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Proverbs Guide to Finance

The proverbs of Solomon son of David, king of Israel: for attaining wisdom and discipline; for understanding words of insight; for acquiring a disciplined and prudent life, doing what is right and just and fair; for giving prudence to the simple, knowledge and discretion to the young- let the wise listen and add to their […]

online bank computerThe benefits of opening an online bank account are well documented. For example, online banks typically offer higher interest rates than local financial institutions. This is attractive to many people, especially to those who are stocking away a lot of money and are, therefore, looking to earn as much as possible.

On the downside, the impersonal nature of online banking scares many away. While this is a valid concern, there are several tips you can follow to stay personally connected to your institution of choice – even if it is online.

1. Call Customer Service
If you have a question or just want to make sure everything is okay with your account, contact your bank’s customer service team via phone. Don’t waste time with email and other online methods. Instead, use the telephone so you can have a personalized conversation with a live body.

A phone conversation alone can go a long way in easing the tension and allowing you to realize that there are “real” people working to keep your money safe.

2. Watch Your Account
For whatever reason, many who rely on online banking are afraid that their money will one day disappear from their account. If you have any fear, ease your mind by reviewing your account on a regular basis. That way, if you see any suspicious activity, you can immediately contact the bank for an explanation.

3. Become Familiar With Your Bank
Before you opened your account, did you search for the bank that offered the highest interest rate? If so, you are not alone. This is how many people choose a financial institution. While there is nothing wrong with wanting to earn as much money as possible in interest, you may have overlooked other aspects of the bank that are just as important.

  • Do you know where the headquarters of the bank is located?
  • Are you aware of the many features available to you through your online account?
  • Have you taken the time to learn about the bank’s security features?

Answers to these questions will help you have confidence in your bank, even if you never step foot in a physical branch location.

Final Thoughts
Unlike a local branch where you can walk in and speak with a bank representative, an online financial institution is an entirely different experience. You will never see anyone in person. That said, you don’t have to feel “out of touch” with your money. Follow the tips above to personalize your online banking experience.

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There are countless ways to save money everyday. However, if you’re currently experiencing debt issues, simply knowing where to start can be a great challenge. Trying to do too much in the beginning can cause you undue stress, while remaining stagnant in your efforts does nothing to help your cause.

When I was trying to weave my way out of my personal debts issues, I turned to the Bible for help. It may surprise you to know that the Bible offers up some good, common sense advice on a variety of topics regarding finance.

1. Debt
Here you can see the importance of repaying your debts – as well as the prudence of not borrowing in the first place.

  • Psalms 37:21. The wicked borrows and does not pay back, but the righteous is gracious and gives.
  • Proverbs 22:7. The rich rules over the poor, and the borrower becomes the lender’s slave.

2. Investing
These two verses suggest the importance of doing research and having patience when it comes to investing your money, and the necessity of establishing an emergency fund.

  • Proverbs 19:2. Also it is not good for a person to be without knowledge, and he who hurries his footsteps errs.
  • Ecclesiastes 11:2. Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on this earth.

3. Planning
If you don’t see the need to plan for your future, you need look no further than these scriptures.

  • Proverbs 13:16. A wise man thinks ahead; a fool doesn’t, and even brags about it.
  • Proverbs 21:5. The plans of the diligent lead surely to advantage, but everyone who is hasty comes surely to poverty.

4. Saving
Saving money is not a matter of following a set of instructions – it is a mindset and a way of life. Focus on this concept into your daily life and you’ll be surprised at how many ways you can find to save a few dollars. And remember, if you find a way to save $10 a week, that translates to more than $500 on an annual basis.

  • 1 Corinthians 16:2. On the first day of the week each one of you is to put aside and save, as he may prosper, so that no collections be made when I come.
  • Proverbs 13:11. Dishonest money dwindles away, but he who gathers money little by little makes it grow.

5. Spending
If you’re wondering where to start when it comes to getting out of debt, ask yourself one simple question whenever you reach for your wallet: Do I really need this? These passages back up this strategy.

  • Proverbs 12:11. He who tills his land will have plenty of bread, but he who pursues worthless things lacks sense.
  • Proverbs 28:1. He who tills his land will have plenty of food, but he who follows empty pursuits will have poverty in plenty.

6. Donating
You’ll feel good when you donate your unused or unwanted items to a worthy cause, and you can also write off your donations at tax time.

  • Mark 10:2. Looking at him, Jesus felt a love for him and said to him “One thing you lack: go and sell all you possessions and give to the poor, and you will have treasure in heaven; and come, follow Me.”
  • James 2:15-16. Suppose a brother or a sister is without clothes and daily food. If one of you says to them, “Go in peace; keep warm and well fed,” but does nothing about their physical needs, what good is it?

Final Thoughts

For many of us, finances are cause for a great deal of stress. It is important to work hard to get rid of debt so you can more effectively plan for the future; however, if you let your finances eat you up inside, you’re not doing yourself any good. Worrying about them all the time is not going to reduce them or make them go away. As Matthew 6:34 states,  “So do not worry about tomorrow, for tomorrow will care for itself. Each day has enough trouble of its own.”

What other Bible verses can you think of that teach about saving money?

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Don’t Panic, Profit

by Derek Clark

The market turmoil recently has reminded me of what the market was doing in late 2008 and early 2009. People were afraid of their shadows, and it seems things are getting that way again. Now the trouble is in Europe instead of US banks. Last week we had 4 days where the markets either went up or down over 400 points. Today it is back down another 400.

When the market gets like this, I try to go back to Buffett’s famous quote. “Be fearful when others are greedy, and greedy when others are fearful.” Today may or may not be the day to buy stocks, but in general I think this is the atmosphere to buying and not selling stocks. The key is to know why you are buying stocks though. If your goal is to get rich quick, you’re doing it wrong. That’s called gambling, not investing. If you are 25 and your goal is to save money for retirement then I suspect today will be a great day to buy stocks. Tomorrow and the next day would be good as well. Good chance next month will be too. You get the idea.

If you absolutely need to have this money around next month, it’s probably not something you should put in the stock market. If you have a time span of a couple years though, go for it. If you are nearing retirement it is a scary time to invest. That being said, when you are planning to retire you really have to consider your options. Right now, there aren’t any “safe” investments that are paying any kind of real interest. If your money is just sitting in a bank account or CD it might as well be in your mattress.

If you just plan on putting it in an index fund and follow the 4% rule, you might not get the results you were hoping for. The theory is that that will last you for at least 30 year. Well, putting 1 Million in the S&P a decade ago and following the 4% rule would leave you with less than $400,000 right now. Unless things go drastically better the 4% rule won’t work.

This is why I’d suggest going for a retirement based on dividends, rather than withdrawing principal. You can pretty easily get a portfolio with a yield of 4%, and if things get bad (worse than now) you still get to cash your dividend checks. I know that many companies cut their dividends in 2008 and 2009, but many didn’t too. You can’t count on just one company, but if you get a basket of 10 or 20 then one or two bad apples won’t kill you.

Currently, I have a portfolio yielding right around 4% and my top holding (Apple) doesn’t even pay a dividend at all. This shows that it can be done, and with the recent market sell off it is pretty easy to get a great group of companies with a high yield. Look at companies like Walmart, Johnson and Johnson, Pepsi, Coke, Waste Management, Intel, Verizon, General Electric, McDonalds, and Proctor and Gamble. Those companies are all still going to be around in a few years, and right now you can get them with some fabulous yields. My favorite is Intel with an over 4% dividend right now.

The point is, don’t panic. Sure, the economy isn’t as great as some would like it to be, but that could just mean you have a great opportunity to invest in the best companies in the world while they are on sale. Buffett has said they could close the market for the next five years and it wouldn’t effect him at all. The only reason he goes to the market everyday is to see if somebody is doing something dumb. I think some of the yields you can get now qualify. Stop panicing. I’ll check back in 5 years to see if McDonalds is still around.

Disclosure: I currently have positions in AAPL, INTC, and GE, and plan to start positions in some of the other stocks mentioned in the next month or so.

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Ez Budget for iPhoneI just released a new budgeting app for the iPhone and iPod touch. It’s called Ez Budget – Quick Envelope Budgeting and it is available on the iTunes store now.

What is Envelope Budgeting?

Envelope budgeting is a method of budgeting that has been around forever and has recently been made popular again by Dave Ramsey. Here are his 6 tips to successful envelope budgeting:

Budget each paycheck. Budget is a dirty word to most people, but you must budget down to the last dime if you’re going to successfully implement the envelope system.

Divide and conquer. Of course, there will be budget items that you cannot include in your envelope system, like bills paid by check or automatic withdraw. However, you can create categories like food, gas, clothing and entertainment.

Fill ‘er Up. After you’ve categorized your cash expenses, fill each envelope with the money allotted for it in your budget. For example, if you allow $100 for clothing, put $100 in cash in your clothing envelope for the month.

When it’s gone, it’s gone. Once you’ve spent all the money in a given envelope, you’re done spending for that category. If you go on a shopping spree and spend the $100 in your clothing envelope, you can’t spend any more on clothes until you budget for that category again. That means no visits to the ATM to withdraw more money!

Don’t be tempted. While debit cards can’t get you directly into debt, if used carelessly, they can cause you to over-spend. There’s something psychological about spending cash that hurts more than swiping a piece of plastic. If spending cash whenever possible can become a habit, you’ll be less likely to over-spend or buy on impulse.

Give it time. It will take a few months to perfect your envelope system. Don’t give up after a month or two if it’s not clicking. You’ll get the hang of it and see how beneficial the envelope system is as you dump debt, build wealth, and achieve financial peace! See … simple!

Now, there is one problem I have with the envelope system. I don’t like using cash. I don’t like carrying it, and envelopes are a little bit of a pain. I really prefer to use my debit card. Because of this I’ve looked for other alternatives. I’ve tried inzolo, mvelopes, neobudget, and mint. All of them are ok, but none of them have done everything like I would want.

Specifically, I didn’t like any of the options on my iPhone. So I decided to make Ez Budget. It allows you to create spending categories and envelopes to track your spending. When you get paid, allocate the money to your envelopes as needed. When you spend money, you categorize the transactions to the correct envelope. This way you always know exactly how much money you have left to spend in certain categories. This is especially helpful for things like groceries, eating out, and entertainment.

Ez Budget tries to be as simple as possible while still providing all the features you need to keep track of your budget including:

-Define spending envelopes
-Group the envelopes into categories
-Manually import transactions
-Automatically import transactions using OFX for banks that support it
-Split income and transactions into multiple envelopes
-Keep a running total for the amounts in each envelope
-Keep track of the balance for all envelopes
-Keep track of past transactions

Check it out and let me know what you think. Anybody else use the envelope system? Do you have a method for implementing it online or with software? Let me know what you like and dislike about your current solution.

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If you’ve followed this blog at all you know I’m a big fan of Dave Ramsey and his baby steps. Step one is to save up $1000 in an emergency fund. I had a conversation the other with a couple that thought it should be more than one thousand so I thought I’d go over that viewpoint and let you know what I think about this.

First off, Dave actually allows for different amounts as he is teaching the baby steps. In general, he says that if you have a household income of less than 20k a year baby step one should be to save up 500 dollars. Otherwise he puts the amount at $1000. My friends just had several emergencies pile up on them in a short time frame, and it has led them to believe one thousand isn’t enough. We had an interesting discussion on this, and I came away with the following conclusion – it depends.

For most people, I think that one thousand is probably a good number. If you have credit card debt at all then I think this is a good number. You really need to get on to baby step 2 and attack that credit card debt. In general, the credit card debt will have a fairly high interest rate and getting it paid off sooner rather than later is a good thing. If you have a big emergency and you absolutely have to you can put it on the card. It should be a last resort, but if you don’t have any other choice it is there.

Now, the situation my friends found themselves in was there only debt was college loans that were at about 2% interest. In the last month, their oven, hot water heater, and air conditioner broke. Now, I have no idea how you get that unlucky, but needless to say the expenses were well over what their 1k emergency fund could cover. In their situation, having only low interest loans and owning a house, having a slightly bigger emergency fund might be a good idea. When deciding how much your emergency fund should be, you need to take into account what would count as an emergency for you.

If you are a renter, one thousand should be plenty as you don’t have to take care of lots of potential problems. If anything in the house or apartment breaks you get to call the landlord to fix it. If you own your own home, it adds many potential “emergencies” to list of things to take care of. Hot water heaters, ovens, washers and dryers, AC, furnace, roof, siding, windows, and plumbing are all things that you might need to replace / fix at some point. If you own a car or two that increases your potential for problems as well. If you are a renter in the city who takes the subway to work you don’t need as much.

The other thing to take into account is what type and how much debt you have. As I said before, if you have lots of credit card debt you need to get started on paying it down. If you only have 2% college loans left, a bigger emergency fund is more reasonable. The other thing to consider is how much total debt you have. If you only have a few thousand it makes sense to get started on it. If you have fifty thousand in debt left, the odds are much better that you will have a few emergencies before you get it paid off. It might make sense to have a slightly bigger fund so that you don’t backslide when something hits.

Basically, I think Dave goes with $1000 because it is a nice round number that will work nicely for most people. That being said, they call it personal finance because it is personal. You have to decide what’s best for you and your family. For me, I used $1000 when I was single and renting, but when I bought a house and got married I decided to bump it up to $2000. Take into account your situation and then decide on a number. Make sure you get on to baby step 2 as fast as you can though. You have to attack that debt so you can bump up the emergency fund to fully fund 6+ months of expenses.

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Negotiating can be hard, but it can also be a lot of fun. My wife and I have been working hard for a long time now getting out of debt and saving up 3-6 months of emergency fund, so we’ve cut back as much spending as we could. One of the things we decided we could live without during this time was a bed. (Well, I decided I could live without a bed and managed to convince her it would be ok for awhile as well). So for the last year and a half we’ve been sleeping on a mattress on the floor. Believe me, being debt free was completely worth it.

Well, now that we’ve accomplished those goals my wife has been a bit more adamant about wanting a bed, and I can’t blame her too much. So, we saved up some money and decided to go shopping for a bed yesterday. At this point in the story I’ll mention that my wife hasn’t been very good at negotiating in the past. My parents gave us some money for a couch for our wedding, but we went to pick it out. I was trying to negotiate with the salesperson for the couch we had picked out, and she was there like a kid in a toy store who just had to have that one. “Well what do you think about this one hunny?” “I want it I want it I love it this is the one let’s get it,” or something along those lines was the response. Awesome, thanks a lot. You probably just cost us $150. Oh well, you live you learn. Now we have a funny story to tell.

Fast forward to this weekend, and we found a bed we really liked. It was a nice platform bed with drawers for storage underneath. We don’t have box springs so we’d been looking for a platform bed, and the drawers seem like a nice addition since it doesn’t have the box springs getting in the way. Now, we had hoped to get a bed for less than $500 or so on craigslist, but we’d been striking out for a long time in that department. Just couldn’t seem to find anything we both liked, and when we did they were more expensive anyways. So while $500 was the target, we were willing to spend a bit more if we found something we liked.

Well, we found the bed you see above, and looked at the tag. It said $1529. Ouch. No way I’m gonna spend that much. Now, I don’t ever really believe the tags at furniture stores, but I didn’t think it was going to be in the ball park of what we were willing to spend. Well, they were having a sale so I decided to at least find out how much they take for it. He started off with $1050 or so. I chuckled to myself and thought we should just leave. I told him we had hoped to spend about $500, but I realized they wouldn’t take that for a bed they marked at over $1500. I said I’d be willing to go to $700, but that was pushing it. He said, “Well I doubt that we can take that, but let me go ask.” I hate it when the guy I’m negotiating with doesn’t actually have any decision making power. Oh well.

So he went to ask his boss if they could take it, and comes back and says they need another $50, or $750 total. Now that isn’t too terrible, it’s over 50% of the sticker, but I just wasn’t willing to go that high. I said I don’t think so, and he offered to split the difference at $725. I turned to my wife and asked her what she though, expecting her to say ok we’ll take it. She said, “It’s ok, we can just keep looking and find something else.” I was so proud of her.

The power of being able to walk away from a deal is huge in negotiating. Now it can’t just be a tactic you try to get a better deal, you have to really being willing to walk away for it to be successful. She was perfectly willing to keep looking, we have been shopping around for months now. It was already more than I really wanted to spend, so even though I thought it was a decent deal I was fine with walking away as well. He said, “Ok, we’ll take $700 for it, let’s get some paperwork filled out.” Ah sweet success.

Apparently the incident with the couch stuck with my wife. She told me afterwards that when he was coming over she was really giving herself a pep talk and she was going to make sure she didn’t appear too anxious or excited about it. She was so happy that she held strong and managed to help with the negotiation.

There are a couple things to takeaway from this. First, remember “Ask and you shall receive.” Luke 11:10 says, “For everyone who asks receives; he who seeks finds; and to him who knocks, the door will be opened.” I was ready to just go to the next store based on the sticker price, but I figured it couldn’t hurt to ask. Sometimes that’s all it takes. Second, remember the power of being able to walk away from a deal. For almost everything, there is something else just like it, maybe better. There is always the chance to find a good deal on something else later. If you are willing the walk away, that gives you the upper hand in any negotiation from the beginning.

Anybody else have a good negotiating story to share? If you do, let me know in the comments below, I’d love to hear about it. I’m always trying to practice and get better at negotiating. It’s a really great skill to have when trying to save money, and frankly it can be a lot of fun sometimes.

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Get to Work!

by Derek Clark

For even when we were with you, we used to give you this order: if anyone is not willing to work, then he is not to eat, either. For we hear that some among you are leading an undisciplined life, doing no work at all, but acting like busybodies. Now such persons we command and exhort in the Lord Jesus Christ to work in quiet fashion and eat their own bread. ~ 2 Thessalonians 3:10-12

43 million Americans are on food stamps right now. That is almost 1 in 7. This is a very sad state in my opinion. President Obama just gave a speech on his ideas for “fixing” the budget deficit. While I don’t agree with his definition of fix, that’s not really the point. The point is that we have gotten to this huge deficit in the first place. We continue to pay for all kinds of things we simply can’t afford.

Many of the things we are paying for are entitlements. We have food stamps, welfare, multiple years worth of unemployment, Medicare, Medicaid, social security and more. We continue to fund everything even though we can’t afford it. This year we are going to spend more than 1.5 trillion MORE than we are going to bring in from taxes.

This isn’t to say we shouldn’t be spending any of this money, certainly we should, but we have to get it to the point where we are spending less than we bring in. We can’t as a country expect everything to be given to us. We have to stop expecting the government to take care of us. That isn’t what it is there for.

As Dave Ramsey would say, you have to leave the cave, go kill something, and bring it back home. Get to work and start taking care of yourself and your family. Pay for your house, your healthcare, and your food. I understand having the safety nets in place. That’s fine, but 3 years of unemployment is unacceptable. The are jobs to be had if you get out there and look. Much of the time it is just a case of people not wanting to take less pay than they used to make. At some point you have to get back out there and work your way up the ladder again.

Our budget problems are huge right now, and nobody has the will to change them in Washington. We need to have the will to fix the problems on Main Street. Get back to work and take care of yourself. Then vote all the incumbents who don’t understand that you have to spend less than you earn out of Washington.

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Yahoo has an interesting article on 6 questions you should ask before buying buying the latest Groupon or Living Social deal. These online daily deals sites have become really popular recently, and I’ve seen some of the good and bad that go with them. Here are the 6 questions and my thoughts on each.

1. How much will this deal really cost? – You have to look at all the costs associated with a deal. If it is a coupon for $25 at a nice restaurant, you need to look at the menu ahead of time. If you “save” 25 dollars on a hundred dollar meal, you still went out and spent $75. Is that in your budget this month? If it is go for it, if not though you have to pass.

2. How else could I put that money to use? – Are you still in debt? Do you have 3-6 months saved in an emergency fund? If you answered no to either of those questions I can tell you for sure that that $25 off coupon to the really nice restaurant is a bad deal for you. Learn to cook at home. It’s cheaper and many times it can be just as good.

3. What does the fine print say? – Check for blackout and expiration dates. If you plan on using it next Saturday you are going to be upset when you can only use it during the week.

4. What does my calendar say? – If you are thinking about buying the deal you should go ahead and put it on the calendar. If you can’t fit in your schedule, you are probably better off not getting it. It might end up expiring before you get around to using it, or you may find you don’t even feel like doing it when find the time. If you can’t put it on your calendar before you buy it, you probably shouldn’t buy it.

5. Is this merchant worth visiting? – Seems that should go without saying. If you don’t know what the deal is why are you thinking about buying it? At the very least do a Google search for some reviews and see if the place is any good.

6. Will I really use this deal? Yahoo gives an example of someone who doesn’t like being outside buying a paintball deal. Seems obvious to me that you shouldn’t buy something that you don’t like, but apparently it happens.

I’ve had some good experiences with these sites so far, but most of the deals fall into the above categories as things I shouldn’t spend money on. On the other hand, I got a great deal on some Amazon gift cards from Living Social, and I recently got a nice deal from Groupon for the golf course next to my house. I think that is the real key. Buy the deals that you already plan to pay for. If you are getting lots of “deals” that wouldn’t normally be in your budget, you probably aren’t getting a good deal.

Have you tried the online coupon sites? Let me know how it has gone for you in the past in the comments below.

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I’ve heard people say Dave Ramsey’s Baby Steps are nice in theory, but he just doesn’t want me to have fun. “That’s fine for you, but I want to have fun now.” I’ve also heard, “That’s probably a good idea, but I’ve never been cheated along the way.” Well, they may have some valid points, but they are also missing some.

Sacrifice Now

Getting out of debt when you have a lot of it takes some hard work. Saving money when you could buy a new car or go on vacation can be hard. It does take some sacrifice to do it. The thing is, it is worth it. And those that would choose fun over sacrifice are missing a key point. You are going to have to sacrifice at some point. If you don’t save enough money you have to keep working to feed yourself and put a roof over your head. Talk to someone who is 68 and still working because they spent every dime they ever touched. Ask them if they are sacrificing now.

Personally, I haven’t found the “Sacrifice Now” path to be all that bad. The only thing I’ve done is prioritized my spending. I drew a line in the sand and said this is how much I’m willing to spend, we’re saving / paying off debt with the rest. Then I had decide what I was willing to “Sacrifice.” One thing that I don’t have is cable. It is really expensive, and it doesn’t provide enough value for me to want it. I cut the cable, and got Netflix for $10 a month. I haven’t however, sacrificed my iPhone. It is really convenient, I really like it, I pay a lot of money for it. To me it is worth it.

I’ve sacrificed eating out. I used to spend a lot of money eating lunch out all the time. I know lots of people that eat out almost every day. That becomes very expensive. I’ve tried to limit myself to only once every few weeks. The key is simply having a budget and sticking to it. We budget X dollars a month towards eating out, and when it runs out we stay home and pack lunches. It’s that simple. Is it a sacrifice? I guess so, at least a little bit. I enjoy going out for lunch. Really though, it isn’t that bad. Packing my lunch, or going home to eat have advantages too. If I pack I can save a lot of time over eating out and get home earlier. Going home is really nice as well. I live close to the office, so I go home and relax, or get things done around there at lunch. And they save money.

The point is, I really don’t feel like I’m sacrificing any happiness, just sacrificing spending. I still buy myself nice stuff, and we still take vacations. The difference is we save the money ahead of time. I’ve been saving almost all of my blow money for the last several months because I wanted an iPad. I knew there would be a new version coming out this spring, and I wanted to have enough saved to get it. It comes out Friday, and I plan on getting one Friday. You know what, it doesn’t even feel like a big purchase. I’ve just been saving the money and I have a category in my savings for it. The money won’t come out of our regular budget at all.

Sacrifice Later

The point of the little sacrifices I’ve done now is so that I don’t have to sacrifice later. I plan to retire much sooner than most people do. I’ll probably still work, but it will be for myself and my own projects, and if I don’t feel like working on any given day, I won’t have to. You may think you are living in the moment and don’t want to ever sacrifice, but at some point you are going to have to. When you get to 60 and you wish you were retired living in the south, or cruising the world, you won’t get to. You’ll still have to keep working. Even if you like your job, that is a sacrifice.

This post is a reminder to those who like to carpe diem, or seize the day. You may want to consider the fact that some sacrifices you can do today aren’t really that bad, and they are much better than the sacrifices you won’t have a choice on in 30 years.

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Ways to Waste Your Money

by Derek Clark

I saw this piece on Yahoo today about 25 ways to waste your money. I thought I’d share the more interesting ones and my thoughts on each of them.

1. Carrying a balance. Debt is a shackle that holds you back. For instance, if you have a $1,000 balance on a credit card that charges an 18% rate, you blow $180 every year on interest. Get in the habit of paying off your balance in full each month.

This one is obvious, but I’d go a step further and say don’t carry a credit card at all. You can do anything you need with a debit card, no need to use credit. Get out of debt as soon as you can.

3. Keeping unhealthy habits. Smoking costs a lot more than just what you pay for a pack of cigarettes. It significantly increases the cost of life and health insurance. And you’ll pay more for homeowners and auto insurance. Add in various other expenses, and the true cost of smoking adds up dramatically over a lifetime — $86,000 for a 24-year-old woman over a lifetime and $183,000 for a 24-year-old man over a lifetime, according to “The Price of Smoking” (The MIT Press).

Another habit to quit: indoor tanning. There is now a 10% tax on indoor tanning services. As with cigarettes, the true cost of tanning — which the World Health Organization lists among the worst-known carcinogens — is higher than just the price you pay each time you go to the salon.

I’ve never understood why people purposely do things that they know will eventually give them cancer. Not only are these things terrible financial moves, they will kill you. Just don’t start.

4. Using a cell phone that doesn’t fit. How many people do you know who have spent hundreds of dollars on fancy phones, and then pay hundreds of dollars every month for the privilege of using them? Your phone is not a status symbol. It is a way to communicate. Many people pay too much for cell phone contracts and don’t use all their minutes. Go to BillShrink.com or Validas.com to evaluate your usage and see if you can find a plan that fits you better. Or consider a prepaid cell phone. Compare rates at MyRatePlan.com.

This one I have a tough time with. I have an iPhone and I really love it. It is expensive, but I really can’t see myself getting rid of it. It is certainly a good idea to check minutes, data, and texting rates to be sure you aren’t paying more than you need to, but I can’t fault you for having a smartphone. It is really convenient, and like I said before, I probably won’t be without one.

20. Making impulse purchases. When you buy before you think, you don’t give yourself time to shop around for the best price. Take the time to compare prices online, read product reviews and look for coupons when appropriate.

Make it a policy to give yourself a cooling-off period in case you’re ever tempted to make an impulse purchase. Go home and sleep on the decision. More often than not, you’ll decide you don’t need the item after all.

This one goes along with having a budget in my opinion. You have to know where your money is going. Impulse purchases are fine as long as you have the money in the bank for it and you know that’s what the money is for. My wife and I get a set amount of blow money each month and we have to limit ourselves to that amount. If we want to spend more than that, we have to save it up. I’ve personally been saving for an iPad for quite awhile now, and I just got to the point where I can afford one last month. Next week when I get it, it won’t feel like a waste or an extravagant purchase because of been saving for it for a long time.

21. Dining out frequently. Spending $10, $20, $30 per person for dinner can be a huge drain on your wallet. Throw in a $6 sandwich for lunch every day and you’ve got quite a leak. Learning to cook and bringing your lunch from home can save a couple hundred bucks each month. When you do go out, consider getting carry-out instead of dining in (you’ll save on the tip and drink), skip the overpriced appetizer and dessert, and search the Web for coupons ahead of time.

This is a big one. Most people have no idea how much money they spend eating out. If you don’t currently have a budget and keep track of your spending I’d challenge to do it for just a month to see how much you are spending on food. I’ll bet you’d be surprised how much those lunches out every day can add up to.

Feel free to share your thoughts on these and other money wasting activities in the comments below.

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