Beating Broke

Personal Finance from the Broke Perspective

Beating Broke Rules: Bonuses

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Beating Broke Rule: Spend your Bonuses wisely.

Every year, many of us are lucky enough to receive some sort of bonus from our employer.  (If you’re self employed, that’s bonus enough. 😉 )  And when we do, the inevitable question arises.  What do I do with the money?  And then, how to budget for it?

The simple answer is to spend it wisely.  In a more complex answer, it depends on what your goals are for your financial life.  Using your bonus to buy Christmas presents may make you feel good for a month or two, but will you feel guilty afterward?  You’ll feel much better, in the long run, if you spend the money wisely towards your goals.

198/365 - paydayHere’s the downside to that, though.  You’ll also feel guilty if you use it all for debt repayment.  Each of you will have a different situation, but here’s how we usually use our bonus here in Beating Broke.

Consider taking 10% of the bonus and blowing it.  Buy some presents.  Take your family out to dinner and a movie.  Whatever you want.  Give yourself 10% in cash and free rein to do whatever you want with it. You’ll feel better when you do.

With the remaining, take a look at your situation.  Do you have a purchase that you’ve been saving up for, or putting off until you could afford it?  I’m not talking about those gifts, or the television upgrade, but things that you really need.  Maybe some costco eyeglasses? For example, a portion of my bonus (if I get it) will go towards buying new tires for one of our cars and paying for a repair that one of them needs.  It won’t take the whole bonus, but a good portion of it.  And it will be extremely relieving to not have to come up with that money out of my normal paycheck.  If the bonus doesn’t come, I’ll still have to pay for those things, but it might take a little longer to pay for them.

Maybe your situation doesn’t have a purchase like that that you need to pay for.  But, maybe you’ve got some debt that it could help retire.  What we don’t spend on tires and repairs, will likely go towards paying off a debt.  It won’t pay off any of them all by itself, but it will cut the payoff by several months.  And, while that doesn’t give me the same feeling that just blowing the money on stuff does, it will leave me feeling much better for a far longer time.

The bottom line is this.  Think about how you spend your bonus and spend it wisely.  You’ll feel much better for it.

photo credit: jypsygen

Advice for College Graduates

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When I entered college, I had no debt. Well, I guess I had some as I’d already signed the papers, but hadn’t received the money, for the loans I was going to be using to partially finance my education. When I finally graduated, 7 and a half years later, I had mountains of the stuff. Nearly 30k in college loans, close to 10k in credit card debt, a car loan, and a mortgage.

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.

Beating Broke Rules: Dedication

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You can’t turn a corner, enter a bookstore, listen to radio, read a blog, or watch sports without hearing the word dedication several times.  We all talk about dedication in one shape or another.  And in truth, many of us still lack it.

Beating Broke Rule: Get Dedicated

Get dedicated to your goals.  Get dedicated to your new life being free from debt.  Get dedicated to saving for your retirement.  Get dedicated to saving for a house.  A new car.  A ring.  Just get dedicated.

Dedication to your goals is the only thing that will ensure that you can fulfill them.  If you aren’t dedicated to them, you won’t follow through.  If you aren’t dedicated, you won’t meet your goals.  Without dedication, you will fail.

Make the choice today.  Dedicate yourself to your goals and work every day to fulfill them.  Take a step now to reach your goals.  You’ll reach them before you know it.