Archive for March, 2008|Monthly archive page

Bringing Your Lunch to Work Can Save You $1000

One of my rituals before getting ready for work is to always prepare my lunch. 90% of the time it is always the same thing. It usually consists of two sandwiches, a piece of fruit, and some cookies. The other 10% of the time I bring leftovers from dinner. It only takes me five minutes to make, and I save around $1000 a year!!!

Lets say that on average someone spends $20 dollars a week on food at work. This can include soft drinks, candy, coffee, and anything purchased before and during working hours. That $20 a week ends up adding to $1000 at the end of the year (for this example we are using a 50 week work year) If you are trying to cut your expenses down, this is a great way to start doing so. I know that it is hard for some people to bring their own lunch if they have a job that requires taking clients out to eat, and for networking purposes. But for the most part this is not the case.

We tend to always be on a rush during lunch hours at work. So naturally, we end up going to fast food places or eating from the snack machine. By bringing your own food, you will increase your savings and your overall health. Once I began to bring my own food from home I began to have more energy after lunch because I was eating fruits and other things that didn’t make me feel bloated and like a need it to take a nap

Just Imagine what you can do with that money instead. I use this money for my vacations. Every week, I automatically draft 20$ from my checking account to a savings account. Then, when I’m ready for my yearly trip, I have a minimum of $20 ready for me to enjoy. Better yet, invest the money and watch compound interest work it’s magic.


Emergency Fund to the Rescue

Yesterday, as I pulled in to my driveway, my car all of a sudden sputtered a little bit. I didn’t think anything about so I put my car in reverse to park it next to the house. When I tried to set it on park, I noticed that the car would not switch gears. Even when I moved it to other gears, it would still stay on reverse. Now I found myself stuck in the middle of the street. I turned off the car. and pushed it out of the way so it wouldn’t block any traffic. By this time I knew that I had probably have a transmission problem. I may not know a lot about cars, but I do now that fixing an automatic transmission is never cheap. Yet, for the first time in my young adult life I didn’t panic in a high money situation.

I didn’t panic because I knew that I had an emergency fund set up for incidents just like this. So what would become a stressful moment in life became a minor nuisance. That was not always the case for me. Before, I didn’t have any money saved up, especially not for a rainy day. So when something unexpected happened where money was involved, I would scramble like a mad man trying to figure out how to pay for it.

I haven’t read a personal finance book that doesn’t insist on having some type of emergency fund set up before tackling debt, or starting to save in general. Some lean towards three months your salary, but the majority suggest having three to six months expenses put away in an account where it is easy to get a hold of. Something like a money market account, or a high-yield savings account Personally, I have my money set up with HSBC Direct Online Savings Account. It took about twenty minutes to set up, and their customer service so far has been excellent. They have a comparative interest rate and I can transfer money back and fort between HSBC and my local brick and mortar bank easily. My brother uses ING Direct and has nothing but positive things to say about them as well. J.D his a great post discussing how to choose an online savings account.

In the end, the cost to fix the car was $120. Thankfully, it was just the shift cable. Mentally I was prepared for the worst, so I thought it was going to be over $1500. Either way, I would of been okay because I have enough money saved up in my emergency fund to cover both amounts. I guess our grandparents knew what they where talking about when they told us that we should stash some money away in case of rainy day.

Embracing the Frugal Lifestyle Part 2

At the beginning of the first entry on frugality, I had mentioned briefly how I sometimes had to deal with my coworkers and explaining to them the frugal lifestyle. The stigma behind frugality is that one is cheap. Because of this, many people feel almost the need to constantly buy the newest and greatest thing. It is natural that we want to feel hip and modern, but at what cost. While one may have the newest car, or the most expensive purse, they probably have little to no savings to speak of. I’m not preaching to never spend a dime. What I am saying is that use what you have already till it is not usable, and buy bargains.

I have a friend that loves fashion. The more expensive the article of clothing is, the better. I tell them that there only two things that seperate his clothes from mine. The brand, and the price. Thats it! The clothes have the same material for the most part, and are made with the same equipment. He thinks about it and agrees. The only answer he can give me as to why he needs to buy expensive clothing is that he would feel cheap, and that other people would look at him differently. My friend lives paycheck to paycheck and is drowing in a pool of credit card debt yet he can’t seem to fight the need to spend his money on things he does not need.

J.D in GetRichSlowly wrote a post about How to Live on Less and Love It and also Ask the Readers: How Do You Live Frugally Without Seeming Like a Looser. In it, he explores enjoying being frugal and his own personal struggles with his new frugal lifestyle. His readers give great advice into what to do at work, for fun, and even on dates. Who says you need money to have fun?

Embracing the frugal lifestyle

Many of my colleagues at work think that my choice of lifestyle is weird. They really don’t
understand the meaning of frugality, so the moment I tell them, the first thing that comes to their minds is cheapness, no fun, and and whole bunch of restrictions. They really think it is odd that I don’t have any debt, I save over 20% of my salary a year for retirement, and I don’t lust over expensive objects. Nevertheless, once I dive deeper into explaining to them that being frugal doesn’t mean being cheap, they start understanding what it really means.

The first thing I want to clarify is that my definition of frugality can be very different from yours. So I will start by using a standard definition. Webster’s definition of frugal is “one who is not wasteful”. To me that is the simplest way to explain what frugal is. Frugality is clearly understanding what is a want, and what is a need. Frugality applies to food, clothes, cars, etc. Frugality is not just bound to how and where you spend money.

This post is is to become one of many in deciphering frugality. We have established its simplest definition. Next we will put it into context what frugality is and dealing with the stigma from others.

High Price of Gasoline

Yesterday, I pulled up to one of the major gasoline chains by my house to fill up my car. My jaw dropped when I saw how much it cost me to fill my little 1999 Cavalier. $40.20!!! This got me thinking about how can one save money on gasoline. Here are some time tested methods one can use to save on gas:

  • Shop around: Just remember that if you have to drive too far for just a couple of cents less, it is actually more expensive.
  • Avoid running your gas to close to empty: My frugal mind would tell me to use every little drop of gas that I have. However, this actually causes you to use more gas because your car is running less efficiently when accelerating.
  • Keep your car up-to-date with it’s tune up: You can increase your mileage by 5% by having a well tuned engine. This also includes changing the car’s oil when the time is due.
  • Change your air filter: Studies by FuelEconomy suggest that changing your air filter on a regular basis can help you improve mileage by more than 10 percent.
  • Keep your tires properly inflated and rotated: By having your tires in good shape, your car doesn’t have to exceed as much force when driving thus saving on gas.
  • Service your car in the winter: I’ll be honest with you guys. I live in Texas so this concept is foreign to me. After doing some research, having your car serviced before winter comes, specially in places where snow is common, has a great impact on your gas mileage.
  • Combine trips: Instead of doing multiple errands from your house and back, try combining doing as many as you can with one trip. Many small trips can consume almost double the amount of gasoline. Combining the trips will save you money and time.

Clearly there are more ways to save on gas such as commuting or using public transportation. I just wanted to point out that we can still save money on gas even though we can’t control the price of it. Gas is not going to get any cheaper any time soon lets try and use the tools we have to our advantage to keep driving ahead. I would love to hear the creative ways you guys save money on gasoline as well.

Start Saving NOW!!!

So how exactly can the average Joe become a millionaire. One way could be by winning the lottery. Another way can be by inheriting it. Now how about doing it yourself. You may not have a million dollar idea, or the athleticism to become a pro athlete, but you do have something on your side. That is, compound interest.

Compound interest is the adding of accumulated interest back to the principal, so that interest is earned on interest. Compound interest is found everywhere specially in loans. More importantly it is found in your retirement savings account. It won’t make you rich overnight. Compound interest works in a slow but steady pace. As interest compounds, month after month, or year after year, the pace picks up and that is when you can earn some serious cash.

Take a look at this example from mindyourfinances. If the link doesn’t work here it is as well: Two different individuals–Darryl and Cheryl, each 22 years old–have an extra $2,000 a year to invest or spend as they choose. Darryl opens an Individual Retirement Account (IRA) to start saving. Cheryl chooses to spend her $2,000.

In this example, Darryl’s IRA earns 12% per year. Darryl saves $2,000 per year for six years, then never puts another cent into his IRA.

Cheryl spends her $2,000 per year for six years. After that time, she invests $2,000 per year until she is 65 years old. Cheryl earns the same 12% interest per year that Darryl does.

The chart below shows the value of Darryl’s and Cheryl’s respective IRAs, from the time they are 22 years old all the way to 65. Keep in mind, Darryl’s total investment is $12,000 ($2,000 per year for the first six years), while Cheryl’s is $74,000 ($2,000 per year for the last 37 years).

Age Darryl Cheryl
22 $2,240 $0
23 4,509 0
24 7,050 0
25 9,896 0
26 13,083 0
27 16,653 0
28 18,652 2,240
29 20,890 4,509
30 23,397 7,050
35 41,233 25,130
40 72,667 56,993
45 128,064 113,147
50 225,692 212,598
55 397,746 386,516
60 700,965 693,879
65 1,235,339 1,235,557

The earlier one starts saving the better. It is never too late too start investing. Whatever it takes put money away NOW!!! No matter how small the amount is, every little bit counts. In this particular example it took Cheryl almost a whole working life time to catch up to the 6 years of investment done by Daryl when he was 23. All done by the power of compound interest.

If you want to see what compound interest would do for you, use this calculator I found in Moneychimp just plug in and it will give you the future value of your investment. Bare in mind that this is a very simple calculator that doesn’t take things such as risk into account.

Intro part 2

The content that I hope to provide to you from this blog will come primarily from my personal experience with finance and my growing interest in the subject. Things such as articles, book reviews, blogs about personal finance will also be discussed here. Due to my job I will only be able to post 3 times a week (Monday, Wednesday and Friday) but I plan to post Monday through Friday after the first month.
So who is Young Saver? In a nutshell:

  • I’m 23 years old
  • I’m from Leon Guanajuato, Mexico. Currently living in Houston TX
  • I work in retail
  • I’m getting married in August and October (I’ll explain this later) : )

About three years ago I began to get serious about saving money. I noticed that I was buying stuff trying to satisfy a want and not a need. At this time I was attending college and working full time as well. I was working long hours yet when I looked at my bank statements there was nothing to show for it. I realize that I was spending money as fast as I could get it in my hands. Something triggered in my head and I said enough is enough. I drastically cut down my spending and started saving my money. I didn’t have a particular goal to save for. All I wanted was to have more money in the bank just in case I really need it for something important. I didn’t know anything about personal finance. In fact I was somewhat scared of it. I didn’t even have a credit card (still don’t) just because I couldn’t grasp the concept of credit.

So one day driving home from work the Dave Ramsey Show came on. and suddenly I wanted to learn more about managing money. I started saving for a rainy day, invested my money for the future and learned the power of compound interest. And as the old cliche says “the rest is history”. In the next month or so, I will keep writing about my own philosophy in managing money and I will be glad to here your opinion on the matter as well.

Hurray Me!!!

Well guys I finally decided to become the 1 billion and one person to start a blog. I have been hesitant in doing so for the longest but I decided that there is no better way to combine my love for writing and my passion for saving money than by writing a blog about it.

This Blog is also a way for me to hopefully be able to connect with other people who enjoy personal finance and exchange ideas and thoughts. There are many excellent blogs out there with personal finance being the main topic. What I didn’t find was too many that focused on the young adult (I’m 23 by the way).

So bare with me in this journey. And to all the millions of readers. Well… To my fiancee and my mom, I hope you will enjoy watching me grow as a writer.

The journey of a thousand blogs begins with one.