Financial Goals

Why Financial Envy is a Waste of Time (Update)

You see this happen all the time. You are in a situation with other people and someone mentions his nice vacation plans. What is the first thing that pops into your head? Are you genuinely happy for him or do you automatically think about how much he’s spending (that includes jealous thoughts of the “he must be making more money than me” kind). You know what I mean.

But in the past few years, I have learned to stop comparing my financial situation with friends and family family (I’m not perfect but I am improving). I have come to realize that I am projecting my values and beliefs onto other people. What I think or believe about another person’s finances has no basis in reality. I am not in their shoes and don’t know what their situation is.

People spend money on things that are important to them. I know that some people may think I travel a lot. When one vacation ends, I am already planning the next. I personally always want to have a trip to look forward to. You might be thinking thoughts like “how can she afford it?” or “where does she get the money to travel?” You may even be envious. But you won’t know exactly how I make my little dreams come true because personal finances are just that – personal. .

Although in a few weeks,, I will shed some light on how we travel.

The other side of comparing your finances is the presumption that you are somehow morally better or worse than others. Grim tales of credit card debt are all over the news, often mixed with stories of foreclosure and homelessness. You may feel good about yourself because your debt is lower, but do you know why the person on the news has the debt? Was it really insane overspending, or was it a medical emergency or a layoff. Maybe the credit cards were used as a last resort to pay bills?

I have heard it said that “to compare is to despair.” This thought process of judging others is detrimental to you. You have no idea whether another household spends more money than they have, is in debt to their eyeballs, or has planned ahead to achieve their desires. You don’t know how much they earn or how much they give to charity. It is much easier to judge someone else than look inward at your own spending habits.

In the budgeting process, people track their daily expenses to see how much they spend and in what category. This can be a great exercise. Once you see where your money is going, you can make life-changing decisions. Where do you want to spend? What do you want to save for?

There are no right or wrong answers. There are only personal choices. Maybe you choose electronics over vacations. Maybe you choose decorating and entertaining over both. Maybe you choose to give your children spectacular holidays or birthdays over everything else. These are the kind of choices your neighbors, friends and family members made when they did something that impressed you and made you envious. They simply chose to spend their money in a different way than you.

So the next time you see someone order an expensive meal at a five star restaurant, purchasing the latest greatest electronics, or buying a designer outfit, don’t judge them. Not only is the thought process destructive, but it is a total waste of your time.

Creative Ways to Get Paid

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Have you reduced your expenses to the bone, yet it’s still not enough? Maybe you just need to make more money? Ha ha. Who am I kidding, right? You can’t commit to a second job with your responsibilities and it’s not like you can ask for a raise in this economy. Hear me out, because you don’t have to get a part time job to pad your budget

Here are some ideas that might help your cash flow:

Sell things you don’t need or want online. I’ve used CraigsList.org to sell lots of things – everything from toothbrush heads to a car! Use EBay.com for collectibles. Newspaper ads really cut into the cost of selling things you don’t need, but the internet has made it profitable.

Hold a tag, garage or yard sale. You can go it alone or talk your neighbors into holding a block sale – that way you can share the cost of advertising. If you live in an apartment or condo, or simply don’t want strangers coming to your home, see if your town hosts a yearly “flea market”. To sell at our town’s flea market, you just have to pay a fee for the space. It’s a big popular event and attracts paying customers. If you have quality items, you’ll make your fee back, and pull in a good profit.

Try a consignment shop if your items are valuable. If you’ve got something that’s very gently used and still has value, this is the way to go. I have personally consigned clothing, and other small merchandise, and have been happy with the fair price received for my treasured items.

Have a great skill, or ready hands, but can’t commit to a second job? Check out TaskRabbit.com. This website connects people who need things done with those who are willing to do them. A woman I know grew up working a big yard and garden with her mother. All that drudgery paid off. Now she rents herself out for a day on weekends planting gardens. It’s the kind of second job that she can fit in her schedule because she only takes the extra work when it’s convenient. The plus side? She enjoys getting paid to spend time outside doing something she’s good at. As with anything do you research before moving forward.

Would you like to rent out space in your home? Airbnb.com “connects people who have space to spare with those who are looking for a place to stay.” The name means “Air Bed and Breakfast” but you don’t have to convert your home into a permanent hotel to make money. The upside for travelers is an authentic stay in a real neighborhood. It’s also great for business people looking to relocate because they want to get to know a neighborhood before they commit. There are restrictions to being a host. You’ll need to check the website to see if you qualify. As with anything do you research before letting someone in your home.

Take a survey or participate in a focus group. I’ve done it. Marketing companies actually gave me money to give them my opinion. I like that!

Odd jobs can make you extra cash. I’ve paid people cash to help with a tag sale, move furniture, haul things for me in their truck, walk the dog, pet sit, and run errands. What can you offer? Get your name out there as an odd-job doer. Like with TaskRabbit, you can accept work on your terms and turn it down when you don’t want it.

As with anything, watch for scams and try to stay with legitimate companies. Do your research before, and choose accordingly, based on your situation and needs.

How do you get extra money when you need some? Let me know.

Keep Your Savings Accounts Away from the ATM

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One thing I’ve learned over the years is not to have my savings account linked to my debit / ATM card. If I want to make an impulse purchase, I have to put some thought into it and move money either online or at the bank. This delay gives me time to talk myself out of wasting my savings on something I don’t really need.

An added benefit to keeping your accounts separate, is that if your debit card is stolen, the thief cannot access the money in your savings.

Transfer to Savings Automatically

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Have you struggled to save money because there never seems to be anything left over? Big surprise! We tend to spend the money we have in front of us. Getting a raise never seems to help, because that money disappears, too. There’s always something we think we need right now.

The best way to grow the money in your savings account is by setting up an automatic deposit from your paycheck. That way you never see it to spend it. If your company doesn’t offer this, that’s not a problem. Have an amount set up to be transferred automatically from your checking account to savings on a regular basis. The benefits here are that you are saving without any effort on your part and the money isn’t in your checking account to tempt you.

Make Payments towards Your Retirement

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Making payments towards retirement doesn’t have to be difficult. Remember what you’re saving money for. You want to retire some day, so you can enjoy some golf and vacations when you get older without having to work.

There are few ways to fund your accounts. If you receive large bonuses, you could simply deposit them into your IRA or 401K and just live within your regular paycheck. That won’t be possible for everyone. Most of us calculate the amount to pay by dividing our maximum contribution amount by the number of pay periods per year. Basically, we’re taking the money out of our paychecks.

The key is to act like it’s not yours to spend. This is your fun money, so you can take the grandkids to Disneyworld and finally take the European cruise, without having to worry about where you’re going to live or how.

The Biggest Savings

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The Biggest Savings

In honor of Financial Literacy Month, I want to show you the biggest savings we’ve come across in our family. Any guesses?

It’s lunch! We used to eat out for lunch every day. Who has time to make lunch before work, right? But we gradually learned that we could save a lot of cash for things we really want if we could just get used to bringing our own food.

Lunch shouldn’t cost that much. It’s not dinner at a nice restaurant – it’s a sandwich at the cafeteria or a McD’s. But, it does add up. Let’s say you spend $10 a day for food at work or school, combining lunch, a vending machine snack, and coffee, bottled water or pop. It’s just a few little items throughout the day, but let me show you the numbers.

$10 x 5 days a week = $50
$50 x 50 weeks a year = $5,000
$25,000 is what it will cost you for 5 years

And that’s for one person. If there are two of you in the household, then you can double the numbers. I bet you can find something better to do with $5,000 or $10,000 a year.

I used to have all the excuses – not enough time to make my lunch, it’s too boring, etc. Well times have changed.

Part of that change was accepting that we like different types of lunch foods. He’s a sandwich person and makes his lunch the night before. Sandwiches keep well in the fridge overnight. That doesn’t work for me. I like leftovers, soups and salads. I might make extra for dinner so I can have leftovers for lunch the next day. Or, make soup on a Sunday, then have soup for a few days. I like combining my leftovers with salad greens to make a fancy salad. My lunches need to be freshly made in the morning. Because I have the ingredients, and a plan, it takes less than 5 minutes.

What about beverages? My husband is a coffee drinker. He makes his coffee the night before with a programmable coffee pot. The money savings made the pot a really good investment. I’m a water drinker, so I use a washable metal water bottle. I just refill and put it back in the fridge when I get home from work, so it’s ready to go in the morning.

Just by taking these little steps, we are able to save money and use it for other purposes. How about you? Are you ready to try bringing your lunch to work? What system would work for you?

Shop around before opening an IRA

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Opening your own IRA is a great idea, but do your research first.

Make a few appointments to interview banks and investment companies. What are their fees? What types of investments do they offer? There are many options to choose from.

If Your Company Doesn’t Offer a 401K, Get an IRA

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If your company doesn’t have a retirement plan, then you should start an IRA or a ROTH IRA.

An IRA account is for saving pre-tax money to be able to withdraw later in life when your tax rate should be lower.
A ROTH IRA is the opposite. You contribute after tax money now and withdraw tax free at retirement.

Talk with your investment person or tax preparer to determine what is best for you. Discuss the income limits and the maximum contribution amounts you can contribute based on your age. Have this discussion today.

If Work Offers Retirement Savings, Do it

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I can hear you saying… “I don’t have enough money to live today, so how can I think about saving for retirement?” Yes, that might be true, but look at it another way… you will get older and you will want to retire some day. If you don’t start now you’ll have to work the rest of your life.

If you work for a company that offers a 401K or 403B, take advantage of it. If your company offers you matching funds and you haven’t taken advantage of it, then you are turning down FREE money. As an added benefit, the money you contribute is tax free today, and any growth in your account is not taxed until you withdraw it.

Talk to your company benefits person and start an account as soon as possible. If you need to wait for open enrollment, mark that date in your calendar.

If you already have a retirement savings with your company, increase the amount you contribute so you’ll have more later when you really need it.

Saving for Emergencies

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Emergency savings are for when your car breaks down. It’s for an unexpected medical expenses. It’s for covering your bills if you’re between jobs. It’s for unexpected home repairs. An emergency is something that must be taken care of right now or you won’t be able to get to work, have a place to live, or when you might have to choose between medical bills and utilities.

What it’s not: a savings account for things you think you need. No matter how much you think need to book a cruise, a nice vacation is a want. You will survive if you vacation at home with trips to the local beach. You will also survive without a smart phone, or cable TV, or a Kindle. You get the idea.

Once you have an emergency savings equal to one year of your expenses (yes, I said one year), then you can start saving for the fun things you want in life. Today, plan on how you are going to start saving for emergencies. Set up a regular savings amount from your pay that automatically goes to this account.