Archive for April, 2008
Wednesday, April 30th, 2008
By Liz Pulliam Weston
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Most Americans should use their economic stimulus checks exactly as they told pollsters they would: to pay down debt and boost savings.
But retailers are doing their best to get a chunk — or, better yet, all — of your rebate check. The latest spin: offering you a gift card worth 10% more than your stimulus payment. So far, Sears, Kmart, Lands’ End and the many grocery chains under the Kroger and SuperValu umbrellas have announced such deals. Wal-Mart is expected to announce a plan within days.
Here are some of the reasons I hate this:
Your check won’t help your community as much as it could. The stores offering these deals aren’t the mom-and-pop places that could benefit from your checks the most and keep your money in the community longer. (The Kroger grocery chain includes Baker’s, City Market, Dillons, Fred Meyer, Fry’s, Gerbes, Hilander, Jay C, King Soopers, Owen’s, Pay Less, Ralphs, Smith’s and QFC stores. The Sears rebate deal applies to Sears, Kmart and Lands’ End stores as well as LandsEnd.com and Sears.com. SuperValu includes Albertson’s, Jewel- Osco, Cub Foods, Shaw’s and Shop’n'Save, among others.)
Buying U.S.-grown groceries or U.S.-made appliances is better than buying a plasma TV made overseas, of course, but if you really want your check to make an economic impact, spend it with a local business.
You pretty much have to give up your whole check. Kroger stores will at least give you change; you can buy as many gift cards as you want in increments of $300 and get change in return. Not the Sears stores, though. They want the whole check and will add 10% to the total loaded onto the gift card. And do you really want to spend it all at one store?
I hate gift cards on principle. They’re OK if you’re not actually giving them to someone. But they’re too easy to lose, and some come with fees that reduce their value over time (though that’s not the case with the Sears or Kroger gift cards). Also, they can become worthless if the chain files for bankruptcy, as Sharper Image’s recent filing showed.
But here’s the big one: You could be blowing your chance to get ahead. An ACNielsen poll in 2005 said 28% of U.S. consumers were living paycheck to paycheck, with “no spare cash” after paying bills. If that’s you, the last thing you want to do is squander this windfall.
Having just a few hundred bucks in savings could help you climb above the “work, spend and debt” rat race, as I wrote in “Why you need $500 in the bank.” That small cushion can help you avoid bounced-check fees, stay clear of payday lenders and avoid maxing out your credit cards when the next emergency inevitably crops up.
A young couple who throw their $1,200 combined rebate into a Roth individual retirement account and don’t touch it could have $20,000 by retirement, given typical long-term rates of return. Not a fortune, but way better than facing old age with nothing but a Social Security check.
Buy freedom instead
It’s more important, psychologically and practically, to have that little pad than it is to pay down high-rate debt — although that should be your next priority.
You may be telling yourself, “Well, I have to buy food anyway” or “I was planning to buy something at Sears eventually,” but that’s a slippery slope. You’re locking yourself into buying a certain amount from a certain retailer. Consider, instead, buying yourself some freedom from always living on the edge.
Resisting retailers’ siren calls is just going to get tougher as the Internal Revenue Service begins mailing out rebate checks and businesses ratchet up their advertising. So here’s my advice for a two-step plan:
* Figure out what you should do with the money. If you haven’t already, read “America, don’t blow this rebate” for a recap of your best options, including paying down debt, boosting savings and, if your finances are already in good shape, buying American. Make your decision now, before your head can be turned by advertising.
* Commit to that plan. You can read “Learn when you’ll get a rebate check” to find out when your check is due. If you plan to save the money or pay down debt, set up an automatic transfer that will take effect a week or so after your check is scheduled to arrive. Want to apply the money to your highest-rate credit card? Set up a transfer between your checking account and your credit card account. Want the money to go into savings? Set that up with your bank, or open a high-rate savings account online and have the money transferred there.
The key is to do this before the check arrives. When something is important — investing for retirement, saving for a goal, paying down debt or boosting an emergency fund — it’s best to make a decision once and set it up to continue automatically, rather than give yourself opportunities to change your mind.
Posted in Informational, Personal debt, education, goals, purchases, success | No Comments »
Friday, April 25th, 2008
Well during my downtime (laid off) I’ve been contemplating paying off 2 bills or keeping my cash stash for a raindy day.
If you’ve read my initial blog entry “My RDL introduction - Financial breakdown” you’re aware of my 2 debts I’ve been wanting to pay off.
Nebraska Furniture Mart (Wife just HAD to have a new washer & dryer set) and my (investment in myself) student loan. Those debts totaled $5500.
With the help of my budgeting program I’m now going to pay those 2 bills off IN FULL by May 30th of this year. If I get my stimulus check ($2100) early, I will be able to pay them off earlier than that.
Paying off those 2 bills will leave us with 3 debts left. My Wife’s student loan ($30K) Our mortgage ($97K) & our rental mortgage ($57K). This will also allow us to save $280/month which was going towards paying those 2 bills off.
My next hurdle will be to payoff the wifes student loan which will allow us to save $288/month. It’s a long hurdle but I think it’s attainable within 2 years. I’m reaching for a goal of end of ‘09. Realistically I’m thinking middle of ‘09
YEAH ME!
Posted in Generate income, Informational, Inspirational, Personal debt, education, goals, success | 1 Comment »
Tuesday, April 22nd, 2008
I’ve gotten to the point to where I’m finally getting sick of putting $75-$100 into my gas tank while I’m only getting a 11-14 mpg return out of my ‘02 Yukon XL Denali. It’s been a reliable and great car to have and drive but it’s getting to the point I’d be better off selling it and buying a new fuel efficient car or buying a $2500 used fuel efficient car while keeping the Yukon for family trips. At the same time, I must mention that we do have a 2005 Ford Freestar (minivan) in which I could put some flames on the side and swallow my pride. [/sarcasm]
I paid $19K for the Denali 3 years ago and after doing a little research, I’m sure I’d be able to get $13 - $17K out of it. I’m thinking closer to the $17K range because it has 22″ wheels, a wireless headphones dvd system, all tinted windows, a 10GB kenwood music keg (replaced the cd changer) which can hold about 70 CD’s.
OR…
I’ve been thinking about testing this water4gas solution that’s supposed to significantly increase my gas mileage. Some of you guys that know me know I’m basically willing to try anything and I’m curious as to what kind of results I can achieve with this water4gas system.
I’ve downloaded the e-books and will start reading them and I think I’m going to buy a premade kit on e-bay. I’ll be sure to post some results as to how it goes once I start the process. If I can get my car to get 20 mpg then I’d be happy as a fox in a chicken coop.
Of course, I’m skeptical and can’t really find any real reviews as to if it’s been successful or not. So I guess this will be on of the first blogs that’ll actually document the claim and report it. Hopefully it’ll help someone by saving them from following my mistake or reaping the benefits of my experiment.
Posted in Generate income, Informational, Personal debt | No Comments »
Monday, April 21st, 2008
I can’t sit here and take credit for my (relatively) recent financial makeover. In 2006, I received a tidbit of recommendation from the most unlikely of sources to check out the Dave Ramsey program… MY SISTER.
After listening to the (then) most financially irresponsible person I knew at the time sell me on the Total Money Makeover (TMM) audio book, I’ve become a cult Dave Ramsey follower. I’ve always been good with money by mainly listening to my mother and grandfather talk about how to budget and constantly instilling that credit cards are the devil. I’ve held true to those values but without a plan.
Despite the teachings of my parent’s and grandfather, I was never taught how to become debt free until I ran into TMM. From start to finish, I found myself being captivated and inspired by following 7 small common sense steps to get my financial future on the right path.
To be quite honest the journey is half the reward. It’s amazing how things become SO possible once you create a plan and set goals. For instance, I once laughed at my cousins idea that he should be able to pay off his house within five years. I was brought up believing my fathers teaching that we’re always going to have bills. I’m here to tell you inf act… IT’S ENTIRELY POSSIBLE!
I’ve since apologized to my cousin for making a mockery of his suggestion. I’m nowhere closet o paying off our mortgage but I’m not going to sit here and say that it’s impossible. If I really dedicated myself to doing that, it could easily be accomplished within 5 years or so.
Here’s the basics of Dave’s Financially Fit plan (7 baby steps):
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$1,000 to start an Emergency Fund |
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Pay off all debt using the Debt Snowball |
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3 to 6 months of expenses in savings |
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Invest 15% of household income into Roth IRAs and pre-tax retirement |
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College funding for children |
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Pay off home early |
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Build wealth and give!
Invest in mutual funds and real estate |
Because of baby step #3, despite my time of currently being laid off, I’ve been completely stress free because of Dave’s plan to achieve financial responsibility.
Having said everything but, “I want to have the man’s child”, I highly suggest you read it also so we can really get an understanding as to what we’re trying to accomplish and how we’re going to go about doing it.
Posted in Informational, Inspirational, Personal debt, education, goals | No Comments »
Monday, April 14th, 2008
Where do I start? I’m currently a laid off Sprint employee looking for work. My official release date was March 21st, 2008.
Despite the layoffs, I’m determined to get my family financially fit. I prepared for this round of yearly layoffs by treating myself as a corporation. I cutback on bad debt in order to increase my bottom dollar. I paid off both cars (2002 Yukon Denali XL & 2005 Ford Freestar) in April 2006. That alone allowed me to save $500+/month. It hurt me to have to write a $20K check which drained my savings & cashed in stock but it was worth it in the end.
I then switched to Vonage in February of 2008 for home phone service, saving me $40+/month. On top of that I switched my trash removal service which netted me a savings of only $20 /qtr (every little bit helps).
These cutbacks and debt payoffs now allow us to save approximately $1000 - $1500 per month.
Currently I receive a severance package from Sprint that allows me to get paid (bi-weekly) until August 22nd, 2008 (with benefits). If I land a job soon I have a real opportunity to get a great head start on becoming debt free.
A breakdown of our situtation:
- We bring home around $5k/month.
- Outside of mortgage and utilities we have…
- My wifes $30K student loan ($288/month)
- My $3500 student loan ($110/month)
- $2000 Nebraska Furniture Mart bill ($130/month)
- Our $58K rental property mortgage ($505/month)
- The rental property is currently generating $205/month income.
Currently we’re on track to have at least $20K in savings by the end of the year ($15k if I don’t find a job by then). If I can land a job soon, $40k in savings shouldn’t be out of the question at the end of the year.
Having given a financial breakdown of my situation, I’m hesitant to payoff the NFM & my student loan bill at the moment. Doing so would deplete our current savings account to a little less than half. Considering I’m unemployed at the moment, I wouldn’t feel comfortable taking out of our emergency stash at the moment to pay these off. Besides, The NFM bill is interest free until the middle of 2009 and the current $130/month payment will have me paid in full by that time. Also, my student loan is only 6% interest rate so it’s not like it’s killing me at the moment. I’ll pay it off early regardless as I pay at least $150 every month (applying the extra to principal).
Well there you have it. My financial breakdown for future references.
Roger Garrett
Posted in Informational, Personal debt | No Comments »
