Category Archives: General Finance

I’ve Disappeared Again, Where Was I This Time?

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So if you’ve somehow kept following my blog all these years you have certainly noticed there hasn’t been much updating since 2013. I didn’t give up on blogging but wanted to focus more of my time on my true passion which is starting my own business. Now I wrote about MoversAtlas (which is still trucking along) in another post but I have since started a new venture that I wanted to share here as well.  So without further ado I introduce Vamori and the story of how it all started.

Changing the way you store, wear and wash your clothes!

When I landed my 1st professional job after college I realized I was spending way to much time and money washing the clothes I wore to work. The office environment was business casual so that meant slacks and a button up shirt every day. Originally I would wash everything I wore to work after only one wear but I quickly realized that was unnecessary. I began wearing my clothes multiple times between washes but then I ran into another problem, how do I know how many times I’ve worn something and when it needs to be washed?

To solve this problem I created a manual method of tracking how many times I wore each shirt and pair of pants. I decided 3-4 wares struck a good balance between wearing and washing. About a year into using my manual method I thought, “ya know, wouldn’t it be really cool if I could just log this information on the hanger itself?”. While I thought that was a great idea I had no idea how to make such an item so I kept using this manual method for over 5 years.

That is, until this Summer, when I decided I was going to learn how to hand make a hanger that would track how many times I wore an article of clothing myself! After learning the process, making a closet full and showing a few hangers to friends and family, most thought they were pretty cool so I decided to put them online and see if any would sell. Which lead me to opening my first Etsy shop! You can take a look at my shop and the actual products here.

I am excited to see where this new venture will lead, hopefully I’ll be back soon with positive updates!

 

My Long Hiatus Finally Explained

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Mover's AtlasIt’s been an awful long time since my last blog post, over a year ago actually. I didn’t intend for it to be this long and some of you may be wondering what happened or what I have been doing during this time instead.

Well, I am excited to share with you the side project, now business, I have been working on for the past year. Mover’s Atlas! A website dedicated to helping individuals moving to Florida or within Florida learn about an area online without actually having to visit.

The site is similar to Zillow or Trulia, less the houses, plus community info. We use a Google map based interface and allow users to toggle on and off different map features they are interested in. Some of the information we provide includes, schools & school grades, public parks, places of worship, safety information like the nearest police or fire station, and demographic info such as median household income and home ownership rate.

Those are just some examples, I encourage you to check out the site to see all we have to offer http://www.moversatlas.com/. If you do, let me know what you think , the more user feedback the better!

41% of U.S. adults give themselves a C, D or F on their knowledge of personal finance

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I stumbled upon a great article over at Forbes yesterday that I thought was worthy of a post. It speaks to America’s lack of financial literacy and shares some eye opening results from various financial surveys taken in the past few years.

Financial Illiteracy Is Killing Us

My favorite quote of the article:

“The good news is that most college graduates are financially literate. The bad news is that only 28% of Americans graduate from college, leaving nearly three quarters ill-equipped to make critical financial decisions”.

The author makes a point to state that financial education needs to be taken more seriously in our schools and I agree 100%. What about you, do you think personal finance is something that should be given more emphasis in the educational system?

11 Ways to Creatively Save Money in Your Daily Life by Debt.org

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America’s Debt Help Organization at Debt.org is a company that helps people become more knowledgeable about their financial well-being. Each staff member is an IAPDA Certified Debt Specialist and Certified Credit Counseling Specialist who works to set, meet, and exceed your financial and life goals. They believe strongly in financial literacy and have been kind enough to write a guest post sharing a list of everyday ways to save money, after all one of the first ways to stay out of debt is to never get in debt. Here is

11 Ways to Creatively Save Money in Your Daily Life

Saving money is a long and arduous task for many people. It takes a certain level of patience, dedication and sacrifices. But that doesn’t mean these sacrifices have to be big. Small changes to your daily routines can add up to big savings. Here are 11 ways to save money in your everyday life.

1. Bring lunch to work

You may be spending an average of $6 a day eating lunch out when you could be spending about half that by making your lunch and bringing it to work. This would save you $60 a month, or more than $700 in a year.

2. Quit smoking

If you’re a pack-a-day smoker, you spend around $200 a month on cigarettes alone. You may also have higher medical and life insurance costs. Even just cutting down on the amount you smoke can put hundreds of dollars back in your wallet each year.

3. Rent and borrow movies and books.

Instead of going to the movie theater, rent a movie overnight. And instead of buying books and movies, borrow them from your local library.

4. Make your own coffee

Save a few dollars every day by brewing your own coffee before you leave home. If you’re a daily coffee drinker, investing in a coffee maker can pay for itself within just a few weeks.

5. Carpool, bike or ride the bus to work

With the ever-rising price of gas, avoiding extra miles in your car can mean major savings. Try out public transit, get a simultaneous workout by commuting by bike or get to know your coworkers in a carpool. It’ll also save you some money on car maintenance.

6. Pay cash

Bring a set amount of cash with you when you go shopping and use it to pay for nonessential items. You’ll be more aware of price tags and your actual spending, and it’ll be more difficult for you to go over your budget.

7. Freeze credit cards

Freeze your credit cards — literally. Place them in a cup of water and put your plastic in the freezer. It’ll make it more difficult for you to make big purchases on impulse. You’ll have to plan ahead when you want to go shopping, and it’ll give you time to change your mind. And once you implement this in your monthly routine, you’re likely to stick with it and establish your financial future as a priority avoiding future pains such as debt settlement.

8. Use coupons and buy off-brand products

Coupons are a great way to save a few dollars on your shopping list. Likewise, skipping over the name-brand groceries and trying out the store brands can also trim your grocery bill. You may not even notice a difference in the products.

9. Cancel unused gym memberships and magazine subscriptions

Check your credit card bill for needless recurring payments. Cancel your gym membership if you haven’t used it in months, and unsubscribe from magazines you no longer have time to read.

10. Plan a “staycation” or no vacation at all

Skip those plane tickets and that expensive hotel or cruise. Rediscover your own area or state by planning a “staycation” close to home. Or if your company offers a payout for unused vacation time, consider forgoing a vacation altogether in exchange for an additional week’s pay.

11. Don’t spend your tax refund

Instead of buying a large item like the newest LED TV or going on a vacation with your refund check put it away into savings or start a retirement account like a Roth IRA, this will help kick start your savings into high gear only a few months into the year.

Get Your Finance On!

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I just came across a neat little fact that I was completely unaware of; April is National Financial Literacy Month. A month aimed at helping Americans get educated about their personal finances. Having a career in finance and having went to school for finance I am surprised I never heard of this before. Seeing as taxes are due on April 15th financial literacy seems quite fitting for the month of April. For the occasion I will be publishing a few new posts and sharing some of my past favorites on Facebook, Twitter, Google+, etc. Spread the word about National Financial Literacy Month by sharing this post! (Hint use the buttons below ;))

For more information check out: http://financialliteracymonth.com/

Your finances are your responsibility

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Check out this article I found last week on Yahoo! Finance. It stress’s the importance of understanding your financial decisions and taking responsibility for educating yourself, an opinion I strongly agree with.

“Using the recent financial crisis as an example, Leibowitz says there’s ample blame to go around, not just the predatory behaviors of big bad banks, but also as a function of people that took out mortgages they really didn’t understand”

http://finance.yahoo.com/blogs/breakout/back-school-nyse-euronext-coo-stresses-financial-literacy-131210002.html

“How Much House OR Car Can I Afford?”

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Usually the two largest costs families and individuals incur are the mortgage (or rent) and car payment. Have you ever wondered if you are spending too much on your house or car, or what you could afford when purchasing a new one? If you have you’re not alone. Even I occasionally wonder if I am spending my money wisely on these two necessary items. A quick Google search of house or car affordability will yield many differing opinions and advice, some I tend to agree with while others I think are flat-out wrong. Through my research and experiences I have developed a few guide lines of my own to help answer the age-old question “How much house or car can I afford?”

To understand my thought process I need to share my view of affordability, which this statement pretty much sums up. Just because I am able to make a $700 car payment each month doesn’t mean I can afford to do so. When it comes to large monthly payments I find it extremely helpful to have some guidelines for the amount that you allow yourself to spend, ensuring enough income is remaining after these large payments for the rest of the your expenses. Below are two guidelines I have come up with to determine an affordable monthly payment for a house and car[1]:

  • Mortgage (or rent) payment should not exceed 30% of monthly net income
  • Car payment should not exceed 12% of monthly net income

*Bonus guideline built into my assumptions*

  • Savings is at least 10% of monthly net income

The monthly payment is only part of the story however; you should never only consider the monthly impact without taking the total cost into consideration. There are too many different types of financial products which give the illusion of an affordable monthly payment, like the variable rate APR loan. Those factors are the premise for the next two guidelines I developed; a method to quickly determine the total amount of car or house you can afford knowing just your gross income.

To determine how much house you can afford:

  • Take your current Gross Income and multiply by 2.5. For instance if I am making $50,000 per year the calculation would be as follows:
  • $50,000 x 2.5 = $125,000
  • With a $50,000/year gross income one could afford a $125,000 house
    • This rule assumes 6% interest rate, no money down, 30 year fixed mortgage, 1.25% property tax, and .5% PMI

To determine how much car you can afford:

  • Take your current Gross Income and multiply by 38%. For instance if I am making $50,000 per year the calculation would be as follows:
  • $50,000 x 38% = $19,000
  • With a $50,000/year gross income one could afford a $19,000 car.
    • This rule assumes 6% interest rate, no down payment, and 5 year fixed loan

Both rules assume no down payment, so if you plan on putting some cash down add the down payment to value calculated. With the car example above if we planned to put $5,000 down, the total we could afford increases to $24,000 ($19,000 + $5,000).

The reason behind the multipliers, 2.5 for a house and 38% for a car is simple and straight forward. When calculating a monthly payment based upon the results of the gross income calculation and assumptions listed, the outcome will be close to 30% and 12% of net monthly income for income ranges between $25,000 – $125,000 give or take a few percentage points[2].

Utilizing these guidelines has helped me build a strong financial base and limit my financial commitments to monthly payments I know I can afford, freeing up my cash flow for activities I enjoy or extra savings.

Remember, these are just guide lines, not the letter of the law, if your rent payment is 34% of net income don’t sweat it, these guidelines are meant to help build cost awareness and promote conservative spending habits. As long as you’re close to the stated values you are in good shape.

[1] These percentages are not chosen at random, when summed together they equal 52% (including 10% savings) of your monthly net income, leaving only 48% for everything else, food, utilities, gas, etc. Many people make the mistake of spending much more than 50% on their house and car alone, eliminating savings or worse adding debt to cover the rest of their expenses.

[2] When calculating the monthly payment as a percentage of monthly net income I have assumed that net income equals 75% of gross income

Simplify Your Budget, Simplify Your Life

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I don’t budget. Well I kind of do, but not in the traditional sense of the word. When people hear budget, they usually envision sitting down and setting up spending limits, line item by line item for every type of expense they can think of. At the end of the process the result is usually something that looks like this (and this is probably short):

There are a few problems with trying to budget like this. One, it takes a lot of time and effort to create and keep up with, two, it’s much too detailed. Attempting to budget for every little expense is a recipe for disaster. Life is random and things change. Some months you may go out to eat more, others you may buy a ton of new clothes. What is the point of making a detailed budget when things change so often?

Here is one example that points out flaws budgeting using this method. Say you have a food budget of $200 for the month and use Mint.com to track your spending. On the 22nd you get a text message stating you are about to exceed your food budget, are you going to stop buying food for the next eight days? Probably not, you will end up going over budget on food and hope to come in under budget elsewhere.

This is no way to operate! What I propose instead is budgeting by type of expense. For this method you need no more than three categories; fixed expenses, variable expenses, and savings. This is how I personally budget and it has been a very effective system since I have implemented it.

So how do you set up a budget like that? Let’s follow an example.

Before you begin

  • You will need three bank accounts, one for each category mentioned above; fixed expenses, variable expenses, and savings, and ideally access to direct deposit through your employer.

1.) Figure out your take home pay (if you are unsure what take home pay is, read this)

  • For this example we will assume net income is $2,800 a month.

2.) Determine what your fixed and required expenses are:

  • These are the expenses that stay the same or are similar every month and you must pay them. Items like your mortgage or rent payment, car payment, etc.
  • Helpful tip, I include my electric, water, and other utility bills in this category even though they may change from month to month[1]. I do this to ensure I will be able to cover all of my required payments and avoid any surprises.
  • Let’s say fixed/required expenses total $1,000 per month, we are now left with $1,800 ($2,800 – $1,000)

3.) Setup a savings goal

  • For this example our goal is to save 15% of our take home pay for the year, this equals $420 a month ($2,800 x 15%)

4.) Calculate the remaining amount, which is our monthly allowance for variable expense

  • Using our example, after fixed expenses and savings we are left with $1,380 ($2,800 – $1,000 – $420)
  • That $1380 is for everything else not accounted for above, dinning out, clothes, entertainment, etc.
  • To get a little more detailed we can divide this number by four to get an approximate limit on how much we can spend on variable items each week, in this case $345.
  • Now all we need to do is spend less than $345 during the week and our budget has been met.

5.) With the amounts calculated above set up direct deposit through your employer so the proper amount goes to each account automatically

6.) No more worrying!

  • Now that your money is automatically categorized and spilt the day you are paid, no more stressing and wondering if there will be enough in the bank enough to cover the car payment, rent payment, or any payment. All you need to do is keep a close eye on your weekly spending limit.

Our revised simple budget for the example now looks something like this.

There you have it, simplify your budget, simplify your life!

[1] The value I use is the highest bill from the previous year plus a few additional dollars as contingency

$100 > $1,000,000 (not a typo…)

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I fully intend to have $1,000,000 in the bank one day. Not literally in one bank, spread across many types of investments and accounts, but you get the point. One day, I will be a millionaire.

So many people spend a lifetime chasing what seems to be the elusive goal of becoming a millionaire, only to fail in the end. The thought process usually becomes “if I only made more money” and while making more money certainly helps achieve the goal, it is only half (or less) of the equation. The other half, which is usually widely neglected, is your personal spending habits.

Now, this isn’t going to turn into some published for the thousandth time article that tells you to cut down on the frappucinos, which I’m sure you have read more than once. Instead I am going to share with you one of my personal philosophies on how I think about money.

Regard $100 more than you do $1,000,000

That’s right; treat one hundred dollars today as more than one million in the future. Many people tend to spend $100 without much thought, and a good portion of those will drop $1,000 without much more. And let’s face it, one million is kind of an arbitrary goal to have and probably won’t be enough for you to retire with anyway. Don’t treat saving $1,000,000 like it is impossible and something you will never achieve, think of it in terms of a lifetime and it is actually pretty small.

Millions of people will bring home probably twice that amount during their working lifetime. Think about it, if you bring home a net income of $50,000 a year working for 20 years, you will have made one million dollars. Most people work more than 20 years before they retire and eventually end up bringing home more than $50,000 net per year. Couple this with any income provided by a spouse, and suddenly your earning power doesn’t seem to be the problem.

Read the 1st two paragraphs of this article as some food for thought: http://usgovinfo.about.com/od/moneymatters/a/edandearnings.htm

I could probably make the argument that spending habits actually matter more than income when used to measure a person’s wealth. However, I don’t have any academic studies to reference proving my point…all I need to do is look at the many celebrity actors and music stars who once had millions and are now broke.

Remember when you were a little kid and thought $100 was almost an unimaginable amount of money, what happened to that feeling as we got older? Somewhere along the line it was lost, and the ability to spend freely took over. The next time you are about to make a purchase over $100, do your best to remember that feeling and give the purchase a little extra thought. Is it an item you really need, or really really want*? If you do this, I bet you will see that ever elusive $1,000,000 much sooner.


*Quick Tip: Before buying something you want, wait a week. Or better yet, wait a month before actually buying it. Most of the time the feeling will wear off and you will either not want the item anymore, or want it much less. If you still want it after that time frame and you can justify it, go ahead and buy it. Using this little trick will help you save and cut down on impulse purchases.