Tuesday, August 25, 2015

How to Keep On-Sale Items from Destroying Your Net Worth

It's happened to all of us.  We find ourselves at the store, innocently going about our own business.  And then a sign across the aisle pops out at us.  "BUY ONE GET ONE FREE!"  "FOR A LIMITED TIME ONLY!"  "ONCE IN A LIFETIME BARGAIN!"  We go check it out, decide it's a great deal, and purchase.

We come home with a shopper's high that slowly dissipates to nothing over the next few days.  It was a slip that happens every once in a while in consumerist societies.  But it's not going to derail us permanently.

That is, unless, it becomes habit.  If you find yourself constantly bragging about the latest deal you found, you may be extremely frugal.  Or you may be a perpetual victim of advertising.  The difference lies in the necessity of the item you purchased.  If the prices you're constantly talking about are for items you had planned on buying, you're probably frugal.  If they're for things you didn't know you needed until you had them, you may be destroying your net worth.

When something goes on sale, stores are trying to entice you to purchase, whether you need the item or not.  They try to impart a sense of urgency on you so you won't think about the purchase.  If this happens often enough, those small, regular purchases are going to add up.  The money you spend on them could be put into investments, but instead they're going towards stuff you really don't need.

If you find yourself in this situation, here's three ways to keep on-sale items from destroying your net worth:

1. Make a List

If you don't have a list, you're opening yourself up to become the prey of this type of advertising.  Go into the store knowing what you need.  If you find a bargain on something you were going to buy anyway, great!  But if something's not on your list, it shouldn't even be considered no matter how good of a deal it is.

2. Ask Yourself This Pivotal Question

"Was I going to buy it anyway?  No matter how great the sale is, you're still losing money if you weren't planning on buying the item in the first place.  $10.99 is more than $0, even if the original price was $25.  This is where your list comes in handy, as it makes answering this question a no-brainer.

3. Defer Spending and Watch Sales

There are almost no sales that are truly once-in-a-lifetime.  Most of them are actually seasonal.  If you know the sale seasons, and know that the sale price listed is actually a great deal on an item you will indeed use, by all means buy if you can afford it.  But if you don't know the sales season for the particular item, wait.  Don't tell yourself you're not going to buy it, which makes yourself feel deprived.  Rather, tell yourself you're going to watch price over a given period of time, and maybe go home and do a little research.  After figuring out the best time of year to buy that particular item, go out and purchase it intentionally at its lowest price of the year instead of making an impulse buy.

How do you keep from getting sucked into the advertising machine?

Tuesday, August 18, 2015

Slow and Steady: Dealing With Financial Set Backs

When we set big financial goals, whether they're to pay off a massive amount of debt, save for a large investment, or to become a millionaire, we have to be in it for the long haul.  Big goals aren't achieved quickly, and along the way, there will be some financial setbacks.

When those setbacks happen, it can be incredibly demoralizing.  Just when you're finally feeling good about how much you have stashed in your savings account, you have auto problems and have to take out $1,000 for repairs.  You're working hard and making good money, and then your company decides it has to lay some people off.  You're 50% of the way to your goal, and then you find out you need some massive dental work.

Whatever the setback is, meeting with it is a psychological nightmare.  You can get discouraged, with thoughts of quitting starting to enter your head.  "Why should I even try?  I'll never make it."  It's a dangerous thought process, because it is self-fulfilling. If you quit or give up, it is an absolute surety that you will never reach your goal.

In reality, everyone has to deal with setbacks.  We all have cars break down, disappointments in our career, unexpected medical expenses, and other situations that arise that seem to do nothing but affirm Murphy's Law.  While it's true that some have more resources and advantages from the starting line, that shouldn't deter you.  The biggest obstacle to overcome is that psychological one that tells you you cannot succeed.  You can.  You may just have to get creative, become adaptable, and above all else, not quit.

Loosen Your Timeline

It's a good thing to have concrete goals with a timeline to work with.  It keeps you accountable.  It keeps things measurable.  But it can also make things discouraging.  We tend to want things as quickly as possible in Western culture, so when we set our goals we have to be careful to make them realistic.  It's a good idea to predict those unpredictable expenses that are bound to come up, and account for them in our timeline.  If something  comes up that threatens to completely derail your goal, rather than quitting because you won't meet it in perfect time, sit down and reassess.  Make a new timeline that matches your current circumstances.

Get Creative

Is your savings or pay off  a couple hundred dollars short this month due to a setback?  Get creative.  You may be able to hustle a little harder this month to get to where you want to be, despite life's attempts to get in the way.  If you need some inspiration, check out these 70 ideas to make money.

Recognize That You're Not a Failure

Not reaching your goals based on a timeline that you set a year and a half ago based on an assumption that your life and situation would stay exactly the same does not make you a failure.  Life is unpredictable.  That makes setting accurate timelines tricky and potentially fallible.  For anyone.  You are not alone.  Recognize that despite making the best decisions, there are many things in this world that are not in our control.  Above all else, recognize that the "failure" to reach your goal was not in you.  It was in the human inability to accurately predict everything that will happen in the future. 

Don't quit.  Keep going.  Big goals are rarely met quickly, but slow perseverance can lead to ultimate success, even if you hit a few road blocks along the way.

Wednesday, August 12, 2015

The 5 Secrets of Successful First-time Home Buyers

The challenge most of us face when looking for a home can be so daunting that it’s tempting to either just get the first house that falls in our price range or simply continue to rent. If you’ve been scouting for a place to finally call YOUR OWN, then I’ll let you in to some handy tips to make your life easier as your search for that special place.

Secret #1: Keep Your Money Where It Is. If you’re buying a home within six months, then it’s not a wise decision to make huge splurges as this could affect your credit profile. Lenders will look at your assets and see if you’re reliable so that they can create a complete paper trail to get you the best loan possible. If you amass too much debt using credit cards, you’re going to have a hard time obtaining a loan.

Secret # 2: Bigger Doesn’t Equal Better. Most people are drawn to the biggest, most majestic properties on the block. But bigger is typically not better when it comes down to it. The old adage in real estate recommends not to buy the biggest, best house on the block. The property will only appeal to a small audience – something you don’t want when you re-sell. Your home’s value will go up only as much as the other houses in your vicinity.

Secret # 3: Use your Head, not your heart. Buying a house based solely on emotions will only break your heart. When you fall in love with something, you tend to make some pretty stupid financial decisions. Your instincts and emotions are different as well, going with your instincts mean you see the value you’re getting from a house that has a good price. Going with your emotions is just obsessing over the paint job or the backyard garden. It’s an investment, so be wise and keep calm.

Secret # 4: Check the house and neighbourhood. You’d never buy a car without checking under the hood, so why should you purchase a house just by looking at its exterior? You can hire a home inspector to get an unbiased third-party opinion about the house before you go spend your precious investment. Next, get the lay of the land – drop by morning, noon and night. Don’t be like other home buyers who thought they found the perfect home, only to find out later that the neighbourhood wasn’t the right fit for them.

Secret # 5: Never Try to Time the Market. Do not obsess yourself with trying to time the market and figuring out the best possible time to make a purchase. Frankly speaking, anticipating the housing market is next to impossible. The best time to buy is when you see your perfect house and that you can afford it. Real estate prices go up and down unceremoniously, waiting can cause you to miss out an opportunity. You may also get some assistance from professionals. The best idea is to get expert home loan solutions from NPBS, as services like them offers comprehensive solution for first time homeowners. More often than not, the best-kept secret is right in the hands of industry specialists.

Tuesday, August 11, 2015

The Absolute Worst Thing You Can Do For Your Finances

There is one thing that is worse for you finances than anything else.  It's worse than racking up debt.  It's worse than than having a 0% savings rate.  It's worse than eating out every meal.

It looks like not opening your mail when it arrives everyday.  It looks like dodging phone calls when you don't know the incoming number.  It looks like swiping your credit card, and reddening when it unexpectedly gets declined.

The absolute worst thing  you can do for your finances is to ignore them.

Let's say you're racking up debt, but you open  your monthly statements.  You're well aware of how much you owe, and when it's due.  This empowers you to not incur a late fee, and avoid as much interest as possible within your budget constraints.  Racking up debt is a bad, bad idea, but when you're aware of how bad it is, you are able to take the first steps towards fixing it.

When you don't open the mail, your self-imposed lack of awareness will cause you a nightmare down the line with incredible interest and a long list of late fees.

If you're avoiding calls from creditors, whether they be for credit cards or medical bills, you're missing a change to negotiate.  Even if you can't pay your debt, the creditor isn't going to forget about you just because you don't pick up the phone.  If they do, by some miracle, stop calling, that doesn't mean the debt isn't there.  It just means you have cut off contact as your credit score is likely suffering.  Pick up the phone.  Negotiate if at all possible on interest rates or balances.  If you can't, at least let them know how much you can reasonably pay in installments.  This can lower your monthly payment requirement, and while it won't erase interest, it will allow you to make more progress than if you pretend the debt doesn't exist.

If you're not keeping track of your credit card balances because you just don't want to face reality, you're going to have more problems than being embarrassed after checking out at the store.  Awareness is a powerful tool.  If you know how much you're spending on credit every month, you're more likely to make a budget to figure out how to spend more within your means.  You're more likely to figure out a way to pay off your balance.  You're more likely to identify the problem before it turns into a financial tragedy.  If you are not keeping track, you're almost guaranteed to spin out of control very, very quickly.

Be conscious of your finances.  Just because they are bad doesn't mean they're not salvageable.  The only way you can't save them is if you pretend they don't exist.

Tuesday, August 4, 2015

How Frugality Can Improve Your Net Worth

Lately I've been trying to get back to basics.  Back to my roots.  For a long while I've been focusing on the increasing income side of personal finance.  It's been great.  Our income has gone up, and we've been able to save a higher percentage of it.  But I've also found that as we focused so hard on work, we lost touch with the methods we used to use to live a frugal lifestyle when we made under $20k USD/year.  While this was a short period in our lives, we learned some valuable skills and life hacks to save us money.

In an attempt to slow life down, we've been getting back to those roots that allowed us to function on so little.  We had a massive container full of coins that I rolled.  We cashed them into the bank for several hundred dollars.  We started taking the time to seriously (though not obsessively) coupon again.  While we don't eat out a lot, we have been doing it more since our income has increased, so we've cut that back, too.  

We've reverted to a bunch of small changes that add up to a lower cost of living.  We realized that while we didn't think we had inflated our lifestyle, we had.  We attributed higher monthly costs to healthcare law changes in our country and the need to take out a loan for a car when ours died.  Those things certainly didn't help our monthly budget, but the truth of the matter is that despite the fact that our lifestyle was modest, it had become inflated compared to what it used to be.

How Frugality Can Improve Your Net Worth

Earning more undoubtedly allows you to contribute more to your net worth via savings and investing.  If you're working purely based on percentages, 50% of $100k is larger than 50% of $60k no matter which way you look at it.

But what happens when you add in frugality?  Let's say you increase your income from $60k to $100k, but instead of keeping your percentages static, you continue to live off of that 50% of $60k.  You continue to live off of $30k.  Now, with your increased income,  you're able to contribute $70k, or 70%, of your income towards your net worth and goals every year.  If you can find more ways to cut costs, you can get even crazier with higher percentages.

I've always known that a combination of a frugal lifestyle and increased income is the best way to approach finances.  But living it is a different matter.  Both require some level of work; if you want to coupon to save money, you might have to give up an hour or so of your time every week.  But something about making that concentrated effort to spend less makes every dollar that comes in mean a little bit more.  In the end, the work on both sides of the spectrum is worth it.  As with all things in life, balance between the two is often the healthiest approach.