Monday, June 23, 2008

Five Hot Links for the Week!

Summer has officially arrived! Check out some of these summer articles on blogs and finance sites across the net.

1. Get Rich Slowly explores the benefits of vacationing near home. In today's economic challenges, you'd be surprised at what you'll find just around the corner from you.

2. Free Money Finance explains rightly why index funds are still the best mutual funds to have as a central part of your portfolio.

3. Five cent Nickel details what works in improving your gas mileage, and, exploring further-- what doesn't.


4. CNN Money asks if Obama's plan to match the savings of families (up to $500 if you make less than 75K/yr) will work.


5. And if someone asks you for money, should you give it to them? Bankrate says It depends. -

Monday, June 16, 2008

We Aren't Marketing Slaves...

When it comes to reasons why people chose spending themselves into oblivion over saving and investing, you often hear two compelling and popular excuses er, suggestions :

The first falls along the line of the "Livin' La Vida Loca" and appeals to the younger crowd. The premise is that you shouldn't be saving in your 20s because you have "your whole life" to save. Furthermore, you shouldn't save because Life Isn't about Money, and You Can't Take it With You. I actually can respect this argument because the person has at least established that they don't care about long-term goals (money-wise at least). But it's a bit of a strawman argument--just because you save for the future doesn't mean you can't "have fun." and when you think about it, you don't really have to spend a lot of money to have fun anyway.

It's the second, more academic argument I have a problem with: the Addiction argument. It's the one that bases our tendency to spend all of what we make (and beyond) on the premise that we are "bombarded" with marketing, and as a result, are conditioned to spend, spend, spend. We see rich people on TV, our neighbors next door, our friends' possessions, and we want what they want. So we are "conditioned" to continually purchase things against our will and our budgets suffer as a result.

The problem with both of these arguments is that they seem to encourage people to shirk their own personal responsibility--the La Vida Loca argument suggests that you shouldn't worry about the future because "anything can happen," and the second argument basically says you can't help yourself--that we are slaves to marketing. Both eventually lead to dependence on the Government later in life, an entity will of course, turn to citizens to subsidize the results of these behaviors through higher tax rates to fund entitlement programs.

The solution? Well, I don't see tax rates going down in the future, no matter what the talking heads and politicians on TV say. Programs like Medicare and Social Security will probably be around and will claim a larger share of our nation's production. So, if you still can, it's probably best to divert some of your funds into a Roth IRA, which taxes the money before you invest it, so that upon retirement you can withdraw the funds completely tax free. Also, learn as much about planning your financial future as early as you can. However, don't become obsessed with your financial planning--or you may do more damage than good. Many times people dedicate large amounts of their day with their eye on their fund and may move it around with every market fluctuation and will lose out over the long term.

Finally--remember you are a human being and not a machine. You have control over your purchasing decisions, and as a grown up are equipped with the ability to reason. You have power over still and moving images encouraging you to buy things. You are not a slave with uncontrollable buying habits and if you think you are, its time to re-think that and simply dedicate yourself to bring your buying power and decisions back under control. Now, if you'll excuse me, I will get off this dusty soapbox and watch the ad-supported, corporate sponsored Lakers-Celtics basketball game in peace.

Friday, June 06, 2008

Bankrate: 12 "Necessities" That Drain Your Budget

Here is an insightful article from Bankrate.com about 12 "necessities" that can drain your budget. I've shortened the list and will comment on a select few. Back in the day, "necessities" covered things that were necessary (hence the term) like food, water, and shelter. Yet, in these touch economic times people tend to place necessary value on things like:

1. Daily latte/coffee (bought from a coffee shop)
2. Cable TV
3. Manicures/Pedicures
4. Botox
5. Bottled Water
6. Second Car
7. Lawn Service
8. (Expensive) Clothes
9. Childhood Parties
10. Cell Phone
11. Private School
12. Pet Grooming


Comments:

1. I don't get the whole coffee thing, let along getting it every day. Is it the ambiance people are paying for? It's just coffee, and I bet you could get it for cheaper by (as Bankrate suggests) making it at home.

2. I have cable TV and DVR and would probably be the first thing to go if I had to make serious budget pare-backs. That could easily save you 1,000 per year easy.

4. Who thinks botox is a necessity? This is definitely the "outlier" on the list if you ask me.

5. Bottled water isn't what it's all cracked up to be. As mentioned in the article, tap water isn't all that bad, especially if you buy a filter of some sort. Just because water is in a bottle doesn't mean its any cleaner/better. I agree with them here.

10. My cell phone plan is fairly affordable, and its the only phone I have. I haven't had a land line in over 5 years. Yikes, it's scary how long it's been. I'm rarely home except in the evenings, so it usually works out. However, with these "get everything for $99" plans I see now, I still think premium cell phone service is overpriced.

I don't have kids yet, no pets, no car, and no lawn. Those things will come, but I think the theory of look for smart options should be your guide here. Instead of private schools, consider Charter Schools or Magnet Schools which are (usually) better-performing and in most cases, free. And besides, you're already paying for public school, just look for a quality one. As for those other things, I'll speak on them when I have more experience with them. Perhaps readers with children can shed some light.