Topic : Money Saving Tips and Tricks

 You always need to think in terms of net refund or net tax due;it is the amount of money on line 46 minus any credits that you had.Most likely, you have net tax due, but if you receive the earned incomecredit, you could have a net refund (only in the case of the EIC orSchedule C can you have a net refund).

Okay, here's what to do to make that tax professional work. Be happy ifthe tax adviser did everything to minimize your taxes and you stillhave under $1,000 taxes due. Embrace it. Always keep it under $1,000even if it means revising your W-4 form to have additional taxeswithheld. There's an excellent chance (greater than 80%) that the IRSforumla will leave your taxes due at under $1,000. For example, if youhave a large amount of interest income (or income not derived fromwork) or win a prize where you don't have taxes withheld, that's theonly times that you will need to have additional taxes withheld fromyour paycheck. For instance, if you have self-employment taxes, youmust send in your estimated taxes or if you have a high level ofinterest income due to an inheritance, than you need to lower yourexemption amounts. Otherwise, take all the exemptions you're entitledto. Otherwise, be happy your forking over an interest free loan to theIRS simply to get what I call a paperrefund. Don't be happy with a $4,000 total refund (federal and state)because you had $5,000 withheld. You're tax advisor is an idiot not agenius or you didn't supply the correct information to the tax advisor.

Every individual that is claimed as a dependent has one exemption.
Every other individual has at least two exemptions. Take them. Here's what you do.

If you claim head of household, most likely, you will have at least 4 exemptions but you will have at least 3.

Some places don't allow you to have two checking/saving/investingaccounts; they will only direct deposit into one account. I'm verydispleased with those workplaces.

Here's what to do. Find out how much taxes you'd have withheld if you claiimed 0 exemptions. Then take the exemptions you do have (are entitled to) and put the difference in a savings account. If you have taxes due, simply pay from the savings account your tax bill. You will have earned interest of 5% on your money and, more importantly, you will not pay a penalty as long as you taxes due is under $1,000; it may even be higher if you use their forumla.

HOLY COW......You wrote an entire book on "FINANCIAL PLANNING 101" and frankly, I had a hard time reading it. You ran many words together, jumped subject matter, and made a topic which should be simple to understand.....almost impossible to understand!!

 

I am impressed that you have a Degree in Accounting and Management but your inexperience is showing. Remember......most people who post messages here have a hard time balancing their Check Book. That's not to say they are illiterate.....they just do not have a PLAN. If you really want to help people:

Tell them how to set up a basic household budget.

Tell them the pitfalls of Credit Card debt and how to avoid it.

Tell them how to buy a Car and not be upside down when they drive off the lot.

Tell them the difference in Scholastic Intelligence and Financial Intelligence.

Tell people how to set up an "Emergency Fund" to cover those un-expected expenses.

Tell them why they need Term Life Insurance to protect their loved ones.

Tell them how to save for College.

Tell them how to save for retirement.

Tell them how to do all the above in order to have a Financial PLAN.

 

I appreciate what you were trying to say in your post.....it's just a bit of "overkill" on this thread!!

I agree. I really liked your outline.

1) I think the best way to set up a budget is to not create one at all. I think you need to limit your expenses to 70-80% of your income (ideally). An ideal of 30% or more occurs when two people are working, making a decent living,  making reasonable lifestyle choices (like neighborhood to live in, which can dramatically increase costs). Most families will only be able to live on between  80-90% of their income. Only young people and single parents should be saving less than 5% of their income. I think the other reason is if you need to make a move to find work or find better employment. If you cannot live on 80-90% of your income , than either your expenses are too high (variable costs such as overspending and/or fixed costs, such as rent or increasing unplanned expenses).

2) Credit cards should be used as a payment system and not a borrowing system. Only about 40% of cardholders pay their balance in full every single month. Don't be one of the 60% of those who don't pay their balance in full every month. If you must make a purchase on a credit card, get a low fixed interest rate credit card on cardweb.com

Two things you need to do when you own a credit card. Subtract it from your checking or savings account balance once you make the charge and be sure to not spend anymore on the credit card than you would have if you paid for the item in cash.

3) Make sure your insurance covers your car for full protection for the first year (costs extra). Otherwise, your car drops by about 30% once you drive it off the lot. Or get gap insurance if you take out a car loan. It's wise to get a car loan that doesn't exceed 36-48 months; surely, your car-loan won't be cheap (in terms of monthly payments) but your total interest paid may be greatly reduced. Also make sure, you have your liability coverages increased if you have a home and an umbrella policy if you have a reasonable level of assets ($1 million or more). That's not that uncommon anymore.

4) There is little resemblence between financial and scholastic intelligence; the character of the person, including a financial advisor determines how they handle money more than their scholastic intelligence.

5) One-year of an emergency fund is a must and is obtained easily by living on 70% of your income for 3 years or 80% of your income for 5 years.

6) I think they need disability insurance before term life insurance to protect their income; there's always that caretaker that can take care of their children if they die. However, $1 million of a term policy is a good idea for someone making at least $50,000 per year or a couple making at least $80,000 per year. The disability income policy is ideally not from the workplace as workplace policies are completely taxable.

7) Don't save a dime for college until the 6 needs and your retirement needs are met.

8) Take the 20% of your income fund your Roth of $4,000 in 2007 or $5,000 in 2008.  Contribute what you can to your 401k plan up to the point of the match. So if they match 6% and you make $40,000 as an individual, contribute $2,400 at work, $4,000 into your Roth, and $1,600 into your emergency fund. The $4,000 in your Roth must be invested conservatively as it is also part of your emergency fund until it is fully established. You cannot touch any of the earnings that you make on that $4,000; only the $4K can be withdrawn. No deductions are provided for losses on Roth accounts.

Now you have a financial plan.

 I was really trying to reach a mass-audience. I tried to have a VERY COMPREHENSIVE piece that people could ask questions about anything they had questions about. I like your comments. I thought it was long, but I was trying to reach a mass audience.

I guess if my purpose was to show how easy it is to manage your money yourself, I failed in that regard as I had hoped to succeed. I guess I should have posted separate messages detailing different financial planning options, rather than one message posting all different facets of life (the so called book of financial planning 101). I'll do that next time.

 The best way to put yourself on a budget is to put your life on autopilot.

6% should go into your 401k
5-10% should be placed in your Roth Account(s)
9% should be placed into savings (assuming only 5% went into the Roth)

25-30% should be saved if you can handle this level of saving; 30% is a critical number for those with no or a greatly reduced social security system.

I don't believe a rigid budget is effective as it can be quite discouraging. However, it is necessary to truly assess what you need. For example, you might not need more than 2 weeks worth of clothes in your waredrobe (I think one week is adequate for myself).

I think that by having money taken automatically out of your paycheck, it will pressure you to minimize expenses and set priorities.

AQUASWIM47.......much better.....that's the way it should be. I completely agree with you on the Disability Insurance......unfortunately, most people never think anything bad can ever happen to them. When it does......they are devastated.

 

On Term Insurance, I read so many post where a woman is raising children on their own and they live in poverty. I believe if a husband has any respect for his wife and children he would want to know they would be taken care of in the event of his death. I usually recommend a Policy that would pay ten times his annual salary. So if he makes 50k per year he should have 500k in Insurance. That would give Mom some breathing room and she would not be under the gun to find a job immediately and leave her children at home or with a relative or baby sitter. Actually, I also recommend that Mom be insured as well so that Dad could hire a Nanny or pay Grandma for watching the kids and to provide for their College education.

 

On Financial Intelligence.....this subject is hardly ever taught in College so most people do not know the difference between a Liability and an Asset. They do not know the advantage of compound interest nor the way to make money work FOR them. I recommend a good book that will explain this subject very well and it is: RICH DAD - POOR DAD by Robert T. Kiyosaki

 

IF......you follow your own advise......I have no doubt that you will live a very comfortable, fulfilling, financially secure life. BEST OF LUCK TO YOU!!

 

 

I really feel it was a matter of prioritizing disability insurance and term insurance. The $500,000 of insurance is going to provide two things: in a high cost area, it will allow the mortgage to be paid off. Most likely, it will allow the mortgage to be paid off and allow the parent to get an additional $10,000 per year of income to live on. As a result, $500,000 is unlikely to be enough for a single parent. You really need a plan for not dwindling down that principal; it must be kept in tact. I'm glad you mentioned that both parents should be insured, but if the female needs a substitute for a man who took care of the kids than that would also need its $400,000 policy. So a $1 million policy is needed for each wage earner and $400,000 if either of them have a caretaker role.

There are a lot of single mothers that work three jobs because they have extreme difficulty making ends meet. In a lot of cases, they need time to think, but the time to think is before when the plan must be created. I think that $500,000 often provides a false sense of security as if there is no plan in place that money can be spent very easily. There are several options that a person who buys the life insurance has, including to pay out the life insurance proceeds income as an annuity for life or for period certain. They also have the opportunity to take the money as a lump sum. I prefer the lump sum provided that it be invested in a good balanced fund (which will have a lot of stocks and bonds with high ratings) or income stock funds (well diversified stock portfolio with stocks that have high bond ratings and great dividends). GMNAs, conservative funds (FASIX),  insured munis held to maturity (if income is not needed for the principal contributed to the muni), short-term CDs, T-Bills, Treasury-Inflation Protected Securities, or New Housing Authority Municipal (NHA) bonds (since these are US government guaranteed) might all be appropriate investments.

 You don't need a financial advisor to invest.Investing is pretty simple; it just takes a little getting used to. Atmost, it will take 3-6 months to become savvy (good to very good atinvesting). Don’t take on too much risk, however. Vanguard and Fidelityare great choices; you invest with these discount brokers directly andopen an account with them. Scottrade invests in other broker’s mutualfunds (also called fund families). Make sure to always have no-loadmutual funds with an expense ratio of less than 1.50%. Think about your401k plan. If you pay fees of 4% on an 9.72% average rate of return, you’ll only average 5.72%! Becauseyou’ll earn 5% on your savings account, you’re bearing market risk, butonly averaging an extra 0.72% to bear that additional risk. However, if your expense ratio is 0.19%, than you’ll average a 9.53% rate of return(a 4.53% risk premium). One rule of thumb: make sure the management feehas a zero than a number. Lastly, if you use Scottrade make sure thatnot only are the funds no load with an expense ratio not to exceed1.50%, but that they are also no-transaction fee (NTF), no-load funds. Ifyou’re going to take the risk of the market, you ought to pay as littlefees as possible!!!! On the other hand, if you seek active management,you ought to get a fund that is in the top 20% (don’t chase the topperforming fund, instead look for superior returns over a 10-yearperiod). I list those by Fidelity and ValueLine that have superior10-year returns later in the report. By investing with Fidelity orVanguard directly or choosing among Scottrade’s NTF no-load funds (likeValueLine), you will be on your way to investing wisely. To invest inthe market, you really want no less than a 4% risk premium (an averageof 8-9% per year annualized return), thus always pay attention toexpenses.

What is a fund family? A fundfamily is a company that provides mutual funds to the public. Fidelityand Vanguard are individual fund families that have a lot of choices.Others, like ValueLine, SSGA Funds, Pax Funds, and Wilshire Fundsspecialize in a couple of mutual funds and may perform better (orworse), as a result. Scottrade offers those smaller guys, also at nocost. What is a load? It is money you give to the adviser that doesn’tgo into your account. You also should choose ETFs.Fund Screener: http://www.forbes.com/funds/Tearsheet.jhtml?tkr=VLEOX
http://www.forbes.com/funds/Tearsheet.jhtml?tkr=FASIX
http://www.forbes.com/funds/Tearsheet.jhtml?tkr=FGBLX
http://www.forbes.com/funds/Tearsheet.jhtml?tkr=VALIX
http://www.forbes.com/funds/Tearsheet.jhtml?tkr=FIGRX

ETFs or exchanged-traded funds are among the best investment vehiclesout there. SPY, VTI, VO, and VBK all have only 0.1% for an expenseratio. You may want to put 50% in VTI (or SPY), 10% in VO, 10% in VBK,and 10% in VWO and 20% in IOO (or 15.0% in VGK, and 15.0% in VPL). Yourtotal commissions will be $35 to buy and $35 to sell and your averageannual expense ratio will be between 0.13% (assumes you buy 15% of VGKand 15% of VPL) and 0.18% (assumes you buy 10% of VWO and 20% of IOO)

A little about these funds: SPY mirrors the S&P 500 index, VTImirrors the Wilshire 5000 Total Stock Market Index, and DIA mirrors theDow Jones Industrial Average. VPL mirrors the Pacific Region and VGKmirrors the European market, while VWO is for emerging markets. Lastly,IOO is similar to the EAFE index. Thus, an ETF is basically an indexfund that you can invest in. VO mirrors a moderate to large companyindex and VBK mirrors a small to mid-sized company index. You willcertainly get average returns with these funds and there is nothingshameful about average.

In terms of actively managed funds, Ireally like FGBLX, VALIX, VLEOX, FIGRX, FDVLX, and FIVLX. I like VTMSXand VGTSX as passively-managed mutual funds. VALIX and VLEOX are withValueLine, FIGRX, FGBLX, FDVLX, and FIVLX are with Fidelity, and bothVTMSX and VGTSX are with Vanguard.  I’d invest 20% in FGBLX andVALIX and 10% in the six other funds.  If you don’t have the$3,000 for the Vanguard Fund,  put 20% in the VTMSX fund.Likewise, if you’re having trouble getting the $2,500 minimum forFidelity funds choose the FIGRX first, FDVLX second, and FIVLX third.

Listening to Bob Brinker at 4PM EST or 1PM PST will help you understandinvesting. Reading “Sane Investing in an Insane World,” by Jim Cramerand “Common Sense on Mutual Funds”by John Bogle is likely to be helpful. Also, reading "Women &Money" by Suze Orman, preferably by borrowing it from the library isalso a smart move.

Why should you invest independently?No one knows you better than you. There are three tools that afinancial advisor needs to know:1) What is your income and your networth? This is important to see if you are saving enough to meet yourlifestyle and whether you have an adequate emergency fund. 2) What isyour risk tolerance? You may be a person that, when the market drops,you get out! In other words, you panic like it’s the next GreatDepression. It may, it my not be. It may be long, it may be short. Youmay be a person that waits and sees (a good strategy). Read “CommonSense on Mutual Funds and/or a Random Walk down Wall St.,” if you wantto know why. Lastly, you might be like me, that when the market drops,you buy more. 3) What is your age? There is only one good reason to useage; at an older age, you don’t have the time to regain any losses thatyou may have. There’s a problem with that logic. You don’t know whenyou’re going to retire, you may have a very low-cost or high-costlifestyle, you may want to save money for your heirs and do estateplanning or die with only $1 to your name at age 100 (enjoying yourlife traveling the world in the meantime). Some people may havediabetes at age 55 that shortens their lifespan probably to age 75 orless, while others may be extremely healthy at age 80 and expect tolive to 100, maybe 105. In the later case, stocks may still beappropriate, while in the former case, the individual should be highlyconservative with their money as every dollar might be needed for theirtreatment. In the later case, you should only withdraw 4% of your moneyeach year. So, only you know how to invest your money. The other optionis to find a very trustworthy advisor that you feel comfortable withand that gives you low-expense ratio funds (<1.25%) with no loadsand charges no more than $800 per year or 1% for his advice.

Hope this helps. While, it was about 1 page with 10 font and ½ inchmargins, I feel I really explained things well and tried to stayfocused. My goal is for every investor to be informed so they can maketheir own investment choices.

I am new to the Dr.Phil web site and have enjoyed reading all the different ways to save money.Many things I already do but found a few new ones to do also.I love saving money especially since we have 3 kids and an income of about $1300 a month sometimes more if we get side jobs,but I don't count on that money.That is for wants or fixing up our mobil home that alwys needs repairing.Hey it's paid for though and I love not having a mortgage.I have a few ideas that I do that were not listed I love to share.I clip all coupons and trade with my friends and neighbors.Such as I don't need to buy diapers so I give my friend the diaper coupons and free samples in the mail I get.I have dogs and my friend does not so she gives me all the dog food coupons.I lso have an above ground pool for my kids and the shock for pools is expensive.I found that bleach has same ingredients and cost much less at dollar stores to buy.We also here in Georgia have droughts every year.I like plants so after giving my kids a bath I use a bucket dip out the bath water for my plants.Also I use banana peels for my roses Since doing this my roses have been healthier than ever.I even had one that looked dead I was going to replace come back to life better than ever.Any household waste such as Tea bags,coffe grounds,potato peels,egg shells all go into my flower beds.I also turn my hot water heater off when not using it I saved $30 off my light bill.I also found that the flourecent light bulbs last like six times longer than the cheap ones.I used to go through light bulbs like crazy now I hardly ever have to change a light bulb also saves on electric bill.The cost difference pays for itself.Anybody have anymore ideas not posted I love to read them.Also recycle When I am flat broke I cash in my cans and cords I cut off of old electronics as they break down or that I see on side of road and get $50 or more.

They sound great for saving money, and great for saving the enviornment as well.   One thing I recently learned is that if you leave electric appliances plugged in they still use some energy.   So I have started unplugging most everything that is not in use.   I used to always leave my microwave plugged in and now I unplug it, as well as other items such as the food processor and can opener.    I also reuse plastic grocery bags as trash bags (in fact I never have to buy any trash bags!).  I also don't use credit cards as if even you try to do everything right, they still often get you anyways and they encourage reckless/over spending.   When one uses cash they are much more aware of the value of the money and once the money is exchange the transaction is over.   

 

I love saving money too.  Money is not just a means to buying material goods.  Having money saved gives you the freedom of choice.  For example, the place I work has gotten really bad and having money saved has given me to the option to leave.   It has also given me the financial means to move across the country closer to my parents.     It also gives me peace of mind that if a number of crisis were to happen or expenses were to arise that I would be able to afford them without the use of credit which would ultimately cost me much more money (via interest) than what I would pay in cash from savings.