How to fix your finances in 2010 (WSJ)

To help you accomplish your many New Year's ambitions, here's a year's worth of personal-finance aspirations, timed to major holidays to raise your chances of success.

Condoms and canned goods

What's the last thing people want in a recession? More kids, apparently. According to data-tracking firm the Nielsen Co., dollar sales of products in the "family planning" category, which include condoms and over-the-counter female contraceptives, were up 10.2%. In fact unit sales were up 1.5%, which indicates that consumers are willing to pay higher prices today to prevent crib expenses tomorrow. This is an article run my Time Magazine in mid-2009, but it's full of observations and advice. Read more, click here. 

Teach children the value of thrift

By Sharon Cece of Examiner.com (Raleigh)

Children are amazingly resourceful when given the chance. Teaching children how to budget, shop for sales, sort and clip coupons is good for their future resourcefulness.

Continue reading at Examiner.com by clicking here.

Your Tax Refund

BudgetFree Approach
by S. Nanavati

This year the Internal Revenue Service reports an average tax refund over $2,700. Use the principles of the BudgetFree for Life System to prioritize how to use your refund.

Survival Needs:

Food, Warmth, Water, Shelter…

Utilities: If you’re having trouble fulfilling critical survival needs (electric, water and heating, for example) your refund should be used to address these matters.

Mortgage: For those without debt and job insecurity consider lowering monthly housing payments. Refinancing isn’t for everyone – you need home equity, a high credit score to qualify for the lowest rates and $2,000 - 3,000 for closing costs. To figure out whether refinancing is right for you, try this online calculator: http://www.bankrate.com/.

Safety Needs

Are you protected against uncertainty or disaster (insurance, home security, etc)? Do you have an emergency fund? Is your job secure? Do you have the skills necessary to compete in the market place? Are meeting your long-term retirement objectives?

Emergency Fund: If your survival needs are met, building a cash fund should be a priority. My September 2008 Newsletter “Your Emergency Fund,” discusses the importance of maintaining a 6-month emergency cash fund.

Tip: Beyond security, a cash fund allows you to save money. Insurance deductibles are one example. According to the Insurance Information Institute raising your deductible from $200 to $500 can cut 15-30% off your premium. Increasing your deductible to $1000 can bring up to 40% in savings. If disaster strike, your emergency fund will cushion the blow of a higher deductable.

Credit Card Debt: Putting money in the bank when you are paying a higher interest on debt doesn't make financial sense. If your job situation is secure and you're carrying credit card debt use your refund to pay down high interest obligations. Start by addressing the cards with the highest interest.
Long Term/Retirement Investing: The correction in the stock market has created an investment opportunity for those with a long-term horizon. If your credit card debt is paid off, you have an emergency fund and don’t have a need for your refund money for the next 3-5 years put it towards your long-term/retirement goals.

Retirement versus College Fund: There are many ways to fund a college education (loans, scholarships, ROTC, work study, etc), but saving is the only way to fund your retirement. Make certain your retirement plan is on track before addressing a college fund.

Social Needs:

If you're on top of your debt, secure in your job and up-to-date with short/long-term financial planning focus some of your refund on personal aspirations – vacation, membership, whatever lifts your sense of belonging and acceptance.

Esteem Needs:

Invest in Yourself:
• Hire a career coach or personal trainer
• Attend classes that enhance knowledge and skills
• Attend a conference to network, increase knowledge and possibly find your next job

Tip: Adjust your withholding so next year’s refund isn’t so large. The IRS provides a withholding calculator so you can fine-tune your taxes to get more in every paycheck. Make sure to automatically transfer this extra money to a savings account so it’s put towards your goals, not your whims.

Guest Blogger: Money Smart

This month’s guest writer is Vijai Anand. Vijai writes articles on becoming “money smart” for his website www.moneyreallymatters.com. Last year, when I started www.GivingGrinch.com, Viaji was the first person to interview me (link). This year he agreed to share his financial philosophy with my readers.


Money Smart by Vijai Anand (www.moneyreallymatters.com)


In recent months financial security has become a priority. Are you in control of your finances? Are you Money Smart?


What is Money Smart? Is it clipping coupons, being the first in line for a big sale, signing up for freebies or raffles or comparison shopping online? I don't see anything wrong with saving money, if fact a dollar saved is two earned. Need proof? Check out this article: (Link). Nonetheless, these activities do not make a person Money Smart.


Money Smart is about Making Extra, Spending Wisely, Saving Graciously and Managing Right.


Make Extra

I encourage everyone to profit beyond your job. There are many ways to make extra money. You can turn your passions or hobbies into an income stream. Visit a local farmers market for ideas. You’ll see people selling homemade soap, spice rubs, jewelry, craft work, etc. Another example is to write an eBook. Maybe you’re a musician. Put together a book of lessons and sell it online for a nominal amount (say $10). Even if only 10 people buy your book every month, it adds up to $1200/year in passive income! Bottom Line: Tap into your abilities and you will find a niche to making extra cash.


Spend Wise

As our needs grow so do our costs. We need a roof over our head, food, clothing, gas and so forth. Therefore, it’s important to prioritize how we spend our money. Always keep in mind the difference between a need and a want.

An example, if you don’t own a television, buying a new one for a reasonable price is spend-wise. If you already a have nice TV and buy a big screen set in time for Super Bowl, that’s a different story. This is not a need, but a want. Everyone has different income considerations, but the need versus want principle can be applied to purchases (and incomes) big or small.


Save Graciously

Savings are like antibodies. If you have enough you become resistant to bad diseases. Without ample savings you will struggle when there is an unplanned need for money. Remember, patience is virtue so put money away on periodic basis. If you have children, take a queue from them. You don't have to open a bank account. Use a piggy bank and every day toss in your spare change. Some people have a five dollar rule, every time they receive a five dollar bill, they put it to savings. You’ll be surprised how quick it can grow to hundreds of dollars. If you’re a “spend first, save later” type set up an automatic savings plan with your bank to ensure you only spend what remains.


Manage Right

It’s your money - you earned it - you should have some control of it. Don’t let others make decisions for you. You can take the advice and guidance, but you need to know enough to be able to manage your money the way you see fit.

For example, if you plan to buy a home or save for a child’s education you can talk to an expert, do research on the internet or discuss with peers. The point is to collect information so that you can make an educated decision on how to channel your money to meet your goals.


Money Smart

By now you’ve probably realized that becoming Money Smart is not a bunch of tricks and tips. Money Smart is about changing your thought process and taking actions to make a positive, long-term difference in your life. You can start out slowly, but be consistent.

1. Think about ways you can make extra, spend wise, save graciously and manage right.
2. Learn good money management tips and techniques from various resources (Internet, community groups, expert advice, etc).
3. Read books and magazines that focus on money management, savings ideas, etc. I recommend a few books on my site, www.moneyreallymatters.com.
4. Attend free seminars or workshops arranged by libraries, banks and financial institutions, but filter out the marketing (sales) pitch and scare tactics; take only the information you need. Remember, if a pitch sounds too good to be true, it probably is.
5. Steadily change your habits and implement the ideas and strategies you’re learning.
6. Teach your kids about money to cultivate a culture of saving.


As Lau Tuz said, “A journey of thousand miles always starts with a single step.” When you put it all together, being Money Smart is about personal financial literacy – the first step to financial security.

About the Author

Vijai Anand is a senior web developer by profession and the owner of a web design shop www.igurus.net. By passion he is a husband, father, self made investor, money mentor (pursuing his CFP) and entrepreneur. He writes freelance and for his website www.moneyreallymatters.com.

A Nation of Value Shoppers

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GivingGrinch.com
BudgeFree for Life!
Editor: Shreyas Nanavati
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Blog: http://www.givinggrinch.blogspot.com/
Website: http://www.givinggrinch.com/
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March 2009: A Nation of Value Shoppers

Everyone is talking about cutting costs. It’s en vogue in daily media discussions. What encourages me is how this topic is being approached. We’re willing to spend, but demand more for our money. We still travel, dine out, go to the theatre, etc. Extravagance is in a downward spiral, but if the price is right our wallets will open. One example is travel. A family trip is no longer considered a luxury; it’s an annual activity. This year travelers want to know exactly what they are paying for in advance and are opting for all-inclusive or packaged vacations over a la carte. Meanwhile, hotels and airlines offer deep discounts to lure you their way. It’s not surprising that corporate travel is down this year, but leisure is not. To the chagrin of hoteliers, trips planned around stays with friends or family is also on the rise. If your family vacation is on the fence, download the Master List from either http://www.givinggrinch.com/ or http://www.givinggrinch.blogspot.com/ for more value-oriented travel suggestions.

BudgetFree for Life Consulting (2.0)

Based on feedback from my clients, I’m putting the finishing touches on my BudgetFree for Life Consultation Service. Tailored for individuals, couples or families, this package comes with all the training, tools, techniques and support you’ll need to live BudgetFree for Life. It’s an affordable way to bring fiscal and personal balance to your life. To learn more, check out my 60 second presentation:

GivingGrinch: Budget Consultation Service

View more presentations from Shreyas Nanavati.

BudgetFree for Life Tip: Annualize to Minimize Habit Spending

If you want to understand the magnitude of habit shopping think annually. For example, a $2 cup of coffee may seem like chump change, but repeating this habit daily costs $730/year. Take stock of your habits and determine if they are getting in the way of more important needs like health care, an emergency cash fund, eliminating credit card debt or even saving for a vacation. The solution isn’t necessarily to stop the habit. Rather, it’s to understand how it brings value to your life so you can find ways to fulfill the need in conjunction with meeting the needs of other areas. For instance with coffee, here are three suggestions: cut back on the frequency, brew at home or bring your favorite blend and brew at work. Habit shoppers must also beware of check-out lines. Annualize all the magazines, candy, gum and other small dollar items you reach for than ask yourself, how exactly is this adding value to my life? Here are a few examples clients and readers have shared:

Safety Needs:

• It’s only a $45 parking ticket; unfortunately I seem to get one monthly by forgetting to feed the meter. Annually, that’s $540 I could have put towards replacing my worn out tires! – P. Johnson, Reader
  

Social Needs:

• Once a week I go out with friends from work. I always order Grey Goose vodka. After a couple drinks, my tab with tip is around $30. I really didn’t care what I drink; Grey Goose just rolls off my tongue. I still go out, but ordering happy hour specials cut my bar tab in half. Annual Savings $750. – S. Hanson, Reader
• The only reason I still have HBO, Showtime, Star and Cinemax is because I didn’t cancel after the free trial expired. It costs me an additional $40/month and I rarely watch those channels. I also have NetFlix. I kept NetFlix and cancelled the pay channels. Annual Savings $480. – J. Hayes, Client
  

Coupons Hot, Clipping Not
Coupons can save a lot of money, but not everyone likes to clip. In the future we may not have to. There are now services that link coupons to loyalty cards or to personal PDA/cell phones eliminating paper clippings at checkout. The Wall Street Journal recently discussed this trend. http://online.wsj.com/article/SB123551425475363603.html?mod=most_emailed_day.

• A few sites to get you started:
• Shortcuts.com is linked to the Kroger loyalty card
• Smartsource.com is linked to Giant Eagle
• CellFire.com has partnerships include Kroger and Hollywood Video and sends coupons to data network-enabled cell phones
• Coupons.com will soon launch electronic coupons linked to a number of chain store loyalty cards as well as a cell-phone based application

Before you jump on this bandwagon, I would like to remind you of advice I offered in the Houston Chronicle last year (http://givinggrinch.blogspot.com/2008/10/welcome-houston-chronicle-readers.html).

“Coupons are marketing messages. If you know what you are shopping for and you find a coupon to match that, then you worked the system, but if you get something unplanned because you had a coupon, the system worked you.”

Another tip, a coupon does not guarantee you the best deal. Always scan the aisle for alternative.

The Gift of Time

***********
www.GivingGrinch.com
BudgeFree for Life!
Editor: Shreyas Nanavati
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Visit the GivingGrinch Website: http://givinggrinch.com/
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This Thanksgiving my family came to town. We cooked, ate, played board games and drank lots of wine. Over the weekend I made a few observations and came to a conclusion that we don’t need to break our budget to celebrate the holidays.

The first observation was my dog’s tail wagging like crazy simply because there were more friendly faces in the house. Second, I noticed a friend’s young child vying for attention (in the cutest way) with her younger sibling. Finally, I was reminded by an elder that when it comes to family and friends it’s not what you show, it’s what you share that matters.

My conclusion – and I’m not saying you shouldn’t shop for gifts – we can all learn from the basic needs of our pets, kids and parents. What people really want is for those we care about to budget more TIME for us this year.

I’m sure by now you’ve heard about the Wal-Mart employee killed when a mob of shoppers – camped out overnight – broke down the doors and trampled him to death to get dibs on whatever items they valued more than a Thursday night and Friday with loved ones. A new electronic will become outdated in a year and clothes are destined to collect dust in a closet. Dear readers, it’s the season for family and friends, not Macy’s and Nordstrom’s. Two suggestions for a stress free/BudgetFree holiday from Niki in Houston:

• Organize a white elephant party instead of buying a gift for every single person on your annual list. This saves quite a bit of money since you purchase one nice gift instead of several moderately priced gifts. On an emotional level, this eliminates the anxiety of shopping for the perfect gift for each person.

• For family and friends separated by distance consider a secret Santa holiday. Have one person put the names in a hat and select the individual you will shop for this year.

A few more tips to spread cheer where it is most needed this holiday season:

Gifts of Time:

• Offer to babysit – sitters don’t come cheap anymore and the savings are often more then what you would have spent on a gift. Plus, you get to spend some time with their kids

• Make your own gift – baked goods, crafts – provides a personal touch and are fun to make and share

• Help with a large or labor intensive project

• Invite friends over to a pot luck instead of going out

• Offer to teach a valued skill

• Organize a group or community outing. One idea, volunteer as a family or community at a local shelter

Gifting:

• If you have friends in common, go in on a gift together; usually you can give a nicer gift for less by splitting the cost. Suggested by Saheli in San Francisco

• Reuse gift bags. Suggested by Kristin in Michigan

Gifts that WILL go forgotten:

• Don’t buy gifts for your pets. Give them (safe) old toys
• Don’t buy gift for babies
  

Happy Holidays!