Rich in Spirits

Net worth in the six figures!

Monday, April 24, 2006

April 06 Totals

6757 - Credit cards
9913 - Car
32961 - Student loans

49631 - Total

Sense and Sensibility

While I have as much debt as I do, I am going to focus most of my disposable income toward paying that off. However, I am not going to neglect savings while I am paying off my debts. I am concerned with having a safety net, in case something went awry with my employment or another emergency came up.

I admit that I once thought that a.) it was unimportant to save money in one's 20s, and b.) it was impossible to save money in one's 20s. That was until a friend pointed out to me a principle that I just found reiterated on another site here: saving in your youth is not only smart, it is practically an imperative in an age when the fate of Social Security is so uncertain, and life spans are ever-increasing. The author of the linked piece writes:

"Suppose you set aside $1,000 a year (about $19 a week) from age 25 to 34 in a retirement account earning 8% a year, and never invest a penny more. By the time you turn 65, your $10,000 investment will have grown to $168,627.

But if you don’t start saving until you’re 35 years old and then invest $1,000 a year for the next 30 years—that’s a total investment of $30,000—you’ll have only $125,228 by age 65.

You might want to read this example over again, slowly.

The moral of this story (a depressing one if you’re in your forties) and the focus of this chapter: If you don’t start saving in a tax-favored retirement account while you’re young, you’ll miss out on perhaps the best investment opportunity of your life. That’s because retirement plans offer terrific tax advantages that allow your savings to grow rapidly. In order to maximize the benefit, though, you should get started right away. The government limits the amount you can set aside each year, so if you fail to contribute now, you won’t be able to make it up when you’re older (and perhaps wiser)."

When my friend first pointed this concept out to me, I thought what you might think: "Well, thanks, but I do not have a spare $1000 laying around." Until I did the math in my head, realized that that was indeed less than $20 a week, and that I could strive for, and meet, this goal.

You should try to do this too, if you can. If you think you can't, think about your situation in two ways. First of all, can you cut any of your expenditures so that you come up with an extra $19.23 a week? Maybe you are spread thin, and truly cannot. Then, think about your situation in terms of what you can do to get that extra income every week. You owe it to yourself!

Here are some thoughts that I have considered, and that friends have shared. Not all of these topics will resonate with every person. What I hope to encourage you to do is to cut back in places where it didn't seem possible before, and to consider income sources that you may not have considered before:

To Cut Back and Save
--If you use a credit card responsibly, or consider applying for one in order to build a solid credit history, seek one that offers cash-back rewards, without charging an annual fee, of course.
--If you insist upon giving into your Starbucks urges, think about cutting back. Instead of a latte, get an Americano with room for cream.
--Walk, run, bike, skate, etc, when you can. You'll avoid having to pay gym fees while cutting back on your gas usage.
--Do not succumb to those oh-so-convenient coin machines at the supermarket that let you dump your coins in and trade them for cash. Those often deduct a fee for their service of up to 10% which is too much to pay for convenience! Suck it up, roll 'em yourself, and keep the extra $10 on a $100 by taking them to the bank for free.
--Does a grocery store in your town offer incentives on fuel for shopping there? That could be a wise choice - unless their prices are higher to compensate for this, and end up costing you just as much anyway.
--If you belong to a warehouse store such as Costco or Sam's Club, see if they offer a better price on fuel. Mine often do.
--If your cell phone does the trick and you feel as if you can't live without it, get rid of your land line.
--If you are paying off several debts at once, make sure you check the interest rates on all of them. Devote your extra resources to paying off the one with the highest interest rate first!
--Grow fruits, vegetables or herbs at home.
--Don't just throw two first-class stamps on a letter if it feels heavy. Take if to the Post Office and have it weighed - additional ounces are less than 39 cents.
--If you really just like a certain song from a new album, buy the single song on iTunes.
--If you are a AAA member, make sure you are taking full advantage of all the discounts that your membership offers! Contact your local office for a booklet listing them all.
--Do you taxes yourself instead of paying someone to do them! For most of us, this is definitely an option. The instructions are lengthy, but really not that hard to understand.
--See if your favorite stores accept competitors' coupons. They may have a sign stating this in the front window, or you can try asking your cashier.
--f you find yourself buying a certain magazine every time it comes out, getting a subscription might save you money in the long run.
--If you like to cook, make double recipes and freeze half for later. This will help you curb impulse food buying, since you'll always have something tasty waiting for you in the freezer!
--If you're going on a road trip, bring some snacks from home (like a bottle of water and a thermos of coffee!) or even buy some munchies at the supermarket. Food on the road is going to be expensive and, if you're riding around hungry, you'll be more prone to impulse-buy.
--Invest in a programmable thermostat to save money on heating bills in the cold times of the year. For example, we were both out of the house every day from 9 am to 6 pm, so we programmed ours to turn itself all the way off during those blocks of time.
--Buy some reusable plastic containers for your food, to save money on zipper bags, foil and plastic wrap.
--Re-use plastic shopping bags as liners for small trash cans and as lunch bags. You don't need to buy brown bags or tiny trash bags.
--Rent movies instead of seeing the newest ones in the theater. Also, not that I'm advocating this, but bringing your own snacks to movies will save you a lot, if you must see the latest flicks first.
--Don't use dryer sheets, or if you do, cut them in half.
--Use 3/4 of the suggested amount of laundry detergent. It will do the trick!
--Did you know that you can make your own microwave popcorn? I didn't! All you need are some kernels and a brown paper bag. Fold the bag over tight, and fire that microwave up!
--Carpool with friends or coworkers if you can.
--Bring lunch to work! Even if you don't do it every day. This will save you so much money. When you make dinner at night, make a little extra, and save it for the next day.
--Meat is costly! If you are a meat-eater, try eating less meat, and get your protein from sources such as eggs, tofu, beans, and nuts.

To Generate Extra Income
--Babysit! A good old standard. Start with neighbors with whom you are friendly if you don't know any other place to get started. Or friends' or coworkers' kids. If you are really in a financial pinch, and willing to give up some fun, you can charge higher rates by working holidays - New Year's Eve, Valentine's Day, etc...
--If you live in a university town, there are probably medical/psychological studies going on during the school year. check in your local newspaper or free weekly, or on Craigslist.
--Speaking of Craigslist, this place is a gold mine. This is where odd-jobbers die and go to heaven. Depending on whether your town is on here, or if a lot of people in your area use the site, you can really do well posting things like "Big snow today, huh? Call me and I'll shovel you out!" Maybe raking leaves is your forte? People post a lot of other jobs on here, one-time gigs such as transcribing jobs, editing jobs, moving jobs, etc. Get creative and dig around!
--Roll change that you find around the house. It depends on how dire your straits have been, but I know a bunch of people who could scrounge a $20 out of this.
--Sell plasma. I won't lie, this is not very pleasant. If you are not a fan of needles, this is not for you. However, it is possible to make $30-40 a week, cash, doing this.
--Sell books and media items on
--Sell things you don't need anymore on that wonder of wonders, eBay. Many towns also now have storefronts where you can bring the items that you want to sell and staff there will get it online and sell it for you.
--Some banks are now offering no-fee rewards programs that offer gift card or cash-back incentives just for doing your everyday banking! One is National City.
--Start a new savings account at ING with a minimum deposit of at least $250, and you'll get a $25 bonus. You need to have a current account-holder send you a referral link - contact me and I can send you one.
--This is pure chance, but Blingo offers the chance to win money while you Google! So far I've only won a bunch of free movie tickets, but hey, free entertainment! And I keep hoping...