Do You Need an Investment Broker? (Carole)

Recently, one of you asked if we thought an investment broker was a necessity, or if it would be better to save the commission money and do your own online investing.  

Even though my husband and I have been consistent investors for many years, I do not consider myself an expert in any way when it comes to investing.  But, I've done a lot of reading about this subject over the years, and every reputable expert encourages having a professional along for your investment ride. 

One of my favorite experts, Dave Ramsey, has an excellent article about this  subject that I hope you will find helpful.   I would encourage you to read this very short article a couple of times.  Investing is a complicated venture and not one to rush into, and you should be careful who you trust with your financial future. 

You can expect that he/she will talk you through some simple yet important questions:

1.  At what age do you want to retire?

2.  What amount of money will you need at retirement?

3.  How much risk are you comfortable with in your investment strategy?

From here you can discuss your current financial situation (income, savings & debt), the amount of years between now and your retirement, and any personal criteria you might have for your investment options.  This person will also have tax advice to share regarding your decisions.   Your investment broker should be a valuable asset and a trusted associate through the years.  

On a personal note, my husband and I are big believers in not keeping all our eggs in one basket, and so we have two separate people we invest with.  Neither one knows about the other.  It just makes us more comfortable to split things up a bit (if one of them were to turn into a Bernie Madoff, we wouldn't lose everything).  Maybe you'll feel the same way too.  

The best advice regarding investing is to START EARLY and BE CONSISTENT.  Remember, when it comes to investing, Slow and Steady wins the race.  

  

  

Trolling the Aisles of Your Super Market

Maybe coupon shopping just isn't your bag.  Maybe you hate even the idea of paging through the newspaper ads and cutting out coupons, or worse yet, printing out coupons online and using your valuable paper and ink!  If this is you, here is an easy way to still pick up some great deals at your grocery store without the scissors or newsprint stained fingers.

Each week during your weekly shopping trip, take an extra 10 minutes and slowly walk down a couple of aisles looking for those lovely $1.00 sale tags -- or 2/$1.00 is even better!  My personal favorites to comb on a regular basis are the personal hygiene and cleaning supplies aisles. You'll be amazed at often your favorite deodorant, toothpaste or window cleaning spray are on sale for only $1.00 (which is typically much less than half the regular price).

If I didn't walk down these aisle WHEN I DON'T NEED these items, I would end up paying full price just a few weeks later -- when I'm desperate.   We've all been there before!

My second little piece of advice is to buy 12 of these items when they are on sale for $1.00.  Instantly you have a year's supply of this product.  Easy Peasy.

Remember, the most expensive item is the one you HAVE to buy right now.  I think it's a cosmic law that nothing is ever on sale at that moment.

The Thirty Day Rule (Merrick)

I hate to admit it, but I have a pretty short attention span. And I have a tendency to get really really excited about things. These two traits combined means that when I get an idea in my head, I NEED to do it right then. I plan the whole thing out in my head and I spend all day thinking and dreaming about it. And if I act on these impulse ideas, which usually require spending money, I suddenly don't care about them anymore. The lust is gone, and suddenly I've spent money on something that I didn't need and now don't even want.

Thus I have instigated the thirty day rule in my life.

This is sort of a standard tip for saving money, but it really works. When I get the idea, I write it down (usually in my google docs so I can organize it and re-access it easily), and then I wait. Despite the temptation to act on it immediately and buy up the entire local home depot, I continue to wait.

And then a few weeks later I browse back through my Google Docs and am able to weed through the ideas. Miraculously, I don't care about 99% of them anymore. If I am still as excited about an idea as I was originally, I know that it's something that is worth my time and money. And if I'm not, it gets trashed.

This rule has saved me tons of money and time over the years because I'm not just spending and projecting willy nilly. I take time to think through the projects that I want to undertake and try to only do the necessary and important ones. Emphasis on try...

Balancing Your Life (Merrick)

With the start of the new year, I'm sure you all have many new years resolutions. This year, I decided to tone down my usual new years resolutions craziness and focus on the essentials. My main goals are to simplify and balance my life. I never want to be one of those women who is doing the laundry or cleaning every day of the week, or going to the grocery store every other day to pick up a few things. I want each day to feel individual and special, and be able to have time to do the important things, like playing cars with my little boy.

So let me tell you about a few things I'm doing this year, although not all of them specifically deal with saving money (but I'm saving my sanity here, and that is worth something!!):

I make bread every Tuesday -- I bake it, cut it up, put it in a bread bag, and it's ready for sandwiches and toast all week.

I clean the house every Thursday -- this includes cleaning both bathrooms, dusting, mopping, sanitizing doorknobs and countertops, and any small organizing jobs that need to be done.

I do the laundry every Friday -- this includes sorting, washing, drying, folding, ironing, and putting away ($$ saved by not running the washer/dryer every day!)

I go grocery shopping every Saturday -- this includes planning my weekly menu, clipping coupons, and then going to my regular grocery store (Smiths), Sam's Club for bulk items, Rite Aid for toiletry items, and Sunflower Market for specialty items. ($$ saved by not running to the store every day!)

In the interest of full disclosure, I babysit my neighbor and have art class on Monday's and Wednesdays, which keeps me busy all day. So I keep those days free of house duties.

Also, we do many small household chores on a daily basis -- take out the garbage, run the dishwasher, clean the counter tops, pick up toys, etc.

By dividing up my week in this way, my life is suddenly more balanced than it ever has been. My laundry basket is full, but I'm not stressed about it because I know it will all be washed and put away today. We are running out of milk, but tomorrow is shopping day so why waste my time by running to the store today (especially when I'll probably come home with $20 worth of groceries!) -- we'll just have toast for breakfast. And each of these daily duties only takes me an hour or two of hands on time, so I have plenty of time for other things during the day.

When you have specific days dedicated to your various duties, you can better commit to each of them and perform better at each of them. You're probably not going to save much more money if you spend hours clipping coupons every day -- you're just going to hate couponing.

So do yourself a favor and bring a little balance into your life this year. Everyone, including your wallet, will be thanking you.

Decorating For The Holidays On A Budget (Merrick)

I love decorating for Christmas, but every year I struggle with our small space, the additional cost on top of gifts, and good ideas that aren't tacky.

Despite my past failed attempts, I was determined to come up with something good. So this year I turned to my new best friend, the dollar store. The store closest to me is The Dollar Tree, and they have an excellent selection of Christmas items -- all for only one dollar! So after a little inspiration from blogs, I made my way to the store and picked up a few fun things. Let me show you what I ended up with:

[three ornament packs, two Dollar Tree vases, one vase I already owned, ribbon from Christmas last year, serving platter I already owned]


[half a pack of ornaments, vase I already owned, candle I already owned, ribbon from last year]




[2 Dollar Tree vases, 1/2 a pack of DT ornaments, 2 packs of DT candy canes, ribbon from last year]

[old picture frame, free printable art from a blog]


[vase I already owned, berry branches from my front yard spray painted white and sprinkled with glitter]


I'm really happy with how these decorations turned out. They're classy and pretty, and best of all I spent less than $10 on everything. It is possible to decorating for the holidays without blowing your budget!

How are you saving on your holiday decorations this year?

Saving on Holiday Shopping (Janssen)

I cannot believe it is December. . .this year has RACED by for me.

And now the holiday shopping season is in full swing. Which likely means at least some shopping.

Two things to help you save a little money this year:

First, my annual plug for Ebates. There are about 1200 participating stores and you get cash back from any purchase you make through Ebates. Just sign up for a free account (you also get a bonus $5 or a $10 gift card for signing up) and then navigate to the store through the Ebates website, then make your purchase as normal. And voila, some percentage back of your purchase price. You'll get a check in a couple of months. I checked earlier this week and over the last couple of years, I've made over $250 (in fact, I have my most recent check for $26 in my purse waiting to be cashed at this very moment). And that's for someone who doesn't do a ton of shopping online. I'm never one to say no to free money.

Second, I just found out about ShopRunner, a program that works much like Amazon Prime (where you pay a yearly subscription fee and then you get free two day shipping on your purchases). Shoprunner works for a number of stores (right now the list is somewhat limited, but it does include Borders, Babies R Us, Toys R Us, The Sports Authority, etc) and if you purchase a membership, you get free shipping with all those stores. But, of course, who wants to pay $79 for that privilege?

As I mentioned, I don't do a lot of online shopping, so I would never pay for an account, but I was certainly happy to sign up for the free 30 day trial. I got three books for five dollars and didn't pay a dime of shipping last week and then I made a HUGE note in my dayplanner to cancel my membership before the 30 days is up. If you're ordering Christmas gifts through any of the participating stores and you can remember to cancel your membership before you get charged, you can get all your shipping free and fast with the 30 day trial. No minimum purchase and, at least at Borders, even items from other sellers (including used items) qualify for free shipping. Also, you can get free return shipping on any purchase, so if you sign up now, you'll still have a few days after Christmas to return things as needed before your free membership expires.

Let me say it again, though, don't forget to make a note to cancel it before you get charged! Spending $79 to save $50 on shipping isn't saving money.

Saving During The Holidays and GIVEAWAY (Merrick)

It is very apparent from your comments on the last two posts that many of you are great at saving during the holidays! We're all very impressed!

There are several things that I do to save money on Christmas.

First, I start early. I don't shop all year long, because I just can't think THAT far in advance. But I usually start around July, making a list of things that my family has mentioned, and then I have six months to wait for those items to go on sale, get a coupon, or find something better. And then all my gifts are done (and sometimes wrapped) before December even arrives. No stress for me.

Second, because I'm a spreadsheet fanatic, I write my list of "Gifts To Give" in an Excel spreadsheet with an "estimated cost" and "actual cost" column. I write down how much I think each item will cost, and then as I buy it I write in how much it actually cost (pennies and everything). This gives me a good idea of how much my total spending for Christmas will be before I even buy anything, and lets me know if I have to cut back on something if the total comes over my set budget. Also, if an item comes in over my estimated cost, I can go through my list of other gifts to cut out anything unnecessary or scour for coupons on bigger ticket gifts so that I stay under budget on my total cost.

Third, I repeat gifts every year. Janssen talked about this yesterday and I think it's a great way to save money. Each year for Christmas I give Philip a photobook of the previous years photos. Because I know that I'm giving it to him each year, I spend all year working on it, waiting for sales, and looking for which photobook site has the best deal. I usually do mine through Shutterfly. I have also signed up for their email list so I get notifications of their sales and always order mine when they're 30% off, have free shipping, or some other good deal.

Today we're giving away Dave Ramsey's DVD: Dumping Debt . Whether you're struggling with credit card debt, trying to pay off your car or house, dealing with student loans, or have no debt and are trying to stay away from it, this DVD is for you. Leave a comment telling us about your favorite gift you've ever given, and we'll announce the winner on Monday, October 11.

Good luck!

What Would You Tell a Teenager About Money? (Carole)

A few weeks ago, I was asked to speak about money to the teenaged girls in our church congregation.  Thanks to all of you and your many good comments on this blog since January, I felt like I knew what kind of information would be most interesting and helpful to these girls who are just on the cusp of adulthood.

Here's what we discussed:

1.  Getting a job and saving 50% of what you earn while in your teens.  I also shared with them examples of impressive teenagers I've known through the years and the amounts of money they've been able to save in their bank accounts by the time they graduated from high school.

2.  The cost of tuition at local and out-of-state colleges and universities.  We even took a look at the cost of elite schools like Harvard and Stanford, just so they would know.

3.  Typical salaries of standard jobs:  surgeon, fire fighter, grocery store clerk, pilot, flight attendant, lawyer, school teacher. . .  and what the monthly take-home pay (after federal taxes) would be for each of these jobs.  So. . .is a college education really worth the time and money invested for your particular profession?

4.  How much adult life costs:  housing, groceries, transportation, utilities and insurance.  True to one of my previous examples of teaching children about money, I brought in $3,000 (which is a typical take home salary if you make $50,000/year -- the average salary in Las Vegas) in cash -- in $10 bills.  Together we paid the bills of a typical family in southern Nevada.  Much to their surprise, we ran out of money, long before we ran out of bills.  This was very eye-opening to this lovely group of girls.

5.  How compound interest works.  We walked through how compound interest works in your favor if you're saving money or investing, but how it works against you if you're paying off a loan or a credit card bill.  We also discussed how the length of the loan (or investment) and the interest rate influence your payment (or return) and the total you will pay (or earn) over the lifetime of the loan (or investment).

It was a fun night, and I felt like the girls were right with me.  But I'd love to know what YOU would have said to them?  What do you wish someone had told you at their age?

Homemade Wipes: Part 2 (Merrick)

Two weeks ago we had a guest post by the lovely Britt, of the Skinny Bovine's Kitchen, where she taught us to make homemade wipes.

Have you tried them yet?? I haven't yet, but I'm looking forward to saving tons of money and having some bragging rights about the fact that, you know, I make my own baby wipes.

Well Britt has kindly provided us with some photos of her wipes, which will probably make your project a little easier.




Also, just for your convenience, here are the directions again:

Buy a Rubbermaid, Servin' Saver, 6 cup container. I know you can find them in a 3 pack (with 1 bigger and 1 smaller) but I haven't had much luck finding them by themselves. They are pretty much exactly the shape of 1/2 a roll of paper towels, with a rounded-edge square lid.

The paper towels that fit perfectly (once cut in half with a sharp knife) in them are the regular Bounty ones (not jumbo roll, I buy the 8 pack, makes 16 batches of wipes). I use 1/2 a wipe at a time. Though we recently discovered that the bigger roll Bounty towels that are separated into 1/2 size paper towels work great too if you just tear off a few of the paper towels before you cut them. Then they are already 1/2 sized and you don't have to tear them. (This is my husband's preference). My aunts swear by homemade wipes, but they also say that Bounty is the only brand that really works, so I haven't experimented much there.

To make them: stuff 1/2 a roll of paper towels into your tub. In a bowl, combine 1 1/4 cups water + 1 heaping Tb baby soap (I use the Wal-Mart brand Johnson & Johnsons copy). Pour over the top of the wipes. They probably need an hour to soak all the way through and then you can just pull out the cardboard in the middle and you're good to go.

Thanks for sharing your awesome saving tip, Britt!

What Would You Do With a Windfall? (Carole)

Many years ago I had a good friend.  She and I lived in the same small town and had children who were just the same ages.  We became exercise partners and often spent entire days at each other's apartments while our children played.  After a year or so, we were both on the verge of buying our first homes.  I was aware that before she was married she had been involved in two accidents and had received two different insurance settlements adding up to a whopping $50,000!  In my mind, they had it made, since we were scrimping and saving to get our own down payment together.

But one day she mentioned that they were going to have to borrow most of their down payment from her parents.  She was unbelievably embarrassed to do so, because now her parents would know that she and her husband had blown the entire amount!   I don't know how they spent all that money.  I do recall they had a ski boat and an old truck to pull it with and their kids had a lot of cool toys, but beyond that I couldn't see where it had all gone.

I've often thought of my friend during these past 25 years.  What COULD they have done with that much money that would have been smart?  In reality, the possibilities were endless, but here are three super frugal choices.

1.  Bury it in their backyard or put it in a safety deposit box.  In 5 years they would still have had their $50,000.

2.  Put it in the bank.  In the mid 1980's an average money market account earned 7.71% (these were the high interest Jimmy Carter years -- great if you had money to invest, horrible if you needed to borrow it) and at the end of five years they would have had over $73,000.

3.  Buy a house.  In the 1980's, $50,000 would have been a hefty down payment on a starter home.

What would you do if you suddenly found yourself with a large amount of money right now?

Saving Tips for Travel (Merrick)

As you know, this week's posts are about saving money while traveling. This subject was a little tough for me because we do most of our penny pinching at home and then do a bit of splurging for our vacations. But despite that, I was able to come up with three ways that we tend to save money on vacations:

1. Restaurant.com: I talked about this in an earlier post, and it sort of relates to Janssen's idea of planning where you eat. It does take a little foresight, planning where you'll be on a given evening during your vacation and choosing something that you hope you'll be in the mood for once your vacation arrives. But those problems aside, it's a great way to save tons of money and try out great restaurants. Especially if you join their email list and get notifications of their 80% off promotions. We've used this several times and have never been disappointed.

2. Rewards Programs: There are lots of travel websites that have rewards programs; the two that we most frequently use are Southwest and Hotels.com. As you probably know with Southwest, you get free flights as your flight points accumulate. With Hotels.com, you get a free night when you book 10 nights through their site. This presents a great opportunity to stay in a really nice hotel, or fly somewhere expensive. It pays to be a loyal customer.

3. Upgrade when you get there: For my husband, Philip, one of the most important things when we travel is the hotel room. However, booking a suite or room with a view is usually pretty expensive. We've found that if we book the cheapest hotel room online, we can upgrade once we get there. If the hotel isn't full, they will often do this for free or for only a few dollars more per night. A great way to save money and get the room you want.

We've said it before, but we'd love to hear more ideas of how you save when you travel!

The 10/50/40 System (Merrick)

As long as we're talking about teaching finances to your children, let me tell you a little about what my parents taught me. From several of your comments, it sounds like your parents taught you similarly.

We did the 10/50/40 system:

10% to church tithing
50% into savings
40% for personal spending

Every dollar from babysitting, working at Dad's office, and lemonade stands was divvied up this way.

It's not quite as cut and dry anymore, but as adults, we still try to think in the same way. For us, 10% tithing always comes first, and after that we pay all our bills. Once that is done, I have budgets for groceries and gas, and then try to save 100% of the remaining money. Obviously that doesn't always happen, but that's the goal.

Although I no longer follow the 10/50/40 system meticulously, I fully intend to pass along this system to my children. I think it's a great and very simple way to help your children understand the importance of saving. Especially because that college savings fund could easily be blown on candy if you don't teach them how to save.

What are your saving/spending systems, and what you do currently (or plan to) teach your children?

Evites (Merrick)

I recently received an email invitation for a friend's bridal shower. A few weeks before this, I received an email baby announcement from my cousin. And a few months previous to that, I had two baby showers where the invitations were sent via email.

Although the email wedding announcement that I recently received seemed to be a little strange, I see nothing wrong with using email for bridal and baby showers, baby announcements, birthday cards, or party invitations. In fact, I think it's genius.

For my baby shower, we designed our own invitation and reminder in Photoshop, then inserted the image in an email. We sent out the invitation a week before the shower, and the reminder the day before the shower, and people could directly RSVP by replying to the email. So simple!

However, if you don't have Photoshop, or don't want to design your own invitation, there are lots of good websites that let you make and send your evites for free, including evite.com, Purpletrail.com, Mypunchbowl.com, and Pingg.com. These do the work for you, sending out all the invitations, sending a reminder, and allowing the guests to RSVP and see other guests who have RSVP'd.

Email is such a good communication resource, and best of all, it's free! So next time your gearing up to buy invitations, envelopes, and several rolls of stamps, think about sending an evite.

Automate Your Savings (Carole)

You've probably heard the oft-repeated phrase, "Pay Yourself First."  These just might be the most important words in the English language when it comes to your financial health.  If it's all you can do to pay the mortgage, utilities, groceries, car payment and insurance and you are not putting money aside in some kind of savings vehicle on a very regular basis, then you will never get ahead financially.

The only way to long term financial stability is to put money away somewhere for the future.  You can call this savings account whatever you want:  Emergency Fund, Rainy Day Money, Retirement. . .  Guaranteed the day will come when you will be glad it's there waiting.

If a personal savings plan (in addition to a 401k or IRA) is not part of your current budget and seems absolutely impossible, take heart.  Everyone feels this way!  It almost doesn't matter how much money you earn, you can easily spend it all.  We've all learned that if you make more money, then your bills automatically go up by at least that same amount.  I think it's one of Murphy's Laws.

To stem this tide, you need to set your personal savings plan like any other BILL THAT MUST BE PAID.  Pay yourself -- every month, or every paycheck.  My husband often tells of our first experience with this.  We decided (after being married for many years) to have $100 electronically removed from our checking account every month and put into a money market account.  We both almost hyperventilated after setting it up!  Could we really afford this???  Would we have to transfer it right back within seconds of having it taken out?  Maybe you feel those same fears.

But guess what?  The $100 came out the next month and we still paid all of our bills.  Whew.  And it happened again the next month and the next month.  It was magical.  And easy.  Unbelievably, we didn't really miss it.  Most budgets (even tight ones) have more wiggle room than you think.

After a few months, we sucked in our breath again and increased the amount to $200.  Same thing.  We didn't miss it.  But we did love watching that money market account grow bit by bit each month.  That gave us some serious endorphins to keep going.

After a year, we decided to really ramp things up and increased our auto-withdrawal amount to $1000!  Surely this would kill us.  But it didn't.  We survived and paid all our bills.

Start small.  But start.  I'm not saying you need to do the same amounts we did, but try something.  Call your bank or get online and set yourself up for an automatic withdrawal to some kind of safe savings vehicle (CD, money market, savings account. . .) and watch your stress level go down as your personal savings goes up.

This is what's called "Getting Ahead."

Setting Financial Goals (Carole)

Anyone who knows anything about my husband knows that he is a goal setter.  I'm not sure how old he was when he set his first goal, but by the time I met him when he was 23, it was deeply entrenched in his soul.  In fact, when we were on our honeymoon back in the summer of 1983, he insisted that we take the time to write down our life goals.  These goals dealt with education, career, lifestyle, finances, travel, life experiences and habits to name a few.  We still have the original papers we wrote these down on in our Goals Binder that is kept at his desk at home.  We bring these sheets back out at least once a year and review how we're doing.  I'm frankly flabbergasted at how many of these goals we have achieved over the past 27 years!  We continue to set goals every year (both as a couple and individually), but we especially enjoy looking back at those original goals.  A few of them didn't turn out to be realistic or even relevant, but many of them were right on track.

You'll not be surprised that paying off our student loans in five years, paying off our house early and a set $ amount saved for our retirement years were a major portion of what we talked about that day.  In 1983, David was just about to begin his 2nd year of dental school and we were right in the middle of the whole student loan thing.  The idea of even buying a house was still years in the future and retirement seemed light years away.  But even so, we tried to make our best guess for
1.  How many years until we would be able to buy a house?
2.  What would a dental practice cost?
3.  How many years would it take to pay off our student loans?
4.  How much money will we need to retire in 2030?
This was an exciting discussion!  Our entire lives were ahead of us.

Now 27 years later (our anniversary is 2 weeks away) we've accomplished MANY of these goals -- and amazingly close to the dates we chose way back then.

I would highly recommend that you take time to think your life-time finances through, map out a plan and write it down.  I would encourage you mix in a hefty dose of Blue Sky with your Reality.  You really need both.  I think goals should move you forward at a speed (and maybe in a direction) that normal life would not.  If this were not true, why bother?   It's nice to be able to look back every year at a written goal sheet and be reminded of what you had hoped for when you were young and idealistic.  Maybe you'll discover you're ahead of the game in a few areas and possibly you'll be grateful for a nudge to get moving forward again.

What is a Mutual Fund? (Carole)

Sometimes we hear financial terms (maybe even use them ourselves) and yet don't really know what they mean.  Maybe the term Mutual Fund falls into this category for you.  I'm going to try explain what a Mutual Fund is in less than 200 words.  Here we go. . .

*A Mutual Fund is a pool of money (millions and millions of dollars) from thousands of investors.  Get it?  You are all mutually funding this huge investment vehicle. 


*These millions and millions of dollars are used to buy DIFFERENT types of stocks (or possibly bonds) within this one Mutual Fund.  Your Mutual Fund can own stocks from stores, high tech companies, oil companies, banks. . .whatever businesses out there are selling stocks.  

*These diverse stocks are carefully chosen by a Fund Manager.  His or her job is to choose wisely and broadly so that if one segment of the financial world (say, the price of oil) goes down, chances are that a different segment of the financial world (say, the value of Wal-Mart stock) goes up.  The Fund Manager's needs to make sure you own both kinds of stock, so your investment money is safe -- and hopefully earning interest.  Actually their job is to make sure you own dozens of different kinds of stocks that can balance one another out, which greatly reduces your risk.  With this kind of diversity, the chance that you will lose all of the money you (or any of the investors) have put into the fund, are very very small.  

That's it.  That's all a Mutual Fund is.  You can purchase Mutual Funds that specialize in a particular philosophy or segment of society:  Green Products and Technology,  International Companies, U.S. only based companies, Christian Principles or just about any niche you can imagine.  Mutual Funds are also divided into categories based on how risky the stocks are that the Fund owns.   Your investor can help you determine how much of a gambler you really are as you choose your Mutual Funds.

The reason most small investors like Mutual Funds, is because they allow you to have a very diverse portfolio of investments with very little money invested.  If you had $2,000 invested on your own in the stock market, you could probably only afford to buy a few stocks in a couple of companies.  But in a Mutual Fund you will own parts of hundreds or thousands of different stocks.

Mutual Funds tend to be a much safer way to invest your hard-earned $$.

The Magic of Compound Interest (Carole)

When you are investing money, there are two basic types of interest your money can earn:  Simple Interest and Compound Interest.

Quickly, let's look at the difference between these.

Simple Interest 

(Interest is only calculated on the money you have invested):  

If you invest $10,000 (your principal) at 5% interest for 20 years:

$10,000 x 5% x 20 years = $10,000 (interest earned) 

Add this interest earned to your original $10,000

$10,000  + $10,000  = $20,000

Compound Interest 

(Interest is calculated on your invested money PLUS your previously earned interest):

If you invest $10,000 (your principal) at 5% interest for 20 years with compound interest  you'll end up with $26,532.98 .   


The formula is a bit complex and hard for me to type out, but you can look it up here if you just really need to see it for yourself.

In addition:

The more often  your compound is calculated (daily, monthly, yearly) the more interest you will earn.  Daily Interest = $27,180.96
Monthly Interest = $27,126.40
Yearly Interest = $26,532.98

The longer your money is invested the more interest you'll earn.  Your same $10,000 at 5% for 30 years turns into $43,219.42   Same money, same interest for 40 years is $70,399.89

The higher your interest rate, the more interest you'll earn.  Your same $10,000 at 10% for 20 years will become $67,275.00

Combine longer time and higher interest and it starts to get really fun:
$10,000 at 10% for 30 years =  $174,494.02
$10,000 at 10% for 40 years =  $452,592.56

$10,000 at 12% for 20 years =   $96,462.93
$10,000 at 12% for 30 years = $299,599.22
$10,000 at 12% for 40 years = $930,509.70  (yep, nearly a million $)

Imagine if you could scrape together only $10,000 by age 20 and find a good mutual fund that paid 12% interest (not that difficult really) and just LEFT YOUR MONEY THERE until you were 65 years old, you would have $1,639,876.04   That's without you ever adding one more cent of principal to this investment.  The sooner you can get investing in something earning a decent interest rate, the better off you will be at retirement.


That is magic.  If you want to work some magic yourself, here is a compound interest calculator.  I'll warn you -- it's addictive!

P.S.  Your mortgage (or car payment, student loan, credit card bill. . .) works on a compound interest formula in your lender's favor.  That is why you often end up paying 3 times the cost of your house by the time your loan is completed.

Food Storage (Merrick)

When we did our 100th Post Giveaway, someone commented about food storage, and it got me thinking. I grew up in a home where my dad was a huge food storage guy. We drank powdered milk, made wheat bread from canned wheat, and froze large quantities of fruit from the trees in our garden. But growing up this way isn't the only reason I'm an advocate of food storage; here are a few other reasons:

1. Having food storage can decrease your weekly purchases at the store. Food storage doesn't have to be, and shouldn't be, only lentil beans and potato pearls -- it should be things that you want to eat and will eat. It's the "overbuyer" concept. When I make up my weekly menu, I go through my list of ingredients and see what I need and what I already have. If I purchased extra canned tomatoes or cream of chicken soup when they were on sale a few weeks back, that is one less thing I have to buy this week. Or if my budget is tight on a particular week, I can look in my pantry and build my menu around pasta or canned green chilies that I already have. If you're a couponer, use those coupons or wait for the big sales, and stock up on items you know you will use. Then when you go to make your grocery list, you will already have half of the ingredients.
2. In this economy with frequent layoffs and salary decreases, it's nice to have a food cushion. I know several people who have lost their jobs and have been able to live very cheaply because they can live off their food storage for a few weeks or months.
3. With all of the earthquakes, hurricanes, and other natural disasters that have hit so many people recently, there is no doubt in my mind that a little extra food in your pantry is a good thing, just in case you can't get to the grocery store for a few days.

Now obviously the nature of this blog is saving money, and building food storage costs money. But as I mentioned above, wait for the sales (especially caselot sales), use coupons, or just buy two cans of beans instead of one each week, and soon you'll be on your way to a nice supply of food without breaking the bank.

Multiple Streams of Income

For the first year and a half of our marriage, I was still in school finishing up my bachelor's degree. Although Philip was working full time, his starting salary was somewhat small, and with the cost of school, plus a mortgage, our savings was doing anything but increasing.

Once I graduated, I immediately began a full time job. The difference in our bank account was unbelievable. With both of us working, we were suddenly saving a huge amount of money, and happily watching our bank account grow for the first time in months.

But we didn't stop there. We realized the value of multiple streams of income, and since then we have continually been on the lookout for extra income opportunities. For example, last summer I made and sold many embellished t-shirts. We frequently go through our house and find unwanted or duplicate items that we can sell on craigslist or at Plato's Closet. I have also made and sold headbands, clips, and hair ties.

Now, since I no longer have a job because I stay at home with my baby, I do commission artwork, and recently began teaching children's art lessons, which brings in quite a bit of extra cash.

Already having a job, or being a full-time mom shouldn't stop you from finding other methods of income, because every bit makes a difference.

If you sit down and think about it, I'm sure you can come up with something simple and not too time consuming that you could do to earn extra money. You'll be amazed at the difference even $10 a week can make to your bank account.

Any great ideas??

Financial Goals (Janssen)

Two months ago, my husband and I paid off the last of our student loans, making us completely debt-free. It was glorious.

Once those were gone, though, we had to figure out what our new financial goals were. This was a little tricky because now instead of having one single-minded purpose for any extra money, we had so many categories we could consider - investing, emergency funds, vacations, a new baby (that makes it sound like we are saving to buy a baby. . . ), cars, etc.

We sat down together, looked over our finances and our budget and decided that our priorities were the following three:

1. A fully-funded emergency fund. Following Dave Ramsey's steps, we had previously had an emergency fund of $1000 before we began pounding away at our student loans. Once you're done with your debt, however, he recommends an emergency fund that could support your family for 3-6 months. We reviewed our budget and decided what that amount was for us and started working away at it as quickly as we could. The good thing about this goal is that it has a finish line - once we got that dollar amount in the account (actually, we have it spread out over several accounts at different banks), we could just leave it and move on to our next goal.  
2. Long-term investing. We significantly increased the amount of money we contribute into my husband's 401(k). Because time is on our side at this point, we wanted to take advantage of that, as well as the match that his company provides. 
3. A down payment fund. We currently are renters and probably will continue to be for the next several years, as we don't want to buy another house until we are certain we will stay in it for at least five or more years (we owned a house in Texas for three years and even after selling it for more than we paid for it, we still would have come out ahead if we'd continued to rent for those years - a house is a money pit). Our goal is to have a down payment of 20% since this would allow us to avoid paying mortgage insurance. We have a fairly good idea of how much the kind of house in the locations we're considering would cost us, so while we don't have as solid a number as we do for our emergency fund, it's a pretty accurate ballpark figure, I think. 

It's not as easy to figure out how to approach these goals as it was with our student loans since we knew it was a short time period where we could be incredibly focused. We're less interested in sacrificing all fun for several years than we were in making do on very little for six months. On the other hand, knowing what our long-term goals are and what the payoff will be, it's easier to be a little more careful and a little more frugal.