There are literally millions of personal finance resources out there. From blogs to books to magazine articles and more, the resources are seemingly endless. I make no claims to be a personal finance expert. I am not a financial planner, nor do I work in finance. I do, however, have a vast array of knowledge to share based on personal experience, research that I have done, and methods that work for me. While not everything I write will be brand new advice that nobody has ever heard before, hopefully the way in which I convey the advice will help it to be useful!
Using Multiple Accounts
When it comes to budgeting my money and making it last until the next paycheck, I have tried countless methods. These days, I’m a budgeting master, but in my early 20s, when I first moved out on my own, I went through many trials before I finally found the system that works for me.
First, I had a single checking account that I did all of my spending from. This method led to me consistently overdrafting my account and paying hefty fees to the bank for each overdraft.
After I finally got tired of paying all of the fees, I decided to go cash only and try the envelope system. I closed my bank account and began cashing in paper paychecks, splitting my money into different envelopes for different categories, and keeping the envelopes in my safe. This method did not help me much either. In theory, when your spending money envelope is empty, you are out of spending money. Instead, I’d start pulling from other envelopes and end up not having enough money for bills or groceries. I was saving money with this method by not paying overdraft fees, but I was still not budgeting effectively.
Next, I went back to the bank account route, but this time with a savings account only. Because there was no debit card attached to the savings account, I could not overdraft my account, and because I did not have all my cash on hand at the house, I could not just take from any envelope on a whim. If I wanted to buy something, I had to wait until the next day when the bank was open, withdraw the money I thought I would need, and that would be all I had. This worked great for a while and taught me to not spend money impulsively and to start saving a little.
After about two years of this method, I had grown tired of all the extra trips to the bank, as well as paying $1-$2 a pop for money orders to pay my bills. I decided that this method had trained me not to spend money that I didn’t have and to effectively track my spending. I decided that I was now ready to have a checking account again.
Instead of opening one checking account, though, I opened two. My savings account was already at my local credit union, so I opened a checking account with them first. I also decided to open a second checking account at TD Bank, where I had previously done my banking years ago, because they have more branches and offer more products and services that I may utilize in the future. On top of that, I opened an online savings account through American Express, and also ordered an American Express Prepaid Card.
Now, my checks get direct deposited into my savings account and I divvy up the money from there. My regular savings account is for short term savings. This is where I stick money that is slated for upcoming bills that are not due yet. Let it sit in savings and earn interest, while also being out of sight and out of mind so that I do not spend it for anything other than what it is meant for. When the time comes to pay the bills, I will transfer the money, via my bank’s iPhone app, to my checking account and pay the bill.
My checking account at the credit union that is linked to my savings account is used for paying bills. Anything that can be paid online, I pay out of that account with my debit card. Anything that cannot, I write a check for and mail it in. Also in this account is my monthly allowance for groceries, which I consider to be a household bill.
My checking account at TD Bank is strictly for gas and car maintenance. I stick $400 per month into this account and use my debit card for all of my gas, oil changes, spare lightbulbs, washer fluid, etc.
My American Express Prepaid Card is for my spending money. Instead of carrying around a bunch of cash, I load all of my spending money each month onto my Amex and use it for everything frivolous, such as movie and concert tickets, DVDs, iPhone apps, clothes, and any other personal expenses. If that card runs out of money, then I am out of spending money and I will have to go without.
My American Express online savings account is for long term savings. This holds any money that is not immediately necessary. It has a great interest rate and I can withdraw money to any of my other bank accounts at any time, so this is where I keep my savings contributions and all of my extra money. It’s important to pay yourself first, so before I do anything else after I’ve been paid, I contribute money to this account first. The ultimate goal for this account is to build it up enough to have a sizable downpayment on a house, but this is also where I would take the money for a vacation or a car repair.
At the end of the month, if I was under budget on any items and there is still money left in my accounts after the bills are paid, the leftovers are automatically transferred into my Amex online savings account and the accounts start fresh with their budgeted amounts for the next month.
This system may seem a bit cumbersome or confusing, but it works great for me. Each account has its own purpose and gets a set amount of money from each paycheck. It also enables me to easily track my spending for the month and see where my money is going. On top of that, it leaves a paper trail for every dollar that leaves my (virtual) pocket so that if I need to dispute any transactions I can.
What do you think of my system? How do you budget your money each month? Did you need to try a few different systems until you found the one that worked best for you? Leave your comments below!
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Tags: American Express, AMEX, bank account, budget, checking account, credit union, finance, finance in 20s, how to budget, money, my budget, online savings, personal finance, savings account, TD Bank
Wow…it’s been a while! It’s great to be back blogging again! While this is not a political blog, it is a blog for the people of my generation, and I wanted to write a few short paragraphs about this year’s election.
I attended my first political rally tonight in my hometown of Worcester, Massachusetts for Democratic Senate candidate Elizabeth Warren. Her race is getting a lot of national exposure because she is running against incumbent Republican Senator Scott Brown and she is widely believed to be the Democrats’ key to retaining their majority in the Senate. Senator Al Franken from Minnesota was also present at the rally, someone I’ve looked up to for a long time. I had the great opportunity to shake Mr. Franken’s hand, but the real highlight of the night was getting to spend a few moments with Elizabeth Warren, shaking her hand, taking a picture with her, and expressing my support.
Here is my friend Katie and I with Elizabeth Warren
The rally was so energizing and invigorating. I have been a long time Democrat and supporter of President Obama. I think it is really important that we all think about not only the present, but the future. Our generation needs to be excited about the voting process and realize just how important our votes are. Whether or not you agree with my views or you are on the other side, I believe we are very lucky to live in a country where we have a say in who runs our country, and we should all take advantage of our right to vote.
I believe that President Obama has the country on the right track, has already accomplished a hell of a lot, and will continue to accomplish things. The country is on the right track. Of course, the President would have gotten a lot more accomplished if the Republicans in congress did not keep getting in his way. It’s imperative for the future of this country that President Obama gets re-elected, the Democrats take control of the House, and that they obtain a filibuster-proof majority in the Senate. If this happens, things will get done and this country will progress forward. The old-fashioned and conservative views of the Republican Party are what stand in the way of the USA being the best it can be. This is why I will be voting D all the way down the ballot in Massachusetts. I urge everyone else that cares about this country and their own future to do the same.
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Tags: 2012, Al Franken, Barack Obama, Democrat, Democrats, election, Elizabeth Warren, Republicans are stupid, vote, voting
What is wealth?
The answer to this question is completely subjective. To a homeless person, the guy working at McDonald’s seems wealthy. To the person working at McDonald’s, the police officer stopping in for a coffee seems wealthy. To the police officer, the guy he pulled over in the brand new Lamborghini seems wealthy. I could keep going with this, but you get the idea. Wealth is in the eye of the beholder. Everyone defines wealth differently. If you currently make minimum wage, a million dollars seems like a whole lot of money, and you feel that if you had a million dollars, you’d be wealthy. If you have a million dollars, you may not feel comfortable enough to call yourself wealthy until you have 5 million dollars. Compared to people like Bill Gates with billions of dollars, the person with 5 million feels completely inadequate. My first piece of advice, then, is not to compare yourself with other people. No matter how poor or how rich you think you are, there are other people much worse or much better off than you are. Instead of comparing yourself to other people, just think about what your definition of wealth is? Perhaps it is a specific number, like 1 million dollars. Maybe it is just a feeling that you can do whatever you want, within reason. Maybe just having a little bit saved and being able to pay your bills on time every month is your idea of wealthy.
Rich VS Wealthy
Many people believe the terms rich and wealthy are interchangeable, however they are very different. We use them in that manner, and people know what we are trying to say, but when you really sit down and compare the two, they are vastly different. You might make $500,000 a year, in which case you’d definitely be considered rich. You probably have a nice big house, a couple of fancy cars, eat at the finest restaurants, and travel the world. That’s all well and good, but if you aren’t saving or investing any of that money, you’ll never be wealthy. No matter how much you make, if you spend your whole salary (or more) every year, you will not be wealthy. Wealthy people have a high net worth because they know how to save and they know how to invest. You can make a measly $25,000 a year and end up being wealthy. Wealth is more about your net worth than it is about your yearly income. So as you can see, you need to decide what it is you seek to be: Rich or Wealthy?
There are quite a few common mistakes people make when it comes to amassing their wealth. Some are easily corrected, others will take a great deal of time and effort to turn around. One of the biggest mistakes people make with regard to building wealth is not investing. Everyone has different reasons for not investing…don’t know how, takes too long, don’t have any money to invest, never thought about it, I don’t need to, etc. Some are relying on their relatives to pass on and leave them money, others keep hoping they’ll win the lottery. The only way to guarantee you will amass some form of wealth is through investing. Unless you are one of the few people making $500,000 a year and up, you’ll likely never save a million dollars or more from your paychecks alone. You need to earn interest. Of course, there is risk involved, but if you start in your 20s, time is definitely on your side. For example, if you save $500 a month for 10 years, in a savings account or under your bed, you’ll have $60,000 in 10 years. If you invested that money, depending on the rate of return you received, you could have 100, 200, maybe even $300,000 to show for the $60,000 in capital that you put in. Even if your returns weren’t that astounding, you’d almost assuredly end up with more than just the principal you contributed.
Set A Goal
The best thing to do when it comes to building wealth is to set a specific goal. If you want 2 million dollars by the time you retire, then do the necessary planning to make sure that can happen. Start saving, invest the money you’ve saved, and repeat the cycle. If your goals are more modest, or more short term, that is absolutely fine, just make sure you have a specific plan. For example, I am not yet looking at my long term retirement goal. I have automatic deductions from my paycheck that are put into a retirement plan each time I get paid, and I keep track of how it is doing, but that is as far as I take it. Eventually, I will want to contribute more toward retirement, however my plans are to split my short term and long term goals so that I’m not spending everything now to have nothing later, but also not living with nothing now so that I can have it all later. I like a delicate balance. So each month, a bit of my check is contributed to my retirement account for the long term, and each month I save $500 in cash in a savings account. I’ve only recently started this plan of action, but my ultimate goal with this money is to put a downpayment on a house before I turn 30. I’d like to keep some in cash and put some of it into short term investments. Basically this means that in 5 years, when I turn 30, even if I accumulate no interest, I will have $30,000 in the bank. This will be more than enough to put a downpayment on a house and probably to buy some furniture and other things for the house as well. I’m hoping that my returns will be good enough that I will actually have $35-$40k by that time. Once that major goal has been met, I will be well on my way to my long term goal, which is to have a net worth of at least 2 million dollars by the time I retire. If I buy my house at 30, it will be paid off when I turn 60. If, after buying the house, I increase my retirement contributions, as well as continuing to save and invest $500 a month, I’ll be well on my way to that goal. That is assuming I continue to make the same amount of money and spend the same amount on bills, which brings me to my next point.
More Money, More Expenses
This goes back to what I mentioned earlier about rich people who are not wealthy. If you currently make $25,000 a year, then you get a new job making $50,000 per year, you’ve essentially doubled your income and should be able to save and invest $25,000 a year, right? Unfortunately, all too often people allow their expenses to go up along with their salaries. You were barely making it by on $25,000 a year, but you got your bills paid, kept a roof over your head, food in your stomach, and gas in the car. Now suddenly you’re making double, and you move into a bigger apartment in a better neighborhood, you trade in your old car and buy a brand new car, you upgrade your cable package, you start eating out every night, and now suddenly you’re still spending every cent you make, despite the fact that it is double what you lived on before. This is a very common mistake people make. They all use plenty of excuses too, such as well I worked hard to get that promotion, so I deserve these things, or I’m improving my quality of life. While those things may be true, you should always, always, always be making room for savings. That brings on the next point.
Pay Yourself First
I’m not talking about give yourself $500 to go spend at the mall every month, I’m talking about investing in yourself through savings and investing. The general rule of thumb is that 50% of your income should cover all of your needs, 40% of your income should cover all of your wants, and 10% should be put into savings. Think about that…it’s not that much! If you make $30,000 a year, saving 10% boils down to $3,000 a year, or less than $60 a week. Take that out first, then pay your bills, then whatever is left is yours to have some fun with. If you are 25 now and save $3,000 a year for 40 years, until you’re 65, that is $120,000. If you invest and earn interest on it, that measly 3k per year could equal a half a million dollars or more by the time you’re 65. The longer you wait, the less you’ll have.
Don’t Put All Your Eggs In One Basket
It’s a cliche old saying, but it’s completely true. If you rely just on savings to retire, you’ll have a hard time. If you rely just on your retirement account, you’ll have a hard time. If you rely only on selling your then paid off home, you’ll have a hard time. But if you combine them all, you will be looking at a very comfortable retirement. Contribute 3% of your pay to your retirement plan, save $500 a month, and buy a house (and pay it off) and you’ll surely have amassed enough wealth to live comfortably and do whatever you want in your retirement!
Filed under: Finance, Life, Uncategorized | 1 Comment
Live to work or work to live? This is one of the most important questions you will ever have to answer in your life. It can be a very easy question to answer for some, while for others it takes extreme consideration. Obviously, there are some that don’t fit the mold…those that would rather not work at all and live off of others’ money, and, at least in this economy, many who would love to be working that just cannot find a job.
Living to work:
We all know people like this. Maybe you are one. Workaholics. People that have a deep seeded passion for what they do. They are consumed by their jobs and they let their jobs define their lives. Their friends introduce them by their profession. “This is John, the doctor” or “this is Jack, the designer.” These people work more than a basic 40 hour work week, bring their work home with them, and fully consume themselves. They probably make more money than they could possibly ever need, and the sacrifice is that they have no time to enjoy it.
Working to live:
Most folks probably fall into this camp. You need a job to make money so you can survive, right? So they get whatever job they can get their hands on, do their 40 hour week, collect their paycheck, and go about their lives. They may be extremely good at their job. They may be really terrible at their job. Either way, they are not letting their job consume their lives, it is just a means to an end.
Where do you fall? I’m here to tell you that it isn’t necessary to fall under one of these two extremes. I personally believe in having a good balance to everything in life, career included. I think it would be a terrible existence to work 70 hours a week to make $200,000 that you’ll rarely be able to enjoy. I also think that it would be awful to get up and go to work at a job you hate every day to make $20,000. The perfect career, by my thinking, is one that you enjoy doing and have a passion for and a talent for that allows you to live comfortably and with as little stress as possible. I guess it all depends on your personality. Many people are driven just by having a fancy title, fancy house, and fancy car. Others are driven by the need to take care of their families. Perhaps some people are loners who dedicate their lives to their career because it helps them to interact with other people and make a difference of some sort. I’m sure many people are social butterflies that just want a check they can use to buy some fancy toys and hang out with their friends and family. Others may prefer to stay single forever and not have families, instead enjoying a healthy social life. My best advice is to make sure you like what you do, it pays enough to cover your needs, and it doesn’t require working 80 hours a week. You may not cure cancer, but you’ll also not be asking if someone wants fries with their cheeseburger.
Which camp do you fall into? If you could change your career right now, which path would you choose? Do you enjoy what you do for a living? Comment and let us know!
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Tags: balance, career, hate, life, live, love, money, salary, stress, work
Everyone has preferences when it comes to different products. Some are based on looks, some on function, and some on price, but we all have our go to products. I have many varied go to products. Here are some of my absolute favorites:
Coach Men’s Accessories
Black V-Neck Tee Shirts
Steve Madden Shoes
Bose Audio Equipment
Armani Exchange Flip Flops
Ralph Lauren Polo Shirts
Eames Aluminum Executive Chair by Herman Miller
Apple MacBook Pro
Grey Goose Vodka
Paul Mitchell Hair Products
Slatkin & Co. Candles
North Face Jackets
Black V-Neck Sweaters
Apple 27″ iMac
Are any of your favorite products on this list? What are your go to products? Leave a comment and let us know!
Filed under: Design, Fashion, Life | 4 Comments
Tags: Apple, Apple TV, Armani Exchange, Bose, burberry, coach, Craft Beer, Cross, Diesel, Eames, favorite, favorite things, flip flops, Grey Goose, Herman Miller, iMac, iPhone, leather, MacBook, MacBook Pro, men's fashion, movado, North Face, Paul Mitchell, Pea Coat, products, Puma, Ralph Lauren, seven, seven for all mankind, Slatkin, Steve Madden, v-neck
There is no such thing as the perfect automobile. There is such a thing as the perfect automobile for you.
Too many people focus on one thing or another when it comes to choosing a car, truck, or SUV. Some people are only concerned about gas mileage, others are only concerned about reliability. Some value only speed, others value only design.
I believe in finding the perfect balance. If you focus too much on one aspect, other aspects will soon be disappointing you. That Prius you bought because you wanted über high gas mileage for your long commute will not be worth it when your back hurts every day due to the hard, uncomfortable seats. That Jaguar you bought because it was gorgeous is going be be very annoying when it is in the shop for repairs every other week. Car companies know that so many people only focus on one or two factors, that is why there are so many different cars to choose from. If you do your research, you can find plenty of options that fill many of your different requirements.
Personally, I care about the design of the car, the speed and driving dynamics of the car, the comfort, the interior materials and layout the most, but I also don’t want a vehicle that breaks down constantly or gets 8 miles to the gallon. I am, however, willing to deal with 20MPG and an occasional trip to the shop for a perfectly designed and engineered car with a great driving experience that is comfortable and beautiful. All of the cars I identified in my Top 10 Cars Under 10k article yesterday fit my requirements. None of them are unreliable, none of them have terrible gas mileage, and all of them are beautiful and drive well.
I liken choosing a car to choosing an apartment. First you set a price range, then you identify what you want, see what is available, and choose the one that has the best balance. You may end up with the hardwood floors and stainless appliances you wanted, but no fireplace. You may end up with a fireplace and granite countertops, but no dishwasher. You wouldn’t pick an apartment solely because it has a dishwasher or because it has hardwood floors, you have more than one criteria that matter to you. It should be the same way for your car.
What do you look for in a car? Don’t base your answers on the current economy with answers like ‘cheap’ or ‘gas mileage.’ Give a broad picture of everything that is important and unimportant to you in general, no matter what the economy. Comment below!
Filed under: Automobiles, Design, Life | 2 Comments
Tags: balance, car, choosing, criteria, Design, driving, fast, gas, reliability, reliable, suv, truck