Lazy Man and Money

Six Recurring Costs You Can’t Afford to Cut Out of Your Budget

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It’s tough when you’re struggling to pay your bills each month on a salary that just doesn’t cut it. In this situation, you may be tempted to cut corners on almost all of your recurring monthly bills to help make ends meet. Trimming your monthly budget is a smart idea, but you don’t want to go overboard and cut out things that could end up costing you even more later on down the road. Here are six things you should always make room for in your budget to help you spend less over a longer period of time.

1. Retirement Account

The first recurring cost you should keep in your budget is for a retirement account. Some young people who don’t make very much money in the early stages of their career avoid the investment into their retirement because it’s so far away. This strategy can lead to financial disaster during your vulnerable senior years. Instead, make a plan to open up a small retirement account and start small. Even a few dollars each paycheck towards retirement can help you build that future nest egg.

2. Health Insurance

Health insurance is another thing everyone should make room for in their budget. If your job doesn’t offer an employer-sponsored health plan, it could be expensive to purchase your own individual insurance through your state’s marketplace. Despite this hit to your budget, it may be even more financially devastating to go without insurance. One serious health incident or accident could wipe out your entire savings or leave you in heavy debt for years.

3. Nutritious Food

Good food is another important thing to prioritize, even if it runs a little more expensive than you like. Instead of running to fast food restaurants or choosing frozen entrees for dinner each night, opt to purchase high-quality fresh foods, such as local produce, lean cuts of meat, and wholesome ingredients. Then, invest some of your time into meal preparation each week so you can stretch your ingredients into several healthy meals over the week. At first, you may be paying a bit more on your grocery bill, but over time, your health and overall well being should improve.

4. Good Car Insurance

A good car insurance policy is another essential you should never cut out of your budget when money’s tight. If your dollars are being stretched too thin, talk to your Dallas local insurance agents instead of cutting back on your coverage. Lowering your coverage could leave you and your car vulnerable to accident damage and the high costs of repair or medical bills. An alternative is to work with your agent to get a lower rate or a discount.

5. Emergency Fund

Putting aside some money each month for an emergency fund is another smart idea for any size budget. In many cases, people who live paycheck to paycheck can’t afford to take out a large lump sum for an emergency fund. One idea is to take out a few dollars each month and build your emergency fund over time. This way, you won’t be in a panic if you suddenly get injured at work or lose your job.

6. Renters Insurance

Finally, the last type of cost you should always have room for in your monthly budget is a renters insurance policy. If you’re struggling to pay rent each month, this may seem like a silly idea, but you’ve also got to consider the costs of replacing everything you own if something terrible happens. Fire, theft, or other disasters could wipe out your entire life if you don’t have the safety net of an insurance policy.

Having a limited budget means you need to be selective when it comes to your monthly costs. Avoid the temptation to cut out these important items so you can start to build a healthier financial history for the future.

Planning for the End of Days

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[Today’s guest post comes from Kosmo. I’ll warn you in advance that is a little different from what you’d normally read in this space (I’ve given some thoughts about that at the end). When Kosmo isn’t giving horrendous advice, he’s steering the ship over at The Soap Boxers and spinning up new fiction tales. You can find his Kindle books on Amazon.]

Most of you know that the world will end on December 21, 2012.  Most of the world is hunkered down in cold war era bomb shelters, in a futile attempt to remain alive through the end of days.  The smarter people are seeing the end of the world as an incredible opportunity.  Here are tips on how to take advantage of the imminent destruction of the earth.

  • Three words: cash out re-fi. Home equity? Is that really going to be important when the earth is just a smoldering core? Get your grubby hands on all the cash you can find.
  • Raid the retirement funds and your kid’s 529 plan while you’re at it. Hey, we both know the kid’s going to struggle to make it out of second grade – time to rid yourself of the delusions of grandeur and make a profit at the same time.
  • Job? What job? Goodbye, loser drones. I’ll be on the beach, sipping a Jack and Coke.
  • Spend, spend, spend! Take that cash and make sure it’s all gone by December 21, 2012. Apply for every possible credit card and run those suckers to the limit and beyond! Last one to max out their cards is a rotten egg.
  • Bacon
  • [Bleep] you, IRS. I’ll send you my tax return … in 2013. Ha!
  • Try some new foods. Personally, I recommend the homo sapiens filet. Take care when choosing restaurants that serve this delectable dish. Restaurants located near prisons tend to serve filets that are a bit tougher than those which serve only free range homo sapiens. Pricey, but excellent when prepared by a master chef. Simian fries are a great choice for a side dish.
  • Cut the tags off your mattress. I double dare you!
  • Travel to Costa Rica to see the dinosaurs. For that matter, buy one of the darned things. Cute little buggers, aren’t they?
  • Learn a second language. I recommend FORTRAN.
  • Lock in your 2012 Cubs season tickets early. It has long been forecast that a Cubs World Championship will cause the apocalypse, so the Northsiders are the team of destiny in 2012!
  • Can you really die from mixing Coke and Pop Rocks? Only one way to find out. Let’s wait on this one until a few days before everyone dies from terminal apocalyptia.
  • Buy that collection of Rob Schneider movies you’ve had your eye on. There will never be a better time to snap up the cinematic classics featuring this Oscar-snubbed thespian. The Olivier of our day, in my opinion.
[Editor’s Thoughts: I couldn’t help but not post this as it hit home on a few points. Not not the homo sapien filets. First I thought it made for a great reminder not to take things too seriously. I believe that’s always fitting for a Friday. However, this week I’ve been in need of some comedy as I’ve been wrapped in Tsunami news and NFL players with much, much bigger problems on their hands other than money.

Other points making it post-worthy:

  • I appreciated the “bacon” reference. Bacon to me is like butter to Paula Deen.
  • There was a time when I actually knew FORTRAN fairly well… because I was dorky enough to find it interesting. Though I quickly moved from that to FORTH. Again, I’m big with the dork (as Willow might have said in Buffy the Vampire Slayer).
  • While on Buffy, when I read the phrase “terminal apocalyptia”, I couldn’t help think of this Riley quote, “Buffy. When I saw you stop the world from, you know, ending, I just assumed that was a big week for you. It turns out I suddenly find myself needing to know the plural of apocalypse.” The lesson here is that there’s a lot of fun to be had with the word apocalypse.
  • Finally, I think my mother might buy Deuce Bigalow from the Amazon link at the end earning me a small commission. I seem to recall her mentioning that it wasn’t a bad movie. (Don’t worry mom, you are still cooler than me. Remember the FORTRAN and FORTH stuff above.)

]

Thoughts on Airline Ticket Pricing

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For those thinking that I fell off a cliff and stopped posting, I would like like to direct you to a nearly 1000 word guest post on The Digerati Life about airline baggage fees. If Spirit Airlines new carry-on fee is your bag, lug yourself to The Digerati Life (ridiculously bad puns intended).

[P.S. I did mean to work in the concept that one could perhaps save more money by just buying new clothes at Wal-Mart and donating them at the end of your trip. (I owe credit to a commenter on Lifehacker.com for that one.)]

The Tax Collector

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[The following is a fictional story by Kosmo. Kosmo is an aspiring novelist, vehement opponent of the designated hitter, student of true crime, and plays the keyboard for The Casual Observer – an eclectic, team-written web magazine.

Kosmo would like to give readers of Lazy Man and Money a discount at his store. For the next month, use the coupon code LAZYMAN20 to get a 20% discount on all items (excluding writers’ tip jars).]

Michael Hays tried to avoid talking about his job whenever possible. When the question inevitably arose, he said that he worked as a compliance specialist within the Treasury Department.

This was technically true. The Internal Revenue Service was within the Treasury Department, and an auditor could be thought of as a compliance specialist. This was Michael’s way of evading the slings and arrows that might otherwise come his way, while still staying on the angelic side of the truth.

Michael plopped into his chair and looked at the work ahead of him today.

First on the list were follow-ups to some letters than had been sent to taxpayers to ask for evidence of certain deductions. Many of the taxpayers had deftly shunted the letter on to their tax professional. Most of the tax professionals had written coherent responses and attached the necessary documentation.

Some of the others had decided to respond without the assistance of professionals. Several of them had done very competent jobs, allowing Michael to cross their names off his list as well. Several others had responded in a manner that made it very clear that they did not fully comprehend Michael’s request. Michael set these aside for the moment.

Next on his list was the dispute with Mr. Anthony Davis. Mr. Davis had taken advantage of an investment opportunity that was determined by the IRS to be a tax shelter. The amount was so small that Mr. Davis was getting minimal benefit from the shelter. Michael had the impression that Davis was simply trying to pick a fight with the IRS. Michael hoped that Mr. Davis would soon realize how foolish it was to risk jail time over this dispute.

The next batch of letters contained the interesting ones. Most of these were from the people who had ignored the W2s and 1099s that had been sent to them, under the firm belief that the IRS did not have the authority to collect taxes. The standard array of arguments arose from the letters. The tax system was voluntary, the sixteenth amendment was never properly ratified, the only people subject to income tax are employees of the federal governments. Some of the other letters involved disputes about bogus credits that the taxpayers had claimed on their returns.

Michael spent time carefully crafting his responses to these letters, citing the relevant case law in each situation. Michael was a bit surprised that so many people were still conned by quacks selling fraudulent tax evasion schemes. Time after time, courts had affirmed the authority of the IRS to collect taxes. So many frivolous claims had been argued, and so many had been dismissed by judges. The IRS had even posted a list of these arguments with details of the cases ““ but many of these people simply didn’t want to hear the truth.

The final letter on Michael’s desk was the most pleasant. A recent audit had tripped up a wealthy business owner who had used a variety of shell corporations and foreign bank accounts to evade taxes. Michael had eventually unraveled the mess, and the IRS had laid the facts out in front of the man. They offered a deal ““ pay the back taxes, plus interest and penalties, and the IRS would back down and not pursue a fraud case. Michael pulled the check out of the envelope and stared at the amount for a moment – $13,312,872.42. It was not uncommon to receive checks to settle disputes, but Michael was always happy to see such a large check.

Michael wondered where these dollars would end up going. The construction project near Michael’s home had been stalled due to a lack of federal funding. Perhaps now the road could be widened and the traffic lights installed. The current state of the road was not adequate for the volume of traffic. The changes would make it much safer.

Perhaps the war on terror could afford more advanced screening tools that would allow for detection of dangerous items that currently evaded the scans at the airport. Maybe this money would prevent a hijacking.

Michael was a volunteer at one of the Head Start programs in town. The program was always a bit short of funds. Maybe this money would allow these kids to be more prepared for elementary school.

Of course, Michael knew that this thirteen million dollars wouldn’t be earmarked for any of these projects. However, he also knew that actively pursuing all tax revenue legally owed to the government would allow a higher level of funding for many great programs. Michael knew that nobody enjoyed paying taxes, and realized that large amounts of federal funds were unfortunately wasted ““ but also knew that without the funds provided by income taxes, the United States would be a much worse place to live.

[If you liked the story above… or even if you didn’t… I urge you to visit The Casual Observer and extol the virtues of the designated hitter.]

Dispelling Common College PF Myths

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studenomics_logoToday’s guest post comes from Studenomics, a blog that tries to help younger people reach financial independence. It’s actually part one of a two part series, so when your done, you’ll want to click through to Studenomics to read the rest. If you enjoy reading this guest post then please consider subscribing to RSS Feed.

There are certain assumptions that have been made over the years in regards to a young persons financial situation while attending college. Today I will go as far as to say that these assumptions are nothing more than myths. As a result of this I will go one step further and dispel common college personal finance myths. I feel it’s about time someone showed the young people of today that certain assumptions are simply false and that there are more choices than ever.

Myth #1: You must pay for school with student loans.

Sure there are some programs that are extremely expensive (life sciences, engineering, and a few others) and student minimum wage isn’t exactly ideal, BUT this does not mean that your education you should be 100% student loan funded. You have the whole summer to work and save up your money to cover the costs of a college education. If that is not enough then you may still work a full time or a part time evening job while in college. If all of the above options are not feasible for you then try an internship in your field of study or even better enroll in a program that has paid work terms. The point that I’m trying to get across is that while some students may have to use a loan to fund their education, most students choose to accept this thinking as a fact instead of getting on their feet and working hard to earn money.

Myth #2:You will earn more money when you complete college, so there’s no point to save now.

That is like saying an out of shape person asking, I will be fit one day so what’s the point of working out today? The answer is simple, every little bit helps. Yes the money you save from a part time or summer job will not make you rich but it will definitely give you a head start over your friends that will be struggling to pay off their student debt. If you get used to saving a set amount of your income & budgeting at an early age then when you’re older you will have instilled in yourself strong fundamental habits. Also as you grow older your income will hopefully increase as will your savings. I have seen so many people my age complete a college program that substantially increases their income and guess what? their savings remained stagnant or non existent.

Let me give you a simple calculation to demonstrate how every dollar matters. A couple of years ago when I started my job I decided to automate my finances. A set amount of my paycheck went to retirement, savings, and into a regular checking account. One little thing that I did was I set up an emergency fund (since I had never read a personal blog in my life at that point I called it “secret money”) where I figured I would put $50 every paycheck (biweekly) into a government savings bond. Granted, the interest earned with savings bond is nothing spectacular but there is virtually no risk. Here are my savings without calculating the interest:

$50 x 26 pay checks= 1300$ x 4 years= $5,200

I know that $5,200 won’t buy you that dream car or the newest Giorgio Armani suit but I would rather have $5,200 than owe $5,200. This is also not my main savings account, it is simply an emergency/ “Secret money” account which you could use for whatever purpose you desire when you complete college. What will I use the money for? I already made a down payment on a new condo development so who knows? Maybe I will take a month long vacation across Europe before starting my career.

Myth #3: Retirement savings do not start until you complete college.

Actually you should begin saving for your retirement as soon as you start working or earning any form of an income. While I personally wouldn’t advise allocating a high amount of your yearly income into retirement savings, I still recommend that you put anywhere from $500-$1000 a year into retirement savings before you even begin your career. I set up a joint retirement savings account with my mom when I was 17 because I wanted to get a head start before I began making real money in my career. Once you begin your career then yes retirement savings will begin to get serious because you will have many different options and benefits, however, this is a topic that Lazy Man has covered extensively with his retirement plan series.

A common question that I receive from people in their 20s is, how are you suppose to motivate a 20 year old to worry about saving for a retirement that won’t happen for at least another 40 years? I actually have two answers to this question;

  • Look around you, every time you see a senior citizen well past the age of 60-65 still working (assuming they are not Warren Buffet) a job that they do not particular enjoy just to meet ends meet should make you strive to want to avoid a similar fate. Yes as mentioned above there will be people like Warren Buffet who will probably work forever but that’s because they truly live and breathe their job and it’s not a simple 9-5 for them. For the rest of us we will work a 9-5 for at least over 35 years of our lives, don’t you want to live comfortably in your golden years?
  • Look around you again. You notice all of those supposed “rich people” that are barely over 60 but spend most of their time traveling the world or spending time on activities that they truly enjoy? These people are not luckier than us, they are simply just people that planned for their retirement well in advance.

There you go. I have dispelled the most common myths circulated by young people while attending college. I am living proof that you do not need to be the smartest person to be financially independent. You just need to be the type of person that plans well in advance and goes against the curb in terms of not following common assumptions.

You tired of hearing advice from people that are always pessimistic? You looking for a common sense approach to personal finance issues that confuse many? If so then Studenomics.com is the place for you. Studenomics is one of the fastest growing personal finance blogs out there these days. Come check out the site and find out what all the buzz is about. Do not fear you will not be judged at Studenomics nor will you ever be treated with even the slightest bit of disrespect.

Check out Part 2 of Dispelling Common College PF Myths

[Editor’s Note: I’ve actually been thinking about adding a University of Phoenix (UoP) degree to my resume since I can complete it while I run my businesses from home. The UoP website featuresAll University of Phoenix campus locations and the college degree programs offered in each.]