Archive for the ‘money really matters’ Category

DOES PACKING LUNCH REALLY WORKS?

May 19th, 2009 Vijaianand

You hear this slogan very often these days in many websites and blogs. The matra is strong and clear, “PACK YOUR LUNCH“. I am a full supporter of this saving money strategy and the idea works great to save good amount money of your money which can help fund for your kids education over the years.

Are you jealous of Indian collegues who works with you bringing lunches from home everyday? Let me reveal the truth behind it. First, their wife don’t work so they cook very good food. Secondly, they are money conscious folks who like to save and finally they are used to carrying lunch packs from their school days. It becomes a habit over time so they don’t like to eat outside very much.  If you can try packing lunch frequently, it can become a habit which is good for your health and as well for your pocket.

What do you exactly mean  by “Pack your Lunch”?

Packing your lunch doesn’t have to be a time consuming task. Many of you think packing lunch means preparing the lunch in the morning and pack when you are trying to hurry and get to work on time. It is surely not going to happen and you eventually loose the interest of packing lunch.

No, you don’t have to prepare and pack the lunch fresh all the time. It not about preparing fresh food for lunch which is just one motive. Pack your lunch just means bring lunch from home saving the expense of spending outside. It can be a healthy frozen food which you bought from grocery stores, home made leftovers, freshly made salad or quick sandwich. It can be anything which makes you savior and satisfy your hunger during lunch time. If it doesn’t satisfy you, you will again go towards searching for junk food.

How do I start?

You can start by doing few days a week so you don’t miss out on your restaurant or fast food. By starting slow, you are making a smooth transition helping your body to get used to this new habit. This way, you avoid any upset effect to your body. Just start with leftovers  2 days a week like Monday and Wednesday. Then add one day per month until you are satified with your arrangement to have 5 days from home or keep friday as a going out lunch day.

I bring lunch 3 days a week – 3 day left overs, 1 day frozen food and 1 day submay 6 inch sandwich. Once a month, I go out with friends on friday.

Why many don’t like to pack their lunch?

Many people think that packing their lunch is a shame and crime. They don’t want to heat up or make their food for lunch. They just want to be fed. They also think, it shows your are frugal. Let me tell, there is nothing wrong being frugal. You only should avoid being cheap. There is a lot of difference between being frugal and cheap. According to dictionary.com, frugal means  “prudently saving or sparing; not wasteful.”  cheap is defined as “stingy; miserly.”

I know its more wordy explanation. To be simple in my terms, frugal people spend rightly(for needs), save wisely(for wants) and give graciously. But cheap people, they don’t like to spend even for their needy things. Even if they spend, they tried to save money buying cheap items. They also don’t

So being frugal is not a bad thing at all. Don’t give silly excuses like others here in the website.

Is it really worth packing my lunch?

Yes. It is really worth saving time, money and your health. You save time atleast an hour going out which can be spend efficiently. It helps you to eat healthy and good. Finally the important factor, saves you money. Even if you go out for lunching in cheap chinese buffet, you end up paying min. $10 with tips. For 5 days, its 5 * 10 = $50/week * 4 weeks = $200/ month * 12 = $2400 a year. Thats apx 3-5% of your gross yearly income.

If just reduce to start going out only once a week, it will only cost you $40/month and $480 a year which is a saving of $1920. Thats a good amount to be save up for your kids education or put away for retirement. You can check out how much you can save by packing lunch using our calculator.

If you are bored of getting lunch everyday, you can try going to sandwich place like Subway  once a week. Subway now offers $5 foot long. You can save $2 by bringing your own chips and drinks by buying it bulk from Walmart or wholesale stores.  

If you a reasonably family of 3 or 4, you can consider becoming a member in wholesale clubs like SAMS or COSTCO. Costco is my favorite because of its Quality products and reasonable price range. You might have to pay the membership of $50 but you will sure end saving 2-3 times of the membership cost or even more every year by buying things in patties, sandwich buns and so forth. Be careful and don’t get tempted to buy new items introduced every week in these clubs. 

Food is an important entity in our life which we tend to spend money every day. So it is easy to spend wisely and rightly and see quick savings at this tough times, helping to keep more money in your bank account. 

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Posted in Frugal, money really matters, Saving Tags: , No Comments »
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Stimulus Bill 2.0 & Taxpayers Tax Credits and more – Part 2

April 15th, 2009 Vijaianand

Last week, I started the blog series on Stimulus 2.0 Tax credits. I talked about the first and foremost Tax credit which tax payers should take advantage in their 2009 and 2010 paychecks. Next is the Home and Car Buyer Tax credit.

Home Buyers Tax Credit

To boost the housing and auto industry, this 2nd stimulus package has come out with modest tax break for New home buyers and car buyers.

If you’re in the market for a new car or your first house, the compromise stimulus bill offers modest tax breaks for both kinds of purchases.


First-time home buyers would receive an $8,000 tax credit or upto 10% of their home value, and they wouldn’t have to repay the government later as is required for the last stimulus bill $7,500 credit if they stay in that home for 36 months at least. An earlier Senate proposal would have provided all home buyers with a $15,000 credit which was later cut down to $8000.


According Mark Zandi of Moody’s Economy.com to USATODAY.COM, The home buyer tax credit is a plus for the housing market, but only a small plus.”. “The credit … covers only a part of the down payment needed to make a purchase.


The housing market will take any help it can get, but it needs more.” Other economists point out that the tax credit will still provide a mild jolt to the market by encouraging home purchases, which in turn should help curb the rapid rate of home price declines. It is expected to induce more home sales in 2009 and this will be an important support for the housing market and the housing industry. It should also buffer the rate of decline of home prices.


Vijai’s 2cents:


A tricky tax credit to tackle the new home supply and demand problem in a way to stabilize the housing industry. As the demand increase and supply decrease, the price equilibrium should shift upwards stabilizing the drop in home sales. It is a good tax credit to help many tax payers who been thinking about getting a new home. People who have a home in their to get list is now thinking about really getting one with free money coming from government. It comes with few caveats.


Caveats:

1. It is either $8000 or 10% of your home purchase price. If you buy a home for the value $100k, you can only claim the maximum of $8000.

2. It is only applicable for first time home buyers whether you are single or married who never owned a primary residence in the past 36 months.
 
3. Only homes purchased on or after January 1, 2009 and before December 1, 2009 are eligible.

4.The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return.

5. It is a tax credit you can either claim this in 2008 return by filing an extension if you already filed 2008 return or you can file in 2009 tax return.


I see lot of people wanting to use this $8000 asking for suggestions in many finance forums. I am telling them, Don’t rush it. If you are getting something for free, it doesn’t mean you have to risk your financial health. It is similar to having a pill for a temporary relief without considering the longer term side effects.


Please don’t rush into getting a home whether are qualified easily with a good credit score or not. Take your time, analyze your financial situation to decide whether you really can afford it in a long run.

Ask yourself some practical questions like,


1. Can I pay monthly mortgage and yearly insurance?
2. Do I have a steady job or expecting lay off?
3. Do I have a 3-6 months worth of funds to cover my expenses including mortgage?
4. am I ready to spend some extra dollars every month for home maintenance?


If you can answer these questions in a truthful way without convincing yourself, you might be able to use this credit to get a good home and help the economy.

Check out for more details at http://www.federalhousingtaxcredit.com/

Car Buyers Tax Credit


This bill would allow new car buyers to deduct the purchase’s sales tax from taxable income.  But Ever-increasing credit score requirements by lenders, and slipping consumer credit ratings take many potential buyers out of the pool as per many analyst.


Vijai’s 2cents:

We all know US auto industry is a total mess. General Motors, largest of all in the verge of announcing bankruptcy and becoming Government Motors. With this bill,  Government is hoping to help the auto industry in large by increasing the sales.

Let us say, if you are getting new car which is $25,000 and trading in your old own for $10,000. Most states typically tax the difference of price which is $15,000. A 8.25%  sales tax in the Houston, Texas would be $1238. It is amount that would be reduced in your taxable income. It is similar to $1238 refund from IRS which is a good junk of money.

Many of you might ask,  we already have this provision to deduct our sales taxes in Itemized deductions. What is the difference now? That is true. Texas and few others states don’t have income tax and we have the option to get our sales taxes deduced from Itemized deductions Sch – A but other state residents most likely use to deduct their Income taxes. But this bill is different. It is a tax credit not tax deduction and it is available for all the states and will reduce the taxable income. Check out the previous post to understand the difference between tax credit and tax deduction.

But real question, how many people are going to buy US made cars compared to foreign cars. I am not sure how this will really help US auto makers but it will surely help your pockets to put some money back. If you are thinking about getting a new car, this is the right time. You also don’t have to worry about getting a hybrid car to avail this credit because that is  totally different credit.

We will see Energy Tax credit and others in the next blog post.


Some content are taken and modified from usatoday.com

Posted in Economy, Financial Literacy, money really matters Tags: , , No Comments »
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Be your own Financial Planner

January 29th, 2009 Vijaianand

In my last post, we saw how Goal Setting works better than Resolutions. I also promised to show, how Goal Setting Techniques works better in achieveing your financial dream. Let’s start with a quick check on your stand with money and move on setting some new goals, draft realistic plans and try to reach them by taking some action to make this year a fruitful one. 

Self assess yourself by answering these 3 questions below and figure out where you are in regard to financial planning.  Say “YES” if you have an answer or NO if you don’t have an answer or don’t know anything about the question.

Do you any personal financial goal like buying a new car or home? 
Do you have a Budget in place to track all your income and expenses?
Do you have a Savings Plans to grow your money?

If you said “Yes” to all of these questions, you are really way ahead of many people. If you said “No” to all them, its better you start thinking about them, now as it’s the right time.

Set/Revisit your Goals
When comes to selecting and Setting goals, Try to set SMART goals. These are goals that are Specific, Measurable, Achievable, Relevant, and Trackable. For example, you may want to create an emergency fund in six months to have 3-6 months worth of your salary.


Allot a specific time. Sit down with a pen and paper or your computer. Start listing your goals, dividing them into three categories: short term, medium term, and long term.

• Short-term goals might include buying a new computer, or paying off credit card debt.

• Medium-term goals could be purchasing a car or going back to school.

• Long-term goals might be to buy a home, saving for your kids education or retire with enough money to live comfortably.

At the end, make sure you prioritize the list. Which ones are the most important to you? Which ones can wait? 


Define a Plan
People don’t plan to fail, they usually fail to plan. If you want to go to a place, you better know your directions, otherwise you are sure to get lost. It is as simple as that. Similarly, if you have set your goals, you better work on a clear and concise plan to reach them. Let’s define a plan by taking a simple goal.

The goal is to buy a home in 3 years with 20% down payment. That’s a SMART goal but to get you there you better draft a sound plan. In this case, you need to know things like:

Target Amount: Amount needed for the goal using today’s dollars. If your goal is to make a 20 percent down payment on a home valued at $100,000 today, you would need $20,000 for the down payment.

Target Dates: Enter the year or date when you want to reach your goal, say 2011.

Start out Amount: If you have $10,000 saved in a money market account, you may decide to allocate half of it to the down payment. In this case, you would write $5,000 under Current Assets.

Gap: Indicate the gap between the cost of each goal and the assets you have allocated, in our example $15,000.

Number of Years to Target Date: Enter the number of years between now and your target date, which is 3 years.

Amount to Be Saved Each Year: Divide the difference by the number of years to the target date. That amount you need to save each year to reach your goal is $5,000 a year.


Coming up with $5,000 for a year might be a tough deal. Try to split it monthly. You can then start a savings plan to save around $420 per month to get to $5,000 a year. The next and important step in the financial planning is executing the plan.


Ready, Set and Go: Take Action

“Wisdom is knowing what to do next; virtue is doing it,” said David Starr Jordan.

Making up goals and plans is just 20% of the challenge; executing them is 80%. In our example, you have the goal and plan to be ready to buy a house in 3 years with a 20% down payment.

How are you going to implement the plan if your financial situation is already tight? The first step is to analyze your current income and expenses to see where your money is going and what can you scale back. Start a simple budget to track your income and expenses, going after expenses which can be easily cut without affecting your lifestyle to achieve your monthly savings goal. Open a savings account or an add-on CD to put away a fixed amount every month. Or setup an automatic debit from your checking account to this savings account. This way you don’t have to do it manually.

Finally stick to the plan rain or shine and you are sure to reap its rewards. 

Posted in Education, Financial Literacy, Financial Planning, money really matters Tags: , , No Comments »
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