Budgeting for a Future Purchase

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Whether you want to go on vacation, get that big screen TV, buy a boat or a new car, or anything other high dollar item, you will need to begin budgeting for that future purchase. In this edition of Personal Finance Resources, I want to give you some simple tips that you can implement to help you budget for a future purchase. Anybody that has a little bit of income can put aside enough money to buy most any one item they want, but the key is being disciplined and diligent to get there. And bottom line, you will have to WAIT. No…I said a dirty word…wait. The problem we face in America is our lack of patience, we have to have everything right now; there is no discipline or patience. This leads to debt, and more debt, and ultimately for many, bankruptcy. But let’s get into some of the simple ways of budgeting for a future purchase:

  1. Making small sacrifices to put back a little extra.
    This is very hard to do. Not buying the coke at the vending machine, eating lunch at home or taking lunch to work/school, giving up vices (like smoking and drinking - it would be so much better for your body if you did this :) ) and other small cut backs on a daily and weekly basis can create additional savings. I recommend every time you don’t buy that item, put the money into a jar or safe, and “pay” yourself for not giving in.
  2. Save early, and often.
    Often we look for big things that we can cut or save in our budget. While it is great if you can find these things, you will usually have more success if you look for areas in your budget that small, and overlooked. Once found, create a saving schedule that is daily or weekly at the longest. The savings will become a habit, and seeing a nest egg building is fuel to help you continue to contribute to the fund.
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Grocery Shopping on a Budget

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If you have ever needed to go grocery shopping on a budget (and who hasn’t?), then this post is for you. I wanted to give you several tips to help you meet your shopping budget, as food expenses can get out of control. Even if you are meeting your current grocery budget, there is always room for improvement. Trust me, with escalating gas prices and high inflation rates imminent, food is going to become more and more expensive. But let’s get into some of these money saving tips:

  1. Never go grocery shopping on an empty stomach.
    This may be the important tip to controlling the budget. If you are hungry, you will almost always compromise and spend more in the grocery store than you originally intended. Especially if there are free sample stations, etc as you will get a taste of something (and food always tastes better when you are hungry) and will be a lot more likely to buy it than if you had just finished a meal.

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Calculating Withholding Allowances

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Whenever you get a new job, or if you are in a job and always end up with a large tax refund check, you may want to consider re calculating withholding allowances for your w-9 again. But Jeffry, why would I want to lower my tax refund check? I like getting that big check back in April. My question to you is, do you like giving the government an interest free loan? Because that is exactly what you are doing by not increasing your allowances during the year to compensate for your overpayment to the government in income taxes. I understand that you don’t want to end up owing the government anything at the end of the year, and on that point, I agree with you. So what I wanted to do today was give you a quick formula to even out those withholding payments to the government, thereby increasing your take home pay and minimizing your tax refund check. Don’t worry, it isn’t going to be complicated, these are just some brush strokes.

Gross pay - charitable deductions - exemptions - mortgage interest expense = taxable income (for our purposes)

There are many more deductions out there, but I wanted to take the basics here just so you can quickly make a better decision when setting your number of allowances. Before I run an example, you need to know a basic calculation for each part of the above equation.

Charitable Deductions

Donations to your Church or other charitable organization is currently 100% tax deductible. So whatever you anticipate giving to these organizations this year, just fill that into the blank.

Exemptions

On a family tax return for 2008, you can take $3,500 per exemption, so a husband, wife, and 3 children could take 5 exemptions, or $17,500.

Mortgage Interest Expense

Although this will vary from year to year, just simply use your last statement of interest expense as a quick number to use for the purposes of calculating withholding allowances.

A Quick Withholding Allowance Example

Ok, now that we know the parts of the equation, let’s run a quick example. Let’s say that you are married and have 3 kids, like above, you make $50,000 per year, you gave 10% of your income to your Church, and paid $2000 in interest to your mortgage company last year. So then the quick equation is:

$50,000 - $5,000 (charity) - $17,500 (exemptions) - $2,000 (mortgage interest)  =  $25,500

Ok, so now that you have a yearly approximation, then divide that by 12 (for monthly payments), or 26 for biweekly payments, then look at this tax table (for 2008) to figure out about how much you owe in taxes on every paycheck. In our example, we would be liable for $980.77 every biweek, which means our equivalent tax would be $76.10 per paycheck. Now that you have that, just check with your payroll department to see how many allowances would be about right for $76.10 tax liability per paycheck. Also, just check with them to make sure you are about right in your calculations, just to be sure you don’t undershoot or overshoot too much, then have them make the change.


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Gas Money Saving Tips

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With the price of gas expected to top $4 on average across the US the summer, some small gas saving tips are beginning to become more important. Recently, I was talking with my wife and thinking about what we could do to drive less, and other ways to save on gas. Upon conclusion, I wanted to tell you about a few of those gas money saving tips:

  • Mail your deposits to the bank, instead of driving to it.
    In the old days, it cost about as much or less in gas to  drive to the local bank. But at $3 per gallon, and an approximate 8 miles (16 miles round trip) to our bank, we are looking at significantly more money to drive there than to mail it. Our Acura Integra gets about 26 miles to the gallon so: 16 miles / 26 miles to the gallon X $3 per gallon = $1.85 as compared to a 41 cent stamp and a few pennies for an envelope. Unbelievable, but its the honest truth. On a side note, don’t send cash through the mail, make sure it is in your name only, and write “for deposit only” just below your signature on the back. That will minimize the chances of someone making off with your money.
  • Leverage the internet to pay your bills.
    Absolutely wherever possible, use the internet to pay your bills. Many, many typical household service/product companies like mortgage companies, cable companies, internet service providers, electrical providers, etc. have websites that you can use to pay your bill online. My wife and I use this in almost all of our bills. Be careful of the ones that charge a fee for the online bill pay service. In this case, it is often best just to mail in your payment (this is what we do).
  • Buy gas early in the morning.
    Gasoline, as is the case for most liquids, tends to be more dense when cold. So if you can get the gas while it is cool outside, you stand a chance of getting slightly more gas for the same amount of money. It isn’t going to be much more, but again, at $3+ per gallon, every little bit helps.
  • Plan, plan, plan.
    Plan your trips during the day. It doesn’t take much to come up with a list of things you need to do, and take care of them all in one shot. This will avoid having to turn around, waste time, and spend more money on gas.
  • Keep the idling of your car to a minimum.
    So on those cold days when you want to warm up the car, don’t. Warming up your car for 30 minutes a day, everyday can cost you a considerable amount of gas. Just bundle up, jump in, and go to work. Often it will only take a couple of minutes for your car to warm up and you can get the heater going. It usually only takes me about 2-3 miles to warm up the engine, then the heater works good.

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Budget Tips and Ideas

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For some folks, coming up with a budget is hard enough. But assuming you are following some kind of personal budget guidelines, you may still be unhappy with your results at the end of the month. So today, I want to give you some further budget tips and ideas to save more money, and look to the future.

Reprogramming Your Brain

In today’s world, we see thousands and thousands of advertisements every week. We are constantly pressured to spend what little money we have, on things we do not need. There are only two ways to handle this kind of pressure. One is to ignore it (which is much easier said than done) or to eliminate it. I recommend eliminating it. How? By aiming at the source of most of the advertisements we see. TV! We are living in a society that is absolutely drowned by the television. The best thing to do is just to turn off the television. I mean completely. My wife I do not even have cable TV. We only have a couple of Christian movies and some exercise videos. So if you were to eliminate your cable, you would immediately be saving $30-$200 per month. But beyond the immediate savings, you are not going to hear about the newest gadget, the latest best selling widget, or the latest Ford mustang (I hate the new mustangs, especially because they are made by Ford). And if you aren’t hearing about these things, you will not have the desire to buy them. Don’t think it will work? Try it for a month and leave your comments below. I challenge you.

Thinking Twice Before Acting on Impulse

Impulse buying will absolutely destroy your budget. And usually it isn’t the high dollar item that you impulsively buy, it is the $7 lunch at a fast food restaurant that you eat everyday, and indulging to go out for ice cream, or for guys, going out a buying another $5 fishing lure you will never use. And so on. You must break the habit. The best way to do this is to track these items on your budget for a whole month, and come up with a total number of frivolous buying for that month. You will be shocked and amazed at how much money you wasted. From there, just think about that insanely high number you spent when you think about stopping at McDonald’s for an ice cream.

Commit to do a Little Research

On items that we do actually need, like mortgages, home insurance, vehicles, groceries, communications, etc. make a commitment to look for at least three different offers from competing companies before purchasing. Do a little haggling with each one. What do I mean? Just tell one of them about the better offer you had from their competitor. Many business will honor discounts that are advertised by their competitors. I know it takes a little time to do this, but not really that much time, and the benefits far exceed the extra couple of days to make a decision. Also, having to wait to get pricing from competitors will help you to stop acting on impulse, and act on strong financial planning.

All of these ideas, in a nutshell have to do with a retooling and retraining of your mind, and how you look at life. Don’t be led around by the commercials, and let the peer pressure force you to buying things you don’t need, that are ridiculously priced. Spend a few extra minutes in the morning to make lunch, instead of going out. Scale your house down. Buy cash cars. Buy clothes you intend to wear for years, not for seasons. And find cheap or no cost ways to have entertainment, like going for a walk in a public park, swimming in a public pool, playing basketball in a public area, doing puzzles, playing cards or dominoes, and many, many other ideas to keep the bills down.

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Checklist for Choosing a Bank

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There is a lot of hype around choosing a bank these days. Lots of promotions and other corporate-like strategies to induce you to give a particular bank your money. But be careful - many of the larger banks that offer free checking, free online bill pay, free this and free that have the worst customer service around. The following is just a simple checklist for choosing a bank; what to do and how to do it.

  • Make Sure the Bank is FDIC Insured
    This almost goes without saying, however it is only prudent to be absolutely sure of it. If someone were to rob the bank, etc. you want to be positive that your money is safe.
  • Get a Comprehensive Rate Sheet
    Most banks will have a leaflet sized sheet that explains all of the fees, etc that are charged by the bank for the particular type of account you are interested in opening. Just go through each one, and ask all of your questions. Even if they claim the account is “free” I guarantee there are fees; fees that could be outrageous like $35-$40 NSF fees, daily charges for a negative balance, etc.
  • Ask For a Line of Credit
    More specifically, ask for a line of credit that automatically covers any overspending you might accidentally do. I have a $5,000 line of credit at my bank directly tied to my personal account, just for such occurrences.
  • Ask About Online Services
    Nothing compares to free online bill pay. The ability to send out checks and online payments from the comfort of your home without any or cost is worth tons. Also, being able to go back and view a check image to find out why you spent that money is great as well.
  • Ask About Interest Bearing Checking Accounts
    It isn’t done all that often, but sometimes you can even get better than a free checking account - an interest bearing free checking account. Enough said.
  • Relationships, Relationships, Relationships
    Find out who the highest ranking employee is at the branch office you will be doing business with. Talk to him/her personally and starting building a relationship. When it comes time to get that loan for business or a house, etc. they will come in very handy. I know the the VP at one of the local banks I do business with, and he has already put me on to a good commercial loan (blanket loan, that I wasn’t able to find elsewhere) for two duplexes specifically for rental income.
  • Stick with a Local Bank
    Don’t go with a national chain. You won’t be able to make connections with decision making employees, and you will be treated like a number. I just got away from a national chain bank and I am relieved beyond words.

Comments? Questions? More ideas? Please leave them at the bottom of the page.


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Reduce Cooling Costs

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If you want to learn some things you can do to reduce cooling costs, you have found the right page. I am going to show you several things you can do to get those electric bills down. But first, you need to understand why you have a high electric bill. Many people think that if they can put high R-value insulation in a home that effectively drive down the cost of heating a cooling. While a higher R-value insulation is rating to insulate better than lower R-value insulation, it still may not reduce your bill considerably. Why?

Most of the energy efficiency that is lost in the home is lost through the doors, windows and ceiling. This is especially true in older homes. Years ago, energy was very cheap, and there was no demand for energy efficiency. So, windows were built without insulation. Also, many older homes have cracks in the walls and ceilings, and generally weren’t optimized for energy efficiency. Even in newer homes, most of the energy is lost in the doors, windows and ceilings, and therefore your focus should be on maximizing the efficiency from those items. Further, most of the energy consumption is used by your air conditioning system. So here is quick list of things you can do to increase the efficiency in your home, and decrease cooling costs.

  • Cut out and re-caulk all your exterior doors and windows.
  • Replace your exterior windows with new, low energy doors and windows.
  • Replace your spray in insulation in the ceiling with foil backed insulation.
  • Replace your air conditioning system with a heat pump system.
  • Replace your water heater with an instant heat system.
  • Buy a programmable thermostat and automate your temperatures when you will be gone, etc.
  • Replace all your light bulbs with energy efficient light bulbs.
  • Hang dry some or all of your clothes instead of using the dryer.
  • Hand wash dishes instead of using the dishwasher.
  • Replace that old clunker refrigerator with a new, energy efficient refrigerator.
  • Turn lights, TV, etc off when gone or not using them (I know this one is simple, but think about it, how often do you exit a room and leave the light on?)

Some of these are costly, and some are not. But if you can focus on just a few of them, you should start to see you energy costs decreasing. Also, if available, consider shopping around for low cost energy providers. Here in Texas, you can visit powertochoose.org, and get a list of all the available providers in your area, and compare costs, terms, and fees. There are ways to get your energy bill down, go after them!

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5 Tips to Boost Your Personal Finances

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There are only two ways to increase your net finances, saving money and making money. I want to give you a few simple tips on both fronts. Now, you may have to adapt your thinking some, as getting ahead means that you have to do things differently than the people around you. You have to learn that a big part of saving money is not finding deals, it is negotiation. You see we have been conditioned in America to accept the price that has been offered by the companies we want to do business with. But in many cases, if you would apply a little negotiation, you would be amazed at the discounted merchandise you can purchase. With that in mind, let’s look at some of these personal finance tips:

  1. Doctor’s Bills
    If you don’t know, I used to work for a hospital. While I was there I learned that the yearly collection rate of that hospital was somewhere around 46-48 cents on the dollar. That means that the hospital got a little less than 50% on average for every single bill that was sent out. This is the trend in the health care industry. So what does that mean for you? Basically, it means that you can negotiate with your doctor(s) to drop the price of your care. You don’t have to be bullish about it, just simply call them and ask them to lower their prices for you. Tell them you know the average collection rate, and you are convinced that another doctor would discount their prices if he didn’t want to.
  2. Buy Used Cars, not New Ones
    I have preached this before, but it is a fact that new cars depreciate some 25-30% in their first year. So instead of looking at a brand new Acura Integra (I drive an older one of these by the way, and they are great cars), get you a 5 or 10 year Honda Civic, or something like that. Honda and Toyota are some of the most reliable cars on the road these, and with increasing gas prices, their high gas mileage comes in handy.
  3. Donate to Charity
    This one is close to my heart. I believe in donating to the local church, and supporting foreign missionaries through the local church as well. But not only does it bring a benefit to other people, you are also able to take 100% of the donations as a tax deduction. Now, most people know this, but I will throw in a little twist. If you own stock, you can donate that to the church or other organization. This way, you avoid the taxes paid on any earnings the stock may have gained, and you get to take the full stock price as your deduction.
  4. Negotiate with Creditors
    Many credit card companies have ridiculous fees like annual fees, minimum finance charges, etc. If you negotiate with them, often you can relieve these fees. I had a credit card once that I didn’t think had an annual fee, but they tried to charge it. When I saw it on my bill, I called them, talked to them about it, and they removed the fee. You can negotiate.
  5. Buy an Automatic Thermostat
    There are too many things to worry about these days. Try to put some of this stuff on autopilot. With a programmable thermostat, you can set the temperatures during the day and at night to dramatically lower the costs of heating and cooling. With these units only costing $100-150, it is a very smart decision. One of these units could pay for itself in a matter of a couple of months.

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Eating for a Whole Month on One Dollar a Day

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Check out this post on how one man was able to eat for a whole month on just $30. Now, as a preface, he did not do much initial research and his methods are unhealthy, but it is interesting that he was able to eat for the whole month so cheap. Our budget is around $150 per month, and we were getting a lot of help from HEB’s fresh or free program, but lately, the store has done better with keeping their products in date, and we have had less time to really hunt for the out of date stuff. Give it a read, and come back here to leave your comments and questions. I will be around to answer them.

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Entertainment on a Budget

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For many of us out there, entertainment just eats our budget down to nothing. Expensive eating out multiple times per week, $8-$9 movies at the local theater a couple of times per week, sodas and chips every day, and a host of other things really kill the budget. My wife and I are very conscious about money (especially now that I have quit my job and am working full time on my own business) and have spent time finding ways to save money, while still being able to have some fun in a Godly manner. Here are some tips that we have unearthed for cheap evenings that are fun:

  1. Buying a DVD from Walmart once or twice a week off the $5 rack.
    Combine this with a TVGuardian to filter out all language and sticking with PG-13 movies and below, and you have a very cheap solution to a fun date night. This is probably our most chosen method, because we both like movies and the cost is so low - $5 per movie, versus spending over $4 to rent a movie, then having to return it. This way, we own the movie and can watch it whenever we wish.
  2. Taking a walk down at the public walkway.
    We have a very nice creek that runs through the middle of town, with a very nice concrete sidewalk for walking, and feeding ducks, etc. This is a very tranquil way to enjoy each other and good old fashioned conversation. And best of all, there is no cost for entry!
  3. Grilling, instead of eating out.
    With a little bit of practice, guys can make some amazing cuisine on the grill. Often, my wife and I enjoy my grilling far more than eating the same meal at a restaurant. Gas grilling is the cheapest method, however I use charcoal, it is slightly more expensive, but the flavor is much better. Do simple meals like chicken quarters which can be bought for less than $1 per pound.
  4. Inviting friends over for dinner and board games.
    On a typical week, we invite the teenage guys from our Church over to our house. They are a great group of guys, and we usually eat and play 42 (a domino game), or watch a movie. Very cheap but we have some great laughs, and really enjoy the fellowship.
  5. Playing basketball with a group of guys.
    This one is mostly for the guys, but some of the men from Church get together on occasion and play basketball. This is a zero cost way to have great fun and build relationships.

There are many other extremely low cost ways to have fun. If you have any ideas, please leave them at the bottom of the page in the comment area.


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