Have a daily routine -- Save Money!

I have been thinking about changing up my daily routine to mix things up a bit in my life. Doing the same thing over and over each day can get boring. I am taking steps to combat the boredom as best I can. I also realized: routines save you money!

Example Routines:

• You make your own coffee by setting the pot each night: save money on Starbucks
• Cook big on weekends: Leftovers for the early week
• Stock breakfast bars or the commute in: No expensive donuts or scones
• Combine Errands: Run to grocery, drug, and other stores in the same trip (save gas)
• Dine out midweek: A lot of restaurants offer coupons or specials during the week

These as just a few of hundreds of examples of how routines and daily planning can cut your costs in almost all areas. Some of us may have routines and not realize it. Think about your typical day from start to finish. Do you have frugal routines or do they cost you extra money each week?

Moving: How to save money and backache!

I am not a fan of moving. It is a huge hassle to find boxes, pack up everything I own, load into a truck, go to the new place, then unload it all and unpack. Over the years I have created a yearly purge that helps combat having too much junk.

Even with the deepest of purges we all still have to move at some point. Whether it be for a job, marriage, family, or other reasons. I am going to share my tips for making it the least painful.

Steps to take before moving:

1. Purge: Throw away anything broken, too old, or no longer usable.
2. Yard Sale/eBay: Find stuff you can part with and sell it. Cash is much more useful and a lot easier to carry!
3. Donate: Anything that didn't sell can be donated to Goodwill or some other charity. Bonus: you have a potential tax write off. Keep the receipt!
4. Gift: If you have some items that you don't need and know a friend or family member who needs it--gift it. People love free stuff!
5. Packing: As you pack up your stuff ask yourself: "Do I really need/want this?" for each item as you pack it. You will be surprised how much you can live without!
6. Donate/Sell/Gift (again): Chances are you found more items while packing that you can live without. Repeat steps 1-4 with these items as well.

Following the above instructions will make your move a lot smaller, faster, and cheaper! Having less stuff to move means you may need a smaller truck or don't have to hire movers. It also saves your (and your friends') backs from having to carry all those heavy boxes.

Side Tip: Compare moving in a truck to using ground shipping. It may be cheaper to ship some of the boxes and get a smaller moving truck!

Basics: How to start an emergency fund

A few of my close friends are reading my blog and have asked me: "How do I start my emergency fund?"

My first answer was: "Simple. Just open an online savings account and transfer money each paycheck."

I realized that most of these people are not used to saving money at all. I neglected the fact that someone trying to get on track financially for the first time might not know how to start logistically. Guys: This post is for you!

If I were starting an emergency fund today from scratch this is what I would do:

1. Open an online savings account at ING Direct (or other online bank of your choice). Ask me for a referral so we both get the account opening bonus money!
   
2. Roll/Deposit all your coins at your local bank and transfer it to the above savings account.
3. Set up an automatic transfer of $20 (or more if you can afford it) per paycheck to the new savings account. Analyze your monthly budget to get your exact figure.
   
4. Calculate how much your total monthly essential expenses are each month. This only includes the money you need to live like rent/mortgage, food, utilities, insurance, etc.
   
5. Multiply above number by 6. This is your target amount for your emergency fund.
6. Deposit any extra income, tax refunds, etc. into your emergency account.
7. Once you hit your money target you are done. Continue saving for other goals or stop the automatic savings transfer and add the same amount to debt repayment.
8. Review your emergency fund each year. Did your expenses change? Do you need to add more to it to maintain your 6 month's worth of expenses?
   

If you follow all of the above steps you will have set up and maintained your emergency fund. Having an adequate emergency fund is the only way we can weather all the bumps that life throws at us. Unemployment, health problems, house fire, and many other situations can come up and this is our own form of insurance.

If you ever have to tap into your emergency fund remember to go back to step 2 and replenish the money as soon as you can. An emergency fund works only when we keep it funded at all times.

Side note: If you are self employed you need a 12 month emergency fund.

H&R Block Tax software for $25!

I found a day today on slickdeals for tax software for Mac and PC. H&R Block At Home Deluxe, formerly TaxCut, is on sale at amazon.com with free shipping. It covers both federal e-file and paper state returns. This is a good deal!

I ordered one for myself to try it out. I have used TurboTax in the past but $25 for both federal and state is a good deal. The cost is also an itemized deduction so it will save me a little on my tax bill too. It is a great tool as you can import your information into future years as well.

With most of us getting all of our W2's, 1099's, and 1098's soon we should jump on this deal!

Interest paid to you by the IRS is taxable!

I just got a surprise 1099 in the mail from the IRS. I filed a 1040X (Amendment) to get my tax credit money for buying my house. Since I had to amend my 2008 return they paid my around $118 in interest. Apparently this is taxable!

I now have to claim the interest as income for this year's return. I cannot complain since it was money I would not have otherwise. I just think it is a bit odd for a tax authority to pay you interest on a refund then turn around and charge you tax for it. I do not follow the logic.

For any of you out there that fall into this situation check your mail for a 1099 from the IRS. It increases your taxable income and therefore lowers any refund due or raises tax due. Also note that there is no explanation in the 1099 of what it is for. I had to Google search the Tax ID to find out it was the IRS itself.

101 Goals in 1001 days

I found a lot of bloggers out there have done or are doing this. I decided to give this a try myself so I can have a consolidated list of what I want to achieve over the 1001 day period. Here are the rules borrowed from The Simple Dollar:

The Mission: Complete 101 preset tasks in a period of 1001 days.

The Criteria: Tasks must be specific (ie. no ambiguity in the wording) with a result that is either measurable or clearly defined. Tasks must also be realistic and stretching (ie. represent some amount of work on my part).

Why 1001 Days? Many people have created lists in the past — frequently simple goals such as new year’s resolutions. The key to beating procrastination is to set a deadline that is realistic. 1001 Days (about 2.75 years) is a better period of time than a year, because it allows you several seasons to complete the tasks, which is better for organizing and timing some tasks such as overseas trips or outdoor activities.

I am currently working on my list and once it is complete I will post it here. I plan to provide regular posts of my progress on the list. This should be a quite challenging and rewarding experience. Once the list is complete I will post it and the clock will start running from that point on!

Closing Accounts: Simplify your life!

After going over my finances I realize that I have too many open accounts. This includes credit cards, bank accounts, and investment accounts. It has become a hassle and is time consuming to manage. I aim to consolidate and close accounts I don't use.

I gained the accounts over the years for various reasons. 0% credit card transfers were good for a while so I have amassed quite a stack of unused credit cards. I got a lot of account opening bonus offers along the way so I have a few accounts with a little money in them that needs to be transferred and closed. I also want to get my investments into as few accounts as possible so my portfolio is easier to track and manage.

Accounts I will be closing:

1. (5) credit cards. I no longer need these accounts and don't use them. Whatever benefit I got from them before is gone. Time to close them and avoid temptation and trouble.
2. (3) bank accounts. These accounts I opened to get a cash bonus or some other free item. I don't use the accounts nor do I want to. I am happy at ING.
3. (2) investment accounts. These are old Sharebuilder accounts that I no longer invest in and have since moved the money to Firstrade. No need to have them open.

Closing accounts also helps prevent identity theft and forgotten payments. It reduces the paperwork that I get in the mail and online and reduces clutter on my desk and in Quicken. Closing credit cards may temporarily hurt my credit score but the long term simplification of my life is well worth that small setback. A simpler life leads to a happier life.

2010 Goal: Cut overall expenses by at least 5%

I have just come up with a new goal for this year. I want to cut my general living expenses by 5% or more. There are some areas that I can work on right away and achieve this but I am going to tackle some more difficult tasks. Here are my options:

1. Getting the homestead exemption on my new house. This will lower my total monthly housing payment by roughly $83.33. That reduction is about 13% of my current payment. I have already submitted the forms for this.
   
2. Cook/eat at home more. I am doing this already by necessity. Once the kitchen is finished I will be able to do this a lot easier. This cuts my meals costs by at least half. Lean Cuisine is filling part of that gap currently.
   
3. Curb temptation. This one really got me more than I thought it did last year. I am making a conscious effort to wait 30 days before I buy any "toys" or non-essential items. This will be done with strict(er) budgeting.
4. Debt Interest. I will soon refinance my debts into a home equity loan or some variation of it. It will lower my rates and have the added tax benefit. This will drop my overall interest rate by about 50%.
5. Eating out and Entertainment. I am cutting way back in this area. I am only going to dinner if I have coupons or some other discount. I cut back on concerts and going to the bar too. This will help immensely!

Getting one's expenses under control is easier said than done. I am used to going out often with friends and spending a good bit doing it. I have to make some tough lifestyle changes and am having a bit of a hard time adjusting. I realize this is the only way out of debt and have to stay focused on that goal. As my situation improves I can lighten up some. It just takes time, dedication, and patience and I will get there!

Outline: Getting out of debt

I am in debt. I have mounded up credit card, student loan, and now mortgage debt over the years. Unemployment and extensive travel have put me in this hole. Now I have to tunnel out with a spoon. This outline is for me as much as it is for everyone in debt. These are the basic steps to becoming debt free:

• Evaluation: Gather all statements and other pertinent documents referencing any balances that you owe. Order them from highest balance to lowest balance and include the interest rates with each
• Emergency Fund: Save at least 2 months worth of living expenses in an emergency savings accounts.
• Plan: Once you have your emergency fund form a debt destruction plan. I use the debt snowball where all minimum payments are made and any extra goes to the lowest balance debt. Carry on with this until all debts are gone never reducing the total amount you pay each month.
• Execute: Follow your plan religiously. Cut corners where possible to pay more towards your debt. Throw any extra income or windfalls to your debt. Any pay raises should also add to your debt repayment. Paying off your debt is priority 1!
• Completion: Now your debt is down to 0 (except for maybe a mortgage). The money used to pay your debts can be directed to saving. Build the emergency fund to at least 6 months (1 year if self employed). Max out a Roth IRA. Save, save, save!

This plan will work for anyone no matter how much debt you have. The evaluation seems daunting at first but as you pay your lowest balances first you will get seemingly "big wins" which will motivate you even more. The debt snowball, when used correctly, works quickly. Stick to the plan and get it done!

January 2010 Prosper Lending Update

It is the middle of the month again and it is time for my update on prosper.com lending. I had one loan payoff and 1 has recently gone slightly late. The number of "good" listings has certainly fallen over the past month due to the holidays. I "write off" all loans in collections as a loss.

Here are my stats as of today:

Outstanding Loans: 53

Late: 1 (< 30 days)
In Collections: 3 (written off)
Current: 49

Closed Loans: 8

Charged Off: 1
Paid Off: 7

Open Bids: 0

Total currently invested: $1613.02 (Principal Value)
Cash in Account: $ 79.80 (includes open bids)

Total Principal: $1692.82

Net Change from last month: $26.06 (1.56%) increase.

Note: I am currently not adding new money to Prosper. I only reinvestment payments I receive each month.

FREE Calendar syncing for your PC, Mac, and/or Smart Phone!

I have been doing some digging and testing lately to find a good, free calendar system to keep track of birthdays, holidays, vacations, work travel, and all other important dates that I don't want to forget. I found a solution: Google Calendar.

I have been a long time user of Gmail (free) and other Google services but not the calendar until now. They now have the system set up where you can sync your Google-based calendars to iCal (Mac), Outlook (PC) and almost all smart phones (Blackberry, iPhone, Windows Mobile, etc) seamlessly and automatically. You can make a change on any one of the devices which could be your PC, your phone, or online via Google Calendar. It will automatically update in all other places. This is great!

The best part: It is 100% FREE!

Once you get your calendar(s) created via Google Calendar on the web they have very good tutorials on how to set up all of your various devices to work with it. They even have tutorials on the net on how to export your calendars from other systems such as MobileMe (Apple), Outlook (local only), and iCal (local only) among many others.

This is truly a great service that took me about 20 minutes to get set up and going and now I can access all of my calendar data no matter where I am. If you use Gmail you also have the option of adding appointments to your Google calendar (which it can "see" from your emails) and they will of course be pushed out to all of your devices. No more missed dates! Give it a try and I am sure you will wonder why you didn't do this before.

Never pay full price!

A new rule I am going to implement this year going forward is to never pay full price. There are too many options available to get discounts, coupons, buy-one-get-one, etc. Their are a few sites that I follow that help me do exactly that. They cover everything from electronics, clothes, restaurants, events, and just about everything else.

The List:

• Slickdeals.net: People find deals on certain items online. They are submitted through this site and the best deals make the front page. Good especially for electronics, clothes, household, etc.
• Restaurant.com: Great for buying discounted coupons for restaurants. Keep an eye out for their 70% and 80% off coupon codes to pay next to nothing for $10 or $25 worth at local eateries. Be sure to read the fine print on each before buying.
• Groupon.com: They have a daily deal that you can receive by email. It ranges from restaurants to massages to wine tastings to activities. These are usually great deals and big discounts! Currently only offers a few major US cities.
• Travelzoo Top 20: Best place to find vacation and travel deals. Most often offers hotels, flights, crusies, and some packages and good prices. Sign up for their weekly email delivery of the Top 20.

These sites cover the majority of what I do and look for. If I cannot find them on any of the above I will go to Google and do some digging around. If I am at a physical store shopping I will check prices on my iPhone via Amazon or Google Products before buying. I also check the clearance and/or open box sections to see if they have what I am looking for. eBay is a last resort if I want an item used (and cheaper).

My 6 Personal Financial Wins

Yesterday I wrote about my financial blunders. Today I want to share the positive choices that I have made. We all-to-often hear about the bad choices we make and not the good. I believe that acquiring good financial habits also requires us to focus on what we do right. Here is my list:

1. Started a Roth IRA: When I was working in college I did put some money in a Roth IRA. In retrospect it would have probably been better to pay down debts but is still a good choice.
2. Built an Emergency Fund: I now have an emergency fund that equals roughly 3-months take home pay. Based on my current situation this is the best thing I could have done.
3. Contribute to my 401(k): I get matched 100% for the first 3% of my pay that I contribute. With immediate 100% vesting this was an easy choice. The match I get outweighs the interest I pay on debt and adds up fast. Worst case scenario I can withdraw it if I absolutely have too. I also save on taxes!
   
4. Bought a foreclosed home: I got such a good deal on my house that I had to buy it. I now have a roommate who covers my mortgage and I own it. I gain equity each month. I also lowered my expenses at the same time. If I had to sell it today for well under its value I would still be ahead in most cases.
5. Changed Banks: I used to pay way too much in banking fees. I got smart and moved to a bank (ING Direct) that does not charge month service charges and minimum balance fees. I also earn a lot more interest on checking and savings!
6. Tracking expenses: I now track every penny (because I have too) in order to live within my means. With the help of Quicken Online and doing 98% of my transactions via credit/debit card I have this seamless. I can log in and quickly tell where I stand currently.

As we move forward in our financial lives on the road to financial independence we have to take a step back and take a look at what we do right in order to stay motivated. Keeping track of how you are improving gives us motivation to carry on!

My 6 Personal Financial Mistakes

Going along with the adage that "no one is perfect" I have decided to share my personal financial mistakes. I hope that sharing my mistakes will help prevent others from doing the same thing. It is never easy to admit mistakes, especially when it involves money, but I think it is a good exercise to perform.

1. Student Loans: I currently am carrying almost $14,000 in student loans. Most of this was used for living expenses during college. If I could do it over again I would have worked at McDonald's in order to avoid them. Luckily I locked in a 2.79% interest rate.
2. Credit Cards: This one is two fold. I used credit cards to fund my 18-month around-the-world trip. I consolidated and then used some again to fund a failed small business. This is a very expensive lesson that I will pay for the next 5+ years.
3. Investing: I learned the hard way that index funds are the way to invest for the long term. I thought I could beat the market and got "schooled". I have straightened it out now but had some losses to begin with.
4. Tracking Expenses: Before I learned about personal finance (thanks to a class in college!) I basically just checked my bank balance. I have come a long way from living hand to mouth to having an emergency fund of any kind.
5. Buying a car: Back in 2003 I bought a brand new 2003 Honda Civic. I made a good choice in the car itself as I still drive it today. I made the bad choice of financing it. I locked in a 2.9% rate but the next car I buy will be cash (or 0% with cash to back it up). That car payment was not fun in college (hence the student loans above). On paper it is paid off but I still have the student loans.
   
6. Unemployment: For nearly 2 years in college and another 20 months during my around-the-world trip I was unemployed. This is by far the most financially devastating event(s) in my life to date. I have a mountain of debt to prove it. I now have gotten into networking and better interviewing plus an emergency fund to combat future problems.

I have learned a lot of hard lessons that I am now paying for. If I had been taught better habits at a much younger age I would have been much better off. Most of us don't learn about how to handle money until college or well after. Now is the time to live within your means!

Keeping goals (and life) in focus!

The new year for most people means new goals. At the end of last year I posted an update on my progress. I find that going over your longer term, lifelong goals is a good exercise to keep you focused on what really matters. I am going to list my personal goals here:

• Travel: My #1 goal is to travel and see as much of the world as I can
• Independence: In order to travel I need to be financially independent. Hence this blog was born!
• Meaning: I want my life to have meaning. Once I am financially independent I can focus more on volunteering and charity work that I feel is important.
• People: Life is all about the people. I want to make new friends and keep tabs on the current friends. Living life alone is NOT fun!
• Stuff: I am somewhat anti-stuff. I am the opposite of a pack rat and want to have as little as possible. This will allow me to be more free to travel without the physical and mental weight of too much stuff dragging me down.

Any time I feel discouraged or that I am drifting off course I try to think of these things. Sometimes I get lost in the shorter term goals and details and forget to step back and look at the big picture. This post is a reminder to myself and all of us to keep things in perspective!

Important Tax Dates

We get our tax forms infrequently enough that no one can remember exactly when each forms are supposed to be sent to us. I have compiled a short list of dates here so we can plan when to file our returns:

• Feb 1: All W-2, 1098, and 1099 forms should be sent out by all firms.
• April 15: Deadline to file all personal returns or extensions to file
• June 15: Deadline for US Citizens working outside the US to file returns
  
• Oct 15: Deadline to file all extended personal returns
• Dec 31: Deadline to complete transactions that affect this tax year.

These are the most common needed dates. Their are others that apply to special situations. Most of us will only be concerned with the above dates unless you are a business owner which has a different set.

Financial Lessons from Work

Working at a small company has taught me a lot about business in general. I have rewired my mind to look at return on investment instead of just cost. I also learned a lot about the battle between time and money, project management, and accounting.

Lessons Learned:

1. Cost Analysis - In business you look at a potential cost and figure out if you will get more than the cost back. You can apply this at home to purchases. The return does not have to be financial but is it justifiable?
2. Time versus Money - In business time costs money. In personal finance we can weigh the convenience of something versus what we earn per hour. How long do you have to work in order to pay for that particular item or service? Is it still worth it?
   
3. Project Management - Projects are everywhere in business and in life. Goals are projects in a sense. Achieving financial freedom is a long project and requires careful planning. Setting deadlines and goals along the way gives you milestones to work towards and eventually finish it!
4. Accounting - Businesses have to account for every penny they have. We should do the same so we stay on track for goals, avoid fees, and have a very good idea of where our money goes. Businesses and personal finance alike will fail without accounting. This includes budgets!
   

These are just a few of the many concepts of business that we can apply to our financial lives. The "return on investment" of your life depends completely on how you live, how carefully you plan and manage it, and what you do every day. The same goes for business. Take control and live the life you want!

The New Year's Purge

Everyone talks about Spring cleaning. I tend to do my a bit early--In January. I like this time of year to sit down and do my annual financial review, clean out closets and cabinets, and simplify my life both financially and otherwise. It is good to start the year fresh and in control!

Here are a few things I look at each year:

• Reduce my stuff (clothes, electronics, furniture) by 25% or more by selling, donating, gifting.
• Shred sensitive documents no longer needed.
  
• Consolidate financial accounts.
  
• Close unused or dormant financial accounts.
• Scan important documents from past year to PDF and store safely.
• Roll accumulated coins and deposit to savings (or debt payment).
• Donate unwanted canned goods to food bank.
• Use up gift cards.

Above is just my base list. I find that as I go I discover more that I can do. The idea is to make life simpler and easier. Clutter causes stress and costs money. Having to manage too many financial accounts takes time and gives you more room for error. The idea here is to keep it simple and maintain a manageable lifestyle!

Tax Return Projection: File now or File in April?

Every year I normally anxiously await my W-2 so I can file as soon as possible to get my (hopefully small) refund. I have now devised a way to estimate my tax refund (or liability) based on your 12/31 pay stub.

Here is how it works:

• Find the "Gross Pay Year to Date" number on your pay stub.
  
• Subtract the Standard Deduction (or itemized deductions) and any exemptions (found on form 1040, page 2, online PDF)
• Subtract any other estimated expected deductions (IRA contributions, Student Loan interest, Capital Loss, etc)
• Add any interest earned, IRA Distributions, Capital Gains, etc. (estimate)
• The result is your rough taxable income.
• Look up the result on the tax tables in the instructions for 1040 (online PDF)
• This is how much tax you "owe".
• Compare this number to your federal withholding on your final pay stub (and any other withholding you may have had during the year)
  
• Subtract the "owed" tax from your withholding. Positive = refund. Negative = What you owe.

If you are due a refund then you want to file as soon as possible. If you owe money you will want to wait as long as possible to file (April 15) so you can have time to plan for the expense and also pay it as late as possible. Note that this is a rough estimate and real numbers may change but you can at least have an idea!

January 2010 Net Worth Update

It is the 1st of the month again and it is time for my net worth report card. I did not change much this month due to the holidays and unexpected expenses as well as unpaid time off from work.

As of today my current net worth is (21,425.79). That is an increase of $346.84 over last month. The major factors contributing were stock market gains, a few temporary spending cuts, and careful tracking of my money. I am glad to have made any ground this month!

I expect next month to be a slightly better month as I should be able to consolidate my debts, simplify my finances a bit, and obtain a lower interest rate. As long as I can get my floors put in downstairs in a timely manner I should be able to get the house re-appraised and get the loan I want.

Alternative Income:

$7.46 - Gomez Distributed Computing