My Personal Finance Journey

All posts by Jacob A Irwin

Step 1 in Personal Finance – List Out All of Your Financial Accounts and Calculate Your Net Worth

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $51.95 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is January 31st, 2013.

As part of my blogging goals for 2012-2013, one of the ongoing projects I’ve been working on since Thanksgiving has been writing a book called, 31 Days to a Financial Revolution – Automate Your Finances To Achieve Financial Success. As the name suggests, the book details a series of 31 approachable steps over a one month period that people can take to optimize their finances. Along each step of the way, 2-minute automation action items are implemented to increase the likelihood of the financial planning steps continue to be followed going forward.

At first, my goal was to just write a short 20-30 page eBook on one specific topic. However, when I started looking at all of the material I had already covered on my site (now at 804 posts total), I realized it was complete enough to tie together in to the form of a book.

From there, the question then became what would be the first step/day to get the financial revolution started! In thinking for a while about the first step that I would take to get my finances set up, the answer became abundantly clear. In fact, it was so clear and obvious, that I realized I had never even thought to actually write a post about it on my site, despite the extreme importance of the step.

 The purpose of this post will be to correct this annoying little discrepancy and cover the first step that I think should be taken in personal finance – listing out all of your financial accounts and calculating your net worth!

Step 1 in Personal Finance –  List Out All of Your Financial Accounts and Calculate Your Net Worth

As I’ve dealt with people’s finances over the past three years of personal finance blogging, I’ve noticed one thing – when people are not doing too well financially, they are afraid and/or ashamed to face the music and gain a concrete vision of their financial position.

Of course, this fear only causes them to get further behind on their finances. Why is is this? Simple – because in order to start getting your financial house in order to achieve financial freedom, the first essential step is to get a clear picture of where you are currently (i.e. where your financial mistakes or successes in the past have lead you to right now). 

Not convinced yet? Let’s take an example of a fictional man named Mark.

Mark is trying to decide how to use some excess money he is realizing each month from a recent pay raise. He racked up a large amount ($50,000) in credit card debt during his 20’s, and since he’s ashamed of it, doesn’t track the balances or current interest rate he is paying. Because of this, he decides to invest the money in the Facebook stock IPO in hopes of aggressively growing his money. However, what he doesn’t know is that the interest rate on his credit cards is 20%, and because of this, he has no business investing in an IPO since he can get a guaranteed 20% return by simply paying off his credit card bill.


In other words, in order to make continually informed decisions about your personal finances, you have to keep up with what your current position is!

So, how do you obtain this clear financial picture? Easy – it’s called a personal financial statement. Wait a second, aren’t financial statements complex? Not really, but just to make things easier, let’s call this a personal net worth calculation.

How do You Calculate Your Personal Net Worth?


In short, your personal net worth is equal to your solvent assets (investments, cash accounts, etc) minus your liabilities (debts). So, in order to perform this calculation, you have to keep a running list of all of your accounts and their corresponding balances.

Depending on personal preference, this listing of financial accounts can be done manually in an Excel (or equivalent) spreadsheet or automatically through free or commercially available personal finance software.

  • Personally, I prefer to handle this process manually using a Google Docs spreadsheet. Google Doc spreadsheets are super easy to use, handle just like a regular Excel spreadsheet, and are automatically stored/backed-up online, enabling my information to be protected from computer crashes and also accessible from any computer in the world with an Internet connection.
  • If you’re interested in automating this process with personal finance software, there are now many great options available. Some of the ones I’ve tried and like are Mint (free), Manilla (free), SaveUp (free), Personal Capital (free), and Quicken Home ($). The only reason I don’t use this type of software is because some of the banks I have my money stored in are not listed in the directories of this software.

Regardless of whether you decide to handle this tracking manually on a spreadsheet or automatically with one of the personal finance software alternatives listed above, the overall process flow is the same:

Step 1 – List out all of your accounts (and corresponding balances) containing your “marketable” financial assets. Shown below are some examples of the types of accounts that should be included in your list:

·         Checking accounts
·         Savings accounts
·         Brokerage accounts
·         Investment accounts
·         Stocks, bonds, mutual funds
·         Person-2-Person loans (where you are the lender)
·         Microloans (where you are the lender)
·         Anywhere else you have placed or invested your money

Got all of them listed out? Good. Now, add up all of the balances.

Step 2 – List out all of your accounts (and corresponding balances) containing your loans/liabilities (debts).  Shown below are some examples of the types of accounts that should be included in your list:

  •          Credit cards
  •          Personal loans
  •          Boat loans
  •         Car loans
  •         Furniture loans
  •         Student loans
  •      Or anywhere else that you owe money


After getting all of these listed, add up all of the balances and subtract the total from your asset total to calculate your net worth.
Ok, so you calculated your net worth! Now what? Well, your net worth statement/listing of financial accounts will be continuously used as the starting place to make informed financial decisions. However, it’s important to know that this calculation IS NOT a one-time action item. For this system to work, you must keep this listing current EVERY MONTH.

Now, if you’re like me, you easily forget things like this because your life is pretty hectic with many different commitments. Because of this, you need to complete the following 2-Minute Automation Action Item to maintain visibility.

2-Minute Automation Action Item – Place automatic monthly reminder on Gmail or Outlook calendar to update your net worth listing as your account balances change.

How about you all? Do perform a similar tracking exercise of your financial position/net worth on a routine basis? If so, how often? Do you do this manually or use a type of personal finance software? 

Share your experiences by commenting below!

    ***Photo courtesy of http://www.flickr.com/photos/59937401@N07/5856725357/sizes/l/in/photostream/

    What’s Your REAL Hourly Wage?

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    Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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    Click here to enter my free $51.95 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is January 31st, 2013.

    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.


    Do you know how much you bring home for each hour of work you put in?

    If you’re an hourly employee, the number will be in the front of your mind. If you’re salaried, it might take a little calculating (salary ÷ 12 months ÷ 4 weeks ÷ 40 hours (or however many you put in) = hourly wage).

    In reality, though, whatever number you just came up with is wrong. What you actually bring home is much (sometimes much, much) less.


     I bet you didn’t realize that. I also bet you won’t look at spending the same way again once you do.


     Here’s why it’s true:

    You Have to Spend to Work to Earn the Money You Spend

    If that sounds confusing (and more than a little unfair), it’s not surprising. This isn’t a concept many of us consider when we’re making our financial decisions. But, it was brought into stark reality for me when I read the book, Your Money or Your Life, by Vicki Robin and Joe Dominguez. In addition to challenging many aspects of my relationship with money, what really hit home for me was the exercise in this book called “Your Real Hourly Wage.”

    Whatever your stated hourly wage is, that’s not the amount you’re really adding to your budget. Because in order to have that job that earns you that wage, you incur all sorts of work-related expenses that essentially deduct from your final take-home pay (not to mention taxes).

    Work-related expenses can include:

    • Commuting costs – Gas spent to get to and from work, public transit costs, extra wear and tear (which means more repair) on your car, car insurance.

    • Childcare costs – Ask any working parent how much it costs to pay someone to keep an eye on their kids while they’re at work. Unless you’re fortunate enough to have very generous in-laws in close proximity to you, this can be a huge budget-suck.

    • Food costs – The coffee you grab on the way into work, the lunches you pay to eat out because you didn’t have time to brown-bag it, the snacks you grab from the vending machine to combat your crash.

    • Wardrobe costs – Whatever you spend over the course of the year on work clothes, shoes, and accessories (not to mention dry cleaning), divided as we did above in the calculation to turn your salary into an hourly wage.

    • “Decompressing” costs – I’m not saying you wouldn’t go to Happy Hour or indulge in weekend shenanigans if you didn’t have a job. But, when the majority of your waking hours are filled with a job that can be taxing and stressful, you tend to be more in need of (and likely to justify) pricey entertainment and relaxation on your time off. I’ve certainly called more than a few Girls Nights Out on an emergency basis to damage control what had been an awful day at work.


    These aren’t the only work-related expenses you might have, but they’re some of the biggies. Anything you pay for in order to do your job, to cope with your job, or to keep your job, is something you probably wouldn’t be paying for if you spent your days relaxing at home, living off your lotto winnings (or whatever other dream scenario you like to imagine would let you to not have to work).

    Here’s Where It Gets Scary

    Warning: This exercise is not for the faint of heart.

    If you’re really curious to know what your real hourly wage is, list out a rough estimate of all the costs you incur because of your job, and break down how much you spend per day on each cost. Then, divide that by the number of hours you work each day, and voila! You have your very own, much smaller (and probably quite intimidating) Real Hourly Wage.

    When I read Your Money or Your Life in the spring of 2011 (I’ve been too scared to recalculate my wage now that I’m a part-time freelancer), my Real Hourly Wage was $6/hour. (Actually, it was more like $5.67, but I rounded it up to make myself feel better.)

    Now take that number and flip it around: For every $6 I spent, I needed to devote one hour of my life to my job. It took me a good 6 months to stop thinking about this every single time I bought anything. Was that Starbucks macchiato really worth 45 minutes stuck at work? Coloring my hair at home from a box seemed a lot more sensible once I considered the fact that a professional coloring meant 10 hours pretending I cared about collating copies and formatting page breaks.

    As I said, it’s not a realization for the faint of heart. But, if you need some motivation to get your spending in check, woo boy, is it ever an effective one!


    How about you all? If you’re brave enough, what’s your Real Hourly Wage? How would figuring this out make you rethink your spending habits?


    Share your experiences by commenting below!

      ***Photo courtesy of http://www.flickr.com/photos/socialeurope/4304126242/

      How Diabetics Can Get Life Insurance

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      Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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      Click here to enter my free $51.95 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is January 31st, 2013.

       The following is a guest post written by Lauren Cohen. Enjoy! 

      If you have diabetes and have tried to get a diabetic life insurance policy, you probably already know that a diabetic faces special challenges when buying life insurance. Let’s start at the bottom line: almost all diabetics can get insurance. However, the challenge is to find the best rate for your situation.

       

      How to Optimize Your Life Insurance Costs

      The secret of getting the best insurance rate is also the secret to a longer, healthier life: controlled diabetes. Insurance companies look at controlled diabetes in a completely different way than they do uncontrolled diabetes. This is just logical, as the insurance company is taking a greater risk insuring someone with a chronic disease than it does when insuring a healthy person. Each day that diabetes is uncontrolled, a person’s organs are suffering damage, and he or she is at greater risk of being a fatality. Controlling your diabetes will lengthen your life, as well as lower insurance premiums.

       

      Blood Glucose Testing and Annual Eye Doctor Visits

      The first step in getting the best insurance rate is to be good to yourself. Make blood glucose testing part of your daily routine, and log those results. Seeing your doctor regularly and documenting those visits is vital. The tests your doctor administers, such as measuring blood pressure, looking for signs of vascular disease and neuropathy, and administering an important blood test called the HBA1c, will paint the picture of how well you are doing. Diabetics who have an HBA1c level of 7 or lower are normally considered controlled. A level of 10-11 indicates that your disease is uncontrolled. At 12 or higher, there is much less chance of approval.

      Since diabetes can result in damage to your eyes, an annual visit to an ophthalmologist is crucial, and so is the documentation of the visit. Eye damage diagnosed and treated early can help you avoid further deterioration.

      All of these measures together will allow you to present a picture of control to the insurance company. When you are seeking approval to buy term insurance, this controlled picture is important. Some insurance companies may also require evidence that the medication you are taking and other maintenance measures are making a significant improvement in your health.

       

      Insurance Company Ratings for Patient Insure-ability

      The insurance company will give each diabetic a rating based on the information you provide. The usual ratings are: Super Preferred, Preferred, Standard, and Substandard. A well-controlled diabetic will receive a Super Preferred rating, paying less for insurance than a diabetic with a Standard rating. A diabetic with a Substandard rating may not be able to buy medically-underwritten insurance. For a fast, reliable quote on term life insurance, you can obtain one easily from online insurance brokerage to compare multiple rates for maximum savings. 

      How about you all? Have you ever had trouble getting insurance due to a specific health condition? What steps did you take to optimize your situation?

       Share your experiences by commenting below!

      ***Photo courtesy of http://www.flickr.com/photos/diggersf/709831439/sizes/l/in/photostream/

      401(k) Hardship Withdrawals And How To Obtain One

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      Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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      The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger from Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.
      Your 401(k) plan is intended to provide for you during your retirement years, but there may be times where the money in your 401(k) plan is needed for other expenses. 

      There are not many good reasons to tap into your nest egg, but when a good reason arises, it is important to know how you can obtain the money that you need.  Although there are various ways to borrow from or access the money in your 401(k) account, each method has benefits and consequences that you should be aware of.

      When you have no other viable options to get the money that you need, you may want to consider a 401(k) hardship withdrawal. 

      What Is A 401(k) Hardship Withdrawal?

      A 401(k) hardship withdrawal is a distribution from a 401(k) plan based on an immediate, costly, financial need by the employee, their spouse, or their dependent.  The amount obtained through the withdrawal must be the amount necessary to satisfy the immediate financial need.  Because they are not required by the federal government, not all plans allow hardship withdrawals. So, you will need to read the information for your plan to see if these withdrawals will be allowed. 

      What Circumstances Are Necessary For The Withdrawal?

      Any 401(k) plan that allows hardship withdrawals must provide applicants with the specific criteria that will be used to make a hardship determination.  The plan may provide for some types of hardships, but not others, and require some sort of documentation to determine the existence of a need and how much money is necessary to meet that need.  The plan must use nondiscriminatory and objective standards to make these determinations.
      There are certain circumstances that may constitute the costly, immediate financial need required to obtain a 401(k) hardship withdrawal.  Certain types of medical expenses qualify as well as burial or funeral expenses.  Costs related to the purchase of a principal residence or to prevent foreclosure on a principal residence also typically qualify.  Tuition and other related educational fees may be included in the list of qualifying needs as well as expenses to repair significant damage to their primary home.  Expenses to purchase furniture, electronics, or vehicles are generally not included.

      How Much Money Can Be Withdrawn?

      The amount received through a hardship withdrawal cannot exceed the amount needed to satisfy the immediate financial need of the account owner.  That amount can include any taxes or penalty fees that result from obtaining the hardship withdrawal.  The amount withdrawn cannot be more than the account holder has contributed to the plan up to that point.  Earnings, qualified non-elective contributions, and qualified matching contributions cannot be withdrawn under a hardship withdrawal unless there is a specific clause in the plan’s terms and conditions allowing this.  Regular matching contributions and profit sharing contributions may or may not be withdrawn depending on the plan used.

      What Documentation Is Needed?

      The plan that you are obtaining the hardship withdrawal from will specify the type and amount of information needed to demonstrate hardship and qualify for the withdrawal.  In some cases, an inquiry into the employee’s financial status is not required and the employer may rely on the employee’s representation that they are experiencing an immediate and costly financial need that cannot be relieved with other resources.  In other cases, the account holder must demonstrate that they cannot satisfy the financial need through reimbursement or compensation by insurance, by liquidating their assets, by borrowing from a bank or lending institution, by stopping contributions under the plan, or by obtaining a loan against the plan.

      Denial Of Hardship Withdrawals

      The owner of the 401(k) account will not be allowed to take a hardship withdrawal if the person has other resources available that will allow them to meet the financial need.  These available resources also include the assets of the owner’s spouse and their minor children.  For example, a vacation home in the name of the owner’s spouse would be considered a resource under the hardship withdrawal rules.  The owner of the 401(k) account must also exhaust all available 401(k) loan options before a hardship withdrawal will be permitted.  The employee must first use any available distributions or loans allowed under the plan and any other plan maintained by their employer. 

      The Consequences Of Obtaining A Hardship Withdrawal

      401(k) hardship withdrawals are subject to a penalty fee for withdrawing money from the account before you reach retirement age.  This penalty is generally 10% of the amount of the hardship withdrawal.  This fee is generally taken from the amount that is going to be disbursed from the plan, so it is important to take the amount of the fee into consideration when determining the amount of money that you need to handle the financial issue that has arisen.
      Once the owner of the 401(k) account has received a hardship withdrawal, they are prohibited from making contributions to the plan for a minimum of six months after they receive the withdrawn funds.  This includes all elective and employee contributions to the plan or any other plan available from their employer.  The amount withdrawn under the hardship withdrawal cannot be returned to the account, permanently reducing the balance of the account.
      There may also be consequences when it is time to file your taxes.  You may have to pay additional taxes because the withdrawal is considered an early distribution of elective contributions and will be included in your gross income.  Depending on the amount of the hardship withdrawal, this can increase your gross income substantially and subject you to a higher income tax bracket.
      How about you all? Have you considered or gotten a 401(k) hardship loan?  Did it provide you with the financial help that you needed? 

      Share your experiences by commenting below! 

        ***Photo courtesy of http://upload.wikimedia.org/wikipedia/commons/a/a2/US_Dollar_banknotes.jpg

        $51.95 Giveaway – Community and Charity 10% Monthly Blog Income Give Back # 16 – January 2013 Edition

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        Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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        The 10% give back giveaway fun rolls on for the month of January (I can’t hardly believe we’re in 2013 now)! 

        I’ve had a wonderful holiday vacation the past few weeks, spending one week at my home where I grew up in Arkansas and then another week on a vacation with my family in Mexico (the picture on the right was taken from Isla Mujeres at sunset). I hope things are treating you well also! Are you all ready to get back in gear for working the next few months?! 

        In case you missed the first 15 editions of the 10% Blog Income Give Back, after doing some thinking at the beginning of October 2011 about what direction I want this blog to grow and evolve towards in the future, I decided that any income made from this blog would have more significance to me at a personal life values level if I knew that a portion were being given back to the following places:

        • 1) The readers – Obviously, without you here to read my articles and interact with my ideas, there would be no blog in the first place (let alone blog income). As such, it is only fitting that you receive a portion of any blog income.
        • 2) Charitable organizations – If you’ve read my blog before, you know that I’m a big believer in donating a portion of my money to charity. Each year, I donate between 5-10% of my income to the National Multiple Sclerosis Society as part of the Bike for MS fundraiser that I do. Beyond the good that is done by donating your money, getting used to contributing to charity is also a good practice to emulate the actions of affluent individuals (T. Harv Eker discusses this in his book, Secrets of the Millionaire Mind, which I would definitely recommend reading if you have a few hours).

        Because of these considerations, I’ve decided that each month going forward, I’m going to give away 10% of my net (after-tax) blogging income/profit to My Personal Finance Journey readers (5%) and to charity (5%). Listed below is how the process will work:

        • After each calendar month passes, I’ll tally up my net blog income and determine what Dollar value correlates to 10%.
        • I’ll post the giveaway (similar to this post you’re reading now), and you’ll have approximately 2-3+ weeks to enter.
        • Once the giveaway is over, a grand prize winner will be announced, and that winner will then select what charity they’d like to have 5% of my blog income sent to. Once the giveaway entry window ends, I’ll send out the money to the blog reader winner(s) and personally drop off the charity donation.  
        • So far, I’ve been very happy with the success of the October 2011 – December 2012 give backs. Listed below is a summary of what we’ve accomplished so far with the give backs. 
          • Current total given to 9 different charities = $770
          • Current total given to blog readers = $769 

        So, that’s the overall flow of things and a brief recap of what’s happened so far with the give back initiative. Now, let’s get in to the specific details for this month’s (January 2013) giveaway. 

        Details of January 2013 10% Blog Income Giveaway
        • $51.95 total blog income to give away – $26.95 to a My Personal Finance Journey reader and $25 to the charity selected by the giveaway grand prize winner (see bullet point below for additional details on how the charity selection will work this month).
          • $26.95 in the form of one prize available to one reader as follows – 
            • 1) Grand Prize = $26.95 Amazon Gift Card or $26.95 cash via PayPal.
          • Because of the success experienced in the October 2011-December 2012 give backs with building relationships with local charitable organizations, I’ve decided that for January we’ll keep how we select the charity that receives the 5% blog income donation the same as last month. Continue reading below for more details:
            • Instead of having each entrant specify any charity in the world, the goal for this month will be for My Personal Finance Journey to develop a relationship with one of the 4 charities listed below. The Grand Prize winner will select which of these 4 organizations receives the donation on behalf of the blog.
            • All of these charities were selected because 1) they are high quality organizations who do very good things and 2) they all have a significant presence/office in the area in which I live and operate this website (Central Virginia). 
            • I have contacted the local offices of these organizations and told them that they are part of the 10% blog income give back. After the Grand Prize winner is selected and the selected charity announced, I hope to be able to visit the local office of the organization, meet their staff, and present them with the money personally.
            • It’s been very fulfilling developing a relationship with the local chapter of the National Multiple Sclerosis Society through the MS150 fundraising bike ride I do each year, and I’m hoping that this experience will be just as awesome! I look forward to seeing which organization is selected.

          How to Enter the Giveaway – Deadline to Enter is 11:59 PM, January 31st, 2013


          Like last month, I’ve decided to use the RaffleCopter giveaway management tool to handle sign-up facilitation for the January giveaway, so simply go through the steps listed in the widget below to enter the running for the prize and accumulate entry points.

          There is no limit to the amount of points you can earn. If you refer 10 subscribers – your name will have accumulated 170 entry points! Or, if you link to the giveaway more than once, you can accumulate those 10 entry points multiple times. You can also retweet the giveaway and/or share other My Personal Finance Journey articles via social media sites once per day. In the event of a tie, I will be using a random number generator to select the winner.

          Important instructions: After you complete an entry method, make sure to click and fill out the “I Did This” or “Enter” button in the widget so that I have a record of your points.  

          a Rafflecopter giveaway

          Remember, the deadline for entries will end at 11:59 PM, January 31st, 2013 (a little over 3 weeks from today – the start of the give back). Good luck to you all! Please contact me if you have any questions. After the deadline for entries passes, the winner (one with the most points accumulated) will be contacted via email to receive their prize and select this month’s charity organization for the donation.

          Ramp Up Your Savings in 2013 With These Simple Techniques

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          Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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          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.

          A new year starts us all off on a new page, so to speak.  January finds us full of optimism and ready to accomplish our goals.  If you resolved to save more money in 2013, you may not know where to start, especially if money is tight.

          However, there are some simple strategies that are very popular right now that can help you save money painlessly. 

          Here are some ways you might want to try:

          1.  Save a dollar a week.  

          That is right.  Just one dollar.  Then, each additional week, you add a dollar to the amount you are saving.  Week one, you save $1.  Week two, you save $2.  Week three, you save $3.  By the last week of 2013, you are saving $52. 


          It doesn’t sound like a lot, does it?  Well, at the end of the year following this savings method, you will have saved $1,378!  That is enough to fully fund a Dave Ramsey advocated $1,000 emergency fund. If you are 29 and put that money in a Roth IRA making 7% interest a year and never add any additional money, by age 65, it would have grown to $15,742! 

          If the only thing you put in your Roth IRA from 29 to 65 is the savings you create from $1 a week, you would have invested $49,608, but your Roth balance would have grown to $219,567. 

          Clearly, this can be a powerful savings strategy for those who feel they don’t have enough money to save on a regular basis.

          2.  Save your $5 bills.  

          This is my favorite savings technique because the savings add up quickly.  This strategy is best for someone who pays cash for most of their purchases.  Every time you get $5 back, save it and add it to your bank account. 


          We are paying down debt and on a cash only budget.  Using this strategy last year when we were saving to go to one of my husband’s conferences, we saved almost $600 in 4 months.  Yes, it is painful when the smallest bill you have is a $20 for a small purchase and the cashier gives you back 3 $5 bills, but it does increase your savings. 

          I just modified my spending category to deduct the amount I was saving.  For instance, if I had $400 for groceries in the budget, and over the course of the month I got back a grand total of $35 in $5 bills when I was buying groceries, I deducted that money from my grocery budget and then had $365 for groceries and $35 for savings.  Another nice part of this savings strategy is that it tends to make you think twice before spending money on little purchases.

          3.  Save your age.  

          If you are bit more comfortable financially and up for a bigger savings challenge, AARP recommends saving your age.  To follow this method, simply take your age and add two zeros.  That is how much you should save per year for your retirement.  So, if you are 33, you should save $3,300 this year.  Next year when you are 34, you should save $3,400.  Of course, the earlier you start with this savings method, the better.


          If you can’t yet afford to save your age plus two zeros, another option is to save your age every week.  The same 33 year old, under this method would save $1,716 over the course of a year.  Next year, he would save $34 a week, or $1,768.

          If you have resolved to save more this year, there is a savings method for you.  The trick is to find the method that works best for you and that you are likely to stick with.  To make it even easier on yourself, try having the money automatically deducted from your paycheck and put in the bank.  Then you don’t even need to think about the effort to save money.  (This option works best for savings method #3.)

          How about you all? What is your favorite “trick” to save money?

          Share your experiences by commenting below!

            ***Photo courtesy of http://www.flickr.com/photos/o5com/5126344583/sizes/m/in/photostream/

            Lifestyle Becomes Less Important When You Have a Bigger Purpose in Mind

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            The following is a post by MPFJ staff writer, SK. SK writes about the reasons we get into debt, changing the patterns that get us into debt, and examines small business ownership and real estate investing at her blog, American Debt Project.

            People are subjective, especially when dealing with themselves. For example, it always surprises me when someone describes me as tall. I’m 5’8, but I never really think much of it and I never feel tall. 

            I’m reminded again of how subjective we are towards our own situations when people think I am sacrificing a lot to achieve a better financial situation. A friend recently commented that, “You’ve done so much that I wouldn’t be able to do. I wouldn’t be willing to give up that much because my lifestyle is comfortable and I really enjoy it.” But, I don’t think that I have done much at all! Sure, I gave up a really cute apartment to move closer to work and rent a room in a house. But, by saving over $700/month, I am freeing up money to pay off debt faster. I will also be carpooling and saving money on transportation. My boyfriend is living apart from me, which is the hardest part, but we promised ourselves we are doing this for the next 6 months so we can enjoy a lifetime together. Getting to see each other every weekend is not nearly as hard as if we lived too far apart for quick visiting.

            I used to think I could never give up any aspect of my lifestyle that would mean:
            • Not living in my own place (like renting a room or having roommates)
            • Not being near the beach
            But, I did it anyways. I was renting before, and there are still rules and restrictions involved. I loved our little apartment and having my boyfriend and dogs to come home to. But, we were living in a neighborhood that was too far from both of our jobs.  I started a new job in December that was further east, and it was taking me 1.5 hours to get home. We both took temporary rooms in order to save money and be close to work.

            Even though I joke around that I am “basically a migrant worker now,” my sacrifices still seem minimal. I live in a huge house and have all the same amenities as before. My rent is a tiny fraction of my income for the first time in my life. I’ve always been very lucky and very comfortable. Lifestyle is fun and all, but I don’t need to be comfortable and pampered every step of the way. The majority of people in this world live much, much harder than I do. 

            In some ways, this is lifestyle design too, because I am excited to change things up and see if I can achieve my goals faster. Life is an adventure, stepping out of the norm can help you discover new possibilities. I don’t mind this stretch of sacrifice. I think it will lead to a bigger reward in the end.
            How about you all? How important is lifestyle to you? Have you made a change that you didn’t ever think you would be willing to make?

            Share your experiences by commenting below! 

              ***Photo courtesy of http://www.flickr.com/photos/56223083@N06/5514150673/sizes/l/in/photostream/

              2012 Year-End Blogging and Personal Goals Review and Progress Update

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              Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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              Back in January of 2012, I laid out some personal goals for my life in general and blogging goals for My Personal Finance Journey for the 2012 year.

              As I experienced in 2011, by tracking these goals periodically, it provides me with more accountability and visibility to what I am doing and where I want to go with this community/blog and in my life. As such, the purpose of this post is to review how I did in 2012 in reaching the aims I set out for myself. 


              As far as life goes overall, the second half of 2012 was very successful in my opinion. However, because I was fairly swamped with finishing up my Master’s Thesis defense, serving as a Teacher’s Assistant, and trying to continue making progress in my Alzheimer’s research in general, I wasn’t able to spend quite as much time on my blog (and we’ll most likely see this reflected by a good number of Not on track status updates below). But, such is life I suppose, so I’m not too disappointed about it all! 

              Nevertheless, here goes! An update on my progress in 2012 for my blogging and personal goals,with updates highlighted in bold text below.
              • Read and interact with (comment) 25 partner blogs per week.
                • Done.
              • Continue active participation as a proud Yakezie Personal Finance Blog Network member.
                • Done. I’ve been doing pretty well recently with interacting through the forums, although I could definitely improve here!
              • Publish 3-5 blog posts per week.
                • Done. With the help of the staff writers on MPFJ, I’ve been able to consistently post around 5 articles per week. A big thanks goes out to all of them for helping out during this busy time in my life (and in the coming year!).
              • Obtain 800 unique visitors per day average by end of 2012.
                • Not achieved. 
                • During 2012, my traffic has remained very steady at around 400 visitors per day, so it has not increased quite to the level that I was shooting for. However, this really is my fault. There are several things that I’ve been needing to do in order to build my site further, but just have not had the time to do them. Because of this, I will keep trying to fit these things in as time allows.
              • Host all personal finance blog carnivals (Festival of Frugality, Best of Money, Tax Carnival, Carnival of Personal Finance, Totally Money, Carnival of Retirement, Carnival of Financial Planning, Carnival of Passive Investing, etc).
                • Done.
              • Continue organizing Carnival of Passive Investing in 2012. Offer hosting of the 12 editions for 2012 to guest hosts. If you’re interested in hosting, October, November, and December 2012 are still open and in need of hosts! You can view the schedule by clicking here. Also for the Carnival in 2012, my goals are to a) continue getting passive investing authors involved and b) start reaching out to financial journalists (maybe from Kiplinger’s or Money Magazine, etc) and/or financial reporters on TV.
                • Done.
              • Continue to spread word about benefits of passive investing over active investing. Get involved in BogleHeads forums as well.
                • Not achieved. Need to participate more in BogleHeads forums.
              • Write 1 guest post for another blog per month to expand reach of my ideas.
                • Done.
                • I did really well at this the 1st half of the year, but ran a little short on time in the 2nd half.
              • Create an eBook on one of the following topics – a) Ways to be Frugal, b) Investing Strategy, c) Steps to Buying a Home, d) Getting out of Debt, or e) Financial Prioritization / Account Hierarchy.
                • On track! I started writing a book during Thanksgiving about 31 steps taken over the course of a month (1 per day) that a person can take to get their personal finances in order.
              • Possibly transfer blog to WordPress hosting. First, migrate Carnival of Passive Investing for practice before do My Personal Finance Journey.
                • Not achieved – Have not had time.
              • Create and publish monthly newsletter – “Intelligent Financiers Newsletter.”
                • Not achieved – Have not had time.
              • Attend blogging, marketing, finance, or real estate classes at local community college or nearby conference locations. Particularly, I would like to take a class or two to learn more about Search Engine Optimization (SEO).
                • Done. Took a blogging class at a local community college back in October. It was really good actually! I learned a lot about marketing during the class.
                • I also recently attended a meeting of a local entrepreneurs group that was really interesting as well. I learned about some of the resources that the county government offers for free to local business owners.
              • Submit blog posts to 5 blog carnivals each week (or after generate 5 new un-submitted posts) to expose my blog to new audiences and build links.
                • Done.
              • Successfully execute Tour de Personal Finance in July this year. For 2012, plan further ahead of time to gather more entries (max = 64) and get some sponsors involved. If get sponsors, donate 50% of the earnings of the event to a charity chosen by the yellow jersey winner of the event and also offer prizes for top place entries and jersey winners.
                • Done.
              • Do Easy Like Sunday Morning Roundup and Recap 1X per month minimum.
                • Done.
              • Improve social media presence on Twitter and Facebook. Establish a more regular M-F posting schedule for those outlets.
                • On track.
              • Feature one Cheapskate Jake Frugal Ramblin’ per month.
                • Not achieved – Have not had time. 
              • Run 10% Blog Income Give Back Project each month. Continue teaming up with local charities to build relationships. Try to get other sites interested in doing something similar and also begin to look for sponsors for 1-2 of the giveaways.
                • Done
              • Start and grow personal finance group speaking service. Generate ideas for speaking topics. Offer to local community first and build from there. Create page promoting service on My Personal Finance Journey.
                • Not achieved – Have not had time. However, I did teach one class on personal finance topics for college students which was fun!  
              • Continue to try to find other ways to help people with their finances away from the blogosphere. One thing I’ve applied to do is become a volunteer credit counselor with Credit Education.org. However, I have not heard back from them, even after submitting my application multiple times. Another option I could pursue is offering general advice on finances from a life coach perspective – lifestyle, frugality/money saving tips, life values and dreams, etc. You have to be very careful in making it clear to not offer advice on specific financial instruments since you must have the correct certifications for that (which I do not have). This might be hard for me to resist delving in to the specifics, but it could be fun! I would definitely need to learn more about the legal aspects first though.
                • Not achieved – Have not had time. 
              • Start building smaller sites – one about blogging tips, finance from a scientific perspective, running, and my family’s genealogy as time allows (this is a lower priority goal).
                • Not achieved – Have not had time. 
              • Network with other bloggers, with a particular focus on physically meeting them to build relationships. The bloggers I have met in person so far are really interesting people!
                • Done. 
              • Incorporate affiliate resources in to posts where relevant.
                • On track. I was fairly surprised how long/difficult it was for some of the affiliate programs to actually approve me. What I was finding was that most of the programs that center around products I actually would use were either 1) not offering affiliate programs or 2) not approving me. Because of this, I had to manually email the affiliate program managers to move the process along.
                • So far, I have inserted affiliate links in to appropriate past posts on my site, but I need to work more on adding product resource lists pages, etc. There is definitely more work to be done here!
              • Negotiate advertising deals for other sites.
                • Not achieved fully – Although I did a few throughout the year, I didn’t have as much time to actively pursue this as I would have liked. 

              In addition, my personal goals for 2012 that I set were as follows:

              • Get to bed at midnight and wake up earlier, instead of staying up until 2 am working on various projects.
                • Done. 
              • Take 1 day off per week (Saturday or Sunday) completely from doing work on my blog or from my graduate research job to keep my mind feeling more “fresh.”
                • Done.
              • Become better at following the Getting Things Done email/workflow management system to focus my time and energy on high value projects first and avoid distractions. 
                • Done. 
              • Run a full marathon.
                • Cancelled – During January and February, I started ramping up my running training, but I soon realized that my body simply wasn’t meant to run 17+ miles at a time.
                • However, I’ve been really good in the past few months at bike riding more with a local riding group. 
              • Hike more with the Charlottesville Hiking Group.
                • Done. 
              • Read one personal finance book per month.
                • Done. 
              • Learn how to build a group speaking business.
                • On track – I’ve learned enough for now, but the hurdle now is to find time enough to execute on the things I’ve learned. 


              Looking over the progress I’ve made on the goals listed above, I would say that I am satisfied (but not extremely ecstatic!) with how I’ve done in reaching the goals relating to blogging. These are ambitious goals, and would likely be more appropriate for me to achieve in full if I was blogging full time. However, they continue to the great things for me to strive towards as time allows, so I’m not too worried! 🙂


                How about you all? How did you progress on your blogging/personal/professional goals you set for yourself in 2012? 

                Share your experiences by commenting below!

                  ***Photo courtesy of http://www.flickr.com/photos/meddygarnet/2224691808/sizes/l/in/photostream/

                  Effective Budgeting Strategies for the Over-40 Crowd

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                  Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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                  The following article is by MPFJ staff writer, Miss T, from Prairie Eco-Thrifter. If you want to learn how to live your dream life in a sustainable, healthy, and money savvy way, check out her site here.

                  Achieving financial security without working to a budget is almost impossible, which is why everything you read stresses its importance.

                  Your budget is vital to your financial security.

                  Failure to budget would have to be the most common cause of people experiencing financial difficulties, serious debt, and financial disaster. Having a working personal and household budget is a non-negotiable as far as financial security is concerned.

                  Now, if you’ve reached your 40s without having consistently used a budget, these tips are designed for you. It’s different now; we have less time to set ourselves up for a secure financial future; we have less time to achieve the things we want, once we get to forty.

                  However, it isn’t all doom and gloom.

                  Forty year-olds still have a good twenty years of working life ahead of them, during which time they can ramp up their savings and invest more heavily to play catch up. Many people are enjoying a more stable, if hectic, lifestyle; many are in a better position financially, than they were in their twenties.

                  The main budgeting tip for the over 40s crowd is to make a start.

                  Delay no longer; set up a working budget today and start creating the life you want to be living, now and in the future.

                  Purpose of Budgeting

                  When you first create a budget, your spending habits will be glaringly obvious; they may not be a pretty sight! A budget shows you very clearly where you spend your money and where spending is excessive. It can come as a bit of a shock, so be prepared!

                  Elements and Characteristics of a Good Budget

                  Understand the basics of a good budget – it must contain all income and every single expense. It’s easy to forget expenses, so be prepared to have to add things in as you go along. A working budget is always a work in progress. A good budget needs regular tweaking.

                  A good budget also needs to balance – this may seem a bit obvious, but you’d be amazed at the number of people who continue to work with a budget where spending exceeds earnings. This is a situation doomed from the start – it can only continue for a short time until disaster strikes. So, make your budget balance; look for areas where you are over-spending and cut these back. Reduce or eliminate spending on things that are not important to you, so you have enough money for the things that are.

                  Regular savings are an important part of a good budget. If you are over 40, your savings figures need to be at least 15% of your total income; 20% is even better. 10% of income is fine for those young 20 year-olds, but at your time of life, you need to sock away much more. If your budget doesn’t allow for this level of saving, find more ways to shave expenses. A little bit from several different areas is easier to do than cutting big chunks from one place. Start with smaller savings, if you must, but at least start.

                  A good budget is simple and easy to follow. Complicated budgets get ignored and forgotten, and bad habits creep back. You need to check how you are tracking – weekly at first and then at least monthly. Be prepared to make adjustments if bits aren’t working, but try to avoid borrowing from one area of spending to pay for another. Tempting, I know, but it’s way too hard to pay these amounts back to where they belong.

                  A great strategy for those who have struggled with budgeting in the past is the use the ‘accounts’ system. Basically, you assign an ‘account’ to each area of spending in your budget. So you’ll have a rent or mortgage account; a separate one for food, utilities, clothing, school fees, transport, entertainment, holidays etc. When creating your budget, you’ll have worked out how much you need to assign to each area of spending. These amounts go into each ‘account’ from every pay check.

                  So, at any given time, you will know that you have enough cash to pay the power bill, buy food and clothe the family. Draw up a simple spread sheet on the computer or keep it all in a notebook if you prefer a more hands-on approach. I know some people who put the correct amount of actual cash into glass jars, until they learn how the system works. Whatever works for you, I say!

                  When you spend an amount, deduct it from the ‘account’ it applies to. This way, you have a running balance in all your areas of spending ‘accounts,’ and you know your budget balances. You may find that you need to make adjustments from time to time, as things change in your life. You’ll need to re-allocate money from child care to school expenses, for example.

                  Budgeting for the over 40s crowd must include some form of debt reduction and retirement planning. Start with baby steps if necessary, but do make a start. The sooner you do, the sooner you’ll be on the road to a more secure financial future.

                  How about you all? How do you budget in your middle age?

                   Share your experiences by commenting below!

                    ***Photo courtesy of http://www.flickr.com/photos/68751915@N05/6869762317/sizes/l/in/photostream/

                    2012 Year-End Financial Goals Review and Progress Update

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                    Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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                    Happy New Year everyone! 2013 is finally upon us! I hope you’ve had a nice holiday season, full of some fun vacations and spending time with family. 

                    Back in January of 2012, I set my financial goals for 2012. Since the year is now over, I figured it would be a good time to sit down and take a few minutes to review how I’ve done in reaching or NOT reaching (in some cases) the various targets I set for myself almost a year ago today.

                    Overall, I would financially rate the 2012 year as being quite phenomenal!                     I’ve been able to establish a good doggy emergency fund, max out my Roth IRA, contribute significantly to my Individual 401k, invest in my site’s future growth, and my net worth has increased 40% during the past year. Of course, I’ll go in to more details on each of these points below. Read on! 

                    So, here goes, a progress update (in bold below) on how I did in 2012 reaching my financial goals.                     Enjoy, and I look forward to reading any comments you all have!  

                    Short Term (less than 1 year) Goals
                    • Contribute $5000 (or ~$420 per month) to my Roth IRA with Vanguard this year (maximum allowed).
                      • Done. Nice! 
                    • Reach net worth target for this year (not displayed here).
                      • Done and surpassed! Nice! 
                    • Maintain target 6-9 months of expenses in cash reserve emergency fund in Dollar Savings Direct account.
                      • Done. 
                    • Rebalance mutual fund portfolio to meet asset allocation target %’s (75% equity, 25% fixed income overall). 
                      • Done.
                    • Obtain 30% ownership / equity in condominium. Pay $500 per month for condo mortgage payment.
                      • Decided to delete this goal. Instead, I have been focusing on putting more money away in my Individual 401k account. 
                    • Put together a will and have it reviewed by a lawyer.
                      • Not done. Oops! Dropped the ball on this one.
                    • Continue to save money for trip to Grand Canyon. 
                      • On track – Currently have saved $1670 for this trip. 
                    • Invest $500 in Microloans with Microplace.com to support Latin American micro entrepreneurship. This equates to $41.67 to invest per month. 
                      • Done.
                    • Donate $1,150 to Multiple Sclerosis Foundation in 2012 (5% of take-home pay in my graduate school research assistantship job).
                      • Done – Donated probably close to $1,500 this year.
                    • Fund raise $7500 for MS 150 bike event in June 2012.
                      • Did not achieve. Raised $6,000 though! 🙂
                    • Save 3% of take home pay each month (after taxes) for Dream Account.
                      • Done.
                    • $30 per month save for doing running races as part of health life values account.
                      • Done. 
                      • Was not able to do as many running and bike races/rides towards the end of the year since I twisted my ankle pretty badly in October.
                    • $20 per month save for buying fresh vegetables as part of health life values account.
                      • Done.
                    • Save ~33% of blogging income (if any) + untaxed graduate fellowship income from my research job in a high yield online savings account in preparation for 2012 taxes.
                      • Done.
                    • $30 per month save for trips to visit friends in other states I have not seen in a long time.
                      • Done.
                    • $10 per month save for purchasing food for backpacking trips in the Blue Ridge Mountains.
                      • Done and was able to take a nice backpacking trip along the Appalachian Trail this summer!  
                    • Contribute 20% of blogging income to Individual 401(k) with Vanguard.
                      • Done and surpassed. I just ran the calculation, and it appears that I contributed 67% of my net income from blogging to my Individual 401k account. Nice! 
                    • Investigate and execute any business tax deductions I can for 2011 taxes.
                      • Done. Deducted home as a business expense with the help of my accountant.
                      • Use 1% home value home maintenance fund to fix various small things that are broken around my condo after 2 years of use. These things include a closet door off the hinges, the light-switch in the bathroom not working all the time, 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. 
                        • Not yet done. Need to do!
                        • Execute 4 estimated tax payments for blogging + graduate research fellowship income on the following dates – 1) April 17, 2012, 2) June 15, 2012, 3) Sept. 17, 2012, and 4) Jan. 15, 2013.
                          • Done. I’ll be doing this again in 2013! 
                        • Organize move in of my girlfriend in to my condo in June-July 2012. 
                          • Done. She moved in during June 2012.
                          • Start saving a little money each month to attend the Financial Bloggers Conference, 2012 in Denver in September. 
                            • Cancelled due to lack of vacation in graduate school. 
                          • Save $111 per month until have a total of $1600 for health expenses for new Greyhound we adopted (for annual health checkup, Frontline/Interceptor, and miscellaneous health emergencies/treatments needed – Greyhounds can have a lot of health issues because they were bread for racing!).
                            • On track – It actually worked out pretty well since I just am using the money that I was accumulating for the FINCON12 above towards savings for the dogs.
                            • I will have the $1600 total after March 2013.

                              Mid-Term (3-5 years out) Goals:
                              • Continue contributing $5000 to Roth IRA each year and using dollar cost averaging.
                              • Reach intermediate net worth target (not displayed here, but is 1.42X my current net worth).
                              • Own a rental property by 2016.

                              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. 



                              In reviewing my progress, it appears that there were only 3 items that I was not able to achieve during 2012 that I laid out for myself. Overall, I am highly satisfied with this! Thanks to everyone that helped out to make this year great! 

                              How about you all? How did you do in reaching the goals you laid out for yourself in 2012? What techniques do you find most effective in holding yourself accountable and on-track for your goals you set?  

                               Share your experiences by commenting below!

                              ***Photo courtesy of http://www.flickr.com/photos/smemon/4805089632/sizes/l/in/photostream/

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