The most obvious way that saving money could be a waste of money is in lost opportunity cost.  If your money is tied up in some CD or savings account that you don’t have ready access to, what opportunity are you going to miss out on that could make you even more money.  If you can’t take advantage of an opportunity to make money, your savings is wasting those potential profits.

But, that isn’t the real issue.  Potential profits don’t necessarily mean lost profits.  Maybe that opportunity doesn’t perform as expected and you earn less than you would have in the CD or savings accounts?  No, I don’t think that theory holds up.  Sure, you might miss out on a potential profit boon, but I wouldn’t encourage not saving for that purpose.  In fact, having a readily accessible savings could make it easier to take advantage of an opportunity like that.

But, let’s think for a moment about what we do to save money.  The easiest way to do that is to just have it taken directly from your paycheck and into a 401(k) or to set up an automatic transfer from your paycheck to a savings account.  Easy.  A little bit of set up involved, but very little effort thereafter.  That’s hardly a waste of money!  But, let’s look at the opposite side of the spectrum.  You’re pinching your pennies, saving as much as you possibly can and then some.  You don’t want to miss out on an opportunity, or you want to pay your debt off super fast!  You go so far as to start collecting pop cans.  (assuming you live in a state that has a deposit.)  You walk down the street and throw the cans you find into a bag.  Maybe you even hit the parks and poke through the trash cans there.  Every week, you spend several hours looking for cans.

How much is your time worth?  If you’re spending several hours a week for a few bucks worth of cans, are you making a good use of your time?  Isn’t your effort to save a few bucks a waste of potential money doing something else?  Heck, you could deliver pizzas for a few hours a week and make much more than that.  Sure, the cans are an extreme example.  But, one used to put a spotlight on my point.  What saving practices are you employing that are a waste of money?  Which of them are worth your time, effort, and resources?  And which aren’t?

If we are going to attempt to create a super financial situation, we have to make our saving machine as efficient as possible. It doesn’t hurt to question your tactics.  Find the ones that are causing you to waste your money and find a better use of your time.  Not only will it make your money saving efforts more efficient, but I think it will free up some time to do things that you want to do.  Like spend time with your kids, or walk through the park and not look for cans!

Is Saving Money a Waste of Money is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.

For the high school graduates: If you learn nothing in college, learn to avoid debt.  That single thing will make the rest of your life so much easier.  It allows you to start ahead of every single one of your college peers, and will make it so much easier to achieve the goals that you want in life.

If you’re reading this, and you’re a college graduate that never got the above bit of advice, you’ve likely ended up like I did.  Lots of debt.  Here’s my advice to you (and roundabouts to my past self).

1. Learn how to budget.  Creating and maintaining a budget opened my eyes to the ways that I was spending (and wasting) my money.  Create a budget for yourself and stick to it.
2. Learn how to avoid debt.  Very few of you will be able to completely avoid debt.  Minimize it.  Pretend it’s your leprous uncle.  Instill an aversion to debt.
3. Learn the meaning of appreciation.  If you’re going to add debt, only do so to buy something that you expect to appreciate.  New furniture doesn’t count. Houses sorta count.  Cars absolutely, positively, do not count.
4. Learn the value of shared costs.  Just because you’re a big boy (or girl) now with a fancy diploma (with fancy calligraphy), does not mean that you’re above having a roommate.   In fact, I would encourage it (unless you’re married, because that’s just a bit weird).  It doesn’t even take a calculator to figure out that rent/2 is better than rent/1.
5. Learn the value of patience.  Just because you can get a mortgage or a car loan, or whatever, does not mean you should.  Statistically speaking, you’ll change jobs several times over the first 5 years of  your career.  Do you really want to be tied down to a house if you need to move to another city?  Slow down and ease yourself into your adult life.  It’s not all that it’s cracked up to be anyways.
6. Learn the word Retirement.  Sure, your all excited about your newly earned earning potential and your fancy new career, but, if you’re like every other person on the planet, you’ll want to retire at some point.  Start saving now to make that dream come true later.
7. Remember to have fun.  Just because you’re all grown up and joining the “real world” doesn’t mean you can’t still have fun.  Your hobbies and activities are what make the “real world” worthwhile.
8. Wear sunscreen.  None of you will get this reference as you were probably 8 at the time.  The rest us do and it’s not that important. (in case you’re curious: http://en.wikipedia.org/wiki/Wear_Sunscreen)

The preceding is, by no means, an exhaustive list.  In fact, it can’t even really be considered a quick and dirty list.  It is, merely, a list of a few things that I have come to think of as some tenets for post college life.  Some, I have learned, others I wish I had.

Congratulations on your graduation, and best wishes as you join the rest of us in the real world.

Advice for College Graduates is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.

Let me tell you a little secret.  We’ve all been there.  In all likelihood, we’ll all be there again.  But, some of us will get back up, dust ourselves off, and get back to doing what it was we were doing in the first place.  The rest will sit on the ground where they landed, beaten and broken, and never get back up.  They’ve given up.  The world got the best of them, and they have lost the will to try again.

Getting back up isn’t the hard part.  Gathering the will to get back up is.

None of us who have fallen and gotten back up have any greater aptitude for it than anyone else.  Sure, we may be better at some things than other people, but when we fail, we are all the same.  Here’s a little bit more of a secret.  Some of us are better prepared for the fall.   We’ve done what we can to soften the blow, not because it’s inevitable, but because it could happen.  Think of it this way; you don’t buy health insurance because your sick, (well most don’t) you buy it in case you get sick.  You don’t wear a helmet while bicycling because you know you’re going to fall, you wear it in case you do fall.  Sometimes situations are out of our control.  We certainly don’t choose to get sick.  And we don’t choose to fall off of our bikes on to the hard concrete below.  But, sometimes it happens.  And the better prepared you are for it, the easier it is to get back up and get going.

An example.

Many years ago (something like 7), I drove a old pickup (older than I am).  One particularly cold day, then engine refused to start.  It refused to start the next day despite having a charger on it and attempts to pull start it.  I couldn’t go without a car, so what was I to do?  I had no savings, and no means of coming up with any extra money.  I had fallen.  In order to get myself up and out of the hole I had dug, I was forced to take on a massive (for me at the time) car loan on a used car.  The bank wouldn’t finance much without a down payment, so I took what I could get.  It was a terribly low spot for me, financially.  I went from having no car payment at all, to having a car payment of a little under $200 a month.  I could afford it, but just barely.  If anything had happened to my income or if an emergency of some sort had arisen, I would have fallen that much farther (and harder).  To be honest, I didn’t learn all that much from that particular episode.  But, I did get back up and back on the road.

A week or so ago, my car sprung an oil leak.  The repair wasn’t horribly expensive (only about $150), but enough that it could have been very damaging if I had been in the same situation as I was before.  But, I’m not.  I’m prepared.  I have a small emergency fund that can easily cover an expense of that magnitude.  The fall wasn’t nearly as bad.  It wasn’t as bad of a situation as it was before, either.  But, because I had prepared, the fall was very short and I was able to recover quickly.  In fact, it was less of a fall than it was just a little bump.

Preparing for an emergency isn’t a bad thing.  It doesn’t mean that you are expecting to have an emergency any more than having health insurance means you’re expecting to get sick, or wearing a bike helmet means you’re expecting to fall.  But it cushions you against the fall.  Getting sick is less stressful if you have insurance that you know will pick up part of the bill.  You’ll have less road rash if you’re wearing a helmet.  And, if you have an emergency fund, more falls will become bumps.

Do yourself the favor.  Prepare now, so that when you do fall, you’ve got some cushioning to land on.

Picking Yourself Back Up Again is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.

In the process of paying off our debt and saving money, many of us will be faced with a moral or ethical dilemma.  Perhaps you bought a bunch of things at a department store and the teller didn’t notice that one of the items rang up for less than it was supposed to be.  Or maybe the teller only rang up one item when there were really two.  Many of us have been faced with just such a situation.  And many of us, in our struggle to reduce our spending and debt, probably didn’t say a thing.  I know I have.  And I felt guilty about it.  Morally, and ethically, we have a responsibility to pay the correct price for an item, and to pay for the correct amount of items.  Even though I admit to not doing anything, I do try to keep myself honest.  Ill gotten gains are gains you’re likely to lose.  Call it karma, or whatever you like, you’ll feel the reverberations of your acts.

Perhaps more-so than in paying off debt and saving money, ethical and moral dilemmas can arise after we’ve paid it all off.  Suddenly, we find ourselves with an abundance of spendable money that we can save or do what we want with.  It’s not earmarked for any debt, and we’ve already paid ourselves.  The situation has changed, but we still have a moral and ethical obligation to do what is right.  If you’re investing your money, do you invest in so-called “sin stocks”?  The stocks of cigarette and alcohol and other indiscretions.  Again, I know I have.  I am still a shareholder in the parent companies of both Marlboro and Camel.  I’ve owned others in the past.  Depending on how you feel about those companies, a ethical dilemma could come up.  As a generality, those companies have rather solid stock and usually pay dividends.  If you feel that those companies are responsible for cancer and death, can you ethically allow yourself to support them by becoming a share owner of that company?

As debtors, we all despise the credit card companies who charge double digit interest rates and hide fees around every corner.  Banks too.  As someone who can now invest money rather than paying those credit card companies and banks, deciding how we feel about those rates and fees can be another dilemma.  If you’re one of the lucky ones  whose state has allowed access to the peer-to-peer lending companies, you have the ability to invest in loans that carry rates that are very much the same as what a credit card company or bank would charge.  The table has turned.  If you were against it when you were paying the rates and fees, can you ethically charge them?  Morally, should you?

I think that many of us look too closely at the technical aspects of personal finance.  We study amortizations schedules and debt snowballs.  We talk endlessly about our retirement funds and the ways that we are going to build them up.  And, while it is there as an undercurrent, we sometimes fail to see the moral and ethical currents that run in the background.  And sometimes, we allow our technical expertise and know-how overcome our moral and ethical compasses in order to make our debt snowball roll a bit faster.

If you truly want to win at personal finance, you have to find your moral and ethical limits and remain steadfast in their direction.  We all fail to do that occasionally, but, as the old saying goes, you’ve got to get back up and try again.

Ethics and Morality in Personal Finance is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.

The mantra holds true for personal finance as well.  Want to retire rich?  You’ll need to save quite a bit up.  Don’t hem and haw about how much you can afford or when, just save it.  Want to become debt free?  Just pay it off.  Whatever it is in your personal finance life that needs work, you need to recognize that it’s not going to improve itself.  You’ll need to work on it.  And whatever it is, you need to also recognize that if you don’t just do it, you’ll never get it done.  Do your research, make a decision.  Once you’ve made a decision, follow up with it as quickly as possible and execute it even quicker.  100% of plans fail that don’t get acted upon.

Just Do It. Whatever It Is. is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.

And working towards your goals sometimes doesn’t get the required dedication that it deserves.  If you’ve set goals for your personal finance, but have never met one on time, you probably suffer from a low level of PF dedication.  If, however, you always meet your goals on time or early, you not only likely have a high level of PF dedication, you also need to set higher goals!

In the course of my day to day life (and yours, I’d bet) I’m constantly tempted with things that I would like to have or places I would like to go.  And to get those things or go to those places costs money.  Money that might not be in the budget.  The temptation can sometimes be strong to put aside a budget item for this month so that you can have that “want” now.  Time for a self check.

It’s at times like that, that I try to remind myself of the goals that I have set.  That $50 gadget could be a $50 payment towards the next debt item in the debt snowball/avalanche/snowflake.  It could go towards retirement, or towards college savings, or towards down payment savings, or…  You get the idea.  Often, that little reminder is enough to keep me on track.

But it’s only because I’ve decided to have a very high level of dedication to my personal finance goals that it works.  If I had a much lower PF dedication level, it might not be so easy to turn down that gadget.  And I’d be that many more months behind schedule on paying off my debt.

What is your PF dedication level?  Do an inventory of the goals that you have set and decide now how much dedication you want to have towards those goals.  I’ll let you in on a little secret.  If you set a goal, you want it to be a 100% dedication item.  Maybe you don’t realize that, but (consciously, or sub-consciously) you created that goal with the intention of giving it 100% dedication.  And if you aren’t giving it the dedication that you intended for it, you’re letting yourself down.  And maybe it’s time to rethink your goals and set new ones.

Whatever the case may be, your dedication level to your goals is the deciding factor in meeting those goals.

image credit: Duchessa

What’s Your Personal Finance Dedication Level? is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.

What they aren’t telling you is that it isn’t really a reduction.  Sure, they’ll be taking less out of each paycheck.  But they didn’t reduce the tax bracket rates any.  All they’ve done is reduce the percentage of your wages that will be withheld from your paycheck.  You’ll still owe the same amount on your taxes at the end of the year.

Here’s how it will work.  If you got a return this year, and are planning on getting one next year, it will be reduced by the extra taxes that didn’t get taken out of your check.  $13 less withholding dollars means $13 (or more) less refund.  Where it could really hurt people is where the person is already expecting to send a check with their tax forms.  Their check will have to be much bigger because of all this.

Now, to avoid all of this, you could instruct your payroll department to take that $13/week out anyways.  You could adjust your withholdings on your W-4 so that more is taken out.  Or you could take that $13/month and stuff it away in a shoebox so you’ll still have it to pay Uncle Sam with come next April 15.

Any way you shake it, it comes down to a publicity stunt to make all the other needless spending in the bill look better.  It’s the proverbial spoonfull of sugar to make a whole lot of pork go down.

Stimulus Bill Tax Credit, Isn’t. is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.

Ramseyan thought:  Start with a goal of $1000 and then after your bills are paid off, move it up to cover at least 6 months of expenses.  This is the current plan that my wife and I are using.  We built up our intitial fund of $1000 and have been letting it sit in our e-trade savings.  It’s just under $1050 at the moment and growing at about $2-$3 a month.  Nothing big, but much more than we ever had before.

Some will say that Ramsey is a little off on this thinking.  Many people, my wife and I included, couldn’t even make it a month on $1000.  Those same people would suggest that you build up a 1 month expenses emergency fund at the minimum.  They may be right.

The key here, is that we’re discussing personal finances.  It’s personal.  When my wife and I decided to take the reins and take control of our personal finances, we didn’t have an emergency fund at all.  We had just completed reading Dave Ramsey’s Total Money Makeover, so we followed (are following) his baby steps plan to get ourselves out of the hole.  We’re Beating Broke. (Do you like how I slipped that in there? )

The Beating Broke thought: Because we’re talking about personal finances, it’s important for you to gauge your risk and build an emergency fund that is appropriate.  Certain things will raise the risk of an emergency.  If you’re driving an old car, for instance, the risk of a breakdown is higher than if you were driving a newer car.  If you’re health is a little worse than average, the risk of you having a medical emergency could also be higher.

The higher your emergency risk, the larger your emergency fund should be.  I suggest starting with at least $1000.  It’s a good number, and for many, it’s more than what you already have.  If you can continue to grow that emergency fund without derailing your excess debt payoffs, do so.  Continue to build it until it is at least 3 months expenses.  In the end, shoot for a constant emergency fund of at least 6 months expenses.  Try to keep it to no more than 12 months though.

Why no more than 12 months?  Because you’re likely keeping it in a high-yield savings.  The 3-4% that they are currently paying is good, but you can do better elsewhere.  If you’ve already got 12 months of expenses in the bank, you can take any excesses and do much better through investments that will get you a higher return.  Presumably anyways.  History would say so, and it usually doesn’t lie.

Most importantly, you must have an emergency fund.  If you don’t then this whole article is pointless.  It will give you a peace of mind that you’ve been missing and make it easier to pay off your debt.

As usual, the advice here is merely that of a lowly personal finance blogger and not that of a financial professional.  Before making any big money moves, you should consult a professional.

How Much Should Your Emergency Fund Be? is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.

Here’s the dirty truth of it all.  The price of gas is not the reason that you are having trouble financially.  At 17 MPG, the difference between 1.999 a gallon gas and 4.159 a gallon gas is about $1500.00 a year.  A little over $125 a month.  It sounds bad, but when was the last time you remember paying $1.99 a gallon for gas?  It’s been a while.  The recent raises in price took the gas from about $2.499 to 4.159.  The difference there at 17 MPG is just under $1200.00 a year.  Or a little under $100 a month.

And that’s at 17 MPG.  If you are driving a car that gets 25 MPG, the difference is about $800 a year or $66 a month.  At 30 MPG, it drops to about $664 and $55.

$55 a month is nothing to scoff at.  And $125 can be a near catastrophe for some people.  But, if you had your finances in order to begin with it wouldn’t be a disaster.  It’ll still take a dent out of your budget, that’s for sure.  But a person who has control of their money and tells it what to do will be able to quickly rearrange that budget and keep on track with their debt elimination and savings goals.

If you make concessions and shorten trips or consolidate errands, you can cut that gas bill too.  Besides, don’t you feel just a little bit silly about blaming all your financial woes on $50 a month?  I bet you pay more than that on your cable bill…

Wanna see my numbers?  Here’s the spreadsheet I used. http://spreadsheets.google.com/ccc?key=pKnPEyRsjPSLpIC6wCWdjbg&hl=en

Don’t Make the Cost of Gas Your Scapegoat is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.