Year-End 2013 Current Asset Allocation and Net Worth Growth

Hello there everyone!

The past few months have been quite eventful, with planning to finish my PhD by next August, starting the job-finding process, starting an internship with the University’s licensing / commercialization office, getting engaged/planning our wedding for September 2014, and trying to submit a journal article to the ACS Journal of Chemical Biology here in the next few weeks. 

Anyhow, with 2013 now being just a memory, it’s time to review the progress on my net worth realized the past year! So, without further ado, let’s get started – first with reviewing my net worth growth during 2013! As always, if you have any questions, please ask via email or commenting below!

As I’ve mentioned before, the goal of this running net worth and asset allocation progress update series is two-fold:

• 1) To share how I (as a fairly normal non-financial professional) approach various financial issues that come at me throughout life so that you can use my learnings to assist you in your financial decision-making, and
• 2) To make me more accountable in sticking to my various financial goals that I set forth by periodically evaluating my status and making adjustments.

Overall, I would say that 2013 went amazingly well from a financial perspective. I’ve been able to make a lot of progress towards my personal, professional, and financial goals (even raised a total of $11,000 for the MS Society with my MS Bike Ride!).

In particular, I’ve been able to efficiently leverage my three-legged retirement stool accounts (Roth IRA, taxable account, and Roth 401k). And, I’ve been able to invest significantly in my blogging goals with the help of several amazing staff writers on the site.

On top of that, the overall market did very well during the past 12 months!

With all of the up and down that has occurred, let’s take a look and see how it affected my net worth progress…shall we?

 

Liquid Net Worth Growth (Not Including Condo Nor Blog/Graduate Fellowship Unpaid Income Tax Savings)

In October of 2011, I had to make a fairly significant change in how I calculate my net worth and asset allocation percentages each month. The change pertained to the cash I consistently save up throughout the year in a high interest online savings account (Dollar Savings Direct) in order to pre-pay self-employed or unpaid (from my graduate research fellowship) income tax to the government in the form of quarterly tax payments. What was happening was that the balance in this tax savings account (which was being counted in to the cash portion of my asset allocation) was becoming too large, and it started to skew my asset allocation calculations.

To remedy this, since October of 2011, I’ve started using a system of calculating my liquid net worth, which includes all of my various equity and fixed income holdings but excludes 1) my equity and debt related to my condo and 2) the amount of savings I have accumulated so far during the year earmarked to pay the tax man. I’ve decided that doing the analysis in this fashion helps me remain more objective in making financial decisions without being influenced by assets that are needed for shorter-term living/tax expenses.

Keeping this important change in mind, let’s continue…

 

Overall Liquid Net Worth Growth

From 27-December-2012 to the beginning of Jan, 2014, the S&P 500 index increased 28.09%. Pretty awesome by any standard you think about really!

During that time period (January-December 2013), my liquid net worth (excluding condo ownership and unpaid tax savings) increased 31.27%, which seems pretty good since I do not have full equity exposure in my portfolio (only 70% equity – more details below).

With an ~30% increase in the overall market, several important things come to my mind for investors going forward:

• Now is NOT the time to get greedy with stocks!
• Now is NOT the time to try to “predict” that the market will go down!
  • Historically, investors are VERY GOOD at being too heavily invested in the stock market at times when the market is overvalued and not being invested enough when the market is undervalued.
  • In addition, historically, investors are VERY BAD at predicting the direction of the market.
  • This cycle of bad decision-making greatly decreases investor returns.
  • Because of this, it’s important to remember to not stray from your target asset allocation balance between equity and fixed income investments.
  • This ensures that you:
    • 1) Do not shoulder more risk than you can tolerate (if a market downturn occurs) and
    • 2) Do not fall in to the trap of trying to predict the market direction (if the current growth continues).

 

Condo Equity Growth

I still currently have 19.88% home ownership in my condo, with this accounting for 13% of my real net worth (so net worth subtracting the condo loan – this is different from the net worth figure discussed above).

As I continue to learn more and more about advanced personal finance topics, I have become quite sure about one thing – I am not the biggest fan of aggressively building up as much home equity as is possible. While I am sure that home ownership is a great idea for personal finance success, I don’t believe that pre-paying a mortgage far beyond what is required is a very good investment (unless the mortgage loan interest rate is very high).

Why is this? Because the money that you pay over and beyond what is required (even though it is saving a little bit on interest, which is tax-deductible, so not really that much savings) is not gaining you any type of return whatsoever – it is essentially money stuffed under a mattress.

Instead, I have been taking the money I have leftover and maxing out my Roth IRA, then saving an equivalent amount in an after-tax account, and then using any that is then left over to contribute close to the maximum allowed for my Individual Roth 401k account.

 

Permanent Portfolio Performance Update

In November 2011, I became fascinated/interested enough in Harry Browne’s Permanent Portfolio asset allocation strategy in order to give it a small trial run with my own money (less than 1% of my liquid net worth). As such, I’ve decided (for fun!) to start tracking the performance of my small ETF version of the Permanent Portfolio in order to compare it to how the market is doing.

While holding the Permanent Portfolio from the end of December 2012 to the beginning of January 2014, the Permanent Portfolio decreased in value by 4.88%. During this same time period, the S&P 500 index increased by ~28%. So, looks like it did not perform better than the general equity market during this time period. However, one really cool thing I’ve noticed about this portfolio is that it is indeed very stable – with it never dropping or gaining more than 1% or so in any given month. Just as Harry Browne predicted, eh?!

In addition, it is also very apparent that the strategy has A LOT of tracking error with the overall market. So, ask yourself whether you think you would be OK missing out on big gains in the stock market like the one over the past year in exchange for more stability before committing significant money to the Permanent Portfolio.

We’ll continue to keep an eye on this portfolio in 2014 and beyond. Should be interesting to see what happens!

 

Making Future Child a Millionaire Update

In December 2013, I researched/published a post about how regular folks can make their current or future children millionaires by saving $1 per day for 23+ years and then letting the money sit and grow until the child retires at age 65.

In this same post, we examined whether an annuity or regular/taxable mutual fund account would be a better home for these savings. What we saw was that a regular mutual fund would yield more savings in the end because of the favorable long term capital gains taxation that you receive.

Anyhow, I decided that I would set one of these accounts up for my future child now since it is so easy to do. Because I didn’t want to commit $3000 to fulfill the minimum investment requirements for a Vanguard mutual fund, I decided to put these savings in to a taxable ETF account, containing the following ETF – Vanguard Total World Stock ETF (VT). I choose this ETF because it has a low expense ratio, good exposure to US + international stocks, and most of all, I didn’t already own this ETF so I could maintain segregation of this account from my existing ones.

The current balance is $59 (1 share). We’ll keep monitoring this one and see how it grows over the years! 🙂

 

Review of Current Asset Allocation (Excludes Condo and Tax Savings)

• Overall Fixed Income / Equity Allocation
  • Currently, 31% of my net worth is invested in fixed income instruments (cash or bond funds), and 69% is invested in equity.
  • This is only 1% off from my targets for these categories of 30% (fixed income) and 70% (equity). So, it is still within my +/- 5% allowable band limits.
• Equity Allocation
  • In the equity portion of my portfolio, 71% is invested in US Domestic Equities with the remaining 29% being held in international equities. 
  • This is within the tolerance banding limits of my equity breakdown targets of 70% and 30%, respectively, for US Domestic and international holdings. So, no action is needed at this time regarding this component of the analysis.

While the overall percentages for these categories look fairly good, a detailed look (table/listing below) at the allocation breakdown reveals the real story and provides for better analysis of the current state.

Remember: In order to maximize the benefits of your asset allocation strategy, a red flag goes off if your current % allocation in a category is greater than +/- 25% change from the target allocation. This is my trigger that I need to rebalance that aspect of my portfolio.

 

Analyzing my current asset allocation percentages, it appears that my current asset allocation is aligned with my target levels within the +/- 25% band limits. Thus, no action is needed at this time.

 

Three-Legged Stool for Retirement Allocation

I added a new financial goal added during the 1st half of 2013 to continue building, optimizing, and balancing a Three-Legged Stool for Retirement.

The idea behind this strategy is to target having a 1/3 split between tax-free, tax-deferred, and taxable accounts by the time you hit retirement in order to have flexible control over your income sources so that you can optimize your tax bracket each year.

Since I am in the 15% tax bracket, I first maxed out my Roth IRA for 2013.  My next move was to contribute an equivalent amount in an after-tax investment account in order to have money that is accessible for needs prior to retirement. Having completed that, I am now working towards maxing out my contributions to a Roth Individual 401k with Vanguard.

Listed below is my current asset location split between the three-legged stool account types:

• Tax-Deferred = 33.4%
• Taxable = 44.1%
• Tax-Free = 22.58%

On one hand, I have been very satisfied with how I have been able to increase my three-legged stool tilt towards tax-free and taxable accounts and away from tax-deferred accounts in 2013, focusing especially on contributing to my Roth IRA and Roth 401k.

However, as you can see by the percentages above, I still have a ways to go to increase my tax-free allocation. This is especially important for me right now since I am in a very low tax bracket in graduate school (but also have fairly limited cash in terms of being able to pay the income tax to convert tax-deferred money to tax-free accounts).

 

My Next Moves For The 1H2014 Time Frame

2014 is going to be a big/busy/involved year for me financially, emotionally, and intellectually. Because of this, it’s tough to fit in all of my next financial moves in to one small section of a post. However, just off the top of my head, I need to get started with the following things:

• Begin fundraising for the 2014 Tour de Vine National MS Society event.
• Send out 1099-MISC for blog contractors by Jan 31^st, 2014.
• Use my 1% home value home maintenance fund to fix various small things that are broken around my condo after 3 years of use. 
  • These things include a closet door off the hinges, the light-switch in the bathroom not working all the time, the towel rack in the bathroom needing to be re-attached, and some pipes under the sink that need to be re-caulked. Once I get these things repaired, I will then need to replenish the depleted funds in the home maintenance account.
• Finish contributing to an Individual Roth 401k Account with Vanguard by the April tax deadline (maximum amount, taking Roth IRA contributions and deductible portion of self-employment tax in to consideration).
• After finish contributing to Roth 401k for 2013 tax year, begin contributing to Roth IRA for 2014 tax year.
• Reconcile / finalize business income and expenses for 2013, print out records of all transactions, start getting together information for 2013 tax return.

• I will also need to process the $1500 I have already saved up for a personal donation in support of my ride.

 

Wish List

• At some point, purchase the Vanguard Total Stock Mkt Idx (MUTF:VTSMX) to replace S&P 500 index fund, whenever more money is needed to increase my domestic large cap asset class holdings. This gives better, broader diversification to the US stock market.
  • I finally was able to exchange my 2 – S&P500 Vanguard index funds for the total stock market fund above during the last week of December. Great success!

How about you all? How did you progress with your net worth in the July-December 2013 time-frame? What are your thoughts about the strength of the market right now? Do you think it’s getting too overvalued? 

What financial challenges are you currently facing?

Share your experiences by commenting below!

2013 Year-End Financial Goals Review

Happy New Year everyone!

I hope you all have enjoyed the holidays, were able to relax with family and friends, and got to have some champagne to bring in the New Year!

For the past week and a half, my fiancé and I have been on the road and in the air away from our home in Virginia. First, we celebrated Christmas with her family in Northern Kentucky (a little south of Cincinatti). Then, we headed out to my childhood home in Arkansas for my sister’s engagement party and to celebrate New Year’s. Currently, we are on our way back to Virginia to get started working again after the weekend.

Back in January of last year, I set my financial goals for 2013. Since the year is now officially finished, I figured it would be a good time to sit down and take a few minutes to review how I did in reaching or NOT reaching (in some cases) the various targets I set for myself. 

Overall, I would rate 2013 as top-notch financially and personally. I got engaged back in March of 2013, and am planning to finish my PhD by August of 2014 and get married shortly after. On top of that, the stock market has increased over 25%! Nice!

So, here goes, a review (in bold below) on how I did in 2013 reaching my financial goals. Enjoy, and I look forward to reading any comments you all have!

 

Short Term (Less Than 1 Year) Goals

• Contribute $5500 (or ~$458 per month) to my Roth IRA with Vanguard this year (maximum allowed, which increased $500 in 2013 compared to the $5000 maximum allowed in 2012!).
  • Done. I finished maxing out these contributions in around the May timeframe. Yahoo!
• Reach short-term net worth target for this year (1.42X my current net worth).
  • I’m getting a lot closer, but not quite there yet.
  • I need an increase of about 10% more from where I am now, so that’s definitely better than a 42% increase needed back in January of 2013! 
• Maintain target 6-9 months of expenses in cash reserve emergency fund in Dollar Savings Direct account.
  • Done. 
  • With me getting married in 2014, it will be interesting to see if this level changes / if I need to re-evaluate my savings level.
• Rebalance mutual fund portfolio to meet asset allocation target %’s (70% equity, 30% fixed income overall).
  • Done. Going well. 
• Put together a will and have it reviewed by a lawyer.
  • Have put together a will, but still have not gotten it reviewed by a lawyer. Need to though! 
• Continue to save money for trip to Grand Canyon or to see Niagara Falls.
  • Done.  
• Invest $500 in Microloans with Microplace.com to support Latin American micro entrepreneurship. This equates to $42 to invest per month.
  • Done. 
• Donate $1,150 to Multiple Sclerosis Foundation in 2013 (5% of take-home pay in my graduate school research assistantship job).
  • Done. I actually donated $3,000 this year. Yah! 
• Fund raise $7500 for MS 150 bike event in June 2013.
  • Done and surpassed. I ended up raising over $11,000 total this year for the MS Society, which puts my total in the past 5 years at above $25,000. Nice! 
• Save 3% of take home pay each month (after taxes) for Dream Account.
  • Done.
• $30 per month save for doing running races / bike rides as part of health life values account.
  • Done.
• $20 per month save for buying fresh vegetables as part of health life values account.
  • Done.
• Save ~20% of (blogging income (if any) minus amount of income deferred to Individual 401k with Vanguard plus untaxed graduate fellowship income from my research job) in a high yield online savings account in preparation for 2013 taxes.
  • Done.
• Apply for new graduate research fellowships since the one I have from the NSF will run out in 2014 (and need to apply for new ones about a year ahead of time).
  • Canceled / no longer applies.
  • Since I am graduating by next August when my NSF Fellowship runs out, I will no longer need to apply for a new fellowship to take its place. It seems to have worked out nicely!
• $30 per month save for trips to visit friends/family in other states.
  • Done.
• $10 per month save for purchasing food for backpacking trips in the Blue Ridge Mountains once a month.
  • Done.
• Contribute at least 20% of blogging income to Individual Roth 401(k) with Vanguard.
  • Done.
  • According to the account hierarchy priority order, in 2013, I first maxed out my Roth IRA before starting to contribute to my Roth 401k with Vanguard.
  • By the time of the 2013 tax deadline, I will have saved 100% of my blogging net income in my Roth IRA and 401k combined. Nice!
• Execute any business tax deductions I can for 2012 taxes.
  • Done.
• Use 1% home value home maintenance fund to fix various small things that are broken around my condo after 2.5 years of use. These things include a closet door off the hinges, the light-switch in the bathroom not working all the time, the bathroom towel rack holder coming unscrewed, and some pipes under the sink that need to be re-caulked. Once I get these things repaired, I will then need to replenish the depleted funds in the home maintenance account.
  • Did not accomplish.
• Execute 4 estimated tax payments for blogging + graduate research fellowship income on the following dates – 1) April 15, 2013, 2) June 17, 2013, 3) Sept. 16, 2013, and 4) Jan. 15, 2014.
  • Done.
• Save $111 per month until have a total of $1600 for health expenses for dogs we adopted (for annual health checkup, Frontline/Interceptor, and miscellaneous health emergencies/treatments needed. I will have the $1600 total after March 2013.
  • Done.
• Help friends become debt-free.
  • On track.
• Continue investing in long-term content growth of blog.
  • On track. 
• Continue building, optimizing, and balancing a Three-Legged Stool for Retirement
  • Done.
  • Since I am in the 15% tax bracket (and recently confirmed that I will be again in 2013), I first maxed out my Roth IRA for 2013.
  • My next move was to contribute an equivalent amount in an after-tax investment account in order to have money that is accessible for needs prior to retirement.
  • Next, I began to work towards contributing as much as possible to a Roth Individual 401k with Vanguard.
  • Since my graduate school fellowship income does not count as “earned Income” for retirement plan contribution purposes, I had to make sure that my combined Roth IRA and 401k contributions were less than my net blogging income minus the deductible part of self-employment taxes. It appears that by the tax deadline for 2013, I will be able to contribute the maximum possible to both of these retirement accounts. It has worked out well.

 

Mid-Term (3-5 years out) Goals:

• Continue contributing maximum allowed to Roth IRA and Individual Roth/Traditional 401k each year using dollar cost averaging.
• Reach intermediate net worth target (~2.2X my current net worth).
• Own a rental property by 2018.

 

Long-Term (greater than 5 years out) Goals:

• Obtain a net worth of $1,000,000.
• Own a home free of mortgage payments.
• Own a vacation home in the mountains or a ski resort.
• Accumulate enough funds not have to work, but will probably anyways because I would get bored. 

How about you all? How did you do with your financial goals for 2013? What techniques do you find are most effective in holding yourself accountable and on-track for your goals you set?  

Share your experiences by commenting below!

Sneaky Tricks To Actually Accomplish Your New Year’s Resolutions

The following post is by MPFJ staff writer, Catherine Alford. Cat is a freelance personal finance writer who blogs at www.BudgetBlonde.com. 

Wouldn’t be amazing if we could actually accomplish our New Year’s Resolutions? As in, wouldn’t it feel incredible to completely, 100% succeed in meeting or exceeding them?

Well, if you want to actually make some good goals and have 2014 be the most amazing year yet, I have some sneaky tricks that will help you to get there.

Here they are below:

 

1.    Make Month-to-Month Resolutions

A year is definitely a long time. I mean, can we really promise ourselves to not say a curse word for all 12 months of it?

Or, can we really expect ourselves to stay out of a fast food joint for the entire year? I mean, there are always exceptions and special circumstances that cause us to break our resolutions, and if you’re anything like me, breaking resolutions causes you to beat yourself up.

We don’t need that this year!

So, let’s make some month-to-month resolutions. Maybe January can be the month of flossing your teeth every day. Perhaps February can be the month of reading one book that you’ve really wanted to enjoy. You can really do anything for 30 days, so maybe if you set a time limit on your resolutions, they will actually get accomplished!

 

2.    Pick Something Fun to Accomplish

Why do your resolutions always have to be so awful?

I mean, why give up eating bread when you can make resolutions that are fun and exciting? For example, you can make a resolution to keep up with movies this year. I am horrible at movie conversation. At a party, when someone says a movie quote and everyone laughs, picture me standing there with a blank look at my face. I have no idea what you are talking about when you give a movie quote, and it’s something I should work on!

Another example is keeping up with old friends, which is my husband’s New Year’s resolution. My husband has gotten so busy and so caught up with medical school that he rarely has time to send an e-mail to some of his best friends growing up. He’s made it his goal to do a better job of staying in touch with them in 2014. Everyone loves getting e-mail and snail mail, so that should be a relatively painless and fun resolution to work on this coming year.

 

 3.    Make Resolution Teams

One tip I always give people is to share your resolutions with others, but my ultra sneaky tip is to actually get on a “Resolution Team.”

For example, don’t just tell someone you want to lose weight. Actually find someone that shares that same goal, and work together with them to get ‘er done. If you want to give up drinking Diet Coke, don’t just tell your coworkers. Try and rally them and make everyone who shares an office with you do the same thing.

Resolutions are much easier to keep when you stamp out temptation, so be the person who gets everyone else excited about goals so that you can accomplish something amazing.

 

4.    Make a Resolution That’s Teeeeeny Tiny

Don’t get me wrong; big goals are great.

I love it when people say they’re going to pay off 500k worth of debt. However, the bigger the goal, the harder it is to make it happen.

So, why not start with something teeny tiny? I’m talking about drinking an entire bottle of water every day or trying to touch your toes every day. This type of resolution takes pretty much zero time and zero effort. I’m not trying to encourage you to be lazy about your resolutions. I’m just trying to show you that you can feel accomplished and give yourself a pat on the back for actually sticking to them if you make goals that are reasonable.

 

 5.    Set a Goal You’ve Already Halfway Finished

I know you might think this is cheating, but there’s no sneakier way to accomplish your goal than to pick one that’s already halfway done!

So, if you’ve started organizing your garage, make a resolution to finish it. If you’ve already changed out two of the doorknobs in your house, then make it a goal to fix the rest of them. Basically, it’s a sure fire way to feel accomplished because the goal has already been started and you already know how to do whatever it is that you’ve chosen.

Ultimately, setting New Years Resolutions is definitely a great thing to do every year. However, the reason people fail to accomplish them is because they make it too hard on themselves! Next year, be sneaky! Try the tricks above so that you can feel great and tell the world that you stuck to your goals and did something awesome to improve yourself.

How about you all? What are your 2014 resolutions? Are you going to be sneaky and accomplish them? Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/photoann/6605711959/sizes/l/

Does The Research Favor Investing In High Dividend Yield Stocks?

The following is a guest post by Squiggle over at www.financesquiggle.com.  To read further on investing strategies, see his post on the best way to invest $10,000. Enjoy!

Talking to most stock investors, you’ll hear of attempts to maximize returns or beat the index.  Those who strictly adhere to the Efficient Market Hypothesis (EMH) contend that the stock market is too competitive and that stock prices reflect all readily available information, making consistently above average returns impossible.  Hand-in-hand with EMH supporters, Random Walk Theory proponents will tell you stock prices are simply too random for you to achieve above average returns in the long-run.

The research is mixed, however.   Many studies show that certain types of stocks tend to have better returns.  Below is a summary of some of the evidence supporting investing in stocks with high dividend yields.

 

Research Highlights in Favor of High Dividend Yields

Tweedy, Browne Company LLC published a fascinating paper strongly in favor of investing in stocks with high dividend yields.  One study in the U.K found that from 1955 to 1988, the decile of stocks with the highest dividend yields had a compound annual return of 19.3% compared to 13.0% for the index.

O’Shaughnessy Asset Management has a similar paper supporting high dividend yields.  In a US study from 1930 to 2011, the top decile of dividend yield stocks had a compound annual return of 11.6% vs. 10.2% for all US stocks.  Even more exciting, from 1990 to 2011, the top decile of dividend yield stocks worldwide had a compound annual return of 14.8% vs. 6.9% for the index of all stocks.  The top decile beat the benchmark in 100% of the 5 year rolling periods throughout.

Credit Suisse published another promising paper on the topic, with an added twist.  The firm examined the returns in 12 countries and reached the same conclusion that high dividend yields produce superior returns.  They also examined a second variable of payout ratio (the percentage of net income paid out as dividends).  In the majority of the countries studied, the combination of high yield, low payout ratio produced the best returns (in a few cases high yield, high payout won).  For example, in the United States from 1990 through 2008, the high dividend yield, low payout ratio portfolio had the highest compound annual return of 15.4%, while the S%P 500 returned 8.4% annually.

 

Recent Performance of High Dividend Yield Funds

Despite the research, high dividend yield funds haven’t been fairing well in the last several years.  Here are three examples vs. the S&P 500 since their inception.

From March 20^th, 2007 to December 16^th, 2013 the S&P 500 beat the Vanguard High Dividend Yield Index Fund (VHDYX) 28.8% to 16.57%.

From October 19, 2007 to December 16^th, 2013, the S&P 500 beat Tweedy, Browne’s Worldwide High Dividend Yield Value Fund (TBHDX) 14.69% to 10.47%.

From September 17, 2010 to December 16, 2010, the S&P 500 beat the O’Shaughnessy Enhanced Dividend Fund (OFDIX) 61.0% to 23.32%.

Final Thoughts

Unfortunately, high dividend yield funds have not been performing well in the last several years.  However, the research in favor of stocks with high dividend yields is robust.  Those with high dividend yields tend to outperform those with low dividend yields handily (especially those with a low payout ratio).  As with most strategies that have shown outperformance over the long run, there are periods of underperformance.

Despite this recent lag, decades of sound research make this strategy worthwhile as part of your portfolio for the long-term.  Diversification is one of the cornerstones of personal finance, so it’s best to dedicate only a fraction of your investments to high dividend yield stocks.  Additionally, research shows that funds with low fees outperform those with higher fees over long periods.  Accordingly, dedicating part of your portfolio to the Vanguard High Dividend Yield ETF (VYM), with a low expense ratio of 0.10%, is an excellent investment choice.

How about you all? Do you think it is possible to beat the market returns by investing in high yield dividend stocks or a dividend-based index fund? Share your experiences by commenting below! 

References

Patel, Pankaj N., Souheang Yao, and Ryan Carlson. “Quantitative Analysis: Global Dividend Strategy.” Credit Suisse, 23 Jan. 2009. Web.

“The High Dividend Yield Return Advantage.” Tweedy, Browne Company LLC, 2007. Web. 16 Dec. 2013.

Viswanathan, Ashvin. “Dividend Yield vs. Dividend Growth.” O’Shaughnessy Asset Management, 20 Sept. 2012. Web. 16 Dec. 2013.

Take a Baby Step to Improve Your Financial Life in the New Year

The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

The New Year is right around the corner.  Will you be among the millions of Americans to make New Year’s resolutions?  If you do make them, do you keep them?

When I was younger, I always made lofty, ambitious New Year’s resolutions, and, of course, I failed miserably.  Why?  Often my goals were unrealistic, and I didn’t make any plans for how I would reach the goals I set.  I just decided sheer will would carry me through and change my behavior.

It didn’t.

If this sounds familiar, why not try to make just one financial goal this year?  Make it one that is attainable but helps you change your behavior and improve your financial life.

Not sure what goal to set?  Here are a few ideas to get you started:

 

1.  Have a frugal fast.

The basic premise is that one week a month, don’t spend ANY money.  You’ll want to buy enough groceries to last the week and have your car gassed up before you start.  Then, that week if you’re at work and your colleague asks you out to lunch, you’ll need to decline.  If friends asks you out to a movie, see if they want to come over to your house instead and do something you already have available.

If a one week frugal fast is too much for you, in January, take just one day of the month to not spend anything.  In February make it two days.  In March, make it three days.  Continue doing this until you are having a frugal fast for a month.

To make it even more productive, estimate the amount of money you saved during the fast.  For instance, if you didn’t go out with your colleague, you saved $15.  If you didn’t go to the movies, you saved $10.  Add up all the money you saved and put that money in your savings account or apply it to your debt.

Little by little, you’ll be changing your behavior and teaching yourself to say no to temptation and unplanned expenditures.

 

2.  Take the 52 Week Money Challenge.

You may have seen this idea floating around the web last December.  The idea is that each week you save one dollar more than you saved the week before.  So, week 1, save $1.  Week 2, save $2; week 3, save $3.  You get the idea.  It doesn’t look like much, but by the end of the year, you will have saved $1,378.  If you don’t currently have an emergency fund, you’ll have a nice little one at the end of the year.

If you plan to take this challenge, consider joining Jeff Rose of Good Financial Cents’ 52 Week Money Challenge.  Simply sign up, open a Capital One 360 bank account, have your money automatically deposited each week, keep track of your progress and send in a screenshot of your final balance at the end of the year, and you could win a matching $1,378.

This challenge is excellent because you learn to have discipline to routinely save.  Who knows, after you’ve met your goal and saved $1,378 in 2014, maybe you’ll be able to save even more in 2015!

 

3.  Do some financial housekeeping.

If you have children, do you have your financial house in order?

Do you have life insurance?  If you don’t, make this the year that you get it.  There are several online calculators that can help you determine how much life insurance you need to meet your family’s needs.  A 20 year term policy is not that expensive, especially if you’re fairly young and in good health.

If you do have life insurance, do you have enough?  Having some life insurance is good, but you want to make sure your family is properly covered.  My dad died right after his 38th birthday, and my parents had inadequate life insurance.  My mom had enough to pay off the small mortgage they had, but not much more than that.  Within a year of his death she had to go back to work full-time, and because she hadn’t worked outside the home for 18 years, she had a difficult time finding a job with a living wage.  She continued to struggle for many years after that.  If you die unexpectedly, you don’t want your spouse to struggle this way, especially when he or she is already grieving your loss.

Do you have private life insurance?  If you think you’re covered because you have a free or low cost life insurance policy through work, I urge you to think again.  You could always develop a medical condition that makes you uninsurable or makes the price of life insurance out of reach.  If you leave your job or get let go, you would then be without life insurance.  A company policy is fine as a supplement, but make sure you get your own private life insurance policy, too.

Do you have a will?  If you don’t yet have this document in place, make sure to do so in 2014.  No one likes to think of their demise, but don’t you want to protect your children?  Life insurance can help support them until they are of age, and a will can help you make sure that your children will be raised by the person you’ve chosen, not by the courts.

Best of all, once you have life insurance and a will, you’re done.  You don’t have to think of these tasks again unless you need to buy more insurance or update your will.

 

4.  Learn to invest.

One of the best ways to grow the money you do have is through investments, but too many of us find investing intimidating.  If you don’t want to learn how to do it yourself, find a good financial planner who can work with you and help you invest.

If you’d like to learn more about investing, there are plenty of ways to do so.  If you’re a woman, you may enjoy the book, I’m on My Own and So Are You: Financial Security for Women by Judy Resnick.  This book contains a comprehensive chapter on investing that covers the basics in easily understood terminology.

Of course, there are many other investing books that you could check out from the library.

There are also investing courses online.  Morningstar offers 172 free investing courses on a range of topics including stocks, bonds, funds, and portfolios.  You must sign up for a free Morningstar account, and as you complete classes, you’ll earn credits toward 60 days of Premium Morningstar for free.  Of course, this is just one of many free online investing courses available.

If you know someone who is passionate about investing, consider asking that person to mentor you.  Online classes are good, but supplementing with a mentor who can give advice and answer your questions will help you learn that much faster.  If you don’t have a mentor, you can always read blogs like this one that discuss investing and investing strategies in depth.

So, which challenge will you take this year to improve your financial life? 

Remember that significant change begins with one single action.  The question is, which action will you take in the new year?  

***Photo courtesy of http://www.flickr.com/photos/felixmontino/4233020807/sizes/l/

What You Need To Know About Nonprofit Debt Relief Providers

The following post is by MPFJ staff writer Travis.  Travis is a customer blogger for CareOne Debt Relief Services, and also appears weekly at Enemy of Debt.  Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he’s learned along the way. As a father and husband he provides a unique perspective on balancing debt, finances, and family.

Struggling with debt is a very stressful.  I can attest to that, as I’ve lived through it.

Deciding to take a step forward and get help is extremely difficult, and knowing where to get help from can be confusing.  Commercials for debt relief providers can be heard on the radio, seen on TV, and pop up at any time when surfing the internet.

There are seemingly countless debt relief providers willing to help people get out of debt.

People looking for a way out of their financial problems can be vulnerable because they are desperate to do anything to improve their situation and get their life back on track. Not only could they easily fall victim to a scam, but they could also enroll into a debt consolidation program based upon misinformation. 

One of the most prevalent pieces of misinformation is that nonprofit debt relief companies will serve you better than companies that are for profit.  Here are some of the more common myths associated with nonprofit debt relief providers:

• Nonprofit Debt Relief Providers Charge Less: The fee structure determining what debt relief companies can charge are generally dictated by individual states.  They are mostly based upon the amount of debt owed, or the number of accounts enrolled in a debt relief program.  When compared against each other, nonprofit and for profit debt consolidation providers charge almost identical fees to customers.

• Nonprofit Debt Relief Providers Are Charities : Many people equate nonprofit with being a charity, which is not true.  Nonprofit only refers to a company’s tax reporting status.  If they are able to meet the qualifications to be 501(c)(3) certified, they are nonprofit.

• Nonprofit Debt Relief Providers Don’t Make Any Money: Being nonprofit certified does not mean they don’t make money. What it means is that they use the proceeds of doing businesses for other means such as increasing salaries of their employees, or providing additional services for their customers.

• Nonprofit Debt Relief Providers Cannot Be Scams : Being able to meet the IRS’s guidelines to be labeled as nonprofit says nothing about the integrity of the people running the company or their ability to scam vulnerable people out of their money.

These statements expose commonly held myths regarding nonprofit debt relief providers, yet we continue to have large numbers of providers get certified as nonprofit, and make sure potential customers know it.

Why?  There are several advantages to being certified as nonprofit.

• Attract Customers : The above myths continue be perpetuated and believed by consumers.  Debt relief providers know the positive connotation associated with the term nonprofit, and use it to their advantage to appear more attractive to potential customers.

• Some States Require It : Some states require a debt relief company to have nonprofit status to operate in their state.  Lawmakers seem to believe the very misguided assumptions listed above assuming that having a nonprofit status somehow protects consumers from having their money taken away by a crooked company.  For profit debt relief providers have been trying for years to change these laws.

• Tax Exceptions : Nonprofit companies receive tax except status, which gives them tax breaks from the IRS as well as from many states.

• Fair Share Payments from Creditors : When a person falls upon hard financial times, there’s a good chance that they may just stop paying creditors and eventually declare bankruptcy leaving creditors holding balances that will never be paid.  Getting some of their money is better than none, so creditors give a kick back to debt consolidation companies for each payment made to them through a debt consolidation program.  The amount used to be in the neighborhood of 15%, however in recent years this amount has been reduced to the 3 to 4% range.  This kick back is called a fair share payment, and is made in the form of a contribution to a “charitable organization,” ie a nonprofit debt relief company.

Fair share payments are a huge point of contention within the debt relief industry.  Many industry experts believe that a debt relief provider getting a kick back from the creditors represents a conflict of interest.  They fear that fair share payments could result in debt relief providers steering customers towards debt consolidation instead of another solution (such as debt settlement or bankruptcy) that may be better for a customer’s unique circumstances.  This point continues to be debated between the parties involved, as with the government agencies that regulate them.

Nonprofit debt relief providers aren’t inherently any worse, or better than their for profit equivalents.  The point is that their nonprofit/for profit status shouldn’t heavily way into your decision as to what provider to use.

Here are a few things that do matter when deciding which debt relief provider to use:

Fees:  Find out what fees they charge, and how much they are.  This will vary a little from state to state, so ensure you tell them what state you reside in.  Many debt relief providers will charge a one time administration setup fee, and then a monthly program fee.

24 Access to Data:  You should be able access information about your program at any time.  This information should include (but not be limited to):

• Your accounts enrolled in the program
• How much you are paying
• Payment history
• Estimated time until completion

Better Business Bureau Rating :  If a company has a bad rating with the BBB, it’s a definite red flag.

Better Business Bureau Complaints:  You should not only investigate how many complaints they have had in the last year, but just as important is how many they have successfully resolved.  There will always be some amount of people that have a bad experience, even more so with debt relief.  But it’s a good sign if the provider is successfully resolving their complaints.

Testimonials:  If you know someone that has used a debt relief provider, ask them about their experience.  Nothing is more valuable than first hand testimonials.  Search the internet, and even check the provider’s site to see if they have an online forum or community.  Spend time reading what their customers are saying about them.  There will always be spectacular reviews, as well as the horrible experiences.  Read enough reviews to get a feel for what the overall “voice” is saying about the provider.

The best thing someone can do before starting down any debt relief path is to become as educated as possible.  Know what programs are available to you, know what the differences are about the different types of providers, and thoroughly research each provider that you are contemplating using.  The important thing to remember is that while they may be in the business of helping people, their primary object is to make money.

How about you readers, have you used a debt relief program?  Have you ever heard any of the myths of nonprofit companies?

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Cashback Sites Worth Checking Out

The following post is by MPFJ staff writer, Kelly Gurnett. Kelly runs the blog Cordelia Calls It Quits, where she documents her attempts to rid her life of the things that don’t matter and focus more on the things that do. You can also follow her on Twitter and Facebook.

Every year, more and more people make the switch from doing their holiday shopping in-store to doing it online. And it’s hard to blame them. With the crowds, the traffic, the lines, and the stress of shopping in-store, shopping cozily in your PJs can be hard to beat.

Not only is online shopping easy, quick, and on your own terms, but the ability to browse the entire Internet to find the best deals is enough to make many frugalistas start clicking away. But to really double-team the savings, you should also make use of the cashback sites that offer you rewards for doing the shopping you were going to do anyway. It just takes a couple more clicks to access a store through these sites rather than going straight to the store’s website, and the savings can add up fast—especially during a heavy shopping season like the holidays.

So, start filling your stocking along with friends’ and loved ones’ by checking out the following popular cashback sites. There are enough cashback sites out there to make your head spin, but these are some of the biggies if you’re looking for somewhere to start. Rather than overwhelm yourself with choices, it’s usually best to pick a few sites you like and stick with those to build up your rewards.

 

Ebates

One of the best-known cashback sites (you may have seen their commercials on TV), Ebates lists over 1,000 online retailers where you can receive anywhere between 1% – 25% of your purchase back in real dollars and cents. Many other sites use points that translate to certain amounts, which isn’t as straightforward to understand when you’re trying to figure out what you’re really making for each purchase.

Ebates also sends you their famous “big fat check” every quarter with whatever amount you’ve accumulated to that point. It’s not quite as convenient as receiving points you can transfer directly to PayPal, but it is fun to suddenly receive a check in the mail without even having to request it—especially if you’ve forgotten one is coming.

Similar sites: For other sites that give you back either a percentage of your spending or an equivalent number of points, which can be converted to a check or PayPal transfer once you reach a certain threshold, also check out:

• ShopAtHome
• Extrabux
• FatWallet
• Mr. Rebates

 

Swagbucks

If you’re looking for something a little different, Swagbucks rewards you for a number of different activities. In addition to earning points (or Swagbucks) for shopping through the site’s retailer directory, you can also earn points for doing searches with their toolbar, taking daily polls and surveys, watching videos, and finding special “Swag codes.”

Swagbucks can be redeemed for a variety of merchandise in the rewards store, as well as for gift cards, gas cards and even charity donations. If you’re looking for a site that gives you more ways to generate some free cash, Swagbucks is a fun option site to consider.

Similar sites: If you like the idea of sites that allows you to generate points for multiple activities, also see:

• MyPoints
• iRazoo
• Cash Crate

 

CashbackHolics

Want to skip the “hunting” part of bargain hunting and skip straight to whichever site has the best reward for whatever you’re looking for? Try this site, which shows you 160+ popular stores’ sites and where you on which site you find the best cashback reward for each. This site compares not only cash-back sites, but also rewards from credit cards and airline miles programs.

Similar sites: We all have different preferences when it comes to which interfaces we like best, so here are a few more options to choose from:

• Cashback Comparison Tool
• Cashback Monitor
• Cashback Watch

How about you all? Have you used any other cashback sites you’d add to this list? What do you like about them?

Share your experiences by commenting below! 

image:  http://www.flickr.com/photos/68751915@N05/6848823919

Startups That Make Financial Management Easier

The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.

People receive financial advice in a number of ways. Some people turn to friends and loved ones that they perceive as being successful financially for advice on how to manage their finances. Others choose the assistance of a financial advisor who is paid to help them manage their finances effectively. Now, there are dozens of new investing and personal finance-themed startups that are designed to make financial management easier for all consumers.

These companies offer everything from algorithm-based investment advice to online financial advisor search tools to online financial planning and budgeting tools.

 

LearnVest

LearnVest originally started as a budgeting Web site directed at women.

Today, LearnVest offers both online financial advisor services as well as free budgeting tools. In the four years that the company has been in operation, it has provided comprehensive and conflict-free financial advice to the middle class.

Founder Alexa von Tobel wanted to make financial advice as widely available and affordable as any other mass-produced consumer product or service. LearnVest charges a $399 upfront fee and $19 a month, or $608 annually, for its financial planning services. Customers that are just interested in reaching a particular financial goal, like paying off debt or starting a budget, can obtain help for less.

LearnVest recently received another large round of financing from investors which will allow the company to expand its hiring as well as open a training and adviser hub in Phoenix. The company will be releasing a newly designed product, a seven-step customized financial plan, in the near future. The company is also working on a potential deal with American Express, one of its new investors, and is working with employers and financial planning firms to sell its program within 401(k)’s.

 

Betterment

Betterment offers straightforward online tools that allow savers to manage their investments themselves. Betterment allows people to roll over their personal or corporate retirement plan and they can connect their bank accounts to Betterment’s own systems. People who move their retirement or savings accounts to Betterment can choose from index and exchange-traded funds from Vanguard and iShares. Customers also have the choice to leave most of the decision-making to Betterment’s software by inputting information about their goals and risk tolerance.

Betterment charges an annual fee on the assets it manages. The fee for Betterment’s no-minimum account begins at 0.35% annually. Customers who can afford to put more in and elect to maintain higher account balances are charged lower rates. The company currently manages more than $200 million in assets for thousands of customers, mostly in the form of savings and retirement accounts.

Betterment CEO Jon Stein believes the financial services industry should use crisply designed technologies that make financial management easier, smarter and more efficient. Betterment is very user-friendly, so if someone doesn’t have any specific financial goals set, the site will suggest some based on what other users with a similar income level or profession profile are saving for. Betterment tries to cut through the complexity to make financial decisions as easy as possible for the account holder.

 

SigFig

Sigfig offers algorithm-based investment advice based on users’ aggregated accounts. The company’s advice gives investors recommendations for how to optimize their investment portfolio with regards to fees, management expenses, and risk adjusted returns. SigFig allows its user to link accounts from more than 100 different brokerages. The company also offers weekly suggestions for saving money and improving investment performance.

SigFig was initially known as Wikinvest, an investment tracking wiki. The company changed to its current advisory business model in May 2012 after becoming an SEC-licensed Registered Investment Advisor (RIA). According to co-founder and CEO Mike Sha, the company relies on data-driven analysis to deliver “unbiased, scientific portfolio recommendations.”

SigFig utilizes a business-to-business-to-consumer (B2B2C) distribution model. The company licenses its Web and mobile investment tools to publisher partners in exchange for a revenue share. SigFig also generates referral fee revenue when a consumer switches to investment advisors recommended by the company. The company doesn’t take commissions on trades or collect an asset management fee.

 

Jemstep

Jemstep is a money-management website that lets retail investors import their retirement-account data and get automated advice. The company was founded in 2008 by Michael Blumenthal, a former stockbroker who is now the company’s co-chief executive officer. Today, the company has a membership of around 2,000 users, including employees at Google and EBay.

In January, Jemstep began offering its automated portfolio manager to the public as a free service. For suggestions about specific funds to buy and sell, the company charges a flat monthly fee that starts at $18 per month and is based on the size of the user’s retirement portfolio. Advice on asset allocation is free.

The service will remain free for those managing less than $25,000 in retirement assets, but for those managing larger portfolios, the cost can be as high as $70 per month. However, those with larger portfolios also get to take advantage of the company’s portfolio analysis service as well as tracking and rebalancing advice.

How about you all? What do you think of these services? Have you used LearnVest, Jemstep, Betterment, or Sigfig?

Share your thoughts with us. Share your experiences by commenting below! 

Photograph: http://www.flickr.com/photos/68751915@N05/6848822477/

Reader Profile – Emily from Urban Departures

Today, in the ongoing Reader Profile Series, we’re getting to know MPFJ.com reader and commenter, Emily, from the site, Urban Departures. Let’s all give Emily a big round of applause for sharing her life with us and listen to her story. Enjoy!

Also, if you’re interested in sharing your own financial story/journey with us in a reader profile of your own, just shoot me a quick email, and we can get the ball rolling!  

 

1. Please Tell Everyone a Little Bit About Yourself (Background, Education, Family Situation, etc).

Our story begins in our second year of university. A boy sat next to a girl in fluid mechanics class and asked to copy her homework. While I don’t recommend that as a pick-up line, it worked in this particular boy’s favor. A decade later, the girl and boy have been married for five years, traveled to over 17 countries together, and have a little toddler following them around.

Yours truly was born and raised in Toronto and a city girl through and through. Daniel was born raised in three countries but acts like he’s from a small town. I like fashion, art and design, and making the space around me pretty. He’s into all things geeky, like Star Wars, Star Trek, Stargate and Battlestar. The little one likes cars, pasta and the Hokey Pokey.

We both grew up in modest middle class families who valued the importance of hard work. They sacrificed to support and provide the best for their families. We were taught to never spend more than what was earned, to live below our means, and to avoid debt like the plague. Their lessons were valuable and it paved the way for a better standard of living for us. We left university with a pair of engineering degrees. My parents paid for my education and I was debt free. Daniel, on the other hand, had $30K in student loans. With a frugal lifestyle, we paid off the loan within a couple years post-graduation, saved enough to cover our wedding and put a down payment on a condo. We both work at large firms and make decent salaries that allow for everything we need and more. Other than our mortgage, we have no outstanding loans.

Urban Departures was born of our desire to leave behind a consumer mentality and set our sights on pursuing things of personal importance. We live a blessed life, and we want to be better stewards of our money and learn to manage it wisely. We want to be able to save and spend in a way that aligned with our values: to live simply, serve a community and create memorable experiences.

 

2. Describe Your Current Financial Situation (Who Works in Your Family, How Your Income Is, Your Expenses, etc).

Daniel works in oil and gas industry while I’m in environmental consulting. We enjoy the work and find it rewarding despite working in the corporate world, confined to our cubicles.

We live in a big city by choice. We love the conveniences of the City- arts and culture within a public transportation ride away and a gazillion restaurants serving authentic ethnic food within walking distance- but the expenses add up quickly. 80% of our monthly budget goes towards our expenses with the majority going towards our mortgage and daycare (as a reference, daycare in the area averages $1600/month).

The arena of personal finance is chalk full of those diligently working their way out of debt and those further along in the journey skillfully balancing their portfolios. We’re right in the middle- out of debt but naught a clue when it comes to investing for the future- and looking to chart our path forward. We plan to educate ourselves in the area of personal finance and pass along our findings, successes and failures in our writing.

 

3. What Are the Current Financial Challenges You Are Facing (Saving, Paying Off Debt, Student Loans, Merging Finances After Being Married, etc)?

One of our main challenges is saving for a bigger home- a house with enough yard for a small vegetable, please. We currently live in an 850sqft condo that suits our needs but will become a bit of a squeeze if a second little one decides to show. Housing in Toronto is as much as 85% overvalued when compared to rental rates; townhomes in our area, for example, start at $700k. We’ve reduced our mortgage amortization from 25 years to 10 years but will most likely be taking on more debt when we decide it’s time for an upgrade.

Our biggest financial difficulty is striking the right balance between spend and save. On one end of the scale we’re looking to cut expenses without eroding our current standard of living. On the other end, we want to increase our rate of savings to reach financial independence earlier. Part of our current solution is to use our allowances and to buying things at retail value.

 

4. What Are Your Plans for the Future (Retire Early, Build Your Career, etc)?

For the near future, we’re looking to further our careers. Our work stretches and challenges us and allows us to learn and grow. But as much as we find value in our careers, we hope to one day pursue other ambitions. If we play our cards right- be diligent with our savings and invest wisely- early “retirement” is certainly achievable.

I daydream about living in a small farmhouse in France and painting in my vegetable garden. Daniel wants to play soccer, make music and contribute to humanitarian efforts. Baby, even though he doesn’t know it yet, is training to be an astronaut surgeon, a real-life Dr. Leonard “Bones” McCoy. We haven’t fully defined our plans- they seem to evolve as we grow- but we are set out to live an adventure. And travel, of course- we love to travel.

5. What’s Your Best Piece(s) of Financial Advice and/or Your General Philosophy on Personal Finances?

Define values. Identifying values gives clarity and focus. These values lay a foundation on which it’s possible to confidently make decisions and goals, including financial ones. Should I buy the Chanel lambskin quilted clutch or should I put the money towards a travel fund? Should you buy a 4 bedroom house for your family of 2 or settle for a smaller place and save more? Only you can decide what is important.

Make time. Life is busy. After a hard day at work and the endless rounds of singing “ye-wo suma-ween” (The Beatles), the last thing I want to do is read about portfolio diversification. But, in order to be good at anything, we need to first invest the time to develop the skills required to succeed. In short, spend the time to learn how to manage money; this will determine the steps needed to achieve your financial goals.

5 Ways To Stay Organized This Holiday Season

The following post is by MPFJ staff writer, Shondell of Call Me What You Want, Even Cheap. She blogs about her recent car loan and mortgage pay off and a whole bunch more. Check out her blog right here.

In a perfect world, the holiday season should be filled with moments of sheer joy, unmatched happiness, and complete relaxation!

In the real world, it often becomes a source of stress especially because of all the shopping that needs to be done and all the preparations you need to take care of.

The key to a successful stress-free holiday season is planning, and here are 5 ways to make that happen:

 

1. Always know exactly what you are going to buy before leaving your house

A big mistake that almost everyone makes during the holiday season is leaving the home without any plan whatsoever. Many times, they don’t even know where they’ll be shopping not to mention having a list of things to buy and a well defined budget.

It’s hard to expect a relaxing holiday season if you are shopping for whatever looks more attractive with no concern to what you can really afford? The hole in your finances will be difficult to cover if you have no idea what you are going to buy.

Make detailed lists with the gifts you want to buy and the persons who will get the gifts. Include groceries, decorations, clothing, and everything else you need this holiday season in your list. Adjust the list to your budget by cutting here and there. Most importantly, make sure you stick to your lists.

 

2. Leave the kids at home

We all love our kids, but they are not the best partners when shopping. They have a way of seeing the most useless and expensive little things that they simply must have.

They have a way of asking for it that it makes it impossible for you to even try to say no. No matter how much you would like to make your kids happy, you need to stay organized and make sure you respect your budget. The holiday season should be more about the time you get to spend together than the gifts you are purchasing.

 

3. Only bring the cash you are going to need, and leave the credit cards at home

Credit cards are really dangerous items when it comes to Christmas shopping.

When you are surrounded by so many wonderful things, it is almost impossible to resist temptation, especially when you know you can always use your credit cards even if the cash you have on you is not enough. Credit cards make it harder for you to stick to your budget and the amount that you can truly afford to spend over the holiday season. It is easy to pay with your credit cards but remember that there comes a time when you have to pay it all back plus interest. If you don’t bring them with you, you can’t use them.

 

4. Try online shopping for decorations and Christmas gifts

Going to the malls during the holiday season feels like heaven if you have a fortune to spend.

However, very few people can afford to spend a considerable amount of money on holiday gifts and decorations. As you pass through the store, it becomes more and more difficult to stick to your budget and only buy the things you actually need to buy. A safe way to buy decorations and Christmas gifts and save money and time at the same time is shopping online. There are a lot of venues that you can visit online. Comparing prices is also a lot easier.

 

5. Take a day off work to get everything done

The best way to handle all of your Christmas shopping this season is to do it all in one day. If you carefully plan everything and you know what you need to buy and which stores you need to visit it shouldn’t be difficult to get everything done in one day. You should avoid the wonderful days of Sunday and Saturday and take a weekday off to handle all of your shopping needs. Stores are less packed with people, streets are less packed with cars and you are more likely to see clearly the things that you need to buy. When you’re relaxed and you know you have the whole day at your disposal to shop in an organized fashion it shouldn’t be too difficult.

Organizing your Christmas shopping and all the preparations that come with this wonderful holiday offer you the opportunity to enjoy more of the Christmas spirit rather than get annoyed and stressed out because of the Christmas spirit. Planning doesn’t mean that you don’t know how to have fun; on the contrary, it means that you know the secret to gaining the time and money to have fun during the Christmas season and after.

How about you all? How do you stay organized around Christmas time?

Share your experiences by commenting below! 

***Photo courtesy of Picture by Tom Saunders