Okay, first off, let me say that I am sincerely, SINCERELY sorry for the lack of posts!!! I have a number of excuses, but they mostly have to do with my new business, The Mommy Brand, and the blog that I write to go with it. It's pretty much taken over my life for the last little while! Here's my plug: go to my new website for trendy handmade baby gear, and go to the blog to win some great giveaways, get baby shower ideas, baby product reviews, etc. Done.
Now back to the good stuff... I am also now a guest author for a great blog run by BYU students, grads, and faculty called Notes on Parenting. Here's what I posted today...
I just graduated with my bachelor's degree this past spring. Going through high school and college, I always envied the kids whose parents bought them a brand new car, bought expensive clothes, flew them and their spouse to family vacation – you get the idea. Although I was very jealous of the financially dependent kids, looking back, I'm grateful for what I learned from being financially independent. I learned when I first started high school how to save for what I wanted, budget for my expenses, and to live within my means. Another great benefit: now I have more of a long-term vision where I can see the consequences of my financial decisions.
A huge problem among young adults, especially in my generation, is that they start thinking that once they fly the coop they should still be able to live like they did when they lived with their parents; they often expect to have a great car, the latest and greatest electronics, a well-furnished condo, the latest fashions – all the things their parents worked their entire lives to be able to afford.
Next thing they know, they are up to their eyeballs in student loans and credit card debt, turning to their parents for a bail-out. And the most incredible thing that I will never understand is THEY DO IT! Some kids' parents bail them out over and over again! Some long-term effects of these terrible spending habits include: (1) a lifetime of debt, (2) strained – and very often failed – marriages, and (3) bankruptcy. You might think that this is just an extreme example, but you would be surprised at how often this happens.
Don't worry, you can help your kids avoid financial disaster. Here are a few principles to begin teaching at a young age:
1. Teach your kids the value of work. They need to know that money comes from work. Kids these days (my generation included) are living in the Age of Entitlement – they believe that they deserve things. When my mom refused to buy video games for my brother, he always used to say, "Mom, most kids' parents buy them like fifty games."(I'm sure none of you have ever heard that one before!) He felt he deserved what other kids had. Kids need to know that they can work to earn what they want.
2. Teach them to set goals. Goals are essentially the underlying principle of a budget. As you teach your kids to set goals to earn enough money for their wants, help them understand that in order to reach their goal, they will need to give up some of the things they want in order to get what they want most. Help them save a certain percentage of their earnings toward one of their goals.
3. Teach kids financial literacy. When age appropriate, get your child a bank account and teach them how to make deposits when they earn money. Help them understand what a savings account, withdrawal, and deposit are. Teach how compounding interest works – if they keep their money in the bank, it grows. When they get older, get them a checking account (and teach how to balance a checkbook), and eventually a credit card.
16.8.10
27.4.10
Education Loans
Sorry for the long hiatus from posting - I've been working on finals, graduating from BYU, and moving back home to Alaska. But I'm finished with school and ready to put time into some good posts!
Just a thought for today - As I've just finished college, here's a little insight on financing an education.
Education loans are relatively easy to come across, but if at all possible, I encourage students to get by the best they can without them. Live frugally and within your means - college is probably the easiest time in your life to live cheaply.
Remember these two points:
1. When you graduate from college and start making some real money (hopefully!), just think how wonderful it would be to NOT OWE YOUR PAYCHECK to anyone! When money comes in, you get to decide what you do with it!
2. When you're in school, remember that if you live NOW like most people WON'T, later you'll live like most people CAN'T.
Just a thought for today - As I've just finished college, here's a little insight on financing an education.
Education loans are relatively easy to come across, but if at all possible, I encourage students to get by the best they can without them. Live frugally and within your means - college is probably the easiest time in your life to live cheaply.
Remember these two points:
1. When you graduate from college and start making some real money (hopefully!), just think how wonderful it would be to NOT OWE YOUR PAYCHECK to anyone! When money comes in, you get to decide what you do with it!
2. When you're in school, remember that if you live NOW like most people WON'T, later you'll live like most people CAN'T.
12.4.10
Wise Counsel on Budgets
Here are more great words of wisdom on budgeting by Marvin J. Ashton:
Some claim that living within a budget takes the fun out of life and is too restrictive. But those who avoid the inconvenience of a budget must suffer the pains of living outside of it. The Church operates within a budget. Successful business functions within a budget. Families free of crushing debt have a budget. Budgeting guidelines encourage better performance and management. (emphasis added, Marvin J. Ashton, "It's No Fun Being Poor," Ensign, September 1982, 72.)
Some claim that living within a budget takes the fun out of life and is too restrictive. But those who avoid the inconvenience of a budget must suffer the pains of living outside of it. The Church operates within a budget. Successful business functions within a budget. Families free of crushing debt have a budget. Budgeting guidelines encourage better performance and management. (emphasis added, Marvin J. Ashton, "It's No Fun Being Poor," Ensign, September 1982, 72.)
8.4.10
Eliminating Debt: Step 2
So now that you have quit diving further into debt by using a strict cash-only budget, it's time to start paying off the debt. And since it's highly unlikely that you'll be able to pay it all off in the first month, step 2 is to prioritize.
How to Prioritize Debt:
Start by making a list of all your creditors, your balance, and the interest rate they are charging you. Example:
Bank of America Visa: $3750; 22.1%
Ford Credit: $8,400; 8%
Gap Credit Card: $475; 18.9%
Dr. Smith: $800; 10%
Then, rank each creditor by interest rate. Set aside a specific amount each month that will go toward debt reduction. With this amount, starting paying off your debts in order of interest rate (in this example, pay off Bank of America first, then Gap, then Dr. Smith, the Ford). The purpose behind this prioritizing is to get rid of the debt that is most expensive to you first. So, in the case of your Bank of America debt, each dollar in your balance is costing you 22.1 cents per year, whereas Ford is only charging you 8 cents a year on a dollar. Get rid of the credit card debt first! (Note: Keep paying your monthly minimum to ALL your debtors as you go through this process to avoid default) Once you pay off one debt, move to the next.
How to Prioritize Debt:
Start by making a list of all your creditors, your balance, and the interest rate they are charging you. Example:
Bank of America Visa: $3750; 22.1%
Ford Credit: $8,400; 8%
Gap Credit Card: $475; 18.9%
Dr. Smith: $800; 10%
Then, rank each creditor by interest rate. Set aside a specific amount each month that will go toward debt reduction. With this amount, starting paying off your debts in order of interest rate (in this example, pay off Bank of America first, then Gap, then Dr. Smith, the Ford). The purpose behind this prioritizing is to get rid of the debt that is most expensive to you first. So, in the case of your Bank of America debt, each dollar in your balance is costing you 22.1 cents per year, whereas Ford is only charging you 8 cents a year on a dollar. Get rid of the credit card debt first! (Note: Keep paying your monthly minimum to ALL your debtors as you go through this process to avoid default) Once you pay off one debt, move to the next.
5.4.10
An Alarming Statistic
In the pamphlet, "One For The Money', Elder Marvin J. Ashton gave these statistics:
"How important are money management and finances in marriage and family affairs? May I respond, “Tremendously.” The American Bar Association has indicated that 89 percent of all divorces can be traced to quarrels and accusations over money. Others have estimated that 75 percent of all divorces result from clashes over finances. Some professional counselors indicate that four out of five families are strapped with serious money problems."
That was 35 years ago, before credit was in abundant supply in our country. I believe that these stats are probably worse now.
"One For The Money" is great for all families can be ordered free through Church Distribution or downloaded here.
"How important are money management and finances in marriage and family affairs? May I respond, “Tremendously.” The American Bar Association has indicated that 89 percent of all divorces can be traced to quarrels and accusations over money. Others have estimated that 75 percent of all divorces result from clashes over finances. Some professional counselors indicate that four out of five families are strapped with serious money problems."
That was 35 years ago, before credit was in abundant supply in our country. I believe that these stats are probably worse now.
"One For The Money" is great for all families can be ordered free through Church Distribution or downloaded here.
1.4.10
The Worst Financial Advice I've Ever Heard: Part 2
Go back about a year and a half ago, just after the stock market took a nose-dive in October 2008.
If you were like most people, your retirement accounts took a nose-dive as well because they were full of stock investments.
Some bad advice I heard: Get out of the stock market now!
Why is this bad advice? It is contrary to a "sleep well" (as Dr. Sudweeks at BYU calls it) buy-and-hold investment strategy. Unless you were all set to retire that year, you definitely should have stayed in the market. In fact, this would have been a perfect time to buy.
A buy-and-hold investment strategy means (1) diversifying the types of investments, and (2) holding for a long time. The reason is that even though the stock market is cyclical and sometimes takes nose-dives and seems risky, over the course of a number of years, it is generally always a positive investment.
Lesson: If you are young, invest in stocks now, but don't monitor your stocks performance everyday - you'll be tempted to trade if they are having a bad day. Hold them! You'll notice that over your lifetime they will likely always grow. If you are closer to retirement, most of your investing should be in more "fixed" investments, such as bonds, from which you always know the payout. In the long-term, you will usually receive a higher payout with stocks; however, they are much more risky in the short-term, which is what you want to avoid when you are nearing retirement.
Let's say you had a stock that normally had a price around $50 per share during the previous summer. And say it went down to $20 in October. Well, by the time Summer of 2009 rolled around, stocks had been steadily climbing back up. So say your stock had gone back up to $35 by summer. It might not have reached its previous price of $50, but your stock is worth $15 more than if you had sold in October '08.
Now let's say you bought the stock on the day it tanked at $20. By the next summer, your stock is now worth $35 - up $15! That's a 75% gain! And if you understand the stock market, you know that if you hold it for a long time, it will likely go well above and beyond that. When it comes to investing, always remember the old adage: Buy Low, Sell High!
If you were like most people, your retirement accounts took a nose-dive as well because they were full of stock investments.
Some bad advice I heard: Get out of the stock market now!
Why is this bad advice? It is contrary to a "sleep well" (as Dr. Sudweeks at BYU calls it) buy-and-hold investment strategy. Unless you were all set to retire that year, you definitely should have stayed in the market. In fact, this would have been a perfect time to buy.
A buy-and-hold investment strategy means (1) diversifying the types of investments, and (2) holding for a long time. The reason is that even though the stock market is cyclical and sometimes takes nose-dives and seems risky, over the course of a number of years, it is generally always a positive investment.
Lesson: If you are young, invest in stocks now, but don't monitor your stocks performance everyday - you'll be tempted to trade if they are having a bad day. Hold them! You'll notice that over your lifetime they will likely always grow. If you are closer to retirement, most of your investing should be in more "fixed" investments, such as bonds, from which you always know the payout. In the long-term, you will usually receive a higher payout with stocks; however, they are much more risky in the short-term, which is what you want to avoid when you are nearing retirement.
Let's say you had a stock that normally had a price around $50 per share during the previous summer. And say it went down to $20 in October. Well, by the time Summer of 2009 rolled around, stocks had been steadily climbing back up. So say your stock had gone back up to $35 by summer. It might not have reached its previous price of $50, but your stock is worth $15 more than if you had sold in October '08.
Now let's say you bought the stock on the day it tanked at $20. By the next summer, your stock is now worth $35 - up $15! That's a 75% gain! And if you understand the stock market, you know that if you hold it for a long time, it will likely go well above and beyond that. When it comes to investing, always remember the old adage: Buy Low, Sell High!
31.3.10
Grab My Button!
Here's how:
First, copy the HTML code in the box below my button in the sidebar to the right. On Blogger, go to the Layout page on your blog, then under the Page Elements tab, click on Add a Gadget on the sidebar. Choose HTML/JavaScript, then paste the button html code in the Content box (you can leave the Title box blank if you want), click Save and ...voila!
First, copy the HTML code in the box below my button in the sidebar to the right. On Blogger, go to the Layout page on your blog, then under the Page Elements tab, click on Add a Gadget on the sidebar. Choose HTML/JavaScript, then paste the button html code in the Content box (you can leave the Title box blank if you want), click Save and ...voila!
30.3.10
Clippin' Coupons
Do you clip coupons? Coupons are a great way to lower your grocery bill every week - you'd be surprised how the savings add up throughout the course of a year.
If you're like me, you clip coupons with every intention of using them, then you forget to take them with you to the store, lose them, or don't feel like sorting through the stack.
Here's a great way to organize your coupons.
Find a binder and some business card or trading card sheet protectors. Then, as you clip your coupons, slid them into the slots so you can see the product. I like this method because you can take the binder with you to the grocery store, then easily take a quick glance through it to find the coupon you need. You might even want to highlight the expiration date so you don't forget to use it in time. You could also get some binder tabs to keep them better organized.
Happy clipping!
If you're like me, you clip coupons with every intention of using them, then you forget to take them with you to the store, lose them, or don't feel like sorting through the stack.
Here's a great way to organize your coupons.
Find a binder and some business card or trading card sheet protectors. Then, as you clip your coupons, slid them into the slots so you can see the product. I like this method because you can take the binder with you to the grocery store, then easily take a quick glance through it to find the coupon you need. You might even want to highlight the expiration date so you don't forget to use it in time. You could also get some binder tabs to keep them better organized.
Happy clipping!
28.3.10
Eliminating Debt: Step 1
So you are in debt. And want out.
If you have decided that you want to make a big leap and get out of debt - good for you! I promise, that decision will be one of the most liberating decisions you will ever make!
Now, I've said before that the process of getting out of debt is usually miserable, but I promise you won't regret it. Ever.
Step One: Stop the bad habits.
Sound easy? You'd be surprised how challenging it can be.
It is absolutely imperative that you stop digging a deeper hole of more debt. Probably the biggest problem with most families is credit cards. If your debt on your credit card (I mean the balance, not the minimum payment) keeps growing and is never being paid off, CUT UP YOUR CARDS! Or at least cut up all but your oldest card. Then, go to a strictly cash budget. Even if you don't have enough money right now to pay off any of the debt on your card, at least you are not going deeper and deeper.
A system that works well for a cash budget is called the Envelope Method. It will help you get on the right path to spending less than you make, which is key to getting and staying out of debt.
1. Create an envelope for each category of spending (house payment, groceries, etc.).
2. When you get paid, get all cash for your check.
3. Divide the cash between the envelopes.
4. Use only the cash that is in each envelope for your expenses. When an envelope is empty, you're done spending any money in that category for the month. Any extras goes directly to paying off debt - No shifting cash between envelopes!
See this article in LDS Living Magazine for a new cash management system called Mvelope. (I haven't had any personal experience with this program, but I have heard good things about it.)
If you have decided that you want to make a big leap and get out of debt - good for you! I promise, that decision will be one of the most liberating decisions you will ever make!
Now, I've said before that the process of getting out of debt is usually miserable, but I promise you won't regret it. Ever.
Step One: Stop the bad habits.
Sound easy? You'd be surprised how challenging it can be.
It is absolutely imperative that you stop digging a deeper hole of more debt. Probably the biggest problem with most families is credit cards. If your debt on your credit card (I mean the balance, not the minimum payment) keeps growing and is never being paid off, CUT UP YOUR CARDS! Or at least cut up all but your oldest card. Then, go to a strictly cash budget. Even if you don't have enough money right now to pay off any of the debt on your card, at least you are not going deeper and deeper.
A system that works well for a cash budget is called the Envelope Method. It will help you get on the right path to spending less than you make, which is key to getting and staying out of debt.
1. Create an envelope for each category of spending (house payment, groceries, etc.).
2. When you get paid, get all cash for your check.
3. Divide the cash between the envelopes.
4. Use only the cash that is in each envelope for your expenses. When an envelope is empty, you're done spending any money in that category for the month. Any extras goes directly to paying off debt - No shifting cash between envelopes!
See this article in LDS Living Magazine for a new cash management system called Mvelope. (I haven't had any personal experience with this program, but I have heard good things about it.)
22.3.10
April 15 = Taxes Due!
If you haven't filed your taxes yet, quit procrastinating! You don't want to be stuck rushing to finish at 11:00 at night on April 15...Plus, you might be pleasantly surprised with a refund :)
If you are not planning to hire an accountant or tax prep agency, I recommend TurboTax. Personally, I've never used any other program (besides the professional program for accountants when I was preparing taxes as an intern at Mikunda Cottrell, & Co., who are great if you are in Alaska and want taxes done professionally). It' s pretty easy to use if you make sure to READ EVERYTHING carefully. I've never had a problem with it. Depending on the complexity of your taxes, you may even be able to file for free, but be careful. Last year I accidentally asked for it to file my UT state return for my on-campus job and didn't realize that they were going to charge me for it. I ended up paying more to file the state return with Turbo Tax than I paid in taxes to Utah! Just don't rush through it and you will be fine.
If it's coming down to the wire and you don't think you will be able to finish in time, DON'T FORGET to file an extension with our good buddies at the IRS.
If you are not planning to hire an accountant or tax prep agency, I recommend TurboTax. Personally, I've never used any other program (besides the professional program for accountants when I was preparing taxes as an intern at Mikunda Cottrell, & Co., who are great if you are in Alaska and want taxes done professionally). It' s pretty easy to use if you make sure to READ EVERYTHING carefully. I've never had a problem with it. Depending on the complexity of your taxes, you may even be able to file for free, but be careful. Last year I accidentally asked for it to file my UT state return for my on-campus job and didn't realize that they were going to charge me for it. I ended up paying more to file the state return with Turbo Tax than I paid in taxes to Utah! Just don't rush through it and you will be fine.
If it's coming down to the wire and you don't think you will be able to finish in time, DON'T FORGET to file an extension with our good buddies at the IRS.
18.3.10
Good Debt v. Bad Debt
I study Business Finance at BYU. Just like a business entity, before taking on debt your family should decide whether that debt is good or bad.
President Hinckley counseled to ONLY go into debt, if necessary, for two things: (1) a modest home, (2) education. I believe his counsel is not just a "nice idea;" it is a commandment from the Lord for our temporal salvation.
Good debt--Businesses usually try to have at least a little bit of debt as good "leverage". The idea behind leveraging up is that they are taking on projects that will eventually help them grow their revenues, and not that they take on debt to buy fancy desks or office art. The same idea should go for your personal financial life.
Pretty much the only good debt for personal finances is education. Why? Because (usually) with more education, you are able to get a better job, get paid better, etc. Education is one of the most important investments you will ever make, and not just in a monetary sense. Try to get by as much as you can without it, but if you do need some education debt, be sure to have a sound plan to pay it off quickly to avoid the interest costs and get it off your "books".
Your home might also be good debt. For most people, buying a home outright is somewhat impractical. So long as you have a home that is modest for your needs, your debt is probably fine. Keep in mind that bigger houses require more energy, more repairs, more maintenance, etc. So if you go take on extra debt in order to buy a bigger house, remember that you will also have those added expenses in addition to a higher mortgage and/or interest payments.
Bad debt - Wow. I could go on and on about this one. The list is long: car loans, furniture loans, credit card debt, etc. Pretty much all consumer debt is something to avoid like the plague. If you let yourself get into too deep into it, the process to get out is miserable. Best advice: avoid it in the first place.
Car Loans - Discouraged by financial planners because they rapidly lose value. So not only are you losing cash by paying a ton of interest with your car payment, but your personal net value (total assets minus total liabilities) is decreasing quickly as the car loses value. Be cautious. When shopping for a car, ALWAYS distinguish between WANTS and NEEDS.
Credit Card debt - Big no no. Wherever possible, pay off your credit card balance in full every month. Interest rates are high because credit card companies know that it their cards make it really easy for consumers to get what they want, when they want it. It helps me to just pretend that my credit card is like a checking account and I can only spend the money that I really have in my bank account. Exercise self control.
If you are already in debt, stay tuned and I'll give tips on how to get out.
President Hinckley counseled to ONLY go into debt, if necessary, for two things: (1) a modest home, (2) education. I believe his counsel is not just a "nice idea;" it is a commandment from the Lord for our temporal salvation.
Good debt--Businesses usually try to have at least a little bit of debt as good "leverage". The idea behind leveraging up is that they are taking on projects that will eventually help them grow their revenues, and not that they take on debt to buy fancy desks or office art. The same idea should go for your personal financial life.
Pretty much the only good debt for personal finances is education. Why? Because (usually) with more education, you are able to get a better job, get paid better, etc. Education is one of the most important investments you will ever make, and not just in a monetary sense. Try to get by as much as you can without it, but if you do need some education debt, be sure to have a sound plan to pay it off quickly to avoid the interest costs and get it off your "books".
Your home might also be good debt. For most people, buying a home outright is somewhat impractical. So long as you have a home that is modest for your needs, your debt is probably fine. Keep in mind that bigger houses require more energy, more repairs, more maintenance, etc. So if you go take on extra debt in order to buy a bigger house, remember that you will also have those added expenses in addition to a higher mortgage and/or interest payments.
Bad debt - Wow. I could go on and on about this one. The list is long: car loans, furniture loans, credit card debt, etc. Pretty much all consumer debt is something to avoid like the plague. If you let yourself get into too deep into it, the process to get out is miserable. Best advice: avoid it in the first place.
Car Loans - Discouraged by financial planners because they rapidly lose value. So not only are you losing cash by paying a ton of interest with your car payment, but your personal net value (total assets minus total liabilities) is decreasing quickly as the car loses value. Be cautious. When shopping for a car, ALWAYS distinguish between WANTS and NEEDS.
Credit Card debt - Big no no. Wherever possible, pay off your credit card balance in full every month. Interest rates are high because credit card companies know that it their cards make it really easy for consumers to get what they want, when they want it. It helps me to just pretend that my credit card is like a checking account and I can only spend the money that I really have in my bank account. Exercise self control.
If you are already in debt, stay tuned and I'll give tips on how to get out.
11.3.10
Savings, Step 1: Emergency Fund
As you get your savings started, it turns out there is a method to the order in which you should save.
The first step is the Emergency Fund. An emergency fund is for...EMERGENCIES! Don't touch it for anything else! That would include unexpected medical procedures, loss of a job, etc. Use self control.
How much is enough? Most experts recommend estimating your average monthly expenses and then multiplying that by six to twelve months. Some also say that you should save 6 to12 months of your monthly income rather than expenses. Whichever you choose to do, the idea is that you will have plenty to get by should an emergency occur and your family will be much less likely to experience financial distress.
How to do it? Each month, when you are saving 20% of your income, put that 20% into an emergency fund. Use an account that is liquid (meaning it can be easily converted to cash) and low-risk -- probably a savings or money market bank account, NOT an investment account as the balance could decrease. Keep doing this until you have 6 to 12 months in savings and then you can go on to the next step in savings, which I'll tell you about later.
P67D34BVCUU5
The first step is the Emergency Fund. An emergency fund is for...EMERGENCIES! Don't touch it for anything else! That would include unexpected medical procedures, loss of a job, etc. Use self control.
How much is enough? Most experts recommend estimating your average monthly expenses and then multiplying that by six to twelve months. Some also say that you should save 6 to12 months of your monthly income rather than expenses. Whichever you choose to do, the idea is that you will have plenty to get by should an emergency occur and your family will be much less likely to experience financial distress.
How to do it? Each month, when you are saving 20% of your income, put that 20% into an emergency fund. Use an account that is liquid (meaning it can be easily converted to cash) and low-risk -- probably a savings or money market bank account, NOT an investment account as the balance could decrease. Keep doing this until you have 6 to 12 months in savings and then you can go on to the next step in savings, which I'll tell you about later.
P67D34BVCUU5
18.2.10
How To Save $6,282 in a year!
How can I cut back on spending? The small things add up quickly! Here are some ideas I shared with some BYU students:
Plan meals before going grocery shopping – save $260 (by not wasting $5 of food a week)!
Bake homemade bread – save $104 a year ($2 a week)!
Walk to school – save $360 ($30 a month) a year!
Wait for movies to come to the Dollar Theater or Redbox--if you see two movies a month, you save $228 a year!
Go jogging and/or use BYU’s workout facilities (free!) instead of gym memberships – save $840 (for two memberships at $35 a month)
Cook dinner together as a date instead of going out to eat -- save $780 a year ($15 a week)!
Organize coupons in business card sheet protectors in a binder. Take binder with you on shopping trips. – save $260 a year ($5 a week)!
Be conscious about utility usage. Reducing your bill by $10 saves $120 a year!
Replace tap water with a $1 bottled water, juice, or soda (or buy a Brita filter) – save $730 each year!
Pack a lunch (for $1) instead of going for fast food (for $6 per person) – save $2600 a year!
Search Craigslist.org or DI for gently used items such as sporting goods, vehicles, furniture, baby stuff
Shop consignment (Plato’s closet)
For more ways to save, go through your spending habits line by line and look for any way you can make adjustments.
13.2.10
Build A Better Budget : Part 3
I just realized that I forgot about a very important part of creating your budget--the structure!
1st -- Pay the Lord. 10%
2nd -- Pay yourself (personal goals). 15-20% is recommended. We'll talk more about this later.
3rd -- Pay others (expenses).
4th -- Apply leftovers to your personal goals.
If you can learn to use this structure, you are twice as likely to be able to accomplish your goals because you get two chances to put your money towards those goals. Many people set up a budget like this:
Income - Pay the Lord - Pay others - Pay yourself if there's anything left over.
Can you see what's wrong with this method? If you ALWAYS pay yourself before you pay others, you are guaranteed to meet your personal goals eventually. If you pay others first, you likely won't have anything left for yourself. If you're still skeptical, here's what L. Tom Perry had to say about this:
"After paying your tithing of 10 percent to the Lord, you pay yourself a predetermined amount directly into savings. That leaves you will a balance of your income to budget for taxes, food, clothing, shelter, transportation, etc. It is amazing to me that so many people work all of their lives for the grocer, the landlord, the power company, the automobile salesman, and the bank, and yet think so little of their own efforts that they pay themselves nothing."
CHALLENGE: Always pay yourself 20%.
1st -- Pay the Lord. 10%
2nd -- Pay yourself (personal goals). 15-20% is recommended. We'll talk more about this later.
3rd -- Pay others (expenses).
4th -- Apply leftovers to your personal goals.
If you can learn to use this structure, you are twice as likely to be able to accomplish your goals because you get two chances to put your money towards those goals. Many people set up a budget like this:
Income - Pay the Lord - Pay others - Pay yourself if there's anything left over.
Can you see what's wrong with this method? If you ALWAYS pay yourself before you pay others, you are guaranteed to meet your personal goals eventually. If you pay others first, you likely won't have anything left for yourself. If you're still skeptical, here's what L. Tom Perry had to say about this:
"After paying your tithing of 10 percent to the Lord, you pay yourself a predetermined amount directly into savings. That leaves you will a balance of your income to budget for taxes, food, clothing, shelter, transportation, etc. It is amazing to me that so many people work all of their lives for the grocer, the landlord, the power company, the automobile salesman, and the bank, and yet think so little of their own efforts that they pay themselves nothing."
CHALLENGE: Always pay yourself 20%.
9.2.10
The Worst Financial Advice I've Ever Heard: Part 1
Last Christmas season, I was watching the Today show and they were talking about how to get the best deals on Christmas shopping.
The guest "shopper" said that when a store offers, say, 15% off your purchase for opening a credit card, you should TAKE IT so you can get the great deal!
I nearly fell out of my chair at this TERRIBLE advice!!! Why? First of all, the more credit cards you have, the more you set yourself up for identity theft. Second, the average consumer spends more if they have more credit available to them, which wouldn't be such a bad thing if it weren't for the fact that the average consumer doesn't always have good self-discipline when it comes to spending habits. Third, it's difficult to keep track of your spending when it's spread over many different accounts.
But the biggest reason -- this Today show guest apparently does NOT understand credit. Here is how a credit score is determined:
Moral of the story: If you can't live without it, you're probably okay having one or two credit cards for your favorite stores, but don't let the appeal of a sale on your purchase tempt you into applying for a credit card. Your credit and social security number MUST be protected, so be careful handing it out loosely.
The guest "shopper" said that when a store offers, say, 15% off your purchase for opening a credit card, you should TAKE IT so you can get the great deal!
I nearly fell out of my chair at this TERRIBLE advice!!! Why? First of all, the more credit cards you have, the more you set yourself up for identity theft. Second, the average consumer spends more if they have more credit available to them, which wouldn't be such a bad thing if it weren't for the fact that the average consumer doesn't always have good self-discipline when it comes to spending habits. Third, it's difficult to keep track of your spending when it's spread over many different accounts.
But the biggest reason -- this Today show guest apparently does NOT understand credit. Here is how a credit score is determined:
- 35% -- Your payment history: Do you pay your bills on time?
- 30% -- Total amount owed as a percent of limit: You want to stay as far away from your credit limit as possible. Keep your balance low and request credit limit increases.
- 15% -- Credit history: How long have you had your oldest account? (Hint: always keep your oldest credit account open, even if you don't use it)
- 10% -- Application history: Every time you apply for a new credit card (or any other type of credit, for that matter), this part of your score hurts.
- 10% -- Credit Mix: Do you spread your credit over different types of accounts (i.e. Credit cards, mortgage, line of credit, car loan).
Moral of the story: If you can't live without it, you're probably okay having one or two credit cards for your favorite stores, but don't let the appeal of a sale on your purchase tempt you into applying for a credit card. Your credit and social security number MUST be protected, so be careful handing it out loosely.
5.2.10
Build A Better Budget: Part 2
Now that you've tracked your spending, it's time to write your budget.
CHALLENGE: Write your budget and stick to it for a month.
Keep these guidelines in mind:
1. Look at what you spent last month as a guide for this month's planning.
2. Distinguish between needs and wants (discretionary spending).
3. For the first month, it might be easier not to alter your spending too much from last month -- this could frustrate you into completely abandoning your budget if you fail to meet your new spending limits.
4. As you meet with your spouse each week to review your finances, make sure that your spending for the week has been consistent with your budget.
Following a budget can be a life-improving habit for anyone! But like any habit, budgeting takes time to be habit-forming. Don't be hard on yourself if you find that you grossly underestimated expenses in a few categories.You'll find yourself improving each month.
Like I've said before, if you can follow a budget, you are much more likely to get what you REALLY want most.
CHALLENGE: Write your budget and stick to it for a month.
Keep these guidelines in mind:
1. Look at what you spent last month as a guide for this month's planning.
2. Distinguish between needs and wants (discretionary spending).
3. For the first month, it might be easier not to alter your spending too much from last month -- this could frustrate you into completely abandoning your budget if you fail to meet your new spending limits.
4. As you meet with your spouse each week to review your finances, make sure that your spending for the week has been consistent with your budget.
Following a budget can be a life-improving habit for anyone! But like any habit, budgeting takes time to be habit-forming. Don't be hard on yourself if you find that you grossly underestimated expenses in a few categories.You'll find yourself improving each month.
Like I've said before, if you can follow a budget, you are much more likely to get what you REALLY want most.
26.1.10
The FUN Part!
Before you get too much in depth in financial planning, it's time for the BEST part--writing your goals!
I know what you're thinking: "are you kidding me?! FUN?!?" Trust me.
This is when you can write down all the hopes and dreams you have for your life. Do you want, say, a big home on a five-acre lot? Write it down! Or maybe you aspire to own a Land Rover? Write that down too! How about serving a mission in your older years? Or taking a family trip to Europe? How about read a new book every month? These are all things that you should write down as a family.
CHALLENGE: WRITE A LIST OF FAMILY GOALS.
Here's how:
- Choose your categories. Examples: Education, travel, hobbies, health, family, church, home, recreation, etc.
- Write short-, medium-, and long-term goals within each category. Short-term = One year or less. Medium-term = One to Ten years. Long-term = Ten or more years.
- When writing goals, remember to make them SMART:
- Specific. Not specific: "I want to get in shape." Specific: "I want to run the Boston Marathon this summer."
- Measurable. It's harder to achieve a goal if you can't measure it and track your progress.
- Achievable. I'm not saying don't dream big, but don't write down "buy a leer jet" unless you really think it's something that you can actually do someday.
- Realistic. Do you dream of flying to the moon? Nice dream, but as it looks now, it might not be a feasible goal. If some of your goals aren't realistic, you'll have a hard time taking yourself seriously when it comes to other, more feasible goals.
- Time-bound. You're much more likely to accomplish a goal if you set a specific date by which you want to have it accomplished.
- Review your goals often. Even if you go through all the trouble of writing down your goals, you likely wont' accomplish them if you don't review them often. Perhaps in your weekly finance meeting with your spouse, the two of you can discuss your progress toward your goals.
Why is goal-setting important when we're talking financial management?
If you already know what you want to get out of life (i.e. goals), it's much easier to cut out anything that slows you down.
21.1.10
Weekly Planning Sessions
In The Millionaire Next Door, the author says that people who become wealthy allocate twice the number of hours per week to planning their finances as those who do not become wealthy. The way they allocate their time is consistent with their intentions of enhancing their net worth. If you put adequate time into your finances each week, you will be come more self-reliant!
CHALLENGE: Have a scheduled weekly financial planning meeting.
Have it at the same time each week so that you always remember. Your financial planning meeting should include your spouse (even if you are the family "budgeteer", it's important that your spouse know the plan and how you want to accomplish it. More on marriage and money later).
Things you might include in your meeting:
- What have we spent money on this week? Is it consistent with our budget?
- Have we paid tithing this week? Have we paid ourselves?
- Do we have any outstanding bills that need to be paid?
- Are we working toward paying off debt?
- Are we on track to meet our goals?
- How is our retirement savings going (which you should start in your 20's, by the way!)
- Is our investment framework consistent with our investment goals?
- Are our cash accounts balanced?
- Has anything come up that would require an adjustment to our budget?
15.1.10
Donations For Haiti
(I posted this on my personal blog, but thought it would be appropriate here, too.)
The LDS Humanitarian Services is one of the best ways to donate, in my opinion, because 100% of your money goes directly to the cause (which is very rare, even among the most popular charities, like American Red Cross). Here's a link to make a donation: LDS Humanitarian Services Emergency Response
This link goes to the LDS Church Newsroom, where the Humanitarian Services efforts are posted.
Most charities keep some of your money to pay its employees, fundraising, and administration costs. If you want to use any other charity, check the organization on www.charitynavigator.com to find out what they do with your money.
The LDS Humanitarian Services is one of the best ways to donate, in my opinion, because 100% of your money goes directly to the cause (which is very rare, even among the most popular charities, like American Red Cross). Here's a link to make a donation: LDS Humanitarian Services Emergency Response
This link goes to the LDS Church Newsroom, where the Humanitarian Services efforts are posted.
Most charities keep some of your money to pay its employees, fundraising, and administration costs. If you want to use any other charity, check the organization on www.charitynavigator.com to find out what they do with your money.
12.1.10
Build A Better Budget: Part 1
Spencer W. Kimball: "EVERY family should have a budget."
I'd say his advice would be good to follow, wouldn't you?
Starting a budget can seem daunting, but it need not be. Here's how to get yourself started.
CHALLENGE: Track your expenses for a month.
You need to know where all your money is going. I think the best way to do this is to use a credit card for ALL my transactions. That way, you can see EVERY transaction online or in your statement. I also like to use Quicken because you can automatically download all your transactions directly from the web, then categorize each transaction. At the end of the month, Quicken will give you a report of the total you spent in each category. Another good program is Money.
The problem with using cash is that you have to keep track of receipts. Also, paying in cash or check is becoming less practical in our world of online payments, automatic bill-pay, etc.
Come February, I'll help you start creating your budget. Good luck!
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