Tag Archives: Savings

Financial Lesson For My Son – Savings

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A few months ago, around my son’s birthday, I tried to teach my son a financial lesson about savings.  Unfortunately, it was foiled by birthday money that he received.

For the past few years, my son was spending a lot of his allowance money on pokemon cards.  A few times he got disappointed because he wouldn’t have enough money to buy other things like Nintendo DS games, Legos and the like…  Of course, I would explain to him why he should save his money, but when we would talk about the interest gaining aspects, he never quite grasped the idea or at least he didn’t  until a few weeks ago.

You see, my son has converted from an impulsive spender to a thoughtful saver!  While I’m not entirely sure what brought out this change other than the example that my wife and I set, I’m impressed!

So yesterday, I decided to try to explained the financial lesson on savings again.  I pointed out how the interest gains can work with his saving dollars.  He understood the idea of interest this time around, especially the geometric (also called exponential) growth aspect.  When it’s my daughter’s time to learn this lesson, I think I’ll create a “what if analysis” spreadsheet as a fun interactive visual to the lesson!

My Son The Budget User?

My son created a type of budget journal!  It actually more like a checkbook balancing kind of journal, but he created it by without any help from adults!

The most important thing is showing encouragement for both this new activity, “Savings“, and the newly created system that my son created to help accomplish his new savings habit!

I created excel process to help me with my finances all the time.  Do you use spreadsheets or other such document to give you a leg up on finances or other decision-making processes?

-MR

Shout Outs:

My Yakezie Membership Post! – Want to know more about my background?  Check out my membership post at Yakezie!

 

Roth IRA Emergency Fund

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I don’t have a traditional emergency fund, so I decided once my mortgage is paid off, I’m going to use part of my previous mortgage payment savings to fund into my Roth IRA as an emergency fund.

My Roth IRA previously was used just for active trading in a few high beta stocks.  This was my “play the market” fun money.  I had a great time with it, and I did okay until the “Great Recession” hit.  Most of my Roth IRA money was and still is in solar and Chinese stocks.

Roth IRA Emergency Fund Plan:

I’m going to take 25% of the money that I’ll be saving by having my mortgage paid off in February 2010 and start to funnel it into a money market or bond fund in my Roth IRA.  After a few years, when the fund hits $15,000, I’m going to change my percentage ration to a smaller ratio.

Why am I doing this, you might ask?…

The Money Reasons 🙂

  1. Any interest or dividend received grows Tax Freeeeeee
  2. If I sell a security, and incur capital gains, they are also Tax Freeeeeee
  3. I can withdrawal my contributions to the Roth IRA without any penalty.
    1. Since the money has already been taxed, no taxes apply!
    2. No age limit applies to the contributions either!!!
  4. It’s simple to get to the money!  As long as I don’t tap into the earnings…

I will have to make sure if I withdrawal money in an emergency to only withdrawal what I contributed.   So I keep track of my contributions in a separate spreadsheet.

I’ve seen some advice about this not being the best route to take because of lost future gains.  But currently, the amount that I’ll be contributing will be above and beyond what I’m currently contributing.  By doing this, I also get to take advantage of a great legal tax loophole!  Plus I’m max out my Roth IRA contribution amount allowed by the government (currently 5,000 + inflation).

Using a Roth IRA is one of the only ways to get the interest rates that so many books and blogs reference.  After all, regular brokerage accounts get hit with taxes…

What  do you think of my plan?

MR

 

Carpooling to Save Money and Reduce Gas Prices

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During the winter of 2008, I was amazed when gas prices crept over $3.50 a gallon (not to mention when it went over $4.00).  When this happened, I asked a buddy from work if he wanted to start car pooling.  We have the perfect scenario, he only live 2 miles from my house, and his house was on the way to work for me.

The arrangement was, we would alternate weeks of driving, so for first week, I drove, the next week he drove, then me, then him…

My Benefits from Car Pooling:

  1. Lowered my monthly gas spending from $180 to $90.
  2. Reduced the wear and tear on my car by 1/2.
  3. I did my part to try to reduce oil prices by car pooling.
  4. I cut the carbon emissions I produced by half.
  5. Cut down on traffic on the highway by 1 car.
  6. Freed up 1 parking spot at work (our lot is pretty full, or was…).
  7. It’s nice to ride some mornings, instead of driving.

Once the gas prices fell to the low $2 range, we stopped car pooling at that time because of conflicts in schedules.  However, if prices creep back up to the $3.50 or higher, we said we would start car pooling again.

Near the end of our car pool trips, we both started telecommuting once a week, and that was even better!

Below is the ultimate solution to high gas prices, if the weather and distance permits (which in my case, it doesn’t).

Don

Update, I forgot to add a few additional benefits:

  • If you’re in an accident, you have a captive witness (unlikely, but still nice).
  • Forces you to adhere to a more strict timetable, you don’t want to be late or pickup your buddy late.