Nickeled and Dimed

If this is your first time visiting Centsability to Wealth you may want to see what we are about , read about me, or read our introductory post.

In yesterdays guest post, Nate talked about goal oriented savings.  He used his personal situation–moving to Egypt–as an example of identifying a goal (that will cost money), figuring out how much it will cost, and saving for it.  By taking these steps, Nate says, we can do the things we are passionate about (moving to Egypt in his case, perhaps buying a new TV in yours) without ruining our finances.

In a continuation of the goal oriented savings theme, I want to talk SmartyPig, a goal oriented savings account. SmaryPig is similar to any normal online savings account.  You deposit money from your regular bank account and have the option of making reoccurring automatic deposits in the future.  But it also offers many features to cator to those who are simply saving for one big goal.

After opening an account with SmartyPig, they will ask you what your goal is.  You will then tell them how much money you need to meet this goal and when you need the money by.  With this information, SmartyPig will figure out how much you need to deposit each month to reach your goal.  Pretty cool stuff, but not ground breaking by any means.  Here is what puts SmartyPig over the top for me:

It allows you to make your account “public” (this term is misleading, people will need to know your email address to access it and they will not be able to get any information about your account, so it is not truly public).  By making your account public, family and friends can use your email address to locate your account and can then donate money to it.  Mom and Dad get a little extra money on their tax returns?  Guide them over to your SmartyPig account and they can make a nice little contribution.  They also give you a widget to put on your Myspace and facebook pages that will allow anyone on your friends list to donate money to your goal.

Now if you are simply saving for a big screen TV, you probably won’t find many contributors.  But if you are saving for something life changing, like Nates move to Egypt, or my up coming wedding, you may find many willing contributors.  And even if it is just $10 here and there, every little bit helps.

And here is the kicker with SmartyPig; they are currently offering a fantastic 3.25 percent rate (ING Direct is currently offering just 1.85 percent!).

To sum up all their qualities, SmartyPig will allow you to identify a savings goal, tell you how much you need to save each month to reach, allow and encourage others to contribute to your cause and give you one of the best interest rates around.  What’s not to love?

Registering with SmartyPig is simple.  Just head over to www.smartypig.com, click the “register now” tab on the right side of the front page and follow the simple instructions from there.  All you will need is the bank account information from the bank you will be making deposits from and your goal information.

If you have a large savings goal you are looking to reach, give SmartyPig a try.  The interest rate alone will make it worth your while.

Please continue sending any personal finance related questions, suggestions and story tips to centsabilitytowealth@gmail.com.

Ben Steverman has an excellent article in BusinessWeek called 20 do’s and don’ts for 2009.  After interviewing several of the top financial advisers in the country, Steverman compiled this list of 20 things you should, or should not do with your personal finances in 2009:

1. Don’t try to predict the future.

We are in the midst of an unprecedented market, Steverman says.  Trying to predict the bottom of this market, or an individual stock especially, is a sure way to lose money.  Instead, continue making steady contributions to your investment accounts.

2. Do keep enough cash available.

Here Steverman advocates something Centsability to Wealth believes strongly in, an emergency fund.  “With extra cash available”, Steverman says, “you can avoid selling investments to pay for expenses in an emergency”.

3. Do invest internationally.

International markets have been hit even harder than ours.  And some, like China, still have very promising long-term outlooks.  Steverman argues that this is not the time to bail on your foreign investments, in fact, it may be the time to add more.

4. Don’t try to pick one winning investment. Diversify.

With prominent companies going under left and right, now is not the time to put all your money in one stock.  Stick with the time tested strategy of diversification.

5. Do think about energy efficiency.

Financial advisor Russell Francis recommends taking advantage of $500 energy tax credit that can be used to cover the costs of making your house more energy efficient, by adding more insulation, replacing doors and windows, etc.  The credit was rescinded in 2008, but is back for 2009.  Basically the government will pay you to save money on your energy bills.  Definitely something to look into.

6. Don’t stop contributing to 401(k) and other retirement accounts.

If you have at least ten years before retirement, this is a great time to be investing in your 401k.  The article has a great quote from advisor Sidney Blum, “more money is made at the bottom of a market than the top”.  Amen, Sidney.

7. Do live below your means. Save.

You can only invest if you have money left over each month.  Continue to look for ways to spend less and save more.

8. Don’t make sudden moves.

Decisions based on fear and emotion aren’t good for your finances.  Steverman recommends ignoring day-to-day news and focusing on your long-term investment plans instead.

9. Do pay off expensive debts.

Not many investments are offering the 7 to 20 percent return you can save in interest payments by paying off credit card or car loan debt.  Before you get serious about investing, plug the holes in your boat by paying off debt.

10. Don’t give up on stocks.

“Historically some of the best periods for stock market returns have been during dismal economic times,” says Paul Winter of Five Seasons Financial Planning in Salt Lake City.  Stocks are on sale, they aren’t toxic.  Take advantage of sales on stocks as you would a sale on anything else.

11. Do track your spending.

You can’t cut your spending if you don’t know what you are spending your money on.  Keep thorough records of your spending.

12. Don’t pay high management fees.

It doesn’t matter how high the return on your portfolio is if your fees are eating all the profits.  And in a down market like this, fees can really bite you.  Shop around for the lowest management fees available.

13. Do review your credit reports.

Your credit score may not have ever been as important as it is today.  With an excellent credit score you can borrow money practically for free right now.  Mortgage rates are at historic lows and cars are offering zero percent financing on virtually anything.  But with a less than great credit score you could be left on the outside looking in.  With lenders cutting down you may find it very difficult to get a mortgage at all right now, much less a good rate.  Watch your credit score and do what it takes to get it to the top level.

14. Don’t follow the herd.

Steverman uses my favorite quote from Warren Buffet here “Be fearful when others are greedy, and greedy when others are fearful”.  Don’t jump ship on your investments just because everyone else is.  Instead take advantage of people selling at such low prices and invest more.

15. Do write down an investing plan and budget, and stick to them.

Like we talked about with goals, Steverman highlights the importance of having a specific plan for your finances and sticking to it.

16. Don’t forgo necessary insurance.

Skimping your insurance coverages is not the proper place to save money.  Make sure you are properly protected against worst case scenarios.

17. Do check out your financial adviser.

With more money managers looking like crooks everyday, you would be wise to do a full investigation on anyone you have managing your money.  Ask proper questions and look them up on online databases.  Steverman says the Financial Industry Regulatory Authority’s BrokerCheck is a good place to start.

18. Don’t invest in anything you don’t understand.

Do your homework.  Don’t just invest in a hot stock tip.  Know what your money is going into.

19. Do make sure safe investments are actually safe.

Make sure your bank accounts are federally insured to cover the full amount of money you have in them.  If they aren’t, change accounts.  More bank failures are coming.  Make sure you are protected if your bank comes next.

20. Don’t take more risk than you can handle.

While this is a great time to invest, you should not try to make up all your losses with one move.  A classic mistake is “following one investing mistake by making an even bigger one.”, Steverman says.

Following these 20 dos and don’ts for 2009 will give you a good basis for your financial decisions.

How can you set good, attainable goals this year for your finances? Here are four tips from life coach Lisa Mininni on setting New Year’s Resolutions or goals:

1. Make your goals specific.

Do not make vague resolutions like, “I want to lose more weight,” or, “I will save more money.” Make the goal measureable, “I will lose 20 pounds by March,” or, “I will save 1,000 dollars by April.”

2. Create a plan of action steps with specific time targets.

Tell yourself how you will obtain your goals and by when. “I will lose 20 pounds by March by exercising three times per week,” or, “I will save 1,000 dollars by April by tracking and cutting out unnecessary expenses.”

3. Keep your plans realistic.

Make your goal and plan something you realistically follow through with. If you tell yourself you will lose 50 pounds by February by working out seven times per week and not eating past noon you will never follow through.

4. Adjust your plans when necessary but learn to incorporate activities because you are committed.

If your goal is to save 1,ooo dollars by April and you only have 500 saved come March, do not scrap the whole goal.  Instead, move the deadline back and keep using the steps that you have implemented, or if necessary, adjust the steps.

By following these tips you can help insure your financial goals for 2009 will be achieved.

New Year’s Resolutions have been around for over 4,000 years, ever since the Babylonians came up with the idea that whatever a person did on the first day of the year determined how the rest of their year would go.  The most common “resolution” back then was to return borrowed farm equipment.

Today, the first day of the new year is used for countless numbers of people to make (and usually break) promises to themselves involving things like losing weight, quiting smoking, working out, etc.  While I’m not a big fan of the typical New Year’s Resolution, I do think reflecting on past performances and setting specific goals for future performances is absolutely vital to your journey to financial success.

So what I’m going to do today is look back on my financial performance for 2008, list my financial goals and plans to achieve them for 2009, and list four tips for setting and keeping New Year’s goals or Resolutions.

Reflection of 2008

Unfortunately, I did not set a list of specific goals last New Year’s, so I do not have anything to judge my progress against.  Instead, I will simply list what I feel were good financial decisions I made this year and bad financial decisions I made this year.

The Good:

- Made a commitment to paying down debt, and paid off over half my credit card balance as a result.

- Increased my number of roommates from one to three, which cut my rent in half, despite moving to a more expensive area.  This gave me more money to put towards debt and savings.

- Graduated college and got my first “real” job.  This doubled my income and gave me more free time.

- Sold my motorcycle.  This eliminated 3,500 dollars of debt and my 80 dollar minimum monthly payment. 

- Opened and started making healthy contributions to a 401k.

- Started an emergency fund, which came in handy when I had over 1,000 dollars of unexpected expenses in December.

The Bad:

- Took a student loan out for my entire final semester of college when I could have easily worked extra hours and paid at least half of it with cash.

- Used credit cards at times for items I could not pay back in full the same month.

- Went out to eat too much, especially for lunch at work.

- Traded in my fully paid off car and took out a 13,000 dollar loan to get a new car (not actually new, it was used).  I have a little trouble putting this one here, because my old car wasn’t in great shape and I got a very good deal on my new one.  But if I’m being perfectly honest adding 13,000 dollars of debt and 250 dollars a month payments to my finances was not a necessary thing.

Goals for 2009 and Plans for Achieving Them

- Pay off remainder of credit card balance by February: Current amount owed is about 1,800 dollars

        - Plan for achieving this goal: Use extra paycheck in January to pay remaining balance.

- Pay off 5,000 dollar personal loan by April: Currently owe entire amount

        - Plan for achieving this goal: Pay back 600 dollars a month starting in February and use most of tax return

- Build a 3,000 dollar emergency fund by August: Currently have about 900 dollars in fund

        - Plan for achieving this goal: Starting in April begin contributing 400 dollars a month

- Save 2,000 dollars for 2010 wedding: Currently have nothing saved

        - Plan for achieving this goal: Begin contributing 100 dollars a month in April and 500 a month in August

- Earn enough passive income from this site to cover at least one of my fixed expenses every month by June

        - Plan for achieving this goal: Work to constantly improve content on this site and market it to the best of my abilities

Those are my financial goals for 2009.  I also have other smaller goals within those main ones, but those are the targets that will dictate my finances for the rest of this year.

How successful were you in following through with your 2008 goals?  What are your financial goals for 2009?