Beating Broke

Personal Finance from the Broke Perspective

Archives for August 2010

31 Days to a Better Bank Balance

By 1 Comment

If you’re ready to make a change and get your finances in order, you need to check out the 31 Days to a Better Bank Balance by my Yakezie friend, Money Crush!

Each post contains a great nugget of personal finance wisdom and a task/step that you can complete that very day to improve your personal finances.  The goal being that at the end of the 31 days, you’ll have a much better hold on where your money is, where it goes, and where it comes from!

Money Crush has already posted the first day today, so go to the link above and get started.  I think you’ll thank yourself for it.

New Home Sales Drop Even Further

By 2 Comments

It wasn’t that long ago that we were talking about how far home sales had dropped (a new record low at the time) and the causes behind it.  It was just announced (yesterday or today) that new home sales have “unexpectedly” dropped another 12.4% to a new all time record low.

To be completely honest, I’m not sure why it was so unexpected that the sales would continue to drop.  The economy is still just as bad as it was.  It hasn’t necessarily gotten any worse, but it certainly hasn’t made any great rebounds either.  I still maintain that anyone who was in a financial situation to buy a new house likely did already to take advantage of the tax credits that were in play until the end of April.  On top of that, there’s still talk of more “stimulus” to the housing industry.  So it’s likely that there are some who are holding out for a new tax credit to show up.  Will that happen?  I hope not, but you just never know.  Another factor may be the still falling value of homes.  The further the prices fall, the more likely it is that you’ll end up underwater on it.  If you can’t get out from under that, it’s unlikely that you’ll be able to sell without a large amount to cover the difference.

I will continue to not be surprised by these “unexpected” drops in sales.  How about you?  Are there factors that I’m not taking into account that might rescue the sales figures?  (Wizards and warlocks don’t count.)

Sometimes Saving is Wrong

By 11 Comments

Invariably, every few months, we get a wave of posts talking about “what would you do if you won $x,xxx,xxx?”  Or, what you would do with a smaller windfall.  And invariably, a majority of the people talk about how they would save the money.  And in some cases they are right.  But, most of the time, they are wrong.

Why are they wrong?  Because they’re looking at saving from the wrong direction.  I wouldn’t save a dime of it.  I would use every last cent of it to pay off debt.  And until I have no more debt, that’s what I would do every time.  Sure, maybe I’d by a few things that I needed, but the rest goes to debt.  Saving in a savings account doesn’t do you damn bit of good if you have debt.

If you have any debt at all, you really should think twice about having any savings at all except for an emergency fund.  Why?  Because, there is no savings account in the world that will guarantee you more interest than what you are paying on your debt.   If you pay off $100 of your credit card debt, you’ve just earned the 19% interest that you would have paid.  You “saved” more with that $100 than you would have in years if you had put it into a savings account.

Don’t fool yourself into thinking you need to have anything more than an emergency fund in the bank.  All the rest is just money that could be making you 19% interest instead of the paltry 1.30% that you’ll get at that high-yield online savings.  When you get rid of your debt, then is the time to start building your savings!

Some of you will likely ask “what about retirement savings?”  That’s a gray area.  There are some that would argue that if you don’t get that debt paid off, you’ll end up taking that money out early anyways.  Others would argue that due to the tax benefits of retirements accounts, and the magic of compound interest, you really should be putting money into your retirement too.  My current opinion is stuck somewhere in between.  I think that you should be putting a little into retirement, just so you have something going.  But, I also think that you should keep in minimal until your debt is gone and then ramp it up like gangbusters.

So, what would you do if you won $x,xxx?