Yearly Archives: 2009

Spot Budgeting To Save Money For A Goal Fund

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First, let me say, that I’ve always admired people that create budgets and could follow them to the T.  I’ve actually tried to create a budget when I was in college, but it’s never worked out for me. There was always something that would pop up that I didn’t save the receipt for.

Surprisingly, while doing my Breakfast/Lunch experiment, I “out of the blue” realized that my experiment is really a form of budgeting.  I decided to call this type of budgeting “Spot Budgeting“.

Here’s how “Spot Budgeting” works for me:

  • First, every monday, I clip 5 sheets of paper I recycled together and use them as a log for things I do at work.
  • At the top, I add Breakfast and Lunch cost to these 5 sheets, 1 entry for breakfast and 1 for lunch on each sheet.
  • On Friday, I add up the total cost for breakfast and lunch, then I do the following calculation:
    • Is 60 – (weekly breakfasts + weekly lunches), greater than 40?
      • If 60 – (weekly breakfasts + weekly lunches) is greater that 40, then I pay myself the full $40 dollars for an allowance.
      • If 60 – (weekly breakfasts + weekly lunches) is less that 40, then I pay myself the amount that’s less than $40 dollars.
      • The following week I’ll make it up by not eating out for lunch as much.  Then I’ll pay myself the amount over $40 dollars that I didn’t spend.
  • Since I’m adjusting and tracking this weekly, I don’t do any monthly or yearly budgeting comparisons (this makes it simple).
  • Since it a weekly comparison, and it typically only involves 20 entries (only 2 a day) to log per week, it’s very simple and quick to do.
  • If I want to calculate my yearly savings, it’s just (40*52, which is $2080)
  • That’s it…  My budget is just for Breakfast/Lunch and during the typical workweek only.

Now my next stage is to take the money I save by budgeting and put it into a dividend yielding stock (etf, bond, mutual fund or whatever).  Then use the dividend paid by that investment to increase the amount of money I have for lunch.  See my attached spreadsheet table below:

So after 3 years of saving, I can afford to buy another cheap lunch per week, while I’m at lunch… so instead of 2 days out for lunch per week, I’ll added another lunch out with the guys after every 3 years of savings.

My view on the “Spot Budget” is that you are no longer paying for the lunch out of your earned money, but instead using the money from your investment dividends.  So after the 1st year of investing the money, this will effectively be my “Lunch Fund”.

To speed up the savings, I also add “Additional Savings” to my “Lunch Fund”.  The “Additional Savings” could come from bonuses, part of my tax refunds, etc.

Additional Main Adult Total Yearly Amount & Interest Monthly Weekly
Savings Savings Allowance Contributions Interest Interest Rate Earnings Earnings
2009 1000 2080 3080 3,080.00 $154 3,234.00 5.0% $12.83 $2.96
2010 2080 2080 5,160.00 $258 5,418.00 5.0% $21.50 $4.96
2011 2080 2080 7,240.00 $362 7,602.00 5.0% $30.17 $6.96
2012 2080 2080 9,320.00 $466 9,786.00 5.0% $38.83 $8.96
2013 2080 2080 11,400.00 $570 11,970.00 5.0% $47.50 $10.96
2014 2080 2080 13,480.00 $674 14,154.00 5.0% $56.17 $12.96
2015 2080 2080 15,560.00 $778 16,338.00 5.0% $64.83 $14.96
2016 2080 2080 17,640.00 $882 18,522.00 5.0% $73.50 $16.96
2017 2080 2080 19,720.00 $986 20,706.00 5.0% $82.17 $18.96
2018 2080 2080 21,800.00 $1,090 22,890.00 5.0% $90.83 $20.96
2019 2080 2080 23,880.00 $1,194 25,074.00 5.0% $99.50 $22.96
2020 2080 2080 25,960.00 $1,298 27,258.00 5.0% $108.17 $24.96
2021 2080 2080 28,040.00 $1,402 29,442.00 5.0% $116.83 $26.96
* The idea here is to pack food, which saves money and to pay my allowance out of that money

This is my first “Goal Fund”, eventually I plan on have other “Goal Funds” that will pay dividend for other goals, perhaps vacations, taxes, etc.

Well, this is my evolution of my lunch experiment into a Lunch “Goal Fund”.  I’m kind of excited to see this come to fruition!!

Goal Fund for lunch

Goal Fund for lunch

– D

Saving Money Using Google

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Google is great for searching for your favorite topic of interest, but did you know you could use it to save money too?

Last Feburary, my dryer started making a horrible metal grinding sound (I tried turning up the TV to drown out the sound, but it got louder). I didn’t want to buy a new dryer (these are hard time afterall…), so I decided to try to figure out how to repair it myself via google.  So for the search criteria, I entered “whirlpool dryer squeak” and I was able to find some good site on what the problem and how to fix it.  I like to put just the key words in the search windows.

I tried to type things like “whirlpool dryer is making a squeak sound“, but that wouldn’t give me as good of results as “whirlpool dryer squeak“.

I didn’t even know how to get the dryer apart to figure out the problem… until I googled it. It turned out to be the felt gasket, that the drum twists around over. It cost me $20.00 in total to fix the dryer.  I ordered the part (off of ebay), and install it. Normally, to get a repairman out, it would probably cost me at least $150 to $200 and they would do exactly the same thing that I did myself.

I’ve been able to do this with my car brakes and with other car repairs too.

During one of the coldest days of last winter (-10F), my heat pump decided to stop working.

Using google, I was able to quickly figure what the problems was, but I didn’t have time to order the part. From a few websites, I was able to determine what to do, and I was also able to determine that the part would cost me only $26. Unfortunately, I didn’t want my pipes to freeze, so I called a repairman so they could get it fixed that day.

The repairman did exactly what the websites stated to do, but instead of costing me $26 by doing it myself, the repairman’s fee cost me $234.

The moral of the story, the internet (using google to find a fix-it guide) is a great resource for saving money by diy (doing it yourself).

Google rules!

-MR

Benjamin Franklin – Financial Hero

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My post today is about Benjamin Franklin (this sentence kind of reminds me of the start of a school speech, heh heh).

Young Ben

Benjamin Franklin

While he did provide some excellent financial advice in his “Poor Richards Almanac”, Benjamin Fraklin is my top financial hero for the following reasons:

List of reasons why Benjamin Franklin is my top financial hero:

  • Benjamin was born into a working class family and where he was the 15th out of 17 children.
  • He went thru a few different apprenticeships before settling on the printing profession!  Originally, he was destined for the church, then he had a short apprenticeship as a candle-maker (with his dad), but he didn’t like that.  As a Printer, he ran way from his first apprenticeship (it was to his older brother James).  The printing business was a business that Benjamin had great passion about.  There are stories of how he submitted stories to his brother James newspaper, under the pen-name of Mrs. Silence Dogood.  Using Mrs. Silence Dogood, he achieved this first brush of anonymous fame.
  • He only have 2 years of formal schooling (not that this was uncommon for the time…)  He actually said in his autobiography, that he failed at arithmetic.  But grammar was his passion and strong point.  Benjamin was self educated, but also got a lot of education from his father (who was also self educated).
  • Ben, later worked on his short falling and other deficiencies.  Ben later at age 16 went back and self taught himself arithmetic, and geometry too.
  • Benjamin, wasn’t a perfect kid.  Apparently according to his autobiography, he got into a small amount of mischief.  Luckily, he grew out of this… or did he?
  • Benjamin was a do-it-yourselfer. Apparently, his dad took him to see other workers, in an attempt to find an apprenticeship that Ben would like.  A side effect of this activity, was that Ben could fix small jobs himself.  He also developed an appreciation for the other working men of that time.
  • He treated other equally, no matter how much wealth they had.  As Ben became rich from his business, he still treated all people with respect and would hold conversation with them in addition to the more literate in his society.
  • Benjamin worked hard and became rich thru this own efforts and his ability to make people believe in him.  Being brilliant isn’t enough to be successful at a profession.  Both Warren Buffett and Bill Gates (the 2 rich men in the world), display the diverse skills that Ben first displayed way back then.  Ben got investors to invest in his Printing business, just like Warren and Bill Gates did in their beginnings.
  • At age 21, Ben organized a social meeting group called Junto!  This was a diverse group of individual that would meet every Friday evening in an attempt to better themselves and society.  The group was also called “Leather Apron Club”.  I think this would be pretty cool to have today.  Although with blogging, you kind of get that today  albeit in a different form.
  • Ben did things differently.  He believe in equal right for women (controversial for the day), lifted weights (when he was younger, I’ve never hear of someone back then doing this activity), swimming, scientist, etc.
  • Ben was an expert at seeing opportunities, and creating opportunities at work.

Ben didn’t get rich with his inventions (at least not the ones we are familiar with).  He really only get heavily involved with investion after he retire at 42.  And at that point, he was extremely rich.

The thing that impresses me the most about Mr. Franklin, was his tenacity…  If you read his story, it’s a story of overcoming problems to become extremely wealthy, and quite literally helping to create our country as it is today.

I attribute much of Ben’s success to his parents, and the way his father tried to find Ben an apprenticeship that Ben would be content with.  Most kids back then didn’t get that luxury.  Apparently, his dad also was respected, and people would ofter stop by and ask Ben’s dad for advice.  Luckily Ben was permitted to listen in on these conversations.

Anyway, this is why Ben is my financial hero.  If you get the chance, listen or read his autobiography, and any other book on him.

Wiki on Benjamin Franklin

Click here for a unusual Franklin Trivia link

A Stock Market "What If" from My Youth

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From the time I was 5 years old to about age 18, I had an uncle that would buy me shares of stocks every year for birthdays and Christmas.

DuPont Stock Certificate

 

He was pretty good at it.  By the time of the start of my junior year, the portfolio was worth about $15,000. Unfortunately, I was short on cash for my final college years, so I cashed in most the stocks so that I could paid for my remaining years of college. I still had some money left over, so I put the remaining cash in a savings account that I would mostly use up for rent.

Lately, I’ve been wondering how much that money would be worth if I just left it alone.  By my calculations, it should have worth more than $30,000, and maybe even close to $40,000.

Even though the money went to good use, it was nice know that I had that money.  Some days, I play devil’s advocate and regret using it, always asking “what if”…

I think it was great of my uncle to be so generous and wise.  I’ve taken my uncle’s lead and investing small amounts of money in the stock market for my kids and a 529 program. Hopefully, they will be more wise with their money than I was.

– D