Wednesday, October 17, 2007

Saw these on my aggregator today

Some great, thought-provoking articles over at two of my favorite blogs.

J.D. over at GetRichSlowly talks about recurring monthly costs and whether they are worth it. Recurring monthly costs are something that I try to avoid as much as possible. Pretty much the only ones I have right now are my cell phone bill, which has been a static (but higher after I got my Treo) cost for years, and a subscription to Blockbuster’s cheapest online movie plan.

My cell phone is my only phone as well as now being my calendar, on-the-go email, address book, and main form of entertainment (via Monopoly!), so although I pay about 5% of my monthly income to the mighty Cingular/AT&T, I really don’t begrudge it.

The Blockbuster subscription started as a mystery shop requirement and I was reimbursed for the cost. When the shops were discontinued, I kept the subscription-—it’s $6.49 per month for two online rentals and two instore swaps making it only about $1 more than renting just one movie in the store. There’s a Blockbuster only a few blocks away from my apartment, and for the time being, this is a cheap treat for myself.

Both of these charges are auto-billed to my credit card, which is paid off each month in full.

And Trent at The Simple Dollar has been reviewing one of my favorite books, Your Money or Your Life, for the past two weeks or so, and today’s post focuses on ways to save money. These ideas are so unbelievably simple, so basic, I can’t believe everyone doesn’t automatically follow them. Alas, I’ve seen with my own eyes that many people don’t. In short order, my experiences with some of YMOYL's 10 sure ways to save money:

Live within your means.
How is it possible to spend more than you have? There's just some kind of mental block in my brain that requires me to pay off my credit card in full every month, just as if it were any other kind of bill. I don't know what my APR is and I don't care, because I don't use it. I only have so much coming in; therefore, I must have that or less going out each month.

Take care of what you have & wear it out.
This, also, is plain old-fashioned common sense. My parents took great care of a Dodge minivan that lasted for nearly 300,000 miles and was the starter car for me and my three younger siblings. That car could get banged up (as it inevitably did) as we all learned to drive. It sure was ugly, but under the hood it ran great. By the time it died (after probably 16 years), it was puffing out black smoke if you went past 45 mph and had only one windshield wiper. It had been in at least two minor wrecks, and the front passenger door no longer opened. When we graduated to our own cars, we knew how to drive carefully--and also how to maintain a car so that it would last a long time as well.

I'm getting some boots reheeled this week--they're perfectly good boots, but the heels are worn down. This could be a case of, "They're worn out, I should toss them"--OR it could be a "Take care of what you have" opportunity. I really like these boots and they're already broken in, so the $10 to get them reheeled is a better investment to me than $50+ for a new pair that I might not like quite as well.

The difficulty with both of these commitments is to make sure that we're not putting our effort in the wrong place. Quality clothes are worth taking care of and will take much longer to wear out--but their upfront cost is more expensive than a more cheaply-made item. Don't try to truly wear out a cheap shirt that is pilling or otherwise looks bad, and be willing to give up things that you'll never, ever wear out because you hate them. Go ahead and pass them on to someone else, because the costs (mental and physical) of clutter shouldn't be underestimated.

Anticipate your needs.
This is actually the only way a budget really works. If you're only budgetting for bills that regularly come up, like food, electricity, and cell phone, that's great, but an unexpected medical bill or even Christmas will completely throw you for a loop (and as with dieting, each time you "fall off the wagon" makes it harder to get back on again). This is where an emergency fund (for true emergencies) and sinking funds (for expected but somewhat irregular expenses) come in so handy.

For an emergency fund, figure what you'd need to survive for a month if you lost your job or got very sick or otherwise lost your main source of income. Then save six times that. Note that it's your EXPENSES for a month, not your current income--this can actually cut the amount you're saving almost in half, depending on how much you already save per month (and I guess in some sad cases, it might be MORE than your monthly income, depending on whether you're actually living within your means).

Sinking funds are also very easy--you can start by figuring either what you can afford to set aside (as in for gifts) or what the cost is going to be (like a once-a-year premium for renter's insurance) then divide that by the number of paychecks you get and start setting money aside. Failure to do either of these will be very, very ugly.

No comments:

Post a Comment

Thanks for commenting!