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Wednesday, July 13, 2011

Cash is King, right?  It helps ourselves and small business owners and we both know we need as much help as we can get right now.
We’ve been doing solely streaming movies and streaming TV for several months now and don’t even miss the DVDs and legacy TV.  We see a lot less commercials, too.  Give it a try and prevent increased costs or even reduce your current costs.
More on that higher education bubble . . . well, more on the high financial cost of that higher education bubble.
It pays to read the fine print and ask lots of questions.  With regard to cost number 9, we always suggest not taking a loan from your retirement plan.  There are many reasons not to do so, the primary being that you get double taxed by Uncle Sam.
Heh . . . the NSE of airport lounges.  It's always a cheaper way to have a good time.
We’ve been championing the NSE wine for years. 

Monday, June 27, 2011

How long will retirement last?  Good question.  Most of us spend a lot of time thinking about how much money we’ll need to save for retirement, but we also need to consider how long we’ll be retired and how we'll spend that money throughout retirement.  Sadly these days, retiring before or at 65 seems to be a harder prospect for most people and we're living longer.

Tuesday, June 21, 2011

Used Car Refi?

With low rates and used car prices up, maybe it is time for a car loan refinance to help lower your payment. Remember it's not the extra cash you are after, but the lower payment.
All the self-protection may be catching up with them, but brace yourself.  It will, of course, hurt you more than it hurts them.

Wednesday, June 15, 2011

Gallup Survey

In line with what we talked about the other day, Gallup did a survey and found that of all the financial issues that Americans are facing today, we’re most concerned about not having enough money for retirement . . . 66% of us, in fact.  Reducing our expenses now and moving that “extra” money to a retirement or investment account will help us all address that concern.  With a little creative juice (think NSE), we won’t have to lose our standard of living by too much, which is our third biggest concern (58%). 
Our sixth biggest concern, by 41%, is not having enough money to pay for our children’s college education.  There is a lot of talk on the Internet these days about the “higher education bubble” and the virtual “debt slavery” our kids take on in order to get a college degree.  Now is the time that we need to assess whether paying $50,000 to $300,000 is worth a higher education degree, especially with about one in four recent college grads not being able to find a job right now. 

Our Piece of the Pie Is Shrinking

I don't knock anyone for getting a pay increase, especially if they are worth it, but I am starting to wonder if these guys ever really suffered any pain of the economic down turn. How many people could they hire with even half of that 36% increase?

Bank Chief's Pay...

Maybe it's time to rethink where our money sits?

Move Your Money

Monday, June 13, 2011

The New Normal

MarketWatch has a story on the Employee Benefit Research Institute’s latest study that suggests that the current, standard age of retirement is going the way to of the dodo bird.  We had to see this coming.  With the average life expectancy of both men and women increasing over the years, men current at 76 years old and women at 81 years old, living on a combination of government assistance that’s dwindling and personal savings that getting harder and harder to accumulate, it’s no wonder.  What is a Money Conscience person supposed to do?
There are several weapons in our arsenal, but they revolve around two factors: saving more and spending less.  Yuck!  That doesn’t sound fun.  Do not fret.  It’s not as bad as it sounds. 
First and foremost, set your savings aside before you budget any of your spending for the month, pay period, week or whatever regular interval you budget your money.  This is most ideally done by your employer portioning a set amount of money to be put into your retirement savings plan.  This way you don’t see and can’t get to it. 
Next, cut back on dining out and cook at home, whether with friends or family.  Stop spending $50 to go to the movies, but rather stream a movie from Netflix at home.  Netflix’s streaming plan is $8 a month now and there are thousands of movies from which to choose.  Go to the grocery store with a grocery list and a menu already created for the week and stick to it.  This helps make sure you don’t waste food and make rash purchases that you and your family don’t really need.  This summer, plan a staycation.  There are numerous websites that highlight free or relatively cheap events in your local area.  Take advantage of this.  Drive strategically.  This mean car pooling when we can, mapping out our routes when running errands so we don’t back track or so we’re not running out for only one reason.  Finally, consider the “Not So Expensive” (NSE).  These are the non-name brand items that are just as good as name brand, they’re the Yellow Tails of the world. 
With any money we have left over from practicing some, all or more of these money saving ideas, set aside in a Roth IRA, increase your company sponsored retirement plan savings or set aside in a brokerage account.  In all accounts, invest wisely, considering your time horizon, risk tolerance and your short and long-term financial goals. 

Saturday, June 11, 2011

Second Mortgage Killed the Economy Star

A recent article in the Wall Street Journal pointed to the higher number of individuals with negative equity and how many of those have a second mortgage on their primary residence. It eludes the severity of these second mortgages and the impact they have on this negative equity when it states “borrowers with second mortgages had deeper levels of negative equity—an average of $83,000 compared with $52,000—than borrowers without second mortgages.” I personally cannot image what it must feel like to have even the $52,000 hanging over my head let alone nearly 60% more at $83,000.
During the height of the housing boom Americans took $2.69 trillion dollars in equity out of their homes. Yes in many cases this was to put it back into the home through fix ups, new appliances, additions and remodels. Although vast numbers of individuals used their home equity as an ATM, taking out cash; cash that they later used on vacations, cars, clothes and other disposable and depreciating items.
Is it any wonder that our economy would take a turn for the worse when first homes started to not become as valuable as the loans being taken out on them. When you drain the equity out of the house soon it is going to be flat if not upside down. It is basically the same as taking the cash out of a business all the time and expecting it to be able to continue running and increasing value. Secondly, we were spending money we didn’t earn on things we didn’t need. Hmmm… sound familiar? Living Below Our Means was a forgotten concept and our star economy began to wheeze. A wheeze that we know turned eventually into pneumonia that it is still suffering from.
So as we personally start to recover or move on from the recession, we need to learn from our own or other’s mistakes and Live Below Our Means and be cautions to deplete the equity from an asset just for temporary pleasure.  
Second Mortgage Misery

Friday, May 13, 2011

Maybe It’s Time to Start Taking Care of Ourselves

Over the past several years there has been a lot of talk about the dire situation that Medicare and Social Security are in and what the impact will be on those of us in our forties, thirties and twenties. We will be left without a security net, without the protection of government funded health care when we are elderly.  Oh what will we ever do? What will happen to us? How shall we survive?
I guess I have to say that maybe this is a good thing. Maybe it is time to take away the “safety net,” that has become a crutch.
One of the defining principles of Debt Free Living is Planning Ahead, and we are not just talking about the weekend or next month, or even this year’s vacation. Planning means being ready for all future events, be that a lay off or retirement. Being ready for our future means that we do not have to rely on anyone to take care of us, whether that be in our old age or in our times of ill health. True it is nice to know that if I were to become disabled tomorrow I would have something to fall back on for tomorrow, but why not plan ahead for myself.
There are a number of ways to plan ahead for retirement and for health concerns. We can invest in IRAs and 401k accounts as well as HAS and flexible spending accounts. Being ready for tomorrow is a true sign of someone who is Money Conscious.
Medicare, Social Security Will Go Bust Sooner: Report

Wednesday, May 11, 2011

The Fed Gives the Rich a Long Needed Wake Up Call

During the Great Depression our federal government came up with the great idea that helping individuals buy a home would be a boost to the economy and put people back to work. It was a nice gesture and maybe had its place and time seventy years ago, but what happened to it all? Politicians got a hold of it, is what happened. What started out as “an affirmative obligation to facilitate the financing of affordable housing for low-income and moderate-income families” turned into backing mortgages for homes to the price of $729,750.
Really? I mean really in a Seth Myers SNL kind of really. Not even in California or New York is a $730k home for the “low-income and moderate income-families.” This is actually something that the Democrats and Republicans seem to finally agree upon. Yes, it’s true, even our elected officials who pander to the power brokers agree that you and me, tax payer should not be on the line for someone who wants to buy a house three times the national average.
Of course we will hear the complaints of poor rich home owner, there is no one to back my mortgage and the snowball will roll down hill to those of us who bought much much lower priced houses, but that’s a lot of snow and a pretty big hill.
It is nice to see someone say enough is enough, people have to take responsibility for what they buy and maybe just maybe, be Money Conscious; know what they can afford and buy what they can afford.
Federal Retreat on Bigger Loans Rattles Housing

Stretching Your Dollar with the NSE

More and more people are looking for ways to make their money go further. Sites like Groupon and LivingSocial offer coupons or deals for items or services that are up to 75% off. These can be a great way to stretch your dollar as long as it is on something you already need.  There was a story on Yahoo this morning, though, that caught my interest in one of the facets of the principle Living Below Your Means; the NSE.
The NSE is the Not So Expensive. The idea here is that there are almost always replacements or substitute items that we can purchase instead of buying that top of the line brand new “must have”.  The Yahoo story points out how one man lives the Six Figure life on a $30k salary. His NSEs have been a foreclosed on home purchased in a prime neighborhood that needed a little work and a Mustang that he purchased on Craigslist from someone who was desperate to sell and thus willing to cut him a bargain.
We did something similar in 2007. When all the new high rise condos were going up, we also wanted in on the game, but at a price of $350-450k for 800-1000 square feet we were looking at being house poor. With a little searching, we found a place on the 12th floor of a building built in 1962 that needed some TLC. We have a fantastic view of the city and mountains that we never could have come close to affording in a new building; all this for $130k and a mortgage that we can now pay off in less than 30 years.
What about other NSEs? Think about items you purchase regularly like food and clothing. Are there ways to focus on items of similar quality, but at a lower price? We don’t need to buy gourmet food all the time.  Can we shop around for better deals on clothes, maybe even looking at second hand or consignment shops?
Living the life you want can be had, especially if we find ways to get what we want at a price we can afford.

Monday, May 9, 2011

Double Dip Housing Market Reinforces Why We Should All Live Below Our Means

In 2007 when we were looking to purchase a home our real estate agent kept urging us to look at homes in the $375-450k range in a fantastic Mid-Century modern neighborhood we love. The homes are beautiful and very stylish and fetching a price that even to this day has maintained its value. What was the problem? First the homes were about 40% larger than we really needed, ranging from 1500-2200 square feet. Secondly the prices were about 5 to 7 times our annual salary, at the time.
We kept reminding our agent we did not want a place larger than 1,200 square feet and we did not want to spend more than one and a half times our joint salary, since we wanted to continue to be able to afford our new, future home even if one of us lost our job.  We stuck to our guns and purchased a 1,008 square foot condo for just that price. 
Now that we seem to be heading into a double dip in the housing market, this reinforces for us the principle of living below our means.  We understand that the popular opinion is to be angry with banks for robo-signing loans and motivating real estate agents to motivate their buyers to buy larger and more expensive homes, but we have individual responsibility, too.  Mom and Dad’s old rule of thumb of not buy a home more than three times our income is still solid.
With our increase in salaries over the years and our aggressive plan to pay our mortgage off early, our loan is now only one times our joint salary and that feels pretty good.  Hopefully others will learn the lesson of the not-so-distant past and the present when they find themselves in the market for another home.

Saturday, May 7, 2011

Banks Are at It Again

The other day we mentioned how the cost of using debit and credit cards is becoming too much for some small business.  It now looks as though it may soon become too costly for the consumer.  That’s you and me. highlights some of the increase costs that we may expect if The Federal Reserve gets Congress to agree to its request for capping these “swipe fees” at 12%.  Swipe fees are that charge mentioned previously that business pay every time they run your card through the reader.  Since the banks are going to make their money one way or the other, this underscores our suggestion on using the Cash is King philosophy.  Banks are threatening to increase ATM to as high as $5 for non-customers (you’ll also likely have a charge from your own bank), increase late fees up to 30%, limiting us to purchases as small as $50 on debit cards and if you have any rewards program on your debit card, consider it gone with the wind.  Banks claim that they need these fees to run their business and address fraud issues and Washington is trying to save us.  It seems the more they try to save us, the more costly it gets.  Go to your ATM as little as possible to withdrawal the money you need to get you from pay check to pay check or even consider going to your bank and get your money directly from a human.  Using cash will help you and your favorite small business. 

Thursday, May 5, 2011

Gas Guzzling

OK, it’s that time in the economic cycle again where we need to rethink our driving habits, we already see Americans doing this.  Last month the average household in American spent $368.09 on gas.  That’s an average of 9% of the average household’s income.  Ouch!  Since many of us aren’t going to run out there to buy a Nissan Leaf, we may want to consider adapting the idea of going to the ATM as little as possible to that of visiting the gas station and driving all together.  This means planning trips for running errands and picking up the kids, so that we’re hitting a couple of places on the way to and from our final destination.  We should try to hit the grocery store once a week or less if you’re a frequent shopper at Costco or Sam’s Club.  This may, also, mean not making some trips at all.  Another option is to car pool one day a week. Check with your local city or state transportation agency, there are some fantastic ride share programs out there. Another option is to work with your employer to telecommute when you can. Try one day a week and see how much more you can stretch that tank of gas. Granted we still want to have a life, but if there is any way to reduce that $400 monthly charge, let’s do it.
Just as a side note, blame it on speculators or blame it on the gas companies, but the info below is interesting.
2008 Peak Oil Price $145 a barrel       2011 Peak Oil Price $115 a barrel        20.6% less than 2008
2008 Peak Gasoline Price $4.11          2011 Peak Gasoline Price $3.98           3.1% less than 2008
So why is gas so much more now than it was back then?
Gas Prices Eat Up $386...

Wednesday, May 4, 2011

Consumer Stages – Which are You?

I was laying in bed this morning thinking about consumerism. The fact that each and every one of us is a consumer. The reality is that it is something from which we can no longer get away. There are very few people in the world, let alone America, which consume only what they themselves have produced.  How has this consumerism affected us and what type of consumer are you?
Understanding the stages of the consumer and which one we spend our lives in will tell us what our financial picture and outlook is.  Below is a picture of the Consumer Stages on a line graph, this is done primarily because we do not stay in one phase all the time. We move back and forth. Yes, we may spend the majority of our time in one or two stages, but we will still move back and forth.

                                                                                              Consumer/Saver              Consumer/Investor
Consumer/Debtor                    Consumer/Consumer

The four stages, as stated above, are Consumer/Debtor, Consumer/Consumer, Consumer/Saver and finally Consumer/Investor.  In each phase the type of consumer we are depicts the type financial condition we either are in or what our future financial condition will become.
Consumer/Debtors are the individuals who are not Money Conscious. They basically have no idea where their money goes, how much they make and are primarily focused on consuming just to have. They are often reckless with their spending and are accumulating debt beyond what they can pay off in the short term.  This is the stage that many Americans found themselves in during the hay days of the housing boom in 2002-2006. They usually carry a revolving balance on their credit cards for years, rarely seeing the balance drop, while keeping up with the minimum balance payment.
Consumer/Consumers are individuals that have a slight grasp on what money is and what it can do for them. Typically this individual is focused on things, but understand value and how spending less on one item can help them purchase another more desirable item. They may focus on coupons and sales, knowing that the money saved can help them buy the new shoes or golf clubs they want. The fact remains; they are still consumers and may move back and forth between Consumer/Debtor and Consumer/Consumer. They typically do not carry over a balance on their credit cards for extended periods of time.
Consumer/Savers are individuals that are focused on getting a good deal and how they can set aside a little money. Like the previous two stages, they are focused on consuming, but are able to cut back or are conscious enough about how much money they make so that they have a small emergency or rainy day fund. They rarely, if ever, carry a credit card balance and are able to make large purchases with money saved rather than going into debt to do this. These savers live within their means, knowing that the money they set aside will allow them to enjoy future purchases.
Finally we have the Consumer/Investor. At the far right end of the spectrum, the Consumer/Investor is rarely focused on consuming. Investing is their focus and consuming is the byproduct of their investing. These are individuals who, at some point in their lives, realized they could live off of their investments. They spend their time and effort putting their money to work for themselves. Yes they still are consumers, but at some point in their lives their consumption was focused on buying things like property, art, cars, homes and other tangible items that would give them a return on their money and are not just consumed. In addition, they purchase items with the intent that the money they save will be used for additional investments and not just on buying more stuff. These are the individuals that eventually reach the definition of wealthy.
As mentioned above, the stages are not separate and distinct. We move back and forth between them. But the question we need to ask ourselves is in which stage do I spend the most of my time? For example, we have friends who, in the rush to not miss the market, purchased homes well beyond what they could afford. They were Consumer/Debtors, at the time. Because of this costly mistake and the integrity to pay for what they purchased, they now find themselves house poor and are stuck in Consumer/Consumer or even falling back into Consumer/Debtor all so they can keep the house they cannot afford.  Their house now owns them, rather than them owning their house.
For those of us focused on paying off debt, our focus should be to stay in the Consumer/Saver stage. This will allow us to keep paying off the credit balance, which in a sense is saving. But ultimately, all of us should strive to glide between Consumer/Savers and Consumer/Investors.

Monday, May 2, 2011

Sunday, May 1, 2011

Getting Out of Your Financial Hole

Below is a reprint of an article that we wrote for a local Denver newspaper. Even though the article is now two years old, it seems that things have not changed much when it comes to the economy and the financial outlook of many Americans. Enjoy!

-- You know when Prada has to reorganize their debt that times are tough. Not even The Devil would recognize them. The financial crisis of 2008 and 2009 has hit the wallets of everyone if the rich are not buying their Prada! Where does this leave the rest of us?
Many reaped the benefits of the sizzling economy from ’04 to ’07, from home values to stock market appreciation. Problem is that not everyone was the beneficiary of that economy. Many pay checks were not going up 5% to 10% a year, but our spending habits sure did. 
Now that this ugly step sister of an economy has slapped reality across our face like Alexis Carrington, how do we get straight . . . er, get our finances in order?  It’s time to assess our financial picture.  Boring!  It’s much more fun to spend like Paris Hilton, but we don’t want to be as empty as Paris. 
The following three steps will get us started on that Yellow Brick Road to financial freedom:
1.       Know what we make
2.       Know what and where to spend
3.       Have a plan to get out of debt
Step 1: One fallacy many of us believe is that if we make $40k a year, we can spend $40k a year.  Wrong!  Remember taxes, health insurance, our retirement savings, and we better have one, as Social Security as we know it won’t be around too much longer!  Many items are deducted from our pay even before we receive it, so the easiest way to determine how much we can afford to spend is to look at our pay stub; specifically our net pay.  If we are paid weekly, take that net pay and multiply it by 52, then divide it by 12. If we are paid twice a month, simply multiply the net pay by 2.  That’s how much we can spend on a monthly basis. Here are a few examples:
                Take home $875 every two weeks = $875 x 26 / 12 = $ 1895 per month
Take home $1700 twice a month = $1700 x 2 = $3400 per month
Step2: Now that we have this total, what do we do with it?  We spend it all, of course, and often even more by using our credit cards and going further down the rabbit hole as a result. It’s time to learn how to consciously spend. Our first focus should be on essentials or things we can’t live without; mortgage/rent, insurance, groceries and clothes within reason.  If we have anything left over, yeah us!
What happens if we are in the red? We are spending too much and it’s time to make some adjustments. The fact is that most of us really don’t know where our money goes. It’s time to dump our unconscious spending habits. Part B of the second step, which is a good thing to do even if we are in the black, is to come up with a strategy for our spending. Here’s where we learn the difference between a need and a want. No matter who we are, we can cut back a bit on our wants. Our suggestion is to use our take home pay as a spring board. Subtract 10% and then use the other 90% for our expenses.
Step 3: Plan, plan, plan! This is the essential step to paying off our debt. If we begin every pay cycle with a plan, then we will surely get out of debt. Here’s where the 10% we subtracted above comes into play. It’s time to put it to work by paying off our credit cards. Turn that 10% or more if possible, into a regular expense. Just like the rent check, this payment must go out! Actually it’s best to set this up as a direct deposit or automatic bill pay from our bank. Establish the check to be sent on each pay day so we won’t forget or put off our payment.  The final and most crucial part of the plan is to cut up our credit cards and trash them. To not do so is like putting make-up on in a blue bathroom. You never look any better. 
Getting out of debt is as easy as 1,2,3 if you follow the simple steps outlined above. Take a little time and create a plan, get out of the red and you too will see that debt-free is the new black! "

Saturday, April 30, 2011

Coupons; Are They Worth It?

I like's post on April 28th about the show Extreme Couponing on TLC. The reality is that many coupons are there specifically to get you to buy something. The merchant or product provider knows that many people will fall prey to the "deal." You end up buying what they want you to buy. Not because you need it, but because they are giving you a deal. One of the important aspects of Living Below Our Means, is understanding exactly what it is that we need. Heading off to the store without a list or plan is stupid. Heading off with a coupon for something we don't really need is financial suicide. If you plan ahead, create a list of what you really need for the week based on the grocery adds sales flyers, you are going to typically save more than you would with a coupon. If the coupon is for something that is already on sale and something you truly need or can use that week, then it’s a bonus. Use coupons to your benefit, not the benefit of the merchant or the product provider.  Extreme Couponing…

Friday, April 29, 2011

Bank Debit and Credit Card Fees - A Sink Hole for Us All

Although we are not opposed to any business, including big banks, making a profit, maybe it is time for the American consumer to rethink the use of plastic on every transaction. With the fees being charged by card providers sucking billions out of the wallets of consumers and merchants, Cash is King certainly is a principle that can help us small folks. As the linked article below points out, some merchants would rather give merchandise such as a banana away then swipe a card for small transaction. According to a typical PIN debit card transaction costs the merchant between .35 and .55 cents. On transactions less than $10, the merchant is paying a large percentage of the total bill out in fees. Who ends up paying those fees? We do. They pass that cost on to us. So why not give the merchant a break and in turn give yourself a break. Pay with cash on small dollar transactions especially. Your merchant will appreciate it and the beneifits will be passed on to us in slower price hikes. Swiped: Banks, Merchants And Why Washington Doesn't Work For You

Thursday, April 28, 2011

Our Mission

To help each person become Money Conscious resulting in eliminating their debt, living a debt free life and empowering them to achieve financial success by virtue of the universal principles discovered by us through our own financial mistakes, victories and professional training.