Saving Money Archives

Tips for investing at an early age

When a person starts investing money at an early age, the result is that this individual is sure to have more money for payment of homeowners insurance premiums whenever the individual decides to purchase a house. In fact, starting an investment strategy at a young age can help a person to have $500,000 or even $1,000,000 by retirement age, even if the individual does not earn extremely high wages at a job.

Stock Market Volatility Can Lead to Insanity

Seasoned investors know that money grows over time, and they develop the habit of ignoring constant volatility of the stock market. Besides the fact that paying constant attention to the positive and negative whims of Wall Street can literally drive a person to the brink of insanity, ignoring daily stock market fluctuations helps a person to stay on track with an initial investment plan. Constant buying and selling of shares may reap rewards in the present, but eventually this type of investor may end up losing a substantial amount of money.

The Gentle Art of Investing Money is not a Game of Poker

Investing and gambling are not identical practices. At least, these two concepts used to be different. In today’s world of investing, the fact that many investors own computers makes it extremely easy for them to engage in daily trading of stocks and ETFs. The old adage of holding onto stocks and mutual funds for long periods does not appeal to many modern investors who prefer to take their profits and run for the hills. The problem is that once they sell shares, the gambling fever mentality persuades them to buy shares again on the following day. Since every investor makes mistakes, the likelihood of making a serious error is higher when a person persists in treating investing as though it is a poker game.

The Traditional Viewpoint about Investing

People who know about successful investing advise investors to start when they are young. A twenty-year-old man who starts investing money in a bond fund or equity fund that pays good dividends can add small amounts of money every week or each month. Forty-five years later, when the person is ready to retire, he or she is going to have a surprisingly high amount of money invested in these stocks or funds. Dividends keep reinvesting, and the person does not even need to do anything to earn these dividends. The money simply grows throughout the years. Another benefit that goes along with this type of investing is that the investor spends his or her time participating in meaningful and beneficial activities instead of spending every day reading stock market reports and comments from analysts.

Young Persons Need to Open Up Brokerage or Mutual Fund Accounts

In order to invest money in stocks, bonds or mutual funds over a long period of time, a young person first needs to establish a brokerage or mutual fund account. Opening an account is simple. Once the individual has an established account, he or she can research different investment options. The safest and wisest sway to invest money is to choose quality stocks or funds that pay good dividends. The next step is to add a little bit of extra money on a regular basis. A young person who sticks to this plan is sure to achieve extremely positive results in the future.

This article was written by Bill Johnson, who is the primary writer for homeownersinsurance-quotes.org, which specializes in home insurance rates and quotes.

Saving Money with Gardening is Unlikely

Growing Your Own GardenIf you are like me, you are probably enjoying the benefits of growing a garden this time of year. The joys of growing a garden are vast, but the benefits are oftentimes overplayed. Saving money with gardening is not as easy as it sounds. Most likely, you will not save any money growing a garden. Does a garden have the potential to save you money in the long-term? Of course, but the typical garden setup is often very inefficient.

Imagine with me, that you want to grow a large quantity of tomatoes. Let’s imagine 20 tomato plants in a 10 by 10 plot. So what kind of costs should you consider for your tomato garden?

First off, you need the seeds or plants themselves to start growing your tomato garden, a cost that varies tremendously based on type of tomato (heirloom for instances) and age (seeds or small plants). You might have to rent or buy a tiller to till your soil. You may need some soil amendments (peet moss, top soil, etc. ). Odds are you will need to protect your investment from fuzzy adorable critters with some sort of wire fencing. Speaking of wire fencing you will most likely need wire fencing posts and wire tomato stilts.  You might need some hoses or hose attachments (I love drip hoses).  Last but definitely not least, you will need water for your plants.

What is the total investment for this tomato plot? About $100 up front and probably about $5 a month in water during the hot months. The math is as follows:

  • Tiller (Rental, 4hrs) – $40
  • Soil Amendments – $20
  • Fencing and Posts – $35
  • Seeds – $1
  • Hose and Attachments – $10
  • Watering – $5 a month

This is a very conservative estimate for growing your tomato garden, but it is easy to see that most likely you are not going to cut out $100 of your food budget with this tomato plot.

You can collect your own water and use a composter to drastically mitigate the costs, but rain collectors and composters are an added upfront cost as well. If you start talking about raised bed gardens, the cost is even worse.

Now of course there are more effective ways of getting your garden to pay out, but the long and short is that most people do not garden with cost in mind. Gardening is peaceful and enjoyable and that is the payoff for most individuals. Individuals who will spend countless unpaid hours tending to large gardens, breaking even or slightly ahead at best.

Best ways to make growing a garden more cost effective.

  • Economy of Scales – Larger crops usually reduce overhead
  • Composter –  You need to amend your soil with nutrients that are cost effective
  • Grow from seeds
  • Have land with good soil
  • Have a free water source
  • Variety of Plants can reduce your food budget. Having just tomatoes might take a chunk of your tomato budget, but why not grow some garlic and onions while you are at it?
  • Selling your garden, but be warned that permits are most likely needed.

Why You Will Never Be A Millionaire Making $50k a Year

Are you the type of person who constantly strives toward becoming the next millionaire? You might think that with a frugal lifestyle and proper investing, you will obtain the status of self made millionaire excluding your retirement benefits. Sadly the truth might be, that if you are not making a lot of money, your odds of becoming an inflation adjusted millionaire aren’t very good.

An example would be an individual making $50,000 a year will probably have approximately 25% (or more) of their money going to health care and taxes, bringing their monthly take home to roughly $3,100. Depending on where you live and your lifestyle, there is a good chance that you will likely have at least a base level of expenses of roughly $1250 – $1750 (rent, food, phone, utilities, clothing, and etc.) Now of course there are exceptions to this such as living rent free with a relative, but in most scenarios, about half of your take home pay evaporates every month. If this person was a financial martyr and didn’t buy anything, take any vacations, drove an old car, etc., its reasonable to think they could scrap up $1,500 every single month.

Assuming 6.215% yearly growth, how much do you think this $1,500 a month would be in 10 years? If you said a million dollars, you are wrong. It’s a quarter of a million dollars unadjusted to inflation. Assuming 2.5% inflation, it’s only $195,299.  If you continue to save $1,500 a month for the next 20 years (30 years total), you would now have $1,706,600 unadjusted for inflation, but let’s not forget capital gains taxes. If taxes remain constant, you are looking at paying about $175,000 (or more) in taxes. After taxes and again assuming 2.5% inflation, this amount would only equal $730,183 after inflation.

Even though this individual saved $1,500 a month for 360 months, they would still not have an inflation adjusted million dollars in thirty years. Imagine where you are 30 years from now. It is possible that your income has increased, but most likely your responsibilities have as well (kids, housing, etc.). Can you imagine saving $1,500 a month on a $50,000 income? I make more than $50,000 a year and I only save approximately $400 a month.

So what is the point of this article? To offer perspective on becoming a millionaire by just being frugal. Most likely most people with careers will become millionaires when including retirement accounts, pensions, social security, etc., but the idea of becoming a self made millionaire by only living frugally might not be the best approach. The best way to become a millionaire is a combination of living frugal and increasing ones income whether that be through a promotion, side business, or a spouse working.

Smartphones seem to be vital part of our everyday life, but the costs of having these smartphones is getting out of hand. With most major carriers (Verizon, AT&T, Sprint) , a smartphone, such as an iPhone 4s, can run about $80 or $90 with data per month. Of course there are many discounts offered by these carriers (Such as 15% or 20% off for working for any large company). But even with these discounts, these phone plans can be financially crippling.

I myself was paying $76 a month for my Galaxy S2 (Now Evo 3d) on Sprint with Unlimited Data, Unlimited Mobile to Mobile, and Free Nights and Weekends (after 7pm). For those who do not know, Sprint tends to be viewed as the cheaper carrier versus Verizon and AT&T. Recently I added my girlfriend to my plan with her iPhone 4s and was shocked to hear the cost per phone was still going to be roughly the same, and in fact a little more. I can’t believe they don’t offer any discount for that second phone on a plan. But what about a third phone? Sprint Cost Per iPhone

This is where things get interesting. Adding a 3rd, 4th, and 5th phone is roughly $30 a month more per smartphone. That means you can get five iPhone 4 ‘s (or any other smartphone) for about $240 a month (after 15% discount off the base plan, excluding surcharges and taxes), that’s $48 per phone. This of course would also make you liable for a five smartphone contract, but at $48 per phone, this is a sweet deal. This is most likely the cheapest iPhone family plan out there.

But you don’t have to be a family to do it. In fact you don’t even have to share a relationship. Girlfriends, boyfriends, friends, or just acquaintances are all eligible to join your plan. But once again, remember the contract holder is liable for payment.

The best course of action would be to find people that will either:

  • Prepaid the entire 2-years ($1,152 + $36 activation = $1,188 + any phone insurance premiums), or 
  • Prepay $350 for the early termination fee (ETF), so if they don’t pay they are dropped off the contract on their dime, or
  • Go with someone you trust whole-heartedly (such as family)

Whatever you decide, be careful and get it in writing. Make sure everyone understands what the plan entails. If you do opt into this cheap family sprint plan, you can plan on saving about $22 – $40 a month against other major carriers, which is $528 – $960 per phone over the 2 year contract ($2640 –   $4800 for all 5 phones). On the high end of that savings scale, that’s a cool five grand in 2 years. It can be a lot of hassle, but with numbers like this, it might be worth the hassle. For a complete breakdown of how the Sprint family plans are priced, take a look at the image below (click to enlarge).

Sprint Cheapest Family Plan

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