Gather Little by Little

Here are some articles that Mrs. Stew liked this week:

Think Your Way to Wealth wrote about the challenges of living on one income. There are challenges, but also blessings to having a parent at home all day . . .

This article might be a hint from Mrs. Stew – Borrow from None wrote about lesson six in the Financial Peace University: Buyer Beware. I could probably do a better job in that area sometimes.

Mrs. Stew enjoyed the discussion about money itself from Aristotles perspective posted by Mrs. Micah over at Finance for a Freelance Life.

Tough Money Love details his attempts to discontinue his subscriber based radio service. He is getting quite the run-a-round. I have experienced similar tactics in dealing with newspaper subscriptions.

Do you have a personal finance firewall? Frugal Dad tells you how to set one up (with some help from Jim at Bargaineering).

Christian PF talks about time management skills for entrepreneurs. Entrepreneurship is an American art form that I find fascinating. Small business owners can be some of the most creative, generous, decent people you will ever meet.

Remember that you can Ask Me Anything at glblstew(@)gmail.com and have a great weekend! Don’t just spend money, spend time with family.

Article by Stew

Photo by mighty ohm

Last week’s Carnivals:

Festival of Frugality (Editor’s pick!)

Carnival of Twenty Something Finance (Editor’s pick!)

Carnival of Personal Finance #230

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For decades, many of us have been putting more and more of our money into real estate. Strange enough, it is an asset class that many owners do not even consider when they answer questions about their stock portfolio or investments even though it is by far the most significant in many cases.

Are you among those who complained about the major banks’ excessive leverage?

Chances are that you or your neighbour is leveraged at least as much if not more. Think about it… If you own a house that is worth 400,000$ and you have a 360,000$ mortgage, you are leveraged 10 to 1! Many banks used that kind of leverage.

But for some reason, that has been ok and has become so accepted that it is almost surprising when someone buys a house with 30-35% cash down. Of course, that happened mainly because we have expected prices to rise continually. The worst that can happen is for my home’s value to stay the same for a few years right? So why not leverage myself, enjoy the good life and then sell my house 10-20% higher in 3-4 years? That is exactly what happened in the past couple of decades as owners’ bought more expensive houses and often even chose to own several houses simultaneously. Of course, when prices in many regions such as Florida, California and Las Vegas dropped by 30-40%, it created a very tough situation for many homeowners.

Imagine you have a 500K mortgage on a home that you paid 600K… and a few years later, your home lost 30% of its value… and so you now own a 400K house with a 500K mortgage, which is described as “negative equity”. Add a lost job and you have major trouble. The bank can take possession of the home at any point in time in such a situation and selling your house becomes a major insult as you “realize” your loss.

It’s always interesting to meet people who look at me as if I was from another planet when I suggest using leverage when investing in the stock market while hearing that they put little to no cash down when buying their half million dollar home. Sounds a bit ironic in my opinion. While you don’t see the definition of leveraging to buy a house in any investment guide, the point is that you are still borrowing a lot of money and taking a substantial risk in buying your principal residence.

Of course, most would say that they have no choice and that buying their home in cash is simply impossible. And in most cases, I agree. I don’t think there is anything wrong with that and as long as real estate prices do not experience a crash you are fine. Yet I still consider it very important to at least acknowledge that you are using a leverage strategy and that there is risk involved. If you are leveraged 10 to 1, there is risk. I’m not against leverage, far from it. But we should all be aware of how much we use leverage in our personal finance.

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I have been doing a lot of thinking about family finance and especially the financial relationship between a husband and wife. I do not have all of the answers to solve every problem in this area, but I thought I would share just a few thoughts:

Family finance is about priorities. Both the husband and the wife should contribute to these priorities. It is our money, regardless of who may have directly earned it. My paycheck might be bigger, but Mrs. Stew does a whole lot of things that allow me to do the job for which I am paid.

I am not a fan of “his and hers” money or “his and hers” purchases. All money belongs to the family and all purchases need to be according to the priorities set by that family.

Different areas of financial responsibilities are certainly appropriate. When we were first married, my wife took care of almost all areas of our finances – food, clothing, utility bills and the rest. That did not work out for various reason. Now I take care of monitoring our bank accounts and paying regular bills. Mrs. Stew does a good job caring for the grocery and clothing budget items.

I am more likely to make a major purchase without consulting my wife. Not a good idea. Mrs. Stew is far more likely to consult me if the positions are reversed.

It is sometimes difficult for me to grasp the financial priorities favored by my wife. I think that we could spend more for things that she thinks are important.

A little walking around or “funny” money for each spouse is a good idea.

Open and honest is best.

When one spouse spends money in a way that does not reflect the priorities of the family, it allows the other spouse to rationalize expenditures that do not fit the plan. This can be the catalyst for friction. “Well, you spent money on ________ , so I can spend money on ________ and there is nothing you can do about it!”

Expensive hobbies can present a huge financial problem in a marriage. Hunting, cars, gambling, golf, etc. can place unneeded financial strain on a marriage. A good rule of thumb might be that each spouse is allowed to spend the same amount of money on a hobby. For instance, I gave up golf when I got married. I would love to play again someday, but not until I can afford to bring my wife along!

If both spouses are doing their best to support the financial priorities of the household, then money can never drive those spouses apart.

Hopefully there is a nugget or two here that you can use . . .

Article by Stew

Photo by makelessnoise

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. . . or soon will be.

We used to live in one of the coldest areas of the country. Our heating bills for a 1,200 square foot house ranged from $225 and $275 a month during the winter. We now live in a state with a more mild winter and our heating bill never really goes over $100 in a month. Needless to say, in our former home, we did everything possible to hold costs down and even though our current heating expenses are not as great, we still take measures to reduce heat loss.

Here are a few of our tricks. Some are worth more than others and many of you will probably be able to add to the list. I will start things off:

• Lock all windows. Leaving a window unlocked will allow more cold air to flow around it. Locking windows was a part of my routine in late fall and will even improve the performance of modern, gas-filled, double-paned windows.
• Make sure that glass pane on storm doors is closed. During warm weather months, we sometimes get in the habit of leaving the solid panes open in order to take advantage of the breeze that flows through the screen. I often see homes where the owners have forgotten to close the pane when the heat is turned on.
• Doors present one of the most difficult insulating problems for modern homes. Put a “draft snake” in front of doors leading to the outside – especially doors that are not used often. If the “snake” is in the way or kids constantly move it or play with it, close it in between the door and the screen door. It will serve the same purpose and be invisible to anyone in the interior of the home.
• We used to turn the heat off when we left the house – with two caveat’s. There are instances when more heat is used in the warm-up after you return home than if you had let the furnace maintain the temperature in the home while you were gone. Secondly, make sure that you do not have any pipes that might be easily frozen. We never had frozen pipes in our old home, even though we regularly turned the heat down to 50 degrees F when it was -20 and -30 outside.
• In our old house, the whole family slept upstairs, so there was no point in heating the first floor. This will not work for everyone, but we turned the house heat way down – usually under 60 degrees – and used space heaters upstairs to make up the difference. The sleeping area upstairs was quite cozy.There are some low cost heaters that are quite safe, but you need to experiment and make sure that the space heater is not using more energy than the furnace would use.
• It is amazing the difference that a few more clothes can make – slippers, a sweatshirt, etc. My personal favorite is a long sleeve t-shirt.
• Again, might not work for everyone, but the more people who sleep in the same room, the warmer they will stay. Not just because of the extra body heat, but because it reduces the number of rooms that have to be heated. In our old home, our family of five slept in two rooms. Mostly because that is all the rooms we had, but we only had to heat those two rooms .
• Closing drapes and shades will help to insulate a house, keeping warmth inside and cold outside.
• A lot of old homes have doors in places where they are no longer needed. In our old home, we had one such door and I placed a 3 inch sheet of styrofoam insulation between the two doors. We never used that entrance and the styrophoam made the space almost as airtight as the rest of the wall.
• Insulate, insulate, insulate! Between floor joists, in walls, more fill in the attic, on top of the basement wall, around the dryer vent, there are all kinds of little nooks and crannies that could use a squirt of Great Stuff foam sealant or a few tufts of fiberglass insulation.

Do you have any more tips to add?

Article by Stew

Photo by ansik

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Welcome to this edition of the Carnival of Money Stories! Since all featured posts reflect a money story, I decided to share my money flaws along with the articles.

If you are new to Gather Little by Little, you should read the following articles:

- How to build a compost bin

- How to get your finance under control

- Simple ways to make money online

- zero percent transfer balance credit card

Money Flaw #1: Having Spendthrift Moments

The current recession and the recent read of In Cheap We Trust got me thinking about my spending habits. While I am frugal in several aspects of my life, I am having a hard time spending less on food, clothes and cars. I don’t go shopping often, but when I go on a shopping frenzy, I can spend my whole pay check on clothing… I am actually worse than my wife when it comes to shopping . In order to control my spendthrift moments, I am continuously asking “will I regret it?”. Thinking twice about what I am about to buy reduces my bill at the end of the month considerably;-).

Ben presents Open Enrollment deadlines posted at Money Smart Life.

Tom @ Canadian Finance Blog presents Save Money By Selling Your House Without A Real Estate Agent posted at The Canadian Finance Blog.

Patrick @ Cash Money Life presents Save Money on Auto Insurance Rates posted at Cash Money Life.

Silicon Valley Blogger presents My Retirement Plan Or What I Plan To Do When I Retire posted at The Digerati Life.

DR presents 10 Simple Steps to Buying a Car or Truck on eBay. posted at The Dough Roller.

Michal presents Tips to Creating a Green Home Theater posted at Energy Saving Gadgets.

Peter presents This Blogger Fell Into The FICO Trap, But Saw The Light And Became Debt Free posted at Bible Money Matters.

PT presents Results of a Week Without Spending posted at PT Money.

Money Flaw #2: Procrastination

In my opinion, procrastination is my worst money flaw. The problem with procrastination is that it often doesn’t show. You barely notice that you are losing money because you don’t take care of something. It’s like water dripping from a leaky faucet; you are losing water but you won’t notice the damage until something breaks and you see the big hole under the counter! I try to send myself emails (it’s a Gen Y thing, so says conspiracy theory man) and leave notes everywhere of what needs to be done (like looking at my insurance coverage for example or analysing how much interest I pay on debt). I am slowly getting better when it comes down to take care of my personal finances.

RJ Weiss presents How I Saved $1,925 By Picking Up The Phone! posted at Genyweath.com.

Mrs. Accountability presents The Time I Almost Married An Amway Salesman | Out of Debt Again posted at Out of Debt Again.

Julia Kingston presents Taking the Life out of LIFO posted at Gray Matters

Madeleine Begun Kane presents Ode To Prosperity posted at Mad Kane’s Humor Blog.

CreditCardAssist presents Card Issuers Find Loopholes Before New Law Takes Effect posted at CreditCardAssist.com.

Peak Personal Finance presents 6 Types of Financial Apps for Your Smart Phone posted at Peak Personal Finance.

David Carlson presents Dual Income No Kids: DINKs Buying Silver & Bonds posted at Dual Income No Kids.

KCLau presents Caring for the Elderly posted at KCLau’s Money Tips.

Tyler presents What?s Your Environmental Net Worth? posted at Frugally Green.

Money Flaw #3: Looking to increase my income continuously

While aiming for a bigger salary is not a bad thing by itself, I would say that continuously looking towards the next promotion, working more hours to make extra bucks or spending time and energy on a sideline (like starting an online store) will gradually take away from the most important things in life: your family and friends. Since I have finished my MBA, I have decided to cut down on my hours at work and spend more quality time with my beautiful wife and children. I definitely don’t regret my choice!

FMF presents How to Buy a New Furnace and Air Conditioner posted at Free Money Finance.

Steve Patterson presents FastSwings – Blogs – Federal Reserve Holds Rates as Expected posted at FastSwings.

Darwin presents The Truth About Rewards Credit Cards – But, Is it Really True? posted at Darwin’s Finance.

Jeff Rose presents Should You Buy Life Insurance at an Early Age? posted at Jeff Rose.

Aussie Investor presents How To Buy Shares In Australia posted at Australian Stock Market Investing Blog.

Diane Laine presents The Definitive Inverse ETF Guide posted at ETF Database.

jim presents Tips for Buying Used College Textbooks posted at Bargaineering.

Money Flaw #4: High tendency to leverage

I have mentioned it before, I have a high tolerance for risk and I don’t mind borrowing money in order to increase my assets or income over time. This is what I call “having productive debt”. However, good or bad, a debt is a debt. If things turn sour, my tendency to leverage everything might blow up in my face as I am taking a lot of risk. I haven’t found any tricks to reduce this “bad” habit. I just hope that I will continue to make money from it I guess!

chris presents Credit Score Factors posted at Real Estate Money Matters.

freefrombroke presents My Experience Switching To Cable/Digital Phone Service posted at Free From Broke.

J.D. Roth presents Knocking Out the Beliefs That Hold You Back posted at Get Rich Slowly.

Baker presents Budgeting Ups and Downs: October and Beyond posted at Man Vs. Debt.

MatthewPaulson presents Tips For Using Your 401k posted at Fine Tuned Finances.

Braudis Lee Pegram presents Goodbye Capital One posted at The koH Resources Blog.

Madison presents Make the Most of Open Enrollment posted at My Dollar Plan.

Mr. ToughMoneyLove presents Does Las Vegas Deserve a Recovery? posted at Tough Money Love.

Money Flaw #5: Fighting with my Budget

While I have no problem sticking to my budget (besides a few spendthrift moments ), my biggest problem is to keep track of each expense in order to be able to analyse them. I did enter each dollar earned or spent for 2 years in Microsoft Money software. But since starting my basement renovations, I have completely lost count and never went back to my original budget again. While I know that, overall, my assets are increasing and my debt is decreasing, I can’t pinpoint where to concentrate my efforts in order to get rid of my debt faster.

Austin Morgan presents The Best $100 I Ever Spent posted at Foreigner’s Finances.

Chris Lang presents Property and money: 20 tips any married woman must read (part 1). posted at Home I Own.

Mike presents The Finish Line posted at Minting Pennies – Personal Finance, Investing, and Microfinance.

TC presents Who Funds Non Profit Debt Help Organisations? posted at How To Eliminate Debts.

Bucksome Boomer presents The Trouble with Rebate Cards posted at Buck$ome Boomer’s Journey to Retirement.

Matthew Paulson presents Thefts at Open Houses Return to Real Estate Market posted at American Consumer News.

Mr Credit Card presents Should I Get Another Credit Card Before Moving Overseas? posted at Ask Mr Credit Card.

The Smarter Wallet presents Secret Bank Accounts And Marriage Don’t Mix posted at The Smarter Wallet.

Miss M presents Hit and Run! posted at M is for Money.

Super Saver presents Part Time Job Situation is Improving posted at My Wealth Builder.

I hope you have enjoyed reading about my money flaws along with the articles in this carnival!

Author: Mike.

Image source:

松林Ｌ

ucurami

steve wampler

brandon godfrey

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