6 Simple Steps To $1 Million

6 Simple Steps To $1 Million

Let’s face it; we all don’t make millions of dollars a year, and the odds are that most of us won’t receive a large windfall inheritance either. However, that doesn’t mean that we can’t build sizeable wealth – it’ll just take some time. If you’re young, time is on your side and retiring a millionaire is achievable. Read on for some tips on how to increase your savings and work toward this goal.

Stop Senseless Spending
Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don’t need. Even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can really add up – and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month. (For related reading, see Squeeze A Greenback Out Of Your Latte.)

That said, it’s important to realize that it’s usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This means that people who are looking to build their nest eggs need to make sacrifices somewhere – this may mean eating out less frequently, using public transportation to get to work and/or cutting back on extra, unnecessary expenses. (To learn more, read The Disposable Society: An Expensive Place To Live.)

This doesn’t mean that you shouldn’t go out and have fun, but you should try to do things in moderation - and set a budget if you hope to save money. Fortunately, particularly if you start saving young, saving up a sizeable nest egg only requires a few minor (and relatively painless) adjustments to your spending habits. (For more insight, read Under 30 And Financially Secure In 10 Steps.)

Fund Retirement Plans ASAP
When individuals earn money, their first responsibility is to pay current expenses such as the rent or mortgage expenses, food and other necessities. Once these expenses have been covered, the next step should be to fund a retirement plan or some other tax-advantaged vehicle.

Unfortunately, retirement planning is an afterthought for many young people. Here’s why it shouldn’t be: funding a 401(k) and/or a IRA early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later. (To see how this works, check out Why is retirement easier to afford if you start early?)

How much difference will funding a vehicle such as a Roth IRA early on in life make?

If you’re 23 years old and deposit $3,000 per year (that’s only $250 each month!) in a Roth IRA earning and 8% average annual return, you will have saved $985,749 by the time you are 65 years old due to the power of compounding. If you make a few extra contributions, it’s clear that a $1 million goal is well within reach. Also keep in mind that this is mostly interest – your $3,000 contributions only add up to $126,000.

Now, suppose that you wait an additional 10 years to start contributing. You have a better job and you know you’ve lost some time, so you contribute $5,000 per year. You get the same 8% return and you aim to retire at 65. When you reach age 65, you will have saved $724,753. That’s still a sizeable fund, but you had to contribute $160,000 just to get there – and it’s no where near the $985,749 you could’ve had for paying much less.

Improve Tax Awareness
Sometimes, individuals think that doing their own taxes will save them money. In some cases, they might be right. However, in other cases it may actually end up costing them money because they fail to take advantage of the many deductions available to them.

Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your return. (To learn everything you need to know about filing your tax return, check out our Income Tax Guide.)

However, if you’re not willing or able to become very well educated filing your own income tax, it may actually pay to hire some help, particularly if you are self employed, own a business or have other circumstances that complicate your tax return. (For more on this, see Crunch Numbers To Find The Ideal Accountant.)

Own Your Home
At some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren’t sure where we want to live for the longer term. And that’s fine. However, renting is often not a good long-term investment because buying a home is a good way to build equity.

Unless you intend to move in a short period of time, it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.) (For more insight on weighing this decision, read To Rent Or Buy? The Financial Issues.)

Avoid Luxury Wheels
There’s nothing wrong with purchasing a luxury vehicle. However, individuals who spend an inordinate amount of their incomes on a vehicle are doing themselves a disservice – especially since this asset depreciates in value so rapidly.

How rapidly does a car depreciate?

Obviously, this depends on the make, model, year and demand for the vehicle, but a general rule is that a new car loses 15-20% of its value per year. So, a two-year old car will be worth 80-85% of its purchase price; a three-year old car will be worth 80-85% of its two-year-old value.

In short, especially when you are young, consider buying something practical and dependable that has low monthly payments – or that you can pay for in cash. In the long run, this will mean you’ll have more money to put toward your savings – an asset that will appreciate, rather than depreciate like your car.

Don’t Sell Yourself Short
Some individuals are extremely loyal to their employers and will stay with them for years without seeing their incomes take a jump. This can be a mistake, as increasing your income is an excellent way to boost your rate of saving.

Always keep your eye out for other opportunities and try not to sell yourself short. Work hard and find an employer who will compensate you for your work ethic, skills and experience.

Bottom Line
You don’t have to win the lottery to see seven figures in your bank account. For most people, the only way to achieve this is to save it. You don’t have to live like a pauper to build an adequate nest egg and retire comfortably. If you start early, spend wisely and save diligently, your million-dollar dreams are well within reach.

Reprint of article by Glenn Curtis on Investopedia

Budgeting 101 – 10 Simple Steps To Financial Security Before 30

10 Simple Steps To Financial Security Before 30

reprint from Investopedia by Ken Hawkins

Being financially secure enough to enjoy your life in retirement is the last thing on the minds of those under 30. After all, with the stress of all the expensive “firsts” that often come about during this period, like purchasing a car, buying a house and starting a family, it’s hard to even think about saving for the future. However, working toward financial security need not be an exercise in self-deprivation, as many people assume. Attaining this goal even has some immediate benefits, as financial insecurity can become a serious source of stress – something 20-somethings have enough of already.

// So can you achieve long-term financial security without sacrificing your short-term goals? Read on for 10 tips on how to do just that.

1. Have Fun
Enjoy yourself while you are young – you will have plenty of time to be miserable when you are older. Living a successful, enjoyable and happy life is about achieving a proper balance between time with family and friends and between work and leisure time. Striking a proper balance between your life today and your future is also important. Financially, we can’t live as if today was our last day. We have to decide between what we spend today versus what we spend in the future. Finding the correct balance is an important first step toward achieving financial security. (For further reading, see Budget Without Blowing Off Your Friends.)

2. Recognize Your Most Important Financial Asset: Yourself
Your skills, knowledge and experience are the biggest asset you have. The value of your future earnings will dwarf any savings or investments you might have for most of your career. Your job and future career is the most important factor in achieving financial independence and security. For those just entering the work force, future career opportunities are as bright as they’ve ever been. The large number of retiring baby boomers is expected to create labor shortages. There will be room for advancement as companies scramble to fill the positions held by these aging baby boomers. Those who are in a position to take advantage of these opportunities will benefit the most.

Look at yourself as a financial asset. Investing in yourself will pay off in the future. Increase your value through hard work, continual upgrading of skills and knowledge, and making smart career choices. Efforts to improve your career can have a far bigger impact on your financial security than tightening your belt and trying to save more. (To learn more, see Should You Head Back To Business School?)

3. Become a Planner, Not a Saver
Research has shown that those who plan for the future end up with more wealth than those who do not. Successful people are goal oriented: they set goals and develop a plan to achieve them. For example, if you set a goal to pay off your student loans in two years, you’ll have a better chance of achieving this goal than you would if you merely said you wanted to pay off your student loans, but failed to set a timetable.

Become a planner. Set goals and develop an action plan to reach them. Even the process of writing down some goals will help you to achieve them. Being goal oriented and following a plan means taking control of your life. It is an important step toward improving your financial independence and security.

4. Set Short-Term Goals – Long-Term Goals Will Take Care of Themselves
Life holds many uncertainties – and a lot can change between now and 30 years into the future. As such, the prospect of planning far into the future is a daunting task and in many ways, it’s often an exercise in futility for young investors.

Rather than setting long-term goals, set a series of small short-term goals. These goals could be a simple as trying to pay off credit card debt or student loans in a matter of months. Maybe your goal is to contribute to your company’s pension plan with a set salary reduction contribution each month. Setting short-term goals that will help you to advance in your career is important in helping you get ahead. Remember, these short-term goals should be measurable and precise. You can’t win a race if there’s no finish line.

As you achieve your short-term goals, set other short-term goals. Maybe you want to buy a house, earn a promotion at work or buy a new car. The constant setting and achieving of short-term goals will ensure that you reach your longer-term goals. If your goal is to be worth a million dollars by age 40, you cannot achieve this without first achieving smaller goals like having $10,000, $50,000 or $500,000.

5. Planning For Retirement: Fuggetaboutit?
Just out of school, retirement planning is the last thing on your mind. So, if you have to for now, just fuggetaboutit. If you follow the other tips, you will not only be more financially secure and prepared in the short term, but you will also be financially prepared for the distant future as well.

However, if you take a few steps now to start saving, like setting up automatic monthly contributions to a retirement plan like an employer-sponsored 401(k) or your own Roth IRA, compounding will work in your favor, which makes reaching your goal much easier.

If you implement this pay yourself first ideal, you won’t have to worry about how much you’re contributing; the most important thing is to develop the habit of saving. The rest will take care of itself. You can increase your contributions when your income rises or when you’ve achieved more of your short-term financial goals. (To learn why starting now can save you thousands later, see Understanding The Time Value Of Money, Compound Your Way to Retirement and Delay In Saving Raises Payments Later On.)

6. Make Sure Your Lifestyle Costs Lag Your Income Growth
Many new graduates find that in the first couple years of working they have excess cash flow. Still used to their more frugal student spending habits, it is easy to make more money than they need. Rather than using excess income to buy new toys and live a more luxurious lifestyle, this excess could be put toward reducing debt or adding to savings. As you advance in your career and attain greater responsibility, your salary should increase. If the cost of your lifestyle lags your income growth, you will always have excess cash flow that can be put toward paying down debt, making investments, saving for a home, or achieving any other financial goals you may have.

Where many people get into trouble is that they feel entitled to a standard of living that exceeds what they can afford. However, if you keep your standard of living below what you earn, you won’t have to cut back to accumulate money; instead, you will naturally have excess cash flow because you earn more than you need to live on. In addition, keep in mind that trying to keep up with the Joneses is always a recipe for financial failure. For all you know, you may make more than the Joneses, who may be funding their lavish lifestyle with debt anyway. (For more on this topic, see Stop Keeping Up With The Joneses – They’re Broke.)

The good life should be a reward for your hard work, good fortune and successful planning, not something that you are entitled to. Once you have established a certain lifestyle, it is psychologically difficult to lower it. It is very easy to raise it.

7. Become Financially Literate
Making money is one thing; saving it and making it grow is another. Financial management and investing are lifelong endeavors. Making sound financial and investment decisions is important for achieving your financial goals. The more knowledgeable and experienced you are in financial matters, the fewer mistakes you will make.

Research has shown that people who are financially literate end up with more wealth than those who are not. There is a strong monetary incentive for becoming financially sophisticated. Taking the time and effort to become knowledgeable in the areas of personal finance and investing will pay off throughout your life.

8. Seize the Opportunities: Take Calculated Risks
Taking calculated risks when you are young can be a prudent decision in the long run. You might make mistakes along the way, but remember, mistakes are the lessons of wisdom. You often learn more from your mistakes than from your successes. Also, when you are young, you can recover faster from financial mistakes, and you have many years to recover. (Keep on reading about this in Retirement Savings Tips For 18- To 24-Year-Olds and Retirement Savings Tips For 25- To 34-Year-Olds.)

Examples of calculated risks might include moving to a new city with more job opportunities, going back to school for additional training or taking a new job at a different company for less pay but more upside potential. Starting a new company, working for a small startup company, or investing in high risk/high return stocks, is easier to do when you’re young. Younger people can afford to take risk, and the same opportunities might not be available later in life. As people get older and assume more family responsibilities like paying off the mortgage or saving for the kids’ education, many are forced to play it safe and are unable to capitalize on riskier opportunities that present themselves.

Taking calculated risks when you can afford to do so is necessary to get ahead financially. Playing it safe might be the bigger mistake in the long run.

9. Borrow Money For Investments – Never to Finance a Lifestyle
As mentioned before with the Joneses, you should never borrow to finance a lifestyle you cannot afford. Using credit for a life you feel entitled to is a losing proposition when it comes to building wealth. The constant borrowing will assure that there is no money available for investing, and the added interest expense of borrowing further increases the cost of the lifestyle.
Borrowing money should be used only for investing – where your gain will outrun your borrowing costs. This might mean investing in the literal sense (for stocks, bonds, etc.) or it might mean investing in yourself for your education, extra training, to start a business or to buy a house. In these cases, borrowing can provide the leverage you need to a reach your financial goals faster. Borrowing to meet short-term desires is counterproductive. (To learn about your borrowing options, see Different Needs, Different Loans.)

10. Take Advantage of Financial Freebies
Not many things in life are free. If you belong to a company pension plan, take the free money it offers and make sure that you contribute at least up to the maximum of what your company will match.

You can also look for (legal) ways to take advantage of tax laws. For example, contributing to an individual retirement account (IRA) will result in a tax savings – in effect, the government is giving you free money to provide an incentive to contribute. There is also an incentive to invest in stocks because of favorable tax treatment on capital gains and dividend income.

Conclusion
Achieving financial independence is a goal most people strive for. It is not necessarily easy, but it is achievable if you understand your priorities, set achievable goals and take the proper steps toward reaching them. 

reprinted from Investopedia by Ken Hawkins

The Disposable Society: An Expensive Place To Live

The Disposable Society: An Expensive Place To Live

Reprint from Investopedia by Lisa Smith

We live in an age where everything gets thrown away. From disposable cameras to disposable diapers, few products marketed to consumers are made to last. But what many consumers don’t realize is that this throw-away world was largely made by design. Manufacturers call it “planned obsolescence“. Find out how this trend affects not only your pocketbook, but also the environment.

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Not Meant to Last
Creating products that aren’t meant to last is a very viable business strategy as this means that consumers will need to buy replacement products. Consider the straight razor that your great grandfather used or the cloth diapers that your great grandmother probably made for her children. If you can find it and sharpen it, that razor can still be used today and those diapers were probably used for multiple children and then put to further use sopping up spilled milk or scrubbing floors. In more recent years, those long-lived products have become bad news for companies that need to sell more products this year than last year to keep their stock prices high.

In a more modern context, consider videogames. Old games, like Pong, could be played over and over again. Today’s games, like the popular Grand Theft Auto series, have a beginning and an end. Once you “beat the game” you need to buy the next installment in the series. The same concept applies to computer software. If you call Microsoft and try to get support for Windows 98, a once expensive product that still works just fine on many computers, you’ll be told that it is no longer supported. It’s not that the product doesn’t work, it’s that the company wants you to buy the latest and greatest version of whatever they’re selling.

More durable goods, such as automobiles and cellular telephones, present a bigger challenge to manufacturers. While new cars may not seem to be built to last like cars were in the 1950s, improving warranties at least conveys the impression of quality. But even if the quality of newer cars is comparable, manufacturers still try to tempt drivers into buying new cars by coming out with new styles every few years. Cell phones follow the same script. If you don’t have newest, thinnest, most feature-packed model, advertisers tell you that you are hopelessly out of style. To keep up with the Joneses, you need to replace your existing model – regardless of whether it still works – with a new one. (Read more about this in Stop Keeping Up With The Joneses – They’re Broke.)

Building low quality products also results in higher profit margins for manufacturers. Using throw-away materials not only guarantees a repurchase of the same item (in a new model, with more features, at a higher price), but the cost savings also end up being pure profit for the manufacturer.

Most consumers are so acclimated to the process that they don’t even think about it. After all, advertising has taught us that new is good and that old isn’t. So, we spend, spend and spend some more until, in the worst case scenario, even our creditors won’t let us buy anything else.

The Cost
This “out with the old, in with the new” lifestyle has a tremendous cost. Not only is your wallet continuously emptied as your limited supply of dollars chases an endless supply of new and updated products, but many people fall victim to making their purchases on credit once they run out of available cash. Unfortunately, using credits cards is an easy way to put a serious dent in your finances. (To learn more about credit, see Understanding Credit Card Interest, Take Control Of Your Credit Cards and Digging Out Of Personal Debt.)

Personal finances aside, there is also an environmental price to pay for consumerism. Constant manufacturing of new and unnecessary products uses up raw materials and contributes to pollution, impacting the quality of the water we drink and the air we breathe. The products themselves end up in landfills, taking up space that is often at a premium.

Voluntary Simplicity
Combating the costs of our disposable society is a major challenge, but there are ways to fight back. The Amish, often noticed for their style of dress and lack of focus on material goods, are the most visible representatives of the modern-day voluntary simplicity movement. They eschew modern conveniences and luxury items in favor of a simpler way of living.

While nobody expects you to ride around in a horse and buggy, there are steps you can take to minimize your participation in our consumer-focused society and, in the process, bolster your personal financial situation.

A few of these easy methods include:

• Buy durable goods whenever possible.
• Ignore or stop style-driven purchases. If it’s a choice between cheap stuff that will need to be replaced or better items that will last, spend the extra dollars in the short term to save money over the long run. From a style perspective, wearing your grandmother’s hand-me-downs may not be practical, but trading in your cell phone or MP3 player for no better reason than that it is new is not only unnecessary, it’s also expensive
• Recycle whenever possible. To reduce your personal impact on the environment, recycle. Everything from newspaper to toner cartridges can be reused. Also, be sure to donate old eyeglasses, cell phones and computers instead of throwing them away. Speaking of reusable items, take your own reusable, cloth bag with you when you go to the grocery store (many stores now charge a small fee for each plastic bag you use) or, at the very least, choose paper over plastic, and then recycle the paper.
• Grow your own garden. This will cut down on your trips to the grocery store, saving money on both gas and food.
• Make your home green. Using low-flow shower heads, compact fluorescent light bulbs and other energy-efficient devices will help your budget in addition to the environment. (To read more on being green, see Building Green For Your House And Wallet.)
• Use public transportation when possible. If you must drive, consider a fuel-efficient car. Carpooling is another good way to reduce both the financial and environmental impacts of traveling.
• Downsize where you can. You may like the souped-up 4×4 gas-guzzling monster you’ve been driving to the mall, and you may like the convenience of buying precooked dinners in bulk, but the excess money and material costs going into these purchases will have a huge impact on your bottom line. In this respect, the biggest one-time choice you can make is to downsize your home. (To find out why and how to do this, see Downsize Your Home To Downsize Your Expenses.)

Get Started Today
Ignore the siren song of runaway spending. Forget about owning the latest styles, biggest houses or flashiest cars. Instead, make your financial situation your top priority. Your pocket book will breathe a sigh of relief when you make the effort – and you may be able to reduce your impact on the environment in the process.

by Lisa Smith

Budgeting 101 – Save Money The Scottish Way

Save Money The Scottish Way

reprint from Investopedia by Andrew Beattie

The Scottish have long been famed for their frugality and practicality. Henry Duncan, a Scottish minister, founded the world’s first commercial savings bank. Adam Smith, one of the most famous figures in economics also hailed from Scotland. (For more on Adam Smith, see How Influential Economists Changed Our History.)

It’s no coincidence that many of the successful businesses today have, among their portraits of former CEOs and founders, a painting of a side-burned Scot whose eyes suggest any spare change would have to be pried out of his cold, dead hands.

In this article, we will look at three ways you can give your budget a boost using some of the famed Scottish frugality.

1. Be Utilitarian
When William Wallace led the Scots against the English in the 13th and 14th century, the militiaman’s weapon of choice was more likely to be a pitchfork or scythe than a spear or sword. Why? The average Scot used a pitchfork everyday, but swords were expensive and rare.

In battle, a sharp pitchfork was just as fatal as a sword, so very few men needed swords. Many people would be well served just by learning this one lesson: buy what you need, and if your needs change, adapt. It’s foolish to buy a sword if a pitchfork will do just as nicely.

Examples abound of people paying for more than they need: a polished teak table to hold up a TV dinner, a brand new laptop to send email and print photos, an SUV to drive to the suburbs and back or a huge house that is ruinous to maintain. The waste goes on and on.

Plan your purchases as you would plan a vacation. Know precisely what you need and how much you are willing to pay for it. Write it down and carry it like talisman to ward off aggressive salespeople. (To turn your vacation dreams into reality, check out Travel Tips For Keeping You And Your Money Safe.)

2. Buy Second Hand
Britain’s economic emergence during the industrial revolution owed much to a single invention: the Watt Steam Engine. In 1763 James Watt, a Scotsman, got his hands on a broken, second-hand steam engine and modified it to be much more efficient. Within years, Watt went from refurbishing old models to creating his own line of powerful engines - engines that drove the factories that made up the industrial revolution. The lesson of buying second hand, while less dramatic than powering the industrial revolution, can save you significant amounts of money.

Used goods were once the specialty of pawnshops – where you could get a near-new stereo for a 70% discount if you didn’t mind the bullet holes and the dark stain on the left speaker. However, these goods have now become commonplace. Quality second-hand shops are popping up all over the place. These stores offer used models in good working condition at significant discounts compared to buying new. Garage sales, warehouse auctions and eBay auctions are also great places to search when you know what you want.

Another area where buying second-hand pays off is in cars. Because new cars generally plummet in value once they have drive off the lot, a careful buyer can find a used car comparable to the showroom model at a huge discount. Japanese cars in particular seem to hit a certain price and stick there whether you own it for two years or five. This means if you find a decent used car, you may be able to sell it after a year or two for nearly the same price as you paid for it. Whether it is a car or a stereo, you can save yourself a lot of money by finding a used model with the same capacity. (For more on used-car savings, read Wheels Of A Future Fortune.)

3. Do It Yourself
When the Oxford English Dictionary was floundering on the edge of oblivion, the university brought in a Scotsman by the name of James Murray. Where the previous chief lexicographers delegated and did little, Murray rolled up his sleeves and began hammering away at the dictionary letter by letter. His do-it-yourself attitude saved the dictionary. He managed to keep expenses down and still produce results. This attitude will save you more money than you may realize.

You are the cheapest labor you can hire. When you pay someone to do a task such as mow your lawn, paint your house or change your oil, the service is costing you much more than the amount on the receipt. To understand what you are losing by not being hands-on, you have to look at how much income you have to earn to produce enough after-tax dollars to pay for a particular service.

For example, if you pay $1,000 to have someone landscape your yard, and you are in the 28% tax bracket, the job actually required around $1,400 of before-tax income. Getting out the shovel and doing it yourself is like adding $400 to your yearly income, let alone saving the $1,000. (To save money by managing your own investments, read The Indiana Jones Guide To Getting Ahead and Economic Indicators For The Do-It-Yourself Investor.)

Conclusion
The Scottish aren’t the well-known spendthrifts they used to be. However, the work of Scots during the industrial revolution still stands as one of the greatest leaps forward by a country and its people. All that hard work would have meant nothing if it wasn’t enforced by frugality.

You don’t need to feast on haggis or wear a kilt, but if you bring some old-time Scottish frugality to your own budget, you might find you’re pleased enough to at least try the haggis.

To begin your new tight-fisted life, check out Fifteen Insurance Policies You Don’t Need.

by Andrew Beattie

Budgeting 101 – Get Your Budget In Fighting Shape

Get Your Budget In Fighting Shape

reprinted from Investopedia by Andrew Beattie

In boxing, each boxer has an ideal fighting weight - the weight that provides the best balance of speed and power. If a boxer is too heavy, he forfeits his speed. If he’s too light, he loses power. Finding this ideal weight and maintaining it is the main challenge for most boxers and their handlers. As it turns out, investors need to strike this same type of balance in their finances – particularly when it comes to making a budget.

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For example, if you are finding that you are not meeting your financial goals as quickly as you planned, you may need to trim down your expenses. On the other hand, if you set a budget that is too harsh, you will probably lose your motivation to follow it. Read on to learn how to measure your budget’s ideal fighting weight. (To find out why you need a budget, see The Beauty Of Budgeting, Ten Tips For Achieving Financial Security and The Seasons Of An Investor’s Life.)

Good and Bad Calories
Boxers need calories for their bodies to burn. Even when they are dieting to make their select weight groups, they rarely go below 1,200 calories a day and during training camp, they may consume as many as 6,000 calories. Boxers also pay attention to what they eat - all of their calories are carefully selected and they choose quality foods, like pasta and steak, over burgers and cheesecake.

Similarly, when you’re working out your budget, expenses are necessary, but, much like the boxer and his calorie quota, you should watch out for the quality of the expenses you incur – this can make a big difference in how much disposable income and savings you end up with.

The problem with necessary expenses is that people feel that they can go all out when buying something they really need. You need a house. The house needs furniture. The car needs a wax. But, these “necessary” expenses quickly become unnecessarily expensive. You need a place to live, true, but if you have a mortgage that is eating 50% of your monthly income, that is definitely cheesecake – and too much of it.

The same is true for new cars. You may need something to transport you back and forth, but buying a new car with all the options is a sure way to reduce your disposable income and ability to save. When you are looking at buying a house or a car, you have to allow room in your budget for emergencies. If you buy the biggest house you can afford, lease a brand new car and tighten your budget to the point where your monthly expenses are leaving you with a zero balance each month, it may only take something small like a faulty water heater to break the bank. And then the credit cards come out, and the slope gets slippery. (To learn more, see Wheels Of A Future Fortune, Build Yourself An Emergency Fund and Take Control Of Your Credit Cards.)

Empty Calories
Necessary and unnecessary expenses are sometimes difficult to separate. As we saw above, within each necessary expense, there is a range of reasonable costs that you may be surpassing. There are, however, many common expenses that are more luxuries than necessities.

Whether we know it or not, we are living in a golden age of luxuries. The days of pulling potatoes out of the ground to survive the winter are over for most North Americans, especially for those who can afford the internet connection and computer needed to read this article. This is not, in and of itself, a bad thing, but it does cost you. One area where luxuries often sneak up and bludgeon your monthly budget is through the services you receive.

If someone else is cutting your lawn and cleaning your house, you may be living way outside your ideal budget. Although it is nice to have someone else cut the grass and do the dishes once in a while, using such services on a regular basis is a sure way to reduce your disposable income, savings and, ultimately, the money you have free to invest. The money you bring home to pay for these luxuries has already been earned and taxed. When you spend it on frivolous luxuries, you lengthen the amount of time you have to keep working in order to finance your retirement – is having your carpet vacuumed worth the time you spend working overtime on your 65^th birthday? Spending your money on unnecessary items you could live without is a surefire way to put your savings plan on the bench.(Find out how much you need to save to retire in A Pre-Retirement Checkup, Can You Retire In Five Years? and Determining Your Post-Work Income.)

The Best Defense is a Good Offense
It is human nature to want certain luxuries. The goal is not to let those luxuries get out of hand. This doesn’t just mean the high-maintenance money holes like second homes, vintage motorbikes and rarely-used boats, but it also includes smaller items like advanced cable packages or an internet connection.

For example, suppose that you want the internet to send emails and keep on top of stock prices. You could get dial-up, DSL or get cable – you can even get free internet if you can handle ad bars. For people who want email and some browsing, the cheapest connection often provides more than enough bandwidth. These same people end up trying out one of the faster connections and then signing on, perhaps even spending more time on the internet than they planned or wanted to in order to justify the purchase. Cable packages work the same way: people go in looking to get the golf channel and come out with the platinum plan. The same is true for most cell phone, camera, computer and other electronic purchases. (To learn which purchases are necessary, see Patience Pays For Consumers.)

If you want to come out on top, be proactive when you absolutely need to purchase a luxury. Put limits on what you will buy before you even step into the store. Nail down what you need, for example, “a computer that can send email, burn CDs and connect to the internet”, and then decide how much you can afford to spend and still maintain your budget. If possible, set up your budget so that saving up for a luxury is a part of it – rather than charging luxuries to a credit card and having to adjust your budget to pay off the debt later on. You may find that saving for a luxury in advance motivates you to budget more efficiently and keeps you from overspending. (To learn how to pay off old debt, see Digging Out Of Personal Debt, The Indiana Jones Guide to Getting Ahead and Seven Common Financial Mistakes.)

Blood and Sweat in the Gym Saves You in the Ring
It is the roadwork, training and effort that a boxer goes through in the months before a fight that decides how successful he will be in the ring. Likewise, the harder you work on your budget, the easier managing your finances will become. There are sacrifices. Some of them as small as getting a connection a few bytes slower or making your own morning coffee instead of getting it from a shop on your way to work. Some are big, like passing up on the cabin in the mountains or a new car in favor of a used one. It even hurts sometimes.

In boxing, you have the choice of sweating and sacrificing in the gym or getting knocked out in front of everyone when it matters. With your finances, no one is monitoring your training but you, and, if you get knocked out by being too lax with your expenses, there isn’t a referee to step in or a bell to ring that will give you time to get back on your feet. It is better to do the hard work of budgeting and cutting down on your expenses on your own terms, rather than when a creditor is twisting your arm.

To learn more about planning your money to meet your future goals, see Life Planning – More Than Just Money, Enjoy Life Now And Still Save For Later and Ten Tips For Achieving Financial Security.

by Andrew Beattie

Budgeting 101 – Stop Keeping Up With The Joneses – They’re Broke

Stop Keeping Up With The Joneses – They’re Broke

reprint from Investopedia by Lisa Smith

It used to be that spending money on status symbols for the sake of flaunting your wealth was an activity reserved for celebrities and millionaires. That has all changed. Conspicuous consumption, what was once referred to as “keeping up with the Joneses”, has brought the lifestyles of the rich and famous to suburbia.

Just as most people consider themselves to be above-average drivers, most people assume they aren’t the ones doing all this needless spending. They aren’t wearing ten pounds of gold chains, or gowns created by famous designers. Four-hundred-dollar haircuts, sprawling mansions, Rolls Royces and private planes aren’t in their budget, so they assume their spending is reasonable. However, a closer look at what you’re spending might put your own lifestyle in a different light.

The Trappings Of Success
The competition is on. Everyone is looking for the smallest phone, the cable provider with the most channels and the television with the biggest screen. Add in desktop computers and high-speed internet access and you’ve created a list of America’s growing “necessities”. According to a 2006 survey entitled “Necessity or Luxury” by the Pew Research Center, 33% of Americans now view cable or satellite TV as a necessity. In 1996 that number was 17%. Also, 51% now can’t live without a home computer, up from 26% in ‘96.

Some items that were seen as fads or didn’t exist in 1996 have also jumped onto the necessity list:

• Cell Phone: 49%
• High-speed internet: 29%
• Flat-screen TV: 5%
• iPod: 3%

Even huge sport utility vehicles are now being justified under the guise of safety. There are now so many of the behemoths on the road, it feels like the only way to be safe in a crash is to make sure you’re driving one too.

Weekly maid services, private contractors and landscapers are clearly not necessities, yet they have become quite common. In all of these instances a little elbow grease could lead to huge savings. Cosmetic surgery, pleasure boats, McMansions, restaurant quality kitchen appliances, professional quality home gym equipment, and second homes are a few items that still qualify as luxuries in most people’s minds, but that hasn’t hurt their popularity. How long will it be before these items make the jump to the necessity category, too? (To learn more, see Save Money The Scottish Way and McMansion: A Closer Look At The Big House Trend.)

A Global Phenomenon
The western countries are well known for their excessive consumption, but the emerging middle classes in China and India are working hard to join the crowd too. While these major players gain the bulk of the attention, they are far from alone. From blue jeans in Russia to satellite dishes in Iraq, people around the world are coveting their neighbors’ lifestyles. (For insight on the growing middle class around the world, see What Is An Emerging Market Economy?)

Why We Do It
There are a variety of factors driving consumption:

• The desire to show off our success
• The need to have what other people have
• Prolific advertising and product placements
• Easy credit
• A society that favors instant gratification over hard work

The Joneses Are Broke
Many of the people driving around the suburbs in their giant SUVs while talking on their new cell phones are deeply in debt. If you ask them how they are doing, they will tell you that they are just barely getting by. According to a Federal Reserve Board study, 43% of American families spend more than they earn. Statistics from the Federal Reserve Board also show that, in 2005, household debt was at a record high when compared to household income. Not surprisingly there was also a record number (2,039,214) of consumer bankruptcies filed in 2005 according to the American Bankruptcy Institute.

As mentioned earlier, the grim outlook isn’t limited to America either. A survey conducted by Newspoll Market Research indicated that nearly two-thirds of Australians say they cannot afford to buy everything they need. Yet, the World Bank cites Australia as having the twentieth highest per capita income in the world according to the publication “World Bank Development Indicators 2006″. Luxembourg, Norway and Switzerland took first, second and third places. The U.S. came in at No.6 and Canada at No. 19. Why so much debt and such a grim outlook from areas of obvious affluence? It’s simply a matter of people spending far more money than they should. If you can “afford” life’s luxuries but aren’t funding your 401(k) and maximizing your retirement savings, you need to reevaluate your financial situation.

Trim Your Needs
Most people don’t use all of the features on their cell phones. Nobody watches all of the stations that they pay for. You may need a car to get to work, but you don’t need a luxury vehicle, and you certainly don’t need a gas-guzzling sport utility vehicle. Remember, one person simply can’t drive two cars at the same time, so there’s no reason to own more than one.

The big homes, expensive toys and other goodies seem nice, but in reality they are unnecessary from a practical perspective, and will only make you happy for a very short period of time before the next “must-have” item rolls around.

Set Your Priorities
Remember when you were little and mom told you, “Don’t worry about others; mind your own business and worry about yourself”? It’s one of those lessons we all seem to forget as we get older. If you’ve got a healthy nest egg stashed away or an endless supply of cash, by all means spend. However, if you’re concerned about the future, you need to curb your spending today.

Take a page from low-income America, and limit your “needs”. The same survey that found iPods were a necessity for 3% of people, found that the less you earned the fewer items you listed as necessities – items you could not live without. The lesson is, you shouldn’t worry about what other people have; it’s your money, so spend it wisely.

To get started on a life of savings, see Three Simple Steps To Building Wealth.

by Lisa Smith

Budgeting 101 – Squeeze A Greenback Out Of Your Latte

Squeeze A Greenback Out Of Your Latte

reprint of article on Budgeting 101 by Amy Fontinelle

When many people think of budgeting or saving money, they think of making major changes like cutting out vacations, downgrading the car, or moving to a smaller house. But budgeting doesn’t necessarily have to involve a great deal of sacrifice or hassle. Paying more attention to the little expenses you incur every day on food, transportation and entertainment can help you stick to your budget with enough money left over to pay down your debt, enjoy a trip to Hawaii, or just live a little more comfortably. (Budgeting doesn’t have to be all pain and no gain. To learn more, read Enjoy Life Now And Still Save For Later and Top 5 Budgeting Questions Answered.)

Food
Food can be a major expense for busy people who purchase a lot of meals away from home. If you added up the cost of all those lunches out, you might be shocked to find that you’re spending $200 a month or more on meals that wouldn’t cost more than $50 a month if you brought them from home.

Let’s take a look at a few food-money traps you’re likely to encounter on a daily basis and how to avoid them.

• Reduce coffee costs – It’s tempting to hit the coffee shop every morning, but the cost really adds up, especially if you’re purchasing premium drinks like lattes. Strike a balance between saving money and treating yourself by reducing your weekly visits to the coffee shop from five to two, or ordering regular coffee and adding the milk yourself for free. Better yet, buy a coffee maker for your desk at work if it’s your hatred of the office coffee that compels you to search out the premium blends. Even a fancy coffee maker will quickly pay for itself if you’re currently spending $4 a day on lattes (that’s $80 or more per month!).
• Eat breakfast and create a food stash - Breakfast is usually the least expensive meal of the day, and you might not spend as much money on lunch and dinner if you don’t starve yourself all morning. For the times you do get hungry, keep snacks with you in the car, in your purse or briefcase, and in your desk at work. You’ll save both money and calories if you eat a granola bar instead of buying a muffin. Don’t forget to take advantage of any freebies provided by your office.
• Do it yourself - Rather than opening up your wallet, it’s cheaper to make your own energy bars, yogurt parfaits, muffins, or whatever you habitually hand over money for. Also, don’t buy bottled water. Carry your own re-usable bottle instead. The tap water in North America is perfectly safe to drink.
• Save on lunch - Bringing your own lunch is a highly effective way to reduce spending, whether it’s making a sandwich, bringing leftovers from last night’s dinner, or heating up a can of chili. If your office doesn’t have a communal fridge, consider getting your own mini-fridge. While this item may cost $80 new at the store, it will quickly pay for itself if it gets you to bring leftovers from home instead of spending $10 on restaurant lunches every day.If brown-bagging isn’t your bag, “lunchpooling” can be another way to save money on workday lunches. Get together with a small group of co-workers and agree to each provide lunch one day per week. One person orders a pizza on Monday, and the next person buys a couple of foot long subs for Tuesday, etc. By selecting the right lunch choices, you’ll save money by taking advantage of economies of scale.
• Cook dinner - Cook ahead for the week during the weekend when you have the time. Make a large batch of food and freeze part of it. Don’t hit the restaurant, pick up the phone, or visit the prepared food section of the grocery store every night. If you have to eat out, choose an inexpensive restaurant with generous portions so that you can get two or three meals for your money. Always take home restaurant leftovers.

Transportation
Driving a car to work every day costs more than just the price of gas – it also causes wear and tear on your vehicle (decreasing its value and increasing your maintenance and repair expenses) and increases your odds of being involved in an accident. Use these tips to make getting to work more cost-effective.

• Carpool – You don’t have to work in the same office as someone to catch a ride to work with him or her. Search out people on Craigslist who live and work in the same neighborhoods you do and have the same work hours. In addition to removing the stress of driving a few times a week, carpooling may even directly reduce your commute time by taking advantage of a carpool lane on the freeway.
• Avoid peak commuting hours - Adjusting your commute to avoid rush hour not only gives you more free time; it also improves your gas mileage as you spend less time idling. Traffic may be much lighter just 15 or 30 minutes before the time you normally leave. Removing a long, stressful drive from your day can improve your energy level and your mood.
• Take the bus - Even if it takes a little longer and you have to sit next to a stranger, you might find that being able to ignore the traffic and read a book makes sacrificing the privacy of your own vehicle worth it. A monthly bus pass is usually cheaper than a month’s worth of gas.
• Don’t buy premium gas - Ignore the hype about premium gas unless the manufacturer of your vehicle specifically recommends a higher octane fuel.
• Maintain your vehicle - Many major repairs and unexpected breakdowns can be avoided if you change your oil regularly and have the car thoroughly checked out once or twice a year. You can also buy an OBD-II reader to read your car’s computer, which can save you a trip to the mechanic when your check engine light comes on.

Entertainment
At the end of a hard day’s work, we all want nothing more than a few hours of relaxation and fun. How you choose to spend this time can have a major impact on your finances.

• Stay home - The No.1 way to save money during your free time is to stay home. You’re already paying for the place you live, so why not enjoy it? Avoiding malls, bars, clubs, movie theaters and restaurants will put you ahead of the game (as long as you don’t fill that time with online shopping). This isn’t to say that you should never go out, just that it’s good to enjoy these pleasure in moderation. If you just have to get out of the house, run errands that are already factored into your budget, such as grocery shopping, or take advantage of free activities like hiking, visiting your neighborhood pool, or going to the library.
• Trade major luxuries for affordable luxuries – If you feel like treating yourself to something special, keep it reasonable. Buying yourself some gourmet chocolate at the grocery store won’t set you back nearly as much as going out for a gourmet dinner, but it might be all the pick-me-up you need. (To learn how to stretch your spending dollars even further, read Five Money-Saving Shopping Tips.)
• Save on internet costs - If you live in an apartment or condo, look into sharing wireless internet with your neighbors. If you already have a land line and a cell phone, you can get dial-up internet without worrying about tying up the line. Today’s dial-up is considerably faster than it used to be. If your online needs are minimal or you can accomplish what you need to during your lunch break at work, consider going without home internet altogether.
• Only buy as much TV as you watch - Downgrade your cable package, or give up cable altogether and pay to watch individual TV shows from download sites such as Netflix or iTunes. Some networks let you watch recent shows for free online. You might also find that the cable company will suddenly offer you a better rate, at least for a few months, when you call to cancel. (For more on how conspicuous consumption can destroy your finances, see Stop Keeping Up With The Joneses – They’re Broke.)
• Be wary of bundled services - Don’t assume that package deals that bundle your phone, internet and cable TV together are the best deal. It often pays to price-out the individual services from the different providers. Bundles also put you at greater risk of being unable to communicate in an outage.

Conclusion
Sticking to a budget doesn’t have to be painful – it can actually be enjoyable when it helps you achieve your goals. You work hard for your money, so why let it slip away from you in ways that are easily controlled? While we can’t always predict or prepare for the major expenses in our lives, we can choose how much money to spend on work lunches or television. Taking charge of the small, recurring costs can have a surprisingly large effect on your finances.

For more budgeting tips and tricks, read Save Money The Scottish Way and Get Your Budget In Fighting Shape.

reprint from Investopedia by Amy Fontinelle

Budgeting 101 – 3 Simple Steps To Building Wealth

3 Simple Steps To Building Wealth

reprint from Investopedia by William Artzberger,CFA

Building wealth – it’s a topic that sparks heated debate, promotes quirky “get rich quick” schemes and drives people to pursue transactions they might otherwise never consider. ”Three Simple Steps To Building Wealth” may seem like a misleading title, but it isn’t. While these steps are simple to understand, they’re not easy to follow.

The Steps
Basically, building wealth boils down to this: To accumulate wealth over time, you need to do three things:

1. You need to make it. This means that before you can begin to save or invest, you need to have a long-term source of income that’s sufficient enough to have some left over after you’ve covered your necessities.
2. You need to save it. Once you have an income that’s enough to cover your basics, you need to develop a proactive savings plan.
3. You need to invest it. Once you’ve set aside a monthly savings goal, you need to invest it prudently.

Getting on Track
Step1: Making Enough Money
This step may seem elementary, but for those who are just starting out, or are in transition, this is the most fundamental step. Most of us have seen tables showing that a small amount regularly saved and compounded over time can eventually add up to substantial wealth. But those tables never cover the other sides of the story – that is, are you making enough to save in the first place? And are you good enough at what you do and do you enjoy it enough that you can do it for 40 or 50 years in order to save that money? (For related reading, see Understanding The Time Value Of Money and Delay In Savings Raises Payments Later On.)

To begin, there are two types of income – earned and passive. Earned income comes from what you “do for a living,” while passive income is derived from investments. This section deals with earned income.

Those beginning their careers or in the midst of a career change can think about the following four considerations to decide how to derive their “earned income”:

1. Consider what you enjoy. You will perform better and be more likely to succeed financially doing something you enjoy.
2. Consider what you’re good at. Look at what you do well and how you can use those talents to earn a living.
3. Consider what will pay well. Look at careers using what you enjoy and do well that will meet your financial expectations.
4. Consider how to get there (educational requirements, etc.). Determine the education requirements, if any, needed to pursue your options.

Taking these considerations into account will put you on the right path. The key is to be open-minded and proactive. You should also evaluate your income situation annually.

Step 2: Saving Enough of It
You make enough money, you live pretty well, but you’re not saving enough. What’s wrong? There’s only one reason why this occurs: your wants exceed your budget. To develop a budget or to get your existing budget on track, try these steps:

1. Track your spending for at least a month. You may want to use a financial software package to help you do this. If not, your checkbook is the best place to start. Either way, make sure you categorize your expenditures. Sometimes just being aware of how much you are spending will help you control your spending habits.
2. Trim the fat. Break down your wants and needs. The need for food, shelter and clothing are obvious, but you also need to address less obvious needs. For instance, you may realize you’re eating lunch at a restaurant every day. Bringing your own lunch to work two or more days a week will help you save money.
3. Adjust according to your changing needs. As you go along, you probably will find that you’ve over- or under-budgeted a particular item and need to adjust your budget accordingly.
4. Build your cushion – you never really know what’s around the corner. You should aim to save around three to six months’ worth of living expenses. This savings prepares you for financial setbacks, such as job loss or health problems. If saving this cushion seems daunting, start small. (Learn how to save for the unexpected. Read Build Yourself An Emergency Fund.)
5. Get matched! Contribute to your employer’s 401(k) or 403(b) and try to get the maximum your employer is matching. Some employers match 100% of the participant’s contribution, and this can be a big incentive to add even a few dollars each paycheck. (To learn more, read Making Salary Deferral Contributions – Part 1 and Part 2.)

The most important step is to distinguish between what you really need and what you merely want. Finding simple ways to save a few extra bucks here there could include programming your thermostat to turn itself down when you’re not at home, using plain unleaded gasoline instead of premium, keeping your tires fully inflated, buying furniture from a quality thrift shop and learning how to cook. This doesn’t mean that you have to be thrifty all the time: if you’re meeting savings goals, you should be willing to reward yourself and splurge (an appropriate amount) once in a while! You’ll feel better and be motivated to make more money.

Step 3: Investing It Appropriately
You’re making enough money and you’re saving enough, but you’re putting it all in conservative investments. That’s fine, right? Wrong! If you want to build a sizable portfolio, you have to take on risk, which means you’ll have to invest in equities. So how do you determine what’s the right exposure for you? (Confused about risk? Read Determining Risk And The Risk Pyramid.)

Begin with an assessment of your situation. The CFA Institute advises investors to build an Investment Policy Statement. To begin, determine your return and risk objectives. Quantify all of the elements affecting your financial life including household income, your time horizon, tax considerations, cash flow/liquidity needs and any other factors that are unique to you.

Next, determine the appropriate asset allocation for you. Most likely, you will need to meet with a financial advisor unless you know enough to do this on your own. This allocation will be based on the Investment Policy Statement you have devised. Your allocation will most likely include a mixture of cash, fixed income, equities and alternative investments.

Risk averse investors should keep in mind that portfolios need at least some equity exposure to protect against inflation. Also, younger investors can afford to allocate more of their portfolios to equities than older investors, as they have time on their side. (To read more, check out Asset Allocation Strategies, Five Things To Know About Asset Allocation and Achieving Optimal Asset Allocation.)

Finally, diversify. Invest your equity and fixed income exposures over a range of classes and styles. Do not try to time the market. When one style (e.g., large cap growth) is underperforming the S&P 500, it is quite possible that another is outperforming. Diversification takes the timing element out of the game. A qualified investment advisor can help you develop a prudent diversification strategy. (For more insight, see Benchmark Your Return With Indexes.)

Conclusion
Building wealth over time depends on the successful execution of three steps: 1) having enough income, 2) saving an adequate portion of that income and 3) investing what you save prudently. Getting on the path that leads to wealth begins with a thoughtfully constructed plan and diligent execution of that plan. An investor who stays on that course should in time find that he or she is successfully building wealth.

by William Artzberger

Budgeting 101 – 5 Money-Saving Shopping Tips

5 Money-Saving Shopping Tips

reprint from Investopedia by Amy Fontinelle

Have you already squeezed every last penny out of your budget? Maybe not. Thanks to free market capitalism, we can choose from a wide variety of products at a wide variety of prices pretty much any time we want to buy something. Unlike investing, saving money on purchases doesn’t require any specialized training and is an easy way for anyone to stretch their budget a little farther.

No matter what your income level, you can give yourself more breathing room by becoming a savvy shopper. Here are five tips to help you get started.

Tip 1: Make the Store Your Last Choice
Most people’s default response is to go to a store anytime they need something, but that’s not the only way to obtain a needed item. Ask yourself these questions:

Can I get it for free?
If you don’t need something right away, and you usually don’t, it’s worth searching on community ad sites like Craigslist or Kijiji, signing up with some local Freecycle groups, and asking around to see if anyone you know is getting rid of whatever you want.

Can I borrow it?
This tactic can be a great money-saver for any item that you use infrequently or will only need to use once. For example, if you only need to use a drill once a year when you change apartments and have to reinstall your curtain rods, you can get by with borrowing a drill from someone else. Many home improvement stores even have tools you can rent. Likewise, instead of spending money on the newest bestseller novel that you will probably only read once, head down to your local library and see if you can borrow the book.

Tip 2: Negotiate When Possible
Some prices are set in stone, and it’s a waste of time trying to negotiate with someone who won’t budge. However, when you think there’s some wiggle room, consider these strategies:

Can I negotiate a lower price?
While you probably can’t negotiate the price on many items, like new DVDs or a package of gum, there are plenty of situations where you can negotiate, even in a retail store. For example, if an item is cosmetically damaged, a store may be willing to offer a small discount because that blemished items tend to be more difficult to sell. If a salesperson wants you to buy a bunch of extras with a new computer or cell phone plan, ask for a discount – the salesperson they may be allowed to offer discounts in order to close the deal on big-ticket purchases. Of course, if you’re buying an item from a private party, you can always negotiate. Also, you probably already know not to automatically pay the sticker price on a car or house, because negotiation is standard practice on these major purchases and the sticker price is generally higher than the real amount the seller will accept.

Can I barter?
Barter can be difficult because many people are not accustomed to doing it and it’s hard to find someone who wants the service or goods you have to offer in exchange for the what another person is selling. If you have some valuable products or services to offer, however, and you’re purchasing from a private party, it’s worth asking. Even if the other party isn’t willing to barter for the entire item, he or she may be willing to at least reduce the price in exchange for an hour of your expertise.

Tip 3: Time Your Purchase
If you wait to purchase something until you really need it, you’re likely to pay the sticker price, but with a little advanced planning, you can save big bucks.

Will this item go on sale?
If you want an electronic good, you will probably have to wait patiently after it is introduced – a sale will emerge once a newer model comes out or the regular price will drop as supply increases and demand drops. As new items become more popular, even if they don’t officially go on sale, you may be able to get a good deal on eBay. Certain everyday items, like groceries, toiletries and cosmetics, will always go on sale sooner or later, providing an opportunity for you to stock up when your favorite brands are priced at a discount. For anyone who doesn’t closely follow the latest fashion trends, clothes are best purchased during end-of-season sales, even if it means you don’t get much use out of them until the following year.

Might there be a coupon for this item somewhere?
Combine sales with coupons, and you’ll save even more. For the internet-savvy, eBay can be a great source of coupons, such as 10 buy-one-get-one-free coupons (abbreviated B1G1 in eBay lingo) of your favorite deodorant. The coupons might cost you $2.50 total including postage, but if you use all 10 of them, your net savings on a $3 stick of deodorant will be at least $27.50 plus tax. If you have time to look through a few pages of content, then sites that offer free printable coupons, like Coupons.com could be a good option for you too.

When shopping online, search for the store’s name plus “coupon code” before making a purchase. Many sites will advertise coupon codes to help give consumers a break. Sometimes you’ll enter coupon codes to no avail, but sometimes you’ll get lucky and get some savings like $5 off shipping fees or 20% off your entire purchase. It’s always worth taking a few minutes to look.

Can I get a better price somewhere else?
It’s usually a bad idea to buy an item at the first place you see it because it’s very likely it is cheaper somewhere else. For expensive purchases where you have a lot to gain by comparing prices, and for situations, like online shopping, where it’s extremely easy to compare prices, the savings you’ll achieve are worth the extra time and effort. However, if you don’t stand to save much or are likely to waste a lot of time, gas and money by shopping around, don’t bother. If you’re pressed for time, you can avoid shopping around altogether by making a habit of doing all of your shopping at stores that regularly offer bargain prices, and you’ll be confident that you’re already getting a good deal.

Tip 4: Substitute
If the item you want to buy doesn’t quite fit into your budget, think about similar but less expensive alternatives.

Is there something that doesn’t cost as much, but does the job I need it to?
Figuring out the real reason behind a pending purchase can help you brainstorm ways to achieve the same result more affordably. For example, if you’re worried about being bored during a long flight, you may want to buy a $125 spare battery for your laptop so you can get some work done. In this case, your main concern isn’t really getting more work done, but rather finding a way to occupy your time. Instead of buying that extra battery, you could use your laptop on the most energy-efficient setting until the battery runs out, and then spend the rest of the flight reading a library book.

Do I really want this?
Wish lists can go a long way toward preventing impulse buying. By keeping a never-ending wish list, a person is less likely to buy items that have not been contemplated for at least a month, which provides sufficient time to decide whether the item is a necessity or just a want.

If the mere prospect of saving money isn’t enough incentive, consider the opportunity cost of buying an item. Maybe that new suit or purse isn’t worth it when you could use the money toward going on a vacation.

Tip 5: Expand Your Shopping Universe
If you normally head straight to your favorite website, specialty store, or the mall when you need to buy something, consider these other shopping options that can save you a great deal of money:

Is someone personally selling what I need?
Garage sales, moving sales and estate sales tend to offer all types of merchandise at much lower than retail prices. You are most likely to benefit from this type of shopping experience for items that are not necessarily needed right away. For example, goods like canning jars, dishes or a jewelry organizer. This can also apply to more practical goods as well. However, don’t expect to find absolutely everything at these sales, but do check them out from time to time to add value to your shopping budget.

Does it make sense to buy this item in bulk?
Consider big box discounters as a source for the same products you normally buy at more expensive, specialized stores. You may not have ever thought of the drugstore as a specialty store, but when you start comparing their regular prices to those of discount stores like Target and Costco, you might change your mind. Even on inexpensive items like shampoo and toothpaste, drugstore prices can be significantly higher. As an added bonus, you can knock out several visits to smaller stores with one visit to a big box store, which also saves you time. But keep in mind that it doesn’t always make sense to buy in bulk. Stores like Costco and Sam’s Club charge annual membership fees that can easily offset your annual savings, and many people can’t use up an extra-large container of pretzels before they get stale.

Checkout Time
The ideas presented in this article might seem excessively frugal to some, but when you cut costs in lots of little ways, you can achieve big savings without making big sacrifices. Even thinking about how to save money on relatively minor purchases, like cans of soda or packs of gum, can result in significant savings when you buy these items habitually. It doesn’t take much time or energy to get into the habit of considering your purchases more carefully. You may not always make the choice that will save you the most money, and instead opt for convenience, but at least you will have made a conscious and well-informed decision toward that purchase.

by Amy Fontinelle

Why New Year’s Resolutions Never Work – 5 Steps to a NEW Solution to LIVE YOUR POWER This Year!

Why New Year’s Resolutions Never Work

5 Steps to a NEW Solution to LIVE YOUR POWER This Year!

As I reflect on the year past, I find that the struggles and sacrifices of the year have brought me great rewards. They built character, stamina and faith in the process of my growth. Growing is the reward of staying the coarse of your dreams. It is the reward endurance brings as we grow through our pains, hurts, mis-haps, disappointments and mis-understandings. It is the greater reward of staying the coarse to succeed in the manifestation of your greatest dreams, hopes and desires because we eventually grow past the negative thought processes that our disappointments build and come to understand that thinking negatively only serves to cause more turmoil.

New Year’s is a time to celebrate the dawn of a new year. But when the parties are over we find the issues from last year and the year(s) before still awaiting a resolution. So we make yet another fragile attempt at yet another New Year’s resolution. Sadly this becomes another fading idea as we move into the year and settle back down into our habitual thoughts and activities. The problem is that without a viable solution we will continue to perpetuate the same experience(s) in the New Year that we had the year(s) before.

Unfortunately, resolutions never seem to keep us motivated past the first few weeks of the New Year because we have developed habits that have formed our lifestyles making it difficult to develop new patterns that will direct a new coarse for our lives. Resolutions are (re)solutions. They are suppose to be solutions that we recommit to. Generally the problem is there has never been a clear and concise solution originally committed to, so there is nothing to resolute.

Waiting until the New Year to make a (re)solution almost always ends with disappointment, adding another failed attempt to our stock pile of shattered dreams. We must clear our mental landscape of this stock pile that clutters our minds and hinders our energy while dampening our self-esteem. By having a clear solution to begin the new year you have already put the key in the lock to open the door to achieve your goals. It is the key to achieving new goals, manifesting your greatest dreams.

The New Year is an excellent time to begin a new count down to your successes. It is a time to refresh, take charge and give new birth to your dreams. It is a time to rejoice in your POWER, re-evaluate your goals and the direction your life is moving to make the adjustments necessary to accomplish your dreams. It is a time to reflect on the lessons learned throughout the past year(s) and analyze the reasons you sabotaged your dreams and goals.

Here are 5 Steps you can take to create a New Solution to Live Your Power this year.

Step 1 – Know What You are Suffering From?

You have control over every facet of your life. This includes the choice to not linger through any period of suffering longer than is necessary to learn the lesson so you can move forward. It’s like burning your finger, it’s very painful. It swells and blisters creating a sore that leaves a scar which reminds you of the pain you experienced.