Joe's Money

Ok, ok, shopping for car insurance is not usually on the top of the fun list but you can save a lot of money.  I learned the hard way.

About 6 months ago, I needed a new insurance policy.  I drive a 2008 Honda Civic coupe and my better half drives a 1998 Toyota Camry.  When I looked for a policy 6 months ago, the best price I could find for both cars for 6 months was a little over $1,000 for 6 months of coverage.  This was full coverage.  I knew this was high but after looking myself and having a broker look, this was it.  Awesome.

So obviously towards the end of the policy, I started to look again.  Well, this time around it was a different story.  I was able to double my coverage, and get save about $350 every 6 months.  The only thing I did was change my deductible from $500 to $1,000.  And this was not the major cost savings.  We ran both quotes and even with keeping a $500 deductible, I still would have saved $300 for the policy.  I was shocked to say the least.  Point is, shop around constantly.

Here are a couple of other quick tips that might be able to save you a few bucks on insurance.

Put all of your households vehicles under one policy.  Having a multi-car discount will shave off a few dollars.

If you own a home, have your home owners insurance with the same provider.  This will usually trigger yet another multi-policy discount.  This works for renters insurance too.  Even though renters insurance is usually less than $15 per month, you can get a multi-policy discount with this too.  Sometimes, the renters insurance ends up just about free!

Consider dropping collision for older cars.  Sometimes by the time you pay your deductible, its simple not worth it to have collision.

Lastly, if you can afford it, raise your deductible.  If you have a good record, lower your deductible.  If your in an accident and can afford it, this can save you quite a bit on your premiums.

This seems like a obvious money saver yet some of us never buy anything used.  You can buy almost any item second hand.  This could include things like video games, movies, appliances, TVs, clothing, and cars.  Buying your car used will save you thousands.

There are great resources out there to help you save a fortune by buying used.  You can find almost anything online these days.

Craigslist

Craigslist has more than one use.  Obviously, you can find tons of used good here ranging from lawn mowers to video games, to light fixtures for your home.  Most on craigslist sell at a pretty good discount compared to buying new in the store.  More times than not, you can find what you’re looking for here.

Craigslist also has a services section.  Need some work done around the house?  Check it out!  I have seen great bargains to be had here.  Lawn and snow services, plumbers, computer technicians, etc.  You name it they are out there.  You can even use the wanted section to have them find you rather than the other way around!

Another great section on Craigslist is the cars and trucks for sale.  There are TONS of listings on here.  Skip the dealer, shop from home.  Both dealers and individuals can list here but private party is almost always cheaper than buying from a dealer.

Garage sales are also posted on Craigslist.  Garage sales are a great way to find many heavily discounted items.  Take a look!  This can help save you a lot of time too.  Rather than driving aimlessly to all of the sales in the area, use Craigslist to find only the garage sales that may have the items you’re looking for.  In most ads the garages sale host will list many of the items available.

Ebay

Ebay offers many of the same things that Craigslist does.  Ebay however is not limited to the area you live in though.  Ebay has more buyers and sellers than any other auction website.

Top 10 Things to Buy Used to Save a Fortune:

1.  You next automobile

Buying a used car will not only save you money on the purchase price but you insurance premiums will likely be lower.  Also, if you finance your car, you will pay less in interest since you should be able to pay it down faster.

2.  Clothing

People love to go clothes shopping all the time.  Let them spend the big bucks.  When they unload their 6 month old clothes that have been worn twice, you can realize the savings.

3.  Appliances

Used appliances usually go for a fraction of the new price.  If you can’t find exactly what you’re looking for, try a scratch and dent liquidator.

4.  Baby clothes

Obviously, the kids will out grow their clothes quickly.  Grab used items and save a bundle.  And, when your kids out grow them, you can resell them again.

5.  Entertainment items – Movies, games, etc.

Used movies and video games often sell for significantly less than they do new.  Check out eBay and Craigslist for some great bargains.  Many times, you can even trade with other parties and pay nothing!

6.  Computers

Computer junkies are known for upgrading their computers constantly.  The average user doesn’t need to be on the leading edge.  Do your homework and find something used that will fit your needs.

7.  Auto parts

First off, never buy from the dealer.  Even the auto parts stores will be much cheaper.  Craigslist as well as salvage yards can get you the same parts for much less money out of pocket.

8.  Tools

Tools are another category of items that seem to drop in price quickly.  Do it youselfers often come to the conclusion that they should have hired a professional and end up selling their tools at huge discounts.

9.  TVs

Another entertainment purchase.  Like computers, some people prefer to be on the up and up with this technology.  Take a look at the used ads and you can often get current or only slightly older models for a fraction of the new price.  Remember, even if you buy new, there is going to be something better in 6 months.

10.  Furniture

Furniture can be had for extremely low prices.  Especially now.  With all of the foreclosures happening, there are tons of deals out there with folks needing to unload their furniture.

For Average Joe’s Automatic Investing is the Only Way to Go

When it comes to money and saving, us averages Joe’s tend to procrastinate more than with anything else.  The “I’ll start saving tomorrow” idea isn’t going to work.  Unless you are one of the fortunate ones that manages to do this without thinking about it, automatic investing is the way to go.

You can setup automatic investing for almost any type of account.  401K accounts are among the easiest, IRA accounts, regular savingss accounts, education 529 accounts, and so one.

401K accounts are the easiest.  You set them up with your employer and the money comes right out of your check.  If you start doing this immediately when you start your new job, its almost like the money wasn’t there to begin with so you don’t miss it or even realize it was ever there to begin with.

Roth IRAs, traditional IRAs, and brokerage accounts can be setup online with any major discount brokerage firm like Fidelity or eTrade.  You can set how often the money is transferred, it could be weekly, bi-weekly, or monthly.

Standard savings accounts, including online accounts (which typically have better rates than local branches) can also be setup for automatic saving.  You can have either the bank setup the automatic transfers from your checking to your savings accounts and in many cases you can even setup your direct deposit with your employer to automatically transfer a portion of your check to your new savings accounts.

Education 529 savings plans also usually offer a automatic investment option.  These work very similar to the IRAs and brokerage accounts.

Keep things simple.  Setup your automatic investing and savings.  Its one less thing to think about for your financial well being.

Follow these tips and save tons!

1.  Remove unnecessary items.  The lighter the load, the less gas it takes.
2.  Use sites like GasMoney.com to find lower gas prices around your area.
3.  Use lower grade fuel if your car will accept it.
4.  Keep your distance and anticipate traffic changes, the longer you keep the car in motion without stopping, the less gas is used.
5.  Control your emotions, don’t floor it around the slower drivers!
6.  Use cruise control on highways.
7.  Don’t accelerate to stop signs and red lights.
8.  Drive at the posted speed limits to save gas and avoid costly tickets.
9.  Don’t warm up your car.  Driving slowly and avoiding hard acceleration  for the first few miles does the same thing.
10.  Avoid toll roads if you can.
11.  Use a GPS.  Find the shortest route possible.
12.  Car pool.
13.  Walk if the destination is close enough.
14.  Cover all of your stops in one trip.

The simple answer is yes.  I don’t recommend doing this until all other debts are paid off because the rates on other loans, credit accounts, etc, are likely much higher than the interest rate on your mortgage.  However, once you have those paid off, any little bit extra you can pay towards your mortgage will save you a ton of money in the long run.  Since mortgages are front loaded in interest, the first third of your mortgage payments are almost all principal so you barely pay down the balance.  The bank doesn’t want you to know, but you can save a ton of money over the long run without spending a ton of extra money.

Lets take a look at my mortgage.  I ended up financing $125,600 after closing costs, everything said and done.  I locked in a fixed 30 year mortgage at 4.875%, this rate will be unheard of shortly.  I locked on almost to the day for this rate.

If I pay only the minimum on my mortgage, the payment is $665 per month.  This does not include taxes and insurance.  It will take me the full 30 year term to pay this off entirely and I will have paid over $113,600 on interest only.  Total payments would be about $239,200 over the life of the loan, or about twice what I paid for the house.

If I paid only an extra $50 per month on top of the minimum payment, I would have only paid $95,000 in interest and I would have paid the full loan off in 26 years instead of 30.

If I paid an extra $100 per month on top of the minimum payment, I would have only paid $81,900 in interest and I would have paid the full loan off in 23 years instead of 30.

If I paid an extra $200 per month on top of the minimum payment, I would have only paid $64,000 in interest and I would have paid the full loan off in 18 years instead of 30.

I don’t know about you, but saving 12 years of payments and $49,600 on interest payments sounds pretty good to me.

Check out the calculator here to input your data and see how much interest you are paying and how long it will take you to pay off your home loan.

Here are 5 quick tips to help you save money this month.  These are simple tricks that if executed, can help you save money.

Track Every Expense

In my opinion, the easier way to find ways to cut back on spending is to track where every cent you spend goes.  A precise log will show you where your money is going.  More times than not, there will be a few eye openers at the end of the month.  Its much easier to cut back when you actually know where you are spending.  There are multiple software titles available to help you enter in your expenses into many categories, you can even create your own.  Or if you like, a simple spreadsheet can do the same thing.

Vacation at Non Peak Times

This simple trick can save you hundreds of dollars.  When you are thinking about going on your next vacation, use tools like Expedia to look at rates for different parts of the year.  Non peak times obviously have the best rates.

Also, if you have friends or family living at your vacation spot, consider the option of bunking up with them for the duration of the trip.  Keep in mind you spend the least amount of time in the hotel.

Make an Effort to Lower Your Investment Fees

Take a look at your investments statement.  Take a look at the fund prospectus and find what the fees are.  Index funds are usually much lower in fees than actively managed funds and they usually out perform the actively managed funds.  Actively managed funds can have fees of up to 3% or even more while index fees can be had as low as .02%.

Stop Eating out!

Eating out for lunch everyday can add up, and fast.  A $6 quick lunch everyday adds up to $120 per month assuming 20 working days.  Buying food at the grocery store almost always costs less than dining out even at the fast food type restaurants.  On top of the savings, I’d guess the meals would be much healthier too.

Downsize your Vehicle

If you drive to and from work and have a gas guzzling vehicle, downsizing your car can save quite a bit on gas.  SUV lovers, sorry, but if you want to save up, it might be time to think of a small commuter car.  Even though gas prices have come back down from the peaks, $2.50 a gallon is still no deal.

Lower Your Utility Bills

This can be an easy win for many people.  Its pretty simple.  In the winter, turn down the heat.  In the summer, turn down the air conditioning.  Dress appropriately for the weather, even indoors.  Last year, turning my thermostat down only 2 degrees more in the winter saved upwards of $50/month.  The furnaces ahs to work overtime to provide those toasty temps inside.

I finally gave those compact florescent bulbs a shot too after paying a pretty penny for not so hot lighting years back.  Not only are they a money saver on the electric bill, they last much longer, and light quality is much better.  These can be had for just over a buck a piece now.  I picked up a 12 pack at the big box home improvement store recently for about $13.

One of the top reasons for divorce is financial disagreements.  When you tie the knot, you are also tying in your partners financial habits as well as debt.

Before you wed, it should be a top priority to discuss your financial goals, among other things.  Many times, one partner will spend much more frivolously than the other.  This can lead to long term problems when it comes to financial planning.  One partner may have long term goals such as when they want to retire, how they will finance their children’s education, and so on while the other partner can barely finance next week.

Merging your finances

When it comes to merging your finances after you wed, the thought should be whats mine is yours and whats yours is mine.  Keep in mind this can include both debt and savings.  Put yourself in the situation before you tie the knot.  Get a joint checking account for starters.  See if you can both manage to stay on track and keep the account in good standing.  Also, you should both be able to agree on where the money goes.  How much you should spend on things like entertainment and dining out as well as the usual bills should all be discussed.

What to about debt?

Whether you like it or not, once you’re married, your spouse’s debt can become your debt.  Once again, both of you, together, should figure out a way to tackle the problem and make a decision before getting married.  Many times, couples will not see eye to eye on this.  The debt free partner will say, I have accumulated any debt so I’m not paying yours off.  If you are planning to be together for the rest of your life, this is an issue that needs addressing.  The debt doesn’t go away when you marry.  When you discuss this, don’t take the position “Your debt will ruin us.”  If that is the approach you take, it most certainly will.

Check Your Spending

So your soon to be wife is constantly nagging about your wild spending and then comes home with a $400 purse.

If this sounds familiar, your right.  This is the second most common reasons couples fight.  Most of the time, one of the partners get labeled the spender and the other the saver even though they actually spend about the same, they just spend differently.  The amount of small purchases by one partner may seem negligible, since they carry a low dollar amount while the other partner may spend much left often but on larger items like TVs or computers.  At the end of the day, they usually spend about the same.  Perception needs to be put aside.  Check the reality, the bank statements.  Most purchases should be budgeted for and agreed on by both partners.  Make sure you keep it fair though, one partner shouldn’t always decline what the other wants.  The fellas out there are never going to want a $400 purse and the ladies are never going to want a 65 inch TV to watch the football game.  Well, at least most of the time.

Hidden Money

Couples should not keep financial secrets.  They can come back to bite you in the backside.  Again, this goes for both sides of the equation.  No one wants to find out you have been racking up a credit card bill without the other partner knowing.  The other side of the coin, no one wants to find out you have $50,000 in savings the other didn’t know about.  While an extra $50,000 sure is nice to find out about, but what was the reason for concealing it?

An emergency fund is a very important tool in your quest to be debt free, staying debt free, and your overall financial fitness.  It shows that you CAN find money to save and it also prevents you from going back into, or further into, debt.

Start small, save one months expenses before making any more than the minimum payments on all bills.

The emergency fund should only be used for true emergencies.  Examples would be furnace needs repair, car needs repair, etc.  This should not be used for new toys for yourself or even for gifts for others when you come up short.  Those types of items should be budgeted for in your monthly budget.

The best thing that saving a months pay will do for you is protect you from either going back into debt, or putting you further into debt when trying to get out.  This will give you some protection to help aid in your quest to becoming debt free.

Ideally, your emergency fund should eventually be at least 6 months pay.  After saving your first months pay, pay off all other debt besides your mortgage and then start building you emergency fun.  The monthly expenses to calculate the 6 months expenses should include everything from your mortgage to your cable TV bill.  Anything that you are not willing to cut should be included.  Obviously if times do get tough enough, canceling cable TV would be a wise idea!  Basically take a look at your budget.  Everything listed there should be included in calculating your emergency fund.

Hey all!  Every month, I will scrape the internet to find the best online savings account rates.  Let’s take a look at October’s best.  Keep in mind, some accounts do have minimum opening balances.

Also, if you are looking for CD accounts, take a look at each of the below savings accounts, more times than not, they offer slightly higher rates on their CD’s.

American Express 1.85% No minimums, no fees

Ally 1.80% No minimum, no fees

Capital One 1.60% $10k minimum, no fees

HSBC Direct 1.35% No minimums, no fees

ING Direct 1.30% No minimum, no fees

Emigrant Direct 1.30% No minimum, no fees

I personally use HSBC Direct.  While they do not have the best rate for the time being, they stay competitive.  American Express seems to be the best deal out there right now.  I have never used them.

Until next time!

Lets take a look at how I think the average Joe’s budget should look like.  Budgets are only useful if you have enough discipline to stick with them.  You will hear me repeat the following constantly throughout my blogging.  99% of success is taking action.  Hold yourself accountable for sticking to your plans.  The old saying goes, if you fail to plan, you plan to fail.

Every payday, every dollar I have coming, is budgeted before the cash even hits my account.  I have found it much easier to pay bills, etc. when all (well, lets be realistic, most) expense are budgeted for.  Here is a sample budget (Which is actually mine to the dollar) to get the juices flowing on what items should be planned for.  Almost all expense fall into this category.  Seriously, when is the last time you didn’t get an electric bill?  So why isn’t it in your budget?  Ask yourself the same question for all categories listed below.

All dollar amounts are per pay period (Every two weeks).

Mortgage – $500
Car Payment – $180
Insurance – $100
Savings – $253
Cell Phone – $53
Comcast Cable/Internet – $29
Electric/Gas – $100
Grocery – $100
Trash Service – $15
Car Maintenance – $25
Home Maintenance – $45
Vacation Fund – $25
Water/Sewer – $30
Clothing – $35
Gifts – $50
Long term entertainment purchases – $40
529 Plan – $13

Cash withdrawn every pay period for other expenses/fun $400.  This includes gas expenses for driving to work, etc.

Most of these are pretty self explanatory.  However, some are not.  I’m an eletronics junky.  I like computers and giant TVs so I have budgeted a small amount of my total pay to the “Long term entertainment” account.  The 529 plan is a educational savings plan for if and when I have kids and they opt to go to college.  Yes, you read that right, I save for college expenses for non-existent children.

You may be looking at these numbers thinking “This is impossible.  I don’t have that kind of money.”  I didn’t always have this money either.  The truth is, if you are living within your means, you should be able to budget for any of these things.  If you are stretched to the max between rent and groceries, you may need to consider getting a smaller place or looking for ways to increase cash flow.  We’ll get to that later.

Think your situation is impossible?  Shoot me an email with your example.  I will create a budget for you and post for all to see.