What is an IRA? (Carole)

You probably already know that IRA stands for Individual Retirement Account.

It is the U.S. Government's way to encourage each citizen to save up to $5,000/year (or $6,000/year if you are 50 years old and older) with some pretty nice tax benefits.  This means a married couple can save up to $10,000/year (or $12,000 if you're both 50 or older).

There are two types of IRAs.  Traditional and Roth.  They are quite different.  Here are the basic concepts of each.

Roth IRA

*  If you file your taxes singly, you have to earn $120,000 or less that year to invest in a Roth IRA.  If you are married and filing jointly, you have to have a combined income of $177,000 or less for the year.  These amounts change nearly every year, so check with your investor for the current limits.  In fact, I found various $ limits mentioned for 2010, but the above amounts seemed to be the most accurate.  Investing through a government plan is a bit confusing!  A good banker or broker will easily navigate you through it all.

*  Your contribution is NOT tax deductible, but ALL the principal and interest earnings are tax free when you withdraw them after age 59-1/2.

*  You can withdraw your principal (the money you actually invested in the Roth IRA) at any age with no penalty.  But you will pay penalties if you withdraw any of your interest earnings before age 59-1/2

* Your Roth IRA money can be invested in almost anything:  stocks, bonds, CDs, investment property. . . through a bank or brokerage.

Traditional IRA

*  There is not an income requirement to invest in a Traditional IRA.

*  Contributions ARE tax deductible.  However, taxes (on principal and interest earned) will be charged when you begin to withdraw your money.

*  You cannot withdraw any of your contribution or interest earned until age 59-1/2.  You do not have to withdraw at that age, but MUST begin withdrawing by age 70-1/2.  If you withdraw your money before you are 59-1/2 there is at least a 10% penalty.  Ouch.

*  Again, your Traditional IRA can be invested in almost anything:  stocks, bonds, CDs, investment property. . . through a bank or brokerage.

To max out your yearly contribution would be a monthly investment of $416.67 per person (or $500 per person/month age 50 and older).  However, your contributions can be made in any increment at any time, and you do not have to reach the $5,000 limit.

$10,000/year savings might not sound like it will ever amount to much, but if you can consistently put that away in either kind of IRA from age 40 until you retire at age 65, you'll have over $1,000,000.  Just think how much you'll have if you start investing in your 20's!!!  The earlier you start saving any amount in an IRA, the more money you'll have at retirement -- remember, compound interest is your very best friend over the long haul.

Frugal Shopping (Merrick)

If you're anything like me, sale racks lure you in. I often find myself in Old Navy and being tempted to buy items only because they're $5.

Because I know myself and know that I will do this, and then end up with items that I don't love, I have come up with a few shopping guidelines. Now every time I take an item off the rack, I ask myself these three questions:

1. Do I love it?
2. Will I wear it?
3. Does it fit in with the style of my current wardrobe?

Now, I still occasionally buy things that I don't end up loving, but with these guidelines I buy more things that I really love and will wear. Being frugal is not just about buying a $5 skirt; being frugal is spending your money on something that you'll actually wear. Think about it as price per wearing. A five dollar skirt that you never wear will remain five dollars. The price per wearing for a twenty dollar skirt that you wear once a week will soon cost only a few cents.

So the next time a sale rack lures you in, think about these three questions and make sure you're spending your money on something that you actually want and really love. Your wallet and closet space will thank you.

DIY Gifts (Merrick)

I like giving gifts, and I've always considered myself pretty good at it.

Because gift giving is important to me, but I have many people to buy for, I have a few criteria when coming up with a gift:

- inexpensive
- easily duplicated for multiple birthdays (I'm all about finding gifts that I can do for both of my sisters and my sister-in-law)
- creative
- DIY (because I think homemade gifts are just a little more personal (but take note I don't always give homemade gifts))
- somewhat easy

So, like Janssen does with Christmas gifts, I spend the whole year coming up with ideas: scouring crafting blogs, jcrew, anthropologie, and other websites, and then saving the image or the link so I can easily refer back to it.

One of my favorite DIY gifts that I've made and given to many people is an embellished t-shirt. The idea came from a top someone was wearing in a TV show. After watching the show and spending the rest of the day thinking about that shirt, I scoured hulu.com until I found the scene, took a screen shot, and saved it to my "to make" computer file. Then that week I went out and bought the material to make it.

Here's how it turned out:
I love this shirt so much that I have to force myself not to wear it every single day.

You can do it a myriad of ways but here's how I did it:
Materials:
- one t-shirt (when I'm doing these as gifts, I wait until Old Navy, Kohls, or Target is having a sale and I buy them for $5)
- 1/4 yard fabric in the color of your choice (Joann's always has cheap cotton in a million colors, and often has 40% off coupons available online -- this makes it less than a dollar, usually)
Directions:
1. Cut the fabric into long strips about 3 inches wide, then twist and spiral each strip of fabric around itself to make a flower
2. Using a sewing machine or needle and thread, make stitches in several places around the flower to secure the shape
3. Repeat for each flower
4. Using a sewing machine or needle and thread, tack each flower to the neckline of the shirt
5. Using a needle and thread, sew the edges of the flowers together so they don't gap when the shirt stretches over your body.

Approximate cost for this darling embellished t-shirt: $5.80

With a price like this, you should be making these for everybody you know.

Small Spaces - Part 2 (Merrick)

In my last post about small spaces, I talked about how we made more storage space before the house was built. Today I want to talk about making more storage space after your house is built, because this is probably much more applicable to all of you.

When we bought our house, our laundry room looked like this (not the best picture, but it's the best that I have. Basically the room had one shelf and one hanger rod..that's it):


Today, it looks like this:





After three years of living in this condo, it was stuffed to the gills. With the addition of a baby, we just needed more storage space. We had hoped to sell our home before the baby came along, but when it didn't sell, we were forced to turn every bit of unused space into storage space.

We bought the materials at home depot, they cut all the boards for free, my dad drove up for the weekend, we borrowed a table saw, and I painted it with the free white touch-up paint that our builder gave us when we moved in. Now we have a customized laundry room, all for around $150.

By using all the empty and unused space above the washer and dryer, we now have a place to store all my paintings (of which there are a lot, as you can see), diapers, toilet paper, the sewing machine, laundry detergent, and bunch of other things that didn't have a home. Most of these used to sit on the floor, and there is nothing worse than watching your floor space shrink by the day as more things get stacked next to each other. So not only do you not lose square footage, you also increase the value of your home with off-the-ground storage space. Win-win.

Now, if you don't have a handy-man dad like me that can build an entire shelving unit from scratch, home depot has a lot of pre-made shelving units that pretty much only require a screwdriver and a hammer to install. IKEA also has complete storage systems, or even simple single shelves you can easily install and create extra storage space. And all of it is really pretty cheap.

Having a small space is no excuse not to be organized, have food storage, or have plenty of storage space. All it takes is a little creativity and a few nails.

Why You Want a 15 Year Mortgage (Carole)

There are 4 excellent reasons to have a 15 year mortgage:

1.  You will build equity in your house much faster, since each monthly payment has a larger percentage of your money going toward the principle.

2.  You will own your house (FREE AND CLEAR) in 15 years.  You'll be amazed at how quickly 15 years passes in your adult years.

3.  You will save tens of thousands of dollars in interest on a 15 year mortgage compared to a 30 year mortgage.  More about this in a minute.

4.  Interest rates are typically .5% lower on a 15 year mortgage.

Take a moment to visit a mortgage calculator .  Type in your own mortgage information (full amount of your loan and interest rate) using a 15 year time line and then do it again with a 30 year time line.  Have the calculator figure out your amortization schedule and scroll down to the bottom to see how much interest you will have paid to your lender over the life of your loan.  You'll see that even though your monthly house payment will go up a bit with the 15 year mortgage, you will save more than HALF of the interest $ you would have paid with a 30 year loan!

Here is an example:

30 year mortgage on $150,000 at 7% interest.  Your monthly payment would be $1097.75.    During the 30 years that you pay on your loan, you will pay your lender $209,263.35 in INTEREST.  (This means you will have paid way more than double the original price of your house).  Ugh.

15 year mortgage on $150,000 at 7% interest.  Your monthly payment would be $1348.24.  During the 15 years that you pay on your loan, you will pay your lender $92,683.63 in interest.  So even though your monthly payment went up by $250.49, your overall savings on this loan is $116,579.72.  Fantastic!

Yes, you can do this on your own by getting a 30 year mortgage (with the lower monthly payment), but paying at the 15 year payment rate.  This plan gives you wiggle room if you ever hit some hard times and need a lower monthly payment to fall back on.  Just make sure you're the kind of person who is very disciplined and will keep to the 15 year schedule.

Remember, housing is one place you want to be very, very careful with your money.  Your ability to save yourself hundreds of thousands of dollars is very real.  Take the time to do your homework -- and reap unbelievable rewards.

Cheaper Cleaning Products: Part 4 (Merrick)

I recently found a recipe for homemade furniture polish. I have a wood cleaner that I frequently use, but it leaves little spots on my front table, which looks terrible. So when I found this alternative that was cheap, healthy, and got good reviews, I decided to give it a try it out and give a review of my own.

Here's the recipe:

Needed
Cooking oil (no need to waste the good stuff on this, cheap unhealthy stuff will do fine)
Lemon juice
2 rags
1 container to hold the mixture (cup, basin, or bottle)

Instructions
1 In your container, mix a few tablespoons of oil with a dash of lemon juice. Stir or shake well.
2 Dip your rag into a tiny bit of the oil-lemon mixture.
3 Rub thoroughly over the wooden surface, adding more liquid as needed.
4 When completed, the wood should be dirt free and glistening.
5 Use the second cloth to rub down the furniture so no oil remains on top, so the furniture is not slippery or prone to giving oil stains.

Note: This works on faux wood as well as real wood.
{source: penniless parenting}

My review:
I tried this mixture on three surfaces: my real wood front room table, my wood kitchen table that has a seal over the wood, and my son's non-real-wood IKEA dresser.

Every. Last. One. Of Them. Is. GLEAMING!

The front room table has zero spots, and is shining like it's never shined before.

We have been struggling to find something to clean our kitchen table that doesn't leave streaks and won't hurt the sealed surface. This left NO streaks, and the table looks brand new again. And because it's not full of chemicals, it's safe for the surface.

The IKEA dresser looks beautiful too, and after cleaning it there was some dirt left behind on the rag, so I know it was really cleaning it.

For all three of these surfaces, I used probably 1/2 teaspoon of the mixture, so the several tablespoons that I made will last a long time. And because it was only oil and lemon juice, the several tablespoons cost almost nothing. Probably only a few pennies.

Bottom line, I'm sold. I'm using this furniture polish from now on. Go right now and make yourself a mixture and clean every wood/faux wood surface in your house!

Cheaper Cleaning Products: Part 3 (Merrick)

Someone mentioned in the comments of the last post that white vinegar was a great cleaning product. I personally have never used vinegar to clean my house, but after a little google search I found out how great it is -- not only is it cheap, it's also non-toxic, and kills bacteria, mold, and germs!

My husband hates the smell of vinegar (while I love it -- reminds me of salt and vinegar chips...yum!), but apparently the smell goes away as soon as it dries. That's a good thing because I probably don't want my house smelling like potato chips.

From cleaning your counter tops to making your pennies sparkle like new, white vinegar has so many uses for cleaning. Check out this awesome list here.

Philip is gone this weekend, so I think I'll be testing it out on my shower...I'll let you all know how it goes!

Cheaper Cleaning Products: Part 2 (Merrick)

In my last post about cleaning products, I mentioned the plethora of cleaning products I have in my house. Each product has a different cleaning purpose, so in order to clean each area of my house I need LOTS of products.

A cheap cleaning product that cleans MANY areas around your home and can replace nearly all of those bottles? Baking Soda.

I've never personally used baking soda for cleaning, but after finding this list of ways to clean with it, I am converted. (Also, it's completely non-toxic).

Cleaning the Kitchen with Baking Soda

1. Use in the refrigerator, freezer, or cupboard to keep odors away.

2. To clean surfaces, sprinkle baking soda on a damp cloth. Wipe, then rinse with clean water.

3. To clean silver, use a paste of 3 parts baking soda to one part water. Rub the paste onto each item, then rinse with warm water and dry with a soft cloth.

4. To remove scuff marks or grease spills from the floor, sprinkle with baking soda and then wipe with a warm, damp cloth. This is even safe for no-wax floors!

5. For burnt-on food in the bottom of pots, sprinkle with baking soda, then add hot water. Let soak overnight; the dried on food will come loose much more easily.

Cleaning the Bathroom with Baking Soda:

1.To remove stubborn stains from most surfaces, use a baking soda paste (3 parts baking soda, one part water). Apply, let stand, then scrub or wipe clean.

2. Hairbrushes and combs can be cleaned in a baking soda solution.

3. To avoid clogged drains, pour 1/4 cup baking soda down weekly. Rinse through with hot water.

Cleaning the House with Baking Soda:

1. To remove scents from a carpet, sprinkle with baking soda. Let stand for at least fifteen minutes, then vacuum. Repeat as needed.

2. To quickly clean pets and remove "wet dog" odor, sprinkle with baking soda and brush out their fur.

3. Clean children's toys using 1/4 cup baking soda in 1 quart warm water. Submerge in this mixture (or wipe with a cloth dampened in it), then rinse with clear water.

Doing Laundry with Baking Soda:

1. Replace half of each measure of laundry detergent with baking soda to keep clothing fresh.

2. To remove grease stains, either add baking soda to the wash load or pretreat the stains with a baking soda paste.

3. Baking soda increases the effectiveness of chlorine bleach. Add 1 / 2 cup to your laundry, along with the usual amount of bleach.

Cleaning Outside the House with Baking Soda:

1. Baking soda can be used to help clean up grease spills.

2. To remove burnt food from the grill, sprinkle with baking soda, then soak. After several hours, the charred pieces will come loose easily.

3. Lawn furniture can be easily cleaned with a rinse of 1/4 cup baking soda in 1 quart warm water.

With Baking Soda available in large quantities at Sam's Club or Costco for only a few dollars, you can replace nearly all the cleaning products in your house for next to nothing.

Who's willing to try it with me?

Cheaper Cleaning Products: Part 1 (Merrick)

If your bathroom cabinet and under your kitchen sink look anything like mine, you have upwards of twenty different cleaning products in there. One to clean your mirrors, another for your toilets; several to clean your sinks and showers, and a few more for wood, carpet, fabric, etc. Every single one of these cleaners in my cupboards cost several dollars, and many of them are not even being used. What a waste of my money!

I was recently reading an article on cleaning, and it brought up “Organic Cleaning.” Now, I’m not really a “green” kind of person, but when I read this I about died:


The main reason we should be keeping our homes clean is to keep our families healthy, and if we’re forking over big bucks for toxic products that are actually making them unhealthy, then we should be finding healthier and better cleaning products that are also CHEAPER.

These next few posts will cover some cleaning solutions that are much cheaper, much healthier, and still will keep your house as clean as ever.

Cleaning Solution #1: Make Use of Old T-shirts and Towels

When I do kitchen and bathroom cleaning, I use paper towels and/or anti-bacterial wipes. Even though we buy both at Sam’s club in bulk, they are fairly expensive and we go through them pretty quickly. In our house growing up, we always used sponges, which may seem like a better solution because they’re cheap and last a long time. But after a little research, I discovered the disgusting amount of bacteria that builds up on them. So really you’re just spreading germs around rather than getting your house clean. Also, that bacteria can spread to you through a cut.

But enough about that…let’s talk about a cheaper, cleaner, and healthier solution.

Tear up your old t-shirts and towels! They are free (or you can buy really cheap rags at the store), and after cleaning with them, bleach them out in the washer to kill all the bacteria. In your laundry room, have a bucket where you can store the dirty ones so you only have to wash them every few weeks (we don’t want you using up all your saved money just to run the washer and dryer!)

By eliminating, or decreasing your use of paper towels, cleaning wipes, and/or sponges, and using towels or t-shirts instead, you are not only saving money, you’re also getting huge health benefits and helping the environment! What more could a girl ask for??

Recipe Wednesday: Lettuce Wraps (Merrick)

One of my family's favorite restaurants is P.F. Changs. Whenever we go, at least one of us gets the lettuce wraps because they're just too good not to get. I never considered trying to make them at home until Real Simple sent me a recipe for lettuce wraps in their daily recipe email. Their recipe looked pretty good, so I decided to give it a whirl.

After dinner, Philip and I both declared that they were far better than P.F. Changs. Then I passed the recipe onto my little sister, and she reported the same thing. Try it out and judge for yourself which ones are better..

Chicken and Cashews in Lettuce Cups

3 tablespoons low-sodium soy sauce ($.20)
3 tablespoons honey ($.10)
2 tablespoons canola oil ($.10)
1 1/2 pounds boneless, skinless chicken breasts, cut into 3/4-inch pieces ($3.00)
pepper
2 cloves garlic, finely chopped ($.10)
1 tablespoon ginger ($.05)
1 bunch scallions, trimmed and sliced ($.60)
1 8-ounce can sliced water chestnuts, drained (I left these out, so I don't know how much they cost)
1/4 cup roasted unsalted cashews ($1.00)
1 small head Boston or Bibb lettuce, leaves separated ($1.00)

1. Combine the soy sauce and honey in a small bowl; set aside.
2. Heat the oil in a large skillet over medium-high heat. Season the chicken with 1/2 teaspoon pepper and cook, stirring occasionally, until it begins to brown, about 3 minutes.
3. Lower heat to medium and stir in the garlic and ginger. Add the scallions and cook for 1 minute. Stir in the water chestnuts and half the soy sauce mixture and continue to cook until the chicken is cooked through, about 4 minutes. Remove from heat and sprinkle with the cashews.
4. Divide the lettuce leaves among individual plates and spoon the chicken over the top. Serve with the remaining soy sauce mixture for drizzling.

(Serves 4)

Total Cost: $6.15

If you determine that these are better than P.F. Chang's, make these when you're in need of a Chinese food fix. You'll save money since P.F. Changs are $7.50 (plus tip!), and you'll save yourself the trouble of driving over there!

A One-Car Family (Carole)

I feel almost un-American mentioning the possibility of a normal, red-blooded family only owning one car. But as I've cruised around the internet lately, I'm amazed at how many presumably normal people are not only thinking about it, but actually ditching the second car.

I'm not saying this course is for everyone.  We currently own three cars (hubby's, mine and one with our daughter at college).  But in our former life, with very young children, we were one of those one-car families - for 12 years.  It wasn't that bad.  Really.  My husband and I were both flexible, and I tried to consolidate my errands and only take the car  when I really needed it.  I think a good attitude helps too.  My girls will remember many, many nights going to pick up Dad at his office while they read in the back seats already dressed in their PJs.   We'd often crank up That Thing You Do on the CD player and cruise down to his office on Flamingo Road  and occasionally stop for ice cream cones at McDonalds before picking him up.  If he was running late, we'd dash to the local book store that was open until 11:00 PM and wander around until he was ready to go.  It was actually kind of a cozy time.

Besides special, fun times in the car, however, there is one very compelling reason to own just one car:   Money.  Of course.  Your car, as you know, is the single largest guaranteed negative investment of cash you will ever make --  unless something really bad happens to you.  Almost no car appreciates -- you spend tens of thousands of your hard earned dollars on a beautiful, shiny car and within 5 years any car is nearly worthless.  You can hardly give it away.  Ouch.

In addition:
1.  Think of the tax you paid when you signed those papers.  7.35% is a lot on $20,000 - $60,000.
2.  Interest too, if you have a monthly payment.
3.  Then there's auto insurance every month.
4.  Gasoline.
5.  Maintenance (oil, tires, tune ups, repairs. . .)
6.  State licensing (several hundred dollars in most states).
7.  And remember you actually had to earn at least 25% more than the cost of the car just to pay the federal taxes on your income that paid for that car.  Happily Nevada has no state tax, but if your state does, then add in another 7% or so.

Even a $20,000 car, if kept for 5 years, will cost you approximately $50 per day to own and operate.  That's nearly $20,000 per year.   And that's if you paid cash.  It goes up if you have monthly payments.    Or bought a more expensive car.  Or both.  My goodness, you could have vacationed quite nicely for a couple of months in europe on that!  Or fully funded you 401k for the year.  And an IRA.  And then retire a multi-millionaire at age 50 -- if you started early enough.

Just like when buying a house, cars are big ticket items, so there is a lot of money to be saved by making wise choices.   I don't know about you, but I OFTEN wish I lived in a big city (preferably London :), right downtown so I could easily walk most places.  I'd happily give up my car.  I could rent a pretty nifty auto for the occasional trip out of town for a whole lot less than $20,000 per year.  Also, think how trim my calves would be from all that walking or biking!!   I'd also buy a lot fewer items knowing I had to carry them back to my home.  The benefits and savings just keep on comin'!!  Mostly, I'm writing this post because now that I only have one child at home, and my husband stays in one location all day while at work -- I'm thinking about it again.  What I could do with all that extra cash!  I'm really very tempted.  How about you??

Careful on Any Income (Carole)

When I was 5 years old my grandfather gave me 3 silver dollars.  I carefully put them in a little pink coin purse for safe-keeping.  I was SO proud of these and had absolutely no intention of ever spending them.   I kept them perfectly safe for about 2 weeks (you can see this coming, can't you). . . then lost them (and the pink purse) somewhere deep in the bowels of the Sears' Bargain Basement.   I must have set the purse down while trying on some shoes and, of course, forgot all about it and walked away.  When I realized that I no longer had the purse in my hand, it was too late.  Someone else had decided that they really wanted my pink purse and silver dollars too, and they were lost forever.

It's been more than 40 years since that dark day, but I still remember and regret being so forgetful and foolish!  Maybe you have a similar story from your youth.  Or possibly you squandered a decent sum of money on something foolish that brings you sorrow even today.  Yes?

Well, never fear.  There are those out in the world that make just about any money mistake you've ever made seem paltry by comparison.  As you can guess, most of these famous/infamous folks, in the following list, lost all of their money and had to file bankruptcy, due to mis-management of their huge fortunes.  The most common themes in these bankruptcies are:  drugs, iffy investments, and uncontrolled spending.

Donald Trump
Dorothy Hamill
MC Hammer
Gary Coleman
Toni Braxton
Burt Reynolds
Mickey Rooney
Sheryl Swoopes
Kim Basinger
LaToya Jackson
Zsa Zsa Gabor
Mick Fleetwood
Walt Disney
Leif Garrett
Willie Nelson
Ted Nugent
Larry King
Mike Tyson
Isaac Hayes
Tammy Wynette
Wayne Newton
Don Johnson
Margot Kidder
Meatloaf
Many, many big lottery winners

The take-home message here seems to be that you have to be careful with your money, no matter how many millions you've got.  Seems pretty obvious, but maybe not.

Categories to Cut (Janssen)

This year has been a year of focus for us - we've been working like crazy to pay off our student loans (both my husband and I completed masters degrees last summer) before our baby is born in July.

The interest rate was not particularly good on these loans and we really didn't want to have another required monthly expense when our overall expenses would likely be rising with the addition of a new family member.

Putting so much money toward paying off these loans means, of course, less spending in other categories, and we spent a little time looking over our budget to see where we could cut back.

We mapped out how long it would take us to pay off our loans and decided that we would be willing to entirely eliminate a few categories from our budget for the months that we were paying off our loans. That meant no spending, on either of our parts, until our loans were gone in the following categories:

• Entertainment. We would not go to any movies or concerts or rent movies during this time period. We would use redbox codes or the library to see any movies or watch things online (like Lost, which is available for free from abc.com). We aren't huge movie watchers anyway, so this wasn't a major sacrifice.
• Eating out. I like to cook and it costs nearly half our weekly budget to go out to dinner at an even low-end restaurant. Bart has a number of dinners that he goes to for his job anyway and I don't usually get enough satisfaction from a restaurant meal to justify the cost, so this was pretty low-impact for us.
• Our allowances. I mentioned in an early post that Bart and I both have an allowance of $50 a month. This money is ours to spend as we will, although realistically, since we don't have a clothing budget, this money generally goes to that. We decided to freeze this category until the loans were gone, so no money would be accruing in these accounts during this time period.

Do I want to never go out to dinner again or buy myself a cute pair of shoes? Of course not. But I'm willing to do it for a finite, specified amount of time. These categories are ones I don't miss all that much over the period of a few months.

Of course, the categories you'd be willing to give up for the short-term might be different than mine. You may hate to cook or need a weekly dinner out for mental health and the idea of not going out to dinner for six months is beyond intolerable. But you might be willing to give up your cell phone for a year. Or you might be willing to get rid of cable for six months.

What categories would you be willing to freeze spending on for a few months in order to put that money toward something greater?

Saving for Both Short and Long Term Goals (Carole)

Melanie, a faithful FWWL reader, asked about saving for both Long Term and Short Term goals at the same time.  Haven't we all been there?  If you sit down and think of all the things you really should/want to save money for, it will probably be a mighty long list.  Where do you start?   Most people don't have the personal discipline to prioritize their wants and needs, so they just buy everything on credit the moment they want it and soon find themselves in deep financial trouble.

There is a better way and it works every time.

First -- Write your list.  Take a couple of days or weeks to work on it, as it often takes some time for all your past ideas to come to the surface.  Take this time to decide what you REALLY want and need.

Second -- Divide your list into both Long Term and Short Term financial goals.
Long Term Goals might include:
Emergency fund (3 - 6 months of take-home pay saved in cash -- this money is used to cover unexpected car repairs, household repairs, major medical expenses, and possible unemployment),
A down payment on a house,
A new car paid for with cash.
Some of these long term goals aren't that exciting, but they will bring stability and safety to your future financial life.  Definitely worth the effort.

Short Term Goals might include:
A new piece of furniture,
Re-carpeting a room,
A vacation.
Remember financial goals are about both wants AND needs.

Third -- Now comes the hard part.  Prioritize your Long Term Goals.  1, 2, 3. . .  Same with your Short Term Goals.

You will quickly see that you cannot possibly save toward all of these at the same time, unless you have a great deal of extra money sitting around.  My husband refers to this as trying to "ride your horse off in all directions at once."  (He's said this to me many times over the years).  If you try to spread your savings money too thinly, you will make very little progress on anything and will quickly get discouraged.

I suggest that you choose #1 from your Long Term list and #1 from your Short Term list and save for only those two.  Decide how much money each of these goals needs to bring them to fruition.  Then look to see how much money you can reasonably put toward each goal every month.  Make yourself a chart (I LOVE CHARTS!) with completion dates.  Tape the charts up somewhere you'll see them every day, so that you will keep these goals in the front of your mind.  Take it from someone who has saved for dozens and dozens of things over the years -- the first few months of saving pass very, very slowly.  But before you know it, it's been 6 months and your saved $ amounts begin to look pretty substantial.  Those big numbers are highly motivating to keep moving forward!  I've been saving up for a set of custom doors leading from my dining room to my kitchen for quite some time and just passed the $5,000 mark (these are expensive doors) and it feels GOOD.  I'm ordering them soon!

The Short Term Goal will probably max out within only a few months and you can go buy whatever fabulous thing it was you wanted to get -- with cash!  Celebrate not only by making your purchase, but also write across your chart in big red marker "SUCCESS!" and begin wallpapering your bathroom with these as you achieve each one OR fold up the chart and place it in your journal for future motivation.  Then move onto Short Term Goal #2.  You may find that some of your short term goals (possibly items #4 and below) begin to look a lot less interesting as time goes on.  You'll be glad you didn't impulsively buy these items on credit and now 18 months later you're still paying for things that aren't important to you anymore.  Delaying a purchase often causes your rational thinking to take control again or for you to  simply change your mind.  The VISA people hate that.

Your Long Term Goal may take you a few years to accomplish, but you'll get there too!  It may seem like a slow process at times, but there is absolutely no other way to achieve your long term financial goals.  This is where you see the value of keeping your monthly fixed expenses low.  The more expensive your daily life is, the harder it is to save for your future or any extra lovely things.

By following this technique you will join that rare breed of people who save money to protect their futures and pay cash when they buy something substantial!  Let me be the first to say it, "YOU are amazing!"

Simple Budgeting Plan (Carole)

I like to read books about money.  You too?  Right now I'm reading a brand new book called Your Money:  The Missing Manual by J. D. Roth.  I've just recently discovered Mr. Roth, but it turns out he is a long-time blogger at Get Rich Slowly.  Check it out.  You'll find he has tons of good ideas and stories.

However, back to the budgeting plan. . . in J.D. Roth's very readable book he tells of a very simple budgeting plan proposed in another book, All Your Worth by Elizabeth Warren and Amelia Tyagi (I haven't read All Your Worth yet -- but I plan to).  These two authors recommend dividing your take-home money into 3 simple categories.

1.  50% of your money for needs:  housing, food, transportation, insurance, basic wardrobe. . . (this is where some hacking and slashing may be needed -- a very worthy endeavor)

2.  30% of your money for wants:  eating out, extra clothes, books, cable TV, hobbies, travel. . .

3.  20% of your money for savings (this should be used for paying off debt if that is where you are on your financial journey)

(For those of us who pay a tithe to our church, I would suggest dividing your money into these 3 percentage categories AFTER you've paid tithing -- otherwise you'll get all goofed up.)

This balanced plan (as they describe it) lets you have fun (30% of your take-home pay is A LOT of fun!) while living within your means AND paying off debt or saving for your future.  If you've struggled to live on a budget, give this really good method a try.  Let me know if it helps!

Naming Your Accounts (Janssen)

Dave Ramsey likes to say, when talking about budgeting, "Tell your money where to go." We try to make this happen in our family budget, but sometimes it's difficult when money is being saved up for various future expenditures (say, a twice-yearly bill or a vacation or a large purchase) instead of being spent by the end of the month.

To combat this slushfund approach, where your money being saved for various expenses is all mixing together, untitled, in your checking account, Bart and I have a whole host of savings accounts. We use ING Direct and it's incredibly easy (and free) to open as many savings accounts as you'd like. You can name them whatever you choose and there is no fee to transfer money between various accounts.

For instance, we currently have an account called "Student Loans." When we get extra money or deposit a check, we put that money directly into the Student Loan fund, where it sits for a week or two until our next paycheck and then we pay the total amount toward our student loans. There's no temptation to accidentally spend the $85 check we'd said was for the student loans, because it's not in our checking account.

Likewise, our fifth anniversary is coming up this summer, and we wanted to do something great. About a year ago, we opened an account called "5th Anniversary" and started putting money towards it. All our graduation gift money went into that account and when plane tickets went on sale earlier this year, the money was right there ready to be spend (and to help us determine how much we could afford). The money hadn't been washed away in electric bills or fast food or an impulse pair of shoes.

Putting a name on our money, having it in a dedicated, specific location, makes budgeting and saving considerably easier for us.

Any one else use multiple accounts this way?

Keep The Change (Merrick)

When I met Philip, he had a big plastic jar that he kept all his change in. He estimated that the change in the money jar equaled about $50. I have never been much of a change keeper, but after we got married I converted and added my $3 (or something pathetically low) worth of coins to the jar, we upgraded to a larger plastic bin, and from then on we started keeping all our change. Since Philip works for a car rental company, he frequently washes cars where he runs across coins that people have left behind. This change goes in the change bin along with any other loose change we find in the house, in the car, or in my purse.

Now that we’ve been married three and a half years, this plastic bin is filled with change – and not just pennies. We’re estimating several hundred dollars of change.

Over the last few months we’ve been talking about buying a nice kitchen table to replace our tiny and cheap IKEA table. I suggested that we use this change. It may not cover the entire cost of a table and six chairs, but it will probably cover most of it. It is amazing to me that a quarter here and a nickel there, accumulated over a few years, will be able to make such a huge purchase. We rarely think about this money, and have never missed it, so it’s almost like having a huge chunk of free money to spend on something we would really like to buy!

I’ve heard of others using their spare change to save for family vacations. Others, to buy cleaning supplies and other household necessities. Some use it up every month, and others save it for years. But any way that you look at it, it’s basically free money that allows you to make purchases that won’t take away from that month’s paycheck. And really, you can’t get much better than that.

So readers, do you save your change? And if so, what do you use it for?

A Peek at the Promised Land (Carole)

A few weeks ago, Tara commented that she didn't see the point in being frugal, frugal, frugal just so she could be a millionaire when she and her husband are 80!  What is the fun in that??  Maybe some of you have had the same thoughts as you've thought about coupon-ing, garage sale-ing, eating at home. . .   Hopefully, I can give you a glimpse at where this whole Frugal Life thing is really headed.

If you have credit card debt, car loans and/or student loans, most people (when you finally get very serious about it) can pay all of it off within 3 years.  We have never carried credit card debt, but we've had a few car loans and we had over $60,000 in student loans back in the 1980's -- so about $130,000 in today's money.   We paid minimum payments for a number of years, and then we got religion.  We paid off our car in about 8 months and our student loans in about 2 years.  So we paid off all our consumer debt in right around that 3 year mark.  We weren't making tons of money and we had 3 children.  We were extremely average.  You could probably pay things off faster than we did.

Our next step was paying off our house.  We knew a couple of families our own age (early 30's) who had paid off their houses.  We were AMAZED.  Could we do that too??  How long would something like that take?  We owed about $160,000 on our house at the time.  As a little family we confronted this monumental financial goal with everything we had.  We printed out an amortization schedule (numerous pages of small type -- very scary), and taped it ALL to the back of the door where the bills were paid in our house.  Every month when we paid our regular house payment, we also added as much extra $$ as we could scrape out of our home budget and sent that along to the mortgage company too -- that extra money goes straight to the principle.   We often gathered our 3 girls into the room while we marked off  the payment amount with a highlighter pen and circled all the skipped interest payments that NEVER HAS TO BE PAID-- EVER!!  Did we starve through this time?  Live on nothing?  Never leave the house?  No, we actually took a few pretty decent vacations along the way and fed and clothed everyone.  Probably saw a few movies too.  But we stuck to our house payback schedule.  We threw everything we could at this debt and in 3+ years we received our title, free and clear, in the mail.  That is a moment never to be forgotten.

We paid that house off in 1996.  In 2003 I wanted a bigger house (we had more children, the older ones were larger, and we wanted to live in a better school district).  We found the house we wanted and went back into a $100,000 mortgage (we were able to pay for MOST of the house with cold, hard cash from the sale of our first house -- that felt very, very nice).  We paid off this new mortgage in about 2 years.  I thought I would mention here that both times we got down to the last $30,000 on our mortgage, extra money just started appearing.  I can't even explain it.  It's like the Lord knows you are serious about taking care of your family and your finances, so He blesses you beyond anything you've ever seen.  The last $30,000 was paid off about 5 months earlier than scheduled -- both times.  When you get to that point, let me know if this happens to you too!

So, when you've paid off all of your debt -- in under 5 years probably -- how does life look?  It is an amazing place to be.  Think of the amount of money you bring home every month in your paycheck.  Now think of how much it would cost you to live with no major bills.  No credit card payments, no car loans, no student loans, no house payment.  Can you even wrap your mind around that?

You still have to buy food, electricity, gasoline, car insurance, clothes, property taxes.  That's about it.  Hmm.  How much would that add up to in a month?  Not very much.  All the rest of your take home pay is YOURS.  Wow.

What will you do with it?

Saving is a big thing.  Putting as much money as you can into tax-free or tax-deferred programs is very smart.

Beyond that, you can spend it on anything you want.  You could buy a new car with cash  -- every few months!  You could buy a brand new boat in cash, also in just a few months.  You could redecorate your entire house.  Put in a backyard pool.  You can be generous beyond anything you can imagine.  Travel to Europe, Asia, Africa -- every few months.  All for cash.

You will finally be free.  All the hard work you (or your spouse) puts in to bring home money, will finally benefit YOU.  All in about 5 years.

Enjoy.

Recipe Wednesday - Pasta with Broccoli and Chicken (Merrick)

This is a recipe I recently tried out of the The $5 Dinner Mom Cookbook. I mentioned this cookbook before and there were several commenters who said they were nervous about a $5 dinner; did these dinners only include spaghetti, casseroles, and ramen noodles? Well here is a recipe that proves the $5 Dinner Mom Cookbook has great options. In fact, after making this, Philip said it went into his top 10 recipes that I've ever made (that top 10 list doesn't include soups...that man would eat soup or stew every day for the rest of his life if I would make it for him).

Pasta with Broccoli and Chicken:

2 boneless, skinless chicken breasts ($1.66)
1/3 cup plus 1 tsp olive oil ($.50)
salt and pepper
2 garlic cloves, crushed ($.10)
1/2 tsp crushed red pepper flakes ($.03)
1/4 cup bread crumbs ($.25)
2 heads broccoli ($.79)
1 package (16 oz) shell pasta ($.97)
1/2 cup grated Parmesan cheese ($.50)

Pound the chicken breasts between two sheets of wax paper to a thickness of 1/3 inch. Rub both sides of the chicken breasts with 1 tsp of the olive oil and season them with salt and pepper.

In a skillet, saute the chicken breasts for 6 to 8 minutes on each side, or until the chicken is cooked through. The cooking time will vary depending on the thickness of the chicken breasts. Remove from the skillet and let cool. When cool, dice the chicken and set aside.

Peel and thinly slice the garlic cloves. Place them in a shallow saucepan with the 1/3 cup of olive oil and heat gently until the garlic takes on a golden color. Add crushed red pepper flakes for a bit of zing. Remove from the heat and set aside, uncovered.

In the same skillet used to saute the chicken, toast the bread crumbs until brown and set aside.

Remove the stems from the broccoli and separate into florets. Cook the broccoli florets in boiling salted water until they turn bright green. Drain and set aside.

In a large pot, cook the pasta according to the package directions. Drain, reserving 1/3 cup of the cooking water. Return the pasta and reserve water to the pot.

Toss the broccoli and chicken with the cooked pasta. Pour the headed oil with the garlic cloves and red pepper flakes over the pasta and toss. Finally toss with the grated Parmesan and toasted bread crumbs.

**I like a little sauce with my pasta, and usually the pasta water doesn't really do it for me. So I made a half batch of $5 dinner mom's Homemade Basic White Sauce and tossed that with the meal right before serving**

Homemade Basic White Sauce:

4 tablespoons butter ($.40)
6 tablespoons flour ($.10)
3 cups milk ($.30)
salt and pepper

In a medium saucepan, melt the butter over medium high heat. Add the flour and whisk with the melted utter until it forms a paste and bubbles.

Whisk in the milk. Whisk until flour and butter have dissolved into the milk.

Cook the sauce over medium heat for 5 to 6 minutes, stirring continuously. The sauce will begin to thicken, as it bubbles and cooks. Add milk and flour one tablespoon at a time to reach desired consistency for your meal. Add more milk for a thinner sauce. Add more flour for a thicker sauce.

Cost for Pasta with Broccoli and Chicken: $4.80
Cost for half batch of White Sauce: $.40

Total Cost for Dinner (that made plenty of leftovers for the next day): $5.20

Skills That Save (Merrick)

I recently read a magazine article about saving more than you earn. It went through some basic ideas on how to save money, one of which was to “Get An Education.” They didn’t necessarily mean go to college, but to develop skills and educate yourself on ways that can help you save money. A few of their suggestions were to learn budgeting, computer skills, cooking and/or car maintenance. With the help of a book, internet tutorials, or a friend, you could acquire skills that will save you hundreds or thousands of dollars a year.

One skill that I acquired a few years ago, which I think falls into this category, was cutting my husband’s hair.

Before we got married, Philip went to the local hair school for his haircuts. Like most men who keep their hair short, he went in every 3-4 weeks for a cut. Although it was only $12 or so for a cut plus the tip, it added up pretty quickly when we were forking that over every three weeks.

When Philip suggested, only a few weeks after we got married, that I learn how to cut his hair so we could cut this expense out of our monthly budget, I quickly agreed. Yes, it took a few times for me to really get the hang of it, and yes, one time I put the wrong guard on and the haircut ended in tears (tears from me, not him), but after a few months, my skills improved, I figured out exactly what he liked, and was able to produce a great haircut almost 100% of the time.

Although saving roughly $150 a year on haircuts may not seem like a ton to you, this one skill has given me confidence to learn other skills that will save us money. And if I can learn five other skills that will save me $150 a year each, that will add up very quickly and suddenly I’ll have nearly $1000 per year of extra money that could go toward a vacation, or new clothes, or something way more awesome than a haircut.

So readers, do you cut your husband/children’s hair? What other skills do you have that help save you money?