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saving

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Going Green to Save Green

by Jaime Thompson on August 28, 2010

We all know by now we should be using compact fluorescent light bulbs, unplugging electronics and appliances that aren’t in use, washing our clothes in cold water, and adjusting our thermostats when we aren’t home. These will all help save us money every month on our utility bills and it’s just better for our earth. But what other ways can we be green in our lives and help us keep more money in our pockets?

Some retailers will pay you to recycle! Office Depot and Staples offer a store credit for every ink or toner cartridge you recycle with them. M.A.C. cosmetics will give you a free lipstick when you return 6 of their primary packaging containers. Recyclingforcharities.com allows you to recycle electronics such as cell phones, cameras, and PDAs. You select the charity you want your unused product to benefit and then you can take a tax deduction (assuming you itemize your tax returns).

Another great idea is Freecycle.org where you can find items other people no longer need and get them for free! No, you aren’t going to find a brand new stainless steel fridge, but if you want to try your hand at camping, you can probably find someone who has an old tent lying around that they no longer use. In fact, it’s a great way to help clear out some things you no longer need but are still in usable condition. After all, we want to enjoy life, not just a garage full of clutter.

(Photo credit aussiegall)

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The Bad News Is People Saved Some Money

by Derek Sisterhen on August 5, 2010

I love reading consumer spending reports. The way they are written just makes me laugh because all the “bad” news is right up front:

“Last week the government said economic growth for the second quarter slowed to 2.4 percent. Many analysts believe it will dip further in the second half of the year as high unemployment, shaky consumer confidence and renewed troubles in housing weigh on the year-old economic recovery.”

Oh no! What are we going to do? Don’t Americans know that the only way to solve our economic troubles is to spend, spend, spend?

It’s your patriotic duty to buy appliances, houses, cars, clothes, movie tickets, more clothes, and take vacations. You don’t want to be a traitor, do you?

(So, we read a little further in our spending report…)

“The personal savings rate rose to 6.4 percent of after-tax incomes in June, the highest reading in nearly a year. The savings rate is now about three times the 2.1 percent average for all of 2007, before the recession began. Households chose to save the extra money rather than spend it. Higher savings restrain spending in the near term. But the extra resources allow households to repair their tattered balance sheets.”

Another fault of consumer spending reports is that they lag. Right now, we’re reading about what happened in June, a full five weeks after the fact. Since the summer months are notorious for lots of unbridled spending, I’ll be interested to see how the savings rate fared in July.

We’re still seeing a shift in a large portion of our country toward conservative money management. Recognizing that personal savings mitigates a whole host of risks we face – from emergency room visits, to car repairs, to job loss – means that we’re finding some sea legs in the choppy recessionary waters.

And when the bad news is that people are saving money, I’d say many of us might just make it out of this storm.

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Termites and Economics

by Derek Sisterhen on June 8, 2010

Ever wonder why your dining out budget has a tendency of blowing up in your face? Or how that nebulous “miscellaneous” category in your budget inflates to two or three times what you planned?

Before you get to supply and demand in an economics class, there are two concepts you must understand. First, you live in a world of scarcity. That means that you have a limited set of resources to work with. Sounds like your paycheck; you have a set amount of money available to use.

Second, you live in a world of opportunity cost. That means that if you spend any money on any item at all, it not only costs you the price of that item, but it also costs you the opportunity to use the money elsewhere. Thus, if I save $100, that’s $100 I can’t use to buy groceries. If I spend $300 on groceries, that’s $300 I can’t use to go on vacation. If I spend $500 on a vacation, that’s $500 I can’t use to get out of debt (or buy groceries or save).

So, in essence, every decision I make with money has a ripple effect across all of my spending categories.

I met with a couple recently who felt so compelled to spend money on their children – because they loved to see them happy – that they weren’t making their mortgage payment. I told them they were living with financial termites: to the kids everything appears just fine, but the insides are rotting to the core. There would come a day when the money for “happiness” would run out and they wouldn’t have a home.

In their case, the opportunity costs of happiness spending are keeping the roof over their heads, being able to fund emergency savings, contributing to retirement, taking a family vacation. The list goes on and on.

Ultimately, a budget is nothing more than a list of decisions we make that will have a positive impact on our financial situation. In the execution, though, we tend to forget that overspending anywhere in our budget means we must underspend elsewhere just to get back to even. The consequences of this brand of forgetfulness are quite negative.

Kind of like termites.

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All I Need to Know About Money I Learned from Proverbs: Saving

by Derek Sisterhen on February 12, 2010

I joke often that, in spite of my degree in finance and career in the banking world, had I just read the Book of Proverbs I would have gotten a much better – and much cheaper – financial education. In this series I’ll highlight a few key principles from Proverbs that you can apply to your finances today.

“In the house of the wise are stores of choice food and oil, but a foolish man devours all he has,” is written in Proverbs 21:20.

I draw two different principles from this one proverb. First, wise people have savings. Second, foolish people live beyond their means.

There are three reasons we must save money: for emergencies, for large purchases, and for wealth building. If Money magazine were providing a commentary on Proverbs, they’d reference this verse for the study that revealed eight out of ten Americans will have a major negative financial event in any given ten-year period.

In turn, it’s usually the lack of savings that throws us into deals like “90 days same as cash,” “no interest, no payments for 36 months,” and “0% balance transfers.” And then we wonder why we’re still making payments on a refrigerator when the ice maker stops working. Wise managers of resources put a portion of what they make into savings to cover life’s unexpected events along with the needs they’ll have when they retire.

Webster’s defines a fool as one “lacking in judgment or prudence.” The truth of this proverb is that we are imprudent, or irresponsible, when we spend all we make. We also know that we reap what we sow. For some of us, we reap stress, pressure, and discontentment. Others reap mounting debt to maintain a lifestyle beyond their means – they’ve devoured everything and then some.

To be successful, you must save. To save, you must live within your means.

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