M is for Money

We are the quintessential Angelenos – 2 people with 3 cars! The good news is that we don’t have any car payments, all of them are paid for. But the bad news – they still aren’t cheap to keep. We spend an unbelievable amount on transportation, but the cost is less apparent than a monthly payment.

Purchase Price

Our vehicles weren’t free, though my parents did sell us their used Durango at a significant discount. The Subie on the other hand cost $28,000, all financed. I paid the loan off early, effectively $600 a month for a full 4 years. It’s hard to get ahead with that kind of payment, and that was only a fraction of the cost to actually use and maintain the car.

Gasoline

With current technology, we’re all slaves to the price of gasoline. We don’t drive much compared to many Americans, my work is only 6 miles away and Mr. M (as a freelancer) is home most of the time. But gas in Los Angeles is always expensive, it’s currently pushing $3.50. I actually paid $5 a gallon last year and had to increase our gas budget. Currently I budget $200 a month for our gas consumption.

Insurance

Insurance in California, and Los Angeles in particular, is notoriously expensive. One of our vehicles, an old 4WD pickup, is minimally insured. But we carry both comp and collision on the other two vehicles, along with $300k in liability. That sets us back $240 a month.
We were in an accident several years ago when a teenager turned left in front of us. Insurance did not cover all of the costs, I paid for 6 weeks of a rental car, among other things. Of course the other driver, the guy at fault, was uninsured.

Registration and Annual Memberships

The state government, suffering a downfall in revenue, just increased the cost to register a vehicle by 40%. Our annual bill will run around $400 this year. Then there is the cost of our AAA membership, which proved useful when the Durango broke down a dozen times in a row. Add another $120 to the total.

Repairs and Maintenance

This is the huge unknown when you get a car, you can estimate how much gas will cost and call around for insurance quotes. But the repair bills will be affected by how much of a “lemon” your car is. Some never need more than the regular oil changes and scheduled maintenance, while others will experience every problem in the book. Oh, and scheduled maintenance is more than just oil changes, tires wear out and brakes need new pads. Somehow we all conveniently forget these facts when we look at car costs. Our annual repair bills are around $1800 including the regular maintenance. This will probably go up as our cars continue to age.

Annual Cost - $7600

Yep, even without car payments, our basic transportation costs $7600. When we had a car payment, we were paying $15,000 a year! Gas and insurance add up in small but regular increments. Include the occasional set of tires, a few oil changes and some unexpected repairs and suddenly the cost to keep and maintain a car dwarfs the purchase price. This doesn’t even account for the inevitable car washes, tolls and parking tickets. Even a paid for car isn’t cheap.

Do this exercise in your own life. How much is it costing you to keep a car, not just pay for it?

Photo: The Busy Brain

Thanks for reading. If you enjoyed this post consider subscribing for updates.

Personal finance isn’t rocket science or brain surgery, it is not beyond the comprehension of the average American. Yet many people plead financial ignorance and don’t bother trying to improve their financial standing. The fact is financial success doesn’t happen overnight. Every person with a million dollar net worth had to start somewhere and chances are they were as lost as you in the beginning. The first steps are of course the hardest, breaking from years of habit doesn’t happen instantly. But it doesn’t have to be hard either - here are a few simple ways that anyone can start improving their finances today.

1) Check Your Credit Report
2) Sign up for Online Banking
3) Save before you Spend
4) Build an Emergency Fund
5) Start a 401k or IRA
6) Make a Net Worth Statement
7) Set Clear Financial Goals
8) Track Spending for a Month
9) Trim the Fat
10) Develop a Budget

Check Your Credit Report

Credit has far reaching effects on your daily life – the interest you pay on loans, the cost to insure your car and even your ability to get a job all depend on how good your credit is. It’s easy and FREE to check your credit report, simply go to annualcreditreport.com and pull your report from one of the three credit agencies. Make sure it is accurate and that you haven’t been the victim of identity theft. If you’ve got past blemishes then make the commitment to pay on time every time, simply improving your credit score will save you money.

Sign up for Online Banking

Why wait for a monthly statement when you can have free, instant access to your account information. Curious if that check to grandma cleared or if your rebate has been deposited – logging on will give you the information you need to stay on top of your money.

Save before you Spend

Set aside money in your paycheck as soon as you receive it, not at the end of the month after you’ve spent all you have. By making saving a priority, not an afterthought, you’ll be on the path to financial solvency. Set up an automatic transfer from your paycheck or checking account to savings. It’s the Ron Popeil method of financial success – set it and forget it!

Build an Emergency Fund

Saving money is a habit like any other, but habits don’t form themselves. Start with setting aside $40 from each and every paycheck. For those paid every two weeks this simple habit will give you a $1000 emergency fund in 1 year’s time.

Start a 401k or IRA

Tax advantaged accounts like 401ks and IRAs give you a relatively painfree introduction to investing. The money you invest is taken out pre-tax, lowering the amount of income you are taxed on. This means you are saving more money than the reduction in your paycheck, magnifying the benefits. Also your employer may provide matching funds to help grow that balance.

Make a Net Worth Statement

You can’t give directions to a location without knowing where you are starting from. What is your net worth right now? Make a list of all your assets – savings, retirement, investments and such. Then make a list of all your debts – student loans, credit cards and other loans. Now you have a clear idea of where you currently stand. Do your debts dwarf your assets? Hopefully seeing the sheer size of your debts will help motivate you to pay them off.

Set Clear Financial Goals

You know where you stand, but where do you really want to be? Research shows that simply setting goals and writing them down increases the odds you’ll actually achieve those goals. Look ahead and make financial milestones for the next year and the next 5, 10 and even 20 years. Worry about how to get there later, for now focus on appropriate goals for each timeframe. Starting an emergency fund and paying down debt are great goals for the coming year, not for year 20!

Track Spending for a Month

The simple task of tracking your spending for a month is both eye opening and illuminating. Few people know how much they really spend on fast food or clothing or other “expendables” each month. Taking financial control means understanding where your money is going.

Trim the Fat

After tracking your spending for a month you will have an idea where you can cut back. Unused monthly memberships, bloated cell phone plans and buying convenience food – at significant mark up – all come to mind.

Develop a Budget

I know many financial “experts” do not keep a budget, but they also don’t have a problem with their finances! Budgeting is what helps me work towards my goals, all I have to do is follow my budget and everything will work out fine. I have many tips on how to make a budget that works for you.

Make the Commitment for Better Finances

Do you want to stop living paycheck to paycheck, stop worrying about your financial security? Try one or all of these simple steps and take charge of your money.

Photo: Darren Hester

Thanks for reading. If you enjoyed this post consider subscribing for updates.

There was an intervention this weekend and the subject was me! Mr. M had had enough with my straggly hair so he conspired with my mom to get me into the hair salon. After 10 years living it up as a blond I’ve gone native, back to my natural brunette. Dark hair makes me look even paler, Mr. M said I look like Snow White with my new short cut and bangs. I grew my hair out for 6 months prior to cutting it off, but still some blond peaked through the chin length bob so the ends had to be tinted. Then the stylist so graciously pointed out the few stray grey hairs on my head and dyed the rest as well. Ah the joys of getting older. For a cut and (easy) color in LA, the $140 price tag was rather modest. It was my mom’s treat cause she and Mr. M knew I’d never spend that much on my hair. She got her own done as well so it was a nice mother/daughter day out. Afterward I took her out to lunch and we hit a few shops in Old Town Pasadena. There were a decent number of people out and about, though many were walking empty handed. Based on my own observations the economic story is still mixed, some businesses are crowded while others are still wallowing.

This week’s carnivals:

Earlier this week I had the chance to host the Carnival of Money Stories. Regular readers know that I favor stories from real life that help illustrate a financial lesson. If you’ve written such a story please be sure to submit it to the carnival, many of the submissions were NOT stories and did not fit with the theme. I know there are great stories out there that need to be shared.

-Carnival of Personal Finance at Taking Charge: Opening a Roth IRA with Vanguard
-Festival of Frugality at Green Panda Treehouse: Christmas is Coming
-Economy and Your Finances at One Mint: Do You Get Comp Time?

Thanks for reading. If you enjoyed this post consider subscribing for updates.

Income taxes affect all working Americans yet myths and misconceptions about our tax system abound. Most involve the marginal tax rates whereby different tiers of income are taxed differently. Stop me if you’ve heard this one before:

Co-worker A thinks overtime is a waste of time, the extra money will just kick him into a higher tax bracket and he’ll take home less money than if he hadn’t worked the extra hours.

Unfortunately for your co-worker, he is misinformed.

The confusion comes in when we talk tax brackets, like the 15% tax bracket or the 25% tax bracket. This seems to imply an across the board tax rate that applies to all of your income. But really when we talk tax brackets or tax rates we are talking about marginal tax rates, which is the tax rate applied to the final dollar earned in a year.

In the US, income is divided into tiers with progressively higher rates applied as you move up the income ladder. The first money you earn has a rather low tax rate, only 10%. For 2009 every single person in the US, millionaire or minimum wage slave, pays 10% in tax on the first $8350 of income. The next tax rate, 15%, applies to earnings above $8350 but below $33,950. Most Americans fall into these two lowest tax brackets, let’s do an example using a single person with $30,000 in TAXABLE income for 2009.

Tier 1:
$8350 x 10% = $835

Tier 2:
($30,000 – $8350) x 15% = $3248

Total Tax Liability = $835 + $3248 = $4083
Effective Tax Rate = $4083 / $30,000 = 13.6%

So our example person falls into the 15% tax bracket yet only pays 13.6% of their income in taxes. For a person in the highest tax bracket (35%) a portion of their income was taxed at each of the lower rates along the way, they don’t pay 35% on all of their earnings.

So how would this break down for our overtime worker who is worried about being pushed into a higher tax bracket? Let’s take the same example person but now they have $37,000 in taxable income due to all those extra hours. The next tax bracket for earnings above $33,950 is 25%, which applies all the way up to $82,250 (for single filers).

Tier 1:
$8350 x 10% = $835

Tier 2:
($33,950 – $8350) x 15% = $3840

Tier 3:
($37,000 - $33,950) x 25% = $763

Total Tax Liability = $835 + $3840 + $763 = $5438
Effective Tax Rate = $5438 / $37,000 = 14.7%

Our overtime worker certainly is paying more in taxes, but not enough to negate the value of the extra work. Their income went up by $7,000 while their federal taxes increased by $1355, they still come out ahead. To the left you will find a table showing the 2009 tax rates for both single and married filers.

For more on tax brackets and the American worker see The Marriage Penalty Myth.

Thanks for reading. If you enjoyed this post consider subscribing for updates.

Your 20’s are a time to establish yourself as an adult. You are just beginning a career, setting up a household and discovering your interests. Social pursuits, like dinner out with a group of friends, are a regular part of your life. Saving for the future is pretty low on the list of priorities.

Your twenties are an expensive time of life. Setting up a household means buying furniture and all the objects of daily living. You might be searching for that someone special and last time I checked – dating isn’t free. I know from a woman’s perspective every time I had a date or special night out planned – I bought a new outfit. I’d usually buy a new lipstick or other bit of make-up. Even if my date picked up the tab, I would have spent over $100 on the night out.

At some point in your twenties you will be buying a car and probably getting married. You might be buying your first house and starting a family. But there is a light at the end of the tunnel.

I’ve found it easier to save money in my thirties. I’ve done the nightclub scene, the dating scene and run off to Vegas on a whim on more than one occasion. But these things are behind me now that we’re older, we’ll go out but have no desire to do it more than once a week. There is no need to impress Mr. M, he has seen me at my worst and hasn’t run away yet. We still haven’t started a family, and I know that will be expensive, but such adult dreams have changed our spending perspective. Saving and being prepared for the future has become a priority when once it was not.

For the 20-somethings struggling to live for today and save for tomorrow, it does get easier. Eventually you will settle down and hopefully leave your spending demons behind. Some day retirement savings will feel a necessity, usually around the time you realize that spending the rest of your life in an office is intolerable. One day you will stop caring what other people think and start focusing on what makes you happy. It’s definitely easier to get frugal as you get older, eventually you have everything you need. In fact, judging by the number of self storage places we all have more than we need. As I’ve said before to all you 20-something’s, don’t screw up your finances too much. But also relax if you’re not saving 50% of your paycheck and maxing out your 401k. These goals make more sense when you’re a little bit older and for me, saving got a whole lot easier in my thirties.


Thanks for reading. If you enjoyed this post consider subscribing for updates.

Mr. M has been married before. At age 25 he married his long term girlfriend, who had been pestering him for years to get hitched. It wasn’t a big affair, they went down to the courthouse and said their I-do’s. About 6 months later a neighbor stopped by one afternoon to talk, he had a confession to make. He had been sleeping with Mr. M’s wife.

Mr. M offered his wife a choice – go to counseling and end the affairs or end the marriage. She chose the latter. Mr. M has come to terms with the infidelity, which was a constant in their relationship. He realizes now that marriage won’t change a cheater. But to this day he is still bitter about the financial infidelity he discovered later.

Mr. M worked full time while his wife worked part time and went to school. He put off his own education and instead had to work overtime and pick up extra shifts to cover their living expenses. When the marriage ended he simply wanted out and gave pretty much everything he owned to his ex.

Later he learned she had been secretly stashing money the entire time, she worked on commission and received her bonus check separately. He didn’t know there was another check, the bulk of her earnings had been hidden from him.

Financial Infidelity

Financial infidelity could take many forms – secretly stashing savings for personal gain, covering up debt, hiding gambling losses and trashing your partner’s credit are all forms of betrayal. For many people this betrayal is enough to end a relationship.

First you must wonder what else your partner is hiding, financial infidelity might only be the beginning. It shows your better half is at least deceitful - not a great quality. Second, all hope for financial security is lost when your partner destroys your finances. Do you want to stop living paycheck to paycheck, send the kids to college or have a retirement? These are important life goals for many people, can you imagine giving them up because of your spouse?

Which is Worse?

You can’t escape the repercussions after your partner trashes your finances, there is no recovering the money they lost or spent. If they ran up mountains of debt, chances are you will be jointly responsible for paying it off. Stay together or break apart, either way your own financial picture is ruined.

Mr. M believes that financial infidelity hurts worse than physical infidelity. After physical infidelity your heart will be broken and your life devastated, but as long as your finances are intact you can start over. Broke and with a broken heart is worse, your options are limited and you are starting with nothing. He was young enough to recover financially, but there are many stories of divorce and financial devastation later in life with all hope of retirement lost.

What is your opinion? Which is worse – financial or physical infidelity and why?


Thanks for reading. If you enjoyed this post consider subscribing for updates.

I enjoy looking at what search strings readers are using to find my blog. Sometimes they reveal an important topic that needs to be addressed. Other times, they leave me scratching my head. And once in awhile they are good for a laugh.

-What to do if your man buys you a crap engagement ring
(Did you say yes?)

-How to screw your friends over
(Sorry I can’t help you there)

-We got no wedding gifts
(wow that sucks)

-Dog closets
(I don’t get it)

-Current rate of pigs right now
(so many jokes, so little time)

-How will you write no gifts cash only on wedding invitations
(hello tacky)

-If a man that likes you gives you money and pays your bills does he love you
(thanks for setting back women’s lib 100 years)

-Overdraft fees are a tax on stupidity
(haven’t I read this blog post before?)

-What works best with girls
(may I suggest chocolate and diamonds)

-You can’t start it like a car
(why does this give me dirty thoughts)

-Heartworm toy furry stuffed petco
(back away from the drugs)

-Blob about investing net worth
(I guess my lack of exercise is leaving me blob like)

-Frustrated househusbands
(as opposed to desperate housewives)

-Screw love screw who call himself best friend
(ouch, sorry dude)


Thanks for reading. If you enjoyed this post consider subscribing for updates.

Story telling is a tradition that predates the written language. It provided not only entertainment in an age before television but also a valuable education before formal schooling existed. As far as we have come over thousands of years, stories still fill an important role by allowing us to share our experience with others. Stories are how we relate our interpretation of the world and share the lessons we ourselves have learned. When it comes to finance, these lessons are often costly. So do yourself a favor and read the following stories, each has something to teach.

Earlier this week I swapped guest posts with Mr Credit Card. Please stop by and check out my Prepaid Debit Card Trick and read all his other credit card related advice. Tomorrow I am hosting the latest Carnival of Money Stories, one of my favorite carnivals. I love weaving together personal finance with stories from real life. I’m busy compiling stories for tomorrow’s post but here is a quick list of the carnivals I participated in last week. Much love to the hosts because I know how much work it is to put one of these together.

-Carnival of Debt Reduction hosted by Climbing from Debt: Can a Spender Become a Saver?
-Carnival of Money Stories at Suburban Dollar: How Much Do You Spend on Beauty?
-Festival of Frugality at The Good Life on a Budget: Walmart and the Latte Factor


Thanks for reading. If you enjoyed this post consider subscribing for updates.

This is a guest post from Mr Credit Card from www.askmrcreditcard.com. I just recently talked to him on his radio show. Mr Credit Card reviews credit cards and today he is going to write a post about how I can use credit cards to help me save for my honeymoon or vacation. If you are looking to apply for a credit card, he has compiled a section with his best credit cards recommendations.

Hi to all. Firstly, I would like to thank Miss M for letting me do a guest post here. As Miss M mentioned about her changing financial goals and hinted at marital plans in the not so distant future, I thought I'd write about how to actually make use of credit card reward points to save for your next travel plans. But first a background.

Reward programs have existed since the early days of credit cards. But because they have evolved so much, I'm first going to explain how reward points work.

To earn reward points on a credit card, you simply have to use your card. Typically you can earn one point for every dollar that you spend on the card. Credit Card issues will find ways to get you to use their card more by offering you more points. For example, some will give you double points for spending their card on their online portal.

Transferring Points into Airmiles - Before the mass proliferation of credit cards and credit card reward programs, traditional reward programs from Diners Club and American Express allowed you to transfer reward points to frequent flier programs. This is still a great way to earn rewards.

Using Points for travel - Modern credit card reward programs requires you to use your points to book travel items on their travel sites. Most of the time 100 points gets you $1 in value. For example, Amex's travel site is powered by Travelocity. So if you book your flights through there, it is like booking through Travelocity.

Some programs like the starwood preferred guest program allow you to transfer points to air miles or use them to book airline tickets.

How to choose a reward program to earn points?

Now that we have seen how credit card reward program works, here are some factors that will decide what card to get and what reward program to use.

Where would you like to go for your honeymoon? - This is pretty elementary. But the earlier you decide where you want to go, the better chance of you getting great deals from reward programs.

What airline goes to your destination from your home city? - Once you have decided where you want to go, you have to check which airline flies there from where you live. For some, it may be the case that only one airline flies there. For others, you may have more choices. You also want to check if the flights are direct or indirect.

Decide which hotel you want to stay in advance - Do this research in advance. The reason why you want to do this is because this may influence your choice of reward program. For example, you may choose to earn points with a hotel frequent guest program rather than an airline frequent flier program.

Calculate how much will your hotel and air fares cost approximately - You should plan on how long you will stay at a particular place. Though fares may change, try your best to build in some cushion because prices tend to rise as you get nearer to intended departure date.

Find out how much you spend on your credit card - You can easily find out by looking at your statements.

Figuring out the best course of action - Once you figure out how much you spend on your card, you can now work backwards to find out the best reward program that will save you the most money for your honeymoon or vacation.

The first step is to find out what can a "normal" program get you. Programs like Citi ThankYou, Capital One, BOA's WorldPoints allow you to buy book your travel through their travel site (in Citi's case, it is actually Expedia.com). So you get the usual 100 points will get you $1 in travel rewards. The savings is equivalent to 1%.

Do another exercise. Find out how many miles you can earn if you get an airline credit card of the airline that you intend to fly. Find out how many miles you require for a free airline ticket and how much you can save compared to using a regular credit card reward program.

Do the same exercise with the hotel frequent guest program and find out how many points you can earn if you use that Hotel's credit card, how many points you need for your stay and how much you can save compared to the previous exercises.

If you intend to fly overseas for your honeymoon, check out the various airline alliances (like Star Alliance). Airlines have formed alliances among themselves so that you can use another airline's miles for a flight on another's airline. Sometimes, you need much less miles if you use another airlines miles! The only way to know is to check.

Choose your card - Once you have decided which reward program or frequent flier or guest program will earn you the most miles, then you should go ahead and get the card that will earn you the most points.

Here, you also have to be careful because there are a few tricks you can use to get more bang for the buck. If you end up choosing to get a reward credit card, make sure the card offers a generous sign up bonus. Frequent flier card have different levels (like gold and platinum versions). Get the ones that offer the most bonus miles. Many cards offer 25,000 to 30,000 bonus miles and that alone is worth one ticket (at domestically).

Conclusions - Well, I think I will end here. To be honest, doing the research is more tedious than it looks. It is easy for me to write (since I know this topic). But it is time consuming to even decide where you want to go, not less researching reward programs. But if you put in the effort, you can really save a lot of money buy charging to your card what you already buy and earning points or miles at the same time (much like coupon cutting!). As long as you pay in full every month, you might as well enjoy the perks that come with a reward program.

It was Labor Day weekend and I couldn’t believe my eyes – Costco had already gone Christmas! There were ribbons and wrapping paper, silly mechanical lawn ornaments and all the other holiday paraphernalia for sale. It’s amusing to me that while the date stays the same each year, the holiday shopping season keeps starting earlier and earlier.

Rather than be repulsed by this creeping commercialism, it reminded me that now is the time to start planning for a frugal holiday. I always spend more when I wait until the last minute because good money saving ideas take time to implement. So with Christmas coming, here are a few thoughts on how to get an early start on the holiday and save money in the process.

Stock Up for Holiday Cooking

I love to cook, I love to eat too but we don’t talk about that. Many a holiday memory is made over Christmas cookies or around the Christmas dinner table. Over the next few months keep an eye out for those supermarket sales to stock up your pantry. There is nothing worse than paying full price for nuts, those little suckers are expensive.

Keep an Eye Pealed for Bargains

Black Friday may mean big sales, but only on certain items. Start tracking prices now on those must haves so you’ll know a bargain when you see one. Waiting till the last minute to buy means you are at the mercy of the current price, good or bad.

Do It Yourself Gifts

Handmade gifts com from the heart, but they don’t come overnight. Planning, making and packaging handmade gifts takes a lot of time. A hastily thrown together homemade gift is just cheap and tacky, don’t do it. Get nice jars for homemade jams and bath salts, put together a basket with a few small store bought gifts mixed in. Last year we made flavored oil and vinegar sets, in the basket I also included some cute tea towels and a kitchen gadget or two.

Start a Saving Fund

Christmas is no fun when you have to go into debt to pay for it. It comes the same time each year, no reason you can’t be prepared. Make a holiday budget (don’t forget food, travel, tree etc) and start saving now. I get 3 paychecks in October, one of which will fill up my Christmas fund.

It Creeps up Quickly

I’ve already noticed a change in the air, the feeling of fall. It’s certain the holidays will be here quickly whether I am prepared or not. Starting the season early has benefits for retailers, why not take a cue from them and start planning for your holidays now too. With extra time you can have a happy holiday that is full of cheer while fitting your budget.


Thanks for reading. If you enjoyed this post consider subscribing for updates.

Employers have many ways of handling extra hours on the job. Sometimes it is simply part of the job description while in other industries, extra pay for extra work is the norm. But how many of you get comp time – time off for the extra hours on the job?

In my industry, overtime pay is the standard. Our hours are billed to a client, therefore it makes sense that the hours billed matches the hours worked. Otherwise we would never understand how many hours it takes to do a job (I’m still not convinced we do). But recently one company has broken away from the herd and gone to straight salary. The problem is – our project is perpetually understaffed and extra hours are a regular occurrence. So how is this company handling billing – are they still billing the extra hours while only paying for 40? Seems like someone figured out how to squeeze a few extra dollars of profit on the back of the employees. Unfortunately my assistant works for this company and without thinking I had him work this past Saturday.

Normally this is no big deal and has been standard operating procedure for our two years together. Extra hours, extra pay, hooray. But if this new policy is now in place then he isn’t getting paid for those hours! So what am I, the sympathetic supervisor, to do? I think I should offer comp time for that day, provided my superiors are OK with it. It’s only fair given his co-workers are working under different rules. Not to mention the fact that his company suddenly implemented this policy after years of employment. He could look for work elsewhere, but I understand if he would rather stick with the sure thing – the job he already has.

Is comp time part of your employment? Would you rather have the time off, or the extra money?


Thanks for reading. If you enjoyed this post consider subscribing for updates.

I finally did it! After years of stalling I finally opened a Roth IRA this week with Vanguard. Saving for retirement was never a priority to me, I had debt to pay off and a lifestyle to afford. But I’ve tackled most of those demons and I’m now making up for lost time. This means ramping up my tax advantaged retirement plan at work, my 401k, and adding a Roth IRA to the mix. So what is it like to open a Roth IRA?

Saving up the Initial Investment

I think many people put off investing in mutual funds because of the minimum investment required. If you don’t have several thousand in the bank and want to start investing today, I recommend T Rowe Price. They will waive the initial investment requirement as long as you sign up for monthly automatic investing. Vanguard, on the other hand, absolutely requires a minimum $3000 initial investment. There are only two ways around this hurdle – buy a Vanguard ETF via a brokerage account or start with their “STAR” fund, which has a lower minimum investment.

I’ve chosen the latter route because I do not have $3000 to invest right now. Instead I’ve been saving up $100 here and there since the beginning of the year in an online savings account. The $1200 I have saved is more than enough to meet the fund’s $1000 minimum investment. I plan to start monthly automatic investing with Vanguard as well (already in the budget) and later, once I’ve amassed the necessary $3000, I will move over to one of their fabled index funds.

What You Need to Open an Account

Other than the initial investment, there is very little you need to open an account. Make sure you have the bank routing number and account number for the account holding your initial investment. Other than that all they require is your personal information - like name, address and Social Security number.

You will need to pick investment(s) as well, so take the time to do your research beforehand. You should understand their range of funds and build a portfolio based on your goals. This process doesn’t happen overnight and I’ve found that hasty investment decisions lead to regrets later. For now Vanguard’s limitations are dictating my investment moves, the STAR fund is certainly not my first choice. But I am tired of leaving this money in a savings account earning minimal interest and I like the fund’s lower barrier to entry. I will dollar cost average each month until I have enough to switch to one of my preferred low cost index funds.

Need to Know Info

Vanguard prides itself on its low management fees, primarily because they specialize in index funds, which have lower expenses. But they do charge various account fees on small balance investors – unless you sign up for electronic updates and statements. This is very simple when you sign up online so don’t neglect this important step. Otherwise the regular fees will take a big bite out of your balance. Vanguard, like most mutual fund companies, offers automatic investment. But nowhere did this option appear during sign up, you must go to account profile after creating your account to add this feature. If you’ve been thinking about setting up a retirement account, now is the time to do it. I waited far too long to begin this important step to financial freedom. At a company like Vanguard, it only takes a few minutes to start down that path.


Thanks for reading. If you enjoyed this post consider subscribing for updates.

It was Friday afternoon, just after work, and Mr. M and I were discussing what to do with our evening. Suddenly we heard a loud bah-boom! What was that, we asked each other? Mr. M thought it sounded like a sonic boom. I suddenly realized what the sound was – the space shuttle coming in for a landing. Sure enough, with bad weather in Florida, they chose to land in California instead. The perpetual sunshine has its benefits, and its drawbacks.

As most people know, everything seems to cost more in California. The houses are more expensive, the gas and groceries cost more and don’t ask about the cost of daycare. This added cost of living has inspired its own term – the sunshine tax. It is the added cost to live in one of the best climates on earth, where the sun shines almost every day.

There are benefits to the great weather. We can grow a garden year round, in fact we just started our winter crop of broccoli, cauliflower and celery. Being able to grow a greater amount of our produce has some cost savings. The mild climate also means lower heating and cooling costs (not true for more inland areas like the high desert). In the LA basin many houses have no heating or cooling built in, because there is little need for it. In summer evenings we simply open the windows and the cool breeze soon cools the house. If we ever choose to go green and install solar panels on our house, the ever present sunshine will help pay off the cost. Then there is the intangible benefit on your mood, many people like myself find dreary weather depressing.

Personally I can’t imagine living anywhere else right now. I’ve established a career in the area which nets me enough to pay my share of “the tax”. But many others choose to leave for cheaper pastures, the high cost of living makes it hard to get ahead. This great weather, and beautiful sunshine, has its cost. So fellow Californians, do you think the sunshine tax is worth it?


Thanks for reading. If you enjoyed this post consider subscribing for updates.

Saturday we went to an annual charity event benefiting dogs. Each year they have a silent auction with some great items up for grabs and we went with some money to spend. We were looking for a custom pet painting, a gift for my mom. One of my mom’s dogs was recently diagnosed with cancer and we thought a painting of him would make a nice present. We won the portrait, sadly her C passed away this morning. I think I’ll wait a few days before asking mom for photos for the artist.

There was one item I was dying to have, but I had spent all my money and the bids were too high. I wrote down the artist’s name and looked him up online when we got home. He has an etsy shop and I found the exact same set of prints that were up for bid at the event. I couldn’t wait, I had to have them. I placed the order, even though my spending money is all spent out. I’ll just have to dip into savings. Aren’t they adorable?



I swear I don’t have a house filled with cutesy boston terrier stuff. I have the real thing, no need for collectibles. But I loved the whimsy of these paintings, it captures some of their silly yet adorable nature. They make me want to design a kid’s room around them, too bad we don’t have kids yet!
It’s Sunday and time for the weekly carnival links:

-Festival of Frugality at the Centsible Life: 10 Uses for Stale Bread

-Money Hacks Carnival at ABCs of Investing: Do You Balance Your Checkbook?

Photo: Brian Rubenacker's Space Rangers

People never change – it’s a phrase often repeated. But does this always hold true or are there circumstances where people will change, either due to desire or necessity? And when it comes to money, can a spender become a saver?

This question was raised recently on a message board from someone who was worried their financial problems will never be under control. Overspending is a common cause of financial woes and for many people, curbing their shopaholic tendencies is the only hope to getting out of debt. But change is never easy.

I know for a fact that a spender can become a saver, after all I’m an example of one. I used to spend mindlessly on clothes, make up and home furnishings. The only important question to me was – did I want it? I never asked myself if I could afford it. With easy access to credit, saving felt like a tedious, unnecessary task. But a life of easy credit can easily get out of hand.

Saver versus a Spender

A saver puts aside money and then spends the remainder. A spender spends their money and then puts aside the remainder – if there is one. Sometimes the cure is as simple as setting up an automatic savings plan or a retirement plan at work. Many people spend whatever is left in their paycheck, by taking out savings first you can painlessly make the transition. Start small and you’ll never even notice the difference. But for people who spend more than they earn – like I did – it’s not so simple. Automating savings will help with one side of the balance sheet, but not the other. You have to start living within your means, including setting aside money for rainy days.

Change for Yourself

It is impossible to force someone to change and if somehow you do accomplish it, they’ll probably resent you later. Change is best achieved from within, a spender has to want to change. I know I wanted to change, the stress of the debt and the size of the balance I faced was too much. I had to eliminate it so I could get on with my life. I changed for myself. It is possible and it only takes two things – desire and commitment. Track your spending, get a budget and make saving money a priority, not an afterthought.


Thanks for reading. If you enjoyed this post consider subscribing for updates.

Ever wanted to hear the voice behind the blog? Ever wondered if I’m as big of a dork as I seem? Well now there is the answer to these questions and many more. Earlier this week I had the opportunity to do a blog radio interview with Mr. Credit Card from Ask Mr Credit Card. He was interested in my experience of being debt and how I finally managed to kick the habit and pay off those cards. We had a wonderful chat about credit, debt and all things financial. I had a great time doing the interview and I hope you check it out.

M is for Money Interview



Thanks for reading. If you enjoyed this post consider subscribing for updates.

Smart companies know to change their marketing to embrace the current mood of the public. When gasoline shot up to $4 a gallon, car manufacturers produced ads touting the fuel efficiency of their vehicles. With the current recession many stores are touting their “value” and how they save shoppers money. Walmart is taking a slightly different tack with their current line of TV ads – the power of small changes to save big money.

The Latte Factor is based on this same concept – that small changes have the potential to add up to substantial savings. Say you spend $5 each day for coffee and a muffin from that Nameless Coffehouse. Replace that with homebrewed coffee and a muffin from the market and you’ve just saved $3. No, it’s not much money, but what if you stick to this new routine for a month? Over that month you will save $60 and over a year that one change adds up to $700. For someone without savings or an emergency fund, $700 is an infinite financial improvement.

For years financial pundits have harnessed the power of the latte factor to help clients gain control of their finances and get out of debt. Now Walmart, recognizing that the American consumer is becoming more financially aware, is using the concept to their own advantage. In their latest television ads Walmart compares the cost of a meal out to a meal made with ingredients from Walmart. The $5 fast food breakfast is only $2 when made at home, saving $12 for a family of four. The ad goes on to say, replace one meal a week and save over $600 a year, that’s the power of Walmart. It’s also the Latte Factor in action, David Bach would be proud (I believe he coined the phrase).

This is just one of several ads in rotation, all based on the same principal. Apparently Walmart believes the American public is finally becoming more financially savvy and is more than happy to show how basic financial principals apply to their own business model.


Thanks for reading. If you enjoyed this post consider subscribing for updates.

It’s Labor Day, which explains why I’m home watching Oprah and not at work. They were discussing women and the differing definitions of beauty around the world. The piece on Brazil was rather astounding. As many people know, the Brazilians tend to be more obsessed with beauty than most of the world. What isn’t known – the price of that beauty. \

The young lady being interviewed in the beauty salon was having her hair lightened and straightened. Apparently a common procedure in a nation of dark, curly haired individuals! The journalist asked the young lady how much she spent on beauty treatments – half her salary. In Brazil beauty is priceless and many women will spend all they have in order to look the way they want. I can’t imagine spending even 10% of my salary on beauty, despite being rather vain. I want to look good, but not at the expense of saving and other goals.

Unfortunately I’m reaching an age where beauty can’t be left to chance. In your 20’s it’s pretty easy to get away with no makeup or moisturizer and hair that says I don’t care - but your 30’s are a different story. I find myself contemplating expensive creams and the growing lines creeping across my face. There is only so much that make up can hide. Grow old gracefully and use that money for retirement, or fight every step with the power of my bank account? Some days, vanity wins.

Oh and apparently there is a place where women with big butts and stretch marks are viewed as the most beautiful – Mauritania. There is hope for all of us. So how much do you spend to look beautiful?


Thanks for reading. If you enjoyed this post consider subscribing for updates.

Hopefully you are relaxing on this holiday, enjoying a rest from the normal Monday’s labors. We spent the morning playing with the food dehydrator that Mr. M received for his birthday. We wanted one to preserve some of our garden produce and to recreate the food we currently buy for our pooches. We could make the same food for a fraction of the price, but we needed a dehydrator to do it. My mom gifted us a very nice one for Mr M’s birthday, so we’re doing a trial run. I still need to find a few of the more obscure ingredients – rose hips and bee pollen anyone? It was a busy carnival week:

-Editor’s Pick! Carnival of Pecuniary Delights at Canadian Finance Blog: 50 Ways to Save on Pet Expenses
-Festival of Frugality also hosted by Canadian Finance Blog: A Grocery Confession
-Military Finance Network hosts this week’s Carnival of Debt Reduction: Can You Keep Your Credit Cards?
-Carnival of Money Stories at Dough Roller: The Unexpected Costs in Pet Ownership
-Carnival of Financial Planning at the Skilled Investor Blog: Early Retirement – The Starting Line

I’m enjoying a few days holiday so the following is a guest post written by my honey, Mr. M. He wanted to write about personal safety and his own experience with purchasing pepper spray. Now if he’d only let me test it on him…

No one wants to be a victim yet most of us take personal safety for granted. This is an obvious contradiction. Personal safety starts with making good decisions, like avoiding that lonely dark alley at night. But sometimes awareness will not prevent you from being attacked for your money, vehicle or worse. So what do you do when you are about to become a victim?

Are you going to hope you can outrun a guy chasing you with the knife? If you do carry a gun, will you actually shoot someone? Fortunately, non-lethal alternatives that require very little training are available, affordable, and extremely effective.

When I called my local police department to discuss non-lethal defenses, they immediately suggested pepper spray. The duty officer explained that he used FOX Labs Pepper Spray and that he once sprayed a guy in the side of the head – who then dropped to the ground screaming. I have to admit, the officer certainly piqued my curiosity.

Did you know that some pepper sprays shoot up to 20 feet and dramatically affect the target for over an hour? Firearms often hit unintentional targets and can kill a loved one. A can of “whoop-ass” is easy to use, won’t kill anyone and can be carried without a license. You could also use it to stop a canine attack.

Based on my online research I decided to go with FOX Labs 5.3mil Scoville Pepper Spray. This is the EXACT same spray that military and law enforcement agencies all over the country swear by (Pretty cool)! An application of this on an attacker should give you the break you need to escape. I am totally intimidated and genuinely scared of FOX Labs spray, which is why we’ll carry it.

I chose to order from RedHotPepperSpray.com mainly because they offer a 100% satisfaction, money-back guarantee and they offer FREE pepper spray replacement; should you use the pepper spray you purchased from them, as part of self-defense, within 2 years of your purchase (the product has a shelf-life of 2-3 years). No other company offered this as part of the purchase, and the price was similar to the other major distributors.

IS YOUR LIFE WORTH $20? I want to urge you to NOT to buy cheap pepper spray or to trust your safety to something in a sporting-goods or discount store. When it comes to your life and the lives of your loved ones, the difference between $6.99 and $16.99 is insubstantial yet incredibly significant. I urge you to do your own research. You are worth it!

PLEASE NOTE: Pepper spray used in anger, as an assault, or in any way other than self defense CAN get you thrown in jail. NEVER USE PEPPER SPRAY IN ANGER. Laws differ some state to state so check your local laws on legality and the maximum volume you can carry.

In last week’s blogger chat the issue of online banking came up. The question was – how has the emergence of online banking affected the way people handle their finances? Personally, I love the ease and access that online banking provides. It allows me to quickly check my spending and update my budget. But another blogger felt that online banking is causing people to become lazy with their finances and that balancing a check book is becoming a lost art. I had to confess – I’ve never balanced my checkbook!

Worse, I’ve never used one of those checkbook register thingys that come with your box of checks. I’m terrible about keeping records so years ago I switched to carbon copy checks – a small price to pay for lazy folks like me. But I still don’t balance a checkbook. Instead I keep a budget spreadsheet that I update several times a week with our spending. Is this the same thing?

In some ways my method goes above and beyond the balance your checkbook routine – I record all our spending either cash, check or credit. The spreadsheet does most of the heavy lifting for me by using that data in a myriad of ways. But there is one crucial step missing in this process – reconciliation. Periodically I check my bank balance against my budget spreadsheet to make sure they agree. Otherwise I’d be in serious trouble if I forgot to note a large purchase or payment I made.

What about you, do you balance your checkbook? If not, do you track your bank balance some other way?


Thanks for reading. If you enjoyed this post consider subscribing for updates.

While cleaning up the fridge I discovered the dried out ends of several loaves of bread. Unwilling to throw them away, I decided to make bread crumbs. It seemed like the perfect use - I was in need of some to make eggplant parmesan from the eggplants we grew.

Pretty much every family ends up with dried up bits of bread, like the heel that no one wants to eat. Those two ends are easily 10% of the loaf simply going to waste. Obviously the problem of old bread has been around for centuries, and there are many recipes adapted to make use of this otherwise throwaway item. Here are just a few ideas:

1. Bread Crumbs

Use a toaster or leave the bread out to dry for several hours. Once hard, use the food processor to pulse the pieces into bread crumbs. You can add seasoning or leave them plain. Store in an air tight container.

2. Bread pudding

Layer 6 slices of stale bread in a buttered baking dish, along with nuts or dried fruit like raisins. Mix 3 eggs with 2 cups milk, 1 tsp vanilla, cinnamon and ¾ cup sugar and then pour over the bread. Bake at 350 for 45 minutes.

3. Croutons

Cut or tear bread into chunks, season with olive oil, salt, pepper and other spices. Toast for 10- 15 minutes in a 350 oven.

4. Soup

Add chunks of stale bread to your favorite soup. There are also many soup recipes that use stale bread as a main ingredient

5. French toast

In a bowl mix eggs, milk, cinnamon and vanilla. Dip slices of bread into the egg mixture and then cook on a greased skillet or griddle.

6. Stuffing/Dressing

Mix chunks of old bread with onions, spices and broth to make poultry stuffing.

7. Bruschetta

Toast or broil sliced bread that has been drizzled with olive oil. Top with chopped tomato and basil.

8. Cheese Toast

Sprinkle dry bread with garlic butter and parmesan cheese and broil for 1-2 minutes.

9. Bread Salad

Toss bread cubes with diced tomatoes, red onion and cucumber. Add red wine vinegar, olive oil, garlic, basil and salt.

10. Apple Brown Betty

Use bread crumbs and apples to make this traditional dessert.

Being frugal means making use of what you have. Start getting creative in the kitchen to use up ingredients that would otherwise go to waste. What other ideas do you have for stale bread?


Thanks for reading. If you enjoyed this post consider subscribing for updates.

Most everything I learned in life I learned in school. In elementary school I learned the ABCs and how to read and write. In middle school I learned that people can be terribly cruel to one another and in high school I learned how to function without sleep. But in all those years I never learned a thing about finance.

Sadly despite its importance in everyday life, basic personal finance is rarely taught in school. If you are lucky, your parents undertook teaching you about money as a child. But most of us are left to our own devices, destined to learn through our own adult sized mistakes. I do recall one school lesson in how to write a check and balance a checkbook, a skill that will soon be obsolete. Other than a few bills, I never write checks anymore.

Personal finance is primarily self taught, through experience, trial and error. It’s a life skill that no one teaches. It seems obvious that too much debt is trouble and everyone needs savings for a rainy day, but many people make these basic mistakes. I’m smart and well educated, that didn’t stop me from falling into these same traps.

Finance is one area where everything I learned, I learned as an adult. Perhaps in shielding children from the family finances we inadvertently hide valuable lessons. I had no idea of the value of a dollar. I didn’t know about compound interest and how it could work both for and against me. To this day I don’t know if my family was living beyond, below or within its means. I had no idea what real life cost.

I learned personal finance the hard way, by making mistakes. It shouldn’t have to be this difficult. Why is a critical life skill left for us to figure out on our own? We spend all of our formative years being fed information, why not teach a few practical skills at the same time? Personal finance is one skill that everyone needs, for money is an intrinsic part of our modern existence.


Thanks for reading. If you enjoyed this post consider subscribing for updates.