Posts Tagged ‘finance’

Saving Money While doing Your Household Shopping

February 22, 2008

One of the ways to save money while doing your shopping is to maintain a price list. This is something we learned about while looking for ways to save money after our fallout. It is simple to do, yet the savings can profoundly affect your budget. There are a couple different ways to go about the process, as always pick what you can use and leave the rest.

Take a notebook with you while shopping. This recommendation is that you jot down items that you normally buy along with their price as you do your shopping. We have also seen the suggestion that you shop at a different store each week for three weeks to compare your prices. If you live in a city where competition is level, this would be fine. However, where we live there can be a two dollar difference in a gallon of milk. It would not be feasible for us to shop there and blow our monthly budget in one trip.

Save your shopping receipts and make the list once you get home. It is alright to do this if you wish to do this every week for a while and shop at your three different stores. The only problem is that you are only going to have the items listed that you are using for your current menu.

Make a list of the items you need most, then go compare. This is the method we use. We sat down and made a list of the 56 items that we use most on a monthly basis, and then we went shopping. In our area we have a Kroger, Save-A-Lot, Wal-Mart, and an Aldi. We made our list before we left, looked for sale items that we could purchase from each place, and away we went. We were able to write down all our prices and do business with each store.

Our findings were different than we thought they would be. We were able to take around $70 off our monthly budget just by doing this to compare prices. Even though we are now shopping at three different stores, our trip only takes about an hour and a half every two weeks.

The same principle also works for household goods as well (toilet paper, shampoo, soap, carpet cleaner, etc.) Just make your list and compare.

By doing this you will have a good idea on what you are paying for items at several places, thus it will allow you to take advantage of sales more effectively. Have you ever bought something on “sale” only to find it cheaper at regular price elsewhere? We sure have. By knowing your average prices, when you see items that you use regularly you can stock up on them and help your budget even more.

How do you try to find the best deals? Do you keep a price list? What about coupons? Are they worth the trouble?

Start Your Savings 2: Your 401k or 403b plan.

February 20, 2008

In this series we are discussing various savings accounts and how to possibly fund them. To get the rest of the series click here, or subscribe to our RSS feed. The post will be delivered as soon as they are made available!

Lets take a few minutes and talk about your 401k or 403b retirement plan. If your employer does not offer one, take heart, you may change jobs in the future and work where one is offered. If you are very influential, you may convince your employer to offer one (encourage as many coworkers as possible.)

Taxes. We just completed our taxes the other day, so this is foremost in my mind. Your contributions to your 401k come out of pre-taxable income. Depending on your income level, this could place you in a lower tax bracket if your income is right on the line.

Employer match. Most employers will match a certain amount of your contributions. The amounts vary greatly, but it is usually x% of your contributions up to y% (example-they may match you 25% on the first 4% of your contribution). Regardless of the amount, this is free money. If you contribute nothing more, at least get the maximum amount that your employer will kick in.

Tax deferred growth. Again, I am going back to taxes. The contributions, and the earned interest/dividends (compounding is your friend), grow tax deferred. The 401k’s have investment options in stocks, bonds, mutual funds, etc., but the capital gains and dividends are not taxable until withdrawn.

It is automatic. You can set this on auto-pilot and forget it. We found that if it was gone before we seen it, we did not miss it. I would review once a quarter, and only change after careful consideration. Avoid watching CNN and other news networks at all cost. They live on promoting fear and the gloom and doom of “the coming recession.” The facts are these: recession or not, the market has cycles. It will forever go up and down. Whether it be the tech bubble bursting, or the sub-prime market falling on its face, it will always be a roller coaster ride. The Dow Jones started in 1896 with an average of 40.94. It is now over 12,000. Yes, it has seen low periods, but it continues to grow over the long run. Which brings me to my next point.

Stay in for the long haul. Unless you plan on retiring in the next 10 years or so, do not stress over the ups and downs of the market. Just keep plugging along and ride it out.

As we have stated in our about page, we are not financial advisers or professionals. Your situation is unique, and you should consult a competent professional before making any decisions. We are only sharing our thoughts and what has worked for us.

Do you contribute to your 401k? How much does your employer match?

Start Your Savings 1: Build an Emergency Fund

February 19, 2008

In this series we are discussing various savings accounts and how to possibly fund them. To get the rest of the series click here, or subscribe to our RSS feed. The post will be delivered as soon as they are made available!

I will say that I am extremely biased on this topic. It seems to me, from the research that we have done, is that there are two schools of thought. Either you pay off you high interest debt, then build your savings, or you get a specific amount saved before you begin paying more than the minimum payment on your debt.

Having been in a situation where the income suddenly disappeared, I am now a firm believer in having an emergency fund. It would have been nice to have a cushion to fall on when things went haywire. We have started our emergency fund, but we have a long way to go to reach our goal. When you first begin, I recommend setting your goal to be enough to cover at least one month of expenses.

The first step is finding the money to place in the fund. We had a zero budget when we began, which means everything we had coming in (and then some!!) was going back out. Here are some of the ways we have “found” money to save:

  1. We created a budget. The list included all of our expenses that we had gathered. I am working on a spreadsheet budget, and as soon as I get it finished and uploaded we are going to do an entire post on budgeting. Once you have created a budget, any amount that is not used in a category (providing all other expenses are covered) can be placed in your savings.
  2. We started a change jar. We placed a simple mason jar on our kitchen counter and place all loose change (other than quarters) in the jar. Our first month we had around eight dollars. If you use your debit card for most purchases (as we do), this will not add up quickly, but every little bit will help.
  3. Look for ways to lower your expenses. For a list of general ideas on how to save on expenses check these post. Again, whenever you are able to lower an expense, place some (if not all) of the savings into your emergency fund.
  4. Sell unused items. Anything that has value, that you are not using or personally attached to, get rid of. This was a two fold bonus for us. We made money for our savings, and the extra space and clutter free rooms really made a positive difference in our house. Ebay is one place to start. Although, I do not recommend selling anything that will not bring at least five dollars. It is not worth the time and effort to list items and pay the associated fees for less. Ebay has great research tools available to see what most items are selling for.
  5. Take on additional work. This is not a favorite choice, but it is an option. Either volunteer for overtime or extra work at your current employer, or find “odd jobs” to help people with. Unless circumstances are dire, I would try to find other ways before taking additional time away from family.

Once you have a little extra money, the next matter to consider is where to save it. Here are some of the choices we considered.

  1. Our local bank. If you need to have the money immediately available, then this is your best option. You can walk in and withdraw your money if need be, but you are going to pay for this luxury dearly. I am not talking about an actual expense, but rather in lost interest. Our bank currently only pays 0.5%. Our bank also requires a minimum balance, or you are assessed a $3 fee every month your balance is below minimum.
  2. Online savings accounts. These accounts are insured just like your local bank accounts by FDIC. There are many options available, and the interest rates will vary, but we chose ING. At the time of this posting their rate is 3.4% APY. While there are banks that are paying higher, all of our research lead to the fact that ING has phenomenal customer service, and an easy to use site. We were not disappointed.
  3. Interest bearing checking. This was an option for about two minutes for us. First of all, most require a minimum. Secondly, we decided that this was to be a savings account, and even though we wanted to have “quick” access, we did not want immediate access. We know enough about ourselves at this point to know that we could find an “emergency” (we should buy that limited edition thingamajig, they might run out!) if we had instant access.

Even though there are many other options available, those are the only ones we considered. As with most avenues in personal finance, patience is a key factor. It may not make you feel like dancing in the street, but that $4.40 deposit (yes, we have made one) will get you closer to your goal.

Do you have an emergency fund? How do you save for your fund? Where do you invest the money? We would love to know!

One Step at a Time: A Journey Toward Financial Independence Step 2

February 8, 2008

This is part 2 in this series on getting your financial house in order. To see all of this series click here. To learn why we are on this journey, please read this.

Step 2: Estimate Variable Expenses.

In this article we would like to talk about the rest of the money that goes out of the house on top of bills. Later we will look for ways to reduce the total for some of these expenses as well as reducing some of the monthly bills, but for now we just want to get the estimate. This will give us another opportunity to face reality and change our situation. It is amazing at how many purchases we made that were unnecessary. Most of our purchase are completed with a debit card, so we had an accurate count of amounts spent for most categories. Here are some other ways to get these figures:

  1. Make a list of your expenses and “guesstimate” the amount. Although this is not the best way to get a total it is a start. If you are going this route, I recommend writing down the amount you believe to be close to accurate, then add 15% to that total. We have a tendency to underestimate the cost of our expenditures, and overestimate our frugality.
  2. Carry a small notebook with you to record your purchases. This is a great way to get an exact amount of your expenses. I have read of several different ways to do this, but my favorite is to save the receipt in a pocket that you have designated for this purpose. Then when you get to your desk, car, or where ever you have to opportunity, write an itemized statement of what you bought along with the total. One reason for waiting till later is that you do not want to hold up the line while you write this information down; but, do not wait too long, for if the receipt is not itemized you may not remember what you purchased. I know that this can be a pain, but it will give you an honest account of your situation. I also recommend doing this for at least a couple of week, or even a month if you can. We all have those items that may only be bought once or twice a month.
  3. Use bank records to get your figures. This is the way that we came up with our totals. It is the most accurate, and we had several months of figures to deal with so we could come up with a more accurate amount. If you use online banking, and your institution offers the service, you can download your totals per transaction in Excel format.

When we sat down and actually completed this exercise, we were honestly shocked at the amount of money that we had spent frivolously. There are also a lot of purchases that we made that would have not been accounted for had we not made an all inclusive list. If you do not have a solid list to go by, here are some of the categories and items that we have that you may use as a starting point:

  • Automobiles. This, next to our next category, is our largest expense each month. Included are: GAS (by far the biggest), and maintenance (oil changes, tire rotation, wiper blades, washer fluid, brake fluid, transmission fluid, and even cleaning are listed here.) Some car care businesses will top off all your fluids whenever you have a service completed there. It pays to check with several different providers to get the best deals. Be sure to look at the cost of the “extras”, such as what was listed above, when calculating the best deal.
  • Groceries. This is our second biggest expense next to our vehicles. It is something that we are looking to reduce the cost of in the near future.
  • Household items. This was kind of a catch all for items we purchase frequently for the house. Paper towels, toiletries, laundry items (powder/liquid, fabric softener, dryer sheets, stain remover), as well as cleaning supplies such as Windex, furniture polish, carpet cleaner, mopping solution, etc.
  • Personal hygiene/care. This includes all personal care items that you use to groom yourself. Also in this category we listed our daily regimine of vitamins and other over-the-counter medicines that we use regularly. Hair cuts, unless you do them at home, are in this category as well.
  • Eating out. In the past this has been a major pitfall for us. There have been times when we have spent the equivalent of a house payment eating out. Thankfully it is something we have gotten under control lately (out of necessity, though).
  • Convenience items. Here we have all the unnecessary items such as beverages and candy purchased at the gas station, snack items purchased from the vending machines at work/school, and my weakness, gourmet coffee from various coffee houses.

This is a great place to start, coupled with the information derived from the first post in this series, the next item on the agenda will be creating a budget.

What did you find to be your greatest expense? What other items did you find while completing your list?