Category Archives: Saving

A Parking Lot Case Study

MP900385984Let me tell you a story about a parking lot. My fiancé and I went away for the holiday weekend with three other couples. On the afternoon of the 4th, one of the other couples went into town to pick up some supplies, and learned from a local that there was going to be a big fireworks show that night. The local told them that most people here for the weekend would gather in the park, but they’d charge you $8 to park there, so the locals usually park for free at the golf course across the street and watch the fireworks from there.

“What great inside information!” I thought. “We can watch the fireworks for free!” I was apparently alone in my thinking. “The people here are really cheap, they’re not willing to pay for parking, but we can afford to pay for parking, so we should just go park in the lot” said one of my friends.

I wanted to give him the benefit of the doubt. After all, the locals are indeed a bit seedy (we were in marijuana country) and we had children in our group, so perhaps my friend just wanted a more wholesome environment for the kids. However, something about the way he said “cheap” made me think that wasn’t the whole reason. There was the implication that the locals had to be cheap because they don’t have a lot of money, but because we are all gainfully employed, there was no reason we shouldn’t pay for the convenience of parking in the lot.

My suspicions were confirmed when, as we were approaching the gate to the parking lot, we spotted a parking space just outside of the lot where we could park for free and walk the extra 50 feet or so to the park – we’d get free parking, and we would be in the park with the tourists rather than the golf course with the locals. “Let’s just park there and walk into the park” I said, which thankfully at least got the agreement of one other person in the car. But despite that person being the one driving the car, she instead listened to her husband, who chimed in with “nah, let’s just go into the lot, it’s fine.”

Continue reading

Why is it So Hard to Get Ahead?

Broken piggy bank

It doesn’t take a genius to realize that if you spend every dollar you earn, you’ll never build up savings. Everyone knows that if you want to buy a car or house, or ever be able to retire, you need to save money. So why do so many people fall so far short of their goals?

It Takes a Long Time To Save That Much

Saving up a down payment for a house requires a lot of dedication for an extended period of time. When you first decide to start saving, you’re motivated and excited at the prospect of owning a house. But two years later when you only have $10,000 saved and you need $50,000 for a down payment, your motivation may start to wane. Skipping restaurant meals and shopping trips wasn’t so difficult when you were gung-ho about your goal, but after months and months of sacrifice, you may begin to feel like you’re never going to make it to the goal, so why bother trying? May as well enjoy your life now and worry about the future tomorrow, right?

They Think Only About Cash Flow

When it comes to car buying, the first question most people ask is, “what’s the monthly payment?” This is the wrong question to ask. Dealers are more than willing to accept a tiny down payment and stretch out a payment plan for 6 years or more to reduce the monthly payments. Paying $400/month for your car may not sound like such a bad deal right now,  but what happens if you lose your job two years from now and can’t make the payments any more? Are you really willing to bet on your job security for the next 6+ years just so you can have a shiny new car? On top of that, though your monthly payment may seem manageable, over the course of 6 years, you’ll be paying thousands of dollars in interest, which is just plain silly.

Retirement is So Very, Very Far Away

Even home ownership is a short term goal compared to retirement. Many people in their 20′s fool themselves into thinking that they have so much time until retirement that they don’t have to worry about it yet. Also, while you’re early in your career, you’re rapidly learning new skills, focusing on career advancement, exploring new possibilities, and are generally excited about work. The prospect of working into your 80′s doesn’t sound so bad — after all, your job is great! So why bother putting money into your 401(k) when you’re going to keep working forever?

Expensive Things Must Be Better

For many people, they just have an impossibly hard time accepting that pricing is not always based on value. “This shirt costs $50, so it must be higher quality than that one which only costs $20.” “I need granite counter tops because everything else is such poor quality.” “This apartment is too cheap, there must be a catch!” (Ok, there probably is a catch, but it may be something you’re perfectly happy living with, so don’t write it off until you dig deeper.)

Continue reading

Save Money by Making it a Game (Plus a Giveaway)

gameWhen I lie in bed at night and reflect on my day, I always sleep a little better if I made it through the day without spending a cent. It’s a great feeling of accomplishment. And it always sparks the thought: “let’s see if I can do it again tomorrow.”

I was in a meeting at work yesterday in which we were discussing ways to gamify one of our products. You see, the product is intended to help people with a very tedious task, and while it makes the process of completing the task much more efficient, it still doesn’t make it fun. So we thought that if we could build in a points system, or achievements, or a way to track your progress in a fun way, it would make people enjoy using the product more.

When I sat down to write this post, I kept thinking back to that meeting. Saving money and resisting the urge to buy things we don’t truly need is a tedious task, and introducing a “no spend” challenge is a great way to gamify that task. Spending money is fun. You get something tangible in exchange for your money, and that’s exciting. So if we want to be successful at saving money, we need to make that fun too.

Continue reading

2012 Goal Update

finance goalsIt’s not quite the end of the year yet, but I thought I’d take a moment to look back on my goals for 2012 and see how I did. When I started up this blog back in May, I set several goals for myself. They were stretch goals – I would need to be close to perfect with my finances to meet them. But what’s the point in setting goals you know you’re going to reach, anyway? The whole idea of setting goals is to give you something that’s just out of reach to shoot for.

I set four financial goals and one health goal for myself:

finance goals

Down Payment Fund – Reach $10k by the end of the year
Other Taxable Investments – Reach $13k by the end of the year
Dividend Income – Earn $400 over the course of the year across all taxable accounts
Retirement – Max out IRA and invest in a REIT

health goals

Weight Loss – Get my body fat percentage down to 25%

Continue reading

When There’s Not Enough Money – $100 Cash Giveaway

not enough moneyThis week I am participating in a $100 giveaway hosted by Savings Advice. The theme of this giveaway is “When there isn’t enough money at the end of the month”.

A little while back I wrote about how I’m living paycheck to paycheck (sort of). The gist is that I have automated savings set up, so once my recurring bills are paid and money is automatically transferred into savings and investments, I’m left with a very small amount in my checking account with which to pay my credit card bill. Anyone who’s actually living paycheck to paycheck might wonder why I would voluntarily put so much stress on myself to stay within my budget when my cash flow would support much more spending.

The answer is simple: if you’re not at least a little worried that you won’t have enough money at the end of the month, you’ll end up overspending on things like lunches and dinners at restaurants, shopping, and entertainment. If you’ve never experienced running out of money before the end of the month, you’re probably not saving enough.

Continue reading

Financial Lessons From My Fiancé

Couple MoneyRounding out this series, I thought I’d add some financial lessons I’ve learned from my fiancé. For previous installments, see what I’ve learned from my mother and my father.

My fiancé had a very different upbringing than I did. My father was a salaried professional who recently retired from the job he’d held for my entire life. My mother was a stay-at-home mom for most of my childhood. They’ve been happily married (and living in the same house) for 35 years.

My fiancé’s parents on the other hand had separated a couple times throughout his childhood before finally getting a divorce not too long ago. His father moved his family around the country buying up businesses trying to turn a profit. As my fiancé puts it, it’s not that he was unsuccessful making a profitable business, it’s that he got greedy and would cut corners so he could pocket more money, over-expand the businesses, and turn down offers from buyers because he was holding out for more. He ended up selling most of his businesses for about what he bought them for in the first place, and had to take a loss on a few of them. At one point when his parents were separated, my fiancé lived with his mother on food stamps. This is all to say that my fiancé had a radically different childhood than I had.

Continue reading

What Would You Do With $10,000?

I received an email yesterday from Ally Bank asking me what I would do with $10,000. I clicked through to find an infographic summarizing the data collected from 1022 people over the age of 18 in the continental United States. What I found was rather interesting, but what truly peaked my interest was the way in which Ally presented the data.

Ally Asks: What Would You Do With $10,000? [INFOGRAPHIC]. Check out this story and more at Straight Talk, the official blog of Ally Bank.

The choices were save, invest, pay off debt, or spend the money. About a third said they would save it, while another fifth said they’d invest it, and yet another fifth said they would use it to pay down debt. I found it pretty surprising that over 50% of respondents said they would either save or invest it. I have to hope that those people don’t have high interest debts they need to pay off, but I’m skeptical that less than half of the respondents have no credit card debt.

Then I looked closer and marveled at the fact that they didn’t list the percentage of people who would spend the money. If you add up the percentages, you’re left with 28% of the respondents saying they’d spend the money. That makes it the second most popular answer, yet it’s swept under the rug, as if Ally is hoping you won’t notice it.

Why? Clearly Ally has an agenda: they want you to save more money and they want you to save it with them. Is the idea that by down-playing the proportion of people who said they’d spend the money and highlighting more responsible choices, they hope you’ll look more favorably on the responsible choices so when you get a windfall at some point you’ll be more likely to save with them? Or are they trying to make you feel guilty by showing you that the majority of people would do something responsible with the money, so you should too?

What do you think?

Running Outside Will Get You to Retirement Faster

Yes, you read that title correctly. I intend to argue in this post that running outside will get you to retirement faster than running on a treadmill. How do I plan on arguing this point? Well through an analogy, of course!

It’s the age-old question of which is more important in building wealth: saving money or increasing your income. In this analogy, speed = income and distance = net worth.

Continue reading

5 Steps to a Secure Financial Future

building a secure financial futureYou just graduated college and landed your very first job. You’re excited to start working and start earning a paycheck. The last thing on your mind is saving for your retirement, or even the near future. You’re not thinking about the car you may need in 5 years, the house you’d like to buy in 7 years, the children you’ll have in 10 years, and certainly not your retirement that’s a whopping 40+ years away!

The problem is, if you don’t start thinking about these things now, you’ll end up woefully unprepared for them. Do you know people who are up to their eyeballs in credit card debt? Who buy $30k cars with $5k down? Who have had their houses foreclosed? Who are working in their 70′s because they can’t afford to retire? You don’t want to wind up with those same problems, do you? Then start doing these 10 things right now to build a secure financial future.

Continue reading

Why Everyone Needs an Emergency Fund

The emergency fund is the bread and butter of beginning personal finance. It is the first thing any person looking to build a secure financial future needs to attend to. And though it’s the first form of savings you’ll develop, I believe you need to keep it for the rest of your life. As you build more wealth, it will become a much smaller piece of your finances, but it will remain an important one.

In an age of online brokerages where you can easily and quickly manage your money yourself, I’ve often asked myself if an emergency fund is really necessary. After all, if there were a dire emergency, I could use my credit card to pay for it, and then move money from one of my investments into my checking account within a day or two. So why is an emergency fund necessary?
Continue reading