I Resurface

Goodness me, it's been a long time since I was here. I've been doing a lot of interesting stuff lately but I didn't know if I should write about it or not. But my public demands it, so here I am again.

Money! Moneymoneymoney. The getting of, and keeping of money seems to be what we center a large portion of our waking lives around. So why are so many people quick to spend it all?! The US has a quite low rate of personal savings; people here are simply bombarded with messages telling them to spend it all, that they "deserve" to own everything their heart desires, and stuff they didn't even know they wanted. This is a bad, bad thing and should be subverted whenever possible.

I've found a really good way to do this regarding furniture and other household items. Buy them at an auction. Our local auction house meets twice a week and you can get major appliances, dining room sets, piles of plates, sofas and chairs etc for pocket change. You just need to resist the urge to "buy new because only dirty, poor beggars buy second-hand". That message is what retailers want you to believe so they can make their ridiculous markups on new furniture. I'll write more about auctions later, but I'll one thing - you can make easy money buying little household items and reselling them on Amazon.com.

The eventual aim of taking care of one's finances properly, is that you'll very seldom have to think about it. Once you're financially stable, it should take care of itself quite well with, perhaps, a monthly checkup. And if you're young, you have an irreplaceable asset on your side: time. The richest billionaire on the planet cannot buy more time in the market, and that's what you have at your fingertips. The sooner you start investing, the better off you'll be.

To finish off, here's an email I wrote to a friend that summarizes the simple advice it takes to get one's finances in order. This is mostly aimed at those who are carrying debt - the best investment you can make is to pay it off, especially if it carries a high interest rate - anything above 10%.

Assess the State of Play
So, let's see, I think the first order of business is to write down what you know about the state of play. How much comes in, how much goes out, what are your assets and your debts. What interest rates are you paying on those debts? List them from highest to lowest interest rate, grit your teeth and start making extra payments. There's not much point saving money in the bank if your car's debt is piling up at a high interest rate.

For your assets, remember to value them at how much they'd sell for today, not how much you paid for them. Hopefully you won't need to sell anything in order to get the books balanced, but it's always an option. A good example would be the car. You can use kbb.com to get an idea of its current value...hopefully more than $8K :)

Choose A Plan of Attack
Once you know how the money is flowing, let's see how bad the situation is? Ideally you want to be able to save 15%-20% of the money that's coming into the house. Saving means money that is locked away as an investment and not spent unless it's a really dire emergency. So, is that achievable? Or are you breaking even? Or are you actually losing money and dipping into savings each month?

Your answer to that will affect how hard you attack the next step - if things are cruising along, you don't need to adjust much. If things are dire, it's time to sell the car, buy a junker, cancel the cable and get a night job delivering pizza. You're probably somewhere in between, though.

Look for easy adjustments. Can you easily lower any bills or bring more money in? Cancel some cable premium channels (or the whole thing!)? Cancel magazine subscriptions? Is there any "low hanging fruit" - easy changes you can easily fit into your life without trouble? I cancelled my cable and reduced my internet dsl speed to the minimum as part of my adjustments. I don't rent DVDs, I borrow from the library. I buy lots of food on sale (and from the auction!) and make sure to eat it before expiry. If you're throwing food out then you're buying too much. Do you bring lunch from home or buy it at work?

Tell your sons what the whole financial picture is like, and what they can do to help. Hopefully they're upstanding young men and will volunteer to make some sacrifices and help you out as much as they can.

Also look into other ways of bringing more money into the house - can you ask for a raise? If one is coming, can it be bigger? Ask your boss what'd you'd need to do to get a bigger raise or a promotion in, say, 3-6 months time. Have a yard sale - if your house is full of stuff, a yard sale is a quick way to clear out junk and make a few hundred bucks. If you have time in the evenings, look up DVDs,CDs, books etc on Amazon and other stuff on eBay to see what the going price is. It's time consuming, but the best way to get top $ for your items. I'm making about $200 a week selling out my old video games, CDs and books - this won't last though, all the good stuff is going quickly. (New note - this has gone up to $500 a week, gross income, and it's at least $300 profit.)

Final piece of advice - DON'T DIG THE HOLE ANY DEEPER! If you need to buy anything at all ask yourself (a) do I *really* need this? (b) can I get buy with a second hand one, or a cheaper model? (c) can I buy it at auction for $10 instead ( i.e bed, mattress, memory-foam mattress topper) ?! Don't embark on any risky schemes or high-risk investments and don't believe anything any "guru" says about real-estate, penny stocks etc.

My advice is, hopefully, generically useful, but the library will have lots of books on personal finance (and they're free!). Take an hour to go look through and pick one that makes sense to you - they all say much the same thing. "Spend less than you earn, and invest the rest!" is the core message and it works every time :)

My gut feeling, without knowing the figures, is that your top priority should be clearing your debt as fast as possible, especially anything with a high-interest rate. If you're not contributing to your 401k, it's probably a good time to put it at least the amount your company matches - that's 100% interest right there, tax-free!

Some websites
Instant Home Budget - http://cgi.money.cnn.com/tools/instantbudget/instantbudget_101.jsp
Some budget worksheets - http://www.personalfinancebudgeting.com/budget_worksheet.php

If you google for "personal finance budget" you'll get lots of good hits.

Dave Ramsey's website is not much help, but his show is excellent. Weeknights @ 8pm on *shiver* Fox Business Channel.

Lots of good advice here - http://www.allthingsfrugal.com/m_money.htm

COPF : http://carnivalofpersonalfinance.com/ is a weekly collection of the best personal finance blog entries from around the web. Pick and choose the good bits.

http://www.getrichslowly.org/blog/ is a good read - the articles are about various things, but will get you in a good mindset for saving. There's lot of blogs about saving money; look around until you find one you like. The weekly carnival will lead you to lots of good ones.