I have found myself becoming more and more obsessed with the financial world over the last year. It started with a simple conversation with one of my friends who is a financial analyst for a big bank. We were having a slumber party in his living room (yeah we may be in our 20’s, but we will never be too old for slumber parties!) when he started telling me about the Roth IRA and how it could greatly benefit me. We talked for a good hour or two about other investment strategies (actually he talked, I listened). This conversation kickstarted my quasi-stalkerish obsession with finances. I love reading helpful strategies to make my money work harder. I don’t mess with the convoluted financial gameplans, I like it to keep it simple. Here is what I am doing to secure financial freedom over the next few decades.

Investing 8% in to my TSP (government equivalent of a 401K)
Maxing contributions to my ROTH IRA each year
Putting $2k in the bank each month for my future house fund
Doubling my school loan repayments every month
Selling cocaine to little kids that think it is powdered sugar

One of the above may or may not be a “white” lie…haha no pun intended. But seriously, I’m 23 and I feel like I’ve got a good jump start to the rest of my life. Fortunately I have a steady job with a cool title , make okay money $60k/yr, and live dirt cheap. Every dollar I earn I make sure that it is working it’s @$$ off and finding some friends to come back and play in my online savings account.

Peace up, A-town down,
D Ninja

The best way to save over $200 a year!

I think for the first time in my life I was convinced by a door to door sales person to purchase their product. What were they selling? Cable…as in tv and internet. A man working for AT&T knocked on my door one afternoon and began his sales pitch. I was tempted to interrupt him and tell him I was not interested (as I do with most other salesmen).

He handed me a pamphlet of information that included all the different package options and pricing AT&T was offering. I saw their basic cable and internet package was $89 per month. I was paying $91 for my COX cable package. I told the man I wasn’t interested in making the switch because I wouldn’t be saving any money. He asked me about my current COX package (internet speed, how many channels I get, etc.). With COX I was only getting basic cable (channels 2 through 60) and medium internet speed. With AT&T’s basic package I would get over 200 channels and slightly faster internet. It sounded too good to be true so I asked the man how much the instillation fee was. Turns out, there is no instillation fee and we also get a cable box that can record four shows at one time and a high power wireless modem and router. With COX we don’t get a cable box and they charge a rental fee for the modem. The man said these aren’t promotional rates that are going to go up in one month. He explained AT&T is just trying to be competitive against the San Diego Mega-Cable companies like Cox and Time Warner.

Convinced that AT&T would be more bang for my buck I asked the guy for his card and told him I would give him a call later. I went back to my computer did a little more research and was sold that AT&T was a great value. I scheduled my appointment. The cable folks came out last weekend and installed our new cable and let me tell you…IT IS WONDERFUL! The cable box is amazing. I don’t need to record four shows at once, but its still a neat feature. The internet is WAAAAY faster than our old internet. Paranoid that there was going to be hidden fees or an upgrade that I wasn’t aware of I called AT&T and asked what my bill would be at the end of the month ….$99 the lady told me, but since we had cable and internet we got a $10 discount to bring out total bill to $89…just what the salesman quoted me. This is when things got really good. I asked the lady if she knew of any other deals that would be worth my while. This is when she told me that for $40 extra a month we could upgrade our cable to get a total of 400 channels. I politely declined. Then she said… “Oh wait I can get you the 400 channels and a $40 discount for 6 months making your bill total $89 a month.” I don’t need 400 channels, but if they’re free I’ll take them. I wrote myself a note to cancel the extra package in Dec. so I don’t get stuck with a higher bill. Oh yeah, and did I mention we get our fist month of service at no charge and a $100 check for signing up. All-in-all I will end up saving about $250 this year and will have a way better cable package.

My advice to you…. Check with other cable companies and see if you can get them to beat your current cable costs. They will almost always try and work a deal out because they want your business. If there are no competitors or you don’t want to go through the hassle of changing your cable company, at least call your current cable company and tell them you are going to cancel your service because you want to take your business elsewhere. They will offer you some type of benefit, maybe a cheaper bill or maybe just more channels and faster internet for no cost. Try it out. See if you can make your dollar work harder for you!

Take care,

Is your savings account costing you?

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It is not only possible that your savings account is costing you money, but it is highly likely! I searched for a while to see what percent of Americans have money in some type of high yield savings account (i.e. online savings account) but I couldn’t find any hard data. However, I would be willing to bet that the majority of Americans don’t have a high yield savings account and stick with the savings account at their local brick-and-mortar bank. Do me a favor right now…quit what you’re doing and look to see how much money you have in your banks savings account. If you can, figure out what the interest rate is on that savings account. If you can’t find that data, a safe assumption would be to estimate the interest rate is 0.5% or less. So lets play with some numbers because that’s what will hopefully make this real!!!

Lauren has $1000 in her WaMu savings account. First, I should commend her for at least having money in savings as many don’t even have that. But on to more important things. Pop quiz… How much does lauren have in her savings account one year from today? If you multiplied the 0.5% interest to her $1000 she would have $1,005 dollars at the end of the year…right? WRONG! Lauren would really have $970 at years end. But how can that be? Sure her account will show that her balance is $1,005, but you can’t forget to include inflation over that year. According to inflationdata.com the average for inflation is 3.43% annually. That means, although her original savings increased in number by $5 over the course of a year, in reality it would be equivalent to only having $970 in her account in todays money. If you are confused I will make this very simple for you. Lauren is paying $30 a year to basically keep her money in a bank that is making 5%-10% interest off her savings. The solution to this problem is a simple one that I’m sure most of you already know…High Yield Savings Accounts!

Go to bankrate.comto get an idea of what interest you could be earning on a high yield savings account. You should easily be able to earn a minimum of 3% interest, which will at the very least keep your money pretty close to increasing with inflation rates. I try to keep my blogs simple. If you want to look up more information on high yield savings accounts without getting bogged down by all the bank jargon go to this blogand check out all the information on them.

I’ll leave you with one more example of what your brick and mortar bank may be costing you.

Lets say Joe has $40K sitting in his local banks savings account. This is Joe’s Wedding Fund for when he gets married 5 years down the road. Let’s see what Joe’s money does over that 5 years. If he leaves it with his brick and mortar Joe will have approximately $41K in his bank account after the five year time period. Not bad, he made $1,000 bucks off it! WRONG!!!!! That $41K in “Five years time money” is really equivalent to only $35K in todays money. Basically Joe’s money is now worth $5K less than when he began. He could have gone on a SWEET honeymoon with that $5K, but now he will be forced to stay at a Motel 6 in Bakersfield, Ca. That sure doesn’t sound like much of a savings account to me.

So here is what you need to do. Keep some money in your brick and mortar savings account (I keep $300) so you can have access to it quickly in case of an emergency. Then throw all the other money that you are keeping for short term savings (less than 5 years) in a High Yield Online savings account…chances are your current bank may even have an online savings account option that has a higher interest rate than your current account! At the very least prevent from losing value in your money. Don’t put it off. Do it today open up an online savings account!

Be the solution not the problem,

Maybe its time for a second job…

As I have mentioned in earlier posts my income is by no means above average. I make $40k a year and am pretty much able to cover all of my living expenses, investment/retirement accounts, and have a little bit of pocket change left to play with at the end of each month. I currently max out my Roth IRA annual contributions and allot 8% of my gross income to my Government TSP (my 401K plan). Fortunately, since I work for the government I know exactly how much I will be making in one, two, five, and ten years as I am on a career ladder and I know exactly what my annual pay increases will be. I don’t plan to alter my investment account contributions much in the future (maybe a slight increase in my 401K contribution). The way I am investing now even at a meager 40K salary I will have millions waiting for me when I retire, with inflation taken in to account over the next 40 years I will still have plenty of money waiting for me when it comes time to throw in the towel. Like most renters, I hate the idea of throwing away my money in rent every month when I could be investing it in a home that I own. But with me contributing nearly 20% of my gross income in to my retirement accounts I dont have much left at the end of the month to put towards my “Buying a house” fund. There are three quick solutions to this problem…

1) Contribute less to my retirement accounts so I can save more for a house. Not really an option since my younger years are the most important time for me to invest to secure financial freedom in my 60’s

2) Get a job that pays more. Wouldn’t it be nice if life was that easy?! I love the job I have now and I like knowing that I will double my salary in three years with the government. Sure I would be open to jobs that wanted to pay me $70K+ now, but I dont anticipate that happening…its just not realistic, at least right now its not.

3) Get a second job. This is by far the most reasonable way for me to save for a house over the next 5 or so years. Fortunately, I am pretty good at math and science and have discovered most people aren’t. I decided to make my second job be in home tutoring for high school students. I get to make my own hours, charge whatever rates I want, network and meet some rich families (because thats who generally pays for tutoring), and I actually enjoy doing it. I currently charge between $30 to $40 an hour for tutoring. I tutor between 7 to 12 hours per week. That means I basically have an extra $1000 a month that I get to put directly in to my emergency fund and house fund. Its amazing what that money can do when all my expenses are covered by my government salary. I put it in to a high-yield online savings account where i can get between 3%-5% depending on current rates. With my tutoring income, and as I receive my pay grade increases with my job, I will be able to save between $50k and $70k over the next five or so years for a house.

So what about you? Do you wish you had just a little bit more money coming in every month? Why don’t you consider getting a second job? Even if you work at a mall 10 hours a week (two five hour shifts) and make minimum wage thats $3,640(AGI) extra dollars at years end! Go out there and pick up a second job doing something you enjoy once or twice a week and enjoy a couple extra bucks in your pocket each month!

Raise Your Potential,

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