How to invest when you're broke.

So you want to know how to invest when you're broke, huh?

Say you're making $25,000 a year and know that (along with feeding yourself, paying for gas, rent, etc.) you need to start thinking about your future. It pays to do that, because even small amounts add up surprisingly fast if you invest on a regular basis.

Couple points to the article:

1. If you're making only a little bit of money (up to $15K for a single person), the IRS will give you a 50% credit on your contributions to a retirement account.

2. Invest in mutual funds or exchange-traded funds to mitigate your risk.

3. Usually, the only way to invest small amounts is through automatic payments.

4. Check out the fund's risk at using Morningstar's rating system.

The article also lists funds that are open to investors only able to pay a small amount each month.

This article definitely makes it seem doable to invest with only a small amount of money. The only caveat is to live below your means to ensure that you have that money to invest. This will insure that there is extra and that there are NO debt payments. But, even if a person is paying debt, like me, one could still invest in these funds.

Thoughts?

Clink

Buy more, save more?

Normally, this is the conventional advice when buying items in bulk or large quantities. The reason is that, usually, you save more per ounce/package. Case in point: It's generally cheaper to buy a 24 pack of toilet paper than a 4 pack of toilet paper.

There is a problem with doing this, though.

First, if you were only going to buy a small amount because that's all you needed, buying the bigger size actually costs you money. Let's say you never eat sour cream or eat it only once every few months and now, the time has come for a loaded baked potato. So you go to the store where you can get the 16oz container that is, like $.15 per ounce (or something similar) and costs $2.95 or you can buy a 4 oz container that is $.45 per ounce, but only costs $1. So, what do you do? I would buy the $1 size because that's all that I'll use. If I bought the bigger one, the majority would go in the garbage and I would have wasted $1.95.

Second, you're encouraged to buy more. Take those 2-for-1 deals at the store. If you shop and you stick to a list, they blow your shopping budget out of the water, especially if it's something that you don't regularly use. Chips, soda, and juices are a great example of where I get sucked in often. (Ocean Spray Cranberry mixes are my downfall.) If you take advantage of 3 offers during one trip, it may cost you up to $10 per trip, $40 per month, and $520 per year. This also applies when shopping for other items: "Oh, its such a great deal, I have to get X!" (However, this can be an argument for flexibility in your budget, if you use the item frequently.)

Saying no to supersized savings can also be beneficial to your waistline. At one point, I was over-weight, so I had to cut back on the junk food. I only allowed myself to buy small bags of chips and cookies and the single-serve sodas, even though they were more per ounce. (My gf at the time could not wrap her head around the concept, encouraging me to buy a big bag and break it up into little sizes. But, my will power was zilch.). Plus, it was so much work to find the small sizes, that I rarely ate the treats at all!

So, save money and lose weight!

Clink

Work or go to school?

I sent this in an e-mail to Single Ma the other day:

I'm studying anthropology (to be read as a career with NO money - anecdote: my professor always tells us that if we want to make money in Anthropology, we should marry lawyers!). I eventually want to get into Public Health (to be read as a career with A LITTLE money) and work for the UN/W.H.O. or the CDC/NIH. But, I'm still figuring it out.

It's funny (though, not really), sometimes I struggle with staying at my job and making NO money, but getting my schooling paid and other FABULOUS benefits (these people give me retirement money and I don't have to contribute - yup, just give it to me!) or going to another job and making WAY BETTER money but getting crappier benefits and struggling to study and pay my schooling (i.e. loans) or, hell, even quitting work altogether and busting my ass to finish school (which would get me started sooner in my career and towards making money). For now, I am comfortable with my decision, but I haven't really crunched the numbers.

What would y'all do or what have y'all done?

Clink

Accumulating wealth? Not here.

Apparently, I'm a bad millionaire in training.

Saw this on Single Ma's blog recently:

Make sure that your lifestyle does not expand to fit your income when times are good because we have no idea what’s just around the corner. (Link)

I read this and it makes me sigh because my gf and I don't do this and it's terribly unfortunate. We finally get into a position to pay off some bills and something always comes up.

For example, just around the corner, we will be taking over my mom's car loan (we're getting the car, too) and I will be giving my mom a monthly stipend until she gets back on her feet (see, I know where you're coming from btc). Not only will this add to the bills that we already have, but it will cut into my ability to pay the credit mofos. For the car, we had a few options:

Keep our old car with no payment and let my mom figure out her biz.

This would have meant me paying my mom more money, particularly if she kept the car. If she sold the car, then I would be helping her out when she needed to drive somewhere (often down here in S.FL).

Take over my mom's car and sell our old one and leave my mom w/o a car.

This just ain't right. If we decided to take over my mom's car and not give her one, I would have felt like crap.

Take over my mom's car and give her our old one.

My mom gave us the car when we needed it, so one good turn deserves another. This will save me from having to cart her around for errands and it will give her the ability to search for (and hopefully get) a job that is not attached to the bus system (crappy and not very extensive down here).

We have talked it over and this is the best solution for us as a family right now, but I can't say I'm entirely happy with it.

As for my mom, without going into major details, of all of our options, this was the best compromise. I get to live with my gf again and my mom doesn't face the prospect of being homeless (only a slight exaggeration). However, we haven't worked out an end-ate, though - I'm thinking 6 months. Keep you posted.

Damn Single Ma, making me think when I don't want to!

Are you *still* trying to keep up with the Joneses?

Now, y'all should know better. But for reinforcement, look no further than this quote:

People are still trying to keep up with the Joneses, but they don't know how much in debt the Joneses are.

- From 6 ways to be a grown-up about debt.

(The article details a couple that is drowning in debt and what people, in general, should do to change their thinking when it comes to money.)

This is SO true.

Thankfully, in the last year or so, I find that my thinking has changed a bit when it comes toward the proverbial Joneses. I still lust after things - all the time, actually - especially when I see younger people with expensive and nice-looking stuff - toys, cars, clothes, whatever! But now, my second thought, after the initial lust, is to wonder what sort of debt those folks, or their parents, are in. It helps curb the envy and keeps me on track!

Whatever works, right?

Clink

Premier General Finance, Inc.

Premier General Finance, Inc. offers several business and personal financing options. From their website:

Premier General Finance was created in 2004 to assist business owners, investors, and startup entrepreneurs in developing the most effective and productive solutions for obtaining lines of credit and funding.

On the business side of things, they can assist a company to obtain working capital of up to $500,000 in as little as 7 days! On the personal side, they claim to offer means to increase a person's credit score by up to 100 points in less than 30 days. (They say that it's legal [they stress it quite a bit, actually]; I'm not a legal expert, so far be it from me to say whether something is legal or not - just tread carefully.)

In any event, check out their website. It's a pretty neat design and is set up almost like a media player.

Clink

How to keep your sanity while working a second job.

This article is about keeping your sanity when you work a second job. Sometimes, for whatever reason, a person chooses to work a second job. Be it because they can't make ends meet or they're trying to get ahead on bills or savings.

I have seen people push this online, particularly in the PF blogosphere, as a means of getting extra money. Moonlighting at a second job is a great idea to bring in some extra cash, but what these folks rarely talk about is the ramifications on your personal well-being. D, over at 2 Nickels Making a Dollar (also, check her other blog), finally tells it like it is: working a second job does a number on your health and it f*cks with your relationship like you wouldn't believe.

I have been in this situation before and, let me tell you, it sucked ass!

So, what are you to do if you find yourself in this situation?

First things first, make sure you're good in the health dept. I don't mean like going to the dr and stuff, that's a given. What I mean is the stress. The stress of dealing with everything can get to you and screw you up royally.

Listen to your body. If it's telling you to take a break, TAKE A BREAK. Remind yourself that whatever money you are going to get for that day or those 4 hours is not worth screwing your body/mind up for a long time in the future. I like to think of it in terms of money: This $48 dollars is important to me and it will get me closer to paying the credit mofos, but it's not worth it to mess up my health or my day job. (This is a hard one, sometimes.)

Take time for yourself. Carve out some time in your day that is just for you and only you. It doesn't have to be much; very likely, it won't be that much what, with working 2 jobs and all. It can be while you're eating breakfast in the morning, your lunch at work, hell, even your time on the family throne (that's the 'potty' and my #1 choice). Take the time and breath, reflect, read, play video games, do a crossword, whatever. Seriously, 15 minutes will make a load of difference. There was a period for abt a month recently where I was working ft, pt and going to grad school. I was SO stressed out. I had to make time for myself or I would have gone nuts. So, I allowed my throne-time just for me to read a magazine or solve a sudoku puzzle.

Make time for your relationship! This is extremely important! Set some time each night to catch up with your honey and schedule a date night once a week or 2 weeks. You can do free stuff or just have dinner at the house. Try to make sure your SO is on-board with you working the 2nd job, or they will make your life hell on top of all the stress. If they don't agree to it, try to work a compromise where you work less than you were going to originally or maybe they can pick up the slack at their job, etc. I didn't do so well in this dept and my relationship suffered greatly. I still work pt now, but at a less demanding job and I always make time for my GF. We have a date night every week and when I move in, we'll adjust our schedules so that we have max time together. (I don't have kids, so that's a non-issue with me.)

I hope this helps!

Clink

Update on the dilemma - Credit or E-fund

As a follow up to this post, I have decided to just pay the minimums on the 0% accts and save what I would be paying into my current savings acct. I will put it into a sep savings acct (just for the cc money), but I haven't set it up just yet. I contemplated sending it over to ING, but that's only at 4.5% and it takes a few days to get it (both a pos and a neg). This way, I'll earn more interest and it will take only seconds to get to. My goal is to build up a temporary pseudo e-fund while I'm building up a real e-fund. AND, I automated it at $75 per week.

It could be automatic...*

Amanda, over at Young and Broke, just posted about making your savings automatic (as does just about everyone else in the pf blogosphere). I just set up an automatic transfer recently for $7 per week (I would have done it $1 per day and obsessively checked the balance everyday, but, alas, not an option), so that I'm at least saving the equivalent of $1 per day. I know that it's not much, but it's a start. This is for the Emergency Fund.

I have it at my local bank (WAMU). They have a special running right now that if you open a checking account you get something like $.03 for every transaction AND you get a savings acct with 5% interest with no min balance or fee. There are two catches: you have to open the acct online AND you have to open the savings acct at the same time you open the checking acct (otherwise they charge you if it's under the min balance) (My gf went to the branch and opened one and she didn't have the option of the savings acct.).

Clink

*I know that's from a song (or I bastardized the title), but I can't remember. Anyone have a clue?

Networth

Y'all see that fabulous networth widget on the right? I am SO embarrassed. Well, my goal is the get the line going up. Definitely for January's numbers it will, but it will take a nosedive when my student loan disbursement comes out (maybe Feb's update). It will get added to the loan balance and a large portion of the money is allocated already, so it won't be reflected as much in the assests side.

Clink

Could you survive (and thrive) on $12K a year?

Surviving (and thriving) on $12,000 a year.

This MSN article details what a 48yo returnee college student is doing to survive and thrive on $12K per year. There are several things I find interesting about her story. First, I think it's great that she is taking responsibility for her choices - in other words, she chose to leave her marriage and she chose to go to college and she chose to, essentially, live on $12K a year. I admire that - I think it's also foolish, but, well, you know.

Next are the actual deets of what she is doing - such as going to a food bank and shopping at thrift stores. Also, she does something that my gf and I do regularly - putting it out to the universe. This might be called praying over it. Basically, I will say out loud "I need a new table, universe" (I'm not the praying kind) and I also let some friends know what I need, since they might run across it. My gf and I have been very successful with this - she actually furnished her whole entire apt on free or very cheap with good quality stuff - I'm talking 32in flat screen tv good quality.

The article doesn't go into detail on if the woman is living on additional savings or the like, but it doesn't seem like it. Nor does it give a picture of her overall financial situation. I also would like to know what she's going to do for her future retirement plans. I would think that if since she doesn't have extra money draw from, that she doesn't have any future savings either.

Additionally, I'm not sure how realistic some of her practices would be for everyone else (like shopping at a food bank, mainly), but, at the very least, the story was eye-opening on what a person will survive on AND what they would be willing to do when they are faced with a stark situation.

What would YOU do in this situation? I tell you what I would do - quit school full time, go part-time, and get a full-time job!

Clink

Couples finances - update

This is a quick update to this post on how to handle couples finances.

I broached the idea of having a talk about how to handle the joint finances with the gf and it went well! We will be moving back together in March. I suggested that we figure out what our personal financial goals (of all sorts) are so that we can come to an agreement as to what we want to do together.

I am glad that it went well. For so long, I held onto the finance reins with an iron fist. I realised, though, that my method for handling the finances was not good for couple financial sanity, so I'm looking at it differently. And now that she is on her own, she has her personal goals and does not want to give up control. But, with my new approach, she was open to talking about things and coming up with joint goals.

It's really cool to see how far she's come with respect to her finances. She is doing a budget, starting to live within her means, and planning for the future. It's really exciting.

Clink

Current Net Worth

Single Ma's recent Net Worth Post prompted me to calculate my net worth. I downloaded this format from Microsoft Office online, but I could have easily made up a spreadsheet in Excel.

The cash and the credit card numbers are accurate as of 1/4/07, but the other balances are conservative guesstimates (basically, if I can check it online, it's good.). As I get a more accurate handle on balances, the numbers will be more accurate.

So, this is where I stand. It's not great, but it's not horrible, either.

(Click to enlarge)

To the details:

Assets

Personal Items

Scooter - I guesstimated down on this one. I did some research (meaning that I looked at one website where somebody was selling their's) and these are being sold for $1000 and since mine isn't in the best condition appearance-wise (runs great, though), I guessed $750.

Personal items - I really don't have anything of note, except for books, clothes, and miscellaneous household items (my mom and I share an apt including all the stuff in it), so I just guessed $500. If I considered everything in the house, it would be $1000-$1500.

Cash, etc.

Multiple checking/savings accounts - Yes, these are crazy, I know. I am in the process of changing my checking accounts at WAMU to the rewards checking accounts, after which I will close the other accounts, but it will take some time. Plus, my gf and I share several accounts. Also, I may just list the ING accounts together, but I'm not sure.

Investments

Everything but Sharebuilder is guesstimated on this section, but I think they're fairly accurate.

Liabilities

Loans

I only have school loans at this point. THis number will increase next month, when the next allotment comes out. Thankfully, though, this will more than likely be the last loan I'll need to take as I work for the university and will finally qualify for tuition reimbursement.

Other debts

Credit Mofos - The chase card will be paid off in the next few days, so this will come off. This number will go down steadily, as I am going to continue to pay the same amount as I was paying before I transferred to 0% interest (down from 29%!). I will add one more charge to the MyPoints card (anniversary dinner that is extremely important - would be worth it even on the 29% card - trust me on this.) and then no more charges that can't be paid off in full.

Clink

Handling joint finances?

I mentioned in my previous post how I have had some personal issues with my relationship recently. As a result of this, we separated all of our finances. Now that we are coming out of our troubles and merging as a couple again, I am not sure what to do about our finances.

I have several questions - how do people who keep separate finances save/pay bills together? I understand having multiple checking/saving accounts and such - we already do that. But what about the nitty-gritty - paying the bills and saving?

Friends have recommended we have separate AND joint, where we each contribute a certain percentage (basically divided up by the percentage that we bring to the household) to the bills and savings. Debt Hater and Make Love Not Debt (among others) seem to have a good system down, but I haven't seen the minute details (or maybe I haven't been reading long enough), which is where I am having the problem.

What do we do when our goals are different? I want to save a lot, my gf wants to save a little (although this is slowly changing).

I can save in my account separately, but what do I do when I have a bunch of money and can afford a trip and she can't, especially when we never go anywhere together? Am I supposed to save for the both of us when she spends her money on going out and presents and such (for the both of us, to be fair)? Or vice versa, what do I do when she saves her money (she makes way more than me) and I've saved all my money to pay down debt and build up the EF and at the end or whenever, I'm debt free and she has a bunch of money saved up and can go on a trip or something?

Do we make couple AND personal goals? Something in the vein of "Honey, I want to do X and Y (save $2000 and pay off 100% of debt, for example)" and "Dear, I want to go to Hawaii (or whatever)". Does it become something like "Well, let's compromise and save $1000 and pay off 50% of debt AND take a short trip to NYC and stay with friends"? That seems like the most logical thing, in my mind. I have never approached it this way before.

Hmmm, seems like we are going to have to figure out what our personal goals are first and THEN work together towards a compromise that suits us both.

Do other couples handle it this way? How do you handle this?

Clink