Tag Archives: Saving

Facts Don’t Always Matter


“When dealing with people, remember you are not dealing with creatures of logic, but with creatures of emotion, creatures bristling with prejudice and motivated by pride and vanity.” – Dale Carnegie

Sometimes facts don’t matter. Some people believe in “alternative facts!” One conclusion that can be drawn from this phenomenon is that people are humans and often times our decisions are dictated by our emotions rather than by logic or facts. Facts don’t matter as much as emotion does. Stirring up strong passionate emotions like anger, fear, outrage, and on the more positive side, love, inspiration, and hope will often trump facts, logic and math.

A friend of mine, who taught a financial literacy class, talked about Dave Ramsey’s snowball method of paying off debt to his students. With this method, you pay off the debt with the smallest balance first and then move on to the next one with the smallest balance. “The math doesn’t make sense,” I argued, and countered that you should pay the account with the highest interest rate first to save on the interest you pay. My friend explained that while math may be on my side, his experience told him that paying off small balances motivated people to continue on the path to debt freedom. What good are facts and logic if someone gives up on making those extra payments because it seems like such an uphill battle? We need to win the small battles to win the war.

In a similar financial debate, many often ask whether you should pay off debt first or invest. In a recent post from the Big Law Investor, Josh asked whether you should pay down an auto loan of 1.9% or invest. I always thought my decisions to be fact-based, rational, and logical. I always came down on the investing side and wondered why others chose to pay off low interest debts so quickly. If you look at the math, it would seem pretty easy to beat a 1.9% return.
In the comments section, one reader said, “In my experience, most folks don’t actually invest the difference and /or increase their lifestyle since they have the low-cost debt.” Josh replied, saying that lifestyle creep occurs without you even realizing it when there’s “extra cash sloshing” and that you’re probably tricking yourself into thinking you’re actually “investing the difference”. I started to think about what was said and realized that this was true with me. I had been tricking myself into thinking that I was investing the difference when that wasn’t really the case.

My student loan interest rates are low and I haven’t made any extra payments to them since paying off the high interest ones. I also recently bought a car with an auto loan even higher than the rate posed by Big Law Investor’s blog post (It’s at 2.9%). I didn’t pay it off either, but am I using that extra money that I have to invest? Not really. I keep thinking I will use that money to invest but just haven’t done it yet. Maybe I’ll buy another rental property, but maybe I won’t. However, in the 10 years that I’ve had my student loans, did I invest the difference because I didn’t put many extra payments towards those loans. I would say yes, to a certain extent, but it’s hard to say how much extra I invested. And I think it is highly likely that much of that excess cash also went to lifestyle creep instead.

After this realization, I think I’ll be taking some cash I have on hand and combine it with my tax refund this year to make extra payments on my auto loan. Speaking of tax refunds, as I input my taxes into TurboTax, I remember thinking that how it was silly for people to want big tax refunds. Getting a large tax refund was giving the government an interest free loan right? And having money now is better than getting the money later, so why not take the money now by increasing your withholding? It made sense, but when I owed money to the IRS a few years back, I was very upset. But shouldn’t I have been happy? The government had given ME an interest free loan, and I just had to pay it back. It didn’t feel like a win to me and I had to allocate some savings to cover the tax bill. With my higher paycheck throughout that year, did I save and invest that money? I’m pretty sure the answer to that is “NO.” After that painful lesson, I changed my withholding and have been getting a tax refund ever since. And now, every year after I get that tax refund, I make contributions to my Roth IRA account as well as my wife’s IRA account, contribute to our son’s 529 plan, pad our savings or make extra payments towards debt (mortgage/student loan).

Money is more about emotions than the numbers. And as disciplined and logical as I may think I am, I am still human. I’m not a robot analyzing every decision, inputting the numbers and running an algorithm to determine the best and most optimized choice. I have to remember that when making financial decisions and in giving financial advice to others.

Live For Today

credit: freedigitalphotos.net by Stuart Miles

credit: freedigitalphotos.net by Stuart Miles

When I was a little boy, I loved dinosaurs. What little boy doesn’t? My mom bought me a dinosaur book which included a pack of dinosaur stickers. There were 4 sheets of stickers with 6 stickers on each sheet. If you follow my blog, you know that I had a saving mindset even as a young child. I knew I only had 24 stickers and that there would be no more when they were gone, so I was very deliberate with how I used those stickers. I didn’t want to run out of them in the future when I may want to use them. I mean there were 24 stickers but only 4 Triceratops stickers which was my favorite dinosaur. I would use the stickers on a birthday card to my best friend, put it on my looseleaf that I used for the school year, but I wouldn’t willy nilly put the stickers on JUST ANYTHING. Fast forward many years later while cleaning out my stuff as an adult, I found that I still had 2 sheets of dinosaur stickers with 2 Triceratops stickers.

Having a saving mindset and planning for the future has served me well for the most part financially. I’m not someone who needs instant gratification nor do I generally succumb to impulse purchases. But there are pitfalls to this mindset too. I clearly didn’t get to enjoy my stickers! To use an example that best illustrates how I always think ahead and often not live in the moment, let me tell you about my visit to the aquarium with my little one a few weeks ago.

We arrived at the aquarium around 2:00 p.m, and it closes at 5:00 p.m. My little one is not even two so trips need to take into account his napping schedule or you risk a meltdown. The tickets to the aquarium were $25 each, though I got it for half off using Groupon. But nevertheless, it was rather expensive and I wanted to get my money’s worth. After arriving at the aquarium, my son was mesmerized by a fish tank. “Whoa!” my son exclaimed as he excitedly pointed at the fish. Instead of enjoying the moment seeing my son’s excitement, I was intently looking at the aquarium map and events schedule.

I looked at the Penguin, Hippo and Stingray feeding schedule and tried to devise the best and most efficient route to take to see them all and calculated how much time we should stay at the exhibit so that we wouldn’t miss anything. Rather than trying to rush around the aquarium looking at everything, I probably would have been better off actually watching the fish and living in the moment like my little one was doing.

I am one who worries about the future, even if I already have a plan of action. Not only do I worry about the future, I admittedly am someone who also dwells too much on past mistakes, even if it is a small one. Instead I should just shake it off and move on with my life and chalk it up as a learning experience. While I don’t believe in the FOMO and YOLO philosophy where you ONLY live in the present and not worry about the future, there has to be some balance.

Too often, I find myself going through the motions of life and drudgery of work, thinking in my mind “another day another dollar.” I need to appreciate each day and the experiences that every unique day brings. I need to trust in my plan, and stop worrying about the future, especially things that I cannot control. I need to forgive and forget the past mistakes that I’ve made, and use them as learning experiences.

It is good to reminisce about the past, great to plan and dream about the future, but always remember to live in the present.

Are you the type of person who constantly dwells on the past or always daydreams about the future?

The Top Ways Your Home is Costing You Money

The following is a guest post by Chad Dannecker

Repairs and maintenance are an inevitable part of home ownership. Putting off certain repairs can be costly to do, because they could turn into bigger repairs later or cause you to waste precious energy. Here are the top five ways your house could be costing you money, along with solutions on how to rectify these problems so they do not become bigger ones later on

1. Improper caulking
This is a relatively simple job, but one that is nevertheless often overlooked. After time, old caulking can break down and no longer perform as it is supposed to. Check the area around doors and windows to ensure there is adequate caulking in order to prevent air loss. You should also check the caulking around your toilets, bathtubs, countertops and sinks, as inadequate caulking could result in moisture getting behind these fixtures and causing damage to your walls.

2. Excess water loss
Even small leaks can cause you to use a great deal of extra water over time. To save money on your water bill, have a good look at all your pipes and faucets to see if they show signs of leaking, and then make repairs as needed. You can also save money by installing new low-flow showerheads and toilets; in some cases, you could reduce your monthly water consumption by as much as 50%.

3. Inadequate insulation
If your home has inadequate insulation, it will naturally be harder to heat and cool as a result. Insulation can be purchased rather inexpensively, and can also be installed as a DIY project. If you’re unsure as to whether or not your home has the right amount of insulation, consider having a professional inspection performed. The money you spend on this inspection will more than pay for itself over the long run, should you discover more insulation is needed.

4. Pests
No matter how clean or well maintained your home is, you can still be subject to pests such as ants, roaches, spiders or even rodents. If these pests are left unchecked, they can cause serious damage to your home’s foundation, wiring or crawl space. Insect droppings could also get into your ductwork, thereby causing you and your family to suffer respiratory disorders. To avoid damage from pests, consider having a professional exterminator treat your home on an ongoing basis in order to prevent small problems from becoming bigger ones. If you’re intimidated by the cost, there are a number of do-it-yourself remedies you can use to fight pests with as well. Spray around the foundation of your home on a regular basis, and place glue traps in strategic areas to catch mice with-just be sure to keep them out of the reach of pets and children.

5. Dirt and grime

One of the best ways to prevent major repairs is to keep your home as clean as possible inside and out. Have your carpets cleaned on a regular basis, as this will ensure they last longer. Pressure wash your siding once or twice a year to prevent dirt and grime from aging it prematurely. Clean your ductwork in the spring and fall in order to ensure air is able to flow freely, as this will also help your HVAC system work more efficiently. Wash down walls on a regular basis, and you won’t have to paint them as often either.

These home repairs are rather simple and inexpensive to make, yet many times are overlooked. Take a look around your home today to see which ones if any need to be performed, and then make plans to get them done as soon as possible. You’ll not only be saving money, but you can also avoid major repairs while also increasing the value of your property.

Chad Dannecker is the team leader of Dannecker & Associates. With more than 40 years of local real estate experience, Dannecker & Associates has established themselves as the leading source of real estate expertise in San Diego.

3 Must Do’s for the New Year

credit: freedigitalphotos.net by Stuart Miles

credit: freedigitalphotos.net by Stuart Miles

Well it’s over a week into the New Year and I’m finally getting to this post. So my New Year’s resolution should probably be to stop procrastinating! Actually, I don’t like to make New Year’s resolutions because I almost never follow through with them anyway. But with a New Year and a new start, here are a few things that I think should be on everyone’s to do list. Plus, these are pretty simple and easy to do.

Make a Budget

I have to admit that my wife and I don’t really have a budget. I know what you’re thinking, “what kind of personal finance blogger doesn’t make a budget?” Well, my wife and I have listed all of our expenses and made a determination as to how much we should save each month, but we don’t track our spending. We live within our means and are pretty frugal, so there was no real need to have one. Keeping a budget just seems like too much of a hassle. But I’ve been reading a lot about Personal Capital from fellow bloggers and finally tried it out. I like the interface and the ability to see all my accounts on one site. No more having to log on to each individual account to see how it’s doing. It also tracks our expenses which will be helpful to see if there are leaks in our budget that can be cut. Also, Personal Capital is free so why not try it? To read a more thorough review, check out the review from Jacob who blogs at Cash Cow Couple.

Start Investing/Invest More

If you are still on the fence about whether you should start investing, well you really shouldn’t be. As I posted in When Lazy and Cheap is Better, investing does not have to be time consuming or complicated. So, if you haven’t started saving and investing for the future, now is the time to do it. Start contributing to your 401k. Go open an IRA account.

Whenever I read articles about starting to invest at a young age, I pat myself on my back for starting to invest in my 401K plan and opening an IRA retirement plan when I first started working. After reading an article from Matt who blogs at Mom and Dad Money, I realized that good habits can go bad. While, I’ve increased my contributions into my 401K plan, my IRA contributions have stayed the same. Yes, I still contribute the same amount as when I just started out and was making a much lower income. That pat on my back has turned into the kick in the butt I need. I will be increasing the amount that I contribute into my IRA.

Travel for free

One of my big regrets is not getting into travel hacking sooner. I did churn a couple of cards and received 2 free roundtrip tickets and a stay at a luxurious hotel, among other things. But now with a little baby, I don’t know if I’ll be traveling much in the near future. In addition, we are looking at taking on a mortgage, so we don’t want any dings on our credit report. But, I will definitely be looking to get back into the game ASAP. If you want to learn a little more about traveling for free, check out How to Travel the World for Pennies on Budgets are Sexy. I’ve told many friends and family about traveling for pennies using credit card rewards and bonuses, but many are skeptical or don’t want to make an effort to do it. For those who need some extra hand-holding, Brad from Richmondsavers offers a free travel rewards coaching program where he will teach you how to travel for free. His blog also offers instructional guides to travel to different locations for free, so make sure to check it out.

More Ways to Save

credit: freedigitalphotos.net

credit: freedigitalphotos.net

When I first started blogging, I wrote a couple of posts on how to save money in various areas. As I probably only had one reader (me), I figured I’d highlight some of them just in case you missed it.

Housing and Transportation often takes up a big chunk of a budget, so check these out to find additional ways to save money in these expensive categories.
How to Cut Transportation Costs
How to Cut Housing Costs

Buying groceries is one of the things that you can’t avoid doing. It has also been a popular topic, so check out how I save money on groceries.
How to Save Money on Groceries

And for the days that you decide to eat outside, you can save money by checking out these tips.
How You Can Save Money When Eating Out.

Now on to more ways you can save money:

Cellphone- If you have an expensive cellphone plan, consider splitting a family plan with family members or even friends. For most plans, you can split a family plan even if you do not live together or even if you live in different cities. A cellphone bill with data, text messaging and voice will costs approximately $90 or more for a single person. When split up in a family plan, the costs can go down to around $60. It may get complicated if the people you share the plan with are not responsible people who pay on time. Also check to see if you qualify for a discount. I get a discounted rate for being a government employee. There are also discounts for service members, students, and various other organizations and companies.

Land line- You have a cellphone so you might not even need a land line. However, some people do want a separate phone line. I didn’t have a land line for a few years, but my phone and my wife’s phone would sometimes be on vibrate and we’d miss certain calls. Plus, for people with a family, it’s nice to have a phone at home. I bought the Ooma device which you connect to your high speed internet to get free calls in the U.S. You have to pay applicable taxes which come out to about $4.00 a month depending on your location. If you want more features, you can pay for premier service which is still probably less than most phone bills. The Ooma Telo Free Home Phone Service costs about $122 at Amazon. However, if you are paying for a land line, you’ll make that back in a couple of months by cutting out the expensive phone bill. Other options are OBi100 VoIP Telephone Adapter and Voice Service Bridge which works with Google voice. There is also the Magic Jack.

Library: This is an obvious one, but so many people overlook it. Many haven’t been to a library since they were in school. They have books, DVDs and CDs. Many libraries are pretty high tech now, allowing you to reserve and renew things online and to borrow books for your e-reader.

Television: Cut the cord already! There is plenty to watch on over the air television. If that isn’t enough, there’s always Netflix, Hulu, and Amazon Prime. You can also sometimes watch episodes of your favorite shows on its website. Plus, watching television makes you less productive.

Services- I’ve gotten my bills reduced just by asking. Well, actually I had to threaten to switch providers and I was transferred to the retentions department where they seem to have more flexibility to give you a discount. I received $10 off my cellphone bill because I told them that I don’t text that often and do not want unlimited text messaging, which was the only plan available. The customer service reps were not much help until, I said that I was cancelling. I was transfered to the retentions department and they were ultra friendly and gave me the discount. With my cable internet provider, they also gave me a reduction and it was less of a hassle.

Merchants- People will haggle at a car dealership or when purchasing a house, but many rarely do so when buying other products. Well, if you don’t ask for a discount, you won’t get it. Now, I’m not haggling over a stick of gum, but for bigger purchases, it pays to negotiate. When we were buying a mattress, I didn’t even intend to haggle, I just wasn’t ready to buy. But the salesman dropped the price $100 and I took it.

Pay Cash:
I love using cash back cards. I’ve also discussed using coupon codes, shopping portals and discounted gift cards in a previous post to save money. However, cash sometimes is king. If you offer to pay cash, many places will offer you a cash discount.

What other things do you guys do to save money?