Monday, December 26, 2011

Control Your Money - A Budget


There are two keys to an effective budget - having it and following it.  If you haven't got one, you're probably overspending simply because you don't know how much you're spending.  If you don't follow it, well, what's the point of having it?

A budget is not a trivial undertaking.  Don't expect to be able to bang one out in an hour and not have to worry about it anymore.  If you want a budget that's actually accurate, you need to revisit it often in order to track your progress, make updates, add new expenses, etc.  On the bright side, a budget does not have to be a complex document.  I use a very simple spreadsheet.

My budget (we'll use mine as an example) has two sections.  One is a list of all of my expenses including bills, savings, miscellaneous expenses, etc.  The second section breaks it out by paycheck (I get paid twice a month so my second section has two parts) and shows which bills get paid per paycheck.  It shows the amount budgeted for each bill and the amount I actually spend.  That way, if I'm going over budget, I know it immediately and can adjust for it.  Here is what a section might look like:




Billbudgeted amountactual amount
Mortgage$12001149.65
Power$300213.65
Water$10079.21
Food$350362.12


Just looking at the example numbers above, you can see that I may be able to budget less on power but I either need to budget more on food or cut back on my food expenses.

Of course my budget document is more complex than that (I have a beginning and ending balance as well as a running balance so I see where I stand after each expense and what's left over).  You're budget may be simple or complex; it doesn't matter.  What matters is that it accurately reflects your expenses and that you know how to maintain it.

The trick to a good budget is to remember that it's a living document.  You need to revisit it periodically and decide if things need to be adjusted and if so, what.

Another important thing to remember is to include your spouse whenever you're changing something.  Financial decisions (in my opinion) should be made together.  A husband and wife should be moving forward together.  This is especially important as it relates to finances because financial issues can cause a lot of stress.  Work with your spouse on a strategy to keep your budget balanced.  It will likely be a compromise but if you both agree on your financial strategy, it will be a lot easier to move forward with it.

Once you have your budget worked out and start following it, you will be surprised at the results.  You may have a lot more money than you thought you did.  Even if you don't, you will know where all of it is going and won't have the stress that comes when you don't know if all of your bills were paid, how much money you actually have, what other family members are spending money on, etc.  Some may see a budget as a set of limitations but I see it as a path to freedom.

Friday, December 23, 2011

Control Your Money - Get A Good Credit Score


Getting good credit is easy to say and can be REALLY difficult to do.  Here are the basics:

  • Pay your bills on time - late payments bring down your credit report
  • Pay down your debt - the more debt you have, the riskier it is loan you more money and that is shown by a lower credit report
  • Don't have too many credit cards - credit cards are like soft debt, you may not actually owe money but you could at the drop of a hat
  • Pay off your credit cards - technically this is just part of paying down your debt but it's worth saying
Like I said, easy to say and difficult to do.  Nobody wants to give up things and/or lower their standard of living. My experience is that people (or maybe just me) tend to adjust to a raised standard of living in about 10 minutes but may never really adjust to a lowered standard of living.  I think it's human nature.  If you used to have more stuff and now you don't, you miss it.

All is not lost, however.  There are things you can do to lower your expenses without really lowering your standard of living.  The main one is being in control of your money.  I mean having a budget and sticking to it.  If you know where your money is going, you can (possibly) reduce or eliminate quite a few expenses without it really impacting your standard of living.

At the end of the day, you have to spend less than you make.  This is also easy to say and hard to do but, if you can pull it off, good credit will follow.

Wednesday, December 21, 2011

Control Your Money - Your Credit Score


If you want to spend less and get more bang for your buck, one of the best things you can do is have a good credit score.  No, it won't make everyday purchases cheaper, but it can put more money in your wallet for those everyday purchases.  You see, having an excellent credit score can save you thousands of dollars.  How?  Here's how it works.

Say you're buying a house or maybe you're looking at refinancing your current home.  The first thing a bank will do is run your credit report.  If you have good credit, you will get a lower interest rate.  If you credit is not good, you will get a higher interest rate.  This is what costs you.

To illustrate, here's an example for a $200,000 mortgage (houses for big families aren't cheap you know):

  • Amount Borrowed: $200,000
  • Interest Rate: 8% (this is for a poor credit score)
  • Monthly Payment: $1,467.53
  • Interest Paid (over 30 years):  $328,310.29
  • Total Amount Paid (over 30 years):  $528,310.49
Wow, those numbers are just plain ugly!  If you borrow $200,000 at 8% interest, it will cost you $328,310.29 over 30 years.  That's more than $10,000 per year and that's just the interest!  That's right, you still have to pay off the original $200,000.  This is how banks make so much money!  But what can you do?  You have to live somewhere.

Well, let's look at the numbers again but change the interest rate.  If you have good credit, you will get a better interest rate.  Here's what would happen if you got a 5% interest rate on the same loan:
  • Amount Borrowed:  $200,000
  • Interest Rate:  5% (this is because you have a good credit score)
  • Monthly Payment:  $1,073.64
  • Interest Paid (over 30 years):  $186,511.57
  • Total Amount Paid (over 30 years):  $386,511.57
Is this right?!!!  Yes, it is.  Either that, or mortgagecalculator.org is giving me bad data.  But it's not.  If you drop your interest rate from 8% to 5%, it will save you $141,798.72!!!!  Just look at it, it shaves almost $400 off of your monthly payment!

Wow!  

OK, I'm shouting a lot.  I almost feel like one of those shady salesman guys: 
"Just follow's Jeff's simple 7 step get rich quick program and you'll save thousands!  All this can be yours for only $39.99!"  
Everybody wants to save money and a lot of people are trying to find some hidden way to do it.  The truth is far simpler.  Get a good credit score.  Without good credit, you will pay far too much for anything you have to borrow money for.  You will get a far better deal on a car, a house, even on credit cards if you have good credit.

So, how do you get good credit?  I'll save that for another post.

Tuesday, December 20, 2011

Control Your Money


There's an old saying, "If you don't control your money, then it will control you."  I've taken it to heart and would like to share some blog posts on what I've done and how I've done it.

When you have a large family, you quickly find that your money doesn't go very far.  When you've got 8 people in you household, you find that your income is quickly eaten up by food, clothes, power bills, house payment (a small house just doesn't cut it), etc.  With money going out that fast, you need to keep things under control financially.  Here are some of my financial goals that I will be writing about:

  • Have an effective budget - This is key.  Not only do you need to have a budget, but you need to keep it, control it, and update it regularly.
  • Live frugally - Figure out innovative ways to get what you need/want at less than full retail.  Also realize that as you appreciate what have, you find that you want less (not an easy thing to do).
  • Save money - You never know when you might need it and, with a large family, those needs seem to come often.
But remember, life isn't just about money.  Here are some of my goals toward my family:
  • Spend quality time with each family member - This one is easier said than done but well worth it.
  • Spend quality time with my wife - This, in my opinion, is vital to a happy family.
  • Spend time getting closer to God - This brings a great amount of peace to my life and to my family
  • Have fun! - Having fun doesn't have to be expensive but if it never happens, you're missing out on life. :)
So, those are some of my general goals.  Let me know if there are other things that have helped you keep your finances under control.

Monday, December 19, 2011

Gadget Lust - Cool New Toys!


There are lots of cool new tech gadgets and toys out there.  In fact, it seems like there are new things coming out all of the time.  There are smartphones (iPhones, Android phones, Windows phones, Palm phones, etc.), personal media players (iPods, Zunes, etc.), digital media players (Roku, Apple TV, blue ray players, HD TVs, etc.).  It seems that no matter what you're interested in there are gadgets coming out for those interests.  Even books are being replaced by eReaders like the Kindle or Nook.  The problem is that all of these things are expensive and they may end up being more cool than useful.  For those of us striving to prosper financially (on a budget), getting them all may be out of the question.  Heck, getting one or two can still be a stretch.  So what do you do?

I've found, with myself, that I suffer from what I call gadget lust.  When a new gadget comes out, instead of evaluating it to see if it fits into my life, I seem to try to find/create a gap in my life that the gadget would fill.  Smartphones are a perfect example.  When the iPhone first came out, I wanted one.  Same with Palm phones, Android phones, and most recently, the new Windows phones.  Now, smartphones aren't cheap.  So how do you justify spending a couple hundred up front and an extra $40 or more per month?  That was my problem.  I couldn't.  But I really, really wanted to.  My conversations (with myself) would go something like this:

Me: "I could use it for work stuff - you know, checking email, getting alerts, etc."
Myself:  "Do you want to check your work emails at home?"
Me (dejectedly): "No."
Myself: "Doesn't your current dumb-phone (as opposed to smartphone) already get alerts?"

Me (dejectedly): "Yes."
Myselft: "Do you need to be doing more work from home?"
Me: "No!"
Myself: "Then why do you need a smartphone?"
Me: "Because they're so cool!!!!"

I would have many conversations with myself on many facets of the smartphones.  They have cool features like GPS, Netflix, games, email access, etc.  Almost every time, once I got past the coolness factor (which is really hard to get past sometimes), it all came down to: "Would you actually use it?", "No."  I will admit that there are some things I would like from a smartphone.  For example, having my contacts, and calendar available on my phone (I use gmail and google calendar).  But in those cases, it came down to "Is it worth the cost?" and the answer is always no.

That doesn't mean things will always be that way.  Situations may change that justify getting a smartphone, or a tablet, or a ChromeBook, or a Nook, or something else.  On the other hand, I did get a personal media player (I got a Zune HD).  It's great for listening to music on the way to work (I actually canceled my Sirius subscription which will more than pay for the Zune in a couple of years).  It's also fun for some games, and I've got a couple of eBooks on it, and family pictures, and home movies, etc.  It's quite the useful little gadget and it fun to share it with the kids sometimes, but it's primary purpose is music which is saving me the cost of a Sirius subscription (about $15 per month).  That makes it worthwhile.

So my point isn't that all new gadgets are bad.  They're not.  Just make sure they're more than simply cool, but useful before you start making some of those rather large financial commitments.  Remember, it's not the person with the most toys who's the happiest, it's the person making the best use of their time (both work and leisure).  If a gadget helps you with your goals in life, go for it.  If it doesn't, even if it's super cool, you're going to be better off without it (wow, that was kind of hard to say).

So remember, keep the important things in focus and don't worry about the rest.  They're probably just passing fads.

Sunday, December 18, 2011

Combining Blogs

A while ago I decided to start a blog for more personal stuff and leave this blog to the more political stuff.  It seemed like a good idea at the time but I'm starting to feel a bit fragmented.  I'm also realizing that my political persona overlaps my personal persona and that it's less effective to try to spit myself up.

So I'm going to discontinue my other blog and move the posts to this blog.  Then I'll just have this blog and my work blog (tech-astute.blogspot.com for all of you who are into information technology).

Hope you all enjoy!

Saturday, August 27, 2011

When Did Compromise Become Evil?

I think I've probably ranted about this or similar things before but it continues to be a frustration.  As politicians and political activists get more and more polarized, the art of the compromise seems to disappear.  I would like to remind my readers that our country was built on compromise.  Even today, the voters are split down the middle.  Sometimes they lean right and sometimes they lean left but there are always significant numbers of people on both sides of the aisle.  The art of the compromise is finding a way to satisfy both sides.  I'm just not seeing it anymore.

Nowadays, it seems that all I hear is rhetoric.  This official is evil, that one is ignorant, this other one is going to bring our country to ruins.  Our leaders are so busy vilifying their opponents (and by extension everybody who votes for their opponent) that they have no opportunity or even a desire to work with them.  There is no mutual respect between parties.  In fact, it seems that there aren't even any shared values.  Fiscally conservative democrats seems to be shunned by their party as well as republicans willing to raise any kind of taxes.  What's the result?  A congressional approval rate of less than 20%.  Everybody seems to think that our elected officials are a bunch of greedy, spoiled, self-righteous, idiots (with the exception of their own elected representatives of course).  Are they wrong?

In an increasingly fractured society, we are desperately looking for real leaders.  People who inspire those around them, who can bridge the ideological gaps.  I think President Obama's popularity was due to the perception that he was such a leader.  Perhaps he even started out that way.  But now he's just like everybody else:  everything that goes wrong is the republicans' fault and all of the successes are the due to the hard work of democrats.

In my opinion, our problems in government are not because one party or the other but because neither party is willing to work with the other.  Not only that, but I think the animosity is getting worse and, unfortunately (since I'm a republican) I think the larger section of blame goes to the republican party.  They're the ones signing pledges to never raise taxes, they're the ones who seem the most unwilling to even speak to the other party, and they're the ones spouting the most rhetoric.  So, to the ALL of elected officials of our country I say, quit acting like two-year-olds, stop the blame game, and get to work!

Tuesday, August 02, 2011

The Debt Compromise Passes

Wow!  Talk about a last minute save!  The compromise passes and we don't default on our debts... yet.

Unfortunately there's still a lot to be done and a lot of disagreement on how to do it.  As near as I can tell (in very broad terms) the Democrats want to expand revenue and the Republicans want to cut spending/reduce the size of government.  The problem is the lack of compromise.

Our country was built on compromise.  You get some of what you want and I get some of what I want and we both come out ahead.  It seems that in Washington, the tone is just the opposite.  At least with the extreme ends of the political spectrum.  Out there it seems to be I get what I want and then I get more of what I want.  There were those voting against the bill because it didn't cut enough.  There were those voting against the bill because it didn't raise taxes.  In my opinion, both extremes are wrong.

Where is the statesmanship?  Where is doing what's best for the country?  The bill that passed wasn't the best it could have been but it was far better than nothing.  We need to step down from our ideological soap boxes and work together.

So, to my congressman and senators, I say, "If it moves us in the right direction (even if it's not as good as you would like it to be), you'd better have a good reason for not supporting it."  Oh, and incidentally, I don't think Jeff Flake (who I like) has a good reason for not supporting it.  Sorry Jeff.

Saturday, July 23, 2011

Who's Got Skin In The Debt Ceiling Game?

There's a lot of discussion, posturing, blaming, etc. going on with this whole issue on raising the debt ceiling.  Both sides blame the other and are predicting dire things if they way isn't followed.  What I wonder though, is how invested are they?

If an agreement is not reached, how will it affect the President and the Congress?  Will they stop getting paid?  Will they lose any benefits?  Do they have any real skin in the game?

It's a lot easier to be cavalier and idealist about these things when it's other people's money that's at stake.  Perhaps an agreement would come faster if our leaders actually had their paychecks at stake.

Just something to think about.

Monday, July 18, 2011

Pragmatism vs Practicality

I recently wrote, in another blog, about what I called Gadget Lust - you know, the desire to get those cool gadgets that are coming out all the time.  A desire that can transcend their usefulness and leave you with a cool gadget that you never use.  I've been thinking about that and wondering if it doesn't pertain to politics as well.

Many of us are idealists.  We follow our principles and try to leverage them into policies in an attempt to make the world (or even just our hometown) a better place.  Some days I find myself brimming with ideas and energy and I want to make all of them reality.  It's here that I wonder - perhaps I'm running faster than my feet can carry me.  Perhaps some of these ideas, ideas which sound good and right, are not all they're cracked up to be.

This is a bit of a cautionary tale.  When you come up with a grand idea; one that seems so perfect and right: stop for a bit and reason it out.  Will it really have the effect you think it will?  Are there any unforeseen consequences?  Does it need to be properly vetted before it is made into law?  It is far easier to enact a law/policy than it is to repeal it.  I'm simply urging a little caution (to myself as much as anybody else).  Like to old carpentry saying goes, "Measure twice and cut once."  Let's make sure we know what we're doing before we do it.