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Personal Finance from the Broke Perspective

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Invest in Yourself Instead of the Lottery

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Last week, the Mega Millions lottery reached an historic high of $640 million.  That is more money than most of us can wrap our minds around.  In the days leading up to the historic drawing, people everywhere bought tickets, some spending $20 or more on a lottery jackpot they had a 1 in 176 million chance of winning.

Put this in perspective—if you fly on one of the 25 safest airlines (based on safety records), your chances of dying in a plane crash are 1 in 10 million (Yahoo! Voices), which is 17 times greater than your chance of winning this particular lottery.  Likewise, according to the National Lightning Safety Institute, your chances of being struck by lightning are 1 in 280,000 (628 times greater than winning the Mega Millions), yet the majority of us don’t expect to be hit by lightning in our lifetime.

In the days leading up to the lottery drawing, when I expressed disbelief that some whose states do not sell Mega Millions tickets traveled out of state and waited up to six hours to buy the tickets, the romantics around me declared, “When you buy lottery tickets, you are buying the chance to dream.”  So, basically, lottery ticket buyers know they won’t win, but they pay to “dream.”

Mega Millions Lottery

I’ll dream for free, thanks.

Even if you do buy the tickets with the hope, the dream, of winning, do you really want to win?  Time and time again we hear of those who win millions and watch their lives disintegrate and sometimes tragically end.  Business Insider included the tale of 10 lottery winners who won big and lost even more.  Consider just a few of the stories:

-Jeffrey Dampier won $20 million in 1996 and he generously helped his family members buy houses and opened a gourmet popcorn restaurant to supply his family members with jobs.  Still, in 2005 he was kidnapped and murdered by his sister-in-law and her boyfriend.

-William Post won $16 million in 1988.  An old girlfriend sued him for half his winnings, and his brother hired a hit man to kill him.  Within a year he was $1 million in debt and filed bankruptcy.  He now lives on food stamps and $450 a month.

Unfortunately, these stories are not unique.  In addition to the Business Insider post, a quick web search reveals similar posts, “6 Lottery Winners Who Lost It All” and “13 Lottery Winners Who Lost Everything.”  In addition, TLC has a show called Lottery Changed My Life.  If you watch the show, you know that for the majority of winners, their lives were not changed for the better.

Many of us dream about what we would do with more money.  However, the best way to achieve the dream is not through purchasing lottery tickets for a multi-million dollar jackpot that we won’t win (even if you use the worn out argument, “somebody has to win”).  Instead, the best way to achieve that dream is through our own lives.  Dream about what you can do with your life, how you can improve it, and then set to work doing so.  That will get you infinitely further than buying a lottery ticket and paying for the right to dream.

Data Backup on a Budget

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One of the most common things we hear in the computer repair shop that I work part-time in is that the computer has crashed, and could we please make sure to get the data off of the hard drive before we re-install windows.  And, the first question we always ask is, “do you have your data backed up?”  I probably don’t have to tell you what the common answer is to that question.

Many computer users assume that backing up their data is expensive.  We see advertisements for services that cost $40-$50 a month, and for external hard drive solutions that are several hundred dollars.  But, keeping your data safe, doesn’t have to be expensive.  In fact, I’ve got all my important data backed up, and I spend less than $50 a year.  It’s not because I have some inside information, or get favors from tech companies.  You can do it too.  And, if you value your data at all, you should.

This is the set-up I currently use.

Data Backup BudgetPicture Backup

Pictures are one of the top two things that people are concerned about losing when they bring their computers in.  Unfortunately, pictures are also the largest files that you’ll likely have to backup and store.  If you take a lot, you can have Gigabytes of pictures that will need to be backed up. In my set-up, I pay for a full membership to photo sharing site, Flickr.  It’s about $26 a year, and allows for unlimited uploading to the site.  The pictures are then stored on Flickr’s server, and I can get to them whenever I want.  I should note that this isn’t the most elegant solution, as I would have to download the images one-by-one if I wanted to restore them to my local PC.  I’ll go over some more efficient services at the end, but you’ll likely have to spend more money to use them. (See note below: 4/15/13)

Data Backup

For any files that are important, besides pictures, I use a service called Dropbox.  Their basic plan is free, but limits you to 2GB of data storage.  Because I backup my photos elsewhere, I’m able to store everything else that is important with them, and keep the free account.  After several years of using it, I am getting close to the 2GB max, so I may have to upgrade to the next plan up soon.  The first paid plan allows for 50GB, and is only $9.99 a month, so I don’t think I’d ever have to go above that plan.  I should also note, here, that if you have a very large music collection on your computer that you’d like to backup, you’ll likely have to look at a paid plan. (See note below: 4/15/13)

Other options for data backup

There are several other options that you could use for data backup.  The aforementioned external hard drives can be super easy to use.  One drawback to using one, however, is that the data is still physically located in the same place as the PC you’re backing up.  That’s fine if you only need to restore because of PC failure, but can be a disaster if you have to restore due to something like a fire or flood.  Ideally, external hard drives that are used for PC backup should be placed in an off-site location, but since that’s a bit cumbersome and likely to keep you from actually backing up your data, they should be at least placed in a fire-proof safe when not in use.

Another, more ideal way to back your data up, is through a service like Dropbox.  There are a few others that are specifically designed and marketed as data backup services.  Carbonite is probably the most well-known of them, but there is also CrashPlan, and Mozy that do the same job.  Carbonite and CrashPlan come in at $59 a year (about $4 a month), while Mozy comes in at $5.99 a month. Crashplan has a free plan, but it requires you to have your own server to back up to.  This can work out if you have a second computer at another location or have a friend that you trust with your data.  They’ve also got a plan that’s $33 a year, but it limits you to 10GB total storage.

Not backing up your data can be an expensive mistake to make.  Not only can it cost you a lot of money ($100 or more) to get your computer fixed, but you could lose all of your valuable data.  Save yourself the money of having it recovered, and save yourself from losing years of photos and information; get a data backup plan.

Update 4/15/13:

One of the nice things about a disaster recovery backup plan is that you usually don’t have to use it.  More often than not, our computers run on and on until we replace them and we transfer the data to the next machine.  Earlier this week, I had to put my set up to the test.  My main storage hard drive crashed.  While I tried to recover the data from it, it was lost.  With a newly formatted hard drive, I was able to reinstall Dropbox and as soon as it was done syncing, I had all the data that was in Dropbox back on my PC.  The Flickr photo backup was a little bit more cumbersome.  There are several apps out there that you can run that will allow you to download all of your pictures one after the other.  I ended up using one called Flump.  It worked, but the pictures are in one heck of a mess.  None of them have any names, and the structure I had before is lost.  So, I’ve got 7000+ pictures to sort through.  Moving forward, I’ll be adding one of the above back up services (Crashplan or Carbonite) to my PC to back up my file structure and other assorted things.  For the $59 a year it costs, it’s worth the added convenience of not having to deal with the sorting of files and individual applications.

Do you backup your data?  What do you use for your data backup plan?

Original Image Credit:Hard Disc Crash by barnoid, on Flickr

The Slippery Slope of Float

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In the financial sector, there is a term that you have likely heard before.  That term is Float.  I’ll try to define it as it pertains to this article.

Float – To use known time delays in processing of financial transactions to allow for extended time to cover cost of transaction.

Much like any other financial term, there are some good and bad ways to use float.  One bad way, is actually illegal in some places.  That’s the “check float”.  In a “check float” a person writes a check to themselves from an account they have at one institution and deposits it in an account they have at another institution in order to inflate the balance at the second institution and cover any outgoing transactions that would have otherwise been returned.  They then write a check from the second institution to themselves and deposit it in the first institution a day or so later to cover the first check.  It’s usually illegal because the person is technically writing bad checks.  Eventually, it will catch up to them, and they’ll get caught. It should also be noted that with recent Check 21 regulations, checks process much quicker than they used to and have cut back on this practice.

SlideThere are less criminal ways to take advantage of float, however.  For instance, at my institution, I know that there is a delay between when I tell the bill pay service to send a payment and when it actually is deducted from my account.  Because I know that, I can sometimes send a payment a day or two before I am paid in order to make sure the payment gets where it’s going on time.  People who get paid on the 1st and the 15th will sometimes get paid earlier when the payday lands on a weekend.  That’s a kind of float as well.  In some ways, a payday loan is a type of float (legal, but should be criminal in my opinion).  People go to a payday loan institution and get a short term loan (float) to gain access to funds before they are paid.  When they are paid, they pay off the balance of the loan along with some high-interest and fees.

Using float can be a very slippery slope.  In some cases, it’s just illegal and should be avoided.  In others, like payday loans, it should be illegal, or heavily reformed.  Other uses, like my bill pay example, are more innocent.  But, all of them can lead to trouble if the user isn’t careful.  Using float once in a while can be fairly safe, but repeated use can often find you in a hole that you dug for yourself.  In almost all cases, the necessity of float can often mean your spending has outstripped your earning.  Use float sparingly, and legally, and you can avoid the slippery slope.

photo credit: marktristan