2008 January | Online Savings Blog

Would You Rather Have Money or Prestige?
01.14.08 | Money | 0 Comments | by junger

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What's more important to you: money or prestige?

Michael Shermer, author of "The Mind of the Market: Compassionate Apes, Competitive Humans, and Lessons from Evolutionary Economics," has an interesting article in the LA Times about people and their money desires.

Would you rather earn $50,000 a year while other people make $25,000, or would you rather earn $100,000 a year while other people get $250,000? Assume for the moment that prices of goods and services will stay the same.

Surprisingly — stunningly, in fact — research shows that the majority of people select the first option; they would rather make twice as much as others even if that meant earning half as much as they could otherwise have. How irrational is that?

It doesn't make much sense. But emotion has a lot to do with money, and when it comes to investing — especially when it comes to investing — you shouldn't let emotion overtake you.

Even though I have money in the stock market, I don't follow it every day. How can you, with all of the ups and downs?

Getting too involved emotionally causes you to make irrational decisions. Irrational decisions cost you money.

Now, don't get me wrong — money isn't everything. There are a lot more important things in life, like health, friends and family.

But if you want to maximize your investments and daily money decisions, step away from your emotion. Even if it doesn't sound easy, try and make rational decisions.

Take a few minutes to ponder what would happen if you made that financial decision you're considering. I really want Rock Band for the PlayStation 3, but I know there's a lot better things my money could be doing.

If you find yourself about to make an important financial decision based on your emotion, stop. Consider how important it really is. Think beyond the immediate results and consider how it will affect you in the long-term.

If you let your financial decisions be made emotionally, chances are you'll be making the wrong ones.

You can make smart decisions, if you let yourself.
Wanting Rock Band, But Talking Myself Out of It
01.14.08 | Consumerism | 4 Comments | by junger

I want Rock Band.

I really want Rock Band.

But I just can't justify buying it.

I have this whole process mapped out in my head, but I can't take the first step — and I probably won't.

Now that it looks like Blu-ray will win the next-gen DVD format war, I figure it's a safe time to buy a PlayStation 3, which features a built-in BD drive.

Price? $399.

And if I get a PS3, I'll want to get Rock Band.

Price? $169.99.

That's nearly $600 for a new video game system, Blu-ray player, and the hottest game out there. There's no way I can justify spending that.

Just think of all the things I could do with $600 — put it towards a vacation, save for a house, add it to my Roth IRA, pay off some debt … you get the point.

As badly as I want Rock Band, I can't justify spending all the money it takes just to get it.
Traveling on the Company's Dollar
01.09.08 | Money, Work | 0 Comments | by junger

For the past few days, I've been out at the Consumer Electronics Show (CES) in Las Vegas, covering the country's biggest gadgetfest for CE Pro.

It's an exciting time, with lots of new product introductions and announcements, but it's also overwhelming — 140,000 people and not nearly as much time to see everything as you need.

CES is one of the four or so tradeshows I travel to every year for work, which brings with it some interesting money situations.

When I travel for work, I'm given a stipend of $55 per day for food. Now, $55 is a LOT more than I would normally spend a day for food, but when you have to eat out all of your meals, it adds up quickly.

At CES, I'm also expected to put my hotel room charges on my own credit card. For the five days I'm here, I'll rack up a bill of over $1,000.

Traveling also brings transportation bills (cabs, monorail, etc).

Of course, my company reimburses me for what I spend, but the money has to come from my pockets first. For that reason, I charge nearly everything to my credit card. I don't want the money coming out of my pocket any sooner than it has to!

Normally, it doesn't take too long for accounting to send out the checks for what I've paid. But when you're racking up a bill over $1,000, I want to make sure I have the money to pay it first.

Although I only have one credit card, it would make sense to use a card with cashback or airline miles. You get the points, but don't have to pay the bill.
10 Smart Money Moves We Made in 2007
01.04.08 | Money | 4 Comments | by junger
2007 was a great year for us financially. No, we didn't win the lottery or get any other kind of windfall, but we made a bunch of smart money moves that will pay off well in the long run.

Here are 10 smart money moves we made in 2007, in no particular order.
- We Moved Cities
  It wasn't a cheap move, but by moving to a more affordable area, we're much more prepared to purchase real estate. Moving is not a small change — but it can have big effects on your financial situation.
- We Started a Housing Fund
  In order to meet our home-savings goal, we opened a new online savings account earmarked for housing money. Every month, HSBC automatically pulls money from our checking account and deposits it — paying ourselves first.
- We Started Using Index Funds
  Rather than trying to beat the market (an unsuccessful long-run plan), we transferred our Roth IRAs from Ameriprise to Vanguard, investing in low-cost index funds.
- Increased Monthly Roth IRA Contributions
  In addition to our move to Vanguard for our Roth IRAs, we increased our automatic monthly contributions. Last year, we used a chunk of money from our tax returns to max out our Roth IRAs — this year, we'll be closed to maxing them out without additional funds.
- Got a Promotion
  Earlier this year, I got a promotion at work, leading to more responsibility, more work and, yes, more money. While my paycheck is a bit fatter, our lifestyle isn't. We're spending nearly the same amount of money as we were before the promotion — pocketing the difference for savings.
- Bumped Up 401(k) Contribution to 10%
  At the same time I got a promotion, I upped my 401(k) contributions to 10% of my salary. Because I did it at the same time my pay went up, I never "knew" the difference and questioned its worth.
- Opened an FSA
  As I've said, the smartest $400 I ever spent was on my FSA. With a flexible spending account, the money comes out pre-tax, and with a debit card, purchases are seamless. Since it's not coming from my normal accounts, it's like buying things for free!
- Joined Yodlee to Track Finances
  If you don't know where your money is going, you don't know how to save. Even though we use a written budget, we joined Yodlee for more automatic budgeting and to track all of our accounts and net worth.
- Downgraded Cell Phone Plan
  I wasn't using all of my cell phone features, so why should I pay for them? Earlier this year, I downgraded my cell phone plan, saving money every month on features I don't use. (Even though Spring screwed up my plan change.)
- Automated Our Finances
  Even though we think about our finances daily, we don't worry about when bills are due or if we can pay for them. Nearly all of our bills are paid automatically, our savings are transferred without a key stroke, and our salaries are deposited directly.
Well, you've heard our smart money decisions for last year. Now, we want to hear yours.

What were the smartest money moves you made in 2007?
Where Did My Money Go?
01.03.08 | Money | 2 Comments | by junger

You know you have to save money. You'd like to start investing. You'd like to go on a vacation.

But you don't have the money for it. Each of these scenarios leads you to the question: where did my money go?

This is the fundamental question to beginning your financial responsibility. The first step in simple money management is to spend less than you earn.

Chances are you know how much money you make. But do you know exactly how much money you spend, and where it goes?

Being as detailed as possible in tracking your spending is a huge first step to proper money management.

Here's how I do it.

I keep receipts for nearly every transaction I make, both cash, debit and credit card purchases. When I get home, I put them on my desk to add to my budget notebook, which tracks all my spending.

The most important receipts to ensure that you get are for purchases with tips and gas purchases. You'll find out why in a minute.

I also log onto my checking account online all the time, to double check that my transactions are correct and to find out when my monthly bills have been automatically deducted.

Online banking also helps when I forget to get a receipt or lose it somewhere in the process.

As I said before, certain receipts are more important to keep: gas and purchases with tips. This is because, when you buy things with a debit card, the correct transaction amount does not appear until the payment has cleared.

When you go out to a restaurant and pay (with tip) on your debit card, you'll notice that the pending transaction only deducts the amount for the meal: not the tip. So you can't rely on this number instead of a receipt — at least not if you add the purchase to your budget that day.

On the gas side, funds do not get deducted from debit cards (even those acting as credit cards) automatically. The process normally takes a few days.

So, I always keep my gas receipts to add to my budget that day, so I don't wait for it to appear online and forget about adding it.

In addition to keeping a budget with my monthly spending, I track my expenses online via Yodlee. The number isn't as precise as my hand-written budget, but once you've categorized a few of your transactions, Yodlee does the rest.

Want to start saving more money? Find out where your money is going first.

» Next Entries

Would You Rather Have Money or Prestige?

Wanting Rock Band, But Talking Myself Out of It

Traveling on the Company's Dollar

10 Smart Money Moves We Made in 2007

Where Did My Money Go?

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