Limited on $? Prioritize on what matters to you...

I like planning to have money to retire on. For some, it's not their priority, so they choose not to do it yet. But at some point you have to formulate a plan and act on it. The simple truth is the sooner you start, the easier it will be to save.

With that said, I had a tough time getting started with my own savings. I started my first Roth IRA in 2004, and it was definitely a sacrifice at the time. Looking back on it now though, I'm glad I did not squander every cent I made when I was younger. I spent money on a lot of stuff I didn't need, and learned a lot of lessons about money. I owe much of my knowledge to my family letting me make my own mistakes. I especially thank my grandmother for not strangling me as I learned these lessons, sometimes at great expense. I learned through my mistakes and began to realize that I could never improve my situation by spending more than I earned. For a long time, I felt lost when it came to my personal finances.

If you are working on your finances but don't know where to start...try prioritizing what is important to you.

What was the spark that led you to start looking at your finances?

Some common ones that have helped me stay on track:

1. The never ending treadmill of debt. This one can be so frustrating as many small purchases do add up, and compound interest never treats you well when it's working against you. Turn it around by paying off your debt, and then make it work for you by saving and investing.

2. The ease of spending. The simple truth is it is easy to spend money. Whether it is cash, credit, layaway, or other...it's way too easy for companies to make you part with your money. Think of the one goal of all advertising, and what you get is someone who wants your money. If it helps to motivate you to stop spending, think about how all the CEO's get their own airplanes/houses/cars. While we may not ever have any of that, you can use that as "ammunition" to keep you fired up about saving. At least if you try to reign in your spending you can progress onto other financial goals.

3. The suck of saving. While talking to some friends about saving, the subject of the amount needed to provide cash flow in retirement comes up quite a bit. Don't focus on how much you think you will need in the beginning. If you look at a big number, you are probably discouraged from starting in the first place. Try thinking instead of how you can start saving $20 per paycheck any way you can. Move on from there, and continue snowballing your efforts so they continue to improve. Small changes can bring about great things.

4. The amount of your income limiting you from doing what you want. This is a huge one. I have heard friends say "I don't make enough to save anything!" or "Maybe next year when I get a raise." There are a few things to think about when you are thinking your income limits you from saving. There is always a sacrifice to get the things we want in life. If we don't go to work, we don't get a paycheck. Think of your job, and then think of your goals. One should be to provide solid plans for you and your families future. If that means you need to grab a part time job to help out for a while until things "get better" then so be it. Just be sure to keep your eye on your goals when you do bring that extra cash in. It is much too easy to be "tricked" into spending more just because you have a little extra income.

These are a few examples of what may have gotten you to the point of reading a blog on this subject matter. Take a look at what bothers you about your situation and try to fix it. It usually won't be a quick fix, but it will pay off!

Financial Mistakes

Have you been feeling guilty about your financial mistakes?

Get over it.

The sooner you can accept that those mistakes were your past, the sooner you can start to plan your future.

I made a purchase a few years ago that I beat myself up about for quite some time. It was very much a "want" and not a need. It was more than I should have spent, and it bothered me for a while. Then I got over it. The change came when I put that purchase in perspective with what I was doing in other areas to help my wife and I's future. I realized you can't make the right decision all the time. People make mistakes, it's in our nature. If we were all perfect, life would be pretty dang boring!

If you've been putting off your savings, spending too much money, feeling guilty...stop!

Instead, take a negative and turn it into a positive. Let that negative be what turns your attitude around!

You will soon be finding better things to focus on than your mistakes! You will soon have positives to reflect on, and after you start this process, you will want to continue on that path!

A great example.

This short piece from the New York Times is an interesting and humorous look at what you could end up with from stock picks/individual stock investing.


Quoted below is a great excerpt:

"This seems to confirm Burton Malkiel’s famous prediction that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

This is a great piece, and should remind the average investor that there is something very empowering about taking the time to put effort into your own finances. The net benefit to you could be equated to paying yourself the difference (compounded!) of using low cost investment products instead of (over)paying a "chimp" to do it for you!

Online shopping and price checks

As requested by a frequent reader, here are some sites that I frequent that help me out when shopping.

Amazon.com - The link is a shameless plug for the Bogleheads' Guide to Investing (I had to sneak in something related to investing for this post!) but the site should be familiar to anyone on planet Earth. What may not be too familiar to you is the selection and prices on nearly everything. I have been using Amazon.com for over a decade now, and have had a great experience. The few times there have been issues, they were resolved with a quick online customer service email. I purchase most of my music through their MP3 downloads section, as it is DRM (Digital Rights Management) free, and offers very good prices. Many times, they offer full albums for just five dollars. I have purchased way too much from Amazon, and much of the time it is because the price is very good, and they offer free shipping over $25 on a lot of their items. I also love their "Subscribe and Save" feature which offers a significant discount (15% on many items) if you sign up to get an item on a regular basis. I use this feature for several items around the house, and I love not having to worry about remembering to order a frequently used item. If you are getting close to your next shipment, you can choose to skip one, or stop the entire subscription with no penalties. It's a pretty sweet feature.

Monoprice.com is a fantastic site for a huge number of digital products that usually cost much more in big box retailers. A perfect example is HDMI cables that go for upwards of fifty bucks in stores, but are available for less than five bucks on Monoprice. Shipping is very reasonable and lightning fast in my experience. I've been using this site since I stumbled upon it a few years ago, and I recommend it to anyone who wants quality stuff at incredible prices. I've had great experience with this site, and I've saved a lot of money too!

Bing.com is Microsoft's updated search engine effort. To lure users away from other search engines, Bing has a cashback program that rewards individuals who are willing to go through a few minutes of extra effort. If you search for specific terms in Bing, you can get an icon to pop up next to some of the search results with "Bing Cashback." This is a great opportunity to save some cash, as some of the cashback amounts are very lucrative. I have seen some at 20%! If you find a site that offers a competitive price on an item already, and then add in the cashback, you can really get a deal. The site requires a quick sign up, and it's got Microsoft behind it, although some would joke that's not necessarily a good thing. I've had a great personal experience with this, but you have to be careful to not violate the terms of the program. This means you may not be able to add a coupon at checkout or you risk forfeiting the cashback for that transaction, but if you do comparison shopping you can still come out way ahead.

Google Shopping I've had a good experience over the years with what used to be termed "Froogle" and is still a fantastic and quick way to check prices on an item. There are options for calculating and adding in shipping costs, and using that as a way to filter out results. As shipping can kill an otherwise competitive price, this is a great way to comparison shop.

These are just a few sites I like to use, and I will definitely expand soon. Enjoy!

Financial Freedom Fund

 Retirement savings can tend to have a certain stigma attached to it.

When you first hear it, it sounds pretty boring. It also sounds pretty painful.

You may be used to spending all or most of your paycheck on fun.

Retirement sounds like something that is so far off, that you may not even be thinking about it at all.

Because of this, if I term my own savings a bit different, it can help keep me on track when I feel like veering off course.

I like to think of my retirement savings as my Financial Freedom Fund.

You may be thinking "Hey, I got enough financial freedom right now! I spend whatever I earn!" and I definitely see that point of view. But I think of every dollar I can put away as getting me that much closer to financial freedom, or the idea that if the unforeseen happened, I would still be able to take care of my wife and my family.

Life happens, and life tends to cost money. I only see my costs rising over time. Helping to take care of family, raising kids, college costs, it will all add up very quickly. These things are going to be very powerful deterrents to our own savings. It's with that in mind that we put our plans in place. We may not be able to save much, if anything later, but right now we can make some sacrifices to ensure that we are not behind our own financial needs later. The power of compound interest makes the time your money is invested so much more powerful than just saving more later.

If you can only save 5% of my income now, well over time that 5% will mean more actual money going in. Your salary will go up over time, and you bump up your percentage as it does. Eventually you are saving 15% of your income for your fund. Then life gets in the way, and you have to use some of that money for another cost, so now you have only 12% going in.

You will still have all of that money "locked in" and earning you compound interest! Think about that stack of money...

This is a much better scenario than never even starting to save!

Do you see yourself as helping care for your grandparents/parents at some point? Do you want to send your kids to college? Do you want to go on vacation without feeling like you are shooting yourself in the financial foot? Do you want to be less stressed about money?

Find what motivates you, and use that energy to get yourself to start saving for your own FFF!

Use frequent flier miles for free stuff

I am not a frequent flier.

But when I fly I look for the best prices, and then buy my tickets. I always join the frequent flier program at the airline I by my ticket through, since it is painless and quick.

I've never gotten a free flight from my actual flight points, because I don't fly enough.

But I do use the miles for free stuff!

Why not just save them up until I have enough for a flight? Well, the airlines are onto people like me, and they have instituted some expiration date policies. Most require a certain amount of flight activity to keep your points, or you will forfeit them within about a year.  But there are other options besides flights!

At the beginning of December I got an offer for redeeming my soon to expire points for magazine subscriptions. I had received the offers before, but my miles were getting dangerously close to the expiration, so I took another look at it.

The website gave me a limited, though decent, selection of magazines and newspapers.

I took a look around and "spent" our miles.

I scored some magazines for the wife, and the Wall Street Journal for myself. The WSJ is not something I would have paid cash for, as it is expensive. It's around $120 for a years worth, which is out of my price range for sure. The value of our miles was less than $100 and for that I got several magazine subscriptions and the newspaper delivered.

It was a bit of an early Christmas present for myself and my wife last month!

Next time you take a flight, consider signing up, even if you don't fly that much. You can still walk away with some cool stuff for little effort!

Start the New Year with a New Personal Goal

Tax yourself. Pay yourself first. Take care of your own financial house before you spend money on other things.

The power of compound interest means you are literally leaving 10's of thousands of dollars on the ground.

Start something today!

This shows the power of less than a dollar a day saved and invested for the future.

A good friend of mine mentioned that New Year's resolutions start on Monday, so today is the day!

Open a Roth IRA, start contributing to your 401k, start saving an emergency fund.

Small steps can bring about enormous change, the key is to actually begin.

Your tipping point is today.

Holiday Giveaway Winner

Welcome to the new year, and congratulations to the winner of the holiday giveaway!

The winner is Jennifer!

Thanks for all the feedback, it will be used to improve the blog!