Search Results for: budget

Is Saving Money a Waste of Money

June 21, 2010 By Shane Ede 5 Comments

Save! Be Frugal! A penny saved is a penny earned. There’s a plethora of maxims meant to encourage us all to save our money for a rainy day. To hoard our excess funds so that we can spend them at a later date and enjoy their usage. But, is saving our money a waste of our money?

The most obvious way that saving money could be a waste of money is in lost opportunity cost. If your money is tied up in some CD or savings account that you don’t have ready access to, what opportunity are you going to miss out on that could make you even more money. If you can’t take advantage of an opportunity to make money, your savings is wasting those potential profits.

But, that isn’t the real issue. Potential profits don’t necessarily mean lost profits. Maybe that opportunity doesn’t perform as expected and you earn less than you would have in the CD or savings accounts? No, I don’t think that theory holds up. Sure, you might miss out on a potential profit boon, but I wouldn’t encourage not saving for that purpose. In fact, having a readily accessible savings could make it easier to take advantage of an opportunity like that.

But, let’s think for a moment about what we do to save money. The easiest way to do that is to just have it taken directly from your paycheck and into a 401(k) or to set up an automatic transfer from your paycheck to a savings account. Easy. A little bit of set up involved, but very little effort thereafter. That’s hardly a waste of money! But, let’s look at the opposite side of the spectrum. You’re pinching your pennies, saving as much as you possibly can and then some. You don’t want to miss out on an opportunity, or you want to pay your debt off super fast! You go so far as to start collecting pop cans. (assuming you live in a state that has a deposit.) You walk down the street and throw the cans you find into a bag. Maybe you even hit the parks and poke through the trash cans there. Every week, you spend several hours looking for cans.

How much is your time worth? If you’re spending several hours a week for a few bucks worth of cans, are you making a good use of your time? Isn’t your effort to save a few bucks a waste of potential money doing something else? Heck, you could deliver pizzas for a few hours a week and make much more than that. Not to mention the other ways to make extra money. You can make money selling ebooks, or working some overtime, or consulting, or just about any second job, or make money on twitter, or even *ahem* blogging. Sure, the cans are an extreme example. But, one used to put a spotlight on my point. What saving practices are you employing that are a waste of money? Which of them are worth your time, effort, and resources? And which aren’t?

If we are going to attempt to create a super financial situation, we have to make our saving machine as efficient as possible. It doesn’t hurt to question your tactics. Find the ones that are causing you to waste your money and find a better use of your time. Not only will it make your money saving efforts more efficient, but I think it will free up some time to do things that you want to do. Like spend time with your kids, or walk through the park and not look for cans!

The Expensive Produce Myth

June 7, 2010 By Shane Ede 10 Comments

When many people discuss buying more produce (fruits and veggies) the most common complaint is how expensive it is. How can they afford to pay that much for fresh produce and still feed their family?!? Well, I think it’s a myth.

Based on my recent visit to the grocery store, the price of produce is actually pretty good. Let’s compare for a minute. A quick trip down the meat aisle will tell us that a chunk of meat of whatever shape or size will likely cost us about $3 a pound. And that’s the cheap stuff. No t-bones here. How about the other aisles. Hamburger helper? About $3. Plus a pound of hamburger, a cup or so of milk, and some margarine or butter. Chips? Doritos were on sale for about $2 a bag. I think that’s about a 10 ounce bag. Frozen Pizza? I saw some that were 5 for $10. Smaller ones, sure, but pizzas.

Now, lets take a look at produce. Apples were $1.49 a pound. Oranges were $1.89 a pound. Potatoes were about $1 a pound. Onions were $1.38 a pound. Broccoli was about $2 a bunch. The list goes on.

Sure, none of those, by themselves, is a meal. Very little of the first list is either. But, if you eat an apple before dinner or as an appetizer, it makes you fuller. Which means you’ll eat less of the other, more expensive stuff. Maybe you replace 4 ounces of steak with a 9 ounce apple. Even at a 2:1 ratio, you break even. If you manage to cut the meat even further back and replace it with other veggies, you’ll save even more!

And I won’t even go into the savings on medical costs that could be gotten from eating more fruits and veggies.

The bottom line is that expensive produce is a myth. It’s only when you don’t stop to consider that it’s replacing something else in a meal that you realize that. If you replace something, you can buy less of it at the store. And you will spend less. Sure, costs might stay the same, or even go up, if you don’t reduce what you buy based on your new eating habits. But, that food will last longer. Give it a try and then compare your budget sheets from before and after. I think you might be surprised by the outcome.

Advice for College Graduates

May 14, 2010 By Shane Ede 7 Comments

When I entered college, I had no debt. Well, I guess I had some as I’d already signed the papers, but hadn’t received the money, for the loans I was going to be using to partially finance my education. When I finally graduated, 7 and a half years later, I had mountains of the stuff. Nearly 30k in college loans, close to 10k in credit card debt, a car loan, and a mortgage.

For the high school graduates: If you learn nothing in college, learn to avoid debt. That single thing will make the rest of your life so much easier. It allows you to start ahead of every single one of your college peers, and will make it so much easier to achieve the goals that you want in life.

If you’re reading this, and you’re a college graduate that never got the above bit of advice, you’ve likely ended up like I did. Lots of debt. Here’s my advice to you (and roundabouts to my past self).

Learn how to budget. Creating and maintaining a budget opened my eyes to the ways that I was spending (and wasting) my money. Create a budget for yourself and stick to it.
Learn how to avoid debt. Very few of you will be able to completely avoid debt. Minimize it. Pretend it’s your leprous uncle. Instill an aversion to debt.
Learn the meaning of appreciation. If you’re going to add debt, only do so to buy something that you expect to appreciate. New furniture doesn’t count. Houses sorta count. Cars absolutely, positively, do not count.
Learn the value of shared costs. Just because you’re a big boy (or girl) now with a fancy diploma (with fancy calligraphy), does not mean that you’re above having a roommate. In fact, I would encourage it (unless you’re married, because that’s just a bit weird). It doesn’t even take a calculator to figure out that rent/2 is better than rent/1.
Learn the value of patience. Just because you can get a mortgage or a car loan, or whatever, does not mean you should. Statistically speaking, you’ll change jobs several times over the first 5 years of your career. Do you really want to be tied down to a house if you need to move to another city? Slow down and ease yourself into your adult life. It’s not all that it’s cracked up to be anyways.
Learn the word Retirement. Sure, your all excited about your newly earned earning potential and your fancy new career, but, if you’re like every other person on the planet, you’ll want to retire at some point. Start saving now to make that dream come true later.
Remember to have fun. Just because you’re all grown up and joining the “real world” doesn’t mean you can’t still have fun. Your hobbies and activities are what make the “real world” worthwhile.
Wear sunscreen. None of you will get this reference as you were probably 8 at the time. The rest us do and it’s not that important. (in case you’re curious: http://en.wikipedia.org/wiki/Wear_Sunscreen)

The preceding is, by no means, an exhaustive list. In fact, it can’t even really be considered a quick and dirty list. It is, merely, a list of a few things that I have come to think of as some tenets for post college life. Some, I have learned, others I wish I had.

Congratulations on your graduation, and best wishes as you join the rest of us in the real world.