5 ways to save money now

by glblguy | Posted in Money Saving Monday Tips | 13 Comments

Cash

I often get emails from people desperate to get control of their finances and immediately reduce their spending.  Most often, these emails are the result of a sudden job loss.  While I’ve published more than 80 money savings tips as part of my Money Saving Monday Tips series, I thought it would beneficial for some out there to have a consolidated list of quick tips that would provide immediate money savings.

Here are 5 ways you can save money now:

  1. Cut your cable/satellite service – Contrary to popular belief, cable and satellite TV services are a luxury, not a necessity.  They are also a fairly expensive luxury at that.  Cutting your cable or satellite TV service can result in an immediate $50 – $200 savings per month.
  2. Reduce your cell phone plan – Many people have expensive cell phone planes that include lots of luxury features like text messaging.  Change your plan to a pay per use plan OR reduce it way down to the most minimum plan.   Turn your phone off when you don’t need to make a call and keep your calls to only those absolutely necessary.  Following this tip could potentially cut your monthly cell phone bill by more than $100.00.
  3. Sell a car – Most families these days have two (or more) cars.  Consider selling one and only having one car.  Sure, it won’t be as convenient, but consider the money savings: gas, maintenance, payment, taxes, insurance.  Cars are expensive, and if you really don’t need to have 2, selling one and using just one car can have a significant positive impact on your finances.
  4. Stop eating out – I talk to a great number of people about finances, especially when they find out I write here on Gather Little by Little. One of the things that amazes me is the number of people that say they’re “living on the edge” financially, but continue to eat out on a frequent basis.  Their reasons are lack of time to cook.  Make the time. Eating out is expensive and not near as healthy in most cases as eating at home.  If you’re struggling financially and don’t have time to eat at home, cut back on your schedule.   Personally, I’ve found people eat out because they’re too lazy to cook.  No excuse, there are hundreds of meals that literally take less than 15 minutes to cook.
  5. Reduce your bills – Block out a 1 -2 hour time frame on a weekday, and spend some time calling all of your service providers: insurance, utilities, cable, cell phone, etc.  Tell them your looking for ways to cut your expenses and see if they can provide any options.  Many of these companies have special programs of offers they can provide.  Why? They would rather get less money from you and keep your business than lose you all together.  Trust me, with the recession these companies are hurting like everyone else.

These are just 5 quick ways you can cut your expenses.  Take a look at your budget, and spend a month writing down every expense/purchase you make.  Then at the end of the month, review where your money went.  I guarantee you’ll find a few areas that will shock you.  One of mine was the cost of Starbuck’s coffee everyday.  I found I was spending over $30/month in coffee alone!

How about you readers?  What tips or suggestion can you provide for other readers looks to immediately reduce their expenses?  Add your tip or suggestion by adding a comment!

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iPhone application giveaway winners!

by glblguy | Posted in Contests | Comments Off

Ok, so I’m a day late.  Sorry about that everyone.  For some reason I had it in my mind that I would announce the winners on Saturday.  Symptom of too much going on I guess.

I received 16 comments on the iPhone applcadation giveaway article and with 2 codes being given away, everyone had really good odds of winning!  The winners are:

Rebecca who added comment #6 and James who added comment #7

Congratulations to both of you and you have emails from me with the download codes!!  Thanks to everyone that entered!  Watch for more contests coming very soon!

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Reverse Mortgages: Destined to be the Next Subprime Meltdown?

by glblguy | Posted in Guest Posts | 5 Comments

senior-citizens

Reverse mortgages are suddenly coming under fire. But these unique loans remain an effective and at times essential financial option for seniors across the country – and they’re proving more popular than ever.

One of the federal government’s banking regulators this week warned that reverse mortgages may soon need greater oversight and scrutiny. John C. Dugan, Comptroller of the Currency, compared reverse mortgages in part to subprime mortgages, claiming some of their similar risks should “set off alarm bells.”

In short, a reverse mortgage allows homeowners to convert parts of the equity in their home into cash payments that can be taken as a lump sum, in monthly installments or through a line of credit. These mortgages are for senior citizens who either own their home or have a low mortgage balance. The Federal Housing Administration insures about 90 percent of all reverse mortgages in the United States.

That penetration rate that worries regulators like Dugan, who fear taxpayers may wind up on the hook because of the risks associated with reverse mortgages. Dugan’s office issued a press release that spelled out some of his concerns, which included “the ability of consumers to access their home equity through immediate and large lump sum payments.”

He also expressed concern that seniors can be “particularly vulnerable to coercive sales of annuity and long-term care insurance products that are expensive and may not be appropriate to their needs.”

While these concerns are certainly valid, reverse mortgages are on the rise. Federally insured reverse mortgages increased almost 20 percent in March and April, the Wall Street Journal reported this week. The U.S. government backed 11,660 reverse mortgages in April, its highest monthly total ever.

Much of the increase is linked to the down market, as senior citizens continue to search for ways to keep their retirement savings intact.

This was a guest post by Brandon Laughridge.  Brandon is a mortgage blogger with Mortgage Loan Place. MLP specializes in educating consumers about Home Loans and FHA Loans.  If you would be interested in writing a guest post for Gather Little by Little, feel free to contact me.

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How in the world did I get here?

by glblguy | Posted in Psychology | 9 Comments

You Are Here

Ever ask yourself: “How in the world did I get here?”  If your current situation isn’t a good one, generally there is a huge emphasis on the word “here”. I cannot tell you how many times I’ve asked myself this same question over the past 4-5 years. Fortunately a few of the times have been positive, like when I stand out on our front-deck and see our beautiful mountain view or when I look at my work queue for my blog consulting business that is now booked out 4-weeks. For the most part though, the last 3 years or so have seen that question in a less positive light and particularly with my personal finances.

How in the world did I get here?

I was asking that same exact question in November of 2006: Due to some personal events in my life, I was facing a job loss. For some in the technology field like me, no big deal right?  My problem though was that my finances were a mess:

  • I was living paycheck to paycheck. We literally were spending each and every paycheck before the next one came.  I remember for the last few days prior to receiving my next paycheck literally having no money in our accounts and frequently over drafting.  I remember even buying life basics using our already way too full credit cards.
  • I had more than 60,000 dollars in debt, not including our mortgage.  This was a combination of car loans, a camper loan, and 3 or 4 different credit cards.  We were just barely able to pay the minimum payments on the credit cards.  Heck, I remember a few times even using one credit card to pay on another!  Can you say stupid?
  • We owned a home, but it badly needed some fairly major repairs. Due to how tight our finances were we couldn’t make them.  We literally slowly watched the wooden chimney surround on our house rot away and fall off into the yard along with various other issues.

The only silver lining in our dark financial cloud was that I had been contributing 6% of my monthly salary into a 401k program since the first day I started my professional career.  We did have some long term savings.

What a mess right?  Have you seen the movie The Day the Earth Stood Still?  We rented it from Netflix one evening.  It’s not a great movie, but it did have one very interesting observation about people: “It’s only on the brink that people find the will to change. Only at the precipice do we evolve. This is our moment. ”

Was I on the brink?  Oh yeah. Did I change?  Absolutely.

Finding the will to change

At some point everyone “living in the land of stupid” (as Dave Ramsey likes to say), reaches the precipice.  I was there, and here’s what I did to change:

I read

Don’t ever make the mistake of thinking you are the very first person to ever be in a particular situation.  I can almost guarantee you that regardless of your situation, somebody, somewhere is going through your situation (or worse) AND someone in the past has survived your situation.  The best way to get out of your situation and change is to look at the positive actions done by others.  Fortunately for me I found Dave Ramsey’s book: The Total Money Makeover while at Costco one evening.  I also found Get Rick Slowly and The Simple Dollar which opened up the world of personal finance blogs to me.

One thing I learned pretty quick is that just based on the number of debt reduction blogs on internet, I wasn’t alone.  I was not the only one facing repayment of  large amount of debt.  They say misery loves company.  I believe that’s very true, but for me it wasn’t so I could complain and wallow in self pity, knowing that I wasn’t alone gave me hope.  When facing 60,000+ in debt, one thing you really need is hope.

I also dove deep in scripture.  The Bible is literally full of money advice.  If you aren’t sure where to start, read to book of Solomon.  Solomon was the first personal finance blogger and was given wisdom far beyond that or normal man.

I stopped what wasn’t working

Based on the things I was learning from reading, I stopped doing all of the stupid things right away.  We immediately stopped eating out, we cut up our credit cards and  with the exception of buying things we absolutely needed to live, we stopped spending.

When you’re headed down a road to destruction, the first thing you have to do is stop.  While that seems like an easy thing to do, it’s not.  Easy or not, stopping is critical.

Another important aspect of stopping is facing the reality that you are the reason your finances are mess.  Oh sure, blaming everyone else is easy, but it doesn’t get you anywhere.  Go stand in front of a mirror, look at yourself and literally say out loud “You are the reason you’re here“.

Let’s just take a quick example.  Many people today are losing their jobs.  Their fault?  In some cases yes, but for the most part no.  Job losses as a result of corporate cut-backs are just a reality of the recession.  So losing your job in this situation isn’t your fault BUT is not having your finances in order to sustain such a loss your fault?  Absolutely. I don’t care who you are or how important you are to your job, you can lose your job.  As a result, each of us needs to take the necessary steps to shore up our finances in case just such an event occurs.

I took action

Once I stopped and realized that I was indeed responsible for my own financial situation, I took action. I didn’t hesitate, I didn’t dwell, I didn’t roll in self pity crying out “poor me”.  I immediately picked something I could do to start down the road to financial control and did it.  That first step literally cost me nothing but a little time.  What did I do?  I created a budget.

Here are the initial steps we took to get our finances under control:

  1. Cut up our credit cards and vowed to live on cash in our checking account only.
  2. Created a budget
  3. Created a financial plan – Think about it: if you want to head down a new path you better darn sure know where you’re heading.
  4. Sold everything we had that we didn’t need and used that money to pay on our debt
  5. Created an emergency fund
  6. Created a debt snowball

Given I had lost my job, I also aggressively started looking for other employment.  This event also taught me to never, ever rely on just one source of income.  While not the initial reason I started blogging, blogging coupled with my blog consulting work has provided  that backup income.  While it doesn’t earn me near as much as my full-time job does, my side income would pay the mortgage AND put food on the table.  That is very comforting.  Investors diversify their investments, shouldn’t be diversify our income?

How in the world did you get where you are?

Are you currently in a bad situation in your life asking: “How in the world did I get here?”  If so, while it’s certainly important to understand how you got where you are, don’t dwell.  Remember also: Only at the precipice do we evolve. You aren’t the first person to be where you are, and you can change.  Changing may not be easy, and the path to getting where you need to be might be hard, but it will be worth it.

Figure out what your first action is and take it.  Don’t think too much, don’t look to far ahead as if you look at things as a whole it may be too overwhelming.  Just figure out the first step and take.  Then the next step and take it.  After all, the journey of a thousand miles begins with the first step.  Start your journey towards making your personal finances better.  I did and it is one of the best decisions I ever made in my life.

Photo by: 0ccam

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Figure the interest

by Stew | Posted in Money Management | 2 Comments

loans

Johnny Carson once said, “Scientists have discovered a powerful new weapon that leaves buildings standing, but destroys people . . . it is called the 17% interest rate.” Another famous quote about interest may or may not have been uttered by the famous physicist, Albert Einstein, who was once asked about the most powerful force in the universe and answered: “compound interest”.

I always understood the math side of interest, but it has taken me many years to fully understand the impact of compound interest. The more I understand compound interest, the more I hate debt. Just think about of how much money a family could have save over time if they never financed a purchase. What a novel concept – just save up the amount needed before making the purchase! My family is not drowning in debt, our credit is good and we have almost never paid credit card interest, but it makes me sick to add up the amount of money we are throwing away – just because we could not wait:

  • House Payment: $625*
  • HELOC: $130*
  • Car Payment: $310*
*numbers are pseudonymous

How much interest?

Of that $1,065 in monthly finance payments, only about $300 is being applied to principal! Could we have gone without a house for a few more years? Certainly. Could we have gotten by for a couple more years with a less expensive car? Of course. Look at it this way, if the price tag on our car was $17,000. And we could have saved the amount equivalent to our car payment each month before purchasing the vehicle, we would have had to save for 55 months, give or take. By getting the car right away,  we will now be paying for 72 months – almost two years longer than if we had saved up – and the car probably will not even last that long.

The HELOC is an even worse deal. If we continue to make payments for the entire term of the loan, we will have given the mortgage company almost three times the original loan amount! Makes that new roof look mighty expensive.

Total payments

From now on, when my wife and I discuss taking on debt to pay for things that we think we need, we are not going to consider the number on the price tag, but rather, we will use the number commonly known as “total payments”. This is the number that you get when you add the principal to the amount of interest that you will pay over the life of the loan.

Some examples:

A $20,000 car at 7% APR will actually cost $24,550 over 72 months.

That $10,000 home equity loan to remodel your kitchen or – heaven forbid – take a vacation to Disneyland? At 8% and amortized over 15 years will cost you $17,760.

That house that you so desperately need to “own”? The one with a great purchase price of $190,000 and a low rate of 5.125%? It will cost you $372,427 over thirty years.

I don’t know about you, but after we lick our current debt, we don’t plan to sign any promissory notes anytime soon. A used car is fine by us and I do not have a problem with renting for a long time. Live is too short to spend so much time and effort trying to come up with the interest.

Photo by omar omar

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