Living Within Your Means

When we purchased our first house we put down a large down payment. Our realtor was surprised to find out we didn’t have any other debt. Getting the loan was no problem as we bought quite a bit less house than what the banks said we could afford.

Several years later the realtor stopped by to say hi. He said, “You and your wife were really an inspiration to me. We’ve started paying off our debt and trying to get our living expenses under control.” Evidently his normal customers weren’t people who lived beneath their means.

When you spend less than you make, you are buying flexibility and freedom. You gain the ability to change jobs or move to another area of the country. You are buying the ability to say yes to the things that matter because you save on the areas that aren’t as important to you.

This isn’t something most people do. If all your friends spend every penny they make it is easy to feel like you are doing well by just not going broke. There are people who are quite wealthy even if you’d never know it. They have chosen financial freedom over financial exhibitionism.

Do you have any examples you’d care to share of people living beyond their limit financially?

Good management of your finances can have one of the biggest impacts on your productivity because it determines how efficient you convert your time into money into the things you need. On Wednesdays we are discussing the financial aspect of productivity. Watch for more Wednesday financial posts in the future.

Six Tips for Eating Out Frugally

Most of the time, people go out to eat, not just for the food, but for social and entertainment purposes. These six suggestions will help you get the experience at a “discount”.

1. Order water - In the US, you’ll usually pay $1 to $3 for a soft drink with your meal. Water is healthier and can often reduce the cost of your meal by 10% to 20%.
2. Go out for lunch - Many places charge more for the evening meal than for lunch. Sometimes the evening portions are bigger, but this isn’t always the case. If you go out for lunch you’ll often save 35% to 50% on your meal. (This seems to be particularly true for Chinese restaurants.)
3. Go out just for dessert - Eating at home and going out for dessert can be a good option if you are just wanting to get out of the house. One advantage of this is that you can splurge and get something fancy without completely blowing your budget.
4. Take home leftovers - If the money you paid for one meal feeds you twice, you’ve made it much more cost effective.
5. Order toward the low end - Many times a $12 entree and a $35 entree don’t differ substantially in quality of taste. Most of the time the more expensive items simply reflect the additional cost of bringing in food from outside the country. However, restaurants will sometimes mark up an item more just to get a nice range of prices–someone will order the more expensive products thinking it is better.
6. Share an Entree - In most US restaurants the food portions are enormous. Sharing an entree can be a good way to keep the cost down and eat portions that are more healthy. My wife and I have found that in most places we have to share an entree in order to have any room left for desert.

Bank Mistake

I have a bank that didn’t get my last change of address notification. When the mail was returned to them, they found my address and sent it to me along with a note telling me to change my address with them.

The odd thing was along with my statement were 5 other statements from people I don’t know. I called them and confirmed the address change and mentioned the other statements. They said they would take care of it.

The other day I got my next statement--and the statements from 5 different people I’ve never heard of. I don’t mind getting other people’s statements. However, I’m very concerned that some of my statements may be sent to total strangers.
This is one advantage of online statements. They are less likely to get put in the wrong envelope. Of course there is the risk that they will do something wrong and everyone’s information will be exposed, but that is a risk either way.

If you are concerned about identity theft, you might consider moving away from paper statements as much as possible in order to decrease the amount of data about you that is running back and forth in the mail.

Have any readers had experiences like this with their bank?

Good management of your finances can have one of the biggest impacts on your productivity because it determines how efficient you convert your time into money into the things you need. On Wednesdays we are discussing the financial aspect of productivity. Watch for more Wednesday financial posts in the future.

Asking for a Discount

One way to realize great savings is to simply ask for a discount. For example, when we were getting ready for our daughter to be born we asked the hospital if we could have a discount for paying the entire fee up front. They gave us 20% off what we would have paid otherwise.

I’ve generally had good luck asking for discounts. Here are some tips to follow:

• Make sure you have something to offer - If you can pay in cash, but in bulk or offer some other type of incentive it is easier for the person selling to want to negotiate with you.
• Be prepared to walk away - If the sales person realizes that you might not make the purchase you have much better bargaining power. I’ve had car salesmen turn down my offer and then coming running after me with a change of heart as I walked out the door.
• Don’t be argumentative - The ideal offer is a win win for both parties. If they don’t agree to your proposal, you should still be nice. If you don’t like the price walk away.
• Ask for upgrades - Sometimes they can’t budge on price, but they may be able to do something else. For example a car salesman might be able to give you an upgrade on the stereo or a free oil change. Sometimes an upgrade would be valuable for you, but cost them very little.

Asking for discounts can be a little tricky, but with some practice it can add up to significant savings. You usually have nothing to lose so there is no reason to stop practicing.

What type of luck have you had asking for discounts?

Good management of your finances can have one of the biggest impacts on your productivity because it determines how efficient you convert your time into money into the things you need. On Wednesdays we are discussing the financial aspect of productivity. Watch for more Wednesday financial posts in the future.

Credit Card Skimming

Today I got a call from my credit card company wanting to verify a few charges. They listed several purchases from a part of the country we haven’t visited for years. The charges were all from a card that we don’t use any more–we keep it just for emergencies (if other cards are declined or stolen).

My wife and I both have our cards so it seems someone “skimmed” the number. Hi tech thieves will find a waiter or waitress and offer them $5 or $10 for each card they run through a small hand-held device. The thief then takes the device and downloads all the numbers into a computer and offers them for sale on the internet. Usually this will be done in a batch of cards say 100 or 1,000 card numbers.

People buy these cards numbers and put them on the magnetic stripe of other cards that have been physically stolen, but have been cancelled. Then they take these cards into the store and make purchases.

If you notice stores like Best Buy typing in the last 4 digits of the card, this is why. They want to verify that the number scanned in matches the number printed on the front of the card.

Other methods of skimming include getting a hold of the paper receipts from the old manual credit card machines or photographing (or even memorizing) the card number when you take it out at the store. There are also cases where people skim the cards by picking them up from a store’s unsecure wireless network when the point of sale reads the card or even extracting them from a merchant’s server.

In the past we have had a credit card physically stolen but this is the first time I’ve run into just having the number stolen. Oh and the credit card company canceled the card, refunded the purchases and is sending a new card.

In most cases, you are only liable for the first $50 of fraudulent charges and only if you discover the theft and don’t notify your credit card company within 30 days. Both times we’ve had a card stolen, the credit card company called us immediately because they noticed the change in our buying patterns.

Have you had a credit card stolen? Please share your stories in the comments.

Good management of your finances can have one of the biggest impacts on your productivity because it determines how efficient you convert your time into money into the things you need. On Wednesdays we are discussing the financial aspect of productivity. Watch for more Wednesday financial posts in the future.

Books

Earlier today I mentioned a book by the Wall Street Journal about personal finance, but failed to actually point people to the book. I’ve added the book to the Productivity501 store.

The book is designed to give you a good financial foundation.  It doesn’t go into great depth on subjects, but it seems to do a great job of making sure you aren’t missing anything in your financial foundation of understanding.

Another book that I’d recommend is called Founders At Work.  It is a series of interviews with people who started various companies.  It is a great read and very enlightening to hear the stories behind all these different businesses.

One thing I’ve been fascinated by in the book is how money injected into a small company is often just as much of a curse as a blessing.  Many of the truly innovative things created by these corporations were done with very little capital investment.

That isn’t to say that money never helped any startup companies, but it does give you a different perspective that not having unlimited cash on hand can be an asset.

If you haven’t checked out the book at our online store, I’d encourage you to take a look.  It is quite an eclectic collection of titles that I feel have made me think deeper.

Being Financially Literate

One of the best investments you can make in yourself is to increase your financial literacy.  In fact if you only have 10 hours this year that you can invest in self-improvement there are very few ways you can better spend that time than reading a book on investing and financial management.

Go ahead and take the time to visit your library and find a few books on investing and financial management.  Even if you just skim the parts that look interesting you’ll find this small investment can make a big difference in your ability to plan financially for the future.

The Wall Street Journal has a good book on investing that I’d recommend.  What do other people suggest?  Is there a financial book that you would recommend? 

Good management of your finances can have one of the biggest impacts on your productivity because it determines how efficient you convert your time into money into the things you need. On Wednesdays we are discussing the financial aspect of productivity.  Watch for more financial posts in the future.

Fewer Financial Institutions

Last year I finally got fed up with all the statements I was getting from various financial institutions.  I had retirement accounts with 4 or 5 different companies and stock accounts with 2 or 3 others. It was very difficult to keep track of what was doing going and what was doing poorly.

I finally settled on two institutions.  One for retirement type accounts and one for my non-retirement savings, checking and investments.  I contacted both institutions and gave them a list of what I wanted to move over.  On the retirement side of things the transition went very smoothly.  They filled out all the paperwork, sent it to me for my signature and I FedExed it back to them.  The non-retirement side of things took a bit more work–probably because I was dealing with a smaller amount of money so they made me do it on my own.

In the end it has made things much easier for me to manage.  If you have worked several different places over the last decade or so and have retirement accounts in various areas, you might consider combining them.

One advantage I found was that with my combined balance, some of the fees I was paying are now waved on the retirement side of things.  On the non-retirement side of things, I have access to savings accounts and CD with a higher interest rate because I’m over a certain threshold.

On the negative side of things, I suppose there is a little more risk that someone could get into one account and take my money than getting into multiple accounts.  This is probably offset by the fact that with my combined account on the retirement side I have an account manager paying much more attention now because of the larger balance.

What are your thoughts?  Do you think it is better to combine to one or two institutions or keep things spread out with 5 or 6 different places?

Good management of your finances can have one of the biggest impacts on your productivity because it determines how efficient you convert your time into money into the things you need. On Wednesdays we are discussing the financial aspect of productivity.  Watch for more financial posts in the future.

Productive Finances Checklist

Here is a checklist for your financial productivity. Most of these things seem minor but taken together they really add up and can make a big difference in how efficiently you are using your time and money.

1. Are you using direct deposit for your paychecks? — If you are still manually carrying a check to the bank or putting it in the mail stop! Direct deposit will get your money to the bank faster so you start earning interest as soon as possible. Even if it only saves you 5 minutes every two weeks, that is an extra 2 hours each year you can spend on something more important.
2. Is your money in the bank earning at least 4% interest? — If not, look for a different account. There are a many banks out there with savings accounts earning at least 4%.
3. Does your checking account earn interest? — If not consider if you should switch to a different type of account. Sometimes combining your checking and savings into a single account will get you over certain minimums and allow you to earn more interest than either account could separately.
4. Are you paying any unnecessary fees to your bank? – Watch out for fees. Your bank should be paying you for the privilege of keeping your money, not the other way around.
5. Have you maxed out your employer contribution to retirement? — Many employers offer some type of matched retirement savings plans. If you put in 3% of your income, they will match it. (The best retirement plan I had matched 7%.) If you work offers this and you aren’t taking advantage of it, you are basically throwing money away. Sometimes companies don’t publicize this information very well, so be sure to check the employee handbook and any information on retirement benefits.
6. Do you have any old credit cards that should be canceled? — You might be surprised how many credit cards you have–especially if youi tend to sign up for those promotions where you get 25% off your purchase if you sign up for a credit card at Target or JCPennys. If you have cards you aren’t using you should cancel them so they don’t show up on your credit report and to reduce your chances of having to deal with fraud.
7. Are you using bill payment? – This is a time saving feature just like direct deposits. In my opinion if your bank doesn’t offer this, you should switch banks to one that does. Many places offer free bill payment services. If they can directly wire money to the vendor they will. If not they will manually cut a check and send it. Bill payment saves you postage and makes it easier to manage your bills directly on your bank’s website.
8. Is your banking password secure? — If you read the fine print, most banks aren’t liable if someone breaks into your account because you didn’t have a secure password or had some type of spyware on your computer. Make sure you bank password is something secure. If they offer one of those security keychains with the changing number, consider getting one of those.
9. If you were to die, could your spouse easily find a list of all your accounts? — This is preparing for the worst case scenario, but if you handle most of the finances and you were to die a very small amount of planning now will make things easier on your spouse. A list of bank accounts and insurance policies could make things much easier when you are gone.
10. Are you taking advantage of FLEX and HSA plans? — Some employers and insurance plans offer these types of accounts as a way of setting aside pretax money to use for health care. The rules are fairly liberal and you can use these account for a variety of things including contact solution and aspirin. If you know you will have some medical expenses, these can be good ways to plan ahead to lower your tax burden.
11. Are you taking advantage of preventative healthcare? — Insurance companies realize that it is much cheaper to treat problems when they are small. Many plans include routine checkups and office visits to encourage you to have things checked out early on. Some offer other wellness plans to encourage you to take care of yourself. Taking advantage of these plans can help keep you healthy and let you fully utilize the services that have already been paid for as part of your insurance policy.

Can you think of some key items that should be on this checklist? If so please contribute them to the comments.

Good management of your finances can have one of the biggest impacts on your productivity because it determines how efficient you convert your time into money into the things you need. On Wednesdays we are discussing the financial aspect of productivity. Watch for more financial posts in the future.

Working with Your Spouse Finacially

In the book The Millionaire Mind and The Millionaire Next Door, the authors point out that millionaire’s tend to marry people who support them financially.  One of the easiest ways to wreck your financial plan is for there to be competition between a husband and wife financially.

If you have ever heard a couple say things like, “well you bought a new dvd player, so I can go buy a new dress” or “you spent $300 at the mall, so I decided to go buy a new television” you know what I’m talking about.  If a members of a marriage feel like they are in competition with each other for spending, they are off to a bad start.  Here are some simple tips to avoid this type of competition.

• Regularly discuss financial goals — If you are both headed toward the same goal financially it is much easier to work together.  This can be saving for a vacation, saving for retirement or getting ready to start a business on your own.
• Give each person a fun budget – Some couples find it is beneficial to give each person a budget for fun stuff each month.  As long as each of them stay within their budget, neither feels like the other is getting an  unfair use of their combined money.
• Try to give instead of take – The ideal situation is when both parties are doing their best to help meet the needs and desires of the other.  This works much better than when both parties are doing their best to take as much as possible.  Of course this needs to come from both sides to work.  If one person (often the woman) is giving all the time and the other person (often the man) is taking all the time it can breed a lot of resentment.

The biggest key here is to have open communication about finances with your spouse.  A good way to start is to set some small financial goals that you can meet together.  Even setting a small goal of trying to save up a $2,000 emergency fund can be a great exercise in working together financially.

Do  you have any suggestions or tips that have helped you work well financially with your spouse? Please share in the comments.

Good management of your finances can have one of the biggest impacts on your productivity because it determines how efficient you convert your time into money into the things you need. On Wednesdays we are discussing the financial aspect of productivity.  Watch for more financial posts in the future.

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