Thursday, March 13, 2008

Don't Pass Up Free 401(k) Money

When I first started my current job, I was surprised to find out that my company offers free money to anyone that invests in their own 401(k) retirement account. A lot of companies do this. Some will match up to a certain percent. I signed up as fast as I could. It was like I got an instant raise just for investing some of my own money.

What surprised me more than the free money my company offers, was that many people don't participate in their 401(k) to get the free employer match. If you don't invest the minimum part of your salary to get the matching funds, you are essentially turning down a free raise, and turning down free money. The average company only offers 3 - 5 percent. That is not a lot of your salary to withhold.

Investing in your company 401(k) and receiving your employer's matching funds is an instant 100% return on your money. You instantly double up. It is guaranteed. No risk. I cannot imagine why anyone wouldn't take up that offer. Forget about compounding interest and the benefits of long-term savings. You can instantly double up! With no risk! There is no other investment vehicle that exists that does that.

If your company offers free matching funds on your 401(k), put in maximum that they will match; no excuses. You double up instantly, with no risk. It really is that simple.

Tuesday, February 26, 2008

Disposable Things Waste Money - Simple Ways to Save by Reusing Stuff

If you use something often, find a way to use a reusable item instead. Buying the same thing again and again wastes money you could be saving and investing.

Water Mug/Container
If your office/school/place you go everyday has a water cooler or a water fountain, then do not buy bottled water. Buy some sort of mug or container that you like, and fill it up for free. You can save a hundred dollars or more a year depending on how much you drink. And I hate to be the one to break this to you, but it's the same water.

Lunch Bags
If you make your own lunch and bring it to work or school, you are already saving hundreds of dollars a year; good for you. However, if you are using disposable lunch bags and zip-locks, you are also throwing away money.

A brown bag is just a waste. Get a nice permanent lunch bag and you save money for the rest of your life. Also, instead of zip-lock bags, you can buy reusable sandwich bags. I got some and they're pretty neat. You just rinse them off and let them dry over night, and they are ready to use the next day. And if you actually make something better than a sandwich, invest in some nice plastic boxes.

This goes without saying; Don't ever buy batteries! Get a good set of rechargeable batteries, and recharge them.

USB Stick
Don't waste money burning data on to a CD or DVD every time you just want to bring something with you to work. If you aren't going to keep that data around, you're hurting the environment, and your wallet buy using permanent media. USB sticks are cheap, small, and convenient. Get one, and use it to bring digital data with you.

Digital Camera
First, don't buy disposable cameras. Second, if you still have a camera that takes film, you better be a photographer. If you want to save money, you should buy a digital camera. Not only will you save money on film, but you will also save on prints. You no longer have to waste money on an entire roll if you just want a couple of photos printed. But even better, you can email your pictures, or use a free online service like Flickr or Picasa and save even more.

How often do you wipe up a little spot of water with paper towels, or dry some dishes with paper towels, etc.? You might as well dry them with dollar bills. Using paper towels is so wasteful.  How did that become so prevalent in our kitchens. A good hand towel for drying dishes and water spills will save you money, and helps the environment. Paper towels have their uses (tomato sauce comes to mind), but not for that small spot of water next to the sink.

If your goal is to save money, then don't waste money buying things you could be reusing. While you are buying bottled water and batteries, I'm investing in stocks and making money.

Monday, February 25, 2008

Get Things Fixed for Free

I had a hair dryer that just stopped working. The last thing I wanted to do was spend more money on a new one. So I looked around, and by chance I still had the box and instruction manual. The hair dryer had a 2-year manufacturer's warranty. I didn't have the receipt, but the date of manufacture was less than two years ago, so I was in business.

I mailed it away and waited. And after a month of wet hair, I got a brand new hair dryer in the mail. It cost around 5 dollars to mail it, and they charged 5 dollars for shipping and handling. 10 dollars is much less than the 30 - 35 dollars it would have cost for a new one.

In the past I've had other things break or stop working and just bought replacements without considering the factory warranty. Don't be a fool and waste money on a buying something new when you can get it fixed for free. And often times, like I experienced this time, you'll just get a new replacement in place of the repair.

Save a little warranty information, and you can save a lot of money in the long run.

Tuesday, February 19, 2008

Recessions are for Buying

Everyone seems to be worried about the economy these days. As a result, the market is tanking. People freak out and want to cut their loses, so they sell everything and get out. Those people are fools. Now is the time to invest more money in the market.

Almost everything is down. Rule number 1: Buy Low. Everything is low now, tech stocks and financials especially. Apple and VMWare are two great examples of stocks you should buy right now. They are down a huge amount, but not because they are doing poorly. They are down just because the rest of the market is down. Both of these companies are increasing profits, and more importantly, have great future prospects for increasing market share and revenue. They will go back up; it's just a matter of when the market settles. Instead of trying to cut losses, you should look toward future gains.

Another sector of stocks trading at great prices right now are the financials. Wells Fargo and Bank of America are down because of the market, and because of the sub-prime mortgage nonsense, and a lot of other factors. However, this is all relative in the short term. These are huge banks and they will go back up. Now is the time to invest in them. And let's not forget about Citi!

When the market as a whole is down, your first reaction might be to sell and save from losses, but the market usually makes its correction and will settle, and go back up. But in the mean time, the best opportunity to buy is when everything is down. A recession is great news for an investor!

Saturday, February 16, 2008

DIY and Save Money - Computer Cables

A great way to save money is to do something yourself.

I have all my computer stuff in one corner, and it's a big mess. My goal was to organize and clean up the clutter from all the wires and power cords. I went to stores like Office Depot and Best Buy to see what my options were, and they were all the same: expensive. CompUSA had a computer cable organizer for $75, and it didn't really remove the clutter. No way I was spending that much money on a piece of plastic to wrap my cables around. So to save myself money, this became a do-it-yourself project.

Here is the before situation:

The goal was to hide and organize the following cables and power cords:
- APC power supply
- Cable modem
- Apple Airport Extreme
- 2 WD MyBook external hard drives
- Cell phone charger
- Camera docking station

I wanted a solution that looked nice and neat, but did not cost me any money. At first, I considered a shoe box, but the power cord transformers can get really hot, so it seemed like a fire hazard. So I went to the store looking for something similar to a shoe box.

I found the following at the Container Store. It cost $1.99.

I drilled holes in the top for air flow, and holes on the sides for cables to pass through.

The next step was to pack everything in the box, with the wires passing through the holes.

I tied the wires up with twisty ties to pack them in there nicely. The twisty ties only cost 1 dollar. Actually, I could not find just twisty ties. I checked the dollar store and Big Lots. So I had to buy some plastic storage bags to get the ties.

After everything is packed in the box and the cables and power cords hooked up, all that was left is to close the box and arrange everything into the corner.

I think it looks pretty good for the amount of time and money spent. It is definitely better than the mess of cables and power cords owning up the floor space before. Everything is neat and packed into the corner.

Total cost: $3
Total time: 20 minutes of work
Money saved: $50+

The lesson is don't spend a lot of money on something if you can do it yourself for cheap.

Free Stuff is Awesome

There are tons of ways to save money, but nothing beats free stuff.

I was surprised to see how many companies give away free stuff all the time. New product releases and promotional items are just given away to get the name out there. You just have to know when and where to get the free stuff. These two sites do just that.

Slick Deals

Fat Wallet

These two sites have deals every day that you would never know about. But better than the deals, is the free stuff. All the time there are coupons for free stuff. I've gotten free Smoothie King smooties, free Power Bars, Cliff Bars, Zone Perfect bars, even yogurt.

These sites have an RSS feed so it's really convenient to check. Just look once a day and see what comes up. Often they are limited time offers so you have to check daily. These sites will make sure you don't miss out on things like free-scoop day from Ben & Jerry's and Baskin Robbins.

Free stuff saves you money, and is awesome.

Tuesday, February 5, 2008

Buy and Hold

Investing is not a short-term activity. The object is to grow your money. The longer you have it invested, the larger your potential returns.

The basic rule is buy low, sell high. However, it really should be buy low, hold... sell high.

In the short term, stocks go up and stocks go down. Profits change, the economy changes, political events happen; you cannot predict what will happen in the short term. However, in the long time, the stock of a good company will go up. So invest for the long term, and you will not be in danger of short term volatility.

In addition to riding out short-term fluctuations in the market, you will save money in long-term capital gains taxes if you hold on to a stock for at least one year. However, if you are investing in stocks, then you should be in it for at least five to ten years.

Buy stocks of good companies, and hold them.

Wednesday, January 30, 2008

Don't Stop Saving

The Federal Reserve has recently cut the federal interest rate twice in two weeks. If you have your savings in a high-interest online savings account, you might have gotten an email detailing your new, lower interest rate. The attraction to these high-interest savings accounts is in the name: high interest.

Many online savings rates are down to around 3-4%. That's still a great rate, but not as nice as 5+% has been for the past year. You should not stop saving because you are earning less interest than you were before. 3.5% is still 3% higher than your local brick and mortar bank will give you.

However, if you are looking for a better return, now is the time to invest your new money in the market. Stocks are down and you know the rule: Buy Low.

But don't stop putting money away in your emergency fund, HDTV fund, house fund, or whatever you are using an online savings account for. Any amount of time your money isn't in your savings account, it isn't earning interest, and you aren't making any money.

Wednesday, January 23, 2008

Buy Low, Sell High

When stocks are low, buy. When stocks are high, sell.

Often people don't think rationally when it comes to their money. If the stock market starts to take a dive, people panic and sell. Even if it's at a loss, they will sell out of fear of losing more money.

You don't lose any money until you sell. If you have a long term buy and hold strategy then you have nothing to worry about. What you should do when the stock market falls, is buy more. The best time to buy is when everyone is selling out of fear. You can get good companies for great values because the stock price just followed the market. Once the market recovers, you will make out.

If the market is down because of an economic recession, you should buy. Again, the idea is buy and hold. Downturns and recessions are the best time to buy. The worst mistake people make when the market is down is to get out of the stock market. You want to get in while it's cheap so you can make the most return.

Thursday, January 17, 2008

Spend Less than you Earn

This is quite possibly the simplest money rule of all. Unfortunately, most people don't understand this, or just plain ignore it.

There is nothing hard about this rule. Your total expenses have to be less than your total income. For example, if you make $3,000 a month, you should not be spending $5,000 a month. The goal is to build wealth, not go into debt.

People who don't follow this rule generally fall into one of these categories:
  • They don't live beneath their means
  • They have no idea how much they are actually spending
Live beneath your means
This is an easy fix. Stop paying for things you don't need. If you can't find any spare money to save, and always end up deeper and deeper in debt every month, then you aren't living beneath your means. 

The key is to identify the difference between wants and needs. You want a new car, but you don't need it. You want a large house, but you don't need it. You want to eat out every night, but you don't need to. Cut back on things you want but don't truly need, and you can begin to live beneath your means. If you can't seem to do this because your rent and car payments are too high, then you need to sell your car and move to a smaller place. 

Look around you and reevaluate some of your purchases. For example, if you have 100+ DVDs and a 50+ inch HDTV, yet are going deeper into debt each month, then you aren't living beneath your means. Make some life changes, and start spending less than you earn.

Tracking your spending
If you don't track what you spend money on, then it is very easy to spend more than you earn. In the past, you would have to keep receipts or a written record of all your purchases. Now, everything is electronic and online. There is no excuse to not know where all your money goes. All major credit card companies and banks have an online account where you can track all your purchases.

If you have multiple credit cards, debit cards, and checking accounts, then you can use an all in one service like Mint. This site tracks your spending for you. Being lazy isn't even an excuse to not track your spending now. When you see in a pie chart that entertainment makes up half of your expenses for example, you can start to target your spending according. 

If you start living beneath your means, and track all your spending, you will be on your way to spending less than you earn. Only then can you start putting your money to work for you to build wealth.

Friday, January 11, 2008

A Blog Simply About Money

This blog is about money.

I want to work less, and make more money. Making money, saving, and growing your wealth should not be hard. I'm going to share my insight about money as I work hard at my goals:
  • Earn a higher salary
  • Earn more passive income
  • Save more money
  • Invest more money
  • Grow my wealth
  • Spend money smarter
I think these are all reasonable goals. Let's get started.