Today, Prosper & Budgets Are Sexy team up and celebrate the season of Lent! (Didn't see that coming, did ya?). If you've ever heard of "peer-to-peer lending" before, you're probably already aware of Prosper.com - one of the biggies in the industry. The site's based on the premise that consumers should be able to help each other financially by borrowing & lending from one another, instead of through banks. Some people lend money out, and some pick money up! Pretty cool concept really, except for that fact I can't participate cuz I live in Maryland! Boooo...

So yeah, back to Lent. As a Catholic, I give something up every year for 40 days until Easter hits. Sometimes I give up Soda, sometimes complaining (and I charge myself a dollar per complaint!), and most recently SHOPPING! You could probably guess which is more financially rewarding ;) I reckon I've saved at *least* $300 a month since I first gave this up 2 years ago, and it's been awesome ever since (I still shop btw, just not every single weekend like I used to! I'm much better with my habits now).

But enough about Prosper and I, we want to hear from you! How do YOU currently saving money? Share with us and be entered to win a $200 check!!! Here's what to do:

1. Drop a comment letting us know what you're currently doing to save money, AND how much you'll have saved up by Easter! (even if you don't celebrate Lent)
2. Then, leave me a way to contact you (email, twitter, blog, etc)
   

That's it! We'll leave this up for a week, and one lucky bastard will be rewarded with $200. It doesn't get much better than that my frugal friends. Be extra nice to Random.org this week, okay? ;) Mad thanks again to Prosper for hookin' us up! NOW START COMMENTING.

-------------------
PS: And if you want *another* chance to win, be sure to sign up to my V.I.P. Newsletter! We'll be giving out a separate $100 check on top of this one come Friday!
PPS: How cool is it that people give us money to give away?
--------------------
*UPDATE* Make SURE to leave your contact info! You can go anonymous all you'd like, but if I can't tell you that you've won you're going to be mad at me ;)
--------------------
*UPDATE 2* Blogger is only showing 200-something comments, but I AM getting them all! So don't worry if it doesn't show up here, you're still on the list :) Picking winner tonight (Thursday, 3-11)

Labels: giveaways, loaning money, religion, saving

Borrow from yourself first, that's what I say. It sounds funny, but think about it. What if you needed $1,000 or $2,000 in cash right now, where would you get it? Would you pull it from your emergency fund? Take out a payday loan or credit card advance (please say you wouldn't)?

I ask this because people do the oddest things when it comes to getting their hands on money. They'd borrow, steal, and even cheat sometimes before pulling from their own cash reserves. I once knew a guy who'd take out an 8% loan every time he "needed" something instead of dipping into his $5k+ savings account. Why? I'm all for doing what makes you comfortable, but financially I just don't think it makes any sense.

We have savings accounts, rainy day accounts, and emergency funds set up for a reason - to have cash available at a time of need.

If you don't pull from it then, then when? We all validate "emergencies" in different ways, but it really IS OKAY to pull from your stash when needed :) I know that sounds crazy, but that's seriously what they're there for.

In fact, I had a brilliant idea of listing out all the possible ways you could get your hands on money - in order of need & financial smartness - but after an hour and a half (and going) I realized it's better set for another day. And that day being Monday ;) So go out and enjoy your weekend for now, and we'll get back to this tantalizing list of options upon your return. I'm hoping you like it as much as I do!

Labels: advice, debt, loaning money

Payday Loans vs. Credit Cards - which are worse to take out cash from? They both have their pros and cons (mainly cons) but if you were in a bind and had to pick one, which would it be?

This debate popped up during my coffee meet up w/ James from Dinks Finance last night (I told you I'd be blogging about it! haha...). BUT, the crazy thing here was that we found ourselves defending opposite sides! He was slamming credit cards, and I was quick to diss those damn payday loans. It was an epic battle of two finance bloggers going head to head ;) Or perhaps a battle of nerds sipping coffee, take your pick.

The question we have to ask ourselves here though, of course, is who's right? Or better yet, which product technically IS the worst of the two? Well, I'm no expert in the field, but this little quote found on the CFA's (Consumer Federations of America) website says it all:

"Payday loans are extremely expensive compared to other cash loans. A $300 cash advance on the average credit card, repaid in one month, would cost $13.99 finance charge and an annual interest rate of almost 57%. By comparison, a payday loan costing $17.50 per $100 for the same $300 would cost $105 if renewed one time or 426% annual interest."

Ca-ching! They also share a pretty interesting cost comparison chart (pdf) and loan calculator that helps to determine what your total costs would be. By the way, for those who aren't familiar with the term "payday loan", it's basically a small short-term loan that's intended to cover a borrower's expenses until their next payday, sorta like a cash advance (also referred to as a paycheck advance or payday advance). They can be taken out online or at physical stores like pawn shops or their own entities.

In fact, it goes without saying that NEITHER payday loans or credit cards are a good answer for getting cash. Borrowing money from family/friends, taking out a personal loan, or just dipping into your savings accounts always trump cash advances when it comes to the fees you'll have to pay. Unfortunately there are times when these aren't an option though - and thus, the reason for this post (other than to prove my man James wrong ;) )

Contender #1: Payday Loans
The average fee you'll pay for a payday loan is somewhere between $17-$25 for each $100 that you take out, but it can get as high as $30 per $100 in some states! So, say you take out a common advance of $500 and you pay it back in full after 2 weeks - GREAT! You had to pay an extra $87.50 on top of the $500 you borrowed, but at least it's over with, right? Unfortunately no, the odds are stacked against you. According to the CFA - "Consumers have an average of eight to thirteen loans per year at a single lender." That's pretty damn scary.

On the plus side, you could argue that since these are mini loans of 2 weeks at a time, it might be easier to pay off and not have it drag on like it may w/ a credit card. That all comes down to personal preference and usage though - I can't really relate to it here.

Then, of course, we have that big ol' stereotype that payday lenders are bad evil people and are out to steal your money! Well, I don't have any facts myself to to say they're shady (although I feel they are), but I can def. say without a doubt that they want your money ;) And unfortunately you're hard pressed to see *all* their fees upfront and readily accessible on their sites - at least on the non-reputable ones.

Contender #2: Credit Cards (cash advances from)
Now let's talk credit cards. As much as I champion my dear credit card for budgeting purposes and the cash back rewards (not to mention the free grace periods to pay back purchases), they're certainly no angels either. According to common knowledge" and the talking heads on TV, the average American household is in about $8,000 debt. Some feel this is a bit inaccurate, but the fact is that many of us are, indeed, ADDICTED to our credit cards.

And if you're already addicted, why not just slap on a cash advance to it right? *shiver*. While usually LESS than paydays (do your research!) you'll still pay a steep price for it - anywhere from 15-25%. Of course, there's also the problem of mixing and matching normal purchases with cash advances. Most cards, if not all, will use your payments to pay off the lower interest items first (like your purchases), and THEN use it to pay off the higher cash advanced amount. It looks like there may be some new rules in place soon that would get rid of this though.

On the other hand, most credit card companys display all the informaton upfront - the rates, the fees, etc. You might actually have to look for it, but it IS there. And usually written in itty bitty font ;) I believe most c/c statements have it all disclosed on the back, but either way it's easily accessible on your bank's website or by placing a 2 min phone call. If you do your research and check around for the best rates, you might be suprised at what you can find.

The Winner: Credit Cards
In conclusion, they both suck and should be avoided like the plague. BUT, if forced to take one over the other, I'd go with my credit card all the way. I'm comfortable with it, I have a good relationship w/ the bank that issues it (USAA), and I can easily go online and pay the advance off at any point (because I don't carry any other balance. And if I did, I could always take out a new card specifically for this purchase and *then* pay it off online).

Now, if only I could remember the reasons James argued for payday loans ;) I'll have to ping him and get him to respond back here. Although in all honesty I'm scared as that boy's a genius at analyzing! Seriously, have you ever checked out any of his posts? whew.

UPDATE: James from Dinks posting up his rebuttal...although his tune has changed ;)


----------------------------
PS: If you find yourself in a situation and you need help, PLEASE research RESEARCH research! Spending 30 mins now can save you hundreds of dollars later if you don't know what you're getting yourself into. It's easy for me to state my opinions on the subject based on what I know, and what MY experiences have been over the years, but it's not necessarily the best for *everyone*. Only you know that and can judge the best option for yourself.

Here are some other articles I found while researching:
- Payday Loan vs. Credit Card Interest
- Credit Card Cash Advances Versus Payday Loans
- Why a Payday Loan is Better Than a Credit Card Cash Advance

Labels: credit cards, fast cash, loaning money

We have received a hefty check to help pay our grad school and mortgage costs!

And the timing couldn't be better. The Mrs. starts school on Monday! As in, 3 days from now. As in, WOOHOO for her, and BOOHOO for our money ;)

Unfortunately I have to remain pretty vague here, but we're talking about more than just a few hundred dollars. AND, better yet, we don't have to pay it back! ..... at least yet.

The person who gave it to us had been helped by a similar action years ago herself, and she's always wanted to "pay it forward" when financially able to do so. And now, lucky for us, that time has come :) Not only was it totally unexpected, but it really does go to show that my brother's crazy saying really DOES work. I better start paying even closer attention!

What this means to us is that we can push off taking out loans to make up for our loss of $50k in salary for now. I'm just thankful Mrs. Budgetsaresexy accepted the college who gave her a full ride!!! Or else we'd be out a good $100k PER YEAR at least. *shiver*

So this "paid forward" contribution will be saved into our money market account with USAA, where our Emergency Fund is (no point in opening up another, right?), and will be drawn upon monthly for $1225 - the amount the Mrs. usually sends over each month to help pay for all house related items. Per my calculations, this will keep us going nicely for a bit before loaning it up. (I almost slipped and said for how many months, but then you'd be able to figure out exactly how much we got! haha...sneaky sneaky).

This paying it forward idea is really damn cool, not to mention healthy for society. One person's sincere and loving gesture years ago, now affects our future together and will be continued for more years to come! It actually works out perfectly because we weren't going to accept any money from ANYONE without paying each penny back in full anyways. So this is even better.

NOW we get to pay it back on our own time frame, AND help out another great cause down the road. If that's not sexy, i don't know what is. Well, i do, but that's for another time and place ;) I gotta go out and watch that movie "Pay it Forward" all over again and start getting some pointers!

Labels: awesomely awesome, gifting, life, loaning money, money management, money markets

Before I share my own, totally boring, advice from over the years, I wanted to share my fav. quote from an article in this month's Money Magazine (Aug). It comes from their "Smartest Advice I've Ever Got" article which covered 30+ smarty pants, and the one thing that stuck by them over the years.

My awesomest was from Elizabeth Gilbert, author of Eat, Pray, Love, on her father being the "most frugal human being" she's ever met:

"Borrowing money is like wetting your bed in the middle of the night. At first all you feel is warmth and release. But very, very quickly comes the awful, cold discomfort of reality."

How awesome is that? I seriously WISHED someone had told me that back in the day...i'm not sure if it would have changed anything, but it sure would have stuck :) I think i need to start hanging around some more clever people...

The smartest advice I ever got isn't nearly exciting, but it IS helpful! While my mom and grandma have always been the most frugal of the group - creating my addiction to yard sales, thrift stores, and Ta Ta Ta TJ Maxx - it's my dad who's usually the go-to guy when it comes to the overall picture.

The one thing he's always harped on, along w/ many others, is to "never put anything on a credit card that you can't pay off". Plain and simple, but oh so true! It may not be as sexy as Elizabeth's quote, but it sure is smart. And while I may not pay the purchases off asap, I ALWAYS have some sort of plan and timeline in mind before swiping.

What about you guys? Do you recall any helpful advice over the years?

----------
Here's another post I wrote on the role money has played growing up.

Labels: advice, education, loaning money, money quotes

This is part two of a two part series on loaning family money. This is the GOOD part. (the not-so-good part is here)

Last year my darling bro was considering his first foray into home ownership. He was certain he could afford his condo, but he just wanted to be 200% sure. At the time I had a couple hundred dollars at my disposal each month, so I offered to hook him up.

Having just gone through the process myself, I knew it was kinda scary so we came up with a plan (might sound familiar from my net worth updates) and The Bank of J. had its first customer!


The Loan Details
We threw around some ideas, and ultimately came to the best way to pad his liquid cash AND relieve a little stress. It's pretty laxed over all, but we put down in a contract enforced by Dad. They always like to do that, don't they? Here's what we came up with:

• $123 a month (10% of his total mortgage payments)
• 5% interest rate, compounded monthly. I wanted to bang out the importance of compounding interest and all, as well as make it more "official" (and likely) that he'd take it seriously and pay me back.
• He can stop receiving payments at any time, no questions asked.
• I can stop sending payments at any time, no questions asked.
• No repayment date - in theory. He can pay back any and all of it at his own discretion, but it's "understood" that he'll do so as extra money comes in - or when/if he sells the condo.

The Past 10 Months
My brother has a tendency to lose track of things - even checks! So it hasn't been the smoothest of transactions over time, but it's not the worst that can happen, so it's all good. In fact, i've grown even more patient with him! Here's a breakdown of all transactions, along w/ the running total that I send over to keep things organized:

• Oct check - $123.00 - cashed
• Nov check - $123.00 - cashed
• Dec check - $123.00 - cashed
• Jan check - $123.00 - cashed
• Feb check - $123.00 - cashed 3/05
• Mar check - $123.00 - cashed 3/26
• Apr check - $000.00 - *lost*
• Apr/May check - $246.00 - cashed on 6/2
• Jun check - $000.00 - *lost*
• June/July check - $246.00 - pending

Total: $1230.00
Total with 5% interest (compounded monthly): $1258.54
*i used the calculator at: http://www.coolmath.com/calculators/calculator-annuity-1.html

Re-Payment is Near
We're going on the 11th month now, and he's already good to go! Not only has he gotten all his finances in order, but it seems he's actually INTERESTED in personal finance! *gasp* Perhaps his older brother has been planting some good seeds? (Uh thank you.)

The last loan installment from the Bank of J has been sent, and the period of re-payment officially starts today. I think sometimes people just need an extra push to get them started. And while he hasn't started paying me back yet, I'm pretty confident that it'll go smoothly. You'll be the second to know if it doesn't! (He'll be the first ;) )

There's a HUGE difference between my brother's situation, and my uncle's situation, but it does go to show that everyone has the *potential* to follow through with their promises. Thus, I shall continue to loan away!

Labels: loaning money

This is part one of a two part series on loaning family money. This is the not-so-good part.

When it comes to mixing money & family, i'm usually against it. As it turns out though, i can easily be convinced ;)

People say they'll loan out money if they trust they'll get it back, but how do you know who WILL and who WON'T do so? Are your friends and family inherently trustful in this dept? For me, If i'm not sure I can trust you, I'll at least test the waters.

my uncle's situation.
He's in his late 50's, broke, and unfortunately barely living off unemployment, disability, and who knows what else. He's been loaned money dozens and dozens of times (literally) by friends and family, and has rarely paid them back - if ever.

So WHY exactly did i loan him money? Well, when it comes down to it I love him to death. He's always been the "cool" and "fun" uncle, and I REALLY wanted to give him a chance to redeem himself, at least in the eyes of his direct family. Of course, there was no way in hell i was gonna tell my parents this - they've lost thousands and have had enough.

He asked for $400 so he can finally move back to the area and be closer to all of us, and promised to repay it back within 2 months, but ESPECIALLY before our wedding. At the time, that was 3 months away.

Initially i thought Hell to the No! I need that money for the wedding, and the odds of getting it back, at least according to past history, was a good 10% - if that. But you know what? I figured i've never been burnt by him before, and it's probably taken a lot of guts to ask for $ from someone half his age. And he MUST be serious in returning it ESPECIALLY because of the upcoming wedding.

Instead of the full $400, I agreed to $100 and blamed it on my lack of savings. I had to determine an amount that i could easily lose and still be okay with - and $100 was the magic number. We'd still be okay for the wedding, and I had just received a bonus so I could budget it in there fine. I also told him that if he paid it back on time, I will gladly loan him more down the road.

He understood, and was extremely gracious for it, so i dropped that bad boy in the mail hoping to one day see it again. And even more so to raise other's opinion of him. It felt GREAT inside, and I forgot about it...apparently, he did too :(

my benjamin's situation.
It's now been 4 and 1/2 months, the wedding has come and gone, and the money is still "1 paycheck away". And by paycheck, I mean the unemployment check as he hasn't worked for quite some time.

The purpose of this post though isn't to rag on my poor uncle (well okay, it is a little...but only cuz i need to vent somewhere!), but it's really to help put things in perspective when this stuff happens. I'm definitely pissed i'm out the $100, but i have to remember that he needed it more than i did.

In all honesty, I can't really blame anyone but myself. I knew full well that the odds were stacked against me going into this one. And regardless of his intentions or excuses, I at least accomplished my original goal - to give him a chance. It didn't end pretty, but i'm gonna do my best to forgive and forget.

Labels: loaning money