Thursday, November 30, 2017

Gift Ideas for Frugal People (and from Frugal People)

It’s that time of the year again. People all across the world are trying to come up with holiday gift ideas for the frugal and practical people in their life, while the frugal people among us are trying to figure out how to give thoughtful gifts to the people in their life without going into bankruptcy.

Although I’ve written gift guides for people many times in the past (here are gifts to give to frugal/practical people, sub $10 gift ideas, inexpensive last-minute ideas, and a collection of homemade gift ideas), I’m always inundated with queries from interested readers this time of the year asking for new gift suggestions, both in terms of inexpensive gifts and in terms of gifts that their frugal/practical friend will like (I think I’m a proxy for many people when they think of their frugal/practical friends).

For starters, I strongly encourage you to check out those previous guides, as many of the ideas are still quite relevant now. What follows are some additional ideas that I’ve received, seen, discovered, or made in the last year or two (apologies in advance if there are any direct duplicates from the earlier posts).

I’ve divided this up into two sections, reflecting the two types of questions about gifts that I frequently hear this time of the year. First, a section on “gifts for frugal/practical people,” meaning gifts that might be somewhat expensive (or might not be) that frugal/practical people will genuinely appreciate. After that, a section on low-cost gifts with mass appeal, gifts that frugal people might consider for those on their gift list that they struggle to find the right gift for.

Ready? Let’s do this.

Gifts for Frugal/Practical People

Durable high-quality items that they’ll frequently use This is always my default gift suggestion if you’re looking for something for the frugal or practical person in your life. Look for something that you know that they use and get them a high quality and reliable version of that item. Here are some examples.

Socks Buy them a pair of merino wool socks with a lifetime guarantee, like the socks made by Darn Tough. They are rather pricy per pair, but they are extremely comfortable in all but the hottest of conditions, last for an extremely long time, and come with a great guarantee.

Other clothing You almost can’t go wrong with LL Bean or Land’s End in terms of solid quality clothes that will last and last. Both brands offer a lifetime guarantee on their products, so you can buy them knowing that if they ever do have a problem, your recipient can easily replace the item. (If you’re unsure of sizes, a gift card works well – I can’t imagine a frugal person not using a gift card to one of those places.)

Shaving If you’re giving a gift to a male friend or family member who stays clean shaven, consider getting him a safety razor and a supply of blades. A Merkur Classic safety razor along with 100 double-edged blades, a shaving brush (which basically ensures that you never over-apply shaving cream once you start using it – I use a tiny fraction of the quantity of cream I used to once I switched to a brush), and some high-quality shaving soap or shaving cream. It takes a little longer to shave this way, but the shave is so close that you don’t have to shave nearly as often (especially compared to electric) and the cost per shave is way lower because of the far less expensive blades.

Other items The best overall approach to take is to simply talk to the person and see if you can pick up on things they use that are wearing out and may need to be replaced soon, then research versions of that item that are reliable, durable, and high quality. That’s pretty much a guarantee of a great gift. For example, if someone loves to grill but is grumbling about a rusty grill, get that person a ceramic grill that’s pretty much impervious to rust. Just spend the time to specifically research that product type.

Consumable items that match their tastes Frugal people almost always love consumable items. It’s a treat that they often won’t buy for themselves but they can thoroughly enjoy, plus it won’t take up space in their home or end up sitting in their closet. In short, consumables are pretty practical as far as gifts go. Here are a few examples.

Coffee If the person you’re gifting loves coffee, consider getting them a bag or two from a very reputable coffee roaster like Stumptown or Chromatic or, better yet, a local roaster from your area. If you want them to have coffee the whole year around, consider a coffee subscription service like Driftaway or Beanbox.

Craft beer If the person you’re gifting loves craft beer, get a few bombers or a six pack from a local brewery, particularly if you happen to live near a well-regarded one. If you don’t, stop by a local craft beer store and ask for some recommendations. Craft beer enthusiasts tend to appreciate new and unusual ones.

Chocolate Again, as with the above options, it’s never a bad idea to find a local chocolatier for a small assortment. If that doesn’t work out, look for a list of the best chocolates from a reputable publication (a href=”http://www.foodandwine.com/slideshows/best-chocolate-us#1″>like this one from Food and Wine) and pick out an item or two from that list, like the truffle assortment from Vosges which is mind-blowing but rather expensive per piece.

The advantage here is that these are all consumable. They can be eaten as a treat, easily shared with friends if they so choose, and eventually take up no space at home as they’re all consumed. If you can choose an item in line with their tastes, a frugal person will appreciate it, particularly if it’s a well made item or a local item. If in doubt, go local. Frugal/practical people

Items that simplify or reduce the cost of making things yourself Most frugal and practical people enjoy simply making things for themselves. They like to make things at home not just because it saves money, but because the process is enjoyable and the results are pretty good. Gifts in line with that mindset are usually appreciated.

Having said that, items that only have a single use or don’t match up with something that they’ll frequently use are frowned upon. The best gifts for frugal and practical people are items that they’ll reuse frequently, often replacing something they already have or providing a clear alternative.

Here are a few examples.

Coffee drinkers might appreciate a cold brew coffee system, which does away with the need for electricity or paper filters and produces wonderful mellow coffee that’s easily stored in the fridge. This cold brew coffee maker comes very well regarded; you just add water and grounds to the top chamber and let it sit in the fridge. My wife and I use both a coffee maker and a cold brew maker at our house, so they work in parallel.

An enameled cast iron pot is almost always a great gift for anyone that cooks at home. Enameled cast iron pots, especially larger ones, are incredibly useful because you can use them almost like skillets on the stovetop, use them like soup pots, and also make casseroles in them and bake things in the oven. I’ve done everything in ours – made bread, made stews, sautéed vegetables. While Le Creuset makes the best ones, they’re very expensive; Lodge makes one almost as good for a fraction of the price.

A multi-port USB hub is a surprisingly good gift for someone who has several electronic devices. It replaces the need to carry around lots of plug-in USB adapters and instead just requires them to bring around the requisite charging cables. I pretty much don’t leave my house without this one; it has a permanent home in my “to go bag” and it always seems to be an item that, when people see it, they go “I should really start carrying one of those!” Not only is it a convenient item to carry in one’s work bag, it’s also a pretty nice social opener as you always have a couple of ports free to offer to others who may need a charge.

Inexpensive Gifts for Everyone

What if you’re on the flip side of that coin? You’re a frugal person who wants to really stretch a dollar, but you also want to give meaningful, thoughtful, quality gifts to people for the holidays? Here are some things that you can give that everyone will like.

A simple item and a promise Give a person a very simple inexpensive item that lends itself to a common task that they might take on, but pair that item with a promise to actually help them with the task or take it on yourself.

For example, you might buy someone a caulking gun and some caulk, which can be relatively inexpensive, but put with it a note that you will come over and actually air seal their windows for them or help teach them to do it.

You might buy someone a hedge trimmer and put a note with it that you promise to come over and trim their hedges nicely in the spring. This is a particularly good gift for someone who might not enjoy landscaping and yard work.

You might give an elderly relative a 9″ by 9″ Pyrex baking dish, and on the inside tape a promise to come over and make five dinners for them and eat with them.

Something you made yourself Homemade gifts are always a great choice, particularly if you can make something well or you know how to make something that’s time consuming.

For example, we often receive jars of homemade food items from one of our closest friends who knows that I love fermented foods, so he cans some crazy variation on sauerkraut or pickles and gives me a few jars as a gift. It’s very inexpensive for him, just costing a few jars and the cucumbers or cabbage from his own garden, but I absolutely cherish that gift.

I have another friend who is a photographer who makes handmade stationery cards similar to these using inexpensive prints and extremely cheap blank stationery. These items cost her perhaps $0.30 per card to assemble, but the time invested in taking the photographs, choosing the prints, getting all of the stuff, and actually making the cards is incredibly thoughtful.

We have another relative who loves making handmade soaps. She makes an enormous batch of them every few years and gives several bars to people for the holidays. She’s also made bath bombs.

We have yet another friend who likes to make hand copies of poems along with a wonderful little drawing and frame them with an inexpensive frame as a gift (she drew this wonderful picture of me and my son standing together in the woods with the text of The Road Not Taken by Robert Frost a few years ago that brings tears to my eyes whenever I see it, but it cost her a few hours, a trivial amount of art supplies, and an inexpensive frame).

Another good idea: turn vintage books, comic books, album covers, sports cards, candy wrappers, or other such items into wall art. Figure out what the person you’re giving the gift to really enjoys, then find flat items that represent that interest, arrange the items well, and put them in an inexpensive frame.

Make something you know how to make well and share it. Often, the end result is far more valuable than the ingredients you put into it.

Letters Write a dozen or so letters to a person you care deeply about, appropriate for different occasions, and package them all up together.

For example, you might sit down and write a letter to your mother for a time when she’s lonely, a time when she wants to talk to you, a time when she wishes you were a little kid again, a time when she’s worried about the future, and so on. Write a letter just for your mother concerning each of those topics, saying the things you would want to say to her when she’s feeling that way and touching upon your shared experiences in the past.

This will take some time, no doubt, but the financial cost is pennies and it is so deeply sentimental that it will be an unforgettable gift.

A shared experience One great option is to give an inexpensive gift to someone that will provide the foundation for a shared experience for the two of you.

For example, you might give that person a copy of your favorite book. Take the time to write a nice inscription on the inside of the front cover and promise to go out for coffee or for an inexpensive dinner to talk about the book once they’ve read it. You can do the same thing for your favorite movie by handing over a copy of it on DVD or Bluray, along with a note promising to watch it together or talk about it afterwards.

If you happen to score some low-priced tickets to an interesting event, give one of the tickets to a friend so that they can plan to go to the event with you, providing a great shared experience.

In both cases, you’re adding the extra value to the item by relating it back to a personal connection between the two of you.

Charity time This is a surprisingly thoughtful idea for someone who wants to give a meaningful gift and has lots of time but very little money. Simply give someone a gift of some significant number of hours of your volunteer time.

For example, you might say that you will work 20 hours or 40 hours of volunteer work in the coming year for a cause of the recipient’s choice. This might be work for a political campaign, work for a local charity, or something else. They pick the charity, you put in the hours for that charity.

This is a great way for the recipient to feel like they’re bringing about meaningful change on a local level for a cause that they care about and you’re able to give that gift without any financial burden whatsoever.

It’s a good idea that, if you give this gift, you’re giving it to someone you’re roughly in political and moral alignment with. It would not work out well if you gave this to someone who then asked you to phone bank for a candidate you intensely disliked.

Final Thoughts

Gift giving occasions are difficult ones for frugal and practical people. Many holiday gifts are items that frugal and practical people really don’t want in their home, as they tend to be very selective and fairly minimalist about the items that they do choose to own.

At the same time, frugal people are typically fairly careful with their money and want to give meaningful gifts without just throwing money at the problem.

The ideas here are meant to provide ideas that can solve both problems, making the holidays better for frugal and practical folks both on the giving and receiving end of the equation. Hopefully, the ideas presented here will make the holidays a more joyous occasion for all involved.

Good luck!

Related Articles: 

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Rewards for Recreation: Credit Cards That Match Your Hobbies

You might see the world of credit card rewards as two extremes — jet-setting on one end and penny-pinching on the other. The truth is, there’s a big world between glitzy travel rewards and no-nonsense cash back. Plenty of credit cards have rewards programs that can help you indulge your everyday interests while saving some money in the bargain.

Take a look at some of the ways that credit cards can match up with various hobbies and pastimes, from food to fitness.

Dining out

For some of us, the experience and ambience of going to a restaurant matter just as much as the actual eating. The menu of best credit cards for foodies includes:

  • — This card’s 5% cash back bonus categories often include restaurant purchases once a year. Make sure to check the Cashback Calendar and activate your bonus every quarter.
  • Uber Visa Card — Earns 4% cash back on purchases at restaurants and bars as well as UberEATS orders. (Plus, $0 annual fee.)
  • — Earns 3X points on dining and travel worldwide.
  • — Earns 2X points on dining and travel.

TV, movies and music

Earning credit card rewards for enjoying video and music, streaming subscriptions included, is a surefire hit. Cards that reward video and music purchases include:

  • Amazon Prime Rewards Visa Signature Card — This exclusive card for eligible Amazon Prime members earns 5% points back on Amazon.com purchases.
  • — Earns 5 Sony Rewards Points per $1 spent on digital music and video purchases, plus movie rentals, concerts and theater purchases.

Books

  • U.S. Bank Cash+ Visa Signature Card — This card lets you choose your quarterly rewards categories to earn up to 5.5% cash back, and those categories include bookstores. (To maximize your rewards, you’ll need to concentrate your book purchases within that particular quarter.)
  • Remember the Amazon Prime Rewards Visa Signature Card listed above? If you buy books on Amazon.com, you can also get those 5% points back rewards.

Gaming

  • — Getting 5X points on PlayStation™ Store purchases? Game on!

Fitness

Using credit card rewards to get more value out of your fitness-related spending presents a special case. Many card issuers, such as Discover and Visa, have online shopping portals that include retailers offering sportswear and other types of fitness gear. If you apply rewards points to those purchases, you can turn your credit card into a workout machine.

Even if their rewards programs aren’t specifically geared toward fitness, cards may still offer special deals from time to time. One example is , which recently launched an offer for reduced rates on SoulCycle indoor cycling classes.

Homework first, hobby second

The right credit card rewards program can make your favorite hobby or pastime more enjoyable and more economical. Even if you don’t have a specialty card, you can still reap the benefits of credit cards that offer all-purpose cash back or points for general purchases.

Just make sure to research the offers and terms so that you fully understand how you’ll earn your points and cash back — work before play.

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Five Ways the Holidays Can Burn Your Budget (and How to Avoid It)

The holidays may be a wondrous and exciting time of the year, but that doesn’t mean they’re free from pitfalls. Not only do Americans tend to eat more (and pack on weight) over the holidays, but we all spend a lot more, too.

This holiday shopping season could be one for the record books. The National Retail Federation predicts 2017 holiday sales will increase 3.6% to 4% over last year, which was already its own record year. This means consumers could spend as much as $682 billion on holiday shopping this year, or up to $976 per person.

That’s quite a bit of cash to fork over for parties, decorations, and gifts that may or may not be necessary or even wanted. Unfortunately, a lot of the holiday hoopla (and associated spending) is often a waste, weighing heavily on our cash reserves and leaving us worse off by the time the new year rolls around.

Five Holiday Money Drains to Avoid

The holidays are a time to spend with family and celebrate your faith, but they can easily destroy your financial goals, too. If you want to make it to New Year’s without facing financial ruin, here are a few money drains you should try to avoid:

#1: Generic Gift Exchanges

Gift exchanges can actually be a good way to help everyone cut down their holiday shopping bill. Instead of buying for each person in your family, many groups have everyone pick a name from a hat (or use some other system) so that everyone is only buying for one other person.

Unfortunately, not all families or groups run their gift exchanges this way. Some decide to go with anonymous or generic gift exchanges that require everyone to bring a $20 (or any price) thingamabob that will end up in a random person’s hands.

Generic gift exchanges are the worst because, well, you have no guarantee your person will enjoy what you buy – and you may end up with something you don’t want, either. Sadly, I’ve experienced this misfortune firsthand. One time, my husband and I each purchased a $20 generic gift for an exchange only to bring home a new set of jumper cables and a ceramic elephant in return. I might as well have set $40 on fire instead.

The fix: If you’re able and willing to take the heat, try telling your family or work group you don’t want to participate in a generic gift exchange. Better yet, suggest a white elephant exchange where everyone brings a random, unwanted item from home instead. White elephant gift exchanges are a fun alternative, and you may actually end up with something you want — or at least a good laugh. Plus, there’s nothing to lose, since nobody has to spend money – you can just grab something funny lying around the house that you don’t really want, and wrap it up for the party.

#2: Secret Santa (or Sneaky Santa)

Secret Santa exchanges are another common gift-giving routine for workplaces and extended families. Everyone draws a random name – the person they’ll be buying a present for. But the “giver” is supposed to be a surprise until the end.

While Secret Santa groups with a firm price limit may be no big deal, these schemes are notorious for getting out of hand. A friend of mine recently told me that, in her office, her Sneaky Santa easily spent $100 or more on her because firm price limits weren’t set ahead of time.

The fix: If you’re going to join a Secret Santa group or jump into the one at work, make sure there are clear spending limits ahead of time. Spending $10 or $20 on a co-worker may not break the bank, but dropping significantly more than that could be a hardship – especially if you weren’t expecting to spend that much.

And, if you’re overly worried or just don’t want to spend the money, don’t feel bad opting out altogether.

#3: Stocking Up on ‘Stuff’ You Don’t Need

The holiday season is ripe with deals intended to get us to part with our hard-earned dollars. From Thanksgiving week to Black Friday, Cyber Monday, and basically the entire month of December, you can score stellar discounts on everything from household goods to clothing to electronics.

The good news is, the holidays are a great time to stock up on items you actually need. Sure, you’ll shop for holiday gifts, but why not save on items you need to buy anyway?

The bad news is, it’s far too easy to use these deals to justify purchases you shouldn’t really be making. We all know clever marketing ploys and flash sales get us to spend more, but the rush of holiday sales and “door buster” discounts only exacerbate the effect, whether you’re throwing in an extra pair of jeans just to hit the free shipping threshold or convincing yourself that it’s time for a new blender.

The fix: Before you shop over the holidays, make a list! There’s nothing wrong with treating yourself or getting a deal on the stuff you need, but you’ll spend less if you make a careful and thoughtful list of items you actually need ahead of time. It can also help to make a shopping list with spending limits for everyone you plan to buy for this year. Without a list or limits, you’re almost doomed to spend more than you intended.

#4: Not Paying Off Your Credit Card Balance

Unlike previous years, you’ve decided this is your year to earn cash back on Christmas presents. You signed up for the Chase Freedom® card early once you found out it offered 5% cash back at Walmart and department stores this quarter, and you’ve steadily used the card for all your holiday gifts so far.

But then, the bill actually comes… and you find out that you’ve spent more than you wanted, and more than you can pay back. So now, instead of benefiting from cash-back rewards, you’re stuck carrying a credit card balance and paying double-digit interest on your purchases instead.

Unfortunately, this scenario happens all the time. About two-thirds of Americans who took on holiday debt in 2016 weren’t planning on it, according to a survey by Magnify Money, and nearly half said they’d need four months or more to pay it all off.

The fix: The best way to ward off holiday debt is to shop with a list and a budget in mind. Buy only what you can afford, and only splurge on “extras” if you’re sure you have the cash to cover the bill this month. Not everyone benefits from credit card rewards — after all, somebody is paying the credit card interest that fuels these generous rewards programs. If you’re worried you may not be able to stick to a budget or plan, that somebody could be you – and you may be better off eschewing credit card rewards and sticking to cash or debit instead.

#5: Return Policy Mishaps

Another way to lose money this holiday season is to bungle your holiday gift return policies – or worse, throw away receipts. While lots of retail stores let you return items without receipts for store credit, you won’t always get the full value when you do (I’m looking at you, Kohl’s). Further, you might be stuck with items if you don’t understand a store’s return policies or know how long you have to get them back to the store. Hint: Check out our list of stores with the best return policies for details on retailers who are most generous in this regard.

The fix: It’s crucial to make sure you save receipts for all of your gifts and other holiday purchases. It might even help to keep a special folder or envelope for your receipts. If you’re doing a lot of online shopping, make sure to set up an email folder where you can store digital receipts as well.

Using a good rewards card that offers guaranteed returns is another way to avoid return policy mishaps. The Chase Freedom® card very generously offers guaranteed returns “if you are dissatisfied with a personal item that you purchased and the merchant will not accept the return.” You do have to use your card for the purchase for it to be eligible, however. Also, this protection is only offered on top of store guarantees or protections, or as a last resort. Fortunately, coverage is good for up to $250 per item with a limit of $1,000 per year.

The Bottom Line

The holidays are rife with situations where you’re expected to spend whether you want to or not. Between lavish holiday parties and pushy co-workers trying to rope you into who-knows-what, there are more opportunities to spend over the holidays than most people – or budgets – can handle.

Fortunately, you do have some control over your spending and the events you choose to participate in. And, like it or not, sometimes you just have to suck it up and say “no” to the people you love – and to yourself.

The holidays should really be about faith and family anyway, so don’t feel bad about setting limits. Your family and co-workers might raise an eyebrow if you buck the system, but your pocketbook will thank you.

Related Articles:

Which holiday money drains are you trying to avoid this year? Please share in the comments below.

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Wednesday, November 29, 2017

Six Essential Strategies for Negotiating a Raise at Work

Negotiating a raise at work is a powerful way to improve your financial situation with a single stroke. You suddenly have more income, which means that it immediately becomes easier to pay off debts, build up an emergency fund, save for future goals, and have some quality of life improvements to boot.

At the same time, a raise negotiation is something that many people dread. The simple act of negotiating something creates a challenging conversation of the type many people want to avoid, and some hold the fear that asking for a raise indicates disloyalty and will put the job they currently have in danger.

Remember, almost everyone on Earth wants better pay. It’s not surprising to your supervisor that you would want to have better pay – in fact, he or she probably assumes it. What matters is whether an employee has the courage to bring it up in conversation and whether or not that employee’s performance merits an increase in pay.

Furthermore, almost every strategy in this article works very well for other types of workplace perks. Let’s say that, rather than a raise, you want to be able to work just four days a week instead of five. Perhaps you want to be able to telecommute two days per week. Maybe you want to be able to start coming in an hour or two earlier and leave an hour or two earlier. Those types of changes can save you a lot of money in your day-to-day life and can also significantly improve one’s quality of life, too.

Here’s how to get started.

Use your performance reviews as a template. If you’re in an organization that gives regular performance reviews, your most recent performance reviews are the best place to start. Such reviews usually make it abundantly clear whether or not you are an effective employee (meaning you’re more likely to receive a raise if you ask). They also provide areas in which you can improve, and improving in those areas is often a clear path to be perceived as an exceptional employee.

So, grab those performance reviews. Are they strongly positive? If so, you already have a pretty good case for asking for a review. Are they mediocre, with lots of areas for improvement? If so, then you have a checklist of things to work on before asking for a review.

With just the simple step of looking back over your performance reviews, you instantly know whether or not you have a good case for asking for a raise and, if not, you also know what things you should be doing to build a good case for a raise.

Learn about comparable salaries and know what you want. This is another invaluable preparatory step: know what people in your field and in your area are getting paid. One great place to start is with Indeed.com’s salary database, which lets you see what people in your area are earning for the same job title as you.

Remember, use this as a baseline. If you’re an entry level employee, your salary should likely be a bit below the average, as the average includes people who are exceptionally talented and those with a lot of experience. However, if you are experienced or have a track record of exceptional performance reviews, then you should be expecting an appropriate salary.

Time your negotiation well. For example, it’s a bad idea to ask for a raise shortly after a poor performance review. It’s a bad idea to ask for a raise when the organization is having severe financial struggles. It’s a bad idea to ask for a raise when you’re on some form of probation.

It’s a good idea to ask for a raise after the successful completion of a project. It’s a good idea to ask for a raise after a glowing performance review. It’s a good idea to ask for a raise after you complete a major certification or earn a degree.

In other words, if you’ve just done something that demonstrates your strong value as an employee and the organization seems healthy, that’s a great time to strike. If you’ve not done anything to raise your profile or you have a less than stellar profile or the organization is struggling, then you shouldn’t be asking for more pay right now.

Be clear, but not emotional or demanding. When you decide to have that conversation, be clear and avoid emotion, particularly if you don’t get an immediate yes.

What you need to do is decide in advance what you’re specifically asking for and why you should get it – your performance and the salaries of people in similar positions as your own. Decide exactly what you’re asking for and give them reasons to say yes – do not give them reasons to say no.

So, for example, you might come in and request a 10% raise because you’ve had three excellent performance reviews in a row and you just played a key part in finishing up a particular project. You’re stating exactly what you want and why you deserve it.

If you are straightforward like this, without emotions and threats, and you’re clear about what you want, virtually all supervisors will respect that. As long as you don’t bring emotions into the situation or make empty threats or make “or else” demands, your supervisor is likely going to at least understand where you’re coming from. Everyone wants to be paid more, after all.

The same thing is true if the “raise” you want comes in the form of non-financial perks, like a more flexible working schedule or a day or two of telecommuting per week.

If you don’t get an immediate yes, don’t get upset. Don’t react emotionally. The story isn’t over yet. Be patient and calm.

Create a plan with your supervisor. If your supervisor declines your request for a raise, your immediate response should be “Okay, then, what do I need to do in order to receive such a raise?”

Work with your supervisor to come up with a plan that, if you complete it, will lead to the raise you want. It may be that your supervisor does not perceive your value in the same way that you do, so the goal here is to display your value in such a way that it’s abundantly clear to your supervisor in the terms that he or she cares most about.

Frame the conversation in terms of things you need to do to earn such a raise in the next six months. What do you need to do so that, when you have a follow up conversation in six months, the answer will be an easy “yes”? That’s your new checklist of things to do at work.

Document your efforts. If you have a plan that will lead you to a raise, keep track of it. Review it constantly, work toward the items listed there, and most importantly, document your efforts toward those goals.

Treat it like a work diary. Whenever you take steps toward any element of that plan, record it. Keep a saved document going that lists all of the things you’re doing to complete your part of that plan.

Then, when the timeline of the plan finishes up, you can draw upon those notes to make a detailed case for how you executed that plan and thus why you deserve that raise. You won’t have to include every detail, but you will have tons of source material to create a great summary that can be backed up with details if your supervisor digs into the rabbit hole.

One final suggestion: bulk your resume through these efforts. As you’re going through the steps to meet what your supervisor wants in order to earn a raise, don’t forget to think of those steps in terms of your resume. Most of the time, the steps in your plan also match up well with bolstering your resume so that, if your supervisor doesn’t follow through on his or her side of the plan, you are in a much better place in terms of seeking out a new job.

That’s the best part of this kind of process: not only does it increase your likelihood of getting a raise at work, it also sets you up for your next career step if you don’t receive that raise.

Remember, asking for a raise in a calm manner with a clear request and reasons for doing so won’t anger your boss in almost any rational situation. They’ll understand, even if they can’t immediately say yes. If you prepare for the conversation, it’s nothing to fear.

Also, remember that “no” isn’t the end of the road. It’s just the next step. Use it as an opportunity to build a plan for a “yes” down the road, and if that plan doesn’t get the results you want, use the results of that plan to improve your resume and find a better job.

Good luck!

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Went Overboard on Black Friday? Four Ways to Fix Things

An estimated 115 million people planned to snatch up bargains (real or imagined) on the day after Thanksgiving, according to the National Retail Federation. But that wasn’t the extent of the holiday buying. The NRF’s annual survey indicated that:

  • 32 million planned to shop on Thanksgiving Day.
  • 71 million would shop on Saturday (76% of whom said they would do so to support Small Business Saturday).
  • 35 million planned to shop on Sunday.
  • And 78 million would shop on Cyber Monday.

The Mad Men (and Mad Women) of Madison Avenue are very, very good at what they do. They know we want to make the holidays memorable for children, grandchildren, nieces and nephews, and significant others.

As a result, consumers may find themselves going into debt, or at least overbuying, to satisfy someone else’s idea of the perfect holiday.

And if that’s you? If despite your best intentions you went a little (or a lot) overboard with the spending?

Stop panicking and start fixing. The following tips will help you forestall debt or at least deal with it quickly rather than pay a ton of interest.

Fix No. 1: Return some (or all) of what you bought.

Obvious, right? Even if you have to pay a re-stock fee for an item, it sure beats wondering how you’re going to pay for the whole thing. Chalk up any fees to the Impetuous Tax and vow to do better next year.

This tactic works particularly well for people with children, since extended family members will likely provide gifts. So let Junior have one or two nice things from you, and fill in with the presents from grandparents and doting aunts and uncles.

(Pro tip: Consider observing the “four gift rule” — something you want, something you need, something to wear, something to read. Our children’s expectations should be shaped by us — their parents — rather than TV commercials.)

Suppose you went rogue with things like small appliances, accessories, tools, or electronics? Now is a good time to have The Talk with your significant other. (A better time would have been last year, but too late now.) During this chat, emphasize how much you want the holiday to be special, but that you blew it and overspent.

Suggest that the two of you set a reasonable spending limit in order to keep household finances on an even keel. Solvency is one terrific gift, especially when it’s given year after year. Then decide what to return, and have fun giving what’s left.


Note: Some deals truly can’t be beat. For example, personal finance blogger Lauren Greutman combined rebates, a store loyalty card, and a discount code with Black Friday sales prices and paid only 52 cents each for a slow cooker, coffeemaker, griddle, and waffle-maker.

If you got a deal that good, you should probably keep the items, because your coffeemaker (or whatever) will wear out eventually, or you could make some money selling them on a Facebook yard-sale page or on Craigslist. 


And if you plan to keep it all, no matter what, then move on to the next tactic…

Fix No. 2: Hold some items back.

Who’s gonna know? Your kid won’t magically sense that you originally bought him eight toys even though only four of them wound up under the tree. Your partner won’t know that he was going to get an iPad and a wallet and a bathrobe and new ski goggles.

Keep back some items to create a gift closet. Extra playthings will make great birthday gifts and, more to the point, will be on hand to give when your child gets invited to birthday parties in the coming year. Bonus: You paid rock-bottom prices for both the gifts you keep and the gifts you give away (#winning). 

The fleecy hat-and-glove set the store practically gave away on Black Friday could make a good Secret Santa gift at your workplace next year. If your kid brother will graduate from college in June, turn that 52-cent coffeemaker into a present for his first apartment. And so on.

However, deciding not to return any of the things you over-bought means you’re also deciding to accept a higher-than-usual credit card bill. To reduce the pain, get going on…

Fix No. 3: Make extra payments. Starting now.

But not from your emergency fund! Overspending on gifts is not a bona fide emergency.

Take a look at the budget and see how much wiggle room you’ve got. Suppose you’ve got a $150 cushion after paying the bills and allowing for the month’s gasoline and groceries. Send at least $75 to the credit card issuer right now. Got more than that? Send more than that.

Yes, before the bill arrives. The card issuer doesn’t care when you make payments. (Well, actually, it does care: These companies get rich because consumers carry balances.)

Make another payment when your next paycheck comes. Repeat the process until you’ve covered the cost of what you bought.

Understand: I’m not suggesting that you deplete your checking account, but rather that you man- or woman-up and accept the responsibility for your actions. Which brings us to the next tactic…

Fix No. 4: Get creative about the source of those extra payments.

This is a time of year when we spend more than usual. Not just on gifts, either, but on things like special foods, decorations, greeting cards, and non-gift items we buy for ourselves (e.g., that new television for the family room).

The challenge, then, is to find “extra” money in the budget right when you’re about to observe beloved traditions like an enormous Christmas dinner, massive holiday light displays, or the dozens of Swedish Creams and pepperkakor you bake every year.

Creativity is key. Here are a few options:

Cut back on small treats. Skip some coffees. Pack your lunch. Spend your Saturdays addressing holiday cards or playing games instead of hitting the movies. Make it a point to eat more (or all) your meals at home. If you usually hit happy hour at the end of the work week, either take a few Fridays off or sip a single beer and leave when it’s finished.

Do a “pantry challenge.” Make it your business to eat mostly or completely from the cupboards and freezer. If the only things you buy at the supermarket for the next few weeks are milk, bread, and produce, you can throw what you would have spent at the credit card bill. Bonus: You prevent food waste by clearing out some older stuff that wasn’t being eaten.

Look for a side gig. Put it out in the universe that you’re available for babysitting, dog-walking, helping hang holiday lights, or whatever it is you enjoy (or at least do well). Already got a side hustle? Push it a little harder: Take on more rideshare clients, say, or spend some evenings making more items for your Etsy store.

Ask your family for ideas. “Guys, we’re looking for ways to pay for a truly awesome holiday with cash. Who has ideas for places we can trim spending?” Your kids may have good tactics (“Do we really need holiday PJs?”) and they’ll get a sense of themselves as part of the family unit.

For more tips, here are some other ways to come up with extra cash quickly.

Festive Opportunity Cost

It really doesn’t have to be spelled “Chri$tma$” to be memorable. Considering the holiday’s humble origins, it shouldn’t be all about excess anyway.

Overspending may be due to nature (we want to make our loved ones happy) or to nurture (because you grew up with huge celebrations and think that’s the way everybody does it). Or it might just be that marketers really know how to whip us into an emotional frenzy during the last couple of months of the year.

Here’s how psychologist and author David Tolin puts it:

“(Merchants) have spent million of dollars in figuring out how to manipulate you psychologically into how to spend more money. Understand that most of us are powerless against that.”

There’s nothing wrong with giving gifts. But there’s a whole lot wrong with going into debt in order to obtain them. The success of a holiday celebration is not guaranteed by the amount of money spent.

Besides, the hundreds (or thousands) you drop each year translate to some pretty festive opportunity cost. How else might that money have been able to work for you? A retirement plan, the “down payment on a home” account, a long-delayed vacation, an emergency fund?

It’s not necessary to forgo the holiday if it’s always made you happy. Just make it more about love and togetherness than about conspicuous consumption. And yeah, pay the re-stock fee if you must.

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Veteran personal finance writer Donna Freedman is the author of “Your Playbook for Tough Times: Living Large on Small Change, for the Short Term or the Long Haul” and “Your Playbook for Tough Times, Vol. 2: Needs AND Wants Edition.”

The post Went Overboard on Black Friday? Four Ways to Fix Things appeared first on The Simple Dollar.

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Tuesday, November 28, 2017

The Incredibly Valuable Role of Frugality in Investing

My wife and I have no debts at all. We own our own house with no mortgage – we paid off the whole thing. We spend substantially less than we earn.

Taken those facts into account, people always ask why Sarah and I consistently make frugal choices. Why aren’t we going on great trips all the time? Why on earth am I driving a 14 year old SUV? Why do we buy store brand… everything at the store? Why do we only have one television, one that has a huge flaw on the screen? Why do I wear shirts that are more than ten years old? Why don’t we live in a McMansion?

The reason we do it is simple: It hastens and improves our retirement without sacrificing anything we really care about.

Our frugality is all about things of lesser importance to us. We actually prefer trips to national parks most of the time. I like driving my current car and hope to do so until it becomes unreliable. The store brand stuff fulfills our needs. Our television fulfills our needs. My shirts are still in fine shape. Our house fulfills our needs and is already plenty big enough. We don’t need to spend money on “better” versions of things if we’re perfectly happy with what we have.

At the same time, spending less enables us to save more for retirement. Our frugality plays a key role in our retirement planning – in fact, I’d say it’s the single most important element. Not our investment choices. Not anything else. Our frugal choices are the most important pieces of our retirement plan.

People often shrug off that statement as crazy talk. Trust me, I’ve seen it: I’ve talked about retirement planning in casual conversation with people and they simply seem to not believe me at all when I say that frugality is probably the most important ingredient. Their immediate assumption seems to be that there is some super secret investment trick to retirement, or else people are just making a lot more money than they are. While both are helpful, frugality is the secret sauce that makes retirement click for most ordinary Americans.

Let’s dig in and see how this works.

A Normal Non-Frugal Retirement Strategy

Let’s look at Bill’s retirement planning. Bill is 25 years old. He makes $50,000 a year and saves 5% of his income for retirement – $2,500 a year. He puts it entirely in a retirement account that earns a 7% annual rate of return – basically in something like the Vanguard Total Stock Market Index. He does exactly this for the next 40 years. At the end of those 40 years, he’ll have $516,555.85 in retirement savings.

That’s not too shabby. At a 4% annual withdrawal rate, which should last him through the rest of his life, he can take out $20,600 per year which is a great supplement to his Social Security benefits (which I estimate to be $16,800 a year using this calculator). That means that, for the rest of his years, Bill will have $37,400 in annual income at a very low tax rate.

Pretty solid, huh? Well, let’s change the picture a little bit.

Adding a Bit of Frugality

Let’s now say that Bill figured out how to spend just $5 less per week. Just $5 – that’s like a single stop at Starbucks or taking leftovers to work instead of going out once every other week or some mix of such options.

Over the course of a year (we’ll give Bill two weeks to spend money as he wishes), that frugality adds up to $250. So, let’s add that to Bill’s retirement contributions. He’s now saving $2,750 a year.

As before, Bill puts it entirely in a retirement account that earns a 7% annual rate of return – basically in something like the Vanguard Total Stock Market Index. He does exactly this for the next 40 years. At the end of those 40 years, he’ll have $568,211.44 in retirement savings. Because he chose to take leftovers to work once every few weeks and skip a morning latte every once in a while, Bill now has another $55,000 in retirement savings.

Bill didn’t use some secret ninja retirement strategy. Bill didn’t add a bunch of risk to his portfolio. Bill simply ate some leftovers a couple of times a month.

What did that change? Bill now can safely withdraw $22,700 per year rather than $20,600 – more than $2,000 a year more for the rest of his life. All because he skipped two morning coffees a month and drank whatever was in the office instead and brought in his lunch once a month instead of going to Applebee’s.

The Standard of Living Shift

Here’s another way of thinking about it. In the first example, where Bill isn’t doing anything frugal, Bill is living on $47,500 a year. When he retires in that case, his income will drop to $37,400 a year. (I’m not worrying about taxes in these examples as taxes will change significantly over the course of forty years.) His income will drop by $10,100 per year.

Now, if Bill takes just a couple simple frugal steps (as I mentioned above), he’s now living on $47,250 a year. However, when he retires, his income will now be $39,500 a year. His income will only drop by $7,750 a year.

In other words, because Bill made just a couple small frugality adjustments in his life, he’s suddenly in a position where retirement becomes much less of a shock and he doesn’t have to give up nearly as much of his quality of life as he otherwise would. In fact, once the cost of going to work is eliminated, Slightly Frugal Bill will probably have very little lifestyle change at all, whereas Not Frugal Bill will likely have to pinch some pennies and give up some real things.

Again, all because Bill found a way to spend $5 less per week. He literally just cut out the least important $5 of his spending each week and it made an enormous quality of life difference in the last thirty years of his life.

Kicking It Up a Notch

Let’s say that Bill is really excited by this. He goes through his spending habits and realizes that he’s spending about $40 a week in ways that are completely forgettable. He stops drinking so much soda. He switches to store brand dish soap and hand soap. He stops buying the expensive shampoo that his barber shop pushes and finds that, with his short hair, inexpensive shampoo and conditioner do a great job. Just little things that are almost completely forgotten in the big scheme of things.

So, rather than cutting his spending by $5 a week, Bill is cutting back by $40 a week. Over the course of a year, that adds up to $2,000 in additional retirement savings on top of the $2,500 he was already saving.

What does this change about Bill’s financial picture? After forty years of investing in the exact same way as in the story above, he’ll now have $929,800.53 in savings for retirement. That’s almost a million dollars.

If he takes the safe withdrawal rate of 4%, Bill will be able to take out $37,200 a year. Add that to his Social Security benefit of $16,800 a year and our friend Bill will have $54,000 a year in income. More Frugal Bill will actually be bringing in more money when he retires than when he was working.

In fact, if Bill just wanted to match his current income (after retirement savings) of $45,500 a year, he could retire at age 62 – three full years earlier – and take all of his living expenses out of his retirement savings for the first three years, then have a safe withdrawal rate for the next thirty years supplemented with retirement to “bring home” $45,500 a year. (He’d have lower taxes at this point, too.)

Our pal More Frugal Bill is retiring three years earlier than expected and will have no drop in income for living expenses for the last thirty years of his life, and all he has to do is take a few little steps like buying store brand dish soap and cutting back on his soda.

What About Other Steps To Improve Retirement Savings?

Investment books and articles tend to focus on two other strategies as the main way to improve retirement savings.

One is simply to invest smarter. Countless articles and books have been written about various retirement investment strategies. In the end, however, they usually require one of several things that most individual investors don’t have: access to a hedge fund, early access to information (by the time the book is written, the strategy is probably played out), tons of time to spend on research, or a great deal of luck.

I tend to subscribe instead to the “index fund” philosophy, which basically says that the best strategy is to shoot for exactly average with the fewest fees possible. In other words, you ride the stock market as a whole all at once and do it as cheaply as possible. This means that you won’t experience tremendous spikes in value, but you also won’t lose your shirt – instead, you’ll stick very closely to the overall average of the stock market. Many investment houses offer index funds that allow you to do this at a very low cost – they essentially just buy everything in roughly equal amounts and thus it doesn’t cost much to manage them. An example of this type of investment is the Vanguard Total Stock Market Index.

Another common strategy is to simply use a Target Retirement Fund, which essentially follows the same philosophy. Target Retirement Funds are typically invested very broadly in a wide array of things and with little hands-on management – it doesn’t take a whole lot of management to just “buy everything.” The difference here is that these shift over time, moving your money from more risky things like stocks into less risky things like bonds as you reach retirement and start withdrawing. An example of this is the Vanguard Target Retirement 2050 Fund.

In other words, “investing smarter” for most ordinary people involves investing in something very broad based and cheap and just sitting on it. You’re going to be hard pressed to consistently beat that strategy, let alone beating it by enough to do better than being even a little frugal and putting that savings aside.

The other avenue for saving more for retirement is earning more so that you can save more. This is a very solid approach, but it often requires a long time to build to a higher income. You can’t just magically flip a switch and be earning 20% more – if that were the case, we’d all be earning millions a year.

Working toward improving your income is absolutely a laudable goal, and success in that goal is incredibly valuable and useful for retirement goals. However, it’s not immediate. The advantage that frugality has in this case is that you can start being frugal immediately. There’s literally nothing stopping you other than your own behavior and your own desires in your head.

Remember, one of the best possible strategies for retirement savings is to start saving now, because the power of compound interest will never be as powerful as it is when you are young. Every month, every year that passes by, the less powerful compound interest becomes.

Frugality is the only strategy that can amp up your retirement savings immediately through your own actions and choices. There’s really nothing else like it.

Twenty Things You Can Do

The best part about frugality is that it’s an a la carte strategy. You can check out a huge list of frugality tips, ignore 90% of them, implement the other 10% that are easy and fit into your life, and save yourself $50 or $100 or more a month.

The key, however, is that you must actually do something productive with that savings. If you take on some frugality strategies that save you $100 a month, you should immediately go to your workplace and increase your 401(k) contributions, or immediately increase your Roth IRA contributions, or open a Roth IRA and contribute $100 a month to it. Don’t let the savings go unused or you’ll find yourself spending that money on other relatively unimportant things.

So, here’s what we’re going to do. I’m going to share twenty really good frugal strategies. Each of these will cut a person’s spending each month by a notable amount. I want you to skip 17 of them. That’s right – if they sound hard, skip them. Choose three of them that feel like they would have very little impact on the quality of your day to day life.

Make those three strategies a reality. Keep track of how much you save following those strategies in a month, then simply adjust your retirement contributions by that much. That’s it! That’s all you have to do!

Even if the change is just $10 or $20 a month, it’s going to end up making a profound change in your retirement savings over time provided you do it now. That’s the advantage of frugality – you can do it now. There are no excuses. You have the power.

Here are twenty straightforward frugality steps you can take.

#1 – Make a bunch of meals in advance, freeze them, and use them. Once a month, spend a Saturday afternoon making a quadruple batch of one of your favorite casseroles or soups. Put three of the batches in the freezer and eat them in the future on nights when you’d otherwise eat out – all you have to do is thaw them and finish warming them up, so it’s really easy. This eliminates three (or so) meals eaten out per month, so it adds up to significant savings.

#2 – Replace some of your routine household purchases with store brands. For most of your household supplies, like dish soap, dishwashing detergent, hand soap, shampoo, conditioner, shower soap, toilet paper, paper towels, and so on, try buying the store brand version instead of the name brand. You’ll save about $1 per item that you switch, on average. If you find that the store brand isn’t good enough, switch back next time, but for most of them, you won’t notice a difference.

#3 – Switch to all LED lighting at home. As you replace light bulbs around your house, buy LED bulbs instead of incandescent or CFL bulbs. LED bulbs last far longer and eat a lot less energy than incandescents, thus quickly recouping their higher initial cost. Compare your energy bill to a year ago and start socking away the difference.

#4 – Put a weather strip along the edge of any doors that leak air. If you have any doors that let in cold air in the winter or warm air in the summer along the edges, add a weather strip to block that air flow. It’s a simple DIY project that’ll take just a few minutes and it’ll significantly reduce your heating and cooling costs. Again, compare your energy bill to a year ago and sock away the difference.

#5 – Caulk the edges of any leaky windows. If you feel any cold air (in winter) or warm air (in summer) leaking in around the edges of windows, apply some caulk to the area where those leaks are occurring. Again, this is a simple project that takes just a few minutes and it can make a surprising difference on your energy bill. As before, comparing your bill to the bill from a year ago will show you the approximate savings.

#6 – Take leftovers to work. After supper, put together a simple meal in a reusable container such that you can just pop it in the microwave the next day, then sit that container in the fridge. The next day – or the day after – grab it on your way out the door to work, then eat it at work. You’re immediately saving several dollars versus going out to eat for lunch, having something delivered, or hitting a food stand or other convenient food option nearby.

#7 – Make coffee at home. There are tons of ways to make coffee at home in a convenient fashion that will drastically cut down the number of times you stop at a coffee shop to pick up coffee. Both a drip coffee pot and a cold brewing setup are incredibly convenient and make delicious coffee at home for a fraction of the cost of buying it at the coffee shop. If you can replace even one coffee shop stop per week with making a batch of cold brew at home, the savings are going to add up very quickly.

#8 – Drink filtered tap water instead of bottled water. We have good tap water here, so I almost never buy bottled water. Instead, I tend to fill up water bottles, keep them in the fridge, and grab them as needed. It’s cold and refreshing and costs just a penny or so. If you don’t have the best tap water and drink a lot of bottled water instead, you’ll save money very quickly by installing an under-the-sink water filter, which makes your tap water much better, or using a filtered water pitcher. The cost of replacing filters is far cheaper than the cost of buying endless bottles of water.

#9 – Use the library for “book shopping” or “movie shopping.” If you’re tempted to go shopping for a book or a movie or an audiobook, head to your local library instead and “shop” there. You can borrow anything on the shelves there for free, watch or read or listen to it, and then return it so it’s not taking up unnecessary space in your home once you’re done with it. It’s free, it saves space, and you’re still entertained!

#10 – Break a “vice” habit. If you smoke, stop. If you take drugs, stop. If you drink alcohol, stop. If you drink soda, stop. At the very least, trim your habit. Such consumable habits are the equivalent of burning your money – it just goes away, leaving you with nothing but worse health in very short order. It’s not worth it.

#11 – Write a meal plan and grocery list before you go grocery shopping. If you need food, spend the time to plan out your meals for the next several days on a sheet of paper or a whiteboard, then make a grocery list based on those meals. Use the grocery list at the grocery store and you’ll spend a lot less time at the store and buy far fewer incidentals and unnecessary items.

#12 – Stock up on holiday supplies right after a holiday instead of before. The best day to buy Christmas supplies like wrapping paper and so on is on December 26th. Everything’s on deep discount, so buy what you’ll need for the following year right then. The same is true for things like big bags of candy for Halloween on November 1 and so on.

#13 – Bulk buy nonperishable things that you use frequently. When buying items that you use frequently that don’t spoil – items like toilet paper or shampoo – buy it in large portions so that the cost per unit is the lowest possible. You can usually save quite a bit by buying 36 rolls of toilet paper at once or a jumbo jug of hand soap. Refill smaller containers out of the large containers of hand soap or shampoo so that you don’t overuse it.

#14 – Use the community calendar first when deciding on something to do. If you’re bored, don’t turn to expensive things like movie listings first. Instead, open up your local community calendar (usually found on your city’s website) and see what’s there. Check the calendar of any local universities as well. Quite often, you’ll find a number of free activities, and if even one of them is enticing, you’ve suddenly got free entertainment for the evening.

#15 – Cut the cable cord. Cancel your cable or satellite service and switch to a combination of Netflix, HBO Now, Amazon Prime, Hulu Plus, and free over the air HD television signals. A good strategy is to rotate those subscriptions and not have them all at once so that you can binge-watch all of their offerings, then move to another service, then eventually come back to one you’ve subscribed to before and catch up.

#16 – Switch banks. If you find that you’re not getting much of an interest rate on your checking or savings accounts, or, even worse, you’re getting dinged regularly for account maintenance fees or big ATM fees or other unnecessary fees, look into switching banks. See if there are any in your area that don’t have such fees associated with their account and then switch to that bank. Banks are in competition with each other – use that to your advantage.

#17 – Inflate your car tires to the maximum recommended amount once a month. This is such a simple free step that it’s well worth your time to take advantage of it. Keep a tire pressure gauge in your car, then once a mont, when you refill your gas, pull over to the free air pump at the gas station. Check the pressure in each tire and refill them all to the maximum recommended pressure (listed in your manual). Every single PSI you put into a single tire saves you 1/8% on your fuel efficiency, so if all of your tires are 8 PSI low (which is a common thing), you’re making your car 4% more fuel efficient for free.

#18 – Run your ceiling fans the right way. During the winter months, the blades of your ceiling fan should be running in a clockwise direction when viewed from the floor, while in the summer, they should be running counterclockwise. The direction is typically fixed with a little switch at the base of the fan. Having your fan running in the proper direction aids cooling in the summer and heating in the winter, making it feel more palatable even when the weather outside is extreme.

#19 – Lower your home temperature by a couple degrees in winter (and raise it by a couple in summer). Not sure about this? If you combine it with the previous tip and have the blades turning the right way on your ceiling fans, you’ll barely notice the difference in rooms where a ceiling fan is running. This simple change causes your furnace and AC to both run significantly less.

#20 – Master a handful of very simple “staple” meals. The temptation to order takeout becomes far less when you always have the supplies on hand for a simple meal or two that you love. For example, our family always has a jar of pasta sauce and a box of pasta on hand for a quick spaghetti meal, something we have a couple times a month. It’s a meal that either Sarah and I can assemble quickly, it’s very inexpensive (because we can always buy the items when they’re on sale and stock up), and it’s something our whole family likes. Find a few meals like that for you and your family and it becomes much easier to just make one of those instead of ordering food.

Final Thoughts

A frugal life provides the foundation for investing, no matter what your goal might be. Frugal choices enable you to start saving for your goals now rather than later because you control the action. You make the choice that gives you the money to invest with.

If you feel guilty because you’re not investing for retirement or for other goals, take a few frugal tactics, apply them to your life, figure out how much they’re saving you, and start investing that amount. You lose almost nothing from your quality of life, but at the same time you’re now working toward a powerful life goal and making real strides toward that grand destination.

Good luck!

The post The Incredibly Valuable Role of Frugality in Investing appeared first on The Simple Dollar.

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How a Home Equity Line Impacts Your Credit Score

Are you considering applying for a home equity line of credit? Home equity lines of credit, commonly referred to as HELOCs, represent an attractive type of financing that home owners may decide to take advantage of for a variety of different reasons. HELOCs are commonly used to finance home improvements, to pay off expensive credit card debt, and to pay off student loans, among other purposes.

What Is a HELOC?

In many ways, HELOCs are similar to credit card accounts. Instead of a fixed initial loan amount (as you’d get with a traditional home equity loan), the loan is set up to allow a maximum limit of available funds.

As a result, HELOCs offer flexibility to borrow only as much as you need, leaving you the option to access the remainder of your available limit at a later date if desired.

Unlike credit card accounts, however, HELOCs are secured by your home — and if you default on the loan, then the lender can take your house, as it has been pledged as collateral.

HELOCs resemble credit cards in other ways as well. Both are considered to be “revolving” lines of credit, reported to the credit reporting agencies as “R” type accounts (for “revolving”). And, interest is only incurred if you do not pay your balance in full each month.

Pros, Cons, and Myths About HELOCs

One of the biggest pros HELOCs may offer are their typically attractive interest rates. Interest rates will vary from state to state and lender to lender, so your best bet is to research home equity rates before you decide where to apply for your loan. However, since lenders get the security of your home as collateral, HELOCs boast rates that are much lower than the average credit card account and many other types of personal loans as well. That’s one reason HELOCs are often used to consolidate more expensive debts.

Another great feature of HELOCs is the fact that, like mortgage interest, the interest you’re charged on home equity loans, if any, might be tax deductible (though you should always check with your tax advisor to be sure). Additionally, HELOCs are the only other type of loan (besides a credit card account) where interest is optional, since you can pay the balance in full each month before interest is assessed, if desired.

The biggest con associated with a HELOC, as addressed above, is the fact that by securing the loan with your home’s equity, you could be putting your home at risk in the event of a default. Because of the way these loans are structured, a HELOC is sometimes referred to as a second mortgage.

Unfortunately, if you find yourself unable to pay back your loan, the lender might be able to initiate foreclosure proceedings on your home. The simplest way to avoid this, of course, is to borrow only what you can afford to pay back, and to pay your bill on time.

Finally, a common credit scoring myth has been born out of the fact that HELOCs are considered “revolving” accounts. It’s time to clear things up.

Credit scoring models like FICO and VantageScore are designed to focus on your revolving utilization ratio — that is, the relationship between your balances and credit limits — on your revolving credit card accounts. This means running up high credit card balances relative to your credit limits can lower your credit scores, even if you make all of your monthly payments on time.

Despite some misreporting on the issue, and the fact that both are considered “revolving” debts, HELOCs are not counted when credit scoring models calculate the revolving utilization ratio on your credit card accounts, as a HELOC is not considered a credit card account. Therefore, the fear that a heavily utilized HELOC may negatively impact your credit scores in the same way a nearly maxed-out credit card account might is unfounded.

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John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.

The post How a Home Equity Line Impacts Your Credit Score appeared first on The Simple Dollar.

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Monday, November 27, 2017

Questions About Exercise Equipment, Balance Transfers, Homemade Gifts, Multiple Cars, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Space in super-tight budget
2. Exercise equipment
3. Holiday decorations for new apartment
4. Stock market versus home ownership
5. Portable office backpack
6. Balance transfer drawbacks
7. Reality show warning
8. Worried about automation
9. Homemade gifts and feeling cheap
10. Holiday cards worth it?
11. One or two cars?
12. Regrets?

This time of the year, I start to get a LOT of questions about the holiday season. People want advice on gifts, family relations, budgeting, and so on.

I typically write an article discussing frugal gift ideas early each December in order to clear out a lot of those questions at once (you can expect that post sometime in the next ten days or so), but the reality is that the holidays are on the minds of a lot of Americans right now and it can be a real financial struggle to figure out how to make the holidays as wonderful as you want them to be.

Remember just one thing: very few people will ever judge you based on how much you spend if you are thoughtful with what you do. If you make thoughtful choices that really reflect the recipient in your choice or do something special that goes beyond what can be bought in stores, people really aren’t going to care about the price tag at all.

In other words, don’t spend yourself into oblivion this year or any year. The people that you’re giving gifts to wouldn’t want that. Instead, find ways to be thoughtful without spending too much.

Q1: Space in super-tight budget

I am currently in my early thirties, single, and renting in Jersey City, NJ (right across from New York City). I don’t own a car or have any dependents and my commute costs are paid by my company. I have approximately $9k in CC debt at 0% until 4/2019 and no savings other than about $9k in 401k. I have a budget set and don’t splurge on clothing, dinners out, or much else. After taxes I take home about $2600 monthly after contributing 5% to my Roth 401k (no match until 1/2018) then I hope to increase that. My expenses are as follows: Rent $1600 for a Studio apt within 2 miles of work, Savings of $400 to pay off my CC debt, $140 CC payment, $160 food, $65 for Internet/TV combined and $60 cell phone plus smaller expenses ($25 haircut, $20 laundry, $8 TiVo) I have little spare time and have high medical costs (doctors, prescriptions, etc.). Without starting a side gig like working part-time or blogging, I don’t see where I can cut my budget or how I can earn more. Any advice?
– Will

The most obvious thing I can think of is to seek out a roommate. That single move will knock off $800 from your rent, which would be a life changer for you.

To take a different approach, you could sit down with your boss and talk about what you would need to do specifically to earn a raise. What benchmarks do you need to hit to earn more? Your boss should be able to give you some guidance here.

Another thing to consider is that if you just ride this out for a while, those credit cards are going to go away, freeing up quite a bit of money each month for you.

You’re headed in the right direction and you have a few options, but things are tight for now. The biggest ingredient in financial improvement is patience.

Q2: Exercise equipment

I want to buy some free weights and a treadmill for home exercise during the winter. (didn’t really get how cold Wisconsin was going to be!! lol!) Is it okay to buy these at a used sporting goods store?
– Mary

Both of those items should be completely fine to buy from a used sporting goods store. You may also want to consider shopping on Craigslist for those things, as they often show up there.

There are very few sporting goods that are a bad idea to buy secondhand. I would hesitate to buy any gear that’s safety-related secondhand, as it may have suffered damage already and be less effective at protecting you. Almost all other equipment should be fine.

One final tip: before you invest in home equipment, make sure that you’re actually going to have a home exercise routine that makes the equipment worth it. Do you already exercise at home with a routine of some kind? If not, I wouldn’t buy everything all at once. Buy things a piece at a time and see if you actually stick to a routine, or else you’re just buying some expensive laundry racks.

Q3: Holiday decorations for new apartment

My fiance and I moved in together in August. Before that I lived with four other people in a rented house. This is the first year that I have needed holiday decorations. I want to make things look Christmas-y but we don’t have a lot of money. Thrift shops have nothing but junk.
– Dana

For your first Christmas, go minimal. Do things like “wrapping” your pictures so that they look like gifts hanging on the wall, or making centerpieces out of pine cones or cuttings from pine trees. Have a very small, very basic tree, with stringed popcorn kernels as decoration.

Then, on December 26th or 27th, head out to the stores and buy decorations for the following year. Right after Christmas, holiday decorations of all kinds go on sale at most department stores, making it a perfect time to stock up.

Put those items into storage and pull them out next year. You’ll have plenty of things to decorate with at the right price.

Q4: Stock market versus home ownership

If a person buys a house with the intent of living there for more than ten years, doesn’t it make sense to make the smallest possible mortgage payments and put extra money into retirement? The stock market returns 7% a year on average over the long term but mortgages are at like 4.5%.
– Connie

On average, over a period of longer than ten years, you’ll be money ahead by putting money into your retirement account and investing it aggressively than making extra payments on your mortgage.

However, the “floor” – the worst likely outcome – is better for putting money into your mortgage than into the stock market.

That’s what makes investing tricky. Paying off your house mortgage early is a safer investment than the stock market. Some significant percentage of the time – 30% or so – it’s going to be financially better to pay off your mortgage. The other 70% of the time, the stock market is better. However, the worst case scenario for stocks is a loss, whereas paying off your mortgage your mortgage is always a gain.

That’s why it’s hard to say that there is strictly a right or wrong answer to this question, because it all relies on estimates of future returns. The only right answer is to spend less than you earn and do something worthwhile with the difference, whether it’s putting money away for retirement or paying down your mortgage.

Q5: Portable office backpack

You’ve mentioned a few times that you have a North Face backpack that you use as a portable office. What do you carry around in there?
– Nicholas

My trusty “portable office” has pretty much everything I need to work almost anywhere. Here are the contents, which vary slightly at any given moment but are pretty consistent:

+ My laptop and laptop charger
+ A charger for my cell phone
+ A rechargeable external battery
+ A headset for listening to audio and occasionally making Skype calls
+ Several pens
+ A couple of notebooks – one is more of a writing pad
+ A book or two
+ A magazine or two
+ An empty water bottle
+ A few granola bars and (usually) a protein shake or two
+ A toothbrush and a small container of toothpaste
+ A few breath mints
+ A multitool

I can handle almost everything that my professional life might throw at me with those items. I just keep everything packed all the time.

Q6: Balance transfer drawbacks

Are there any drawbacks to transferring your credit card balance to another card? I got an offer for 0% interest balance transfer for 12 months and that would save me about $1,200 in interest.
– Sharon

There are a few drawbacks.

One, some balance transfers charge a balance transfer fee. This is usually just tacked onto the balance transfer amount – a balance transfer of $1,000 with a $50 fee would become a new balance of $1,050.

Two, the interest rate on a transferred balance once that initial offer runs out is often really high. A 32.9% interest rate is completely normal with a balance transfer.

A final indirect issue: it is common for people who have recently transferred a balance to suddenly have a bunch of available credit, and then they use it up in short order. That puts them in an even worse place than they were before.

Be aware of those drawbacks and be careful to avoid them.

Q7: Reality show warning

I just wanted to offer a “warning” to any of your readers who might be persuaded to take on DIY projects or make lifestyle choices based on reality shows. Most people on reality shows are fairly wealthy to begin with. Many of them have trust funds or receive a great deal of “outpatient financial care” from their parents which enables lifestyle choices that are impossible for most Americans. Many of the choices made are showy but very impractical for the long term. Treat such shows as pure entertainment, not DIY or lifestyle advice.
– Shari

The vast majority of “reality programming” on television should be treated solely as entertainment and nothing more.

As a viewer, you are barred from seeing the full reality of the situation. You don’t see the finances of the people involved. You don’t see the lifestyle choices and requirements involved off screen. You don’t see how the people on the show are being compensated for whatever is happening on the show. Are the producers paying for this? How much?

Because of that, I have a hard time seeing any value in most reality shows beyond the pure entertainment factor of the situation.

Q8: Worried about automation

I am worried that in the near future my job will be eliminated by automation. I do not have any training for anything else other than entry level retail.

I work in part supply. Basically my job is to pick parts out of a large warehouse and put them in bins to be shipped down a conveyor belt to [an assembly line].

Parts of the system have always been robots but over the last few years they have installed more sophisticated stuff and now there are only a handful of people up here left. We do the trickier tasks but it is clear that it is just a matter of time before robots replace us too.

What should I do? The people who were replaced before were “bought out” but I don’t want to trust that.
– Stephen

Get ahead of this. Talk to your supervisor about what you would need to do to become a technician for the robots that do the part picking. You already have a ton of domain knowledge about how the warehouse actually runs. Combining that with the technical skills for managing the arms would make you very valuable, and your employer would probably be interested in helping you to transition to that new job (as it would be far cheaper than retraining someone on your domain knowledge).

So, my first step would be to talk to your supervisor about it. Tell him or her that you can see which way the wind is blowing and you want to get ahead of it and actually be a part of what’s to come instead of becoming obsolete.

If they’re excited about it and want to help you train, take advantage of it. Dive in deep and learn as much as you can.

If they seem indifferent, you should expect that they’re planning to downsize you. At that point, you need to figure out what you want to do next and prepare for the cost of transitioning to a new job or career. Take advantage of the job you have for the time being to pay for the cost of classes or whatever else you need for a new position.

Q9: Homemade gifts and feeling cheap

I don’t have much money and want to make homemade gifts for everyone but I feel so cheap when everyone else is buying each other nice things and I’m giving people bundles of cookies and jars of jam. I feel like such a pathetic cheapskate and so I end up feeling bad and buying people stuff too.
– Chari

Here’s what I’ve found about homemade gifts: they’re the most loved of gifts if you really put in the extra step to personalize them.

For example, if your sister really, really loves apples and you make homemade apple butter for her and put it in a jar and put a note in with it about the time the two of you enjoyed apple butter together, that’s going to utterly blow away any store bought gift she’s likely to receive.

It’s that personal touch that makes handmade gifts excel. It’s not just making a bunch of jars of jam and giving them to everyone regardless of their personal tastes. It’s about finding some way to connect the gift you make specifically to the recipient so that they feel like you made it just for them – and you did. That’s when homemade gifts feel really special.

You have time. Spend some time thinking about something that the person you’re giving to will really like and make that thing, whatever it is. That’s the key to a mind-blowing homemade gift.

If you can’t come up with anything, then buy a thoughtful gift. Having to just buy a few gifts means that the holiday is still pretty inexpensive.

Q10: Holiday cards worth it?

Is it worth it to send out holiday cards to people? Seems like an expensive waste of money.
– Charlie

For me, the value of holiday cards depends wholly on the effort I put into them. If I’m just buying a bunch of highly expensive customized cards of which I print off about 100 and hastily mail them out without any additional effort (or merely to stuff a self-congratulatory “family newsletter” in the envelope), I personally don’t feel like it’s worth it. I don’t think there’s enough value there.

The primary value of holiday cards is to genuinely touch base and reconnect with people, and you can do that with a very simple card with a blank inside. If you really want the recipient to have a nice picture of your family or kids, just run off a bunch of prints and put them inside the card.

The problem here is that the blank inside cards not only take time, they take some thought, too. You have to think of something worthwhile to write on the inside that’s personally meaningful to the recipient, and that can be really hard to do. It’s that challenge that makes the personalized card worthwhile.

Put yourself in the shoes of the recipient. What’s more meaningful to you: a card that looks like it was pushed out of a factory somewhere, or a handwritten note that reflects on the relationship between you and that person? The thing is, that handwritten note is usually far less expensive.

Q11: One or two cars?

While I don’t need to replace my paid off, mid-sized, not terribly fuel-efficient car for hopefully several years, I like thinking ahead. Most of my year-round driving consists of short trips to the grocery store, to church, and to the gym, so usually I consider a subcompact, fuel-efficient car like the Prius C or the Honda Fit. But during the summer months I drive to hiking trails nearly every weekend, and each trip is usually over a hundred miles. I don’t look forward to taking a subcompact with low clearance up steep or poorly maintained Forest Service roads out of cell service.

A friend suggested getting an early 2000s SUV for the trails along with the subcompact for everything else. While I like the idea of having the right car for the right place, I hesitate at paying insurance and maintenance costs on two vehicles. Do you have thoughts on this?
– Stephanie

Well, with the “early 2000s SUV for the trails along with the subcompact for everything else,” you’re basically describing our vehicles. We currently have a 2004 Honda Pilot and a 2009 Toyota Prius in our driveway. My wife uses the Prius for commuting and we use the Pilot for most other uses – my daytime use if needed, hauling the family around, and so on.

What you seem to be looking for is a relatively fuel efficient and low cost all wheel drive sedan. You want the good fuel efficiency for commuting and local errands and the all wheel drive for hiking.

That’s basically Subaru’s wheelhouse – they make several models that fall right into that description. The Impreza (available as sedan or hatchback) and Legacy are both relatively fuel efficient and inexpensive sedans, while the Forester is a very solid inexpensive SUV that’s more roomy but a bit less fuel efficient. You can find them both new and late model used without too much effort.

If you’re willing to spend a little more, I can personally speak very highly of the Toyota RAV4 hybrid SUV, which is a small SUV that gets over 30 MPG both highway and city and has AWD. My in-laws have one and it is a very nice vehicle, though it is about 25-40% more expensive than the Subarus listed above.

Hopefully this gives you some options to look at!

Q12: Regrets?

Do you have any big financial regrets? You reflect on your good moves a lot but what ones do you regret?
– Ted

I regret not starting sooner. One might think that I would never regret spending a lot on my twenties, but the only thing that I spent a lot of money on that I don’t regret was my honeymoon with my new wife where we went to Europe. That one thing I wouldn’t undo, but almost everything else that I spent significant money on in my twenties is something I regret.

In more recent years, I regret not getting a better grip on my hobby spending. Overspending my hobby budget has been my most constant financial error in recent years, even though I recognize that most of the “overspending” tends to be on things that I never end up with enough time to really enjoy.

There are times when I regret leaving my research job and switching to work on The Simple Dollar full time, but that’s mostly because I miss the more interesting aspects of the work and a few of my coworkers. I still keep in contact with three of them, almost a decade later. Could I have made it all work for another couple of years? Should I have? I’m not sure if it’s a regret, but a question about my past.

I regret trying to manage all of The Simple Dollar by myself for so long. I should have done something different much sooner, because the stress of managing all aspects of the site from writing to the software that runs it to social media to talking with advertisers to making sure the server was running, all of it, almost completely burnt me out on anything having to do with it in 2010 and 2011. It took me a good year to recover any real passion for writing content for the site.

I have a lot of regrets. Those are just the big ones. The thing is, I try not to dwell on them but instead use them as fuel for making better decisions going forward. I can’t undo the past. All I can do is use the past to make the future better.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

The post Questions About Exercise Equipment, Balance Transfers, Homemade Gifts, Multiple Cars, and More! appeared first on The Simple Dollar.

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