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Gambling, Smoking and Other Fun Ways To Ruin Your Budget

June 4, 2013 by Stan Poores 14 Comments

Daniel Wesley is the founder and CEO of CreditLoan.com, a website that educates consumers about various personal finance issues. Among some of the topics discussed are bad credit loans, credit cards, auto financing, and many other credit and financial help issues. Connect with Daniel on Twitter and Google+. 

 

Paychecks never seem to go as far as you think they should and your piggy bank is looking pretty empty these days. Some of the choices you make every day could be hurting you financially. By identifying the extraneous items you’re spending money on and eliminating those purchases, you can make a significant difference to your finances over the course of a few months or a year. Here are five common spending habits that could be wrecking your budget:

 

5 Spending Habits Wrecking Your Budget

 

– Gambling 

It’s the thrill of a shot at winning it big, but whether it’s the lotto, casinos, or a work pool, you can waste a lot of money gambling. A few dollars here and there on scratch-off tickets when you fill up with gas start to add up quickly. Quit cold turkey, avoid situations where you might be tempted to gamble, or seek help if you think you might have an addiction. Think of it this way: you’re likely to make more money by investing than gambling it away.

 

– Smoking

 

Many people consider certain parts of their lifestyle a normal expense rather than a luxury, but cigarettes are expensive and costly to your overall health. Sit down and add up the amount you spend on cigarettes over the course of a week, month, and year. Many people will be shocked at the actual figure. Like gambling, there are ways to kick this habit. Stop on your own, seek a doctor’s assistance, or join a program. However you decide to eliminate this expense from your life, your body and wallet will thank you for it.

 

– Extraneous Spending on Beverages

 

Like most people, you probably look forward to a caffeinated pick-me-up at some point in the day, but consider how much you’re spending on extra beverages each month. From coffees in the morning to soft drinks when you’re out at dinner (which are usually the same price as a whole two-liter bottle at the store!), the cost of buying drinks at restaurants and convenience stores adds up fast. Find money-saving alternatives like refilling a sports bottle with water throughout the day or making your own coffee at home. However you work it out, if you stop buying beverages, you’ll save money at every meal.

 

– Eating Out

 

You might be surprised to learn that the average American spends approximately $2,500 per year eating away from home. Now multiply that number by the number of people in your household, and you’ll get a better idea of why eating out is not a smart move financially. This doesn’t mean you need to completely deprive yourself, but stick to going out for special occasions rather than a couple of times per week. Make more meals at home, and cook a variety of dishes to prevent boredom. Save (and use!) leftovers. Buy more store brands or stock up on items when they go on sale. Pack a lunch for work. All of these are great methods of cutting your food cost down considerably.

 

– Paying for Unnecessary Services

 

We often pay a lot for convenience, but how much of it is really necessary? Do you truly not have the time for some things, or do you simply not want to do them? If you make the effort to limit the services you pay for that you could actually do yourself, you’ll be shocked at how much you will save. Mow your own lawn. Clean your own pool and house. Change the oil in your vehicle yourself. Give yourself a pedicure. Learn how to groom your pet. It may not be as convenient, but the money you save will really add up.

 

Going On the Attack: Planning Your Future

 

Once you’ve identified and eliminated your bad spending habits, re-examine all of your monthly expenses and create a budget; the next time you go to the store, don’t allow yourself to spend money on things that will exceed that budget. Audit yourself and evaluate the true value of what you’re spending money on to find even more ways to cut back, whether it’s your cable package, your cell phone plan, or the magazines you subscribe to.

 

The last step is figuring out what to do with all the money you’re no longer throwing away. It probably goes without saying that the best thing to do is save. Having extra funds stored away is always a good idea; unforeseen expenses can quickly crumble your financial well-being, and having money saved away is the best way to protect yourself and your family.

 

Being mindful of your finances is important at every stage in life. Minimizing excess can be a difficult process, but cutting out unnecessary expenses can significantly ease financial pressure. Recognize your bad spending habits, find a way to eliminate them, and take steps to make better choices in the future. Your piggy bank will be filling up before you know it.

Photo: Stephanx80

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Filed Under: Debt Management, Planning Tagged With: Budget, Credit history, finance, Gambling, Personal Finance, Twitter

Avoiding Sex With Strangers and Other Poor Money Decisions

September 13, 2012 by The Other Guy 30 Comments

Thursdays are when we hear from the Other Guy (OG). Sit back and enjoy:

I recently stumbled across two interesting sites on longevity. Both www.livingto100.com and gosset.wharton.upenn.edu/mortality accomplish the same task – they pose a litany of questions about your health, wealth, mental and spiritual well-being and use your inputs to predict how long you’ll live.

For the record, I’m planning on living until 135.

The questions these sites ask fall into two different categories: things you shouldn’t do to your body and things you should.

My unscientific analysis surmises that it’s generally a bad idea to:

a) smoke
b) drink
c) avoid seat belts
d) have random sex with strangers (I know you think I’m kidding – but seriously, according to these two sites, it’s not a good idea. I can’t seem to imagine why…)

All this “research” started me thinking about financial longevity – what are the 4 stupidest things you can do with money that will kill your chances of a healthy financial life, no matter how well you try and recover in other areas? Can we draw some parallels? If we’re smart enough to show you the Top 7 Financial Hacks to Avoid, we can surely pull together the four worst ways to train wreck your financial life.

 

Here’s my list:

 

1) Borrow money from your 401(k) or other retirement plan. Why? This is financially like smoking 3 packs a day. Stop doing this. “But, O.G., I’m paying myself back with interest!!” Right. You’re paying yourself back these pre-tax dollars with after-tax money. Don’t get me started on the arithmatic of how much you’ll pay.

2) Rack up credit cards and roll the balances into your mortgage. Obviously this isn’t as common as it used to be, but it’s still happening. Paying 2.99% for a J Crew sweater for the next 30 years is freaking dumb. This is like having six Jack and Cokes a day. Your liver isn’t going to quit tomorrow, but it’s not there to crank through your whiskey addiction at 6 ounces a night either.

3) Not paying attention to your lifestyle costs relative to portfolio value. This has come up in my practice a number of times recently. I don’t care how much money you have – you simply cannot withdrawal $100,000 per year from a $1,000,000 portfolio forever, even if David Copperfield is your buddy. It’s simple mathematics. It won’t last forever. Be conservative. Wear a seatbelt – and go slow.

4) Scattering money with no clear and coherent plan or direction. You guessed it – this is like putting your…well you get the idea. You’re not in college anymore. It’s time to settle down and put all your stuff in one place.

That’s my fantastic four, or fabulous four, or fashionable four, or…well you get the idea. What are yours? I’m curious: what’s the top financial mistake you’ve seen that will submarine an entire financial plan?

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Filed Under: Debt Management, money management, Planning Tagged With: finance, Longevity, Money, sex and money

So You Want to Manage Your Own Money?

September 4, 2012 by Average Joe 29 Comments

A friend texted me this morning.

“We should talk soon. Julie is coming around to the idea of us managing our own money.”

It seems easy, right? My initial reaction to my friend was, “That’s awesome!” because it is. There are few things more satisfying than achieving your financial dreams and knowing that you climbed the money management mountain yourself.

No “money-god” came down and did it for you.

You didn’t need the Powerball numbers.

You actually plotted a financial course and landed safely at your destination.

For my friend, and for you if you’re about to embark on this journey, there’s good news and bad news: the good news is that it isn’t difficult to manage your own money.

The bad news is that to effectively manage your own money you’ll need to be ready to face some fairly difficult tasks.

 

Two Types of People

 

When I was a professional advisor, I’d meet some smart people who wanted to jump into their own money management and wanted an expert with an opinion to look over their shoulder, hold them accountable, and make sure they didn’t miss any “I” dotting or “T” crossing.

…and then there were other, often equally-smart people who wanted to hand it over to me and have someone else take care of it for them.

Believe it or not, most advisors I knew preferred the latter type of client and loathed the first one. Someone questioning their motives? Someone asking “why are we doing it this way?” all the time? That’s preposterous!

But if you’re going to ever learn how to manage your own money, you’ll need to be the first type, not the latter.

The steps aren’t difficult:

 

The Steps to Managing Your Own Money

 

My kids are reading myths in school. In the story of Hercules, he faces a series of challenges to achieve is goal.

I look remarkably like the guy on top, but I’m a little paler and not quite as naked. And I have less hair.

You’ll have a series of gauntlets in your way too, if you want to manage your own money.

1) Write out your goals. I’m not talking about writing:

Retirement

College

New Boat

Fall Deeper in Love

Real goal writing has a specific time, dollar amount and vision attached.

I want to be able to live on $65,000 per year (in today’s dollars) by age 65 without having to work every day. With this money I’d like to: (here you write your bucket list, which should include visiting every NASCAR track in the country).

That’s a goal you can shoot for and be excited about (except for visiting the track at Pocono, which I thought was pretty overrated).

2) Next, you write out all the hurdles in your way.

– I have $25,000 in credit card debt (separate by interest rate, term, amount)

– I have to put two children through college

– I know nothing about money management

3) Then, you find one of the nearly bazillion financial calculators online (you can use our powerful little PlanWise calculator here on the site!) and figure out how much you need to save to reach your goal.

– I need to save $250 per month to reach my dream if I achieve an 8% return.

Armed with your money management return information, now you figure out how to come up with $250 per month.

– Tweak your budget

– Pay down debt

– Take on more work

4) Before investing, though, you have a big problem. You have to insure yourself against some of the huge “what if’s” out there for you and your family:

What if you die?

What if you are disabled?

What if you have a car accident?

You’ll need to create a will and evaluate insurances.

5) Finally, you begin the heavy task of research to find investments that have historically achieved 8%.

 

No Step is Difficult, You Just Shouldn’t Miss One

 

As you can see, when you take on the hard task and decide to manage your own money, getting it right will be difficult. Each area demands time and energy:

– Planning, milestones and tracking

– Budget, income advancement and debt reduction

– Insurance need projection and comparison analysis

– Estate planning

– Investment allocation, picking and monitoring

These are five basic money management steps, but each packs a punch!

 

I Don’t Mean To Imply You Can’t Do It

 

As soon as I finish this piece I’m calling my buddy and talking him through these points. Before he takes on the task, he should know how long the financial security road really is. Going in with your eyes wide open is half the battle if you plan to win the “manage your own money” game.

He can do it, and so can you!

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Filed Under: money management, Planning, successful investing Tagged With: Budget, Debt, finance, Financial services, Insurance, Investment, manage your money, money management

Two Guys and Your Money Episode #2: Planwise Financial Planning Tool Creators Interview

July 9, 2012 by Average Joe 5 Comments

Happy Monday! We’re here to help you ease into the week with another nearly-awesome episode of Two Guys and Your Money.

Here’s a direct dowload link (Right Click)

Never listened to a podcast before? They’re fun and free! iTunes shares how to listen to podcasts: Tips for Podcast Fans

Want Two Guys and Your Money goodness every week automatically? Subscribe to the show on iTunes: Two Guys and Your Money

Thanks to a slew of people who made this week’s episode happen.

First, my parents, who created me.

Second, my grandparents, who created them…

Oh, is that too many?

How about a huge “Thanks!” to Vincent Turner & Ryan Paredez from Planwise for sparing time to be interviewed this week!

Also, thanks to PK from DQYDJ.NET for another great Fractional Cents piece.

Finally, thanks to Len Penzo (Len Penzo dot Com), Dominique Brown (Your Finances Simplified) and Carrie Smith (Careful Cents) for a cool roundtable segment again. Dr. Dean….we missed you dearly this week (though not the Mac user jokes…..).

 

Show Notes

 

<> Open

 

<> Listener question: “What’s the dumbest financial mistake you’ve ever witnessed?” Thanks to Tim in Eureka for the question!

 

<> On the Blog: Homeowner’s Insurance

 

<> Fractional Sense: Savings Rates w/ PK from DQYDJ.net

 

<> Roundtable: Financial Scams

 

<> Interview: the Planwise Tool w/ Vincent Turner & Ryan Paredez from Planwise.

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Filed Under: Podcast Tagged With: Carrie Smith, Dominique Brown, finance, financial podcast, funny money podcast, Len Penzo, On the Blog, Vincent Turner

5 Jaw-Dropping Financial Advisor Interview Questions

January 24, 2012 by Average Joe 14 Comments

Some people need professional help–not the type I’ve been told to find–but financial help. I’ve met many of these people firsthand. Over my years working as an advisor, it was difficult watching people walk into my office grossly underprepared for a meeting with an advisor know what to expect. I could tell by the look in their eyes that they hoped I was honest and actually knew what I was doing.

I know the look because it’s the same one on my face when I’m talking to an auto mechanic.

Luckily, you’ve come to the right place. There are five questions that are important to ask a financial advisor.

But is that all I need to ask? Five questions?

Nope. Hopefully these start you on the right track to building a dialogue with the advisor about your personal financial circumstances and dreams.

Whether you’ve found the name of an advisor from a friend (good idea), by their reputation (scary), or even through an internet, mailing or yellow pages search (most frightening), you’ll want to still ask these specific financial advisor interview questions. You have seen in the media that well respected names with degrees, certifications and mountains of clout have ended up as bad people. Although these questions won’t make sure that you won’t get ripped off, they will give you a better idea regarding your advisors methods and whether they’ll fit with your long term and short term plans.

  1. Tell me about your education. Listen to their experiences, any testing they’ve taken and professional credentials, such as a Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC) or one of a host of other designations. For “vanilla” financial planning, the two listed above (CFP and ChFC) are the two broad certificate designations. Others, such as a Chartered Retirement Planning Counselor (CRPC) or Chartered Financial Analyst (CFA) either are more narrow designations or focus on one aspect of a financial plan.
  2. How long have you been practicing? Suze Orman recommends hiring an advisor who’s been practicing for at least ten years. Back when I started, I thought that advice was complete baloney. Once I’d been an advisor for ten years, I completely agreed with her. Why? Because there are so many nuances and situations that are new in the wide world of financial planning that for the first ten years you’re often running into brand new situations. Your financial life is important enough that you shouldn’t have your paid professional help “practicing” on you.
  3. How does your financial planning process operate? Here’s the scoop: you can throw investment darts as well as any advisor, so you aren’t hiring him for that purpose. People hire an advisor not for the 80 percent of stuff you can do easily yourself, but for the 20 percent that he can do with far more accuracy and efficiency than you.
    • The base of any advisor’s work should be encompassed in a written financial plan that’s backed up by hard data. You’ll use this to mark your progress toward your goals and to hold the advisor accountable to their promises.
    • This plan can only be written if you’ve taken home some type of survey about your expenses, income, assets and liabilities.
    • Finally, you don’t want an advisor who’s only concerned with your assets (unless that’s all you’re concerned about….but I dare anyone to tell me that your budget, estate plan, insurance needs and tax situation don’t all tie into your asset mix). Your plan should place weight on those areas of your financial house that need work now. If you’re talking budget and he’s talking Roth IRA, you know it isn’t a match.
  4. Who will be working with me? In larger practices, experienced advisors often have less-knowledgeable associates who work with some clients. I don’t want to hire one advisor only to find out later that I’ll end up working with another. Make sure you know how the relationship will work before entering into an agreement. The advisor might also have specialists that help out in areas outside their knowledge base. Ask how referral arrangements work between the advisor and any other professionals they recommend.
  5. How are you compensated? Advisors are paid three different ways:5 Financial Advisor Interview Questions
    • Fee only. Some people prefer these advisors because they’re only paid to dispense advice. You decide whether to take it or not and generally implement solutions on your own. Although I understand this thinking in a perfect world, I’ll tell you that the people who hired me did so NOT because they weren’t smart enough to plan on their own. On the contrary, I worked with people who were CEOs and CFOs of corporations, experts in taxation, engineers and entrepreneurs. These people had drive. I learned that they didn’t just hire me for knowledge. They hired me to make sure they took the time to implement the plan.
    • Fee based. These advisors charge a fee for planning, but may charge an additional fee for managing assets OR receive commissions for some products. I was this type of planner, charging anywhere from $750 per year to $5,000 per year, then collecting both fees and commissions. Critics say these types of advisors “double dip” on charges, and you can end up paying large sums of money. That’s all correct, if my client wanted it that way. I ALWAYS told my clients how to avoid my fees and commissions, and often helped them set up accounts at other places. Once again, it depended on the client. My job was to identify strengths and weaknesses. If they wanted me to babysit their money or there was a product through me that helped better than those elsewhere….I was paid for that additional support.
    • Commission only.  These advisors will perform financial planning analysis for free, and are only paid when you implement solutions through them. Critics (like me) believe that these plans have to be slanted toward the methods supported by the advisor’s company, because that’s the only way they’re going to bring home a paycheck. I must say, though, that I knew some commission-only advisors who were top people in their field. They would only support a product they sold in the correct situation, and would actively refer people away from their product if it didn’t fit the need.

As you can see, it’s difficult to find a “perfect” set of financial advisor interview questions for your needs. But by asking these five questions, you’ll gain an understanding of the process the advisor uses, their fee structure and how their practice operates. You’ll also see the advisor’s personal history and gain an understanding of their personal feelings. This is a good start. Once you’ve asked these five questions, move toward your goals and find out how you like the advisor’s answers. It’s like hiring a coach: if you don’t listen to them, it was a big fat waste of money.

Want more questions? Try these resources:

NAPFA.org (National Association of Personal Financial Advisors) How to Find a Financial Advisor

CFP.net (Certified Financial Planner Board of Standards) Questions to Ask When Choosing a Financial Planner (.pdf document)

Photo attribution: Icon Checklist (Wikimedia Commons, Ckepper), Discussion (Wikimedia Commons, HBS1908)

That’s my story, now it’s your turn: have you interviewed an advisor before? Any good questions or stories from that experience that our readers might like?

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Filed Under: Hiring Advisors Tagged With: Certified Financial Planner, Chartered Financial Analyst, finance, Financial adviser, Financial plan

Boner of the Week! – Can Money Buy Happiness?

December 5, 2011 by Average Joe 5 Comments

I like good, solid financial advice as much as the next guy, but when it goes over-the-top, well….we award the Boner of the Week! to the most outrageous item I found in the media during the last seven days.

Oops …and we’re back to financial bloggers.

Don’t get me wrong: I love reading money-oriented blogs. Sometimes I love them because their advice for financial success is spot-on. Other times it’s because the blogger’s sharing juicy personal stories. It’s like reading their diary—you feel a little dirty but also thrilled that you know some secrets about their life and what gives them inner happiness.

I love some others because I get to wonder how come the blogger didn’t invest in a spell-check button. Maybe saving money includes backing down on English lessons or spell-check tools.

Last week, one of the top financial bloggers on the “internets” shared a nice diary-type tale of a trip abroad. He allowed us to follow the travelogue with some crisp photos and helpful insights into the financial aspects of the trip. Trying to tie in some meaning, he discussed ways financial success can help your life.

Kind of.

Specifically, he wrote this: “Having money buys you freedom and happiness.”

Oops.

How many things are wrong with this statement? Let me count the ways….one, two….three.

1) First, can money buy happiness? I hope you aren’t that gullible. While it can be proven that financial success buys freedom– and a ton of doughnuts–there’s no fact backing up that money can buy happiness. In fact, sadly, the opposite appears to be true. According to a story in Scientific American in August of 2010, money can impair the ability to enjoy purchased items. Researchers in Belgium have discovered that while wealth allows people to purchase more things, thoughts of how that lifestyle was acquired lowers the amount of happiness people experience. In this case, money detracts from inner happiness.

I will agree that I’d rather be rich and miserable than poor and miserable. After all, I think it was former editor-in-chief of Cosmopolitan magazine, Helen Gurley Brown, who said, “Money, if it does not bring you happiness, will at least help you be miserable in comfort.”

2) Experts insinuating that money buys happiness is a reason I feel many have a spending problem. When I was a financial advisor, I met tons of unhappy rich people. They’d head to a store or expensive restaurant to buy away their ennui. I think they were buying into a house of cards. Do you want that for yourself? I don’t think so. Make a list of goals…not just financial goals or things to buy. What do you want to do? Who do you want to be? Explore your world.

3) I think the goal of many bloggers is to help others. By presenting to a large audience that money = happiness, we propagate a stereotype that many are actively fighting to eliminate. I like a pocket full of cash as much as the next guy, but let’s focus on building inner happiness. While it’s true that having money—or rather a source of income—quells fears at the bottom of Maslow’s hierarchy of needs, it’s still only a fuel for life’s goals. Let’s not prey on consumer psychology by creating an illusion.  Chasing the next buck is not going to increase the amount of happiness we feel.

It might give you a warm, fuzzy feeling to go back and watch A Christmas Carol if you’d like a quick holiday reminder about the meaning of happiness.

My point: I love the fact that you read this blog and others like it. It’s exciting for me, too, to share better methods to manage cash, increase savings and prepare for a rainy day. Following the advice in my blog won’t make you happy, although it is completely true that my incredible wit will charm you to tears. Will money buy happiness? Nope. But there is good news: financial blogs can help you achieve the flexibility to do what you wish, when you want, with whomever you choose. Sometimes those of us in the financial world get so enamored with financial success that we forget that money can’t buy inner happiness.  ….or maybe he just wanted to be the boner of the week.

Disclosure: Purchasing A Christmas Carol from Amazon.com through the above link pays us a commission. Although that money won’t make us happy, it will continue to allow the website to operate, which should totally fill you with joy.

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Filed Under: blogging, Meandering, smack down! Tagged With: boner of the week, can money buy happiness, finance, financial success, Helen Gurley Brown, inner happiness, money equal happiness, Wealth

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