Money Habits I am Doing Right

Life is a balancing act.

Many times I think back and I re-read some of my past blog posts and think to myself I might have used some harsh words to incite change upon myself and my readers. But my intentions were not to scold down or to say you are doing very badly at money management skills. I get caught up at times with my own short comings that I am my own worst critic, and I admit I use it to fuel the fire for this blog with great content. This time I am trying something different, and it is a post that probably has been around the block more often than not. But I am still going to share with all of you, what things I have been doing right financially speaking. I will answer for you all the money habits I am doing right.

When I do things right I am actually happier, because these things are in my happy go lucky financial rule book. No not really a book, but just good ideas I have in my mind at all times. Did all of you know that finance and money management is 80% behavior and 20% math? If you can maintain this balance in life you will always win with money. Given this I am going to share with you all the behavior rules I use in my life to stay in my personal finance lane.

Money Habits I am Doing Right:

1. I write this blog which keeps me accountable for my actions. (I can’t Believe it’s 1 Year already)

2. I am saving a good portion of my income. (About 15% soon to be about 20%)

3. I am on top of my investments and assets. (Mostly monthly and sometimes daily.)

4. I am thinking in a long term perspective for my money. (Not what can I buy with my next paycheck mindset)

5. I take the advice of other PF blogger’s / financial guru’s if it benefits me or awakens a need to an improvement change.

6. I look at time in a productivity mindset and look to maximize my efforts. (Always finding a balance between family and work)

7. I hate debt and am working on eliminating my school loans while not going into any other future debt.

8. I am always looking for a new book to read on finance as I still find it intriguing to expand my personal finance horizons.

9. I am excited to help others improve while helping myself become a better communicator. ( Face to Face and written)

10. I see options and opportunities that investing gives me now and can give me in the future. (Passive Income)

These are some of the things I am currently doing to better myself every day and improve my finances. I hope I can lead by example with these steps and help any willing person with a desire to improve their personal finance picture in these uncertain economic times. Will these steps increase your income? No, but with time and effort it can help anyone improve financially and with goal setting. Behavior modification is not very easy, including how to manage finances. That can be one of the most important things you can do to help yourself achieve life’s basic money goals. Goals were made to be accomplished and surpassed.

In an uncertain world we have to do our best to help us be better prepared if another recession, depression or emergency were to occur in our lives. A layoff or a reduction in income can pop up at any time for anybody working for somebody else. Can you live on less than you make if it were to happen to you today? If you can just get over living the paycheck to paycheck syndrome you have succeeded in a personal goal that many people find too daunting. I will do another post in the near future and list all the bad things I am doing because nobody is 100% perfect in this life. But remember to keep striving to achieve a better more balanced you in this life.

What are some of the things you are doing right with money behavior that you would like to share?

Rich Uncle EL

Pic is credited to the movie called Man on Wire.

What I did to save a buck

An unfortunate event took place on my way to work on a recent Friday morning. I make my usual stroll to my car about two blocks away from my apartment building and that’s when I saw the travesty right in front of my eyes. My 1999 Camry was hit and my driver side mirror was shattered in pieces and hanging for dear life. Well you know, what was my first thought when I sat down in my car? How much is this going to cost me? See picture below for your viewing pleasure.

During my lunchtime chat with a co-worker I reveal my recent incident and he quickly tells me a story of a similar situation he went through several years ago. It cost him about 200 bucks back then to fix. Now my mind is checking off the dollar signs to the tune of $400-500 because:

1. His accident was a few years ago and Inflation will get the best of me.
2. His car is a newer Camry and I figured newer parts should be cheaper to find.
3. His mirror didn’t need a complete replacement with some body work / painting involved.

NOW I am freaking out because as you already know I am not fond of spending money on miscellaneous transportation costs. It’s the next day and now I have a plan to get at least three estimates from local body shops and go with the best price and customer service I receive. It’s more important to me for the work to be done quickly and efficiently than the overall price.

Now for the Details:

Estimate 1: Body Shop closest to my house- $225 to order part, paint and Install.

Estimate 2: Body Shop about a mile away- $210 to order part, paint and Install.

What did I actually Spend: $35 for a driver’s side mirror found at a local junk yard, 55 to paint and Install part at body shop number 2. $90 dollars total.

So there you have it folks I saved about $120 because I took matters into my own hands and tracked down the exact auto part I needed and hustled my way to getting some huge savings. I stopped at the second body shop because the owner was cool and very open and honest about the details of the job. Because of this I gave him my business.

These tactics can be used by anybody if you just take the time and make a plan to negotiate and save some dollars. I could have just given in to the first body shop estimate, and been happy with the first quote given. But luckily for me that I am never 100% trusting with service quotes, plus I love to shop around for better deals. Never ever forget to get a second opinion in anything you need to get done service wise. Because different people charge different prices at different times, and it may help you tremendously if one of those individuals is in a good mood.

Examples of Price Quotes/Estimates to save a buck:

Car Insurance
Life Insurance
Home Insurance
Home Repairs
Car Repairs
Car Loans
Mortgage Loans (Good Faith Estimate Docs)
Any type of tutoring / lessons
Financial Advisor Fees
Cable / Cell / Internet Services

Now is the time to Comment if you have a cool story on how you saved a buck by taking matters into your hands.

Watch your Money!

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RichUncle EL

Richer by 288 Times

Have a 150 grand lying around?

Can you believe this? The Super rich have 288 times more savings than the normal American. Compound that by 4% and you have a pretty decent interest income. I must say I didn’t fully agree with all the hoopla surrounding the top 1% and all the wall street protesters, but the facts are very clear and right in front of our noses. The Super rich are richer by 288 times the median income. How can the top 1% be so abundantly prosperous and the average person not be? The economic system if taken to extremes will not sustain another meltdown.

Did you know that the system is based on good faith and that most of your money is not all accounted for in banks or brokerage firms. Let me explain a little further for those of you who do not know. Most financial institutions use about 80-90 % of your money to lend out to others or to re-invest again for their future gain. If the system were to collapse it could be the end of monetary policy as we know it. The actual figure the computer displays out to you and millions others just like you, is a figment of your imagination because guess what, you’re actual money is the mortgage of some other person and the bank is the administrator of your assets and another person’s debt.

I am not telling you all this so that you can run over to the bank tomorrow and hit the eject button on your money, but to get you to think a little bit about what is actually occurring behind the scenes. Things are not as rosey as the media is making it seem. One day it’s OMG we might go into another recession and the next day the media is all about how great of an economy we have. They can not seem to make up their minds or just maybe the powers from above and the ultra rich are making the media outlets run the happy go lucky stories so that a political / monetary uprising do not occur.

Richer by 288 X the median Average article: Net Worth Article

So if you can sit down and digest the article you just read in the link above about the super rich and the income disparity affecting our nation, How do you feel? Do you now feel a bit of compassion for the wall street protesters? Do you even care that somebody has 288 times more savings than you do?

RichUncle EL

Pic above is credited to Icon Airplane Co. Toys of the Super Rich!

Asset Allocation

Why is asset allocation important? Basically you are dedicated to a specific breakdown of financial sectors that you may or may not have knowledge what the breakdown should be. The possibilities are endless when it comes to the asset breakdown for your retirement accounts. Finding the right asset allocation is crucial to how your investing performs.

But it all comes down:

What you want to invest in
How much Risk you wish to take
Why your age may favor a specific breakdown
How comfortable you are with making adjustments

For years many investment gurus preached that the younger you are the higher your percentage of funds should be in U.S. Stock sector but now I think that is not the right way to invest. The volatility now a days is getting way to out of control for even the professionals to grasp.

What can you do to put yourself in the best possible path for your funds? Understand the importance of doing asset allocations based on you’re percentages and fund prices. (If you are into spreadsheets and tracking prices you will benefit from the ups and downs of the market)

When I say for you to make these allocations, I am referring to your 401K or similar plan which may include IRA plans as well. The reason I say this is because these types for accounts usually do not charge you fees for making moves / shifts between funds. Now let’s discuss the % breakdowns by age range.

Asset Allocation by Age:

20-30s: 70% U.S. Total Stock Fund, 15% International Fund, 15% Bond Fund
40-50s: 50% U.S. Total Stock Fund, 30% Bond Fund, 20% International Fund
60-70s: 40%U.S. Total Stock Fund, 40% Bond Fund, 20% International Fund

Clearly as you get older you want to start to move the risk away in retirement accounts by reducing your % in the U.S. equity markets and moving it to bonds, income producing assets, and cash. This will assure you will be better protected if there is a dramatic market collapse like in 2008. These diversification tactics coupled with the lower costing index funds like Vanguard funds you will have a greater chance of hitting your retirement magic number sooner than later.

Then you can be preoccupied with what to wear to the beach because you have just reached the financially free stage of your life. Now the fun begins.

Asset allocation definition as per Investopedia

Rich Uncle EL

Why I like Vanguard Funds

I will give you the reasons why I like Vanguard as my primary online investing option for Index funds only. A lot of people preach that simplicity is better and leads to a more fulfilled life. But when it comes to investing things can get a little skewed and complicated. Vanguard is my number one option for Roth IRA and Traditional IRA account options including transferring any old 401K employer accounts.

For stock investing I do this at another online broker because I for one like having a little separation of wealth to avoid risk and also my online broker is cheaper when it comes to doing stock trades. Plus some of the big name investing options charge more than the discount brokers per trade usually, unless you have massive wealth and then the discounts are available due to the size of your nest egg. Having a big amount of money has it’s perks.

Back to the matter at hand, Vanguard index funds. I find their customer service to be exceptional. Every time I have contacted them over the phone, I get a person who is both knowledgeable and very customer service driven. They always answer my questions and I am not steered into doing something I am not 100% knowledgeable on the subject matter and comfortable doing. Give them a chance and you will see how easy it is to maneuver around online and set up an account with them.

They have all types of accounts available like, mutual funds, IRA’s, 529 plans, stocks / bonds, and ETF’s. In addition to being a full service broker you can invest as little as $50 a month automatically from you’re bank account to your IRA (only) investing account for no additional fees. This is called a bank ACH debit and can be very convenient for your online money system.

I promote Vanguard because I like how the company is run and how inexpensive most of their funds are to own. I am not being compensated for promoting them and you can find them at their website Vanguard.com. I am just passionate about sharing what is and has worked for me and the great reputation of a good financial company. If you have any questions you can call them directly, go on their home site, or send me an email at Moneywatch101@gmail.

Here is a link to a another fellow blogger who loves Vanguard as well: MrMoneymustache

RichUncle EL

Photo credit to Businessweek and Vanguard.

Spent $0 in a week

How:

Hey don’t judge me, I had all the food I needed and all the drinks were already chilled in my ice box, didn’t need to buy gas or anything else. It was a regular week and I finally reached a milestone. I always thought that this would be difficult to accomplish when I started blogging, but I can now say that I have done it at least 3 or 4 times in the last 4 months. It all started by tracking every penny I spent in my handy dandy notebook. The days of the week that I didn’t spend any money vary, sometimes the spend fast week started from Friday to Friday or most recently from Sunday to Sunday. As you would be shocked that I didn’t make a purchase during the weekend, I will let you know that it could be done. So if you want to accomplish a similar feat for all mankind or maybe just for your wallet, start tracking every purchase and then make drastic cuts by planning ahead of time. Groceries should be purchased to last you through the week, your gas tank should be filled prior to as well, and for crying out loud avoid any major retailers.

Why:

As you might be asking yourself why did I put myself in such a predicament of being a terrible consumer and not adding to our nation’s GDP. Well if you may ask I did it to add to my Net Worth which is my very own GDP. Another word for this extreme sport as per shopaholics everywhere, is basically called a spending fast. I had a goal in mind as a way to test myself to think differently and I was going to achieve it no matter what. Every step taken financially will hopefully lead me in the right direction towards achieving my goals. Not a single online purchase, not a single candy bar, and not a single article of clothing purchased in that week.

Conclusion:

The end result if I do this more often than not, I will reduce my annual expenses and systematically increase my savings. I have so many goals in life and I want to achieve them as badly as we all need air. Well maybe not that bad, but you get my point. Sometimes to achieve something you have to make drastic changes and this is my major change as of right now. I can not say that I will keep the spending fast going for long or that I might not spend money on something as dumb as a $150 dollar pair of Jordan’s. I can clearly state that I am more focused and determined than ever to do what I have to do, which is to be in a more stable personal finance foundation while growing my net worth.

RichUncle EL

Interest is What?

Recently I saw a show called “Princess” on TV and it is based on spoiled individuals (90% girls) who walk around spending hordes of money with their income, with debt, and with other people’s dimes. It is hosted by a famous Canadian TV personality and finance guru, Gail Vaz-Oxlade. This show is shocking to me because, I have never seen anybody spend 75% of their income on wants and not needs. What are the typical wants they spend their money on: Manicures, hair-do’s, shopping sprees, massages, eating out and drinking.

On a recent episode, one of the young ladies that was featured last week did not know that if you pay with debt that the purchases made on the card accumulates interest on a monthly basis. Now if she applied for the card and never read the fine print, how many more people are this naive. She didn’t even know how to do a budget. This young lady has been living a reckless life, spending carelessly and on top of that did not even make a single effort to repay her debt. Thankfully this show is a half hour long for the viewers because by the end of it, and after 4 weeks time span she finally learned some personal finance basics and can now be more of an adult.

Who is to blame for this young person not knowing a basic money foundation principle, like interest repayments? Her parents for the most part are to blame, because they spent the majority of the time with her throughout the years. Have you heard of the saying- it all starts at home, well this girl all she got from her upbringing was spoilness, if that’s even a word. What a world we live in where another little princess in another episode, is currently making $2800 dollars a month, spends $4000 a month on things that do nothing for her, but increase her vanity and this went on for years. How did she get to spend so much month after month, by borrowing from her parents, her boyfriend, her sister, her credit cards, and (the icing on the cake) her poor old grandma. Can you believe the gaul of this individual. My jaw dropped as I couldn’t believe that 85% of the $4000 grand went to wants, and not a dime went to debt repayment.

So if you know a princess in your life please teach her what interest is and send her a link to Moneywatch101 or the thousand other personal finance websites, so that she can do better with her finances. The majority of the princesses I’ve seen on the show are in their late 20’s, and have $0 net worth. That is just unacceptable. This is just an example of the times we live in where hyper consumption is the norm and superior marketing tactics by the major companies in this world are legally stealing millions from the hands of the people in this society.

Be smart, Be frugal, Be strong, and Be resilient.

Watch your Money

Photo credit to Slice TV show Princess

Saving Money Tactics

As we all know saving money tends to be an extremely difficult task with all the bills and expenses we accumulate throughout the years. How can you fight back and defeat the non-savings bug? By utilizing smart money tactics and creating a barrier between you and your money.

Anyone can do it as the system is not prejudice to race, but favors towards stubborn minded people who stick to a system of always paying themselves first. Most people are set in their ways and do not want to embark on a mission to better themselves by trying new financial tactics. What new savings tricks have you done recently? If you have not gone out of you’re comfort zone, try a few of the tips below:

Saving Tactics:
*Open an online only savings account and direct deposit a set amount per paycheck (Barrier 1)
*Apply for your employers retirement plan with at least the employer match or up to 15%
*Open another checking, savings account and do not get checks/debit card(Direct Deposit Also, Barrier 2)
*Open an online brokerage account for scenarios if you see a cheap stock or mutual fund( For Investing )

This is system will utilize the two other accounts aside from your main checking account to use for 1. Goal Savings, 2. Emergency Savings. They will both have a direct deposit from your paycheck unless you can be diligent and transfer the money yourself every pay period. Most people will eventually forget or decide after three deposits that they need the money for something else. If you set it up for direct deposit through your employer then you will be less likely to remove the system. It will continue indefinitely and grow over time to help you achieve that emergency fund you have been dying to fund for a long while. A automatic system like this is just the beginning steps as you can add even more layers to the mix with DRIP’S and DSPP’s. (Dividend reinvestment plans and Dividend stock purchase plans)

Saving Money Tactics:

-Match your Friday spending and save the same amount

-When you go out to dinner, save the same amount of the bill in online savings

-Get the biggest piggy bank and attempt to fill it with all the loose change you can find

-Pay yourself first every pay period, even before bills.

-Sign up for all employer sponsored savings / retirement / profit sharing plans. (Start small, then increase)

If you do all these steps you will have a great online saving money system that can not be stopped easily. Systematic barriers will help you grow your accounts without you ever interrupting it. Simple steps can lead you to a better more relaxed financial life. Also very important to consider always set up a beneficiary for all your accounts just in case an emergency occurs.

Contact me if you have any questions regarding setting up a system like this. But really all it takes is a desire to begin by guiding yourself to complete all the Saving Money Tactics.

Rich Uncle EL

Pic is courtesy of moneywatch101.com of a typical Bank in the old days.