These days we’re always hearing about about a weakening economy and fears that we could be heading towards a recession. It also seems that every day there’s a new report that comes out that is supposed to shed some light on the health and state of the economy. I hear about these reports and notice the effects they have on the stock market, but they have always seemed so distant from people’s everyday lives.

Today though, I was having a conversation with my brother and he actually mentioned the wholesale price report that came out today pointing towards rising inflation throughout the broader economy. Apparently, it was at least a little bit of cause for concern for him and his family’s finances. I found this interesting since I had never actually heard anyone express personal concern based on one of these financial reports. People may be concerned about their investments and how they’ll respond to various reports, but that’s generally it.

So it made me start wondering how many people actually pay attention to these reports and let it affect their views of their personal finances. Do you pay attention to financial reports? Or are you possibly lost as to what I’m even talking about…?

I often hear people talk about their savings and investments almost interchangeably. I hear about people taking their savings and investing it as well as people who rely on their investments to be there if they need any savings. It may seem trivial to many of you, but I believe that there is or should be an important distinction between the two.

The Purpose of Savings

The primary reason for having some money readily available is in case of an emergency. This is why you’ll hear about emergency funds time and time again from many personal finance bloggers and other financial resources. There are many different opinions about what the size of such a fund should be and how it should be determined, but it’s usually agreed that we should have an emergency fund of some sort.

Savings also provide a sense of financial security and stability. Not only does it keep you from having to constantly worry about your finances, but it also allows you to invest with confidence. You’re able to make more rational decisions when you’re not worried about having to use any of your investments for near term emergencies.

The Purpose of Investments

Investments are a way for you to secure your future and have your money work for you eventually replacing your current forms of income. Investments are meant to provide alternative forms of income or are used to increase your income producing capacity. These are all different purposes than what standard savings are meant for.

A Practical Implementation

Both of these are important aspects of your finances, and one shouldn’t be done without the other. Fortunately, it’s all too simple to make progress in both areas while also keeping them separate. All you need to do is set up two different savings accounts or money market funds into which you can easily transfer funds. Each time you get paid or have some sort of income, just take a percentage of the income and transfer some into each account. The funds in the investment account can then be used for any investments that you want to make.

It’s important to keep these account separated from the beginning. I’ve talked to some people who keep putting money into a savings account and then raid it from time to time in order to invest in various things. Unfortunately, a lot of investments seem to be so good that more money is taken out of savings than what should be. Without an adequate savings buffer, it can then be difficult to weather any investment storms that can come.

Obviously there are many different ways to handle your finances including your savings and investments. This, however, is the best way that I have found so far to handle both savings and investments. It’s simple, straight-forward, and gets the job done. What are your thoughts on the subject? Do you handle things differently?

I was paying a few bills yesterday and for some reason took a closer look at my water bill. It only comes every three months since that’s just the way they choose to bill it. I’m all for it since I don’t have to write a check and use a stamp every month, but that’s neither here nor there. What struck me was the breakdown of all the charges:

Customer Charge: 10.23
Usage Charge: 24.25
Primacy: 0.27
Fire Hydrant Service: 6.21
Service Line Protection Charge: 3.00
Gross Receipts Tax: 2.14

Grand Total: 46.10

I’ll preface the following comments by saying that $46 is really not all that much when you consider that it’s for 3 months worth of service. Even so, there are a few things that I have a difficult time getting my head around. For starters, I noticed that my actual water usage only accounts for about half of my total bill. This is the only thing that I have control over. If I were to cut my usage by 20%, I would only see a cost savings of 10%.

And what exactly is Primacy? It took a little digging, but I finally found a pdf that explains what the primacy fee means in Missouri. It supports the efforts to ensure that we’re provided adequate water that is safe to drink. I thought that was just part of what we were paying anyway, but apparently it needs to be a separate line item.

I was also surprised to see the Fire Hydrant Service charge. I have yet to use a fire hydrant ever, and once again thought that these were maintained and paid for with general tax dollars. I also can’t imagine that it takes $2 per month from every Missouri resident to pay for fire hydrants that seem to be to be pretty low maintenance.

Have you ever taken the time to look over your bills and all of the line items that you’re being charged? Were you surprised by what you found? I don’t really think there’s anything that I can do about any of these charges, but they are a little perplexing.

1. With all the politics going on right now, perhaps you’d like to take a look at some of the candidate’s finances. CNN Money has a bit called Millionaires in Chief and goes through seven of the candidates. Interesting to know for sure, but the suggestions at the end are kind of useless. They’ve obviously done rather well for themselves on their own.

2. This time of year a major focus is on giving. An article at MSN Money, however, talks about the financial benefits of giving. Give and Grow Rich mostly covers the issue of tax deductions for charitable contributions. It’s one thing to already know this, but another to know the details of what’s allowed and what isn’t.

3. This Christmas, one gift has certainly garnered most of the attention. I’m speaking here of the Nintendo Wii. And Mrs. Micah goes into a discussion about whether the lack of Wiis will drive demand for other gaming systems. I have to say that I believe it is, but I don’t think that Nintendo is intentionally keeping the supply low. An interesting read if you’re caught up in the Wii craze.

4. Another Fiscal Musings Throwback (FMT): Way back when, I explained why I don’t keep an income statement for myself. I also explain how I handle all my income. The process is simple and doesn’t require any budgeting or spreadsheets. It ensures a positive financial future, plain and simple.

And now for a little humour for the weekend. I recently posted a video at The Milk Crate that you may have already seen, but I laugh every time anyway. You can’t help but laugh as well because the newscasters just won’t stop laughing. Anyway, check it out.

The following is a guest post from The Rogue League. If you’d like to have a guest post featured, submit an article by email.

If you’ve ever wanted to learn the difference between an earning asset and a depreciating asset, read this story. The article from Reuters is re-published here for your convenience. Enjoy.

By Michelle NicholsNEW YORK (Reuters) – Deal or no deal? A woman’s online bid to find a rich husband in New York earning more than $500,000 a year has caused an Internet stir with a mystery Wall Street banker publicly assessing her hunt for romance as a business deal — and a bad one at that.

The following is a guest post from The Rogue League:

A lot can be learned about warranties by knowing how they are accounted for. Accounting guidelines don’t require that publicly-traded companies separately disclose how much they spent on warranty expense. They only have to separately disclose their warranty liability if it’s deemed material (i.e. significant), and even then it can be done in the notes to the financial statements, not in the statements themselves.

This is significant because this means these companies can basically very easily hide their warranty expense and liability information from the less than astute investor. Why would they want to hide it? Because of what can be inferred from this information. If a company has a lot of warranty-related expenses, the public will view it as a producer of low-quality products. Conversely, if it’s warranty expenses are low, people will see no need to purchase a warranty from the company. A company doesn’t really want either of these things. They want the public to think they are producers of high quality products and, simultaneously, that they still need some kind of insurance. Because, at the end of the day, that’s all a warranty really is.

That is worth remembering here–that warranties are money-making devices, whether a company just rolls it into the overall purchase price of the product or they make it an add-on purchase. A company offers a warranty only after having determined that payments from customers will exceed the charges they expect to incur on repairs. In other words, the company is pooling the risk of all the individual consumers in such a way that they can offer protection to the individual but still make a profit. This happens, of course, because most people never need to use the warranty, or at least, not use it in full.

I think all of this is worth keeping in mind when deciding about what product to purchase and when considering its warranty situation. If the product is of very high quality, an extended warranty probably isn’t really worth it. you’d just be giving the company more money for no real reason. But, if you place a high value on peace of mind, and you just want to know that it’s there if you need it, then you might decide that a (extended) warranty is worth it. I think the main thing to remember here is that, overall, it’s a numbers game, and the company makes money off the arrangement. the odds are more likely than not, that whatever warranty payments you make, you will get less back in free services from the company.

For as many different types of people, there are equally as many different ways to manage personal finances. They may be varied, but people somehow seem to make it work. And they should since they’re the only one that worries about their finances. Things don’t always go as smoothly however when a couple comes together and combines their finances.

Oftentimes one is a spender and the other is a saver. I don’t believe I need to explain how this could be a problem. One person may also love credit cards while the other abhors them. One may love to budget and keep track of everything while the other prefers a more carefree style. As you can see there are many issues that can arise between a couple when it comes to their money.

I’m not going to dive into all the specific issues that can arise due to the sheer number of them, but many of them can be solved through open and honest communication. Too often I hear about someone that only recently found out that their significant other has hidden debts. One may spend first and ask questions later. When situations like these come up, too many people just get frustrated and keep to themselves. Unfortunately, this can be one of the worst ways to deal with things.

We need to set aside some time to openly talk about our financial situations, and we also need to talk about more than just the numbers. We need to be honest about our financial habits and spending patterns. Only when we understand where each other is coming from can we work together to solve any issues and potential problems. Maybe it’s finally time that you talk together.