March 13, 2012

My Meandering Financial Advice



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Our family got hit by the bad economy. Hard. It didn't help that we made a major move and had two children right in the midst of it.

At one point we consulted a bankruptcy attorney. When he spoke to me about liquidating our assets I became determined to find another way to survive. Although I'm in no way materialistic I think I would sink into a deep depression without my wedding ring. Unfortunately it is quite valuable (I wouldn't care if it was tin and cubic zirconia). After 30+ years of being single - then finding the perfect Yin to my Yang - I just can't bear the thought of being without it.


I lost it once. I knew my daughter was involved. She's three. I grilled her mercilessly. I promised her the world in exchange for my ring back. I dug through weeks of disgusting garbage, piece by piece, in case it wound up in there somehow.

Weeks later she was playing near my husband's pool trophies (he's quite good). Bethany said, casually, "Mommy, the man has a crown! Look at his crown!"


I've never in my life felt relief like I did at that moment, when I turned around and saw this. The ring hasn't left my finger since.

None of this is the point.

I was a bank officer for many years. I've got a vague idea about finance. If you want real advice visit The Motley Fool. They are WAY smarter than me. I'm not ashamed to admit it.

I'd like to share some simple tips I've learned by trial and error. I sincerely hope they help you.

1. Write down your (reliable) monthly income. Write down your (recurring) monthly expenses. Compare.

I recommend using Mint.com (free!), but the basics are here:

Income:

Sally - $1,900
Bob - $1,200

Expenses:

Rent - $1,200
SUV - $530
Van - $250
Vehicle insurance - $310
Cable - $115
Cell (Family) - $136
Electric - $60
DSL - $75
Water - $65
Credit Cards - $250

You have $109 per month expendable income. No wonder you aren't making it! Groceries, fuel, entertainment, clothing... this all comes out of a small pittance of excess income each month. Credit card debt piling up? Of course it is.

2. You don't need a car payment.

YOU DO NOT NEED A CAR PAYMENT. Sell your newfangled rigs for a couple of older, well-maintained, fuel efficient, ugly mofos. Fuel is only going up in price. Craigslist is a beautiful thing. If you can buy something fuel efficent outright - POOF! No car payment. Car Talk suggests that it costs less to repair a car than it does to buy a new one. BONUS - less $ to insure.

3. Is the plan too complex for your needs?

Cable. Cell phone. DSL. Are you actually using all the features you are paying for? Can you afford them? Is there another provider offering the same service cheaper? Review your plans and determine if you can downgrade or cancel completely. 

4. 401(k)

Are you fortunate enough to have an employer who offers a 401(k) plan? Think you can't afford it? Does your employer match contributions? If you aren't contributing the maximum matched amount you are throwing away free money.
  • 401(k) loans - There is never a good reason to do this. Please believe me. We are currently paying hundreds of dollars per month on a loan we took out to remodel a house we no longer own. We never expected to be so broke. Who does? Of course the money is being paid to ourselves, but that's a small consolation when we can't afford, well, anything.

This is a serious insider secret. Listen closely to the following conversation:

Brand X: "Hello, I represent Brand X toothpaste. We're very interested in doing business with you."

Walmart Buyer: "Cool! We love Brand X! Here's my proposal: sell us your product, but package half of it in a tube that says 'Equate Toothpaste' and charge us half the price."

Brand X: "But, but... how will we sell our product? We can't afford to do that!"

Walmart Buyer: /click/

Terrible, unethical, evil... cheap. Try it. You may be surprised. It's literally the same stuff.

6. Do your own taxes.

Don't be scared. There's software that makes it super simple. I had to take mine in to have done professionally last year and was SHOCKED at the cost.


This is the program I've been using myself for years. They save your information from year to year, making it painless to import the mundane details. You can usually even pull your W-4 data without having to enter it manually.

7. Take control of your investments.

Can't afford to invest? Yes, you can.

Every time we get paid I transfer $25 to a peer-to-peer lending site. The premise is that borrowers apply for loans and private investors fund them. Because there is less overhead the rates are better for borrowers and the return is significant for investors.


If you spread your investment out over multiple loans you decrease your loss in the (inevitable) event that the borrower defaults. Any investment involves risk, make sure to minimize yours by putting your eggs in as many baskets as possible.

Don't understand stocks? Neither do I. Build a balanced portfolio (risk vs. stability) on a peer-to-peer lending site and see returns comparable to stocks.

DO NOT PAY A FINANCIAL ADVISER. Understand and control your own investments. If you understand the stock market, there are several online venues to simplify that type of investment.

There are also several online venues for peer-to-peer lending. The largest is Prosper.com. They've been operating since 2006.

Check out Prosper Marketplace here.

8. Pay off your credit cards.

You are losing your ass on them. Pay more than the minimum payment and stop using them.

9. Equity, schmequity.

If you're in dire straits, it makes more financial sense to rent a living space from a reputable landlord than to own a home. The landlord is responsible for maintenance and renter's insurance is much cheaper than homeowner's insurance.

10. Check your credit report annually.

You don't have to go through a service with cutesy ads. The credit monitoring services are required by law to give you a free annual report: Equifax, TransUnion, Experian. No sense in working hard to repair your credit only to have an error mar your good name for years.     
-Kim

1 comment:

  1. If you need a strategy of how to pay off your debts--check out "Total Money Makeover" by Dave Ramsey from the LIBRARY. If you don't like how he suggests you do it, get a strategy--follow it to a tee.

    Good stuff, Kim! --Amie V

    ReplyDelete

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