With all the talk about the run up in food prices, I thought I’d share a few thoughts on keeping your food bill down these days. I’m a firm believer that complaining about increasing prices will get you nowhere and do nothing to change the situation. Instead, you need to focus on things that you have control over and ways that you can change your situation. Here are a few of them:

1. Change What You Buy. There’s no law that says you have to continue buying the same things that you’ve always bought in the past. Prices haven’t gone up on everything these days. If dairy products have gone up, just purchase less of them and choose cheaper alternatives. If it’s the packaged foods that have gone up, make your own “hamburger helper”. It’s just ground beef, noodles, and seasonings anyway, a far cry from rocket science. Also, it wouldn’t hurt to return to some of the basics either. Rice is still cheap, as are beans. And take a look at the fruits and vegetables that are in season instead of buying just your favorite all year round.

2. Change How You Shop. If you’re one of those people that plans what you want to make during the week and then goes and buys the needed items, maybe you should change your approach. Instead, browse the grocery store circulars and find the loss leaders and other things that are on sale. When these items are cheap, stock up on them. Your meal choices then come from what you have on hand. It’s actually quite simple, but if you’re not used to doing things this way, it can take some getting used to. For example, I have an unofficial rule that I only buy meat (such as steaks, chicken, pork chops) that is $2 a pound and under. I buy what’s on special and that’s what we eat. Pretty simple.

3. Change The Quantity You Buy. There are two parts to this one. First of all, I’m sure most of us could stand to eat a little less. And eating less means you don’t have to buy as much. Secondly, many items can be purchased cheaper in bulk. Use your head with this one though; don’t buy pounds and pounds of perishable items that you’re going to end up throwing away. But you can buy pasta, rice, beans, can goods, etc. in large quantities and they’ll last a long time. You can even buy huge bottles of olive oil for much cheaper than the smaller ones and then just refill the little one. These are just some examples, but you get the idea.

The point here is to think about things that you can do to keep your food expenses in line instead of just complaining about rising food prices. I’m sure I’ve missed many other ideas, so feel free to share yours in the comments.

Well, the rebate checks are finally being paid out this week. I’ve already heard from a few people who have received them, but as of yet I’m still waiting for mine. I’ll be honest though, I’m not all that anxious about it since I figure it’ll eventually get here. I also don’t plan on spending it right away either so it’s not going to matter much when it does finally get here.

The government would like for everyone to take these rebate checks and go out and spend them. This is then supposed to give the economy a boost, which I don’t disagree with. It’s not however, what I would recommend to anyone reading this. The government is perfectly alright with you thinking that it’s giving you a gift with this check. But you should remember that this is a rebate of your taxes, money that already belongs to you. You should use it in a manner that will best help your personal financial situation.

If you have debt to pay off, then pay it off. If you need to boost your savings and emergency accounts, do it. Perhaps you’d rather invest in a particular company instead of just buying the company’s products. Just don’t feel pressured to go out and spend the money on consumer items just because that’s what the government thinks it wants you to do.

I also think it’s interesting that the government wants to give people money and then tell them to just spend it. All of this spending is what has gotten people into the problems they face. Out of control spending is what leads to the average American to have some amount of credit card debt. All this spending is how people went out and bought houses that they knew they realistically couldn’t afford. At some point we need to break out of this cycle of rampant spending. Why not begin by not spending this rebate check on more unnecessary consumer spending?

This was a guest post I wrote for another blog, but thought that it would also be well served here.

Growing up we never really had a lot of money. I wasn’t aware of any of the specifics concerning the family finances, but I knew we didn’t have a lot of money to just throw around. As I grew older I remember telling myself that money wasn’t going to be an issue for me and that I wanted to be rich (whatever that meant at the time). While I was in college I remember still having this goal somewhere in the back of my mind, but I wasn’t doing anything about it. It wasn’t until the summer before my senior year of college (I was on the 5 year plan) that my mindset actually started changing, and I began working towards this goal that I had vaguely set years before.

The Internship

During this summer, I took an internship position with an Aerospace company as an Electrical Engineer since I figured it would be a good way to get my future career started. The internship was in another state and lasted for about 3 months give or take. Up until this point, everything I had learned in school was very theoretical and in the context of academia. On my internship I caught a glimpse of the “real world” and that products are engineered in order to sell them and make a profit. I also realized that there was more to life than just “what do I want to be when I grow up”.

I was also making more money on this internship than I had ever made before, and frankly didn’t need all of it. This got me to wondering what I should be doing with what I had left over. I went to the library and checked out all sorts of personal finance books, investing books, how to get rich books, and anything else that was remotely related. I didn’t read all of the books all of the way through since I was after the main content and not a plot-line or the experience. I was fascinated by everything that I read and just soaked up everything concerning 401k’s, savings, IRAs, the stock market, the bond market, and even a little about real estate (something I would learn about more a little later). I knew that I had a lot to learn and that not every source agreed with one another. It was a great learning experience and was sort of the springboard into personal finance.

Back To School

When I got back to college for my last year, I registered for a few business classes alongside my remaining engineering classes. I took an accounting class and sat in on a finance class. By far my favorite class was an Entrepreneurship Lecture Series where successful entrepreneurs would come in and talk about their experiences and how they did what they did. I absolutely loved the class and what I gained from their experiences. So, as an engineering graduate, my favorite class ended up being a business class… go figure.

I have since gone to work full-time for the same Aerospace company with whom I did my internship, and am looking forward to going back to school full-time to get my MBA since the business, investment and personal finance world thrills me. This is how I came to be so interested in personal finance and ultimately start a finance blog of my own. It wasn’t just one experience, but a collection of experiences that led me in this direction. So what was/is your experience? How did you develop an interest in the world of personal finance?

I’ve talked before about the importance of having some sort of liquid savings, what is usually referred to as an emergency fund. It’s a topic that’s brought up quite frequently on financial blogs and everyone seems to have their own opinion. I’m not going to go into a lengthy explanation of what the right amount for one is and how it should be handled, but I am going to discuss what I personally do.

I’m aiming for one year’s worth of living expenses saved up in liquid savings. To repeat, that’s one entire year’s worth. I’ve heard it time and time again that it’s too much and better returns could be had elsewhere. Regardless, one year’s worth is what I’m going for, and you’ll see shortly how it’s not really that tough of a goal.

So how do I plan to accumulate that much? Some may be thinking that it’s a great goal to have but maybe a little unrealistic or something that will take years to achieve. This isn’t the case, and I’ll explain why. Every time I get paid I put 20% into this emergency savings account. If this was all I did, it’d take 4 years to reach my goal of one year’s worth (80% left over, which is four times twenty). This isn’t the whole story though. I also pay 10% of any earnings to our church as tithing and put another 40% into another account reserved for future investments. What this means is that only 30% of my take home pay is left over for living expenses, bills, and other spending.

So with this scenario, how long will it take to accumulate one year’s worth of savings? About a year and a half. Living expenses account for 30% of earnings, and 20% is saved. So you can see that it’s not a distant far off dream to have an entire year’s worth of savings. It does presuppose living well within one’s means, but the less you live on, the less you’ll have to save to cover it. So there you have it. One year’s worth of savings done in 18 months.

Getting ahead financially in the most basic sense is actually fairly simple. It typically seems complicated to many people because of the many varying opinions about the specifics of something that in general terms is quite easy to understand. For example, choosing the best account for an emergency fund and exactly how much to keep in it is something about which many people have differing opinions. But it’s only one part of the basics of personal finance.

What I’m talking about here are the two main parts of everyone’s finances, our earnings and our expenses. It’s important to focus on both of these instead of neglecting one in the name of the other. As The Digerati Life mentions, we should spend less than we earn, and earn more than we spend. These two phrases may seem redundant, but the subtle difference is important.

Focus on Your Earnings

I believe it’s safe to say that you don’t have a financial life without earning any money (or at least having some sort of income). Too many people though, go through life having resigned themselves to earning whatever income it is that comes fairly readily to them. If you’re serious about attaining some level of financial freedom, there needs to be a focus on growing your earnings. You can’t save what you don’t have, and you can’t invest what you haven’t earned. Be sure to make this a priority in your financial life.

Focus on Your Expenses

As you’ve probably experienced yourself, or at least seen with others, it doesn’t do any good to earn a great deal of money if you end up spending it all. And for those that have already taken a keen interest in their finances, this is usually the area of most focus. I’m not going to go into a long explanation of why one needs to focus on expenses (it just makes sense), but I do want to make one point. You can always spend more than you earn. So make sure to keep tabs on your spending.

If you take a step back and look at your financial life, you can probably see which if these two goals you tend to favor. That’s what it should be though, a tendency. You need to consciously focus on both of these areas, regardless of where you naturally focus.

I had an interesting conversation with someone the other day who is having some personal cash flow issues. Apparently there have been some vehicle issues as well as some other things that have come up that are putting a stress on things. So he basically wanted to see what I thought about lowering or discontinuing his 401k contributions for a little while in order to free up some more money to take care of some of these short term issues.

My first thoughts were to try and think of anything else that could be done before having to cut back on these contributions, and for a number of reasons:

• These contributions are pre-tax, so you wouldn’t be freeing up as much money as you might think.
• By discontinuing the contributions you’re also missing out on the associated company match, which in this case is an instant 75% return on your money.
• You’ll also be missing out on a time to buy when prices in the market have pulled back and are therefore cheaper.

If you have some credit card debt that is charging you upwards of 16% or so, you may be tempted to cut back on the contributions since it’s a guaranteed high rate of return on your money. Just remember though, that what you’re giving up could be a far higher rate of return such as the 75% in this case.

Something Else To Try

Like I mentioned above, I wanted to think of almost anything else that could be done before having to give up the benefits of these contributions. Of course one could cut way back on some expenses such as eating out and entertainment, or any other unnecessary expenses, but there’s one idea that wouldn’t take much effort at all.

If you consistently get a tax refund at the end of the year, then you have money just waiting to be given you. All you have to do is change (raise) the number of exemptions on your W-4 so less will be withheld from your paycheck. I know it may be nice to get a fat tax refund at the end of the year, but it’s your money to begin with and you may as well use it if you need it. I would at least explore this option before considering lowering your 401k contributions.

What other ideas might you have that could free up some cash in the short term?

In the typical large company raises usually come out once a year. Sure there are those occasional promotions and new positions every now and then, but some sort of pay raise is generally expected about once a year. It’s a time that is usually looked forward to, but then quickly forgotten as people move on to other things. So how is it best to handle a pay increase before it quickly gets absorbed into our spending and then forgotten?

Make a Concerted Effort

First of all, tell yourself that as far as your lifestyle is concerned, it never happened. If that’s too tough for you to handle then pretend that the raise was significantly smaller than in actuality. It’s important that you get your mindset right before you take any action with it, otherwise you’ll soon wonder how you ever “scraped by” without it. Keep your lifestyle in check and then you can move on to what you actually should do with the few extra dollars.

Just as there are a lot of stupid ways to spend a bonus, there are equally as many dumb ways to fritter away your raise. Even if you don’t purposely change your spending or buying habits, the tendency will be for any little extra amount of money to somehow get spent. Somehow the lifestyle will inflate to fill the means if not consciously kept in check. I don’t want to get into all the unwise uses for your raise though; I’d rather focus on the more savvy uses thereof.

Savvy Ways to Spend a Raise

1. Increase your contribution percentage to your company sponsored 401(k) or other retirement plans. This is probably the simplest way to ensure that you don’t just spend the extra funds since they’ll be deducted automatically from your paycheck and you’ll never see it. It’s also one of the few ways to actually save all of the raise since contributions to these qualified plans can be exempt from any tax.

2. Set up automatic transfers, or payroll deductions if your employer has the capability, to a high yield savings account and you’ll again never miss the money since it’ll never pass through your hands. This is a great way to bolster the emergency fund, save for a down payment, or achieve any other financial goal that you have. It won’t take much time at all to set this up and then you can leave it on autopilot.

3. Use the extra funds to pay down any debt that you owe. I will caution you though, that this won’t make a bit of difference if you don’t also resolve not to rack up the debt again. Paying off debt shouldn’t be free license to go out and spend again putting you back in the same situation you were to begin with. And once your debt is paid off, go back and see number 2.

4. Consider donating to a charity or helping others in need. This is a great way to remind yourself of what’s really important in life. Being able to give and help others is one of the greatest feelings around. And it’s just a side benefit that you don’t have to pay taxes on these funds either. You’ll be surprised at how rich you’ll feel when you’re able to help someone in need.

I’m sure that you can think of many other great ways to make use of your raise, but the point is to make a conscious effort to use the funds wisely and improve your financial situation or that of another. What are some other ideas you have to make the best use of your raise?