Extended Warranties?

Do you buy extended warranties? Here's an article from the Consumerist stating why you do what you do.

Why Pennies To Wealth?

I thought I should clarify why I called this blog Pennies To Wealth.

It has to do with the idea of saving small amounts and building wealth in the long run. In a post I wrote the other day regarding Ric Edelman who studied over 5,000 wealthy Americans, he discovered that many of them used small amounts of money to invest over long periods of time. They were consistent and found that their money grew surprisingly well.

Remember it may be easier to cut expenses on big items, rather than smaller ones, but keep in mind it all adds up.

Even saving your loose change every day will make a difference.

So the next time you wish you had more money saved, remember that small amounts over time add up, and that your pennies will turn to wealth.

Believe In Wealth

Warren Buffett has been quoted as saying,

I always knew I was going to be rich. I don't think I ever doubted it for a minute.

When It Comes To Money, Don't Follow The Crowd

Are you glued to CNBC or MSNBC during the day, following the latest stock market activity? Do you read all the money magazines every month? Do check your 401k balance every day? If you said yes to the above questions...I have one thing to say:

Relax.

You don't have to follow every move the stock market makes. It could be hazardous to your health. Maybe not, but let me explain.

If you pay to much attention to the news or your account balances you are more likely to make some emotional decisions instead of sound financial ones. When others start selling stocks so do you. When people are buying, you are more likely to buy. So what can you do?

Stick to your guns, and your financial plan. Even Warren Buffett says you should not follow the crowd. Create a plan, buy your mutual funds. Keep buying them when you can, and hold them for a long time before selling. At least five years.

The stock market can turn on a dime. Don't waste too much time changing your mind. Make a decision and stick with it. You'll be glad you did.

Mutual Funds: Another Key To Wealth

I only invest in mutual funds. I don't have individual stocks and I don't care too. If you ever wondered what a mutual fund was, and would like to know the pluses and minuses of owning them, here is a good article on the topic from fivecentnickel.com

Specialized Knowledge: A Key To Wealth

There are two kinds of knowledge, general and specialized. For the most part, general knowledge does nothing to help you acquire wealth. There is plenty of general knowledge being taught at high schools and colleges; but we as students are not taught the right kind of knowledge, or how to use it to make money.

Specialized knowledge is needed for the particular service or product you are offering. A key point is that you don't have to possess the information to use it successfully. There are several ways you can gain specialized knowledge: At the library, by asking someone, by distance learning courses, or night classes.

You can even have someone smarter than you are work for you. Of course you will have to provided fair compensation for their efforts.

We all have general knowledge. Maybe that is why games like Trivial Pursuit are so popular. There is nothing wrong with having general knowledge as long as you realize it won't help your money grow.

We get paid for the value we bring to a product or service. If we provide basic information that is readily available we won't be compensated as well as if we have a more specific skill set.

So remember to take the time to develop your knowledge, or find someone who has the skills and work with them. It will pay off by putting more cash in your wallet.

Why Renting Makes Cents

Here is an article from SmartMoney on MSN money. The author talks about why he rents instead of owning a home. Here is a teaser:

I have something un-American to confess: I rent an apartment despite having enough money to buy a house. I plan to keep renting for as long as I can. I'm not just holding out for better prices. Renting will make me richer.
I normally write about stocks for SmartMoney.com, but the boss asked me to explain to readers my reason for renting. Here goes: Businesses are great investments while houses are poor ones, so I'd rather rent the latter and own the former.
SmartMoney

Here is the rest of the article. After reading it, I don't feel as bad about renting. Do you own or rent?

Becoming Rich Is Not About Luck

Many people believe that wealth comes to the lucky ones; perhaps from inheritances or the lottery. Most of the time this is not the case.

Ric Edelman in his book Ordinary People, Extraordinary Wealth, studied over 5,000 wealthy people and discovered that most of their wealth came from small amounts of money invested over time. Here are some interesting facts from the book regarding those who became wealthy:

• They began investing at an early age. The average age when they began investing was 24. 10% of them started before they were 18.
• They invested small amounts. Their first investment averaged $658, while some started with anywhere from $100 to $499.
• 92% saved regularly throughout there lives.
• 81% put money aside into a special account. They'd save a few hundred and then invest it.
• Nothing stopped them from saving. Despite difficult events in their lives, only 4% stopped saving.

So if you think you need to hit Power ball, think again. Time is on your side. It doesn't matter if your in your twenties or eighties. Start saving today.

Make That Change

The secret to getting out of debt doesn't just mean consolidating your bills while finding the lowest interest rates you can get on your credit cards.

It's not like going on a diet, making changes for the short term, and then going back to your old eating habits.

To get on the right track with debt, you need to really spend the time doing a self inspection, and then, making changes. In an article from The Simple Dollar website, Trent reveals that he too, got into major debt. Instead of fixing the problem, he wanted to fix his actions temporarily, instead of facing the fact that his lack of self-esteem pushed his desire to impress others around him.

He suggests five things to think about if you are in debt:

1. What makes you truly happy in life?(Besides spending money!)
2.What things are broken in your life?
3. Set a one day goal
4.Discover things already around you.
5.Build relationships that aren't centered around money.

These are very good tips. Here is the article called, Prolonging The Inevitable.

How To Save An Easy $50 Or More A Month

In Ric Edelman's book The Truth About Money he lists these three tips on how to save some cash each month:

1. Save $10 or $25 dollars before paying this months bills. You'll still be broke at the end of the month, but at least you will have saved some money.

2. Don't spend your coins. Save your change every month and you could save $20 or more.

3. Use supermarket coupons, and use them correctly. The next time you get a dollar off coupon, save the dollar and don't spend it on anything else. You could save between $20 and $50 per month doing this.

Car Buying: New Or Used?

Financial advisor Jonathan Pond recommends the following:

If you love cars, buy used. The reason is if you are trading in cars more often; every four years or so, it will be more expensive if you buy new. Car values drop the most in the first three years.

If you hate buying cars, and want one just for transportation, it's best if you buy new. If you keep it ten years and run it into the ground it will save you money in the long run.

The best strategy he says, is to buy a four-year-old car and keep it for four years. That way you buy it after it's greatest depreciation, and before major repair work is needed.

Now I like cars...but I still bought new. Here's two reason's why:

• It was a demo and the price was reduced because of that.
• It's a Honda Fit, which should hold it's value well over the years.

I traded in my nine year old car for this new one. I wanted to get some value out of the old car and avoid many costly repairs.

I have bought both new and used cars in the past, and I have had pretty good luck for the most part in both cases.

What kind of car do you look for when buying...new or used? Leave a comment and let me know.

Ric Edelman On Not Paying Off Your Mortgage

Financial advisor Ric Edelman studied 5,000 Americans to see how they became wealthy. In his book Ordinary People Extraordinary Wealth, the one secret that surprised him the most was that wealthy people have the money to pay off their home but they choose not to.

Here is a clip from from YouTube where he discusses his finding.



Dave Ramsey and many other money advisors are big on paying off the mortgage. How about you?

Dave Ramsey's Take On Emergency Funds

For the past week or so I have been writing about emergency funds and how important they are. If you have money stashed away in a money market or savings account it will give you peace of mind.

Financial guide Dave Ramsey recommends saving $1,000 really fast for a starter emergency fund. He asks you to take steps such as, selling things, working part time, or trimming expenses from your spending plan to reach that goal.

After you save the $1,000 he then suggests that you start paying down your debt. Everything is to be paid off except for the mortgage if you have one. Once your debts are paid off, he wants you to go back to building your emergency fund up; to 3 to 6 months of living expenses. This step alone could take years to accomplish. The total amount saved should be anywhere from under $10,000 to over $20,000.

We are trying to set up an emergency fund in our household.

But...

At one time we did have a money market account earmarked for emergencies. That fund was erased when we bought a used car with cash. We really didn't need the car. That's mistake number one. I avoided debt...but used up our savings in the process.

Recently I replaced a 9 year old car with a new one. I took out a loan to do it. According to Dave Ramsey that was mistake number two. I really don't feel comfortable leaving only $1,000 in our money market to follow Dave Ramsey's advice. If I do that, in time we'll have a paid off car and no emergency fund aside from the $1,000.

My plan now is to put more money in the emergency fund and pay a little extra each month on the car loan.

I know Dave Ramsey wouldn't approve, but I feel this is the best choice to make at this time. What would you do? Pay off the car faster, or build up your emergency fund. I'm curious to know.

Are Credit Cards A Curse Or A Blessing?

Credit card companies are raising their minimum payments from around 2% to around 4%. What does this mean to you?

The average credit card debt per household in America is $8,000. If your credit card interest rate is 15% and you pay the minimum per month of $320 it will take you 12 years 10 months to pay it off. Your $8,000 turns into $11,574.42 after interest.

Sounds like credit cards are a curse to me.

A couple of months ago my wife and I applied for a mortgage (which we decided against.) We had a problem because my wife didn't have enough credit history. She doesn't have a credit card, she uses a debit card instead. She has paid off student loans, and co-signed on a car loan with me, which has been paid off. She got penalized for not using a credit card.

I on the other hand, have been rewarded for using a credit card, because the majority of the time I pay off the balance in full every month.

Are credit cards a curse or a blessing?

How many credit cards do you use? Will you be able to pay the minimum per month when payment rates go from 2% to 4%?

Here is another good article from MSN Money. Take a look and see where you stand.

Credit cards are what I like to call invisible money. Sure they are convenient, but we do pay on average 18% more on items we buy with credit cards instead of cash. I have two credit cards, but I use only one. I use it for gas, or doctor's visits. Sometimes, however, I use it to buy groceries, or I'll use it at the bookstore. It's at those times I am sure I am spending more.

Are you spending too much? Are credit cards a blessing for you, allowing you to build your credit? Or are they a curse...keeping you from paying off other bills, or for saving and investing?

This is a question we should all be asking ourselves.

To Buy A Home Or Not To Buy

My wife and I have gone back and forth on buying a home. We have been renting for 11 years. The reason we have stayed put is that our rent is cheap. If we were to move into a home or townhouse our costs would go up about $1,000 a month.

We use that money now as a cushion to save and invest. In fact, we really don't bring that much extra home a month, so we would need to get more income to make a house payment work.

Some say this is a good time to buy. Others say wait until the moment is right for you.

If you are debating the own vs. rent question here is a good article from Liz Pulliam Weston on MSN money.

She mentions that there are reasons to buy now, but there are three reasons that aren't as good.

They are:

The theory that you are throwing your money away when you rent
You want to buy a house as an investment
You want to buy for the tax deduction

Either way there are positives and negatives to buying a first home. Leave a comment on your thoughts if you want.

Richest Man In Babylon Steps

Here are seven steps from the Richest Man In Babylon on how to acquire money:

1. Start thy purse fattening (pay yourself first)
2. Control thy expenditures
3. Make thy gold multiply
4. Guard thy treasures from loss
5. Make of thy dwelling a profitable investment
6. Insure a future income
7. Increase thy ability to earn

Want More Money? Look In The Mirror

If you're not happy with your money situation take a look in your mirror.

The mirror tells us a lot about ourselves. I'm not just talking about what you look like on the outside. To me, the term looking in the mirror is a reminder that you need to inspect yourself fully.

On the inside and out.

So start on the inside. With your mind.

What are your attitudes regarding money? Is it the root of all evil? Do you depend on it? Love it? Hate it? If you can decide what it is about money you like or dislike that can help you to see what you need to do to acquire more.

How badly do you want money? Are you willing to come up with a plan, decide how much money you want, how you are going to get it, and when you will have it by? These are all things to consider when looking inside.

Now to the outside. Have you got the look?

The mirror doesn't lie. Are you trying to look wealthy or be wealthy? Do you wear the latest fashions, drive sports cars, and buy new gizmo's every week? I think it's best to be wealthy and not look wealthy. How you look on the outside plays a large part as to what people think of you, however, you can look good without wearing the most expensive clothes.

If you can look and be wealthy at the same time, more power to you. If not, lay off of the spending sprees, and work on becoming rich. Inspect yourself fully. Then decide to claim the money that is already waiting for you for having paid the price of looking in the mirror.

Dave Ramsey On YouTube

Here is a cool clip of Dave Ramsey on how to be financially successful...

Napoleon Hill's Six Steps To Riches

Here are what Napoleon Hill calls six definite, practical steps to acquire riches:

1. Fix in your mind the exact amount of money you desire.

2. Determine exactly what you intend to give in return for the money you desire.

3. Establish a definite date when you intend to possess the money you desire.

4. Create a define plan for carrying out your desire, and begin at once to put this plan into action.

5. Write out a clear, concise statement of the amount of money you intend to acquire. Name the time limit for the acquisition. State what you will give in return for the money, and describe clearly the plan through which you intend to accumulate it.

6. Read your written statement aloud, twice daily, once in the morning and once before going to sleep. As you read, see and feel and believe yourself already in possession of the money.

Use Your Mind To Attract Money

Before we can accumulate riches in great abundance, we must magnetize our minds with intense desire for riches.

Napoleon Hill

Think And Grow Rich

Avoid The Temptation To Spend Your Emergency Money

Once your have some money in your checking and emergency fund you may get tempted to spend it. You know, the kind of temptation you feel at midnight when you raid the fridge? Or the high you get when you hit the mall for a shopping spree?

It's the little kid in you screaming I want it now!

Think of the money in your emergency fund as off limits. Remind yourself that it's for a rainy day and leave it at that. It will feel good to know it's there, and just as important, it will be a relief to have it when an emergency hits.

In my opinion, in addition to the emergency fund, it's a good idea to keep at least $1,000 in your checking account. That way, if you have a cell phone bill to pay, you won't have to wait for your next paycheck to pay it off.

Remember, your checking account is in addition to your emergency fund. Imagine how tempting it would be to have emergency money in your checking? Don't do it.

Temptation is all around us, but if you want to save your money and build a financial foundation, avoid the urge to spend it.

The Importance Of An Emergency Fund

Sometimes life throws you a curve ball. You lose your job, your car transmission goes (this happened to me for a total cost of $3200) your washing machine dies. These events happen all the time.

An emergency fund protects you against these things by allowing you to dip into your savings to pay for them instead of going deeper into credit card debt.

The experts disagree on how much you should stash away. They say anywhere from 2 to 8 months of living expenses should do the trick.

For example if you have a freelance job that pays you different amounts each month you probably want to have 6 to 8 months of living expenses saved. If you feel your job is secure then you may only have to put away 2 to 3 months of expenses.

According to Dave Ramsey, you should start with $1,000 in your savings. On top of that I feel you should have $1,000 as your average checking account balance. This may help you from living paycheck to paycheck.

You may find it difficult or easy to build up your emergency fund, but you will sleep better at night with the savings in place in case something goes wrong.

How You Can Save $300 Or More A Month

Here are several ways to squeeze extra money out of your spending plan each month:

Credit Cards Are Risky

Some reports say that we spend an extra 18% when using credit cards as opposed to cash. It's like invisible money. It's just so easy to use that plastic instead of our hard earned pennies.

Let's say you use your credit cards for groceries, dining out, or clothing. If you spend $200 to $500 a month, you're really spending an extra $35 to $90. If you have finance charges of another $50 dollars, that would (on the conservative side) bring you an extra $100 saved by cutting back on your credit card use.

Bank Fees

If you keep your checking account near zero, and use a debit card that takes money out of your checking, you could be paying a lot of money in bank charges. $20 here, $45 there. You could save $50 a month avoiding bank fees.

Your Bad Habits

Sure we all have them, and I'm not suggesting you live like a saint, however, if you cut back on your bad habits it could save you some money. Maybe you smoke, or eat out often. Maybe you buy lunch everyday, or a coffee, or soda. You could save an easy $100 a month cutting down on these habits.

Don't Spend Your Tax Refund

The average tax refund is $2400 a year. What if you only get back $1200? If you don't spend it, that's another $100 a month in savings.

Total Savings A Month

Credit Cards - $100
Bank Fees - $50
Bad Habits - $100
Tax Refund - $100

Total savings...$350. That's a lot of pennies folks.

The Greatest Value

The greatest value in life is not what you get. The greatest value in life is what you become.

Jim Rohn

Motivational Speaker

A New Hope

Hope is defined in Webster's Dictionary as:

1. To cherish a desire with anticipation

2. To expect with confidence

Maybe you have made some mistakes with your money. Maybe you're deep in debt, or you just don't have enough money to make it through the month.

If you have reviewed your spending plan and are disappointed at the results, now is the time to take a step back and take a look at the whole picture.

Just because you're not in the position you want to be with your money doesn't mean you won't be someday.

As Webster's points out, hope is expecting with confidence that a desire will come true. This blog has been created to give you the tools to move ahead in your quest for financial freedom.

To become wealthy, you first have to see what you're doing wrong, and then follow a plan to head in a different direction.

You've got to believe you can do it.

It takes as much effort to aim low in life as it does to aim high. Why not make the decision now that you are going to create goals and strive to reach them?

I know the stock market and the economy are down, but they will rebound. Things will get better, but you have to make some changes first. If your money plan is not working, (or if you don't have a plan) make the choice to create a new one.

Perhaps you can earn more, or cut your expenses. Or maybe you can do a little of both. In future posts I'll write about methods to free up cash, and how to set goals...and reach them.

How many times has something gone wrong in your life only to turn out okay?It's the same with your money.

Expect with confidence.

Create A Spending Plan In Seven Easy Steps

It's time to tell your money where to go. A spending plan is the method we will use.

You've probably heard of spending plans or the B word (budget) but I prefer to use the term spending plan. They basically work the same way. But...

the word budget sounds so cold, so restricting, soooo boring.

What is a spending plan?

A spending plan is simply a way to keep track of your money month to month. It allows you to record your spending, and hopefully your saving habits.

The Seven Steps

1. Track your expenses and savings or retirement accounts for one month, (see my post Keeping Track Of Your Cash)
2. Use any of the following to track your information; a pad and paper, an Excel spreadsheet, Quicken or Microsoft Money.
3. Create a category for every item or event you spend money on each month.
4. Take your estimated income for the month and break it down into each category. For example $250 may go to your car payment, and $1500 for rent.
5. Some items will be fixed, such as your rent or mortgage. Others will be flexible such as the minimum balance on your credit cards, or the cash you put into your savings. (If you don't have enough cash left to put into savings don't worry for now, we'll get to that in a later post.
6. Don't forget to list any expenses that are not occurring every month but come up throughout the year. For example, spending on birthday gifts can occur during any certain month of the year, so add that spending to your plan for the month they fall on.
7. Create a plan every month.

Conclusion

A monthly spending plan plays an important part in getting you on track financially. Once you get the hang of it, it should only take you about fifteen minutes a month to complete it. Of course you can spend more time crunching the numbers if you're anything like me and enjoy that sort of fun.

Napoleon Hill Quote And Link

Whatever the mind can conceive and believe, it can achieve.
Napoleon Hill

Here is a YouTube video of Napoleon Hill. He wrote Think And Grow Rich after studying over 500 wealthy men.

Keeping Track Of Your Cash

We get in trouble when we don't keep track of our spending. Does your money disappear as soon as you get it? Are your dollars spent before your get your paycheck?

If you answered yes...take a deep breath. You're not alone.



In Jean Chatzky's book The Difference her research tells us that 54% of Americans live paycheck to paycheck.

And 15% get further in debt each month.

It's time for you to get control of your spending. Here are three options to start:

1. Use a pen and paper (sounds simple, but it works)
2. Use an Excel spreadsheet
3. Use a money program such as Quicken or Microsoft Money

What To Do

Two quick notes: Save all receipts, and don't count ATM withdrawals as one expense. Cash from the ATM should be recorded separately depending on what items you spend it on.

For one month (to start) do the following:

Set up categories you spend your money on such as; rent/mortgage, electric bill, car payments, credit card 1, credit card 2, and so on...

Keep a piece of paper or pad with you during the day and keep track of every penny you spend.

At the end of the month, add up your expenses by category, and then total your spending for the month.

Subtract your expenses from your take-home pay(after taxes)

One of three things will happen:

• You will break even(not bad)
• You will have more income than expenses(very good)
• You will have more expenses than income(ooops)

A Closer Look At Your Expenses and Income

If you really want a clear picture of your financial situation before you subtract your expenses from you income please read the following:

You have expenses that come up throughout the year that you don't pay for every month. For example, Christmas or birthday gifts come around during the year. Think of any expenses you pay that aren't monthly and estimate the total amount you spend. Then divide that number by 12 months and you will have your estimated yearly expenses. Add that number to your monthly expense number you calculated earlier and that will give you a more accurate idea of where you stand with your outgoing cash.

For example...

Lets say you spend $4,000 the month you track your expenses, and you calculate your yearly costs are $3,000 dollars(divided by 12 months = $250 per month.) Your estimated monthly expenses would then be $4,250.

To get a better idea of your net yearly income, take your take home pay for one week and multiply it by 52 weeks. Then divide by 12 months. This will give you a more accurate monthly income amount because some months have 5 weeks and others have 4.

Conclusion

In one month you will have a clearer picture of where your money goes, and how much you take home. It may not be a pretty sight, but at least you will know where you stand. Read on for future posts to help you get on the right track.

Are You Ready To Turn Your Pennies Into Wealth?

If you answered the questions in one of my previous posts regarding where you stand with your money, then you know where you are financially. If you're happy with where you're at, you can still enjoy this blog and hopefully learn some new tips.

If you're not happy with your financial footing...it's time to make a change.

Would you like to:

Stop living paycheck to paycheck?
Have some more money in your checking account?
Take a vacation now and again?
Fund your retirement so you don't have to work until you're 90?(unless you want to of course)
Drive a car that doesn't need tape to hold it together?

If you would like to do any of the above, it's time to act. You have the ability to change your future.

As you will soon read, the first part of your plan may be the most difficult. Hang in there. It will get easier as you build your confidence...and your cash.

Please remember this. We all make mistakes with our money. I'm learning about how to handle money just as you are. We have a journey ahead of us, but instead of viewing it as difficult, lets view it as a challenge.

Make a list of your own financial goals. What do you really want? You need to develop a strong desire for what you want in order to eventually get it.

A Bit Of Hope...

When riches begin to come, they come so quickly, in such great abundance, that one wonders where they have been hiding during all those lean years.

Napoleon Hill / Think and Grow Rich

7 Questions To Ask About Where You Stand With Money

Many of us are living on the edge with our money, and not in a good way. We live paycheck to paycheck. If we were to lose our income we would have no financial cushion to fall back on.

The first thing we need to do is take a look at where we are, before we can go forward.

Here are 7 questions to ask yourself:

• Are you living paycheck to paycheck?
• Do you have an emergency fund set up?
• Do you set aside money each month for retirement?
• Are you getting further into debt each month?
• How much money do you have in your checking account?
• Do you have a plan to make your financial situation better?
• Are you ready to make a change?

Take some time to go over your answers to these questions. Your responses may make you feel unpleasant, but by looking at where you are, you can decide where you want to be.

The Five Laws Of Gold

Written here (in my own words) are the Five Laws Of Gold from George S. Clason's classic -The Richest Man In Babylon:

1. Money will be attracted, and come in greater amounts, to the person who places no less than 10% of their income toward the future.


2. Your dollars will be hard workers if you find wise places of employment for them.


3. If you are careful and seek council on where to put your money to work, it will stick close to your side.


4. You will lose your money if you invest in a venture you don't understand or is not run by those skilled in the project.


5. You will lose money if you look for unreasonable earnings and seek others that have wild dreams and inexperience handling your money.

I think this is good information to start the blog off on the right foot. Consider these laws, and ask yourself if you are following any or all of them. You may be surprised at your answers.

What This Money Blog Is About

This blog is for anyone who wants to turn their pennies into wealth!

I myself am interested in the process of growing wealth, and my goal is to teach you about personal finance, and in turn trust that your comments will help me to write a better blog.

I have read many personal finance books, talked to those who have money, and have tried out the methods I have learned with some success and some failure. I will turn to those methods in my writing as well as create original posts to hopefully set you on your course to get rich.

This is not a get-rich-quick money blog. You will need to put in the effort. Together, my hope is that we can all turn our pennies into wealth.

Enjoy