Monday, July 21, 2014

Keeping Consumer Spending Low

Our family has been long-time budget spenders; however, lately we’ve been working harder than ever to keep costs down.  With two small children, and income tight, we’ve been avoiding the temptation to go out and spend our hard-earned money frivolously.

And according to CNBC, we’re not the only ones keeping our money close to the belt. 
A recent article on noted that “U.S. consumer spending has remained largely flat for the last three months, Gallup reported on Monday, despite other indicators that suggest consumers keep spending at a brisk clip.”

It went on to say, “The polling agency found that "self-reported" daily consumer spending was $89 in July, unchanged from the $90 of June and May. Based on a series of tracking interviews with more than 14,000 Americans during July, Gallup said that flat spending was perceptible across income levels.”

Our family fits this trend of not increasing consumer spending, and we might have even reduced spending in certain areas.

Overall economic uncertainty
There is a reason why we’re not getting overly excited about spending even though we’re being told the economy is in a recovery.  The stock market has lately been cruising to new highs, the housing market seems to be going higher (at least in certain regions of the country), and jobs are supposedly being created.

However, having studied statistics in college, I know better than to just listen to numbers.  Things like part-time service jobs being created rather than full-time higher paying roles, housing prices skyrocketing in places like Arizona and California but stagnating in other areas, and the Federal Reserve’s “easy money” monetary policy can skew the numbers.  And now with Chicago and other cities beginning to look kind of like Detroit when it comes to finances and pensions, we’re tending to play a more conservative hand when it comes to our personal finances.  Economic uncertainty has us keeping our spending limited, at least for the moment.

Kids and clothing notes that, “A North Dakota State University study from 2010 found that the average American household spends about 3.8 percent of their income on clothing. The Census Bureau states that the average household income is about $50,000 per year, so that means roughly $2,000 per year, per household.”

We don’t spend nearly this much on clothing.  In fact, we spend but a fraction of that $2,000 total on our entire household’s clothing needs.  When it comes to our shopping needs, we tend to go the resale and hand-me-down route, especially for the kids who tend to burn through or outgrow clothing faster than us older people.  Hitting resale shops and garage sales is effective not only for keeping our family clothing budget between $300 and $400 a year, but also for regaining some of that expense later.  Having garage sales helps us recoup some of our expenses, and making use of lightly used children’s stores like Once Upon a Child -- where we just pulled in $38 for some of our gently used kid stuff -- also helps minimize our costs in this budget area.

Travel and entertainment
We’ve also been working to keep our travel and entertainment costs lower as well as we work to reduce our consumer spending.  This year, we’ve started using to check area gas prices before buying, often saving us 5 to 10 cents a gallon on gas.  We’ve also been spending more time with family, visiting the set of grandparents who live nearby so that we can let the kids play in their yard and enjoy family time together as well as combining meal efforts, saving money in the process.

Our three-week summer vacation this year only cost us about $1,000 for our family of four since we were able to stay with family.  So pairing up with other friends and family members can help cut costs in a number a ways as well as potentially build relationships.


The author is not a licensed financial professional.  The information provided in this article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

Thursday, July 10, 2014

If We Move Back to a Single-family Home, I’m Starting Our own Association Fee

I’m pretty good about keeping home repair and maintenance costs to a minimum.  Even then, such expenses ran about $200 a month in our previous, single-family home.  Add in another $250 for our average utility bills, and we were dropping some decent cash in regular home-related expenses, and we weren’t even getting crazy about things like updates, new appliances and the likes. 

Now we live in a condominium, and many such items are covered by our $300 monthly association fee.  I like this fee structure and I think that if we ever move back into a single-family home, I would institute a similar program to cover related expenses.

A fixed monthly allotment
A certain amount of peace of mind can come with knowing just how much we’ll be paying for the majority of our repair and upkeep costs.  In our previous single-family home, we might go for two months without spending a dollar on repairs and then be hit with an $800 bill out of the blue.

Such financial hits were harder to plan for and recover from than our current situation of just putting $300 a month toward our association fee that covers most repairs and maintenance.  In the future, I would continue to put this amount -- or a similar amount based upon our housing situation -- toward this purpose.

Covering repairs, maintenance, and home modifications without touching savings
By continuing the association fee-style payment even once we’re back in a single-family home, I can prepare for a variety of expected and unexpected repair, maintenance and home modification items without having to dip into our emergency fund for such costs.

I’d like to break down our home association fee into categories like repairs, lawn equipment, new appliances, roof replacement, HVAC repairs, etc.  Along with associated dollar amounts, it kind of sets aside money for such items for frugal people like me who consider a dollar saved a dollar earned and therefore have a harder time putting money aside specifically for such items.

Adding a reserve fund
Maybe the best thing about continuing the association fee-style structure -- even after condo life -- could be putting a portion of this money toward a reserve fund.  Taking out 10 or even 20 percent of my monthly self-charged fee and putting it aside for unforeseen repairs and maintenance projects means that we’re prepared when the unexpected strikes.  Sump pump goes out, we’ve got it covered.  Water heater dies, we’ve got it covered.  Air conditioning goes out on a 90 degree day, we’ve got it covered. 

With this money set aside in a separate account and only to be touched for home-related emergencies, it makes the shock of such repair costs less substantial, helps cheapskates like me bite the bullet and make repairs when they crop up rather than trying to put them off (sometimes making things even worse), and adds peace of mind regarding such costs when they arise.


The author is not a licensed financial or real estate professional.  The information provided in this article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

Tuesday, July 8, 2014

Microjobs: A Strange Juxtaposition of Independence and Lack of Freedom

As a freelance writer who has bolstered his income over the years with a number of side jobs and work roles, I know just how important microjobs can be to the self-employed.  However, while the idea of microjobs might to some seem a wonderful way to free themselves from the normal work routine, they can at the same time be a strange juxtaposition of independence and lack of freedom.

According to a article on the subject, “Odd-jobbers and freelancers are nothing new, of course, but modern microjobs are an outgrowth of digital technology that brings laborers and hirers together more efficiently than ever, often via smartphone.”

It goes on to note, “Yet for all the attention they’re getting, microjobs seem unlikely to solve pernicious problems such as low pay for many workers and a shortage of entry-level positions that allow college grads to put their education to good use. Plus, microjobs rarely come with benefits, and juggling a variety of part-time jobs requires more adept time-management than showing up at an office day after day.”

A role in which you’re the boss
As a holder of multiple microjobs, you might in some instances realize that you’re not just an employee now, you’re the boss.  While you might not own the company or companies for which you are working, as a freelancer, you could find yourself in charge of your hours, how hard you work, and how much time and energy you put into your endeavors.

While this can be a great thing in some ways, it also means that you may be assuming more responsibilities.  And it also means that while in a regular work role, you could find yourself going home at night and escaping your boss and work responsibilities, as your own boss, you never truly escape, which can at times be an aggravating situation.  Sitting on the couch watching television or trying to relax and hearing that voice in the back of your head nagging at you to “get back to work” could mean that even times when you’re attempting leisure activities are now ruined with the thoughts of work and work responsibilities.

More hats that you ever expected
While microjobs can provide independence from a regular job, you might find them binding in other ways, since now instead of just one work role to focus upon, you might have three, five, ten or more.  You could find yourself handling logistics, accounting, finance, marketing and advertising activities, sales, customer relations, information technology duties, and more.

This could work out in your favor or not.  It could be that now, rather than one boring work role, you’re able to spread your focus over multiple duties, finding that this is more interesting and that it keeps your mind busier and more occupied than before.  Or, it could be that rather than becoming really good at one sort of role and being able to get through the days on cruise control, you’re being pulled in eight or ten different directions at once, finding yourself frazzled and exhausted by the end of the day. 

Still tied to benefits
Sadly, in this day and age, and even with Obamacare supposedly there to “free us from our jobs”, many of us are still tied to employer-sponsored benefits.  And when working in the microjob environment, you may find that such benefits are sorely lacking.  But it’s not just health-related benefits that you could be on your own to find.  As a micro-jobber, you could be saddled with funding your own retirement plan, handling your own employment taxes, and dealing with similar benefits that might once have just seemed commonplace and were just a part of a “normal” job.

So before you jump on the microjob bandwagon, you might first want to consider whether it’s the right sort of work for you and that not everything might be as fantastically freeing as some people make it out to be.


The author is not a licensed financial professional.  This article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

Saturday, July 5, 2014

Understanding Mortgages Motivated Us not to have one

During and even after the housing market collapse there was a lot of talk about people not understanding mortgages.  With adjustable rate mortgages of different timeframes and types, I can understand this ignorance to a point.  However, understanding a general mortgage is really not all that difficult. 

By learning about and educating my own family regarding the standard mortgage, we in essence motivated ourselves to work hard at not having one, ridding ourselves of the burden of being indebted to a financial institution for the privilege of living in our home.

3 key components of a mortgage
In a standard mortgage, there are three major components that it can be important to have a clear understanding of and that can help clarify just how costly a mortgage will be over time.

These include:

  • Interest rate
  • Loan amount
  • Number of payments

These components interrelate, as the length of a mortgage can affect the level of interest rate and payment amounts significantly.  Someone taking on a 15-year fixed rate mortgage could find themselves getting an interest rate well below the rate of a 30-year mortgage, which means they could pay less in interest over the course of the loan.  However, doing so might mean that the shorter payoff timeframe increases the payment amount so that it’s almost doubled compared to the longer-term loan.

Even a good down-payment doesn’t mean a mortgage comes cheap
We put a large down-payment on our first home.  However, the amount that we had to take on as a mortgage was still significant.  While a hefty down-payment was helpful in reducing our mortgage payments, it didn’t mean that we still didn’t have a hefty monthly mortgage bill or that over time the costs wouldn’t add up.

While we ended up selling our home before the term of our loan was completed, and we had a shorter-term, 15-year mortgage, had we maintained our loan until completion, we would have paid over $70,000 in interest on a $165,000 mortgage.  While this isn’t bad compared to some, it’s still a lot of money to pay to a financial institution for the right to borrow their money.

Extra payments are good, but…
Don’t get me wrong, making extra payments on our mortgage had us on track for cutting almost $20,000 in interest off the total interest on our loan.  We signed up for a bi-weekly mortgage plan as well as making extra payments occasionally on our own when we had a little extra cash available.  However, now that we are mortgage free, we’re finding that no mortgage at all is even better than paying one down quicker.

By knowing how costly a mortgage can be, we decided to downsize our living situation to a condo about half the size of our previous single-family home.  Better yet, this home was also about half the price, which meant we could eliminate our mortgage altogether.  Not only does this mean we no longer have that $1,350 monthly mortgage bill hanging over our heads, but our home equity that we maintain acts as a sort of monetary reserve or cushion in the event of a financial emergency, which increases our peace of mind as well.


The author is not a licensed financial, mortgage or real estate professional.  The information provided in this article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

Friday, July 4, 2014

Potentially Costly Pitfalls of a Job Offer

Getting that first job offer was an amazing feeling.  However, a first job can also come with a variety of costs.  While these expenses weren’t enough to make me not accept the job, they were enough to be costly and somewhat frustrating.

Here are some of the issues that came into play with my first full-time role out of college that had both me and my wallet somewhat feeling the pain.

Location: Putting the cart before the horse
I’ll admit that I screwed up big time when I accepted my first job out of college.  Being the naive college graduate, I accepted for fact what the recruiter told me about being placed in a particular location of the city to which I was relocating after graduation.  Therefore, I signed a year’s lease in that location that was about a quarter mile from the location at which I was expecting to be placed to work.  Come to find out though, about a month later I was told that I would actually be placed at a location more than 30 miles away.

This was a big blow that meant not only did I have about an hour’s commute each way ahead of me every work day, but there was the frustration of the drive, not to mention the cost of gas involved with this commute.  It was a valuable lesson though not to jump the gun when it came to choosing a living location before finding out exactly where I would be working.

Dress code
Jumping the gun when it came to buying my new work wardrobe was another rookie financial mistake I made.  Again, I ended up asking the wrong person when it came to this aspect of my new work.  I asked a recruiter rather than someone who was in operations and actually out working in the trenches.  Therefore, I ended up spending hundreds of dollars on work attire that I couldn’t use for this particular work role since there was a very uniform (no pun intended) uniform standard.

Transportation and parking
After I ditched my first work role after college, I found a job in my dream industry…the hotel business.  My work was located in a busy section of downtown and I enjoyed being around the hustle and bustle of the urban environment.  What I failed to realize was that getting back and forth to work in this area could be costly. 

Not only was there the stop-and-go traffic city which added additional wear and tear to my vehicle as well as lowering my gas mileage, but there was also the cost of parking downtown, which was expensive.  Thankfully, my work provided a parking pass for free downtown parking as one of the perks of the role; otherwise, parking costs would have added thousands of dollars each year to the cost of my work.  Therefore, transportation to and from a job can be another important aspect to consider before jumping the gun and taking a role in a particular location.


The author is not a licensed financial professional or career advisor.  The information provided in this article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

Wednesday, July 2, 2014

Buying Gold or Silver…and How?

It often seems like investors either love gold and silver or hate them.  I’m constantly seeing articles about how these metals are soon going to “pop” or how they’re about to “drop”.  And in my opinion, silver often gets overshadowed as a metal investment by its bigger brother, gold. 

A recent MSN Money article notes, “Traders often substitute silver for gold because the two have a strong correlation with each other. However, the commodities are very different and should not be used interchangeably despite the seeming correlation.”

So which way do I go in this debate.  Well, I’ll tell you; and I have several reasons to back up my choice.

Gold or silver?
As I’m not a person of means, it’s not easy for me to go and buy a couple ounces of gold.  Meanwhile, I can quickly and easily pop in the local coin shop or buy a few ounces of silver online for around $23 (at current market prices plus markup over spot value) an ounce (at current prices) if the mood hits.  So personally, I’m more a fan of silver than gold. 

I also like that silver is used for a variety of industrial purposes, is often offered in US minted coin form (pre-1965 dimes and quarters as well as certain half dollars and war-time minted nickels) with such coins being easily recognizable to the average person, and it is still widely available in coin form.

Paper or physical
The nice thing about buying metals in paper form through an ETF or mining stock is that there is the option to trade it relatively quickly, which is great for short-term investors.  You can buy on a dip and sell on a rise or buy and hold for a while in hopes of greater returns.  The commission or fees on such trades might be lower as well as compared to dealing in physical metals.

With buying physical gold and silver, it could be a little more difficult as you might have to find a buyer/seller of such items either at a physical location such as a coin or pawn shop or trade show or buy/sell online.  Either way, it can take a bit more time and effort than it does to just hit a few buttons on the computer or call a broker.  And there can be commissions involved on both the purchase and sale of the physical goods, which can take a large chunk of any profits.

Still, as someone with a longer-term outlook, I prefer the physical metals since they provide something of actual value in return for my money, is educational for the kids, and can maintain a collector’s -- or numismatic -- value in addition to the dollar value of the actual metal itself.

Bars are, well…meh
Gold and silver bars might look pretty, but when it comes to the excitement factor, well, they’re just not all that interesting.  There’s really no numismatic value (unless they’re from a Spanish galleon or have some sort of provenance factor attached to them), they typically don’t have interesting images or dates, and unlike coins, they can be bulky, heavier and more difficult to transport.

Therefore, when I look to buy, I tend to go with coins.  Their dates give them a sense of history and a potential story.  Their look gives them come character, and their size makes them easy to transport and share with others or even sell online if or when the time comes.

The author is not a licensed financial, commodities or metals professional.  The information provided in this article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.