I have to admit that I’ve never done a cash only budget, but I am going to try it, at least for a week and maybe for a month, to see how it goes. A friend of mine a long time ago relayed that she and her husband put money for various items into different envelopes, and when the money was gone, it was gone. They couldn’t buy anything else until their next payday. Spendthrift me thought that sounded a little strange and wondered how and why they would do this.

Create A Home Budget Using The Envelope Budgeting System

More recently, I discovered talk radio host Dave Ramsey, who often talks about his cash envelope system on the air. Listening to him, I understand the concept better: every paycheck, you put money into different envelopes marked groceries, clothes, entertainment, etc. If you run short in one area, he says it is fine to shift money from one envelope to another. But again, the bottom line is that you can only spend the money in the envelopes and no more. Here’s a graphic of what it looks like, thanks to Money3rd.

Envelope Budgeting System

It seems as if more and more people are discovering the benefits of such cash only budgets and these envelope systems, and cash is making a comeback. I find this ironic, given that the projection has been for people to never use cash again (at some point), with the proliferation of credit cards, debit cards and electronic transfer. Taking a closer look, you’ll see that there are some pros and cons to using a cash only system. Here are a few:

Cash Envelope Budgeting System: The Pros

• This system forces you to make a budget and adhere to it, something that I struggle with. I might start out using envelopes for groceries, gas, clothes, and entertainment (things that are easier to control), while I use my high interest savings account which I’ve just opened as another “envelope” in which to deposit money for semi annual or annual payments such as insurance premiums, property taxes, and the like. If I can only make myself save so much money every month for these bills, then it won’t hurt so much when they come due.
• Using cash is better than using debit cards. I used to think that they were one and the same, but the plethora of overdraft charges from my debit card has convinced me otherwise. I actually prefer debit cards to credit cards because I can place limits on my spending, but by using cash, I’m also able to avoid unexpected fees. Like most people, I feel that cash is the most attractive option for controlling spending. A debit card is still plastic, and when using one, you are still more likely to spend more money than you would with cold, hard cash.

Cash Only? The Cons

• A cash only system may not work well for emergencies or unexpected expenses, so establishing a separate emergency fund would be a good idea.
• Using cash can be awkward in a restaurant or bar (or in certain other establishments). Many times I have used cash to pay for a bill in a restaurant or bar, and the server ends up not giving me back any change, assuming that I meant to leave them a large tip. This has been so uncomfortable that I now prefer to use a debit card in this circumstance, so I can indicate how large a tip that I want to leave.
• It’s almost impossible to use cash to reserve a hotel room or a rental car. Ultimately, you may be able to pay in cash, but most companies want a credit or debit card number to track.

As you can see, while using cash is a great budget trimming idea, there are some situations that highlight the inconveniences of using cash over plastic, and no doubt there are many more scenarios of this kind. Cash is not always practical, and because of the tradeoffs, you may have to be somewhat flexible about using cash alternatives in order to avoid any inconveniences (unless you’re resourceful and can develop a system that works for you: ie. find and work only with merchants or businesses that only accept cash, etc).
 

Contributing Writer: BEM

Create A Home Budget, Use The Envelope Budgeting System

YNAB Pro Giveaway Code: fibonacci

Tim Parker of Elementary Finance is today’s guest contributor.

When Investing, Everyone Thinks They’re Right!

If you watch any of the financial news channels or talk to any of those people who are considered the best in the financial world, one of the first things you will find is that everybody has an opinion and everybody feels that their way is the best way.

I believe that the reality is much different. While you will find a lot of people who are clearly not doing well, you will also find a lot of investors who are doing it right but who are using various approaches. While there are a lot of opinions, I can think of at least one truth that has no controversy: Use any legal investment strategy you would like but the object of the game is to make money and that is how you determine success.

My Top Stock Investing Strategies

I’d like to share with you how I do my own investing; my strategies are pretty much rooted on the basic principles of long term investing that many (if not most) investors espouse:

Rule #1: Invest with your financial goals in mind.

First let me say that I have a full time job outside of the financial world, so I’m one of countless stock investing hobbyists who enjoys participating in the stock market on the side. My primary goal for investing is to build my retirement portfolio. I’m not looking to buy a private jet or a yacht in a few years nor am I looking to one day become a full time investor (at least, not anytime soon). My strategies revolve around who I am and what my goals are. Among the many stock investing tips that are out there, apply this one first: know who you are and why you’re investing. This doesn’t seem like it would be important but I assure you that it is. It will change the way you invest.

Rule #2: Diversification rules!

If you could see how I invest, you may actually think that I’m overly conservative with my portfolio, and you would be partially correct with that assumption. The first thing I do is split up my money. For the sake of easy numbers, let’s assume that my portfolio has $10,000. (Don’t you get tired of reading those articles that give you all the best stock trading tips and investment advice for managing your $10 million dollars?) Often, when I help somebody set up a new portfolio, we start with a piece of paper upon which I draw 5 circles. This is where my “island theory” comes from.

My $10,000 has to be split into pieces. Pardon the analogy but I’m going to describe this as such: think of the pieces as 5 different islands that are far away from each other but in the same ocean. If a hurricane comes through and damages one island, the other islands are fine. Of course, because they are in the same ocean, they will all affect each other at least a little bit.

My island theory is simply an analogy for stock diversification in the investing world. This is the most important investing strategy that I follow. Don’t subscribe to information that says that you don’t need to diversify. It’s essential for protecting your assets. So let’s take our $10,000 and split it into five parts. Each of our islands is going to have $2,000. We don’t have to be exact with our numbers but we have to be close: within $100 is my general rule. You can’t take from one island to help another.

Next, each island has to look different. One island can’t be made up of computer stocks and another island made up of telecom stocks. These are all technology stocks and only one island can be based around tech.

So basically, that’s the kind of diversification I do, in a nutshell. Many people achieve great results by simply investing in index funds or a target date mutual fund. I prefer to diversify this way, by fully controlling my portfolio and picking my own stocks. I’ll follow up later to discuss what I have in my islands (or buckets), and to talk about the rest of the ways that a part time investor can make money.

My Investing Strategy: Diversification Rules!

YNAB Pro Giveaway Code: fibonacci

Why earn a college degree abroad? Have you considered sending your kids (or yourself) to study in a different country? Besides some relatively cheaper options for schooling, studying abroad may also offer a lot of rich and new experiences. In this article, we explore Mexico as a potential place to get an education, but the ideas here are simply representative of what to consider when you decide to pursue your studies overseas.

Pretty picture by the NYTimes.com

When I was living in Mexico, teaching English to Mexican university students in Monterrey, a doctor friend of mine launched a bold program to attract dollars to the School of Medicine via American students who either were unable to enter a school due to the high costs, or who were simply rejected because their SAT scores were too low. He was quite successful and I helped him welcome the first batch of 20 students from various states north of the border.

Of course, these medical students were aware that once they had their degree, they would still have to satisfy State Bar medical exams to be able to work as physicians. Some courses were in English, but a wise requirement by the University of Monterrey mandated that they had to learn Spanish during their first year; hence, ad hoc classes were provided as part of the curriculum.

Take Your Studies Abroad

This program lasted only 3 years, as the founder passed away suddenly of a heart attack; however, any American student can study at any Mexican university, as long as she/he understands Spanish. The costs are a little higher than for native Mexicans, but still a long way below the amount paid in the U.S. The Universidad Autonoma de Nuevo Leon is a state university that is renowned the world over for its extraordinary record in kidney transplants. It has its own public hospital which caters mainly to the indigent population.

…And Broaden Your Horizons

You don’t have to get your degree in a foreign country to enjoy studying abroad. Many American universities even require some students (based on their curriculum) to spend a year in a foreign country studying the language and the customs. Some financial aid is even available:

“The Carlos Castañeda Memorial Scholarships are available to students with an above average academic record as well as significant financial need. Awards are $1,000 toward summer tuition or $2,500 for a year of study in Mexico. Applicants must also meet Spanish language proficiencies,” according to this site called College Scholarships: this offer is among many other offers of scholarships for American students in various areas. Isn’t it fascinating to think about archeology or anthropology in Mexico, Costa Rica, or Honduras? Primitive artifacts are awaiting the audacious graduate student!

Note as well that if you have a 529 college savings plan in your name (or your child’s name), then the funds here can be applicable to certain accredited colleges and universities abroad. There are certain “study abroad programs” that are approved as viable recipients of funds from 529 plans.

Scholarships For Americans!

While most of this site is in Spanish (you’d also have to ignore the questionable web design), there are sections here that discuss options and possibilities for financial support for American students (referencing the Fulbright-Garcia Robles scholarship for tuition and living allowance.) The U.S.-Mexico Commission for Educational and Cultural Exchange (COMEXUS) has government support for growing the understanding between the two neighboring countries by developing programs of this sort that allow graduate students who are US citizens to seek international experience.

Advice For American Students

One of the most important words of advice to young American students who wish to polish their education abroad is: Be Careful! What may be tolerated here may not be acceptable in the host country. I remember a young American tourist in Singapore who was condemned to 20 lashes for smoking pot. You will discover very quickly that we enjoy a much greater freedom and safety here in the United States than in many other countries. Mexican jails are not particularly hospitable to gringos (particularly to the younger ones). But if you adapt quickly and show tolerance for different mores, your stay could be highly memorable!

Why Study Abroad? Get Educated In A Foreign Country

YNAB Pro Giveaway Code: fibonacci

Thoughts on the Dow Jones over the 9,000 mark.

Stock Market Performance: Any Cause To Rejoice?

At the beginning of this month, I wrote an article inquiring whether the economic downturn was over. I wrote about the use of an interesting economic indicator that could herald the end of the slump if you take stock of what some economic analysts are saying. That indicator is the jobless claims number — once it peaks, then falls, it’s supposed to signal the bottom of the recession — and as they say, there’s nowhere to go but up!

But that article attracted a lot of cautious responses. People told me to “listen to my spouse” who continues to be skeptical about all this talk of recovery, and who still believes that we’ve got a ways to go with this recession. His view? Got to wring out all the negativity that’s still weighing upon the fundamentals: massive deficit, foreclosures and bad loans, loan defaults, tottering banks, unemployment.

Reviewing The Economic Fundamentals

These last few days though, there appears to be (at least, on the surface) some kind of turning point in the U.S. market psychology, since we’re suddenly seeing the Dow Jones sitting above 9,000 for the first time in 9 months.

The mainstream media is now reporting that the indexes are at their highest levels in 9 months, and what can we attribute this action to? Supposedly, there are three factors:

• A drop in jobless claims (hey, wasn’t that the indicator I was just talking about?),
• Improved profit reports from companies,
• More confidence in the status of the world economy, particularly that of Asia.

So what do you think? As they say, stock market behavior and performance can be harbingers of things to come, particularly with the economy. When the market turns up after a significant weak spell, it may be the sign of an economic turnaround in the near future since stock market trends are said to track the economy some 6 to 9 months in advance. The question here is whether we believe that the fundamentals are improving enough to merit a 9,200 in the Dow Jones, or a 986 in the S & P. My guess is that there are still a lot of you out there who aren’t quite convinced that we’re out of the woods just yet. Here’s why: just take a look at how the U.S. debt has ballooned over time (source: check out this article for more on this sordid matter).

We’re still facing the issues of debt and defaults, and their serious, lingering after effects. Our nation’s financial woes don’t seem like they’re going away anytime soon. So if you acknowledge the underlying fundamentals from this vantage point, then you’re likely to believe that this rise in the market is going to turn out to be one more meaningless bounce in the big scheme of things.

How High Can The S & P Go? Technical Analysis Predictions

But how about we take a peek at what technical analysts are saying on the other hand: since they provide short term reads of the stock market through charts and indicators; their calls are meant more for active investors and traders (those who market time). For the short term, stock traders are seeing a continued bias to the upside based on a potential chart pattern formation called a “head and shoulders” bottoming in the markets that has developed over the past 9 months. For more insight into this, check out the video below to get the perspective of one experienced analyst.

Click this link or the image below to watch the video:

The premise of this video is that there is an opportunity here for the S & P index to hit the 1,200 level (with a minimum target of 1,000) from the current 980+ level. Again, to appreciate this information, you’d have to buy into the teachings of technical analysts, stock traders and chartists. For more on this type of investment focus, check out our posts on how to trade stocks using stock charting tools and stock trading software.

I quake under the enormity of our nation’s situation as I try to grasp the significance of our massive debt problems. So while I’m happy that some of my investments look like they’re recovering quite nicely as they ride the latest market surge, a part of me is bracing for more volatility ahead. And if this market looks any better soon, I may be strongly tempted to lighten my U.S. investment holdings at higher levels (yes, I may just acquiesce to the forces of market timing) as we readjust our portfolio towards a more conservative bent: after all, we’re not getting any younger!

What’s your take on this upward trend?

Great Stock Market Performance, But Will Dow 9,200 Hold?

YNAB Pro Giveaway Code: fibonacci

Here’s more on the creative job hunt. Find out what people are doing to stand out from the job hunting crowd!

We live in a society in which most people fear being different, fear making waves and thus fail to exhibit their unique qualities. In this jobless era, however, the few and the bold (to paraphrase a military slogan) are the ones who will get the good positions available. For let’s not forget a very important fact: Companies are hiring, albeit not as much as usual. For every open job, there are 250 people (OK, I exaggerate; it’s more like 4 per opening) asking for an interview and/or plopping their resumes in the company’s inbox at a job fair. So how can one differentiate oneself from all the other applicants?

Use The Internet To Your Advantage.

Heard about the guy who created a “musical resume”? He created an original composition, and delivered his song to the internet audience via YouTube, and it was a virtual hit. Just check out his “Will Sing For Work” video. Visit this link or click on the image below to watch it.

I was impressed by this job hunter’s creativity and wonder why he hasn’t been hired yet!

And what about this interesting case of a young graduate, Jamie Varon, (written up in Fortune Magazine); she applied to a lot of places (including Twitter) and pretty much got nowhere, even going as far as taking a box of cookies to Twitter’s offices. So she decided to do something different; she created her own website called twittershouldhireme.com, where she posted her resume, her recommendations and a blog to track her search. She was asked within 24 hours for a face-to-face meeting at Twitter, and got a couple more offers from other companies to boot. It pays to be different!

How To Get A Job: Think Outside of the Box!

Show just how different you are and make yourself stand out. If you’re applying for a job somewhere, let them know what you can do for them and what kind of value you’ll add to their enterprise.

There was also an interesting post on LinkedIn where the author emphasized that creativity and being different are two important qualities in today’s difficult job market. He gave the example of a young graduate who had a very creative (as in “I like Alice in Wonderland”) resume that mirrored her interests and priorities. I wouldn’t recommend that approach to everybody, of course. Some jobs require sticking to conservative mores, and a resume formatted to look like a movie ad may not go well in some circles (banking industry, anyone?). However, the concepts of clarity and courage are essential to impress would be recruiters, simply because these very qualities are going to benefit the company’s bottom line. You must however find creative ways to convince them that you’re the ideal employee for them:

1. Prepare for your first contact with the hiring company.
If you were lucky enough to be invited for an interview, prepare as you have never prepared before (maybe check out our job interview techniques!). Find out all you can about the company’s products and strategies and if you are an experienced manager or technical person, try to find something specific you can do to improve their products and or bottom line. Case in point: a software designer looking for work sent a list of 3 mistakes he found in his potential employer’s software product and was hired on the spot.

2. Participate in networks.
If you haven’t done so already, join LinkedIn and participate in the forums related to your area of expertise. Social networks are an excellent way to get noticed when you make thoughtful comments. You can also ask the group members if they know who is hiring.

3. Dust off your rolodex.
During your 20 years at Company X, you should have made a list of clients, providers and colleagues. Contact them one by one and don’t be ashamed to ask for help in finding a job. They can provide you with valuable leads.

4. Focus on those employers you’d really like to work for.
Do not shoot out a thousand resumes, hoping that one will bite. This is not fishing or gambling. Concentrate instead on 10 companies you know you’d like to work for and in which you can make a difference. By the way, a cover letter may not be very effective, unless you find a way to truly focus your achievements in such a way that the HR manager can get an instant picture of your worth. A P.S. might also be a good idea, as people are usually curious about that section.

5. Join highly visible social, professional and/or community groups.
Join social and professional groups where you are likely to meet people in positions of power. The local Chamber of Commerce may be a good start. At least you are meeting people face-to-face, not online. Drop a few hints in the conversation that you are looking for a job without sounding too desperate. Be ready to give them a personal card if they ask for your information. Look sharp and smart!

6. Volunteer.
Volunteering is another creative way to find a job. You may become so valuable that they’ll want to keep you. Think Red Cross, mentoring kids in schools or clubs, teaching immigrants English, and so forth. Quite a few important people work in these areas and may be able to help you.

7. Go back to school?
College is a good place to find a job, of course. Aside from the school’s job board, the university may need help themselves in all kinds of areas. That is a good place to start if you are a recent graduate who doesn’t have to worry about mortgage and kids. You may also want to contact your favorite teachers; they often have leads from friends in the private sector who are looking for that special graduate student.

8. Check out government slots.
Our government is the largest employer in the nation with the best benefits. If you have joined the service or the Peace Corps or Teachers For America, you have a better chance of landing a good job. A friend of mine from TFA finished her 2-year teaching commitment and immediately obtained a position for a government agency that specializes in rescuing at-risk students.

Why Not Take A Risk?

Don’t be afraid of being different, which means taking different routes to the coveted position. Just make sure you don’t take a job just because there is nothing else (unless you have 5 hungry kids). Go out there and show how unique you are. Somebody is bound to notice!

How To Get A Job By Thinking Outside Of The Box

YNAB Pro Giveaway Code: fibonacci

Based on the awesome response we received for Studenomics’ guest post entitled How To Work Full Time While You’re In College, we decided to follow up on this same topic. The Studenomist is our guest contributor for today; he runs Studenomics, a great personal finance blog aimed at the college crowd. Please consider subscribing to his RSS feed here.

Image from ABC News.

Even if free college tuition isn’t in your cards, you may still afford going to college on your own. Want to know how to effectively balance your work and studies? It’s important to stay well-organized, and it also helps to develop a structured routine at school. Here are some suggestions based on my own experiences:

Create Your Own Work Study Program! How To Balance Your Job and School Work

1. Find a relatively easy job.

Are you too burned out after work that you can’t even keep your eyes open long enough to read a chapter out of your textbook? Well, you can try looking around for a job until you find one that’s relatively easy to handle. For example, my friend works as a teaching assistant at his school and on most hours, he just sits in the class with the students while a lecture is going on. When he has tutoring sessions after a class, he hands out tasks for the students to complete, then reviews the materials with them. Sometimes he works 40 hours a week and goes home without feeling any stress at all.

There was also a comment on my post, How To Work Full Time While You’re In College, which was made by a reader who wrote that he worked as a bus driver and had the opportunity to turn off his brain so to speak.

When you find a job that is relatively physically or mentally “easy”, you’ll find that you’re able to work full time hours without feeling much stress. What are some relatively easy jobs that college students can find? Well I hope I don’t offend anyone, but here are a few jobs that won’t burn you out mentally/physically:

• Library help. Nice and quiet while you stock books and work the desk.
• Custodial work or janitorial services. Mop the floor while your mind rests.

I could go on but you catch my drift. If you find that 10 hours of work a week is killing you, then maybe it’s because you need to find something lighter on your mind and body. You could argue that this is the lazy way out but the way I see it, your main goal is to complete college with high grades. If you can pay off your student loans as you go through college then you’re ahead of the game.

2. Try part time work first and SLOWLY pick up more hours.

Start off at 5 hours a week and try adding an hour each week until you reach your maximum capacity. What is your maximum capacity, you might ask? Well I could give the obvious answer and say it all depends on your situation, but here’s how I see it:

• If you find yourself with ample time in between lectures or with a light course load then add in some extra hours at work.
• If you are always struggling to meet deadlines, sleeping 3 hours a night, running from one class to another, then you’re definitely not in a position to pick up any extra work.

You may find that 15 hours a week is all you can spare or you may find that working 40 hours a week after a gradual transition actually feels quite comfortable. At the end of the day, if you find yourself spending time on mindless activities (e.g. playing Facebook games) then you can probably accommodate some work hours in your schedule. Some trial and error will be necessary here as you adjust what feels right for you. If you’ve got a truly challenging course load, then try to remain at a minimum of 5 hours a week of work.

3. Cut out pointless activities.

You must be willing to drastically limit the time you spend on “fun activities” (or should I say “pointless activities”?). If you see value in hanging out with your closest friends then this isn’t a pointless activity; it’s something you need to maintain balance in your life, so by all means, don’t miss out on this (social activities are important too, but anything taken to the extreme may simply be a waste of time and energy). But if you find yourself being bored (e.g. watching reruns on television or flipping channels), then you could just be misusing your time. If you’re not spending this time on your studies then this is valuable time that you could spend earning an income. The goal here is to maintain a balanced life and an efficient schedule.

4. Set up a “sleep in” day.

We all love to sleep in, but honestly, do you really need to do this every single day? True, the thing about working full time while studying full time is that you may not get the full 8 hours of sleep every night. So my suggestion here is to set up one day during the week where you have the morning off and get to sleep in for as long as you please.

5. Sucks to say this but sacrifice is needed.

So you want to earn a college degree but don’t have a 529 college savings plan in your name? I really don’t know how else to put this, but you must be willing to make some sacrifices in college. There will always be time to get wasted or time for just lounging around; however, based on your goals and priorities, you’ll need to make tradeoffs. If you’re determined to make a work schedule fit into your college life, then be prepared to make a few sacrifices: you can still have fun… but you’ll need to place limits. During last year’s fall semester, I went for 6 weeks completely focused on work and study. My girlfriend wasn’t happy about it, but those are the sacrifices that have helped me accumulate a decent savings account while studying in college full time.

Create Your Work Study Program and Balance Your Job and School Work

YNAB Pro Giveaway Code: fibonacci

We’ve often talked about how to get rid of debt. But this time, we’d like to cover an actionable plan comprised of simple steps you can perform to fully eliminate your debt.

While some families I know can pay off their credit cards each month, most people I know maintain mortgages, car loans, credit card and other debt. In the past, I felt like I was climbing a mountain that I’d never pay off, but I learned how to set up a debt repayment plan. The process isn’t too complicated to set up and with consistency, I found out that I could find zero balances at the end of my hike.

How To Get Out of Debt: Set Up A Debt Repayment Plan

Allow me to go through what I’ve done to set up my personal debt reduction program.

1. List your debts.

First off, I took all my latest billing statements and listed all my debts.  If spreadsheets aren’t your thing, just start with the nearest sheet of blank paper and start writing down items like:

• credit cards
• auto loans
• student loans
• personal loans
• medical bills

2. Add up your debts.

Next, I added the amounts I owed and the interest rate for each debt.  For example, let’s say I owed the following:

While a grand total of $40,400 might make anyone woozy, I’m sticking with the program and focusing on the amount I want to repay each month.  I then asked a debt calculator how long it would take to pay off my Visa if I paid only the credit card minimum payment due each month. When the calculator came back with an answer of 32 years, I decided I needed to pay more.

3. Set your monthly payment amounts.

So how did I cut down the payback time so I wouldn’t be in debt for the rest of my life? Here’s an “easy” approach: I first looked at the minimum amounts due for each of my bills, then came up with a grand total. For the list above, let’s say the minimum total amount for all my bills is $520.  For each day of my debt management plan, I resolved to pay $520 each month.

Now over time, my balance should start shrinking, and eventually, my credit card statements will show a readjusted minimum payment; but I’m planning to keep paying $520 overall to shrink the debt in a reasonable amount of time.  Once I finish paying off one debt, I need to apply the payment to the next debt in line, a tactic familiar to many of us thanks to Dave Ramsay’s Debt Snowball plan.

Highly recommended: If you want to be more aggressive about paying down your debt, you can always pay more than the minimum from the very beginning. For instance, you can hike up your total payment by 10% (i.e. pay 10% more than the minimum across all bills) and keep paying this amount till all your debts are retired. You’ll reduce your debt much faster this way!

4. Decide which debts to focus on first.

How can I decide which debts to pay off first?  Some experts, like Suze Orman, have favored paying off the debts with the highest interest rate first.  That benefits you because you’ll end up paying less money over time, if you do the math.  Also, you may want to call your credit card company if you’d like to negotiate for lower interest rates.

However, Dave Ramsey argues that paying off the smallest debts first is going to give you the push you need to continue your plan.  For example, if I had a smaller zero-interest hospital bill of $400, I could pay it off within months — and kick that worry out of my head all that much sooner.  If I choose to tackle larger bills at a highest interest rate first, it may be a while before I retire this debt and feel like I’ve accomplished something.

5. Pay more whenever possible.

Five years or longer can seem like forever on a debt repayment plan.  To reduce the amount of time spent on the plan, I learned to send in extra payments when I could, and eventually, I began to send in a larger amount on a regular basis. Cutting my other expenses helped, too.  I became a frugal shopper for groceries and household items.  In addition, I avoided trips to the mall so I wouldn’t be tempted to spend too much.  For those with big debts, why not take second jobs? These other debt elimination tips are also worth trying out.

I’ve also discovered Paid Twice’s Snowflaking method.  With snowflaking, no amount is too small to be applied to a debt repayment plan.  If my credit card company doesn’t limit the number of times I can pay them online each month, then I can take the extra $5 rattling in my old PayPal account and send it in to the debt at the top of my list.

6. Find help if you need it!

Although many people can tackle their debt repayment plans on their own, you may decide that you need the structure of a debt counseling agency’s program.  If you go this route, you may be able to check in with a counselor to discuss your questions or problems for free or for a nominal amount each month.  The National Foundation for Credit Counseling can help you locate a credit counselor. CNN Money has a debt reduction tool to assist you, too!

How To Get Out of Debt With A Debt Repayment Plan

YNAB Pro Giveaway Code: fibonacci

We’ve discussed credit report monitoring services here before, which help you in a couple of ways. They can keep an eye on your credit standing by monitoring your credit reports: they’ll let you know if your credit has been affected in any way or if you’ve somehow become a victim of identity theft.

Sure, the business of protecting our identities via credit monitoring and other means has offered consumers a way to be proactive. However, I thought to write about a few considerations we should all be aware of before signing up with a fraud protection service like Lifelock or Trusted ID, which are two big names in the industry.

Identity Theft Protection: What To Watch Out For

Your credit card company may have given you a pitch about fraud protection at some point. Or you may have heard about the promises that id theft services can bring you. Peace of mind is what they’re selling. If you’re shopping for such a service, here are some things to take into consideration before you sign up.

1. Read the fine print carefully.

Instead of assuming you’re covered for the worst, make sure you do some research and read the terms, conditions and contract (or service agreement) from any company in the business.  For example, are you signing up for a range of services, or just a few items? What actions will the fraud protection company take in the event of a fraudulent charge on your credit card? TrustedID actually has a detailed set of terms and conditions that limits the company’s liability and tells you what’s covered.  It helps to read a company’s FAQs and forums if these are available as well.

2. Know the benefits offered by the fraud protection service.

Different identity theft protection companies offer a variety of services. But what is it exactly that you need? Don’t assume that you are covered for any or every incident that happens to you. A chat with a customer service rep might help you clarify when your coverage begins and what the extent of your benefits are.

So what can you expect from such a service? Some of the features include:

• Credit score monitoring
• Your FICO credit score and other free credit scores
• Automatic fraud alerts
• Automatic fraud alert renewals
• Service guarantees or identity theft insurance for up to a certain amount (e.g. $1,000,000)
• Free annual credit reports and monitoring of those reports
• Legal help in case you encounter fraud or have your identity stolen
• Coverage of lost wages
• Removal from mailing lists
• Credit card monitoring
• Lost wallet protection

You may not receive all these services once you sign up with a company. You may be getting just a subset of these features, so make sure you understand what it is you’re getting!

3. Know which credit bureaus are monitored by the service.

While there are three credit bureaus, an id theft protection service might not check in with all of them.  Say I sign up with a service that monitors Equifax such as myFICO Score Watch; that doesn’t necessarily mean that they’ll also track my Experian credit score and report. I’d prefer the wider coverage of a service like Equifax Credit Watch that monitors all three bureaus since I’ve lived in various parts of the country over the years (credit reporting by one company may dominate a certain region).  Check if the service will monitor all three bureaus for free or for an extra charge.

4. Check with the Better Business Bureau.

It should be easy enough to follow the track records of established companies such as:

• the big three credit agencies: Equifax, TransUnion and Experian,
• identity theft protection service providers like LifeLock or Trusted ID,
• credit monitoring service providers like myFICO.

But how about newer or lesser known fraud protection and credit monitoring service companies? It may be harder to find out how well newer providers handle their customers because of their limited track record.  In a way, I’m reminded of warnings to be careful of those companies that promise to fix your bad credit; do some research online and check with the Better Business Bureau to see if the provider you’re interested in has any complaints lodged against it. Avoid any fraud protection company that makes hyped up claims without the evidence to back them up.

5. Evaluate whether you can do the work yourself.

Have you considered monitoring your own credit reports? Is signing up to a service really worth your money? Find out if your budget can handle the expenses of a subscription service over time. You’ll need to decide whether you’d prefer to do all the work of monitoring your credit and watching for signs of id theft on your own time, or pay hundreds of dollars every year to outsource this job. By subscribing to a service, you’re paying for convenience.

Finally, you’d want to know how easy it would be to cancel a service and get a refund in case you do need to trim your finances. I love the idea of having my own ID theft watchdog, but I still need to know how to back away gracefully.

Should You Get Identity Theft Protection?

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Some thoughts of a newly married man who’d like to dispel some illusions about the frugal wedding. Tim Parker from Elementary Finance weighs in on what it takes to get hitched.

Some weeks ago, I got married. While we planned our wedding, my then fiancee did the bulk of the work while I played the good spouse-to-be and did exactly what I was told to do. I suspect it’s like how things usually turn out at most weddings. Now I don’t want to be yet another guy to write the next not-so-great article about how to control your wedding costs. Instead, I’m hoping to tackle the subject of planning a wedding by discussing the stuff I learned from the process.

How To Plan A Wedding Without Getting Stressed

While going through the planning process, here were a few ideas we had that quickly became impractical.

“We’re keeping it simple”.

I think this may rank as the number one most impractical “goal” (or statement) my fiancee and I made. If you want to keep it simple and would like to save money on your wedding, hop in the car and go to the courthouse on an unannounced day and get married there. Or go to Las Vegas. If you decide to have a wedding, you’ll want to get a wedding cake; you’ll also want to have pictures along with a reception, decorations, dresses, tuxes, music, a pastor, and a place to do all of this in. It will not be that simple and will cost a certain amount of money. If you want things truly simple and basic, then don’t have a wedding. It’s a fact that the people who provide these services are far from cheap.

Tip: Set expectations.

“We’re having a small wedding”.

So you want to keep wedding costs down and your guest list short. Perhaps you’re hoping to get away from the traditional practice of inviting all your close friends and extended family whom you haven’t seen in a while. I think this is a great idea. So great, that we tried this. The problem is that if you invite your mother (but of course!), how do you not invite her sister? If you invite her sister, how do you not invite her kids (your cousins)? Before you know it, “immediate family” adds up to 50 people. How much does it cost to feed 50 people? At $20 a head for food alone, your expenses quickly add up to $1,000.

But wait, if there are people you know who’ve got the creative talents to pull off some aspects of your wedding, then why not use some leverage? Here’s one example of what one couple has done for their wedding invitation (warning: may contain an offensive element). And here’s someone else who’s come up with truly unique creative ideas. You’re in luck when someone with talent can lend you a hand. In this case, inviting such people to become part of your wedding can be a good thing!

Tip: Barter services if you can.

“Let’s have a wedding our guests will never forget”.

Do you wish for a wedding that people will remember and talk about for years to come? Many couples work to give their guests a wedding they won’t soon forget… the goal therefore becomes “how to impress the wedding guests”.

But let’s not forget that this event is mainly about the couple taking center stage and hopefully having people help and support them. As the couple, you should be enjoying your special day, rather than stressing about it. Have you seen the show on television called “Bridezilla”? It’s dedicated to featuring many stressed out brides who aren’t enjoying their weddings all that much. But why does it have to be that way? Unfortunately, very often, it is.

Tip: Put the couple first.

“We’ll do it ourselves.”

On your wedding day, you’ll be busy being the stars of your event, so you won’t have time to put the food out, cut the cake, arrange the flowers, and still be able to enjoy what’s going on. So my advice? If you don’t have enough money to get the right people to take care of the details on your day, then work on a budget, prioritize your requirements, try your best to cut back, dial back your expectations and make adjustments. You don’t have to incorporate everything you want in your wedding. This should be your day and you should allow it to be about you (even if it means foregoing the fancy venue and doves)!

Tip: You don’t have to do everything. See if you can recruit others to pitch in.

“We’re flying away for our honeymoon”.

You don’t have to follow “tradition”. I invite you to disagree with me on this. For us, we ruminated upon the $2,000 or more it would take to go on a storybook honeymoon. Then we looked at the shape that our furniture was in and thought about which option seemed like a better idea for our $2,000. It was an easy decision — we didn’t want to take on any extra debt. So we took a rain check on the honeymoon, a compromise if you will. We’d like to enjoy our honeymoon without any money worries, so why not wait 6 months and save our money in order to afford it?

Tip: Make the right financial choices. Beware of the dangers of debt; don’t fall into the debt trap as you plan your wedding.

Say NO To Debt!

You may think that I’m anti-wedding. I’m far from that. In fact, I believe my bride and I made our wedding even more joyous by making sure that we didn’t have to worry about credit card bills piling up in the mailbox after it was all over. We’re starting our new life together debt free. If the experts are right and marriage is a challenge during the first couple of years, then don’t let debt make it even tougher.

How To Plan A Wedding Without Getting Stressed

YNAB Pro Giveaway Code: fibonacci

Manshu from OneMint has written this intriguing guest post about an aspect of social psychology called “groupthink”. Sounds like another term for “herd mentality”. While there are many applications of this concept, it appears to have some interesting implications for the world of investing.

What Your Investment Club Should Watch Out For

If you’re in an investment club or are involved in group investing of some sort, you may want to be aware of this phenomenon called “groupthink”.

Irving Janis coined the term – groupthink, which is a concept referring to how smart and intelligent people, when formed into groups, sometimes make horrendous decisions. Here’s how Irving Janis describes this concept:

“I use the term groupthink as a quick and easy way to refer to the mode of thinking that persons engage in when concurrence seeking becomes so dominant in a cohesive group that it tends to override the realistic appraisal of alternative courses of action. Groupthink is a term of the same order as the words in the newspeak vocabulary George Orwell used in his dismaying world of 1984. In that context groupthink takes on an invidious connotation. Exactly such a connotation is intended, since the term refers to the deterioration in mental efficiency, reality testing and moral judgments as a result of group pressures.”

While groupthink is a concept that was used to describe closed groups headed by a leader, I believe there’s some peer pressure involved here; I see it also applying to people who aren’t necessarily in a closed group, but who share the same income group, job profile, and so forth.

Don’t Let Groupthink Cramp Your Investment Style

Irving laid out 8 symptoms of groupthink. They seem to account for the behavior of people during wild market swings and business cycles, don’t you think?

Image by Design G Productions.

1. Invulnerability
Illusions of invulnerability create excessive optimism and encourage risk taking. Group members may believe that nothing can go wrong and may therefore ignore dangers that stare them in the face. A friend who bought real estate funds at the peak, only to see their value go down by over 80%, told me that during the euphoria of the real estate boom, no one ever spoke or thought about things that could go wrong. Nobody seemed concerned about investment risk; there was much less concern about having to manage risk. So, in a situation where no one ever talks about anything negative, it is easy to get into a cocoon and feel that good times will continue to roll forever.

2. Rationalization
Collective rationalization and consensus seeking are hallmarks of groupthink. Again, during the boom, there were countless occasions when I heard about how things were different this time: that home values could never decline so dramatically, or that the dot com bubble is really an exception to how market cycles work. Well, we now know that things are no different this time.

3. Morality
Unquestioned belief in the morality of the group causes members to ignore the consequences of their actions. According to Irving, victims of groupthink ignore the moral or ethical consequences of their decisions. They often don’t talk about the consequences, or they may actually ignore the consequences, especially when everyone else around them does the same thing. I watched a show about the subprime mortgage crisis the other day. It depicted and interviewed lenders who knowingly participated in subprime lending practices, and who allowed their offices to conduct behaviors that were clearly detrimental to consumers who went to them for assistance. These lenders enabled unqualified homebuyers to purchase homes they could not afford. While some felt morally conflicted about these policies, they still felt that it was easier to ignore the problem and to go with their company’s position on the situation rather than to question what was going on (well, their jobs were at stake).

4. Stereotypes
Stereotyping those who are opposed to the group as weak, evil, biased, spiteful, disfigured, impotent, or stupid. Victims of groupthink hold stereotyped views of the people of the opposing camp. Certain situations can foster an “Us vs Them” mentality. Think about those investors who turned more aggressive as the boom escalated. Day traders, highly leveraged investors or anyone who went on margin were at one point making tons of money during the market peak. Everyone else envied their position. Of course, these days we can only be thankful that we’ve missed those “opportunities” and have somehow avoided the dicey predicament many of these “gutsy” investors find themselves in today. But check out some of the stereotyping that goes on among stock market investors: Are market timers foolish or crazy? Are buy and holders patsies for staying put even while their retirement funds evaporated?

5. Pressure
Direct pressure to conform is applied to any “disloyal” member who questions the group. Pressure is one of those contrarian indicators I use to get a feel for the market. When everyone — and I mean everyone, including your neighbors, family, friends, coworkers or random people you meet on the street — are encouraging you to engage in the same activity (e.g. buy certain investments), it’s an indication that something will probably go wrong very soon. During the peak I received a lot of advice on buying stocks and houses — advice that I felt I didn’t need at the time. I found it very difficult to explain to people why I wasn’t in a buying mood: I’d say “the market is peaking, I’m not buying”. And they’d counter: “it can still go higher”. Or they’d tell me “what, are you nuts?”

6. Self Censorship
There’s a self censorship of ideas that deviate from the apparent group consensus. A system may become vulnerable to losing its checks and balances once it begins working a little too well. Sometimes things are progressing so well that people begin ignoring the flaws in the set up or process; eventually, people block any misgivings, questions and concerns they have and decide to “join in” and become part of the process. They jump on the bandwagon and think to themselves “if you can’t beat them, join them”.

7. Unanimity
Illusions of unanimity exist among group members, when silence is viewed as agreement. As market bubbles grow, there were experts in the private and public sectors who kept silent about how things were unfolding. Hardly an objection was heard, and those who dared counter the majority were scoffed at. Does this mean that those “in the know” who said nothing about the elephant in the room could be construed as unanimous in supporting the shenanigans occurring in the real estate and credit industries?

8. Mindguards
Mindguards are self-appointed members who shield the group from dissenting information. Irving wrote about committees headed by a leader, but also referred to mindguards as people who prevented opposing points of view from reaching the leader. Can you think of real life mindguards who’ve played big roles in orchestrating certain events in our history?

These symptoms serve as good pointers the next time we find ourselves in extraordinary market cycles and situations. When everyone is in a hurry to buy or sell houses, stocks or gold, there could be ample reason to be skeptical.

 
Thanks again to Manshu for this insightful article. Please consider visiting One Mint and subscribing to One Mint’s RSS feed here.

Joining An Investment Club? Watch Out For Groupthink

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