Retirement Doesn’t Have to be Your [only] Goal

Ever since I’ve started to read Personal Finance blogs I’ve realized there seems to be a common theme: retirement. And there’s definitely nothing wrong with that. Many people’s goal is to work, save and live in such a way to be able to retire earlier than most with more money than most. Now, what they are actually going to DO during retirement, I am not sure. It varies from person to person, I guess.

But regardless if that is the dream most people are chasing and working to achieve it does not mean that is the dream you have to work to achieve. Or at least the only one you work toward.

Maybe your goal is to save enough money to start your own business one day. Or to have enough to live on while you start blogging full-time.

I guess it all comes down to how you define, “retirement.” Sure, one day, I’d like to escape the 8-5 and “retire” but that doesn’t mean I want to sit around and do nothing. It means I want to be able to do whatever I want 24/7…whether that’s working, playing, relaxing or traveling. But with that definition of retirement we don’t have to wait till we’re older when we are able to cash in our 401(k)s or IRAs. It’s something we can work to achieve much earlier than that if we would like (while still funding those ‘retirement’ accounts for later on.)

Of course it’s hard enough to save enough to live on after the traditional “retirement” around the age of 60, so if you’re wanting to do some major things before then it will require even more focus and planning. But of course, as always, it’s totally possible.

If you’ve been stuck in the mindset that all you’re working toward is retirement but feel a little uneasy about it you should take time today or this week to sit down and write out the things you’d like to achieve before then. And then how you’re going to get there. 🙂

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The Automatic Millionaire: The Latte Factor

I finished reading the book The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich(affiliate link) a few weeks ago but with trying to finish the school semester strong (which I did!) I have yet to post about it. So here it is!

The Automatic Millionaire is written by David Bach, and despite its title, is not a “get-rich-quick” scheme (trust me, if it was, I would not have wasted my time to read the entire thing.)

It’s a fairly quick read, and one I highly recommend to any person starting to pay attention to their finances and setting the goal of being well-off and worry-free one day. (Remember, the first decision is to DECIDE.)

The points David makes in the book are valid and powerful regardless of whether you choose to “automate” them or not. He is a big fan of making everything automatic–especially retirement savings (setting it to come automatically out of your paycheck into your 401(k) or IRA.) But some people do not feel comfortable setting everything up automatically so I would vary with him on that some people DO have the self-control to move the money right away on a regular basis (every paycheck.) I’m one of those people who takes great pride and joy in moving my money (manually, though still electronically) into my savings accounts.  If, however, you foresee or start to see, the problem of spending the money you are supposed to be saving, it would be best to automate it.

Besides the “automatic” side of the book, one of the major points Bach writes about is what has become known as the “Latte Factor.” How little expenditures every day add up and how that money could be adding up to wealth for retirement (or whatever other kind of goal you have!) Here’s the breakdown if you buy a latte and a muffin every morning for breakfast:

$5 average cost of a latte and muffin x 7 days = $35/week = approx. $150/month.

But if you chose to INVEST that $150 a month and happened to earn a %10 annual return, you’d wind up with:
1 year = $1,885
2 years = $3,967
5 years = $11,616
10 years = $30,727
15 years =  $62,171
30 yea rs = $339,073
40 years = $948,611

Some of you are saying, “But I have to eat breakfast,” and others are saying, “I’m not going to earn %10 every year.” Both are true but 1.) You can eat breakfast for much cheaper (at home!) and 2.) You may not, but it’s definitely possible and the idea behind it is what is important and powerful!

The point is to realize that most of us spend money like we breathe. Obviously, life requires spending money. But it doesn’t require spending ALL of it or spending it just because we HAVE it. If you have a dream that requires money (retirement, starting a business, building a house, etc.) then you need to start saving for it NOW. It won’t just magically appear whenever you’re ready to start living out the dream.

There  are definitely other principles David Bach discusses in the book, and I will address some more of them in the coming days. My hope is that when you start to think about it and see the numbers the way you view and spend money will change and your life will be better off because of it!

Do you have something that you could give up on a daily (or just regular) basis and start saving that money instead? (Mine used to be lattes but I’ve cut that out of my life since January of this year! So glad I did too.)

Stupid Mistakes Will Cost You

I have 2 checking accounts. One I use to pay bills out of (reoccurring, monthly ones basically) and the other to “live” out of (daily expenses.)

I keep only what I need to in my bills checking account–though I know I need to put a few hundred in there as a cushion, I just haven’t got that far yet.

So this past week I deposited money into the account through the “night drop” at my credit union thinking it would get posted on Saturday (because they are open.) Of course, it didn’t get deposited till Monday but I knew there was that risk.

In the mean time I was charged rent. It was the one weekend I wasn’t paying very close attention to my finances since I had taken cash out to spend while on a mini-vacation to Dallas, and I didn’t think there was any reason to really check up on it.

Wrong.

My stupid (little) mistake cost me a $22.50 non-sufficient fund fee plus a little bit of hassle with the management of my apartment (though they were very understanding since I went to them the day of instead of later.)

Thankfully, since I have a good track record the (awesome) credit union I am a member of refunded it for me, no questions asked. But it does show that regardless of how “automated” your finances are you still need to keep an eye on it.

Wisdom: I have now set up overdraft protection from another account of mine just in case. I should have done this when I opened the account but it goes to show we all can make mistakes sometimes. 😉 I was tempted to get stressed over the whole ordeal but I knew it would work out, and I’d just have to be patient. So I did. And it all paid off. All stress does it make you miserable. It doesn’t help your finances. So next time, just take a deep breath, plan how to fix the problem, then go fix it.

It will all be over soon. 🙂

Awareness Saves Money: Electric Style

The more aware we are of our spending the more we may be able to save money.

I have yet to perfect the art of tracking all my spending (honestly, I think I’m just still too lazy–feel free to give me a good kick) but I have found the perfect tool to track my spending on my electric bill.

It’s a website (and also an app for certain phones) called My Usage. Not all electric companies support this tool but for those who do, it’s perfect. Just go to http://www.myusage.com and click “Sign Up Now.” It will offer you a few steps to see if your particular company is supported. If it is, you can sign up and be able to view a graph of how much electricity you are using every single day.

My graph currently looks like this:

The usage is measured in temperatures and the red graph represents the average in “my area” (not sure what the area is exactly.)

I have this app on my HTC Hero with google phone (android powered) and check it every morning. I live in a 2 bedroom, 2 bath apartment with only 1 other person so my usage may be lower than some (it is also quite perfect right now outside so now air or heat is being used) but I definitely notice a difference on days I do laundry and use the dryer.

This app has just made me a lot more aware of how much electricity I am really using and how much it’s costing me. Turning off lights and keeping the usage down to a minimum whenever possible is now a thought that actually crosses my mind whereas if I didn’t have this app I probably wouldn’t really think about  it.

Basically, it just helps me stay aware. And awareness is powerful. Because it promotes action–even more powerful!

Being Young: Rent or Buy?

It’s part of the American dream to own a home. You know–maybe one with a white picket fence and two little children playing in the yard.  Sounds like a plan!

But that’s never really been  my dream. My dreams have always consisted of travel, volunteer work, starting up non-profits, exercising some entrepreneurship, and helping start-ups get their feet off the ground. So buying or building a home wasn’t at the forefront of all of that.

And at the age of 20 I have decided to go out on my own. So when I chose to do this I was faced with the decision to save up for a deposit on a house and buy one in my hometown or rent.

Some people say rent is throwing away your money every month. But realistically it’s money that is keeping a roof over your head and providing a place for you to live outside of your day job.

So personally, at my ripe young age, I’ve decided to rent an apartment. Mainly because I want to  build up my assets in the form of cash right now, and because since I am so young I don’t exactly know what the future holds. It seemed like too big of a risk to just buy a house for the sake of buying one.

I have to admit I had somewhat of a prejudice toward people who rented–I thought maybe they rented because they couldn’t handle their money well enough to have a mortgage. But my thoughts have changed in regards to that. That may be the case for some people but I know it’s definitely not the case for everyone who rents. Right now, renting allows me to be mobile and not feel as “stuck” as I might if I had a mortgage.

I still have a long ways to go in understanding everything about buying a home vs. renting but overall I think it’s a choice each individual has to make for themselves. One day I may very well own a home but even then I hope to travel around doing different things.  =)

Let me ask you–what do you think of renting vs. buying? Do you think it’s wise when young people get a mortgage during or right out of college?

Financial Goals: Makin’ It Happen

So last week or so I posted some specific goals I’d like to reach by end of this year. There were some financial ones, health ones, education ones and relationship ones.

I was able to post them but not able to give a lot of specifics on how to do achieve those goals. Today I wanna discuss how I am planning on meeting my financial goals for 2010 and give you a small update on each of them.

Here is my list from February 24 and my thoughts below.

FINANCIAL
1. $1,000 in emergency fund by year end 2010
2. $2,000 in cash savings by year end 2010
3. $1500 for vacation in fall of 2010
4. $800 for school every semester
5. Open a 401(k) and Roth IRA and begin to fund

On the emergency fund…
I am currently 75% to my goal. I was going back and forth whether to just throw all my extra money at it at once to get it up to the goal more quickly but I’ve got a few other things happenin’ so I’m going a little slower than I thought.

On the cash savings…
This isn’t much yet. I’ll say this: there’s some in there. But I am not contributing to it currently so I can add more to my e-fund. (By the way, this is basically an extension of my emergency fund. I’d like to get my e-fund up to 6-8 months of living expenses because you never know what could happen.)

On the vacation savings…
I am all set to go on a vacation but the more I think about it sometimes the more I think, “If I put that money toward my e-fund that’d ROCK.” But…vacations are good things. And I haven’t been on one in awhile so I’m doing this. Though I am thinking of cutting the cost down. 😉

On the school savings…
I’ve got a plan in place that should rock this baby home! I’m thrilled.

On the 401(k) and Roth IRA…
I will open the 401(k) in November as that is when I am eligible for an employer match. And I’m shooting to open my Roth once I”m done saving for vacation (hopefully mid or late summer.) I know some of you may have just fallen down dead that I’d put off retirement savings for a vacation NOW but it is what it is and I’m happy about it! 😉

There you have it, kids. Short and sweet.

What are some of your financial goals and how are you reaching them??

The Bad Decision Mud Slide

Sometimes one bad decision leads to another.
Or…
Most of the time.

It’s an unfortunate scenario but I think it’s true. Do you agree?

I try to not eat sugar and on the third day I eat sugar and instead of continuing on with not eating sugar I choose to eat sugar…and lots of it.
I say I’m going to work out 4 times a week, but by Tuesday I’m tired of being away from home and skip “workout Wednesday” and instead of 4 times I’ve only worked out twice. And then why even go back the next Monday?
I make a decision to not take any money–EVER–out of my emergency fund (um, unless it’s an emergency) and put my tax refund money in there so I don’t touch it but after a hard first of the week at work I’m ready for a pedicure. And of course I wasn’t planning that in my spending money for that week so where did it come from? Oh yeah…my emergency fund. Thankfully that’s the only mistake I’ve made with this one but the opportunity to make another and another and another until I’m in a mud slide of bad decisions is definitely there.

Sound familiar? Maybe not. But it’s pretty familiar to me.

And it has to STOP.

And it can stop. It’s all about thinking rationally and being at peace and stepping away from the situation. Let me think about today…

I should have worked out but I didn’t. How do I stop the bad decision mud slide here and now? Go the gym tomorrow.
I shouldn’t have eaten 7 packets of ‘fun-sized’ m&ms. And the bowl of cereal. And the piece of chocolate pie. What now? I go cut carrots right after typing this and put them in a sandwich bag to munch on tomorrow.
I had planned to finish at least 1/2 of my biology homework for the week but I only finished about 1/4 of it because I got distracted by American Idol and Facebook and the internet in general. And now….Take a deep breath and realize I still have the rest of the week to do it. No biggy.

Sometimes we get to worked up about things we didn’t do or we messed up on it only prohibits us from moving forward. And instead of making the right decision the next time we make another bad decision because…well, heck, I messed up last time.

But take heart, the bad decision mud slide can actually be reversed and instead of going down the mountain you can make right decisions and it have the same effect but going UP the mountain. Generally, good decisions lead to more good decisions. And that’s when life get’s exciting.

Follow peace. And if you don’t have it–go find it. I promise it’s there. But you might have to step way back from your situation. Get outside. Go to a place you don’t go to often. Get away. Good things are waiting.