Well, apparently the author bug has really bitten me, because I’ve already released another book for the Amazon Kindle!

The book, “Family Money: Easy Ways to Cut Your Family’s Expenses,” is a light-hearted how-to book on ways to drastically slash your monthly expenses without correspondingly affecting your lifestyle. Through years of writing on Saving Without a Budget I’ve found that the single biggest reason people don’t adopt a frugal lifestyle is because they think they’re going to have to live a life of self-deprivation. It’s not because they’re lazy or stupid; it’s because they falsely believe they’re going to have to drastically alter the way they live day-to-day.

The book offers well over 100 simple ways individuals and families can reduce their monthly expenses without ever really noticing a change in their lives. These money saving tips are broken down into different types, like utilities, clothing, and groceries; i.e. the major expenses in people’s lives.

Considering the price of the book is only $3.97, buying Family Money is certainly a worthwhile investment, especially when you consider following just a few of the tips for less than a day will save you much more than $3.97!

Please leave a comment below and let me know what you think!

While driving home from work the other day, I heard a report on the radio about how, for many Americans, retirement will be nothing more than a pipe dream, mostly due to poor financial planning.  This is sad to hear because you’d like to think that after putting in 50 years of work, more of us would be able to ride off into the sunset, but we can’t because, for the most part, we’re our own worst enemy when it comes to money.

In being our own worst enemy, one of the absolute dumbest things we do is pass up matching retirement funds from our employers.  To put it a different way, we fail to take free money from our employers that goes directly into some sort of retirement plan, like a 401(k).

What is a 401(k) and how does it work?

Take control of your retirement!

For those of you who don’t know, a 401(k) account is a tax deferred retirement account.  To put it plainly, you tell your company to contribute part of each of your paychecks to a retirement account for you, and because you never “touched” the money (remember, your company took it out for you), you do not pay taxes on that portion of your paycheck.

The money you put in your 401(k) account can be allocated to stock, bonds, mutual funds and/or money market accounts; it all depends on the investment company your employer uses as well as how you choose to allocate the money.

Still confused?  Let’s look at this example:

I have a monthly income of $1,000 and contribute 10% of that to my 401(k).  So, $100 goes directly into my retirement account; only the remaining $900 is subject to tax.

However, when you begin to withdraw money from your 401(k) account upon retirement (or under very specific circumstances), you will have to pay income tax on the money at that point.  Thankfully, since the money has been allowed to grow tax free for (hopefully) many years, you will come out on top.

With most 401(k) accounts being tied up in stocks, bonds, mutual funds and/or money market accounts, there are risks associated with this type of investment.  You are not guaranteed any return, and may ultimately have less than what you started with.

For example, remember Enron?  Many employees of Enron lost all of their retirement when the company went belly up because they had a significant portion of their 401(k) tied up in company stock.  So, if you have a 401(k) account or plan on starting one, I urge you to speak with a professional financial planner to get help in determining the correct retirement/investing strategy for you.

Are You Making a REALLY Dumb Mistake?

Okay, so now that you know what a 401(k) is, how they work, and possible risks, what is the best way to maximize your investment?  TAKE ADVANTAGE OF EMPLOYER MATCHING!

Would you burn money? Then why would you pass on free retirement funds?

Many employers will match an employee’s 401(k) contribution, up to a certain amount.  And what that essentially boils down to is an automatic return on your investment.  In today’s environment, you need to take advantage of any automatic return you can get!  Actually, scratch that – not just today’s environment, but whenever you’re investing!

So, what do I mean by automatic return?  Let’s go back to the previous example I used, where I contributed 10% of my $1,000 salary every month and assume I also happen to work for an employer that matches every $1 of my contribution with a $.30 contribution of their own.

That means each month when I put in $100 my employer will put another $30 in my account for me.

That’s an instant return of 30%!

Granted, this is just an example, and not every company will match or match this this well, but no matter what your company matches, the moral of the story is it is an automatic return on your investment, and you’d be a fool to pass up this free money – which could eventually mean hundreds of thousands of dollars towards retirement.

So, if you haven’t started a 401(k) account, I highly recommend you go and talk to your company’s human resources department to find out how you go about setting one up.  Once you have an account set up, or if you already have a 401(k) account, I suggest you meet with a financial planner to determine the investment options that are best for you.

Penny wise and pound foolish sounds like a funny saying, but it’s actually a pretty important concept when it comes to living a frugal life.

For those of you who don’t know what the phrase means, it more or less means you sweat the small costs so much that you either end up incurring a larger expense down the road or miss an opportunity make a ton of money.

Make good decisions with your money. Aim to be frugal, not cheap.

Or, to use another idiom, it’s not being able to see the forest for the trees.

If this still doesn’t make sense, here are some real world examples. Let me know if you’re guilty of any of these:

Buying the cheapest product at the expense of quality. For example, your refrigerator breaks, so you run out to the store and replace it with the cheapest model at $500 for the sake of minimizing the expense.

Seems to make sense right? Not necessarily.

If you would have just done a little bit of research you would have found that the cheapest model lasts only five years on average, and that the $650 model – just slightly more expensive – last for eight years on average, and is more energy efficient.

So, instead of saving $150 up front, you actually end up losing at least $350 after five years when you end up replacing the cheaper fridge instead of having another three years with the slightly more expensive model.

Skipping out on doctor’s appointments to avoid having to pay a co-pay. As a 30 year old man, this is one of the penny wise and pound foolish things I deal with all the time. I know I should go to the doctor to get my aches and pains checked out, but I don’t feel like spending $20 to be told everything is fine.

Well, what if everything isn’t fine?

Instead of possibly getting something serious taken care of early, minimizing the expense and increasing the chance for full recovery, I risk letting something serious drag on, which could lead to much higher medical costs and maybe even worse stuff (i.e. death).

Now, I’m not advocating running to the doctor’s every time you sneeze, but, at the very least, make sure you’re getting an annual checkup!

Opening up a store credit card to save 10% on that day’s purchase, only to make minimum payments. I’ve never understood why people bought into the whole “open a card with us and save 10% on your purchase” thing. Unless you’re buying $5,000 worth of stuff – which I really hope you’re not – you’re likely only saving $10 to $25 on your purchase.

Save money by shopping sales, not by opening up store credit cards.

Then the problem is compounded when you pay off the new bill by making only minimum payments, which end up costing you ten times the initial savings in interest charges! So, instead of saving $25 you end up losing $225 due to incurred interest expenses ($250 in interest – $25 in initial savings).

Eat from the dollar menu at fast food restaurants because it’s slightly cheaper than a healthier home cooked meal. If you’ve made your three daily meals consist of nothing but fast food dollar menu items as a means of saving money, you’re likely setting yourself up for a lot of health related expenses down the road.

Eating nothing but junk is a great way to increase your chances of obesity, diabetes, heart disease, and various cancers, none of which are particularly inexpensive to treat.

Plus, if you actually plan out your meals around sales at the grocery store, you can make much healthier home-cooked meals for very little money. For example, you can have a bowl of whole-grain spaghetti in marinara sauce with a side-salad for probably less than $4. Sounds a lot better, healthier, and cost effective than a quarter-pounder, fries, and a soda.

You don’t contribute to a retirement account because you want the money now.  While it’s certainly a good idea to have an emergency fund, and nice to have money on hand to pay your bills or splurge every once in a while, you really shouldn’t build up these funds at the sake of your retirement accounts.  Or, to use another idiom (I’m action-packed full of them today), don’t rob Peter to pay Paul.

Sure, it’s nice to have an extra $100 to play with every month, but, thanks to the power of compounding interest, that $100 today could add up to thousands of dollars years down the road.  And, if you fail to contribute to a taxable account, you’d be missing out on today’s tax benefits, too.

(That being said, I always recommend to my friends that they contribute to a Roth IRA first.  Sure, you don’t get the tax benefit but that money grows tax free.  It’s the greatest investment vehicle for your retirement accounts!  I love Roths!  Anyway…)

Obviously, the list of ways you can be penny wise and pound foolish is much longer than the examples above, but I think you get the point.

For me, being penny wise and pound foolish is the litmus test I use when I’m trying to figure out if I’m being frugal or if I’m being cheap. If I find I’m being cheap – which I almost was when I had a real life refrigerator emergency – I have to take a step back and realize that sometimes it’s okay to spend a little more up-front because I know in the long-run it’ll be a lot more cost effective to do so.

So, make sure in going forward, you’re being both penny wise and pound wise.  That is the definition of being frugal!

Are you penny wise and pound foolish?  Leave a comment below!  Also, as always, please share this post using the social bookmarking buttons below – especially Facebook and Twitter!

Living a frugal life now will let you live your dreams later.

Living a frugal life and learning how to save more money is great in the short-term.  You have a nice emergency fund, you don’t feel the pressure of keeping up with the neighbors, and, in this day and age, everyone is envious of your money saving abilities.

Also turns out, living a frugal life and saving more of your money is a great way to help you live out your dreams.

In a great article entitled “5 Dreams You Won’t Achieve Unless You Live Below Your Means” published on WiseBread.com, David Ning points out that living below your means – i.e. spending a lot less than you take in, being frugal, making smart purchases, etc. – is probably the single best way to set yourself up to live out the life you want to have:

Living below your means is probably a personal finance tip that you already know about. In fact, spending less than you earn has been talked about so often that it doesn’t even feel like advice anymore — many people’s reaction is, “Isn’t this obvious?”

However, not everyone who knows what to do actually practices what they know. If you are one of those people, you probably won’t be able to achieve the following dreams unless you start living within your means.

Obviously, I think you should check out the article and read it in its entirety, but if you’re just looking for the Cliff’s Notes version, here are the five things living below your means can help you achieve:

1. Having more time and working less
2. Retiring early
3. Finding a job you love
4. Getting better raises
5. Buying when you want

Of the five, I thought “getting better raises” was the most interesting point, and certainly one that I hadn’t thought of before:

Unless you’ve been living in a cave (or have so much money that you have your assistant carry your wallet and pay for everything), you know that prices of just about everything have gone up. Fortunately, not all is bad in regards to inflation. People who spend less than they earn are have an easier time adjusting to the new prices because even though their companies’ raises might be smaller than the inflation rate of goods, these people are more likely to have the increases to their cost of living fully covered by their raises.

Here’s an example. Let say you make $50,000 dollars and get a 2% inflation adjustment this year, giving you a $1,000 raise. If you only spend $20,000 a year, and a 2% increase on $50,000 is $1,000, it’s like you have a 5% increase on what you can spend.

It’s kind of convoluted, but once you get what Ning is saying, it’s a great point.

Now, here’s an interesting video talking about the importance of living below your means!

What are your thoughts on living below your means?  Leave your comments below and, as always, please share this post using the social sharing buttons below, especially Facebook and Twitter.

The other day a buddy of mine was asking about what to do with his 401k – he had recently switched jobs and wanted to move all of his money from the old company’s plan to the new company’s plan. Simple enough.

However, when he told me how he planned to do this, I just about had a heart attack.

His initial plan was to get a hold of his old company’s 401k provider, ask them to cut him a check for whatever was in his account and then go ahead and write the new company’s 401k provider a check for the same amount once he got their information.

While this plan is perfectly legal, it’s probably one of the worse financial decisions you could ever make due to the severe tax consequences.

By having the old 401k company cut him a check, my buddy was essentially getting a distribution, which would be considered taxable income, and would get hit at whatever his current tax rate is.

On top of that, there would be an additional 10% penalty tacked on to the taxes because you are not allowed to touch money in your retirement accounts – with very few exceptions – until you’re 59 1/2 years old.

After explaining this to my buddy, I told him that the best thing for him to do would be to do the research prior to requesting the check, contact the new 401k provider and get all of the necessary rollover information from them. Once he gets this information, then he can contact the old 401k company, give them the name of the new financial institution and request that his “distribution” be made to the new company.

You see, as long as you rollover the money from one account to another without taking possession of the money (i.e. the distribution check is made out to you) you won’t incur any penalties or have to pay taxes on the money.

By following my advice, my buddy probably saved at least 35% of what his 401k is worth. And no matter how much money you have, 35% of it is a pretty big chunk of change.

The other day I was reading an article by Walter Updegrave, Money Magazine’s senior editor, in which he states that the “10% Rule” – the notion that you need to save 10% of your salary each year in order to have enough money when you retire – isn’t a very good savings plan.

Updegrave believes that the “10% Rule” falls short because it requires that you stash away 10% of your income every single year you’re in the work force which, for most people, is an unrealistic expectation.

I tend to disagree with Updegrave’s stance on this, and I believe that the “10% Rule” is a very good rule of thumb when it comes to stashing away money for your retirement. Here’s why:

1. The “10% Rule” essentially forces you to start saving as soon as you can. One of the most widely accepted ideas in retirement planning is the earlier you start saving, the better off you’re going to be, and by having to save only 10% of your income, it’s easy for young people to get started on this plan.
2. People like dealing in round numbers. Don’t get me wrong, I’m not trying to say that saving for retirement isn’t sophisticated, but any time you can make things easier and simpler, I think that’s probably a good thing.
3. It’s really not that hard to find ways to save 10% of your salary. For example, many of us can simply go to our work’s HR or payroll department and tell them that we would like to put some percentage of our paycheck into a 401k account; that way, they take care of getting the money into your retirement account and all you have to do is worry about managing where the money is allocated.

Obviously, there are drawbacks to this type of retirement planning. For those of us who started saving late in the game, saving 10% of your income probably isn’t going to be enough to ensure a big nest egg, so you’re going to have to up the ante a bit. Additionally, this isn’t a set it and forget it retirement plan either. It’s not like you’re going to be guaranteed financial independence if you save 10% each year; you still need to periodically check up on things and stash away extra money when necessary.

Despite these drawbacks, I think that the “10% Rule” is a great place to start when you begin to plan how you’re going to fund your retirement.

According to an article published on CNN.com nearly half of us working stiffs have saved less than $25,000 for retirement – with nearly 1/3rd of the work force having absolutely nothing stashed away.

I know I’m a little late to the game on this article, but I think it’s worth reiterating how scary these numbers actually are, not to mention the fact that this is just another item that shows why learning basic personal finance is something that needs to be stressed in schools.

In looking at these numbers, the thing that concerns me the most is the fact it appears that many of today’s workforce seems to be relying on the fact that social security will be around to either bail them out or provide a nice stipend to make up for having skimped on their other retirement accounts.

With social security being in such bad shape, it seems we should be taking the opposite tact – putting more money towards our retirement accounts to make up for the fact that social security as we know it might not be around when it comes time for our retirement.

Unfortunately, with so many workers lagging in their retirement savings, they’re absolutely killing the one thing vital to allowing their accounts to grow – time.  Most of us have seen how important time is to growing a nest egg and how starting even just a couple of years later than you should may ultimately end up costing you hundreds of thousands of dollars.

So on that note, if you’re not saving for retirement, start right now.  If you’re not saving enough, figure out ways to increase your contributions.  If you’re on track for a comfortable retirement, reach out to others who might not be as financially savvy and help them start putting money away so that they can spend their golden years enjoying the fruits of their labor as opposed to continuing to labor to make ends meet.

Until it becomes a part of school, you'd better prepare yourself to teach your kids about personal finance.

Thanks to a recent poll on Saving Without a Budget, it appears that I’m not alone in the belief that personal finance should be incorporated into the core curriculum of America’s schools.

According to the poll, 89% of respondents stated that they believed that personal finance should be a required part of every child’s education.

The logic behind teaching children and teenagers about personal finance is pretty obvious.  Just think of all of the finance cliches that you’ve heard: start investing as early as you can, the most important factor in investing is time, don’t get into credit card debt, etc. – all things that are best to learn sooner rather than later.

And because many basic aspects of personal finance currently aren’t taught in school and are left to be learned at home, this current system seems to nurture the fact that wealthy people tend to stay wealthy and poor people tend to stay poor. I don’t think it takes a giant leap of faith to see the possible correlation.

And probably the most ironic part of this is, the results of the Saving Without a Budget poll come on the heels of a recent report that shows nearly half of all people in the workforce have less than $25,000 in savings for retirement.

Again, it doesn’t take an MBA to see that this number would probably be a lot less if all of us had been exposed to some basic personal finance lessons as we were growing up.

For a lot of us, tax season really isn’t that bad thanks to the fact Uncle Sam is going to cut us a nice fat check for all of the taxes we overpaid throughout the year.  Whether it’s $100 or $10,000, it’s always nice to get that “unexpected” money.

So, what should you do with your Federal Windfall?  Blow it on a trip to Vegas?  Buy that 72 inch TV you’ve had your eye on?  Pimp out your 1987 Toyota Corolla?

I’ve got a better idea.  How about you put your money towards something useful that will actually help your personal finances?  Here’s a list of things you might want to consider putting your tax refund towards instead of splurging:

• Pay down any debt you might have.  Because you probably weren’t planning on having to live off of Uncle Sam’s refund check, it’s not a bad idea to go ahead and use that money to pay down your debt.  Whether you’re applying the money towards credit cards, student loans or a mortgage, putting this extra money towards reducing your debt is a pretty good idea.
• Start an IRA.  Why not use the money you’re getting back from the government to help fund your retirement by putting some of the cash into an IRA – or even better, a Roth IRA?
• Put the money towards home improvements.  Because your home is more than likely the largest investment you’ll ever make, it’s probably a good idea to keep it up to date and in good condition.  If you’ve already got that taken care of, why not add things that will increase your home’s value, like a deck or an extra bathroom?
• Squirrel the money away for a rainy day.  If you don’t have several months worth of salary in reserve, putting your tax refund towards your emergency fund is a pretty smart idea.

Granted, this list isn’t all inclusive, but you get the point; take the money, make it work for you and improve your personal finances.  Even if it’s just a small refund it can still make a big difference in the long run.

I have a confession to make – I love money more than almost anything.  Don’t get me wrong, my family and friends come first, but I don’t know if I can think of anything else that would be ahead of money on my list.

And because I’m this way, I’ve been called miserly, stingy, tightfisted, penny pinching and cheap.  Unfortunately, I like to think that I’m pennywise, fiscally responsible, frugal and certainly not cheap.

That being said, there are plenty of times when I think that my life would probably be a little less dull and a little more enjoyable if I would be willing to spend just a little of what I’ve worked so hard to save.

For example, I haven’t taken a real vacation since it was on my parents’ dime.  I never went on spring break in college, didn’t take a break between graduation and my first day at work, and will reluctantly take a day or two of vacation here and there, mostly just to take care of things I can’t schedule for after work or on the weekends.

Despite the fact that I’m doing just fine financially, money is still my number one worry.  I never feel like I have enough, even though I squirrel away money in my 401k, a Roth IRA and still have enough to store in various savings and investing accounts.

I scrutinize every purchase I make, seemingly forcing myself to justify every little purchase.  And God forbid I actually follow through and make a big purchase because I’ll be feeling buyer’s remorse for the next week.

Anyway, being a miser certainly isn’t all bad.  I know that if I ever got into a pinch, I would probably have enough reserves to be okay.  I’m not as worried about retirement as many people who go paycheck to paycheck, and if I could ever teach myself to enjoy an every-once-in-a-while splurge, I could easily afford it.

So, for as much as I talk about fiscal responsibility and storing away money, you also have to be able to strike a balance and know when it’s okay to let loose and spend.  If you can’t do that, and end up doing one or the other (saving OR spending) you’re setting yourself up for a lot of sleepless nights and unhappiness.