Ahhhh, the good old "pay off debt vs. save for X" debate. Gets me teary eyed every time ;) Got an email from a reader, and thought it would be better to hear from all of you rather than just me - esp. since I'm sorta anti-home owning at the present time. Well, kinda, but not really...

Anyways, here's what Mrs. Debater asks:

"I am debating on whether to save up $$ toward a down payment on buying a home or paying off my student loans first. Currently, my student loans are the only loans I have and has a balance of $5500 (one for $2000 @ 6.8% and another for $3500 @ 5.6%) but I'm only in my 1st year. Thankfully, my employer is going to contribute generously from here on out though I'm going to have to put some cash down each semester myself. I really want to buy a house in the next few years but I hate the student loan cloud over me. Would you pay off the debt or save for a house down payment first?"

Personally, I think both goals are admirable. If you pay off the debt, your mind is free'er and you can concentrate more on the house down payment (awesome), and if you start saving for the house first you'll be that much closer to owning (awesome again!). They're both great for your finances and it's pretty much a win-win situation. So that's good!

If I personally had to choose, I'd probably go w/ the saving for a down payment route. Not at all because homes are "good investments" or anything, but just because having a crap ton of cash saved up is wonderful! It's like having a giant Emergency Fund before you spend it :) Another thing to consider is that you could always use this cash anytime to pay off whatever you like. So if your saving is going well and you want to throw a couple hundred towards the loans, you can do it! Rather than the opposite of paying them down first, and then taking it out and using the money for something else. Once that cash is gone, you ain't getting it back.

I think it really comes down to your own preferences. If cutting out your debt means you're a happier person, then by all means go for it :) Especially if you've already got a decent Emergency Fund. Paying interest on loans, or anything for that matter, blows, so anything you can do to alleviate yourself from it is a good idea. But let's see what our readers say - How would YOU GUYS handle this?

Labels: debt, goals, reader mail, saving

If you're in college and reading this,YOU ARE SMART! Not only for getting into college (naturally) but for wanting to get a head start on your finances. When I was your age the only thing I cared about was women & beer pong - and in that particular order. As long as I had enough to survive, I didn't want anything to do with financial management ;)

Unlike me though, you want a head start in life and you're doing something about it! So today's post is directed at you, along with a fellow student of yours looking for some help. We'll call her Miss Roxy for the fun it. Here's her dilemma, along with my thoughts on it:

"I'm 19, in college, planning on marrying in summer of 2012. I can't save much right now, but I know eventually I'll have a job and I want to put away for retirement. The problem is, I'm not sure how to. I know that sounds silly because there are posts about this all over the place. But the problem is, there is a chance that my future husband and I might be moving to a different country within the next ten years. How does that effect my retirement savings and can you help me?"

First off, good for you in trying to plan all this stuff out! I couldn't tell you what I was doing for lunch each day, regardless of planned weddings, moving, etc so good job. That being said, I think life is too crazy and will change when you least expect it - esp. in the next 10 years. That doesn't mean planning for retirement and the wedding shouldn't be done right now (it totally should!) but just that I wouldn't worry about having the *perfect* game plan at this point in your life. It'll always be a work in progress.

THAT being said (again, haha...) the answer to your question depends on a slew of variables. Here are a few things I wish I had thought about back in the day:

5 Financial Tips to Get Your Mind Right

1. Save save save! Every time you get paid, get cash presents, win the lottery, etc, stash at least 10% of it away. You do this for the rest of your life you'll have plenty of money, believe me. It's one of the simplest things anyone can ever do.
2. Find as many income streams as you can. Work side gigs while in college, get a good job when out (and if it takes a while to find one, at least work others in the meantime!), etc. Without income you can't do squat. This applies to both you and Mr. Roxy ;)
3. If you're looking for an investment vehicle, besides a saving account, try a Roth IRA. You can put in $5k a year that will grow TAX-FREE for the rest of your lives. As long as you don't hit the maximum income to be able to contribute (it's over $100k so you don't have to worry about that right now), it's one of the first places people usually advise to put money in.
4. Contribute at least up to your employer's match in your 401(k) plan. This doesn't apply now as you don't work full-time yet, but once you do make sure to contribute at least whatever they're matching as it's FREE money for doing nothing saving (which you should be doing anyways).
5. Create a simple budget and review it once a month. It's boring at first, but once you get into the habit you catch yourself spending more than you should be ;) Give free budgeting sites like Mint.com (affiliate) a shot, or see if any of the excel spreadsheets I gathered does the trick! As long it gets you to take action, it really doesn't matter which.
   

You & your man follow a few of these, and you'll be just fine :) People make this stuff a lot harder than it actually is. When it comes down to it, it's all about spending less than you earn, and saving the rest. That'll leave you with plenty of money for the wedding, retirement, and whatever else you're planning up.

Anyone want to add anything else? Maybe some tricks/lessons YOU learned in college?

Labels: advice, money management, one of my lists, reader mail, retirement

So I got an email from a friend of mine this weekend, and she's faced with an interesting quandary.

Usually I can come up with some sort of advice (especially when it comes to money) but this one's got me stumped, and I'm hoping you guys can chime in and offer her up some of your own words of wisdom :)

Here's what she wrote, followed by my own helpful-but-not-really thoughts on the matter myself:

Hey J,

It's Brandi from - Brandi's Healthy Journey.

I have a dilemma... kind of. If you haven't read up on the blog recently my car exploded on the highway. I've had tons of people helping me out by lending me a car, taking me to work etc etc. This includes a few people looking for car options for me. These people have been great in sending me links to cars. Taking what I know I can afford and listening to what I want.

However, without asking me, my grandfather just today went out and bought me a car. He BOUGHT me a CAR. And he won't tell me how much it was (prolly at LEAST 2000 more than I told him I would pay) and he will only let me pay him the original $2500 I was budgeting for.

Now this has graciousness and awesomeness written all over it. However, to me it doesn't feel like a gift. I feel as if I'm going to owe him. I can't afford to owe him more than the $2500 I budgeted for. I also can't live with myself knowing that I do owe him. I didn't WANT this. I was working through it on my own. I was proud of how well I was handling it and I was going to be really proud when I found myself a deal I could handle and do it without having to owe anyone money. Well at least serious money.

So I'm asking u for advice. I don't know what to do. I tried talking to him about WHY I didn't want to buy a more expensive car before he went and did this and he did it anyway. Am I just being proud? Am I being stupid and ungrateful? I just feel as if he's cut the legs out from under me. I told him what i was looking for and what I wanted and that I would pay for it. And now, I feel as if he disregarded everything I asked and just did what he thought was best because 'I didn't know any better'.

What should I do? What CAN I do?

Thanks Dude,
Brandi

Tough one, right? My instinct was to tell her to accept it now that it's already happened, but to make sure her grandfather truly knows how she feels about the whole thing (that she's thankful, but also very upset). Unfortunately though it wouldn't solve her problem with the budgeting aspect, nor the feelings on paying him back (or not).

I then wondered if there was a way she could just return the car? If that were a possibility, she could remain thankful but politely decline the car, show she's a strong person, and then find the car she really wants without any more "paying back" worries! She thinks the only way she could return it at this point, though, is if she were to sell it her herself and then pay him back with the proceeds. Plus, she still doesn't know how much her grandfather even paid for it, nor how insulted he would be.

So, my dear readers, what do YOU think? She's given me permission to post this up, and is really looking for some honest to goodness feedback here :) Thanks guys!

Labels: advice, car stuff, in the real world, reader mail

Once you're contributing up to your company's 401(k) match, do you continue upping the % or do you jump to the IRA?

This is one of the questions I get asked the most as a PF blogger (the other is probably how to start blogging or the order to pay off credit cards), and it usually comes down to personal preference. Since I mostly respond back the same way all the time, I figured I'd copy & paste the question and my answer below and see if maybe YOU have some better advice on it this time around? That way I could refer them back to this post in the future :) Here's the question from Mr. Wants-to-take-advantage-of-retirement-plans:

"I'm like you, turned 30 this last year, and getting my finances in line (I'm in the black, which is a good thing, but I can do better)....got a question for you regarding 401k's and IRA's. I currently participate in my companies 401k program, but I am only contributing the amount that the company matches (i.e. 60% on my first 6%...). However, my 6% doesn't even get me close to my annual maximum ($16,500 or so... whatever it is...(J: Yup, that's correct!)).

Would you suggest hitting the $16,500 in my 401k before setting up a separate IRA account? Or would you just contribute to the 401k up to the employer match amount, and then max out an IRA each year?"

First of all, GOOD WORK on matching up to that 6% already - 90% of people never even consider it. Second, I like that you're asking this as a lot of people wonder the same thing (me too, at times) and to be honest it's a tough call. You're right in that I'm not a professional, so I can only tell you what I would do in your shoes :) And that would be to compare the funds available in your 401(k) vs. the IRA, or even better, Roth. The Roth is the bad boy these days and much more pimped out than the Traditional - but still do your research to make sure it works for ya.

But back to the funds. *Most* 401ks from smaller companies usually suck as the funds to choose from aren't as good as if you had the open-sea of EVERYTHING out there like you do with IRAs. My company has a great match at that 100%, but the funds are pretty shitty from what people tell me. So, if I were only getting the 6% match then I'd do that, or maybe even up it to 10% to keep it even (I always round up) and then work on maxing out my Roth. This way, you could pick much better places to put that money and in all types of products - mutual funds, stocks, bonds, whatever you want really. It might depend on which institution you go to open one up, but it's nothing Google can't help you with. I'd start at Fidelity or Schwab and go from there. (Or, USAA if you qualify - that's who I use for my Roth) .

Not only should your money get into better places this route, but you hit that max a lot quicker giving you that feeling of Awesomeness. The Roth & Traditional IRA max out at 5k this year, so you could break up the payments from now until the end of the tax year to make sure & evenly distribute the money until maxed. In all honesty, you've already gotten 80% of the smart investing part down as either route you take is bad ass :) But that's what I'd do - keep your 401(k) contributions to 6-10%, and throw the extras into an IRA. What would you guys advise?

Labels: 401k, advice, reader mail, retirement, roth ira

I got a pretty impressive email the other day, and I'm hoping it inspires you!

It comes from a reader here at Budgetsaresexy (we'll call him Smart Budgeter), and he does a wonderful job at summing up a few points that we often don't hear about - or at least in this way. And what's even more interesting is that he uses & reloads GIFT CARDS to work it all out! Hah! Whatever work...Check it out:

J - I am budget crazy! Have been on a solid budget for about 2 years now. In the beginning, the hardest part was figuring out where the leaks in our spending was. For us it was grocery/and loose spending at the supercenter. Now we purchase/reload gift cards at the start of every paycheck cycle. We prepare a 2 week food menu and shop all at once. What ever balance is left on the gift cards is spent on non-need items like new towels, or treats (toys) for the kids. This tactic has made the biggest impact on our ability to stay disciplined to our budget and I suggest it to everyone I know. Take care - Smart Budgeter

If you haven't found them already, there are at least 3 great points to take from this:

Find out where your spending leaks are.

The only real way to do this is to track your spending for a month or two and see where it's all going (I know, it sucks, but you only have to do it once!) When you find it, you can then work on improving it and feeling good about it all. When I did this I learned that I was spending $300-$400 a month on clothes, electronics, $40 bottles of water, and all sorts of random stuff that I could care less about. That may be higher or lower than what you spend, but for me it was horrible and I wanted to change it.

Do something about it!

Luckily, the only thing I had to do in order to quit shopping was to STOP going into stores ;) Since I don't shop much online, that pretty much cut out a good 50-75% of it (once I actively made an effort to not "shop for fun"). When I do shop now though, I'm always cognizant of the amounts I'm willing to spend in order to be happy with everything (roughly $100/mo) Sometimes I stick with it, and others I splurge - but at least it's a conscious decision I'm making now.

Reward yourself and allow "extras" every now and then

For Smart Budgeter, it's all about treating his kids or picking up things he'd LIKE to have, but that he doesn't NEED. For me, it's a tiny allowance for lottery tickets, coffee, and an occasional new outfit (yes, I'm sorta like a girl in that way). As long as it makes YOU happy, it really doesn't matter what it is - just that you allow yourself to be human. Allowances like this keeps you motivated and sane, so be sure to include them :) Now get out there and start plugging those leaks!

Labels: advice, budgets, money management, reader mail

How much is a house really going to cost me? A lot more than you probably think ;) Although it's still doable if you're ready to jump in! I was asked this same question by a fellow reader recently, and thought I'd forward my answer over for anyone else just starting the home buying process:

"Wow, that's certainly a loaded question! Here are my quick thoughts - First, it'll probably cost you a lot more than you originally think. Between the down payments (usually around 20% of purchase price these days unless you go FHA or other routes), the closing costs (usually around 3-5% of purchase price), and moving, picking up new furniture & household items, and then future taxes/homeowner dues/condo fees, it gets pretty crazy.

All that said, however, it could definitely be worth it while the prices are so low! If I didn't already own I'd be all over it (although I surely have my moments). In all honesty, I recommend finding a local realtor and scheduling a meet-and-greet w/ him or her to get all the info. from the beginning. It doesn't cost a penny (if they say it does, hang up and go somewhere else!), and that person could work on your side to help you through the whole process. As a previous realtor myself, I can tell you it's well worth your time.

You could also check around other blogs and click on "home ownership" or similar labels to get a general idea as well :) Try mymoneyblog.com - he has a great pool of info. Hope this helps! And good luck, let me know what you end up doing."

Labels: advice, home ownership, reader mail

Just like budgets, financial checklists also come in different shapes and sizes.

Today I present to you a real-life one by fellow blogger Kaitlyn from Upturned Barbie. She blogs about life in general, but it's pretty obvious she has a keen eye on her finances.

Check out her current game plan:

• Open a c.d. (waiting for a decent initial deposit)
• Decide on, and begin, contributing to an IRA
• Pay off the less than $1k of debt I have
• Apply for, & get, a credit card & make regular pymts
• Buy a house (foreclosed) in 1-2 years w/ a 30% down pymt & six months living expenses

Now that's a woman who knows what she wants! This self-proclaimed spreadsheet nerd is on track and ready to make things happen. She's already established a budget and believes "control of money is really one of the best things ever!" Sexy! How old are you again? Sheesh....@ 20 she's already 10 steps ahead of her peers.

It doesn't come w/out it's drawbacks (she's currently working 50 hours a week), but saving like a squirrel getting ready for winter sure does have its perks! How about you rock stars? Care to share? (You can see my top 3 over there in my sidebars, along w/ my progress)

Labels: goals, money management, reader mail

You know that joke - "Do you wanna hertz donut?" - where you answer "Yes" and then get punched in the arm? Well, that's what came to mind when reading today's email about a $195k inheritance getting knocked down to $95k - "Hurts Don't it?"

As I do for all my blogalicious readers w/ crazy conundrums, today we shall feature an email along w/ my un-spellchecked and top of the brain answering skillz.

Well okay, there's definitely more thought and time that went into it than that, but you get the point - I just copied and pasted my answer here instead of tweaking it up to be blog-presentable. But that's okay, right? You're not reading the NY Fabulous Times up in here or anything. You're on a blog w/ "sexy" in the title for goodness sakes ;) But enough rambling, on to the show!

How would you advise a 20 year old girl that had $195,000 invested (inheritance) last year, only to be screwed by the economy and now has only $95,000? Should I keep it in there?? My stocks are spread evenly throughout, I don't belong to just one particular company.

I also get a check from my mom's SS for $1,400 a month. After bills, I'm left with around $800 or so. I have no job, as I can't work right now because I go back and forth to [edited] all the time. Long-distance relationships can be a B-word sometimes.. I'd love to find work online, though.

I ALSO hope to be getting this woman's full policy, 100k, for a car accident I was in 2 years ago. IF I get the full amount, I'll have about 50k left AFTER fees and medical bills.

Please, send me advice!
Nevada Queen

RE: Investing - Yes, I'd totally keep that money invested, ESP while things are so low right now and you have *plenty* of time to earn it all back and THEN some. As the saying goes, "buy low, sell high". If you quit now, you've lost the rest and you'll probably want to get back in again down the road when all is "normal" again and the prices are high. Of course, no one can say for certain it'll get back up there, but history shows it will - and i bank on that.

That being said, what I would do is meet with a financial adviser and see which investments would work with what you want out of it. They may tell you stuff you already know, or they could even suck balls, but even so it may help you sleep better at night. I'd check around your friends and ask for references and then set up a meet & greet with one (which should be totally free btw) and see what they say. I'd happily spend a few thousand over time if it means earning much more in the long run, ya know? just make sure to go w/ someone you trust and makes you feel comfortable.

And if you DO get that extra $50k from that accident? Then having a plan ready to go for it will do you nicely. and that's something a planner can help you with.

RE: Online work - Have you thought about blogging? if you're passionate about it, you could start earning a little somethin' somethin' on the side from doing that. It always takes more work than people think, but it's def. do-able, esp if you don't have a 9-5 gig. If you don't like writing, maybe try picture blogging or celebrity bashing ;) haha....or celebrity loving for that matter. anyways, the point is - if you can learn how to navigate the online world, you can then use that for future jobs down the road, not just for blogging. Learn Twitter, Facebook, Flickr, online marketing, etc. it's all fun stuff and won't bore you to death.

I hope this helps! Keep in mind I'm no sexpert, so don't punch me in the face if anything goes awry from any of this ;) And keep us updated - we love hearing how this stuff turns out! How about you guys out there? Have anything to add to this?

Labels: advice, blogging, crazy economy, financial advisor, in the real world, inheritance, reader mail

You all know how much I LOVE my 401(k), but what about our friend the Roth IRA? Both investing vehicles are sexy in their own way, but how do you know when to use one over the other?

The answer to these questions always lies within the situation at hand - and it just so happens we've got one today. The odds? ;) A fellow reader hit me up recently and wanted to know what we thought about her dilemma. Here's what she sent:

"I graduated from college in December and am in my first "real" job with benefits. I am a teacher. I am required by the union to contribute to the teacher's pension. In addition to this, I have the option to have a 401(k) and the employer does not match contributions. My thought is to skip the 401(k) and simply open a Roth IRA. Is this a good thought? In any circumstance would I want to pick a 401(k) over a Roth IRA? (Besides the obvious employer matching) What made me start thinking this path was an article I read on Kiplinger about Roth IRAs and one of the benefits is that you can use it to help save up for a first home, and this is another goal in the somewhat near future of my life."

First off, I'm impressed you are already thinking of this at a young age! Good for you. This topic has been debated like crazy amongst the finance world, but it really comes down to your goals here. Both 401(k)s and Roth IRAs are awesome as hell, and both have their pros and cons. For anyone who's not familiar with them, here they are in a nut shell:

401(k)s - All money that goes here are pre-tax, meaning not taxes come out while investing. This is great in that you have MORE money to invest and accumulate over time because you have that additional 25% (or whatever your tax rate is) earning money for you. 401(k)s are also great in that your employer will usually match you up to a certain % (as mentioned in your email) meaning you get FREE money. On the flip side, you have to pay taxes on this once you start drawing out the money in retirement. You will also get charged up the a$$ if you take any money out before you're eligible. There are some sneaky ways here and there where you could, potentially, take out some money w/out incurring this wrath, but I wouldn't advise it.

Roth IRAs - Another investing tool that allows you to save for retirement, and sorta like the opposite of 401(k)s in that you get taxed UP FRONT, but you never have to pay a tax again down the road! So say you drop in $5k and then leave it alone. In 30 years that $5k can become $20k and you don't have to pay a cent on that $15k of earnings :) On the flip side, you can only put in a certain amount each year ($5k for 2009 if you're under 49 vs $16.5k for 401ks ), and you can't make over a certain amount of money (a bit over $100k)

But back to your question. Whether you choose a 401(k) or a Roth IRA comes down to your future plans. If you want to invest for RETIREMENT, meaning you won't touch it for 30+ years, then I'd open up both a 401(k) and a Roth and leave it alone (you can add more to one over the other, but I always suggest having both).

In your case, it looks like you will probably need this money for a down payment on a house sometime soon. So dropping $ in a 401(k) is def. not the way to go (after you contribute up to your employer match to get that FREE money). In fact, I probably wouldn't even go with a Roth either since its main use is for retirement funds as well. If it were me, and I were definitely getting a house in 3-5 years, I'd throw the main chunk of extra money into a high-earning savings account like ING or another online bank since you'll be dipping into it soon.

That being said, you'll probably end up opening up a retirement account anyways cuz it looks like you really want to ;) In that case I'd recommend going with a Roth. While it's not designed to be used like that, at least according to my accountant when I asked her last year, you *can* take out any $ you have contributed at any time w/out incurring any fees or taxes - you just can't take out any interest earned. (there are certain situations where you CAN take out all of it - like a home or hardship - but you have to make sure the account's been open for at least 5 years. I'd talk it over w/ a professional)

So if you want to save save save and then take out the contributions when you need that down payment, the Roth is the better option here between the 2. Would you all agree?

Labels: 401k, reader mail, retirement, roth ira

Yikes - We got a live one here folks! A fellow reader (we'll call her Lost in Louisiana) emailed over and needs our advice. Her husband started making quite a bit more money these days, and it seems like their priorities have now been shifted around - at least in her view.

I've already emailed her back, but I wanted to get some more thoughts on the matter as there's never a right or wrong answer when it comes to this stuff... Here's what she has to say:

My husband & I have been married a year and are already having problems with our finances. We both have the same goals (save for a new house & vehicle) but our spending habits are very different. I would love to get your opinion on what a good budget would be.

When Husband & I bought our home together three years ago we were engaged & broke. I was making $11.00 an hour and he was making $9.00 an hour. We were by no means wealthy, but we were so happy and we honestly never fought about money. Our bills were always paid on time but we didn't have much extra. At the time my income covered the house payment & his covered all of the other home expenses. He paid for his truck & truck insurance & I paid for my college and car insurance.

Shortly before we got married my husband got a new job making double what he did before. He works overtime some weeks (we don't know when it will be offered) and when he does, it adds $300-$565 extra on his pay check.

After he got the job we started going out every weekend, and eating out at least 3 times a week. I looked over our bank statement (for the first time in a long time) and we spent over $1,200 in food and going out in just one month!!! I was shocked and when I spoke to my husband about setting a stricter budget he got defensive, he said that he doesn't want to work his life away and that when he works overtime he wants to be able to go out. He even threw the "it's my money" card (I was not expecting that)

I'm more of a saver; I put money away for my school & for a new car. I rarely buy myself anything and I'm starting to get jealous of my husband's spending habits. Please help! It was easier when we made close to the same amount of money, but since he's gotten this job I don't know what to do.

This is our income now and what we do with the money, any advice would be appreciated.

My paycheck: $788.00 bi –weekly
$332 – savings account toward a new vehicle
$25- our home savings account
$35- school account
$316-House payment
$80- my personal spending money including my gasoline
All automatically drafted into these separate accounts

My Husband: at least $544.00 a week (his last 4 paychecks added to $3174.60). He puts $200 a week into our house account, and the rest goes into his personal account. When we go out to a bar with friends he always pays for drinks and he pays for our deer hunting expenses (did I mention I live in (edited)). Occasionally he will give me money toward my car savings account.

I know there has to be a better way to divide our money, where we can both work towards our goals and have a comfortable amount of separate spending money. Please help before money ruins our marriage!

There it is! Open and honest for all the help she can get. She's already checked out my ideas on managing your accounts while married, but she needs just a little more direction. As I stated in my email to her, I think this can be broken down in 2 parts. The first is to sit down with each other (possibly over coffee or a beer) and understand where exactly they're coming from 100%. Once they can acknowledge there is a problem, they can work on resolving it TOGETHER.

The second thing I mentioned was to jot down all expenses (both house-related and personal) and decide afresh who should pay for what, and to possibly implement a % system. This will not only help re-distribute the wealth, but will allow flexibility down the road instead of just a "quick fix". And I like the idea of keeping the separate "spend however I want" accounts open as well. It allows for some freedom and a little fun which Mr. Husband clearly finds important :) Another option would be for Mr. Husband to donate a little more into the "house account", maybe $500 instead of $200? and then allow him to spend any overtime money himself - no questions asked.

Of course, that's only my ideas and they're pretty skewed ;) All I know is that it's better to fix this now - and not just temporarily- before time continues and our friend Mr. Resentment comes into play. So whatcha got for our dear friend Lost in Louisiana?

-------
ps: "Legal" tells me that I have to add the following: I am not a professional, nor a psychiatrist.

Labels: advice, married life, reader mail

Oh how i love me some reader mail! This one comes from a fellow budgets lover who just wanted to know that she's not the only crazy out there.

Her email was too colorful to take a part, so i'll just copy and paste it here and then give my response :) Plus, it's hella fun to read! It's not every day you get some animation out of people like this...Please to enjoy:

In early 2007 my fiance and I noticed that the market here in (edited) was dropping really fast, so our lease was up and we bought a new house, paid about $50k less then what they where asking, it is a 1500 sqft home, hardwood floors, built in 06, beautiful kitchen etc etc. We bought it for $180,000. Great Deal!!!! We do everything right, every month we have a budget, we always stick to it, we have a little over $11,000.00 in our savings, I have maxed out my 401k, and he invests in the states pension plan. We have nice cars that we can afford and both of us have one credit card that we keep a maximum of $1000.00 on just to keep our credit looking good.

My problems is now I couldn't even sell my house for $120,000!!!!! I'm furious, and to top it all off, my cousin who is a complete snob (she is 18, got married has never worked a day in her life and never wants to) she and her husband have no savings, no 401k, nothing. Now she is pregnant and they just bought a semi decent house for $95,000!!!!!WTF, her mortgage is only $500.00, she doesn't have to work and they blow their money away!!!!!! My point is, this really isn't fair, I am seriously thinking of going out, buying a Mercedes, freeze my contributions to my 401k, and drain my savings at Macy's!!!!!!!!!! Why is it that the smart, frugal, responsible ones are getting fisted up the (bleep!), while everyone else gets a free ride because of this economy!!!!!!!!!!! I want my break dammit!!!!!!!!!! Please give me the encouragement to not be bitter and jealous towards her and to keep being financially sexy!!!!!!!

Whew, that was a load full! But ya gotta appreciate the honesty :) And it really sparked my insides a bit. Not so much because her situation sucks so much, but because we really are all in this TOGETHER. Below is my attempt to help cheer her up...or at least back her up!

You know what i think about your little situation over there? $HITTY to the max! I'm with ya girl, life is just plain weird like that sometimes. I really don't get it - we're doing all that we can to better our financial situation (esp you, my damn you guys are onfire!) and yet others get things handed to them. I truly believe things come around in due time though, so maybe it's just not our time?

And you know what? At least we're all in it together :) We bought our place for $355k (instead of $360k which we thought was a steal at the time) 1 1/2 years ago right when things *looked* like they were about to get better and instead came crashing down. That, and 2 other places in our neighborhood has since filed for bankrupty and are reportedly going for $200-$250. So yeah -WTF indeed.

All that being said though, it's 100% totally & completely out of our hands right now. That's what you have to focus on. The only things we can do is KEEP saving our money, keep budgeting, keep maxing out our retirement funds, and stay away from all other debt out there. Yes it sucks, and yes people get lucky with timing (or NOT so lucky as in our case). But you know what? We are ROCKSTARS and we are killing this financial stuff :) Sure we can go out there and start blowing our money, but then we'll turn into the big idiots!

I'd much rather be a financial bad a$$ than an immature possesion monger, so this side of the situation is just fine with me. We are learning about stuff, applying it, and it'll all come around full circle - i can promise you that. So just keep doing your thing, and do your best to try and block out other people's experiences....the only thing we can work on is our own.

Ya diggin' me? You still wanna punch someone in the face? haha...I hope not. That's all i really got for ya ;) Good luck with it all and be sure to keep us updated!

Labels: cockamamy indeed, crazy economy, life, money management, reader mail

It's reader mail time again, and it's all about Credit Cards! You all know i love me some emails (and comments, twitterings, etc) so don't be a stranger, my virtual door is always open :) And if the stars align, i'll sometimes even blog about it! oooohhhh, ahhhhhh...

So yeah, today's post is brought to you by a fellow Budgets are Sexy reader who wants some advice on the old "Pay everything with your credit card" idea. And guess what? That's one of my specialties!

But before we start, you know i have to throw in a quick disclaimer here: Using your credit card like this is NOT for everyone, esp. those who aren't good at managing their money. If you've got that on lock, then continue reading my friend ;)

Here's what my dear reader asks:

"My question is this- I know folks like you swear by using your credit card for daily things, bills, etc and then paying it off each month. (by the way, neither myself or my bf have ANY credit card balances since we decided to buy our house this past year...) Anyways, I want to try this with this rewards card, but I\'m not sure how to go about it. I have online bill pay set up through my credit union for most household/regular bills and just worry about tripping up and getting screwed if I try to use this cc like you say you do. Help? Can you do a post about this, perhaps?"

Your wish is my command young lady ;) People use their credit card this way for a number of reasons, but the two main ones for ME are A) To help me budget & track my expenses easier, and B) To rack up a crazy amount of rewards! Plus, you'll actually find yourself spending LESS since you see the amounts build week after week. Here are the 4 steps for Operation Credit Card:

1. Create a Credit Card Budget!
Since you wont' be using debit cards, checks, or cash all that much now, you'll have to make sure to have enough to pay off your c/c balance each month. VERY IMPORTANTE amigos. The first time i did it i just guestimated and came out $200 short. Not. Fun. Here's a look into my own credit card budget to help get you started. Remember, it doesn't have to be all that complicated...

2. Find a Credit Card w/ Cool Benefits.
Everyone has their own soft spot - free mileage, gas rewards, cash back, there's a whole mess of them out there. Once you have a favorite, do a little research and check around for the best cards that focus on it. Pf Blogs, financial magazines, they're all great for finding them. I use USAA's Platinum Rewards card to get cash back, but you have to be affiliated w/ the military to get it. Here's a few others i found in Money Mag the other month, and also some of MyMoneyBlog's favorites to help get ya started.

3. Now, Use the Credit Card for Everything You Possibly can.
Cell phone bills, utilities, car insurance, life insurance, lunches, presents, tv/internet/phone, etc. Whenever it's time to spend money, try using the credit card first. Unfortunately (or fortunately?) you can't pay off ALL things like mortgages or car payments with it (well, you *can* but you'd have to use the cash xfer option which you NEVER want to do), but you can get pretty close.

4. Pay it off IN FULL Each Month!
Seriously, don't forget this - it's the most important part :) It may take a few months to get used to 100%, but it'll be second nature soon after. It can actually be pretty fun too - each month you get to see how you compare to the previous month! woohoo! haha....

There's a couple ways to pay here and stay out of trouble. I prefer using my bank's online bill pay over automatic anything simply cuz i'm scared $hitless of overdrafting my checking account accidently. If you manually pay it each month, you're more likely to stay on top of it! And if you're worried about forgetting, well, that's what we have Gmail/Outlook for! You can easily set up customized reminders and calendar events to help remind you every month. Plus, don't forget you'll still get the monthly credit card statements in the mail (or emailed) too.

And there you have it - the 4 steps to get in on Operation Credit Card! Again, it's not for everyone, but it sure is for Rock Stars :) It's all about maximizing the benefits baby!

Labels: advice, budgets, credit cards, reader mail

Even when an emergency comes up?! Hopefully none of us have to go through anything TOO crazy, but in life there's always some issue we're dealing with - and it usually involves money.

So when these issues arise, are you/were you prepared to pull from your Emergency Fund and put the crisis out?

That's the gist of an email i got from a reader here at Budgets are Sexy. I ofcourse have my own opinion on the matter, but I thought i'd share her email w/ the community so she can get a variety of thoughts on it. I mean, that's why i have you guys, right? :)

Here's what she sent:

J. Money
I've been reading your blog for a few months now. Thank you for publishing such great content!

My problem isn't as severe as most people out there. For all intents and purposes, I've done everything "right." I've got an emergency fund with about 6 months of expenses. I invest in my 401k. I own my home and am able to make the payments. I don't have any credit card debt and I save every month.

My water heater just broke, which stands to cost me about $1500 for damages and to replace it. When I complained to my coworker about the hassle I had when I discovered it was leaking, she said, "good thing you have credit cards." And at that point, I was so thankful that I have an emergency fund.

My problem is, however, that I feel guilty for using my emergency fund. I don't want to take the money out of my e. fund because then I have to focus on building my fund back up and the money won't be there if I were to have a greater emergency next week.

Please talk me out of my craziness and re-affirm that this is, indeed, what emergency funds are for. Or am I wrong?

Thanks.

First off, thx for the nice comments - and you've got some MAD financial skills! 6 months of expenses in an Emergency Fund, no debt, avid 401k investor - talk about a savvy saver :) So okay, she has a great head on her shoulders, but what do we do about the guilt?

That's a tough one for sure. The thought of taking a huge chunk from my own E. Fund would certainly give me the shivers. I mean, we spend mooooooooooooonths building that bad boy up ya know? And in most cases, we (as in the general public) rarely meet our goals before having to dip back into it.

YES you're gonna feel guilty about it, and YES you're gonna have to dip into your Emergency Fund. It's what it's there for :)

The odds that something even MORE serious hits next week is extremely doubtful. And if it does? Whelp, back to the E. Fund again :( It'll suck for sure, but unfortunately it's just one of those things we have to deal with as homeowners. Now, there ARE other options as you hinted about, but they wouldn't be my first:

• You could throw it on a credit card. You've already told us you're against it, and rightfully so - no point in paying all that interest when you have the money stashed. If you'll have to make installment payments anyways, might as well "pay" it back into our Emergency Fund. On the other hand, you COULD use it to delay your pain for a good 30 days and then pay it all off in full.
• You could pick up a Home Warranty. Again, not the BEST option as it's probably too late here, but you never know...i've known a few people to pull it off. You'd basically have to take it right away, and then wait for the 4-6 window to close so you can file your first claim. Be sure to ask about "pre-existing" issues and all too, as that may be an issue. It's DEFINITELY something to consider in the future though! You can never predict this kinda stuff :( Home Warranties can usually be picked up from your Mortgage company, and it'll cost around $400-$600 per year with a $100-$200 deductible - all depending on coverage.)

All in all I think you're on the right track :) And for what it's worth, "it's only money" ya know? it's gotta be used at some point. GOOD LUCK, and keep us updated! (readers - how would you cope with this? Anyone totally against the E. Fund?)

Labels: advice, emergency funds, reader mail