Abandon Nest

After setting up your budget, you’ll need to figure out where to stash the money that you’re saving. There are a variety of options available, and I urge you to research them extensively before choosing for yourself. To start, here are my top 3 places to keep savings, and my opinions about their use:

• Bank Savings Account - If you’re just starting your savings, as I am, then you’ll probably want to stick with a bank savings account until you get some real cash assets. The savings account I use at PNC Bank has a $300 minimum balance and basically offers no amenities. I’m looking to move away from this account soon, but it did me well while I discovered other options.
• Money Market Accounts - Money markets are relatively stable investments with little short term growth potential. They have moderate annualized returns (in the 4-5% range) but are definitely one of the safest investments you can make. Saving for a short term purchase? Go with a money market account. I believe PayPal has its own money market account that PayPal members can participate in, but I don’t know the details. It is worth investigating though.
• Mutual Funds - Mutual funds are for long-term savers that wish to see their money grow with an appreciable annualized return. This investment is riskier than a money market, but not as volatile as stocks. Even if one year happens to be a loser for your mutual fund, the long term benefits will be positive.

I plan on moving my money soon to either a money market or a high interest savings account like those offered by Ing Group. Now, I just need to figure out which benefits me the most and is the most convenient. How do you save your money?

Technorati Tags: Saving, Spending, Money Market, Mutual Fund

The average cup of Starbucks coffee costs $2.80. That’s a lot of money to pony up for something that will be gone in about 20 minutes. If you drink that cup of coffee every workday for the entire year, 261 days, you’re handing out $730.80. This is just one example where frivolous spending can be eliminated or greatly reduced, increasing positive cashflow and saving you a lot of money. Think about some other situations:

• Buying magazines at the grocery store
• Going out to eat for lunch/dinner regularly
• Buying pay-per-view movies for convenience

These may not seem like big expenditures (and they’re not if taken individually) but over time, even the most mundane expenses start to add up. These items all have something else in common. The cost can easily be circumvented or decreased.

What do I mean? How about we start with buying subscriptions to magazines you frequently read rather than paying full retail. For every magazine you’ll save an average of $70/year. The average cost of cooking or preparing your own meals is significantly lower than that of going out to eat, so buck up and become an adequate chef to save money. Finally, there are so many options that destroy pay-per-view in cost. Join Netflix or Blockbuster Online and receive unlimited movie rentals each month. Plus, you get to watch the film over and over until you send it back and after your first three movies, you’re way ahead of the game.

Evaluate your spending habits and see where you’re wasting money. Before long, you’ll be realizing a better cash flow by eliminating frivolous spending.

Technorati Tags: Frivolous, Budget, Personal Finance, Starbucks

Credit card debt can be a killer financial burden. You pay interest if you carry a balance from month to month. If you miss a payment, you’re hit with a late fee (which is basically throwing money away.) Finally, if you start to fall behind and near the upper boundary of your credit line, your credit score will start to drop. This makes it harder to get the best interest rates on loans and credit in the future. So how do you avoid all these things? Follow my three top tips for avoiding credit card debt, and you should be fine. Here goes:

1. Don’t spend more than you make - This may seem completely obvious to most people, but I know of some individuals that consistently rack up credit card bills that they can’t pay with their current income. I don’t know why they do this, but it’s not a very good practice. Keep track of your receipts and monitor your credit card balance so you know how much you’ve spent during the month. At the end of the month, you should have enough to pay your credit card bill completely.
2. Use credit for things you need, not things you want - I find the best way to do this is to stop and ask yourself, “Do I really need [blank]?” If the blank is something like groceries, then the answer is probably yes. If you find yourself filling the blank with Sony Grand Wega Plasma TV, then I would say your credit card needs to stay in your wallet.
3. Don’t use your credit card at all - Now this may not be very popular with some people, but I find it works for me. My credit card is a backup. It sits in a drawer in my kitchen unless I plan on going out of town or have a major emergency to take care of. If I don’t carry my credit card with me, I can’t use it on a whim or for something I don’t need. See how simple that is?

Obviously these three things won’t work for everyone, so what other suggestions do you have for responsible credit card use?

Technorati Tags: Credit Cards, Debt, Money Management