For some, spending money is a lot like playing with water. It simply slips through their fingers and they don’t even think twice about it. Money buys them their food, their home, the furniture to furnish their home with and much more. However, they never relate it back to their salary and their budget.
If you’re in any debt, think about the few points below and see how changing spending in these categories can revolutionize the way you see money.
1. Your best friend is plastic.
It’s so easy busting out your credit card to pay for a purchase. It’s said that the less tangible a form of payment is, the less likely a shopper will stop to think about how much they’re paying for an item. Tricks like “no interest for 12 months!” and so forth are just other lures to get you into paying with your credit card when you can’t afford it.
Use real cash when shopping. This allows you to set a budget so that you can’t overspend – because you won’t have the cash on hand to do so. Leave your credit card at home on one trip and test out how this can affect you!
While I know that not everything can be paid with cash up front, it’s a valuable lesson to learn when it comes to everyday shopping needs – gas, groceries and other small purchases. It really prevents you from making extraneous purchases that have no right to be in your credit card statement at the end of the month.
2. Being a lazy cook.
Sure, eating out is convenient, but it’s not great for your wallet. Even if you were playing it “cheap” and monopolized on $5 footlongs from Subway for lunch and dinner, for 7 days a week, do you know how much you’re spending? Roughly $70 a week – which doesn’t even include drink or chips with your order. If you are only doing this for lunch, that’s still an easy $35.
And let’s be fair – not all meals will be $5 or less. Dinners can easily be in the $20 range for a single individual and possibly more if you have tastebuds that lust after truffle encrusted entrees.
Be smart and learn to eat at home more often. Cooking is not that difficult and can be an exciting way to bond with a partner or friend. Start off simple with homemade pastas, sandwiches or grilling steaks. See how this can save you money over the course of a month – then compound that to see how much you could save in a year. You’ll be surprised.
3. Shopping when you have no idea what you want!
People who go grocery shopping without a list end up buying a lot of items they think they need, but don’t. Look into your pantry, your fridge and freezer to see what you have already. Can you make a meal out of what you have already? If you don’t, what items do you need to make sure you have what you need for lunch? For dinner? Dessert?
Once you’ve made your list, go to the grocery store and go directly to the aisles where these items are located. Don’t get distracted by other sales.
4. Using shopping as an emotional plug.
I’ve been there. I’ll go online or to a store to shop and buy something to make me forget (albeit, very briefly) about the problem chewing away at me. For those who have long term issues, this can be a very costly bad habit. Don’t indulge in your feelings this way – find healthier ways to channel your frustrations.
5. Buying items just to be cool.
Not everyone needs a smartphone and certainly not everyone needs the latest iPhone. Be reasonable with your expenses. Just because everyone else in your clique is rocking a fancy new iPhone, doesn’t mean you need to drop another $300 to fit in as well (phone and plan itself).
If you’re on a tight budget, go with the dinosaur phone – or something reasonable between simple and breaking edge of technology.
Rethink the way you spend money. It’s not water. The more you spend, the more your debt will pile up and leave you feeling remorseful.
Image Source: en.wikipedia.org/wiki/File:Smartcard2.png
Check out my guest post on Credit Karma about cheap ways to set up a new home office!
I’m of the mindset that whatever your budget is, you can make anything happen. For instance, I decorated my entire apartment for under $500 – furniture and home décor included. While I’ll admit furniture can get pricey, you can find great deals if you look in the right places. Whether you’re starting out with an empty office space or are planning to revamp your current office space, you can get all you need without sacrificing quality by following these tips.
More at the source!
Image Source: en.wikipedia.org/wiki/File:Desk333.JPG
Bonds are bonds, and yet they aren’t. If you choose to invest in them, you need to know that there are different types of bonds and they appeal to investors in very different ways. I’ll give you the run down, starting from least risky to most risky.
Government Bonds
Bonds issued by the government are typically seen as very safe investments in a country like the United States. The likelihood of the government defaulting are slim to none – even with the S&P credit downgrade. If we’re talking about a less stable country, this type of investment is very risky.
Government bonds can be categorized into three subcategories.
- Bills – debt securities that mature in less than one year.
- Notes – debt securities that mature in one to 10 years.
- Bonds – debt securities that mature in more than 10 years.
Municipal Bonds
Also known as “munis,” these bonds are issued by local governments. They are the next level of risk from government bonds. Since cities don’t typically go bankrupt, they are still fairly safe investments. Local governments will sometimes make their debt non-taxable for residents, so as a result the municipal bonds are tax free! However, because you’re saving money on taxes, the yield on a municipal bond is typically lower than that of a taxable one.
Corporate Bonds
A company can issue debt in the form of bonds. They typically have higher yields because there is a higher risk associated with a company than other forms of debt (government and city). However, provided the company stays in business, you’re looking at high yields because of the high risk – and it can really pay off in the end.
Within corporate bonds, there are other bonds.
- Convertible Bonds – Corporate issued bond, which the holder can convert to stock
- Callable Bonds – The Corporation can redeem a bond prior to maturity. Usually the bond holder will be paid a premium if it is redeemed prior to maturity.
Zero-Coupon Bonds
As its name suggests, these bonds don’t have interest payments. However, they are typically issued at a big discount. So essentially, you can purchase a $1,000 bond for a mere $600. You just need to wait until maturity to collect the final sum.
Image Source: en.wikipedia.org/wiki/File:Bruxelles_Bourse.jpg
I’ve been hearing about it for months, but late last week, the fact that most American’s can’t afford a $1,000 emergency expense started making its way across the web.
According to CNN Money, “most” accounts for a whopping 64% of Americans. Wow. Just wow. The remaining 36% could dip into their emergency funds to cover the cost, but the rest could not. CNN Money notes that the majority of Americans would have to “go to other extremes to cover an unexpected expense, such as borrowing money or taking out a cash advance on a credit card.”
While I wouldn’t categorize those moves as “extremes,” these situations are certainly ones I don’t ever care to be in. Many of these Americans may live paycheck to paycheck, barely scraping by with the paychecks they already receive. Any unexpected incidents, like a major car issue or a medical expense will throw their world upside down.
I’m personally a big worrier, so I don’t spend more than I make. But for those of you who are the opposite, how can you integrate a savings plan into your life? With rent or mortgage payments, car loans and student debt, there are so many financial predicaments that complicate our lives.
I advocate a “trick yourself into savings” plan – so that you are forced to re-think the way you budget.
Automate Deposits into Your Savings Account
When I first opened my Washington Mutual savings account, the bank set up automatic deposits from my checking account. Each month, money would disappear from my checking account – and I wouldn’t notice. Over time, my savings account grew larger and larger. This was way back in high school – and I’ve grown accustomed to it now. Even though Chase has now taken over all Washington Mutual accounts, my automatic deposits have been grandfathered in and are still being deducted each month!
You can do the same. Simply put away $50, $100, or whatever you can afford into your savings account. If you have an online banking account, this should be easy to do. If you can’t, speak with a financial advisor at the bank and have them set it up for you. Even if you’re only saving $50 each month, it’s something. By the end of 12 months, you’ll have a sweet $600 in the bank. In order to get $1,000 into your rainy day funds, you just need to deposit $83.33 each month. If you’re paid biweekly, this is just a little under $42 each paycheck.
Not so bad, right?
Cut Out an Expense And Stick To It
I’ve noticed over time that the more I eat out, the more I hate paying my credit card bill. I’m a cheap gal, so I try to spend $10 or less on lunch when I’m at work. Sometimes I’m under, sometimes over. Let’s say I spend $50 on lunch each week, instead of packing a sandwich. Over the course of a month, I spend $200. Over the course of a year, I spend $2,400.
Yeah, you heard right — $2,400. Even if you just brought lunch a few times a week, you could easily save up $1,000 each year for that rainy day fund.
Make a New Budget and Follow It
Use a service like Mint.com to set goals for yourself and to also calculate your expenses, bills and more. They have a nifty mobile app that makes it easy to track on your phone or iPod Touch. The great thing about Mint.com is that it really makes you feel terrible when you overspend. For example, if you only want to spend $50 a week eating out for lunch or dinner, you can only spend $50. If you spend $70, Mint.com will alert you that you’re breaking budget.
In the end, it’s all about self control. But hopefully the above are some great takeaway tips to help you save.
Image Source: en.wikipedia.org/wiki/File:Columbus_Fire_Medic_7.JPG
Just like stock prices, the value of bonds change on a daily basis. As obvious as this fact may sound, many green investors don’t realize this since they focus on the value of the bond at maturity – not its value at any time between.
If you hold onto bonds, yes, you will get the maturity value plus interest. However, if you choose to sell it before then, the value of your bond may be worth more or less than you were expecting.
Yield, defined
In order to better grasp this concept, you need to understand the concept of yield. It is essentially a reflection of the amount of the interest rate or coupon linked to your bond. However, here’s the tricky part – it’s not always equal to the coupon rate.
This is because the bond’s price and the bond’s yield are inversely related. When the price goes up, the yield goes down. When the price goes up, the yield goes down.
For example:
Your bond’s principal value is $1,000 and its coupon rate is 10%. You will receive $100 yearly for the life of the bond.
However, if the price of your bond goes down to $800, your yield rate will go up to 12.5%. This is because the yield needs to adjust so that you receive the same $100 payoff each year.
Likewise, if the price of your bond goes up to $1,200, the yield will decrease to 8.33%.
Bonds And The Market
Many investors are turning to bonds because they feel like they are safer than stocks – and this is true in the market right now. The stock market is a roller coaster and investors are wary of investments that may wash away their savings.
The most influential factor in the ever changing value of a bond is current interest rates in the economy. So, when the interest rates rise, the prices of bonds in the market fall – and vice versa.
Just like in my previous example, this means that investors who owned prices prior to the increase in interest rates will see their yield fall.
When interest rates fall, bond prices rise and the yields of older bonds fall.
Image Source: en.wikipedia.org/wiki/File:Receipt_for_temporary_bonds.jpg
I previously went over what bonds are and why they are appealing to the “safe” investor. However, before I move on about the pros and cons about this wonderful investment option, I need to lay out some terms for the green investors out there.
Face Value
The face value of a bond is the amount of money a bondholder will receive once the bond matures. A majority of bonds are sold at their face value. Other terms for “face value” are par value or principal. However, don’t be confused. The face value of the bond is not the price of the bond. The price of it will vary during its lifetime until maturity, a topic to be discussed later.
A bond is sold at a premium when it is sold above face value. For example, a bond whose true face value is $1,000 sells for $1,200.
A bond is sold at a discount when it is sold below face value. So, instead of selling a bond at its face value of $1,000, it is only sold for $800.
Maturity Date
The maturity date of a bond is a time in the future when a bondholder’s principal will be repaid. This time period varies with each bond and can be as short as one day or as long as 30 years. However, the shorter the maturity period, the less risky the bond.
Long term bonds will experience more fluctuation than a short term one. Just as we’ve seen in the past decade, the market has changed dramatically. There are variables that cannot be predicted and as a result, long term bonds can experience large levels of fluctuation. Yet at the same time, they also provide higher interest rates to compensate for the increased risk.
Interest Rates
The interest rate (or coupon) of a bond is the amount of interest a bondholder will receive. The term “coupon” is used because there are some bonds where you need to tear off coupons to collect the interest. This is not a common occurrence anymore, as we’re living in an internet age now.
Most bonds pay interest biyearly, but there are bonds that pay monthly, quarterly or annually. The amount you receive will be based off the coupon rate attached to the bond, such as 10%. If a bond’s face value is $1,000, you will receive $100 yearly for the life of the bond.
A bond that has a fixed interest rate is a fixed-rate bond.
A floating-rate bond is one with an adjustable interest rate. This might occur if the interest rate is tied to market rates via an index.
Risky Business
The issuer’s stability is a key factor in whether you will get paid. If you borrow from a government with an AAA rating, there is almost no chance of default. If an issuer has no default risk, you’re essentially investing in risk-free assets.
The higher the risk, the higher the interest rate. This is to lure in investors because of the risk of default involved.
Junk bonds are issued by companies experiencing financial instability. They offer very high yields compared to other bonds and this is because of the high risk of default.
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Now that the basic terms are out of the way, we’ll discuss bonds’ pros and cons in later blogs.
Image Source: flickr.com/photos/darkroses/2373587882
Desperation can force a job seeker to take desperate actions. When I graduated from college in 2009, all I knew was a poor job market. It was impossible for me to find a job out of college. I resorted to unpaid internships to beef up my resume and ended up working for 6 months unpaid. This would have been great if I had wealthy parents willing to pay my every expense, but I didn’t. I burned through my savings and was staring at a three digit balance in my savings account. I didn’t even have $500 to my name.
Eventually, I was extended a job offer, but it was far below the luxurious starting wage number I fantasized about when staring at my bank statement. In fact, the starting salary I was offered was impossible to live off of. But the question at the moment was: Is it more than making nothing? Yes. Then I’ll take it. However, down the line, even with raises, I wondered what I had done to myself.
Recently I was forwarded an article from MSN Career Builder about “4 ways to let fear ruin your new paycheck.” It focused on the issue I faced in my previous job – not negotiating when you’re interviewing for a job. The article notes 4 mistakes job seekers make when they are applying for jobs:
- Assume you can’t negotiate. Most employers expect negotiating when it comes to pay, benefits, work schedules and so on. If you’re happy with the initial offer, the worst that can happen is that you’re stuck with that initial offer. If you’re on the hunt, keep this in mind!
- Assume that “no” closes the negotiation. Just because an employer says no doesn’t mean that you can’t revise your proposal. Just like at work, you can’t please everyone on the first go. Talk it out and see if you can move them – even if it’s just a bit.
- Saying “yes” too soon. Don’t be like me. The first offer is never the last offer. You made it past the rest and they want you. Make it work in your favor!
- Negotiating just for money. Money isn’t always the key. Sometimes when you can’t get the pay you want, you can negotiate for better health benefits, more vacation time, flexible schedules and so forth. I have friends who have negotiated for better health benefits and are completely satisfied with their situations.
Why is this important? Because your starting wage will determine how much you make in the future. Yes, you can catch up later if you manage to score a fabulous job, but your current salary will be known to your future employer. It’s best to start high and make the most of your earlier years in the job market.
As the MSN article notes:
An 18-year-old high school graduate negotiates for $21,000 per year instead of accepting the $20,000 per year that was initially offered.
That graduate then gets an average 3 percent raise each year.
He or she works for 50 years (normal in today’s world).
The result is that this person ends up with at least $112,000 more during the course of his or her career lifetime than a person who didn’t negotiate for that extra $1,000.
As one of my current co-worker always says, “ask and you shall receive.” I’ve done this with job duties in my current and past workplaces and have always found this to be a great technique to get what you want and need. Don’t be afraid to take a risk and put yourself out there!
Image Source: flickr.com/photos/59937401@N07/5857159777
With the world in an uproar over the state of the stock market, domestic and international, it’s certainly put fear into beginning investors. I’ve been watching my 401k earnings tank and now I’m in the negatives. I certainly don’t want my 401k wiped out as it was for many in the 2008 crash.
So I moved from a stock heavy 401k account to a bond heavy one until the fear dissipates. For those of you who aren’t familiar with bonds, I’ll try and break down the basics for you in this blog. Granted, bonds are pretty damn boring to listen and talk about, so I’ll try to spruce it up a bit.
How do you make money off a bond?
Essentially every business venture needs money to finance it. However, businesses always have less money than they need for large products, so they issue bonds or other debt instruments to a public market. This is more or less a method of borrowing now and paying back the lender, with interest, later.
Bonds in the market provide investors with interest payments that are given out during specific periods and at a specific rate. Be sure to look into it before you invest – some may be more appealing to your needs now than others.
For all bonds, you need to take into consideration the face value, maturity date and interest rate (or “coupon). For example, if you purchase a bond at $1,000 face value, an interest rate of 10% and maturity date of 5 years, you will make $500 over the next 5 years. This is calculated by (1,000×10%) for 5 years.
Bonds are debt.
Stocks are equity, therefore bonds are considered debt. When you purchase stocks, you become an investor into the company whose stocks you purchased. With this right, you will get shareholder rights to vote and share any future profits.
However, bonds mean that you become a creditor. Since you are funding the company, you will not get to share the profits of the company, only the principal plus interest of your initial investment. However, if the company goes under, you will get priority over shareholders and be paid out first.
Bonds are sexy in a bear market.
In a market like the one now, bonds are safe and that’s sexy. Unlike a stock heavy portfolio, you’re more likely to see less losses as bonds are much more stable than their stock counter parts. This has been true time and time again. However, keep in mind that returns are far smaller than with stocks.
Depending on what type of investor you are, being “safe” with bonds is better than risking it with stocks. This may especially be appealing for individuals who are about to retire soon and don’t want to risk too much.
Image Source: flickr.com/photos/59937401@N07/5857894760
It’s funny because when I first started this blog, I thought of “investing” as a term related only to money. I couldn’t see it any other way! How can I invest my money for my retirement? How much will I need to live until I’m the ripe old age of 95? And for many of you, investing is exactly that. It’s money. But the more I thought about it, the definition of “investing” changed dramatically as what I valued in my life changed.
I’m young. I won’t give you exact numbers, but I’m in my 20s. I graduated in a time of intense economic turmoil, when companies weren’t hiring and when they did, they paid dirt low wages. After living off my meager savings for over half a year and working a few unpaid internships, I had to figure out how to save up money, invest it and make sure I lived a good retirement.
But now, after working for a while, I realized that when I’m investing into my future, I’m really investing in several areas of my life: my relationships, my money and myself. I’m a saver by nature, so it was really easy for me to build up my emergency fund, invest in my Roth IRA, 401K and other investing options with money to spare. I’m not a millionaire, but I’m at a sweet spot right now.
Now I’m thinking about pouring thousands of dollars into travel. I’ll have to give up some savings in the meantime, but I think it is well worth it in the long run. Why? Because I’m passionate about seeing the world and experiencing everything I can while I’m still young. It’s in my top 3 objectives to do in my 20s and I fully intend on fulfilling my dreams if I can financially and time wise!
For instance, I already booked a trip to Peru to hike the Lares trail to see Machu Picchu in all its glory. For 9 days, I’m shelling out about $2,700 upfront and then extra costs for food, souvenirs and other tours.
But it doesn’t stop there. My company is planning on flying me out to Shanghai for a week in January to work with our branch there. I fully intend on staying another week on mostly unpaid vacation time and exploring China as a whole. I’ve never been there and I think it would be a wonderful experience. Including the missing wages, tour costs and other expenses, I’m looking to lose another $3,000.
Oh wait, the madness doesn’t stop there. If time allows, I fully intend on going to Greece in August of 2012, which will be another $2,000-$3,000 in expenses. But I think $8,700 is a small price to pay if it makes me excited to be alive and work towards my goal to travel as much as possible.
This all goes back to a point I made in a previous blog: what makes you happy?
Get out a piece of paper and write those points down. I’m serious. Do it. What makes you happy? Truly happy? Is it money? Is it family?
Whatever those three points are, you need to find a way to map out a strategy to accomplish those goals. If you want to make money, learn about investing what you have. If you want to become an entrepreneur, find out how you can start your first business. If you want to travel, see how you can budget for travel without forgoing the rest of your goals.
I’m not a budget guru, but I know unhappiness and I’m tired of it. Don’t get too caught up in the small things. Look at the bigger picture and live your life the way it should be lived. Look beyond your computer screen and go out an experience something great!
I was lucky enough to have been sent to BlogHer 2011 this year to network for my dayjob. I haven’t mentioned this before, but I do work for a coupon site and contribute almost daily to their deals & savings blog.
On Friday, I dove right into the exposition hall on the first day. All the big companies like Allegra, P&G, Pfizer and so forth were there luring every body in with samples. They were handing out full sized products to individuals who claimed to be bloggers or aspiring bloggers. Thermpaks, Chapstick, Dr. Scholl’s high heel insoles, Dole granola snacks and more. It was all there. BlogHer was essentially targeting women of all demographics and hoping that these free samples would create a chain reaction of good reviews. Even if one or two bad reviews slipped into the mix, it didn’t matter. Hundreds of good reviews can make or break a product!
While I appreciate the gestures, I’ve learned that more often than not, consumers will do almost anything for free stuff but will only sometimes become loyal to a brand. They will be loyal if you keep feeding them products, discounts and so forth, but it’s certainly a hard job to keep bribing bloggers happy with freebies as a smaller company. Megacorps like Coke, Allegra, Pfizer can throw all the money they want and it’s no big deal. But I felt like there was a real emptiness in their marketing.
I was really disappointed that BlogHer didn’t promote more smaller brands and their causes. It would have been such a great opportunity for these brands to really branch out and get great exposure. It was evident that the marketing strategies of big companies was simply to keep consumers content and happy. But in my experience, I’ve found that smaller and upcoming companies are the ones that know how to innovate. For example, how do you think the Blockbuster empire was crushed? It certainly didn’t happen overnight.
