Beating Broke

Personal Finance from the Broke Perspective

Is Saving Money a Waste of Money

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Save! Be Frugal! A penny saved is a penny earned. There’s a plethora of maxims meant to encourage us all to save our money for a rainy day. To hoard our excess funds so that we can spend them at a later date and enjoy their usage. But, is saving our money a waste of our money?

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.  Not to mention the other ways to make extra money.  You can make money selling ebooks, or working some overtime, or consulting, or just about any second job, or make money on twitter, or even *ahem* blogging.  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!

Enjoy Your Money! How to Make it, Save it, Invest it and Give it

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Enjoy Your Money!: How to Make it, Save it, Invest it, and Give it

By J. Steve Miller

Occasionally, authors approach me to read and review their books.  I usually do so, happily.  I enjoy reading, and anytime I can get a book to read for free, it makes my wife happier.  It’s hard for her to argue about my getting more books when they are free.  So, that’s my disclaimer.  J. Steve Miller sent me a copy of this book to read.  He also sent me a copy to give away, which I will be doing in the coming weeks.  Both are autographed too!

So, on to the book.  I’ve never read a finance book that was written in the same way as this book was.  Most of them are so matter of fact that they are beyond dry.  I have to take toothpicks an prop my eyelids open to finish reading them. (I exaggerate, but you get the idea)  But, this book was actually fun to read.  I think the pivotal reason why is that it’s written in a conversational tone.  Very nearly like most of the fiction books you would read.  Instead of just spitting out the facts and information for us to chew through, Miller gives it to us with a story.

Now, I can’t say that it’s an award winning story by any means.  There’s only so much you can do with the topic, after all.  The basics of the story follow a group of high school students (the counterculture club) as they are taken under the mentoring wing of a teacher from their high school.  Over several weeks worth of breakfasts at “Hash Browns” diner, she teaches them some key tenets of personal finance like ways to save your money, smart investing principles, and also ways to enjoy your money once you have it working for you.  There’s several places where the dialogue makes it seem as if the students are the ones feeding the information to us, which breaks the story facade, but if you ignore those, the story is quite good.

Despite the few flaws in the story, I think Miller makes an excellent attempt at making personal finance easy to learn.  The book was great for me, but I think it would be even better as a tool for teaching high school aged children about finances.  I can’t say for sure if that’s what Miller intended, but I would guess it is.  I think it would make an excellent addition to the curriculum of a school.  It would hit a roadblock with some of the religious undertones, so you may have to just buy a copy and gift it to a high schooler you know.

You can pick a copy of it up at Amazon for $15.99.  (Or you can wait for the giveaway and try your chances there.)  For more information, (description, sample chapters, author interviews and reviews) see the press page here: http://jstevemiller.com/blog/?page_id=578

I Won the Lottery! Almost.

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I won the lottery last week.  Almost.  Not quite, but almost.  I suppose I would have had a better chance if I still played the lottery.  I used to play the lottery off and on by myself, buying a ticket now and again, when the jackpot was several hundred million.  Then, I joined a group of people at my work that pooled our money together and bought lottery tickets with that.  Eventually, when I began listening and reading more on personal finance and then found Dave Ramsey, I quit paying the idiot tax.  Happily, I spent that $10 a month on something more worthwhile.  Like debt repayment.  And it was a good decision.  Until last week.

Last week, the group of people that I used to play the lottery with won.  Not the jackpot, but the second highest prize.  All 5 numbers without the magic ball.  $250,000.  There were 19 in the pool, and, after taxes, each will receive about $9700.  When I first heard, boy did I feel stupid.  What was I thinking?  I could have had a share of that!  Do you have any idea what $9000 could do to my finances?  It could eliminate my remaining credit card debt.  What was I thinking, dropping out of the pool?

Then, as I had more time to think about it, I came to my senses.  The odds of winning that prize were 1 in 3,900,000.  You have better luck finding a fresh lightning strike and getting struck by lightning right then and there.  Which doesn’t mean it couldn’t happen.  It did.  But, for each of those 19 very lucky people, there are thousands of people who bought a ticket and will never win.  I can’t say that I’m not still slightly jealous of the winners.  More so because of the “it could have been me” mentality than because I begrudge them the money.  Some of them truly could use it.  But, if they could use it, why are they playing the lottery.

Which is why I wasn’t playing.  I could use the money.  So, rather than spending my money on things like lottery, I was putting it to work for me.  As fate would have it, the pool that I used to play with won.  I see it, now, as a test of my financial resolve.  How many of those 19 will have spent the money on frivolous things and then be complaining in a month or two about how they have all these bills?  All while putting their money in to play the lottery, just in case lightning does strike twice?

I’ll keep plugging away at my debt.  And one day, when they’re still playing the lottery, hoping to hit it big and get rich, I’ll have made myself rich with the money I’m not spending on debt.  Now, does anyone know a good way to make my friends understand that?