Tag Archives: savings

What I Learned on “The Suze Orman Show” last night

Suze Orman is my financial hero. I love her philosophies on money management because she focuses not only on money, but on the emotions surrounding our money. Too many financial advisers ignore the fact that money is one of the most emotional topics in our lives.

Suze believes that in order to make real progress in your finances and bring about real change, it’s important to address the fear, shame, and anger associated with your past financial decisions. Only then can you move on and start fresh. Otherwise, your financial demons will continue to haunt you.

If you’ve never seen her show or read one of her books, I recommend tuning in Saturday nights on CNBC or check out “The 9 Steps to Financial Freedom” or “The Money Book for the Young, Fabulous, and Broke” from your library.

I learn a lot from every episode. Here’s a round up of the best tips from last night’s show for those of you who aren’t dorky enough to watch it faithfully every week. Happy Sunday!

• When interest rates are low, like now, do not lock in interest rates for long-term accounts. It’s better to keep even large amounts of money liquid in savings and money market accounts for now. When the market rebounds and interest rates start to rise again, then is the time to commit to long-term investments like CDs and bonds.

It seems like common sense, but I would probably be tempted to lock in a large amount of money at 5% instead of my 3% interest rate savings account to get the additional 2% interest. However, I’d be kicking myself 3 years later when rates rose to 7% or 8% and I was locked into a 5% CD for 10 years.

• When a spouse or partner is going behind your back and racking up thousands of dollars in credit card debt, your biggest problem isn’t the debt; it’s the deceit. If you don’t sort out the issues behind the overspending and deceit then it won’t matter if you pay off the debt because your partner is likely to rack up more.

As Suze says, in this day and age it’s often not, “Til death do you part; it’s til debt do you part.” I agree. Solid relationships are built on trust, and your finances are an essential part of that trust. Making sure you’re on the same financial page as your partner is one of the most important steps you can take to ensure the long-term success of your relationship.

• FDIC insurance only covers $100,000 per depositor per financial institution, so if you’re holding more than that in a traditional bank, split it up into different financial institutions to ensure that you’re protected.

• When it comes to investing, “It’s better to do nothing with your money than to do something you don’t understand.” Do your research before you do anything. Enough said

• When Suze denies or approves someone on the “Can I Afford it?” segment, she hits a pedal under her desk to control whether the “Approved” or “Denied” graphic comes up on the screen. Who knew?

• Suze would rather you invest the $60 a month you’re paying to watch her show on cable into your savings or retirement accounts. Really, she said that.

• Private student loans are evil. The lenders can set the interest rates as high as they want, and you can never get out of it. Not even if you file for bankruptcy. Do NOT take out private student loan debt. Not for you, not for your kids. Period. I have personal experience with this one. I wish someone had told the young, naïve 18-year-old me to stick with federal loans if any.

Saturday Grocery Round Up

Another week of shopping the sales at two different grocery stores, and the results are still inconclusive. We spent $88 this week, which is about what we’ve spent per week in the past at just one store. Yikes.

However, we did stock up on some meat (a pork tenderloin at $2.84/pound that will serve as three meals and two Porterhouse steaks at an amazing $5.60/pound that will serve as two separate meals). In the past, we’ve spent closer to $100 on weeks when we purchased meat, so this could be a slight improvement.

I’m disappointed that we’re not doing better, but I’ve decided to put in more effort to find manufacturer’s coupons. This is a learning process, and I’m trying not to beat myself up too much this early in the game.

I did discover another great use for the price book today, though. When I ordered 3/4 a pound of turkey at the deli today, the guy told me about a crazy deal. When you buy 1 pound of turkey, you get a half-pound of deli American cheese, a bag of tortilla chips, 4 deli-style sub rolls, and a 2-liter bottle of soda.

So you’re telling me if I add an extra quarter-pound of turkey to my order, all of that is free? OK, I’m sold.

Since I wouldn’t have bought any of that stuff if it wasn’t free, I asked the cashier to double check the receipt before I paid to make sure it came off. He assured me that it did. But when I got home and started adding entries to my price book, I realized that the cheese had not been discounted. It was only $3.25, but that’s not the point. I only took it because I was told it would be free with the turkey, so I wasn’t about to pay for it.

When I went back to the store, they were happy to give me a refund … but not without telling me that it “wasn’t really their fault.” The deal was for yellow American cheese and the nice guy at the deli had sliced white American for me. The fact remains that I didn’t order either. He was kind enough to inform me of the deal, and he gave me what he believed was free. Just because he was mistaken doesn’t mean I should have to pay for it. Whatever, I’m happy to grin and bear their excuses as long as I get my refund. :)

Before I started studying my receipts for my price book, I might not have looked that intently and probably would have missed something like that. Just one more reason I’m glad I started a price book!

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Our first zero-based budget

We’re trying a zero-based budget this month for the first time. In the past, we’ve tried setting arbitrary limits on our spending (which didn’t really work). Other than that, we didn’t really track our spending beyond trying not to buy unnecessary things.

That philosophy has kept us from blowing our money, but we haven’t tracked our spending in a measurable way or designated a certain amount to a savings account until now.

A zero-based budget is a plan for your money that accounts for every single dollar of your income. After budgeting for fixed expenses and assigning limits for other expenditures like groceries and entertainment, you also assign a purpose to “extra” money by budgeting it toward savings, investing, or debt repayment.

I like the idea of a zero-based budget because it forces us to do something with the little bit of “extra” money we have after covering expenses and paying down debt. In the past, we’ve kept all of our money in our checking account. Anything we didn’t spend at the end of the month stayed in the checking account where it collected almost no interest. We were more likely to spend it – if not that month, then the next month or the month after that.

Our new plan is to keep only a cushion amount in our checking account to avoid catastrophe in the event of a spending mistake. We’ve cleared the rest of our money into savings. To avoid spending more than we make, we’re considering the cushion amount to be “zero.”

For the first time, we’re tracking exactly how much of our monthly income is left at the end of the month (if any) and putting it toward savings or debt (in ADDITION to the money we’ve already budgeted for savings and debt). If there’s nothing left or we spend more than our income, we’ll adjust our spending habits to ensure that we’re not spending more than we’re making.

I’m looking forward to having a solid number for our monthly expenses. It will give us more control over our spending and saving habits and help us determine how much we need for an emergency fund.

Rather than setting our budget in stone or setting arbitrary spending limits, we’re creating a flexible budget by tracking our expenses with Mint. New expenses spring up every month and some months our income may be higher than others, so our budget will be different each month.

We’ll sit down at the end of every month and set the next months’ budget based on what we spent last month, what we need to spend this month, and what we expect to make. Every dollar of income will be assigned somewhere. We’re challenging ourselves to spend below the budgeted amount where we can so we’ll have money left over at the end of the month.

We set our first zero-based budget at the end of last month, and we’re on track so far. More updates will follow as I’m sure the closer we get to the end of the month the harder it will become to stay within our budget.

Back on track after a minor derailment

I have to admit, when I finally found a full-time job two months ago, my husband and I temporarily lost sight of our goals. It started with a celebratory dinner, which we had been planning since I started the job search process. But then we found our financial plans quickly derailed by several dinners out per month, some out of control shopping trips, and a general spending craze.

For the first time in a year, we were making enough money to cover our expenses with a little left over, so we succumbed to the urge to spend more. That was exactly what I wanted to avoid, but it’s a tough temptation to resist. It was easy to spend less when we had no money to spend; it’s a little harder to make the right choices when you do have extra money.

I also partly blame a “honeymoon mentality” that extended beyond our actual honeymoon. We agreed that we could afford a little extravagance on our honeymoon because we’d worked hard to save and we’d chosen a frugal destination (Washington D.C.) for our trip. We were only gone for a week, but I was hired at my job the week after we returned, and the extra income paired with the temporary lapse in frugality was enough to bump us off track.

Now I’m looking at our finances and realizing that even a full-time salary doesn’t go as far as you’d like without proper budgeting and goals.

With a new income, new budget, and new goals, I feel like I’m starting all over again. For the past year, the goal has been to keep from financially drowning without feeling financially deprived. Now we’ve got the opportunity to make real choices with our money, and I’m feeling a little overwhelmed.

I’ve updated our budget to include additional debt repayment and savings that we couldn’t afford before, but now it’s balanced with nothing left over. I need to find a way to magically find additional money to put toward debt and savings if we want to reach our goals, so my first step is finding ways to cut back on spending we can control.
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Getting started …

After almost a year of lurking in the personal finance blogosphere, I’ve picked up some great advice and finally feel like my husband and I are on the right financial track.

It’s taken me this long to start my own blog because I didn’t really feel like I had much information to add – I still have so much to learn! But I think it’ll be good for me to get my goals in writing to keep me honest and on the right track.

I originally got into frugal living when I moved to a new city with my fiancé (now husband) right after we graduated from college a year ago. He’s in grad school earning a small living stipend as a teaching assistant, and I struggled to find an entry-level job in the stalling economy.

When I finally settled on a temporary part-time job, I realized that we weren’t making nearly enough to maintain our lifestyle. The savings we’d built was quickly depleting. I didn’t want to feel deprived because, honestly, things were pretty bleak at the time. While I didn’t want to increase our debt by living above our means, I did want to live well and live healthy. So I started looking for ways to cut our spending without sacrificing our comfort too much.

What have we accomplished in the past year?

For starters, we kept our heads above water and avoided the dreaded paycheck-to-paycheck lifestyle despite our low income.

I’m also proud to say that instead of increasing our debt, we’ve paid off about $4000 in credit card debt left over from college. (We’re scheduled to make our final credit card payment in November.)

We paid cash for a beautiful wedding with a $5000 budget thanks to our own savings and help from our parents. We also went on a lovely frugal honeymoon in Washington D.C. where we enjoyed free admission at the nation’s museums and landmarks. We spent a little over $1000 on the hotel and food (also paid in cash from savings).

We’ve saved about $2000 in a high-interest ING account, and I’d like to see that grow now that I’ve finally found a full-time job.

What are our goals?

Now that I am working full-time, I’m faced with some tough decisions about how to use the small amount of extra income that we have. The last thing we want is to fall into the spend-all-you-have trap.

Some of our goals include:

  • Paying off a significant chunk of student loan debt.
  • Building and maintaining an emergency fund.
  • Starting a retirement account in the next year or two.

I’d like to make headway on our emergency fund, savings, and student loan debt before I start a retirement account. We’re only 23 and 24, so I think we’ve got a little time, but I want to begin contributing to a retirement account by the time we’re 25. My employer doesn’t offer a 401K, so it will be an individual account. I’m fine with that because I’d like to keep the bulk of our retirement savings in a Roth IRA anyway.

Most importantly, since we’ve only been married two months, I want to start developing good money habits now when we don’t have much. My main goal is to live comfortably and well without spending every penny that we earn.

I’ve lived above my means through credit card spending, and that certainly wasn’t what I’d call living well. I was constantly stressed about money and never had extra money without putting myself into more debt. If we can get ahead of the game then we’ll have extra money, less stress, and a richer life (though not necessarily more “stuff”).

I like to think that if we can do that at our current income, then we’ll be able to maintain those good habits as we start to make more money. In the future, I want to devote the majority of our income to savings and cash purchases and avoid excessive debt.