Featured Article

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 […]

The rich rule over the poor, and the borrower is servant to the lender. Proverbs 22:7

The heart of personal finance is to spend less money than you make. Whether that means making more money, spending less, or a combination of the two. Any way you look at it you cannot spend more money than you make and be successful in finance. This means no debt. You can’t borrow money for a car, and cut up your credit cards if you still have them.

Proverbs is clear on this point. The borrower is servant to the lender. Some translations go even farther saying the borrower is slave to the lender. If you owe money to somebody you are under them until you pay it back. This is why you shouldn’t lend money to friends and family. It changes the relationship. It becomes a master slave relationship instead of a peer relationship.

Debt kills a person’s ability to grow wealth and gain financial independence. The key to growing wealth is the magic of compound interest. Your money grows as it earns interest from investments, and as time goes on you start earning interest on the interest. That’s where the magic happens, and given time anybody can grow wealthy. The problem with debt is it robs us of that magic, and even works the opposite way. Visa and Mastercard are enjoying the magic of compound interest on your credit card balance.

Do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay your very bed will be snatched from under you. Proverbs 22:26-27

This has played out all across the country over the last few years. Our country fell in love with debt, and people bought many things they couldn’t afford. One of those things was houses. Unfortunately many people lacked the means to pay for the houses they signed up for. Because of this they lost them, and in the process made the entire economy come crashing down with them. The principles of personal finance laid out in Proverbs are as true today as they were when they were written. Say no to debt and you will spare yourself a lot of heartache and misery.

If you missed it, check out the whole list of principles in my intro post – Proverbs Guide to Finance.

{ Comments on this entry are closed }

The following is a guest post by Crystal at Budgeting in the Fun Stuff. Her blog covers living expenses, saving for your future, and the fun stuff in between.
According to the Yahoo Finance article, Five Mistakes Online Job Hunters Make, these actions will NOT get you hired:

1. Forgetting Manners –
If you use Twitter or you write a blog, you should assume that hiring managers and recruiters will read your updates and your posts… “Assume your future boss is reading everything you share online,” says Miriam Salpeter, an Atlanta-based job search and social media coach.

2. Overkill
Blanketing social media networks with half-done profiles accomplishes nothing except to annoy the exact people you want to impress: prospective employees trying to find out more about on you. One online profile done well is far more effective than several unpolished and incomplete ones, says Sree Sreenivasan, dean of students at Columbia University Graduate School of Journalism.

3. Not Getting the Word Out
When accounting firm Dixon Hughes recently had an opening for a business development executive, Emily Bennington, the company’s director of marketing and development, posted a link to the opportunity on her Facebook page. “I immediately got private emails from a host of people in my network, none of whom I knew were in the market for a new job,” she says. ” I understand that there are privacy concerns when it comes to job hunting, but if no one knows you’re looking, that’s a problem, too.”

4. Quantity Over Quality
Choose connections wisely; only add people you actually know or with whom you’ve done business. Whether it’s on LinkedIn, Facebook or any other networking site, “it’s much more of a quality game than a quantity game,” says Ms. Canfield. A recruiter may choose to contact one of your connections to ask about you; make sure that person is someone you know and trust.

5. Online Exclusivity
Scouring the Web for a position and doing nothing else is rarely the best way to go. “When job-seekers choose to search for jobs exclusively online — rather than also include in-person networking — they may be missing out on ‘hidden’ opportunities,” says Mr. Schoonover. “Higher-level jobs are not posted as often as lower-level jobs online. In-person networking may be needed to uncover these higher-level positions, which may be filled by executive recruiters.”

I completely agree with all of these.
1. I know my company Googles the employees and has laid off people based on a few Facebook posts. One post was anti-boss and the other was crude.
2. I’d think leaving a professional account unfinished would be the definition of of unprofessional, right? So yes, make sure your accounts are completed and have at least of couple solid contacts.
3. I talk alot (surprise, surprise, hahaha), and I’ve gotten all my jobs by talking about the fact that I was looking. My hubby-to-be actually referred me to the contact I used to get into my current job. A solid contact and some people skills can make things pretty easy.
4. If a prospective employer calls one of your contacts and they don’t remember you, that would probably get an aplication tossed. Being picky is just a good idea when you are talking about people who will be actually speaking for your future.
5. I got all but one of my college jobs and my main job by applying in person and by networking…the one job I received through an online application was seasonal work that I was way overqualified for. 🙂
What do you think of their list?

{ Comments on this entry are closed }

This is a guest article by Kevin who writes at Invest It Wisely.

What is the difference between receiving aid from a charity, and receiving aid from a government? Are they both the same, or is there a qualitative difference between them? Without going too deep into the differences, one can say that the most significant difference between the two is that one is given freely from the heart, while the other is given from people who contribute because they must.

What is the difference between volunteerism and forced giving? Read on to find out more and read about Mickey’s adventures, as he grapples with both.

A Tale of a Traveler, a Poor Woman, and a Scheming Farmer

Once upon a time, in a very distant land, there was a man named Mickey who lived on an island. Every week, he traveled from his house on one side of the island to the market in the town of Silenia, on the other side. One day, a series of heavy rains washed out his normal route, so he was forced to take a side route to the market.

As he walked down the road, he came across a poor woman living in a dilapidated hut. There were three dirty children playing outside, and some empty whiskey bottles lying nearby in the ditch.

“Sir, won’t you please help us? I have barely anything to eat and the kids are hungry!” she called out to Mickey. Her name was Denise. Mickey saw that the kids could use a bit of food, and his heart went out for them, but he didn’t have much food to spare. He also didn’t like what he had seen in the ditch, so he didn’t want to enable the woman’s habit by giving her coin. “Ma’am, I have but some dried bread and meat to spare, but I know of a charity in town that will be able to help you out; I know that they will help your children, and they will ensure that your needs are met.”, Mickey told her, and after sharing his food with her and the children, he was on his way again.

An hour later, Mickey passed by a corn field. The farmer was sitting outside his house, next to a stand of corn and a strange looking machine. “Sir, you look famished! Come over here and have some corn!” the farmer called out to Mickey. Mickey was curious, so he stopped on by to talk to the farmer. The farmer, whose name was Gorian, welcomed Mickey, and offered him some freshly steamed corn.

“Sir, would you like to invest in a great money-making opportunity? You see this machine here? Well, corn goes in one end, and ethanol comes out the other!” the farmer told Mickey. This was the time when gasoline-powered automobiles were starting to be used, but many people (like Mickey) did not yet own one. “You can mix that on with gasoline and power your car with that! No need to import from Zorland!” Gorian said.

Mickey’s curiosity was now stoked, so he asked Gorian if he could write up a business case for him. “Well, let’s see here, I put in this corn, and the price of gas is this much, so I can sell my blend for this much and make a profit!” the farmer told Mickey with glee. Mickey deliberated over the numbers, but didn’t feel quite at ease. “Now, wait just a second… you didn’t consider costs for fertilizer, or for plowing the field and harvesting the corn. Once you add in all of those factors, I would be surprised if you have any profit left over at all!” he exclaimed. “I’m sorry, but I’m just going to have to pass. If I were you, I’d keep that corn around for food!” he told the farmer as he continued on his way.

Mickey went into town, got what he needed at the market, and stopped by his favorite charity to donate and to let them know of the woman. They promised that they would help her and see to it that her children were well fed. Mickey then headed back home the same way that night, and did not see Gorian or Denise on the way back.

A week passes…

As the week passes by, the charity visits Denise, and works with her to help her get back on her feet, kick her habit, and provide for her children. She appreciates the help, but resents the charity’s moralizing. “What kind of right do they have to tell me how to live my life? It’s my business to decide, and nobody else’s!” she thinks to herself.

The week wasn’t great for Gorian. He managed to swindle some money out of an investor, but the investor has subsequently sued him, and he now has a court case in a few weeks. “Forget that court! Don’t they see how important it is to reduce our reliance on Zorland’s exports?” he thinks to himself.

Some other people traveled the same path during this time, and one of them was a scheming thug named Borat. He came upon Denise, who approached him in the same way that she had approached Mickey. “Sir, spare some change for the children, please…?” she asked. “Bugger off woman…” he replied. “Sir, please!” she begged. Borat thought for a bit, and then had an idea.

“Woman, I’ll get you some money… but in return, I want some tribute. You don’t have much to spare, but you have two hands. Every time I pass by, you shine my shoes and give me a nice shoulder massage. In return, I’ll get you some coin!” he told Denise. Denise was reluctant, but then she thought to herself “Well, at least I won’t have that pesky charity moralizing at me and telling me how I should live!”, and with that, she accepted Borat’s offer.

“Has anyone else passed by these parts lately?” he asked her. “Yes, there was one man who passed by last week, but he only gave me a little bit of food.” she told Borat. Borat then continued on his way.

Borat then approached Gorian, the ethanol-peddling farmer, and rejected his investment idea. “Promise to feed me some corn and give me some of that ethanol every time I pass by these parts, however, and I’ll find a sucker for you!”, he told Gorian, and another deal was struck. “You know what, there’s this one guy in particular… he came this way last week. Maybe he’ll come this way again…” and Gorian gave Borat Mickey’s description and name. Borat then camped out a little ways down the road past Gorian’s farm, and spent a couple days there camping out, waiting.

An unsuspecting traveler travels down the same way…

It was the end of the week, and it was time for Mickey to make his trip to the market, again. He filled his purse with coins and headed down the same way he took last time, as the other road had not yet been repaired.

He passed by Denise again and noticed that the hut was improved and the kids looked cleaner and healthier. He again gave her some food, but due to her habit, was again reluctant to give her actual coin.

Mickey passed by the same farmer as before, but this time, instead of an offer of free corn and an investment pitch, he received nothing but a scowl and a warning to stay off his land.

Mickey was nearing town when a tall, burly man stepped out into the middle of the road, forcing him to a halt. The man was Borat; Borat had been waiting for Mickey to pass by. “What’s the trouble, man?” Mickey said to Borat. “The problem is that you are a very greedy man, Mickey. Yes, I know your name and I know who you are. Twice now have you spurned that poor woman and her family, and you refused to help Gorian! Don’t you know how important it is for us to be independent of fuel imports from Zorland?” he boomed at Mickey.

“Well, I, uh… well, I’ve helped that woman plenty! I had a charity provide her with direct aid, and as for that farmer, his business is nothing but a scam! Wasteful of resources, I tell you!” Mickey said in disbelief. “I’ll now be on my way sir, if you don’t mind!” he said to Borat, as he tried to walk around him.

“HOLD IT RIGHT THERE!!!” Borat yelled in a rage, as he pulled a shotgun off his back and aimed it directly at Mickey’s chest. “I’ll make you an offer you better not refuse. You give me half of all your money right now and I’ll let you walk. Otherwise, you can kiss the tip of my shotgun right here and say goodnight, and I’ll just take all of it!” he said to Mickey, in a deadly calm voice.

“What right do you have to do this!? You have no right to take my money!” Mickey said in a rage. “Yes, as a matter of fact I do; do you remember Denise and Gorian? Well, I work for them, now, and anyone who passes through these parts has to pay up!” Borat said. “What! I never agreed to that!” Mickey replied. “Well, you better believe it! I believe it’s 2 against 1, so it looks like you gotta pay up, buddy!” Borat said, as he pushed the shotgun into Mickey’s chest. “Well, I guess I have no choice in the matter.” Mickey said, as he emptied out his coins. There were 20 gold coins in there, and he handed 10 of them over to Borat. “Thanks, my friend, and I’ll be keeping an eye on you!” Borat said, as he smiled in triumph. Mickey walked on toward town, feeling nothing but disbelief, disgust, and rage.

A distribution of ill-gained rewards

Borat was quite happy with himself, as he whistled to himself as he walked down the road. “You know, I can’t do this thing forever. Denise and Gorian might tire of paying me tribute, or Mickey might come after me seeking retribution and revenge. I think I had better keep 6 of these coins for myself. I’ll let Denise have 2, and give the other 2 to Gorian.” Borat thought to himself.

He saw Gorian first, and gave him his two gold coins. “What, that’s it?” he exclaimed. “It’s better than nothing. You better take it and keep your trap shut, if you know what’s good for you!” Borat said in reply. “All right, all right… I’ll let you have more of my corn if you can get me more coin! With this coin, I can lower my prices and compete!” Gorian said, as Borat walked off.

Borat then passed by Denise, and handed her two coins. “Wow… you know how many bottles and how much jewelry I can buy with this?” she said to Borat. “I don’t care, woman, so long as you pay me your tribute every time I pass by!” Borat said, as he went off into the night.

He was feeling good about himself; he had managed to improve the lives of a couple of his fellow citizens, as well as gain a nice nest egg for himself. Borat was considering whether to keep the money around for his retirement, or simply go into town and have a wild night. He continued to fantasize as he disappeared into the distance.

Mickey was already taking his case up with the court, but it turned out that the “thug” was well connected and could not be touched. He forced himself to take the washed-out path home, even though it was muddy and slippery. “How dare that thug rob me like that… no respect for my rights at all!” he thought. The next time he saw a poor family, he was so embittered by his experience that he shoved them out of his way. “I’ve had enough of you and your kind!” he said in disgust.

Moral of the story

This story shows the difference between how a charity operates and how a coercive agency operates. There is a difference between giving aid and money voluntarily, and being forced to give it. Borat is the most simplified example of redistributing wealth by force, instead of it being redistributed voluntarily.

We can see this kind of difference in our everyday lives, as well. For example, we have many charities around the world today, to which we can voluntarily contribute. We also pay taxes to the government, which is then used for various social goals. The difference between government aid and charity is that charity is voluntary and given by willing people to those in need. Government aid is simply pooled wealth that has been collected under penalty of jail time and asset confiscation. There is a moral difference between the two.

Wealth redistribution by force causes issues for both the giver of wealth and the receiver of wealth. The giver of wealth is forced to support programs that he/she may not necessarily agree with, such as programs to drop bombs on other countries, programs to subsidize corn ethanol production, and programs to erect huge tenements for the poor in the name of social segregation and planning. Some people would take offense to this, while others would support it, but there is no choice in the matter.

The receiver of wealth also has to deal with some moral issues. If I asked you if it is OK to accept charity from a thief, what would you say? When it comes to accepting government aid, you need to also accept the fact that people were forced to give up some of their wealth in order to provide that aid for you. Some of those people might not necessarily agree with that, but they had no choice in the matter.

We are dependent on each other, but the best way to promote a healthy balance between that dependence and individualism is by respecting property, encouraging voluntary interdependence, and by nurturing a mutual respect for each other. It’s important to keep the moral distinction between voluntary aid and coerced aid in mind lest people equate the two.

When it comes to government aid, the best you can do is ask yourself if the money will be put to better use than it would have had the government spent the money on something else, since the money has already been taken from the people. What you can’t do though is ever compare it to help and money given voluntarily, by a willing person, out of the kindness of their heart.

As fellow blogger Joe Plemon said on his blog post Four Lessons From Some Wealthy Beggars, “One element of volunteerism that is totally lacking in government assistance is the four letter word “Love”. With volunteerism, the giver is offering love and the recipient feels loved. With government aid, the giver feels like he has been hi-jacked and the recipient feels entitled.”

For that reason, voluntary giving will always be superior to government aid, because it is given out of the freedom of the will, rather than taken from people who may be willing or not. Nothing can beat the feeling of voluntarism, whether you are the giver or the receiver. Indeed, being the giver can be the best feeling of all.

Kevin currently lives the white collar lifestyle, but his real dream is to get out of the rat race one day. He enjoys exploring unvisited places around the world and gaining new experiences. He believes that by properly managing our energy and time, we can learn to invest our lives wisely.

{ Comments on this entry are closed }

“What? You’ve got to be kidding. It’s only August.” That may be true but if you have heard the story of Santa then you know that his elves are already working. Delivery day is December 25 but all year long there has been busy activity in preparation for the day that we celebrate the birth of Christ by giving gifts to one another.

This year may be the first year ever that you are ready to consider creating a new tradition. No credit cards. No added debt. No paying for Christmas up until April. How about a new tradition of a cash only Christmas? You might have even said this to yourself every year right before you pull out the plastic.

“He’s making a list and checking it twice”. There’s our starting point. This is the most important part because it will be your guideline for what you will do for the next five months and I can tell you it might not be as easy as it sounds. It is hard to think about Christmas in August when we don’t have the store ads and commercials motivating us. “What? Oh, you mean the media is influencing us? Oh…..” Sure. They want to sell as much as they can and lay it on thick with all the best marketing, persuasive colors, lights, and sounds they can find. They have actually studied how to entice us to buy more. Just do it. Pull out the plastic.

This year is going to be different. This year we can plan early. Pay cash. And, have a wonderful holiday season that does not leave us with a strange sick feeling in the stomach when it’s over.

Back to the list making. If you can’t get enthusiastic then find a friend who will do this with you. Once the list is made figure out how much each item costs and write it on the side. Add up what you think might be the total cost. I know. It does take so much fun out of it to be so much like an accountant when thinking about Christmas. I totally get that. Spontaneous gift giving is very fun but it’s like dieting. We can’t enjoy the fact that we have passed up the donuts until we step on the scale and find that we have lost five pounds.

Here are some ideas to think about once the list is complete. You might want to revise your list after reading them.

1. Christmas cards. Almost everybody loves getting Christmas cards especially if they are from someone they have not heard from all year. To economize in this area consider reducing the price of the box of cards, not the number of people on your list. Discount and dollar stores often carry boxed cards year round at very cheap prices. Think about buying stamps now and setting them aside or stashing the money in your Christmas account if you want to wait for the seasonal stamps.

2. Christmas account. Set up a Christmas account at the bank and put a regular amount of money each paycheck that is building to the full amount of the list. With five months to go before Christmas and a list of $1,000 then you would need to put $200 per month in the account. What? Can’t afford that? Then it’s time to go back through the list. Here are more ideas to help cut it back.

3. Baking cookies and treats. We used to spend a few days in the kitchen baking, baking, and baking. Little cranberry and pumpkin loaves, cookies, and fudge. We would then deliver them to friends and neighbors with our personal Christmas greetings. Is there anyone on your list who would be just as happy with holiday treats as they would be with the gift you were planning to buy? In these tough economic times everyone knows about cutting back and understands. Sometimes it can even be a relief to them because they don’t feel like they need to reciprocate more than a hug if that is all they can afford.

4. Layaway. Before credit cards (yes, there was actually a time before credit cards) layaway was very popular with the department stores. Ask at each of the stores you frequent if they have layaway. If not suggest that Christmas is coming and they might want to get it in place. If yes, then watch for the best sale you can find on big-ticket items. Shop around so that you know the difference between the regular price and a sale. When you find the best deal put it on lay-away. You will need to make a regular payment so ask and make arrangements with the store to do so. This can be reduced from the money you are putting in the bank. Don’t miss a payment. The merchandize could go back on the rack and you could lose some or all of what was paid in. Another good reason to have your Christmas account. If you really are running short you have a back-up payment source.

5. Make your own gifts. Do you have a talent or craft that you enjoy? By starting early you can make many of your gifts. One of my favorite Christmas’ was when I was about five. My mom and dad bought me a doll. My grandpa made a wooden doll bed and painted it white. My grandma made some blankets, sheets, and a little pink pillow, and my great aunt made some doll clothes. It was a family effort and it was wonderful. Most was made from scrap lumber, fabric, and yarn. The cost was minimal but the gift was priceless.

6. More please. I am a firm believer that children under 12 would prefer to have a number of smaller gifts than one big gift. It’s more exciting. If income is limited by setting an amount per person you can select what will fit into this limit. Board games, books, articles of clothing can all add to their feeling of an abundant Christmas. Remember that kids do count so if Sally got five gifts then Mike wants five gifts also. If there is a more expensive item on the list is it something that could be a “family gift” instead of being designated for one person?

7. Practical Christmas gifts. It’s great to have picked the perfect gift for everyone on our list. How often does that really happen based on the returns? One of the ways I like to shop is to pick a practical gift and buy the same thing for almost everybody. Towels are my favorite item because everyone can use them and every couple years it’s nice to have some new. It’s very simple to go and buy seven sets of towels in colors to match their bathroom. For children there are Dora, Barbie, sports, and other things kids love. The price is about $12 to $20 per person to do this. Other gifts I have bought in this manner are sheets, digital cameras, and kitchen towel sets. You can structure your gift to the amount you have to spend per person that year.

8. What are your own favorite Christmas memories? What was most special? Can you incorporate any of these ideas in your planning?

9. Still short on having enough money planned? There is still time to do a Labor Day Garage sale to bring in part or the entire amount needed for your Christmas list.

10. Bonus tip. When shopping for others with a plan you will be less likely to impulsively buy things that are not needed just for recreation. You can still have the enjoyment of a day of shopping but are doing it with a purpose in mind.

Every year we remind ourselves that it is the thought that counts for Christmas and that thought flies out the window when we start shopping. Santa’s helpers have the right idea and we can learn from their experience by planning ahead. When the holidays arrive we can be ready and be able to relax and enjoy them. Oops, in December it’s to make all those cookies. So, we can be busy and enjoy them. When January comes we can walk to the mailbox with confidence knowing we have achieved our personal victory over the credit monster for another year.

Carol Schultz-Weil is the author of In The Trenches – Financial Survival During Times of Hardship and has a blog at http://inthetrenches2009.blogspot.com

{ Comments on this entry are closed }

How to Stop the Bleeding!

by Guest Author

The following is a guest post from Heather Green.

I wish I had a dollar for everytime I’ve thought “THIS is the week that I’m going to stop spending so much money!” At the time, I mean it with every fiber of my being, then I get paid and get busy making excuses. So, I did a little research and came up with a few ways to curb my shopping addiction that seem to work for me.

Shop at home

Ladies, You KNOW you have more clothes than you need and even a few items with the tags still attached. So the next time you get bored or depressed or just feel like buying something, go straight to your closet and start piecing outfits together. You’ll declutter and save!

Ditch the Cart, Carry a Basket

I started doing this a few months ago so I wouldn’t buy more than I could carry. It worked. Whether I was at the grocery store or Target, wherever I was, if I couldn’t carry it, I couldn’t have it. The first few times, you’ll cut off the circulation in your arms and over time, you’ll learn to only get what you need.

Put the Stuff You Want on Hold

Walk away and think about it. It sounds like a lot of work, but it saves a ton of money in the long run. Being a compulsive shopper, I’ve started examining my items before I buy. Most of the time, I end up putting a good bit back or I never go back to spend the money that I didn’t have in the first place.

Get an Accountability Buddy

Just like Christian living, being held accountable helps us to keep track of how we’re living and what we need to change. The same principle applies for spending. If you feel the need to get out of the house and you are used to hitting the department stores, call a friend instead and meet up for a cup of coffee or something that’ll squish that shopping bug.

Say Goodbye to Plastic!

“The rich rule over the poor, and the borrower is servant to the lender.” Proverbs 22:7 Start paying for things with cash only. Seeing the cash go is hard to do and chances are good, you’ll spend a lot less.

Heather Green is a Christian mom, freelance writer and the resident blogger for OnlineNursingDegrees.org, a free informational website offering tips and advice on online nursing schools.

{ Comments on this entry are closed }

When you have a family it can seem impossible to stick with a budget or find ways to save money. There are always extra expenses with children growing out of clothes and shoes and the constant barrage of requests from the school for a few dollars here and a few dollars there for field trips or schools supplies or donations. Add to that the ever climbing costs of groceries and petrol and it is easy to see why so many families do not even bother with a budget.

However, spending money without a budget is a dangerous and slippery slope. Without a budget it is unlikely you will save money and you will overspend. The combination of these two things means that you and your family will never truly be financially secure. Instead, follow a few steps to building a budget that your family can live with and that allows you to do the things you want without having to overspend.
The Bullet Proof Family Budget

Plan Together – As parents you have the final say in how the money in your household is spent. However, if you allow children to have some input they will have a greater understanding of money which will help now and in the future. You should be comfortable talking about money with your children, even if you do not go into great detail. They can help decide how much they should get for an allowance and how much should be spent on their needs like clothing and school supplies. They will probably be shocked at how much maintaining a household actually costs, which will make them more respectful of the budget.

Decide What Your Saving Priorities Are – Between retirement, college education, and holidays there are a lot of things to save for as a family. You will have to prioritise and set aside money accordingly, keep in mind that big things like retirement need the most money so start saving for these things early. Likewise long term savings can be put into investment accounts which earn higher returns but are more difficult to withdraw from while things like holidays should be in accounts that are easily accessible. Also, make certain you have an emergency savings fund that will cover your living expenses for three months in the event of an emergency.

Use Cash Not Credit For Purchases – Spending cash keeps you on budget in two ways. The first is that the money you spend in finite, once you run out of cash you simply have to stop spending. The second is that it helps you to avoid racking up credit card debt and interest fees. The exception to this is if you have a great rewards program with your credit card. Just make sure that you use the rewards and that you never spend more than you can repay each month as paying interest always cancels out the value of the rewards. If you are not comfortable carrying cash all of the time a pre paid credit card is a great way to still live in a cash only world while still having the convenience of a credit card.

The most important thing to remember when building your family budget is that key word “family.” If you keep everyone involved and working toward the same goal it is nearly impossible not to be successful. Remember to build some incentive and rewards into the system for the children and mom and dad. Everyone who sticks to the budgets should be rewarded for its success. Just make sure those rewards are noted and accounted for on your expense list!

This article was written by Timothy Ng. You can read more of his work at Credit Card Comparison, where he has a number of comprehensive guides to help you compare credit cards.

{ Comments on this entry are closed }

Sell Yourself Short

by Derek Clark

The following is a guest post by Greg McFarlane.

What’s a short sale?

You buy a house. Years later, you can’t make the payments, so what do you do?

You can just stop paying, and the lender will eventually file an eviction order with the local constable. Depending on where you live, you can either laugh at the order or heed it. For the satisfaction of sticking it to the man for a few weeks, you’re out the price of your house and your credit rating, which will never recover. Which means you’ll never be able to get a credit card, not even from Capital One. What’s in your wallet? Nothing.

The less opprobrious and more financially savvy way to dishonor your contract is to sell your house short. Which involves going to the lender and pleading for mercy.

There’s something important to remember here, both to keep things truthful and to avoid embracing the mentality of a victim. When you ask the lender to accept a short sale, you’re not coming from a position of supplication just because you’re just an average Joe trying to get by while the heartless lender sits back in his corner office, laughing at your misfortune so hard that his monocle falls out and lands on his spats. You’d signed a contract that required you to cut monthly checks. There was no clause in the contract that read “if borrower loses his job, loads up on Fannie Mae common stock, gets divorced, has triplets, starts buying cigarettes by the carton, falls in love with a stripper or buys a boat, contract is void and subject to renegotiation at a lower rate.”

A little quantification might make this easier. Let’s use simple numbers. Five years ago, you bought a house for $150,000. You got a 30-year mortgage at 6%, which was average at the time. Fixed-rate*, of course. You put 20% down so you could avoid having to pay private mortgage insurance, the premium that lenders charge to borrowers whom they figure have lots of incentive to stop making payments if money gets tight. Which means this is your monthly payment:

.06 is your interest rate. 12 is the number of payments in a year. 360 is the number of payments over the life of the loan. 1 is the loneliest number that you’ll ever do.

Oh, stop whining. Yes, it’s math. The very calculator that comes with the computer you’re reading this on can solve it easily. Divide your interest rate by the number of months in a year, add 1, take to the -360th power, subtract from 1, multiply by the number of months in a year, divide into your interest rate, multiply by the amount you borrowed. DONE!

This makes a monthly payment of $719.46. Which doesn’t seem onerous for some people, but if you can’t pay it, you can’t pay it.

When you signed that mortgage, you committed to pay $259,005.83 in equal monthly installments over the next 30 years. Say you’re five years in and you can’t make the payments. You’ve already paid $43,167.60, assuming you haven’t missed any payments, which you probably have. That leaves $215,838.23. Selling short means that if you can’t make your payments, you tell your lender you’re willing to sell your house at a loss.

For a short sale to make sense, your house had to have depreciated. If that’s not obvious, consider that if you couldn’t make the payments, you could just sell the house for at least what you paid for it and not come out behind. Say property values in your area have fallen 30% since you bought the house. Your house is now worth $105,000. With the lender looking over your shoulder, you sell it for that much. What happens?

Well, the good news is you’re not on the hook for $215,838.23, or anything near it: the new buyer will now have a 30-year obligation. But because the house got cheaper, and interest rates happened to follow suit, the new buyer’s obligation will be a lot less than yours was.

You do owe something. If you look at your monthly mortgage statement, you’ll see that part of your monthly payment goes to the principal while the remainder goes to interest. Which stands to reason – at the 29-year-and-11-month mark, you’d obviously have paid off almost all the original $120,000 principal. Which means that early in the mortgage term, you’ve paid off almost none of it. Here’s a sobering chart that shows how much of the principal you’ve paid down at different points throughout the life of your loan:

Even a few years in, you’ve barely made a dent in the principal. It’s not until you reach the ¾-mark of the mortgage term that the house is more yours than the bank’s. If you think this is unfair, take it up with God for making mathematics work the way He did. Or find a rich uncle to lend you money interest-free.

Anyhow, back to your problem. Five years in, you’ve reduced the principal by $8,334.77, leaving $111,665.23 to go. (Trust us on this. Or just go here.) If you short-sell the house for $105,000, you’re out $6,665.23.

Plus you’re out your $30,000 down payment. Plus the realtor’s fee and closing costs, which are around 6% of the purchase price, so say $6,300. And don’t forget the 5 years’ worth of payments you already made.

Total outlay? $86,132.83.

Worst deal ever? No. Again, always look at opportunity cost – what you would have spent otherwise. Keep in mind that you paid that $86,132.83 over 5 years, and most of it is the mortgage payments you already made. That’s important because had you never bought the house, you would have had to spend something close to those mortgage payments anyway, on rent. Assuming that rents and mortgage payments are similar, you can ignore the $43,167.60.

So your 5-year experiment in overextending yourself with a house cost you close to $42,965.23, or $716.08 a month.

But again, opportunity cost. What’s the alternative to selling short?

If you walk away from the house and the bank forecloses on it, that means you probably let it fall into disrepair, or worse – after all, you’re no longer living in it and have no incentive to make it look good for a buyer. Industry standard is around a 20% discount for bank-owned properties – the bank probably won’t bother putting any money into an abandoned house, and will entertain the first solid offer that comes along just to get the house off its balance sheet.

A 20% discount means the bank will sell the house for around $84,000. Just because you ran away, doesn’t mean they won’t catch you. While you’ve reduced your principal balance to $111,665.23, that means the bank can come after you for a $27,665.23 deficiency judgment. They’ll win. Add that to the $30,000 you put down originally, and that’s $57,665.23.

In this example, selling short will save you $14,700 vs. walking away. Nor will it damage your credit quite as badly, nor will it label you a deadbeat.

*Most people who got in a position where they had to sell short are in exotic mortgages, which is of course a symptom of the bigger problem. If you know that you’re going to have the exact same payment every month for the next 30 years, that’s a certainty that you should be thrilled about. Fixed expenses are far easier to account for than variable ones.

Greg McFarlane is an advertising copywriter who lives in Las Vegas and Lahaina. He runs ControlYourCash.com and recently wrote Control Your Cash: Making Money Make Sense, a financial primer for people in their 20s and 30s who know nothing about money. Buy the book here (physical) or here (Kindle) and reach Greg at [email protected].

{ Comments on this entry are closed }

This is a guest post by Mrs. Not Made of Money.

The start of the school year means a myriad of feelings for everyone in the home. For moms, it means that the days will be somewhat freed up to get other tasks taken care of, along with a massive change in scheduling. It also means purchasing everything needed to get the kids started in their new grades. Having some budget stretching tactics for back to school shopping can mean the difference between saving some substantial cash or breaking the bank.

There are countless ways to squeeze your dollars without making it a full time job. One of the easiest ways is to purchase some of your basic items at a dollar store. They are the same quality items that you could purchase elsewhere and at a significant savings. You can find everything from pens, pencils, rulers, and even some notebooks.

{ Comments on this entry are closed }

If you feel you are getting swept up in the bills and expenses of your everyday life, but can’t seem to see anywhere you can cut back, perhaps you need to take a look at your expenses one by one. While you can’t always cut them down or out, some of the costs of living do not need to be as excessive as they are, especially when you identify how you use them, and then find a more efficient way.

So consider how much you could save if you didn’t have…

…a mobile phone

A necessity of life surely? Well yes, but think back just ten years and remember how you functioned then, without a mobile phone and instant connectivity to everyone everywhere. A typical mobile is a smart phone which allows you to stream your emails to your phone as well as go online from your handset.

Smart phones can be on average:

  • On a $70 per month cap. You often pay $70 per month and receive $600 worth of calls for example.
  • Including a $30 repayment. If you can’t afford to buy the phone outright, you can pay it off bit by bit monthly, over a 24 month contract.
  • A $10 per month data allowance. On average this monthly cost will get you one to two gigabytes of data which can be emails, downloads or web access.

Over the two year life of your phone you will be paying $2,640 and if you used your landline to call your friends and family when you got home, sent emails and instant messages while you were at your computer and checked your banking at an ATM or on your statement you could save thousands.

…a car

The costs of buying and maintaining a car differ significantly depending on how much you drive it, where you live, how old you are, what kind of car you choose and hundreds of other variables. However, take the opportunity, and this example, to consider exactly how much your car is costing you, and whether there are ways to make savings; shopping around for insurance for example can reveal a better deal, so too can driving part way to work and walking or catching the bus or train, saving you on fuel, parking costs and wear and tear on your car.

To buy an average four door sedan new is around $27,000 on road. If you are borrowing money to buy the car, expect a seven year personal loan interest rate of 11.49% meaning your repayments are around $498 per month.

If your car has a fuel tank which holds 60 litres and it gets 7 litres per 100 kilometres then if you are driving into the city to work every day, as well as using your car on the weekends, you are going to fill your tank around once a week, and with fuel at $1.20 per litre this will cost you around $70 per week. To insure your car based on your usage will be another $78 per month.

This all adds up to an owning and running cost of approximately $262 per week.


If the average smoker goes through two packets of 35 cigarettes a week, at around $20 per packet, that is $30 per week, or more than $2,000 a year just in cigarettes. However, if you have to answer ‘yes’ to the question ‘are you a smoker?’ it can cost you in a lot of other ways too.

For example, expect to pay around $300 more for your health insurance policy and around $1,000 more for your life insurance policy if you are a smoker. Also consider that as a smoker you are considered more likely to burn down your house and so you could be paying 10% more in home insurance, not to mention affecting the value of your home and therefore costing yourself equity because of the damage and the smell. Your car insurance is also likely to be around 5% more if you are a smoker.

It has also been found that smokers earn between 4% and 11% less than their non-smoking colleagues.

…new clothes

There are new clothes that you want, and those which you actually need, and to help you see where your savings could be going, consider what you are spending on some of your more extravagant clothing purchases:

  • An incidental top or skirt purchase once a week of $50. You see something stunning in the window or walk past a bargain which you just have to have, if you’re adding to your closet weekly this can significantly eat into your savings.
  • A $200 pair of new shoes each month. The seasons and the styles change but we can’t all marry a ‘Big’ stockbroker to furnish our fetish.
  • Another couple of incidental accessory purchases adding up to $100 per month. you may feel the need to finish off an outfit with a new pair of earrings or you forgot your scarf and so simply buy a new one, adding more non-essentials to your wardrobe.
  • Updating your office look with two new suits per year, at $500 each. Suits are a staple of any wardrobe and can quickly eat into your budget if regularly updated.
  • Updating your winter coat for $250. New styles and new seasons – a winter coat is always seen as an investment, but it is not making you the returns a savings account could.
  • Special occasion outfits two times a year. On average you may go to two weddings a year, and see yourself spending $500 each time to cover new outfits or accessories to update older looks.

This brings you to a yearly total of more than $8,400 spent on clothing.

…a job

Having a job is supposed to earn you money right? Well don’t forget that it is going to cost you money as well, and you need to make sure you can come out ahead, or at least break even.

Consider the fact that if you have to put a child in day care, this can cost around $80 per day which can add up to $20,000 a year. Most people will be eligible for rebates which can bring the cost down to as low as $15 per day, but on average you will spend around $30 on childcare, or $7,500 a year.

You also need to consider your fuel costs from the car example above, as well as the costs of keeping your wardrobe updated and in good condition, from the clothing example above. There are also the temptations to buy coffees and lunches which you could normally avoid with a trip to the pantry at home.

Then there are general office costs which differ between companies and industries, but consider being asked to chip in for each of your colleagues’ birthdays – in an office with 20 people and $10 per group present you’re looking at $200 per year on gifts for people you’re not necessarily friends with.

…a dog

If you’re not ready for the investment in children, you may consider getting a dog, but you can still save around $840 a year if you don’t have a pet. There are costs such as:

  • Annual shots of $80 each.
  • Heartworm and all-worming treatments at $10 per month
  • Flea treatments at $10 per month.
  • Dog food at $10 per week.

You don’t always have to give up a part of your life to make savings in your budget. Often simply looking at the costs and break down of each aspect of your life and each of your vices or habits is enough to show you where you can curb your spending, and show you a way which allows you to enjoy your favourite pastimes or your life’s path.

This is a guest post from Alban from Home Loan Finder.

{ Comments on this entry are closed }

A man lacking in judgment strikes hands in pledge and puts up security for his neighbor. Proverbs 17:18

God is pretty clear in this verse that is doesn’t make sense to co-sign a loan for someone else. There are 2 very good reasons for this, and they are very similar to why you shouldn’t loan money to friends and family. First, if you co-sign on a loan, you’re probably going to end up paying the loan. Second, when that happens the relationship is going to be ruined. Simply put, it changes the relationship when you get a phone call because your friend isn’t paying his or her loan.

{ Comments on this entry are closed }