Myth 1: Hunting for deals is a pain

Personally, I love the thrill of the chase. Hunting for deals gives me greater satisfaction than just putting the cash straight down to buy anything at all. It could be something as big as a car or a house or it could be something as simple as groceries, I just enjoy hunting for deals. It’s barely drudgery like some people say it is. I recently saved $25 on shopping for my son, and all because I got my wife to log in toMr. Rebates before she checked out of the shop. And you know what? I loved that I did that.

Myth 2: DIY haircuts are a recipe for disaster

I have to admit, this can be a problem sometimes, but let me give you an example. My middle school English teacher used to cut his own hair and I don’t once remember it being a disaster. He obviously had years of practice, and that’s the whole point. Once you know how it’s done, it’s no biggie. Keep on practicing, for it is as they say; practice makes perfect. Oh, and that haircut? It wasn’t even a buzz cut. Just saying.

Myth 3: Frugal living can be boring

Someone I recently spoke to recounted the story of how someone she knew used newspaper instead of toilet paper and how she reused plastic bags and made her own soap. Personally, I don’t do any of those things, but I feel portraying frugal living as being boring is generous generalization. You know what I think is boring? Working extra hours so that you can pay off credit card bills; I’ve been there, and I didn’t like it. As for me, I don’t even toilet paper. I instead use a personal bidet, it’s far cheaper than toilet paper.

Myth 4: Vacations are a no-no if you believe in frugal living

Now see, this is absolute rubbish. I travel extensively and I love traveling. I am planning a trip to South-east Asia soon and am working out the finer details. But I won’t just do one country; I’ll club countries together to get full value for money and backpack a bit while doing some travel writing on the side to help fund the trip. See how that works? I get to have my cake and eat it too!

It might sound good on paper, but it only takes a few minutes of digging for you to realize that Groupon, and by extension Groupon deals, are celebrated by many and hated by an equal number of people. It’s hard to place a valuation on these internet businesses, but some estimate that Groupon is worth as much as $3 billion. That’s a lot of dollars by any stretch of the imagination. But sample these blog comments that talk about Groupon.

“It’s not for me. There’s no value in it.”

“The financials are skewed in favor of Groupon. It doesn’t add up for us.”

“Groupon is the worst marketing decision I ever made.”

“Groupon deals never benefit businesses, only customers and Groupon themselves.”

“Groupon is ok. It helped us get new customers, but it offers nothing by way of margins.”

So even when someone has something good to say about Groupon, there’s not a lot they say that is much good. I have friends that have tried Groupon (over and above traditional advertising) to grow their business. I’ve had people tell me all sorts of things about Groupon deals. Some say it’s terrible, some say it is terrific. One thing is for sure though. Groupon is an absolute that is growing at the rate of knots and crosses. What else can deliver 2,000 customers to your business just like that? It’s a beast that can really drag your business onwards and upwards, but it takes more than its pound of flesh. Do you need groupon deals? That depends on a couple of things.

For one, do you know how many customers in your area don’t know about you? Can you handle excess capacity? Are you okay with the reduced margins Groupon offers? Other issues revolve around branding; do you want to be seen as a giver of discounts, because that sets a precedent. It’s a personal decision, but it’s a direction I know I’d be very hesitant to take. Once you get started that’s a slippery slope that keeps on sucking you in and your customers will always expect discounts. At the end of the day, going for Groupon deals or not is a judgment call. A judgment call that costs money since you are losing money from sales, so it is effectively advertising. That can mess with you if you’re profit-oriented. Good luck to you, no matter whether you choose to go with Groupon or not.

Let’s carry on with the example of the petrol-head, shall we? If he was making $15000 month prior to retirement, a good 60 to 70 percent of his income would have been going towards meeting his lifestyle needs, a further 20% or so towards taxes and the rest towards his savings. So there’s not a whole lot in there for him to look forward to. It means he would have to bank on collecting benefits from social security on a monthly basis and save up enough to be able to withdraw enough per month to fund his lifestyle and interests. It’s really a case of it being very touch and go, and I don’t even know if he has a mortgage to take care of or not!

Does he have that much money on hand to take care of his needs? If he does, then fair play to him, he’s planned things out very well. If he (like most retirees) has a mortgage he will almost certainly struggle to maintain his lifestyle and expensive hobby that will undoubtedly be a drain on resources. And if he is working himself into a corner, it will take a lot of concerned friends and relatives to get through to him and convince him that he is on the highway to nowhere. I think it’s important to have perfect harmony in having the right amount of money saved up to see to your retirement because one-off expenses like those involved in car restoration projects come about every month or every so often.

People run out of money all the time and it is very hard to impose any sense of austerity on yourself, but this really can be difference between a comfortable retirement and having to tighten your belt every now and then. The need then is to come up with a workable plan that saves you money and then some more to indulge that hobby (car restoration is only an example). The sooner you can work out how to juggle your lifestyle and savings, the better.

1. Rethink Retirement Investment

Solin mentions it very bluntly that if you don’t protect your retirement investment against inflation, you will run out of money much soon than you anticipate. Inflation is the only thing that can ruin your retirement plans. It can depreciate the value of money. So, the money you are saving now will worth much less during your retirement.

So, what’s the solution?

You can keep certain amount of your investment in products like CD’s, treasury notes, savings accounts, bonds, and so on, where you money will grow according to the inflation.

2. Don’t Invest in Individual Stocks

Solin suggest people not to invest in individual stocks unless it’s just for fun. Individual stocks are too risky to include in your retirement portfolio. You don’t want it to be next Enron and drown all your money. Instead, make your investment a bit broader by investing in index funds, mutual funds, treasury bonds, and so on. For instance, you can put 33% of your money in international stocks,, 33% in stock indices, and remaining 33% in treasury or cash notes.

And you don’t need any financial consultant for such portfolio diversification, you can do it yourself. Make you portfolio as much less riskier as possible. An easy way to minimize risk it to purchase retirement funds.

3. Bonds

Solin says investing in bonds is a good idea. But he reminds people that bonds aren’t completely riskless. They are comparatively less riskier than stocks, but not completely risk-free. Besides, if you are worried about inflation, you must not put your money in TIPS (Treasury Inflation Protected Securities), as they can be quite volatile, at times, and may under-perform in times of lower inflation.

4. Depositing Cash

If a bank or financial institution is not FDIC insured, don’t deposit your money into it. Also, make sure the money you deposit should not go beyond FDIC Insurance Cap ($25,000). So, where should you go?

You don’t have to go anywhere. You simply have to search for banks in your neighborhood that provides good rate of interest, is FDIC insured, and is safe.

5. Annuities

If you go for annuity, select the one that offers fixed rate, not a flexible one, suggests Solin.

6. Mining Your Money

We generally withdraw money from our investments. However, we don’t usually take that amount into consideration while planning our retirement. Solin says, you must spare at least 2% – 4% of your savings for withdrawals. Besides, you must also have an emergency fund, so you don’t have to withdraw from your retirement fund.

He has mentioned many other points in his book which includes how to handle social security and pensions, early retirement, financial back-ups, other costs, state of your estate, and so on. I guess the book is pretty good source of retirement planning for beginners and experienced investors.

Personal Financial planning is essential in one’s life, irrespective of the age he starts. So, the below mentioned planning process is for you, whether you are male or female, 20 or 50, single or married. Just get started right away.

Get Yourself a Financial Journal

Sounds foolish? Well, you have tried all your smart ways, why not this foolish one as well. And let me tell you, this is one of the most useful ways to have a plan. When you have your plan in writing, it’s more real, than a vague mental idea.

Create a Wish-list

After you finish with decorating the front page, list down all the things you want to achieve in your life on the next page. This list should, however, be pure financial. You cannot list down about having a new girlfriend, or improving relation with your spouse. If you want to do it, get a new journal. In this one, it’s just money.

Set Priority

According to your preferences, rearrange the list on next page, starting from the one you want to achieve first, then next, and so on. This would help you to know what you have to start working on, and what can be waited.

Set Target and Cost Price

The goals in your journal are your products. So, you are free to set your own cost price. If one of your goal says ‘want to buy a new car’, set the amount or your budget for that product, to be precise. Do it for each of them. Next, set a timeline to achieve it. If you don’t have a target to achieve in specific period, you would not strive to achieve it rigorously. Hence, based on your priority, set a practical time line for each goals.

Achieve

Start putting a tick, or cross, or strikethrough, or whatever you like adjacent to the goals you have achieved. You can do this by doing a small calculation and determining how much you will need every month to achieve the goals.

That’s it. Was that hard? Not at all. You can do it within a day as well. The only thing that kept you from doing personal financial planning is boredom and fear of loss. Throw all your fears, and start today. Live your life as you always wanted it to be.

I will be traveling to the other part of the world next month and planning a trip, for me, is quite alien as I am not a regular ‘explorer’. Hence, I have searched for many budget traveling tips and compiled a list.

• Discounts
  If you check properly, you may qualify for one or the other discount on air ticket, hotels, or food. You just need to check smartly.
• Guidebooks
  It may be a bit boring to follow a guidebook. But, trust me, these guidebooks have some of the most effective money saving tips while you are on a trip. You aren’t, but the guidebook is always local.
• Snacks
  Always carry snacks with you. Food in your flight is expensive. And so it may be where you land.
• Your bit of entertainment
  Journeys are boring. And if it’s long, it can bore you to tears. So, carry your entertainment like books, DVDs, music players, magazines, etc. It will also keep your kids busy, if any.
• Prepare for the weather
  Before you start your journey, check local weather predictions and carry outfits accordingly. This can save you loads of money.
• Carry an extra bag
  We often shop much when we are on a tour. And we purchase another bag to carry these things home. Quite small amount, but why to spend if you can save this cost. Carry an additional bag.
• On foot
  When on a vacation, we travel much around the city or country, which ultimately costs a lot. Though not every such cost can be eliminated, walk wherever possible.
• Prepay
  Many expenses like air ticket or for hotel room can be quite cheap if you can manage to pay few weeks in advance. You can save s much as 40-50%. And if you cancel your trip a couple of days before your schedule, they will happily refund the amount.
• Dual Purposes
  If you are on a business trip, extend your tour and plan a family trip simultaneously. It’s one of the best ways to save money on airfares.

Well, these are many favorite tips to plan a budget vacation. I don’t think any of have the potential to deplete the quality of my vacation. Let me know if you have more of such ideas.

One Time

One time income can be tax refunds, or rebate check, or birthday money, or something like that. However, it comes quite often then we realize and instead of spending it appropriately, we squander the amount. Let’s have a look at how we can utilize it.

If the amount received is below $50, use it for fun. You cannot do much with $50.

If the amount is between $50 and $100, you can use it pay some of your bills. Or maybe add it to your savings.

If the amount is above $100 and below $1000, divide it into two and use it to repay your debt or bills and add the other half into savings.

And if it exceeds $1000, it is highly recommendable to use it to repay your high interest loans, save for a new home, or pay huge bills.

Regular Income

You would ask how can regular be unexpected? It can. You get few income, you know it’s coming, but you don’t know when, hence it’s comes unexpectedly. This would include unexpected income rise, dividends on stocks, etc.

If you are buried under debt, a very logical step is to put this unexpected regular income to repay your debts. However, if you don’t have much to repay, you should save or invest this amount. You can utilize this amount for your 401(k), Roth IRA, traditional IRA, or other long term savings.

And if you have already invested considerable amount into these funds, you can invest unexpected income in other investment instruments like stocks, bonds, gold, or foreign currencies.

Do you have better ideas to utilize unexpected income?

I can return back the purchased items to the store I suppose. But then I seem to have lost my receipt in the holiday emergency (You know, a lot of relatives flooding your house with bag, baggage and gifts and you are so absent-minded about managing small things). So, the store will not accept the item and refund me my money. Ah! I can always give the item to my credit card issuer who’ll accept it within 3 months of the purchase. Mark this friend, even if you happen to lose the receipts of items or bought them online or even if the return date expired, your credit card issuing company can always come to your rescue if it’s got the return protection policy. Just read the fine print and it’ll be probably mentioned there, if the company has it.

The return protection policy of credit card companies is specially advantageous to those buyers who might want to return items bought from the store, after the normal period of expiry of the store’s return policy. American Express, Visa and MasterCard all have good return policies. They are going to take your goods if the store refuses to and you are going to get the cost price. But there may be some constraints and rules which seem to be fair enough to me. After all, the credit card companies are helping you in cashing on your items which may otherwise have been lying as a waste in your house. There may be limitations on the number of times you are allowed to return your gifts and refund your money or the time period in which you can do so. American Express also sees to it that every client is satisfied with the return policy. Visa’s return protection has $250 as the upper limit of refund for items returned and on the whole, in a year, you could refund about $1000 on the whole. It is necessary for the items returned to be in a good and working condition. If I’m not mistaken MasterCard seems to be offering greater flexibility when it comes to your claim on the goods returned. Not only goods that you are dissatisfied with, but also those that are damaged or stolen are worth a refund with the company. But the upper limit of the refund is up to $ 250 only and the claim should be made within 60 days of the date of purchase and only when the store from which it is bought refuses to accept it.

So, I’m going to my credit card company to get a refund on my extra timepiece, what about you?

The first 20% can be saved by driving and maintaining your car efficiently. Here is how you can do that:

1. Remember that faster pace means more resistance against wind. This friction causes your fuel economy to drop.
2. Drive smoothly with patience, less fluctuation in acceleration, and minimum usage of brakes. That doesn’t mean don’t apply brakes and start bumping your car everywhere. Apply when necessary.
3. Use of overdrive except you are ascending a steep slope.
4. Make use of cruise control, which means drive at a stable speed with stable acceleration and not using brakes, when on freeway. You cannot do this on hilly areas.
5. Don’t drag your car much at lower gears. Quickly move to higher gears and keep the RPM low.
6. While on a slope, go at a higher speed before climbing, rather than generating speed on the slope.
7. Don’t overdo warm-ups. Newer cars generally don’t need much of idling. 1 minute is enough.
8. Merge everyday jobs with short trips. This will save much fuel. All you need to do is stay alert and plan how you can consolidate trips.
9. To increase efficiency of your car, the engine needs to be maintained properly. Poorly maintained engines causes a drop of 20-25% in fuel efficiency.
10. You will notice improved aerodynamics with smooth edges. Hence, always keep your car cleaned. Did you know that sunroof is also a distraction in smooth aerodynamics?
11. Use the Formula 1 rule. Lighter car = increased speed and better fuel efficiency. With increase of each 100 pounds, the efficiency drops by 1-3%.
12. Get rid of the ice on your car, it jams the engine, increases rough friction and increase weight of your vehicle.
13. The tire pressure is very important factor in fluctuating fuel economy. It’s important to keep it inflated at the right level every time. Over inflated tire can burst easily, which eventually reduces the mileage. Under inflated tires drags your car at a slower pace than usual, reducing mileage again.
14. Make it a habit to change your vehicle’s oil on a regular basis. Less or old oil creates more friction.
15. While you are driving in the city at night or early morning, when the weather is cool and pollution is less, roll down the windows, instead of switching on the A/C. If it’s required, keep it low.
16. However, keeping windows open on a freeway increases friction and distracts the smoothness of aerodynamics. Keep the window rolled up and switch on the A/C at low level.
17. IF possible, don’t drive during peak hours, when traffic is usually high. Or you can opt a bit longer route but with less traffic.
18. As soon as realize you don’t need snow tires further, remove them because the suppleness exerts much pressure to haul the car.

These are small but really useful tips. Follow them for a week and you will definitely notice a 15-20% reduction in usage of gasoline. Next tip to save some money is by getting a 3% or 5% cash back card. A famous one is Discover Platinum Gas Card. Also, Citi Dividend Platinum Card offers 5% cash back at almost every gas station, grocery and drug stores. A website pumpandsave.com offers in depth info on how to use such cards.

It’s wiser to check where the cheapest gas is available at gasbuddy.com and gaspricewatch.com. However, it’s worthless if you drive at the cheapest gas station that’s 40 miles away. So, keep a watch on the prices at nearby stations, and visit the cheapest among them.

While you buy a car, instead of focusing just on amenities and looks, check out the mileage. Opt for a car that gives very high mileage because in long run, you will be left only with miles per gallon calculation. The looks and amenities would be obsolete soon.

Even if you have a car, it is not mandatory to drive it every time. You can occasionally walk, ski, ride a bike or scooter, or take public transportation.

These tips wouldn’t cost you anything, but will definitely assist you to save around 20-25% of your gas bill.

Behavioral economist, David Laibson and associates have conducted a study and released a report on how the levels of monetary wisdom change with age. In their very interesting  paper “The Age of Reason: Financial Decisions over the Life-Cycle with Implications for Regulation” which is yet to be released, they say that though your experience and age help in increasing your fiscal wisdom till a certain stage of your biological growth, with oldage , your fiscal wisdom declines. Understandably, I think our frugality quotient too follows the same path as our other faculties of intelligence. Oldage does have a detrimental effect on our cognitive skills and with the general intelligence losing its sharpness, you can expect any specific intelligence too to decline owing to that. So what does all this mean to us? It means that you’ve got only a certain age in your lifetime where you are at your frugal best and you’ve got to identify that and cash on your financial planning and management skills. A time not earlier or later than this is going to help you in taking the wisest fiscal decisions in your life. If you are waiting to know this magical number –its 53! So make the best of your fifty third year for a good financial future.

After 53 years, senility takes over for most people and that’s when your cognitive skills along with your body start showing signs of inefficiency due to aging. So, if you are on the right side of 53, take care and see to it that you are ready with all your financial resources. Plan for retirement because you’ll not able to organize your money well after you grow old.

According to Laibson, after 60 years of age dementia increases and 30 % of people who are more than 85 years old are suffering from dementia, Most of the elderly don’t seem to be having the cognitive apparatus to manage their finances properly. Hence they are being taken advantage of. As most youngsters believe in a nuclear family set up without their elderly parents living with them, the elderly have to finance themselves during that age to survive.

So what should the aged do to protect their finances? They should make a trusted person the caretaker of their finances. They should keep their financial portfolio simple and invest in safe government retirement policies like the 401(k). You can also make a revocable living trust if you have enough finances. With a little bit of planning, you should be able to protect your financial resources even after you retire. You may not be able to stop the process of aging, but you can certainly take precautionary measures beforehand.