Category: Budgeting

Are You Financially Fragile?

What would happen to you and your family if:

  • your fridge broke down?
  • your car transmission went out?
  • the primary breadwinner in your family dies?
  • the primary breadwinner in your family becomes disabled?
  • the Social Security fund goes bankrupt and you will no longer receive a Social Security check?

As many as 76% of Americans live paycheck-to-paycheck – they have little to no savings and they spend more than they earn each month. These people are the Financially Fragile.

Financially FragileWhen one of the above events happens it can be challenging for anyone, but it is devastating for the Financially Fragile.

If you are living this way, you can take a few steps to become Financially Resilient. Being Financially Resilient means that you are able to withstand or recover quickly from difficult financial conditions, such as your car transmission going out. Again, that can be difficult for anyone, but the Financially Resilient will recover quickly while it can destroy the Financially Fragile.

Here are some things I recommend to start down the path to becoming Financially Resilient:

  • Have an emergency fund – start out with $1,000
  • Use a budget[i]
  • Spend less than you earn
  • Have adequate insurance
  • Pay off debt
  • Use a Revolving Savings account[ii]
  • Have some “fun money” or “mad money”
  • Pay attention to your credit score[iii]

For more information on these topics, see the links below. I encourage you to take steps to become more Financially Resilient.


[i] Guide to Budgeting

[ii] https://ryanhlaw.com/revolving-savings/

[iii] https://ryanhlaw.com/know-your-score/

Budgeting – how I divide my expenses

Understanding Your ExpensesI break expenses into three categories – essential, important and wants.

Essential expenses are those things you need to survive, and would include food, clothing, transportation, shelter and utilities. I would also include giving in here as I find it essential to financial success. The writer of Proverbs teaches us that we need to, “Honour the Lord with thy substance, and with the firstfruits of all thine increase.” For me giving 10% is the top line of the budget.

Important expenses would include insurance, savings, debt payment and revolving (we’ll cover revolving in a moment).

Wants includes everything else – from Netflix and vacations to eating out and entertainment.

There’s a number of other expenses that could fit in either important or wants. A cell phone and internet are important for most people. A bigger vehicle may be important if you are having a baby and your family won’t all fit in your current one. If you want a nicer car just for fun that would be a want.

Go through your budget and break them into one of the three categories – essential, important or wants.

How do you handle things that only happen once a year such as Christmas or car registration? It’s simple – you just make a calendar with all your known, but irregular expenses with a dollar amount attached, divide by 12 and save that much per month. I call this my Revolving Savings account. For more information see this post: https://ryanhlaw.com/revolving-savings/

Budgeting Software

Budgeting software

Budgeting is the foundation of financial wellness and success. Budgeting puts you in control of your money and helps you achieve your goals.

A few years back two professors did the largest research study on millionaires in the United States. They studied how they made their money, what their family structure was, what kind of car they drove, what kind of watch they had and on and on. After they compiled the research they wrote a great book titled “The Millionaire Next Door.” One of the key findings of the book was about budgeting:

“Millionaires became millionaires by budgeting and controlling expenses, and they maintain their affluent status the same way.”

That’s right – they set a goal to become a millionaire then the budget was the tool they used to get them there.

Maybe you have a goal to become a millionaire, maybe you don’t. You have financial goals, though, even if you haven’t attached a dollar amount to it yet. Do you want to retire someday? That’s a financial goal. Do you want to travel? Go on vacation next year? Buy a better car? Buy a house? Those are all financial goals, and you will achieve those through your budget. Once you attach a dollar amount and a deadline to the goal your budget can start to really work for you.

In this day and age there is no reason not to use budgeting software. It is cheap (or free) and does all the hard work for you.

In today’s post I want to do a review of the top three budgeting programs – Mint, You Need a Budget and EveryDollar. All three are online, have great mobile apps and are very secure.

The basic premise of all three programs is that you budget based on what you actually have – it’s not a projection in the future or a record of the past. If you just got paid and you have $2,000 in the bank then you budget $2,000. In all three programs the $2,000 will go at the top of the page and you give every dollar of the $2,000 a job or a name.

If $1,000 of that is allocated to the mortgage category you put $1,000 in the mortgage category and you have $1,000 remaining. Let’s say you take the remaining $1,000 and put $500 in groceries, $250 in utilities, $200 to a car payment and $50 to entertainment.

At this point your mindset needs to shift. You no longer have $2,000 in the bank – you have $1,000 allocated to your mortgage, $500 in the grocery category, $250 in the utility category, $200 for your car payment and $50 for entertainment. Your bank balance is irrelevant – all that matters is having categories that are funded.

Let’s move on now to what some of the differences are, the costs involved and pros and cons.

everydollarEveryDollar

EveryDollar was developed by Dave Ramsey and his team at Ramsey Solutions.

EveryDollar has two versions – a free version and a paid version. The paid version is $99 a year. The paid version gives you the software and app and the paid version connects to your bank account and imports transactions, which is vital in my opinion. The free version also has a lot of ads pushing you to use the paid version.

EveryDollar recommends you:

  1. Budget before the month begins in a team meeting with your spouse if you are married.
  2. Budget to $0 – or give every dollar a name.
  3. Track your transactions – you enter them manually or with the paid version you import them and assign them to a category.

In addition to the ads pushing you toward the paid version, there are ads for Dave’s ELPs, or Endorsed Local Providers. For example, on the sample budget I set up ads came up for auto insurance, home insurance and life insurance.

EveryDollar comes with a good 15-page Guide to Budgeting that teaches you how to use the software.

I found the interface to be clean and very easy to use. Entering transactions was simple. You can set or change the categories any way you want – adding, deleting, or renaming.

The big problems I see with the software are:

  • Neither version tracks your bank account. The paid one pulls transactions in, but it doesn’t track your account. You would have to log in to each one to be sure your balances are the same. Other software acts as a bank register in addition to the budget. Using EveryDollar gives you an extra step.
  • The ads for the paid version and ELPs got annoying.
  • The paid version is expensive for what you are getting.
  • In most of the categories money doesn’t roll over from month-to-month. If you have $10 left in “gas” at the end of the month it is gone on the first of the next month. I think that is a major flaw. When I looked up why they did that it says that there shouldn’t be any extra money at the end of the month. If there is $10 leftover you should apply it towards your goals. I get that, but I still think it should roll over. What if I am putting extra in the gas category to save for the gas for our vacation?

    There is an exception to this – the “goals” categories do roll over. Put $100 in a category labeled “Emergency Fund” and it will roll over. Supposedly you can also turn any category into a “Fund” and it will roll over. When I tried doing that, though, nothing rolled over. It is possible I got frustrated too early and didn’t learn how to fully use it, though.

While it is clean and simple to use, I think the cons outweigh the positive features. I don’t think it fully does what you want a budget to do.

mintlogo_link_presspgMint

Mint was one of the original players in the online budgeting software game. They were acquired by Intuit a few years back who really hasn’t done much with it. My guess is that they bought Mint to market its other products to the users, of which Mint has over 300 million.

Mint is 100% free. It is supported by ads that can get quite intrusive.

When you first sign up the first step is to link it with your bank account. You can’t move past the first screen until you link it. I don’t like that at all. I think they should let people take it for a spin before they commit, but I think we should also read bills before we pass them. I do wonder how many of their 300 million users signed up, then never actually linked an account.

Because I didn’t want to link an account today, my review is based on how the software used to function. However, just last week I tried to help someone with their Mint account, and it looked the same and had the same limitations it used to have, so my review should be fairly accurate.

Mint will allow you to connect all of your accounts, so it can act like a Financial Dashboard for you. As I mentioned, it is also free.

For me that is where the pros stop. I found Mint to be incredibly inflexible and not user-friendly at all, starting from page one where you can’t see what you are getting unless you link your account. Want to rename a category? Nope. Mint fixes the categories and you can’t change them, which means you have to fit your budget around their predetermined account names. Here is their fixed list: https://www.mint.com/mint-categories.

“Honey, which category in Mint is the money we’re saving for a snowblower?” “It’s the laundry category.” It’s about like that.

Returning things and getting credits to your account throws the budget off as well. If you return $50 worth of clothing it sees that as income. I found full blog posts about how to manipulate the software so it isn’t treated as income. It shouldn’t be that hard.

Remember, though, Mint IS free. If you can’t afford a paid version and you want it to link to your accounts (and you do want to), then Mint is a good option.

ynab-logoYou Need a Budget

You Need a Budget, or YNAB for short, was developed by Jesse Mecham while he was a student at BYU. He had taken an Excel class and created a spreadsheet that he used to track their family budget. He decided to try to sell it and to his surprise it sold – a lot. Jesse has a full team working on YNAB now and it has moved far beyond the Excel spreadsheet. It is now a web-based app with an Android and Apple app. YNAB focuses on one thing – budgeting – and they do it extremely well.

YNAB has four rules for making your budget work:

  1. Give every dollar a job. You budget just the money that you have on hand by asking yourself, “What should this money do before I’m paid again?” You follow this rule by connecting your bank and credit card accounts to YNAB, setting up spending categories, putting money in the categories and tracking your expenses.
  2. Embrace your true expenses. Think about your less-frequent expenses such as Christmas and insurance. You set a goal with a deadline and a dollar amount to meet those goals. The software tells you if you are on-track or not. See my blog post at https://ryanhlaw.com/revolving-savings/ for more details.
  3. Roll with the punches. When you need to change your budget, just change it.
  4. Age your money. Work towards spending money that you earned at least 30 days ago – that way you aren’t living paycheck to paycheck anymore. The software displays an “Age of Money” number at the top of your budget.

YNAB is free for 34 days, then you can pay either $5 a month or $50 a year. Students can get a copy for free for a year by emailing student@ynab.com.

YNAB is simple to use, and in my opinion it is the most powerful budgeting software out there. The only downsides I can think of are:

  • The Android and Apple apps need some more developing. I happen to know that this is a feature they are working on right now.
  • It has a bit of a learning curve. While they have user guides, they could benefit from a simple booklet like EveryDollar puts out with their software. However, they have free online classes (over 100 per week) – including some early in the morning and others in the evening. You should be able to find a class time that works for you. There are currently 13 different classes – from Getting Started to Learn From Reports (https://www.youneedabudget.com/classes/).

Conclusion

If you need a free solution I recommend Mint. If you are willing to pay for a far superior product, though, I recommend YNAB. I have been using YNAB for years now and I recommend it all the time. It is the most powerful and versatile option. You will get far more from YNAB than you will from either other software package.

With any budgeting software, though, it only works if you put in the time. EveryDollar recommends a weekly meeting and check-in. This will work for most people. Being the budgeting nerd that I am, though, I actually log in each morning, pull transactions in from the previous day, and make sure everything is up-to-date. It takes just a few minutes, then I can be sure that all of our budget categories reflect correct numbers.

You can learn more about any of these solutions at:

http://www.everydollar.com

http://www.mint.com

http://www.youneedabudget.com (NOTE: If you sign-up for YNAB through this link you will get your free 34-day trial plus another month for free.)

How to Pay Yourself First

By Ryan H. Law

Jim Rohn

Business philosopher Jim Rohn taught that, “Poor people spend their money and save what’s left, while rich people save their money then spend what’s left.”

It’s familiar advice that we’ve all heard:

Pay yourself first.

Pay yourself first is one of the most repeated phrases about personal finances. One of my favorite financial books, “The Richest Man in Babylon”, which was originally published in 1926, repeats over and over the idea that, “a part of all I earn is mine to keep.”

But how do we actually do this? Today’s post will give you a few ideas to begin to implement this.

  1. Contribute to your 401(k)If you have a 401(k) (or similar plan) available at work, this is one of the easiest ways to pay yourself first. Not only that, but in most cases this contribution will be pre-tax and will lower your tax bill.

    If you have a “match” from your employer, you aren’t just paying yourself first, you are, in many cases, at least doubling your savings. If you contribute 3% and your employer matches that, you are actually saving 6%.

  2. Contribute to a Roth IRAIf you are eligible to contribute to a Roth IRA, it can be a great investment. Many mutual fund companies, such as Vanguard, T. Rowe Price and Fidelity, will allow you to set up an automatic transfer from your paycheck or bank account. You can often start with as little as $25 a month.
  3. Have a set amount (ideally 10%) transferred out of your checking account and deposited in a savings accountIf your bank doesn’t allow this option, check with your employer. In most cases your employer will allow you to allow a certain amount, or a certain percentage, to go to different accounts. You can direct 10% to go to savings and the remaining amount to go to your primary checking account.

    If 10% is too much, start smaller. Start with 1% or ½ of 1%. See https://ryanhlaw.com/one-small-step/ for more information about starting small.

Pay Yourself First

How We Almost Lost a Home

by Ryan H. Law

About 15 years ago my wife and I moved to Indiana, excited to start a new adventure far from where we both grew up. We rented a great apartment that fit our needs and expenses. It was close to the library and shopping, not too far from my work and it had a nice pool. It was perfect.

build a homeHowever, after a while, we got restless. We wanted to own a home. After all, that is the American Dream, right? So we started looking for homes. We found a brand new community that was being built, and they offered 100% financing. We picked out a home we liked and put down some earnest money, then they started building it. What an exciting time!

There were some red flags, though. The first one was that we couldn’t actually qualify for the loan on our own. We didn’t have enough income or credit history. The sellers used some “creative financing strategies” to get us qualified, which involved using a tax credit that would bring our income up. We also had to get a co-signer.

Red-FlagAnother red flag was that we had no money for a down payment or closing costs. Of course, to the seller, that was no problem. They could just roll it all in to the loan.

We really couldn’t afford the payment, either, but we were excited about the home and figured if we qualified, that things would work out. We drove out nearly every day to see the progress on our home.

At some point, though, reality set in. We really couldn’t afford this home. We panicked and contacted the seller, asking to be released from our contract. Of course, they said no. We were committed. We explained that we couldn’t really afford it, but that didn’t deter them. We had a real estate lawyer look over our contract. He said he couldn’t see a way out. We weren’t sure what to do.

We got lucky, though. They had committed to have it done by a certain date, but they got behind on construction. We were able to argue that they had broken the contract, and we were therefore no longer bound by it.  They let us get out of the contract and sent our earnest money back.

Perhaps they also realized that if they had forced us to follow through, we might have lost the home in a foreclosure or short sale, which would have looked bad in this brand new community.

We ended up moving shortly after that, and have been very cautious about home buying since that time. In fact, we waited more than 7 years before we actually purchased our first home.

Along the way we have learned some important lessons. Before you buy a home, I recommend you consider the following:

  1. Make sure your income is stable.
  2. Have 3-6 months’ worth of expenses in an emergency funds in the bank.
  3. Pay off ALL high interest debt (credit cards, vehicles, student loans, etc).
  4. Save up 20% for a down payment. If you put down at least 20%, you don’t have to pay Private Mortgage Insurance (PMI). PMI is generally 1% of the loan annually. On a $200,000 home that will be $2,000 per year, or $166 a month. That’s a lot to be adding to a mortgage payment each month.
  5. Make sure your TOTAL home cost (Principal, Interest, Taxes, Insurance, HOA fees) is no more than 25% of your take home pay. The lender will likely qualify you for much more than you can afford, but stick with your price range. Let your Real Estate agent know exactly the price range you are looking at, and stick with it. We were fortunate to find a great Realtor® in Missouri[1] who helped us find exactly what we were looking for in the price range we were comfortable with. Find someone you trust who will help you do what is best for you, not their commission.
  6. Remember that homes come with extra expenses. For example, if the water heater goes out in your home, you have to pay for a new one. Experts recommend that you save anywhere from 1-4% of your home’s value per year for maintenance and repairs. On a $200,000 home that is $2,000 – $8,000. While $8,000 is probably a bit high, the reality is that you will have to pay for repairs.
  7. I recommend that, on top of repair money, you have enough saved up to pay your insurance deductible. After all, if the roof gets destroyed in a hail storm, the insurance company will pay most of the repairs, but you have to pay your deductible first. That can be anywhere from $1,000 – $5,000.

Buying a home can be a great decision. In general, homes appreciate in value, meaning that you should be able to sell it in the future for more than you bought it for. Even that isn’t always true, though. Remember 2008? Some markets have yet to fully recover from that housing crash. Go slowly and buy what you can afford when you are ready.


 

[1] A shout-out to our friend and Realtor® Ted Webber: http://www.tedwebber.com/.

Buy Experiences, Not Stuff

by Ryan H. Law

For most of us Summer is about half-way over. My question for you is this: What have you done this Summer to build lifelong memories with your family?

I want you to think back to your childhood for a minute and think about some of the gifts you received. How many can you remember? You probably remember a few. I remember getting a stereo one year, and a skateboard a different year. I can remember a few other items as well.

Now think back instead to some fun experiences your family had. For me that brings up many memories of camping or hiking as a family, trips to Disneyland and Sea World, family reunions and others.

Which of the two memories triggers happier thoughts? For most of us, it is the experiences. In fact, research by Thomas Gilovich of Cornell University has shown that we get greater pleasure from experiences than we do from “stuff.”

I’ll share one recent example from our family. We were up at Bear Lake in northern Utah enjoying a day on the beach with some extended family. We decided to rent a boat for an hour, and we had a blast. It was definitely worth the money we spent on it. We could have bought cheap souvenirs for the kids instead that would have been lost or broken in a week or two, but instead they built wonderful memories on the boat.

Here is how my friend and colleague Carl Richards expressed it in a great image:

DD_MoneyHappiness

 

 

 

 

 

 

 

 

 

So with just over a month of Summer left, what are you going to do to build some memories with your family?

The Five Lessons a Millionaire Taught Me About Life and Wealth by Richard Paul Evans

Let me share with you a few book titles on my bookshelf that have to do with money:

  • Think and Grow Rich
  • How Rich People Think
  • As a Man Thinketh
  • Mind Over Money
  • Wired for Wealth – Change the Money Mindsets That Keep You Trapped
  • Conscious Finance

Did you catch a theme there? It was something I hadn’t really noticed before. Clearly, according to these authors, wealth has more to do with your mindset and your thoughts than your habits.

5 lessonsToday’s post deals with that same concept. I am going to review the book The Five Lessons a Millionaire Taught Me About Life and Wealth by Richard Paul Evans (#1 New York Times bestselling author of The Christmas Box). I picked up a copy at the local library and read it in one sitting. It’s an easy read (93 pages of content and an additional 70 pages of resources), but definitely worth your time.

Evans learned these lessons at a young age from a millionaire and went on to change his mindset, incorporate them in his own life, and make a lot of money. He teaches five lessons or principles that he says will lead all who follow them to wealth and financial independence. In fact, he says that all wealthy people share this common denominator – they understand the principles of accumulating wealth and follow them (and by wealthy he isn’t talking about those who win the lottery or inherit a fortune then go broke 5 years later, but truly wealthy people who earn and keep their wealth).

None of these principles are new – you won’t find anything earth-shattering in the five lessons. In fact, they will seem very ordinary to you. However, very few people actually follow them. I discovered areas that I can improve and plan to sit down with my wife so she and I can decide together how to better live some of these principles. I also plan to teach these principles to my children in ways they can understand.

Here are the five lessons:

Lesson One: Decide to be wealthy

Evans says this is the most important principle and that wealth is a mindset – it’s all or nothing. Bryan Tracy, another one of my favorite authors, says that it never occurs to most people that they can be wealthy and that “the primary reason for underachievement and failure is that the great majority of people don’t decide to be successful. They never make a firm, unequivocal commitment or definite decision that they are going to become wealthy. They mean to, and they intend to, and they hope to and they’re going to, someday. They wish and hope and pray that they will make a lot of money, but they never decide, ‘I am going to do it!’ This decision is an essential first step to becoming financially independent.”

Lesson Two: Take responsibility for your own money

You need to know how much money you have (by calculating your net worth monthly and annually), know where your money comes from and where it is going (budgeting). If you don’t control your money it will control you.

Lesson Three: Keep a portion of everything you earn

As George Clason says in The Richest Man in Babylon “a part of all I earn is mine to keep.” Evans says that millionaires save between 15-20% of their income and recommends that you start with a minimum of 10% of your salary and 90-100% of any side earnings.

(Consequently, the book The Richest Man in Babylon is one of my favorite books about money – you can read it for free here: http://www.ccsales.com/the_richest_man_in_babylon.pdf).

Lesson Four: Win in the margins

This principle is the one that will help you increase your nest egg as quickly as possible. The basic idea is to look for ways to increase your income and decrease your expenses. Evans goes through a number of different ways to look for deals and decrease expenses. He says that one of the best ways to save money on a purchase is to ask “Is that the best you can do?” This seems to especially be true with high-ticket items.

Lesson Five: Give back

Evans donates 10% (or a tithe) of his money and says that he has never felt the loss of the money but instead has felt specifically blessed for his contributions. My wife and I do the same thing and feel the same way that Evans does.

Those are the five lessons. Are you surprised at all by the simplicity? I would guess that you are. Like I said, none of the ideas are earth-shattering revelations. How many of them are you actually living, though? If you are intrigued by these ideas I highly recommend you pick up a copy of this book and make some plans to improve.

Why Giving Matters

by Ryan H. Law

Did you know there is one thing you can do that has been scientifically proven to:

  • lower your levels of stress
  • make you more productive and more successful, and
  • make you happier, healthier and more prosperous?

It’s a simple thing as well.

It’s giving.

Giving of your money, your time, or even giving blood.

Of course, most of us don’t give because of the benefits we gain, but because we genuinely want to help other people.

My post today mainly comes from Arthur C. Brooks’ work, who is one of the leading researchers on charitable giving in the United States.

Rockefeller2Brooks came across a statement from John D. Rockefeller where Rockefeller stated that he was rich because he gave so much, and he believed if he stopped giving that God would take his money away from him.

Rockefeller was very wealthy.

His net worth was about $340 billion, and during his lifetime he gave away about $540 million.

He came across statements from a number of other wealthy people who basically said the same thing.

This bothered Brooks so he set out to prove that Rockefeller and others were wrong. Brooks says, “…what I found was that Rockefeller was right and I was wrong [1].” You can read the article referenced below to get into the details of the studies that he did, but what I want to look at here is the results of his studies.

Here are some things that Brooks discovered:

  • Prosperity – when people give they prosper
    • This is true whether you are giving of your time, money or even giving blood.
    • If you take two identical families except that one family gives $100 more to charity than the other family, the giving family will earn on average $375 more in income than the non-giving family, and that $375 is statistically attributable to the $100 gift.
    • As people and our country gets richer, they give more away, but as we give more away it translates into better economic growth for the country and the individual – it’s a wonderful cycle – the more you give the wealthier you become, which allows you to give more, which leads to more prosperity and on and on.Giving cycle
  • Happiness & stress reduction
    • People who give are happier than those who do not give
      • People who give money are 43% more likely than people who don’t give to say they are very happy people.
      • People who give blood are twice as likely to say they are very happy people than those who don’t give blood.
    • When people give, it lowers their levels of stress which makes them more productive and more successful at work.
      • One study showed that those who gave cut their stress hormones in half.

Let me share a story with you that illustrates at least one aspect of this. When I was younger – probably about 10 years old, there was a big snowstorm that left a fair amount of snow in our neighborhood. There was an older widow who lived on the corner, and my older brother and I and a friend from across the street decided we would shovel her driveway, but we were going to do it quietly so she wouldn’t know who did it.

Well, you can imagine how quietly three boys that age can shovel a driveway, but we did try! Every time she would peek out her window we would throw our shovels down and dive behind a bank of snow, figuring we were so fast she wouldn’t be able to see us. I remember going home feeling tired from shoveling, but also feeling really happy. Happy that we had pulled off this great feat of both strength and stealth, but happier because we had done something for her that she wasn’t physically capable of doing for herself. To this day I still feel happy when I think about it. We were definitely the main beneficiaries of this.

cookiesWe did find out later that we weren’t quite as stealthy as we thought when she brought us some cookies, so not only did we get the benefit of feeling happy, but some nice warm cookies as well. =)

I’m sure you have similar experiences – perhaps you have volunteered at a Food Bank, or a homeless shelter, or coached a little league team or done countless other acts of service as so many Americans do, and you felt the same way I did – giving of your time makes you happier.

I find the same is true of money. The very first thing on our budget line is the 10% we give to our church [2]. We never miss this money. Giving doesn’t make you poorer.

Brooks says, “What I charge you with today is what I charge myself with, which is to discover more creative solutions to working these concepts into our everyday lives.” Remember that you are the main beneficiary of your giving – it will lower your levels of stress, make you more productive and more successful, and make you happier, healthier and more prosperous. Just like Brooks I encourage you and me to examine our giving to see where we can do better.




Who Really Cares[1] http://speeches.byu.edu/?act=viewitem&id=1826 Note: This speech was given at Brigham Young University in 2009. Brooks, a Roman Catholic, talks about Mormon giving in this article but also deals with giving in general. You can also read Brooks’ book: Who Really Cares (http://www.amazon.com/Who-Really-Cares-Compassionate-Conservatism-ebook/dp/B004VRP37S/ref=sr_1_1?ie=UTF8&qid=1396546413&sr=8-1&keywords=who+really+cares+brooks) which deals with the subject matter without getting into the specifics of Mormon giving. The article is a great synopsis of the book, though, regardless of your religious affiliation or non-affiliation.

[2] Brooks found that of those who practice a faith (attend church weekly), 91% give to charity each year, compared to 66% of those who don’t attend weekly. Practicing faith is the number one predictor of giving. Malachi, in the Bible, says essentially the same thing Brooks is saying: “Bring all the tithes into the storehouse, that there may be meat in mine house, and prove me now herewith, saith the Lord of hosts, if I will not open you the windows of heaven, and pour you out a blessing, that there shall not be room enough to receive it” (Malachi 3:8-10). Giving brings us a myriad of blessings, as Brooks has pointed out, but you certainly don’t have to be religious to give!

Safe Holiday Shopping Online

Black Friday and Cyber Monday have come and gone and according to the stats, it appears it was (another) record-breaking weekend:

  • The National Retail Federation reports that we spend about $52 billion on Black Friday. [i]
  • IBM, who tracks online transaction sales, reported that we spend between $1.5 and $2 billion on Cyber Monday.[ii]

I personally am not a big fan of Black Friday, especially now that it is creeping onto Thanksgiving. It seems more and more companies put their sub-par products on sale for the weekend. I am also not a fan of standing in line for hours in the cold or being trampled or assaulted by people fighting over a phone or yoga pants, but that’s beside the point.

Today’s Tip is about the remaining shopping that you will be doing. A lot of people will shop online for gifts, and I want to make sure you do so safely.

Here are five tips for sale holiday online shopping:

  1. Be sure the website’s purchase page is secure. It doesn’t matter if the rest of the site is secure or not, but be sure the page where you enter your credit card is secure. Here’s how you can tell – the browser should say https instead of http, and you should see a lock icon somewhere on the page. Here is what the Amazon.com sales page looks like:amazonScreen
    You can see both the https and the lock icon, which means it is a secure page.
  2. Don’t purchase items from e-mails unless you can verify where they came from. I get deals in my inbox from Walmart, Target, Amazon and many other reputable companies. E-mail marketing is cheap and effective. However, I also get deals like this one:“Get the New 32GB iPad Sold for $31.08!”This is from an e-mail send by “Adison Greg” from some website that no one has ever heard of. When you get those emails don’t click any links in them, including the “unsubscribe” link. Delete them immediately! They are Spam and many have some kind of virus. If you don’t click on them you will be safe.
  3. Use your credit card to purchase online. Never trust a website that doesn’t accept credit cards, or that encourages you to pay using Western Union or something like that. Your credit card has protection built in, as do websites like PayPal. If you never receive the item, you can file a dispute and your credit card company won’t charge you for the item.
  4. This is a tip I almost learned the hard way – I got an email saying that my purchase of 2 Nexus 7 tablets being sent to California from Walmart had been cancelled because they couldn’t verify the shipping address.  Concerned, I logged into my Walmart account and sure enough, there was an order for two Nexus 7 tablets that were scheduled to be sent to some random address in California. After doing some research I found that this isn’t uncommon – hackers get into the databases of these websites and can try to order things using your account. This only works if your credit card is stored on the website. Walmart.com, for example, stores your card without asking if you want it stored – they do it automatically. I immediately changed my password and deleted my credit card from their system. I no longer store credit cards on any websites – it only takes a minute to enter the card number and I feel more secure that way. Each time I purchase on Walmart.com now I immediately go to my account and delete the credit card number.
  5. Consider purchasing pre-paid shopping cards to purchase online. I know some people don’t like to use their personal credit card online, so they purchase pre-paid shopping cards and use that for all their Holiday shopping. A bonus is that you can set your limit and not spend any more than that.

Like many of you I do quite a bit of online shopping and will continue to do so. If you will follow today’s tips (especially tips 1-4) you can shop online with confidence.

 

Revolving Savings

As Christmas approaches and the stores get more and more aggressive with their sales, far too many people are buying on credit without thinking about how much they are spending and the consequences of paying the minimum payment.

A 2013 survey from Credit Donkey (www.creditdonkey.com) showed the following stats for those who charge Christmas on their credit cards:

  • 52% will pay it off in full in January
  • 23% will pay by the end of tax season
  • 13% will pay if off by the end of the summer
  • 6% by the beginning of the next holiday season and
  • 6% past the end of the next holiday season

There’s a better way to do it. In fact, it will help you will all of your known, but irregular expenses. I call it my Revolving Savings account. It’s a simple concept, but it works!

First, let’s identify what some of those known but irregular expenses are:

  • Holidays
  • Birthdays
  • Car Registration
  • Car Insurance (unless paid monthly)
  • Life Insurance (unless paid monthly)
  • Tuition and books
  • Vacations

Those are the most common ones that I see, but you may have a few other things that would fit in there as well.

The next step is to make a list of each month, then go through and plug all your known, but irregular expenses in there along with how much you are going to spend. Your calendar might look like this.

JANUARY FEBRUARY MARCH APRIL
Books: $300 Spring Break: $200
MAY JUNE JULY AUGUST
Dad Birthday: $20 Mom Birthday: $30
Books: $300
SEPTEMBER OCTOBER NOVEMBER DECEMBER
Car Registration: $85 Christmas: $200

The next step is to add up the total – in this case the total is $1,135. You then take that $1,135, divide by 12, and you get how much you need to save up each month ($95). If that amount seems too high, you have a couple of options:

  1. Reduce how much you are spending on these categories, or
  2. Figure out a different way to fund some of the items

As an example of the second option you may consider times when you get extra money, such as a tax refund, to fund some items such as your Spring Break trip and Car Registration.

You then put that $95 in a separate account (I call this my Revolving Savings account) that you only use to pay for these expenses.

Each December my wife and I sit down and review the previous calendar and draw up a calendar for the next year. Not only does this make it less stressful as you approach each of these events, but you can actually save money by buying things when they are on sale.

If you have major expenses that come up early in the year you may want to run your Revolving Savings calendar on a different schedule (i.e. July-June of each year instead of January-December). In the calendar above the person is going to need $300 in January, but only have $95 if they run their Revolving calendar from January-December.  If they ran their calendar April-March they would have enough money by the time they hit each expense.

As I said above, this is a simple concept, but it works!

Ryan H. Law, M.S., CFP®, AFC®