The Money Maiden

Goodbye For Now

2010-04-22T08:08:00.004-06:00

The Money Maiden has been struggling to keep up with all of the demands on her time. Therefore this blog will go (fully) inactive for some time. The posts have been few and far between but the item on the task list has been great for guilt-induction. Therefore it's been removed from the task list and The Money Maiden will focus on balancing life in addition to the checkbook.

The blog will remain up for the day when life's demands lessen some (maybe retirement!?).

Thanks for reading and goodbye for now!

Savings and Debt

2010-03-02T13:39:00.006-07:00

How do you actually save for a special item or get out of debt? Of course you’re already putting regular money into savings. This is referring to that trip or expensive new item you need.

Step 1: Determine how much money you need.
If you’re working on getting out of debt, don’t forget to factor in interest payments.

Step 2: Determine how long you have to save, or how soon you’d like to be out of debt.

Step 3: Divide the total needed by the number of months to figure out how much money you need to set aside each month or pay to your creditors.

This also works for Christmas. Yes it just recently ended, but now is the best time to think about how much money you’ll need next December and start setting aside a monthly allowance.

Here's a link to a wonderful story about a family that paid down over $90,000 in debt in a very short time. You might find it inspirational!

You Still Have To Save

2010-03-02T13:34:00.004-07:00

I wear corrective vision lenses. My vision started to decline when I was in college, so I got glasses. At first I only had to wear them when I was sitting in the back of a lecture hall or driving at night so it wasn’t that inconvenient. Over a very short period of time, my vision deteriorated to the point where I needed to wear the glasses all the time. I was finally convinced that I needed to move to contacts when I realized how problematic the glasses could be. I know lots of people wear glasses with no problems, but I wasn’t one of those people.

I tried out ROTC one semester in college. I decided not to enlist when I was offered a full-ride scholarship for the rest of college. I know, it doesn’t sound like it makes much financial sense, but I wouldn’t have been able to be in the reserves if I accepted that scholarship, I would have had to have gone active duty once I graduated, and I just didn’t want to do that. But for that semester, I had PT (physical training) every weekday morning at 5 AM. It was really cold most mornings, so we’d come in from running and my glasses would fog up. So I’d take them off while we were doing the floor exercises like sit-ups and push-ups. One morning I had to miss my classes for the rest of the day because my glasses got stepped on while they were lying next to me. That did it for me, well that and vanity. I ordered contacts that night when I got my glasses repaired.

I’ve never really been comfortable with contacts either though. I get dull headaches on a pretty regular basis. Of course it doesn’t help that I wear them from about 5 in the morning until almost 10 at night. So I decided that I wanted to look into corrective vision surgery. I am slightly nervous about it, after all there are risks associated with any surgery, and other than inconvenience, there aren’t any real risks with glasses or contacts. But my eye doctor was one of the first to start doing the surgeries in the area and so has tons of experience and a really good track record. The next obstacle was of course the money. It’s a fairly expensive procedure, but other than having to pay for it all at once, it’s actually cheaper long-term than purchasing contacts over my life-time.

After deciding that I wanted to pursue this option, I made an appointment to find out if I was a good candidate for the surgery and exactly how much it costs. I am fortunately a good candidate for the surgery, and after saving money for nearly two years I now have enough money to pay for the surgery.

I’ve had several people at work say to me, “Just use your flex account.” They are referring to the IRS-approved flexible spending account program that allows us to set aside tax-free money to spend on eligible medical expenses. This is a great option to save a little money, and I will be using it. However, because I live on a budget and my checks will be smaller after the money is withheld for the account, I still had to save for it.

I’ve written about saving up and delayed gratification before here. Even if you can find an alternate financing method, whether it’s a flexible spending account or a line of credit, it’s still a good idea to save first for anything that isn’t an emergency need. This coming fall I’ll be getting the surgery done and will know that it’s paid in full when it happens.

Money Management and De-Stressing

2010-02-20T17:55:00.005-07:00

I don't post on this blog as often as I'd like to. I get caught up with parenting, work, household chores, and sometimes with feeling like I haven't got anything new to say. I am going to keep the blog up and continue to post as I'm able though. I'm good at budgeting; and the couple of times I had to take on debt, I was good at getting quickly back out of debt.

So I'll keep writing because my stress level is much lower than other's because of the way I manage my finances. If I can help just one other person to get control of their financial situation and decrease their stress, it will be worth the effort.

Financial Education in School

2010-02-10T07:03:00.002-07:00

Time Magazine recently published an article titled How to Teach Kids About Money. The article stated that kids aren’t receiving enough information about money management and even more startling, that financial education programs don’t always work. I think it’s wonderful that schools are trying to teach children about how to properly use money, it’s an invaluable life skill and is as important as learning to work with people who are different than you are. But no one should be surprised that financial education in school isn’t enough. Children don’t perform as well in any of their subjects if they are lacking support at home for whatever reason. Parents cannot abdicate their responsibility to educate their own children in any area of academics, including financial literacy.

Of course there are many parents out there who didn’t understand how to manage their own money as evidenced by the amount of mortgages that people couldn’t afford long-term. To be fair, some people purchased responsible mortgages then lost their source of income; but there were also those who purchased ARMs or other risky mortgages and found themselves in over their heads.

There are scores of people today who are learning how to manage their money because they have no other choice. This is a golden opportunity to teach our children by allowing them to understand how and why we’re making the decisions we are about our money. If they hear us talking about saving for a big purchase rather than buying on credit, or making value decisions about what we need and what we want, they’ll learn to make responsible decisions with their money. Of course the kids will make their own money mistakes and mistakes can often be the best teacher, but giving them a solid foundation could help those mistakes to be less catastrophic.

Spending Money We Don't Have

2009-10-08T09:38:00.003-06:00

I’ve been a bit reticent in my posting lately because sometimes life just gets in the way! However, I recently ran across a story on NPR that I just had to chime in about though. Consumer Spending Up, Incomes Lag talks about the increase in spending that resulted from programs such as Cash for Clunkers while income growth continued to be just about flat.

As a proponent of good debt only, this story scares me a bit. If we’re not making more money, we shouldn’t be spending more money. The statistic offered about the falling savings rate was also a bit disconcerting, but did have some good news when compared to savings rates last year.

“The big jump in spending and much weaker gain in incomes translated into a big drop in the savings rate. Personal savings in August fell to 3 percent of after-tax incomes, down from 4 percent in July. That was still nearly double the savings rate of a year ago. Economists say the savings rate will keep trending higher as households try to repair investment savings shredded by the recession.”

We all want the economy to recover, especially so people can get back to work. But a recovery based on additional debt won’t be a long-term permanent recovery, it would just put us back on the precarious house of cards that our economy was built on before the recession occurred. So the Money Maiden’s advice is to keep putting that money into savings so that we can all benefit from a stable economic recovery.

How The Recession Can Help Us

2009-09-13T15:57:00.005-06:00

Back when I first started this blog and before the recession had really taken hold, I posted a link to a very good article by Liz Pulliam Weston. She talked about the impact it would have if we all started to increase our savings and use our money more wisely. She predicted that the short-term impact would be a global economic recession since our economy was so dependent upon consumers. But she thought it would be good in the long-run because of the positive impacts to both individuals and the broader economy.

I remember at the time thinking that managing our money and living within our means was still the right thing to do, but that it might be hard to convince people to do this because of the pain of going through a recession. Well folks, the recession happened, whether or not we wanted it to. So if we have to go through this, it’s encouraging to me to hear that savings rates are going back up (although no where near the high of 14.6% we saw in 1975). More people are starting to live within their means now. So maybe we’ll get the long-term benefits the article listed even though this wasn’t an entirely voluntary decision.

When to Start Allowance

2009-08-17T08:27:00.007-06:00

I received a question from a reader in a comment that seemed worthy of its own blog post.

What a great blog Darcy! My son is just getting an interest in money and saving. When did you start a weekly allowance w/ the kids and how much do the kids earn? We are trying to figure out when and how much to start our son out at, and what parameters to tie it to....there are only so many chores a 4 year old can do! :)

Obviously you have to do what works in your family, but here's what we do with our kids: We started the allowance when our kids turned 4 years old, and they get $1 per week for each year old they are. So my 8-year old gets $8 per week. We don't explicitly tie the allowance to chores, although they do have chores and we add more each year. So I guess it's more like a salary for them, they get it as long as there aren't serious deficits in getting their chores done.

I don't like to tie allowance directly to chores because I don't want to send the message that the kids will get paid for doing things that are a part of their job in the family (and no one pays me when I do the dinner dishes or the laundry!) But we have docked their allowance in the past if the kids didn't do their chores in a particular week.

Our kids are expected to keep their rooms picked up, including making the bed every day. They have to get their clothes into the hamper and their dinner dishes into the sink every evening. The 8-year old also has to sweep under the table after dinner and clean the toilets once per week.

I think 4 years old is a great time to start allowance for the exact reason listed above, they start to get interested. In my humble opinion, one of the best things we can teach our kids about money is that you have to earn and save money before you can buy the things that you want.

Good luck implementing the allowance, let me know how it goes!

"Going American"

2009-07-18T15:47:00.005-06:00

My family recently hosted a wonderful young man from France through a foreign exchange program. Although we don't speak any French so we occasionally had to try more than once to understand each other, we made it work; and the cultural exchange of information along with a new friendship were well worth the effort.

One day he and my husband were discussing debt and he told my husband that in France the only debt people take on is for big items like cars and houses. (Sounds awfully familiar.) He said that it would never cross his mind to take out a loan for something small like a TV. He actually said that if someone ever talks about taking out a loan for a small item they call it "Going American." I don't know that it's such a great thing to have our country associated with frivolous debt. I can only hope that over time if more and more people are smart about debt that phrase will lose it's meaning and go out of vogue.

Where We Do Need To Spend Money

2009-07-18T15:31:00.004-06:00

I realize that I'm a bit behind the times, but I recently watched An Inconvenient Truth and was pleasantly surprised by the movie. Although the information about global warming was depressing; Al Gore did a good job of leaving you with hope that if we make some changes we can reverse the effects of global warming. I live in Colorado and every time we go into the mountains we see the effects of global warming first hand. The pine trees are all turning brown and dying because our winters no longer get cold enough to kill off the larvae. This is a problem that all of North America is experiencing according to a recent article by the BBC.

As much as I preach money management, there are things that we must spend money on. I firmly believe that spending money on alternative energy, more fuel-efficient cars, recycling, and other items that will help stop and perhaps reverse global warming is very necessary. We don't all have the money to make the changes immediately, but if we start making small changes now, eventually they'll all add up. This is just another reason why it's important to manage our money; so that we have money to spend on the important things.

Responsible Spending Habits Slow Economic Recovery

2009-07-09T16:10:00.006-06:00

Sarah Lockyer recently penned an article in Nations Restaurant News about decreased spending by consumers due to fears of unemployment. The article is based on research by Technomic Inc. which indicates that an economic turnaround will take longer because consumer spending is slower. From the article:

"The current broad unemployment rate, which includes not only those who have lost their jobs, but also workers who are underemployed or discouraged, has reached 15.8 percent and is rising, according to a July Technomic report from the firm’s consulting economist, Arjun Chakravarti. The prolonged climb of unemployment in the United States has not only affected the spending habits of those without jobs, but also has changed the spending habits of those who remain employed “by spreading psychological uncertainty across all workers in the economy,” Chakravarti said".

Although it would be nice if the economy would recover quicker, it will come back stronger and more stable if everyone increases their savings rate. I know that economists would be happy with a quick turnaround, but I for one am pleased to hear that people are developing more responsible spending habits.

Debt Load

2009-06-23T08:54:00.004-06:00

There was an interesting article in this week's edition of Time Magazine about what our economic recovery will look like. One of the sections in particular caught my attention.

[Frugality] is an extremely fashionable topic at the moment. Some cultural observers even think Americans are due for a prolonged shift away from the consumption obsession of the post-World War II era. That strikes me as an iffy bet, but it is clear that the debt-fueled consumer spending binge of the past couple of decades is over. The household debt-to-income percentage more than doubled, from 65%in 1982 to 135% in 2007. That turned out to be way too much for us to handle, and now the leveraging process has gone into reverse. The latest household debt-load reading from the Federal Reserve is 128%, and while nobody knows exactly where the percentage will end up, a lot lower seems like a safe prediction. Which means that for years to come, American households will be spending less than they take in.

Huh, over 100% debt-to-income was too much to handle, does this seriously surprise anyone? I’m definitely not the first person to ever say “live within your means.” How do you prepare for retirement if you’re not only not saving, but spending more money than you’re making? I hope that the cultural observers are right in that we all move away from all that consumption and start trying to build on our wealth by saving some of the money that we earn, and that we’re all in it for the long-term.

Money Isn't The Only Thing You Have To Budget

2009-06-22T20:22:00.007-06:00

It's imperative to budget your money if you want to properly manage it, and it's equally important to budget your time if you want to have enough. Most of us have very busy schedules. If you work full-time, have a house to maintain, kids to raise and spend time with, a significant other who you'd like to be more than just a roommate, and exercise to remain healthy to do all of that; it can be hard to fit everything in.

My husband and I got a rare date night tonight, and while we were walking together, we talked about things we'd like to do with our time (like post on this blog on a more regular basis), and how hard it is to find the time for everything. But then we starting talking about how if we actually sat down and looked at how we were spending our time every day, we might be surprised at how we could fit in a few more of the important things. I started thinking about how our time is much like our money, most of us don't have enough for everything we need or want, and we have to decide when and how we're going to use it, and prioritize and make sacrifices when necessary. Wouldn't it be great if we all won the lottery and had clocks that could stop time? Since that's not reality, I guess the Money Maiden will have to be as diligent with her time as she is with her money.

Another Benefit of Delayed Gratification

2009-06-14T15:12:00.005-06:00

Practicing delayed gratification is one of the most important tools to assist you with successful money management. By saving up in advance so that you have the money for the things you need before you purchase them, you keep yourself out of bad (unnecessary and providing no long-term gain) debt. The other thing that delayed gratification does for you is to allow you time to cool off. I’ve found that there are times that I’ve decided I really want something, but by the time I’ve saved up for it I realize that I’ve gotten along this far without it and don’t really need it.

So now not only did I avoid going into debt, but I’ve also managed to increase my savings rate. Two for the price of one, always good in money management!

Money Mistakes from Women's Health Magazine

2009-05-26T18:53:00.006-06:00

The June issue of Women's Health magazine offered a good article about 4 mistakes you shouldn't make with your money. Here is author Katie Arnold's list of mistakes to avoid:
1. Being financially apathetic. I've posted about this one before here. You have to know how much money you have and where it's going in order to "manage" it.
2. Waiting to save. We've all seen the charts. If you start saving when you first start working, you'll build up a much bigger nest egg than if you wait 10 years.
3. Paying off debts in the wrong order. Get rid of the credit cards debt first, then you can worry about the bigger items that I like to term "good debt."
4. Failing to negotiate. This is one that isn't a strength of mine. It's a hassle and I'm a busy woman; but it's good to keep in mind that I might be leaving money on the table.

I looked on the website but couldn't find this article there, so if you have the opportunity take a look at the magazine. It's a good article with some good, common-sense recommendations.

More Discussions About Money With the Kids

2009-05-17T15:28:00.004-06:00

My eight-year old daughter decided she wanted a new MP3 player that was more sophisticated than the Disney version she'd gotten a few years ago that basically just has a play button. At first she had her mind set on an Ipod touch. We told her she had almost enough money and would just need to save for a little while longer.

We talk to our kids about how much money they have in their savings accounts, so her response to save for a few more weeks was, "I don't need to, I'll just take the money out of my savings account." When I explained to her that she couldn't use her savings account that way, she was pretty disgruntled. It was her money and she wanted it.

It's a bit abstract to explain to a child who's still 10 years away from it, that she can't use her money now because she'll need it for college. But we did have the discussion and she eventually resigned herself to the fact that she'd have to wait until she had saved up a bit more allowance. Although after further digging, we realized that a much less expensive MP3 player would meet her needs and she was able to purchase the player right away. So although the savings account discussion turned out to be unneccesary, I'm still glad we had it. I'm sure it will be first of many times and I imagine it'll become harder to convince her to leave that money alone as she gets older!

Another Learning Opportunity While Shopping

2009-05-12T19:45:00.004-06:00

This weekend my kids and I visited our local craft super store to get the final item for my mother's day presents. My son was enamored with EVERYTHING in the store. He kept asking if we could buy everything that he saw. I told him that we couldn't get those things because they weren't on our shopping list. He asked why we couldn't purchase something if it wasn't on the list. So I explained to him that if you buy things that aren't on your list, you'll wind up spending money that you can't afford to spend.

I have found that shopping with my children presents the most wonderful opportunities for learning about how to manage money. Of course it's more of a hassle, but definitely worth it!

Are We Learning a Lasting Lesson From the Economy?

2009-04-28T15:41:00.006-06:00

I was reading a blog that I enjoy the other day called Bing's Blog. He has a post about things that we've learned during this economic downturn that we should, but probably won't remember when the economy turns around. Item #5 on his list worried me a bit.

It seems that everyone is more aware of their spending habits these days, which as the Money Maiden, I think is fabulous. But he predicts that we'll all forget that unchecked consumerism and no savings were problematic, and that we'll all start doing it again. I imagine that he's not far off the mark. I look at my grandparents who grew up during the Great Depression and their lifelong frugality. Don't get my wrong, my parents are very responsible with their money (they taught me after all), but they aren't as stingy as my grandparents were. So if I were a betting woman, (I'm not, that's not responsible money management!) I'd take the bet that once the economy recovers, some of the people who had become more responsible out of necessity will go back to their old ways. But I hope that not everyone does. I hope that we as society start focusing on saving money, and producing things for others to buy, instead of trying to build our wealth from a house of cards like we did in the past.

How Hipsters Manage Their Money

2009-04-28T15:05:00.005-06:00

Do you want to get a handle on your money, but you think an Excel spreadsheet is far too antiquated? Check out the NPR All Tech Considered blog where you can find a number of websites to help you manage your money, many that have a social networking aspect to them.

And if you need help with the psychology of your spending and not just tracking your spending, here's a helpful website: Your Money or Your Life

Retirement Savings Accounts

2009-04-18T10:52:00.005-06:00

If you have a retirement savings account right now such as a 401(k) or IRA, you probably cringe every time you see a new statement. You look at the earnings line and it's always a significant negative number. You look at the balance and it's less that it was a year ago.

But don't panic, especially if you have a while to go until retirement. Just hold steady and know that right now you're "buying low." The markets traditionally rebound very well after significant losses like these, so you'll likely catch up to where you were fairly quickly once the recession ends. This is another reason why it's important to start investing as early as you can, so you're better able to weather the ups and downs of the market.

The chart below is a simple example of what happens when two people both invest $100 per month when they both have 30 years to go until retirement. John starts investing immediately while Steve waits 10 years. Who would you rather be: John or Steve?

Spending Less Money

2009-04-14T13:24:00.006-06:00

Barbara Warmsley, also known as the "Green Granny" is posting videos on youtube with ideas about how you can spend less money. I saw an interview with her where she discussed the fact that she grew up during WWII and learned how to be frugal. My grandparents who grew up during the Great Depression also learned to be less wasteful and to make better use of their items than my generation.

These videos have some good ideas that just might help you to stay within your budget. They might also trigger some of your own ideas about ways to save money.

Teaching Kids About Money

2009-04-11T14:14:00.007-06:00

My children receive an allowance (which is a part of my budget) in an effort to teach them about money management. My daughter hoards her money and whenever she wants something, she's always got the money to be able to purchase it right then. My son, on the other hand, spends his money every time he's saved up enough for his current action figure obsession. So he always has to save before he can make a purchase.

Kids have different personalities, even kids that share the same gene pool and grow up in the same house. They view money differently so the lessons that have to emphasized vary, but there are still lessons for each child. Both of my kids are learning how to earn money. They're both also learning about value, when it's alright to spend, and when you should save. My son is (hopefully) learning about delayed gratification and that he can wait to get something he wants; a lesson my daughter seems to understand inherently.

What lessons are your children learning about money? How do you teach them? Do you believe in allowance? Let me know your thoughts in the comments.

Expectations

2009-04-06T20:07:00.004-06:00

Contentment with your financial situation (as well as life in general) can come from managing your expectations. Instead of thinking of everything you can’t afford or how little you have; try thinking of how much you really do have. Imagine what life was like for people a few centuries ago, or look at some of the poorer countries today. The average American has more than royalty did a few centuries ago.

Even if you can’t afford a fancy TV or video game set, chances are you’ve got a computer and a TV. You have indoor plumbing and heat. Focusing on what we do have and what our money does buy for us helps us to understand that we don’t need to strain our budget to the breaking point to find happiness.

The Stress and Money Cycle

2009-04-01T20:23:00.004-06:00

Are you feeling stressed right now? Many people are. There’s a laundry list of concerns right now that contribute to feelings of stress.
• The economy
• The unemployment rate
• Housing foreclosures
• Added responsibilities at work
• Fear of losing your job
• Difficulty finding a new job

All of these concerns and many more are making this a particularly trying time for lots of folks. One common response to these feelings is to do something nice for ourselves. This is a wonderful reaction; unless it spirals into a vicious cycle of spending unbudgeted money that leads to more debt which leads to more stress.

There is a good way to break or avoid that cycle altogether: include money in your budget to treat yourself. It might mean trimming elsewhere, but it can help you to manage your anxiety without adding additional burdens or concerns.

During these difficult times it’s important to discover and pursue what feeds your soul. For some people it’s a trip to the movies, for others it’s a relaxing massage, or some really lucky people feel renewed by taking a quiet walk outdoors (that one doesn’t even require budget maneuvers!) Just remember, it is so much more rejuvenating when you spend budgeted money on yourself guilt-free.

Squirrel Away Money When You Have the Chance

2009-03-21T07:57:00.005-06:00

In a recent issue of Time magazine, there was an interesting article about your job being your most important asset. It had some different ideas and definitely gave me some food for thought. It also underscores that education, what I call good debt, is worth pursuing because it increases your future earning potential.

But what about all of the people who have lost their jobs, or are in danger of losing them soon? Their “asset” is no longer paying out. The best protection if this has happened, or might happen to you, is to have money in savings. I know a few people who work at jobs where they are assigned to particular long-term projects. Some of these folks know that there aren’t any new projects in the queue and that their employment will be done when their current project is done. One person is not really worried because he’s saved money for just such an occasion and knows he’ll be all right for about 1 year. Some of the other people I know are sweating it a bit more.

I realize that there are all kinds of expenses that make it difficult to save. However, it is easier to find money to set aside when you have a job than when you’re on employment. Make a category for savings in your budget and put as much as can in there each month. Check with your work to see if you can have two accounts for your direct deposit. If you can (and most workplaces who have direct deposit can), just put some money directly into your savings account. It can be easier if you never actually have the money to spend on other things. Do what you need to do so you’ll be a little bit safer if you lose your job.

Actions Speak Louder Than Words

2009-03-14T14:41:00.005-06:00

When it comes to teaching kids anything, actions always speak louder than words. My dad used to tell my brother and me to “do as I say, not as I do.” You can probably picture the eye-rolls and disgruntled looks that we shared with each other. The way we as parents live our lives says a great deal more to our kids about our values than anything we actually say to them.

The same holds true with money. Talking about money has always been a bit taboo in our society. It’s just one of those things that you don’t discuss in polite company. But if we expect our children not to make the same mistakes that we’ve made and to be responsible with their money some day; we’ve got to show them through our actions how to do that.

We let our kids hear our discussions about how and when we choose to spend our money. We took a Disneyland vacation last summer, and we talked all winter and spring before then about how we were saving up money for the trip. We made the kids save up their allowance to buy their Disney souvenirs. We helped them to make choices about which souvenirs they wanted to spend their money on, since they could only spend as much as they’d brought with them.

My kids also watch us save up money when we want to buy something for ourselves. We make sure to talk about how excited we are that we’ll be able to buy that thing we want after we’ve saved enough money. We make them save up their allowance when they want to buy a new toy or movie.

I’m hopeful that getting to see and hear how we choose to spend our money will lead to them making responsible financial choices in the future. I know that there are no guarantees, but I can say to my daughter and son, “do as I do.”

Priorities, Choices, and Willpower

2009-03-11T19:45:00.006-06:00

Money management can be boiled down to three words: priorities, choices, and willpower. How you choose to spend your money determines how well you manage it. Your choices are driven by your priorities, and willpower is required to stick with those choices sometimes.

My husband and I were trying to figure out how we could contribute more money to charity when we weren't getting raises this year and none of our expenses were decreasing. We decided that giving more money was a priority. So we chose to give up some of our weekly allowance or fun money to put more in the charity pot. I'm currently trying to save my allowance for eye surgery since I don't do well with glasses or contacts, so this means that it's going to take longer to save up. I am also a book junkie and frequently want to buy new books.

I'm confident that this new choice is the right one, so I'm willing to extend my eye surgery, and refrain from purchasing every book that I want to read. (I guess I'll be spending more time than usual at my local library!) By setting our priorities, making different choices and exerting willpower, we're able to keep our budget balanced and give more money to charity.

These are the same principles that can nearly always be applied to any budget in order to succesfully manage your money.

How Much Lower Can the Market Go?

2009-03-09T18:32:00.006-06:00

We all know (or we will soon find out!) what a math geek I am. I obtained the source data for the Dow Jones Industrial Average for the entire 20th century for data analysis. When I charted this data, it sort of scared me, because I don't know when we'll hit bottom.

The spike that has been occurring just doesn't seem to fit the pattern, and it worries me that in order to truly reset, we've still got to go down further.

I ran a regression analysis with the data from 1900 through 1984 (right before the spike really took off) and found that if the trend had continued on that path, we'd be at 1,176 today, but we're actually at 6,574, a number that is very low according to all reports.

Maybe the current market is too different from the pre-1990's market to make the comparison and we don't have anything to worry about; or maybe we still have some correction to do before we really reset. I'm not an economist, so I don't know which way this will go, it's just something that I'm wondering about and will keep watching.

What if I Don't Have Enough Money?

2009-02-28T15:50:00.003-07:00

A question I frequently hear is, “what if I don’t make enough money to cover my expenses? How do I save, how do I avoid debt?”

Most people probably have more money than they actually realize. The first step would be to look at how much money you’re spending on non-essential items. When you start tracking your money and where and how you’re spending it, it can sometimes be surprising how much you actually spend that you weren’t even aware of.

The next thing to look at is what you have defined as essentials. Are some of the things that you spend money on really necessary? Right after I got out of college and wasn’t making much money, I decided that I wouldn’t have cable television. Although I definitely wanted it, I knew it wasn’t necessary and decided that it wouldn’t fit into my budget. What types of services or items are you purchasing that aren’t totally necessary?

It’s also good to look at how much you’re spending on your essential items on a regular basis. Make sure not to get complacent with your service charges, shop around and find the best deal. Can you save money by bundling your insurance, or switching to a new company? One note on this, make sure you don’t switch to save money if the new service doesn’t meet your needs; notice that I wrote find the best deal, not just the best price.

Practice delayed gratification. When you find something that you want, it can be really hard to wait to purchase it. But it’s much better in the long run to save up and wait until you can afford an item than to get into debt. See this clip from SNL called “Don’t Buy Stuff You Cannot Afford.” It sums this point up beautifully and comically.

If you are one of the few who truly cannot pay for your basic needs you’ll need to look into other options. Find out if you’re eligible for any aid programs, get a roommate to help with rent or the mortgage, try to find a job that pays more even if it isn’t your first choice of work. But most of us can use the tips in the previous paragraphs to find more money than we ever realized we had.

Can You Help the Economy to Recover?

2009-02-27T20:27:00.000-07:00

This is a great post about the part that consumers, you and I, played in the current economic recession.

The encouraging thing is that maybe you and I can help to eventually turn the tide by being responsible with our money. Thus this blog.

Now May Be The Time To Invest

2009-02-25T17:08:00.002-07:00

This article is a bit older, but it is a good post about why now may be the right time to invest.

How to Use a Budget - Post #3

2009-02-19T18:04:00.004-07:00

Now that we've walked through the steps of creating a budget (see here and here); we'll talk about how to use your new tool.

The purpose of creating a budget is to understand how much money you have available to actually spend so that you only spend that amount. Now you know how much money you can spend on eating out or buying clothes this month without getting into trouble. Although the real trick can sometimes be actually sticking to your budget. Let me point out that a budget that you don't stick to is a waste of your time. So how do you make sure that you're spending what you decided you should?

Although this is a little old fashioned, if you're having difficulty sticking to your budget here's a really helpful trick: Keep your money in envelopes for each category and only spend what you have in the envelope. Once your envelope for clothes is empty, you don't buy any more clothes until you earn more money to put in that envelope.

I'm obviously someone who likes technology, and I grew up on a debit card. But I found that it was difficult to keep our spending under control when my husband and I were both on the debit card for all of our purchases. So we moved to a cash only basis for our "free" money. This has been very beneficial for 2 reasons: We only spend the money we have on hand so we're sticking to our budget; and we frequently spend less than our allowance so we're able to save up for bigger "fun" items. Saving our unspent allowance is how we got the TV we have now.

A budget can help you to stop spending too much money, and it can even help you to stop spending money altogether on some items. If you find that your Starbucks habit just doesn't allow you to balance your budget, you could cut it out completely and stop spending money there.

Used correctly, a budget can be the tool that helps you to get your spending under control and truly manage your money.

How to Create a Budget - Post #2

2009-02-01T15:04:00.006-07:00

This is the second in a series about how to create a budget. These steps take you through the mechanics of actually creating and working with a budget. Read here for the first three steps.

Step 4: Create categories for all of your money. These categories will be driven primarily by how you spend your money, and so you'll need to modify it for yourself; but here's a list to get you started.

Savings (yes, it's first on the list because you should make it priority for those inevitable lean times)
House - mortgage/rent, insurance, repairs
Auto - payment, insurance, fuel, maintenance
Food - dining, groceries, lunch money
Entertainment
Credit Card
Cash allowance (I know, cash is a little old fashioned, but it's easier to stick with the right amount on your "free" spending than using a debit card)
Charity donations
Daycare
Medical
Life insurance
Telephone - land line and/or cellular, ISP
Utilities - water, gas/electricity, sewage
Garbage Removal
Gifts
Vacation
License Plates
Television
Bank Fees
Business Expenses
Clothing
School Supplies & Fees

Step 5: Based on your tracking of how much money you spend, assign a certain amount for each category per month (or whatever time frame you're using.)

Step 6: Balance your budget. This is a vital step, your income has to be at least as much as your expenses. If you find your expenses outstripping your income, you will need to make some tough decisions about where you can cut back. Can you spend a bit more on groceries which will save money on food since it costs less than eating out? Can you check around and see if you can get a better deal on your insurance? Do you qualify for any assistance programs for your utilities or daycare? However you get to the bottom line, your income has to cover your expenses.

The next post on budgeting will talk about how to use this new tool to actually make a difference. Because that's just what a budget is, a tool. And no matter how fancy or thoughtful your tool is, it only works if you use it correctly.

SNL's Answer to Debt

2009-01-27T19:42:00.005-07:00

Because it's been harder than I realized to find the energy and motivation to post as often as I should after working full time and taking care of a house and kids; I decided to post some comic relief.

This skit from Saturday Night Live sums it all up!

The second post on how to budget will arrive soon!

How to create a budget - Post #1

2008-12-24T10:06:00.006-07:00

I realized that I’ve posted several times and referred to your budget. But some folks may not know the mechanics of starting a budget. So with the new year approaching, I thought I'd post a series on the steps for creating and working with a budget.

Step 1: Determine what time-frame you’re going to use for your budget. The typical time-frame is monthly, but if you get paid on a different frequency and prefer to budget bi-weekly or bi-monthly, that works too. Just choose what works best for you, after all, it is your budget.

Step 2: Determine how much income you make during your budget time-frame. Please see this earlier post about converting your pay frequency to monthly (if you want to budget monthly); and how decide how much income you should budget if you aren’t paid on salaried basis.

Step 3: Figure out how much you’ve actually been spending. This is where your eyes can really be opened to where and how you’re spending your money. If you use software to track your checkbook, you should be able to run reports that will give you this information. If you don’t currently track your spending, you may have to start tracking it for a couple of months before you can really create your budget.

Please check back for the next post that details the next steps in the mechanics of creating a budget.

Can you have ANY fun with your money?!

2008-12-18T17:20:00.006-07:00

During these times when everyone is feeling the pinch of the economy, we all hear advice that we have to be very careful with our money and watch every penny that we spend. I agree with that advice, but not to the same extent that I hear in some recommendations.

I agree that it is very important to make a budget and to understand where your money is going. But part of that budget should include some "fun" money. We all need to be able to spend money on things that we enjoy from time to time. You may not have enough money to spend much on fun activities, but you can probably include a little in your budget and set it aside each time you get paid. After you've saved for a little while you'll have enough for that small vacation, the trip to the amusement park, or whatever activity you and your family really enjoy.

I agree that it's important to be fiscally responsible, but you should be able to live life and have fun at the same time.

Cash only Christmas

2008-11-30T15:38:00.006-07:00

With the holiday season upon us, the money spending frenzy is now beginning. Going into unmanageable debt so that you can buy gifts for everyone on your holiday list is not what the season is about. I'm not going to assume that I know what the season does mean to you, but I know that the people who really love you don't want you to put yourself in financial trouble just so they can have a shiny new gift.

I save money each month for Christmas shopping, so that I'm on a cash-only basis with my holiday shopping. If you haven't been saving for holiday shopping all year, you can still work to have a cash-only Christmas. Make this holiday less elaborate, and then start saving in January for next Christmas. If you're one of the lucky few still getting a year-end bonus from work, you could use that to pay cash for your gifts. Or you can get creative with your gift giving. Between families, friends, co-workers, children's teachers, etc.; the bill can really add up. This might a good year to give hand-made gifts. My mom always gives my grandmothers calendars with pictures of the family. They aren't terribly expensive, but they are very treasured.

If you work to get yourself on a cash-basis during the holiday, you give yourself a big financial advantage for the rest of the year.

Why it's always been dangerous to be in debt

2008-11-17T19:48:00.006-07:00

We're getting a good reminder these days of why it's not so good to be in debt. Businesses are struggling and failing because they've over leveraged themselves. Individuals are losing their houses because they can't make their payments. Our government is borrowing money to solve all of these problems so we don't experience a more drastic economic collapse.

But there were times when the consequences for debt were even more severe. Charles Dickens wrote many semi-autobiographical novels in which he talked about the consequences of debt. His own father spent time in debtor's prison. Yes, you used to go prison (and a very unpleasant prison at that) if you managed to get in debt and then couldn't pay the money back. How anyone ever thought they'd get the money back if they threw the debtor in prison is beyond me, I guess they expected the families to pay them back to get their loved ones out of prison.

Professor Robert Douglas-Fairhurst has written about the comparisons between our current economic crisis and the one in 19Th century England that inspired much of Dickens's work. I don't know about you, but I'm pretty grateful that our economic crisis likely won't result in the same level of social issues.

How to manage your money when you don't make much

2008-10-18T07:12:00.013-06:00

When you're not bringing home much money, you have to be even more creative about managing your money. Especially now in this time when we're facing extraordinary inflation on the essential items that we all have to buy. Here are a few things to think about if you have to manage a very small budget with shrinking buying power:

Are you spending money on non-essential items? If so, this is probably a good time to reduce that as much as possible, and make sure you're saving up before buying any big items.

Are you shopping at the least expensive grocery store in your area? I wouldn't travel too far away to find the cheapest price since that could waste gas or mean a larger bus fare, but most communities have more than one store choice fairly close. And make sure to look for the generic brands with the same ingredients, but a smaller price tag.

Have you shopped around for insurance and found the best price? Check with your benefits department at work to see if they have negotiated any group rates on home or auto insurance; or check with your insurance agent to make sure you've got everything bundled and are getting the best rates.

Have you adjusted your thermostat? If you turn it down a few degrees this time of year and wear a sweater inside, it can save money on your utility bill, and research shows you sleep better in cooler temps. Also, make sure to check with your local utility company to see if they have any assistance for your income level.

Do you turn the water off when you're not using it? I'm pretty good about doing this, but my kids aren't. So I try to remind them when they're brushing their teeth to shut the faucet off. This won't save a ton of money, but it will save some, and every penny helps these days.

Do you shop at thrift or second-hand stores for clothing? If you have kids (who seem to grow an inch a week sometimes!), this is an especially money-saving way to shop. Many of the clothes are in very good condition because another child outgrew them before they could ruin them.

Do you walk or ride your bike when it's reasonable? It saves on gas if you don't start up the car to make a trip 2 blocks over.

As an added bonus, some of these tips are better for the environment and your health (and being healthy can also save money)!

Why Money Management is More Important Than Ever

2008-10-01T20:34:00.005-06:00

Given the current economic situation, successfully managing your money has become more important than ever. One of the big worries that has the government scrambling to get a bail-out bill passed is the effect on the ability of individuals and small businesses to get a loan. The government is very worried about banks and other lenders becoming more reluctant to offer credit. One could argue that might be the right road to take long-term, but it would certainly continue to slow the economy in the short-term.

So how do you ensure that you always have the credit you need? By managing your money and maintaining a strong credit score. If you look like a safe bet, you'll likely still be able to borrow money when you need to. But if lenders look at your credit history and have concerns about recouping their money, you may be one of those on "Main Street" feeling the effects of the economic crisis on "Wall Street".

European vs. American Financial Institutions

2008-09-23T19:30:00.007-06:00

According to a broadcast on NPR, the European banks are blaming America's current financial crisis on too little regulation, too much debt, and not enough savings. Europe sounds like me!

Regulation: You have to have a good understanding of what is happening with your money to be able to manage it. If you've worked in business you've undoubtedly heard the old adage, "what gets measured, gets managed."

Debt: In order to get and/or remain debt free, we must spend no more money than we make, and preferably less than we make.

Savings: It's important to have money set aside each month for all known expenses, and equally as important to have a long-term savings plan to send your offspring off to college, and to someday be able to quit working.

It's a good bet that the government won't bail you out to the extent that they're bailing out the banks right now, since your collapse doesn't jeopardize the global economy. So maybe we as individuals should follow the example of the European banks rather than the American banks.

Teaching Kids About Money Management (Part 2)

2008-09-22T19:46:00.005-06:00

Although we never want to scare our children about money, I believe that open, honest conversations about the way we spend our money teaches our children to make better choices.

The other day my husband was at the grocery store with our daughter. When they were checking out she asked her dad when she could have a credit card so that she could buy anything she wanted. (Editorial note - my husband was actually using the check card, buying groceries on the credit card is a sure-fire way to take on unnecessary and unwanted debt!) My husband explained to her that using a credit card didn't get you anything you wanted. When he signed the card it was his promise to pay that money back.

He also talked to her about the difference between getting things that we want and getting things that we need. He told her we need groceries so we regularly spend money on them. My husband, who has a horrible CD habit, explained that those are things he wants and that mommy makes him save up his money to buy those!

So a quick trip to the grocery store turned into a good money management lesson and now our 7-year old knows more about how to use a credit card than some kids who are 18 years old. Take any opportunity you can to talk to your kids about how to use their money, it's much easier to learn how to do it when they're young than to learn the hard way and have to work their way back out of debt.

In Case You Needed Another Reason To Get Healthy

2008-09-16T20:24:00.004-06:00

In case you needed another reason to get healthy, how about your long-term financial goals? This is a very interesting article by Dan Kadlec that appeared in Time Magazine. It makes perfect sense and is one more source of motivation for making healthy decisions.

Teaching Kids About Money Management (Part 1)

2008-09-13T16:45:00.011-06:00

A coworker posed the question to me about how we teach kids to manage money today. Money is much less tangible than it used to be, we get our money direct deposited and electronically transfer it to other accounts. We pay our bills on line and most of us use debit cards (or credit cards, but check out previous posts to see my opinion on that!) Kids today don't often see cash to understand where all that electronic money is coming from, which can lead to later financial trouble.

I am a firm believer that kids should start with cold hard cash money when they're first old enough to start purchasing things. It helps to give them a solid grasp on what money is. It then becomes easier to explain to them when they start getting gift cards how the money is loaded onto them and that they can only spend up to the balance on the gift cards. Which also helps them to later understand debit cards and the even more abstract idea of credit cards.

My kids' school district teaches math using a curriculum called "Everyday Math" that was developed by the University of Chicago. I think it's a phenomenal math curriculum that teaches math the way we think about it. But the other thing that I really like about it is that it has kids use actual coins and bills to learn about money, and also has them use symbols for the same money. So they start to see different depictions that all represent the same money. OK, I've spent enough time on that soap box. I'll post again on this topic since there is so much to talk about here.

How to Make a Budget

2008-09-09T18:46:00.019-06:00

So I've told you that in order to get out of debt you have to plan for paying that debt down, but how do you go about making that plan? By making a budget. But how exactly do you go about creating a budget?

The first thing you have to know is how much income you earn. If you're salaried this is pretty easy to figure out. The only small challenge here is figuring out the timing if you aren't paid monthly or bi-monthly since most of your bills will be monthly. If you're paid bi-weekly, you have a choice about how to budget your income. You can either multiply your salary by 26 and then divide by 12 to figure out a monthly amount, or you can budget for 2 checks per month and the two times per year that you receive a third check, this can be extra money. The other option is to plan the timing of your checks and plan certain checks for certain bills. The method you choose here should be the one that works best for you.

If you are paid hourly, piece rate, or any other type of rate that doesn't guarantee the same amount on each paycheck, figuring out how much income to count on can be more difficult. You can figure out an average of the amount you bring home on each paycheck, or you can figure out a minimum that you always bring home and treat any additional amount as extra just like the salaried method.

The next step in budgeting is determining what your expenses are. Some of your bills are easy such your mortgage or rent, daycare, car payments and other set expenses which just get plugged into your budget at the amount you pay every month. Bills like utilities, groceries, gas, clothes, etc. are more variable and you'll probably need to figure out on average how much you spend on those bills each month to plug into your budget.

You may find that after you put down all of your expenses, you're spending more than you make each month. This is frequently part of the problem with going into debt, when we continue to add expenses without making sure that our income can support the additional expenses. If this happens, the solution is either making more money (good luck and let us all know if you figure that one out!), or cutting your expenses. Maybe you'll find that you've been spending about $200 per month on clothes. So you can look at spending $100 per month, and not allowing yourself to spend any more than that. If it's your utilities that are causing you to blow your budget you can try setting your furnace 2 degrees cooler and wearing a sweater in the evenings; or spending a little bit of money and getting a programable thermostat. If it's your grocery bill, look for coupons or try a generic brand of your favorite food. The key to getting your finances back under your control is to spend less than you make; and having a full understanding of how much you make and how you're spending that money is the first step.

How to Eliminate Debt

2008-09-01T09:41:00.011-06:00

Nearly all of the advice you read or hear about money management recommends not spending more money than you make. But what do you do if you've spent more than you should have in the past and you're carrying unwanted debt? You make repaying that debt part of your budget.

I once worked as a Before and After School Program director at an Elementary School. When I took over as Director of the program, it was $40,000 in debt on an annual budget of about $160,000. Getting the program back to it's self-sustaining status was a pretty daunting challenge, but one I was willing to take on.

I drafted a budget for the program which included that debt as a monthly expense so that it would be paid off by the end of the year. This plan meant having to cut spending in other areas. We accomplished this by doing a few things differently than we had in the past. We went through all of the craft cabinets and cataloged all of the leftover supplies from old crafts. We then planned our new crafts around those old supplies instead of always buying new supplies. I scheduled the staff differently so as our numbers went down in the late afternoon, staff went home, which worked well for the high school students working in the program. I also worked with families who were behind on their payments to help them to make plans to get caught up.

By the end of the school year the program was not only out of debt, but had a surplus of $4,000 that we were able to donate to the school to buy a marquee sign for the front of the building. My daughter goes to that school now, and every time I see that marquee sign I remember what good money management can accomplish.

So if you're carrying debt that you’d like to get rid of, make it a part of your budget. Decide how much you can pay each month and pay that amount. You'll need to include any interest that you owe as part of the budget or you might just feel like you're only staying even, and absolutely make sure that you’re paying more than the minimum amount required. This might mean making some cuts in other areas, but the result is well worth a few sacrifices. If you stick to your payment plan each month, you’ll be able to get rid of that debt and rest easier in the knowledge that your financial situation is much more secure.

Good Debt vs. Bad Debt

2008-08-26T19:49:00.002-06:00

Is there such a thing as “good” debt? My grandparents didn’t think so. They grew up during the Great Depression and they never took out loans for anything their entire lives. They paid cash for every vehicle they ever bought. They built their house in stages, living in their basement for a time so they wouldn’t have to take out a mortgage. I have to respectfully disagree with my grandparents, I don’t know that any debt is really great, but I think some is both necessary and not all that bad.

The first kind of debt that I recommend is a mortgage. The vast majority of us have to pay someone for our housing, whether we pay rent or a mortgage. And if you pay a mortgage you’re building up equity (albeit at a slower rate than it was once possible to do.) You can also use part of your mortgage interest payments as a deduction on your taxes. So overall, I’d call a mortgage good debt.

Car loans are a little harder to justify, but I live in Denver which isn’t known for stellar mass transit options, and my husband and I both have to get to work. So we have auto loans for our cars that is maybe not “good” debt, but it is pretty much necessary debt.

My husband went back to school a few years ago to get his Master’s Degree and we took out a student loan to pay for his schooling. I also think this is good debt because it allowed my husband to get a raise (he’s a teacher and he automatically gets more money for higher education), and the required payments are so low that it’s easy to pay additional principle on the loan.

So I guess I’d call debt "good" if it’s necessary, has a reasonable interest rate, and/or helps you to improve your life in some way. Bad debt is pretty much everything else, especially those nasty credit cards that definitely do not have a reasonable interest rate!

The Secrets of Successful Money Mangement

2008-08-25T20:16:00.005-06:00

There are really only two things that you need to know to successfully manage your money:

1. Know how much money you earn and how many bills you have to pay (a.k.a. "budgeting"). Most of us have heard the old adage that you shouldn’t live beyond your means, spending more money that you earn. Easy to say, not always so easy to do. Knowledge and planning are what allow you to heed this oft-given advice.

2. Delayed gratification. If your water heater goes out, it's probably a good idea to accept some debt so you can get it repaired and not go to work with hypothermia or unkempt. But if your old television set works perfectly fine but you really, really want that large-screen LCD crystal flat-panel set, you should probably wait until you’ve saved up enough money to buy it rather than purchase it on credit.

If you can make a realistic budget and stick to it by controlling your spending and saving up for new purchases, vacations, etc. in advance, you'll be well on your way to successfully managing your money.

Doing my part to contribute to a global economic recession

2008-08-22T20:41:00.003-06:00

The idea of this blog is to share some of my knowledge to help people who have questions about how to manage their money to live within their means. After reading this article I wondered if this is really a good thing to do!

My Inaugural Post

2008-08-21T18:30:00.015-06:00

This being my first post, I thought it appropriate to explain a bit about my background and what qualifies me to give money management advice. -- When I was a little girl my parents gave me a weekly allowance, and I would immediately pull out my ledger book. (This was back in the days before the fancy ATM piggy banks!) I had 3 categories that I placed my allowance into: 1/2 of the money went into long-term savings (for that oh-so-distant idea of college), 1/4 of the money was placed in short-term savings (for the more expensive toys), and the remaining 1/4 was mine to spend at the toy store or 7-11 whenever I wanted. I didn't manage to put myself all the way through college with 1/2 of the allowance I received as a child, but I always had plenty of money for anything that I wanted (unlike my brother!)

My method is more sophisticated these days, but I still use the same basic principles and I still always have enough money for everything that I need. I have also managed to remain free of credit card debt for the majority of my adult life, and start saving for retirement and college funds for my kids. I still place my money in 3 categories to be able to better manage how I spend it. The 1st category is investments like 401k, Roth IRA, savings account, etc. The 2nd category is allocated money which is how I save for Christmas, home repairs, license plates and the like. The 3rd category is my regular checking account that contains my spending money, although I spend it on vastly different things than I used to!

I have plenty to write about in this blog, but I'm well aware that I can't think of everything so I'd love to get your questions. I am not a financial planner or advisor, and I won’t pretend that I can give you advice on what stocks or bonds to invest in to get rich. If you send me a question that I can't answer, I'll be honest, but if you have questions about things like how to budget or how to make sure you have enough money leftover before every paycheck, I can probably give you an answer that could help you out. So email me those questions at themoneymaiden@yahoo.com.