Bible Money Matters » Commentary

5 Things About Money I Wish I Would Have Known When I Was Younger

Guest Poster — Thu, 02 Sep 2010 11:48:27 +0000

Sam Ewing, who used to play baseball for the Chicago White Sox, once said, “Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.”

Many of us may feel that we can never quite catch up with our money, but one thing is certain: There are many things about money that we probably wish we had known when we were younger. For those of you who are still young or even young at heart, here are five things about money that you should probably think about.

1. Compound Interest

If you can save money at a young age and invest it in a quality mutual fund, you can become a millionaire by the age of 58 with only a small investment. That’s the beauty of compound interest.

Consider this scenario: Beginning at the age of 19, Jane invests $2000 per year ($167 per month) into a mutual fund with a 12% rate of return. She continues to invest $2000 per year into that same fund until she reaches the age of 26. From the age of 27 on, she invests nothing. This gives her a total out-of-pocket investment of $16,000. By the time she is 58, her $16,000 investment will have turned into $1,035,425! It can be difficult to find a fund consistently earning 12%, but even if it is only 10% the power of compound interest still works quite well!

2. Learn to Use a Monthly Budget

A monthly budget is the single most powerful tool you can use to keep tabs on your money. If you aren’t able to see where your money is going each month, you’ll have no way of knowing where you’re overspending or where you need to change your spending habits.

3. Just Say NO to Credit Cards

Remember what we said about compound interest? Well, credit card companies love compound interest. In fact, many of these companies charge interest rates of over 18%. Pretty good return on the money they’re loaning out, isn’t it? The single biggest problem with credit cards is that when you max out the card and only make minimum payments, it will take you forever to pay off the card and the interest that you pay will be much higher than what you originally owed. Even the best credit card rewards don’t make up for all the interest paid if you are paying monthly miniums. Instead use a cashback debit card like Perkstreet Financial which pays just about as much as any credit card rewards.

4. Cash is King

If you budget your money and set specific goals, you’ll be able to use cash for all of your purchases. If you use cash for big-ticket items, you have bargaining power. Most people in the U.S. are afraid to bargain with retailers. Doesn’t it seem strange that when you travel to almost any other country in the world, marketers actually expect you to dicker?

When you bring cash into the store it does a couple of things. First, using cash gives you a sense of the value of the item. It’s much harder to part with the dollars than it is to just put it on a credit card. Guess what? Retailers know this. People who use credit cards for purchases are much more likely to buy more. Basically, it doesn’t hurt as much when you use a card. When you count out that cash to pay for an item, it’s kind of like saying good-bye to a good friend.

Cash enhances your bargaining ability. When the salesperson tells you the price of the item in question, the first thing you can ask is, whether or not you can get a discount for using cash. The answer is usually yes. If it isn’t, you can always go to a store where it is. Using cash also puts a top-end amount that you’re willing to spend. If the item is higher in price than what you have, you can always tell the salesperson that you only have x-amount of dollars. It may take a couple of trips to the manager’s office, but most of the time, you’ll be able to negotiate the price of the item down to what you have.

5. Save Early and Save Often

It’s much easier to save money when you’re young. If you’re in your mid or late teens, you probably live with your parents. This means you have no real living expenses. If you have a job, you can put most of your paycheck into savings or investments. Remember what we said about compound interest? Put your money in a quality mutual fund and be ready to retire early.

Another reason to start saving early is to establish it as a normal habit. Once you’re out of your parents’ house, it’ll be much harder to save. If you’ve established saving as an important goal, you’ll be much more likely to continue a habit that you’ve started early on.

Many of us wish we could have “do overs” in our life. The way we handle money is usually one of them. If you’re still young, begin practicing the items listed above and reap the rewards as you get older.

This article is by Bob Lotich who writes for ChristianPF.com – a blog that looks at personal finance using Biblical principles.

This article was written by Guest Poster. We love guest contributors here at Bible Money Matters. Would you like to write for us as well? Please check out out our guest post submission guidelines and then contact us with your post idea!

Would You Give Up Your Favorite Financial Sin To Achieve Financial Freedom?

Guest Poster — Tue, 24 Aug 2010 12:00:17 +0000

This is a guest post written by Jesse Michelsen, the creator of Personal Finance Firewall. On his site he writes about taking every tiny detail into account when managing personal finances, and gives tips on ways to make it easier for those with full lives.

I often listen to motivation speeches and read spiritual, uplifting material. It’s really positive and always has great life lessons we can learn, regardless of your religious choices.

A couple years back I heard a speech by a prominent religious motivational speaker about sin and sacrifice. This man spends a lot of his time with people of his faith and in he speech he talked about a common trend he noticed among them. He noticed that, while the majority of them did great spiritually, and followed the word set by their faith on all of the major sins; Thou shalt not kill; Thou shalt not commit adultery, when it came down to the little things like honesty, greed or gluttony, many of them fell short.

So he started privately asking people, “Would you give up sinning in order to go to Heaven?”

They of course would exclaim, “Absolutely!”

and follow it with, “Would you give up your favorite sin, in order to go to Heaven?”

He would point out that some of the really small sins, that people often forget about and more often than not, do commit without even thinking about it, are still sins. Even some of the major sins that were punishable by death back in biblical times, are now every day things, generally accepted in our present culture.

Relating this back to finance, debt and general financial ignorance are just as generally accepted in our culture. Even around here, among you and I that read and write personal finance advice and are trying to improve our financial situation, sometimes we are unwilling to give up or even unaware of the small financial sins we commit.

There are many financial “sins” that are often written about that I would consider the major financial sins. Things such as cashing out your 401k after leaving a job; carrying a balance on your credit card; or paying the minimum due on your debt. These are big sins, and usually the first to be tackled when seeking financial redemption. And although I wouldn’t go as far as saying these are the easy sins, because they are some of the bigger ones they are easily avoided.

But what about the small sins, your favorite financial sins?

Things like overspending on Christmas, getting a new cell phone every year, or going out to lunch every day at work. These things are culturally acceptable, even among some circles of the personal finance niche, these are no big deal, but these small things can still really hurt your financial situation especially because they can open the door to bigger problems.

I have experienced all of these small financial sins, and really enjoy them to tell you the truth. These are some of my favorite financial sins, but in order to achieve financial freedom, even these small financial sins have to be avoided.

Do you have a favorite financial sin? Are you willing to give it up to achieve your financial goals?

Image by jonycunha

Wealthy Heiress’s Empty Mansions Attest To How Material Things Can’t Buy Happiness

Peter Anderson — Wed, 04 Aug 2010 11:55:28 +0000

Up on a bluff on the Pacific Ocean sits Bellosguardo – or “Beautiful view.” – a $100 million dollar mansion owned by a reclusive billionaire and 104 year old heiress Huguette Clark. By any account the mansion is beautiful, and the estate is one that any person would love to call home. The thing is, the reclusive owner of the estate hasn’t been there in many decades. Neither has she ever stayed at her estate in Connecticut which she bought in 1952, and she has only rarely been seen at her suites in New York in the past 30 years. For the past few decades since the death of her mother Huguette been a reclusive figure, preferring to remain in the shadows, only talking with a few people, including her lawyer. She now lives in a hospital room, not necessarily because she’s sick, but because it’s easier for her to be there.

So how did it all start for her, and how did she end up living such a reclusive life where things like her homes meant so little to her? From NBC:

Huguette inherited a fortune in railroads, copper mines, cattle, timber and banks. Her father also owned the land that would one day become Las Vegas. But it was here in Santa Barbara that she began to turn her back on all that, retreating from the world after a brief marriage.

Like her mother’s before her, Huguette’s wedding sold a lot of newspapers. Her husband, William Gower, was a bank clerk making 30 bucks a week; Huguette spent 11 times that much every day. She confided to friends that her great wealth was a “menace to happiness,” yet she hung out with rich daredevils who drove fast cars and flew rickety planes. Her marriage lasted two years.

Huguette was later linked with Edward Fitzgerald, the Duke of Leinster, who subsequently told a British bankruptcy court he had come to America looking for a rich wife. The duke denied being engaged to Huguette, but again her life was reduced to cartoons in newspapers.

She stepped into the shadows for good. Huguette never remarried; had no children.

Huguette found that she was living in a prison of her own wealth, one where she felt that her wealth was the only reason people wanted to be around her, and one where they would just as quickly turn on you if they had the chance.

She was by many accounts a generous person, and for those in her inner circle, a wonderful soul. But as she has aged, the money and homes didn’t mean as much – until the point where she gave up her lavish apartment and started living in a drab hospital room.

Almost everyone who worked for Huguette had a job until they died. She sent her chauffeur out to pick up an elderly maid every day. Now she is quite old herself; she turned 104 in June.

“She’s still alive,” Andre Baeyens said. “She knows where she is. She’s not very interested in her friends, but she’s still alive.”

In New York, he said. My colleague, Bill Dedman, msnbc.com’s investigative reporter, tracked her to a hospital.

“I had imagined she’s in a three-room suite, a room for her caretaker, and it’s elegant,” Dedman recalled. “I found that part of the hospital. They looked her up in the computer and they said, ‘No, she’s not here. She’s down in another section.’

“I went there and it’s drab, patient names written on a board in the hallway. It couldn’t be more ordinary.”

Huguette had lavish estates in California and Connecticut, but hasn’t been to either in 50-60 years. She had money, but it doesn’t sound like it had brought her enjoyment in years. In fact she now is not even “very interested in friends”.

Money, Material Things And Wealth Can’t Bring Your Happiness

For me what just stuck out in this story is just how little importance money and possessions can have, once you have enough money to have anything you could ever want. She had money, but she didn’t have happiness. She had an unhappy short marriage, suitors coming after her only because she was wealthy, and she felt like her money was a “menace to her happiness”.

I’m of the opinion that no matter who you are, you need to find happiness in your faith first, and in your family and friends next. Putting your faith in things, money and things of this world will lead to nothing but trouble.

Better is a little with the fear of the Lord than great treasure and trouble with it. – Proverbs 15:16

Have you seen people around you trying to find happiness in money and possessions? Have you done it yourself? How can you keep yourself from falling for the honey trap of wealth?

This article was written by Peter Anderson. Peter Anderson is a Christian, husband to his beautiful wife Maria, and father to his baby boy, Carter. He loves reading and writing about personal finance, and also loves a brisk game of tennis every now and again. You can find out more about him on the about page or check out his design site at http://www.logosforwebsites.com. You can also follow him on Twitter at @moneymatters.

The Benefits Of Being A Stay At Home Mom Versus Being A Working Parent

Peter Anderson — Fri, 25 Jun 2010 16:26:46 +0000

This week is quickly turning into babies and family week. I’m sorry but I just can’t help myself, I’ve got nothing else on my mind lately, understandably. By this time next week I’ll be changing diapers and staying up nights with our new son.

One topic that has been close to our hearts these past couple of months is the topic of being a stay at home parent, versus being a working parent that uses daycare. We’ve been thinking long and hard about which situation was best for us, and which was the best for our son.

We prayed about the situation, ran all the numbers, considered the pros and cons, and in the end it made the most sense to us for my wife to stay home with our baby boy. She ended up handing in her resignation at her job (she loved her job), and had her last full work day a couple of weeks ago. She was sad about leaving her work, but she is glad that she made the decision.

Today I thought I would do a quick discussion of what some of the factors are that may go into a decision on whether or not to stay home with a child (or children).

(Before I start, I realize that there are both mothers and fathers who stay home with their children, but I believe the majority of parents that stay home are still mothers. Because of that, and because our family is making the decision from this viewpoint – I’ll be writing this article from the point of view of a mother staying home with the children.)

Is It Financially Possible To Stay Home?

Probably one of the biggest factors helping to decide if a parent should stay home with the children is whether it is economically feasible. If you go from a dual income family to a single income family – will you be able to make your monthly payments, and keep up with any debt obligations? For many people the answer is no because they’ve leveraged themselves to the hilt, and are living in a home they can’t afford, and driving a car beyond their means. They won’t be able to get by on one income. With two they can usually squeak by.

This is one reason why I believe it’s so important for a family to do their best to be in a financially sound position, because it allows you the freedom to make decisions like these, without having to consider the monetary costs as heavily. Since we’re debt free except our mortgage, it makes it a lot easier to be able to move to a one income household.

So if a parent were to stay home, what are some of the things with monetary value that they would lose?

Income from job
Benefits (Health insurance, dental insurance, disability insurance, life insurance)
Retirement income matching

That could add up to quite a bit of money!

You also have to consider the expenses you’ll be incurring if you work:

Childcare (unless you have a family member or friend watching your child)
Eating out more often because you’re working.
Work clothing
Transportation costs
Higher taxes due to higher family income.

of course this may not be an exhaustive list, but I think some of the big ones are here – especially day care costs.

What expenses might you incur if you stay home?

Kids activities
More social activities for mom due to lost social aspect of working

In the end you need to figure out the two sides of the equation – financial situation with one income, and one with two incomes. What income and expenses do we have on each side of the scale, and would it even make sense to continue working if the scales balance out – or even if you make a bit more money if continuing to work?

At our house we found that once we considered all the monetary factors, we would actually be equal whether my wife stayed home or went to work, mainly because of the cost of child care. It didn’t make any financial sense for her to continue working.

Other Resources

Here’s a “Can You Afford To Quit” calculator at Kiplinger.com.
“Stay At Home Calculator” at Parents.com.

Does Mom Want To Stay Home?

Another important factor is whether or not mom actually wants to stay home with the children. Some women may not want to stay home with their children, and may prefer having a career to being at home with the child 24 hours a day. It doesn’t make you a bad mom to not want to be a stay at home mom, and you can still be a wonderful, loving parent. Not everyone is perfectly suited to being a stay at home mom.

It is a huge sacrifice to stay at home with your children, especially when the mother is losing much of the social aspect of being in the work force, and sometimes feeling like they are not using their expensive college degree by leaving their job. It can be a very under-appreciated job to be a mother! (Mothers – you are my hero!)

On the other hand, I believe many women are perfectly suited and created by God to be wonderfully nurturing parents, often much more so, or in a different way than the fathers. So while it is a sacrifice, it is also for many a privilege and an honor to stay and home, nurture and raise their child. Plus, there are many wonderful ways to get involved with local mothers groups, church groups, etc that will help you to stay social and active.

Maria felt led by God to be a stay at home mom for her child, but she struggled with enjoying her work and losing her career as well. It was a tough choice, but the kiddo won out.

How Would The Child Benefit From Having A Parent At Home?

One thing that really weighed heavily on us when we were making the decision as to whether my wife would stay home or not was what was best for our unborn son. Would he bet better served by having his mother at home to help nurture him, care for him and teach him, or would he be able to thrive as well by being care for by others?

For us we felt that we wanted to be taking a more active role in our child’s care, raising him up in the things we believe, teaching him and loving him for those precious early years.

Some of the benefits for the child of having a parent at home:

A more stable home life and routine
Better able to teach and educate your child
More consistent discipline and care
More time to love on them!

When we considered all of these benefits to our son, it just enforced our opinion that my wife should stay home. We really believed it would be best for him.

Consider The Costs And Benefits – Make The Best Decision For Your Family

Once you’ve considered all the positives and negatives of both sides of the debate, it’s time to make a decision that best fits the needs of your family. For some people it might not be feasible for a parent to stay home – debt obligations and other things just don’t make it possible. For others the decision to have a parent at home with the kids is important enough to make big sacrifices in other areas of their lives.

At our house we felt so strongly about having a parent at home, we most likely would have made the decision for Maria to stay home, even if it hadn’t been a wise decision financially. Thankfully we’re in a good position financially (no debt except the house), and we’re able to make the transition relatively smoothly. Now we’ll just need to make sure that my wife is still able to interact with other moms and others socially so she doesn’t lose touch with that aspect of her life – which is extremely important to her.

It’s a balancing act for sure, and I hope you’re able to make the right decision for your family as well.

What do you think about having the mom stay at home? What are some pros and negatives on both sides of the equation? Which decision has your family made and why? What things are we missing in this discussion of the topic? Tell us your thoughts in the comments!

The Seven Deadly Sins Of Spending

Guest Poster — Tue, 15 Jun 2010 12:36:57 +0000

Spending money is a necessary part of life that requires diligent planning and serious discipline. You may have also realized it’s really fun.

Many of us, often without realizing it, allow our spending habits grow out of control and wreak havoc on our bank accounts. The following are the Seven Deadly Sins of Spending we can all afford to avoid and tips for overcoming them.

1. Pride

It’s easy to get caught up in image. Many people try to maintain an air of wealth or affluence by buying things they can’t afford.

Even you may succumb to pretentious tendencies at times. Perhaps you’ll purchase a name brand over the generic or rely on a credit card for a hot item you don’t have the cash for, all in pursuit of admiration from others.

Over-spending just to perpetuate a facade will eventually catch up with you. It’s OK to admit it when you can’t afford something — and sometimes you have to. Don’t let your ego hinder your financial well-being.

2. Envy

Sure, that shiny new sports car sitting in the driveway next door looks great, but imagine how much better next year’s model will look in yours. Too bad you’re still paying off the sedan you bought five years ago. You deserve it so much more, though.

Keeping up with the Jones’ will do nothing but sink you further into debt. You will not be happier or more successful. Instead of constantly coveting the possessions of others, be thankful for what you have. If you can’t live without a particular extravagance, like a new car, plan a well thought-out budget for it in advance.

3. Gluttony

Do several items of clothing hanging in your closet still have tags attached? Do you feel a compulsion to buy things even when you know you’ll never use them? Over-consumption to the point of waste is a spending sin that takes a heavy toll on budgets.

Compulsive spending or shopping addiction, is a real issue that can negatively impact several areas of your life. TODAYshow.com contributor, Laura T. Coffee, says, “If you feel your spending is so out of control that you can’t wrestle with the problem alone, seek out counseling or therapy or try attending a Debtors Anonymous meeting.”

4. Lust

Just about everyone at some point has been guilty of buying something they really, really wanted even though it didn’t make financial sense to do so. The next time you see something you can’t possibly live without (and can’t possibly afford), restrain yourself from purchasing it on the spot. Instead, go home and give yourself 24 hours to “cool off.” Chances are, you won’t feel the intense desire tomorrow.

5. Wrath

Do your emotions dictate your spending habits? Anger, stress or any other negative feelings can trigger a desire to drop a wad of cash on something frivolous. Spending money is often a coping mechanism consumers employ to distract them from real-life problems.

If you’re guilty of this as well, find a new way to relieve pent up aggression and anxiety. Go outside, get some fresh air and exercise, engage in an activity with your kids or work on a home improvement project you’ve been putting off for weeks. There are plenty of healthy ways to deal with negative emotions that don’t cause your wallet pain and suffering, too.

6. Greed

It’s not hard to justify keeping that extra bit of paycheck for yourself instead of adding it to your savings account. You worked hard for the money, shouldn’t you have it all right now if you wish?

The truth is, there’s no excuse not to save. Saving money is probably the most important rule of finance. If you can’t trust yourself to part with some money every month, have someone else do it for you instead. Enroll in an automatic savings plan through your bank or an employer-sponsored retirement savings account with automatic deductions.

7. Sloth

Buying things becomes more expensive in general when your credit is poor. When was the last time you checked up on your credit?

Don’t slack on regularly monitoring your finances. If you’re careless or indifferent about staying up-to-date on your financial standing, you’ll eventually suffer the consequence of high credit card and loan interest rates due to unknown factors like fraud or mistakes on your credit report. Take a proactive approach to managing your finances and ensure you’re not spending more than you have to.

This guest post was written by Go Banking Rates, bringing you informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide. Follow them on Twitter at @GoBankingRates and on Facebook at /GoBRates.

Obama Administration Urges Congress To Pass Another $200 Billion Stimulus Package

Peter Anderson — Fri, 28 May 2010 11:56:39 +0000

As the effects of the $787 billion stimulus package of last year begin to wear off, the Obama administration is now looking at the option of passing yet another “limited” stimulus package to help dig the economy “out of a deep valley”. Without it they fear that the slow gains our economy has made this year could be lost. The Financial Times explains:

The Obama administration made a strong plea to Congress on Monday to grit its teeth and pass a new set of spending measures – dubbed the “second stimulus” by some economists – in order to help dig the economy “out of a deep valley”.

The call for action, which was made by Lawrence Summers, Barack Obama’s senior economic adviser, who urged Congress to pass up to $200bn in spending measures, came at the same time as Mr Obama asked Capitol Hill to grant him powers to cut “unnecessary spending”.

The combined announcements were made amid rising concern that centrist Democrats, or those representing marginal districts, might vote against the spending measures, which include more loans for small businesses, an extension of unemployment insurance and aid to states to prevent hundreds of thousands more teachers from being laid off.

On the heels of a $787 billion stimulus package, $200 billion doesn’t sound nearly as large, but the fact is – it is money that we don’t currently have. A lot of people aren’t quite as sure another stimulus package is a good idea, they say it’s throwing good money after bad.

The M3 figures – which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance – began shrinking last summer. The pace has since quickened….

It’s frightening,” said Professor Tim Congdon from International Monetary Research. “The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,” he said.

The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.

So there is quite a bit of debate as to whether the first stimulus actually did very much, and now we’ve got quite a bit of debate as to whether there should be another one.

What do you think? Should there be another stimulus? Will another $200 billion in unemployment extensions, small business loans and aid to states make a difference? Should we stop the spending now in light of ballooning deficits? Tell us your thoughts in the comments.

Living On Less Before You Need To: Getting By With One Income

Peter Anderson — Fri, 14 May 2010 16:09:14 +0000

Last week I read a post over at Debt Free Adventure about how it’s a good idea to start living on one income, whether or not you need to. If you’re married and have no kids, it can be a good exercise to see what it may be like if you end up having children and one partner needs (or wants) to stay home with the child. It is also a good way to get ahead faster because you’re living below your means, before you have to! So today I want to talk about living on less before you need to, and why it’s a good idea.

Why We’ll Be Living On One Income Soon

Part of the reason that I’m writing about this topic is because my wife and I are currently being thrust into a situation where my wife will no longer be working. We’ll be living on my income alone.

No, we’re not being faced with layoffs or a bad work situation. The reason we’re going to be living on one income is that we have agreed that my wife will take on the important job of being a stay at home mom. Maria is currently pregnant with our first child, our son Carter, and we’re expecting him to be born sometime at the end of June. We’ve had plenty of time to plan for this situation, not only because the pregnancy lasts for 9 months, but because we’ve just been looking forward to this day for some time.

Yesterday my wife gave her two week notice at her job, and so now our life living on one income is two weeks away from reality. It’s a bit scary, but we’re ready.

The Switch To Living On One Income

We made our switch to living on one income a couple of years ago, not because we were planning to have children, but more just because we were scaling back and working our way through Dave Ramsey‘s Financial Peace University. We were attempting to pay off our non-mortgage debts, and it made sense to live off of my income, and use the rest to pay off our debts. It worked out really well and we had quickly paid off my last student loan, and the remaining balance on my car.

After our debts were paid off, it just made sense for us to continue living off of one income (much less than one income actually), and save my wife’s income for retirement, emergency savings, and to save and pay cash for our next car. It’s amazing how fast you can save money when you’re living on a lot less than you make.

Now that we are expecting our first child, and are anticipating all the expenses that come with having a child, we’re extremely glad that we started living with less long before we needed to. We’ve planned ahead and saved up a substantial 9 month emergency fund (in case of layoffs or other issues) and saved up and paid cash for all of the big baby items (furniture, clothes, car seat/etc). Now we’re building a little bit of extra cushion into our budget for unplanned baby expenses as they crop up.

Because we planned ahead and updated our budget, we should be ready when the day we need to live on one income comes. (It’s only 2 weeks away now!)

Some things you can do in preparation for living on one income:

Do a budget
Save up a small emergency fund.
Pay off all debts with intensity
Continue saving an even larger emergency fund.
Save up cash for expected expenses (like cars, taxes, etc)
Plan for as many scenarios as you can envision. Plan ahead!

Benefits Of Living On One Income

There are quite a few benefits to living on one income, and living on less than you make – before you need to. Among them:

If you’re in debt, you can pay off debt faster.
Once debt is gone you’ll have less stress because you’ll have a surplus.
If one of you loses a job, you’ll be able to absorb the loss easier since you’re living on one income anyway. (unless the job remaining isn’t enough to live on)
You can save money a lot faster.
Retirement funds can add up quicker.
Financial peace knowing that you’re living below your means.

There are also benefits to sacrificing to live on one income when you have children. Some of the benefits include:

No daycare costs because one parent can stay home.
Healthier kids because of no daycare germ incubator!
You’re able to devote yourself better to nurturing and raising the child.
Stay at home spouse can keep the home, which leads to less stressful evenings figuring out who is going to cook, when to clean the house, etc.

Those are just a few of the benefits that I came up with off the top of my head. I’d love to hear your thoughts as well, however – both positive and negative!

Sacrifices May Need To Be Made

If you’re currently living on both incomes, and the thought of living on just one of them sounds impossible, it may be time to start thinking about ways you can cut back.

Can you move into a smaller house with a more affordable mortgage? Are there ways you can accelerate paying off your debts to reduce your debt obligations? Are you living a lifestyle that’s above your pay grade?

Examine how you’re living and figure out why you need both incomes currently. Once you figure it out, try finding things that you can change in order to facilitate a move towards a “living on one income household”. We found that it was key in creating a sense of financial peace in our household, and we believe it will work for yours as well.

What do you think about living on one income in a dual income household? Is it something you are trying to do? What do you think about sacrificing one of the incomes in order to be a stay at home parent? Tell us your thoughts, we want to know!

Should I Have Bought An Extended Warranty?

Jason Price — Mon, 10 May 2010 20:20:47 +0000

A couple of months ago I purchased a new Dell laptop. We’ve needed a new home computer for a while now and the deal I ran across was too good to pass up. So I purchased it for $400 via the Dell website. As an aside, Dell has always been good to us. Their products have performed well and suited our needs for internet, email, blogging, etc. just fine. I’ve also used a Dell for a work computer in the past and was absolutely pleased with the performance and reliability.

A few weeks after receiving my laptop I was contacted by Dell and asked if I wanted to purchase an extended warranty. After kindly and patiently listening to the offer, I gave them my pre-programmed response of “no thank you, no thank you and no thank you.” In fact, I’m used to hearing this question after past purchases of video cameras, digital cameras, TV’s, etc., so in saying no so many times it’s now my default answer as I have my ears half open.

[To provide a little more background, the Dell warranty I was being offered extended my manufacturers warranty by a few more years, if I remember correctly. The cost was about 25% of my purchase price. It covered non-manufacturer problems such as personal accidents. However, since I wasn't considering the warranty from the beginning of the conversation, I didn't catch all the details.]

I know this is where electronic stores, in particular, make a lot of money. For example, if you never use your coverage you’ve wasted the cost of the extended warranty. However, if you do use the coverage, the price you pay may be cheaper than the replacement cost of the product, or repair costs the manufacturer, or a local repair shop will charge you.

Should I have bought the warranty? The unthinkable occurs.

Well, a couple of months after having my laptop the unthinkable occurred. I accidentally knocked over a cup of coffee directly onto the keyboard. While at first I didn’t think the laptop was damaged (I quickly turned it upside down to drain out the coffee), it got progressively worse over a few days as the touch pad stopped working, the keyboard malfunctioned and finally, it wouldn’t boot up anymore.

I suppose my incident might be on the rare side. I would imagine the majority of people don’t have an accident such as this in the first few months of using their new laptop. When I contacted Dell to discover my options, I was told my 1 year warranty didn’t cover the damage because the computer problems were the result of a personal accident (which is understandable).

I was then transferred to another department who handles such cases as mine (the folks who didn’t by the extended warranty). I was told Dell would repair my laptop completely for approximately $250 (remember I paid $400 for it). Of course, they mentioned the extended warranty would have covered the incident and that I should definitely purchase it next time.

What did I do?

I figured I had the following choices:

Try to repair the computer myself
Find a local repair shop
Pay Dell the $250 to fix it and ship it back to me within 8-10 business days
Buy a new computer
Do nothing

Given I had the emergency savings to cover the cost of the repair, I decided to let Dell fix it. I shipped it off just recently and waiting to get it back (supposedly 8-10 days). I decided in the end I didn’t want to buy a new computer which would have cost me more money. I also didn’t have the know-how to fix it myself, nor the time to investigate how. I felt taking it to a local repair shop was a bit risky as the computer manufacturer was probably best suited to work the issue.

Will I buy an extended warranty next time?

I suppose this incident has gotten me thinking about purchasing extended warranties and if it’s really the right approach. According to Consumer Reports, extended warranties aren’t worth it. In a previous post about extended warranties here at Bible Money Matters, Pete does a good job of covering the reasons why:

Extended warranties usually cost more than they’re worth: Before you buy an extended warranty sit down and consider the replacement cost of the item you’re purchasing. Often it doesn’t make any monetary sense. Instead of buying an extended warranty, self insure yourself against product failure by saving a little bit of money each month to replace your product in case it dies.
The warranty may not cover what you think it does: Often the warranty has exclusions that mean things you think you’re covering, aren’t actually covered. Some parts will be covered, others won’t. Or sometimes repairs will only be done so many times, or until the value of the item is exceeded. Check the fine print of any warranty you purchase.
Warranties are a big store profit center: According to consumeraffairs.com industry sources put the profit margin on consumer electronics extended warranties at between 40 percent and 80 percent. That just goes to show that more often than not people are not using their warranties.
Duplicate Coverage: Sometimes the things you’re buying the warranty for are already covered under the product’s manufacturer’s warranty. Double check to make sure.
Product breakdown trends: Trends have shown that if a product is going to have a problem, it will usually have that problem within the first year, or in the last years of service. During the first year most products are covered by the manufacturer’s warranty anyway. During the last years of service usually even the extended warranty has expired, and you’re probably going to want a newer item anyway.

The above reasons make a lot of sense to me and support well why I’ve been against purchasing extended warranties in the past. In fact, I’ve always felt like saving the money in an emergency fund was a better approach versus paying for an extended warranty you may never use.

But to be honest, I wish I would have purchased the extended warranty in this case. Remember, the extended warranty would have cost me around $100 versus the $250 I just paid Dell.

Funny thing, J.D. Roth over at Get Rich Slowly recently posted about how he survived the computer catastrophe of 2010. He said he goes through laptops every few years and plans to purchase extended warranties going forward (against his previous opinion of them).

Items such as laptops can be quite valuable when it comes to using for a business, or even for personal use when using them as you manage your finances and for staying connected with people.

So, what do you think? Was my situation one of those rare occurrences where the warranty may have been a good deal for me, or not? Should I stick to my guns and continue to avoid purchasing extended warranties for all products? Or, for such precious items as a laptop, does an extended warranty make sense?

This article was written by Jason Price. Jason Price is a personal finance writer at One Money Design and a Money Map Coach. His mission is helping people achieve true financial freedom. He provides practical tips for managing money wisely and shares Biblical financial principles. Beyond personal finance, Jason enjoys spending time with his family and playing soccer. You can also find him on Twitter and Facebook.

Baby Is On The Way – Time To Start Planning: Link Roundup

Peter Anderson — Fri, 30 Apr 2010 14:44:58 +0000

Over the past few months I’ve alluded to it here and there, but my wife and I are currently expecting our first child (you can see our baby in the ultrasound pictures above!). The due date is July 8th, and we couldn’t be more excited to become parents for the first time.

Before I formed you in the womb I knew you. – Jeremiah 1:5

While we’re excited, we also know that we have a lot of planning to do. We need to put some new categories in our family budget, plan ahead for baby expenses, buy new baby furniture, think about starting a baby college fund, buy life insurance and disability insurance, saving up for hospital expenses, increasing our emergency fund and so much more.

Thankfully we’ve already been able to find and buy all the baby furniture we needed including a crib and changing table, rocking chair/glider and a chest of drawers. We had the money saved up for this and just paid cash over the past 2 months for everything we needed.

Now we’re getting into the baby shower season – my wife has already had one shower thrown for her by her friends. Next weekend my wife’s mother’s friends are throwing her another one. It’s possible we might have even one more after that. The showers have been a lot of fun for my wife, and have ended up supplying a lot of the other essentials that we needed like clothes, diapers, strollers, high chairs and other things.

So, what’s your advice to a couple of new parents? What things do you think are important for us to prepare for? What things would you tell us to do? Tell me your advice and thoughts for a couple of new parents in the comments section below.

Links From Around The PF Blogosphere

Here’s some good reading from around the personal finance blogosphere this past week.

Health Insurance for the Self-Employed @ consumerboomer.com
DB(k) Pension Plan Rules. Is it the New 401k? @ goodfinancialcents.com
The 10 Awesomest Safes I’ve Ever Seen @ budgetsaresexy.com
How An Excellent Credit Score Has Helped Us Save Money @ freefrombroke.com
Debt Plan – Facing Bankruptcy & Foreclosure @ debtfreeadventure.com
First Timer? Reduce the Cost of Your First Home @ ptmoney.com
Debt Is Not Evil @ providentplan.com
Should We Buy a Vacation Home? @ mydollarplan.com
How to Cure Financial Constipation @ moneysmartlife.com
Backing Up Your (Personal Finance) Data To The Cloud @ milliondollarjourney.com
Disposable Diapers Vs. Cloth Diapers @ moneyhelpforchristians.com
Finding The Balance Between a Sideline and a Day Job @ greenpandatreehouse.com
What You Need to Know Before Co-Signing a Loan @ genxfinance.com
Growing Your Tax Refund @ bargaineering.com
Are You Obsessed With Your Finances? @ frugaldad.com
So Why are Economists Behind the Wheel? @ toughmoneylove.com
Does Taking Advice From An Expert Relieve You Of Responsibility? @ enemyofdebt.com

Happy reading!

How Many Bank Of America Customer Service Reps Does It Take To Close An Account?

Peter Anderson — Thu, 29 Apr 2010 14:32:04 +0000

A while back I talked about how my wife and I were looking to close out our account with Bank of America because the rate of interest that we were receiving on our money was not very good, even in today’s market with low rates across the board. Our account had a paltry .50% rate of interest, and I wasn’t expecting them to raise the rates anytime soon. We had a considerable amount of money sitting in the account (our 9 month emergency fund), and we wanted it to be gaining at least a little bit more interest while it sat there. At the time I wrote about how I had closed the account, and was expecting to receive a cashier’s check in the mail for the balance of our funds in the account. At least that’s what I was expecting, but unfortunately Bank of America had other ideas.

So, how many attempts would it take before we were actually able to close our account?

Closing My Account: Attempt Number One

The first time I attempted to close my account I called up on a Monday morning. I talked to a nice young man who told me that closing my account would be no problem. He quickly processed my request (or so I thought), and told me that my account was now closed, and that I would be receiving a check for the balance of the funds in the account. He said it would take 5-7 days for my check to be processed and sent. He then asked if I had anything else that I needed today. I said no, and hung up the phone fully expecting to receive my check a few days later so that I could open and fund a new account elsewhere.

A few days and then a week passed, and still I hadn’t received a check. I was a bit worried because this was a considerable amount of money that we were waiting on, and I wanted it sitting in an account gaining interest – not sitting out there in a post office somewhere waiting to be delivered. I checked my account online and discovered my account still appeared open and all the funds were sitting there in my account. Something wasn’t right.

Closing My Account: Attempt Number Two

I called up Bank of America again to ask them why I hadn’t received my check in the mail, and to confirm that my account had in fact been closed. The customer service rep pulled up my account and then told me that nothing had been done, that my account had not been closed. I expressed my concern as to why this hadn’t been done, and the rep couldn’t tell me for sure, but told me she would help me to close the account now.

At this point she explained the process. She would close the account for me on her end, which would mean I would receive a letter in the mail that I would have to sign and get notarized, and send back to confirm that I wanted to close the account. I was frustrated by this because it meant I had to find a notary to notarize the documents, and it was going to mean more time and hassle in order to close my account. She told me that this should have been done the first time around, and that it is standard procedure when closing an account with over $25,000 in it.

I finally agreed to do it so that I could be done with it, and waited 3 days for an account closure letter in the mail. I took the letter to a notary at my wife’s place of employment and signed the document and had it notarized. (By the way, if you’re looking for a notary, you can often find them at your bank or a real estate office) I sent the document back and awaited a confirmation and a check with my remaining funds. A week later I had seen nothing.

Closing My Account: Attempt Number Three

By this point I was getting extremely frustrated. I had now made two attempts to close my account, one of them on the phone and one of them involving me having to track down a notary public and signing documents in order to get my own money back. By now I was beginning to think that Bank of America was never going to let me have my money back.

I called Bank of America again and asked why my account hadn’t been closed and my money sent. The rep told me that they had never received my documents, and that I would need to resend them. The problem was that I hadn’t made copies of the notarized letter requesting the account be closed (my own fault, I know). She said the only option was for the documents to be resent to me, and to have them notarized again. So again, I would have to wait 3-5 days for the new letter to arrive.

At this point I was exasperated and started voicing my displeasure with BofA on Twitter. At this point my experience with Bank of America changed for the better.

After I had tweeted my situation I received a reply from the Bank of America twitter customer service rep asking if they could help. If you want to track them down for your own issues, you can find them here:

@BofA_Help

I started talking with one of the reps, Nereida, about my situation on Twitter and via email. She did her best to help me rectify the situation. After doing some research she called me up, got further details of the situation and called the manager of the account closure department. Instead of making me wait 5 days for a letter in the mail, she emailed me a copy of the account closure letter. She then asked that I send it back to her directly, and she would make sure that it was followed up on. I expressed my displeasure that I would have to pay for a notary again, and she said she could make things right by sending me an Amazon gift card.

I got the form notarized again, and faxed it back directly to Nereida. She forwarded it on to the account closure department, and my account was closed and check was received within a couple of days. On top of that I got a $50 gift card for my trouble.

Turning A Negative Experience Into A More Positive One Via Social Media

My experience in attempting to close my Bank of America savings account started out as a frustrating and aggravating one. After several phone calls and weeks of waiting I hadn’t been able to close my account and my money was being held in limbo.

In the end BofA was able to turn the situation around, and leave me with a positive feeling by being more engaging and helpful via their social media customer service team. While it wasn’t enough for me to stick around, it does show that at least some of their customer service reps know what they’re doing. Also, once again it shows the power of social media. I was able to get the attention of a big company by voicing my displeasure online, and get what would have been a 1-2 week wait turned into a 3 day turn around – and a gift card!

So how many customer service reps does it take to close an account with Bank of America? One good one, and possibly several bad ones.

Now I just have to make a final decision about which new savings account I’m going to open. I’m currently leaning towards an account with Ally Bank (read my Ally Bank Review here), but could be swayed if you’ve had a particularly good experience with another bank. Let me know in the comments!

Have you had a bad experience closing an account somewhere? Have your own story of using social media to get better customer service? Tell us your story or thoughts in the comments!

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