That money the government's just GIVING us? We're getting it early.
Check it out: Tax rebates to start arriving Monday !
I'm sticking almost all of mine into savings, of course. Screw mindless consumerism in the name of the economy!
A blog about spending wisely in your twenties, with advice on everything from cooking to saving money on gas; how to teach yourself to save money instead of spending it, traveling without breaking the bank, and much more.
Friday, April 25, 2008
That money the government's just GIVING us? We're getting it early.
Thursday, April 24, 2008
From the Irvine Housing Blog (not as boring as it sounds, I swear!):
Southern California's Cultural Pathology
I read this article about a year ago, and while I'm not in the housing market at the moment (and very few people my age are) - the basic premise that consumers are convinced that opposing ideas about money are true most definitely applies to young people.
While we're not overextending ourselves on mortgages, we are overextending ourselves in other ways. In Southern California, it's not uncommon to see a 22 year old driving a new BMW. Some of those kids are driving a gift from their parents, but most of them put that machine on credit. I don't presume to know the income of every 22 year old in a BMW, but I'd place a pretty hefty bet that quite a few of them are slaves to their car payment and wish they'd bought a Toyota. I believe that the idea of cultural pathology extends to debt denial too. There are people who are literally a thousand or more dollars in debt but are raising money for massive unnecessary purchases, as opposed to pulling themselves out of debt.
I was about $600+ into overdraft three years ago. I stopped using the bank I was with at the time and began doing everything in cash. I still had a decent amount of savings in an online bank, but with no brick & mortar bank to transfer it to, I couldn't get at it very easily (thank god). I did everything in cash, and I bought $300 purses and $180 shoes and $200 jackets. I could have easily brought my bank account back into the black, but instead I blew my hard-earned money on stuff that I'd decided I deserved, dammit. Three years later, I'm back 'on the grid' so to speak, but with a NASTY dent on my credit report. And I pretty much never carry that purse.
The financial doublethink of young people never ceases to amaze me. The fact that many of us do not grow out of it and end up tens of thousands of dollars in debt completely mindboggles me. People (including me at one point) who are totally broke will buy iPhones or Disneyland passes or new laptops or daily Starbucks. And then they complain of being "too broke!" Well, of course you're broke, you just spent all your money! But the "I'm broke!" and the "I want an iPhone!" wires never seem to cross.
Having a flashy car, a fancy iPhone, 18 Coach bags, annual passes to every theme park ever, drinking Starbucks every day and a pony will NOT make you financially stable. It'll make you look like you spent a lot of money. Looking like you spent a lot of money will NOT help you if you find yourself in a an emergency situation with no savings. Nothing is more degrading than having to go around begging your friends for money when your car breaks down. Plus they're going to wonder why you can't fix it yourself, since you've obviously got a lot of money to burn...
I'm not saying that people should never ever indulge a whim or a want. You've got to have little fun every now and then. If you're splurging on a tub of ice cream or (god forbid) a wide release new movie or even the occasional latte, you're probably not compromising your financial security too much. But if you're spending hundreds of dollars on items not necessary to your survival and ignoring your debt like it's not there, that's a purchase that could probably use some re-thinking.
Wednesday, April 23, 2008
If the fact that you need to save your money finally hits home and simply cutting back isn't giving you very much to save, sometimes it's easier to bring in a little extra money and toss that in savings. Once you've got a little bit in the bank, that little balance can become an inspiration to start finding more ways to save. While creating a steady second stream of income can be difficult in your twenties, it's not terribly hard to make a little extra here and there. Here are 9 ideas that can bring in a little extra cash.
- Your Day Job : If possible, pick up some hours at work. Not many, maybe just two to six hours. If you get paid two hours more than you usually would, bank the extra.
- Ebay: This one is obvious. Dig through your closets and see if you've got something that might be valuable to someone else.
- Half.com: I list this one seperately from ebay, because the income is a little more passive. Listings last until an item is sold, and you don't need to worry about making sure your seller fees are paid. Simply wait until someone buys the item, ship it, and wait for the money to show up in your bank account.
- Etsy.com: If you're crafty, whip up a batch of cute pillows or wallets or whathaveyou and list em for sale.
- Have a yard sale: If you don't have a yard, ask your parents (or someone else's parents) if they'd be willing to let you borrow their lawn in exchange for a free grass mowing.
- Get Paid To sites: Sign up for a survey site and diligently click those buttons and confirm paid emails. Try not to get too sucked into "free" trials with a high payout. If you spend less than two minutes doing one or two surveys a day, you'll eventually hit a payout worth at least a tank of gas.
- Domestic Services: Offer yourself up as a part-time house cleaner, nanny, or gardener. Or post an ad on craigslist offering to help someone move. (Try Saturday morning, ask for $20-$60, more if you have a truck.)
- Sell Some Food: If you get fairly good at cooking, find one of your under or badly nourished friends and offer to make them dinner for a week. Make something easy to re-heat and charge them less than the drive-thru lane.
- Have a Car Wash/Maintenance Party: Offer to wash your friends' cars and/or change their oil. Set yourself up on a Saturday (with a partner), charge less than Jiffy Lube.
You could also get a second job, but if you're not really interested in working 60+ hours a week, then creating the occasional small windfall for yourself is probably a better plan. There's still no substitute for cutting back on the crap you dont need and living within your means, but if you're used to an over-the-top, ultra-consumerist lifestyle then living more frugally is going to be tough for you at first. In that case, taking some baby steps toward spending less and finding a non-stressful way to make a little extra cash might be the best way to get started.
Tuesday, April 22, 2008
I've still yet to buy proper groceries this month, though I have purchased these items from the grocery store: a pint of ice cream (bought instead of buying cones at a store), a muffin and a cheese stick ($1.32 breakfast instead of eating out), and some burgers/hot dogs + buns and beer for a barbeque. My day to day meals continue to be made from my pantry. Since my last update I've eaten:
Burritos (with Pinto Beans and Rice w/ Cilantro)
Farina (Cream of Wheat)
Lemonade (made from real lemons! In California, the law is that if a tree's fruit is hanging over public space, you can pick some. I wouldn't make a habit of harvesting sidewalk lemons, but homemade lemonade is tasty!)
+burgers at work.
Today I've got garbanzo bean stew cooking in the crockpot (a tasty stew whose leftovers can be turned into almost-falafel), I'll be baking a batch of pumpkin muffins using pumpkin pulp leftover from Thanksgiving (yay for freezers), and dinner will probably be pasta with lentil-tomato sauce.
I'm beginning to put together a Master List of just what I need to buy in order to eat well. Obviously, not everyone will be content with legume soup/stew in the quantities I eat it in, but having been raised quasi-vegetarian it doesn't bother me at all. In fact, I much prefer tons of homemade stews and soups to anything made from a package. I definitely feel as if I'm eating healthier this month, my "meals" at work notwithstanding.
More and more I'm looking forward to writing my analysis of this whole experiment in a week or two. Before the massive shopping trip I'll need to do at the beginning of May, I'll be putting together a price book in order to be certain I'm getting the best deals possible, but more on that in another post.
Monday, April 21, 2008
My post on emergency funds was chosen as an editor's pick in the Carnival of Personal Finance hosted at The Happy Rock this week. There are a ton of great articles- here are my picks for you guys.
- Greener Pastures discusses the impulse buy in The Psychology of Money-”I Have to Have It”-The Impulse Purchase.
- The Personal Financier presents How to Make Saving More Rewarding and Tangible: 5 Practical Tips.
- Living the Cheap Life runs the numbers on retiring well with a fast-food income in How to work at McDonald’s and retire rich.
- Cash Money Life reminds us that Spending Money is Good. (Though I might amend that to say "Spending Money Once You've Saved It is Good.")
Note: In any other personal finance blog this post might seem too obvious, a useless rehash of an old tenet. But here at burnfive.com I'm assuming that sometimes my readers aren't aware of what might be a big fat 'duh' to people who've been studying personal finance for a while.
Your savings account probably isn't giving you nearly as much money as it ought to be, especially if it's held at the same walk-in (brick & mortar) bank as your checking account. Nearly all brick & mortar banks have dismally low interest rates on their savings accounts. We're talking less than 1%. For example, Washington Mutual's Regular Savings Account? A puny .25%. Nearly all online savings accounts start at 2.0% or more. You're lucky to earn a nickel a month keeping your savings in a brick & mortar bank, but with an online savings account you can get a much greater return on the same amount of savings.
What blows my mind is the sheer amount of people my age who don't realize they could (and should) be earning a much greater return on their cash. Then again, most of them aren't really saving anything either. But once you've started to stash money away (and keep it stashed) - you should be earning the highest return possible while still keeping some of your savings easily accessible for emergencies.
$100 kept in a traditional brick & mortar bank savings account at .25% will earn a quarter in a year. $100 kept in an online savings account with 2.5% interest will earn $2.50 in a year. Granted that's not a load of cash, but it's still money that you don't have to work for. Those earnings go up if you're constantly adding more money to your savings. Here's a simple calculator you can play with to find out how much interest you could potentially earn if you can find some money to squirrel away.
A potential downside to online savings accounts is that it may take longer for your money to get back into your liquid accounts, should you need it. But for me, that's a blessing. When my money is harder to access, it makes it easier to only use it in the case of a true need.
I've used ING Direct for 4 years, and they're one of the most beloved online banks that I know of. They generally offer one of the most competitive interest rates around (3.0% as of 4/20/2008) , and they've got a great referral program: you refer a friend, they fund a savings account with $250 - you get $25, and they get $10. Even if your friend then turns around and withdraws all of his or her savings back into another account, the $25 & $10 are yours/theirs to keep. I've got plenty of referrals, if you've got some savings ($250 or more) and you want to earn a higher return on them, email me and I'll send you a referral.
Take a good look at your account disclosures. Are you earning less than a 1% return on your savings? If so, get your money into an account that will pay you! Even if you choose a bank other than ING, I cannot emphasize enough the importance of a good interest rate- money you don't have to work for is the best kind of money.