31 Essential, Frugal and Wise Actions – 2

Part 2 of 6

Photo credit: kirstyhall via Foter.com / CC BY-NC

Here’s the second installment: Actions 7 – 11.

Make a list of all your newspaper and magazine subscriptions; cancel any that are not regularly read. Take action if you have a stack of periodicals piling up in a corner, untouched and unread. This ‘stack’ could represent hundreds of dollars wasting away every year. Chances are you only have time to read a handful of magazines each month. Frugal alternatives: (1) catch up on your reading for free at the local library (2) ‘share’ subscriptions or swap magazines with friends.

Review all recurring expenses (monthly and annual). Cancel any that are no longer important. These are expenditures that can add up but are easily overlooked as regular charges. They can include (but are not limited to):
- Gym, YMCA or health club memberships
- Pool or golf club memberships
- Any other association or club memberships where you rarely participate
- Credit alert or credit score services (of minimal value, provided you routinely review statements and your credit report)
- Credit or mortgage life insurance – incredibly expensive for what you get. Better to buy a term life policy.
- Subscriptions to video or music providers (Netflix, Sling, Pandora, Sirius, etc.)
- Annual credit card fees (unless the rewards exceed the annual fee)
- Monthly checking account fees – time to find a new bank or a credit union!

Contemplate whether it’s time to cut (or cut back) the cable. Here are several strategies for scaling back or eliminating the cost of cable:
- Cancel premium packages for channels rarely watched.
- Replace cable with a combination of over-the-air broadcasts and streaming services. Attention sports fans, click here for ways to get your sports fix – without the expenses of cable.
- Go old school: rent DVDs from RedBox or check out DVDs from the local library.
- Limit TV viewing – engage more in productive and healthy alternatives. Another advantage: you are less inclined to buy so much stuff when you are no longer being bombarded by commercials.

Investigate dropping the telephone land line – given the pervasiveness of cell phones, do you still need a land line? It depends…
- Pros: (1) dropping the land line could save several hundred dollars each year (2) lose the telephone ‘spam’: all those annoying telemarketing and robo calls. (3) simplify your life
- Cons: (1) there may not be much savings if your phone line is bundled with internet service (2) a land line typically has better sound quality; cell coverage is still spotty in many areas (3) emergency response for 911 calls is faster, since your address pops up in the 911 response center.

Review cell phone plans – cell phones, particularly those with data plans have become a big monthly expenditure. If you’ve had your plan a while, it’s time to shop around. Just be aware of any early termination fees. Take advantage of family plans where data and airtime can be pooled.

Cheers, Paul

Next time: Actions 12 – 16 Friday the 20th.

Photo credit: blavandmaster via Foter.com / CC BY-NC-SA

31 Essential, Frugal and Wise Actions

January is the longest month of the year. Granted, six other months also have 31 days. But none last as long as January. To help pass the time, I present you with 31 Frugal and Wise action items. Make that long, slow slog through January (and February) profitable. Enhance your finances.

I’ll be breaking down the recommendations into six installments between now and the end of the month. (Unfortunately, 31 is a prime number and can’t be evenly divided.) Here are Actions 1 – 6:

Review Auto and Home Insurance Policies: Call your current insurer and ask about reducing premiums; get quotes from competitors. Some of you might have experienced what I have: premiums go up year after year but then you phone your insurer and somehow, they find a way to reduce your premiums. Definitely worth a 10-minute call. If your present insurer can’t do much for you, it’s time to shop around. Possible ways to save: (1) increase deductibles (2) cancel comprehensive and collision coverage on older cars (3) ask if you are you eligible for discounts because of your employer, alma mater, memberships or affiliations (4) get a discount purchasing home and auto policies together from the same insurer (5) ask about discounts for teen drivers with Driver’s Ed and good grades. But avoid skimping on liability coverage limits. Here are the J.D. Power rankings for auto insurance: and homeowners insurance:

Consider Umbrella Liability Insurance: As you faithfully practice Frugal and Wise ways, your savings and net worth are bound to increase. You should consider adding an umbrella liability policy to augment the liability coverage provided by your auto and home policies. Typically, an umbrella policy brings your total coverage up to one or two million dollars. Yet, the cost is reasonable, perhaps several hundred dollars to around $1000 per year. Just remember: a million bucks ain’t what it used to be…

Start Gathering Tax Records: For most folks, preparing a tax return is less painful than a root canal, but not by much. Be on the lookout for 1099 and W-2 forms arriving in the mail or made available online. Tally up last year’s charitable contributions and other deductions. If you are getting a refund, you’ll want to file as soon as possible. If you owe taxes, you don’t want surprises – better to know sooner than later and be prepared. Make an appointment now with your accountant or tax preparer. If a Do-It-Yourselfer, start your return online or with tax preparation software. Here are tax prep software reviews from two sources: http://www.pcmag.com/article2/0,2817,1904319,00.asp , http://www.thesimpledollar.com/best-tax-software/

Check Your Payroll Withholdings: If you anticipate getting a BIG tax refund this year, congratulations! You just gave Uncle Sam an interest-free loan for the year with your hard-earned money. I realize that many, if not most, taxpayers prefer large refunds. But as the Frugal and Wise, you should be taking a different tack: increase your take-home pay by reducing tax withholding. Then immediately save or invest the difference. Just don’t overdo it; withhold too little and you could end up paying a penalty. Come every April, you ideally should owe Uncle Sam a modest sum, say, a hundred dollars or so. Ask your payroll or HR department for a W-4 form to increase the number of exemptions you claim (the more exemptions, the less taxes are withheld from your paycheck.)

Resolve to NEVER Pay ATM Fees Again: Believe it or not, the average ATM fee is now $4.57 per transaction! This is SO unnecessary. You might as well be tearing up Five Dollar bills and scattering them in the gutter! Tips for locating surcharge-free ATMS: (1) Convenience stores – 7-11, Wawa and Sheetz among others (2) Drugstore chains: CVS, Walgreens, Rite Aid (3) Your bank or credit union’s website may have a directory of free ATMs. Note: some “free” ATMs might ask if you want your account balance. Just say No! Otherwise you could get dinged 50 cents or a dollar. If it’s your bank that’s charging the fee, it’s time to switch banks or, better yet, join a credit union.

Pull Your Credit Report: You are entitled to a free credit report every year from each of the 3 major credit agencies: (Equifax, Experian, TransUnion). It’s important to verify the accuracy of your credit record as well as to detect any signs of fraud or identity theft. Visit the online portal annualcreditreport.com – you can either access your credit reports online or download a form to mail a given agency. I suggest staggering the three agency reports so that you are reviewing your credit record every four months.

That’s all for now. As always, your input and suggestions are welcome. The next installment will include Actions 7 – 11. Cheers, Paul

Photo credit: kathuw56 via Foter.com / CC BY-NC-ND

Take These Five Actions Before Year-End

2017-calander — My 2017 Dollar Store Calendar ($1.06 with tax) It’s the Muscle Car theme.

We are now in the last few days of 2016. Here are five Frugal and Wise actions you should take before the year’s end:

Stock up on holiday merchandise for next year. Take advantage of the post-Christmas deep discounts on holiday decorations, lighting, greeting cards and wrapping paper. Do not pay full price for the same items next November or December. (But please exercise some restraint in your post-holiday purchases.)

Pick up your 2017 calendars at the dollar store. OK, the dollar store calendars are not as nice as the on ones sold at book stores or Staples for upwards of $8.00. But are the calendars from Staples 8 – 15 times better???

Make last minute charitable donations – if you itemize deductions on your federal tax return, additional donations can reduce your 2016 tax bill (or increase your refund). Typically, those with middle class incomes are in a 25% tax bracket. That means that every $100 donated to charity could reduce your federal income taxes by $25. To qualify as a deduction for 2016, mailed donations must be postmarked no later than December 31^st. Donation by credit card or electronic fund transfer must be initiated by the 31^st.

Gather up unwanted clothing and household items to donate. This week could be a great opportunity to reduce household clutter and get a tax break to boot! All that stuff no longer being used can be carted off to the Salvation Army, Goodwill, Purple Heart or similar organizations. Be sure to get a receipt for your donation. As a rule, your donation is valued by what it would cost to purchase similar items in a thrift store (Thrift Store Value). Donating $100 worth of clothing and household goods (not all that difficult to come up with) could reduce your tax bill by, say, $25.

Bump up your retirement plan contribution by a percent or two – at a minimum, you should be contributing enough to your 401k or 403b to get the full match from your employer; failure to do so means losing out on a huge sum of money over a lifetime. Every year, try to ratchet up your contribution just a bit more: 1 or 2 percent each year? Such a small reduction in take-home pay likely will not be missed* but could significantly accelerate your retirement savings. See my posting You can’t spend what you ain’t got: Why You Need to Automate Your Savings.

*Example: If your annual salary is $60,000, one percent is $600 or only $50 per month. If your contribution is pretax and you are in a 25% tax bracket, your take-home pay is only reduced by $37.50 per month. Over a 30 year period, assuming a 7% annual return, these extra 1% contributions would accumulate about $56,000 in additional savings!

Wishing you a Happy and Prosperous New Year! Cheers, Paul

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A Class on Personal Finance

FYI for readers in the Philadelphia area: I will be teaching a class on stewardship and personal finance at Tenth Presbyterian Church starting Sunday, December 18, 9:00 – 10:15 AM, in Fellowship Hall east. There will be 9 sessions running through February 26, 2017 (no class on Christmas or New Year’s Day).

The class will be interactive and tailored to the financial questions, needs challenges and goals of the individuals attending. Bring questions!

Here are some of the proposed topics:

A Biblical perspective on money, wealth, stewardship and contentment
Practical suggestions on becoming savvy consumers, cutting costs, stretching dollars and living below your means.
Getting out of debt, staying out if debt. Good debt vs. bad debt
Saving and investing: the power of compounding, the importance of an emergency fund, long term investment for college and retirement. Saving for a house.
Legal essentials, particularly for families with young children.

Please join us if you can. Information on parking can be found on Tenth’s website. Regards, Paul

Running the Marathon to Financial Independence

Fall is marathon season here on the East Coast: The Washington DC Marine Corps Marathon took place October 30; New York’s was November 6 and the Philadelphia Marathon was held this past Sunday November 20 – traditionally the Sunday before Thanksgiving. (I’m not certain, but it’s quite possible that the route of the Marine Corps Marathon skirted the Washington Swamp.)

There are numerous parallels between completing a 26.2 mile run and attaining financial independence. First off, I am of the mind that many, if not most, people are capable of achieving either or both; I ran my first marathon at the age of 54. OK, you probably won’t place in your age group or BQ (qualify for the Boston Marathon) the first time out, but there’s a likely possibility that you can finish. Some people walk the entire route. Granted it takes them many hours, but they finish. (Disclaimer: do consult with your physician prior to undertaking such a rigorous goal). Both achievements require considerable effort, discipline, patience and time, but the rewards are worth it.

Let’s walk through (so to speak) the steps involved for both

Set Your Goals

Running a marathon doesn’t just happen: one must set intermediate goals (like a 5K or 10K run) while keeping your eye on the ultimate goal. The same goes for becoming financially independent. Granted there are rare and improbable cases when someone receives an inheritance or wins a lottery, but please don’t pin your hopes and future on either of these.

Set your financial goals and quantify them as much as possible: example: your kids graduating from college debt-free, living without financial worries for the rest of your life or leaving a legacy. Set intermediate goals as well – goals for attaining a level of savings and investments at a given age or stage of life. These intermediate goals are the equivalent to running the 5K, 10K and half marathon races on your way to a full marathon.

Plan and Prepare

You must plan and prepare to attain your goals. If you are starting out as a total couch potato, running a marathon will likely be a multi-year project. (Again, please seek guidance from your doctor first.) If you have several 5K or 10K runs under your belt, then a training plan lasting several months can get you prepared. I particularly like (and have used) Hal Higdon’s training plans. His novice runner plan lasts for 30 weeks while plans for more experienced runners last 18 weeks. Be aware of the commitment in time and effort. The longest daily run for all plans tops out at 20 miles, approximately 3 weeks before the big event.

Similarly, you must be planning and preparing for financial independence. Educate yourself on becoming a savvy consumer and investor – I’d recommend reading Kiplinger Magazine as a start. Read books on personal finance, seek the counsel of others. Above all, commit to a frugal lifestyle and living well below your means.

Arrive Early

The last thing you need on the day of your big event it to be stressed out getting there. Arrive early. Parking will be easier and closer to the starting line. Allow for time in the long Porta Pot queues. Stretch your muscles, focus your mind, chit-chat with fellow athletes.

For investors, time is you best friend. The earlier you start saving and investing, the longer your investments have to grow and multiply (refer to FW&W postings Pennies a Day and the Rule of 72).

Pace Yourself / Don’t Start Out Too Fast

The starting gun goes off. The crowds cheer. The loudspeakers are blaring the Theme from Rocky. At the starting line. you get a high five from the mayor himself. You are Pumped! Resist the urge to start out too fast! Relax and loosen up. Stick to your determined pace. You have many miles and several hours in front of you.

You get your first real job out of college and think you’ve made it. Guess what? After taxes, living expenses and going out with your buddies, there is probably not a lot left over at the end of the month. Pace your spending and keep it in check. You have years ahead of you on the road to financial independence. Another parallel: better to build wealth the slow and boring way (think low-cost index mutual funds) than trying to make a quick killing on risky investments.

Don’t Quit Too Early

The route takes you back to the Art Museum at mile 13. There is this sign, a very cruel sign: Finish line (for the half marathon) to the right, mile 14 (that’s you) to the left. You feel a strong urge to bear to the right and call it a day.

You career progresses and your income grows. It’s very tempting to give in to ‘lifestyle inflation’. Resist. Stay the course. Continue to live well below your means and invest the difference.

Persist, persist, persist

You hit the wall somewhere between mile 18 and 20. The very definition of eternity is running miles 20 – 25 of a marathon. One foot in front of the other. Keep going. This ‘eternity’ won’t last forever.

The going gets tough financially, too: college tuition, medical bills, a layoff or career transition. Keep at it. And don’t tap your investments if there is any way to avoid it.

Savor Your Accomplishments

Once you get to mile 25, you start to perk up. The end is in sight! You hear the announcer and sight the finish line. You did it! They drape you with a medal and hand you a bottle of water. Walk around some and go get something to eat. Celebrate with friends and family. And remember that an ice bath is more effective than a hot shower at relieving the pain of sore muscles.

Once you attain financial independence, you have options: downsizing your job, volunteering, pursuing a hobby or passion. A splurge or two is in order, provided you subsequently return to your Frugal and Wise ways.

PS I can’t write about running in Philadelphia in the vicinity of the Art Museum without giving you a link to the Theme from Rocky (Gonna Fly Now) Even 40 years later, it still gives me goosebumps.

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My Favorite Things Part II

Here’s the next installment of “My Favorite Things”

Vanguard Mutual Funds – the house that Jack (Bogle) built. Vanguard consistently has the lowest fees in the mutual fund industry. Even a small fraction of a percentage in fees can translate in tens of thousands or even hundreds of thousands of dollars difference over a lifetime of investing. While best known for ‘passive’ index funds, Vanguard also offers a number of excellent actively managed funds with low fees. Unlike most mutual fund families, Vanguard is not ‘owned’ by share holders but by its funds: ultimately by its investors. This is one reason it can keep costs so low. While I can’t vouch for it personally, Vanguard also offers a Personal Advisor Service to guide your investments. The fee is 0.3% annually with a minimum of $50,000 of assets managed, a fraction of what other financial institutions would charge.

Cons: I am not particular fond of the website but it’s adequate. There are no walk-in offices for deposits and transactions, not even at their headquarters in suburban Philadelphia. Paper-based transactions and forms must be conveyed via mail or courier. Not all of its actively managed funds are stellar performers. See this Kiplinger’s article on Vanguard Funds to avoid.

Kiplinger’s Personal Finance – a truly worth-while go-to magazine on personal finance, particularly for those just embarking on the journey towards Frugal, Wealthy and Wise. In it, you will find cost-saving ideas and strategies that potentially could save you hundreds and even thousands of dollars. I definitely prefer it to Money magazine. Kiplinger’s is more button-down with less fluff. A great tool for becoming a savvy consumer and investor.

Cons: Reading it year after year, a lot of topics tend to get recycled. Be objective about its investment suggestions. Personally, I am huge fan of Vanguard funds and believe that it’s the best place for most people to keep most of their investments. But the editors do have to keep the advertisers happy and, this may blur objectivity a tad.

The Economist – an erudite, insightful weekly news magazine that truly covers all corners of the globe. You will likely be scurrying to a dictionary (or google) and adding new words to your vocabulary with each issue. I particularly enjoy the quarterly Technology issues.

Cons: It’s expensive (but worth it IMO). While the weekly online edition is available on Thursdays, the printed edition usually doesn’t show up in the mail until Monday. The editorial slant is conservative on business and government policy but liberal on social issues. And it takes a fair amount of time each week to read cover to cover.

Just a word about magazine and newspaper subscriptions in general. These are discretionary expenditures that need to be scrutinized (see earlier FW&W posts “Catch the Little Foxes” and “25 to Thrive”). If magazines, no matter how worthwhile to read, are piling up in a corner unread, you probably should cancel the subscriptions. Kiplinger’s and The Economist are the only two magazines I currently subscribe to and it’s tough just keeping up with them. A frugal alternative: read these magazines at your local library.

Microsoft Money – I guess I’m an Old School kinda guy; I use a personal finance software package released 12 years ago and has since been discontinued. But it meets my needs: to balance accounts and track expenses over time; I don’t need a bunch of bells and whistles such as real-time updates of my accounts. You can buy a Money 2004 CD on eBay for under $10 (no activation key required on the 2004 edition and it runs fine on modern computers). Believe it or not, many financial institutions still provide statement downloads in the MS Money format for importing. If not, Money 2004 can import download files in the Quicken format. This is one of the very few Microsoft products (out of two, I think) that can be whole-heartily endorsed and they don’t even sell it anymore!

I encourage you to use some sort of personal finance application, either online or as software on your PC, to keep your finances in order. If using a discontinued software product such as MS Money puts you off, check out Mint or Quicken. Yes, there will be a learning curve. And it takes time to ‘feed the beast’. But it is far easier to balance a checking account. And tracking expenses is essential for the Frugal, Wealthy and Wise.

My Favorite Things: to be continued in the next posting. I would appreciate your feedback and the sharing of your experiences with any of these products and services.

Meanwhile watch this “My Favorite Things” clip from The Sound of Music movie c. 1965.

Enjoy. Paul

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