Category Archives: Article

Is it okay to play the lottery?

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Here is one issue I see regularly on various Personal Finance sites. Is it considered okay to play the lottery? My stance on the issue is it is alright, but in moderation. Below I listed the various Pros and Cons and then I give my argument below.

Pros

  • So long as it’s money you don’t need and you only play every so often no harm should be done.
  • There can be an Entertainment value thinking of what if I win.
  • Several states use Lottery winnings to fund education.
  • It can be a social event like in an office pool and can lighten the mood.

Cons

  • You can have a gambling problem.
  • If you overspend you could end up in debt.
  • Is viewed as a “tax” on the low income.
  • Several views it as a way out of poverty and/or a way to fund retirement.

I’m sure the list could go on, but those are the main point from several sites that I have read. I do believe it’s okay so long as it’s what several other Personal Finance sites and myself call “fun” money. I will have cash on occasion to buy small items such as drinks and snacks. If I was to buy a lottery ticket it would just mean one less coke to buy.

Also, a part of my college cost are paid via a scholarship fund that is funded in part from the state’s lottery. Plus I have over heard several people doing “what ifs” such as “If I won the lottery I would by a new car” and would get all excited and would have enjoyment from the thrills of the possibility, however slim it may be.

Yet at the same time we’ve all seen on the news cases of winners loosing it all or of several people spending insane amounts on the lottery in hopes of winning. In cases like this or when it’s viewed as a means to get out of poverty, then one should not play. For as they say in the TV ads, “Remember, it’s just a game.”

Ideas for Staying out of Debt 5 – Budgeting the Babylonian way

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In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.

For those of you that have read The Richest Men in Babylon you know which method I’m taking about. This method is mainly for those of you who are in debt, but I’ll show you my modification once out of debt. For those of you that have not read that book the method is devised as followed:
  • 10% you save right away from each paycheck. The point in this is to have extra money that is yours outright.
  • 20% you divide between all your creditors. You would take out a piece of paper and write all your creditors in it and divide the 20% to all of them, pro rated. Just as an example, if you owe $250 to Creditor A and $500 to Creditor B you may make $375 which means 20% is $75. You would pay Creditor A $25 and pay Creditor B $50.
  • 70% is to be used on your living expenses. All your bills are to come out of here. You cannot dip into the 10% or 20%. For some people this will be hard, especially if your making minimum wage. Yet it also means you have room to spare once you’ve trimmed your bills down to this level.

The part that I find interesting that other Personal Finance Blogs talks about is saving at least 10% for retirement. While in this book they said to save 10% to invest safely. To cover this problem, I believe once your debts are paid off you should put the 20% towards retirement, that way you have money in the bank and/or investments, no debt, and your bills are getting paid.

Ideas for Staying out of Debt 4 – Extra Income

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In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.

This is one area I can speak about from experience. When I first started my business I made less then $1,000 the first year. I had no ads, no car, and I wasn’t sure if I wanted to do it. My primary income at the time was helping out at the family business, a steel yard and a farm. Over time I got my business built up till last year my business out earned the family business and I haven’t looked back.

Now, if you are in debt right now the extra income from a side business or just working longer could be used to pay it down quicker. Or you could use it to build up your savings. This way you will have more income to work with. Think about it, your in risk of going into debt with your current job. By adding an extra $100-$300 a month of income could mean the difference between scraping by or ringing up debt.

For short term debt such as a personal or payday loan then selling items you no longer use on eBay could help. Just make sure you properly describe the object and take real pictures, the buyer would want to see what it really looks like. But for the long term debt you would be better off ether working more hours (if possible) or even starting a side business. I started my business on the side and eventually now it’s my only source of income, after about 3-4 years.

No matter what option you pick, make sure you actually use the extra money to pay down debt. Once you are debt free, then you can splurge a bit, or save it up. Just make sure if you don’t already have an Emergency Fund, to set that up with the extra income first. After all, you want to make sure a bad tire doesn’t wipe out the extra bit you just paid down.

2012 Money Goals, 1st Quarter Expenses

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Expenses

As you can tell, March was expensive (Created in GnuCash)

  •  My Car – You should be able to tell that March was a bad month car wise. At the beginning of March a bad storm came to where I live at and it threw a plastic lid through my back windshield, and side window, and busted out another one. In addition I pay my insurance in 3-month increments and March was the month. In February you see a good month, less then half spent on my car, which is what I try to do.
  • Drinks/Snacks – This also include food along with when I go out to eat. Which I try to spend less then $60 on, but sometimes it doesn’t work that way since I’ll overspend.
  • Books – I am a college student and for the Spring 2012 term I bought all but one off of Amazon, but that was in December and a few didn’t ship until January.
  • Phones/Cellphones – Right now I pay around $50-$60 a month for my Prepaid Phone. In the past there was times I paid $70 and other times I would pay $20. But now it’s pretty predictable.
  • Other(s) – This is just a catch all for misc. items and to make the graph easier to read.

Budgeting

I used to be on a budget and part of it was savings. As you can tell from the last post, I haven’t been keeping up with that goal. Which the goals I had set are going to be the basis of my budget. I want to try to keep Drink/Snacks down to $60 along with trying to pay off my debt and increase my saving. But that will be a topic for another day.

Goals derailment, what if

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Even though I set money goals earlier this week, if I wasn’t to meet them I wouldn’t get to upset. I even expect a few to not be achieved this year. All it would mean is to try harder. Case in point, on debt I have been trying to not use my credit card, well I used it today at Subway.

The point of goals isn’t to set in stone events that must happen. Rather it is what I would like to happen. One goal I made was to have $20,000 in gross income from my business and after doing my quarterly Sales Tax return I can say I’m on progress. I was at the $4,500 mark which isn’t half bad in my opinion. It means I must try to beat that the next three quarters, but more on that later on in April.

Some goals I set for myself as a person I end up rolling over into a new year. Take the goal  of loosing weight, which is also related to spending less on junk food. I have had this goal on my plate for a few years now. Yet I will stick to the goal for a few days then I go talk myself out of it. I will say I don’t have the time and/or energy to and will slowly stop.

This is one area I need to change. I should start to care about my goals and not push them off. I need to hold myself more accountable and reward myself for meeting goals. The Subway today was a reward for progress toward the weight loss goal. I went on several small walks, ate fewer snacks, and drank less Mountain Dew. This is a personal weakness, I used to carry cash and would spend it all on Mountain Dew, leading me to stop using cash. As part of starting Staying out of Debt I will start using cash again, slowly.

Time will only tell if changing how I view goals will help. I am only a human with weakness, but if I am successful I will come out stronger and less in debt. I would like to hear from you what you do to stay on track. Just leave a comment below.

The one debt most people incur – Mortgage

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By the title of this blog many would get the impression that I don’t support mortgages. I do understand that they may be necessary. I have two different view points on this topics

View 1 – Take a Mortgage

This is the more traditional option. You generally pay a down payment of 20% and the rest is paid over 30 years. The only issue with this option is the amount of interest paid.

A $100,000 with a down payment of $20,000 would leave an $80,000 loan. At a 5% rate the amount of interest paid over the life of the loan would be around $74,600 according to mortgage-x.com. So now the house has costed around $174,600, in addition to the fees and charges of getting a loan.

View 2 – Save and pay cash starting small

To really stay out of debt you should start small. Where I live there are some fixer-uppers that are $20,000. Instead of having a down payment you own the house. During this time the payments you would have paid (about $400) could be put in savings. After five years you would have $24,000 in savings. If your house didn’t loose much value you could now upgrade to a $40,000 house, assuming you wanted to. Another five years and the same story, now we are up to over a $65,000 house. You can see where I’m going. About seventeen years after buying the fixer-upper you can now have the $100,000 house without a loan.

Positives and Negatives of each

View 1

Pros

  • Start out in house you want
  • Take interest deduction on taxes

Cons

  • Pay out almost as much in interest as the loan amount
  • Paying bank for 30 years
  • Could become upside down on mortgage

View 2

Pros

  • You own house outright
  • No interest paid, you get interest from the saving account

Cons

  • You don’t start in your dream house
  • The value of the “step houses” could tank

This is over simplified but the big issue with View 1 is the interest paid and the big issue with View 2 is the value of the houses you buy in between the two could tank. One Potential solution is to stay in the starter home, so there isn’t to much to loose.

While other people may chose renting, it is a personal choice. While I cannot blame someone for picking View 1, I am going to try View 2. I would like to know your personal opinion. Which view would you prefer, or would you rent?

Ideas for Staying out of Debt 2 – Make sure to save

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In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.

This is one issue i cannot stress how important it is. If you do not have money saved back at all ether as a buffer or as a separate account and disaster hits, how will you pay for it? But anyone who has read any other finance site should know this. Yet how many of us do this? I myself have been very bad at doing this, and the results are never good. But when money is in my account it is good. Take something recent that happened, my windows got broken. There was a bad storm and my back windshield and two side windows both were broken. At the time I had money to cover it and I could just write a check and pay for it. But had I not had any money in my account, it’s likely I’d still be driving around with broken windows.

So how should you save? This is really an opinion question. What works for one may not work for someone else. I’ve read about automating your savings and I even tried it, but for me being self-employed one month on the scheduled date there wasn’t enough and I haven’t used it since. But for someone on a regular job this would be an excellent way to start saving. You would start with say $5 or $10 a week and just slowly increase it till your at your comfort spot for where you want your savings to be. (Topic for another day)

Another way of savings which is what I do for taxes is every single time you get paid, save a percentage of that pay before you have a chance to spend it. Which for me has worked out great, come quarterly estimated tax payment times I’ll have no issue sending it in. But I only did this after realizing my flaws with not moving the money out. I would believe my business was doing good and blow it on stuff I didn’t need. Then when it came tax time (about now) I would freak out and be angry at myself for not putting the savings in a savings account.

While for some people, they may not need a savings account. I personally know people who will keep a buffer of a few thousands and this works out great for them. Just try out different approaches till you find the one that works. I know before automated savings were popular some would make their own “payment slips” which would be a deposit slip with the amount already written and would mail it to their bank like it was a bill. Which I tried that method and it worked out good for a targeted savings goal. Once you find what works for you, just stick with it, do not one month forget about it and say oh, I can make it up. If anyone is like me, they never will make it up.

Ideas for Staying out of Debt 1 – Don’t buy unneeded items & services

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In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.

As the title states, do not buy items and services you don’t need. I myself have an issue with this as a consumer. It’s just so easy to spend money on items you think you will use/need. Take electronics for example, I’ve spent countless dollars on items and after a few weeks, I no longer use it. I’m sure you the reader knows of a few items you’ve over spent on. And I myself find it way to tempting to spurge on new(er) items. Electronics are a big one for me as I do Computer Repair and will go overboard.

Same for services also, although you can expand this more by getting your money’s worth. The classic example is insurance, but this topic has been discussed to death in many other blogs. Instead focus on other aspects such as how can I reduce the cost of needed repairs which The Simple Dollar did a post on this recently. I have to agree on trying to reduce the cost myself. Just recently the back lights on my Ford Explorer went out and while several people in my family would just go to a shop , I just went to Advaced Auto and paid $4 for the bulbs. After about three tries I got the bulb replaced.

In the end what it comes down to is are you getting your money’s worth and time’s worth. I used to play the GameCube when I was younger and I got my money’s worth for less then a fraction of a penny per hour for all the hours I would play, along with only getting games at the $20 or less mark. While for services I have no issue paying for an oil change as I know nothing about how and I can walk to work so I’m out no time.

feel free to drop a comment on what you have gotten your money’s worth out of or what tasks you would pay others for.

What is Staying out of Debt?

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First thing first, I need to lay down the purpose of this site. This site is mainly for informative purposes. All information given on this site is at your own risk, every situation is  different.

What this site is:

  • A blog for my financial failures/successes
  • A resource for financial tip
  • And a place to post random information I may find

What this site is not:

  • A political blog (Ok, some politics just in relation to finance, but nothing else)
  • Financial Advisers  (I’m not a professional, my specialty is computers and business

I also plan to use this site to track my financial progress. I plan on posting at least three times a week for the first two months and see how I go from there. If it takes off I will post more, if not then I will close this site down in a year. I enjoy the readers questions from The Simple Dollar and I also enjoy how JD Roth from Get Rich Slowly would post about his personal finance and his debts and if I’m correct he even posted records showing his debts.

Welcome to Staying out of Debt. I hope you enjoy it here in the coming months. Just post a comment and tell me what you would like to read here. I plan on posting my idea for getting out of debt in the coming weeks.