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Don’t Screw Future-You

Finance, Life

A conversation between me and my temporally displaced self.

Future Me: Excuse me, Jason?

Me: Yes?

FMe: <Slap!>

Me: May I ask what that was for?

FMe: Of course.

Me: What was that for, jerk?

FMe: That was payback for all of the hell you have put me through.

Me: What?!? I’ve never even met you, before.

FMe: Of course you have. I am future-you, and I’m sick of getting screwed by past-me, that is, you.

Me: Huh?

FMe: Listen close. You’re not the sharpest brick in the box and I don’t want to explain this twice.

Me: ???

FMe: A long time ago, when you first met our wife, you were dumb.

Me: I don’t appreciate….

FMe: Shut up. I was dumb then, too. Remember? You…err…we bought a new truck, built an addition on our…err…your…err…whomever’s house, got married in the same year. On top of many other expensive decisions. Do your recall?

Me: Yes, I do. So what?

FMe: If that wasn’t enough, you and your smoking-hot bride are still shopping like you’re rich. You drive a new car. Your kids wear new clothes. You’ve got a house full of new furniture. How did you pay for all of that?

Me: Naturally, I charged it. Zero payments, zero interest for a year! Pretty smart, huh?

FMe: What happens in a year?

Me: I don’t know. I’ve got a full year to figure that out.

FMe: <Slap!> I’ll tell you what happens! Future-you, that’s me, gets screwed! Your raise didn’t come through. You had a baby. The truck broke down. Your wife took maternity leave. A roommate moved out. You took a loss in the stock market. You didn’t plan! You had no savings to cover any of those problems because you were too busy servicing debt to pay for your current life.

Me: How was I to know?

FMe: <Slap!> Life happens! You never know what is coming next. You need to plan and save for what might happen. Otherwise, you’ll just accumulate more debt to be serviced by yours-truly. That is not acceptable.

Me: So? What are you going to do about it?

FMe: <Slap!>

Me: Really? Again?

FMe: <Slap!> I’m struggling to pay your debt. Your son starts college next year, but you’ve left me completely unable to help. Your daughter wants to get married in a couple of years, but the Father-of-the-Bride can’t afford a tux. My wife, your beatiful bride, wants a vacation that I can’t afford. You’ve screwed me, dude.

Me: I’m sorry. What can I do to fix it?

FMe: Buy me dinner, first.

Me: Huh?!?!?

FMe: Stop the excess spending. Spend less than you make, for a change. No credit.

Me: None?

FMe: None. Nada. Zip. Zilch. Only spend what you can afford. Budget. Pay off those nasty bills. Don’t leave me hanging.

Me: So, what you’re saying is that, if I don’t have the money, I shouldn’t buy it?

FMe: Exactly. That’s the path to wealth, freedom, and financial independence. Live in the real world.

Me: Gee, thanks, Future-Me! Now I know.

FMe: And knowing is half the battle.

What would your future-you have to say to you?

The 10-Step Saving Action Plan

Finance

: Image via Wikipedia

Getting started saving money is hard. It’s easy to get used to instant gratification and impulse purchases. Postponing material fulfillment takes discipline and deferred enjoyment. I don’t like deferring my enjoyment, but I do it. The path to successful savings isn’t always easy, but it is gratifying, when you give it the time and effort required to see actual results.

Here’s the 10 step plan to successful savings:

Recognize the need. If you don’t understand why you need to save, you won’t do it for long. If you think it’s more important to buy a new car, a new TV, or the fanciest portable gadget out there, you won’t prioritize saving. You need to think about how saving a solid nest egg will benefit you and your future self, before you can be sure you will stick to your savings plan.
Pay yourself first. When you get paid, whether it’s a traditional paycheck or a surprise windfall, immediately drop 10-15% in a savings account you keep completely off-limits, no exceptions. If you make this an unbreakable habit, you will have a surprising amount of money in a surprisingly short amount of time.
Prioritize. Prioritize your expenses. If you don’t care about a particular optional expense, get rid of it! Examine the rest of the bill for things you can trim. Do you really need 5000 channels? Can you make do with just 300 specialized versions of ESPN?
Compare prices. If you buy from the lower-priced store, you save money. No s****, huh? Doing this requires that you forgo impulse purchases and do some research before you buy most things. Shop online, at least enough to know what you should be paying.
Save your change. When you get home at night, put your change in a jar. When the jar gets full, bring it to the bank. A medium-sized mason jar full of silver-colored coins will bring in about $100. Put that directly into savings.
Save your dollars. I pay cash for everything I buy in person. When my money clip gets too many one-dollar bills, I put them all into a box. This would be a phenomenal addition to my savings account, if I weren’t planning to use it for spending money on our vacation next month.
Save the extra $$. If you get unexpected money, don’t let it enter you regular cash flow. Get it straight into a savings account. You weren’t expecting it, so you won’t miss it.
Save the new $$. Save your raise. If you start making more money, save the difference. Like #7, you’ll never miss it. Don’t give yourself a chance to expand your lifestyle.
Club the naysayers in the knees. There will always be people who denigrate your choices. If they tell you it’s crazy to live within your means, or get upset because you don’t want to go to the fancy restaurant, screw ’em. Not literally of course. We’re trying to apply a punishment here, after all. If they don’t like your choice, kick them in the shins.
Reward yourself. Don’t be afraid to schedule rewards at certain savings goalposts. When you get $5000 saved, let yourself take $300 to the high-end steakhouse. When you get $10000, look at buying the camera you want. Give yourself a reason to stay motivated. It is, after all, your money.

This is how we’ve managed to build up a small-but-comfortable emergency fund and tackle a nice chunk of our debt. Do you have plan to save?

I Smell a Scam

Finance

I hate scammers. Whether it’s the garage-sale shoplifter, telemarketing “charities” with 99% overhead, 3-card-monte

shell game (Photo credit: mixatal (Clive Power))

dealers, or the guy who begs Grandma for cash every week, they all need to be strung up. Since vigilante justice is generally illegal and occasionally immoral, it’s best to just avoid the problems from the start. Here are some scams to watch out for.

Pyramid Scams – All of the little parties people throw to earn free items at the expense of their friends are pyramid schemes. Most of those are legitimate money-sinks. A few, however, exist solely to get their “consultants” to bring in more consultants. The sales aren’t the actual way to make money. If you don’t have anyone “downstream” you won’t make any money. If the focus isn’t on selling an actual product or service, but is instead on bringing in people under you, you have entered the world of pyramid scams. Generally illegal and always immoral. Don’t sign up and, if you do, don’t ask me to participate.

Advance Fees and Expensive Prizes – If you win a contest and you are expected to send money to claim your prize, it is a scam. You don’t have to pay sales tax in advance. You don’t have to pay transfer fees. Real prizes are delivered free, accompanied by a 1099, because prizes are income. No prize requires pre-payment. No loan service requires “finder’s fees”. If it doesn’t sound right, don’t pay it and certainly don’t give your bank information to anyone you can’t verify.

Work at Home – The most common work-at-home job I’ve found is stuffing envelopes. You see the signs on telephone poles all over the city. “Make $10/hour stuffing envelopes from the comfort of your own home! Just send $50 to….” When you get the instructions, you are told to hand up signs telling people to send you $50 for instructions on how to make $10/hour stuffing envelopes. Everybody is feeding off of everybody else.

Charity – Never give money to a charity over the phone. Always take the time to verify where you are sending your money. Some freak may call to tug on your heartstrings with a sob story, but you don’t have to give them money. At least ask them to send it in writing so you can do some checking, first.

Phishing – Simply put, don’t click on any link in any email, unless you know where it is going. If it is a link to a financial institution, go enter the address into the address bar yourself. If you find yourself on a site you don’t recognize, don’t give them your personal information and don’t ever reuse your usernames and passwords. If you do, one bad site could get access to everything you do online.

[ad name=”inlineleft”]Foreign Lottery – To be clear, Spain did not just hold a international lottery and randomly draw your email address. No lottery in the world works that way. If you didn’t enter the lottery while you were in Spain, you aren’t going to win it. The scam is that you need to provide your bank information, including a number of release forms so the scammers can transfer money to you. In reality, you are signing over control of your account and will be wiped out.

Nigerian/419 Emails – Ex-Prince WhateverHisNameIs wants your help to get his fortune out of WhereverHeIsFrom. The New Widow Ima F. Raud has an inheritence that she won’t live long enough to spend. They’ve both been given your name as a trustworthy person to handle the transactions in exchange for a mere $10 million. What friends do you have that would make this seem legitimate? Once again, they will get your bank information and take your money. At a minimum, they will try to get you to pay a few thousand dollars for “Transfer fees”. Don’t do it.

Overpayment by Wire – I had this one attempted on my last week. You sell something online. A potential buyer agrees to purchase the item, sight-unseen. They’ll send a cashier’s check and, after it clears, one of their agents will pick it up. Unfortunately, the buyer’s secretary screwed up and added a zero to the check. Would you mind wiring the overpayment back, minus a small fee for the hassle? The check is bogus and there is no way to verify it. You’ll deposit the check and it will be assumed to be real. The bank will make the funds available well before it comes back as fraud. You’ll see the available funds and send the money by non-refundable Western Union and some thug in Nigeria gets a new iPhone.

Foreclosure Scams – Some scammers try to prey on the vulnerable because they are, well, vulnerable. If you are facing foreclosure, be very careful about where you turn for help. One scam is to get you to sign over your home “temporarily” to clear the title. That doesn’t work, but you won’t find that out until you are handed an eviction notice and told you still owe the money.

Stranded Friends – You get an email from a friend saying he’s in London/Moscow/Sydney/Wherever, and he’s been mugged. He’s got nothing and needs $2500 to get home. Can you help? Do you really have friends close enough to ask for a $2500 international bailout, but not so close they tell you about the vacation ahead of time? Would they really be too timid to call you collect instead of begging for change to use an internet cafe?

Carnival of Money Stories – Halloween Aftermath Edition

Finance, Misc

: Image by Dunechaser via Flickr

Welcome to the November 1, 2010 edition of the Carnival of Money Stories. One thing I didn’t do when volunteering to host this was to check my calendar. Did you know that November 1 follows October 31, every year? On Saturday, I had 30 people over for my annual Halloween party. On Sunday, I ran a haunt in my yard and coordinated to get a dozen kids out begging for candy while using my house as a base of operations. I’ve had guest from out-of-town since Friday. Halloween weekend is, by far, the busiest weekend of the year at my house.

Editor’s Picks

J. Savings presents Side Hustle Series: I’m a Restaurant Server posted at Budgets Are Sexy, saying, “Is serving tables thankless work? Yes. Are customers sometimes unpleasant? Of course. But the benefits are plenty!”

Wenchypoo presents Marketing, Marketing Everywhere–There’s No Escape! posted at Wisdom From Wenchypoo’s Mental Wastebasket.

The Wise Squirrel presents Does it Matter Who is the Main Provider Between Husband and Wife? posted at Squirrelers, saying, “Money story about a dual-income couple in which the husband had the opportunity for a big promotion that would have required a move, AND his wife to leave her job. Their different viewpoints are discussed.”

Business

Ryan @ CML presents Get a Tax Deduction for a Working Vacation posted at Cash Money Life, saying, “Tips on how to write off a business trip as a tax deduction.”

Career

Jeff Rose, CFP presents How to Pass the CPA Exam and Become a Certified Public Accountant posted at Jeff Rose, saying, “If you are interested in becoming a CPA, here are some of the experiences of someone who just recently passed the CPA exam.”

Jason @ Redeeming Riches presents What Sam Walton Teaches Us About Money, Success, and Family posted at Redeeming Riches, saying, “Sam Walton had it all – or did he? Find out the biggest regret he had on his death bed.”

Credit

Mr Credit Card presents Cash Vs. Credit, A Real World Experiment posted at Ask Mr Credit Card.

Debt

The Family CEO presents Debt Snowflakes: Or How I Made $821.73 in Extra Credit Card Payments This Month posted at The Family CEO.

Kaye presents Stuck in the Middle posted at Mrs Nespy’s World, saying, “The beginning of the journey was excited, the end will be exhilarating, but this “in the middle” stuff is for the birds.”

Kate Kashman presents Why Not To Bounce Checks posted at The Paycheck Chronicles, saying, “An accidental bounced check in college is still causing trouble, 20 years later.”

Michael Pruser presents Managing $225,000 in Debt Is Starting to Ware on Me posted at The Dough Roller, saying, “My struggles on managing a ton of debt!”

PT presents 5 Lessons Learned From Filing Bankruptcy posted at Prime Time Money, saying, “Lessons learned from an actual account of going through a bankruptcy.”

Silicon Valley Blogger presents Should You Pay Off Loans or Invest Your Money? posted at The Digerati Life, saying, “So you’ve got some money. Should you pay off your debt with it or invest the money? Here’s a personal account on what I’ve done.”

Housing

BWL presents Success Story: Paying Off A House In 5 Years While Tithing posted at Christian Personal Finance, saying, “This is an encouraging story of a woman who stuck to her convictions about giving 10% of her income and still managed to pay off her house in less than 5 years!”

Miranda presents Do I Really Want to Rent Out My House? posted at Personal Dividends – Money+Lifestyle.

Investing

2 Cents presents What Would Make Me Invest in the Stock Market? posted at Balance Junkie, saying, “We have not invested in the markets for a while now. A reader recently asked what it would take for us to get back in. Here’s my answer!”

FIRE Getters presents Early Retirement Case Study – Sandy Aldridge and Dale Lugenbehl posted at FIRE Finance, saying, “At times the fast pace of our city lives appear stifling making us long for a slower pace of life with more exposure to clean air and green vegetation. Our souls yearn for a simple life which is in greater harmony with Mother Nature. Of late our work related health problems have been making us yearn, almost every morning, for a more relaxed life with greater freedom. So we were thrilled to read about Sandy Aldridge and Dale Lugenbehl who retired early (at ages 48 and 47 respectively) more than a dozen years ago to their eight-acre farm in Cottage Grove, Oregon …”

Other

Neal Frankle presents Find A High Paying 2nd Job Using Craigslist posted at Wealth Pilgrim: Money Management Advice, Financial Stess Management, Addiction Recovery Plan & Resources, saying, “You Can Find A High Paying 2nd Job Using Craigs List If you’re looking for high paying 2nd jobs, look no further than your computer screen.”

Super Saver presents Retiree Financial Lessons from the Recession posted at My Wealth Builder, saying, “Although I wish this recession had not happened, I am glad that it happened early in our retirement, while we were better able to meet the financial challenges.”

Craig Ford presents Medi-Share Medical Sharing | A Health Insurance Substitue posted at Money Help For Christians, saying, “Medical sharing is a great way to reduce your health insurance costs.”

passive family income presents Cutting Out Wasted Expenses to Save More Income posted at Passive Family Income, saying, “How many wasted expenses are you paying for? After sorting through my family’s past years credit card and bank statements, I have found several small money leaks in our personal finances.”

Kristina presents Our Parents Estate posted at Dual Income No Kids, saying, “If your parents are divorced, how has their separation affect the way you have planned your estate?”

Donna Freedman presents Rockin’ the surveys — when it’s worth it. posted at Surviving and Thriving, saying, “Online surveys can be a nice source of extra income — except when they aren’t.”

Joe Plemon presents My Car Needs an Engine. Should I Sell it, Fix it or Junk it? posted at Personal Finance By The Book, saying, “What do you do when your beloved car needs an engine: sell it, fix it or junk it? This post explores the options.”

FMF presents My Type of Couple posted at Free Money Finance, saying, “Story of a couple who collected 400k cans to pay for their wedding.”

Lindy presents Once Upon a Time…I Used an Iron posted at Minting Nickels, saying, “One of the likely first stops in expense-slashing is the luxury of paying for laundered shirts. This is a tale of my ironing saga (yes, it qualifies as a saga). And it’s not as boring as this description sounds. Thanks!”

Sandy presents One Disaster Away posted at Yes, I Am Cheap, saying, “We sometimes pass judgment on others for the financial situation, but most of us need to realize that all it takes is one disaster to be in the same situation.”

Bucksome presents Top 7 Ways I Budget My Time posted at Buck$ome Boomer’s Journey to Retirement, saying, “Budgets are needed for more than money in this story about 7 ways to budget time.”

Tom @ Canadian Finance Blog presents How to Watch Cheap and Free TV in Canada posted at The Canadian Finance Blog, saying, “Want to know how to see free TV in Canada? You have a few options with over the air free HDTV, broadcaster’s websites and cheap services like Netflix!”

Lauren Mendel presents A Very Scary Money Story posted at Richly Reasonable – Successes and failures, all in the name of living reasonably., saying, “This Halloween week read the true, terrifying tale of how Husband and I almost lost literally every important document that we have. Muahahaha! You might want to lock your doors and close the blinds before reading this one…”

Sun presents What’s in My Wallet? posted at The Sun’s Financial Diary.

Shopping

Money Beagle presents Costco Coupon Policies – Truth or Fiction? You Decide posted at Money Beagle.

ctreit presents Our family budget has to accommodate this chocolate snob posted at Money Obedience, saying, “Name brands versus store brands.”

Rachel presents Sometimes Less Is More | MomVesting posted at MomVesting, saying, “Melinda talks about how the value of many things isn’t necessarily determined by their cost.”

That concludes this edition. Submit your blog article to the next edition of Carnival of Money Stories using the carnival submission form. Past posts and future hosts can be found on the blog carnival index page. Thank you, everyone, for participating!

3 Ways to Keep Your Finances Organized

Finance

The National Bank, Oamaru, built 1871: a prost... — The National Bank, Oamaru, built 1871: a prostyle Palladian portico on a neoclassical facade (Photo credit: Wikipedia)

I have 16 personal savings accounts, 3 personal checking accounts, 2 business checking accounts, and 2 business savings accounts. That’s 23 traditional bank accounts, spread across 3 banks. Just talking about that gives my wife a headache.

Every account has a reason. Three of the savings accounts exist just to make the matching checking accounts free. One of the checking accounts handles all of my regular spending that isn’t put on my rewards card. 14 of the savings accounts are CapitalOne 360 accounts that have specific goals attached. A couple of the accounts were opened to boost the sales numbers for a friend who is a banker. Really, it’s almost too much to keep track of. One credit card, 5 checking accounts, 18 savings account, all on 4 websites.

Sometimes, when you extend your bank accounts this far, it gets easy to let it all slip away and lose track of where your money is going. How do I keep track of it all?

1. Simplify

Whoa, you say? Simplify? I don’t simplify the number of accounts I have, I simplify the tracking, or specifically, the need to track.

Twice a month, I have an automated transfer that moves a chunk of money from my main checking account to C1360. I have a series of transfers set up there that move that money around to each of my savings goals. I move $100 to the vacation account, $75 to the braces account, and $10 to the college fund, among all of the other transfers. Doing that eliminates any need to keep track of the transfers, since it is all automated.

Using the same rules, I make every possible payment happen automatically, so I don’t have to worry about paying the gas bill or sending a check to the insurance company.

Simple.

2. Complicate

As you saw in the opening sentence of this post, I also complicate the hell out of my accounts. On the surface, it would seem like that would make it harder to keep track, but in reality, the opposite is true. I have 14 savings accounts at C1360, each for a specific savings goal, like paying my property taxes or going to the to Financial Blogger Conference in October. I can log in to my account and tell at a glance exactly how much money I have for each of my goals. In the account nickname, I include how much each goal is for, so I can easily see if I am on track.

3. Quicken

Everything I do gets set up in Quicken. This makes it easy to track how much actual money I have available. Since I’ve moved my daily expenses to a credit card, I only have about a dozen entries to worry about when I balance my checkbook at the end of the month. At that time, any excess funds get dropped into my debt snowball.

This may all leave me with a needlessly complicated system, but it’s a system that grew slowly to meet my needs and it is working well for me. I spend about 2 hours a month tracking my finances, and can–at any time–tell at a glance exactly how my finances look.

How do you keep your finance organized? Have you tried any unique savings strategies?

How Banks Work

Finance

The National Bank, Oamaru, built 1871: a prostyle Palladian portico on a neoclassical facade (Photo credit: Wikipedia)

On the first and the fifteenth of every month, my paycheck is deposited into my bank account. Some fraction of it is saved, while another(larger) fraction is spent. They put the money in a vault and protect it from being stolen. Anything I manage to save and anything I haven’t managed to spend yet, will build interest. The bank pays me to keep my money there, even if it’s just for a short time. Why would they do that? If I asked you to hold on to $100 for me, in exchange for giving me $10 next week, you’d laugh at me. Right? If I told you that I was expecting you to keep that $100 heavily guarded in a locked room that requires a staff and utilities, you’d try to have me committed, yet that’s what banks do every day.

What’s in it for the bank?

Let’s start at the beginning. In the financial world, there are fundamentally two types of people: those who have money and those who need it.

The people who have money get it by producing something or otherwise providing value to someone for something. They then spend less than they made, leading to an accumulation of money. Woo! Rich people! Naturally, this money gets stuffed in a mattress for safe-keeping. Their money does nothing except collect dust and, occasionally, hungry insects. It is also used to soften a hard mattress.

People who need money have a few choices. They can beg for it, work for it, or steal it. The third option leads to perforation or imprisonment, so we won’t address that one. Now, you can work for your paycheck, like most adults, or you can go, hat in hand, to a charity and ask for money. But what if you want to start a business? You’ve invented the super-widget, a device guaranteed to revolutionize the world more than anything since sliced bread or the USB-powered pet rock. You got a concept and a prototype, you just don’t have the tooling or manpower to produce the millions of super-widgets the world will soon be beating a path to your door to own. You also lack a marketing budget to tell the world to stock up on path-beaters to make it to your door. What do you do?

Enter banks.

A bank will approach the first class of people and talk their money out of the mattresses and mayonnaise jars. They offer to hold the money for the people who have it. They will protect it from theft and they will pay the owner a fee for the privilege of holding on to the cash safely. Of course savers jump at the chance. They can quit worrying about the maid making the bed and becoming a millionaire and they can build wealth with no work. But wait…TANSTAAFL, right? You can’t get something for nothing. The world doesn’t work that way.

The bank takes your money–and the money of thousands of people like you–for safe-keeping. They pay you a fee, called interest. The rest, the loan out to the second group of people, the ones who need the money. They set aside some of the deposits so the owners can make withdrawals, but the rest goes into the loan-pool. People who need money come to the bank, explain their needs and demonstrate their ability to repay the loan, then they are given money for a fee, also called interest. The interest rate for the borrower is significantly higher–sometimes 20 times higher–than the interest paid to depositors. The difference between interest earned and interest paid is what pays the bank’s bills. That gap pays for the rent, taxes, and payroll.

Ultimately, a bank’s job is to connect the savers with the spenders in a way that’s reliable enough to ensure everybody benefits. If anybody in the chain ceases to benefit, the system collapses. Depositors switch back to using mattresses, borrowers go back to their loan-shark grandparents, and banks close their doors. This is the system that allows the entrepreneurial spirit to thrive, while making money for everyone involved.