Live Real, Now

The no-pants guide to spending, saving, and thriving in the real world.

Search Results for: three-alternatives-to-a-budget/budget-lesson-part-5/debt-burnout/budget-lesson-part-3/travel-expenses-why-i-splurge/future-dreams/budget4/subscribe-by-email/Clearing Up Social Debt in 3 Steps/contact-me

Birthdays on the Cheap

Finance, Parenting

Birthdays are expensive. Shoot, I’ve said that before. It’s usually true, but it doesn’t have to be. Here are five ways to cut birthday party costs.   Note:  If you’re trying to cut costs on an adult party, just replace the word “kid” with “guest of honor”.

1. Location, location, location. The amusement park/pizza place is nice if you like bad pizza, but it’s certainly not cheap. The inflatable playground may be the talk of the school for a day or two, but it’ll flex your debit card in ways it’s just not used to. Why? Kids, being kids, are capable of entertaining themselves. They’ve got imaginations that should make most adults weep with envy. If that fails, make them play a board game or in the worst case, some video games. Lock the wild young’ns in the basement and let ’em go nuts for a couple of hours. It’ll be a blast, I promise.

2. Why invite the world? How many friends does your kid actually have? I’m not talking about all of the kids in school he’s not fighting with or every kid on the block that hasn’t TP’d your house. I mean actual friendship. If they don’t play together regularly, nobody will be offended about missing an invitation. Invite the entire class? That’s just nuts. Thirty ankle-biters smearing cupcakes on the wall? No thank you. You kid will have more fun with 2-3 close friends than 20-30 acquaintances.

3. Toy flood. What was the last toy your kid played with? The last 10? How many toys have been completely neglected for months or years? How many stuffed animals are buried so deep in the pile in the corner that they are wishing for a fluffy Grim Reaper to come put them out of their misery? Don’t buy your kid clutter. It’s a hassle to clean up–and you will–and it trains them into bad habits for a lifetime. One or two things that they will treasure(or, better yet, wear!) will work our much better for everyone than a dozen things to forget in a toy box. Too many toys guarantees that the kid won’t get attached to any of them.  Down with kid-clutter!

4. Designer Cake. Who needs a fancy cake? Correct me if I’m wrong, but aren’t you going to start a fire on the thing, then cut it up and give it to a dozen little runts to rub in their hair? If you can’t bake it yourself, a quarter sheet is cheap at the big box grocery stores and will guarantee leftovers. Nothing starts the week better than chocolate marble cake for breakfast on Monday.

5. Food. Don’t. That was easy. Scheduling is an important way to keep costs down. Don’t have the party at lunch time. For small children, 1:30 PM is about perfect. The parents won’t stick around once the kids are ready for a nap. For older kids, 4PM means they will need to be home for dinner. That cuts the menu down to kool-aid, light snack food, and cake. It also ensures that the party won’t drag on forever.

It’s possible to have a budget birthday party without being totally lame.  Give it a shot.  Your kids won’t mind.

This post is a blast from the past.

Twitter Weekly Updates for 2009-12-05

Misc

  • Guide to finding cheap airfare: http://su.pr/2pyOIq #
  • As part of my effort to improve every part of my life, I have decided to get back in shape. Twelve years ago, I wor… http://su.pr/6HO81g #
  • While jogging with my wife a few days ago, we had a conversation that we haven’t had in years. We discussed ou… http://su.pr/2n9hjj #
  • In April, my wife and I decided that debt was done. We have hopefully closed that chapter in our lives. I borrowed… http://su.pr/19j98f #
  • Arrrgh! Double-posts irritate me. Especially separated by 6 hours. #
  • My problem lies in reconciling my gross habits with my net income. ~Errol Flynn #
  • RT: @ScottATaylor: 11 Ways to Protect Yourself from Identity Theft | Business Pundit http://j.mp/5F7UNq #
  • They who are of the opinion that Money will do everything, may very well be suspected to do everything for Money. ~George Savile #
  • It is an unfortunate human failing that a full pocketbook often groans more loudly than an empty stomach. ~Franklin Delano Roosevelt #
  • The real measure of your wealth is how much you'd be worth if you lost all your money. ~Author Unknown #
  • The only reason [many] American families don't own an elephant is that they have never been offered an elephant for [a dollar down]~Mad Mag. #
  • I'd like to live as a poor man with lots of money. ~Pablo Picasso #
  • Waste your money and you're only out of money, but waste your time and you've lost a part of your life. ~Michael Leboeuf #
  • We can tell our values by looking at our checkbook stubs. ~Gloria Steinem #
  • There are people who have money and people who are rich. ~Coco Chanel #
  • It's good to have [things that money can buy], but…[make] sure that you haven't lost the things that money can't buy. ~George Lorimer #
  • The only thing that can console one for being poor is extravagance. ~Oscar Wilde #
  • Money will buy you a pretty good dog, but it won't buy the wag of his tail. ~Henry Wheeler Shaw #
  • I wish I'd said it first, and I don't even know who did: The only problems that money can solve are money problems. ~Mignon McLaughlin #
  • Mnemonic tricks. #
  • The Wilbur and Orville Wright Papers http://su.pr/4GAc52 #
  • Champagne primer: http://su.pr/1elMS9 #
  • Bank of Mom and Dad starts in 15 minutes. The only thing worth watching on SoapNet. http://su.pr/29OX7y #
  • @prosperousfool That's normal this time of year, all around the country. Tis the season for violence. Sad. in reply to prosperousfool #
  • In the old days a man who saved money was a miser; nowadays he's a wonder. ~Author Unknown #
  • Empty pockets never held anyone back. Only empty heads and empty hearts can do that. ~Norman Vincent Peale #
  • RT @MattJabs: RT @fcn: What do the FTC disclosure rules mean for bloggers? And what constitutes an endorsement? – http://bit.ly/70DLkE #
  • Ordinary riches can be stolen; real riches cannot. In your soul are infinitely precious things that cannot be taken from you. ~Oscar Wilde #
  • Today's quotes courtesy of the Quote Garden http://su.pr/7LK8aW #
  • RT: @ChristianPF: 5 Ways to Show Love to Your Kids Without Spending a Dollar http://bit.ly/6sNaPF #
  • FTC tips for buying, giving, and using gift cards. http://su.pr/1Yqu0S #
  • .gov insulation primer. Insulation is one of the easiest ways to save money in a house. http://su.pr/9ow4yX #
  • @krystalatwork It's primarily just chat and collaborative writing. I'm waiting for someone more innovative than I to make some stellar. in reply to krystalatwork #
  • What a worthless tweet that was. How to tie the perfect tie: http://su.pr/1GcTcB #
  • @WellHeeledBlog is giving away 5 copies of Get Financially Naked here http://bit.ly/5kRu44 #
  • RT: @BSimple: RT @arohan The 3 Most Neglected Aspects of Preparing for Retirement http://su.pr/2qj4dK #
  • RT: @bargainr: Unemployment FELL… 10.2% -> 10% http://bit.ly/5iGUdf #
  • RT: @moolanomy: How to Break Bad Money Habits http://bit.ly/7sNYvo (via @InvestorGuide) #
  • @ChristianPF is giving away a Lifetime Membership to Dave Ramsey’s Financial Peace University! RT to enter to win… http://su.pr/2lEXIT #
  • @The_Weakonomist At $1173, it's only lost 2 weeks. I'd call it popped when it drops back under $1k. in reply to The_Weakonomist #
  • @mymoneyshrugged It's worse than it looks. Less than 10% of Obama's Cabinet has ever been in the private sector. http://su.pr/93hspJ in reply to mymoneyshrugged #
  • RT: @ScottATaylor: 43 Things Actually Said in Job Interviews http://ff.im/-crKxp #
  • @ScottATaylor I'm following you and not being followed back. 🙁 in reply to ScottATaylor #

Evil Interest

Finance

Everybody with a savings account or almost any form of debt has at least a passing familiarity with interest.   How many of you actually know what it is, or even how much you are actually paying?

Debt

 

First, some definitions.

Principal is the term used for the amount of money you have borrowed.

Interest is the rent you pay to have that money.   Interest is money-rent, expressed as a percentage of the principal.  If you borrow $100 at 10%, you pay approximately $10 in interest.   I say “approximately” because it’s just not that simple.

There are two kinds of interest: simple and compound.

Simple interest is called that because it is just that: simple.   It’s easy to understand and it’s what most people mistakenly assume they are paying.  With simple interest, the interest rate is only applied to the principal, never to the accumulated, or accrued, interest.

For example, if you have borrowed $100 at 10% annual interest, this is what your balance will look like:

  • At the time of borrowing the money, you owe $100.
  • After 1 year, you owe 10% of the $100, in addition to the original $100: $110.
  • After 2 years, you owe 10% of the $100, in addition to the original $100 and year one’s interest: $120.
  • After 10 years, you will owe a total of $200.

That’s simple.

On the other hand, in addition to five more fingers, you have compound interest.   Compound interest complicates things considerably. With compound interest, interest is applied to the entire balance of what you owe; both the principal and the accrued interest are included in the calculation.

For example, with $100 at 10% compounded annually:

  • Year 1: You will owe $100 + 10% of the original $100, or $110
  • Year 2: You will owe $110 + 10% of the $110, or $121
  • Year 3: You will owe $121 + 10% of the $110, or $133.10
  • Year 4: You will owe $131.10 + 10% of the $110, or $144.41
  • Year 5: You will owe $144.41 + 10% of the $110, or $158.85
  • Year 6: You will owe $158.85+ 10% of the $110, or $174.74
  • Year 7: You will owe $174.74 + 10% of the $110, or $192.21
  • Year 8: You will owe $192.21 + 10% of the $110, or $211.43
  • Year 9: You will owe $211.43 + 10% of the $110, or $232.57
  • Year 10: You will owe $232.57 + 10% of the $110, or $255.83

That is a total of $155.83 in interest paid over 10 years, or $15.58 per year, for an effective interest rate of 15.583%.

To throw another twist into the mix, interest is rarely compounded annually.  Monthly, or even daily, is much more common.   With monthly compounded interest, the annual rate, or APR, is divided by 12 and recalculated every month.

For example, using the same $100 at 10% APR, compounded monthly:

Since the interest rate is compounded monthly, we will be using the monthly periodic rate, which is 10% / 12, or .83%

  • Month 1: $100 + .83% of $100 = $100.83
  • Month 2: $100.83 + .83%  = $101.67
  • Month 3: $101.67 + .83% = $102.51
  • Month 4: $102.51 + .83% = $103.36
  • Month 5: $103.36 + .83% = $104.22
  • Month 6: $104.22 + .83% = $105.08
  • Month 7: $105.08 + .83% = $105.95
  • Month 8: $105.95 + .83% = $106.83
  • Month 9: $106.83 + .83% = $107.72
  • Month 10: $107.72 + .83% = $108.61
  • Month 11: $108.61 + .83% = $109.51
  • Month 12: $109.51 + .83% = $110.42

That’s $0.42 more interest paid the first year, and that number will continue to climb each year the interest is compounded.

It gets worse if interest is compounded daily, like most credit cards.   If you see “Daily Periodic Rate” anywhere in your agreement, you are getting compounded daily.   This same loan, compounded daily instead of monthly will yield $110.51 owed the first year.   That $0.51 might not seem like much, but imagine it on a $10,000 credit card, or a $100,000 house!  And that’s just the first year.   Every year after, the disparity gets bigger.

Edit: The formula for calculating compounding interest is Principal x (1 + rate as a decimal / compounding term)compounding term. So, for $100 at 10% compounded monthly, the formula is 100 x (1 + 0.1 / 12)12

That’s the downside to compounding interest. There is an upside, if you have investments or interest-bearing accounts.   If that’s the case, compounding interest is working in your favor.

If you save $100 per week, and manage to get a 10% return on your investment, you will have $331,911 after 20 years(with $104,000 contributed)  and $2,784,424 after 40(with $208,000 contributed).   That mean you will have tripled your money in 20 years, or vingtupled* it in 40 years.

That’s how you get rich. $100 per week for the rest of your life will leave you with a comfortable retirement, without missing out on life now.

—

* Yes, it’s a real word**.  It means a twenty-fold increase.

** No, I did not know that yesterday.

 

ING Direct – 2 Day Sale

Finance, Reviews

Today and tomorrow, ING Direct is having a “Financial Independence Days Sale”.

It’s a good sale. If you open a checking account or Sharebuilder account and you’ll get $76.  Apply for a mortgage and you’ll get $776 off of the closing costs.

I have accounts at 4 different banks.  Two of those were opened for specific debt-reduction purposes.  Of the others, one is used for most of my cash flow and bill payments, and the other is ING.   As of this moment, I have 15 accounts or sub-accounts with ING Direct.

Opening an account is painless and only takes a few minutes.   They are currently offering up to 1.25% in an interest-bearing checking account, though I’ve never qualified for more than .25%.  That account comes with overdraft protection, so you are charged interest instead of overdraft fees.

Once you have your first account set up, sub-accounts can be created in literally seconds.  Why would you want a bunch of sub-accounts?  I have a number of saving goals. Each of these goals has its own account at ING.  I can tell at a glance how much we have saved for our vacation next month and far away we are from affording my son’s braces.   My kids each have an account here because, currently, the interest rate is at 1.1%, which is miles ahead of most traditional banks.   Combined with the convenience of total online control, there’s no contest.

Money transfers are smooth.  I use one of my accounts as a transfer account to get money to and from two separate banks.

I also have a Sharebuilder account.  For those who aren’t familiar with it, it is a stock brokerage with low fees and a low barrier to entry.    If you set up an automatic investment, you get $4 stock trades with no minimum.  I’m not aware of any place cheaper.

That all sounds like a lot of ad copy and the links are affiliate links, but the truth is, I am just that happy with ING. I’ve never had an accounting error, or any problems at all.

The downside? Paper checks are verboten.  They will not accept paper checks, but you do have a check card to use.   You can hit 35,000 ATMS for free withdrawals, but any deposits are held for a few days before you have access to the funds.   It can also take 3-4 days to transfer money from ING to another bank.  I keep enough in the accounts that I’m always spending or transferring older deposits while I wait for the new ones to clear.

Even if you don’t like the bank, get a checking account, use it a few times and get $76 for very little trouble.   Open a Sharebuilder account, buy some stock and collect $76 for it.   Without an automatic payment, it will cost you less than $20 to buy, then sell the stock, netting you $56.

Who doesn’t like free money?

The Best Financial Advice I Ever Received

Finance

Read through any financial book, newspaper, magazine, or blog and you’ll find no shortage of advice.  It seems everyone has their own opinion on what you should be doing with your money.  One book tells you to invest in real estate.  Another says index funds.  Another says tax liens.

After awhile it can become pretty frustrating trying to figure out what exactly is the best course of action.  If all these experts have different opinions, whose advice do you trust?

Personally, the best financial advice I ever received didn’t come from a financial guru.  It didn’t come from a personal finance book or magazine.  It didn’t come from the Wall Street Journal or the New York Times.

It came from my dad.

I was probably about eight or nine years old and I was sitting on the floor playing with my Star Wars action figures while he sat in his chair flipping though a trade magazine.  Out of the blue, he asked me for ideas on what kind of products he could sell for extra income.

Being an 8 year old boy the only things that came to mind were whoopee cushions and magic sets.  But that wasn’t exactly what my dad had in mind.

“Why do you want to sell stuff anyway?” I asked him.

“To make extra money.  Gotta keep food on the table,” he replied.

“But you already have a job.  Just ask for a raise or something if you need more money.”

My dad just shook his head.  And then he sat me down and gave me the best financial advice anyone has ever given me.

“Mike, my boss doesn’t give a damn about me.  He cares about himself and his own job.  If it helps him to have me around then that’s good for me.  But if he decides he’s better off without me, then I’m gone.  That’s the way it is.  It will be the same when you get older and get a job.  You’ve got to look after yourself because no one else is looking out for you.  You can’t rely on your boss, or the government, or anyone else to help you look after your family.  You’ve got to take the bull by the horns and do it yourself.”

Now, my dad wasn’t a financial guru.  In fact he was practically broke when he died.  Several years after we had our talk his company decided they could hire someone younger to do his job for a lot less money and they laid him off.   Several attempts at entrepreneurship failed and he ended up burning through the family savings while racking up debt.

But his words still echo with me today.  I harbor an inherent mistrust of corporate America and the knowledge that no matter how well I perform my job I could be let go without warning if they decide to send my job overseas to India or the Philippines.

But my father’s words also fill me with a need for independence and the need to build multiple streams of income to protect myself against the loss of one.  Without that little speech all those years ago I might not have learned how to make websites to supplement my income.  And I wouldn’t be progressing toward my ultimate plan of quitting my day job so I can focus solely on my own business while having the freedom to spend more time with my family.

Most importantly, I have goals and a plan to reach them.  Without that I would be like so many of my friends who march off to work day after day with no real sense of power or purpose.

What about you?  What was the best financial advice you ever received?

Written by Mike Collins of http://SavingMoneyToday.net

Enhanced by Zemanta