How Strategic Currency Conversion Can Prevent Losing Money in Translation

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The following is a guest post from the editorial team at Card Hub, a leading credit card comparison website.

Wasting money – It’s what we all strive to avoid and why many of us read a blog like My Personal Finance Journey. While there are endless ways people waste their hard-earned funds, one of the most frustrating is currency exchange while on a vacation to another country, which can add up to 15% on the cost of a trip.

There’s something about overpaying for a supposedly equivalent amount of money that just doesn’t sit right with me, and I’m sure many of you feel the same. So, what’s the best way to approach currency exchange, and how can we avoid losing cash in translation? Let’s find out.

Current State Analysis of Foreign Currency Exchange

The name of the foreign currency exchange (FXCM) game is minimizing fees and finding the lowest possible exchange rate, which means shopping around. Luckily, you’ll have a bit of a head start in this endeavor as we at Card Hub recently conducted a study of the exchange rates offered by the market’s major players: 15 of the largest consumer banking institutions in the U.S.; Visa and MasterCard, the most widely accepted credit networks in the world, and Travelex, the world’s biggest airport forex operator. Overall, this study provided three major insights into consumer currency exchange that will help guide your shopping:

1. Credit cards save you the most money on currency exchange.
2. You should never convert currency at the airport, if you can help it.
3. Bank exchange rate offers vary widely, so shop around.

More specifically, no international fee credit cards on the Visa and MasterCard networks can save you 14.7% on currency exchange relative to Travelex and 7.9% as compared to your average bank. Therefore, getting such a card is the first step in minimizing the cost of overseas travel.

That’s not the end of the story, however, because you’re going to need cash when traveling abroad and Credit Card 101 says that a credit card cash advance is a terrible idea given the high fees and interest rates. You should therefore use a low-foreign-fee ATM card when you land.

Final Thoughts

There are a few additional details to keep in mind in order to bring your currency exchange savings plan to fruition.

• First, it’s important that you open a no international fee credit card before booking any flights or hotels because the foreign fees that 90.2% of credit cards charge apply to any transactions processed outside the U.S. 
• Second, make sure to notify your bank of your travel plans in order to avoid suspicion of fraud and resulting account difficulties. Last but not least, though it might be tempting, decline any merchant’s offer to covert your bill into U.S. dollars or you’ll be left paying an exchange rate that would make an airport currency exchange service’s offer look attractive. Other than that, all that’s left is to enjoy your travels.

How about you all? Did you know that credit cards have the most favorable foreign currency exchange rates? What strategies do you and your family employ to save money on converting currency? 


Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article

• Great article here! Since my family and I like to travel to foreign countries for vacations, currency exchange is an important topic for my personal finances. It is also one to which I’ve given a bit of thought before.
• Typically, in order to save money on foreign currency exchange fees during vacations, my family does the following:
• Withdraw the majority of the cash we need for the trip before we travel at our home bank branch. This saves money on foreign ATM fees. Then, when we get to our destination, we split up the money among the four of us, with each of us carrying a bit of the cash in our money-belts for security.
• Because all of our credit cards carry the typical 3% foreign currency purchase fee, we try to only purchase “big-ticket” items using our credit card.
• If we need to exchange our US Dollars for the local currency, we generally always try to do so at a bank (because we’ve found banks have better rates than currency exchange booths).
• @ Results of currency exchange study – Very interesting study! I would definitely like to see the complete methodology and results of the study for further reference. My thoughts on the results are listed below:
• I completely agree that 1) bank exchange rates vary (so shopping around is very good!) and 2) that exchanging money at the airport will cost you more.
• I definitely didn’t know that credit cards provide the most favorable foreign currency exchange rates. I would have thought that one would pay a premium for the convenience of having the credit card do the conversion without you having to take any action. I’d like to see the complete details of the study for this part especially!
• @ No-International Fee Credit Cards – I have heard of these credit cards before, but I have resisted applying for one because I really only travel about 1-2 times per year outside of the US. Because of this, I don’t think I would use the card enough to make it worth its while. In addition, I would suspect that since no-international fee cards have this added no-fee perk, certain other features such as cash-back rewards, APR, etc, would be less favorable than normal credit cards.
• However, if I were to get a no-international fee credit card, I would make sure to get one that 1) has no annual fee and 2) has a rewards program.
• A list of cards that fit these criteria can be found here.
• Examining this list, there are 8 credit cards that fit the two criteria described above. Of these 8 cards, none offer cash-back bonus levels as high as my current favorite credit card for domestic spending – The Chase Visa Freedom Card.

***Photo courtesy of http://www.flickr.com/photos/epsos/5902557577/sizes/l/in/photostream/

Tour de Personal Finance, Stage 12, Round 3 – Posts 9-16 & 41-48

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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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Without further a due, let’s continue on with the 12th Stage (the third Stage of the 3rd round of competition) of the 2011 My Personal Finance Journey Tour de Personal Finance (to follow all of the action, click on the Tour de Personal Finance category link and scroll down to read all the posts involved in this subject).

• Bicycle In The City (Bicycle): This article was produced out of both frustration at city traffic congestion, and with optimism for real alternatives to the car. Cars are stressful, from financing the purchase to filling the tank. There must be a better way. Cities that integrate the bicycle and support carless lifestyles are the way forward.   

• An Argument for Privatizing Social Security (Argument):  Just as our country’s finances reach a critical point, Social Security is set to start failing. Social Security makes up 1/5 of our federal budget and is facing a huge deficit if changes aren’t made quickly.  This article argues that privatizing Social Security could be a permanent and sustainable solution.   

***Photo courtesy of http://www.flickr.com/photos/teamtraveller/3921094904/

What Would You Do If You Needed to Buy a Car? – Part 2 – Secure Your Car Buying Financial Details

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Back in April of this year, one of my graduate school friends asked for some advice with buying a new car. Unfortunately, since I’ve never had to go through the car-buying process myself yet in life, I wasn’t able to provide him with as much insight as I would if he asked about investing for retirement.

However, in an attempt to learn some more about car-buying in order to offer help to future inquirers, I’ve decided to roll-out a post series speaking to this important topic. In Part 1, I discussed the various considerations and steps I would take to sell my car. You can view the complete post at the link below:

What Would You Do If You Needed to Buy a Car? – Part 1 – Sell Your Current Car

Having sold my car using the steps discussed (and hopefully freed up some cash from the proceeds), it would then be time to nail down the financial picture that will be involved in purchasing my new car. Similar to buying a house, you must first determine how much car your finances can afford before you even think about setting foot on a new/used car lot.

So, let’s get started with how I would nail down the financial specifics needed to buy a car.

Step 1 – Determine What Type of Car Buyer You Are

Just like we saw in Part 1, the first step (in my opinion) to determining the financial specifics of your car purchase is to do some inner-self reflecting to determine what is important to you in a car.

The ultimate goal of this exercise should be to determine whether or not you are a used car buyer or a new car buyer. Listed below are some guidelines to help you determine which category of buyer you belong in:

New Car Buyer

• People that fall in to the new car buyer category are very similar to the “Category 1” sellers described in the first Part of this posting series. 
• New car buyers are those individuals to whom price is really not the main issue when buying a car. These people are well-off enough to be able to afford a car comfortably, with the biggest concern being that their normal life is not interrupted by the car purchase process.
• These buyers want to purchase a car quickly and can be assured that no wear has already been placed on the vehicle that would result in anything more than the car needing a routine oil change.
• Examples of people who fall in to this category are doctors, lawyers, professional workers, etc. that have enough money in their bank accounts to pay for a new car (or can easily obtain the financing required). 
• I would propose that these individuals typically receive high enough pay that the extra 10 hours of time that would be required to become a semi-expert in car value in their local area would not be worth it financially. After all, if you are a lawyer or contractor charging $300-$500 per hour, that extra 10 hours could be costing you THOUSANDS of Dollars.
• However, you could also fall in to this category if you simply do not have the will, desire, or capacity to learn about the in’s and out’s of car buying and car value. While this is perfectly acceptable, I would definitely encourage everyone to read about the used car buyer category below before deciding to which you belong.

Used Car Buyers

• While everyone (at least to some extent) probably aspires to be in the New Car Buyer category, for a large amount of the population, buying a new (unused) car is either 1) not economically justified (because the car decreases in value 30-50% by simply driving it off the lot) or 2) not financially feasible.
• For the people that fit either one of these two descriptors, we have to rely on being able to buy used (pre-owned) cars.
• Used cars cost much less up-front, but will most likely require more up-keep, maintenance, and on-going costs in general in order to stay on the road. All of this must be factored in to your decision about which car to buy.
• Furthermore, within the used car buyer category, I believe there exists two subcategories – extreme frugalists and value shoppers.
• Extreme Frugalists – This first category is for those rare special souls (like a college instructor I had) that take frugal living to the extreme! These people buy the cheapest of the cheap cars (think $1000-$2000), don’t carry collision coverage (only liability coverage), and don’t care one bit about the appearance of the car as long as it gets them to where they need to go. They are OK with it breaking down because they only drive it around town and can be picked up if needed.
• Value Shoppers – The second category is probably where most used car buyers will be. These folks need a dependable car they can take on an occasional long trip, drive to work each day, run errands, and live life in general. The car needs to be dependable enough to not break down with this normal use.  

So, take a moment and look at which category you think you fall in to before we move on. Personally, I probably fall in to the Value Shoppers used car buyer category. Being in graduate school, I don’t yet have enough money to be able to buy a new car the way I’d like to (more on this later in the post!).

Step 2 – Determine How Much Money You Have Currently to Purchase a Car

Once you’ve decided what type of car buyer you are, it’s now time to think about how you will pay for your new vehicle. To get started with this exercise, you need to take stock of all of the money you have available at the present time to go towards a car payment.

Listed below are some common places to look:

• Cash obtained from selling your car (Part 1).
• Money saved in savings accounts or taxable investing accounts (not retirement accounts).
• Important note: Your emergency fund should NOT be used to buy a car. If you got in to a wreck with your current car and needed some money to pay for medical or car insurance deductibles, that would be an acceptable use of an emergency fund. However, if you’re buying a new car, you should theoretically be able to plan far enough ahead so that you don’t have to touch your emergency cash reserves. 
• You should also not tap in to savings that you have earmarked for other purposes, such as achieving your life values or dreams, to buy a car. This may be tempting, but it really should be avoided! After all, you want to actually achieve your life dreams/values at some point correct?!
• Cash from parents or relatives that might be able to help you buy a car.

Step 3 –  Determine Your Time Frame for When You Need to Buy a Car and Automate Savings Accordingly

So, in an ideal world, all of the money a person needed for buying a car would be obtained from one of the cash sources above. However, the truth of the matter is that selling your current car may not generate all that much cash, you may not have well-off parents, and your savings may be non-existent.

In the real world, we have to take a more active approach and plan/save for our upcoming vehicle purchase. Listed below are the steps I would recommend taking:

• Determine how many months from the present time you’d like to purchase a car.
• From tracking your spending and determining your monthly cash allocation needs, figure out how much extra money per month you can comfortably save for purchasing a car. In other words, make saving for your car purchase more of a priority for any extra money you have after your other monthly cash needs.
• Once you determine the amount, set up an automatic transfer for this quantity to a high yield online savings account to occur at the beginning of each pay period.
• Please note that it’s important for the transfer to take place at the beginning of the pay period so that you don’t have a chance to spend the money.

Step 4 – Determine How Much Car You Can Afford Before Looking Around + Financing Options

After you’ve gone through Steps 2-3 above, it’s time to sum up the total amount of money you will have that will be available for buying a car both from existing funds and future savings according to your automated transfer plan. Take a minute to calculate this for your situation.

Once you have added the values up, I can imagine one of two scenarios happening:

• Scenario 1 – The number you calculated is, in your opinion, sufficient to buy a decent car for your needs.
• Scenario 2 – The number you calculated is too low, in your opinion, to get a dependable car (even a cheap used one). 

If your calculations result in Scenario 1, then great! You’ve successfully secured the money you need to buy a car, and you’re ready to begin the car shopping process. This topic will be covered in Part 3 of this series (on the way soon!).

If it’s looking like you are experiencing Scenario 2, don’t feel bad! There’s still hope; you just have a little more work to do.

Step 4b. – Car Financing

Personally, I am not a big fan of taking out loans on depreciating assets (such as a vehicle that depreciates in value with each year it’s on the road). Because of this, I would try with all of my power to avoid taking out a car loan for my car purchase.

However, I also strive to be a practical person (even if I am a head-in-the-sky engineer! haha). And, the reality in today’s society is that unless you live in a big city with lots of public transit options, you need a car. And, more exactly, you need a sufficiently dependable car.


Because of the strict need for a car in today’s society and fairly favorable financing options (because it’s a secured debt), taking out a car loan isn’t as bad in my book as racking up thousands of Dollars of 25% daily-accruing credit card debt or taking out a 50% interest payday loan.

So, as I’ve mentioned, car loans aren’t all that bad. However, you do need to take some precautions in order to maximize your success with the car financing/purchasing process.

First, let’s take a look at the different possible sources you can turn to for where to get a loan for a car.

• Family/Friends
• The first option available to you for obtaining a loan for a car is your friends and/or family. 
• Personally, I would advise against obtaining this type of financing, as loans to friends/family are rarely ever paid back and often cause stress on relationships.
• If getting a loan from family/friends is absolutely your only option, it’s important to draw up an explicit loan agreement to protect both parties’ financial and legal interests.
• In-House Financing from Dealership
• Pretty much any dealership that you visit will offer some variety of in-house financing/loan options. Why is this? Because dealerships make most of their money off of 1) these loans and 2) reselling used cars. Fairly little money is made on selling new cars.
• An example of in-house dealership financing is Honda Financial Services. 
• One of the benefits of in-house financing is that promotional loan packages are often offered (you’ve probably seen them on TV or heard them on the radio!) to entice consumers to get to the dealership and buy a car. In fact, currently, on the Honda website above, they are offering a loan special for Accords for 1.9% interest financing for 24-36 months.
• Personally, I am not the biggest fan of in-house financing because I feel like they are trying to almost trick me in to buying a car. I also do not like how they try to get you paying for too expensive of a car by offering low monthly payments, but spread them out over MANY years! Why would you want to be paying off a car loan for 15 years?! This is not a house!! 
• However, if there was a SUPER low interest financing deal on a car I wanted, I would consider in-house financing, but would make sure to examine the loan details very closely. Some red flag tricks to look for are hidden loan fees, balloon payments, and/or jumps in interest rate after a certain introductory time period is up.
• Auto Loan from a Bank
• My preferred method of obtaining financing for a car purchase would be from a reliable bank. At banks, I feel like you are more likely to get unbiased loan assistance as compared to a dealer who is also selling you the car.
• If you go to the website of almost any bank in your area, you’ll most likely be able to pull up their options for auto loans. Listed below are several current loan packages I found for used car purchases from a dealer:
• Chase.com – 2.99% for 48 months
• Capital One – 3.99% for 36 months
• Bank of America – 2.99% for up to 60 months  

No matter what route you choose for obtaining an auto loan, the most important thing is that you define what you’d like your approximate monthly payments and loan payoff period to be before looking at cars. These two specifics should be defined by looking at how much cash you have on hand for a down-payment and how much free income you have each month to put towards a car payment.

To assist you in determining these specifics, I created a car loan payoff/amortization schedule spreadsheet at the link below. I’ve shared it as “view-only,” so just download it as an Excel spreadsheet so that you can adjust it to fit your specific situation.

Car Loan Amortization Schedule – Google Docs Spreadsheet

The spreadsheet can be used to determine the approximate “amount of car” you can afford by performing the following steps:

• Enter the following information in Column A – 
• Amount of cash you currently have on hand.
• Interest rate on the bank/dealership loan you are considering (or use the default value of 2.99%.
• Tentative loan term that you’d like to have (or use the default value of 36 months). Please note that if you increase the loan term, you’ll need to simply add more rows at the bottom of the calculation table.
• Next, using the Solver function in Excel, set the cell in the last row of Column G to a “value of 0” by changing your Target Car Purchase Price in cell A14. Then, click “OK.”
• The Solver function should generate the appropriate car purchase price that you can afford based on your cash savings and monthly payment specified.

Once you’ve used this spreadsheet to determine how much car you can realistically afford, you can start thinking about shopping around for your car. And, you will not lured in to buying a car that you cannot afford simply because the dealership tries to talk you in to a promotional loan package.

Conclusions


So far in this post series, I’ve talked about the first two big steps I would take in buying a new car. In Part 1, I discussed how I would sell my car london. After freeing up some money from the sale, I would first nail down the financial specifics of how I would pay for my new vehicle before going shopping.

In determining these details, it’s important to consider 1) what type of buyer you are, 2) how much cash you have on hand for the purchase, 3) how long you want/can wait until buying a car, and 4) how much car you can comfortably afford, either solely from money you have or supplemented by an auto loan. By arming yourself with this information, you can make your car-buying process a more satisfying and less painful process.

How about you all? How did you go about figuring out the finances for buying your last car? Did you take out a loan? If so, did you get the loan from the dealership or a bank? 


Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/rjs1322/1009831723/sizes/l/in/photostream/

Tour de Personal Finance, Stage 11, Round 3 – Posts 17-24

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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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Without further a due, let’s continue on with the 11th Stage (the second Stage of the 3rd round of competition) of the 2011 My Personal Finance Journey Tour de Personal Finance (to follow all of the action, click on the Tour de Personal Finance category link and scroll down to read all the posts involved in this subject).

• This isn’t your grandparents’ recession (Grandparents): 
  Ever since the recession began I think there’s WAY too much blaming of the victims. I’m good and sick of hearing pundits grumble about how lazy and soft Americans have become, and how we ought to take a few lessons from the Great Depression. Here’s the thing: The world was a different place back then. Heaven knows I’m no apologist for slackers, credit-card spendthrifts or people who won’t take anything but the “right” job, but a lot of the advice our elders offered/modeled isn’t relevant today. Plenty of folks are in big trouble not because they’re lazy, but because of complex personal, local, national and global economic issues.

• The Greatest Impact On My Finances And My Best Financial Tool (Tool): I’ve got a financial tool that not only will help me build wealth but makes me a better person as well.  Interested to see what I’m talking about?  Read on to find out more.  

***Photo courtesy of http://www.flickr.com/photos/johnthescone/2541001551/sizes/l/in/photostream/

Tips on Saving Money for the Future

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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 guest post by Check ‘n Go.

Saving money is hard, plain and simple. It’s tough to save when bills pile up and you feel like the future is far away, especially when you need to solve problems right now.

But, saving money is also one of the most essential parts of your finances. If you’ve resolved to start saving money, it’s a valuable and important goal. Consider these money-saving tips to help secure your future.

1. Look realistically at your finances

It’s important to understand your needs. They vary family to family, depending on your specific responsibilities. People who have children are going to have very different responsibilities than people who have hamsters or just dogs.

Figure out all of your expenses so that you know where your money is going, and where you can cut costs. Also, try keeping a list of all you’re spending in one month: it will help you realize where you need to cut back, and where your essential expenses lie.

2. Put money away every month

Once you’ve taken a clear-eyed look at your finances, start saving. Don’t give yourself the chance to back out; set up an automatic withdrawal that deducts money from your account, either every month, or whenever you get paid.

3. Contribute to a 401K or Roth IRA

If your job offers a 401K, start contributing as much as they will match. It might not feel great for your paycheck, but it’s an investment in your future. Unless you have nowhere else to turn, never borrow against your 401K. If you do, consult with a financial advisor beforehand.

If your job doesn’t offer a 401K, look into a nondeductible IRA or a Roth IRA, so you can start contributing to your retirement.

4. Put away money for your children’s future

If you have children, then you’re probably considering their future education. Based on your current responsibilities, you could have a realistic projection of your future finances. As much as you might want to pay for their education, you do have to consider your own finances. If supporting your children now means they need to support you later, you need to weigh your options. If you do decide that you can afford to pay for your child’s college, then it’s worthwhile to look into a 529 plan that can help you save for your child’s college. There are prepaid tuition programs that allow you to purchase a year’s worth of college tuition at the current rate, as opposed to the future, exponentially increasing rate.

5. Look into tax cuts

Even if you weren’t looking into tuition savings, it’s worthwhile to see if you’re eligible for tax cuts or government-supported programs. Houses, tuition, and even certain bills are deductible, and these deductions could save you quite a bit of money in the long run.

6. Flexibility

Even people with the best kept finances find themselves in trouble sometimes. An emergency can drain your finances quickly. Having a cushion of savings to soften the fall means you won’t be driven into debt, or have to borrow money from friends or relatives. Having a backup plan will help you feel safe and secure, even in a bad situation.

Saving money, even if it’s just a little bit every month, is extraordinarily important. It provides you with a valuable way to cement your personal security, and take care of your family down the road.

How about you all? What techniques do you use to make sure you are saving enough for your future and/or emergencies? Do you use any on this list? 


Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

• @ Developing a frame of mind that facilitates saving – It’s very true that saving is quite hard for many people. I think this is especially true when people are not raised with the saving “mindset.” It takes a good bit of mental resolve to force yourself to forgo current pleasure (spending) for enhanced living later in life. 
• However, the easiest way that I have found to make saving more of a part of my life is to think of it as a challenge/hobby. This makes it fun and more motivating all at the same time!
• @ Tracking your spending to determine your financial needs – This is a practice that I personally employ in my personal finances at least every time I move to a new location or my financial situation changes. By tracking your spending, you can figure out what categories you need to devote money to and how much you can pay yourself first with in order to save for your future.
• @ Automatic deductions for savings – Once you have tracked your spending and know how much money will be left over to save/invest at the end of the month, it’s important that the money be transferred over to your savings account without you having to think about it at the beginning of the month (before your wallet has the chance to spend it!).
• This comes in very handy for me with my dream and life values savings accounts. If ~3% of my after tax income each month was not automatically transferred over to my savings account, I probably wouldn’t consistently save the money.
• @ Saving money for your children – I am in agreement with the advice above that saving money for your child’s college education should not come at the detriment of your personal finances. 
• I read a book once that said that the best financial gift parents can give their children is for the children to not have to financially support them once the parents retire. 
• Going along with this advice, I would encourage parents to first make sure they are saving as much as they can for retirement before looking at an educational savings plan for their children. 
• Another option for keeping educational costs low is to encourage your children to attend a state school instead of an expensive private institution for the higher-educational endeavors.

***Photo courtesy of http://www.flickr.com/photos/o5com/5126344583/

Tour de Personal Finance, Stage 10, Round 3 – Posts 25-32

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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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Without further a due, let’s continue on with the 10th Stage (the first Stage of the 3rd round of competition) of the 2011 My Personal Finance Journey Tour de Personal Finance (to follow all of the action, click on the Tour de Personal Finance category link and scroll down to read all the posts involved in this subject).

• THE Top 10 Bad Financial Lists (Lists): I grow weary and tired of bloggers putting out Top 5, 10, and 20 lists of various financial things that would make our lives better. So, I have devised a most nefarious, ugly, and downright useless list of financial lists (there is the twist) that could ever be published and still be labeled as SFW (Suitable for Work). Careful reading this, you may find yourself suddenly wanting to write a similar list mocking other bloggers. 

• 24 Home-Based Business Ideas (Ideas): This article lists 24 opportunities that we can take advantage of from home to start making some extra income with a home-based business. 

***Photo courtesy of http://www.flickr.com/photos/mikecogh/2569755853/sizes/o/in/photostream/

What Would I Do If I Inherited One Million Dollars?

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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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About a week ago, Sandy from Yes, I am Cheap proposed an interesting idea to the Yakezie Blog Network: she proposed that all blogs that were interested write a post on the common topic of “if you suddenly inherited a million dollars from your long lost cousin Bertha that you haven’t seen since you were a baby, what would you do with the money?” 


Since I absolutely love these initiatives where several different blogs write about a common topic (such as the Yakezie Blog Swap, which I always try to take part in), I was very eager to have the chance to reflect on what action steps I would personally take with $1 Million, if I were to be lucky enough to receive it. It also reminded me a great deal of a topic in the 2nd Yakezie Writing Scholarship Contest (which I helped judge several months ago) where essay applicants were asked to write about what they would do if they won the lottery. 

Inheritance/Estate Tax

Like it or not, the first 30-40% of the $1 Million would most likely have to be set aside to pay Uncle Sam for any estate, or inheritance, taxes that I would owe on the money. However, according to Kiplinger’s, Congress’ lack of action lately on renewing the estate tax in 2010 may allow up to $5 Million to be exempt from taxes. This would be quite a blessing!

Since I’m not quite sure what the verdict will be on this or if a final decision has been reached by lawmakers, I will, for now, operate under the assumption that 40% of the $1 Million be paid in taxes.

Amount remaining = $600,000

Play Money

Of the remaining $600,000, I would take 5% ($30,000) and set it aside for what I call “play money.” This amount of money would be small enough that I would be all right with losing, but would still enable me to “live it up” and enjoy the $1 Million.

Several possible things I would use the play money for are shown below:

• A trip to Spain/France.
• Buying new hiking or cycling gear.
• A trip to the Grand Canyon.
• Visit Yellowstone National Park.
• Backpack on the Inca Trail.

Donate Money to Charity

Currently, I donate 5% of my income to a number of charitable organizations. However, the main one is the National Multiple Sclerosis Society, for which I participate in a bike ride each year in order to raise funds to support and find a cure for this disease.

With the $600,000 remaining after taxes of the $1 million inheritance, I would take 10% ($60,000) and donate it to the Multiple Sclerosis Society. I sure would be their top fundraiser then!!! 🙂

Amount Remaining After Play Money and Donating = $510,000

Achieve My Purpose Focused Financial Plan

With the remaining ~$500,000, I would invest it in achieving my Purpose Focused Financial Plan.

This is a system that I adopted after reading David Bach’s book, “Smart Couples Finish Rich.” A Purpose Focused Financial Plan is a very interesting personal finance strategy that David adopts with the people he advises in his financial planning business. If you haven’t read it already, I would strongly recommend that you pick up a $0.01 (cheap!) used copy of the book from Amazon – Smart Couples Finish Rich: 9 Steps to Creating a Rich Future for You and Your Partner.

In particular, the things that I would use the inheritance for (relating to my Purpose Focused Plan) are listed below:

• Ensure that I continue to contribute 5% of my income each year to charity.
• Pay for traveling and participating in running and cycling races in various locations.
• Max out my Roth IRA and/or 401k each year.
• Maintain an emergency cash fund with 6-9 months of expenses.
• Pay off my condo mortgage of ~$90,000.
• Achieve my life dream of owning a cabin in the mountains.

How about you all? If you won or inherited $1 Million, what would you do with the money? Would you save it, spend it all, or a mix?! Share your experiences by commenting below!

***Photo courtesy of http://search.creativecommons.org/?q=million%20dollars

Tour de Personal Finance, Stage 9, Round 2 – Posts 9-12

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!

Without further a due, let’s continue on with the 9th Stage (the third and final Stage of the 2nd round of competition) of the 2011 My Personal Finance Journey Tour de Personal Finance (to follow all of the action, click on the Tour de Personal Finance category link and scroll down to read all the posts involved in this subject).

• Bicycle In The City (Bicycle): This article was produced out of both frustration at city traffic congestion, and with optimism for real alternatives to the car. Cars are stressful, from financing the purchase to filling the tank. There must be a better way. Cities that integrate the bicycle and support carless lifestyles are the way forward.   

• Gratitude: The Key to Happiness (Key): There was a quote I heard as a young girl that I have never forgotten. “If the only prayer you say in your life is ‘thank you’, that would suffice.”- Meister Eckhart. It’s amazing how one simple, easy, positive action can change so much in a person’s life. One of the things that has had the biggest effect on my life is the realization of the power of gratitude. Simply giving thanks. It has affected everything. It has made me a more positive person; A more productive person; A better achiever; A better wife, daughter, and sister; A happier person. I’m still not perfect, but gratitude has made me better for everything and everyone. Can it change your life as well? I can guarantee it!

***Photo courtesy of http://search.creativecommons.org/?q=luis%20leon%20sanchez

Tour de Personal Finance, Stage 9, Round 2 – Posts 1-8

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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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Without further a due, let’s continue on with the 9th Stage (the third and final Stage of the 2nd round of competition) of the 2011 My Personal Finance Journey Tour de Personal Finance (to follow all of the action, click on the Tour de Personal Finance category link and scroll down to read all the posts involved in this subject).

• How to feed a family of 6 on roughly $200 per week (Family):  Groceries account for one of the highest household expenses. However, it is also a variable cost that we can all budget for. Nikki Holloway, a Canadian mother from Arrowwood, AB, who feeds 6 on roughly $200/week, has provided her top 11 tips to putting the money back in your bank account and not on your plate.

• People Who Don’t Have Cable Are Better In Every Way, Say Those Without Cable (Cable): People who have given up cable are a special kind of annoying. They look down on those of us who choose to watch TV as some sort of sewer creature. Are they really so much better than us time wasters? You’ll probably not want to click through if you’ve dropped cable…
   

• Not So Extreme Couponing: Couponing for the Rest of Us (Couponing): The Extreme Couponing show on TLC may be entertaining to watch, but it’s not very practical or appealing for most of us. Here’s how the rest of us can save big money with couponing without using extreme couponing tactics.     

• Getting Stated With Your Money Idea (Idea): Don’t know where to start or how to promote yourself? This article gives you the starting steps as well as a stack of ways to advertise and promote for free or very cheap. It is also an excerpt of my book 365 Ways To Make Money.
  

***Photo courtesy of http://www.flickr.com/photos/petitbrun/5837136708/sizes/z/in/photostream/

Tour de Personal Finance, Stage 8, Round 2 – Posts 13-20

Without further a due, let’s continue on with the 8th Stage (the second Stage of the 2nd round of competition) of the 2011 My Personal Finance Journey Tour de Personal Finance (to follow all of the action, click on the Tour de Personal Finance category link and scroll down to read all the posts involved in this subject).

Also, if applicable, I will give a brief description of the stage of the Tour de France that took place the same day as the competition.

How to Vote

You can vote for the two articles (one from each intermediate sprint) you’d like to see proceed in the Tour by commenting in the comments section below and telling which are your favorites.

I’ve listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Sprint 1: Mutual; Sprint 2: 401k, etc.) Be sure to comment which one you like the best out of each set of two! Criteria for the best article is completely up to you, but you can use these factors as a guide: 1) post of your favorite blogger, 2) most interesting post, 3) most thought-provoking post, 4) most unique post, or 5) most actionable post.

Here are today’s competitions (Sprints 1 and 2 of Stage 8 went live this morning, so be sure to cast your votes for those articles as well!):

• 6 Easy Ways To Get Advertisers for Your Blog or Website (Easy): A look at six easy ways to get advertisers for your blog or website.  This article gives a step-by-step description on what to do and how to sell yourself and your site.

• This isn’t your grandparents’ recession (Grandparents): Ever since the recession began I think there’s WAY too much blaming of the victims. I’m good and sick of hearing pundits grumble about how lazy and soft Americans have become, and how we ought to take a few lessons from the Great Depression. Here’s the thing: The world was a different place back then. Heaven knows I’m no apologist for slackers, credit-card spendthrifts or people who won’t take anything but the “right” job, but a lot of the advice our elders offered/modeled isn’t relevant today. Plenty of folks are in big trouble not because they’re lazy, but because of complex personal, local, national and global economic issues. 

  
   

• An Argument for Privatizing Social Security (Argument): Just as our country’s finances reach a critical point, Social Security is set to start failing. Social Security makes up 1/5 of our federal budget and is facing a huge deficit if changes aren’t made quickly.  This article argues that privatizing Social Security could be a permanent and sustainable solution.

• Will You Be Able to Retire on $1 Million? (Retire) Inflation is eroding the value of that $1 million nest egg; as the years march forward, there is a very real possibility that you will need much more than a $1 million nest egg to live the lifestyle you want. Here’s what you can do to stretch your nest egg further — even if you don’t have $1 million to retire on.

***Photo courtesy of http://www.flickr.com/photos/romyarlyn/2714690394/sizes/l/in/photostream/