Category Archives for Saving Money & Frugal Living

How To Make Your Own Luck With Your Finances

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

I used to think that luck was just – well – luck! As in, isn’t is so lucky that those people won the lottery or picked the right stock at the right time?

However, what I’ve realized over time is that you can actually create your own luck when it comes to your finances. It might not be “lottery luck,” but with a few simple steps, you can ensure that you remain lucky throughout the course of your financial life.

Here are some common phrases that I hear with respect to money and luck.

There are a lot of misconceptions about finances and how people reach their financial goals. I’m sure you’ll be able to relate to hearing some of the comments below, and hopefully you’ll be able to see the same pattern as I did, which is that those who are “lucky” in terms of money actually worked hard to get there first!

1. Mr. Smith is SO lucky that he got to retire at 55!

No, Mr. Smith isn’t lucky.

Mr. Smith lived below his means. He probably drove an old truck, didn’t upgrade his life when he has the ability to, and invested slowly over time. People like Mr. Smith are perhaps lucky that they aren’t prone to materialism or lucky that they have a knack for saving. The truth is, though, that people don’t retire early because they are lucky. They typically retire early due a lifetime of planning and hard work. I can’t tell you how many people reach retirement age and wish they had the ability to quit working. Don’t wait for luck or envy those who are able to. Everyone has the ability to do this. It just depends on how you plan.

2. They are SO lucky they get to go on vacation! I haven’t been on one in years!

People tend to go on vacations in two ways. They either put it on a credit card and have debt problems later or they save up for it ahead of time.

Sure, many of us are fortunate to get vacation time or fortunate to have a little bit of extra income to buy a plane ticket here or there, but is that really luck? I would say that “vacation luck” is self-created. We either get a break from work because we worked hard to earn it or because we saved up for it. The people who don’t take vacations over the course of several years make conscious decisions not to take one or not to make saving for one a priority. Remember, we can make our own luck when it comes to our money because we control what we do with it!

3. You’re so lucky you get paid to work from home.

This is one I’ve been hearing a lot lately, ever since I started working 100% for myself.

Every time someone says it to me, I vacillate between cringing and feeling grateful that I have the ability to do what I do. However, there is nothing “lucky” about getting paid to work from home. It’s hard and scary and challenging to break out on your own and become self-employed. I didn’t just wake up one day and decide to stay in my pj’s and write from the couch just because I’m a lucky girl. It happened because I worked for it. I always like to point out that there’s no magic formula to what I do. Anyone with enough discipline can do the exact same thing. They just have to want to. Again, there’s nothing lucky about it. To be honest, though, it is kind of lucky that I don’t have to wear blazers anymore.

4. They’re so lucky they started investing early.

Investing is one area where you can definitely make your own luck with your finances.

Sure there are people who pick the right stocks or inherit stocks that their grandparents owned. That’s fortunate for them. However, if you don’t have any sort of trust fund, it’s up to you to make your own luck. You can do this by being conservative with your investments, starting now if you haven’t started yet, and teaching the next generation about responsible investing. The truth is, information about investing is open to anyone and everyone. Regardless of your education level, there are free seminars, books, and blogs that can teach you about investments. No one is lucky because they started investing early. They were simply willing to take the time to learn about it and took action to make sure it was a part of their lives.

Ultimately, when it comes to your money and long-term wealth, there aren’t shortcuts for most of us. Yes, there is a small sect of people who come from very wealthy families or who inherit something they weren’t expecting. However, for the average person with a normal job, it’s up to them to create their own opportunities in life and finances.

So what will it be? Are you going to be lucky or not?

What steps are you taking to create your own financial “luck?”

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/timypenburg/5283231645/sizes/l/

Can Too Much Debt Keep You From Getting a New Job?

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

When it comes to hunting for a job, we tend to concern ourselves with factors that are most closely related to the search itself. This includes preparing the most effective resume, developing winning interviewing techniques, having the right experience and credentials, and a list of convincing references.

But with background checks becoming ever more comprehensive, our efforts to land a job can be materially affected by personal factors, such as credit profile. It’s even possible that too much debt can keep you from getting a new job.

Why would employers care how much debt you have, and why would it be a factor in determining whether or not to hire you?

High debt levels affect credit scores – negatively!

Many, perhaps most employers today are pulling credit before making a job offer. The quality and volume of debt that you have are factors. The amount of money that you owe does affect your credit scores. This is most commonly demonstrated through credit utilization – the percentage of outstanding debt to available credit.

A high level on this calculation, especially above 80%, can have a negative effect on your credit score. That could bring your score down low enough that an employer might do a deeper review of your report, rather than assuming all is well.

Credit reports indicate the reasons for the given credit scores. Credit utilization is one of the primary components of your credit score, and this will be indicated as a reason for the low scores. If the score is low, the employer might scan your credit report to see exactly how much that you do owe, and determine it to be unacceptable.

Ironically, current debt levels can be a bigger detriment than a prior bankruptcy or foreclosure. While major negative credit events are in the past, a high level of debt represents an ongoing problem. An employer may see it as a complication that could affect your performance if hired.

Depending upon the employer, either the low credit score or the high debt level could be an obstacle to an employment offer. Employers likely have a certain range within which they consider both acceptable credit scores and debt levels. If you exceed those parameters, you may be declined for employment.

Too much debt could interfere with your ability to do your job

An employer might decide that the amount of debt you have to be so high that it will interfere with your ability to do your job properly. This is not an unreasonable consideration either. If you have a substantial amount of debt, it is likely having an effect on other areas of your life. In fact, a very high debt level could easily become the dominant factor in your life. That would most certainly have an effect on your ability to do your job.

Worry causes stress, and stress can interfere with your ability to do your job properly and efficiently. An employer may decide that you are not the right candidate for the job, particularly if there other qualified candidates with less substantially less debt. It’s simply one of those factors that could get in the way of the job search in a tight market.

High debt could indicate inability to manage finances

Even without knowing the reasons for your high debt level, an employer could conclude that you have an inability to properly manage finances. This can be an even bigger problem if you’re applying for a job that will involve budget responsibilities. The employer may decide that you’ll bring the same poor money management skills from your personal life into the job and the budget you will oversee.

A lot of people are in debt for reasons beyond their control, including medical debt, business failures, or taking care of sick or incapacitated relatives. If you your high debt levels are attributable to any of these factors, you might want to let the employer know in the interview. Absent that information, the employer may conclude you’re simply bad with money. That is the usual conclusion absent evidence of the contrary.

High debt could make you vulnerable to criminal activity

This is the darker side of high debt levels. They may see your high debt levels as a potential incentive to participate in criminal activity in order to pay off your debt. This could include openness to bribery, participation in financial scams, or even outright theft from the company itself.

This does not mean that all employers will view a high debt level as the potential for criminal activity. Much will depend upon the employer’s previous experience. If they have hired people in the past with high debt levels who have gone on to commit criminal activity, they will understandably be reluctant to do so again in the future.

Once again it’s very important that you’re proactive if you have high debt levels. If you know that the employer will run a credit check, volunteer the information even if you’re not asked. You should be prepared to disclose the reasons why, but you should also be willing to share any documentation you have that proves your point.

***Photo courtesy of http://www.flickr.com/photos/debt-consolidation/

Start Your Christmas Club Now to Enjoy the Holidays Next Year

The following post is by staff writer, Sally. Sally is the blogger behind TinyApartmentDesign.com, a blog about interior design, money, real estate, good reads and general life thoughts. Enjoy!

When the excitement of Christmas Eve and Christmas day are over, I get out of the holiday mode pretty fast and start looking forward to the new year, with the days getting longer and warmer and heading into my favorite season: sweet, sweet summer.

Christmas was never huge in our family, although we did celebrate it. But, in my fiance’s family, Christmas is a Really Big Deal (RBD for short). It’s an RBD for everyone to get together and enjoy baking and cooking together, and share plenty of gifts with each other.

I have to admit that every Christmas is hard for me. I always feel short on cash and can’t get gifts I really want to get for people who are wonderful and giving to us all year long.

So this year, even as I put our lovely Christmas memories away until next year, I am going to be thinking about Christmas for the next 11 months with a Christmas Club.

What is a Christmas Club?

A Christmas Club (or Hanukkah or any other holiday) is the simplest way to put away money for the holidays.

While you can do it electronically, the best way to put aside this money is using cash.

Why? Because this fund is totally different from your other savings goals, and even if you don’t spend the whole amount next Christmas, you can set aside that cash to get a head start on the next year’s Christmas Club. The best part is that when you start in January, you hardly have to save any money at all. I know that $800 is more than enough for me to get gifts for both of our immediate families, something special for my fiancé and still have some money left over a fun tradition like going to see the Nutcracker ballet. That’s only $73 a month for the next 11 months. By saving for 11 months, you’ll have your complete Christmas Club fund by December 1 and can start early on your holiday shopping, although some people might consider that a late start.

But Spending Money on Christmas Gifts is Stupid!

OK, I hear you.

You don’t have to get gifts at all or do anything special for the holidays and you can save that $800. That’s true. In the same reasoning, weddings are stupid, showers are stupid and celebrating birthdays and anniversaries is as asinine as it gets.

I’ve got some very anti-tradition people in my family who think all celebrations are for mindless sheeple and we should just enjoy and celebrate every day of our lives. I appreciate that view. It’s helped me become the person that I am and I am not afraid to question traditions or rituals or the way things are simply because “it’s always been that way”.

But, I don’t hate traditions. I like that Christmas is an RBD in our lives. It’s not always going to be 100% perfect or super-happy-fun all the time, but we’re going to try, darn it! And from an anthropological perspective, these traditions and rituals reinforce our social circles, remind us of the people we value in our lives, including children, family and friends.

So, while it’s important to be an independent thinker and be able to assess the value of traditions and assumptions, it’s equally important to enjoy your life. And if giving gifts at Christmas is part of that, join the Christmas Club now to make it easier on your mind and wallet.

How about you all? Have you ever tried setting aside money periodically throughout the year to use for buying Christmas/holiday presents?

Share your experiences by commenting below!

***Photo courtesy of freedigitalphotos.net

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

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

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

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

It didn’t.

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

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

1. Have a frugal fast.

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

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

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

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

2. Take the 52 Week Money Challenge.

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

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

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

3. Do some financial housekeeping.

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

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

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

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

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

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

4. Learn to invest.

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

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

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

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

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

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

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

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

Cashback Sites Worth Checking Out

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

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

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

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

Ebates

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

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

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

Swagbucks

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

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

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

CashbackHolics

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

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

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

Share your experiences by commenting below!

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

5 Ways To Stay Organized This Holiday Season

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

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

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

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

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

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

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

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

2. Leave the kids at home

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

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

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

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

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

4. Try online shopping for decorations and Christmas gifts

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

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

5. Take a day off work to get everything done

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

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

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

Share your experiences by commenting below!

***Photo courtesy of Picture by Tom Saunders

Why You May Not Want Insurance to “Total” Your Car

Your car – a 12-year-old vehicle in good working order – is involved in an accident, and needs substantial repair work.

The total cost of the repairs are in the $5,000 range, which is right about what the car’s book value is. The insurance company suggests totaling the car, by offering you a check for $5,000, rather than going through the repair process which also has the potential of costing even more.

Due to the age of the car, and the fact that you’re now looking at a $5,000 cash windfall, the idea of accepting the check and using it as a down payment on a new car suddenly looks appealing. Is that the right course of action?

Sometimes – but not always.

While I will admit that accepting the check and replacing the car is probably the path most people would take, there are several reasons why you might refuse it and go with repairing the car instead.

You may not be ready to buy a new car – and the loan that comes with it

$5,000 is an attractive amount of money, but it won’t come close to buying a brand-new car. The most it will do is act as a reasonable down payment. You’ll have to make up the difference by taking a loan to fully pay for the car. With an average car costing around $25,000, this could mean taking a loan of $20,000. That could result in a monthly car payment of $400-$500.

You may be ready for a new car – heck, nearly everybody is – but are you ready for a hefty new car payment? Since your car is well over 10 years old, you probably don’t have a loan on. You probably haven’t have a loan on it for several years.

As great as a new car will be, taking on a new, large monthly payment can be a budget buster, especially if you have not had a car payment for several years. That payment could eat up all the money in your budget that would otherwise go for savings, the payoff of other debts, or even next summer’s vacation.

Instinctively, allowing the insurance company to total the car may seem like the right thing to do. But there’s a very real possibility that it will turn out to be a much more expensive option in the long run.

The car may be more valuable than what your insurance will total it for

It’s very difficult to value the true worth of an older car. Sure, there are car valuation websites, like Kelly Blue Book that provide generally accepted values on both new and used cars, but some cars just run better and longer than other cars of the same age.

Part of it may have to do with how well you as the owner have taken care of the car over it’s lifetime. If you have been particularly ambitious about this, and the car is extremely well-maintained, it may be worth far more to you than it’s technical book value.

You may decide that fixing the car and keeping it will be the least expensive option. After all, replacing it with a brand-new car will substantially increase your cost of living. And trying to replace it with a similar aged vehicle will be no better than a crap-shoot – there’s no way you can know if the previous owner has maintained the vehicle in anything like the manner that you have.

You may be able to get the car fixed for less money

If you have no mechanical abilities, and are forced to rely upon repair shops for needed repairs, accepting the insurance company’s check to total the car could be the best way to go. But if you can do a lot of repair work yourself, or if you have the ability to get it repaired by others at less than full-service shop fees, it may be less expensive for you to repair the vehicle.

For example, if you can fully repair the car by using used car parts, and either do the work yourself, or have it done by a “friend in the business”, you’ll save thousands of dollars over having it repaired by full-service mechanic.

Full-service repair shops, and especially body shops, often see wrecked cars as a cash cow, and charge premium prices. But if you have the ability and resources to work outside of the system, you may be better to go the repair route.

Replacement components may increase the life of the car

This is yet another outcome that people who have been in car accidents don’t often consider. If your car has just sustained substantial damage, the replacement parts that are put into the car on repair could actually prolong the life of the car.

We’re not talking about the resale value of the car here. As a general rule, the fact that the car has been in a major accident will lower its resale value. But if you’re talking about a car that is over 10 years old, its value is close to scrap anyway. The main reason that you would keep such a car is because you can get several more years out of it, and doing so will keep your auto expense low.

If replacing significant components are reasonably likely to enable you to keep the car for several more years, then repair will become the least expensive option.
Of course, we’re not talking about $10,000 worth of repairs to a car that’s only worth $5,000. Trying to fix car under those circumstances could be counterproductive. But if the balance is close – certainly with a few hundred dollars – you may not want to be so quick to allow the insurance company to total the car.

How about you all? Have you ever faced a situation where the insurance company wanted to total your car? How did you handle it?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/madaroni/4964347820/sizes/m/in/

What Size Pond Do You Want For Your Fish-Metaphored Life?

This post topic has been on my radar to do for quite a while now, as it’s been something that I’ve thought about quite a few times in my life, moving different places, meeting new folks from different backgrounds, etc.

What am I talking about here? Well, it relates to the very common metaphorical question that we’ve no doubt all heard at one point in our lives – “Would you rather be a big fish in a little pond or a little fish in a big pond?

Essentially, it is the idea that how successful we perceive our lives to be is based more on how we compare ourselves relatively to people around us vs. the absolute value of our outputs on a global scale.

A great money-based example of this metaphor is the age-old question of rather you would prefer to make $50,000 per year when all your friends are only making $30,000 per year, or if you would rather be making $200,000 per year, but all your friends make $1 MM per year?

More specifically, I am interested in how this metaphor applies to a person’s schooling, career, and personal finances throughout various life stages. Assuming that you are a “big” fish, I want to explore answers to the following questions:

Is it better to attend an undergraduate college that is a “big” pond or a “little” pond?
Is it better to attend a graduate school that is a “big” pond or a “little” pond?
Should the first few years of your career experience be in a “big” or little” pond?
Should the later/more senior years of your career be in a “big” or “little” pond?
Should you physically live in a “big” or “little” pond?
- Or, perhaps for these various stages, there is a happy “medium” size pond that is just right….

Let’s take a look at each of these life stages and examine some of the advantages and disadvantages presented by being in the different pond sizes at that specific time in life. I’ll start off by describing the working definition I’ll use for a big pond and little pond in each specific set of circumstances.

Undergraduate College Degree

Definition of big and little pond sizes in this context: For the context of undergraduate college degrees, I will define a big pond as a school which requires top-of-the-line entrance testing scores and grades to get in and is also very selective in the ratio of applicants vs. accepted for admittance. In other words, a school where pretty much all students are STELLAR. A little pond would be on the opposite end of this spectrum.

Advantages of a Big Pond

As you can imagine, there are many benefits of attending a top-tier school for your undergraduate degree.
- You will be surrounded by incredibly smart student-colleagues and world-renowned professors from which you can learn countless valuable things.
- In addition, you will have a much easier time than your little pond contemporaries in finding a job and/or internship, as many high quality/high paying companies will likely be recruiting directly from your door stop. All you will have to do is saunter on down to the career fair at your school with your resume in hand!
- Along these same lines, it has been my experience that several specific types of jobs pretty much unofficially “require” you to have attended a top-tier undergrad school in order to land the job. Investment banking is one type of job that comes to mind where this is more or less the case.

Advantages of a Small Pond / Disadvantages of a Big Pond

One of the key things that sparked my curiosity/motivation in finally writing this article was a recent newspaper column covering the entrance statistics of the Fall 2013 entering class (the one graduating in 2017) of a public Ivy undergrad school, which is ranked approximately 2nd in public undergrad schools in the US according to World News. This article stated that, “The Class of 2017 averages an SAT math and verbal score of 1349, keeping close with the Class of 2016’s 1350. Ninety-two percent of incoming students were in the top 10 percent of their high school classes.”

Now, I’m not sure how you all did in high school and on your college entrance testing, but I would be very below average (a TINY fish) in the midst of the standards of this BIG pond grouping of undergrads.

Being a graduate student at this institution and having been through undergrad teaching assistant orientation, I also have been told that the prevalence of depression, anxiety, and usage of the psychological counseling services are higher at this school than other schools in the same state. One of the reasons the orientation teachers offered was that the undergrads that come here are often top notch students in high school, but then come to college and are simply average or below average because of the high caliber of the overall student population.

Overall, I do think it is a very good thing to surround yourself with other top notch people at least once (or even multiple times) in your life. However, the aforementioned example brings up the following question – since your personality/self-confidence/sense of individuality is not yet fully formed at the fragile age of 18 when you start undergrad, would it not be better to delay the likely possibility of feeling of below average until later in life when you are a little more sure of yourself? In other words, by putting yourself in a smaller pond at such a young age, you can allow your self-confidence to develop on its own.

Furthermore, if you put yourself in a smaller pond during undergrad, it is possible to temporarily immerse yourself in a big pond through a competitive/challenging internship, during the summer or a single semester.

From a personal finance perspective, another disadvantage of a big pond undergraduate degree is that you are more likely to end up with additional student loan debt since the amount of scholarships they give out/that you will be eligible for will likely be less than at a smaller pond where the school desires your big fish talent.

Graduate School and/or The First Few Years of Your Working Career

Definition of big and little pond sizes in this context:

For the context of graduate school, I will use the same definition of a big pond and little pond as for the undergraduate section above, except that the entrance scores and other criteria would be shifted to fit the graduate school setting.
However, the definitions in the context of a career will be slightly different.
- A big pond in the case of a job setting will be defined as working at a company/organization that is considered one of the best in the world, often termed a “name brand” employer (one that is recognized by everyone).
- Their ratio of people hired / total job applicants is much less than 10%, and they can only hire from very selective target schools if they so desired.

Advantages of a Big Pond

Similar to what I discussed above with big pond undergraduate schools, swimming in a big pond for your first job or for graduate school will allow you to be surrounded by top-notch talent and smart people. You will be able to connect, network, and make friends with big-time current and future generation influencers that will benefit your career for years to come. Perhaps even more importantly, you will learn how to do things THE RIGHT WAY (ie the way that the best in the world do it), so that you can elevate your career “game” and skill set to match. Lastly, having the widely-recognized big pond employer on your resume will be easily recognized by future employers as a common meter of the caliber of your talent.

Advantages of a Small Pond / Disadvantages of a Big Pond

A potential pitfall of being in a big pond for your first job, on the other hand, is that you run the risk of potentially not standing out from the crowd and being recognized for your talent. In other words, even if you are a big fish, you’re in a big pond, and your complete talent set may not be leveraged if you are surrounded by other stellar people. The opposite would be true of a small pond career/grad school setting.

However, even if you were to be only “below average” in a big pond, in theory by this time in your personal development, you will have enough self confidence to not let this bother you, and simply accept that you’re doing your best and that it’s OK to be mediocre when surrounded by other top notch people.

Later Working Years of Your Career

Using the same working definitions of a little and big pond as we employed in the above jobs section, let’s analyze how the pond size might play a role when your career is a little more mature. For this thought experiment, we will assume that you have been successful in your career and have still emerged/remained as a big fish!

Advantages of a Big Pond

As a top notch, senior-level big fish, what advantages are there of teaming up with a big pond organization/company?

First, I think that it would likely make your job as a supervisor/boss a little easier. Assuming that you can recruit top notch talent, you theoretically will be able to find people to execute your ideas and follow your strategical plans more easily.
As a result, this might make the absolute amount of projects you accomplish higher than if you were in a little pond.
Second, the big pond organization will likely pay you more since they theoretically would have more money to obtain/keep your big-fish, top-notch talent.

Advantages of a Small Pond / Disadvantages of a Big Pond

One clear advantage of working in a small pond environment later in your career is that your contributions will likely have a greater breadth of impact across an entire organization versus in a big pond where you will have a large impact, but in a very specific area of the company. For example, if you are a top-notch senior engineer at a big pond company, you might be perfectly qualified to perform as a Vice President or CEO of a smaller, start-up company.

Living Location

The big pond vs. little pond decision when it comes to location is one of my favorites to think about.

Essentially, what I’m talking about here is if you are moving to a new city and money is not much of a consideration (because after all, you are a big fish, remember!), is it better to live in a neighborhood where you’re surrounded by normal, everyday folks (little pond), or is it better to live in a subdivision where your McMansion is only 1 out of 100 the same size and everyone around you is successful (big pond)?

On one hand, in the big pond location, you will likely be surrounded by very smart, successful people that can become your friends, help you in the future, etc. In addition, the school system in the area may be better since the property tax base is higher. However, a negative would be that in this setting, you likely would be more inclined to increase your spending. After all, you can’t be seen in a Honda Civic when your neighbors have the Porsche, right?! This of course wouldn’t be an issue in the little pond setting.

Conclusions

In the interest of wrapping this post up, I was trying incorporate my usual personal tie-in where I state how I will apply this topic to my personal life. However, I became somewhat stumped on this one. As such, I have unfortunately concluded that I am not yet sure what type of pond size, big or little, I want for my various future life stages. I’ll have to let time play out to help me figure out what is best I think.

How about you all? Were you in a “big pond” or a “little pond” for your undergraduate, graduate, first real job, senior career, and/or physical location life stages?

If you could do it over again, would you do anything differently?

Are there specific life stages when it’s generally better to be in a big pond vs. a little pond?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/wildlife_encounters/8024090659/sizes/m/in

Frugal Holiday Traditions You Can Start This Year

The holidays are upon us, and while this should be a joyful time, for too many people, it is a stressful time where there is too much to do and too much to buy.

Stores start pushing Christmas products in early September, and the jewelry and toy commercials featuring a loving spouse or Santa Claus have already begun. Getting wrapped up in the marketing bonanza can be all too easy, and you can feel guilty if you don’t drop a lot of money on your loved ones and friends.

However, it doesn’t have to be this way. You can choose to step off the buying merry go round and instead have a more joyful, less financially stressful holiday season.

Within your own immediate family, you can start frugal traditions this year that take the emphasis off of buying and consuming and put the emphasis on spending time with loved ones, being grateful for what you have, and enjoying the season.

Frugal Thanksgiving Traditions

It’s not too late to start some new Thanksgiving traditions. Remember, the original Thanksgiving occurred after the Pilgrims had suffered a horrible year in the new country. They had lost half of the original group that crossed the Atlantic to the New World. However, Thanksgiving was a time to be thankful for the crops they learned to grow and their new found knowledge of how to survive in the New World.

Just thinking of their story can make us more thankful for the lives we have, but these activities will also help:

1. You can express your own thanks by creating a Thankful Tree. I’ve seen a variety of these across the Internet. One blogger puts up her Christmas tree early, but rather than decorating with Christmas ornaments, she first decorates with Thanksgiving “Doorhanger” Ornaments. Later, these can be swapped out for Christmas ornaments.

Another blogger creates hers out of colored construction paper and has each of her kids make a handprint and write all of the things they are thankful for on the hand. Then, they attach it to the tree. Create the handprints in a variety of colors, and you have a beautiful fall tree full of blessings.

2. Give thanks by donating your time. If crafts aren’t your thing, another frugal option is to donate your time. Every Thanksgiving my aunt and her family spend the morning working at a soup kitchen or homeless shelter. When, later in the day, they celebrate their own Thanksgiving, they have plenty of things to be thankful for.

3. Share your appreciation of, and gratitude for, others. Speaking of Thanksgiving dinner, another nice, frugal tradition is to have each person go around the table and mention one thing they are thankful for about each person.

Frugal Christmas Traditions

Christmas is the one holiday that is marketed the most and cheapened because of corporate America’s desire (greed) to make money. Keep in mind that our modern gift extravaganza is only a recent development as Americans get more disposable income. Sixty years ago or more ago, Christmas was a much simpler affair.

You can bring the simplicity back with some of these frugal traditions:

1. Give your children only three gifts. The idea is that you give your child one gift to wear, one to read, and one to create. Or another thought is to give him one gift he wants, one he needs, and one he will wear. The idea is to simplify Christmas AND save your wallet. Granted, if you have an older child, this tradition is difficult to begin, but if you have younger children, you can start now and save yourself a bundle of money over the coming years.

Make Christmas morning a bit more special by having all the other family members watch as one person opens his/her gift, and then move on to the next person, and the next until everyone has opened their gifts. This slows down the gift opening process and helps build anticipation, especially for little ones who are so excited to open presents.

2. Make some or all of your gifts. Thanks to Pinterest, there are plenty of ideas for cute homemade crafts like these snowmen that are really a hot chocolate kit. Another option is to bake, but often, people get overwhelmed with baked goods at Christmas time. A better idea might be to make homemade cookie dough that can be frozen. Then, the gift recipient can take them out after the glut of holiday baked goods and enjoy them in, say, February.

3. Wrap and read a winter/Christmas book a day to your kids. You likely have a large stash of holiday and Christmas books. Rather than making them all available at once to your child, why not wrap 24 of them, and starting December 1st, let your children pick one a day to unwrap and read together as a family. I just learned of this idea a few weeks ago and can’t wait to start it with my kids this year. Buy books cheaply off Paperback Swap or Amazon (and use Swagbucks to make it even cheaper).

4. Have fun with food. There are so many ways you can make little changes to the food you’re already serving your family and make it fun and festive. If you’re going to serve pancakes Christmas morning, why not pour them with winter themes like snowmen and snowflakes? Or, why not make and decorate sugar cookies? You could even have a cookie decorating contest among the kids in the family.

5. Watch a holiday movie together. For years my mom and I watched It’s a Wonderful Life until we grew tired of it. My uncle still loves to watch A Christmas Story with his now adult children. It’s a tradition they’ve shared for at least the past 25 years.

6. Create holiday ornaments together. Again, use Pinterest to find simple easy crafts you can make at home with things around the house. Each year that you put up your holiday tree, you’ll remember making the simple ornaments with your kids when they were little. Our Christmas tree is full of homemade ornaments, and I like them so much better than the ones you can buy at the store.

7. Drive around and look at Christmas decorations. Pack the kids in the car and drive around look at Christmas decorations. While some people tastefully decorate in simple stringed lights, others’ decorations are over the top with the amount of decorations and lights that they use. Chances are everyone will enjoy seeing the displays.

8. Visit the elderly. Those living in nursing homes often don’t get visits from relatives because their families might live far away. Take the time to visit a nursing home and bring some holiday cookies you’ve made. The residents will appreciate your company, especially if you bring your children.

9. Sing carols together. Our neighbors used to sing carols together the last 10 days before Christmas. Because we lived downstairs from them, we also got to hear the show in our apartment. The wife would play the piano, and the entire family would sing songs from simple winter ones to religious tunes. This is a great way to get in the holiday spirit without spending money.

You don’t have to time travel back to 1950 to have a simpler holiday season. You can choose this year to say no to the big corporations that want your money and instead choose to simplify the holiday season and create some wonderful memories. These frugal ideas can get you started AND help you keep your wallet healthy and full throughout the holiday season.

How about you all? What is your favorite frugal holiday tradition to do with family and friends?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/starshaped/2352292485/sizes/m/

CD Rates Suck – But Here’s Why You Need to Be In Them Anyway

A one-year certificate of deposit (CD) paying 0.25% interest doesn’t look appealing on the surface.

And, as a matter of getting a healthy return on your investment, it certainly isn’t. But, don’t be so quick to write off CDs as being worthy of having a place in your investment portfolio. There are compelling reasons to have at least some money in them, even if interest rates are lousy.

Holding investments that are completely independent of stocks

In Investment 101, you learn that diversification of an investment portfolio is foundational. A portfolio invested 100% in stocks – even if they are split between 10 different stock sectors – is not an adequately diversified portfolio.

In order for a portfolio to be properly diversified, there must be a certain percentage of holdings that are totally unrelated to stocks. Though bonds and real estate represent a partial diversification, historically their performance is often parallel with stocks. Sure, they may not be stocks, but if their performance is similar than they aren’t a true diversification.

The best way to achieve true diversification is by holding assets that will be completely unaffected in the event of a blowout in stocks. CDs serve well in this function, because they have virtually zero risk of loss, no matter what is happening in the stock market.

Reducing exposure to equity risk

Whenever the stock market is on a tear – as it is now – it’s very easy for investors to get complacent and sloppy. You might even give it to the temptation of believing that this bull market will continue indefinitely. Rest assured that it won’t.

No one saw the length and severity of the market slides in 2000 – 2002 and again in 2007 -2009. That last one was so bad that many investors are only now beginning to recover their losses, with the Dow Jones Industrial Average having long since more than doubled from it‘s lows.

By having a small percentage of your investments held in non-risk investments – say 20% – you ensure that it will be virtually impossible for you to ever lose all of your investment portfolio. And by holding even that much in non-risk investments, like CDs, means that you will lower your losses in a crash by at least 20% across the board.

One of the biggest problems with major corrections and crashes in stocks is that once they get rolling, any efforts to reduce your exposure are usually too little, too late. What makes this outcome so predictable is human emotion. While stocks are rising, it seems counterproductive to remove any money from the market. That kind of a move only looks smart in hindsight.

A ready cash reserve to buy stocks after the next big slide

One of the truly underappreciated aspects of CDs is that they represent a store of capital that can be tapped in the aftermath of a major market decline. This is another way that CDs represent a true diversification away from stocks. They leave you better able to participate in the future rallies that will follow big market declines.

It is precisely because they are completely unaffected by moves within the stock market that they serve so well in this capacity. We can think of CDs as being an emergency fund for your investment portfolio. When things get really bad in the stock market, CDs become really good to have.

Don’t wait for the next bear market to find this out – especially if you’re something close to 100% invested in stocks right now.

Why not money market funds or online high yield savings accounts?

There are various cash type investments that work in a fashion similar to CDs. These include money market funds and high interest online savings. Why not just invest in those, rather than in CDs? After all, moving money between those vehicles and the stock market is so much easier.

CDs are fully insured by the FDIC, up to $250,000 per depositor per bank. Most people are probably completely unaware that money market funds only enjoy similar protection if they are held by banks. If a money market fund is part of an online brokerage account, or is a stand-alone fund, it does not have FDIC insurance. This could become particularly important if a major market slide were to turn into a major recession like the one we just had, causing institutions to fail.

(**Note from Jacob: Even though money market mutual funds with an investment house are not FDIC insured, I’ve often read in books something along the lines that “no money market fund has ever failed or lost money.” I also just read that in the 2008 market panic, the government even stepped in to support a money market mutual fund that was having trouble. Therefore, they are very secure, but as Kevin mentioned, not insured.)

High-yield online savings can provide richer returns than CDs – especially in today’s low rate environment. But once rates begin to rise, you may want to start locking into those rates for longer terms. This is something you can do with CDs, but not with either online savings accounts or money markets.

There’s one other reason to favor CDs over other cash type investments. It may be more psychological than anything, but savings instruments held at a local bank – rather than in a brokerage account or online savings account – represent an entirely different investment holding. There is an actual separation between your cash type savings and your equity investments with CDs that doesn‘t exist with other liquid account.

Human nature is the reason why this separation is so important. In a strong bull market, it can be tempting to move any available liquid assets into equities. That’s not quite as easy to do with CDs, not the least of which because they’re locked in for a certain term. They represent the one definitive part of an investment portfolio that will not be used for risk of any type, even in a strong stock market.

How about you all? Do you hold any CDs in your investment portfolio? Why you do this, even though rates are so dismally low?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/spcbrass/2283908075/sizes/m/in/

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