Joe's Money

Certificates of deposit are sold by banks.  They are more widely known as CDs.  Typically, CDs are low risk but generally low returns.  CDs are great for keeping cash in a safe place where you won’t need it for months or years.  CDs carry a commitment.  You cannot withdraw the funs for a predetermined amount of time.  The duration varies quite a bit, anywhere from short term one month CDs up to 5 years is common.  Usually the longer the time frame required, the higher the interest is.  Unfortunately, if early withdraw is required, a penalty will likely be assessed.  All gains from CD accounts (unless in a IRA) are taxable.

CDs are very safe investments, about as safe as they get, in fact.  CDs are FDIC insured providing your bank is FDIC insured.  The predetermined rate the bank gives you is guaranteed.  If rates slide while you are in the CD, you are locked in at the original rate.  On the contrary, the same is true if rates rise.

Some common CD types are:

Traditional CD:  A predetermined interest rate is paid over the predetermined term, or length of time.  When the term is up, you can remove all funds plus interest or renew the CD at most current rate.

Bump Up CD:  Basically, these are the same as traditional CDs.  The only difference is you are allowed to contribute additional funds usually once, in addition to the opening amount.

Liquid CD:  This type of CD account allows you to withdraw funds before the maturity date.  Since you have more freedom, it comes with a cost, a lower interest rate.  The rate will still be higher than a typical money market account though.

In addition, most of the above accounts are available at your local branch or online.  I have found that online accounts usually have much better rates than local banks.

CDs are great investments.  For people nearing retirement, they are ideal due to their security.  CDs are guaranteed and will never lose money.  CDs can also be used for your emergency funds as well.  Simply pick a shorter term.  If needed, you can withdraw funds early, but the penalty will be assessed.  The penalty is usually a few months interest.  However, since this is your emergency fund and it should only be used for true emergencies, hopefully the interest has paid you far more than you will lose for early withdraw.

I hear a case of living beyond your means just about daily.  The entitlement factor in this country is unreal.  You need to get realistic and buckle down your finances.

Unfortunately, most people in our society have been brought up to live beyond their means.  We are surrounded by images and videos of people living extra large lifestyles that are simply out of reason for most.  Growing up with the constant barrage of the rich and famous, has created a society that not only thinks they need this lifestyle, but think they are entitled to it.

When growing up, most teenagers spend their parents money.  Unless they are working, they are likely spending their money on frivolous things like fancy clothes and electronics.  According to statistics, only about 42% of high schoolers find paid employment.  According to the statistics, less than 50% of teens are working, so their parents are funding their popularity contest.  They are simply keeping up with the teenage Jones’s.

Unfortunately, this upbringing sets the teenagers up for failure later in life.  They are taught that at no matter what expense, they must appear to be keeping up.  This is proven by their average credit card debt of over $5,000 for age groups 25-34 year olds.  Had they been taught the value of the dollar at a younger age, perhaps the frivolous spending would have stopped.

The worst part of this ridiculous spending spree is, that age is not a factor.  The statistics are similar for just about all ages.  Many books state the same.  The more you make, the more you simply spend.  Doctors, lawyers, and the like are all chasing their tails with the fast food burger flippers just on a different scale.  If you earn $20,000 per year, maybe you spend $10,000 on keeping up with the Jones items.  If you’re making $100,000 per year, your simply spending $50,000 on most expensive Jones items.

I don’t know the Jones’.

Many people have the ability to carry the perception of being well off for long periods of time.  However, eventually, the jokes on them.  The charade is over and all that is left is the consequences of leading this type of lifestyle.  The result is usually a lifetime of debt.  I like to refer to this as chasing your tail.  You can chase it all you want, but your never going to catch it.

What you need to realize is, you need to stop buying items you don’t need on credit.  If you don’t have the cash, DON’T BUY IT.  Its that simple.  You need to learn to sacrifice for the better long term goals.  Take a serious look at your spending. Tell yourself, you don’t know the Jones’.

Here are a couple of quick tips

1.  Learn to budget and search for bargains.  If you can’t pay cash, don’t buy it.
2.  Do not give children credit cards.  They do not have the financial foundation to handle them.
3.  If you have credit card debt, call your provider to negotiate a lower rate.
4.  Pay off small balances first, then tackle the larger ones.  Remember, always pay at least the minimum though.
5.  Once you’re out of debt, don’t go chasing your tail again, stay out of debt!

I can’t begin to tell you how much you can save by buying store brand or “value” brand groceries.  I never had really bothered to consider store or value brand items until I started to have the drive to save.  Now, I find myself constantly looking for value alternatives.  Between the grocery stores, and super stores, you can find almost any food or household item available in a value brand.  I have picked up many of these items to find virtually NO difference in taste or quality 95% of the time.  On the occasion, you will get a bad apple out of the bunch but overwhelmingly you will realize that this stuff is the same.  There have been articles online and news stories on TV about how many of the value branded items are actually manufactured by the name brand counterparts.

In most major grocery stores, the price tags on the shelves display the cost per ounce of food.  Compare the name brand to the value brand.  This is the easiest way to save and there is no confusion even if the package sizes are different since it is measured in ounces of actual product.

Expand your horizons and save!

I am confident that we can agree that simply put, you must spend less than you make to build wealth.  Whether rich, poor, or somewhere in between, if you often spend more than you make, you will never accumulate wealth.  Although this concept may be equally as important as some of the things listed below, it is not the number one reason people fail to build wealth over their lifetimes.

Reason No. 9:  Procrastination

Many people fail to invest in their own financial future until it’s too late.  While you are young, you have a excellent opportunity and a definite advantage over the older folks because you have time.  The reasons behind not starting young vary quite a bit and are wide ranging.  Also, age seems to have an effect on why you fail to save.  While young, people in their twenties are just entering the workforce and tend to indulge themselves with the hottest trends, electronics, cars, etc.  Once you hit your thirties, maybe a young family is preventing you from putting away as much money as you would like.  At this point you may be living check to check and this is where debt problems stem.  Forties hit and you may have children in college or unforeseen medical expenses.  By the time you hit your late fifties, it is already probably too late.  Compound interest no longer has time to grow as much as it would have had you saved earlier.

Reason No. 8: Lack of Discipline

Most people find it difficult to save because they constantly buy, and very seldom, save.  It is much easier to say yes to your impulses.  Those who are able to say no, are going to have a much easier time building wealth.  Most are lead by advertising and the ease of being able to swipe a credit card.  The “I don’t need to pay for it now” ideas kick in.  Worry about it now, not later.  Until you find the power to say no, you will never get ahead.  Stop trying to keep up with the Jones’.

Reason No. 7:  Inadequate Protection Against Unexpected Expenses

Life unfortunately throws a lot of curve balls at us throughout the years.  May it be a water heater, car repair, or medical expense, these can all put a damper on your financial well being, and quickly.  Implement an emergency fund to cover these unexpected expenses so you don’t fall back on using credit.

Reason No. 6:  Poor Debt Management – Borrowing too Much

Lack of patience can cause you to turn to credit to get what you want NOW.  Again, learning to say no now, will save you tons of money in interest payments as well as buying items you may not have really wanted to begin with.  When using credit, unless you can afford to pay the item off in full at the end of the month, the item can end up costing much more than the original sticker price.

Reason No. 5:  Failing to Adjust How You Live

When people are used to a certain lifestyle or are used to spending, it is very hard to break the trend.  Try to find a way to break the routine. Otherwise, you will never change, and never seek the financial freedom you were looking for.  Don’t be afraid to try something new.

Reason No. 4:  Lack of Foresight

Winners have the ability to look beyond the immediate and into the future.  Although some may see your visions as dreams, don’t forget you need to have a vision to make your dreams come true.  You are not going to win the lottery.  Set a goal and create a path to help you get there.  Look into the future, find what you want, and plan how you will get there.

Reason No. 3:  Using Time Poorly

You’ve heard it a million times, time is money.  You have a choice to spend your time on watching TV all day or taking a look at how you will finance your future.  No one is going to knock on your door and give you the magic formula needed to plan for yourself.  Once time has been wasted, it’s gone.  Use it to your advantage.  Plan what you desire.

Reason No. 2:  Failure to Plan

My old man said it best, if you fail to plan, you plan to fail.  It couldn’t hold more true.  If you don’t plan what you want, you have essentially removed all hope of ever getting where you want to be.  According to polls, only 5% of people plan and only 2$ have their plans written down. Planning and writing your goals down can be a great motivator.  Everyday when you get up and look at your goals, you are setting the mindset that the reward is later and you can and will stick to the plan.  If you don’t have a plan or goals, how can you succeed?

Reason No. 1:  Lack of Knowledge

This should actually read lack of willingness to gain knowledge.  Most people give up after reading one thing they don’t quite understand.  Make an effort to read more about financial literacy.  This subject can be found in countless books and online websites.  The knowledge is there for the taking.  It is up to YOU to take in and process it.  This will help you find what is best for you.  No one, including financial advisors, have a better picture of your financial future than you.  Turn off the tube and read a book.

Stop living paycheck to paycheck.
Stop blaming your financial problems on anyone and everything besides you.
You are the only one that can control your future.
Find motivation to plan the rest of your life and stop living like a sucker!

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.