Money Advice, Tips and Tricks
Copyright 2016 by John Stilwell
Limited license for the book cover purchased through BigStockPhoto.com
100 Ways to Save a Dollar without Lowering Your Lifestyle
The Independent Author’s Handbook – Second Edition
How to Make an Extra Dollar
The Stilwell Family Cookbook (Free)
Adrift on a Sea of Stars
Beyond the Galactic Core
Earth not Forgotten
The Galactic Time Trap
In the Image of Gods
The Puppy of Doom and Other Stories
The Tarden Agenda (Christmas 2016)
Tank (audiobook) in MP3 and CD
Wasn’t Tomorrow Wonderful
Money Advice, Tips and Tricks
No matter how much you make, you never seem to have enough. After work, you go to the local bar and have a beer and complain to your buddies. One of them replies, “I know what you mean! I had the same problem, but I did this and it saved me money. I used that to take my girlfriend out to dinner.”
This book is a collection of tips and tricks on how to make an extra buck and how to get things for less. There are over 27 ideas across several topics. So grab a beer because I know what you mean! I had the same problem and here is how I managed to get it for less. And the money I saved… I’m married with kids so you can guess the rest.
In several places in this book, you can click to get useful lists and videos. Your e-book reader will need internet access to view them.
Random thoughts on making and holding onto your money
If you don’t watch it, it will go away.
If you get it legally, few will try to take it from you. If you get it illegally, all will try to take it from you.
If you don’t prioritize properly, your life will always be in trouble. Keeping a job & paying the bills comes first. Toys and entertainment comes last.
If you don’t like your job. Look around. Who do you see that you wish you were just like? What is different between you and them? Look very carefully then change those things about yourself.
Think of dating as interviewing for the most important job of your life. What do each of you bring to the table? Is the other person going to help get the business of life done or only be a financial burden? It might seem harsh but love is only half of the equation.
Pay less to play
Make Tuesday date night
Going to the movie theater is not the inexpensive night out that it used to be. Luckily for you, Tuesday is a slow day. So much so that most movie theaters cut the price of their tickets. It is common to get the matinee price or better, all day on Tuesdays.
To get this discount, the big chains require that you sign up for their club card. These cost nothing but your time filling out the forms. The one we use gives us discounted tickets, popcorn and soda. It cuts the cost of movie night about in half. We also earn points towards free tickets.
Never pay for a paperback again!
GoodReads.com manages paperback give-always from authors. The typical contest lasts about a month and picks five or more winners. There are fifty or more contests going on at any moment. It costs nothing to open an account and nothing to enter a contest. There is no downside to entering many of the contests at the same time. Odds are, you’ll win once in a while. How many books can you read in a month?
What does the author get out of it? The author hopes that you’ll like the book and write a good review on GoodReads.com. It is not required but it’s polite for you to post your opinion. The author just gave you something for free. Return the favor.
Where are the contests on the website? On the home page, click on “Explore” (top middle) then select Giveaways to see the active contests.
There is more than one way to get a group discount
The cost of entertainment can be significant. The less you pay, the more money you have in your pocket at the end of the day. Many businesses offer a group rate for everything from scuba diving to dancing lessons. This discount can be significant.
Let the manager know that you are organizing outings. Ask, “Do you offer group discounts?” A bar and grill will be excited if you walk in and promise them thirty customers. You may be able to get special treatment like a discount or some extras thrown in. If your group is big enough, you as the organizer of an activity may be able to take part at no cost. Imagine going whitewater rafting all summer for free!
There are many ways to put together a group. The most obvious is word of mouth at work, school or church. If that doesn’t work for you, try starting a group on meetup.com and advertise each event you have in mind. This can be as easy as picking the activity, location and date. Most people would drive themselves. Help those that don’t have transportation. Arrange a carpool with somebody who does have a car.
Cut the cost of your cable TV!
With the high cost of cable TV you may be looking for a less expensive alternative. If you have internet, one idea is to cancel your cable all together. No, you don’t have to watch TV on your small computer monitor. Newer computers have an “HDMI out”, so you can send streaming video to any TV that was bought in the past ten years.
ABC, NBC, CBS and PBS all have free TV shows. [+ Click here for a list.+]
[+ Hulu+], , and [+ Amazon Prime+] all have libraries. They cost about $10 a month. Hulu is biased towards newer TV shows. The free trial is only one week. Netflix has more, older movies. Redbox is new. It is an expansion on their successful DVD vending machine business. The Streaming video is in partnership with Verizon.
I have Amazon Prime. You pay $80 a year to get free shipping and access to their video library. There is a lot of free content but not as big as Netflix. Unlike Netflix, not all of the videos are free with the membership. What aren’t included in the annual price can be as much as $4 to rent for a day.
All of these services have a free trial period. Try one after another and cancel after a month. That is almost four months of free movies and TV. After you have tried all four, sign up with the one you like the best.
Your phone bill makes you cry
Save money on your cell phone
Helping a friend lower her cell phone costs was an exercise in frustration. The going rate is about a $100 for a reasonable smart phone and another $50 a month to use it. You are obligated to keep paying for two to three years or they hit you with a cancellation fee on the order of $275.
Go-phones aren’t cheap but can cost less. Every major carrier has a go-phone. The deals change over time. The one we picked was from Virgin Mobile. There is a one time charge of about $29 for a flip phone. We opted for $100 for a reasonable looking android smart phone. The minimal monthly charge was $35. This fee gave unlimited internet and text messages for a month, but the 300 minutes of voice are used even when you receive a phone call. Skipped months means no service that month. The bills don’t pile up as with an ordinary service plan.
An interesting advantage is that if you break the phone, you can buy a new go-phone for the same price. With the ordinary plan I am on, if I break my smart phone, it’s $500 to replace it.
Save Money on a replacement cell phone
When you sign up for a cell phone, the phone itself is inexpensive. You can sometimes get an older iPhone for free! But if you lose or break it, you’ll have to pay full price for a replacement. That’s $500 or more.
If you look online for a replacement, you won’t save very much money. It might be stolen. It might be from the wrong cellular carrier, meaning you can’t use it. Yes, an iPhone from Verizon won’t work with AT&T. It must be a licensing issue.
But there is an inexpensive solution. You can buy a basic, no frills phone from any cell phone store. The go-phones cost as little as $20. Use it until it is time for your next cell phone upgrade. Then you can have a fancy new smart phone for free.
Many of the newer cell phone plans have stopped giving out free upgrades. In this case, an unlocked phone might be what you are looking for. We have bought a couple of them to use while traveling. The best so far has been the BLU. It is an android smart phone. We found it on Amazon for $60.
An unlocked phone can be used as a replacement phone. In our case, we bought it to use when we travel abroad. At the destination country, we buy a sim card for $20. We can then make local phone calls without the expensive roaming costs. But mainly, we use the unlocked phone as an inexpensive GPS.
Maybe you are paying too much for gasoline
Does your car run on Regular but you buy Plus, Premium or Super ? Why are you doing this? There have been studies that show that there is no benefit. Your car engine won't last longer. You won't get better gas mileage. All you are doing is paying 20% more for gasoline than you need to!
Give your medical bills a pill
Generic drugs are better than generic foods
When being prescribed medications, always ask for generic. If a generic version of your prescription exists, it’ll be just as good as the name brand and cost a lot less.
Ambulances are expensive
Medical bills can quickly eat you alive. Unless you have really great medical insurance, a ride to the hospital in an ambulance will cost about $500. If you think you are having a heart attack, this is not the time to go cheap. If you might die, call the ambulance! If it is not a life or death emergency and you can’t drive yourself, there is a less costly option. Take a taxi.
HMOs vs Pay for Service Insurance plans
With a Pay for Service insurance plan, you can see any doctor you want. You can get most any treatment you want. The down side is that you pay a percentage of the cost. At the worst, you pay the whole bill. This generally only applies to elective surgery. For example, liposuction to make yourself more attractive. Insurance companies only want to help pay for treatment meant to make you well.
HMO’s typically pay the whole bill. The co-pay for my daughter’s surgery was $10. That’s it. $10! So why doesn’t everybody join HMO’s? Because they have a history of denying medical treatment. I can pass on a lot of horror stories I witnessed over the years. I used to be a big HMO hater. Only Pay for Service plans for me! Then I remarried and experienced Kaiser Permanente. Eight years later and I can’t sing their praises enough. My family has had nothing but great health care. There you go. One customer’s opinion.
Cut the cost of house repairs
How to get free lumber
Ever patch a wall and wish you could buy just a small piece of sheet rock? Ever need only half of a 2 by 4? Most hardware stores and lumberyards only sell sheet rock and plywood as 4 foot by 8 foot sheets. 2 by 4`s start at 8 feet long.
There is a place where you can get small pieces and typically for free! A construction site. If you keep your eyes open, there is always a house being built nearby. The scrap building material goes into a dumpster destined for a landfill. You just need access to the dumpster. I once got enough scrap 2 by 4`s and plywood to floor an attic.
Talk to the site foreman or whomever is in charge, and ask permission to take what you want from the dumpster. They have always said yes to me. But don’t sneak in. People steal from construction sites. It’s a real problem that plagues builders. So, always get permission first. You wouldn’t want to get arrested for trespassing over a piece of wood.
Lower your electric bill
Reduce your electric bill by timing your day
Does your home have a digital power meter? If so then call your power company. If they have different rates depending on the time of day then running appliances like clothes dryers and dishwashers while your sleep will make a difference in your bills.
What other appliances in your home draw a lot of electricity? The water heater is one of these. Depending on your power company’s rate schedule, take showers at night instead of the morning.
Did you just fill a jaccuzi with cold water? Let it do it’s initial heat up over night instead of during the day when rates are highest.
Credit cards and store cards can take a bit out your bills
Grocery stores charge less if…
The simplest thing in the world is to get the grocery store’s club card. They are free but you have to take the time to fill out the form. You need this card to get most of the store’s discounts. And it is a lot less work than clipping coupons.
You get a free lawyer
When you pay with cash and something goes wrong, you have few options. A store stiffs you out of a refund. Getting a lawyer and taking off work to go to court will often cost you more than the amount of money you are fighting over. But if you buy using a credit card, the credit card company has lawyers on retainer to fight battles like this for you. They have come to the rescue for me several times.
Benefits for opening store cards can be greater than your salary
The classic example is a Sears store card. [_ Get 10% off if you open the card today! _]
Since you can only do this once, it is a waste to open a card for a $20 pair of blue jeans. However, if you open the card when you buy a $3000 lawn tractor, you just saved $300. That is $300 in your pocket for 20 minutes of your time, filling out the application. Does your boss pay you $300 for 20 minutes work?
I just renewed my Sam’s Club annual membership. It cost $100 for the plus account. Unlike the $45 members account, we get pennies back with each purchase. We spent more money at Sam’s this past 12 months than we had expected. Our cash back was $180. The more expensive membership actually made us a profit!
They have a credit card that gives cash back. To open it, I was given $40 credit towards a Sam’s Club purchase. I used this towards my membership renewal. It took 20 minutes to make $40.
Taxes are killing you!
Before you get married check this out
The common belief is that a married couple pays less in income tax than two separate singles. Is this really true? Sadly, no. A married couple pays more income tax in the United States because they are married. The combined income of the couple may cause both to be taxed at a higher rate than if they were two singles, filing separately.
How to save a dollar and still get married? You can, at least for one year. Get married at the beginning of a year. Why? No matter what month you get married, you get taxed for the whole year! In my case, we got married in November. Had we waited until January, we would have saved a four thousand dollars on the previous year’s income taxes. Future years? No such luck.
Want another tip? Watch out for the alternative minimum tax. This came about because of the annual battle cry, “Rich people don’t pay their fair share of taxes!” But how much money defines you as rich instead of a HENRY? (High Earner Not Rich Yet)? This is $175,000 a year for a single person. It is $300,000 for a married couple. Meaning, if you are two married professionals making $150,000 each, you are rich and must be punished! For example, you no longer get a tax deduction for your children.
Do rich people really pay less in taxes than the average person? There certainly are individuals that one can shake a finger at. But rich people as a whole? According to CNN.money.com (2016), 70% of income taxes collected by the government comes from the top 10% of the country's earners. In other words, 90% of the population pays only one tenth of the taxes. So as a whole, yes, the rich indeed do carry most of the tax burden.
Be your own tax shelter
If your employer doesn’t offer a retirement plan you can go to your bank or an investment firm like Edward Jones and open a retirement account. Some vehicles such as 401K’s are pre-tax money. Meaning, whatever you put into the account each year is before your income tax is calculated. So, less tax is taken out.
This does mean that your pay check will be smaller but not by the full amount you put away towards your retirement. You pay the tax when you retire and get the money back. For the typical person, you will pay less in taxes when you retire.
Most retirement plans let you pull the money back out before retirement for events such as buying your first house and paying for your child’s college education.
Loans can drain your wallet. How to plug the hole.
Do you have too many bills and can’t seem to get ahead? Keep in mind that “loan consolidation” is about you are paying, not shrinking the mount that you owe. If you have to pay fees to combine your loans into one, it might end up costing you more that if you had done nothing.
Refinancing your mortgage
Refinancing your home loan is a no brainier if you lower your interest rate by 2 or more percentage points. If you have equity, you can turn some of it (not all!) into cash when you refinance. This money doesn’t need to be paid back (kind-of) and it can be used to pay off loans.
How does this work? Say you bought a house for $200,000 and over the years, your debt has shrunk to $100,000. Even though you owe half what you did many years ago, you are still paying the same amount every month. If you restart your loan over again at $200,000, half that money goes into your pocket. And you are making the same monthly payments as always. The kind-a part is that you’ll be paying the mortgage bill for that many more years.
Now that $100,000 should be put to good use. One way is to improve the house! By doing this, you have increased the value of the house. When I used this trick, I estimated that I had upped the value of my home by $80,000. If I suddenly had to sell the house, all of the fancy improvements would have only cost me $20,000. In a short time, the value of the house grew and this detail was no longer a worry.
One of the worst loans you can have is a student loan. These are real trouble if you don’t pay them off. You cannot shed a student loan in a bankruptcy. You can’t collect social security until the loan is paid off. If you refinance your home use that equity to pay off this bill!
A double whammy against your mortgage interest fees
What if your mortgage interest rate is far above the current rate? Call your mortgage company and ask if they will lower the interest rate. Amazingly, some will. I did this in 2016. My closing cost was a few hundred dollars (instead of a few thousand). It did restart my 30 years. The result was that my mortgage dropped $500 a month. I kept my monthly mortgage payment the same, the $500 became an extra monthly payment against the principle.
Why did I do this? The mortgage gets paid off in less than 30 years and I will save a boat load in interest charges over the life of the loan. An extra benefit is that if I fall on hard times, I can easily stop this extra payment, giving myself an instant injection of extra cash for as long as I need it.
Consolidate loans using the equity in your home
A home equity loan is not a way to spend the profit you have made on your home without selling the home. It is not like pulling money out of your savings account. You have to pay a home equity loan back with interest. Meaning your effective monthly mortgage bill just got bigger.
A home equity loan is a popular way to combine loans and lower your interest rate. Some loan agents recommend paying off your car this way. Taking a 10% loan and replacing it with a 4% loan does save you money.
An old idea was to use your home equity loan to buy your car. Cool. The interest on your car loan is now tax deductible! And it might be a lower rate than the car dealer would offer. But beware! If you don’t keep up with the payment, you will lose the home, the biggest investment most people ever have in their life.
You need a new roof. The furnace broke and the water heater is leaking. Since these are part of the house, a home equity loan is a great way to pay this large bills.
But what if you have more equity in your home than you still owe? And the interest rate on the home equity loan is less than your current mortgage rate? You might save yourself a lot of money by getting a home equity loan to pay off your mortgage! This is a way to refinance without paying expensive closing costs.
My property tax is how much?!
The mortgage on your home is likely your largest monthly bill. Your property tax bill likelycreeps up every year. Property assessments almost never go down. Every couple of years, you get a new assessment along with a notification in the mail. Always appeal your new assessment. Be prompt about appealing. When you get the notification in the mail you may only have days to appeal.
The State might not have the details of your home correct. Ours, for example, was listed as being water privileged and incorrectly having an extra bedroom. A strong defense can be based on what the neighbor’s home had recently sold for. Or, what the neighbor’s home failed to sell for.
Besides, bureaucracies are usually understaffed and overworked. They might be too busy to fight you very hard.
Did you apply for homestead credit? If not then do so. It limits how fast your property tax can raise.
Take a bite out of your college bills
College degrees are expensive. Many college degrees lead to jobs that don’t exist or jobs that don’t pay enough for you to survive. When choosing a degree, find out how easy it is to get a job once you graduate and how much it pays. Ask the college the average time it takes graduates in your field to get a job after graduation. If there is no job at the end of the road, don’t waste your money on college.
College is the second largest bill you will have in your life. It will cost less than a house but many times more than your car. There are several ways to take a bite out of this bill.
1. Let compound interest help pay for college tuition
When each of your children are born, start saving some money every month for their college. $50, $100, $200. Whatever you can afford. Something is better than nothing. It will accrue interest over the decades, increasing your buying power. If this isn’t enough to pay the whole bill at least you will have the benefit of needing to borrow significantly less money. You will pay less money in interest on the loan.
While the college fund is growing it has to sit somewhere. Put this money in an investment plan that can be used for something other than college. Maybe your child will get a scholarship. Maybe your child won’t want to go to college. The point is, that life doesn’t always work out as you predicted. The problem with a fund that locks you into a specific college is, if you change your mind you may not be able to get this money back. Or you can get the money back but lost the past 20 years worth of interest.
2. Protect your child’s college fund
Keep your child’s college fund in a protected place. If you are ever sued or face bankruptcy, retirement funds offer an extra level of protection. With a Roth IRA or a 401k you can take the money out early for your child’s college education, and with no penalty. What funds you have to choose between, changes over the years. A financial advisor can recommend the current best choices. And if it ends up that you do not need the money for college, it can be come part of your retirement.
[* 3. There is a trick that will save you 35% or more *]
You want a four-year degree but the cost looks daunting. You have saved and saved but it’s not enough. There is hope. The first two years of college are mainly about getting the basics and prerequisites out-of-the-way. Start your child’s college career at a community college. The community college will cost a tenth or less than a four-year university. Talk to the guidance counselor at the community college to make sure that the classes will transfer and apply to the degree at the four-year college you hope to go to.
You spent two years at a community college and then transfered to a university for another two years and earned a bachelors degree. The added bonus is that halfway through you will have earned an associates degree. It didn’t take any extra effort and you have 2 degrees on your resume rather than one.
4. You don’t have rich parents
You want to get a college degree but don’t have the money. Your parents can’t help you and you have applied for scholarships to no avail. An option is the military. It is OK to join with the intention of not staying in your whole life. However, the Armed Forces have shrunk since the Cold War. If you do not do drugs, have a criminal record or a DUI, the military could be a useful part of your career path.
When you join the military, they will give you the opportunity to choose a skill to learn. Everybody wants to fly fighter jets and shoot cannons. But you will quit the military in a few years. So ask yourself, how many jobs are there in the private sector shooting cannons? You want to pick a skill where there will be a high-paying job waiting for you when you get out. As long as you pass the classes, they will train you for free. Think high-paying skills like medical, law, cyber security, engineering or intelligence.
5. Let your employer pay for your college degree
With some skills, large companies will pay for your college courses. It doesn’t hurt to ask. An insurance company for example, might pay for accounting or business classes. Even if they don’t pay for the whole degree something is better than nothing.
It is common for big companies to pay the whole bill for a master’s degree for their electrical engineers and computer scientists. In exchange, you have to get Bs or better, and agreed not to quit for so many years. Any classes you get a C or worse in, you have to pay the bill yourself.
[* 6. Save 50% on books *]
Your schoolbooks will be a major expense. At the college bookstore, ask for the second handbooks. Be wary of buying them online or from students as professors regularly change what books and editions that they require. The bookstore will make sure you only buy the right version of the books. When the semester is over, if you think you can live without it, sell the books back to the college bookstore.
7. Where will you sleep at night?
Not everybody can live with their parents for free. The dormitory on campus should cost less than an apartment. The dorm will immerse you in the college atmosphere and make it easier to make friends and very importantly, find study groups. People to work on homework and study for exams with is a critical college survival skill. I cannot stress this more. Your GPA will determine the rest of your life. A study group will up your GPA.
If the dorm is too expensive, look for a room in somebody’s house next to campus. If you don’t know how to find one, the guidance counselor should know where they are advertised.
If you liked this part of the e-book, then you might like 100 Ways to Save a Dollar without Lowering Your Lifestyle, available for [+ Kindle+], , and [+ in paperback.+] In truth, it contains 134 ideas.
Financial Outline for your Life
If you are young, maybe starting out your life, wouldn’t it be great if somebody showed you a path to success? Most of us are left to figure it out for ourselves. I’ve done pretty well. This is what I know. I hope it helps.
Selecting a Career
It starts out in High School. This is when you need to start thinking about what you want to do with your life. This really is the most important decision you will ever make. It will open as many doors as it will close. Few give it little thought. Many completely blow it. Hollywood pushes the idea that doing what you love is all that matters. This is the worst advice an adult can give a teenager.
What you will do for a living determines what skills you will get. It will influence if not decide where you live. It will have a lot to do with the quality of the spouse you eventually marry. A poor choice in what you will do for a living might even set the stage for you never marrying. If you have no income or skills, you have little or nothing to offer a prospective spouse. If you are always traveling, when will you have a chance to build a serious relationship?
The reality is that your career choice is a balance between what you love, or at least, what you don’t mind doing, and how much you make. The more money you make, the fewer things you’ll have to worry about. [+)+]
Money won’t buy you happiness
The lack of money will borrow misery
Jobs that require physical labor like unloading trucks in a warehouse, installing cable TV in houses and roofing are skills that can be picked up fairly quickly. But physical work is a problem once you are 40. In the long run, you are better off pursuing a career where you are paid for thinking. Imagine hauling concrete blocks to build a retaining wall when you are sixty years old. Now imagine sitting in a chair in an air conditioned office giving people your opinion. Which future would you like?
College is specialized training. It is not for everybody. Many degrees are useless. There are a few jobs that require a two year or four year degree in anything. But not many. When I graduated college I interviewed with the FBI on a whim. To be a special agent, you need a 4 year degree. They then send you to their school. If you pass, you become an agent. The FBI wanted to give me a gun and chase bad guys. But I had just spent 4 years learning to build gadgets. I like gadgets! So as you can imagine. I didn’t join the FBI.
If you do decide to spend what will be a lot of money and time on a college degree, ask what is the average salary and how many students land a position within three months of graduation. [+)+]
A combination of two carefully chosen skills can pay you more then each added together. It will open many more opportunities and make it easier to get those few vacancies that you really want. A business degree and fluent in Chinese will command a high paycheck. A geologist who is also a helicopter pilot is extra attractive to an oil company. If you can fly yourself into the field, you can do the job of two. The company saves money and you get paid more.
When you are in high school
all things are possible
High school is when many people knowingly make decisions that close doors, often for their entire life. Poor grades will make it hard to get into the college of your choice if not close the door to college completely. In short, you need a B average or better to go to college. If you get C’s or worse, sorry. Your future is going to be harder than you want it to be. Not impossible. Just harder.
Drug use will bar you from the military and any job that requires a security clearance. A DUI -- drinking and driving -- will bar you from many more jobs than you'd expect. For example, many airline jobs may call on you to drive a golf car once in a while. They don't hire people with DUIs.
Pot is legal in Colorado. In time it may be legal in many states. Guess what? Employers can still fire you if you use it. They can, and often do drug test you and will not hire you. If you do drugs, your future is going to be harder than you want it to be.
In your Twenties
If you want a job that brings you adventure and exotic travel. This is the time to do it. For example, during the war in Afghanistan and occupation in Iraq, there were a lot of high paying jobs. On average, truck drivers and auto mechanics were paid two to four times their normal wage.
If the exotic job you pick fits into your career goals it can make for a fascinating resume. The last time I was involved in hiring it was for entry level computer scientists. I looked at the candidate’s GPA more than I cared about what school they went to. What did catch my eye was the job history. Being entry level, many were fresh out of college. No work experience. That’s fine. Everybody has to start somewhere. One of the applicants during college had worked at Radio Shack. Another had been a summer coop at NASA. Who do you think that I put into the interview list the fastest? It didn’t matter if he emptied trash cans. He worked for the Space Program! I wanted to interview him just on the chance he was an interesting person. By taking that job with NASA for just one summer, he landed the chance to impress me and maybe get a job offer.
You are no longer a child. Your life is run by different rules. When you were a child and did something wrong, mom spanked you then all was forgiven. As an adult, if you do something wrong there are consequences that may follow you for the rest of your life. In school, if you do poorly, you get a bad grade and you move on. As an adult, if you do poorly, you have to do it over until you get it right or get fired
It is all about you paying all of your own bills. In time, you also will have to pay all of your family’s bills. Because of this, you need a job with growth possibilities and benefits. Small businesses often don’t offer either of these. My stepson once worked for a family owned restaurant. He liked it there and they depended on him. They’d call him at all hours and he’d run in to pull a shift for whomever never showed. But when the restaurant hit hard times, he was the first to get laid off. Why? Because he wasn’t part of the family.
In your twenties, expect to be mobile. Avoid decisions that cause you to put down roots too quickly. You may live in several cities, working for several employers before settling down. Decisions that will close doors are pets and buying a house. Many apartments don’t allow pets. If they do, you will have to pay a higher security deposit and possibly higher tent. And if you suddenly need to leave town for a weekend or longer with a new love or business trip, who will take care of your dog? Minimally, it’s a hassle.
Buying a house can be a great financial decision. But it costs money to buy and sell it. Unless you are in a hot housing market, once you buy a house you need to be in it a few years before you can sell it for a profit. If your goal is to collect houses and rent them out, it will be expensive to manage if you suddenly have to live in a different city. I was twenty nine when I bought my first house.
Sacrifice in your twenties
and reap the rewards
in your thirties through your nineties!
This is the time to miss out on the wild parties to get that college degree. There’ll be plenty more parties.
Putting a little away into your savings with every paycheck. You need to build your financial safety net. How much doesn’t matter. $10 a month. $20 a month. By saving and investing any amount puts you ahead of most others. Compound interest is a powerful thing. It’s the easiest way to build wealth.
Many employers encourage you to put some of your money into their 401K plan by matching you dollar for dollar up to some percentage of your paycheck. Anybody who doesn't take advantage of this is a fool. This is free money! There is no investment that guarantees a 100% instant return. But this does.
Whenever you have “found money” such as a raise, birthday present, cash award, put half in the bank. Spend the other half on what is important to you. Pay down a bill or buy a new TV. It’s your choice.
Whenever you get a pay raise or cost of living increase, have half of it go into your retirement. Currently 401K's are the vehicle of choice. Over ten years you can increase your deductions from your paycheck to 15% without ever noticing it. You'll never miss money that was never in your wallet in the first place.
How to keep from over spending? There are many tricks. If your wallet is normally empty, you’ll make fewer useless expenditures. An empty wallet forces you to sleep on it. The urgency to buy often passes by the next day. Another powerful strategy is a budget. A budget is an important tool. It’s not about keeping you from spending. It is about making you aware of where your money is going.
In your twenties and thirties is when you want the riskiest investments. You have the least to lose and most of your life to recover if you do lose it.
If you haven’t picked a career by your mid twenties, life will pick one for you. By your late twenties you are trapped for life. It will be very hard to make a major life change. Why? The mousetrap has snapped shut onto your neck. You need a job to pay for food and a place to live. If you have a family, the urgency is ever greater. To get training of any significance you need to be unemployed or underemployed. How can you work part time if you have a low paying job and lots of bills?
If you have a college degree in business or the sciences, your employer may pay for additional degrees. That is how I earned my Master’s degree fifteen years ago. I worked during the day and went to school at night. Work paid the bill. In my current office, one of my coworkers is pursuing his PHD. Work is paying his college tuition.
Who and when you marry is the second most important decision you will make in your life. It will change every thing. You can fall in love with a rich person as easily as a poor one. An honest person as easily as a criminal. A healthy person as easily as somebody with serious medical issues. What most of us fail to ask is, what does this person bring to the table? Will they make your life better beyond making you laugh, or will they be a financial drain? Everybody runs out of amusing stories sooner or later. Is this somebody you desperately need to save? Will they bring trouble and hassle that will constantly pull you away from your hopes and goals of a happy and peaceful life? You want somebody who has a stable (honest) job. Somebody who will have your back. Who will pick you when you fall down. And you need to be able to do the same for them.
In your thirties and forties
Avoid drugs, theft and drinking and driving. Your whole life can come crashing down in a heartbeat.
One strategy to climb the ladder is to every few years find a new job. Changing jobs while you are employed, often you gets you a pay increase. This mainly applies to skilled workers and professionals who can command as much as a 20% pay increase with each new job. At the low end of the pay scale, people are trapped at or near minimum wage.
You generally get paid better for having knowledge or having skills that most don’t. Always keep your eyes open to learn more. If your employer will pay for a college degree, typically a Masters or PHD, seriously consider accepting. This means going to school at night for a few years. Look at it as a pay increase. A college degree costs a lot of money. And with it, you’ll get paid more for every next job, and for the rest of your life.
Keep it honest. Don’t spoil a good thing. Timecard fraud is the surest way to get fired on the spot. If you job hunt after you have been laid off or get fired, expect a pay cut. Sadly you are now climbing down the ladder of success.
If you haven’t already, you need to increase the percentage of your paycheck that goes into your retirement to the maximum. You are behind the eight ball. Get this done as fast as possible.
Diversify your investments. One of the lessons of the Great Depression was “not to put all of your eggs in one basket”. A Nobel prize was given out for this concept. The misguided wisdom of the 1920’s was that you should invest in your employer. Everybody did it. It made you part owner and kept the stock price high and stable. But when businesses started failing people discovered that they had lost both their job and all of their savings in the same instant.
Your money should be split between more than one investment just like you should have more than one skill. In this day and age of identity theft and cyber crime, you may also want your savings split between multiple banks and have more than one credit card.
In your fifties and sixties
Unfortunately, I lost the article that stated the number of people in their 50’s that unexpectedly lose their job. But it was large enough to take seriously. Large enough to consider it in your financial planning. The average time unemployed for those 55 and older was slightly more than 39 weeks, according to the Labor Department. This is the longest of any age group. When they finally find a job it is at 40% to 50% less than their previous income, never to completely recover. My wife narrowly escaped this two years ago when her employer downsized. A lot of people I know had this happen to them in 2013's federal sequestration. Several eventually gave up and moved out of State, looking for the next career.
How much do you need to retire? 75% of your final wage is a good rule of thumb. There are others out there. A good strategy is to compare or even average together the different estimates. If you are a professional, 37 years might be a magical number. A good retirement plan might mean that after 37 years, you can retire to the same paycheck you received by showing up for work each day.
Try to have your house paid off by the time you retire.
How to maximize what you will have in your 401K when you retire? Once upon a time I played with the math behind this. What I saw was that what you put in each month, drove the growth for the first fifteen years. The rate of return is what drives what you make during the second fifteen years. This is a tough decision because by your fifties, you want to start lowering your financial risks. If you lose 25 years of savings, you can’t recover before you retire.
One rule of thumb is that the stock market will recover from a recession in five years. So, have most-to-all of your retirement money moved to low risk investments by five years before your retirement.
Many people retire before they plan too because their health fails unexpectedly. Turning 40 is the classic time when people start to wake up with aches and pains. By fifty, they medically start to fall apart. But if you have physically active hobbies and limit your drinking and fatty foods, don’t smoke and watch your weight, most of this misery may be delayed to your seventies or eighties.
Where you live can make your retirement money last longer. A state with a poor economy means a lower cost of living. States like Florida and Texas don’t have Income tax. Some people move to countries like Thailand. I was recently in Costa Rica. The cost of living has risen over the past two decades. It’s not the inexpensive country it used to be. Living outside the US means you are subject to a non-US legal system. This is worth examining depending on which country catches your imagination.
Working hard is one third of the process to make money. Step two is to spend efficiently. Minimized the amount of money you throw away. But if you achieve the greatness of spending less than you make, where you put the leftover can become it’s own cash flow.
Protect your profits when buying CDs
When you have enough money in your savings account to cover three emergencies, consider seeking out a higher rate of return for the new money. A CD (certificate of deposit) is a safe and simple step before tackling the stock market. You buy them at a bank or Savings and Loan. Like a savings account, it won’t shrink. And like a savings account, it won’t acrue very much interest. Expect an extra one or two percent more than a savings account. The real profit and risk is with real estate and the stock market.
Why even consider a CD at all? A CD is a great place for a pile of money that you really need, but not for 6 – 12 months, and can’t take the risk of it shrinking. For example, you took out a loan to put an addition on your house and need half now to pay the builder and the other half in seven months when he is finished.
If you are a landlord, you need a cash reserve to get you through six months of lost rent when your renter loses their job and stops paying the rent. You don't know if and when you'll need the cash but when you do, you need it now! Without this cash reserve, your only alternative is to take out a loan. Can you get a loan quickly? You have to pay off a loan with interest! Which sounds better to you? $10,000 acruing a sad 2% a year in a CD at the bank, or a $10,000 loan costing you 12% interest? This simple decision will make a 14% difference in your cash flow.
To save on unnecessary fees, there is one detail that you will want to keep in mind. Your money will be locked away for a time of your choosing. Six months and one year are what most people sign up for. The penalty for early withdrawal is that you forfeit the interest you would have earned during that time period.
I once had a CD for $20,000. One day, I needed to buy a new water heater. My savings was short so I cashed it out a month before it matured. So, after waiting almost a year for my profit, I lost a couple hundred dollars in interest.
If I had to do it over again, I would have instead bought four CDs, each for $5000 rather than a single $20,000 CD. If I had done this, I would’ve cashed out only one of the small CDs to pay the unexpected bill. I’d have lost the interest earned on $5000 but I would have kept the interest earned on the other 15.
The next step is to either buy stocks or real estate -- typically a house. Each has its own advantages and hassles. Over time, you want both.
Getting started buying stocks.
Are you wanting to buy stocks but not sure how to get started? This is a short 101 lecture that my father never gave to me.
There are many ways to play the stock market. They range from simple, safe and cautious, to fast and very high-risk (Day Trading). The latter is a akin to gambling and should never be attempted by a novice. This is where people often lose fortunes.
How much money do you need to buy stock?
If using a stockbroker you need at least $2000 a buy. This is because the fees are relatively high. You pay a fee when you buy and again when you sell. You need to buy a larger amount of stock at a time, for your profits to cover the fees. E*TRADE or Ameritrade are effectively the same as a stock broker without the personal attention, thus the lower fees. After the crash of 2000 they started charging fees if you didn’t buy and sell often enough. That’s when I stopped dealing with them.
Mutual funds require as little as $50 a month until you reach the minimum balance. This amount varies depending on the fund. A common minimum balance is $2500.
It looks and feels like a savings account. Your money is combined with thousands of other people. Without talking to you, stockbrokers (fund managers) buy and sell stock across one or more industries rather than a single company. The fees vary drastically from fund to fund. Morningstar reports are one page long with everything you want to know along with how each is rated. You can get up to date reports for free at the public library reserve desk.
DRIPS require as little as $50 a month until you reach the minimum balance. A common minimum balance is $250. This amount varies depending on the fund.
It looks and feels like a savings account. The bad ones charge you to buy, hold and sell. The good ones cost nothing to buy and hold. They cost only a small amount to sell. The fees are much lower because you bypass the stockbroker and buy directly from the company that issued the stock. Large companies are the only ones that offered DRIP accounts. A favorite one of mine has been Exxon-Mobile
How do you make a profit?
The simple answer is dividends and capital gains. If the company makes a profit, they usually give some of it to the stockholders as dividend payments. You get a check in the mail one to four times a year. With DRIPS and mutual funds, this can be auto-reinvested to buy more of the same stock.
Capital gains is the stock price increasing in value after you bought it. You intend to buy low and someday sell for a high price. You turn a “potential” profit into a “real” profit when you sell the stock. Companies that pay high and regular dividends are rarely ones that change very fast in value.
What is Risk?
This is not what you would expect. Risk is a measure of volatility of the stock price. Typically this refers to the share price. A low risk stock would have a stable stock price or always pays dividends.
What is a stock split?
A stock split is like making change for a dollar. Your one share of stock that is worth $100 is replaced with two shares, each worth $50. All that happened was that a large bill was broken into smaller bills.
So why do people get excited about a split? Most stocks that split return to their previous value in about two years. In other words, there is a reasonable chance you will double your money in two years.
There are countless strategies for selecting what stock to buy and when to buy it. One is based on only buying stocks that have announced a split. Google the phrase “stock splits” and the current year. The expectation is that you’ll double your money in two years. Exxon is one of my long time favorites. Exxon split a few times since I have owned it. The share price would reach $100 then it would split into two $50 shares (2:1 split). They would increase to $100 then split again and again.
The safest strategy is called dollar-cost average. Once you select the stock, ignore the stock price and buy a fixed amount on a schedule. For example, buy $100 worth on the first of every month. Some months you pay too much. Other months you’ll get a great deal. On average, you’ll be paying a reasonable price.
Coupled with this, is the goal to buy and hold the stock for at least five years. However, if the stock is found to under perform for a year or two compared to the market, it is okay to sell it and move your money to a better performing stock.
One interesting strategy is to follow specific CEO’s careers. Occasionally there is a Chief Executive Officer whose every touch turns to gold. Buy the companies they get hired by and sell quickly if they leave. Google “Best CEOs’”.
Follow trends in the market by following individual stock prices -- the DOW and S&P 500. Is the stock value rising consistently over time? Is the dividend paid out every quarter for the past few years? Are there any countries melting down financially, potentially causing others to become shaky?
What is the DOW?
The DOW (DOW Jones Industrial Average) is a list of 30 stocks first created by Charles DOW in 1896. The theory was that by tracking the performance of the top companies, the health and trends of the whole stock market could be seen. Today, what companies that appear on the list is determined by S&P Dow Jones Indices owned by McGraw-Hill Financial.
Since being on the list means, the company is the best of the best, one stock picking strategy is to only buy DOW companies. Another is to only buy the DOW dogs. These are the ten DOW stocks that pay the most Dividends.
Other prominent indexes are the S&P 500, Wilshire 5000, Russell 2000. The NASDAQ Composite tracks 3000 companies.
Tracking multiple stocks
A stock can catch your eye in many ways. You can perform heavy research of many companies across and industry. Or you can overhear a stock tip in the hallway. But once a company has caught your attention you want to know the basics. E*trade, Ameritrade and Scott trade will give you stock quotes without first opening an account.
One of the things to look at is the stock value trend. The default is usually one day. Take a look at all of the settings. The 1 day setting is only good for day trading. To see the larger trends the one year average may be of more use. These slower cycles are easier for a beginner to spot and take advantage of. A recession is an example of a slow trend. A recession is a fall and recover that takes two to five years.
Another major detail to look at is the average dividend yield. If you won the lottery or inherited a lot of money, you may want to buy large quantities of stock and live off the quarterly dividends. This way the initial investment is never touched except maybe during a recession, when dividends may shrink for a couple of years.
Of the list of stocks that have caught your eye, you need an easy way to track and compare their progress. For example, and [+ Scott Trade+]. Try entering a list of stock ticker names separated by a comma.
Getting a stock quote and looking at the historical trend may show a repeated oscillation of a stock. It might be seasonally. A propane company may make most of it’s profit in the winter so it would drop in value in the summer. In this case, summer is when you’d want to buy. If a harsh winter is predicted, you might want to buy a greater amount of stock. If a hurricane damages refineries in Texas, the stock price may rise fast and early because of a predicted gas shortage.
Fear and anxiety drive the market
If something occurs to cause a stock price to plummet but doesn’t endanger the future of the company, you have an unexpected opportunity to make a quick profit. When Steve Jobs went public that his cancer was back, Apple’s share price dropped to half. But once the market realized that even if he died on the spot, the company was healthy and had enough products in the works to keep it a major innovator for at least a couple more years. The stock price recovered a few days later.
A recession is when your neighbor is out of work
Recessions are a great opportunity to make a profit assuming you have cash on hand. It is a good strategy to have a war chest on the side for such an event. There is no universally accepted definition so this is as good as any. A recession is a twenty percent drop kicked off by a major event such as the 1997 Asian financial crisis.
The 2000 recession (Y2K) occurred because of the fear of the Y2K bug. About 1997, efforts to modernize commercial, military and banking software to fix the bug started in earnest. In many cases, new computers were bought. When January first, 2000 happened, much of the world’s corporations had modernized their computer systems. They stopped spending. Nobody was buying computers anymore. The armies of computer scientists and administrators had finished their Y2K task, and many were suddenly unemployed. The stock market tanked. By 2002, industry’s need to regularly replace and upgrade their computers and network infrastructure had returned to normal.
A depression is when you are out of work
A depression is a more extreme recession. It is a fifty percent decrease in the stock market and lasts for four to ten years. The collapse of the housing market in September 2008 hit bottom by summer of 2009. By 2016, most people agree that the economy had recovered.
Many otherwise healthy stocks like Ford and Discover Card were hit pretty hard in the crash. I made a guess when we were close to the bottom and bought Ford. It fell a little farther then rebounded. I held the stock a couple of months longer than I intended then sold, doubling my money.
Whenever you decide to buy,
it is the wrong time
The intention is to buy low and sell high. What often makes one want to buy a stock is that it has had a long upward run. Nothing can go up forever. Once you see the trend, it often is too late to catch the wave. The real skill is buying when a stock is on the way down but for temporary reasons. Blue light special in isle three!
The fees are always a key detail
This part is about minimizing your fees, maximizing your profit.
Making money is like hunting.
The prey doesn’t want to be caught.
When I first started buying stocks, I used the dollar-cost average method. I also looked for month long cyclical trends. When I had a little extra money, I would buy stock when there were easy to spot dips. In general, I held and rarely sold. It was like collecting baseball cards. Instead of spending the extra money that was burning a hole in my pocket on a whim gadget, I’d spend it on a whim stock. Once every year or two I’d compare the performance of each stock, selling the dogs and putting the money into my best performers, maybe adding a new stock to the list. Over four years, I had compiled more money than I had expected.
There are at least 10,000 mutual funds. I used to go to the library and page through the reference copy of the Morning Star. I’d photocopy the page on each of the few best funds, go home and study the stats. I recommend going right to their list of the best performers. Off the fund reports, I’d get the 800 number to call and get an application form. Now a days these forms can be downloaded from the Internet.
I bought a lot of DRIPS. They grew. For an extensive list, google DRIPs, dividend reinvestment plan or no-load stocks. You can try [+ www.dripcentral.com+], and [+ us.computershare.com+]. Some of the lists are old but much of the information should still be valid.
I tried my hand at day trading through E*trade. It was fun but over six months, I lost most of my money. I guess I’m not cut out for day trading.
If you liked this part of the ebook, you might like my book of ideas how to make a little extra money on the side. How to Make an Extra Dollar is available in [+ paperback+], for .
About the Author:
John Stilwell was born and raised in the Midwest. In the 1980s, he was regularly published in popular computer magazines. He was a contributing author to three Commodore Computer books. He earned two degrees in Electrical Engineering. Today, he is an Engineer by day and an author and artist by night.
He has traveled extensively overseas with his hobbies being various and regularly changing. They have ranged from studying massage to bungee jumping. In the 1990s, he learned to draw and produced a respectable quantity, selling an occasional piece.
In the late 2000s, his daughter talked him into doing science projects together and creating youtube videos. Some include a leaf blower powered one-man hovercraft, a solar powered hot air balloon cam and various magnetic levitation curiosities.
By 2010, he was back into serious writing, focusing on books and articles.
This book is a collection of tips and tricks on how to make an extra buck and how to get things for less. There are over 27 ideas across several topics. So grab a beer because I know what you mean! I had the same problem and here is how I managed to get it for less. In several places in this book, you can click to get useful lists and videos. Your e-book reader will need internet access to view them.