Think Your Way to Wealth » money management

Positive Steps You Can Take After Making Money Mistakes

RC — Fri, 04 Mar 2011 19:44:33 +0000

Money Mistakes.

They are the dearth of every frugalite, debt fighter, and money conscious would be millionaire. And we absolutely HATE making them. I can’t stand when I make a money mistake, and, to be honest, I’ve made a whole lot of them.

If you don’t ever make mistakes with your money, you are probably in the minority of people. Everyone makes money mistakes-and they come in a variety of different forms. Here are just a few:

Forgetting– Forgetting to pay bills can result in late fees or worse( getting a service cut off, paying a reconnection fee), forgetting to examine your spending habits can cause you to blow your budget, and forgetting to deal with other financial issues can cost you money as well.

Misplacing things- – Misplacing bills, cash or checks, or other important information. I once found an expense check from work that was about a year old in one of my clothes drawers that had gone past the 180 day expiration date! It was only about $75, and my company did re-issue me a new one, but I really felt like an idiot, and still don’t know how I misplaced it and it got there!

Making Bad Financial or Spending Choices- – Buying things you don’t need or paying more for things than you should can be mistakes that we don’t even notice when they happen. But if you think back on all of the things you’ve bought over the years, how many did you realize you 1.) didn’t need, or 2.) paid too much for?

The list could go on and on. The important thing though, is to learn from your mistakes, and avoid doing them in the future- if not completely (which is probably impossible), then at least a lot less often!

Here are several ways you can take positive steps after a money or financial mistake and avoid repeating them:

Figure out why you made the mistake- Do you have a system set up for your bills after you receive them until you pay them? Or do they just go into a pile on your desk?. It’s easy to lose things that way. Consider setting up a bill paying calendar, with all of your bill due dates on it. Check it often.

Automate where possible- Setting up automatic bill payments for recurring payments, (as well as automatic savings!), can help you avoid missing due dates.

Get organized- Just like getting your physical things organized, like in the kitchen can make cooking a meal go a lot more smoothly, organizing your finances and financial life can help keep you from making mistakes with your money.

Think carefully before making purchases- You need to be clear in your mind what is a need vs. a want, and know when you should or should not buy something, particularly if you are struggling financially or trying to get out of debt. Practicing smart consumerism and personal finance shopping for deals, and waiting before making purchases can keep spending mistakes to a minimum.

An important point to remember about money mistakes is to try not to beat yourself up or obsess about mistakes you’ve made. Once it’s done, it’s done, and getting worked up about them isn’t going to help anything.

Learn from your mistakes, and move on. This is good advice whether it is a money mistake or any other type.

photo credit: photosteve101

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Should You keep a Stash of Cash at Home? How Much?

RC — Fri, 11 Feb 2011 12:29:19 +0000

I like to keep some cash at home, usually around $100 or so. I often will take a $20 or two out of my stash though, to avoid a separate trip to the ATM machine and because I am lazy at times, so I have to replace it later. I’d like to stop doing that though, and keep the cash at home more as a emergency stash, so to speak.

For me, there are 2 main reasons to have cash on hand:

Emergencies

Living in New Orleans and having dealt with the aftermath of Hurricane Katrina, I saw very clearly and heard many 1st hand accounts about the importance of cash. I wasn’t in the city when the hurricane hit, but had a few friends who were. I was back in town about a week later though, and even after the storm (for months), in some areas there were no banks or ATM’s available, so you might need to drive pretty far if you needed some cash. Some business were only taking cash for a while as well.

As the saying goes “In God We Trust, All Others Pay Cash”.

Convenience

Having cash around the house makes it easy to take care of small to medium size expenses where a debit or credit card can’t be used, or you just want to use cash without having to go to the ATM. While I have an ATM machine I can use close to work, it takes me at least 20 minutes round trip if I leave my house to go to one for a special trip.

I use it for things like paying friends or acquaintances for things and other small mostly person to person monetary transactions. For example, I prefer to pay the pizza delivery person in cash as well- I know I can order online now and pay with a debit or credit card, but I just prefer it.

How Much Cash Should You keep at Home?

I think $100 or so is pretty good most of the time for my needs, as long as I replenish it regularly. Lately though, I have been feeling like $100 is not enough. I am planning on building this up to the $400 to $500 dollar range, mostly for the emergency part.

How much cash do you keep at home? $100? $200? $500? What is the right amount for you?

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How You Can Be Incredibly Wealthy and Still Be Broke…

RC — Wed, 30 Jun 2010 11:36:27 +0000

Did you know you can be extremely wealthy and still be broke?

Doesn’t sound like that makes sense, does it, unless you are talking about wealth in some abstract way, as in “my family and friends make me the wealthiest man in the world.”

Well, actually, you can.

One person who is apparently is Elon Musk, who is said to have been used as a model for Tony Stark in the recent Iron Man movies, and is best known for being a co-founder of Paypal, rocket scientist and founder of SpaceX, and co-owner/founder of Tesla Motors.

According to this article, he is broke- as in out of cash- relying on loans from friends for the appx. $200,000 he spends every month.

Apparently, he is going through a divorce and sank his last $35 million into Tesla Motors, leaving him extremely wealthy on paper, but without sufficient cash flow to pay the bills, so to speak.

You can have all of the assets in the world, but if you can’t pay your bills due to insufficient cash or cash flow, you will likely run into problems- at least most people will.

The article goes on to mention that Tesla Motors is valued at appx. $1.4 billion, and Space X has a contract with NASA for appx. $1.6 billion, meaning in reality, Mr. Musk is actually worth quite a bit.

Although things may be looking up- Tesla Motors had their stock IPO (initial public offering) yesterday in fact, which likely netted Musk in the neighborhood of $15 million dollars, so perhaps he can start to put his cash flow problems behind him.

There are a couple of money-related lessons can be learned from this- it is a dichotomy of sorts.

Cash flow is king. Most of us won’t be able to borrow large sums of money if we have all of our money tied up in investments, especially ones that might be business related- I know my friends don’t have enough to lend me $200k a month .

Many people who end up really wealthy follow their passions and are willing to take risks- big ones-with their money, investing in what they believe in. Putting their money where their mouth is, so to speak. I don’t know about you, but I would probably have trouble investing my last dollars into a business if I knew I would be running into major cash-flow problems. Would you?

photo credit: Sh4rp_i

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10 Budgeting and Personal Finance Tips for New College Graduates

RC — Thu, 03 Jun 2010 14:43:07 +0000

10 Budgeting and Personal Finance Tips for New College Graduates

It’s graduation season, and many new college grads will (hopefully) be starting their 1st job, if they had any luck in this somewhat weak economy.

For many new graduates, along with starting a new, full time job as they enter the workforce for the first time will come the first real, steady paycheck.

When the money starts to come in regularly, it is very easy to want to start buying things you feel like you can “afford” now that you are making money. However, it can be easy to get into financial trouble with that type of mindset- some people have trouble making the adjustment to a new and frequently larger source of income.

Here are 10 personal finance and budget tips for new college grads.

1.) Make a Budget- Creating and living on a budget is an important step in controlling your finances and spending less than you earn, the key to financial success. You can spend money on things you want, recreation, and socializing, but you have to live within your means and place limits on the amount you spend in those categories. Check out my article on why budgets are important for links to some personal budget worksheets you can use to set one up.

2.) Start slow- First off, take things slow with your new found source of income. You don’t have to start paying for meals & drinks for everyone, now that you can afford it, nor do you have to buy yourself a whole new wardrobe now that you are a member of the adult work force. Take things slow with your spending, and you’ll likely realize you don’t really need to spend as much as
you think.

3.) Resist the urge to splurge- If you’ve gone through life thus far without much money, it can be tempting to splurge some on yourself with your new source of income. Limiting your shopping opportunities, including online, as well as keeping yourself busy, can help resist the urge to splurge on things you don’t really need.

4.) Wait on the new car- For a lot of graduates, a new car is one of the first things they want to buy when they graduate, especially if they’ve been driving around an old “beater” while still in school. If you have a drivable car, waiting as long as possible is a smart money move, as well as buying a used car instead of a new one.

5.) Check and pay attention to your credit report & credit score- Now is the time to start building credit, so be careful when signing up for credit cards, taking loans, etc. Keep up to date with your payments, and don’t let your credit card balances get too high. Here’s how you can check you credit report regularly for free.

6.) Assess your debt situation, and start paying it off-If you were lucky enough to make it through college without any debt, hats off to you, you’re doing great. For many though, both student loans and credit card debt can pile up while in school. Now is the time for focusing on what debts you have, especially bad debts like credit cards, and start paying them off aggressively.

7.) Start investing for retirement- The magic of compound interest is on your side as a young adult. The earlier you start investing for retirement (and the more you save, of course), the sooner you will reach financial freedom.

8.) Rent for a while or live at home- Don’t be in such a rush to buy a place to live either, whether it is a house or condo. The housing market is still struggling, and may go down further, for all anyone knows, and you may not want to tie yourself down to a city or area when you are young. Living at home is not a bad idea, either, and can save you quite a bit of money-which you can save for that down payment when you are really ready to buy a place to live.

9.) Work hard- and as much as possible-Work hard- don’t expect things to get handed to you, and start thinking about your job as a “career”. Getting ahead at work and becoming known as a person who “gets things done” will do wonders for your future salary increases.

10.) Save, Save, Save!!- As someone who did not do much saving for the first 5 to 10 years out of college, let me tell you- emergencies and “rainy days” happen a lot more than you think. As with investing for retirement, the sooner you start, the better off you will be financially.

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Fixing Financial Leaks in Your Life

RC — Wed, 04 Nov 2009 05:15:00 +0000

Every so often, as I am standing at the bathroom sink early in the morning getting ready for work, I hear a familiar sound-

Drip, drip, drip, drip….

I know where it it coming from, it is the bathtub faucet. If my wife or I forget to turn the faucet fairly tight after giving the kids their baths the night before, the faucet will drip- (I usually blame it on my wife). There does not really appear to be anything wrong with the faucet, but if it is not tightened just enough, it will leak-just a little.

If either of us forgets to consciously turn the faucet off with a little extra effort, we have a leak, and often we don’t address it until the next day, because we didn’t realize it was happening.

Fixing and preventing “financial leaks” takes a conscious effort as well.

Not all leaks are created equal. They could just take a little thought, like my faucet. But they can be a symptom of a larger problem- something, like in the case of a leaky faucet, could require action on your part, even to the point of calling in a plumber to make a repair.

When it comes to your finances, leaks can cost a little over time (which can add up), or could be leading you down the path to bigger financial problems in the future.

Some causes of financial leaks include:

Forgetting- We all forget things, and sometimes we forget to take care of our finances as well. The results of forgetting things can cost a few pennies at times, but it can be big bucks sometimes as well. An extra couple of dollars for some service you forget to cancel, like premium channels can cost a few bucks a month (small leak), but if you forget to pay a credit card bill, you could end up paying hundreds of dollars (or more) in interest and penalties (large leak that can cause serious damage).

Procrastinating- Similar to forgetting things completely, putting things off until a more convenient time often means we never end up doing them. It is not always convenient to call up a customer service rep to cancel a service you have, or to drive across town to that bank branch with the account fees that are outrageous so you can close your account. But doing so can start saving you money right away.

Not consciously thinking of your money- Do you think about where your money is going on a regular basis, or how you are spending it? Doing so every once in a while can keep financial leaks from “draining” your hard earned cash.

How can you prevent and fix financial leaks in your life?

Stay alert/think consciously about your money- Pay attention to the signals around you. Are you frequently wondering where your money went, or didn’t realize how much you have spent over a period of time? Then it is time to start examining the areas you spend money, and looking for things that can be eliminated.

Write things down- Writing things down helps you “remember” when your mind forgets. Make a list, write down the things you need to do, what you need to take care of, or areas of your finances you want to re-examine so you don’t forget about them later.

Take action as quickly as possible- As soon as you identify a financial drain on your wallet that isn’t necessary, take action immediately to correct it. Cancel that extra overdraft protection on your checking account or that long distance plan you no longer use. If you put it off, chances are good it could be quite a while before you actually do what you know you need to do.

Are there any financial leaks in your life that you need to get rid of?

photo credit: Nicholas Smale

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Don’t Wait on Someone Else or Some Future Event to Fix Your Finances

RC — Wed, 27 May 2009 02:32:56 +0000

As someone who has not exactly been the best money manager over my lifetime so far, I have come to believe in a simple principle.

No person, no entity, or no future event will help me solve my money problems.

Believing that, there leaves basically one person who can help me improve my finances.

Myself

Basically, if you want to improve your financial situation, you are going to have to do it yourself. (If you are married, then your spouse or partner can assist as well, but that is about it, in my opinion.)

The following people, entities, or events will not help you with your money problems or help fix your financial situation:

The Government- Even if you get a little more money in your paycheck, or an actual check from the government, the Stimulus Plan is not going to bail you out (unless you happen to be a very large bank). Nor will the new credit card rules save the day for you, either.

Your Family- While your family can be great and help you out in a pinch, relying on others to bail you out will not get your finances on the right track. In fact, it may encourage or enable your bad money habits.

A Windfall- How many lottery winners end up broke? Quite a few. Large sums of cash may not fix your finance, either, in the long run.

Promotion or Future Advancement- It’s easy to think that once you reach a certain level in your career, salary wise, things will be better. But like many people, you may incur additional, regular expenses as you get older as well. Things such as buying a house, having kids, and other regular expenses can contribute to lifestyle inflation.

Your future self- Your future self might make more money. You might even become better at managing money. But the truth is, unless you take the steps to manage your money better now, you will likely still have the same money problems you have now when you are making more money.

It is very easy to think that things will change in the future, or that “I’ll catch a break one day”, and your money problems will eventually disappear. The truth is that it is not very likely to happen, unless you take positive steps to make it happen.

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Thoughts on Going Cash Only- The Benefits and Drawbacks of Not Using Credit Cards

RC — Wed, 22 Apr 2009 03:38:20 +0000

I’ve been trying to spend more cash (not more money, though!) as opposed to using credit cards for purchases lately. Although I would not consider myself a “cash only convert”, I do find it helps me keep within my desired spending limits, to a certain degree.

Especially with discretionary spending- or allowance or fun money-whatever you call it- which is primarily what I have been using a cash only system for, it keeps me from having to keep track of how many times I used my card in a given week and how much I spent in total, which is one less thing I have to worry about. I also find it makes me think a little more about what I spend money on-knowing that when I run out of cash on hand, my spending will be limited to items that are budgeted in some fashion.

Benefits of Going Cash Only

You don’t have to worry about lots of small expenditures “sneaking up on you”-Keeping track of cash is not too hard-it is usually on your person, and when you run out, that is it.
It may make you think a little more carefully about what you spend your money on-This has happened for me, even with my “fun money”, so I am sure it would for other expenditures as well if went to an all cash system.
No chance of interest or late fees or penalties- I suppose if you took out a loan for your cash, you may pay interest, but in general, you don’t have to give a 2nd thought about being late on your credit card bill.
Cash can actually be convenient- I don’t care what the commercials for Visa debit try to say, having someone (or multiple people) in front of you pull out a debit or credit card for a $1.25 purchase can be slow and aggravating-although I have done it myself plenty of times. Splitting a lunch bill usually works out better when all of the parties have cash as well.
It is accepted universally- Cash is desirable by most people, and you hardly ever have to worry about whether someone accepts cash as payment. In fact in many non-retail establishments or personal transactions, cash is not only preferred, but required.

But there are some drawbacks too:

Drawbacks of Going Cash Only

It can be an inconvenience- especially if you try to go “all cash”, including groceries or other larger value budget items, juggling different amounts of cash can be a chore-although I have not tried it with much intensity, many people swear by the envelope budgeting system as a solution.
Less security and protection for loss or theft- If you lose a big wad of cash, unfortunately, in this day and age, the odds are you will never see it again. Credit cards, on the other hand, almost all provide some protection against liability in the case of loss or theft, although it certainly may be a hassle.
No chance for earning rewards- I am not a huge proponent of using credit cards strictly for rewards, like cash back or airline miles, but some people can rack up quite a bit by using their credit cards for the majority of their purchases.
It can limit your freedom with spending- If you only have $29 in cash left, and you need $30 to buy something, you are basically out of luck. Now that $1 may not hurt you in any way monetarily, but if you stick to the system, you will be unable to make the purchase.

What are your thoughts on going cash only- even if just for fun money? What are some other pros and cons to going cash only that I have missed?

photo credit: The Ninja Monkey

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