How much does your vice cost?

by Stew | Posted in Money Management | 17 Comments

habit

Wikipedia defines a vice as a practice or a habit considered immoral, depraved, and/or degrading in the associated society. In more minor usage, vice can refer to a fault, a defect, an infirmity or merely a bad habit.

Recently, I spent some time thinking about how much money I spend on things that I really do not need – not necessarily things that make life easier – but rather things that are simply a habit, a pleasure or a waste of time. I am not going to exactly reveal my particular “vices”, but I think it is a good idea once in a while to take stock of the little money trickles in our budget. You know the holes that allow a few bucks to slip through during the course of a month? Some of these items might even have a legitimate place in our lives, but we all must consider the cost.

  • Coffee: $.50 a day   $15.00 a month   $180 a year (if you make it at home)
  • Cigarettes: $4.50 a day   $135 a month   $1,620 a year (pack a day)
  • Alcohol: $10.00 a week   $40 a month   $480 a year (conservatively)
  • Soda: $4.00 a week   $16.00 a month   $192 a year (two cans a day from the grocery store)
  • Cable: $55 a month   $660 a year (low end package)
  • Gambling: $250 in Vegas   $100 year in lottery tickets   $500 ($10 a week in your home game)
  • Cigars: $6 a week   $24 a month   $288 a year (really cheap cigars)
  • Golf: the sky is the limit . . .
  • Marijuana: $15 a week   $60 a month   $720 a year
  • Eating out: $50 a week   $200 a month   $2,400 a year
  • Spectator Sports: $150 a month   $1,800 a year
  • Tattoos:   $100 a year
  • Shoes:   $50 a week   $600 a year

Okay, obviously some of these may or may not qualify as vices, but we could probably find a way to do without every item on this list. Pick out your particular weaknesses, add up the yearly cost and then compare that sum to your monthly budget, your typical paycheck or some other legitimate expense that is a part of life for you. Then ask yourself if it is worth it.

For some of us, eliminating a vice or two could have the effect of a five or ten percent raise. Now you can make an informed decision about whether the pleasure derived from that vice is worth the cost.

Article by Stew

Blog Traffic Exchange Related Posts

10 Small Ways to Save Money That Make a Big Difference

by Mike | Posted in Saving Money | 18 Comments

small-money-saving

Image: alamosbasement

When it comes to saving, sometimes starting small feels almost like not starting at all. A bit here and a bit there tends to add up like drops in a bucket. The important thing to remember though when it comes to saving money is that those drops can eventually grow to a trickle, then to a stream, then a torrential current of cash.

Using small ways to save is similar to the bundle of sticks story – remember the one that starts with the man easily breaking a single stick. Then he snaps two, even three sticks together. But when given an entire bundle of sticks, he finds it is virtually unbendable, let alone breakable. It’s much the same with small savings techniques. Many, seemingly inconsequential savings methods bundled together can significantly grow your nest egg to immense proportions.

1. Get rewarded for spending on a credit card

It might seem odd to begin an article on ways to save with a topic like credit cards. With interest rates often ranging anywhere from 10-20% percent (unless you get a zero balance transfer credit card), credit cards can be the arch nemesis to a savings plan, but only if you let them. First, you must ensure you pay off your balance each month to avoid those hyper-inflated interest rates. Second, get a credit card that offers cash back, store discounts, or other rewards and incentives, so that when you do spend, you also save.

2. Take advantage of balance transfer cards

If you are carrying a credit card debt then it will definitely be beneficial for you to transfer your credit card balance between cards, which will allow you to avoid paying the sizeable interest rate on a balance. Making such a move with your debt, say from a card with a balance of $1,000 and a 15% interest rate, to a card with an significantly lower or introductory 0% rate, can save you hundreds of dollars, if not more depending on the time it takes to pay off your balance.

3. Coupons will save you money

What if you saw a dollar bill taped inside the Sunday newspaper? Would you take it? Of course you would. Yet, there is a missing sense of urgency among many of us when it comes to coupons, which are essentially the same as cash. Certainly not all coupons are money savers, especially if they are used on particular name brand products that are more expensive than their generic competitors, but if you comparison shop and know a deal when you see one, coupons can turn small savings into big cash.

4. Start to save your spare change

Hey, if it worked when you were seven, it might just work when you’re thirty-seven. Hauling all that change to the bank to be turned in is often a big enough deterrent to make most people leave the jar where it is. Moreover, while all that change probably doesn’t look like much, you might be surprised how much cash you get when you eventually turn it in.

5. Save tax-free with government bonds

Putting money into government issued savings bonds can be a great way to save. These investment vehicles offer a low initial investment ($25 is the minimum E-series buy in), a secure way to save, and guaranteed (albeit sometimes low) returns. Taxes on U.S. government savings bond interest can also be deferred until the time the bond is cashed, allowing your investment to grow for up to 30 years tax-free, and if used for educational purposes might be tax-free altogether.

6. Set up a monthly direct deposit to a savings account

Direct deposit can be a small saver’s best friend. Diverting a portion of your paycheck, even if it’s only $20 each pay period, to a separate account, can add up to big savings over the years. That $20 deposit every two weeks is $520 a year, $5,200 after ten years, and that’s before you add any interest earned on the account.

7. Payroll deductions

Having certain items removed from your paycheck before you are paid is a small way to earn some big savings. Using deductions for an employer sponsored health plan, retirement account, or savings plan, can be a wonderful way to save without really noticing the loss of money. Not only are you stashing cash, but some of these deductions are pre-tax, saving you even more, especially over the long run.

8. Avoid taxes to increase your savings

There is a big difference between evading taxes and just avoiding them for a while. As we’ve already seen, everything from savings bond interest to certain payroll-deducted items can be tax deferred. Avoiding taxes will allow a larger portion of your money to grow, increasing your savings over time, and delaying the cost of taxes for years – sometimes indefinitely. When buying products or considering retirement, it is also important to consider sales and property tax rates since they can range widely depending on cities, counties, states, or regions.

9. Let your savings save

Once you’ve managed to start saving, let your stash work for you. Compound interest, dividends, and similar returns on investments can grow you’re money without you having to lift a finger. While sometimes the returns are small, over time, they can grow exponentially, and who can deny that free money, no matter how little, is nice to get.

10. Liquidating leftovers

Few people realize just how much money they have in their home, either in the form of books, CDs, DVDs, antiques, or other household items. Strip mall stores, resale shops, and a growing number of internet sites offer to purchase specific items such as textbooks, CDs, DVDs, and more. These businesses have made selling personal items a lucrative source of income for many. Reselling such belongings can be a great way to turn your unused items into cash.

##########

About the author

Kris is a personal finance writer who blogs about money management techniques for an Australian comparison website where you can compare credit cards such as cashback credit cards that actually help you make your money go further.

Blog Traffic Exchange Related Posts

Be a discriminating customer, a diligent employee and a generous entrepreneur

by Stew | Posted in Economy | 5 Comments

capitalism

The free market is not perfect. We all know of stories about unethical or corrupt businesses, but lately capitalism has been getting a bad rap. I just thought it might be nice to remind ourselves of a few of the benefits of America’s historic economic system – not because it’s perfect or because it was ordained of God or anything – but just to help us realize that capitalism is not all bad:

  1. Capitalism generally drive prices lower. Businesses want your business and they know that you want to pay as little as possible. Just think about how the prices of electronics have come down over the years. I recently purchased a laptop for less than $300. A laptop that would out-perform almost any computer built before 2007. Think about it, you can probably list lots of items where the prices have come down over time.
  2. Capitalism gives us a choice. I have three grocery stores within walking distance of my house. If I don’t like the prices at one, I can go to another. Gas stations, cable providers, restaurants, furniture stores all competing for my money and if I do not like the taste or the service or the price, I can find a business that I like.  I can even choice where I work or where I do not want to work. There are certainly difficulties tied to changing jobs, but if you want it bad enough and are willing to sacrifice, you have a great chance to earn an income anyway you like.
  3. Capitalism drives innovation. Businesses drive profits by coming up with new ideas and better ways to do things. Just think of what life was like before email or air conditioning or microwaves. Someone had an idea and as a result, they became rich. The thing to remember is that the guy who invented the microwave was not the only one to profit from that invention – factory workers, salesmen, investors all profited from the process to heat food quickly. Innovation is all around us, certainly some of it is bad, but the vast majority is beneficial.
  4. Capitalism supports charity. I was just speaking with a dentist who donates several weeks a year in Ethiopia. He can do this because his income allows him to give services away. Most charitable organizations depend on individuals to give them a certain percentage of their profits every year. People who make a lot of money, people who invested well and people who just have a little extra because of capitalism give it away to support all kinds of charitable interests. Americans gave two trillion dollars to those hurt by the tsunami disaster of their own free will!
  5. Capitalism keeps us honest. Yes, I know, many people have abused capitalism for their own purposes on many occasions. However, crooks are eventually caught, poorly run businesses fail and greedy entrepreneurs almost always end up ruining their lives – that is, unless the government bails them out – but then we all know that is not capitalism! You always have the choice to patronize another company. You can even choose to pay more to an ethical company if that is your desire.

Once again, the imperfections of capitalism are many; I do not defend greed and excess. You may prefer a different type of economic system. That is fine. We can still be friends, but I will take my chances with greed and excess if my freedom is preserved.

Be a good shopper, do your homework, research the best price, frequent businesses with good service, watch every penny and you can help the businesses around you get better. Work hard, think, treat people well and maybe someday you can run one of the good companies that are out there.

Thanks for choosing to read GLBL today!

Article by Stew

Photo by epicharmus

Blog Traffic Exchange Related Posts

“In Cheap We Trust”: Review and Giveaway

by Mike | Posted in Book Reviews, Contests | 33 Comments


in cheap we trustIf we had to separate people into 2 different clans: The Thrifts and the Spendthrifts, I would probably be closer to the latter. Unfortunately, the thing I like most about money is spending it. However, being a husband and father of two beautiful children has helped me be more responsible financially. While I never really wasted my money, I have always enjoyed earning more to spend more in order to indulge myself from time to time.

Now that we live on a single income, I have to double my efforts to become more frugal and concentrate on priorities. I guess this is what attracted me to read more about “being cheap”, which led me to “In Cheap We Trust” by Lauren Weber.

About Lauren Weber:

The author “grew up in Connecticut with a father who rationed toilet paper, set the thermostat at 50 degrees during the winter, and rarely used his car’s turn signals (to prevent them from burning out).”

Strong from her frugal background, Lauren always had a passion for writing. She has been writing for Reuters, The New York Times, The Los Angeles Times and American Banker just to name a few. Since 2007, she has concentrated on writing “In Cheap We Trust”, a combination of personal anecdotes intertwined with social and historical data wrapped up with a political taste for frugal living.

About the book:

Lauren captivated me during the first few pages about her cheap thrills introduction. And why the word “cheap” has become so negative over time. It’s as if the amount of money spent annually has become the measure of your social class in our modern (capitalist) society.

This book uses history to bring us back to the very definition of thrift and how frugality has been an important part of our value system for a very long time. Through a well documented (sometimes too exhaustive though) research, she depicts the history of frugality since the very first person set foot on American soil.

The last decade (apparently) has brought us wealth and comfort. Yet, recent economic events show us that we, as a spendthrift nation, simply incurred a huge credit bill over these same 10 years and it is now time to pay the interest and reimburse the capital. If we had not forgotten the efforts from our ancestors in building the foundation of a strong and frugal society, we might not have hit such a brick wall in today’s recession.

I particularly liked the Paradox of Thrift revisited by Weber. The paradox of thrift was created based on the principle of the economy declining due to the fact that everybody is saving instead of spending. Technically, if consumers stop buying and save their money, it should create an economic contraction resulting in more job losses (I guess this is why Bush was telling us to take our stimulus check to go to Disneyland!).

While the premise is accurate (spending less will result in a longer and deeper recession), spending more will simply postpone the problem for a few years. It’s akin to not going to the doctor because you have the flu, instead wait until you get pneumonia. I feel that a balance between savings and spending would be most appropriate.

I also found it quite interesting to actually understand the roots of frugality and Weber’s personal stories included in her book got me thinking about how far from being thrifty I actually was. It was nice way to get into the mood to save money!

Now the Giveaway!

I actually have 10 copies to distribute amongst Gather Little By Little and The Financial Blogger readers. Each blog will giveaway 5 copies of “In Cheap We Trust”.

Participation rules:

- Comment below with a frugal tip or spending philosophy (1 entry per comment).

- Follow me on twitter (1 entry)

- Register to my free mailing list (on top right of the site)

You can actually participate on both sites by commenting.

The giveaway winners will be announced on Friday, November 6th.

Last week’s Carnivals:

Carnival of Personal Finance

Blog Traffic Exchange Related Posts

Best Investment for 2009: Use your Emergency Fund to pay off your debt

by Mike | Posted in Investment Thursdsays | 9 Comments


Just by writing this title, I already know that people won’t agree with this strategy. How can you tell people to get rid of their emergency fund while we are in one of the most important recessions ever? So please, keep reading until the end of the post, I promise to make sense ;-)

First things first, I am a big fan of the “pay yourself first” technique when it comes to personal finance. If you consider yourself as a priority creditor, you will put money aside for your personal finance and then, live off the rest. Many of my clients are asking the same question with regards to extra money: Should I pay down my debt or invest the difference?

Some people will build a 6 month emergency fund, others will invest the money in a stock portfolio and the rest will pay down their debt. But in many cases, the best investment would be to pay down their debt. And if you have an emergency fund, you should use it to pay off any existing debt such as your credit cards or create additional room on your home equity line of credit.

Savings accounts don’t offer much interest

When I advise my clients on what to do with their money, we find money market funds and saving accounts offering less than a 2% yield. So, here you are technically losing money if you put it aside in an emergency fund. How come? The answer comes in 2 words: taxes & inflation.

Historical inflation is over 2% and most economists expect it to keep an average pace of 2%. So, if you are marking 1.50% in your savings account and you pay 25% in taxes; you are left with a real return of 1.125%. Therefore, if the inflation is 2%, you will be lose almost 1% of your purchasing power per year. You don’t need to read an investment guide to understand that this is not the best way to increase your net worth, right?

On the other hand, credit card interest rates are much higher

Unless you were able to get a zero percent balance transfer credit card, you are probably paying around 10% on your credit card (if not higher). Therefore, you could use the money in your emergency fund (making 1.5%) and pay off debt at 10%. This method helps you  multiply your investment yield by more than 6 times when compared to a money market fund.

We’re in a recession, what happens if I lose my job and no longer have an emergency fund?

I guess this is the part I like the most about personal finance; there are no black and white answers! A few years ago, I would have answered back: take your whole emergency fund and pay off your debt. If you need money because you have lost your job, just use your line of credit for the time being.

However, since the recent credit crunch, we have seen financial institutions using the fine print to their advantage in order to cut credit limits to millions of upstanding individuals. The banks were so panicked that they simply looked to decrease their exposure to risk.

So I am not saying that everyone should cash in his entire emergency fund.

However, I think that if you have 3 months emergency funds (everybody should be looking to cover 3 to 6 months of income according to financial planning guidelines), you may use a few weeks’ or a month’s worth of income to pay off a few credit cards.

Once this is done, you can use the snowball effect to reimburse your emergency fund. Therefore, you will save a great deal of money in interest and you won’t be exposed to big risk.

Using the snowball (taking the money used to pay off one debt in full and add it to make a bigger payment on the following one) in order to reimburse your emergency fund will be a great way to make sure you replace your emergency fund to the level it was a few months earlier.

Author: Mike.

Image source:

Blog Traffic Exchange Related Posts
Page 20 of 178« First...10«1819202122»3040506070...Last »