a 2005 survey by A.G. Edwards referenced in Business Week Online earlier this year, more than half of U.S. parents (56%) have not discussed saving or investing with their children.

If you've skipped out on being your kids' personal finance teacher, there's no better time to start class than now. Here are three tips to help shape your curriculum.

Start young
It depends on the child, but kids who haven't even begun kindergarten yet can begin to understand the basic concepts of money. If your child is nagging you for a couple quarters to buy a toy from the grocery store vending machine, he already knows how money works. Instead of pulling the coins from your pocket each time, get your child a piggy bank and encourage him to make deposits regularly. Then have him take a little money out before you head out shopping.

Think EGSS
Teach the four basic components of money: Earning, Giving, Saving, Spending.

As your kids get a little older, give them some age-appropriate chores or responsibilities around the house to earn pocket money for items as small as candy or chewing gum to as big as CD/DVDs. Instead of just putting their money into a basic piggy bank, though, get them in the habit of splitting their earnings into three "accounts"--for spending, saving, and giving.

The spending account is for their everyday "necessities," like the items mentioned above. The saving account is for bigger items that take a little time to build up the money for, like a video game or skateboard.

The giving account can be used for birthday gifts and the like. But also encourage your kids to think "outside the box" with their giving. Point out that they can also give to their church or to a children's ministry, or even to a friend in need.

Practice what you preach
Of course, the biggest way your kids will learn about how to manage their money is from watching your own habits--good or bad. If financial stress is your standard way of life, you can still teach your kids effective money management skills--just start learning the basics and put the skills into practice in your own life as you teach them. There is no age-limit on financial education.

Financial wisdom for purchasing a car

2006-08-10T06:00:00.000-07:00

M and I are pondering the purchase of a van. My '98 Nissan Sentra is making trips to the repair shop a monthly habit. And if our family gets bigger--something we're mulling--then we'll definitely have outgrown her Honda Civic, which serves as the family car.

Our conversations have included whether we should pay for a portion of the van with savings, or keep the savings intact and borrow the money instead. They've also shown me just how emotions can make a big impact on money decisions.

Borrow a third, or all of it?
Through savings, my trade-in, and a possible cash gift from our family, we could pay about $8,000 for the van upfront. I estimate that's about two-thirds of the price for a used, but still reliable, vehicle.

However, M is uncomfortable putting out that much money at once. To her, since we live on just one income, borrowing for the whole purchase and paying $250-$350 a month for five years is more appealing. "It just doesn't seem as big an expense," she said.

Answer isn't clear-cut
From a strictly numbers standpoint, the "right" decision may seem obvious. Paying a portion in cash, I estimate a van will cost around $15,000 total, factoring in interest from the approximately $4000-$5000 we'd have to borrow. Borrowing the entire amount at say, $300/month for five years, would cost $18,000 total.

But spending decisions aren't just about numbers. Perhaps fearful that we'll need the cash for an unexpected expense down the road--which has also crossed my mind--M likes the idea of keeping the money in the bank as added security. We have about two months living expenses saved for emergencies, but our monthly income doesn't allow us to add to it regularly, so it's tempting to just keep as much cash on hand as we can.

Know your emotional blind spots
Think about some of the most recent big purchases you made. How much did fear play a role in your decision to pay for them in cash or credit?

Being wise with your money includes knowing your emotional blind spots and how they affect your spending. If you were in our situation and more cash in the bank for emergencies helped you sleep better at night, then borrowing has a value. However, note that the real spending decision you are then making isn't just whether you can afford a purchase; it's whether the costs and risks of borrowing are worth that added emotional security.

To make the "right" spending decision, crunch the numbers but consider how your heart is influencing how you look at them. How much is fear, desire, frustration, anger or other emotions pushing you in a certain direction?

I'm not sure yet what decision M and I will make (my emotional blind spot is fear as well, which tends to make me drag my feet when it comes to big purchases). But one thing I'm learning--financial wisdom comes from considering both the logical and emotional sides of the coin, not just one or the other.

Follow up on lessons from Disney: Use gift cards

2006-08-07T06:00:00.000-07:00

One Disney diehard friend of mine had an interesting suggestion about how to manage the spending money of my stepdaughter and her friend during our recent trip to Disneyworld. Instead of handing out their spending money in cash whenever they needed it, we could have provided them with Disney gift cards.

Convenience, and some control
As I see it, the primary benefits of gift cards are convenience and a medium-level of spending control. Cards are available in the parks in increments as little as $5* and can be used in any Disney gift shop or snack bar. However, they usually can't be used with the park "street vendors" that sell things like ice cream, popcorn, etc., which are more prone to being purchased on impulse and tend to add up quickly.

Perhaps best of all, using gift cards prevents you from having to be your kids' personal ATM with a seemingly unlimited money supply. When their cards run out of cash, so do they.

(*Note: According to unofficial Disney site www.Intercot.com, a $6.95 shipping and handling fee can apply when ordering cards by phone. Also, cards are available in $25 increments if purchased online through www.disney.com.)

A hassle, and possibly faster spending
On the con side, you do have to take time out once in the park to go purchase the cards. That can be a hassle when everyone is anxious to hit the rides as quickly as possible. Also, the cards are essentially the same as cash, so if they are lost or stolen, the money's gone.

Perhaps more of a concern is the inherent tendency to spend more when using a card (whether gift, credit, or debit card) than when using cold, hard cash. It's possible that my stepdaughter and her friend would have spent their money more quickly using a card instead of dollar bills. It's an interesting experiment that would be worth a try on our next trip.

Should I save or pay off debt?

2006-08-02T18:00:00.000-07:00

Robin recently emailed me this question about saving for tomorrow versus paying off debt today. I thought others might have the same question:

"Do you know what to do when there is debt to be paid off and the person is adding money to their 401K, i.e., should you back all the way out of the 401K to pay off extensive credit card debt?"

Robin, if your company is matching the amount you putting in to your 401(k), keep making those deposits! That matching amount is "free" money from your employer and you should do whatever you can to keep it coming.

That said, you could contribute just the maximum amount being matched...i.e., if your employer matches $50 for every $100 dollars you put in up to a certain percentage of your salary, like 3% or 4%, put in up to that percentage to make sure you get the full company match. If you are putting in more than the matching percentage...say 5% or 6%...you might consider scaling that back and then allocating that money towards your credit cards.

Personal finance lessons from Disney

2006-07-31T06:00:00.000-07:00

I just returned from a family vacation to Disneyworld. Vacations are an easy way to run into personal finance trouble through overspending, and Disneyworld is the ultimate test. Threading my way through the jam-packed "World of Disney" gift shop--which someone told me has higher annual gross sales than any single store in its category in the world--I couldn't help but notice all of the overflowing shopping baskets and wonder: "How many people can't afford a quarter of the stuff they are buying?" (as well as, "Should I be investing in Disney?")

Tallying up the vacation bill for my own family, I was relieved to learn that we spent roughly what my wife M and I expected--though we did exceed our spending plan by more than $200. Here's what I think contributed to our "success," and where there was room for improvement.

Having a plan
M and I decided on Disneyworld for the family vacation back in March. Once the decision was made, we set a rough spending plan that not only covered the "fixed" expenses of airfare and park tickets (a week at a timeshare condo M's father gave us for Christmas covered our lodging), but also "discretionary" expenses like meals, pocket money, parking, etc. That proved helpful in several ways.

First, it set our expectations for what the trip probably was going to cost ahead of time, helping us avoid the unpleasantness of "sticker shock" after tallying up what we spent when we got back home. Second, planning months ahead gave M and I time to come together on how much we were going to spend on what things ("We're going to eat out how many times?"). Third, it gave us an incentive to save money in the months before we left to make sure we could afford the trip. And finally, it set up some boundaries on our spending that helped us make decisions when faced with Disney's overwhelming choices for food, fun, and merchandise.

Setting limits for the kids
Controlling the spending of my 12-year-old stepdaughter and the friend she brought along proved to be both a success and our biggest headache. Each child had a specific amount of pocket money for the week, which M and I set beforehand (in conjunction with the friend's mother). That, at least, allowed us to know exactly how much spending was going toward fun money for the kids, and gave us leverage to say "No" to one more stuffed Pooh doll when the money ran out.

However, to prevent the kids from spending all their cash in one or two days, M and I served as their personal "ATM," dispensing money as needed. Bad move. That was the biggest source of friction for our family on the entire trip, as well as a hassle to track and manage. Next time, I'd divide the pocket money up by the number of days on the trip and give the kids a per-diem amount before we left for the park. If candy and frozen drink purchases leave them tapped out by 10 a.m., oh well.

Tracking what we spent
I'll be honest: I had little idea of how much we were spending during the vacation. I brought a notebook and had every intention of keeping track as we went. However, juggling a two-year-old while checking the time for our next Fastpass ride and serving as an ATM machine was more than enough to handle at once. M was great about pushing us to sit down and discuss each day's spending back at the condo, but I was usually so tired--and perhaps a bit disappointed for not being a better recordkeeper--that my heart wasn't in it. I feel fortunate we stayed close to our spending plan overall.

Money aside, our Disneyworld trip was an investment that paid dividends in some truly wonderful family memories and experiences. And for two parents working hard to knit together a blended family of children and stepchildren, you just can't put a price on those.

Coin Jar "Finance Find": FTC.gov

2006-07-19T06:00:00.000-07:00

I'm starting a new feature at The Coin Jar: "Finance Find." Occasionally I'll feature an interesting website or resource I come across in my travels that offers sound advice on personal finance or can help you better manage your own finances.

If you read my last article on co-signing, you saw I referenced an article on the Federal Trade Commission's website. Poking around the site a bit, I found that the "For Consumers" area is actually more helpful than I realized. It provides a lot of good--though unspectacular and basic--information on a variety of topics. Want tips on how to use less gasoline? Looking for facts on Lasik eye surgery? Wondering if prepaid phone cards are really a deal? FTC.gov can help.

The FTC's purpose, generally, is to prevent unfair methods of competition in business and provide consumer protection. They are the federal agency that requires businesses to do things such as put care labels in clothes and warranties on their products. They hear from consumers who get ripped off, and help write the laws to prevent it. So they are a good resource to become better informed as a consumer. And if you've been ripped off, they want to hear from you.

Here's an interesting tidbit from their website that I didn't know: If you buy something from a salesperson at your home you have three days to "cool off" and cancel the sale for a full refund. I wish I'd learned about this earlier. A friend of mine recently had buyer's remorse after a crafty carpet salesman pushed her into buying a carpet she couldn't afford.

So check it out when you get a chance: www.ftc.gov.

It's okay to say no to co-signing a loan

2006-07-13T04:43:00.000-07:00

During my first marriage, my wife once asked if she could co-sign a lease for a friend of hers that was having trouble getting an apartment. I thought about it, then said I didn't think it was a good idea and not to do it. Naturally, that sparked a pretty loud argument between us about the merits of helping out a friend in need versus the merits of protecting one's own financial interests. In the end, I refused to budge and my wife was respectful enough of my feelings to tell her friend, "Sorry."

At the time I wasn't sure I was doing the right thing. I knew the friend and felt bad that she needed a co-signer, due to circumstances which weren't entirely her fault. And she seemed genuinely trustworthy, a "good person."

Co-signing is poor judgment
As my knowledge and experience in personal finance has grown, I've learned that my first instinct was right. Co-signing for the debt of someone else, whether a friend or (as in most cases) a family member, is not wise. In fact, Proverbs 17:18 says, "It is poor judgment to co-sign a friend's note, to become responsible for a neighbor's debts." (New Living Translation).

Why? Co-signing means that you accept total responsibility for repaying the loan if the primary borrower fails to. Many times lenders want a co-signer for understandable reasons--a borrower is very young or hasn't established a credit history, perhaps. But often it's because the person has been irresponsible in paying back borrowed money in the past. You are essentially taking on risk that the lender--which probably has more assets and resources than you do--won't.

You really could pay
Additionally, co-signers pay back someone else's loan more often than you probably think. The Federal Trade Commission says that "studies of certain types of lenders show that for co-signed loans that go into default, as many as three out of four co-signers are asked to repay the loan." (View the full article.) If the loan goes into default, it shows up on your credit report as well as the primary borrower's. And it also counts as your own debt, which could prevent a lender from loaning you money directly.

Family members are often the first to ask you to co-sign, and are often the hardest to turn down. But there is no guarantee that a son, daughter, brother, or sister would be a better borrower. A father I know co-signed a loan for his son, then was surprised to get a collection notice from the bank. The son had never mentioned he had been unable to make the payments, and the father ended up paying the balance.

You can still be supportive
If someone asks you to be a co-signer, consider it carefully. Ask yourself if you could afford to step in should the borrower fall behind on payments, and if you're willing to assume the risk. If not, your answer should be a firm "no."

Instead, offer a cash gift to help the person if you can. Collect money from friends or family members on the person's behalf. Contact your church about possible financial help.

If a friend or relative is hurt or offended by your response, empathize with their feelings, but keep the guilt at bay. Ultimately, you could be helping them. You may be keeping them out of a loan that they in truth may not be able to pay back, which would worsen their situation overall.

Become your credit card's nightmare customer

2006-07-08T06:00:00.000-07:00

Here's a fact you probably know, but is still sobering to see in black-and-white.

"Credit-card companies make most of their money by charging interest to customers who don't pay off their balances each month." (The Wall Street Journal, "Credit-Card Firms' Problem: People Are Paying Their Bills," May 25, 2006)

Times are tough for credit card firms these days, the article said. More people, in fact, are paying off their balances, shrinking the companies' revenues and profits. To make up the difference, card firms are increasing late-payment fees and raising rates. They are also launching new technology designed to get you to use your card more often.

The bottom-line: Your credit card company makes more money when you spend more than your income. They have a strong incentive to get you into debt, and keep you there. Now that's "priceless."

Be wise. Instead of doing your part to help the poor, suffering credit card firms, be like Jim Raley. Jim, a 34-year-old from Atlanta, once racked up $14,000 in credit card debt and paid hefty interest. Now he pays his balance off each month, keeping more money in his pocket instead of the card companies'."I am one of their nightmare customers," he said in the WSJ article. (Note: credit card issuers aren't completely hurting; they still rake in transaction fees from retailers every time customers use their card.)

More people paying off their card balances is news that isn't necessarily as good as it sounds. Many pay with cash from a home equity loan, where interest is tax-deductible, or transfer balances from high-rate cards to those with temporary 0% interest. While that helps save a few dollars, it's still borrowing from Peter to pay Paul. And Paul is smiling all the way to the bank.

How long could you last on a "job furlough?"

2006-07-05T18:50:00.000-07:00

A budget dispute has shut down the state government in my home state of New Jersey. About 45,000 state workers have been sent home and face an indefinite time period without paychecks. Which raises an important question about your own personal finances: How long could you go without getting paid?

Financial planners recommend having three to six months of living expenses set aside in a savings account or money market fund. Unfortunately, the emergency savings of many people would only last them three to six days.

Parking a few months of living expenses in a bank or fund account is one of the best and easiest ways to stay out of financial trouble. While few people get furloughed--as New Jersey's state employees have--just about anyone can be laid off, or fired. A sizeable emergency fund at least gives you some time to find out where that new paycheck will be coming from, without racking up the credit cards or hitting up family members for a loan right away.

Here are a few tips about building an emergency fund:

Just start. Does three to six months of expenses seem like an impossible savings goal? It can be, especially if you let that thought prevent you from trying. So start small: commit to putting aside $5 or $10 a week and let it become a habit. Once you see the total start to grow, you'll be more motivated to increase the amount.

Keep it handy... You want to put your savings where you can get it quickly and easily, like a savings account or money market that offers checkwriting. Despite the fact they pay a little interest, certificates of deposit (CDs) are not a good choice because you pay a penalty if you withdraw the funds before the CD's term expires.

...but not too handy. At the same time, weigh whether you are likely to dip into your savings when you overspend, instead of just in emergencies. If you can't avoid the temptation, then go with a money market over a savings account. Having to write a check can be a stronger psychological deterrent than tapping a bank's ATM.

Take your situation into account. Do you really need to save six months of living expenses? It depends on your job stability. M and I have saved about three months, which I'm comfortable with because she had tenure as a schoolteacher (i.e., it was unlikely she'd lose her job) and my employer has resisted layoffs even in industry downturns. Now that we're down to one income, I'd like to increase the amount to six months--but I have to make sure we meet our current monthly expenses first.

Remind yourself: Those savings aren't doing nothing. Once you achieve your emergency savings goal, it might be hard to see all that cash sitting there, especially when you're driving an old car or haven't been on vacation in years. But remember, those funds could give you some much needed peace of mind in a stressful time. Instead of worrying about how to pay the bills, you can focus on sharpening your interviewing skills and landing that next great career opportunity.

Is there "good" debt?

2006-06-29T05:00:00.000-07:00

Kate of the personal finance blog Kate Spills the Beans questioned in her June 4th post if there is such a thing as “good” debt. Yes, Kate, there is such a thing, and the msn Money article you refer to actually does a good job of clarifying the difference between good debt and bad debt.

Here’s my quick take on the subject. First, what’s bad debt?

New car loan=very bad debt. As they say, a new car decreases in value the second you drive it off the dealer’s lot. Interest from a loan piles on to an already inflated sticker price. So you are paying even more to buy something that will be worth dramatically less over time. Two tips: First, buy a “slightly used” car with 10,000 to 20,000 miles on It. Second, start saving for it now so you can pay cash.

Plasma TV by store credit, 0% interest=bad debt (with a catch). You can avoid the interest that would increase the TV’s true price by paying off the debt within a year, which can be good. But you are committing yourself to those monthly payments, which can be bad. What if you lose your job? What if your car dies and you have to get a new (slightly used, of course) one? Miss a payment and often that 0% interest goes away. You can’t predict the future, but you can plan for it. Plan wisely.

Vacation by credit card=the worst debt. Like the car scenario, adding credit card interest—which typically dwarfs the 5% or 10% interest most people pay on a car loan—substantially increases the true cost of that Caribbean getaway. What’s worse, you have nothing of financial value at the end; at least you can sell or trade in your car to recoup some of its cost. Better make those memories on the white sands count.

Now, what’s good debt?

Student loan=good debt (with a catch). The best investment is in yourself. If financing an education allows you to man the local bank’s drive-thru instead of the fast-food drive thru, then it’s worth the added interest. But watch what you borrow; you don’t need to pay Harvard tuition rates to be something like a teacher. School debt that dwarfs the earning potential of your career choice is not good.

Money to start a business=good debt (with a catch). Like a student loan, this is an investment in yourself. If you have what it takes to succeed in business, the sky is the limit and can be worth borrowing to get started. But also like student loans, be careful. Burdensome debt is a major reason why most businesses fail in the first year.

Mortgage=the best debt. Ok, maybe “best” is a little strong. But unlike a car, a home’s value will most likely increase over time. Plus, if you don’t own a home you’ll probably be paying rent, which can be as much or more than a monthly mortgage payment and leaves you with nothing but your security deposit in the end.

Whether the debt you rack up is good or bad, your goal should be to pay it off as soon as possible. Even good debt is bad if you don’t get eventually get rid of it.

Of big houses and luxury cars

2006-06-23T05:00:00.000-07:00

Jonathan Clements' points out in this week's Getting Going column that Americans might be putting less money in savings because they are spending more on their homes and cars. (Thanks to JLP of All Things Financial for alerting me to the article.) I think he's on to something.

I see people who have 5-year, $450 monthly payment car loans, despite large credit card balances and student loan bills. One couple I know is paying off a new truck, in fact, that's worth more than the mobile home they live in.

M and I live in a townhome. About a year ago, we decided to look for a house with a yard in a town with better schools. We even bid on two larger houses that were almost double what our current home is worth (even at the still-inflated housing prices in our area).

Thank the Lord that the sellers took someone else's offer. While we may have had a larger home, I believe the heftier mortgage payment would have offset most of the benefits and created a lot of stress on our lives and marriage.

What's more, M just finished her job as a schoolteacher and is now a full-time mom. She's thrilled, as am I. (The other day she surprised me with brownies! Yes!) Making that choice would have been virtually impossible in a larger, more expensive home. (I plan to write more about how we decided to make this lifestyle choice in a later post.)

Even with one relatively modest income, we're still managing to save through my employer's 401(k). We're probably going to cut back on what we put away for our kids' college funds, as well as for Christmas and vacation. Plus, we're probably going to need a van next year for M, and my car is also making a lot of funny noises.

But to me, saving for the future is a conscious choice. As Clements points out, we need a place to live, and arguably, reliable transportation. But how much of each do we really need today that is worth jeopardizing tomorrow?

"Found" money can take a little bit of looking

2006-06-22T06:00:00.000-07:00

Sometimes the answer to a particular money problem is right in front of you. Finding it is often simply a matter of getting in the habit of looking there first.

A friend of mine recently needed a new lawnmower. He saw one on sale at a local dealer, but didn't have the extra few hundred dollars to purchase it. He also didn't have time to save for it. His grass was already tall and the management association overseeing his subdivision readily fined homeowners for shaggy lawns.

In such a situation, it would be easy for many of us to pull out our credit cards--an all-too-convenient temptation. We might even have been able to rationalize the decision: better to pay the cost of the mower upfront and maybe pay a little interest, than pay the association's fine each month.

But a wiser choice is to keep that temptation in check. Keep your card in your wallet. Instead, start developing a new habit: actively look for ways to avoid buying items on credit in those times you don't have the cash.

My friend started looking around his house. In his garage, he came across a couple containers of scrap metal he'd collected over the years as a machinist and contractor.

Scrap metal prices, like other commodities, have soared in the last several months--so much so that some folks have taken to (please don't try this at home) ripping guardrails off highways and the tracks from railroad beds to fetch a high price at the scrap dealer. For my friend, the containers of scrap metal yielded enough cash to pay for a new mower.

He had other options: He could have borrowed one from a neighbor. He could have temporarily hired one of the neighborhood kids to cut the grass until he saved up enough for the new machine. He could have gone online or looked in the newspaper for a used mower.

But I was encouraged that he at least took a step in the right direction to hold the line on his existing debt. He and his wife have struggled to keep their card balances from inevitably climbing higher and higher, so this is a very good sign.

Credit card debt is avoidable. You don't have to live under the yoke of a monthly minimum payment that really only serves to keep you at the mercy of the lender.

When you catch yourself reaching for that card to buy something with money you don't have, stop. Think. Get creative. See if there's another way to make the purchase without going deeper into debt. With a little bit of looking, you might be able to find something like scrap metal that is as good as gold.

Paying less, without the effort

2006-06-16T18:00:00.000-07:00

Saving money doesn't have to be hard work. In fact, the easier you make it, the more money you'll likely save.

For instance, almost every time I grocery shop, I like to look at the bottom of the receipt for two items:

--"Your total savings" (amount on that shopping trip I saved using coupons or buying on-sale items )

--***YEAR-TO-DATE SAVINGS*** (amount I've saved to that point in the year. I didn't add the asterisks and uppercase letters for emphasis; that's exactly how the text appears on the receipt.)

As of May 31, my family had saved $221.50 at the Stop & Shop, where we do smaller, weekly shopping trips for things like milk and produce. At the Acme, where we place larger grocery orders online every six to eight weeks and have them delivered to our door, we saved $105.91. Total we spent at both stores through the same time period: $1226.17. In all, we saved about 27% of our costs.

I am not a religious coupon cutter. And I don't tend to buy items that I or my family may not eat or use, just because they are on sale, or to see my "year-to-date savings" figure grow each trip. To me, the best way to save a few dollars is to buy or do the same things that I normally do--only, in doing so, find simple ways to pay less for them.

I spend an average of about 10-15 minutes a week clipping coupons from the Sunday paper. Usually I do it while watching TV or having a conversation with my wife, M. I tend to save between $5 and $20 per weekly shopping trip--to me, that's well worth the few minutes of time and the $38/six month-subscription cost of the paper itself. If I miss a week, I don't sweat it.

Applying for and receiving shopping cards from both Acme and Stop & Shop took about five minutes each and was free. I usually find that Stop & Shop reduces price for cardholders on more items we use than Acme.

I purchase most things using a credit card that earns reward points. I pay off the card balance every month, so I'm never charged a cent of interest. Next month, M and I will take the family to Disneyworld for a week. Points accumulated from purchases over the last year and a half will pay for my daughter's flight to Orlando from Seattle (about $400) and a rental car (about $300). So essentially I've saved $650 ($700 minus $50 for two years of membership fees to hold the card) for doing nothing differently than I would have done before.

To me, cutting costs is like dieting. If you go on a diet to lose weight, but eat food and portion sizes that are drastically smaller than what you eat normally, it's most likely a losing battle. Chances are good you'll regain the weight you lose at some point after you stop dieting and return to eating "normally."

If you hate the thought of clipping coupons, chances are good you always will. But that doesn't mean you can't find other easy ways to save a few dollars. Before throwing "junk mail" without a look in the trash, check it for discounts on services you may use in the next couple months, or restaurants you'd like to visit. Buy an Entertainment book and keep it in your car, so you won't forget to check it for a coupon at the fast-food place or popular museum you're heading into. And get a shopper's discount card from all the places you shop at more than once a month.

The point is to incorporate ways of saving money into your existing life as much as possible. Then it will be just as profitable, but won't seem quite so much like work.

Red alert on cheap DVD rentals

2006-06-08T21:00:00.000-07:00

Renting DVDs is a pretty cheap form of entertainment. But watch in your area for a new company looking to make it even cheaper--as well as faster, easier, and better.

Redbox is an automated DVD rental company. It offers $1 per night rentals of new and recently released DVDs through standalone vending machines located in a number of grocery and drug stores, and yes--even McDonalds restaurants. The company is actually a wholly-owned McDonalds subsidiary.

Today, Redbox machines can be found in eight metro regions, including Las Vegas, Denver, and Hartford, Conn. Earlier this year the company began installing their attractive, bright red machines in the Mid-Atlantic Giant and Stop & Shop grocery store chains. Smith's Food & Drug, a West Coast chain, has also signed on to put Redboxes in its stores.

I found my Redbox at the local Stop & Shop. Surprisingly, I didn't notice the trademark big red machine against the wall by the checkout stands. A pink flyer at the bagging station touting $1 DVD rentals caught my eye.

I gave it a try the following Saturday night. While my wife put my infant son to bed, I hopped on my bike and rode the mile-and-a-half to the store.

I was looking for the Clive Owen-Jennifer Aniston movie "Derailed," which came out on DVD just a few weeks before. Sure enough, it was among the fifty or so shown on the Redbox's listing board, which also included recent releases like "Brokeback Mountain" and "The Chronicles of Narnia," and other selections that had been out several months already.

I selected my movie, input some basic information into the machine, and it summarized my order: one movie, one night, for a grand total of $1.06, including sales tax.

At that price, I ended up adding "The Family Stone," knowing full well that M and I would be lucky to get through one movie without falling asleep. But if "Derailed" wasn't any good--you can never be sure with Jennifer Aniston movies--we had another low-cost option. And because Redbox only charges $1 per night for each rental, we could watch "The Family Stone" the following night and still pay half the price of renting from West Coast Video around the corner.

I swiped my credit card and my DVDs appeared through a slot on the machine's side, in pocket-sized cases. The small size was handy, since I was biking it.

Fifteen minutes later, M and I were snuggled on our basement couch in front of the big screen. For the record, "Derailed" was pretty good until the very end. We never did watch "The Family Stone," turning both movies in the next day (through the same side-slot on the machine).

In all, my Redbox experience was terrific--quick, easy, and a tremendous value. As the machines become more popular, DVD availability could be a problem--each machine, according to Redbox.com, holds about 500 DVDs, which to me doesn't sound like much. New releases are added Tuesdays, two days before the weekend, when most people have the time to watch DVDs.

Still, the company plans to have machines in multiple locations, so if a video isn't in your grocery store's machine, you could try the McDonalds down the road. And you can return DVDs to any Redbox--renting from one in Houston for example, and returning it at another in Minneapolis. So look for them at your local airport in the not-too-distant future.

By slashing DVD rental costs, Redbox may have other rental outfits like Blockbuster seeing red. But as my grocery cashier pointed out, there are other ways to see DVDs on the cheap. He'd just watched "Brokeback Mountain" after borrowing it from the local library, which regularly gets a few copies of new DVD releases from Blockbuster for their shelves. And he didn't pay a dime.

Welcome to The Coin Jar!

2006-06-04T21:00:00.000-07:00

You probably have a coin jar somewhere--on your bedroom dresser maybe, or in your kitchen. As loose change builds up each in your pocket or purse each day, you drop the assorted pennies, dimes, nickels, and quarters into the jar until it gradually fills up.

When you dump the contents out and count them, you probably get a surprise. Those small bits of change have actually accumulated into something bigger--maybe even much bigger. Enough money for you, or you and your significant other, to have a really nice dinner, perhaps. Or pay for Christmas gifts without a credit card. Or start saving for your child's education.

That's the idea behind this blog. Except instead of accumulating coins, we're accumulating ideas. Little ideas about earning, saving, and spending money that can really add up into something bigger: things like more financial freedom and less financial stress. Ultimately, a little better financial life for you, and your family.

So stop by regularly to see what's in The Jar. I'll make new posts on Mondays and Thursdays, and of course, you can always make your own "deposit" by adding a comment. If you have a question on your own financial obstacles, feel free to send an email to coinjar@yahoo.com, and I'll do my best to provide some guidance. (Note: My full-time job precludes me from giving any investment advice or guidance.) -CJ