Personal Finance 101 Posts of the Day 4/18/07

• Web CFP talks about the tax consequences of mutual funds.
• Young and Broke talks about why young people aren’t saving.
• Credit Card Lowdown talks about 10 common credit card scams.
• Edith Yeung talks about the 7 habits of highly effective money managers.
• Money Walks talks about the difference between being frugal and cheap.

Personal Finance 101 posts of the day 4/13/07

• Uncle Bill shows us that negative savings isn't always negative.
• Grad Money Matters talks about whether you should loan money to friends and family.
• Personal Finance Advice wonders if you can save too much for retirement.
• Aimee’s Blog talks about marriage and money.
• Crazy Money talks about the dangers of mental accounting.

Personal Finance 101 posts of the day 4/12/07

• Young and Broke talks about how people aren't saving these days.
• Broke Now Rich Later tells us how he's campaigning for a Roth 401k at his job.
• Consumerism Commentary asks if personal finance should be required in high schools. He says no but I strongly disagree.
• The 6 Month Project talks about ways to trim your budget.
• Mighty Bargain Hunter talks about pre-packing your lunch to take to work.
• The Thinking Men talk about how you can get a free credit report.

Personal Finance 101 Posts of the Day 4/11/07

• Ask Mr. Credit Card discusses debt repayment plans.
• 3 Debt Consolidation talks about debt reduction mistakes.
• My Personal Finance Odyssey talks about the US savings rate.
• 5 Cent Nickel talks about how to prioritize your retirement contributions.
• 3 Debt Consolidation talks about 10 debt reduction mistakes.

Personal Finance 101 posts of the day 4/10/07

• Young and Broke lets us know that Minnesota is going to require financial education in school. And can I just say: About freaking time!!! Hopefully more states get with the program!
• Care One lists 101 ways to save one dollar a week.
• Ask Mr. Credit Card talks about what he’s learned from 10 years of marriage.
• Web Financial Planner wonders how rich is rich enough.
• Queercents talks about the US savings rate.
• Investments and Loans tells how to build your emergency fund.
• Debt Consolidation News talks about why home ownership may not be for everyone.

Personal Finance 101 Posts of the Day 4/7/07

• Personal Finance Odyssey talks about applying the 80/20 principle to personal finance.
• Debt Consolidation News talks about how to get your expenses under control.
• Ask Mr. Credit Card gives tips on how to choose a debt consolidation company.
• 1031 Exchange Lowdown talks about things that keep people poor.

Personal Finance 101 Posts of the Day 4/6/07

• Fire Finance talks about the risks of payday loans.
• Money Walks give 10 tips on how to master your savings skills.
• Ririan Project lists 22 myths that can cost you money.
• Wealth Building Lessons talks about how to increase your FICO score.
• Saving Simply talks about why tax refunds are bad.
• Bankruptcy Law New York posts about why he hates pre-bankruptcy credit counseling.
• Money Walks talks about how to become a saver.

Personal Finance 101 Posts of the Day 4/5/07

• Debt Free talks about how to save money every day.
• Interest.org has a great article about credit card tricks and tactics that you should know.
• An old post from Matt Hutter talks about how to save money on credit cards.
• The Frugal Law Student tells us 5 things you should never buy new. #2 is my downfall. I buy 90% of my books used but I never borrow them from the library.
• Frugal Zeitgeist talks about why cheaper isn’t always better.
• My Financial Journey talks about finding the balance between living and saving. I highly recommend every frugal person read this! It’s important information.
• Advanced Personal Finance talks about what financial records you need to keep and which you can toss.
• Frugal for Life talks about the benefits of frugal living.

Personal Finance 101 Posts of the Day 4/4/07

• PF Blog asks if $1M is still enough
• Money Smart Life asks if you should use your emergency fund to pay off debt.
• 12 Years wonders what ever happened to frugality.
• Grad Money Matters tells us to stop blaming our credit cards!
• Personal Finance Advice talks about debt reduction mistakes.
• Money, Matter and More talks about how to save money and time by making left turns.

Personal Finance 101 posts of the day 4/2/07

• Blueprint for Financial Prosperity talks about Saving Beyond 401k and Roth IRA.
• Resident Alien lists 25 rules to grow rich by.
• Free Money Finance talks about how it’s the little splurges that can get you.
• Grad Money shows us how to get into the swing of cooking at home.

10 Reasons You Aren’t Rich

From The Street, 10 Reasons You Aren't Rich covers some of the traps that people fall into that hold them back. (My comments in italics)

1. You Care What Your Neighbors Think This is huge! One of the reasons I'm leaving Washington, DC is that so many people around this area care about things like what you drive, where you work, etc. It gets old and really, the people worth knowing aren't the ones who care about what kind of car you drive or what kind of shoes you wear. Live your life in a way that makes you happy and comfortable and who cares what others think!
2. You Aren't Patient In today's world of easy credit and instant gratification it can be hard to wait to buy something until you have the cash. But, the advantages of waiting are: 1 - you save money in interest, 2 - you tend to appreciate things you have to work hard to get instead of those that come easily, 3 - waiting gives you time to decide if you *really* want something rather than just following your impulse, 4 - saving up gives you time to do your homework and find the best deal on whatever it is that you want.
3. You Have Bad Habits This includes your "Latte Factor." The three hardest things to give up are: coffee, alcohol and cigarettes. It's not a coincidence that they're also the most expensive and the worst for your health. Cutting back on those vices not only saves you money today but also in the future on health care costs.
4. You Have No Goals My Goal Setting 101 class is my least popular class but it's the one that I think people get the most from. The first question I ask is: "If you don't know where you're going, how will you know when you get there?" The answer to that question is: You don't. Without goals you're just floating along rather than moving forward with a purpose. IMO, goal setting is the most important part of financial planning but is also the most overlooked.
5. You Haven't Prepared This is why you need an emergency fund. It's a fact of life: Stuff happens. No matter how prepared you are, you aren't prepared for everything. But, you can do your best. The easiest thing you can do is establish an emergency fund. This fund should be in a cash account (or equivalent) that can be accessed quickly and without penalty. You should aim to have at least 3 months worth of expenses in your account though some people like to keep much more. When you figure out how much you need, take an honest look at your life. Is your job steady? Do you have dependents? Do you own a house? Do you have adequate insurance? The answers to those questions will help you figure out how much (or how little) you need to have in your account to be secure.
   
6. You Try to Make a Quick Buck When people approach me about the best way to turn $1,000 into $10,000 in a week I have 2 standard responses: 1 - go to Vegas. At least there you get free drinks while you gamble with your money. 2 - Re-read The Tortise and the Hare but this time, learn the lesson. When it comes to investing, the vast majority of the time slow and steady will win over the long run. Set your investment up, make it automatic and then forget about it except for when you re-balance twice a year.
7. You Rely on Others to Take Care of Your Money I'm a huge proponent of DIY. It's why I started Personal Finance 101. I saw the aftereffects of too many people who had gotten screwed by investment advisors who sold them bad products. There is no reason why someone can't manage their own money, particularly now that Target Retirement Funds exist. If you're just starting out, there are 2 books I recommend that every newbie read. The biggest thing to keep in mind: You are the only person who cares about your money!
8. You Invest in Things You Don't Understand I did this when I first started investing. I started buying stocks without knowing what I was doing. I just listened to what others were buying and followed the herd. Not only did I lose a *ton* of money to transaction fees, I lost a ton in the investment itself. Since then, I've sold off the losers, held on to the winners (I did get a couple right) and have stuck to funds. I have realized that not only do I not have the knowledge to pick stocks, I don't have the desire to learn the skill so funds are the way to go.
9. You're Financially Afraid I see this all the time, especially in those who lost a lot of money in the dot bomb. So many people who lost money during that time are too scared to invest in stocks again. Every time I ask them about their experience, they were always almost 100% in tech stocks and freaked and sold when stocks went down. When I explain to them what would have happened had they A - been diversified and B - stuck to an investment plan instead of freaking out they start to calm down. For those who are worried about investing in anything risky I usually suggest starting with a balanced fund like the Vanguard STAR fund. That fund is 60/40 stocks/bonds so, while it earns more than bonds it's not as volatile as stocks. I then suggest they start adding small amounts into more agressive funds once they're used to being a bit more agressive. I also forbid them from checking their accounts more than once every 6 months. Frequent account reviews are the worst thing people who are risk averse can do. Any little dip will freak them out and trigger a panic reaction.
10. You Ignore Your Finances I'm a big supporter of a hands-off money management style. But, that's very different from ignoring your money. To have a hands-off style, you first have to have a plan. Then, you can implement that plan, make it automatic and just check back a few times a year to make sure you're on track. Find the balance that works for you - somewhere between checking every day and checking once a year is good.
    

Personal Finance 101 Posts of the Day 3/29/07

• Free Money Finance asks: Does having control of your finances make you happier?
• Money Walks talks about saving money by buying in bulk. I'm a big fan of buying in bulk but only if you're going to use it. A good way to get around this, especially if you're single, is to shop with a group of friends and split the take. Then you all get to take advantage of the savings.
• My Money Blog talks about lazy investing (which I'm a huge fan of!).
• The Simple Dollar talks about asset allocation and rebalancing.
• Learn why you shouldn't buy a new car (and definitely don't finance one!).
• Punny Money gives us a list of the 20 dumbest personal finance questions of all time. Now personally I'm a "there are no dumb questions" kinda gal, but I'll admit that I've been asked some questions that are...less than smart.
• 3 Debt Consolidation talks about credit ratings and FICO scores.
• The Digerati Life talks about spending money on looking good.

Would you use a coupon on a first date?

John at Queercents wants to know.

It's an great question that I've never really thought of before. Dating is amazingly expensive in the beginning which makes me really uncomfortable. I'm not a fan of tradional dates, particularly not for first dates. I almost always have a first date at a coffee shop. There are a couple reasons for this:

1. It's quick and easy and low pressure. This means I'm not stuck having dinner for 2 hours with someone I don't like after the first 5 minutes.
   
2. It's cheap and easier to avoid that whole "who pays" question.
3. If things go well, there's always the option of extending the date to dinner or another activity.

If coffee isn't an option (for whatever reason) there are lots of other alternatives that are cheap/free so why not try to keep things on the cheap for both of your sakes? Try a museum, art exhibit, walk around town or a browse through a book store. Not only will you save money but you'll also have a built in conversation as you'll be able to talk about what you're seeing.

I recently had a first meeting in a book shop and we had a great time browsing and looking at all sorts of books before moving on and getting a drink. That's my idea of a great date.

Show me your creativity instead of your money and I'm much more likely to agree to date #2.

Credit Cards vs. Debit Cards

Smart Money has an article about how Credit Cards Offer Better Protection Than Debit Cards.

This is a conversation I've had several times and it's just one of the reasons that credit cards are better than debit cards in my opinion. Aside from the fraud protection, credit cards offer other benefits like:

1. Rewards on purchases. I make about $400/year on rewards from purchases. This is free money and anyone who has taken one of my classes knows I'm all about free money.
2. Interest earned on delayed payment. Debit cards take that money out of your account immediately which means you get no benefit from it. By using a credit card, you get a few weeks to hold on to that money and earn some more interest from it. With high yield savings accounts like HSBC, Emigrant and others offering rates over 5% and ING's new 4% checking interest rate, this is a chance to make a little extra cash.

So basically, I'm a big fan of credit cards. As long as you can pay off your balance in full each month, I don't see any reason to use a debit card over a credit card.

Personal Finance 101 Posts of the Day 3/27/07

• Debt Consolidation News has a good post about 50 common sense spending tips. I agree with most of them. Except # 20. I've taken long distance bus trips and no thanks, never again. I'll pay $250 for the flight to save 14 hours of my time. It's worth it not only for the comfort but also for the time savings.
• Save Money gives 4 Ways to Keep Your Credit Score High.
• The Simple Dollar talks about how to Follow Your Dreams. I love this post. Not enough people focus on goal setting. My Goal Setting class is the least popular of the Personal Finance Classes I teach but I really think it's the most important. You need direction if you're going to succeed and the key to that is to make your goals/dreams measurable and give yourself a timeline.
• The Consumerist tells us about 8 Free Personal Finance Management Programs (and a few paid ones)
• Anxiety Ended talks about how to save money and reduce anxiety.
• No Credit Needed talks about how to keep grocery costs under control.
• Personal Finance Advice talks about how to eat out without spending a lot of money.

Personal Finance 101 Posts of the Day 3/22/07

• Blueprint for Financial Prosperity posts about why budgeting to the penny isn't a great idea. I agree 1000%. I actually just taught a budgeting class tonight and covered several of the points that BFP made. The biggest one IMO is that the harder you make things the less likely you are to stick to them. That's why I'm such a fan of making things automatic.

• Broke Now, Rich Later has an interesting post about emergency funds. I'm not a huge fan of large emergency funds unless you're high risk. I think they're kind of a waste because there are other things you could do with your money that's more productive. I think that if you have decent credit lines that are empty you might be better served by putting your money into a balanced fund. They're more agressive than cash but not ultra volatile so odds are against you taking a huge loss at the wrong time. I particularly think that having an emergency fund while you are carrying credit card debt is a waste of money.

• No Credit Needed tells us 10 things they've learned about their finances.

• My Retirement Blog gives us 1-5 of 10 things your 401k provider won't tell you.
  

Save money AND have fun? Sure!

The Simple Dollar has a great post on 10 frugal activities to do with friends and how to suggest them.

Since it can be hard to both have a social life and be financially responsible, it's important to come up with ideas of things to do that don't cost a lot of money. Trent makes several good suggestions including: book clubs, old movies and (my personal favorite) camping.

Lucky I live in a city with lots of free activities but I bet your city has some great things going on too. If you need suggestions, head to a book store and look in the local interest section. There may be a book or two that will tell you about things you never even knew existed. Look in the local paper for festivals, art openings, etc. Search online for clubs and social groups. Be creative and if you don't start pre-existing activities start some of your own.

Good luck!

Personal Finance 101 Posts of the Day 3/4/07

• Wenchypoo talks about how to save money in lots of ways.

20 Small Ways to Save Big

Kiplinger's posted a great article about 20 easy ways to save money. How many do you do?

1. Give yourself a raise and bank it. Don’t lend Uncle Sam free loans. Adjust your tax withholding rate and get yourself a bigger take-home check.
2. Open a 401(k). If your employee offers 401(k) with company match and you decide not to participate, you simply let the free money slip away.
3. Raise your car insurance deductible. Higher deductible means lower premium. Go with $1,000 instead of $250. You might as well drive more carefully.
4. Pay off your credit card. What’s the chance you can earn a 18% return? Paying off the 18% APR credit debt will give you just that.
5. Go green. Buy a programmable thermostat and save on your energy bill.
6. Bundle up. Buy a bundle (phone, Internet and cable from one provider), save a bundle.
7. Use your employer’s FSA. One dollar saved on taxes is one dollar net income. That’s why you should contribute pre-tax dollars to flexible spending account.
8. Get a credit card with rewards. Why refuse the cashback for the money you have to spend anyway?
9. Kick the habit. Smoking can burn a hole on your wallet and your lung.
10. Brown bag it. Instead of spending $8 on takeout every day at work, bring a home-cooked meal with you.
11. Negotiate your rate. Got a good credit? Then call your lender for a more favorable rate.
    
12. Travel on the cheap. Forget about Travelocity, Expedia and Orbitz. Go to Sidestep.com or Site59.com to find a better travel deal.
13. Insure yourself. Use a high-deductible medical policy together with a health savings account can save your money on premiums now and medical bills in the future.
14. Make media free. Why buy DVDs and books when you can get them from your library for free?
15. Change your calling plan. If you use your cell phone for less than 200 minutes a month, you may be better off with a prepaid plan instead of a subscription-based plan.
16. Park your car. With gas price again on the rise, why not use public transit or carpooling (if possible) to save money on gas?
17. Ditch your gym. Check out your community centers first. Or better yet, put on the running shoes and hit the road because you don’t have to pay to stay in shape.
18. Reshop your auto insurance. It pays to shop for everything and auto insurance is no exception.
19. Learn to cook. Cooking at home is good for your body and your wealth.
20. Keep track of your money. How can you cut your spending if you have no idea where your money went?

Do you know your money?

Below are 10 questions everyone should be able to answer about their money.

1. Does your employer match any of your retirement contributions and are you getting the full match?

Many employers offer to match all or a portion of the money you contribute to your employer retirement plan. This is free money and you should make sure you are getting as much of it as possible. If you aren’t sure whether your employer matches or if you’re getting the full match as your Human Resources or Benefits office for details about your plan.

2. What are your short-, mid- and long-term goals and are you on track to meet them?

If you don’t know where you’re going, how will you know when you get there? Just like you wouldn’t set off on a cross-country trip without directions, you shouldn’t be saving for your future without a plan. That plan should include your short- (within 12 months), mid- (within 5 years) and long-term (more than 5 years) goals and how you plan to get there. It’s important to come up with a plan that’s reasonable and to review it periodically to see if you’re still on track.

3. What’s on your credit report?

Credit reports are so important. They can impact all areas of your life, not just your ability to get a loan. Did you know that a bad credit report can result in higher auto expenses and that it could even make you lose a great job opportunity? It’s important to check all three of the major credit bureaus at least once a year. You can do this for free at www.annualcreditreport.com. I recommend getting one report (from each of the three) every 4 months. Each credit agency will report different information but with this method you’ll be on top of your credit and see each report at least once. If you want to know what your credit score is, you should visit www.myfico.com to get your true FICO score. Scores gotten from other sources are typically not FICO scores. Before you spend your money on a score, just know that scores are only important if you’re applying for a loan. As long as you are paying your bills on time and there are no negatives on your report, your score should be fine so it isn’t necessary to buy your score very often.

4. How much will you need for retirement and are you on track to get there?

This is a pretty personal question and depends a lot on the lifestyle you want to live in retirement. There are dozens of financial calculators on the web that can help you figure out how much you’ll probably need and how much you should be saving to get there.

5. What kind of expenses are you paying for your investments?

Sometimes we are paying for expenses with our investments and we don’t even know about it. Does your fund have a sales load or a high expense ratio (anything over 1% is high)? Does your brokerage charge monthly or annual account maintenance fees? Review your accounts and make sure you’re getting the most bang for your buck. There is no reason to pay high expenses and fees when there are many well respected low or no-fee brokerage houses.

6. Are you in the right investments for your age, risk tolerance and timeline?

What was a good investment for you at 22 may not be so good when you are 42. Make sure that you periodically check your asset allocation to make sure that you’re investing correctly for your goals. There are many online calculators that will ask you a few questions and then give you a suggested allocation based on your responses. Take a couple of these and see where you stand. Make sure that you’re looking at ALL of your investments, not just one account.

7. Where does your money go each month?

You don’t have to know to the penny, but you should have a pretty good idea of what you’re spending your money on. If you don’t know, you should find out. You’ll probably be shocked to see how much you spend on certain expenses like coffee or eating out. To develop a budget, get a notebook and track all of your spending for 30 days. Write down every penny you spend and then put it into excel and categorize it into expense categories (entertainment, food, gas, etc.). The numbers will probably be eye opening and you might be surprised that by making a couple small changes you can free up a nice chunk of money each year to put towards your goals.

8. Which is better for you – a Roth or Traditional IRA?

This is a frequently asked question and the answer is: It depends. Much of the decision about whether to contribute to a Roth or to a Traditional IRA (TIRA) has to do with taxes. Generally a Roth is better for most people. See our article What's so great about a Roth IRA?

9. Are you getting the most out of your savings?

Many people are still using the savings account that their regular bank offers, and which only pays .5% a year. With the advent of online banks like ING Direct, Emigrant and HSBC, traditional savings accounts are going the way of the Dodo. With rates over 5% at these online institutions and transfers only taking a couple of days to complete, there’s really no reason to keep your savings in a low-rate account. For the latest list on the highest returns, check out these banking sites.

10. When will you be debt free?

Everyone wants to know the answer to this question. It’ll take some math and usually a budget, but you can find out if you put in the effort. Start by listing all of your debts in order of highest interest rate to lowest. Then list what the minimum payment is for each account. Finally, figure out how much money you have available to put towards debt each month. From there it’s simple math. You want to pay the minimum payment on all debts except for the one with the highest interest rate. You want to throw all of your extra money at that one with the highest rate. Once that one is paid off, you’ll add that entire payment to the minimum payment you were making on the next highest interest rate debt. This method will save you the most money and will get you out of debt as quickly as possible.