(No this is not going to be boring, and yes it's by the WSJ so that means it's legit). On six money moves to make in 2013. I'm not rich, and I'm not poor. I'm doing okay. But like anyone, I'd like to have a little more cash in the bank. Until the Fox network creates The Lovely Life of Leah Show like The Mindy Project. (kidding... sorta) and pays me $1 mil an episode, I need to work with what I've got.
Below is a C&P of the article that is by By Brett Arends of The Wall Street Journal. I've made my own notes, in pink like this and am kind of pumped about trying these ideas out. I'll keep you posted. I'm a cheap person by nature, but I think these tips can help me, someone who's not spent even $1 in the past week (ok wait... I spent $17 on gas last night, but seriously other than that. nada. Oh, I had to get a new vaccuum this weekend... and groceries from like 3 different stores, ok yeah I'm not as cheap as I thought).
Are you ready for 2013?
Most financial-planning advice, like most New Year's resolutions, is too complex or too banal.
Half of it is designed for Type-A drill sergeants who already alphabetize their refrigerators. The other half you've heard before.
Let's assume you are already paying off your credit cards, contributing to your 401(k) at work and flossing after every meal.
Here are six unusual, and doable, smart money moves for the new year.
1 Work out your biggest savings goal.
Many people working today are likely to live for three decades after they become eligible for Social Security, but few of them have a clue what that means financially.
Just 42% of working-age Americans have even tried to calculate what they will need in retirement, according to the Employee Benefit Research Institute, a Washington, D.C.-based think tank. (true story, I have no clue. other than the fact I plan on retiring a multi-millionnaire. clearly).
The grim reality: 60% of them have less than $25,000 saved up, excluding the value of their home, and 30% have less than $1,000. Good luck with that. (uh yeah, less than $25,000 for sure. Need to get on saving more...)
How much will you need? To replace your current income for 30 years, you would need—assuming an investment return of three percentage points above inflation—about 20 times one year's income. Social Security aims to replace about 40% of your annual income: By that yard stick you would need to save about 12 times your annual income before you retire. Yikes. can't retire yet.
For a more precise number, use the Social Security Administration's retirement estimator. Subtract your expected annual benefit from your current yearly pay, and multiply by 20.
2 Ramp up your investments.
Open a Roth individual retirement account, if you don't have one already. You can invest up to $5,000 for 2012 and $5,500 for 2013 and a nonworking spouse can invest the same. If you are older than 50, add $1,000. I have a financial planner through work, and need to meet with him. And ok yes, I should contribute the max, I know. I'm contributing now, and have a decent amount in there saved. But it's more like an amount out of my paycheck that I don't really miss :/
Then invest some money in a fund, such as the WisdomTree Emerging Markets Small Cap Dividend exchange-traded fund (DGS), specializing in smaller-company stocks in emerging markets. It shouldn't be the whole of your portfolio, but it should be in there. This is likely to be a volatile growth investment.
Emerging markets offer the best overall returns of any investment at the moment, according to two groups of experts who successfully predicted the last two financial crises: Research Affiliates, the investment advisory firm founded by Robert Arnott, and GMO, the fund company co-founded by Jeremy Grantham. GMO estimates that emerging markets offer an investment return over seven years of 50% plus inflation, handsomely beating any rival asset class.
3 Try homemade month.
Say goodbye to the soy chai lattes, burritos, pastas primavera and Overflowing Bucket O' Fries (a genuine bar food item spotted in Boston). Pick a month—any month—and try not eating out at all, for breakfast, lunch or dinner. Is January too soon to start this? I have a couple things on the calendar already, but can I say as of this moment no other eating out? (Unless someone else pays of course!)
It's not easy. But these meals add up.
It costs you $10 to get a sandwich at work for lunch. It would cost you $2 in ingredients, and five minutes of time, to make that sandwich at home. Do you earn $96 an hour, after tax? If so, you can ignore the rest of this article. If not, try making the sandwich. True, we have a cafeteria at work that makes it just too easy to buy food.
Financial planners say that when new clients audit their household spending for the first time, the biggest shock is usually how much they spend in restaurants—70% of which goes to paying the restaurant's rent and labor costs.
Why do we go out to restaurants that promise "homemade" food? Because I don't know how to cook delicious food like I can have someone else make me. But I'll try.
4 Stop the bleeding.
If you're like a lot of families, you spend $200 or even $300 a month on cellphones, cable or satellite TV and Internet.
Take a scalpel—or an axe—to that budget and see what you can cut. Call your cellular provider and your TV company—cable or satellite—and haggle. Chances are, they will cut you a deal.
Try dumping pay TV altogether and watching movies and TV instead using an online service like Netflix, Amazon or Hulu Plus (partly owned by News Corp., owner of The Wall Street Journal), for less than $10 a month. I don't have wi-fi at home, so that doesn't work :(
If your family spends $200 a month on cellphones and pay TV, that's $2,400 a year. Over the course of 20 years, if you invested that money instead at 4%, you'd have an extra $70,000. Yes that amount is probably right for my phone, air card (I didn't say I didn't have internet, just no wifi and cable).
5 Hold a two-week auction. this is the one I'm most excited about!
Turn your house into Sotheby's for two weeks. Go on eBay.com and Craigslist.com and auction off everything you don't need.
The spare cellphone(s) in the kitchen drawer. The second, unused lawn mower. The designer vase you never use.
Set yourself a target. Like $500? Double it. Omg like $1,000? Then see how close you get. Get the entire family involved.
Removing clutter is a great stress-buster, as psychologists since Ralph Waldo Emerson have noticed. Really?
This project will raise some free money. A process like this also has a remarkable way of focusing everyone in the family on the true value of a dollar.
6 Imagine you're dead.
Cheerful, isn't it?
This is why so few people think about dying. Yet from a financial perspective, they need to. Chances are you haven't prepared in case it happens.
This is not just about the elderly. About one in eight people currently aged 40 will die before they reach 65, according to government statistics. Yikes. sad.
This means two things.
First: Get life insurance, and disability insurance, if you have dependents. Yes.
Most people have some kind of coverage through work. It is usually desperately inadequate. Both one- and two-income households probably need more. It costs about $250,000 to raise a child for 18 years, according to the U.S. Department of Agriculture. Four years of private college is another $160,000, according to the College Board. Could your surviving spouse cope on his or her own? Considering I don't have one... um no.
Second: It means make a will. If you already have one, make sure it is up to date. I sort of have one but not really. Need to get on that.
Dying intestate—without a will—can be catastrophic for the family left behind. And few disasters can be so easily and cheaply prevented.
So what do you think? Could you go a whole month without going out to eat at all? Or setting an ebay goal and actually doing the work to post enough of your stuff to make that goal a reality? it's worth a shot!