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Ignore Your Budget

Finance

IMG_1144
Image by Boz Bros via Flickr

For the first year of our journey out of debt, we had a strict budget, with all of our discretionary money spent out of an envelope system.  We had an envelope for groceries, one for discretionary spending, one for clothes and one for baby crap.   At the beginning of the month, we’d divide the money into the envelopes according to our budget spreadsheet.  If we used a card for anything, we’d take a matching about of money out of the appropriate envelope and put it in a box to get reconciled the next month.

Ugh. Almost 2 years later, it has turned into too much work and too much nagging about everything either of us put on a card.

We decided to simplify the system a few months ago.   Now, we still have a budget.  It’s even a zero-based budget, but we ignore it.  We only look at it if something changes for the worse.  If something changes for the better, the extra money just gets automatically rolled into our debt snowball, so there’s no need to worry about updating the spreadsheet.

Instead of envelopes, we kind of eyeball it.   We budget $450 per month for groceries, so we aim to spend $100 on our weekly grocery run.  That leaves some room for losing track of how much we are putting in the cart, or a last minute addition to the list.  It also leaves room for our secondary grocery trip to buy bread and milk later in the week.  We do go through a lot of milk at my house.  We budget $55 per month for diapers, but the deal we are currently getting with Amazon Mom is only costing us $30.79 for 6 weeks of diapers.  We ignore the difference.

This—and our heavily automated bill pay and savings—lets us keep our finances on track, without stressing over every dollar or fighting over every little thing that comes home unplanned.   I used to fire up Quicken and balance the checkbook every week.  Now, that happens at the beginning of the month, usually.  If I forget, it doesn’t matter.  At the beginning of February, I balanced the checkbook for the first time in almost two months and we never came close to exercising our overdraft protection account.  In fact, we had some extra, so that got sent directly to our debt.

Overall, it’s been good to test out a new system.  We have almost no financial stress and managing our money takes about a couple of hours per month instead of per week.  It’s all win.

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Money Problems – Day 3: What’s Coming In?

Finance

Husquarna automower, taken by me 2007-06-02
Image via Wikipedia

Today, I continuing the  series, Money Problems: 30 Days to Perfect Finances.   The series will consist of 30 things you can do in one setting to perfect your finances.  It’s not a system to magically make your debt disappear.  Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.

I’m not running the series in 30 consecutive days.  That’s not my schedule.  Also, I think that talking about the same thing for 30 days straight will bore both of us.   Instead, it will run roughly once a week.  To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.

This is day 3 and today, you are going to take a look at your income.

We are only interested your take-home pay, because that is what you have to base a budget on.  If you base your budget on your gross pay, you’re going to be in trouble when you try to spend the roughly 35% of your check that gets taken for taxes and benefits.

Income is a pretty straight-forward topic.  It is—simply—how much money you make in a month.  If you are like most people, the easiest way to tell how much money you make is to look at your last paycheck.  Then, multiply it by the number of pay periods in a year and divide the total by 12.

Here’s the formula:  Cash x Yearly Pay Periods / 12.  Yay, math!

If you get paid every 2 weeks, multiply your take-home pay by 26, then divide by 12 to figure your monthly pay.   For example, if you make $1000 every two weeks, your annual take-home pay is $26,000.  Divide that by 12 to get your monthly pay of $2166.66.  If you get paid semi-monthly, you’ll take that same $1000 x 24 / 12, for a total of $2000 per month.

Now you know how much you make each month.  Woo!

Is it enough?  Who knows?  We’ll get into that later.  In the meantime, spend some time thinking about ways you can make more money.  Do you have a talent or a hobby that you can turn into cash?

  • If you’re a craftsy type, make stuff and sell it on eBay or Etsy.
  • If you’re a writer, start a blog, sell articles on oDesk, or start writing for paid article directories.  Squidoo has a revenue sharing plan for your articles.
  • Facebook maven?  Start making Pages for companies.  They will pay for it.
  • Are you mechanically inclined?  Watch your local free market sites for lawn mowers and snowblowers that don’t run.  You can fix them up and sell them.
  • If you’re a clean freak, start a home-cleaning service on evenings and weekends.

There are always ways to make some extra money, if you are willing.  Sit down with a friend or loved one and brainstorm what you can do.  Write down anything you can do, you enjoy, or you are good at.  Remember, there are no stupid ideas when you are brainstorming.  The bad ideas will get filtered out later.

How could you make some (more) side cash?

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I’d Tap That: Making Life Difficult for Government Spying

Life

4th Amendment

 

Skip to the bottom if you’re familiar with PRISM and don’t want to hear any political talk and rampant violations of our Constitutional rights, but still want to protect your privacy.

For those of you who haven’t been paying attention, the PRISM program is an NSA program to monitor electronic activity.

Lots of electronic activity.

The companies identified to be working with the NSA in this grand overreach include AOL, Apple, Facebook, Google, Microsoft, PalTalk, Skype, Yahoo! and YouTube.  For most people, that is the definition of “the internet”.  If you’re doing it online, the NSA is–or could be, at their leisure–watching.

This isn’t a crazy conspiracy theory.  This is happening, and the government has admitted it.  In fact, when this broke, the executive branch’s response was along the lines of, “Don’t worry, we’ll find the guy who leaked this information.”

On top of that, the government has been demanding phone records from at least Verizon on a daily basis.

In addition, the Justice Department was just busted wiretapping Associated Press phones.

Seriously, if you put this in fiction, nobody would buy it, because it’s ridiculous in the land of the free.

As far as the people who say I’ve got nothing to worry about if I’m not doing anything wrong: shut up.  You can speak again when you give me your email passwords, bank records, and let me install a toilet cam in your house.  What are you trying to hide?

Seriously, there is such a mess of non-legislative administrative regulations that are considered felonies that the best estimate is that most people commit three felonies a day, without realizing it.

  • Catch your kid with a joint and neglect to call the cops?  Welcome to the federal penitentiary.
  • Use one of those pill planner things to sort prescription meds for your half-senile grandmother?  In some states, that’s a felony.

When we live in a system with so many rules that have never been voted on and our legal system refuses to consider legitimate ignorance of the law to be a defense and we have a collection of secret laws that are a felony to disclose or violate, government spying gets far more dangerous.

  • Many TSA guidelines are secret.
  • The Banking Secrecy Act of 1970 has a number of secret provisions.
  • FISA.

The Foreign Intelligence Surveillance Act of 1978(FISA) is the law the NSA is using to justify all of these data requests.  The law, that we all must obey, is being overseen by a small subcommittee in Congress, and the FISA courts are just a small subset of the judges.   The judges are signing warrants allowing the wiretaps and massive surveillance, but that is clearly unconstitutional and, hence, illegal.

The text of the Fourth Amendment to the Constitution, the supreme law of the United States is: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

Any warrant that cannot name a place to be searched is illegal.

Any warrant that cannot describe the person to be monitored is illegal.

Any warrant that is not backed by probable cause is illegal.

Tell me how “I want to watch what everyone is saying on Facebook and seize all of the data” meets any of those criteria.

Bueller?

Wiretapping the AP is a serious violation of the First Amendment, too.  “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”

“Congress shall make no law…abridging the freedom of speech, or of the press..and to petition the Government for a redress of grievances.”

Monitoring the press in case somebody breaks a story the government doesn’t want broken is crap.

How can we petition the government for redress of grievances that they call a felony if the company discloses the violation to us?  It’s self-serving circular crap.

When you throw the IRS harassing charities working for the “wrong” politics, you start to pine for the good old days of Nixon-level fair play and integrity.

To be fair, FISA got nasty with the Patriot Act, which was an abomination enacted by a different political party.  Hey, Washington, next time try to remember that your laws will someday be administered by your political enemies, k?  (NSA: I trust you’ll pass the message for me?)

Political talk is over.  How do we stop the government snooping?

There are four main pieces to discuss, based on the scandalous Constitutional violations reported recently.

1.  Social media monitoring.   There’s nothing to this.  If you post things on Facebook, the government sees it and knows it’s you.  Don’t post anything you don’t want broadcast to the police, your grandmother, and your priest.

2.  Internet browsing.  There is very little that is secure on the internet.   The government can subpoena your ISP and get any records they keep.  Unless you go anonymous and encrypted.  Welcome to TOR.  The Onion Router is a system that encrypts your internet traffic and bounces it all over the world.   Once you enter TOR, nothing you do can be tracked, until your internet request leave the TOR system.   The system is not centrally owned or controlled, so nobody in the system can track what you are doing.

For example, if I use the TOR browser to search Wikipedia, a snoopy NSA goon could tell I’m using it, and they could tell there was a request from the TOR system to Wikipedia, but they can’t tie one request to the other.  If I’m dumb and log into Facebook, I lose that anonymous shield.

That’s solid protection from anyone watching your internet traffic.

How do you use it?

Easy.  Just install the Tor Bundle.  When you want the NSA to stop snooping over your shoulder because you want to do a search on erectile dysfunction, you launch TOR and the TOR browser and search without having to share your embarrassing secrets.

3.  Email.  Email is easily the least secure means you can communicate.  When you send an email, that message is in plain text, and it bounces from server to server until it reaches the recipient.  Any of the involved servers can keep a log of the traffic and read your email.

Never, ever, ever, ever put anything incriminating or important in an email.  Don’t send credit card numbers, your social security number, or the address of your meth lab.

But what if you want to have a dirty conversation with your spouse without letting the sick voyeurs at the NSA listen to you ask your wife what she’s wearing and how would she like it torn off?

Use PGP.  OpenPGP is a free software encryption program that is basically impossible to decrypt.   It’s known as public-key encryption, which means that anybody can encrypt a message to you that only you can read.

It’s like magic.

To use PGP, the easy way(for Windows users) is to get Gpg4win.  Install that, then open Kleopatra.  This will let you generate your encryption key.  You do that by:

  • Clicking File, then New Certificate
  • Click Create  Personal OpenPGP key pair
  • Enter your name and email, then click next, then “Create Key”.  Enter your passphrase when asked.

You now have a set of PGP keys.  To get your public key that others can use to send you messages, right-click your certificate and select “Export certificates”.  Pick a path to save the certificate, then do so.  You can open this file with notepad to get your public key, or you can email the file out.  There is no need to worry about security with this file.

You will end up with something that looks like my public key here:

—–BEGIN PGP PUBLIC KEY BLOCK—–
Version: GnuPG v2.0.20 (MingW32)
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=fHba
—–END PGP PUBLIC KEY BLOCK—–

To get your private key, that you can use with any number of plugins for your email client, right-click on your certificate and select “Export secret keys.”

You can either use PGP as a plugin for your email client, or you can use Kleopatra’s feature “Sign/encrypt files”.  To do that, write your message in a file, then select the feature inside Kleopatra.  You’ll end up with an encrypted file you can attach to your email that snoopy government man can’t read.

4.  Phone calls.  This would appear to be harder, since your phone is largely out of your control.   There’s nothing practical you do about a landline, except to avoid saying anything sensitive.  On your cell phone, you have options, assuming you use a smartphone.

For Android users, it’s free an easy.  Install Redphone.  If you place a call with Redphone, it checks to see if the caller also uses Redphone.  If he does, it places an encrypted call over your data plan to the other phone.   Nobody can listen in to an encrypted call.   The same company also makes a program for texting.

For iPhone users, you’re stuck with Silent Circle for $10/month,  which may be a better option, since there is support for more devices, including Android.   It was designed by the guy who designed PGP and handles texting and email, too.

That’s it.

There you are, the whats, whys, and hows of modern, hassle-light, private communications.   Doing what we can to foil bad government programs is our patriotic duty.

 

 

 

 

 

 

 

 

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Money Problems – Day 8: Insurance

Finance

insurance
Image by alancleaver_2000 via Flickr

Today, I am continuing the  series, Money Problems: 30 Days to Perfect Finances.   The series will consist of 30 things you can do in one setting to perfect your finances.  It’s not a system to magically make your debt disappear.  Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.

I’m not running the series in 30 consecutive days.  That’s not my schedule.  Also, I think that talking about the same thing for 30 days straight will bore both of us.   Instead, it will run roughly once a week.  To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.

On this, Day 8, we’re going to talk about insurance.

What is insurance?  Insurance is, quite simply a bet with your insurance company.   You give them money on the assumption that something bad is going to happen to whatever you are insuring.  After all, if you pay $10,000 for a life insurance policy and fail to die, the insurance company wins.

A more traditional definition would be something along the line of giving money to your insurance company so they will pay for any bad things that happen to your stuff.   How do they make money paying to fix or replace anything that breaks, dies, or spontaneously combusts?  Actuary tables.  Huh?  The insurance company sets a price for to insure—for example—your car.  That price is based on the statistical likelihood of you mucking it up, based on your age, your gender, your driving history, and even the type of car you are insuring.  What happens if a meteor falls on your car?  That would shoot the actuary table to bits, but it doesn’t matter.   They spread the risk across all of their customers and—statistically—the price is right.

What kinds of insurance should you get?

Homeowner’s Insurance

For most people, their home is, by far, the largest single purchase they will ever make.  If your home is destroyed, by fire, tornado, or angry leprechauns, it’s gone, unless you have it insured.   Without insurance, that $100, or  200, or 500 thousand dollars will be lost, and that’s not even counting the contents of your home.

Homeowner’s insurance can be expensive.  One way to keep the cost down is to raise your deductible.  If you’ve got a $1500 emergency fund, you can afford to have a $1000 deductible.  That’s the part of your claim that the insurance company won’t cover.  It also means that if you have less than $1000 worth of damage, the insurance company won’t pay anything.

You can get optional riders on your homeowner’s insurance, if you have special circumstances.  You can get additional coverage for jewelry, firearms, computer equipment, furs, among other things.  You base policy will cover some of this, but if you have a lot of any of that, you should look into the extra coverage.

Auto Insurance

Car insurance is required in most states.  That’s because the kind caretakers in our governments, don’t want anyone able to hit you car without being able to pay for the damage they caused.  To my mind, I think it would be more effective to just make whacking someone’s car without paying for it a felony.  If someone is a careful driver or has the money to self-insure, more power to them.

Auto insurance comes with options like separate glass coverage, collision, total coverage (comprehensive), or just liability.  Liability insurance is what you put on cheap, crappy cars.   It will only pay for the damage you do to someone else.

Rental

I’ve never had rental insurance.  The last time I rented, I could fit everything I owned in the back of a pickup truck with a small trailer, and it could all be replaced for $100.   Heck, I had the couch I was conceived on.  Err.  Ignore that bit.

Almost everything you can get homeowner’s insurance to cover will also cover renter’s insurance, except for the building.  It’s not your building, so it’s not your job to replace it.

Life Insurance

If you care about your family, you need life insurance.   This is the money that will be used to replace your income if you die.   I am insured to about 5 times my annual salary.   If that money gets used to pay off the last of the debt, it will be enough to supplement my wife’s income and support my family  almost until the kids are in college. You should be sure to have enough to cover any family debt, and bridge the gap between your surviving family’s income and their expenses.  At a minimum.  Better, you’ll have enough to pay for college and a comfortable living.

Life insurance comes in two varieties: whole and term.  Whole life…sucks.  It’s expensive and overrated.     The sales-weasels pushing it will tell you that it builds value over time, but it’s usually only about 2%.  It’s a lousy investment.  You’re far better off to get a term life policy and sock the price difference in a mutual fund that’s earning a 5-6% return.

Term life is insurance that is only good for 5, 10, or 20 years, then the policy evaporates.  If you live, the money was wasted at the end of the term.  The fact that it’s a bad bet makes it far more affordable than whole life.  It doesn’t pretend to be an investment; it’s just insurance.  Pure and simple

Personal Liability Umbrella

An umbrella policy is lawsuit insurance.  If someone trips and hurts themselves in your yard, and decides to sue, this will pay your legal bills.  If you get sued for almost anything that was not deliberate(by you!) or business related, this policy can be used to cover the bill.

If you call your insurance company to get an umbrella policy, they will force you to raise the limits on your homeowner’s and auto insurance.  Generally, those limits will be raised to $500,000, and the umbrella coverage will be there to pick up any costs beyond the new limit.

A little-known secret about umbrella policies:  They set the practical limit of a lawsuit against you.  Most ambulance chasers know better than to sue you for 10 million dollars if you only have a policy to cover 1 million.   They will never see the other 9 million, so why bother?  They’ll go for what they know they can get.

The flipside to that is that you should not talk about your umbrella policy.   Having a million dollars in insurance is a sign of “deep pockets”.  It’s a sign that it’s worthwhile to sue you.  You don’t want to look extra sue-able, so keep it quiet.

Insurance is a great way to protect yourself if something bad happens.   Today, you should take a look at your policies and see where you may have gaps in coverage, or where you may be paying too much.

 

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Money Problems – Day 4: Making a Budget

Finance

Fiscal Year 2010 Budget Briefing (200905070001HQ)
Image by nasa hq photo via Flickr

Today, I continuing the  series, Money Problems: 30 Days to Perfect Finances.   The series will consist of 30 things you can do in one setting to perfect your finances.  It’s not a system to magically make your debt disappear.  Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.

I’m not running the series in 30 consecutive days.  That’s not my schedule.  Also, I think that talking about the same thing for 30 days straight will bore both of us.   Instead, it will run roughly once a week.  To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.

This is day 4 and today, you are going to make a budget.

Now that you’ve got your list of expenses and you’ve figured out your income, it’s time to put them together and do the dreaded deed.  Your going to make a budget today.  Don’t be scared.  I’ll hold your hand.

Here are the tools you need:

  1. Your list of expenses from Day Two.
  2. Your list of income from Day Three.
  3. A spreadsheet.  I recommend the spreadsheet included in Google Docs, but Excel or the Open Office alternative, CALC, are acceptable substitutes.

Setting up the spreadsheet is dead simple.

Create a column for the label, telling you what each line item is.  Create a column to hold the monthly payment amount.   At the bottom of column 2, create a formula that totals your expenses.   If you are including a bill that isn’t due monthly, use a formula similar to the day 3 income formula to figure out what you need to set aside each month.  To figure a quarterly bill, multiply the amount by 4, then divide by 12.  To figure a weekly bill, multiply by 52 and divide by 12.

Scoot over a few columns and do the same thing for your income.

Scoot over a couple more columns and set up a total.  This is easy.  It’s just a matter of subtracting your expenses from you income.  Hopefully, this gives you a positive number.

To make this even easier, I’ve shared a blank budget spreadsheet.  No excuses.  If that simple spreadsheet doesn’t meet your needs, I’ve got a much more detailed version that includes categories.   I use the detailed version.

Making a budget may be the most intimidating financial step you take, but everything else is built on the assumption that you understand where you money came from and where it is going.  Without,it, your navigating a major maze based on a coin flip instead of a map.

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