Wise Bead (Silicon Valley Blogger)

The Buy-Nothing Lifestyle: Lessons from a Frugal Experiment

Silicon Valley Blogger — Thu, 27 Jan 2011 13:00:11 +0000

Could you be ready for a lower-cost lifestyle? During the start of the year, many people resolve to make positive changes in their lives. They usually take on the goal to lose weight or to reduce their debt. But what about the "no buy" lifestyle? This sounds pretty extreme or somewhat absurd, but there are people who seem up to the challenge.

For instance, there's David Hochman, who was able to get through a whole month without spending beyond $100. In fact, his entire family was part of this frugal experiment. Their rules were simple: Other than the bare essentials, like fresh milk and fruit, the Hochman family would do its best not to buy anything.

While this sounds like a pretty extreme way of cutting costs, realize that this was just an experiment to determine how feasible it was to live on very little. (Although extreme saving is somewhat of a sport for some people.) David Hochman's Reader's Digest narration of his family's adventures reveals he learned quite a few things, among them:

Their cupboards had a LOT of food that got them through the month. David's most priceless find: a can of black beans.
The free food samples at Costco helped them get by with less.
They could score some free stuff by answering surveys from sites like MySurvey.com.
A plumbing emergency could actually be solved by a shot of dishwashing liquid poured into boiling water and poured down a drain that was threatening to regurgitate sewage.
There are generous people out there who are willing to give useful things away. For instance, someone offered a free 52-inch plasma TV on Craigslist. (Well, the benefactor just didn't want his ex-wife to get the TV during their divorce proceedings, but that's another story.)

Towards the end of their frugal-living adventure, David and his family found it more and more difficult to keep things together. The pressure of sticking to this financial challenge was starting to affect their relationships, leading to frayed nerves. By the end of the month, they were bickering, feeling irritable and stressed out. Clearly, there is a downside to radical savings methods and forcing ourselves to adapt to very stringent, limited budgets.

On the other hand, there were also a lot of valuable lessons learned from this experience. Things turned out differently for David once the experiment was over. He had expected his family to return to its previous spending habits, but they didn't. Instead, David's family members stayed close to home and learned how to keep their frugal habits in place. Their experience with extreme frugal living allowed David and his family to realize that they could live on much less and to appreciate the things that they already have. By these measures, this experiment was a success.

David recalled a rich person once telling him, "Money is important only if you don't have any." Indeed, that can be a bit of a paradox: Most of us actually have so much, but it's a pity that we don't always appreciate the things we already have.

For more examples of extreme savings challenges, check out this list of one-year challenges that other folks have embarked on. Here's a look at a few of them:

The Compact is a group of people from San Francisco who've made the commitment not to buy anything new for an entire year.
The Great American Apparel Diet is an ongoing pledge you can make that involves not buying any new clothes for a year.
What about promising to skip on dining out and entertainment for a year? Check out this blog called Not Eating Out in New York.

So how about you? Could you possibly learn to live on much less?

Written by Silicon Valley Blogger and published on Wise Bread. Read more Lifestyle articles from Wise Bread.

What to Do With 100 Tomatoes

Silicon Valley Blogger — Wed, 17 Nov 2010 13:00:16 +0000

Recently I tried my hand at being a little bit more self-sufficient by growing some veggies at home, a great way to eat well for less money. You can certainly get your produce from Safeway or even your local farmers market, but a garden can be a fun family project to tend to, especially when your kids are participating. I therefore embarked on a project to grow tomatoes from seed packets. I started small, but before long, I got a bigger crop than I expected.

Ultimately, I ended up with a fantastic crop of tomatoes that I needed to put to good use. I had to become resourceful! So I thought of applying them as an ingredient in a variety of dishes. Here are my top 10 favorite uses.

What To Do with 100 Tomatoes?

1. Salads

Salads are simple, healthy, and low-calorie. Just toss the cherry tomatoes in with your greens, or cut the bigger ones into wedges for a bigger taste.

2. Sandwiches

What good is bacon and lettuce without a great big slice of tomato? Slice up those normal-sized tomatoes, and eat them in your favorite sandwich, on a juicy burger, or on toast with sardines.

3. Tomatoes and Ham

Grill big, juicy heirloom tomatoes with ham or by themselves with a pinch of seasoning and some oil.

4. Pasta and Pizza Sauce

With so many tomatoes lying around, you have more than enough to flirt with different slow-roasted tomato sauce recipes. Practice makes perfect, right?

5. Salsa

Have you ever HAD fresh salsa? There is nothing better than cold, fresh tomatoes to make the freshest tasting salsa. Chop them up with onion, cilantro, basil, sea salt, pepper, and some extra virgin olive oil. Your friends will be dying for your tomatoes (and the recipe) after they try your salsa!

6. Bloody Mary Mix

Mix those tomatoes up in your favorite Bloody Mary recipe for a fantastic hangover cure!

7. Cure for Cancer?

Well, maybe not a "cure" exactly, but the lycopene in tomatoes (the stuff that makes them red) reduces the risk of some cancers. You can eat healthy and inexpensively and ward off cancer while you're at it!

8. Tomato Soup

Your grandmother's tomato soup recipe never tasted so good as with your fresh tomatoes. No need to open that can of Campbell's when you can make soup at home.

9. Stuff Them

Empty out your tomatoes and slow-cook them for a few hours for a new twist on appetizers and salad bowls. You can fill them with cheeses, salad, pasta — anything you like! — for a dish that is sure to impress.

10. Can Them

This tradition is quickly dying out. Our grandmothers once grew their own vegetables and fruits in abundance and then canned them for use all year. So if you just cannot eat them right now, don't.

When You Cannot Stomach One More Tomato

After a while, you may just yearn for something...else. I would like to say that I am a gourmet cook and that I spent months crafting new tomato recipes for all my friends and family. Unfortunately, they were sick of them too. So, I had to reach far into the recesses of my mind for ideas. Here are some ideas for determining the fate of the tomatoes you cannot eat!

1. Drink Them

Make yourself another great big "healthy" Bloody Mary to help you relax while you figure out what to do with the tomatoes.

2. Donate Them

I already noted that my friends and family could no longer eat a single tomato. However, the world is full of hungry people. Give them away to shelters. Take them to flea markets to sell. Give them away to colleagues and coworkers. Try your neighbors. And when you can no longer find a single soul who will eat them, see if you can send them off to someone who could use them. I'm sure you'll find people who'll appreciate the gift.

3. Have a Good Laugh with Them

Yes, I said "laugh with them." When a bad comedian stutters and stammers through their poorly constructed humor, throw your soft, ripe tomatoes at them! Your tomatoes are gone, you get a good laugh, the comedian will be able to afford lunch — everyone's happy! I kid, of course!

Lessons from Having Too Many Tomatoes

While I may have overdid it the first time, I think that I'm going to keep on working with my vegetable garden for at least another year. Doing so will help me stick to my food budget and cut food costs. Despite some of my miscalculations with my first crop, I found myself enjoying this exercise in self-sufficiency.

Perhaps the most important thing to grow from all these mounds of tomatoes was...me. The tomatoes brought an important lesson. Just as I invested time, patience, and money into my tomatoes, I figure we should invest and believe in everything we do in life — and watch ourselves blossom and grow! I'm excited about growing other vegetables, and I look forward to seeing where my green thumb takes me.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Food and Drink articles from Wise Bread.

5 Signs That Your Credit Card Spending Is Out of Control

Silicon Valley Blogger — Sun, 31 Oct 2010 17:00:12 +0000

How good are you at staying on top of your credit card spending? Credit cards are a convenient financial tool that many of us prefer to use in lieu of cash, but they can become a thorn in your side if you’re not careful. To determine how disciplined you are when it comes to spending with plastic, it may be a good idea to do a self-assessment. Here are five signs that your self-control goes out the window when it comes to buying stuff with your credit cards. If any of these signs seem familiar to you, then it’s time to sit down and give yourself a good talking-to.

You can't leave the house without your credit cards.

This may be a sign that you are overly dependent on your cards, and that you've grown inured to a certain level of spending. Do you really need a credit card every time you pop into town for a quart of milk? When you carry your card around, it's easier to succumb to spending temptations that can add to your card balance. Try leaving it behind once in a while and see if doing so has a positive effect on your card balance and even your spending habits. You might be surprised by the results. (See also: 6 Reasons Why Cash Is Still King)

Every single thing you buy has to be bought with your credit card.

Have you fallen for the pitch that you should put all your financial transactions on your credit card? It's a good thing if you have a rewards credit card, and you are able to pay your bill in full every month to reap those rewards. But if you're keeping a credit card balance, then you need to think about the possible consequences of putting everything you buy on there. Maintaining a credit card balance that grows over time means that you will ultimately find it harder and harder to pay down. Many consumers mistakenly assume that their card rewards will neutralize or make up for their spending. This, of course, isn't the case.

Impulse buying has become second nature.

Impulse buying gets us all once in a while. But the habit can sneak up on you more easily if you always have a credit card with a high credit limit in your back pocket. In order to curb impulse shopping, you need to regain some common sense and question everything you buy for a while. One way to control your spending urges is to set up a budget and account for all the spending you do. It's helped me to keep a closer eye on the purchases I make.

You don't stick to a budget.

I just mentioned the benefits of drawing up a budget. A budget allows you to become intimately aware of your limits so you don’t exceed them, and many responsible credit card users are able to keep their spending in check because of the simple act of budgeting. But it's not enough to set up a budget; you also have to make the commitment to stick to it! You can develop a budget with the use of simple spreadsheets or a free budgeting tool like Mint.com. If you are more inclined towards desktop applications, then YNAB is a good option.

The idea of cutting up your credit cards makes you break out in a cold sweat.

Does it make you nervous when you think about leaving the house without your cards? If it does, it’s time to think seriously about who is in control — you or your credit card. You should never feel as if you couldn’t do without one in your wallet. Many folks have switched to using cash for all their transactions and have actually found it to be a liberating experience.

If you can’t spot any of the above signs just yet, congratulations. You are still in full control of both your common sense and your credit cards. But don't get complacent yet; it's important for you to always track your credit card usage and how much you spend. So keep your eye on those cards!

Written by Silicon Valley Blogger and published on Wise Bread. Read more Credit Cards articles from Wise Bread.

Basic Tips for Investing in a Business

Silicon Valley Blogger — Wed, 13 Oct 2010 13:00:06 +0000

'When I married Donna, I could get both hands around her waist,' said my husband's grandfather. Pointing at his full-figured wife, he boasted, 'Now look how much I got. That's what I call an investment!' — Katherine Eby, via Reader's Digest.com

In essence, that funny anecdote is right. Of course it doesn't sound very flattering to Katherine's grandmother-in-law, but that's exactly what investment is all about: making sure that your accounts and net worth grow bigger over time.

Investment is that exercise of putting money in a financial account, in your business, in a friend's business, or even in some other companies' business, for the pursuit of growing one's money. Investment is an effort to get one's money to "grow."

Investment works on the principle of "compounded interest." Interest that is added to your principal, or initial investment, itself gets to earn interest. So if you've initially invested $200, at the interest rate of 2.5%, at the maturity term of one month, you'll be earning $5 at the end of that month. If you renew the term of your money, your $205 will then earn $5.13 ($5.125) when another month is over. Certificates of deposit accounts or time deposits work exactly like this.

On the other hand, mutual funds work on the principle of snowballed profits. Mutual funds are as good as stocks and bonds, only you don't manage them yourself. Rather, trained financial experts are hired to manage your money. To invest in mutual funds, you can look into a broker that charges low commissions and check out their offerings.

Basic Tips For Investing In A Business

Investments could also mean those things you purchase or put money in, in order to further your business. Most people take additional studies in order to get the credentials needed to help them advance in their chosen careers. Other people invest in machinery, gadgets and equipment in order to make their lives easier. Then, most businesses invest in people which make up their workforce — their much-needed manpower.

Here are three informal rules of thumb by which you can measure your investments and purchases:

Does it add value to your business?
Does it add value to your personal workflow? Does it save time and help you finish your work faster?
Is it an expense that will pay itself off in the future? What is your estimated return on investment?

If what you pay for holds up well to inquiries like these, then it's safe to say that you've made a good investment and have put your money in a good place.

On the other hand, there may be things that we may not see as outright investments, but end up becoming "money well spent."

One interesting financial tool is the credit card. It's a great tool when used wisely, but can also be a problem if used indiscriminately. If you apply for business credit cards as a way to organize your business' bills and expenses, you may find that doing so can be easier and can actually be helpful for compartmentalizing your finances.

In starting a business, one really does not need to have tens of thousands of dollars set aside or obtained on a loan for capital. Starting small is a good idea. As long as you manage your money well, and weigh each purchase or each acquisition against whether or not they add to the business, then you should be fine.

And if there is any advice we could leave you with, it would be these tips:

Make sure your bills are paid.
Make sure your accounting is in order.
Make sure you know where your money has gone, is going and where it will go.
Endeavor to create a product line that answers your target market's needs.
Make sure that you please and listen to your customers.

One of the biggest pitfalls of a business would be sloppy financial monitoring or the lack of any monitoring altogether. You'll have less worries if you can have mechanisms in place to meticulously track your finances. Finally, the other side of your business involves customer satisfaction. Once you have these matters down pat, there won't be anything stopping you.

Good luck on your money-making ventures!

Written by Silicon Valley Blogger and published on Wise Bread. Read more Investment articles from Wise Bread.

Beware the Small Print of High Interest Savings Accounts

Silicon Valley Blogger — Fri, 24 Sep 2010 14:00:07 +0000

How many times have you seen ads for savings accounts that have touted superb interest rates? And how many times have you looked into the offer only to discover that it isn’t quite what it seemed to be initially?

I’m not saying there are no good deals out there to be found. For instance, a savings product like the HSBC Advance Online Savings Account still offers a rate that’s higher than the what an average bank account offers, plus low fees and no minimum balance requirements. However, it pays to be careful and to keep your eyes and ears open and your brain engaged when you are shopping for a place to park your cash. Those tempting posters and advertisements have always got small print –- and it’s the small print that you really need to look at more closely.

Give Your Savings Account a Second Look

Here are some reasons why savings accounts with superb rates aren’t always the delightful find you thought they were.

1. They require a monthly savings contribution.

Some institutions may require you to contribute an amount each month to your account. This may be ideal if you've got a handle on your outgo, if you’ve got a good budget and you know how much cash you’ve got left over each month. But if you struggle to put away the same amount each time (or you even miss some months altogether) it’s no good opting for this kind of savings account. Instead, you’ll have to pass on the interest rate and settle for something less. For a savings account that’s more customer-friendly, check out the Sallie Mae Bank Savings Account.

2. The interest rate includes a "bonus" that disappears after the first year.

The good thing about these savings accounts is that for a specific time period, you can reap the rewards from a better rate of interest. They very often have few limits and they allow you to take out your cash whenever you want to. But they’re banking on the fact that you will forget to close the account and go elsewhere with your money. If you do opt for this kind of account, and you're really only after that rate boost in the beginning, then make sure you mark the anniversary on your calendar and move your money elsewhere when the intro rate expires.

In my case, I prefer to choose an account that still offers a high yield with or without the bonus tacked on. I also look at savings accounts that have other things going for it -- say, if they are part of an institution that has a great reputation, has a brokerage arm and has other interesting investment products to offer. EverBank is an online bank which offers accounts with initial interest rate boosts but also offers a great variety of investment products as well.

3. You don't get the stated interest unless you lock up your money for a given term.

An example of such an account is one that only pays out the advertised interest if you deposit your money and don’t touch it for four or five years. Now there is nothing wrong with this in principle, if you are quite willing to tie up your money for this long. But you wouldn’t choose this kind of account as your main savings account. You should only consider it if you've already got a designated account that gives you more liquidity and that perhaps, contains your rainy day money. If this is the case, you can enjoy getting a better rate of interest on any cash you are willing to tie up for a few years.

4. The account's interest rates change way too frequently.

How stable is that interest rate? Perhaps you are lured to a savings account because of its interest rate advertisement. At times, this type of fluctuation may seem to be a positive thing, particularly if rates are going up. But what if the trend is downward? If you’re using the rate as your primary reason for choosing an account, you may be disappointed later on when you find that the account’s rate changes quite a bit over time. So if you’ve pegged your hopes on a particular rate, it may not necessarily last.

Be Aware of the Hidden Costs

As you can see, there are some good deals to be had on savings accounts, even today when the interest rates are incredibly low. But you need to be prepared to give up something else in order to get them –- whether that is access to your cash, a good rate for an extended period of time or something else.

This means that you have to consider all aspects of every account before making your decision on which one is the best savings account for you. We all want our money to work for us and we want to get the best returns for it that we can. But sometimes we also need to know where to draw the line. Otherwise, we could end up getting tied to something that we really don’t need.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Banking articles from Wise Bread.

Are You Saving Too Much?

Silicon Valley Blogger — Thu, 09 Sep 2010 13:00:07 +0000

The current economy has taught a lot of us that we're not saving enough money for that proverbial (and inevitable) rainy day. Still, there are folks who could easily retire at 40 and never look back. These so-called "super savers" have been saving their milk money since they started kindergarten.

While we are all envying them now, I often wonder what kind of sacrifices they've been making in order to ensure they have the money in the bank to become financially independent. The thing is though, many people who don't possess this same mindset are often not sure about how to go about saving for the long term or how to deal with an investment broker. (See also: Living Cheaply for the Long Term)

I started learning that there are two types of people in this world: savers and spenders. Yours truly happens to be a saver at heart, and saving comes quite naturally to me. For other people I know, they've had to learn through many trials and tribulations that saving money is a habit that needs to be developed so that they can become financially successful. It's a tough lesson for some who've had to struggle daily with combating their shopping impulses or their spending addiction and who've had to control the use of their favorite American Express credit card.

But let's take a closer look at those folks who tend to squirrel away their savings with ease. They carry their tidbits of cash back to the bank as industriously as possible, storing away those little nuggets to be used in leaner times. Some of these people are actually super savers. These savers manage to sock away 50% or more of their weekly paychecks each and every paycheck, without fail, come hell or high water, no matter what.

Of course, they tell us the things we already know. They don't buy fancy new cars. They don't need big houses. They don't overuse their hotel credit cards to go on expensive vacations, they don't eat or dress extravagantly, and they most certainly don't buy anything "just because." They don't go to movies when they can buy the DVD. They don't buy the DVD if they can rent it for less, and they don't rent the DVD if they can simply borrow it from someone else. Rarely will you find a super saver at the table of your local Texas Roadhouse unless it is a very special occasion.

So, what are they planning to do with all of that dough? Some will tell you that they want to retire early. Wow! You say. What a great idea. But is it possible that we can actually save too much? For instance, what happens when a super saver finally decides to actually cut back on work hours? Could the drive to save increase two fold in these households when there isn't a regular income coming in each month?

Unfortunately, I've seen this type of behavior actually happen. What certain savers denied themselves during their working years suddenly becomes completely taboo during retirement. Sure, they might be able to afford to send their kids to the best schools, but how many of them actually do? For these people, it simply doesn't make good financial sense to spend hundreds of thousands of dollars on a Yale or Harvard education if a local university degree will suffice.

I want to emphasize that I am all in favor of saving — but it's also important to find balance in the way we manage our finances. Certainly, people should buy less and save more. We really don't need $100,000 cars if we can't afford to pay cash. 7,000 square feet is a bit much when it comes to putting a roof over our heads, especially if the payments are at the very top of our income allowance. Also, having dinner at home with the family is a great way to save some cash as well as to reconnect with our loved ones on a regular basis.

But, I firmly believe that money is a vehicle. A way to enjoy life to the fullest. You have to be able to find a balance between having money in the bank, squirreled away for a rainy day, and having the money you are willing to spend to enrich your life and the lives of your loved ones. Those new video game consoles are really cool. Going to the movies (especially the 3D ones!) is fun, and taking a vacation every now and again is just what the doctor ordered.

Extreme savers take heed. It is OK to spend some of our hard-earned cash on ourselves. Take a break! You deserve it.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Lifestyle articles from Wise Bread.

5 Loan Options for Those With Good Credit

Silicon Valley Blogger — Fri, 20 Aug 2010 21:22:36 +0000

One of the nice things about having good credit is the ability to secure funds for a variety of reasons and through a variety of channels. The hard part is figuring out the best types of loans that will help you maintain your good credit rating while still getting you the money you need to accomplish your goals. Having excellent credit will allow you to have your pick of cheaper loans with potentially higher limits. If you're in any need of financing, here are a few suggestions where you can seek out credit lines:

Credit Cards

So you've worked hard to make sure your credit remains clean. Even in this difficult credit climate, it should still be relatively easy for you to use credit cards. However, credit cards may not be the best option for financing because revolving credit is costly and is easily abused. When utilizing a credit card to make purchases or to cover an emergency, it is always best to plan to pay your bills in full by the end of the month to avoid having to pay expensive interest charges. Refrain from making any unnecessary purchases on credit cards even if you're faced with cards that sport 0% intro APR rates. The temptation to only pay the minimum payments on the debt is high, and there's that possibility to pile on the debt over time. Use your plastic wisely. If you want to place a limit on your spending or want to avoid taking out debt but want to enjoy the convenience of using plastic, then why not turn to prepaid debit cards instead?

Peer to Peer Loans

A relatively new way to borrow is by taking out a peer to peer loan. It's a form of personal loan that you can apply for through a peer to peer lending network like Lending Club or Prosper. You can simply sign up to become a member of the network and find out if you'll be accepted as a borrower. The service requires that you have a fairly strong credit history and a credit score of at least 680. Lenders who are also members of the network will have the chance to review your loan specifics to determine if they are willing to fund your loan. Here's more on how to apply for such a loan.

Cash Out Refinancing

If you have existing debt, then here's an option to consider. If you have equity in your home, one of the best ways to get yourself out of debt is to refinance your home and take cash out. The interest rates on a primary mortgage are far lower than on any other type of loan product available on the market today. Plus, there are no restrictions on how you use the money. You can pay off other debt, remodel your home or whatever else tickles your fancy, but since you're taking equity out of your home, make sure that the debt you're taking is worth the loss in equity and the additional interest you'll be paying.

Personal Loans

Borrowers with good credit can secure a personal loan or a signature loan from their banking institution. This is an installment loan, just like a car loan, except that the funds are dispersed to you instead of the car lot. If you meet the credit thresholds for your lender, your loan will be secured by only your signature and your vow to pay them back, which is nice if unforeseen circumstances make paying back the loan difficult.

Home Equity Line of Credit (HELOC)

If refinancing is out of the question for you, or just the mere thought of starting over on a 30-year mortgage turns your stomach, then you may want to consider taking out a home equity line of credit, or HELOC. This loan product is commonly known as a second mortgage because it uses the value of your home to determine what your credit line will be and places a lien against your home, just like your primary mortgage, to protect the lender against default. As with a refinance, a HELOC offers the homeowner a pool of funds at a great interest rate and does not require the money to be used for a specific purpose.

However, you should be very careful about taking out this type of loan. Having a HELOC adds another payment to your budget every month and may put your home at risk if you have trouble keeping up with payments. Remember that your house is used as collateral, so be careful when going down this route. Also, the funds are only available for a specified amount of time, known as the draw period. After that, you'll have to start paying back the loan and may no longer have access to your pool of funds.

These are just a sampling of loans you can obtain when you have good credit. The bottom line here is that if your credit record is in great shape, then you have a lot of options for financing. Whichever method you choose, make sure that you approach the process with care. Don't bite off more than you can chew: Only borrow what you can comfortably pay down over time.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Debt Management articles from Wise Bread.

Life After Debt: What's Next?

Silicon Valley Blogger — Mon, 09 Aug 2010 12:00:07 +0000

You've done it. You've worked hard, scrimped, saved, and paid off all your debt. Congratulate yourself as you have now joined an elite club of folks who have finally seen the light AND did something about it. But now that you can turn the page on that goal, what's next? Are you going to Disneyland or getting yourself a treat? Oh, wait a minute. You're facing a new chapter in your financial life, so it's time to set goals. So, now that you are finally debt free, what ARE you going to do?

For starters, you can set yourself up for the now and the beyond. Financial experts believe that the true key to financial health is zero debt, an emergency savings fund in a top savings bank and a sound plan for saving for retirement. You have mastered step one. Now it's time to begin focusing on the future.

Goals to Set

The easiest way to set up an emergency fund is to determine how much money you are now spending monthly in order to stay afloat. This calculation should include your mortgage payment, utilities, groceries, gas, and anything else you can't live without for a full 30 days. Now, take this figure and multiply it by 6. This is the minimum amount of cash you should have in your bank account to cover unexpected situations such as job loss, illness, etc. Now, many financial experts have started telling their clients that six months, while adequate before the recession, is now the minimum amount of cash you need to have stashed away, so saving more will always help. It may be a good idea to use budget management software to track your finances so that you can get a tighter rein on things.

Saving for this emergency fund is also pretty easy, even if you are still in debt payment mode. Once you've vanquished your debt, you'll have additional disposable income to do as you wish. Instead of spending all the extra funds on a bunch of stuff you don't need, start funneling the money into a traditional account or online savings account. The same payments you were making towards your debt may now be routed towards your savings. You'll never miss the money and, if you're like most people, this payment should be significant enough to help you reach your goals in as little as one year or less. If your monthly installments aren't as significant as you might like, try increasing it a little bit at a time, or simply be patient, but under no circumstances should you decrease or forgo making this contribution. Remember that slow and steady wins the race.

Next, you need to start looking into retirement savings accounts. Retirement savings accounts go above and beyond traditional savings accounts when it comes to making your money work for you. Thanks to its tax-friendly properties, retirement savings accounts allow your money to earn a greater return than simple savings accounts, making sure that you have the most money you can possibly have when it comes time for you to retire. When you think of retirement accounts, your mind might automatically wander to IRAs.

A traditional IRA is a good retirement investment account. You can make regular contributions up to the annual limits and in most cases, tax breaks apply to the money you put in. But, traditional IRAs aren't the only way you can save money for retirement. If you are fortunate enough, the company you work for will have a 401(k) retirement plan. You can make tax free contributions, which your company may match. And folks, this is free money. I urge you to take advantage of your company's 401(k) if your employer contributes anything at all. A 401(k) also has unique features like a low-interest loan feature that allows you to pay yourself back (although borrowing this way is something you need to evaluate very carefully) — you even get to keep the interest!

Other retirement accounts include a Roth IRA (which works somewhat like a traditional IRA with other benefits), Keough Plans, and a few others. If you are confused about what product works best for you, sit down with a bank representative and talk the talk. Don't be shy about asking questions. If you can't get satisfactory answers, go somewhere else. And don't forget that it's never too late to start investing. Here is some retirement investing advice.

While these are big savings goals to think about, there are also others that may be in your sights, such as saving for college or saving for big ticket items. When you've retired your debt, you'll need to prioritize the new goals you have before you.

It may take you a year or even longer to fulfill these goals, but they are the building blocks of having a solid financial future.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Debt Management articles from Wise Bread.

What's in Store for the Economy?

Silicon Valley Blogger — Thu, 22 Jul 2010 12:00:09 +0000

So does anybody really know where the economy is headed? For a little while there, things seemed to be looking up, thanks to improved stock prices. But with the market having slipped again and unemployment continuing to brew, it's hard to feel confident about the economy these days. Not to mention that we seem to be heading into round two of a stubborn recession, due to uncertain financial conditions in Europe.

How we perceive this economy is completely dependent on the needs of the politician that’s reporting it. What few people realize is that the Federal Reserve, the Secretary of the Treasury, and all those other economists and talking heads all have an agenda, whether it’s to bolster the confidence of the American people in the current Administration or to shake that confidence down to the core.

The truth is that the economy, just like a most other things in life, simply can’t be measured in straight line gains and losses. The economy is so much more than a line graph on a chart. It’s beyond stock and options trading and big corporations. It’s more than just mom and pop stores and consumers. It’s almost a living, breathing organism. The housing market, the stock market, the banks, the consumers, and the government all have a small but significant role to play in the equation and the contributions of each simply can’t be measured in finite terms.

For instance, let’s look at the housing market. Even though there seems to be more activity in the housing market when it comes to house sales, there is still an overwhelming number of houses falling into foreclosure. Does this mean that the housing market is recovering or that it’s still in dire straits? Big banks are finally showing signs of stability and their recovering stock prices prove it. But maybe it's because of the huge subsidies they've received. And is our economy really on the mend when small bank after small bank (somewhere in the neighborhood of 20-50 or more a month) continues to shut its doors?

And what about the stock market? Are we as consumers supposed to be comforted by the fact that the stock market has recovered nicely from its lows? If you notice the market's behavior, there have been equally as many "up" days as there are "down" days, and this is the normal ebb and flow of the ever-volatile stock market. We haven't really made as much progress as it seems.

And while the credit card industry looks to be recovering after a tough period of tight credit, issuers are still keeping an eye on the kind of customers they extend credit to. Getting approved for a prime credit card may be just a tad bit easier than it was a couple of years ago, but things certainly haven’t returned to those days of yore when subprime loans, easy credit and quick cash ruled the day. Those days won’t be back anytime soon, if at all.

So as far as the economic recovery is concerned, the truth is that we don’t know what’s going on and where this economy will be in the near term. I believe that the so-called financial “experts” are just as in the dark as we are. Sure they can look at their statistical data and make some educated guesses, but in the end, it’s really no more accurate or scientific than predicting tomorrow’s weather. Sometimes they get lucky and get some things right, but, more often than not, they’re nowhere even close.

So, I’ve vowed to take a step back from the overwhelming wave of “knowledge” and information being floated around out there about the state of our economy, and I've decided to make sound financial decisions based on what works for me. I’m no longer listening to the people who once told me that debt and leverage were the ways to get what I wanted out of life five years ago, but who are now telling me (in an about face) that no debt is good debt.

It would be nice to have that peace of mind of knowing that you can pay your mortgage with only one income if you have to. And wouldn't it be great if you didn't have to worry about losing your car because you hold the title to it? But here's the irony — if we work to minimize our credit card debt, cut down on spending, and make a commitment to live within our means, would we be influencing the course of our economy for the better? While becoming more financially responsible and putting a lid on spending may be what's good for our family budget, who knows what kind of collective impact such changes would have on our economy. After all, doesn't the economy rely on a spending, consumerist base? If we become a nation of hard-core savers, where does this leave the economy?

Written by Silicon Valley Blogger and published on Wise Bread. Read more Financial News articles from Wise Bread.

Going Green Could Mean More Money In Your Pocket

Silicon Valley Blogger — Sat, 10 Jul 2010 17:00:05 +0000

With all the environmental disasters we've been facing lately, it's easy to feel helpless about the state of our world. You may feel frustrated and even compelled to protest the big picture issues we've been experiencing. But rather than fall into this mood, I'd like to suggest that we take a look at those things we have a bit more control over.

How about we revisit those things that we can actually do in the name of going green? I'm hoping that in some capacity, the small actions may add up. Having control over some things may help assuage some of the frustrations we feel. After all, we've already covered a few ideas for going green and saving money at the same time. How about a few more simple moves that we can do around the house?

Watch Those Energy Bills

Let's start with the obvious. Your electricity bill: if there were things you could do to go green that could also bring your utility bill down, wouldn’t you want to do them? But of course! So let’s get started in that direction right now.

First, you need to get in the habit of turning your thermostat down. Even doing this by just a couple of degrees can make a dent in your electricity bill, and you'll hardly notice the difference in your house. But in case you do, you can always throw on a sweater until you become accustomed to it.

You can also choose to unplug your electronics, particularly "energy vampires," or appliances that are heavy energy users. While it's been reported to save only around 30 to 60 kilowatt hours a month in an average house, you may want to do this more for the sake of reducing CO2 emissions. Something as simple as using a power strip may simplify how you're able to control your energy usage.

When it comes down to where your energy hogs are at home, don't look further than your home office. It's the perfect place to use an eco-socket (or power strip). There are several versions of these available at hardware stores but the basic idea is that the strip has one switch on it that automatically powers off everything that is plugged into it. You could have ten things plugged into one panel (easy to do in a home office when you think about it) and they will all switch off in one hit.

You can also buy various appliances nowadays that save energy all on their own. Even kitchen items and other household objects are now being manufactured with the environment in mind. You can buy kettles which have an eco-switch on them which allows you to boil at slightly lower temperatures. You can use more energy efficient light bulbs or install light dimmers to allow you to use less power altogether.

Go Green Around The Yard

Another way to save is to recycle as much as you can at home. Get a compost bin and start chucking all your garden rubbish in it, as well as some of your compostable kitchen rubbish as well. For those who use compost, making your own can add to your savings.

If you've got a garden, then you can also try growing your own fruit trees and vegetables, which can be quite rewarding. One great benefit? It allows you to grow produce that is truly organic and free of pesticides and other additives. Plus, there's the convenience of having them ready to hit your kitchen without a trip to the store.

And if you're so inclined, buying things secondhand from yard sales and online sites like Craigslist and eBay is another great way to promote recycling. I personally love shopping for gently used items, as I've found a lot of my favorite treasures this way.

So have you got any tips for saving money and the environment that have worked well for you? While the politicians and big companies worry about the big picture, I'm all for doing what I can in my little corner of the world to help with keeping things clean and green.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Green Living articles from Wise Bread.

5 Signs That You're Too Obsessed With Your Budget

Silicon Valley Blogger — Mon, 21 Jun 2010 12:00:04 +0000

There is no doubt that budgeting can get you out of a financial hole. It can also lead you to employ better financial habits — a wonderful thing! But can you actually overdo it? Well, like with anything else, you can go overboard if you aren’t careful. And you can inadvertently end up having a software product or budgeting tool rule your life.

Here are five ways to find out if you are getting too obsessed with your monthly budget.

1. You consult your budget before spending money on the small things. While the little things count, it may not be necessary to have your budget govern your decision to make a purchase at the dollar store. We all know that taking care of the small change will make the dollars add up faster when it comes to saving money. But we can certainly go too far with this. Provided you stick to your budget most of the time, it won’t make a difference if you spend a few extra cents here and there on occasion.

2. You cannot spend anything — not even a red cent — without panicking that you’ll blow your budget. But we all need to have some fun in our lives! If you've gotten to the stage where you're budgeting every single cent and still panicking about every unprepared eventuality, then you need to take a step back.

3. You don’t allow yourself to have any fun money. Remember fun money? Yes we all need a bit of this every now and again. Work out what your budget will allow you and make sure you get a few dollars for yourself every week. How's this for a compromise: Set up a specific category in your budget planner that addresses this play money, then keep to its limits. This is the best way to make sure you have some cash to spend without worrying about whether or not you can afford things.

4. You are saving as much as you can without knowing what you're saving for. Does this sound familiar? Saving is a good thing, especially if you have specific goals you're aiming for. For example, are you planning to save three months' worth of your salary so you can have a cushion to fall back on? Certainly, saving for a rainy day is highly recommended, provided you've got a strategy that involves addressing your longer term goals as well.

5. Thinking about your budget keeps you awake at night. Unfortunately, there are people who may find themselves tossing and turning at night, worrying about their spending. When you get to this point, it's time to take a chill pill. Everything should be done in moderation, even helpful activities such as keeping an eye on your expenditures. If you're having trouble reconciling your budget with your spending, then determine if your plans are too restrictive or whether you're truly under the clutches of a spending problem. Seek support where you need it (especially if you realize you've got a debt problem) and work out small successes before tackling bigger challenges.

Nobody wants to be a miser. Or a tightwad. Instead, aim to be frugal as someone who knows how to find good value for their money, or as someone who knows how to make those dollars stretch without going overboard. If you recognize any of the above signs in yourself, it's time to think about dialing things back. Just like everything else in personal finance, moderation is key! Make sure you don’t fall into the habit of letting your budget get the better of you.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Budgeting articles from Wise Bread.

How a Solid Credit Score Saves You Money

Silicon Valley Blogger — Wed, 02 Jun 2010 12:00:05 +0000

There was a time when I had no real interest in my FICO score. I always thought it was just another number and wasn't sure just how relevant it was to my day to day living. But I was wrong.

My FICO credit score has a direct bearing on what kind of interest I can expect to pay on a loan, a mortgage or any other similar product. In fact it also helps lenders decide whether they should even consider me for a loan in the first place. I've also learned how much of an influence your credit score actually has on your chances for landing a job or getting into a new apartment. Many employers and landlords review your credit history carefully before deciding to enter into a working relationship with you.

The Importance of Keeping an Eye on Your Credit

A FICO score is comprised of a few elements, each one is formulated as a percentage of the overall score: these include your payment history, amounts owed, length of credit history, new credit and types of credit used. From what I've studied, my ability to make payments on time or to pay off my debt promptly accounts for a massive 35% of my overall score. That’s over a third of my score that can be attributed to my own actions.

Here's where it's important to keep watch over your credit rating, whether you do it on your own by ordering your credit reports via AnnualCreditReport.com, or through the use of a paid credit monitoring service. If upon review, you discover that your credit may have taken a hit, you should remedy the situation by first finding out whether you've been on time with your bill payments. Start by working on those things you can control and do what you can to resolve any delinquencies in your financial records. You should realize that avoiding late or missed payments has a significant impact on your credit rating, and ultimately, on your overall financial health. Again, this has a whopping effect on your total FICO score.

The Costs of Poor Credit

There have been times in the past when my FICO score wasn’t quite as good as it is now. And I now realize that I probably paid more for things back then than I might have done if I had taken better care of my credit.

While your credit score can affect lots of things in life, it has the biggest effect on the costs you incur as a borrower. For example if I'm looking to get approved for a prime credit card and I had a low FICO score, I wouldn't qualify to receive the more attractive terms on this card, and will likely be denied the card altogether. This is the unfortunate consequence of having poor credit, and there are strong reasons why this is the case: the lower your score, the bigger a credit risk you are deemed to be, and therefore, the higher the personal loan interest rates that you are charged.

So when it comes to big things like a mortgage or a car loan, you can pay a lot more over time if your credit score is at the low end of the scale. I am now someone who remains vigilant about my credit; when I pay my mortgage each month, I revel in the knowledge that I'm saving hundreds of dollars per month, thanks to excellent loan terms that I've been able to secure successfully.

Get Educated About Credit

While FICO information is readily available out there, not everyone understands it too well. But it's something you should be willing to learn about and to give a bit more priority to. After all, it's not something they readily teach us in school, so a lot of folks have to read up on this on their own, or have a lender teach them the ropes. The irony here is that this kind of information is hardly exciting, but the savings it brings can actually pay you a lot of dividends over time, which should be pretty exciting. This is actually one aspect of finance that can make a huge difference on your financial bottom line, if you remain on top of things.

If you find yourself resisting this little bit of financial education, then think of it this way: If you can only invest some time now educating yourself about your own FICO score, finding out what it is and figuring out what you can do to improve it, you can look forward to getting the best deals you can make as a consumer. You can look forward to saving a tremendous amount of money over time.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Debt Management articles from Wise Bread.

How to Afford Payments on Your Adjustable Rate Mortgage

Silicon Valley Blogger — Wed, 19 May 2010 12:00:10 +0000

So you’ve managed to keep your house, your job, and even your credit report clean during the economic meltdown. But, the storm’s not over just yet. The second wave of foreclosures and economic instability is gearing up to wreak havoc. And what’s worse, you’ve just realized that you are in the middle. Your adjustable rate mortgage is getting ready to adjust and you might not be able to afford the payment.

So what can you do?

There are several things you can do that can help you survive your adjustable rate mortgage. You can achieve this without having to resort to a second or third job or without having to start a home business, although if it's practical, earning extra income sure can go a long way as well. The options available to you will depend on your current situation, but in most cases you can avoid foreclosure and ultimately get a mortgage with better terms.

Step One: Batten down the hatches and save money!

1. Evaluate new car payments vs old car maintenance costs.

I often wonder why people choose to get new cars as often as they do. If you already own a gas guzzling SUV, it may still be a better move to keep it under certain circumstances: while driving such a car may not seem like the politically correct thing to do right now, paying a little more at the pump at each fill up is still way less than a new car payment. Of course, you may have to weather a few condescending looks from those smart car drivers, but at least you know that you won’t have to call a taxi the next time the ball team needs a ride to the field. Here's more on how to cut car ownership costs.

2. Cut down on credit card use.

This one is a no-brainer. Stop using credit cards unless you can pay them off completely every month. But for many, the temptation to let one's balance roll over into next month is simply too great. You need to keep a credit card around for emergency purposes, but it should take an act of Congress to get to it.

3. Pay your bills on time and stay out of the red.

Do you have any idea how much money you pay out in late fees? Probably not. I know I didn’t until I started adding them up on my bank statement. On average, we pay $350 or more in combined late fees, bank fees and other “stupid tax” that could instead be chucked away into a high interest savings account. So create a workable budget and stick to it.

Step Two: Get better terms on your loans and mortgage.

1. Consolidate your debts.

People often forget that they may have some leeway with the loans they carry. If you've got good credit and have been managing your debt load well, you can possibly negotiate better terms for your existing loans. Using balance transfer credit cards to get lower card interest rates has worked for me. You can also also consider joining a peer to peer lending network to secure better interest rates. You may also want to explore the possibility of debt consolidation as an option.

2. Refinance.

Now it's time to take a look at your adjustable rate mortgage. The best case scenario is to refinance it into a fixed rate mortgage as soon as possible. With an FRM, you'll know what your payment is going to be each month and if you choose to leave any equity you’ve built up in your home, you might actually be able to reduce your payback period from 30 years to 15 or less, saving you a ton in interest. Depending on the amount of equity you have in your house, you may also be able to draw out some cash to place into a savings account or pay off more expensive debt as well (e.g. credit cards and auto loans), although this is something you'd want to weigh carefully. The drawbacks are that not everyone will qualify for refinancing. If you’ve had some hits on your credit, if your house value has significantly decreased or if you lack sufficient funds to cover a down payment and closing costs, then odds are that you won’t qualify.

3. Modify your existing loan.

While not quite as desirable as refinancing your loan, you may qualify for a loan modification. In a loan modification scenario, your lender will adjust the terms of your mortgage — usually by reducing fees and interest — so that the payment remains affordable for you. In exchange for this consideration, the lender will receive a cash incentive from the government and avoid a costly foreclosure. The drawbacks for this process are that not everyone will qualify for a loan modification. In most cases, the borrower has to already be severely delinquent and the reduced interest/fees/principal may be due as a balloon payment at the end of the mortgage.

4. Sell your home.

As a last resort, you may have to consider unloading your house. This is probably the least desirable outcome, but selling your home is much better for your financial standing and credit, than going through a foreclosure. This way, you keep your credit intact and will increase your chances of being able to obtain financing in the future. In certain situations, it may be advisable to sell the house for what you owe (if the balance of your mortgage is less than the value of the home) in order to sell it quickly. The drawback is that this process won’t help if you owe more than your home is worth.

If you find that you are at the verge of getting into financial trouble with your mortgage or you're already in a tight situation and don’t know what to do, call your lender. Do it now because every minute you wait may mean fewer options you have for getting back on course. You may be surprised that there are still many lenders who are willing to work with you and help you get on a path that will keep you in your home and out of foreclosure.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Real Estate and Housing articles from Wise Bread.

Reduce Your Credit Limits to Manage Your Spending

Silicon Valley Blogger — Thu, 06 May 2010 13:00:03 +0000

How much credit do you have? By this, I mean how much available credit could you go out and spend today if you really wanted to max all your credit cards to the hilt?

I’m actually surprised by the gradual increase in my credit limits, and by just how high some of them have gone. I try to spend no more than a few hundred on my credit cards at any time, and always make it a habit to wipe out my balances on a monthly basis. Still, my credit limits are maintained at around $6,000 per card. So what's the concern? Well, with terms improving for many top credit card rewards programs, it's not surprising how tempting it has become to start piling on the credit...or worse, the debt.

All this makes me reflect on the importance of being comfortable with the amount of credit I have. Now if you have credit cards yourself, take a look at them now and review the credit limits you have on them. If you have more than one card in your possession, you could very well find that you have credit lines worth five figures at your disposal. And if you are tempted to spend more than you can afford, then you could end up accumulating credit card debt over time and struggling with financial problems.

One simple way to avoid debt is to remove the temptation. You don't need to cut up and cancel all your credit cards. But you can ask your credit card issuers to lower your credit limits.

A lot of card companies bump up the credit limit on your card without even asking whether you want this to happen. To my chagrin, I’ve had this happen on several occasions. But if you've got any issues with this, you can always just call your credit card company to discuss the possibility of lowering your credit limit.

This is one thing that a lot of people fail to remember when using their credit cards — that they can easily run into debt problems by allowing themselves to accept higher credit limits. Without imposing some set boundaries on our spending, it becomes way too easy for spending to lead to bigger balances over time. Credit card companies are very much aware of how human psychology plays into our spending behavior. As it is, we don’t all have the same levels of discipline to keep our spending patterns in check, so it's wise to implement debt and credit management strategies that enforce actual limits to the things we do.

If you're facing higher credit limits, take the responsible approach and call up your credit card company and ask them to lower it to a limit that fits your budgeting and spending plans. If you know you'll only need $1,000 as a credit cushion instead of $6,000, then ask for it. You’re the customer and if they won’t address your concerns, then you can threaten to go elsewhere. In fact, it's something I'd probably just go ahead and do if I find that my card issuer shows that much disregard for their customers' requests. And when all is said and done, I feel better knowing that I'm taking steps to keep my credit use under control.

More Ways to Keep Credit Use Under Control

So what are some more steps that you can take to get a handle on your debt and to avoid falling into a tough financial bind? Remember that it's easier to manage issues like this before they spin out of your control:

If you've got debt, stop using your cards or applying for additional credit until you're comfortable with your situation.
Stop spending and go on a budget. If need be, use budgeting software to give yourself some spending limits. Simply learn how to say NO to yourself.
Check your credit situation by reviewing your credit scores and reports on a regular basis. Check AnnualCreditReport.com for free credit reports every year, and credit score products like myFICO, which can help monitor your credit information for a fee.

Most of us have made some credit-related mistakes at one time or another.& You may already have run into problems with paying back what you owe. While there is a lot of credit advice out there that can help you if you are in this situation now, it's probably best if you first gauge and assess how your finances currently stand before you do anything else.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Shopping articles from Wise Bread.

Turn Your Passion Into A Living

Silicon Valley Blogger — Tue, 20 Apr 2010 14:00:02 +0000

We all want to have a job that we love — something that would get us excited about getting up and going to work in the morning…right? Who doesn’t want that? But this is often far from the reality we actually do experience.

So what does it really take to make this happen?

Finding your dream job or life's work may not be as hard as we all make it out to be if we decide to take action towards this goal. By coming up with a strategy for making it happen, you may just surprise yourself with the ideal job (or business). Here are a few simple tips on how you can get started on the road to a more fulfilling work life.

1. Find out what it is you love to do.

You know yourself the best. A few questions you may want to ask yourself: What are your skills and interests? What is your passion? What do you like to spend time doing? The first step may be the trickiest to get through, but this exercise should set the tone for you. Brainstorm about what it is that you would love to do. If you already know what that is, then fantastic! If not, then write every idea down that you come up with and explore those ideas fully. Get creative. Make long lists and remember that no answer is wrong. Explore every avenue of interest that you have and consider what it is that could get you excited and motivated every day. For instance, if you enjoy writing, perhaps you'd like to try to make money blogging or to work on self publishing a book. If you enjoy developing software, then there are many platforms through which you can seek creative growth: how about developing iPhone or Facebook applications?

2. Start small, try things out and take action!

Next, get to it. Start small and test the waters (so to speak) by doing side gigs, by freelancing or by teaching lessons in something that you’re good at. Advertise your services on Craigslist or other job forums. Find ways to fit these efforts into your schedule and make time for them. If you need money to fund your venture, budget for this by building a "venture fund" in a free savings account that addresses a specific savings goal. If you need to finance your ideas and happen to have good credit, you can opt to apply for a loan at a peer to peer lender (this Lending Club review covers one such lender). But without taking action, your dream job remains just that...a part of your dreams and ongoing hopes. This seems obvious and intuitive, but many people never realize their goals because of inaction. You have to make time to make change. By taking these steps, you can validate and turn this career into a reality for yourself.

3. Find ways to support your new career.

As you start establishing yourself in your area of work, find other ways to support your passion. Teach lessons in your chosen field and grow your knowledge in this area. See if you can become an expert in this field. Join networking groups that could use or refer your services. Continue to research and learn what you can about your profession or career on a regular basis, as it's important to keep abreast with the latest developments in your field.

4. Continue to promote yourself professionally.

Join related professional groups that are financially feasible and realistic. Promoting yourself online has never been easier than it is now. On the web, you have many free avenues that allow you to keep marketing yourself (e.g. Craigslist is free; blogs are usually free to create; there are free classifieds in online local publications; you can advertise in your local paper, etc.).

5. Gain an online presence.

You may be interested in creating an online presence or joining specific online interest groups or forums to help you enhance your learning and grow your professional network. Build a website that becomes your calling card (e.g. put your website on your physical business card as well) and put samples of your work on your web site. Make sure that you supply sufficient contact information so that your customer base can easily get in touch with you.

And finally, share your aspirations with the people you know — who knows, someone in your own circle may turn out to be someone who could help you with your endeavors. Word of mouth is and has always been the best way to build a business or career, and if you’re not capitalizing on this, you could be losing out. Make sure your family, friends, associates, etc. know about your business or employment position. When you love what you do, it will be obvious, and you’ll see that people will notice.

Have fun getting there! It can be a very fun journey.

Written by Silicon Valley Blogger and published on Wise Bread. Read more Career and Income articles from Wise Bread.

How To Cut Car Ownership Costs

Silicon Valley Blogger — Sun, 04 Apr 2010 17:00:05 +0000

Many people I know are car fanatics who love the idea of owning a trendy new car. I've seen family and friends beam with pride when they show off a new car purchase, eager to have me join them in that celebratory spin around the block.

But whenever I find myself inhaling that new car smell as I sit in the passenger's seat, I often remind myself (secretly, of course) of what it costs to buy a new car. It is during occasions like this that I weigh the costs of a car purchase with the benefits of keeping and maintaining a vehicle over time. After all, it's always a good idea to work out ways to keep those costs low, as a vehicle usually turns out to be one of the largest expenses you'll make in your lifetime.

So how does one go about shopping for a car?

Financial savvy folks will recommend that you first budget for it (this YNAB review describes a great budgeting system you can try). Then shop for and find a used (1-2 year old) car that you could either pay cash for completely, or for at least a portion of the purchase price. Since new vehicles depreciate approximately 15 to 20 percent per year, that’s a huge chunk of change that you can clip off the selling price right off the bat. That saves you an average of $3,000-4,000 that you would otherwise finance or pay for upfront for a spanking new 2010 vehicle. Is it worth it? Here are a few things to consider to keep the costs of car ownership low.

1. Keep your car as long as you can.

According to polls, most Americans plan to keep their new vehicles for approximately 5.5 years after purchasing it. This means that essentially, a new $20,000 car will cost you an amortized $3,636 per year over a span of 5.5 years if you pay for it in full upon purchase (the cost excludes maintenance and gas costs). Now if you finance the vehicle for 100% of the purchase price on a 4 year note, say at a 6% interest rate, you would pay $22,543.63 for a $20,000 vehicle. That means that it would cost you $4,099.20 per year if you finance the vehicle. That’s actually not a huge difference when comparing a cash purchase to financing your vehicle. What actually makes the biggest financial difference? It's the price of the car you purchase and the length of time that you end up keeping it.

Let’s use some more math to illustrate this point, albeit with a simplistic example. Suppose you decide to apply a strict budget as you bargain shop for a slightly used vehicle. You could very well acquire a new set of wheels for around $15,000, down from the $20,000 on a new car. And if you decide to hold on to it for around 8 years (an additional 2.5 years above the average length of time that households keep their vehicles) then you would be paying just $1,875 per year to own that car (again, minus the maintenance and gas costs). Not bad!

Note that the annual cost of owning a vehicle goes down based on a car's initial purchase price and the length of time you decide to keep the car. That is, it becomes cheaper to own a car the longer you own it. It seems obvious but anyone can save money when car shopping by simply going for the more affordable option (forget upgrades). And you'll save even more by simply holding on to your car for longer.

2. Pay off your car loan faster.

Everyone knows that the greatest savings are made by avoiding any form of financing on a purchase, especially a large one. But if you can't afford a car unless you finance or get a personal loan, then keep in mind that you'll save the most by paying off your loan sooner.

I touched on this matter earlier, but it's worth repeating: by skipping on financing, you'll save on having to pay off the interest on your loan. As an example, a $20,000 car with a 4 year loan at a 6% interest rate will require a $469.70 a month payment over a span of 4 years. The interest you'll pay here is $2,545.63 which you wouldn't need to pay if you just set aside enough in your high yield savings account to afford the vehicle in full.

3. Consider the maintenance costs of your vehicle.

Some car sites have numbers that will give you an idea about the financial cost of owning popular vehicles. For instance, there is a huge difference in the 5-year ownership cost between a Hyundai Elantra and a Toyota Sequoia. A $29,784 difference to be exact. That’s a lot of money that could be invested in an online broker account or used elsewhere. How much is your vehicle worth to you? This may be an opportune time to rethink that question.

4. Maintain your vehicle well.

How do we keep our cars running well and ready for the long haul? The life of your car depends on its maintenance record and general upkeep. But if you want to extend that life, it may be as simple as just treating your vehicle as though you plan to use it for 8 to 10 years. Keeping the interior and exterior clean keeps it free from rust and deterioration. Keeping the oil/oil filter, transmission fluid, tires, brake fluid, air filter, and other essentials changed in accordance with the maintenance manual ensures that the engine and key parts are in good working order. When in doubt, do these things more often than required, rather than later than required. The more you baby your vehicle, the better off you will be.

Think about what you could buy with the financial savings you get from just keeping your vehicle an extra 3 years. Could it all add up to be the equivalent of your child’s college education? Or a more padded 401k? How about all those vacations that you’ve always dreamed of? Or a nice home addition?

By being a savvy car shopper and owner, you can very well free up your money to do a lot more for you!

Written by Silicon Valley Blogger and published on Wise Bread. Read more articles from Wise Bread.

The Debate Between Buy and Hold vs Timing The Market

Silicon Valley Blogger — Tue, 16 Mar 2010 14:00:02 +0000

It's interesting to see that with the advent of computerized trading and value discount brokers, a new era of people investing with the idea of getting rich overnight has exploded, even as statistics show that most short term investors do not make money over the long term. This is in the heart of an interesting debate that rages on in financial circles: should we buy and hold on to our investments for the long term or is timing the market the way to go?

The buy and hold faction is quick to say that you'd be crazy to think you can beat the market over time, and that an eye on the long term is how you're going to make money via the stock market. But the other side — those market timers who've decided to cut their teeth on stock and options trading via their trusty TradeKing accounts — make the point that many investors who've held on to their investments are now lamenting that as a result of buy and hold, they'll need to be part of the work force for quite a bit longer than they expected.

A Closer Look At Buy And Hold

Let's take a closer look at buy and hold investing, shall we? So how about a quick game of one question Jeopardy: “the most famous buy and hold investor?” If you answered, “who is Warren Buffett?” then congratulations, you know your investment gurus! Warren Buffett is not only one of the most famous investors around, but also one of the most successful investors in history. Buffett is a market mover whose track record has been scrutinized by the investing public. When asked how long he intends to hold his chosen stocks, he gives a somewhat surprising reply, "we will hold stocks forever." And while this sounds somewhat extreme, he's also been extremely successful with employing a value investing stance over time.

The buy and hold proponents argue that predicting short term market moves is nearly impossible, and according to them, you can expect long term investing to give you much better results. But what about the recent stock market debacle that's decimated many a long term portfolio? While recent stock market numbers don’t look great, if you ask nearly anybody who has been involved in buy and hold investing, they will tell you that while their portfolio has decreased in value, it’s still up significantly from when they first opened their investment broker account, even after taking inflation into consideration. The key to this positive outcome lies in the assumption that you started investing a long time ago, when assets, in general, were quite cheap.

The World of Market Timing

The market timers and stock traders take the short term approach. These folks enjoy online stock trading, believing that they can make short term investments and predict those small day to day stock price changes well enough to make a decent profit over time. They use technical indicators and other economic data to make their educated predictions. When their trading dashboard numbers flash green, they quickly sell their positions to bag a profit. Their stance here is that by buying and selling quickly, they quickly lock in a profit and feel more in control of their financial destinies. Turn on any of the financial news networks and you'll find that many of the analysts here are short term traders who are trying to time the market. There are shows on these networks that sometimes spend an entire hour or more asking the question, “what will the market do tomorrow?”

Best Moves For The Average Investor

We can certainly appreciate the great arguments made on both sides, but I believe that for the average investor, it's best to stick with the long term investment approach. This would entail diversifying, developing a decent asset allocation that fits your goals and requirements, and owning mutual funds, index funds, or ETFs over a period of time. Over the long term, buy and hold investing coupled with a regular portfolio rebalancing strategy has proven to be a more successful approach for the retail investor. Stock market timing has tended to work out relatively better for institutional investors or traders with deep pockets because of their ability to hire professionals, obtain top resources, and use advanced strategies that often require experience and larger amounts of money to succeed. Now there are, of course, investors such as myself who employ both methods but with varying degrees of involvement: I have a core investment portfolio of mutual funds but on occasion, will dabble in some individual stock picking and market timing with my "mad money." What's important here is that regardless of which approach you take, you accept and are fully aware of the financial risks you are taking.

While I would stop short of offering a hard and fast position on this debate, I'll say this: any investor has heard that the stock market rewards patience. So take a look at your portfolio. If you have done well with your current strategy, then stick to what you've been doing; but if your results are flat or negative, perhaps you should try something new and consider beefing up your investment knowledge. After all, aren’t we all doing this for one reason? We all want to make money!

Written by Silicon Valley Blogger and published on Wise Bread. Read more articles from Wise Bread.

Life After Bankruptcy: What's Next?

Silicon Valley Blogger — Tue, 23 Feb 2010 14:00:39 +0000

Having to file for bankruptcy is something we all hope we never have to do in our lifetimes. Whether you file for Chapter 13 or Chapter 7, there are repercussions to going through this process. However, like with other setbacks in life, you can recover. There may be different paths to recovery for each form of bankruptcy, but there is always hope!

You may have done everything you can to avoid bankruptcy but those sweet 0% interest credit cards may have gotten the better of you. Or your health or unemployment issues may have taken center stage in recent years, and you were left with no recourse but to declare bankruptcy. When considering your financial future following such an event, you can expect that trying to secure credit for the next 3 to 5 years is going to be tough. Also, you can expect this negative mark to appear on your credit report for the official length of time of 10 years; although sometimes you may get lucky and the time can be reduced to 7-8 years. For those who need to weigh their options further, check out How You Know When It's Time For Bankruptcy.

Bankruptcy And Your Credit History

It’s legal for creditors to keep financial events on your report for 10 years, but that’s not a hard and fast rule. So how does bankruptcy actually affect your credit? It does so by lowering your credit score by 200 +/- points — usually because of late payments on accounts and not just because you filed for bankruptcy. If you find yourself becoming overwhelmed by payments, then this is an ominous sign. This is one symptom that can eventually lead to serious financial consequences for you if you fail to make any changes about your situation.

Now the good news: if during the bankruptcy proceedings, you decide to reaffirm or keep some of your debt and you continue to take responsibility for these loans (e.g. your car loans or house mortgage), then you may have a shot here (to some degree) to preserve your credit score and future credit worth in the eyes of lenders.

Additionally, there will be credit card companies (yes, they are out there) that will solicit you after the bankruptcy. You'll be debt free after all, right? You should certainly be cautious and wary, although you may think of this as a second opportunity to do things the right way. While taking on new credit and applying for a secured credit card can be a way to rebuild your credit history, you'll have to evaluate just how responsible you can be with handling debt all over again. You'll need to tread down this road very carefully because if caution is not heeded, your actions could lead you back down the same path towards bankruptcy. Here's more on how to build good credit (and clean up your bad history).

Bankruptcy And Your Living Situation

For those who have gone through bankruptcy, you may wonder just how your living situation may become affected. If you're a prospective tenant, you may be surprised to know that in many cases, landlords who own individual homes will be open to considering your application: after all, you've got no debt after you've filed for bankruptcy, and you're eager to build up your finances. Your living expenses and rent are surely a high priority for you. On the other hand, you may find it more difficult to deal with some large apartment complexes and management companies that frown upon those with a record. At any rate, you're likely to still find housing, and things may not be as bad as you thought it would be.

Now if you’re a homeowner, reaffirming your mortgage is the sole way to keep your home. Let’s consider the advantages of this move. The most obvious benefit is that you get to keep your home! This helps your credit and puts a roof over your head while keeping your bank or lender happy. But if you do decide to include your mortgage in the bankruptcy, you’ll be handing your home back to the bank and walking away. If you aren’t a homeowner yet, keep in mind that you can get approved for an FHA (HUD insured government loan) mortgage after two years from the date you are discharged from bankruptcy.

Bankruptcy And Your Financial Future

Do keep in mind that you'll need to continue making payments if you have other credit lines, and that you'll need to keep an eagle eye on your credit score. What most people may not realize is that this is precisely what credit monitoring services are intended for. You can best keep track of your FICO credit score by using myFICO products, which offer visibility to the most widely used score that lenders use.

It may take 3 years before you can qualify for a conventional loan once more, and when you do, the credit score requirements will no doubt be pretty stringent. or such loans, you'll typically need a credit score of at least 620 or higher, while you'll need a score of at least 680 to snag the best mortgage rates. For the lowest unsecured personal loan interest rates, you'll need your score to be in this general vicinity. Approval for these various loan scenarios will be up to the underwriter’s discretion. If you’re considering a mortgage after bankruptcy, I would consider talking with a financial advisor or mortgage banker about specific bank guidelines and your specific scenario so you can get a better understanding of your situation.

Given everything that we've discussed, anyone facing bankruptcy can hopefully see that there's light at the end of the tunnel. Recovery from bankruptcy can happen, and will happen if you're diligent, committed, and positive.

Written by Silicon Valley Blogger and published on Wise Bread. Read more articles from Wise Bread.

Comparing Savings Rates: U.S. vs Japan

Silicon Valley Blogger — Wed, 03 Feb 2010 14:00:02 +0000

Over the past 3 years, we Americans have seen an interesting shift in our economic and social patterns. First, we’ve seen credit card use decline, not by any conscious choice made by spenders, in a lot of cases. Credit card companies have rejected a good number of applications, and have even decided to cancel the accounts of existing cardholders due to single late payments, credit risks not associated with their products, and higher-than-ever credit qualifications.

For instance, while balance transfer credit cards do exist, they are no longer the fad they once were, and have lost some favor with credit hungry consumers, given the stricter requirements and stipulations they now have that govern their 0% APR offers. Combine all this with higher than ever interest rates on many popular credit cards, and guess what? We get people who want to start saving money again. While this may be simplifying things, it seems that as credit card companies began to shift their policies in response to a tighter credit environment, Americans have reacted by tightening their belts and adjusting their spending. The economic recession and subsequent changes in the credit industry have resulted in a silver lining; these changes have had an effect on consumers, even encouraging many of them to shun credit card debt and to avoid using credit cards as a lifestyle choice.

The American Way

In real numbers, there is proof that our attitude towards money has changed. In particular, we have begun to save money to the tune of 5%-7% of our disposable income. Check out this graph, which illustrates the increase from 2007 to now, according to research done by the Bureau of Economic Analysis.

If you’ll notice, the 2nd quarter of 2009 shows the American savings rate lingering at 5%, which is higher than the rate registered at any other time in the last 5 years. That’s a pretty noticeable shift in savings (and consequently, spending) when you consider the fact that many Americans had little to no savings 5 years ago, and relied heavily on credit cards. This is happening despite the current dismal returns of many so-called high interest savings accounts these days — especially when you're lucky to get 2.00% to 3.00% on certificates of deposit.

How Is Japan Doing?

Meanwhile, there is a different and opposite trend going on across the ocean that is completely contrary to our current patterns, yet similar to our economic trends that occurred 4-5 years ago (but for different economic reasons). In Japan, savings rates have declined sharply. They have fallen drastically from “11.4% of aggregate disposable income to just 2.2% in the decade ending December 2007”. Since 2007, disposable income in Japan has remained pretty stagnant, resulting in the decreased savings trend.

What is causing the downward savings trend in Japan? There are many factors, not the least of which can be attributed to income stagnation and an aging population, not unlike our “Baby Boomer” generation, a group that tends to do less saving and more spending, especially of their retirement funds. In addition, there are economic reasons that have accounted for the stagnant income, including an expensive housing market. The housing bubble phenomenon is something that isn't uncommon to many industrialized countries.

In comparing our two economic macro situations on a broad level, it’s easy to see some comparisons and trends that relate to each other. We see similarities in housing climates, spending trends by an aging population, and distribution of money, or lack thereof among generations.

It will be interesting to see how the trends will play out in both Japan and the United States. Here are a few questions that can add some food for thought:

What do you think of these new savings and spending trends?
Do you think credit card spending will continue to increase just as it has in the past?
Do you think Japan will follow suit and see a massive consumer credit bubble?
Any predictions on the economic outlook for the U.S. and Japan?

Written by Silicon Valley Blogger and published on Wise Bread. Read more articles from Wise Bread.

Simple Tax Strategies to Maximize Your Tax Refund

Silicon Valley Blogger — Thu, 21 Jan 2010 14:00:03 +0000

We’re nearing the thick of tax time, and I’m sure the first thing on your mind (I know it’s on mine) is “how much money am I getting back?” and “what am I going to use the money for?” If you’re part of the W-2 crowd and have your taxes withheld throughout the year, you could be getting some money back. If you’re self employed on the side, then you could be in even better shape if you've got expenses and tax deductions that you can take advantage of.

So how can we maximize the tax refund we receive? Can we leverage some of our skills and our assets in order to bring down our tax obligations? Here are a few ideas.

1. Look into self employment options.

If you're self-employed, you can utilize the many itemizations that exist for those in your situation. For instance, even by just taking on one or two freelancing projects during the year, you can already qualify as self-employed, which will allow you to take certain deductions, such as expensing the mileage on the car that you use to do your freelance work. You can also expense meals that you share with clients. Save those receipts and take them to your CPA or tax representative when you are ready to file. You’d be surprised at the expenses that you can write off once you declare self-employed income.

2. Check out real estate tax strategies.

If you own real estate, you can qualify for many tax deductions, including those that you can claim due to paying property taxes throughout the year. If you own a home, you also claim a deduction on your mortgage interest. If you have rental properties, you have to report your rental income, but if you've incurred expenses from repairs and troublesome tenants, those can be itemized and deducted as well. Alternatively, if you rent your apartment or house, your rental payments can be used to offset your taxes as long as you file as Head of Household.

3. Don't forget charitable activities.

You may be eligible for many personal tax write offs, especially if you’re prone to philanthropy. In particular, donating goods to organizations like the Salvation Army, Goodwill and even your local church can yield decent deductions. Make sure you keep your receipts and any forms relating to your donations: if they amount to $250 or more, these will require documentation by the IRS. Keep accurate records of the checks that you write. If you donate cash, something in writing from the charitable beneficiary will be required and you can only claim up to 50% of your adjusted gross income. Be aware that you may not be able to deduct your charitable gift to certain organizations (e.g. political parties and random individuals).

Who Does Your Taxes?

So once we wade through all of this information, we come to how we file our taxes. Do we do it ourselves or do we hire a professional? This of course is a very subjective matter and can really depend on a few things. Some factors that can affect your decision on how you should file include your familiarity with the tax code, how complicated it is to file your taxes, and whether you've got the motivation to do this yourself.

There's a lot of software and online options out there that steer you through the tax filing procedures, but do what’s comfortable for you. For those wanting to try filing themselves, this TurboTax review or this coverage of H&R Block tax services may be helpful.

If you'd rather go with a professional, then ask around for well qualified CPAs or enrolled agents who may quote you a good rate. There are many tax professionals out there and finding a reputable one shouldn't be too challenging. But before you commit to a new service, check them out through the Better Business Bureau to make sure that the service is indeed reputable.

Written by Silicon Valley Blogger and published on Wise Bread. Read more articles from Wise Bread.