Archive for July 2012

158 Days Until Christmas

A friendly reminder from your corner personal finance website, JosephSangl.com:

As of today, July 20, 2012, there are 158 days until Christmas.

Have you started saving?

More specifically, have you started saving for the following?

  • Presents
  • Christmas travel
  • Christmas Cards
  • Postage
  • Decorations
  • Giving to the less fortunate

Even better, have you begun shopping for or making the presents you will be giving away?

I know that I obtain much better deals when I am not under time pressure.

Jenn and I save for Christmas every single month because it is a Known, Upcoming Expense.  We also save for other Known, Upcoming Expenses like vacation, annual insurance premiums, etc.  We used the Known, Upcoming Expense Calculator to determine how much we should save each month/pay period.  You can too –HERE.

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Known, Upcoming, Expenses – Capital One 360 Sub-Account Tracking

//This blog post was written by Joe Ziska – I loved this idea so much that I personally implemented it with my Capital One 360 accounts!//

Q)  What two things do the following have in common?

Christmas; A flat tire; Your son going to college; Vacation in Hawaii; Your daughter getting married

A)  1. They all cost money.   2.  We forget that they cost money until the bill comes!

Let’s face it.  Even the most organized of us tend to forget things now and then.  Whether misplaced car keys or forgotten reservations for Valentines Day, our imperfect memories always seem to make life more difficult.   In my experience, forgetting large upcoming expenses is one of the most demoralizing things that can happen to you.  Unlike true emergencies, such as a sudden illness or job loss, known upcoming non-monthly expenses (KUEs) such as these listed above, can and should be expected!  As Joe always asks, “Should it be a surprise if your car breaks down?”  Of course not.  That’s what cars do!

Many of you reading Joe’s blog are trying desperately to get out of debt and gain financial freedom.  For my wife and me, one of the most disheartening things in that process was a big expense wiping out our emergency fund.  Just when we felt we were finally getting traction, a $500 car repair or having to pay for Christmas presents would knock us off course.  We constantly felt like we were starting over.  I knew that we should be saving for these expenses but didn’t have a good way to separate this from our emergency fund.  We’d generally leave a decent balance in our checking account and just hope that it would absorb most of these expenses when they came up.

I wanted to save for these KUEs.  However, the mathematical part of me rebelled at the idea of gaining no interest on our savings (especially as some of these expenses can be quite costly).  Wouldn’t it be better to just pay down some debt or invest the money?

Enter Capital One 360.  I’d been using HSBC and Capital One 360 to earn good interest on money we were saving for a down payment for our house.  However, it wasn’t until almost a year after opening our accounts that I realized how they could help with my KUE problem

One day, I was checking my account balance online and I noticed a large button labeled “Open an Account”.  I figured this was used for investing or to open a new CD but clicked on it anyway.  After browsing for about 30 seconds, I realized that Capital One 360 will let you create numerous new savings accounts linked to your original account.  Not only that, you can give each a unique name to help you identify them.  We created categories for all of our Known Upcoming Expenses to keep them separate from actual emergencies.  Below is an example screenshot from an account (click on it to see it better):


We have also set up automatic transactions to each individual account.  So now, at the beginning of every month we move $12 to our pet fund (unfortunately, our dog doesn’t pay her own vet bills), $40 to our Christmas fund, and so on.  When we need the money for these expenses, it takes only 3-4 days to move it back to our primary checking account.  Meanwhile we’ve been earning interest on our money instead of paying interest to a credit card company when these events sneak up on us.  Last time I checked, Christmas is still in December so you’ve got 5 months to save up for all those gifts.  Why not create an account for it and make it automatic?
========= End of Guest Post by Joe Ziska ===========

Thanks for the article, Joe!

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Strategies For Saving Money

One of the largest issues I see during our one-on-one financial coaching meetings is the inability to save money.

Here are some facts about saved money:

  • Saving money is essential to long-term sustainability
  • Saved money relieves stress
  • Saved money allows you to take a chance
  • Saved money allows life to happen (job loss, disability, pay cut, injury, etc.) without going broke!

But you already knew that part.  We all know that we are supposed to “save money for a rainy day.” Yet, even though we KNOW how important it is to save money, most people fail to do so.

My hope with this blog post is to challenge YOU to take a next step. If you have negative savings (no money plus overdrafted accounts and debt), the goal is to bring you to zero.  If you are at zero savings, the goal is to get to at least $2,500 in a beginner emergency fund.  If you have been able to save a substantial amount of money, it is my hope that you will participate in the discussion and share your own tips that have worked well for you.

Automatic Draft From Paycheck

Establish a savings account and have the money drafted from every single paycheck.  Whether it is $25 or $250 per pay period – just SAVE!  You KNOW that the car is going to break down.  You KNOW that the school is going to send home a surprise expense.

By establishing this draft, it allows the money to be “out-of-sight.”  When money is out-of-sight, it can be out-of-mind.  This allows the account to grow without you robbing it!

Now, I personally had a problem with this when I did not have a monthly budget.  I would ROB my own savings account about 2.1 microseconds after I was paid.  Only after I had a plan developed together with my bride, Jenn, did my savings account begin growing in a healthy manner.

Create An Escrow Account For Known, Upcoming Expenses

For those unfamiliar with an escrow account, it is a savings account that is established by a mortgage company.  The mortgage company totals the annual cost of property taxes and homeowner’s insurance and divides it by the number of payments being made each year.  The mortgage company then pays for the taxes and insurance from this escrow (savings) account.  For example, if the property taxes are $1,200/year and the insurance is $600, then the total amount needed each year is $1,800.  The mortgage company will collect $150 extra with each monthly payment to place into the escrow account.

An escrow account smooths out the cost over a year – instead of having to pay for it all in one month.  It tightens the monthly budget, but having a fully funded escrow account sure is AWESOME when vacation arrives and the money has already been saved to pay cash for it!  Those who have a mortgage with an escrow account will testify to the fact that they never worry about paying for the taxes and insurance – ask someone!

Take a moment to read THIS POST about how to calculate the amount you need to save each month for your known, upcoming expenses.

Take it from one who has lived it – if you do not plan for your known, upcoming expenses, your ability to save money will be tremendously hampered!

How about you?  What are some ways you have made saving money easier in your own finances?

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NOTE: I hold my Known Upcoming Non-Monthly Savings in an account at Capital One 360. It allows me to save money “out of sight – out of mind” and allows me to create “sub-accounts” for each item I am saving for. For example, I have created a “Christmas” and “Car Replacement Fund” in my account. You can check out Capital One 360 HERE.

Irregular/Seasonal/Cyclical Income Budgeting – Part 4

This series of posts has been focused on how to manage the home economy when it is powered by irregular income.  It is my goal to help you eliminate the feast/famine lifestyle (especially the famine part!!!).

Before we focus on today’s step, let’s review the previous steps.

Step 1 – Recognize it!  To avoid living the feast/famine lifestyle, you need to recognize that you are earning irregular income.

Step 2 – Determine monthly expenses   It is important to understand how much income is necessary each month to ensure that the household operates smoothly and free from the feast/famine lifestyle.

Step 3 – Save up at least three months worth of expenses  This is your buffer that absorbs the wild patterns of your customers!  It allows you to live life smoothly without the feast/famine episodes!

Step 4 – Become personally debt-free and operate your business debt-free

What are the advantages of operating a business debt-free?

  1. Monthly expense load drops!  There are no interest payments to make!
  2. You business can absorb downturns much more effectively.  Again, there are no interest payments to absorb!
  3. Breathing room.  It is amazing how much stress a pile of debt brings on.
  4. When you spend your own real money, you will manage it better.  I don’t know why this is, but if I am spending someone else’s money (i.e. the banks) I am much more susceptible to make a riskier decision!  When I am spending my money, I am much more likely to do thorough due diligence before doing a deal!

Question of the Day:  What are some other advantages of operating a business debt-free?

Looking for additional Personal Finance Resources?  You can obtain free tools by clicking HERE and purchase books/materials by clicking HERE.

Read the series

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U.S. National Debt Update – July 2012

The US National Debt has increased by $109,763,882,862 since our last update on June 5, 2012.  Another month, and the United States has dropped another cool $109 billion in the hole.

National Debt as of 7/11/2012

$15,869,580,562,940

That is an increase of $3.05 BILLION PER DAY since our last update 36 days ago.

One day, the credit card WILL run out, and America will face what many countries have faced in the past – massive budget cuts and slashed programs and a crushed economy.

In my own personal life, I found that it was a lot better to TAKE CONTROL OF THE SITUATION before SOMEONE ELSE DID! Shouldn’t we demand the same of elected leaders – that they take control NOW – before the country is forced to?

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