For Children
There are lots of things you can make at home
that children will appreciate. They are unlikely
to appreciate exclusively homemade gifts, but
they can make up the bulk of the gift giving for
the season. Here are some of the ideas we
liked the best:
1. A scrapbook filled with pictures of the
child with space for them to write their
own stories or history below.
2. An invention box filled with nuts and
bolts, gears, old computer parts, wood,
nails, wheels, wire, batteries and
anything else that may be interesting to
a budding inventor.
3. A dress up box filled with clothes from
relatives or yard sales.
4. Old costume jewelry. Girls especially
like this when handed down from an
older relative or friend.
5. A collection of second-hand tools. Boys
of all ages will like this gift.
6. A homemade workbench. Another
favorite for boys. The design can be
quite simple, as long as it is sturdy
Volume 2 Number 10
enough to pound and saw on.
7. An apron for the kitchen or workshop.
8. A box of homemade cookies and
candies.
9. Sock Puppets.
10. A large floor pillow for watching TV or
lying around listening to music or audio
CD’s.
11. Wooden blocks or dominos.
12. Make a recording of their favorite book
or story.
For Adults:
There are lots of other homemade things that
adults appreciate. Here are a few ideas:
1. A gift certificate to a Thrift Shop (not
homemade but very Scroogie)
2. Homemade Jams and Jellies
3. Homemade chutneys and relishes
4. A price book (what you should pay
for what and where), so they never
overspend again.
5. Designer (quilt-like) placemats from old
fabric scraps.
6. Make a clove studded orange air
freshener. Poke holes in an orange and
push in cloves. Let dry for 2 weeks and
then place in a small drawstring bag.
Can be used in a closet or drawer.
7. Buy magazines from an antique store
dated to year and month of the person
you are buying for. This makes for
fascinating reading.
8. Make a video on the life of the person
you are giving to. This could be from
the point of view of friends and relatives
with narration and old photographs
included. Get creative with period music
as well.
Scrooge
Friday, June 09, 2006
Travel Tips
Winter is the time of year that many snowbound
northerners dream of travel to
the south. A trip south doesn’t have to be
expensive and here are some tips to consider.
1. Drive. Don’t fly. A group of people can
drive south for much less than a flight.
For instance, 5 tanks of gas (less than
$150) will get four to six people 1000
miles. The same amount of money won’t
even buy one person a one-way ticket.
2. Consider contacting a local drive-away
agency and driving one of their cars
down south for free. Usually you will
only be able to take the car one way, but
if you have another option to return, this
could be a good choice.
3. During your drive stay in low cost
hostels. Costs may be as low as $20
per night. Check out this web address
for more info: http://www.hostels.com
4. Don’t like flying or driving yourself? Try
a bus tour. They often have reasonably
priced packages that include travel,
accommodations and a tour guide.
To save on lodgings try a home
exchange. See these websites for more
info: http://www.homexchange.com/
http://www.homeinvite.com/
5. If you have no choice but to stay at a
hotel try booking through a discount
hotel website. They buy up blocks of
rooms in advance and can offer real
bargains. Try the following site and
search for others online:
http://www.discounthotels.cc/
Scrooge
northerners dream of travel to
the south. A trip south doesn’t have to be
expensive and here are some tips to consider.
1. Drive. Don’t fly. A group of people can
drive south for much less than a flight.
For instance, 5 tanks of gas (less than
$150) will get four to six people 1000
miles. The same amount of money won’t
even buy one person a one-way ticket.
2. Consider contacting a local drive-away
agency and driving one of their cars
down south for free. Usually you will
only be able to take the car one way, but
if you have another option to return, this
could be a good choice.
3. During your drive stay in low cost
hostels. Costs may be as low as $20
per night. Check out this web address
for more info: http://www.hostels.com
4. Don’t like flying or driving yourself? Try
a bus tour. They often have reasonably
priced packages that include travel,
accommodations and a tour guide.
To save on lodgings try a home
exchange. See these websites for more
info: http://www.homexchange.com/
http://www.homeinvite.com/
5. If you have no choice but to stay at a
hotel try booking through a discount
hotel website. They buy up blocks of
rooms in advance and can offer real
bargains. Try the following site and
search for others online:
http://www.discounthotels.cc/
Scrooge
Some Meat Facts
Fact #1: Meat is usually the most expensive
part of the grocery bill.
Fact #2: The average adult only needs 2
ounces of protein per day.
Fact #3: Protein in meat can easily be replaced
with cheaper vegetable sources like beans,
grains and peas.
Fact #4: Most meats are 25% - 30% protein.
Fact #5: The following meals will provide a fullgrown
man with all the protein he needs in a day:
Breakfast:
1 cup Oatmeal
1 cup Soymilk
1 Bagel
Lunch:
2 slices Whole Wheat Bread
1 cup Vegetarian Baked Beans
Dinner:
5 oz firm Tofu
1 cup cooked Broccoli
1 cup cooked Brown Rice
2 Tbsp Almonds
Snack:
2 Tbsp Peanut Butter
6 Crackers
For more information on sources of vegetable
protein please see the following website:
http://www.vrg.org/nutrition/protein.htm
Scrooge
part of the grocery bill.
Fact #2: The average adult only needs 2
ounces of protein per day.
Fact #3: Protein in meat can easily be replaced
with cheaper vegetable sources like beans,
grains and peas.
Fact #4: Most meats are 25% - 30% protein.
Fact #5: The following meals will provide a fullgrown
man with all the protein he needs in a day:
Breakfast:
1 cup Oatmeal
1 cup Soymilk
1 Bagel
Lunch:
2 slices Whole Wheat Bread
1 cup Vegetarian Baked Beans
Dinner:
5 oz firm Tofu
1 cup cooked Broccoli
1 cup cooked Brown Rice
2 Tbsp Almonds
Snack:
2 Tbsp Peanut Butter
6 Crackers
For more information on sources of vegetable
protein please see the following website:
http://www.vrg.org/nutrition/protein.htm
Scrooge
Homeless and Rich
Myrna and her husband Doug are both
homeless and rich. Despite their six-figure
portfolio they are living out of a car, but living
well. A couple years ago they sold everything,
put a few personal items into storage, and
headed out in their car. “We organized a
mailing address, made certain that we could
access any business and financial matters online,
and have been on the road for the most
part ever since,” Myrna says. “We have no
home, home is where we are on any particular
day.”
Myrna, 65, and a former school viceprincipal
has always shown a willingness to try
something new. So far the two have traveled
Europe, the USA and much of eastern Canada.
How do they make it financially? Myrna
keeps them focused on conservative stocks
and bonds. As she says, “… when you open
that door [to retirement], and you’re going to
live for another thirty years and you’re going
to do that on what you’ve put away, you have
to make sure your nest egg will last, and you
don’t know how long you’ll need it to.”
They match their expenses to their income. At
year-end, they want to make sure they have
not depleted their capital, and adjust their
plans for the coming year according to growth
in their portfolio.
To accomplish their goals, they rely on
conservative dividend-paying stocks. “A
company that’s paying a dividend usually has
the wherewithal to do just that, meaning they
are making enough money to pay it out.”
They like a company that has regularly paid out
its dividends over the years, and has a trend of
increasing its dividend. They’ll also look into a
company’s past revenues and earnings. “I want
to see a slow and steady upward trend.”
They also don’t easily panic over downturns,
but keep an eye on their overall return. “You
have to keep in mind that you’re going to have
losses. Nobody has a perfect crystal ball.”
They also accept that they won’t be making
huge returns, and remain vigilant against being
drawn into buying a stock that is on a wild
upswing, something that is easy to get caught
up in. “You don’t have time for it to fail and to
recover.”
Keeping their portfolio invested in between 15
and 20 stocks is a good idea, “You can only
keep track of so many, plus with too many you
basically end up with the index.”
They use The Globe and Mail’s globeinvestor.
com website to keep an eye out for articles on
specific companies, and uses Yahoo’s finance
site to check out price-earnings and other
financial ratios. What they do look for is trends,
from the state of the housing market to the
potential fallout a flu pandemic.
They think the best thing they’ve done is stay
invested in the big banks for many years,
despite getting advice to sell them along the
way. “Canadian banks pay good dividends
and in Canada we don’t have a lot of good
dividend-paying stocks, and they’ve been
good-performing stocks.”
As advice to others they say, If you’re retired,
“adjust your lifestyle to your investments, not
the other way around.”
Their six figure portfolio is made up of: Bank
of Nova Scotia, Royal Bank of Canada, Bank
of Montreal, Petro-Canada, Diageo PLC,
Royal Dutch Shell, ING, Power Financial.
TransCanada (preferreds), Quebecor
(preferreds). Trusts: Aberdeen Asia Pacific,
ARC Energy.
-submitted
homeless and rich. Despite their six-figure
portfolio they are living out of a car, but living
well. A couple years ago they sold everything,
put a few personal items into storage, and
headed out in their car. “We organized a
mailing address, made certain that we could
access any business and financial matters online,
and have been on the road for the most
part ever since,” Myrna says. “We have no
home, home is where we are on any particular
day.”
Myrna, 65, and a former school viceprincipal
has always shown a willingness to try
something new. So far the two have traveled
Europe, the USA and much of eastern Canada.
How do they make it financially? Myrna
keeps them focused on conservative stocks
and bonds. As she says, “… when you open
that door [to retirement], and you’re going to
live for another thirty years and you’re going
to do that on what you’ve put away, you have
to make sure your nest egg will last, and you
don’t know how long you’ll need it to.”
They match their expenses to their income. At
year-end, they want to make sure they have
not depleted their capital, and adjust their
plans for the coming year according to growth
in their portfolio.
To accomplish their goals, they rely on
conservative dividend-paying stocks. “A
company that’s paying a dividend usually has
the wherewithal to do just that, meaning they
are making enough money to pay it out.”
They like a company that has regularly paid out
its dividends over the years, and has a trend of
increasing its dividend. They’ll also look into a
company’s past revenues and earnings. “I want
to see a slow and steady upward trend.”
They also don’t easily panic over downturns,
but keep an eye on their overall return. “You
have to keep in mind that you’re going to have
losses. Nobody has a perfect crystal ball.”
They also accept that they won’t be making
huge returns, and remain vigilant against being
drawn into buying a stock that is on a wild
upswing, something that is easy to get caught
up in. “You don’t have time for it to fail and to
recover.”
Keeping their portfolio invested in between 15
and 20 stocks is a good idea, “You can only
keep track of so many, plus with too many you
basically end up with the index.”
They use The Globe and Mail’s globeinvestor.
com website to keep an eye out for articles on
specific companies, and uses Yahoo’s finance
site to check out price-earnings and other
financial ratios. What they do look for is trends,
from the state of the housing market to the
potential fallout a flu pandemic.
They think the best thing they’ve done is stay
invested in the big banks for many years,
despite getting advice to sell them along the
way. “Canadian banks pay good dividends
and in Canada we don’t have a lot of good
dividend-paying stocks, and they’ve been
good-performing stocks.”
As advice to others they say, If you’re retired,
“adjust your lifestyle to your investments, not
the other way around.”
Their six figure portfolio is made up of: Bank
of Nova Scotia, Royal Bank of Canada, Bank
of Montreal, Petro-Canada, Diageo PLC,
Royal Dutch Shell, ING, Power Financial.
TransCanada (preferreds), Quebecor
(preferreds). Trusts: Aberdeen Asia Pacific,
ARC Energy.
-submitted
Carpe Diem
The Latin phrase Carpe Diem (which is
literally “seize the day” - meaning go for
it, or take a leap of faith, or make the most of
each moment) takes on fresh meaning with
the release of some new statistics.
According to a recent Environics poll the
following results were what people planned
to do in their retirement. Two groups were
examined. The first group was still working
and was age 40 or older. The second group
was already retired and was generally age 55
or older.
The 40+ workers planned to travel in
retirement. 48% of them said travel was a
major focus for retirement. However when
the retirees were interviewed (those who
actually were retired), only 24% of them were
interested in travel.
The primary concern of the retirees was health.
In fact they were almost twice as concerned
about health (26% vs. 14%) than the younger
working bunch.
Interestingly the retirees were not very
concerned about money. Only 4% of them
were concerned about having enough money
compared to 13% of the working group.
The retirees were also not very interested in
rest, relaxation and leading a quiet life. Only
5% of them saw this as a priority while twice as
many in the working group thought it would be
a priority in retirement.
The working group also looked forward to
sports and physical activity in retirement, but
the retirees were only half as interested in this.
The younger group wanted to live somewhere
nice, warm and peaceful when they retired but
the people who were actually retired didn’t hold
this as a priority at all.
So what can we gather from all this? Perhaps
if you are young and healthy you should do
your traveling now. Be wise with your money
but don’t get all bent out of shape over it – if
you are wise with it when you are young, you’ll
have enough when you are old. If you are
over-worked and stressed when you are young
then take some time off and go to that warm
peaceful place to rest and relax, because you
probably won’t want to when you are old and in
poorer health.
Seize the day, and enjoy each day to the
fullest! Live your dreams now. Each stage of
life has it’s own dreams and desires and twenty
years from now you may not have the same
wants and needs as you do today. Carpe Diem
quam minimum credula postero (seize the day,
never trust the next).
Scrooge
literally “seize the day” - meaning go for
it, or take a leap of faith, or make the most of
each moment) takes on fresh meaning with
the release of some new statistics.
According to a recent Environics poll the
following results were what people planned
to do in their retirement. Two groups were
examined. The first group was still working
and was age 40 or older. The second group
was already retired and was generally age 55
or older.
The 40+ workers planned to travel in
retirement. 48% of them said travel was a
major focus for retirement. However when
the retirees were interviewed (those who
actually were retired), only 24% of them were
interested in travel.
The primary concern of the retirees was health.
In fact they were almost twice as concerned
about health (26% vs. 14%) than the younger
working bunch.
Interestingly the retirees were not very
concerned about money. Only 4% of them
were concerned about having enough money
compared to 13% of the working group.
The retirees were also not very interested in
rest, relaxation and leading a quiet life. Only
5% of them saw this as a priority while twice as
many in the working group thought it would be
a priority in retirement.
The working group also looked forward to
sports and physical activity in retirement, but
the retirees were only half as interested in this.
The younger group wanted to live somewhere
nice, warm and peaceful when they retired but
the people who were actually retired didn’t hold
this as a priority at all.
So what can we gather from all this? Perhaps
if you are young and healthy you should do
your traveling now. Be wise with your money
but don’t get all bent out of shape over it – if
you are wise with it when you are young, you’ll
have enough when you are old. If you are
over-worked and stressed when you are young
then take some time off and go to that warm
peaceful place to rest and relax, because you
probably won’t want to when you are old and in
poorer health.
Seize the day, and enjoy each day to the
fullest! Live your dreams now. Each stage of
life has it’s own dreams and desires and twenty
years from now you may not have the same
wants and needs as you do today. Carpe Diem
quam minimum credula postero (seize the day,
never trust the next).
Scrooge
ETF Strategies
We often get questions regarding how to invest in ETF’s. The best answer to that question is to see a good financial planner and have the planner map out your best asset allocation. (Be aware that many financial planners will try to sell you commission products. ETF's don't pay commissions to planners. Pay your planner a fee to get the best advice.) It amuses me that many people just say, "Oh, I don’t want to pay for advice". Meanwhile they may have $100,000 sitting in a fund paying 3% and they could be making anywhere from 10% up to 80% depending on their risk tolerance. In other words they are making $3000 on their investment but they could be making $10,000 to $80,000 per year – and they don’t want to pay a few hundred dollars for the advice. This is a classic case of the old British saying "penny wise and pound foolish".
However if you are a die-hard penny-pincher even to the point of damaging your own future earning potential I will give you the following examples that you may be able to learn something from. I cannot, in a general article, say for you to do this or that because it all depends on your particular situation and risk tolerance. So here are a few educational examples.
Jack and Jill are in their 40’s and have no children. Three years ago they had saved $100,000 and put it in a balanced mutual fund that has earned them –4% (a loss) in the first year, 5% in the second year and 10% in the last year. They used these earnings to increase their mutual fund account so it is now sitting at a value of $110,880. They think they can do better so they approach their favorite financial advisor who is fully aware of the power of ETF’s. He looks at their situation and shows them what the following portfolio would have done for them.
40% in a high yield bond ETF
20% in select international ETFs
20% in Financial ETF’s
20% in Energy ETF’s
Over the past 3 years this portfolio would have done much better. In fact it would have grown to $142,747. Almost $32,000 better than they did themselves. Please remember that past performance is no guarantee of future results.
Another example is Dawn and Juan who are both in their 60’s, retired and have a $500,000 nest egg that they don’t want to risk. But they also are not able to get much income from the guaranteed certificates that they currently have it invested in. In fact they are earning less than 3%, or $15,000 per year. They think they can do better so they approach their favorite financial advisor who is fully aware of the power of ETF’s. He looks at their situation and shows them what the following investment would have done for them.
100% in a high yield bond ETF
Over the past year it would have earned them 10.4% or $52,000 with very little risk because it is based on a broad spectrum of corporate and government bonds. This is a far cry from their paltry $15,000 and when combined with their other pension income gives them a very nice income without diminishing their nest egg.
One final example is Reginald. Reggie is a young and single tax lawyer with money to burn. But at 29 years old he is getting concerned that he should be investing for maximum growth while he is still single and can take the risk. He approaches his favorite financial advisor who is fully aware of the power of ETF’s. The advisor looks at his situation and shows him what the following portfolio would have done for him:
10% Australia
10% Austria
10% Brasil
10% Mexico
10% S. Korea
10% Global Energy
10% Global Financials
10% Cdn Real Estate Trusts
10% Cdn Energy
10% Cdn. Financials
Over the past 3 years and starting with $100,000 this portfolio would have grown to $151,791. That’s an average of 15% per year. If he can keep up this growth he will be able to retire with more than $1 million by the time he is 46. But since he has lots of income he plans to contribute another $18,000 per year to these investments. Now he will have over $3 million by the time he is 46. Then he plans to live on the earnings, which will give him $300,000 per annum at current ETF bond rates. Ah, to be young and financially clever! (By the way, his financial advice cost less than $1000.)
But again please remember this was all for educational purposes and past performance is no guarantee of future results.
Scrooge
However if you are a die-hard penny-pincher even to the point of damaging your own future earning potential I will give you the following examples that you may be able to learn something from. I cannot, in a general article, say for you to do this or that because it all depends on your particular situation and risk tolerance. So here are a few educational examples.
Jack and Jill are in their 40’s and have no children. Three years ago they had saved $100,000 and put it in a balanced mutual fund that has earned them –4% (a loss) in the first year, 5% in the second year and 10% in the last year. They used these earnings to increase their mutual fund account so it is now sitting at a value of $110,880. They think they can do better so they approach their favorite financial advisor who is fully aware of the power of ETF’s. He looks at their situation and shows them what the following portfolio would have done for them.
40% in a high yield bond ETF
20% in select international ETFs
20% in Financial ETF’s
20% in Energy ETF’s
Over the past 3 years this portfolio would have done much better. In fact it would have grown to $142,747. Almost $32,000 better than they did themselves. Please remember that past performance is no guarantee of future results.
Another example is Dawn and Juan who are both in their 60’s, retired and have a $500,000 nest egg that they don’t want to risk. But they also are not able to get much income from the guaranteed certificates that they currently have it invested in. In fact they are earning less than 3%, or $15,000 per year. They think they can do better so they approach their favorite financial advisor who is fully aware of the power of ETF’s. He looks at their situation and shows them what the following investment would have done for them.
100% in a high yield bond ETF
Over the past year it would have earned them 10.4% or $52,000 with very little risk because it is based on a broad spectrum of corporate and government bonds. This is a far cry from their paltry $15,000 and when combined with their other pension income gives them a very nice income without diminishing their nest egg.
One final example is Reginald. Reggie is a young and single tax lawyer with money to burn. But at 29 years old he is getting concerned that he should be investing for maximum growth while he is still single and can take the risk. He approaches his favorite financial advisor who is fully aware of the power of ETF’s. The advisor looks at his situation and shows him what the following portfolio would have done for him:
10% Australia
10% Austria
10% Brasil
10% Mexico
10% S. Korea
10% Global Energy
10% Global Financials
10% Cdn Real Estate Trusts
10% Cdn Energy
10% Cdn. Financials
Over the past 3 years and starting with $100,000 this portfolio would have grown to $151,791. That’s an average of 15% per year. If he can keep up this growth he will be able to retire with more than $1 million by the time he is 46. But since he has lots of income he plans to contribute another $18,000 per year to these investments. Now he will have over $3 million by the time he is 46. Then he plans to live on the earnings, which will give him $300,000 per annum at current ETF bond rates. Ah, to be young and financially clever! (By the way, his financial advice cost less than $1000.)
But again please remember this was all for educational purposes and past performance is no guarantee of future results.
Scrooge
A Simple Strategy for Saving Money on Food
Food and groceries are, after housing costs, one of the biggest monthly expenses. I have found a simple way to save money on food. It’s a bit backwards from how most people think. Usually you go shopping trying to find the best deals that save money. This is important, but here is another approach. Aim to spend less than $1 per person per meal when you prepare the meal. This means that when you go to the cupboard or refrigerator think cheap! Then extend that back to the source. Here is an example. When I want to prepare a cheap lunch I might prepare an omelet. I know eggs are cheap and a few shreds of meat and cheese are also not expensive. I would never buy a prepared or ready-to-heat meal because they are a waste of money. Eggs are normally fairly cheap, but we do even better buying eggs from a local farmer for $1.25 per dozen. In the store they are twice as much. So we pay only 10 cents each for an egg. Two eggs go in each omelet plus a bit of cheese, scraps of left over meat, and some dried herbs. Serve this with a slice of tomato and a glass of homemade iced tea and you have a meal for somewhere around 60 cents per person. Now let’s consider some other things.
Cheese
Don’t buy pre-sliced cheese. Look carefully at the price. I was amazed. In some cases it is one dollar per slice! Buy a block of low cost local cheese. In the area where we live that is marble cheddar. A few slices off the block might add up to 10 or 20 cents.
Meat
We (in the western world) eat too much meat. You really don’t need any meat at all if you substitute other proteins. However if you eat meat, eat it at most once per day and even then eat small quantities of it. Eating less meat will make you healthier and wealthier. (You’ll be good looking and rich!!)FishThe fact that most fish has little to no saturated fats but do have omega oils, which are good for your heart, means that fish should be on the menu at least once per week. Shellfish is not as good for you and is often expensive. Avoid it in favor of white fish like haddock, tilapia or catfish. You can also often get salmon or trout cheap enough to make the $1 per person budget.
Breakfast Cereals
Packaged breakfast cereals can be very expensive. Even so, they still may provide a meal for around $1. However if you eat like the frugal Scots and take a bowl of homemade oatmeal for breakfast you will save even more money. It’s really quite good with a bit of honey and milk on it. Oats are also known to lower blood cholesterol.
Regardless of when you have your big meal - mid-day or evening - you can still make it meet the $1 per person budget. Pasta and tomato sauce is low in cost, so is a stir-fry of chopped meat, seasonal vegetables and rice. There are probably thousands of combinations of foods that you can make for $1 per person (or less). All you have to do is be creative, keep costs in mind, and think cheap when you approach the refrigerator and cupboard as well as the grocery store shelf. Remember there are farmers all around you and by approaching them you may be able to get your food much cheaper. Farmers usually receive less than 50% of what the food sells for on the store shelf. They are all self-employed and will more often than not be more than happy to sell you produce at a great bargain.
Scrooge
Cheese
Don’t buy pre-sliced cheese. Look carefully at the price. I was amazed. In some cases it is one dollar per slice! Buy a block of low cost local cheese. In the area where we live that is marble cheddar. A few slices off the block might add up to 10 or 20 cents.
Meat
We (in the western world) eat too much meat. You really don’t need any meat at all if you substitute other proteins. However if you eat meat, eat it at most once per day and even then eat small quantities of it. Eating less meat will make you healthier and wealthier. (You’ll be good looking and rich!!)FishThe fact that most fish has little to no saturated fats but do have omega oils, which are good for your heart, means that fish should be on the menu at least once per week. Shellfish is not as good for you and is often expensive. Avoid it in favor of white fish like haddock, tilapia or catfish. You can also often get salmon or trout cheap enough to make the $1 per person budget.
Breakfast Cereals
Packaged breakfast cereals can be very expensive. Even so, they still may provide a meal for around $1. However if you eat like the frugal Scots and take a bowl of homemade oatmeal for breakfast you will save even more money. It’s really quite good with a bit of honey and milk on it. Oats are also known to lower blood cholesterol.
Regardless of when you have your big meal - mid-day or evening - you can still make it meet the $1 per person budget. Pasta and tomato sauce is low in cost, so is a stir-fry of chopped meat, seasonal vegetables and rice. There are probably thousands of combinations of foods that you can make for $1 per person (or less). All you have to do is be creative, keep costs in mind, and think cheap when you approach the refrigerator and cupboard as well as the grocery store shelf. Remember there are farmers all around you and by approaching them you may be able to get your food much cheaper. Farmers usually receive less than 50% of what the food sells for on the store shelf. They are all self-employed and will more often than not be more than happy to sell you produce at a great bargain.
Scrooge
Avoiding Christmas Debt
The Christmas season is a wonderful time of the year. It can be filled with lights, parties, good food and good friends. It’s also a time that many people exchange gifts with those they love. In fact it can be so much fun that in all this revelry one often gets caught up in the moment and forgets the basic principles of personal finance – specifically, what you buy, you eventually have to pay for. The truth of the matter is that such a great number of us go overboard on Christmas shopping that the economy in general is crippled in the months after Christmas while everyone scrambles to fix the financial mess they just got themselves into. There are a few simple things you can do to avoid these problems this year.
First, set a budget and stick to it. If you
think you want to (are able to and should) spend $1000 on gifts, travel and extra food this Christmas, then set the budget now. The more specific you can be on the purchases the better control you will have. For instance, let’s say you have 5 people on your gift list and you expect to spend $100 each. You also expect to spend $250 more on food and $250 on holiday travel. List all these out in a notebook, ledger or spreadsheet. It can be part of your regular budget or a special Christmas budget. Then track your expenses carefully on each one making sure you don’t go over your limit.
Shop early for gifts. The earlier you can get started, the less of an impact gift buying will have on your cash flow. If you spread your gift buying over several months before Christmas you won’t experience the debts and negative cash flow that last minute purchasing can cause. You will also make better decisions and not panic and jump at over-priced merchandise.
Stock up on food bargains now. Christmas baking can eat up a considerable amount of cash. If you stock up on grocery deals ahead of time you will be able to save a large amount in the long run.
Lower the expectations. In the past you may have bought for too many people or you may have been in the habit of buying big luxurious gifts that you really couldn’t afford anyway. Now is the time to lower expectations for the coming holiday season. Tell your usual recipients that the gifts will be smaller, more meaningful, environment friendly, of help to the poor, etc. In our family we sometimes give monetary gifts to charity in lieu of gifts to each other.
Use a waiting period. Forcing yourself to not buy something until you have thought about it for a few weeks will help to avoid purchases that you may later regret. If you are in the habit of impulse shopping, try the waiting period. You may have to start by always shopping with a friend who you have arranged with in advance to keep you in check.
Teach children to use their own money for gifts. Young children should be taught to use money wisely from an early age. Help children save through the year and then help them to use their own money to make gift purchases. If you always buy gifts for children to give to others they will never have respect for the cost of the purchase. If they see their own savings disappearing they will quickly realize the less they spend the more they will have.
Make your gifts. It’s amazing how many really nice gifts you can make yourself with a little hard work and creativity. Depending on your experience, the choices are almost endless. You can make crafts, woodworking projects, plant indoor gardens, design jewelry, sew clothes, make pottery, construct handmade dolls or puppets, etc., etc.
These are just a few things that will make your Christmas season merrier.
Scrooge
First, set a budget and stick to it. If you
think you want to (are able to and should) spend $1000 on gifts, travel and extra food this Christmas, then set the budget now. The more specific you can be on the purchases the better control you will have. For instance, let’s say you have 5 people on your gift list and you expect to spend $100 each. You also expect to spend $250 more on food and $250 on holiday travel. List all these out in a notebook, ledger or spreadsheet. It can be part of your regular budget or a special Christmas budget. Then track your expenses carefully on each one making sure you don’t go over your limit.
Shop early for gifts. The earlier you can get started, the less of an impact gift buying will have on your cash flow. If you spread your gift buying over several months before Christmas you won’t experience the debts and negative cash flow that last minute purchasing can cause. You will also make better decisions and not panic and jump at over-priced merchandise.
Stock up on food bargains now. Christmas baking can eat up a considerable amount of cash. If you stock up on grocery deals ahead of time you will be able to save a large amount in the long run.
Lower the expectations. In the past you may have bought for too many people or you may have been in the habit of buying big luxurious gifts that you really couldn’t afford anyway. Now is the time to lower expectations for the coming holiday season. Tell your usual recipients that the gifts will be smaller, more meaningful, environment friendly, of help to the poor, etc. In our family we sometimes give monetary gifts to charity in lieu of gifts to each other.
Use a waiting period. Forcing yourself to not buy something until you have thought about it for a few weeks will help to avoid purchases that you may later regret. If you are in the habit of impulse shopping, try the waiting period. You may have to start by always shopping with a friend who you have arranged with in advance to keep you in check.
Teach children to use their own money for gifts. Young children should be taught to use money wisely from an early age. Help children save through the year and then help them to use their own money to make gift purchases. If you always buy gifts for children to give to others they will never have respect for the cost of the purchase. If they see their own savings disappearing they will quickly realize the less they spend the more they will have.
Make your gifts. It’s amazing how many really nice gifts you can make yourself with a little hard work and creativity. Depending on your experience, the choices are almost endless. You can make crafts, woodworking projects, plant indoor gardens, design jewelry, sew clothes, make pottery, construct handmade dolls or puppets, etc., etc.
These are just a few things that will make your Christmas season merrier.
Scrooge
Investing in ETF Sectors
If you have been reading the Scrooge Guide for long you will know that we usually speak highly of ETF’s (exchange traded funds). ETF’s are like a mutual fund but without the high management expenses so they usually outperform a mutual fund by several percentage points. That extra edge can add up to several hundred thousand dollars of extra income over a lifetime of investing. One of the ways to invest in ETF’s is to look at the sectors and determine which one is on the growth curve. For instance as soon as the price of oil started ratcheting upwards a couple years ago you could be certain the energy sector would benefit. If you go to www.iUnits.com and look at the one-year result for their energy sector ETF you will see that it grew 61% over the last year (ending end of July - but it has increased a lot more in August). Another hot sector, real estate, did 31% growth over the last 12 months. Of course since these two sectors have increased so much over the past year they may be ready for a down turn so they may not be the best investment choices at this time. If you do decide to invest in them keep a very close watch on them and sell if they drop more than a few percentage points in one day. I’m often asked for a recommendation of a good low cost online broker. One of the best that I have found is Interactive Brokers (www.interactivebrokers.com). They have offices in several countries and offer very good rates. For instance you can trade shares through them for two cents per share, and as low as one cent for larger blocks. So as an example if you bought 100 shares of the or iShares) natural resources sector (iUnits ticker XEG) it would only cost you $2 to make the trade. Compare this to a more common “discount broker” or bank where you will be paying upwards of ten to twenty times this amount. This means you can go in and out of the sector with little transaction cost. With the Interactive Broker trading platform on your computer (it’s free) you can also sets stops, so that your stock will automatically be sold and converted to cash if it drops to a predetermined level. This is a great way to protect your investments from sudden drops in value. Also, if you identify a stock or ETF in a downward spiral you can sell it short and make money from it’s decent. Many a clever investor made millions on the drop in price of Nortel a few years ago. Be aware, though, their user interface for the trading software will take some time to learn - it's not the easiest of systems.
Scrooge
Scrooge
Are Annuities For You?
Not everyone has heard of annuities, but for those of you who are less risk tolerant they may well be a good way to guarantee an income for the future.An annuity is an investment that pays a regular income. They are usually used during retirement when a salary is no longer received. The benefit (monthly pay out) of the annuity is made up of the original amount you invested plus interest and any other investment income earned on the capital.In most jurisdictions you will buy an annuity from an insurance company or licensed insurance broker. You can usually put an annuity into a tax-sheltered plan if you want.The greatest benefit of an annuity is that in many cases the income is guaranteed. The second best benefit is that it is automatically paid out to you monthly (or yearly) so you don’t even have to think about it. Another benefit is that because it is an insurance product it is protected from creditors, so long as a beneficiary has been named. Also, when a beneficiary has been named it moves directly to that person and is not subject to probate fees.An annuity can either be immediate (where income starts flowing back to you within a year) or deferred (where income flows back to you after – sometimes much after – one year). Self-employed people who are concerned about creditor problems in the future sometimes use the deferred annuity. However it cannot be used to hide assets during the heat of a bankruptcy. Usually the courts will look at financial transactions that took place during the last a year or two before the bankruptcy. If this is a concern to you, consult a lawyer competent in bankruptcy laws in your area.Volume 2 Number 8Not all annuities have a fixed benefit that is guaranteed by the insurer. There is also an annuity called the variable annuity, which has a varying benefit. A variable annuity usually invests in common stocks and the pay out is based on stock market performance. In theory, this type of annuity should give back a greater income than the fixed benefit annuity, but it is also riskier. With most annuities you can make early withdrawals or cash them in. There will be some fees associated with taking extra cash out so keep this in mind. There may also be a market value adjustment (MVA), which is a rather large penalty for early surrender (total cash out). However this is a good disincentive and a reason to keep your annuity intact. One of the benefits of buying an annuity in the first place is that it puts away that large lump of cash you have and pays it back to you in small amounts with earnings. For most people, if they have large amounts of cash lying around they are tempted to spend it on every temptation that comes along and sooner or later it is all gone. That’s why people who win or inherit a large amount of money have usually spent it all and invested none within 5 years. It’s sad but true.Here are some types of annuities: Term certain annuity - it provides income to a specific age or time period. It can be bought with a single lump sum or a series of premiums over time.Life annuity – it makes income payments for your entire lifetime. However because it is funded from a pool, you cannot convert this to a lump sum payment out. Once the payments begin you are locked in to receiving them for the rest of your life.The life annuity has a number of variations:Life straight annuity: pays out until you die and then stops.Life annuity with guaranteed number of
payments: pays out until you die, however if you die before the guaranteed number of payments has been paid out to you then the remaining benefits will be paid to your named beneficiary. Installment refund annuity: guarantees a set number of income payments equal to the purchase price, if you die before the payments equal the purchase price then your beneficiary gets the remainder.Cash refund annuity: guarantees income for life. If you die before receiving payments equal to the purchase price then the amount outstanding is paid to your beneficiary.Joint & last survivor annuity: provides a guaranteed income during the course of two peoples lives. On the death of one the entire income is paid to the survivor for the remainder of their life. It’s typically used by spouses but can be purchased by any two persons.The disadvantage of annuities are that they don’t pay out as much as you might get if you had simply invested the amount in exchange traded funds (ETF) and managed them properly. However ETF’s carry stock market fluctuation risk and are only suitable for those tolerant to those risks.An example of using an annuity in financial planning:Fred is 70 years old and has $1.4 million in savings. He is not very risk tolerant and has it all invested in guaranteed investments that are only paying 3.5%. His wife Wilma has already died and he has only one daughter to whom he would like to leave a substantial estate. Fred currently earns $49,000 in interest from his investment and pays 38% tax for a net income of $30,380.Fred’s financial planner suggests he invests $1 million in a life annuity and buy a $1 million term-to-100 life insurance policy naming his daughter as beneficiary. By doing this Fred’s income from the annuity will be $70,000 less the tax on the taxable portion (interest part only) of $11,400 for a net income of $58,600. He will also need to pay $25,000 per year in insurance premiums and he also has a net income (after taxes) of $8680 from his other $400,000 still in guaranteed investments. In total this means that his net income is now $42,280 (almost $12,000 higher than previous income) and his daughter will receive $1 million tax free (insurance proceeds are tax free in most jurisdictions), which is $300,000 more than she would have received if she had simply inherited the money because of the tax implications. For more information on annuities contact your local life insurance broker and have them to find the best solution for you. If you decide to approach a life insurance company directly then be sure to shop around with at least 4 other insurers as prices and benefits may vary considerably.
Scrooge
payments: pays out until you die, however if you die before the guaranteed number of payments has been paid out to you then the remaining benefits will be paid to your named beneficiary. Installment refund annuity: guarantees a set number of income payments equal to the purchase price, if you die before the payments equal the purchase price then your beneficiary gets the remainder.Cash refund annuity: guarantees income for life. If you die before receiving payments equal to the purchase price then the amount outstanding is paid to your beneficiary.Joint & last survivor annuity: provides a guaranteed income during the course of two peoples lives. On the death of one the entire income is paid to the survivor for the remainder of their life. It’s typically used by spouses but can be purchased by any two persons.The disadvantage of annuities are that they don’t pay out as much as you might get if you had simply invested the amount in exchange traded funds (ETF) and managed them properly. However ETF’s carry stock market fluctuation risk and are only suitable for those tolerant to those risks.An example of using an annuity in financial planning:Fred is 70 years old and has $1.4 million in savings. He is not very risk tolerant and has it all invested in guaranteed investments that are only paying 3.5%. His wife Wilma has already died and he has only one daughter to whom he would like to leave a substantial estate. Fred currently earns $49,000 in interest from his investment and pays 38% tax for a net income of $30,380.Fred’s financial planner suggests he invests $1 million in a life annuity and buy a $1 million term-to-100 life insurance policy naming his daughter as beneficiary. By doing this Fred’s income from the annuity will be $70,000 less the tax on the taxable portion (interest part only) of $11,400 for a net income of $58,600. He will also need to pay $25,000 per year in insurance premiums and he also has a net income (after taxes) of $8680 from his other $400,000 still in guaranteed investments. In total this means that his net income is now $42,280 (almost $12,000 higher than previous income) and his daughter will receive $1 million tax free (insurance proceeds are tax free in most jurisdictions), which is $300,000 more than she would have received if she had simply inherited the money because of the tax implications. For more information on annuities contact your local life insurance broker and have them to find the best solution for you. If you decide to approach a life insurance company directly then be sure to shop around with at least 4 other insurers as prices and benefits may vary considerably.
Scrooge
Running on Vegetable Oil
The use of plant oil as fuel may seem insignificant today. But such products can in time become just as important as kerosene and these coal-tar-products of today.- Rudolf Diesel 1912
Here’s a fact that may turn your head – you can run some engines on vegetable oil and vegetable oil is now cheaper than gasoline. For instance, as this is being written, gasoline in Ontario Canada is running between $1.25 and $1.35 per liter and in this same area you can buy canola vegetable oil for $1.00 per liter in some grocery stores (see your local Costco store as an example).
Remember the saying: "there is nothing new under the sun"? Well in 1900 Rudolf Diesel was showing off his new engine to the world at the Paris World’s Fair. This engine ran on virtually any oil, and at the time he was in fact running it on peanut oil. Shortly after that he wrote: "The use of plant oil as fuel may seem insignificant today. But such products can in time become just as important as kerosene and these coal-tar-products of today."
As the petroleum industry took over during the rest of that century the dominant oil for diesel engines became stinky, toxic, petroleum diesel oil – a non-renewable, polluting and expensive-to-refine choice. However now thanks to the price of petroleum rising out of sight, vegetable oils are competitive again as well as being renewable and non-toxic.
With the cost of gasoline and diesel oil running at all time highs you (like I) may be wondering where the price increases will stop and how we can possibly afford them. Fortunately the alternative of modifying the diesel engine in your car, tractor or generator to run on vegetable oil now makes a lot of sense.
We should make some terms clear here. There is something called biodiesel, which is vegetable oil that has been processed to remove the glycerine. It is more expensive and somewhat dangerous to process. What we are talking about in this article is straight vegetable oil (also called SVO), which is the same stuff you cook with and put on salads. We already mentioned peanut oil, but safflower oil, canola oil and sunflower oil are also excellent choices for running in diesel engines. You can use new oil (also called virgin oil) or used oil from restaurants as long as it is liquid and it’s filtered
3first to remove food particles. Used oil can often be gotten for nothing – which, of course, is highly recommended by the Scrooge Guide. After all what will warm the cockles of your heart more than idling down the road on fuel that costs nothing?However you shouldn’t just run out and buy a used diesel car (if you don’t already have one) and dump vegetable oil in the tank. You might get away with the first fill up because it will mix with the remaining diesel oil, but the second fill up will certainly stop your engine. The reason is you need to make a few modifications to the supply so the vegetable oil is heated up to about 160 degrees F. before it enters the engine. This modification won’t make it impossible for you to also run diesel oil. In fact the modification adds a separate tank for the SVO and heats the supply line. The best modification is to have both oils available so you can start and shut down the engine on diesel oil. That way the engine stays clean and is easy to start even in cold weather.There are a number of companies (probably soon to become very busy companies) that offer SVO modification kits for most diesel engines. For more information on this and other uses of vegetable oil (like heating your house) see the following web links.
Veg-Oil-Car UK site with lots of info: http://www.geocities.com/vegoilcar/
Elsbett German conversion kits for your car: http://www.elsbett.com/engl/index.htm
Goat Industries conversion kit: http://www.vegetableoildiesel.co.uk/conversionkits.html
Plant oil technology site: http://www.folkecenter.dk/plant-oil/plant-oil_en.htm
Oil Press for making your own Veggie Oils: http://www.oilpress.com/
Fatmobile site, how one person converted his VW: http://www.geocities.com/vwfatmobile/index.html
Heat your house on vegetable oil: http://www.columbiaboiler.com/wasteoil.htm
ATG conversion kit: http://www.diesel-therm.com/veggie-kit.htm
Plant Drive conversion kit: http://www.plantdrive.com/
Tons of information on SVO and all sorts of other alternate fuels: http://www.journeytoforever.org/biodiesel_svo.html
Scrooge
Here’s a fact that may turn your head – you can run some engines on vegetable oil and vegetable oil is now cheaper than gasoline. For instance, as this is being written, gasoline in Ontario Canada is running between $1.25 and $1.35 per liter and in this same area you can buy canola vegetable oil for $1.00 per liter in some grocery stores (see your local Costco store as an example).
Remember the saying: "there is nothing new under the sun"? Well in 1900 Rudolf Diesel was showing off his new engine to the world at the Paris World’s Fair. This engine ran on virtually any oil, and at the time he was in fact running it on peanut oil. Shortly after that he wrote: "The use of plant oil as fuel may seem insignificant today. But such products can in time become just as important as kerosene and these coal-tar-products of today."
As the petroleum industry took over during the rest of that century the dominant oil for diesel engines became stinky, toxic, petroleum diesel oil – a non-renewable, polluting and expensive-to-refine choice. However now thanks to the price of petroleum rising out of sight, vegetable oils are competitive again as well as being renewable and non-toxic.
With the cost of gasoline and diesel oil running at all time highs you (like I) may be wondering where the price increases will stop and how we can possibly afford them. Fortunately the alternative of modifying the diesel engine in your car, tractor or generator to run on vegetable oil now makes a lot of sense.
We should make some terms clear here. There is something called biodiesel, which is vegetable oil that has been processed to remove the glycerine. It is more expensive and somewhat dangerous to process. What we are talking about in this article is straight vegetable oil (also called SVO), which is the same stuff you cook with and put on salads. We already mentioned peanut oil, but safflower oil, canola oil and sunflower oil are also excellent choices for running in diesel engines. You can use new oil (also called virgin oil) or used oil from restaurants as long as it is liquid and it’s filtered
3first to remove food particles. Used oil can often be gotten for nothing – which, of course, is highly recommended by the Scrooge Guide. After all what will warm the cockles of your heart more than idling down the road on fuel that costs nothing?However you shouldn’t just run out and buy a used diesel car (if you don’t already have one) and dump vegetable oil in the tank. You might get away with the first fill up because it will mix with the remaining diesel oil, but the second fill up will certainly stop your engine. The reason is you need to make a few modifications to the supply so the vegetable oil is heated up to about 160 degrees F. before it enters the engine. This modification won’t make it impossible for you to also run diesel oil. In fact the modification adds a separate tank for the SVO and heats the supply line. The best modification is to have both oils available so you can start and shut down the engine on diesel oil. That way the engine stays clean and is easy to start even in cold weather.There are a number of companies (probably soon to become very busy companies) that offer SVO modification kits for most diesel engines. For more information on this and other uses of vegetable oil (like heating your house) see the following web links.
Veg-Oil-Car UK site with lots of info: http://www.geocities.com/vegoilcar/
Elsbett German conversion kits for your car: http://www.elsbett.com/engl/index.htm
Goat Industries conversion kit: http://www.vegetableoildiesel.co.uk/conversionkits.html
Plant oil technology site: http://www.folkecenter.dk/plant-oil/plant-oil_en.htm
Oil Press for making your own Veggie Oils: http://www.oilpress.com/
Fatmobile site, how one person converted his VW: http://www.geocities.com/vwfatmobile/index.html
Heat your house on vegetable oil: http://www.columbiaboiler.com/wasteoil.htm
ATG conversion kit: http://www.diesel-therm.com/veggie-kit.htm
Plant Drive conversion kit: http://www.plantdrive.com/
Tons of information on SVO and all sorts of other alternate fuels: http://www.journeytoforever.org/biodiesel_svo.html
Scrooge
A Few Tax Tips
It’s always difficult to give specific tax tips in the Scrooge Guide because we have readers on 3 continents and taxation is different in each jurisdiction. However there are a number of things that are common to many different countries. Some of these are described below.
Interest expense
Take note of what interest expenses can be deducted from your income to compute taxes due. In Canada, for instance, interest can be deducted for anything that produces income (like a rental property) and is not in a tax-sheltered vehicle. In the USA (unlike Canada) you can also deduct interest on your home mortgage.
A Business on the Side
If you run a business on the side (part time) and it is making a loss, then that loss can often be deducted from your other income to give you a tax refund.
Offshore Business
This is an area where you should consult a tax accountant. Many islands in the Caribbean have tax treaties with other countries. That means if your business head office is located there and your income is processed there, then you are also taxed there but not in other countries. So, for instance, if you pay 5% income tax in Bermuda you will pay no other tax in any other countries even when you bring the money in because there is no double taxation.
Retirement Tax Shelters
If you put money into retirement tax shelters (RRSP, 401K, etc.) the money can grow there without being taxed. You also get a deduction on your current taxes owing when you make a deposit. You will be taxed when you withdraw it again but presumably you will be in a lower tax bracket then (for those of us in a so-called progressive tax system) and you will then pay taxes at a lower rate.
Education Tax Shelters
Many jurisdictions have education tax shelters that are beneficial. In Canada, for instance there is a shelter called the RESP (registered education savings plan). Put money into this for a child’s education and it can grow tax-free and the government also adds a grant to it. When it is withdrawn, it is taxed in the students hands so they usually pay no tax on it because of their low earnings during their post-secondary schooling years. The child doesn’t need to be your own. An aunt, uncle or unrelated friend can also contribute to one.
These are just a few things to consider now, to reduce your taxes this year.
Scrooge
Interest expense
Take note of what interest expenses can be deducted from your income to compute taxes due. In Canada, for instance, interest can be deducted for anything that produces income (like a rental property) and is not in a tax-sheltered vehicle. In the USA (unlike Canada) you can also deduct interest on your home mortgage.
A Business on the Side
If you run a business on the side (part time) and it is making a loss, then that loss can often be deducted from your other income to give you a tax refund.
Offshore Business
This is an area where you should consult a tax accountant. Many islands in the Caribbean have tax treaties with other countries. That means if your business head office is located there and your income is processed there, then you are also taxed there but not in other countries. So, for instance, if you pay 5% income tax in Bermuda you will pay no other tax in any other countries even when you bring the money in because there is no double taxation.
Retirement Tax Shelters
If you put money into retirement tax shelters (RRSP, 401K, etc.) the money can grow there without being taxed. You also get a deduction on your current taxes owing when you make a deposit. You will be taxed when you withdraw it again but presumably you will be in a lower tax bracket then (for those of us in a so-called progressive tax system) and you will then pay taxes at a lower rate.
Education Tax Shelters
Many jurisdictions have education tax shelters that are beneficial. In Canada, for instance there is a shelter called the RESP (registered education savings plan). Put money into this for a child’s education and it can grow tax-free and the government also adds a grant to it. When it is withdrawn, it is taxed in the students hands so they usually pay no tax on it because of their low earnings during their post-secondary schooling years. The child doesn’t need to be your own. An aunt, uncle or unrelated friend can also contribute to one.
These are just a few things to consider now, to reduce your taxes this year.
Scrooge
730 Days to a New You
Habits are a hard thing to break. The saying that "you can’t teach an old dog new tricks" is only partly true. What would be a more accurate statement is "you can’t teach an old dog new tricks quickly", because the older you are, the more time it takes. It is true that the younger you are the easier it is to learn something. But middle age and even seniors are good students and when they put their minds and hearts into a new subject they often come out shining stars.
What does this have to do with saving money you say? Everything. The biggest roadblocks to our financial well being is our own habits. These habits have been learned, and anything that has been learned can be un-learned again. But it will take some time and effort to un-learn them. Nothing worth having comes easy.
Another way to look at it is how long will suffering last? When you have to give up something, like chocolate, cigarettes or chips, it takes a while for the cravings to go away. It the same thing with chronic spending. When I gave up cigarettes many, many years ago, it took a full two years (730 days) for the cravings to go away. I thought my experience was unique at the time and didn’t give it much more thought. Then years later when I lost someone very close to me, and I found the pain almost unbearable I went looking for answers. What I found in a publication from a clever Dr. of Psychology was that it takes about two years to get over a loss (that is, change your behavior towards that thing). In some cases you never really get over a loss entirely, but the severity of the reaction to the loss gets bearable within 2 years. So again the 730 day rule came into play.
Then when I examined how long it took to learn a new behavior I found the same thing to be true in many cases – 730 days later the new way becomes ingrained. Often it can become solidified much sooner than 730 days. For instance if you are a chronic clothes shopper and you really want to give up the habit of excessive clothes shopping then you can use a number of techniques to get out of the habit before the 730 day period. Some of these techniques are: never carrying credit cards, debit cards or much cash or always shopping with an impatient tightwad, or forcing yourself to sit and write out an essay of why you should buy the item before you do, or forcing a one week waiting period on any purchase, etc. But these techniques will remain only that – techniques. The real you may still be vulnerable enough to lapse back into the old habit.
However rest assured that once you have forced a new habit on yourself for 730 days, the new habit will become the new you! That’s why it is so important to persevere and not give up too easily. When you give up a bad habit push yourself hard for 730 days. It’s like running from an attacker. Run for just a few days and when you turn around you will see he is still on your heels. Run for 365 days and he will be on a distant hill. Run for 730 days and he will be so far away that you will never see him again…unless you go looking for him!
Scrooge
What does this have to do with saving money you say? Everything. The biggest roadblocks to our financial well being is our own habits. These habits have been learned, and anything that has been learned can be un-learned again. But it will take some time and effort to un-learn them. Nothing worth having comes easy.
Another way to look at it is how long will suffering last? When you have to give up something, like chocolate, cigarettes or chips, it takes a while for the cravings to go away. It the same thing with chronic spending. When I gave up cigarettes many, many years ago, it took a full two years (730 days) for the cravings to go away. I thought my experience was unique at the time and didn’t give it much more thought. Then years later when I lost someone very close to me, and I found the pain almost unbearable I went looking for answers. What I found in a publication from a clever Dr. of Psychology was that it takes about two years to get over a loss (that is, change your behavior towards that thing). In some cases you never really get over a loss entirely, but the severity of the reaction to the loss gets bearable within 2 years. So again the 730 day rule came into play.
Then when I examined how long it took to learn a new behavior I found the same thing to be true in many cases – 730 days later the new way becomes ingrained. Often it can become solidified much sooner than 730 days. For instance if you are a chronic clothes shopper and you really want to give up the habit of excessive clothes shopping then you can use a number of techniques to get out of the habit before the 730 day period. Some of these techniques are: never carrying credit cards, debit cards or much cash or always shopping with an impatient tightwad, or forcing yourself to sit and write out an essay of why you should buy the item before you do, or forcing a one week waiting period on any purchase, etc. But these techniques will remain only that – techniques. The real you may still be vulnerable enough to lapse back into the old habit.
However rest assured that once you have forced a new habit on yourself for 730 days, the new habit will become the new you! That’s why it is so important to persevere and not give up too easily. When you give up a bad habit push yourself hard for 730 days. It’s like running from an attacker. Run for just a few days and when you turn around you will see he is still on your heels. Run for 365 days and he will be on a distant hill. Run for 730 days and he will be so far away that you will never see him again…unless you go looking for him!
Scrooge
The Power of Openness
Nasty habits are harder to get rid of if they are also nasty little secrets. There is considerable power in openness, spilling it all, getting it all on the table, getting it off your chest. Of course I’m talking about bad spending habits here, but it can equally apply to any “dirty deed”. As soon as you “confess” your problem to someone else and ask for help a great weight will come off your shoulders. One way to get this in action is by teaming up with a friend who has a similar (but not necessarily the same) problem and asking them to be your accountability partner. An accountability partner is just that, someone you are accountable to. You meet regularly with them and they will ask you point blank if you have been flirting with your nasty habit or entertaining any financially unbecoming thoughts (like buying that new boat you have been eying). By doing this you will help keep each other on track.Your accountability partner can also be there Volume 2 Number 7to call for support in a moment of weakness. This is particularly useful when you know you shouldn’t be doing something but have no one else to turn to.Intervention is another form of openness. It is often used successfully to treat drug addicts. Lesser and more simple forms of it can be used to control spending problems. An example of an intervention might be something as simple as an outside counselor coming in to talk to the family about “the problem”. Once it is all in the open and everyone is onside, help comes more easily to the chronic spender.Full communication is another form of openness. As parents, many of us don’t like to admit that we are not the fountain of perpetual strength and wealth that our children often think we are. That may be fine with infants, but it is financially deadly with adult children. A better answer to yet another request for money would be “honey, I only have enough money to look after my own needs, and if I give it to you then I will have to go somewhere for a loan. If you need more money you really need to find ways of earning more, or spending less.” Then turn around, grit your teeth, and walk away before a wave of compassion overcomes you. It’ll be one of the best things you ever did for them. Not only will it rid you of a financial drain but it will also teach them to be responsible for their own financial affairs. Once you start experimenting with the power of openness you will be amazed at the results such a simple thing can bring.
Scrooge
Scrooge
A Wedding Fit For Scrooge
The day after our wedding Mrs. Scrooge and I looked at each other and said, "What was that all about?" What we meant was what was all that fuss and expense all about when we could have made it simpler and cheaper and still have had just as much fun. After all we had just spent almost every spare moment in the previous six months planning and paying for this wedding.
In the ensuing years we have noticed a number of things that could be done differently to save a considerable amount of money but still have a nice wedding for everyone.
The Invitations
Printed invitations cost a lot of money. Consider hand-written invitations on decorative stationary. It really doesn’t take long and to the recipient it is much more personal. You could add a photograph of the couple-to-be to make it even more colorful. Or if you have a computer and a color printer you can print your own invitations. Make sure you use color refill kits (the one Costco sells works very well) to recharge your ink jet cartridges.
Total Time
Don’t expect your guests to stay too long. Guests will give you an hour at the wedding ceremony and a few more hours for the meal and reception. Any more than that and they will be getting antsy. You can use this to your advantage by giving a scaled down meal and reception. If you expect them to sit for any length of time make sure you keep them entertained.A noon or afternoon reception will usually cost less than an evening one.
The Place
If you are getting married in a church or synagogue, you can often also get a reception hall for free. So why rent?Another option is an outdoor wedding and reception – just make sure you plan this in the dry season and make sure you have alternate plans for bad weather. My sister got married in my parents back garden and had the reception on the front lawn. They had two acres of land so this was possible.
The Reception
One of our friends had a potluck reception in the church hall after their wedding. The guests brought all the food and drinks. I really liked this reception because first it didn’t take forever to finish, and second I had the choice from dozens of the best home cooked meals I had ever eaten (church ladies are the best cooks!). All of these dishes were donated as a gift by the guests and no doubt saved the bride and groom thousands of dollars on catering.Another idea is to have a theme reception such as a traditional English high tea. Again ask some guests to bring the sandwiches, scones and cookies, jams, tea and Devonshire cream. Add a few traditional decorations and something like this can become an outstanding and memorable event.
The Cake
Somebody in your realm of friends and relatives is no doubt a good baker. They can make a cake for you as a wedding gift. Just ask them. Baking supply stores have wedding cake decorations at reasonable costs. For convenience you should ask for a smaller display cake and a larger sheet cake to feed the hungry masses.
Music
Do you have musical friends? Ask them if they will give their talents as a gift. Music is often used at both the wedding ceremony and the reception.
Photography
Someone else in your circle of friends must be a good amateur photographer. Ask them to take lots of rolls of film (or fill up that memory card on their digital camera) so you have lots to choose from. Ask someone else to make a digital video for you and burn it to a DVD. A professional will rarely get better pictures for you, and it’s often not worth the price unless you get a really good one and go to their studio for the pictures. But then again, how often do you think you will refer back to those pictures? Be realistic.
Flowers
If you get married during the local blooming season and you know someone with extensive gardens then you can save a bundle on flowers. Otherwise ask a budding amateur florist to donate it as a wedding gift. (Hey, you don’t ask, you don’t get.)
Attire
May I make a shocking suggestion? Rent, don’t buy. Even better, borrow it. Ladies you will never wear that dress again. Yes, you could pass it on to your daughter. But even this is fraught with problems: you may not have a daughter, she may not get married, she may not fit in it (despite extensive alterations), she may not like it. However if your mother or grandmother has a dress that you like…go for it.Men, rent a suit or buy a good new one that you can use over and over again.
Attendants
Bridesmaids and a Best man and ushers should be kept to a minimum. The more you have the more you have to coordinate and pay for.But whatever you do have a good time. The objective of the wedding and reception is a very special (and sacred) ceremony. But if you can keep the day within a reasonable budget then you will have all the more money for your other living expenses.
Scrooge
In the ensuing years we have noticed a number of things that could be done differently to save a considerable amount of money but still have a nice wedding for everyone.
The Invitations
Printed invitations cost a lot of money. Consider hand-written invitations on decorative stationary. It really doesn’t take long and to the recipient it is much more personal. You could add a photograph of the couple-to-be to make it even more colorful. Or if you have a computer and a color printer you can print your own invitations. Make sure you use color refill kits (the one Costco sells works very well) to recharge your ink jet cartridges.
Total Time
Don’t expect your guests to stay too long. Guests will give you an hour at the wedding ceremony and a few more hours for the meal and reception. Any more than that and they will be getting antsy. You can use this to your advantage by giving a scaled down meal and reception. If you expect them to sit for any length of time make sure you keep them entertained.A noon or afternoon reception will usually cost less than an evening one.
The Place
If you are getting married in a church or synagogue, you can often also get a reception hall for free. So why rent?Another option is an outdoor wedding and reception – just make sure you plan this in the dry season and make sure you have alternate plans for bad weather. My sister got married in my parents back garden and had the reception on the front lawn. They had two acres of land so this was possible.
The Reception
One of our friends had a potluck reception in the church hall after their wedding. The guests brought all the food and drinks. I really liked this reception because first it didn’t take forever to finish, and second I had the choice from dozens of the best home cooked meals I had ever eaten (church ladies are the best cooks!). All of these dishes were donated as a gift by the guests and no doubt saved the bride and groom thousands of dollars on catering.Another idea is to have a theme reception such as a traditional English high tea. Again ask some guests to bring the sandwiches, scones and cookies, jams, tea and Devonshire cream. Add a few traditional decorations and something like this can become an outstanding and memorable event.
The Cake
Somebody in your realm of friends and relatives is no doubt a good baker. They can make a cake for you as a wedding gift. Just ask them. Baking supply stores have wedding cake decorations at reasonable costs. For convenience you should ask for a smaller display cake and a larger sheet cake to feed the hungry masses.
Music
Do you have musical friends? Ask them if they will give their talents as a gift. Music is often used at both the wedding ceremony and the reception.
Photography
Someone else in your circle of friends must be a good amateur photographer. Ask them to take lots of rolls of film (or fill up that memory card on their digital camera) so you have lots to choose from. Ask someone else to make a digital video for you and burn it to a DVD. A professional will rarely get better pictures for you, and it’s often not worth the price unless you get a really good one and go to their studio for the pictures. But then again, how often do you think you will refer back to those pictures? Be realistic.
Flowers
If you get married during the local blooming season and you know someone with extensive gardens then you can save a bundle on flowers. Otherwise ask a budding amateur florist to donate it as a wedding gift. (Hey, you don’t ask, you don’t get.)
Attire
May I make a shocking suggestion? Rent, don’t buy. Even better, borrow it. Ladies you will never wear that dress again. Yes, you could pass it on to your daughter. But even this is fraught with problems: you may not have a daughter, she may not get married, she may not fit in it (despite extensive alterations), she may not like it. However if your mother or grandmother has a dress that you like…go for it.Men, rent a suit or buy a good new one that you can use over and over again.
Attendants
Bridesmaids and a Best man and ushers should be kept to a minimum. The more you have the more you have to coordinate and pay for.But whatever you do have a good time. The objective of the wedding and reception is a very special (and sacred) ceremony. But if you can keep the day within a reasonable budget then you will have all the more money for your other living expenses.
Scrooge
The Frugal Sears Family
The Scrooge Guide recently interviewed the frugal couple and Scrooge Guide readers Janet & Carl Sears. The Sears live in the St. Lawrence valley on the Canadian side.
Scrooge Guide: Carl I hear you retired at age 55. How were you able to do that?
Carl Sears: Just good planning. I started at age 25 and invested some money in a tax sheltered investment account.
SG: Why?
C: My employer (He owned a catering company) at the time said it was good idea.
Jan Sears (jumps in): Carl had a dream early on…
C: I think I was born with a dream of saving to accumulate cash, probably because my family had no money as I was growing up. My father’s philosophy was to always pay cash and never go in debt. He built the home I grew up in and the barns with no debt or mortgage. The wood came from the bush at the back of our property. The problem today is that municipality rules
don’t let you build like that in stages anymore. However, if you don’t have money you just can’t buy anything, if you live on a cash philosophy.
J: Carl’s first credit card came just before we got married.
SG: Why did you get a credit card?
C: I needed it for the honeymoon…to book a hotel room and so forth.
SG: How old were you when you got married?
C: 44
J: Same
SG: Do you think getting married later in life helped you accumulate wealth?
C: Yes, before I got married, all I did was work. I didn’t make a lot, but I spent very little. Many years I saved and invested $30,000 per year. Plus my investments were growing at over 10%. I remember one year I made $14,000 in investment income alone. I was only spending about $5,000 a year in those days.
SG: Jan, how were you doing financially before getting married?
C (smiling): She’s getting converted!
J: I was frugal to a point but not like Carl. I put money into some registered investments. I had a good example in the home I grew up in.
SG: What were your parents like?
J: Very frugal; generous to a fault, but also very careful with money. Dad used huge budget sheets to detail every projected and past payment, including medical - before we got coverage.
SG: Did that experience lead you to budget?
J: No, not really, arithmetic wasn’t my strong suit and I was a slow learner.
But I do think that this is something that should be taught to children from a young age onward.
SG: I hear you paid for your house with cash. Is that true?
C: Yes, it’s the least expensive way to do it.
SG: I’ll say! Was this the fruit of saving and investing over all those years?
C: Yes, the fruit and the reason for saving.
SG: What was the primary reason for saving so much?
C: I wanted to provide my future wife with a house someday.
J: Wasn’t it also for security, Carl?
C: I don’t know, I think the saving took on a life of it’s own after a while.
J: Saving can become addictive like spending.
C: No, it’s a habit.
J: It can become extreme.
SG: Are your habits extreme? Are you misers?
J: Not me! Carl isn’t either. Perhaps before he got married he was viewed that way.
C: I never deposited my money in the local drinking holes or pubs.
J: We are frugal in many ways. We have a big garden, keep chickens...
SG: What about smoking or gambling?
C: Never did either…we put our money in the church.
SG: Do you have a way to determine your charitable givings?
C: I go by a biblical 10%, plus above and beyond this I give to special projects such as tsunami relief, missions projects and others.
SG: Jan?
J: I go by 10% of income plus on top of that I give to help out as needs are presented to me.
SG: Do you track that, and cut it off at a certain level?
J: No! I give as the Lord leads me and I give as the need is presented to me. It could be half or even everything I have. But that’s never been the case.
C: It also depends on what you have!
SG: Would you go in debt to give?
J: No , debt is horrible and I can’t sleep at night when I carry debt.
SG: You mentioned gardens and chickens…
J: We are blessed with a bush to heat with wood, which cuts down on heating expense; also some of the wood is made into lumber to make toys for orphans. The shavings and sawdust is saved and so we saved on bedding for our meat chickens, laying chickens and turkeys. Sawdust then get mixed in the manure and goes on the vegetable garden. It’s a complete cycle.
SG: You have chickens for meat and eggs, Turkeys, and you grow a vegetable garden. How much do you save by having all this home grown food?
J: We grow open pollinated veggies to save our own seed. We basically don’t buy vegetables all year, perhaps potatoes for a month or two. The chickens are free because we sell the excess.
SG: The excess pays for all feed, etc?
C: Yes.
SG: Your grocery bill must be small?
C: About $280 per month for 3 adults…but mother only eats ½ an adult size.
SG: tell me more about your gardens.
J: We have crab apples for jelly, raspberry bushes for fresh jam and jelly, asparagus for fresh use. We freeze green beans, corn…
C: We buy broccoli and cauliflower when it is in season and cheap.
SG: Why not grow it?
C: Too difficult to grow.
J: Too labor intensive.
C: We also make sauerkraut from cabbage and pasta sauce from tomatoes.
J: We also make tomato chutney & tomato soup, and mustard pickles. We have a cold storage room for carrots, onions, beets, and potatoes. It’s nice in the winter because you don’t have to worry about getting out to the store. The only thing we are lacking is a cow or goat.
SG: Any plans for a cow or goat?
C: NO!
J: I’d like to find someone who will sell me milk to make my own butter and cheese.
C: It’s against the law around here.
SG: Against the law?
C: The milk marketing board controls all that…it can’t be sold at the farm gate.
J: As Christians we want to do what is right…it creates a dilemma…that law is unfair. I can’t see why the law tries to protect me from myself, I would only buy from safe sources…I think the government has gotten their nose too far into everyone’s business…I’d even sign a waiver if I needed to protect the farmer.
J (after a pause): I think with Carl and I, we always wanted to be self-sufficient.
SG: Is that your opinion too, Carl?
C: I suppose I did that with savings.
J: But not just with money, you also grow rather than buy. I think there is a misunderstanding between being frugal and miserly. Frugal is careful. We, for instance, live frugal so we can travel. We aren’t sitting on a pile of money and clutching on to it. We are being frugal for a reason - to do the things we want.
SG: Do you feel that frugality helped you retire early?
C: When you have no debt and live frugally you don’t need much.
J: A benefit I had from the example of my parents was that it lead me to sign up for a voluntary pension plan and a long-term disability plan when I was 20 years old…and years later I got a blessing from both of them. I never thought I would have to use them.
C: Doesn’t matter how much money you make, it matters how much you save. Some make $200,000 a year and blow it all.
J: Start saving young!
C: You can live well debt free.
SG: Some would say you can’t live well debt free. How would you reply to that?
C: If you can’t afford to live debt free how can you afford to pay the bank?
SG: What about borrowing to buy a house?
C: It’s about the only good reason to borrow, I suppose.
SG: How about borrowing to buy a car?
C: Nope. Save. You need to start this early.
SG: Any words of wisdom for young people?
C: Get in habit of saving, even before you have a full time job.
J: Pay yourself 10% before you do any thing else. I would say debt is the worst thing to get into. If you are in debt get out and stay out.
C: Plan to stay out of debt. Keep your wants in check. Most stuff just turns into junk anyway.
J: To have more, have fewer wants. I have a t-shirt that says “live simply that others may simply live”.
SG: Is that more of a global statement?
J: It can work locally in that when living simply others will notice you and it influences them and frees up what you have so you can help others. It also frees you up so you don’t need so much to live on and frees you from work. Like it says in the book “your money or your life”, for everything you want to buy (like shoes), equate how much you need to work to pay for them. SG: Thanks for letting us in on the secrets of your financial success. I think our readers will have a lot of good advice here.
Scrooge Guide: Carl I hear you retired at age 55. How were you able to do that?
Carl Sears: Just good planning. I started at age 25 and invested some money in a tax sheltered investment account.
SG: Why?
C: My employer (He owned a catering company) at the time said it was good idea.
Jan Sears (jumps in): Carl had a dream early on…
C: I think I was born with a dream of saving to accumulate cash, probably because my family had no money as I was growing up. My father’s philosophy was to always pay cash and never go in debt. He built the home I grew up in and the barns with no debt or mortgage. The wood came from the bush at the back of our property. The problem today is that municipality rules
don’t let you build like that in stages anymore. However, if you don’t have money you just can’t buy anything, if you live on a cash philosophy.
J: Carl’s first credit card came just before we got married.
SG: Why did you get a credit card?
C: I needed it for the honeymoon…to book a hotel room and so forth.
SG: How old were you when you got married?
C: 44
J: Same
SG: Do you think getting married later in life helped you accumulate wealth?
C: Yes, before I got married, all I did was work. I didn’t make a lot, but I spent very little. Many years I saved and invested $30,000 per year. Plus my investments were growing at over 10%. I remember one year I made $14,000 in investment income alone. I was only spending about $5,000 a year in those days.
SG: Jan, how were you doing financially before getting married?
C (smiling): She’s getting converted!
J: I was frugal to a point but not like Carl. I put money into some registered investments. I had a good example in the home I grew up in.
SG: What were your parents like?
J: Very frugal; generous to a fault, but also very careful with money. Dad used huge budget sheets to detail every projected and past payment, including medical - before we got coverage.
SG: Did that experience lead you to budget?
J: No, not really, arithmetic wasn’t my strong suit and I was a slow learner.
But I do think that this is something that should be taught to children from a young age onward.
SG: I hear you paid for your house with cash. Is that true?
C: Yes, it’s the least expensive way to do it.
SG: I’ll say! Was this the fruit of saving and investing over all those years?
C: Yes, the fruit and the reason for saving.
SG: What was the primary reason for saving so much?
C: I wanted to provide my future wife with a house someday.
J: Wasn’t it also for security, Carl?
C: I don’t know, I think the saving took on a life of it’s own after a while.
J: Saving can become addictive like spending.
C: No, it’s a habit.
J: It can become extreme.
SG: Are your habits extreme? Are you misers?
J: Not me! Carl isn’t either. Perhaps before he got married he was viewed that way.
C: I never deposited my money in the local drinking holes or pubs.
J: We are frugal in many ways. We have a big garden, keep chickens...
SG: What about smoking or gambling?
C: Never did either…we put our money in the church.
SG: Do you have a way to determine your charitable givings?
C: I go by a biblical 10%, plus above and beyond this I give to special projects such as tsunami relief, missions projects and others.
SG: Jan?
J: I go by 10% of income plus on top of that I give to help out as needs are presented to me.
SG: Do you track that, and cut it off at a certain level?
J: No! I give as the Lord leads me and I give as the need is presented to me. It could be half or even everything I have. But that’s never been the case.
C: It also depends on what you have!
SG: Would you go in debt to give?
J: No , debt is horrible and I can’t sleep at night when I carry debt.
SG: You mentioned gardens and chickens…
J: We are blessed with a bush to heat with wood, which cuts down on heating expense; also some of the wood is made into lumber to make toys for orphans. The shavings and sawdust is saved and so we saved on bedding for our meat chickens, laying chickens and turkeys. Sawdust then get mixed in the manure and goes on the vegetable garden. It’s a complete cycle.
SG: You have chickens for meat and eggs, Turkeys, and you grow a vegetable garden. How much do you save by having all this home grown food?
J: We grow open pollinated veggies to save our own seed. We basically don’t buy vegetables all year, perhaps potatoes for a month or two. The chickens are free because we sell the excess.
SG: The excess pays for all feed, etc?
C: Yes.
SG: Your grocery bill must be small?
C: About $280 per month for 3 adults…but mother only eats ½ an adult size.
SG: tell me more about your gardens.
J: We have crab apples for jelly, raspberry bushes for fresh jam and jelly, asparagus for fresh use. We freeze green beans, corn…
C: We buy broccoli and cauliflower when it is in season and cheap.
SG: Why not grow it?
C: Too difficult to grow.
J: Too labor intensive.
C: We also make sauerkraut from cabbage and pasta sauce from tomatoes.
J: We also make tomato chutney & tomato soup, and mustard pickles. We have a cold storage room for carrots, onions, beets, and potatoes. It’s nice in the winter because you don’t have to worry about getting out to the store. The only thing we are lacking is a cow or goat.
SG: Any plans for a cow or goat?
C: NO!
J: I’d like to find someone who will sell me milk to make my own butter and cheese.
C: It’s against the law around here.
SG: Against the law?
C: The milk marketing board controls all that…it can’t be sold at the farm gate.
J: As Christians we want to do what is right…it creates a dilemma…that law is unfair. I can’t see why the law tries to protect me from myself, I would only buy from safe sources…I think the government has gotten their nose too far into everyone’s business…I’d even sign a waiver if I needed to protect the farmer.
J (after a pause): I think with Carl and I, we always wanted to be self-sufficient.
SG: Is that your opinion too, Carl?
C: I suppose I did that with savings.
J: But not just with money, you also grow rather than buy. I think there is a misunderstanding between being frugal and miserly. Frugal is careful. We, for instance, live frugal so we can travel. We aren’t sitting on a pile of money and clutching on to it. We are being frugal for a reason - to do the things we want.
SG: Do you feel that frugality helped you retire early?
C: When you have no debt and live frugally you don’t need much.
J: A benefit I had from the example of my parents was that it lead me to sign up for a voluntary pension plan and a long-term disability plan when I was 20 years old…and years later I got a blessing from both of them. I never thought I would have to use them.
C: Doesn’t matter how much money you make, it matters how much you save. Some make $200,000 a year and blow it all.
J: Start saving young!
C: You can live well debt free.
SG: Some would say you can’t live well debt free. How would you reply to that?
C: If you can’t afford to live debt free how can you afford to pay the bank?
SG: What about borrowing to buy a house?
C: It’s about the only good reason to borrow, I suppose.
SG: How about borrowing to buy a car?
C: Nope. Save. You need to start this early.
SG: Any words of wisdom for young people?
C: Get in habit of saving, even before you have a full time job.
J: Pay yourself 10% before you do any thing else. I would say debt is the worst thing to get into. If you are in debt get out and stay out.
C: Plan to stay out of debt. Keep your wants in check. Most stuff just turns into junk anyway.
J: To have more, have fewer wants. I have a t-shirt that says “live simply that others may simply live”.
SG: Is that more of a global statement?
J: It can work locally in that when living simply others will notice you and it influences them and frees up what you have so you can help others. It also frees you up so you don’t need so much to live on and frees you from work. Like it says in the book “your money or your life”, for everything you want to buy (like shoes), equate how much you need to work to pay for them. SG: Thanks for letting us in on the secrets of your financial success. I think our readers will have a lot of good advice here.
How Much Life Insurance Do You Really Need?
From time to time everyone should determine how much life insurance they need. There are basically two types of life insurance: permanent and term. Permanent life insurance (also called whole life) is effective for your entire life, as long as you keep paying the premiums. Term life insurance is only good for the duration of the term, typically 5, 10 or 20 years. Permanent life insurance is much more expensive than term for the obvious reason that permanent insurance will always have to pay out but term only has to pay out if you happen to die during the contracted term of the insurance. Most people only need term insurance. Please be aware that life insurance sales people earn more commission on the sale of a permanent life insurance product than on term insurance.
How much life insurance do you need? If you are single and have no dependents you probably don’t need any insurance. If you have dependents however you should be covered with enough insurance so that if you die the income they depend on will be replaced.
There are two common ways to calculate the need for life insurance. The first and simplest is called the Capitalization of Income. The formula is simple: annual income divided by real interest rate (rate of interest less rate of inflation). For instance if you need to replace $40,000 of income and you think you can earn 8% on an investment and the inflation rate is 3% then the formula is $40,000/(8%-3%). This is the same as $40,000 divided by 5%. So using your calculator you will find that you need $800,000 to replace that $40,000. This may sound like a lot of money but you will see that $800,000 in term life insurance bought at a relatively young age is not all that expensive. Most people pay more for their car insurance. The other thing to note is that this will provide a $40,000 income forever. If the determination is that your survivors will not need the income for that long, then the needed coverage is much smaller.
The other common way to calculate the need for life insurance is called the Capital Retention approach. This involves four steps:
Step 1: Assets – Final expenses = Cash needs
Step 2: Continuing income – Continuing expenses = Income needs
Step 3: Income needs / interest rate = Capitalized value
Step 4: Capitalized value + or – cash needs = Insurance needs
Let’s take an example to clarify this. Mrs. Jones has the following if Mr. Jones dies.
Assets (investments and cash on hand) $100,000
Final Expenses (Funeral, Mortgage, Debts) $250,000
Step one therefore shows cash needs of $150,000 ($250,000 – $100,000)
Continuing net income (Mrs. Jones salary) of $40,000
Continuing expenses (household budget) of $50,000
Step two therefore shows income needs of $10,000 ($50,000 - $40,000)
Step three calculates income needs $10,000 / 5% interest rate = $200,000 capitalized value.
Step four shows $200,000 capitalized value + $150,000 cash needs = $350,000 insurance needed.
Therefore the insurance needs in this case is $350,000.
Hopefully these two short examples show how simple it is to determine your insurance needs. Armed with this information you will be able to make informed decisions when you are next offered an insurance policy.
How much life insurance do you need? If you are single and have no dependents you probably don’t need any insurance. If you have dependents however you should be covered with enough insurance so that if you die the income they depend on will be replaced.
There are two common ways to calculate the need for life insurance. The first and simplest is called the Capitalization of Income. The formula is simple: annual income divided by real interest rate (rate of interest less rate of inflation). For instance if you need to replace $40,000 of income and you think you can earn 8% on an investment and the inflation rate is 3% then the formula is $40,000/(8%-3%). This is the same as $40,000 divided by 5%. So using your calculator you will find that you need $800,000 to replace that $40,000. This may sound like a lot of money but you will see that $800,000 in term life insurance bought at a relatively young age is not all that expensive. Most people pay more for their car insurance. The other thing to note is that this will provide a $40,000 income forever. If the determination is that your survivors will not need the income for that long, then the needed coverage is much smaller.
The other common way to calculate the need for life insurance is called the Capital Retention approach. This involves four steps:
Step 1: Assets – Final expenses = Cash needs
Step 2: Continuing income – Continuing expenses = Income needs
Step 3: Income needs / interest rate = Capitalized value
Step 4: Capitalized value + or – cash needs = Insurance needs
Let’s take an example to clarify this. Mrs. Jones has the following if Mr. Jones dies.
Assets (investments and cash on hand) $100,000
Final Expenses (Funeral, Mortgage, Debts) $250,000
Step one therefore shows cash needs of $150,000 ($250,000 – $100,000)
Continuing net income (Mrs. Jones salary) of $40,000
Continuing expenses (household budget) of $50,000
Step two therefore shows income needs of $10,000 ($50,000 - $40,000)
Step three calculates income needs $10,000 / 5% interest rate = $200,000 capitalized value.
Step four shows $200,000 capitalized value + $150,000 cash needs = $350,000 insurance needed.
Therefore the insurance needs in this case is $350,000.
Hopefully these two short examples show how simple it is to determine your insurance needs. Armed with this information you will be able to make informed decisions when you are next offered an insurance policy.
Signs Of Trouble
There are clear signs that financial trouble is brewing. Some of these indications of trouble are:
♦ Always being short of cash.
♦ Always carrying debt and paying interest on loans other than for a mortgage or automobile purchase.
♦ No idea where “it” all goes.
♦ No budget.
♦ No growth in investments.
♦ Uncontrolled or Impulse buying.
♦ Having trouble buying the necessities of life.
If you have one or more of these signs of trouble, there are some things you can do right now to put yourself back on the right path. Here are some things to look at:
1) Pay off high interest debts first. Focus on high percentage interest first ratherthan high total interest.
2) Move all your high interest debts to lower interest accounts like a line of credit or a consolidated mortgage.
3) Pay more on your mortgage. Some mortgages let you pay more each month or once per year. Do it, because the extra payment goes directly against the principal.
4) Refinance your mortgage to a variable rate. This will give you the lowest interest rate. Use a mortgage broker to get the best interest rates for you. In most cases the mortgage broker will charge you nothing.
5) Look over the Money Saving Tips given in the Scrooge Guide, determine which are the top 10 for you and make a plan to implement them right away. This will increase your available cash.
6) Develop a budget and plan for excess to be available for investment.
7) Invest in ETF’s and high dividend yielding stocks. Exchange traded funds are tops for growth, safety, liquidity, and taxation. They track the market or a market segment and are the best vehicle to invest in. They may outperform mutual funds two to one in yearly growth. Dividends on good quality blue chip stocks will usually continue to be paid out even when the stock value doesn’t grow much. This ensures some income in all years regardless of stock value.
8) If you need help - get it! Don’t wait until you are in a desperate situation. A financial planner can help you develop a plan to get out of debt right now.
9) Immerse yourself in information about saving money. Surround yourself withfrugal friends. The concentration principal says that whatever you are focused onwill become the strongest force in your life.
10) Buy, beg or borrow these books & magazines:
♦ So You Want More Money, by George Caners
♦ The Millionaire Next Door, by Stanley & Danko
♦ The Scrooge Guide
Please remember we at the Scrooge Guide specialize in helping people get out of debt and offer a number of services in this area. Contact us for more information.
Scrooge
♦ Always being short of cash.
♦ Always carrying debt and paying interest on loans other than for a mortgage or automobile purchase.
♦ No idea where “it” all goes.
♦ No budget.
♦ No growth in investments.
♦ Uncontrolled or Impulse buying.
♦ Having trouble buying the necessities of life.
If you have one or more of these signs of trouble, there are some things you can do right now to put yourself back on the right path. Here are some things to look at:
1) Pay off high interest debts first. Focus on high percentage interest first ratherthan high total interest.
2) Move all your high interest debts to lower interest accounts like a line of credit or a consolidated mortgage.
3) Pay more on your mortgage. Some mortgages let you pay more each month or once per year. Do it, because the extra payment goes directly against the principal.
4) Refinance your mortgage to a variable rate. This will give you the lowest interest rate. Use a mortgage broker to get the best interest rates for you. In most cases the mortgage broker will charge you nothing.
5) Look over the Money Saving Tips given in the Scrooge Guide, determine which are the top 10 for you and make a plan to implement them right away. This will increase your available cash.
6) Develop a budget and plan for excess to be available for investment.
7) Invest in ETF’s and high dividend yielding stocks. Exchange traded funds are tops for growth, safety, liquidity, and taxation. They track the market or a market segment and are the best vehicle to invest in. They may outperform mutual funds two to one in yearly growth. Dividends on good quality blue chip stocks will usually continue to be paid out even when the stock value doesn’t grow much. This ensures some income in all years regardless of stock value.
8) If you need help - get it! Don’t wait until you are in a desperate situation. A financial planner can help you develop a plan to get out of debt right now.
9) Immerse yourself in information about saving money. Surround yourself withfrugal friends. The concentration principal says that whatever you are focused onwill become the strongest force in your life.
10) Buy, beg or borrow these books & magazines:
♦ So You Want More Money, by George Caners
♦ The Millionaire Next Door, by Stanley & Danko
♦ The Scrooge Guide
Please remember we at the Scrooge Guide specialize in helping people get out of debt and offer a number of services in this area. Contact us for more information.
Scrooge
Scrooge’s Top Secret Rapid Repayment Mortgage Plan
One of the biggest challenges homeowners face is paying off their mortgage. Many people realize that at the start of a mortgage they are paying mostly interest and the principal is really only paid down in the latter half of the mortgage. So if you have a 25-year mortgage much of the original mortgage value (called the principal) is still owing at the half way point (12 years). However there is a fairly painless way to pay off your mortgage in half the time and save tens of thousands of dollars in interest. Consider the following example.
Fred & Wilma have just taken out a mortgage for $100,000. The interest rate is 8% and the amortization term is 20 years.
♦ Payments are monthly and are $836.
♦ Principal portion is $170.
♦ Interest is $666.
Fred & Wilma are happy they will pay off their mortgage in 20 years and know that they can easily make the payments. They decide to go for a walk that evening and when doing so meet Scrooge, their neighbor. They tell him about their new mortgage.
Scrooge gasps in horror!
"What did we do wrong?" Wilma asks.
"Nothing that cannot be fixed." Scrooge replies. And then he invites them into his house for a cup of tea and a quick lesson on how they can save $50,000.
Scrooge shows them the numbers:
♦ Principal: $100,000
♦ Interest: 8%
♦ Amortization: 20 years
♦ Payment: $836 per month of which the first
payment is $666 interest and $170 principal
♦ Total interest over 20 yrs: $101,582
"Did you not say you could easily afford these payments?" Scrooge asks.
"Yes, of course. And we will even make some extra lump payments from time to time when we find the money and are not using it for other things" Fred answers.
"Harrumph!" Scrooge says. "You will probably never do that unless you have a plan. Right now your plan is to make some unspecified payment sometime and in some amount."
"And we do need to spend some money on a new living room set, our old set feels like stone." Says Wilma.
"Exactly my point…you will always find other things to spend money on" says Scrooge.
"Then what do you suggest?" Asks Fred?
"It is quite simple, and very effective. It will cut your amortization time in half (to 10 years) and save you $50,000 in interest, and it won’t affect your standard of living." Says Scrooge.
Fred and Wilma cling to his every word…
Scrooge continues, "All you have to do is Make an extra payment equal to the principal every month.
Fred & Wilma gasp in delight!
Scrooge shows them the new numbers:
♦ Principal: $100,000
♦ Interest: 8%
♦ Amortization: 20 years but mortgage gets paid off in 10 years
♦ Payment: $836 per month of which the first payment is $666 interest and $170 principal plus another $170 per month against principal
♦ Total interest over the term has been reduced from $101,582 to $51,712 a savings of almost $50,000
Some Things to Note
♦ As the interest portion reduces each month, the principal part increases and so does the extra payment.
♦ This means that Fred & Wilma will be paying $1006 in the first month and it will increase to $1212 in year 5 and $1668 by year 10.
♦ Because the payments increase slowly each year they are manageable increases and are often in line with wage increases.
This simple example shows how just a little extra paid each month on your mortgage goes a long way to saving you a lot of money and getting rid of your mortgage debt earlier.
Scrooge
Fred & Wilma have just taken out a mortgage for $100,000. The interest rate is 8% and the amortization term is 20 years.
♦ Payments are monthly and are $836.
♦ Principal portion is $170.
♦ Interest is $666.
Fred & Wilma are happy they will pay off their mortgage in 20 years and know that they can easily make the payments. They decide to go for a walk that evening and when doing so meet Scrooge, their neighbor. They tell him about their new mortgage.
Scrooge gasps in horror!
"What did we do wrong?" Wilma asks.
"Nothing that cannot be fixed." Scrooge replies. And then he invites them into his house for a cup of tea and a quick lesson on how they can save $50,000.
Scrooge shows them the numbers:
♦ Principal: $100,000
♦ Interest: 8%
♦ Amortization: 20 years
♦ Payment: $836 per month of which the first
payment is $666 interest and $170 principal
♦ Total interest over 20 yrs: $101,582
"Did you not say you could easily afford these payments?" Scrooge asks.
"Yes, of course. And we will even make some extra lump payments from time to time when we find the money and are not using it for other things" Fred answers.
"Harrumph!" Scrooge says. "You will probably never do that unless you have a plan. Right now your plan is to make some unspecified payment sometime and in some amount."
"And we do need to spend some money on a new living room set, our old set feels like stone." Says Wilma.
"Exactly my point…you will always find other things to spend money on" says Scrooge.
"Then what do you suggest?" Asks Fred?
"It is quite simple, and very effective. It will cut your amortization time in half (to 10 years) and save you $50,000 in interest, and it won’t affect your standard of living." Says Scrooge.
Fred and Wilma cling to his every word…
Scrooge continues, "All you have to do is Make an extra payment equal to the principal every month.
Fred & Wilma gasp in delight!
Scrooge shows them the new numbers:
♦ Principal: $100,000
♦ Interest: 8%
♦ Amortization: 20 years but mortgage gets paid off in 10 years
♦ Payment: $836 per month of which the first payment is $666 interest and $170 principal plus another $170 per month against principal
♦ Total interest over the term has been reduced from $101,582 to $51,712 a savings of almost $50,000
Some Things to Note
♦ As the interest portion reduces each month, the principal part increases and so does the extra payment.
♦ This means that Fred & Wilma will be paying $1006 in the first month and it will increase to $1212 in year 5 and $1668 by year 10.
♦ Because the payments increase slowly each year they are manageable increases and are often in line with wage increases.
This simple example shows how just a little extra paid each month on your mortgage goes a long way to saving you a lot of money and getting rid of your mortgage debt earlier.
Scrooge
Building the Tiny House
During my formative years, I grew up in a rural area of the country settled by Scottish immigrants. Even though they had landed in the 1700’s the culture was, and still is, definitely Scottish and thoroughly ingrained. There are many jokes about the stereotypical stingy Scot. The fact is, it is more than just a joke – there is some truth in it. I think it was not so much a conscious effort to be stingy so much as a dogged determination to survive in impoverished conditions. They learned early on, both in their Scottish homeland and in the new world, that if they spent less and reused everything, then they needed much less to live. There was one man in particular that I remember, a bachelor, who lived in a simple and very small house - probably close to 150 sq. ft. in size. He lived less than 1 mile from the closest town, and rode his bicycle into town for food and supplies. In the winter he walked. He obviously had very little money. But he did have his own home, his own space and independence. That was the first functional tiny house that I remember. The other very small house I saw in those days was a cabin in a forest at the back of my cousin’s farm. The cabin was somewhat remote, taking at least 40 minutes to get to regardless of the way you traveled. It was in the middle of a mature sugar maple forest and it was used during the sugaring season for overnight stays when they boiled down the maple sap into syrup. This cabin was probably 8’ x 10’, had a bed, a wood stove, a chair and table and a window. I loved it as soon as I laid eyes on it. What a great place of solitude it was! For some reason, knowing about these small and inexpensive houses is a comfort to me. Perhaps it is an inner voice that always asks: “what would you do if you lost everything?” These tiny houses help to answer that question giving me a bit of comfort that I will probably not be living on the street even if the worst of circumstances come my way. There are several resources for those interested in building a tiny house either for recreation or as a main dwelling. Most cities have minimum size regulations for housing 2005and they are usually bigger than these houses so you will need to locate a tiny house in the country or as a second building on someone else’s lot. The following books and websites have some good ideas for building small houses: The Tiny Book of Tiny Houses , By Lester Walker.
The Cabin: Inspiration for the Classic American Getaway, by Dale Mulfinger, Susan E. Davis You can find both online and second-hand on www.Amazon.com .
Websites:
http://www.coolhouseplans.com/index.html (see the small house plans section, but be warned, the plans aren’t cheap. The online floor plans may be all you need if you are an experienced builder.)
http://www.bcmountainhomes.com/homesearch.php?category_id=1(Nice plans here. Worth the visit.)
http://www.insitebuilders.com/ (Small steel houses.)http://www.peak.org/~skinncr/smallhouse/resource_small_house.html(Small house books.)http://www.tinyhouses.net/index.htm(Tiny houses inspiration.)www.minicabin.com(a cabin in process.)
Scrooge
The Cabin: Inspiration for the Classic American Getaway, by Dale Mulfinger, Susan E. Davis You can find both online and second-hand on www.Amazon.com .
Websites:
http://www.coolhouseplans.com/index.html (see the small house plans section, but be warned, the plans aren’t cheap. The online floor plans may be all you need if you are an experienced builder.)
http://www.bcmountainhomes.com/homesearch.php?category_id=1(Nice plans here. Worth the visit.)
http://www.insitebuilders.com/ (Small steel houses.)http://www.peak.org/~skinncr/smallhouse/resource_small_house.html(Small house books.)http://www.tinyhouses.net/index.htm(Tiny houses inspiration.)www.minicabin.com(a cabin in process.)
Scrooge
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