Monthly Archives: December 2008

Serenity Prayer For Finances

Posted on by  at  6:00 am
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God grant me the serenity
to accept the things I cannot change;
the courage to change the things I can;
and the wisdom to know the difference.

These last few months have been trying times for me, personally and financially.  Several things have happened to create sort of a “perfect storm” in my life and when that happens I always look for some piece of inspiration–something to keep me on track. I found that peace in The Serenity Prayer, and have applied its lessons to my personal finances and beyond.

God Grant Me the Serenity To Accept the Things I Cannot Change

Stop and think for a moment about all the things that are currently causing stress in your financial life.  I bet there are quite a few you have control over, like overspending or expensive car payments.  But if you are like me there may be other things that are outside of your control, yet they continue to cause stress. Here are some examples I have witnessed recently from others:

  • The stock market losses.  If you are in the market for the long haul there is little you can do to hedge against these wild swings (mostly downward swings) over the last few months.  Instead of worrying over stock tickers incessantly, try to put it out of your mind and remember that you have a long-term perspective.
  • Political landscape.  I’m not the best one to be advising others not be stressed over politics.  I used to be a politics junkie, listening to talk radio and news most of the day.  But over the last couple years I have unplugged from a lot of it.  Politicians on both sides of the aisle have abandoned fiscal conservatism, as the recent bailouts have shown, and the more I listen to politicians finding ways to spend our hard-earned tax dollars, the higher my blood pressure gets!
  • The financial situation of others.  Many people lie awake at night and worry over other people’s financial problems–their parents, their kids, their best friend, etc.  While it is healthy to show some concern, it is healthier to recognize that they make their own decisions freely, and the best thing you can do is be a supportive father, son or friend.

The Courage To Change the Things I Can

When you have identified the things you do have control over you must find the courage to make changes in your life.  For example, if you are unhappy with your current salary, what strategies are within your control to increase that number?  Chances are your boss isn’t just going to give you a raise for no reason.  You may have to return to school to finish your degree, or agree to take on some additional training related to your job.  You may have to start your own side hustle.  All of these things take courage because they are outside of our comfort zone.

The Wisdom To Know the Difference

Most of us are aware of the types of things that cause us stress, and the thing that don’t.  The challenge is placing a new challenge in our lives into one of those two categories.  It is this “wisdom to know the difference” that makes ALL the difference.  Chances are right now you are worrying over things that are not within your control, and not worrying about things that are within your control.

I encourage you to reflect on the things that are now causing stress in your life.  Take some time to jot them down on a piece of paper, and then really search deep down to figure out which column they belong in–things you cannot change, and things you can.  Then get busy developing a plan to change those things you can.  You will feel better just for having gone through the exercise.

Stores With Layaway Option Seeing Increased Interest

Posted on by  at  2:00 pm
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I know it is en vogue to bring back things from the past, but this is a trend I thought had gone forever:  layaway.  With tightening credit policies, and maxed out consumer debt, it seems layaway is making a comeback.  Personally, I am not a big fan of layaway, ranking it somewhere between using a credit card and taking on a rent-to-own contract.

An Alternative to Layaway

In the Frugal household we have created our own sort of layaway plan.  When we have our hearts set on a big-ticket item we relabel a “subaccount” at ING Direct and transfer a little money there from each paycheck.  For instance, we recently needed to save up a couple hundred dollars for new tires.  Rather than charging them, or financing them through the tire dealer, we gave a subaccount the nickname “Tires” and transferred $25 a paycheck (every two weeks) into this account.  In just a couple months we had enough money to pay cash for new tires.

The account described above is often referred to as a sinking fund, where funds are “sunk” in regular intervals to pay for an item.  The concept can be expanded to cover annual, or semi-annual, insurance premiums and other infrequent expenses.  When you think about it, an escrow account at your mortgage is just a sinking fund where a little money is siphoned away from each payment and held to pay insurance premiums and tax bills.

Layaway is Just a Forced Savings Account, With Bad Terms

My main problem with layaway is that is really a forced savings account with fees and sometimes a nasty cancellation policy.  Instead of agreeing to purchase an item by a certain date, and risk being charged if that date comes without full payment, why not just save up the money in the same increments over the same amount of time?  That way, if something comes up and you cannot buy the item when the time comes you can easily back out of the purchase.

When I told my wife I was preparing this piece for Frugal Dad she shared a layaway nightmare she had as a young teenager.  Guess jeans were all the rage, and while at the mall with a couple friends my wife put a pair on layaway along with an $8.00 “down payment” so the store would agree to hold the jeans.  The idea was that she would later return with her mom and get the jeans.  They never returned, and my wife was out $8.00.  It was a painful experience, but it must have cured her.  That was the last thing she ever put on layaway!

Peer to Peer Lending Review

Posted on by  at  6:00 am
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One of the side effects of the atrocious market we have endured in recent months is incredibly low interest rates on deposit accounts. Bank savings accounts are earning less than 1% yield, and even traditionally higher online savings accounts at the best online banks, such as ING Direct, are only offering 2.75% APY (at the time of this writing).  What’s a conservative-leaning investor to do?

If you are up for taking on slightly more risk for the chance of a lot more reward, the peer-to-peer lending industry might be the place for you.  I was admittedly skeptical when peer-to-peer lenders first came on the scene, but the more I’ve learned about the industry, the more I appreciate its ability to cut out the middle man (banks).

What is Peer to Peer Lending?

Peer-to-Peer lending involves investors pooling their money to fund loans for borrowers in the private market.  Interest rates vary according to the credit risk for a particular borrower, but it isn’t uncommon for investors to earn over 6% or 7% on loans for those with good credit, and much more on riskier borrowing prospects.

One of the aspects of peer-to-peer lending that appeals most to me is the fact that banks are cut out of the lending cycle and power is pushed down to the average citizen.  Perhaps it appeals to my entrepreneurial spirit.  I might not be able to fully fund your $10,000 debt consolidation loan, but I can pitch in $100 along with dozens of other investors.  This helps spread the risk around a bit so that no single investor is heavily leveraged in any one loan deal.  It also provides borrowers greater opportunity for receiving a loan in this tightening credit market.

Borrowers are asked to fill out a profile including a compelling description indicating the reason they are in need of a loan.  This has a way of personalizing the request.  Perusing the current loan listings at Lending Club I see a variety of loan requests from debt consolidation, to a used car purchase, to a request for start-up capital to fund a new business idea.  Knowing that you are investing in someone’s dream is exciting!

Peer-to-peer lenders, such as Lending Club, also grade borrowers based on their creditworthiness including such factors as debt-to-income ratio, credit scores, etc.  Of course, it isn’t foolproof, and there are risks of defaults and late payments, particularly when peer to peer lending to borrowers with bad credit.  However, several well-placed investments in loans could make for a portfolio producing a much higher yield than other types of cash investments.

How Much to Invest in Peer-to-Peer Lending?

I personally treat this type of investing much the same way I treat single-stock investing; I don’t put more than 10% of my overall portfolio in either investment.  The bulk of my investing is for retirement inside growth stock mutual funds.  Outside of retirement funds I stash emergency fund cash away in an online savings account, and with any remaining cash I may dabble in things like peer-to-peer lending or investing in single stocks I feel good about over the long-term, and have a history of producing great dividends.

So like anything else I recommend here, don’t dump all your eggs in one basket.  Start small until you get the hang of social lending.

Interested in finding out more about social lending?  Join me over at Lending Club!

What To Do If Unable to Afford Home Heating Bills

Posted on by  at  6:00 am
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A blast of cold air across much of the country combined with a sputtering economy has made for some tough times for those trying to keep up with home heating costs.  In a neighboring town close to where I live, residents were offered assistance through local churches and community organizations on a first come, first serve basis.  Residents lined up in droves and far exceeded the number of spots available for help.  In fact, at one event over 400 citizens showed up in need of financial assistance keeping their utility bills current, but the church was only able to accept around 100.  That left a few hundred others out in the cold.  I suspect the numbers are even worse in larger cities.

Where To Find Help

There is never a good time to have your power cut off, but when temperatures are extremely hot or extremely cold seems to be the absolute worst time possible. Unfortunately, it is the very young and very old that suffer most.  While none of us have an unlimited supply of money to go around paying electric and gas bills for people, there are ways to make a difference in your community.

Here are a few places to start if you find yourself having trouble making utility payments this winter.

Contact churches, community organizations and The Salvation Army. These organizations are on the front lines and are often the first line of defense for those displaced by the cold.  To those looking for ways to help, these organizations are always in need of financial assistance, blankets, coats, gloves, hats, etc.  I recommend contacting one in your area to find out what they need most.

Investigate energy assistance programs through your utility company. Many power companies offer energy assistance programs and will work with customers by offering one-time assistance such as prorated billing.

Be prepared to help pay a portion of the bill.  Unfortunately, charitable organizations are unable to foot the entire bill for someone in need of help.  In most cases they can only offset a portion of the overall bill, so be prepared to cover the remaining amount.  If you are unable to, contacting multiple organizations could pay off as often times they will pool resources to cover the cost of the entire bill.

The first step if you find yourself in trouble is to sit down and complete a budget of your entire household expenses, and any income you have.  Next prioritize these expenses based on their importance to your survival–food, shelter, lights, clothing and transportation is a good start.  Literally write the number “1″ next to the highest priority, “2″ next to the second highest priority and so on.

You will find things like credit card bills, subscriptions, and cell phones are near the bottom of the list.  That’s acceptable for now.  If credit card companies call looking for money, politely explain your situation and promise to notify them when you are able to make a payment.  Hang up the phone the instant they become abusive or threatening. No one deserves to be mistreated or talked down to by some idiot in a cubicle 500 miles away.  Do not be intimidated into putting credit cards before the mortgage, or other basic needs.

Hopefully any financial setback is a temporary one, and soon those in trouble will find a reliable source of income.  When that happens more money will be available to work further down the list of priorities and catch up any amount in arrears.

Fab Five – Holiday Gift Guide Edition

Posted on by  at  7:08 am
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‘Tis the season to share lots of great gift guides being published around the winter blogger-land. These posts are so good they need no further introduction.

Lazy Man’s Gift Guide 2008.  I enjoyed the layout of this gift guide as Lazy has taken the work out of gift-selection by matching items with the various personalities on your list (him, her, the chef, the traveler, etc.).  My favorite item is the ThinkSport Sports Bottle–an alternative to plastic water bottles.  Better for the environment, your health, and your wallet!  (@Lazy Man and Money)

50 Frugal Gifts You Can Give This Christmas.  Just like the title reads, these are fifty frugal gift ideas.  From this set I really like the picnic pack, even though I could probably come up with an cheaper alternative from the dollar store. Still, it inspired a great idea for this spring and summer!  (@Bible Money Matters)

Free 2008 Cool Savings Holiday Savings Guide.  The folks at Cool Savings have put together an excellent guide for saving around the holidays.  The variety of topics is what makes this guide such a great deal (well, that and the price–free!).  Check it out for ways to save on gifts, holiday travel, decorations and more! (@ Cool Savings)

The Best Gift You Can Give Yourself.  While we are on the subject of gift-giving, I have to mention this great post from Ron. Now is a good time to treat yourself to a holiday budget, and then carry over those principles into the New Year. (@ The Wisdom Journal)

Celebrating 2 Years of Million Dollar Journey.  OK, so this one isn’t a “gift guide” per se, however there are some great gifts attached to this giveaway (that ends Dec. 19)!  Prizes include a Canon PowerShot SD1100, $100 gift card and much more!  Congrats to MDJ for reaching this two-year milestone! (@ Million Dollar Journey)

This isn’t a complete list of my favorite holiday gift guides, but in keeping with the roundup rules I’ll stick to just five for now.  Look for another roundup of holiday gift ideas soon!