Pimp Your Finances

After taking a week off from the Carnivals, I’m back in full force.

The Writer’s Coin hosted the Comics and Cents Carnival. It’s a festival combining finances and humor. My post on The Top 43 Songs About Money was included as an editor’s pick!

Pecuniarities is hosting the Carnival of Pecuniary Delights – Madoline Hatter Pecuiniary Arts Edition. It’s a new festival that puts an emphasis on quality writing. They included my article on 20 Questions with J.D. Roth, Author of Get Rich Slowly. If you haven’t read it yet, check it out. J.D. has some great thoughts on starting a business/website, personal finance, and goals.

Ask Mr. Credit Card hosted the Money Hacks Carnival – April Fool’s Day Edition. It’s a fun theme. It includes the story of the most famous April Day’s tricks throughout history. He included my post that asks, Are Savers Dooming the Economy? No!!!

Make sure to check the carnivals out! Two of them are new, and the other is always full of good links.

I’ll be back in even more carnivals next week. I fell behind in my carnival submissions, but I’m making it more of a priority again.

The winter of despair is finally ending, and it seems like a spring of hope and optimism could be on the way. Even if it’s not, now is a great time to make sure our finances are in order.

Here are a few things I’m going to be working on over the next few weeks to make sure that I’m ready for whatever lays ahead.

Take another look at my goals and priorities

I recently decided that I’m trying to take on too much at once. I’m trying to build an emergency fund, a vacation fund, pay off all my debt by the end of the year, and I’m about to start a 401K. All at the same time

To tell the truth, I don’t think it’s sustainable. I have two options – I can either drop some of my goals (not going to happen), or I could change some of my schedule.

I’m not paying any interest on my credit card debt, so I could extend my timeline. Instead of paying it all off by the end of the year, I could just pay it before any interest is due. It would help me meet my other goals, at no extra cost to myself.

Start a Roth IRA

This is my biggest financial mistake I’m making right now. I need to start one ASAP. I’m missing out on the power of compound interest and tax free growth, not to mention a down stock market.

Re-tool my monthly budget

My budget is a work in progress. I’m constantly tweaking it and adding things. If I’m going to be changing my goals and adding in another big expense – Roth contributions – I need to make sure I have a budget that can handle everything, and is still flexible enough to allow for things like vacations and home improvement.

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I’m always looking for financial insight from new places, and I think I found a good one: I Can Haz Cheeseburger, the original home of LOL cats on the net.

If you somehow don’t know what an LOL cat is, here’s how you make one.

First, you take a cute picture of a cat. Then you add a funny caption that is hilariously misspelled.

I spent a long time looking through old LOL cat submissions, and put together 23 lessons that can teach us about money, the economy, and personal finance.

Why 23? I like prime numbers. Enjoy!

1. Don’t let the news get you down

2. Your lifestyle needs to be sustainable

3. Everybody is feeling the pinch of the economy…

4. …but it’s important to remember how good we have it

5. Look for additional sources of income

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If you’re young, the downtrodden economy isn’t a bad thing, despite what the media would have you believe.

I’m not the only one who agrees. Liz Pullam Weston just wrote a great article about how if you’re under 35, you should be happy about the meltdown:

If you’re young… the biggest threat to your future isn’t the current crisis. Your greatest risk is that fear will cause you to miss some once-in-a-lifetime opportunities.

And she’s right. The job market sucks right now, but other than that, there’s not much of a downside to this economy for us young folk.

Chances are that we’ve lost much less than others, because we have less invested in stocks. Even though the market is down, I’m breaking even after the employer match on my 401K.

What else should we be happy about and taking advantage of? Let’s see what Liz thinks.

Stocks are on sale

Past performance is not an indicator of future performance, but if it gives us any clues, the market will eventually recover. It may take some time, but we can afford to wait.

We’ve a long time away from retirement – probably at least 30 years. Over the history of the S&P 500, it has never lost money over any 30 year period. Even if you started investing in 1928, you still would’ve made 8.47% if you stayed in the game for 30 years.

Although there’s no guarentee that it will come back, the S&P 500 has fallen more than 50% off from its peak. I feel like I’m getting a discount. I’m buying the same stocks (through low-expense index funds of course) that I was a year ago, only now they’re 25-50% cheaper. I think that’s a great deal.

I know that the market may never recover. But I don’t buy it. If the US and global economy really do collapse, what could we really do about it, other than stock up on gold and guns and settle disputes in the thunderdome? We’ve got to put our money somewhere.

Forget toxic debt. Where’s the bailout for post-apocalyptic families?

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It’s that time of the month again. No, not that time of the month. I’m talking about my update on getting out of debt!

February was a great month for me. I used my tax returns to pay down 23% of my debt. However, I didn’t make nearly as much progress in March.

I paid off another 2.8%, which isn’t that good, but I’m still on track to achieving my goal of getting out of debt this year.

The red and green squares are visual reminders of my progress. Each time I pay down another 4%, I change the color of one square from red to green.

I didn’t get to change any squares this month, but I did make some progress, even if it wasn’t that much. Why didn’t I make more progress? Two reasons.

First, I took two weekend trips. It was worth it. I love travelling, and had a great time with friends and loved ones. I didn’t use credit on either trip, but my spending did eat into my debt payments.

The second reason I didn’t make as much progress is that I’ve been saving all all of my extra money for a landscaping project. Our irrigation is out of control. Our back yard is a muddy mess, and water is flowing towards the house in a few spots.

I need to hire someone to do this, as I’ve tried several times and failed. I’m not going to put my house and foundation at risk, nor do I want to deal with a tore-up yard and muddy dogs.

It’ll cost a pretty penny to get it fixed, but luckily I saw this coming last month. I’ve set aside a good amount, even on top of my other commitments (like my emergency fund, vacation fund, and paying down debt).

My March progress was disappointing, but I’m still on track to accomplish my goal of being debt free by December 31st. Even after a slow month, I’m a little ahead of schedule.  By this point, I should be 33.33% of the way there.

However, most of my progress came from my tax returns, which only happen once a year. I need to pay down $867 a month if I’m going to do this. Right now, I’m only setting aside $700, which is good, but will still leave me short in the end.

So what’s my next step? First, I’m not going to get discouraged. I’m going to keep plugging away. And second – I’m going to rework my monthly budget to make sure this goal actually happens.

It happens with every swing of the economy: someone proclaims “the rules have changed!”  But have they ever really changed? Is this time any different?

Jeffery Kosnett at Kiplinger thinks so. He wrote an article called 10 Financial Myths Busted, where he describes 10 financial rules that were disproved by the recent crash.

I’m going to give you his list, along with my explanations and thoughts about whether anything has changed or not.

WUT IM BOUT 2 DO 2 TEH ECONOMY CUD BE DANGEROUS.DOAN TRY DIS AT HOME!

Myth 1: There’s always a hot market somewhere

In the past, it was thought that investments in places like Asia and Russia could prosper even if the US market was in the tank. There’s no way that everyone and everything can crash at once, right?

This time around, the whole world is doing just as bad as we are. Rather than disproving anything, I think the downturn just shows the importance of diversification, even if portfolios are generally down across the board.

Myth 2: Real estate behaves differently from other investments

When real estate kept climbing even thought the dot-com bust, many people thought that real estate acted independently of other financial investments, and could only keep growing. Boy, were they ever wrong.

Real estate and mortgages turned out to be the spark that bled, and took down the entire economy with it. It was a classic investment bubble, and showed that real estate plays by the same rules as anyone else (and may not even be as good of an investment as stocks).

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How is everyone doing this week? I’ve been busy at work, but I’m grateful for the chance to be employed and have a lot to do! I hope that everyone is as lucky as I am. Onto the links!

Divorced Dad Frugal Dad is a man of my own mold. Grilling out is my favorite thing in the world to do, and he made an awesome surf and turf meal at home for only $26! Not only do you save a lot by cooking at home, but it can be incredibly satisfying to make a quality meal for yourself.

Always the Planner has some intriguing thoughts about what it means to be Frugal vs. Cheap, and how it can be dangerous to take it too far. She also has a good sense of humor, as she didn’t get mad when I called her a “he” in the carnival earlier this week. Just goes to show that you shouldn’t make assumptions.

Your Money Relationship did some interesting homework on the average net worth of Americans. If you’re under 25, it’s $1475. If you’re between 25-34, it’s $8525. If you’re me, it’s probably negative right now, but is on the way back up.

The Digerati Life has a thoughtful post on financial gurus.  I’ve taken some cheap shots at Jim Cramer recently, so it’s only fair that I be fair and point out that financial experts are human too.

And last, but certainly not least, No Credit Needed has a list of Reasons We Fail To Stick to Our Budget. It’s a great article, full of some common budget miscues, as well as a list of hints and tips from readers via twitter. A helpful post, and a creative use of technology.

And for the fun link, I’m linked to an article on Cracked.com. (warning – some of their stuff may not look so great if people see you browsing it at work…it’s still safe for work, but some of their ads and such are risque).

They have a funny list of 6 Reasons the Economy is More Depressing than You Thought. They intentionally take things over the top, but it’s nice to laugh at things for a change.

That’s it for this week. I’ll end it by asking a question of you that I’ve been asking myself a lot recently.

What are you doing to achieve your goals?

- this blog post

I read a thought-provoking article at CNN Money earlier today. It’s about a married couple – both 27 years old – who are aiming to be millionaires and retire by the time they’re 40. An admirable goal, to be sure.

But the weird thing is – they’re on track to do it.  How? They’re not using any secret formula or investing scheme. They’re just extremely frugal, and are passionate savers.

Their story

John Rodrigues is a manager at Microsoft. His wife, Gina, previously worked at Wells Fargo and Country Wide, but recently went into business for herself as the owner of a boutique. Together, they make an impressive $174,000 a year.

In the beginning…

They met as teenagers, when Gina was working in a computer store that John frequented. Their relationship started to get serious when they were in college.

John’s grandfather paid for his first year of school, but after that, he was on his own. This seems to have been a defining moment in John’s life.

Instead of racking up tens of thousands in student loans, he decided to get a job and practice frugality. As a result, he got his degree without going into debt.

Gina on the other hand, racked up $5000 in credit card debt before she came clean to John. They paid it off with the commission she made from selling her first house.

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