Driving a Minivan Isn’t Giving Up. Here’s Why It’s a Smart Financial Choice

When you have a baby, especially if it’s number two, people begin to jokingly ask when you’re going to “give in” and get a minivan.

For some reason, many people equate driving a minivan with being old, uncool or a soccer mom.

But I’m here to tell you there’s no shame in driving a minivan.

We got our first minivan, a 2001 Chevy Venture, after our second child was born in 2003. My husband and I couldn’t get the double stroller or the two pack-n-plays — let alone all the other stuff you have with a newborn and a 15-month-old — to fit in the trunk of our car.

With the minivan, we suddenly had plenty of room for everyone and everything.

Buy a mattress or patio furniture? Fold down the seats, take it home yourself and skip the delivery fee.

Need to get your team from one game site to another? No problem; there’s plenty of room for six 9-year-olds. And yes, I’m not only a soccer mom, but a coach, too.

How Our Minivan Helped Us Save Money

The van was not only convenient, it also saved us money.

In addition to helping us save on delivery fees, it helped us save on vacations — we could all easily pile in to visit relatives on the East Coast without worrying about airfare and car rentals.

During the past eight years, we’ve driven twice from Wisconsin to Washington, D.C. I estimate we’ve saved thousands of dollars on airfare by driving. It’d cost about $1,200 for our family of four to fly.

Once there, we saved by using our own vehicle. Since we had room, we also brought along some food so we didn’t need to spend as much eating out or buying snacks.

Moving On from the Minivan

And yet, about 18 months ago, we decided it was time to replace our trusty 13-year-old minivan.

My kids moved on to middle school, and it took twice as long to drive them there. I took a two-hour job at their school, helping in the cafeteria to make a little extra money and get a tuition discount.

If my kids had an after-school activity, I could easily make the 35-minute round trip four times in a single day. I easily filled up the van with gas twice a week, which cost between $50 and $60 each time, depending on gas prices.

Once my daughter’s sports seasons started, I needed to add in another trip to the gas station each week.

A friend made the switch from a van to a crossover and talked about how much she loved it.

The van was starting to have some mechanical problems, and we had to make a choice: either get a certified used vehicle to replace it, or spend a lot to get it fixed.

We decided to trade in the van.

At the time, I was thinking about the daily trips to school and the gas involved.

I wasn’t thinking about the extra space the van provided or how we went on a road trip nearly every summer, whether it was to the East Coast, Chicago or South Dakota.

My husband said it was my call, so I went with the car. It didn’t take me long to realize it was a big mistake.

Life Without a Minivan

Sure, the car could hold five people, but only if three of them were small children. Fitting three middle school students in the back was nearly impossible and involved a lot of whining.

Even when it was just my two kids, they complained about “being too close” together. When my mom visited, I had the honor of squeezing into the backseat between my two children.

When it came time to go on a family vacation up north, we couldn’t bring bikes or other items we’d brought in previous years. Closer to home, we couldn’t load the bikes in the back and drive to a local trail for a family ride.

I tried to rationalize the purchase by saying we saved money on gas. Turns out, that wasn’t true.

What saved us money was driving less.

This school year, I decided against working in the cafeteria, so I only need to make the school run twice a day. I work from home, so most of my driving involves going to school and kids’ sporting events.

I usually run my errands after taking the kids to school in the morning, when stores are less crowded. I also connected with another mom and set up a car pool for school pick-up, so some days I only make one trip to school.

Then, we started planning for this summer’s family vacation — a two-week trip to Yellowstone National Park. Naturally, we’d drive there from our home in Wisconsin.

After barely surviving two-hour trips to my mom’s house with lots of arguing over who was on whose side, I told my husband the only way we could do the trip was to rent a minivan. He agreed, especially since both kids are nearly taller than me and don’t have much leg room.

I started looking into how much renting a minivan would cost for two weeks and was surprised. I kept telling myself, it’s only this once… or maybe every other year if we visit relatives on the East Coast.

But it wasn’t.

Without a minivan, we needed to:

• Rent a U-Haul to move a piece of furniture from my grandma’s house to mine. (It’s a two-hour trip each way and I didn’t want to trouble a friend for that long).

• Take multiple trips to the local yard waste site because everything wouldn’t fit in a single trip, like it did with the van. This meant we used more gas.

• Stop taking family bike rides on local trails since we needed the van to transport our bikes to the trailheads.

• Limit the number of kids we transport for different activities. You’re probably thinking — that’s a bad thing? But you try telling a 12-year-old she can only pick two friends to come with us to a local sporting event. No wait, only one since your brother is coming, too. Or only one of you can bring along a friend since I don’t have room for both of you to bring one.

Why We Switched Back to Driving a Minivan

Enough was enough.

I finally called the salesman who sold us the car and said, “You won’t believe this, but I miss my van.”

He laughed, saying it wasn’t uncommon for people who downsize their vehicles to return to the minivan or SUV after a year or two because they miss the space.

I’ll admit, trading in the crossover so soon after buying it may not have been the best financial decision.

The trade-in value paid off our car loan, so we didn’t lose money. But we wound up dipping into our savings account for a down payment so the new monthly payments would fit into our family’s budget.

In the long run, however, I think the minivan will be a money (and sanity) saver.

When I took a closer look at the gas mileage difference between the new minivan and the crossover and, honestly, it wasn’t very much, especially since I was no longer driving to school three (or more) times a day. It seemed silly to not go back to a minivan.

Even though it’s not considered cool or hip, I pick up our new-to-us minivan next week… and I can’t wait.

Your Turn: Do you think driving a minivan means you’ve given up being cool? Do you find it helps you save money?

MaryBeth Matzek is a freelance writer and busy mom of two tweens. Follow her on Twitter at @1bizzywriter.

The post Driving a Minivan Isn’t Giving Up. Here’s Why It’s a Smart Financial Choice appeared first on The Penny Hoarder.

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Two-Sided Coin: Save for the Future or Live for Today?

This is the fourth in a series of posts called the “Two-Sided Coin,” where TSD’s Jon Gorey and Holly Johnson take opposing viewpoints on personal finance topics. 

Holly: Save Now or Forever Hold Your Piece

When it comes to why people don’t save for the future, excuses abound. Some say they don’t make enough money to save, which is understandable if true. Still, others say they would rather live for today and deal with the future…..well, sometime in the future.

This lack of enthusiasm for saving cash translates directly into our attitude on saving for retirement. If you want proof, all you need to do is look at this 2015 report from Bankrate. Once you dig in, you’ll see that around half (52%) of Americans don’t own any stocks at all.

Among respondents who didn’t invest, 53% said they don’t have the money, 21% said they aren’t educated enough about the stock market, 9% said they don’t trust stockbrokers, and 7% feared investing was too risky.

While some of these people are probably planning to fund their retirement with cash savings, it’s pretty safe to say the rest are avoiding the subject altogether. Sadly, that’s a decision many may live to regret.

Feeling ‘Meh’ About Retirement

But, why are we so indifferent about planning for the future? I’ll tell you what I think: In my eyes, failing to plan is part of the “YOLO Culture” that has captured the hearts and minds of those who don’t know better.

For some reason, it’s becoming more popular to not plan for the future than to hatch a plan for success – to blame our financial failures on the government or our parents instead of taking responsibility for our own lives and stepping up. These days, it’s far easier to wait for someone to fix your problems than it is to tackle them head on. And, as always, instant gratification is a lot more fun than saving money for a rainy day.

“You only live once,” people will say, as they ignore their 401(k) and fumble through life without a plan.  I get that concept, I really do. The thing is, there is a flip side to that.

What If You Live a Really Long Time?

As someone who worked in the mortuary industry for years, I admit I can see both arguments clearly. On one hand, people die early more often than one might think. Young parents meet their end in car wrecks while their children are still young. New retirees drop dead the day after their last day at work. People die of cancer, heart disease, or worse.

With so many maladies to avoid as we age, it’s easy to use them as a crutch. Since it’s entirely possible we’ll all die young, shouldn’t we live the lives we truly want? Shouldn’t we spend our money with wild abandon and pursue our passions – our dreams? Should we really worry ourselves over something as unimportant as money?

That mentality is all fine and dandy, unless you’re wrong… which you probably are. The fact is, far too many people live long and healthy lives only to run out of money while they’re still fairly “young.” For everyone person who convinces themselves they’ll die early and uses it as an excuse not to save, there is an old person struggling to make ends meet and wishing they had done things differently.

I should know, because I’ve seen it with my own eyes. I’ve worked on countless funerals where the guest of honor had nothing left to their name – funerals where adult children were forced to pay with a credit card. Funerals that turned into cremations when families realize that no one had any money to spare – including the deceased.

How Do You Want to Live Out Your Golden Years?

Not to mention the astounding number of senior citizens who live years, or even decades, in poverty. According to the National Council on Aging, 22% of married Social Security recipients and 47% of single recipients depend on Social Security for 90% or more of their income.  Further, 61.3% of households headed by an adult ages 60+ had some form of debt. Among these households, the median total debt averaged out to $40,900.

Next time you find yourself “living it up” while you’re young, imagine yourself at age 65. Picture yourself subsisting on Social Security and Social Security alone. Then envision what it might feel like to cower under the weight of tens of thousands of dollars of debt in old age.

If you don’t change, that is easily where you could end up. That’s not fear-mongering at all – it’s a fact. And it is a fact that is far too easy to ignore – at least until it’s too late to make a meaningful change.

The Final Word

While I’m all for living in the moment and spending money on experiences and things that matter in our lives, the consequences for ignoring your finances and failing to save are real. If living your golden years in poverty doesn’t scare you, I don’t know what will.

So, by all means, live for today. Spend money on the things you value most, and enjoy each day as if it were your last. Have fun. Go on vacation. Enjoy your family and friends. Splurge for a few things you really, truly want.

In the meantime, save and invest as if you might live a long time. Because, chances are, you will.

–Holly Johnson

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Jon: There’s No Time Like the Present

When it comes to investing, everyone wants a sure thing. And in this life, right now is the only sure thing there is.

Tomorrow’s not guaranteed to anybody. For this reason, I’ve always been wary of wishing time away — even simply longing for the weekend to arrive sooner. Those tedious workdays between now and Friday afternoon are nonetheless irreplaceable hours of your finite life – so it’s worth trying to get something out of them.

I’ll be honest: The notion of buckling down and gutting through a miserable job or spartan lifestyle for several years or decades, all for the promise of a comfortable life in an uncertain future, makes me shudder.

That’s not to say I don’t believe in saving for the future; I do, and we’ll get to that in a moment. Nor am I averse to hard work – not in the least. If anything, I’m a restless workaholic: I’ve always had a side hustle or two going.

But it’s work I enjoy. I would rather work twice as long for less pay doing something I’m passionate about than slog through a job that sucks the life out of me (presumably by way of vampire spreadsheets and bloodthirsty acronyms).

Now, some of what follows is not very good financial advice, I realize. But to me, wealth isn’t really about money. Wealth is living your ideal life on a daily basis. Money can help make that happen — it can bridge the gap between your actual and ideal lives.

But what if there is no gap to begin with?

Do What You Love Every Day

In addition to doing work I loved on the side, over the years I gradually tried to nudge my real career closer toward my ideal — and by some miracle, I’m nearly there. But that means I’ve sacrificed my future in some ways. I’ve left or turned down higher-paying jobs because they’d make me miserable or rob me of time with my family, even though they would have set us up better for retirement.

That’s a right-now choice, and it’s one I’d make every time.

I have a history of making right-now choices, for better or worse. I lived above my means throughout most of my 20s, which maybe wasn’t the best idea… but boy I had a fantastic time doing it. I wasn’t living extravagantly — living in squalor is more like it. But I was traveling a lot more than I could afford to, going out with friends, and trying to catch every indie band that came through Boston.

My middling career aside, I was living something very close to my ideal life during that time — even if I couldn’t quite afford it. I knocked off a few bucket-list items that, frankly, could probably only be done in one’s early adulthood.

• Related: Living an Amazing Life via the Reverse Retirement Plan

In a world where people’s biggest regrets usually involve not doing something, I can safely say I made the most of those prime years of my life. In fact, my only regret is that I didn’t do something even more financially irresponsible and quit my steady job to pursue music full-time.

I chose the present, and it admittedly left me with a lot of debt — but also a lot of incredible experiences. The thing is, debt is something you can pay off in the future; you may never get another chance to make the same memories.

Banking on Experiences

This may also sound like lunacy, but my favorite investment is stories, not stocks.

Study after study confirms that experiences — such as a baseball game with friends, a family vacation, or just an invigorating hike – bring us greater and more lasting happiness than possessions. While even favored and useful objects like couches or iPhones slowly deteriorate or fade into the background of our lives, experiences somehow grow more precious in our memories. “Even a bad experience becomes a good story,” writes The Atlantic’s James Hamblin.

Your stories are yours forever, and they get better with age. They live on after you die, and the government can’t tax them. No economic crisis, political upheaval, or stock market crash can take your memories away from you. 

If that’s not a sound investment, I don’t know what is.

Fund Your Retirement With Useless ‘Stuff’

My secret to getting the most out of today while still hedging my bets for the future comes down to investing in experiences, not in stuff.

It’s not that I’m not saving for retirement — I’ve got the typical under-funded 401(k) and Roth IRA — I just don’t skimp on experiences. That’s the stuff of life. But I’ll happily forego a nicer car, fancy furniture, a bigger house, or high-end appliances for the sake of my retirement and the experiences I hope to have then. (Who are these people spending $5,000 or more on a refrigerator? Do they need help laundering money?)

This echoes a point that Trent is always trying to make: Saving money doesn’t have to mean living a crappy life right now. It means paying more attention to your choices and cutting out the things that don’t matter to you (or making some smart substitutions).

Don’t spend your extra money — or your free time, for that matter — on stuff that doesn’t noticeably improve your life. That’s the money you can save for retirement without it affecting your right now.

• Related: The $15 Retirement Plan

A ‘Real’ Investment for the Future and Right Now

There’s one other investment of sorts that fits well with my “right-now” philosophy, and that’s home ownership. Yes, I realize home values can plummet anytime, and they’re too high in many parts of the country. And owning a house can be a pain in one’s neck (or an albatross around it) that isn’t right for everybody.

But when push comes to shove, you can live in a home; unlike an index fund or stock portfolio, you can use and benefit from your investment right now.

If you’d be paying rent anyways, in many cases you may as well make that payment to your future self. Imagine if your workplace offered two 401(k) plans, and you were required to choose one. Under Plan A, they withhold $1,000 a month from your paycheck, and invest $900 of it on your behalf. Not great. But with Plan B, they withhold $750 a month from your paycheck… and give it all to somebody else. Crazy, right? As with the buy vs. rent decision, the only real reasons not to choose Plan A would be if you just can’t afford the extra withholding or you expect to leave in the near future.

While home values have traditionally kept pace with inflation, making home ownership a decent but unexceptional long-term prospect, the fact remains that regardless of what home values do, at the end of your mortgage, you own a house. So even if your home’s value drops and never recovers, you’ll still have a place to live.

Does that make it a good retirement investment? Well, no, not by itself. But consider: Most Americans spend up to 30% of their income on housing costs; a fifth of Americans spend more than half of their income on housing. If you own your home by the time you retire, you’ll have eliminated almost a third of your expenses. That doesn’t mean you can retire in comfort if you never saved anything, but it can certainly help you stretch any Social Security payments you’re eligible for along with your less-than-plump retirement account.

Holly imagines retiring on Social Security benefits alone as some kind of nightmare scenario. While it’s not ideal — and Social Security’s future isn’t quite guaranteed — it doesn’t have to be that scary, either.

The average Social Security retirement payout was $1,335 a month in 2015. For a retired couple who both collect benefits, that amounts to $2,670 a month, or $32,040 a year. The median household income in the U.S., meanwhile, was $53,657 in 2014. That’s a big gap. But if the couple owned their home by the time they retired, they’d only need to account for 70% of that median income, or $37,560, to achieve the same lifestyle, since their housing costs would be minimal. That’s not nearly as dire.

No Regrets

The truth is, though, you and I may regret not saving enough for retirement. As Holly mentioned, too many seniors are forced to scrape by in or near poverty.

That doesn’t mean you have to shortchange your life today, though. People regret not having lived their lives to the fullest — make sure you do. People also regret not having saved enough for their golden years — make sure you do.

But no one on their deathbed ever laments their decision to buy the basic refrigerator instead of the high-end one. No one wishes they’d splurged on a fancier couch 30 years ago.

So stop paying so much for stuff, and put that money toward your future experiences instead. Because with any luck, tomorrow will soon become right now.

–Jon Gorey

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Related Articles: 

• Why I’ll Never Feel Bad About My Vacation Spending
• The Dance Between Your Present Self and Your Future Self
• The Frugal Magic of Substitution – and 25 Ways to Make the Magic Happen

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House prices continue to rise, says ONS

Helen Knapman

house-prices-rising.jpg

UK house prices rose by 9% in the year to March, and by 7.6% compared to the price in February, according to new data.

UK house prices rose by 9% in the year to March, and by 7.6% compared to the price in February, according to new data.

It takes the average house price to £292,000, according to the Office for National Statistics (ONS).

Split by country, house prices increased by 10.1% in England, by 2.1% in Wales, and by 6.4% in Northern Ireland. They fell by 6.1% in Scotland.

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Inflation drops to 0.3% as air fares and clothing prices fall

Helen Knapman

inflation-image.jpg

Today’s figures also reveal that the Retail Prices Index (RPI) rate of inflation, which unlike the CPI includes housing costs, stood at 1.3% in the year to April, down from 1.6% in March.

Inflation fell to 0.3% in the year to April, down from 0.5% in March – the first drop since September 2015.

The Office for National Statistics blames the decrease in the Consumer Prices Index (CPI) rate of inflation on the falling price of air fares, clothing, vehicles and social housing rent.

read more

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Could You Make Money Baking and Decorating Cakes? This Mom Does

Preparing cakes for special occasions is one of my favorite moneymaking hobbies.

I love baking and decorating cakes. I love being able to make money from home with minimal capital using skills I picked up for free. I love that word-of-mouth keeps me in as much business as I want.

And I definitely love eating the cake trimmings.

I’ve been selling decorated cakes on and off for 15 years, since I was 14.

I both decorate and bake cakes, partly because I prefer not to ice cakes other people have baked, and partly because nearly all my clients want me to do both for simplicity’s sake.

How Much Do I Make With a Cake Business?

It’s a very irregular income.

People seem to get married in batches, so I might do five wedding cakes one year and then none the next. I once created two wedding cakes in a month and made about $400.

Last year, I was in the middle of a horrible pregnancy, so I only did a few cakes and made about $500. I could have done several more and maybe made $1,200… if I hadn’t been fainting all over the place.

I’ve never made a killing from cakes — I have too little time because of other side gigs and too many children to take on as much work as I’m offered.

But my kitchen table currently boasts a simple one-tier fruitcake — a 100th birthday cake for a friend’s father’s coworker’s mother — which is about to net me a profit of $120. Not too shabby.

When it comes to baking and decorating cakes, here are the rules I live by.

Charge a Decent Price

Do you have any idea how much a professional wedding cake costs?

Phone a few of your local bakers for quotes. The average wedding cake cost $466 in 2014 — not exactly cheap.

So, I undercut the competition. But I don’t go too crazy, because wedding cakes aren’t cheap to make.

A three-tier cake might use eight recipes’ worth of ingredients — which could easily be, say, 16 blocks of butter — plus eight bricks of almond paste and fondant, three cake boards, three cake tins you’ll probably have to rent, wooden dowelling and a significant amount of electricity.

Add on gum (or sugar) paste, edible glitter, ribbon, gel colorings and so forth. Plus, “tool fund” money for buying handy things like cake levelers and tilting turntables. Then, factor in labor, which will be significant.

My rule of thumb is to charge 250% of the ingredient costs, including non-reusable supplies like cake boards. I may charge more for a time-consuming cake, such as one covered with gum paste roses.

I generally net a profit of about $150-$200 per wedding cake — and I’m still cheaper than the professionals.

Choose a Great Recipe

I’m frequently amused by the people who are surprised my cakes taste good.

I’ve had brides choose a traditional fruitcake for the top tier purely to appease Grandma — who invariably believes a chocolate mud wedding cake renders a wedding invalid — only to say to me later, “Wow, I thought I didn’t like fruit cake, but yours was really nice!”

My other standby recipes – chocolate mud, banana and carrot – get similar enthusiasm.

The fact is, a lot of commercial cakes are geared toward looks, not taste.

I choose great recipes geared toward moistness and sturdiness and use real ingredients. As a baker, you’re even more appreciated if you have a few gluten-free, dairy-free or vegan recipes available.

Decorate Your Own Cakes

I once had a bride ask me to decorate a cake her mother made. It was a hard, dry, over-baked fruitcake that had been spread unevenly in the tin, so one corner was lower than the other.

I had two options: even it out by trimming off half the cake, resulting in a very flat cake, or pack the low corner with great wedges of fondant, meaning several guests would get slices which were more frosting than cake. It wasn’t exactly an appealing choice.

Since then, I’ve only decorated my own cakes. Even a good home baker won’t necessarily bake the tiers to the right heights, or know how to avoid burned edges and a raw middle in a 12-inch cake.

Figure Out Transportation

My favorite rule of cake decorating? The client picks up the cake.

I loathe transporting wedding cakes, and always breathe a sigh of relief when the cake goes out the door and becomes someone else’s responsibility.

Most of the time, firmly gluing a cake to its cake-board with frosting is enough. The client can line a well-fitting cardboard box with a towel, then place it flat in the trunk, and that should get the cake safely to its destination. (Yelling at the driver periodically is optional, but soothing.)

A tiered cake may need to be assembled onsite, partly so it won’t tip over in the car, and partly because a fully assembled wedding cake can be unbelievably heavy. My own three-tier wedding cake, which I made, couldn’t be lifted by a strong man once it was assembled!

Assembling onsite means packing each tier into a separate cardboard box for transportation.

You’ll want to negotiate with the couple about who puts the cake together — and you may need to travel to the venue to assemble the cake yourself, well-equipped with extra frosting and fix-it tools just in case.

Keep It Low-Key

This is a personal choice, of course. If you want to go the whole hog and start up an official cake-decorating business, great!

But depending on the cottage food laws in your state — and they vary even between counties — you might reach a similar decision to mine.

If you start a home business, you may need to bake the cakes in a registered kitchen, register for a number of food handling and business permits, undergo inspections of your home kitchen and similar hassles.

Personally, I prefer to operate on a favor-to-a-friend basis. My friends know I’m not a “real” cake decorator; I don’t advertise, and 100% of my orders come through word-of-mouth. I do pay taxes, but I don’t own a “real” business — which is just how I like it.

As for the future, I plan on continuing this side gig. I’m snacking on fruitcake leftovers at this very moment, and it’s great.

Your Turn: Do you sell home-baked goods? Would you like to make money baking and decorating cakes?

Sarah Tennant lives in New Zealand with a husband, three children and an irritatingly tiny kitchen. She has been selling decorated cakes to friends and family for 15 years. Sarah’s other money-making hobbies include freelance writing, mystery shopping, exam supervision and living-room neurosurgery.

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How to Sip Your Way to Small-Business Success

By Cathi Nelson Do you sip your coffee in the morning or gulp it down? Do you jump out of bed ready to take on the day, or are you a slow riser, needing an hour or so in your PJs before you get dressed? Do you drive like you’re in a race or take […]

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Savings update: banks and building societies keep cutting rates

Sylvia Morris

Cash Isa rates continue to fall with Coventry Building Society cutting the rate on its Easy Access Isa to 1.3% for new savers, down from a previous 1.4%. And Virgin Money has withdrawn its 1.31% easy-access deal from sale.

Cash Isa rates continue to fall with Coventry Building Society cutting the rate on its Easy Access Isa to 1.3% for new savers, down from a previous 1.4%. And Virgin Money has withdrawn its 1.31% easy-access deal from sale.

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Mohegan Sun Pocono president resigns

PLAINS TWP. — After more than a decade spent building and running Mohegan Sun Pocono, president and General Manager Mike Bean announced Monday he is resigning from the company.Bean , 51, sent an announcement to employees saying he intends to leave his post at the end of the month. In a phone interview, Bean said he had plans at another company, but he declined to say what they were because it was “not an appropriate time.”“I’m moving on from [...]

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How to Win Free Chipotle for a Year (Plus Tickets to Lollapalooza!)

Would you like free food from Chipotle?

Trick question. At this point, I think it’s more fitting to ask, “How would you like your free food from Chipotle?”

You could get it by playing a game, via snail mail, through a text message or just by clever ordering.

And now you can get your free Chipotle with a side of Radiohead, Red Hot Chili Peppers, Lana Del Rey and Ellie Goulding.

Chipotle’s Ultimate VIP Lollapalooza Sweepstakes

Now through May 31, you can enter to win free Chipotle for a year, plus a trip for four to Lollapalooza in Chicago this July.

All you have to do is send a text!

To enter, text any of these words (only one) to 888222:

• TIX
• CHICAGO
• LOLLA
• BEATS
• ROCK
• CHIPOTLE
• PRIZE
• SWEEPS
• CONCERT

You’ll receive the confirmation, “You’ve been entered for a chance to win.”

If you prefer to enter online, you can do so with your email and phone number here.

Good luck, and rock on (or whatever someone cooler would say on your way to a music festival)!

Your Turn: Are you headed to Lollapalooza this year?

Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).

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Could You Live WIthout Money? This Woman’s Been Doing It for 17 Years

Penny Hoarders know the importance of saving money and living frugally.

But have you ever imagined what your life would be like if you gave up money entirely?

It might sound completely impossible, but German psychotherapist Heidemarie Schwermer proves it’s not.

She’s lived without using even a cent… for 17 years.

How to Live Without Money

When she was 53, Schwermer decided to forego money and material possessions for a full year.

After setting aside 200 euros (about $226) as an emergency fund, she canceled her lease and gave away everything she had, except for a few daily necessities and a change of clothes.

“After my apartment was emptied, I jumped around for joy,” Schwermer says.

She then began a bartering lifestyle, exchanging psychotherapy sessions, window-washing services and other household help for room and board in a number of private homes.

Once the year was up, Schwermer’s experiment was still going strong — and she was happy with the freedom her new lifestyle afforded her.

So she kept it up.

Now, she’s 70 years old… and still hasn’t touched her 200-euro emergency fund.

Can Money Buy Happiness?

Today, Schwerner stays busy giving lectures and consultations to those curious about how to live without money.

In exchange for her wisdom, she’s been offered lodging, food and often, free travel.

She’s also the subject of the 2010 documentary “Living Without Money,” which has been screened more than 300 times in 30 countries.

Schwermer’s story is a fantastic reminder that in the end, money is just a utility — a key that unlocks your freedom to travel, move to a different city… or, yes, make a purchase.

But if you take the time to figure out what you value and what makes you authentically happy, you may discover you don’t need money to get what you really want out of life.

Your Turn: Would you give up everything you own to live without money?

Jamie Cattanach (@jamiecattanach) is a staff writer at The Penny Hoarder. Her creative writing has been featured in DMQ Review, Sweet: A Literary Confection and elsewhere.

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This Custodian Just Graduated From the College He’s Cleaned for 8 Years

“You go through life and you say, ‘someday I’m going [to] do this. I’m going [to] do that,’ and very often in life you’re hit with a curveball that kind of throws you off track,” Michael Vaudreuil told CBS Boston.

For Vaudreuil, like many others, that curveball was the recession. In 2007, his plastering business went under, and his family lost pretty much everything and filed for bankruptcy within six months.

His “decimation was completed,” he said.

He finally found a job as a custodian at Worcester Polytechnic Institute, a private technical university in Worcester, Massachusetts. Though it was a far cry from owning his own business — and boring to boot — this position would turn out to be life-changing.

How a Custodian Job Changed His Life

To counter the boredom, CBS reports, Vaudreuil began taking some classes tuition-free, a WPI employee benefit.

After eight years of classes during the day and cleaning the campus at night, 54-year-old Vaudreuil graduated Saturday, May 14, as a mechanical engineer.

The custodian walked at graduation with classmates, the majority whom were nearly a third his age, and is hopeful about starting the next phase in his life. He plans to turn his highly sought-after degree into a lucrative new career — the median starting salary for mechanical engineers is about $63,000, according to the Bureau of Labor Statistics.

“Very few times do you ever get to experience a real ‘someday,’” Vaudreuil told CBS. “And so it feels like, welcome to my ‘someday.’”

Your Turn: Do you know a story of someone who turned a financial disaster into a blessing? Share it in the comments!

Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).

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7 Ways to Ensure You Maximize Your ROI From Content

I’m not going to lecture you.

You already know that content marketing can be a very successful form of marketing.

You also know that producing great content takes a lot of time or money, sometimes both.

But there’s something that you might not know, at least not for sure.

Just because a piece of content gets thousands of views or hundreds of social shares, doesn’t mean that it returned a positive return on investment (ROI).

You could spend $100,000 on the most spectacular piece of content on how to pet a cat. It’s very unlikely that it would ever make you anywhere close to that amount back.

Content marketing is only effective if it’s profitable.

From what I see and hear, only a small fraction of marketers actually achieve a significantly positive ROI with their content.

That’s a HUGE problem.

While there’s a lot of factors that contribute to your ROI, I’m going to assume you have the basics of content marketing down.

That allows me to show you 7 different ways to maximize your content’s ROI.

If you apply even a few of these tactics, it can take your content from a breakeven or slightly negative ROI to a healthy, positive ROI.

Achieving this will allow you to ramp up your content production in a sustainable way. 

1. Pick 1-2 channels and design around them

A common mistake I see is creating a piece of content, and then trying to promote it everywhere.

I’m talking Facebook, Twitter, forums, Reddit, and any number of marketing channels.

The reason that this is a mistake is that audiences on different channels and platforms within those channels typically behave very different from each other.

Content that may be very popular on one channel, isn’t necessarily going to do well on another channel.

That makes a shotgun approach for promotion a waste of your time, and it’s going to kill your ROI.

The solution? Get specific: You need to find 1-3 channels where your content does best.

For Quick Sprout, I use mainly Facebook and Twitter, along with my email list.

Ideally, you want to identify these channels before you even create your content. Then you can tailor everything from the topic and angle, to the title just for those specific audiences.

Here’s your practical takeaway: Stop promoting your content every place you can think of – you’re wasting your time. Focus on the sites that send you the most visitors for your time, effort, and money.

How do you pick a channel to focus on? Analyze your past content and determine the amount of visitors or subscribers you got from each channel. Create a simple table like this for each piece of content to measure your results.

 

• Time spent – how much time do you need to spend to promote content on this channel
• Cost of time – your time has value, input a $/hour value here
• Other costs – put in any money you spent (like on advertising)
• Total cost – add your time and other costs together
• Sales/subscribers/visitors – pick a metric and record the results

Then, divide the sales (or subscribers, or metric of your choice) by the time it cost you, to get a return per hour metric.

You will see that certain channels vastly outperform others.

2. Never stop updating

As you may know, there are 2 types of content…

Evergreen content, which stays relevant for years (possibly for the foreseeable future), and non-evergreen content, which will go out of date in the near future.

You’ll probably end up creating both types of content.

The main downside of non-evergreen content is that once you get the initial value out of it, it fades into irrelevance and won’t help your business much.

However, you can essentially erase this negative by continuously updating your content.

It’s something that Brian Dean does very well, he’s the example you should be following.

For example, he created an incredibly thorough guide of SEO tools:

He updates this guide on a regular basis.

Why is updating so important? Updates are all about the reader. They make the content so much more valuable.

SEO tools come and go all the time.

If you go look at other lists of SEO tools that are a few years old, most of the tools are either ineffective these days, or not even still available. Plus, they also don’t include some great tools that were recently released.

While Brian isn’t ranking #1 for “SEO tools” in Google, he ranks very highly, and I expect his rankings will continue to rise (it’s a tough keyword):

Google is going to see that users find his guide the most useful, and it will be promoted.

Updating has a few other side benefits.

First, it allows you to keep promoting your content. Usually, you publish something and then you go all out on promoting it for a week or two.

After that, you probably have a bit of anxiety doing more promotion, because you feel like your content already isn’t that “fresh.”

If you update your content, it allows you to send a quick Tweet or email to people who have enjoyed it before, letting them know you’ve added a few cool tidbits (like new tools for Brian). That’ll get you extra shares and links.

Finally, a lot of things influence what your readers will share with their friends and communities.

Mainly, they want to share things that make them look good. That’s why they rarely share old content, that’s probably not correct anymore. By updating your content, visitors will still have no problem sharing it, far past your first publish date.

3. Never stop promoting

I’ll let you in on a little secret:

Most of your ROI is going to come from your content promotion.

While great content is a good start, it’s nothing without a substantial amount of promotion.

Some top marketers, like Derek Halpern, even spend up to 80% of their time promoting content (the other 20% on creating it).

But here’s the problem: Even if you do a great promotional push for a week or two, your traffic will spike, and then quickly die down.

I guarantee that you haven’t reached even a fraction of the people that could benefit from your content during that time frame.

There’s no rule that says that you can only promote new content.

If you want to maximize your ROI, you likely need to spend more time promoting your old content as well.

For starters, you can simply repost your content on social media and forums every once in awhile.

Additionally, you can set up Google Alerts to let you know when anyone is talking about the topic you wrote about. You can then pop in and suggest they visit your guide.

On top of those, most promotional tactics are still viable. Very few don’t work simply because your content was published a month or two ago.

4. There are diminishing returns between quality and ROI

This is where creating great content gets really tricky.

Generally, I’m a supporter of creating truly “epic” content.

But it’s not always a good idea.

Sometimes, making your content better will leave you with a worse ROI.

The reason behind this is pretty simple. To design custom images and layouts, it takes a lot of time and/or money.

Even the table of contents for my advance guides (in the sidebar) cost a ton to make:

At some point, you may have a piece of content that’s really good. If you spend another $100 on a custom image, will that bring you more than $100 later on?

That’s the question, and it’s a tough one.

When do you stop improving content?: It’s going to vary in every case, but I’ll get as specific as possible.

Let’s start with a fundamental principle – your content should be better than all of your competitors.

If it isn’t, you’ll be lucky to achieve any positive ROI at all.

The better your content is, the more it stands out from the rest:

But you reach a limit.

Once your content is significantly better than all the other content on that subject, readers can’t tell the difference if it gets better.

Readers determine the quality of your content in large part by comparing it to others. So even if you improve your already-better content, in the eyes of most readers, it’s still just “better” than the rest.

If there’s no significant difference in perception, there won’t be a significant difference in your return. And since you spent more to improve your content, that means your ROI declined.

Your practical takeaway: Make your content significantly better than your competition, and then stop. Any further improvements will be costly and you’re ROI will likely decrease.

Of course, you should test this yourself, but that’s a good rule of thumb to follow.

The one exception to the rule: I mentioned my ultimate guides before. These obviously broke the rule because I went way above and beyond what was already out there.

I did this for one main reason: So that no one could come in later and create something significantly better.

These guides have driven hundreds of thousands of visits to my site since being published. Even though they are years old, no one has comprehensively been able to create content that “beats” them.

They allow my site to retain its position as the leader in each of those areas, and deliver constant traffic even now.

If you know that a piece of content has the potential to deliver a large volume of traffic (usually through SEO) for years, and that others will try to create better content than you, you can take this route.

Alternatively, you could just upgrade your content as others catch up and hope that none of them create a guide like this that you can’t really beat.

5. Advertising is not the enemy of inbound marketing

I told you earlier that Facebook is an important channel for Quick Sprout.

But if you’ve used Facebook for your business, you know that the organic reach percentage, the number of your fans who see your posts, is dismal:

If you only rely on organic traffic on most social channels, you’re missing out on a lot of reach.

But a lot of marketers, especially newer ones, really hate advertising. If you’re a strict inbound marketer, you might not want to tap into outbound marketing options.

But outbound (“interruption” in the picture) marketing and inbound marketing do not need to be exclusive.

You can use both of them at the same time to promote a piece of content. And when you find the right combination, you can see big gains to your ROI.

6. The biggest mistake you can make – not optimizing your funnel

It’s the first word in ROI – return.

If you have no way to make money, no content will have a positive ROI.

It’s absolutely essential that you have some sort of sales funnel in place, ending with some sort of product (or alternative monetization method) for visitors and subscribers to buy.

Most of what I’ve written in this post focuses on your content and promotion, but just as important is what happens after.

Have you optimized your email marketing? Do you have a clear path to where you can generate revenue from visitors?

If you don’t, you need to.

Doubling the conversion rate at any point near the bottom of your sales funnel is an easy way to double the ROI of all your content.

Here’s a good starting point to optimizing your sales funnel.

7. Simple, but crucial – Measure  your ROI

Your ROI for a piece of content is determined based off a variety of factors.

You need to understand how to calculate your ROI, and then measure it for every piece of content you produce.

If you don’t measure it, there’s no way to try out different content creation and promotion techniques and see which ones actually improve your ROI.

Good marketers continually refine their content marketing strategies and find incremental improvement.

Conclusion

Content marketing can be a great tool in your marketing arsenal.

But only if it actually makes your business more than you spend on creating it (aka a positive ROI).

I encourage you to test out all the ways to maximize your ROI that I just showed you. In most cases, you’ll see a significant bump in your ROI.

At this point, I’d like to hear from you. Specifically, what kind of ROI have you achieved with your content in the past? Leave me a comment and let me know.

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Asking prices rocket for first-time buyers

Gary Adams

rising-house-prices.jpg

First-time buyers have been dealt another blow as figures released by property agent Rightmove reveal that the typical asking price of a first-time home has risen by 6.2% over the month to May.

First-time buyers have been dealt another blow as figures released by property agent Rightmove reveal that the typical asking price of a first-time home has risen by 6.2% over the month to May.

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Questions About a Case Study, Rental Properties, Life Insurance Loans, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Renting out house to students
2. Loan against life insurance
3. Home loan with middling credit
4. Rental property willed to tenant
5. Negotiate now or later?
6. Which debt first?
7. Pay off mortgage first?
8. Living off last month’s income
9. Paying myself first?
10. Opening a Vanguard account
11. Getting interest from taxable account
12. Setting priorities

This week, I’m trying something a little different with the latter half of the reader mailbag.

A reader sent in a very lengthy case study about her and her family, which she graciously agreed to have shared on the site for discussion purposes. Since she also included a lot of questions about her situation, I decided to include the full thing in this week’s reader mailbag. The case study starts with question 6.

I don’t intend for this kind of thing to become a regular part of the reader mailbag, but I do think it is an interesting thing to look at and the case study and resultant questions do lead down some interesting paths.

If you’d like to do the same thing, here are some important guidelines.

First, alter personal details. Don’t give me your exact age or your partner’s exact age – being within a few years is fine. The same is true for your children and their genders. For your career, be vague with it, or as vague as you can be while still having valid answers to your questions. Be approximate with your location, too.

Why do these things? The biggest reason is that, if you’re too specific, other readers might actually figure out who you are, and that can lead to embarrassment.

Second, try to come up with several questions you want answered about your situation. Don’t just send in five pages of information and say “what do you think?”

Finally, understand that I won’t necessarily be able to include your story in the mailbag. I receive many more questions than I can use in a given week, and a case study will take up a significant portion of the mailbag in a given week.

Don’t hesitate to send in a question using the contact link at the bottom of the website or by sending me a message directly on Facebook.

Q1: Renting out house to students

I’m in the process of getting divorced. We own a house that I will be responsible for afterwards. I can’t reasonably stay in the house and maintain any type of lifestyle that I’d like to. The house is worth less than I owe on it, so if I short sale it I’m still going to be responsible for the difference that’s owed. I have a realtor that recommended trying to rent it to college students (I live about a mile and a half from a mid-size university). The university subsidizes housing, even for students living off campus. The house has 5 bedrooms so could fit 5-8 students. If I was able to move in 5 students it would cover the mortgage, insurance, and property taxes; anything more is profit. Do you think this would be a good idea to try to maintain the house without affecting my credit, and make a little money besides? Also, would you recommend hiring a property management company?
– Andrew

I think this is a reasonable approach for your situation, provided of course that you have a place to live elsewhere that’s low cost.

I would strongly recommend using a property management company in this situation. Make sure that the company is reputable and that you can still make solid money after paying their fees. Don’t hesitate to shop around a little bit.

You also need to make sure that you’re properly insured for this. This will require different insurance than your typical homeowner policy, so contact your insurance company well before you do this.

Q2: Loan against life insurance

I live in Canada and am looking to loan against my life insurance policy and was wandering if you could recommend either someone or a reputable company. I would appreciate any help you could offer.
– Annie

I’m assuming from your question that you have some form of whole life or universal life policy. You can’t borrow against a term policy because the benefits in those policies expire.

In general, you have two routes you can take. One is borrowing directly against the balance of your life insurance policy, which can really only be done through the company that issued the policy. The other route is to get a loan elsewhere that uses your policy as collateral, which is something that many banks will consider.

I can’t specifically advise you which one is better. Some, but not all, financial institutions will lend you money using your insurance as collateral, so you have a number of options there. I’d probably suggest starting with a local credit union and then shop around for the best rates.

Q3: Home loan with middling credit

I’m willing to buy a house… my credit score is 620… first time buyer… I have the money for down payment and closing cost, but, I dont want to spend my savings in down payment and move to my new house with no back up for rainy days… so… I was looking at the LINE OF CREDIT that banks offer… and my cuestion is; would a line of credit affect my purchase power some how? And, is that a good idea? I just dont wanna be with no back up like i said… do you have any other idea.. One more thing; if I wait for my credit score to at least be at 640, the mortgage company that i want to get the loan with can help me get first time buyer’s help for the downpayment, but, I dont want to be paying rent any more…any thoughts?
– Noelle

Here’s the thing: you won’t be paying rent any more, but you will be paying a similar amount in interest on a mortgage, and just like rent, that money is gone. You get nothing in return for it.

That’s why it makes little sense to jump into a mortgage until you’re in a situation where the interest is lower than what you’d be paying in rent – and ideally it’s substantially lower than what you’d be paying in rent.

How do you get there? Start building your credit score for one. Try to get your credit score over the 700 line, and you do that by paying all of your bills on time and getting your credit cards down to a reasonable level. You’re correct that you should maintain an emergency fund through all of this, too.

Q4: Rental property willed to tenant

What are the pitfalls for a tenant if a rental property is willed to the tenant?
– Maxine

First of all, your inheritance does depend on what exactly happens with the estate. Even if that property is willed to you, if the person who willed it to you left behind a bunch of debts that can’t be easily resolved with other assets, if this is a rental property and not a primary residence for the owner, it can potentially be sold to cover those debts. Such decisions are in the hand of the executor of the estate of the original owner of the house.

Unless the person is very wealthy, estate taxes shouldn’t be an issue.

When you inherit the property, it will have to be appraised immediately, and that will become the new basis for that property, meaning that if the value of that property goes up, you may owe taxes on the increase in property value when you sell that property.

Those are the pitfalls that immediately come into my mind from this situation.

Q5: Negotiate now or later?

My husband and I have a lot of debt at the moment and our current income is not covering our expenses so at the moment we have late payments and overdue notices everywhere. We are working really hard to bring in more money but I also want to reduce our expenses. I’m wondering if it is even worth me trying to negotiate lower interest rates or consolidate debt on lower interest with all the red in my current history. Am I better off trying to get a few months of good payment history down (once hubby gets a full time job) or can I try now? If I do have to wait when will I be able to do this and not get rejected?
– Diane

In your current situation, you should definitely negotiate. Start calling up the credit card companies and flat-out tell them that in your current financial situation you cannot keep up with the bills, period. Tell them that you must negotiate your interest rate and payments or you are potentially facing bankruptcy, which appears to be the truth.

Now, some lenders – particularly credit card companies – may end up closing out your line of credit at this point, but they often will negotiate and lower your rates.

Don’t sweat those cancelled lines of credit. If you’re going to get out of this, you have to stop relying on them, period. You have to figure out how to get by on less than what you earn. This isn’t optional. It’s not going to ever work if you don’t.

My advice, then, is to start negotiating immediately. Get those payments and rates lowered as soon as you possibly can.

So, let’s get started with this case study!

Q6: Which debt first?

Please feel free to use me as a case study. I would love any and all advice!

Age of wife 42
Age of husband 43
Age of daughters 6 and 5

Jobs:
Her – Teacher
Him – Police officer

CURRENT ASSETS

1) $22,000 in college savings through state sponsored plan scholarships – We put in $400 in a month after tax for our two girls ($200 in each account).

2) $48,000 + $13,000 in two separate 403b retirement accounts for myself – put in $500 a month pretax – going to consolidate them in July 2016.

3) $62,000 balance in state pension for myself. Putting in $500-769 a month pretax. it is a defined benefit plan.

4) $200,000 in husbands county pension. Putting in $2,000 a month pretax. It is a defined benefit plan as well.

5) $11,000 in cash savings – Currently put in $1,000 a month with goal of building to $15,000.

6) $2,600-$5,000 average in checking.

7) Toyota Tacoma truck used as the mommy mobile. Paid in full. 2005 model.

8) 2 bed/1 bath 950 sq foot home in Napa, CA purchased in 2005.

DEBTS

1) $22,000 loan on a very large towable camper (2 bed/2 bath…yeah…that big), which also acts as a guest house in our back yard.

2) $16,000 loan on a diesel truck to pull said fifth wheel (which hubby also uses to commute to work 10 days a month).

3) $300,000 mortgage left to pay. ($500,000 appraised value) $610,000 current zillow value.

GOALS

1) For me to have more flexible time so that she can volunteer at daughters school (cook more homemade meals and do more gardening) Is semi retirement (part time work?) a workable/ goal?. I’m a teacher so I already have some significant time off work. But I want more school days off work so we can leave and travel more on a flexible schedule. If they go on a choir trip to Europe I want to go. I want to see their performances. I want to be that mom that car pools for other working parents.

2) To have some investment income to be able to earn interest and have our money start working for us.

3) To possibly buy a mobile home or small condo for my mom who is somewhat homeless and in her sixties. May share financial burden with one other sibling.

4) To buy our next used car with cash combined with trade in value. I don’t ever want to do another car loan again!

HISTORY

I know the bad: the debt! It has been a six year battle for me trying to convince my husband that our money can work for us instead of us working so hard. When I went part time after the girls were born he had a heart attack and it was a huge fight. I told him that it would work out and showed him the numbers and how in some areas we would have to cut back but he was convinced it wouldn’t work. My goal was 50% but we compromised at 70%. I did that for two years and then went back full time in year three. We had to change some priorities and it was good for me. Something in me clicked. I was working part time and all I kept thinking was how I could save more/spend less to make it less hurtful at the end of each month. I wanted to work smarter/not harder.

We had tons of medical debt related to our children’s birth even with insurance and I was determined to never be sitting in that cesspool of debt again. I didn’t want our daughters growing up like that. I snowballed everything and paid off ALL of our debt: credit cards, medical, car loans, refinanced the house for a lower interest rate and less years for a savings of $80,00 in interest and paid off my school loans. It took us two -three years but we did it! I had already started the savings accounts for the girls, every time someone gave us cash for birthday or Christmas I put it in an account and when it reached $10,000 I rolled it into the state sponsored savings plan and continued adding to it every month.

I also saved money for rainy days (something I’d never done before) and saved up our emergency fund.

Then my hubby started looking for trailers and I knew I was in trouble. While I liked the idea of a trailer and traveling the country I felt we should have saved up the money and bought something with cash. Something he would feel comfortable letting me drive. But my hubby likes big and impressive and we now have a truck and trailer debt. He really has no concept of how much things cost. I tried to slow down the train by asking him to research how much the trailer would cost per month to see if we could afford it but all he could come up with would be the trailer loan amount of $300 per month. I would ask what about insurance? interest? Maintenance? Improvements? Things that came up later that I didn’t even predict was trailer storage until we finally fit it into our back yard. That grand total trailer cost is closer to $800 a month! Ugh!

But I agreed to it. I admit I get sucked into the fun aspects of the trailer too. Now I don’t have regrets that the trailer allowed us to spend three weeks traveling Idaho, Montana and Wyoming last summer… Stayed in Yellowstone and the Grand Tetons and we used it for the first three years at least once a month for a quick trip to various locations all along California. I don’t regret one bit of the travel. Could it have been done cheaper? Absolutely.

So, first question: what to attack first? (Truck and trailer debt?) Saving up for a minivan? (carpooling is hard in a truck!)
– Renee

The first thing you should attack is your husband’s spending habits. Given what you’ve described here, it doesn’t really matter what financial moves you make. If you have money to spend, your husband is going to find a way to spend it. That needs to be put in check immediately, or else all of the smart financial moves in the world are going to be for naught.

Now, how do you do this? The thing that worked best in my own marriage was simply talking about goals. What exactly do you each want out of life in the next ten years? Where do you want to be in ten years? With the debts you currently have, debt freedom is a pretty good goal. The challenge for your husband is to see that goal as important compared to having more stuff.

Now, if you’re looking at your financial options, assuming your truck is an extended cab and can in fact carry your family, I would focus on paying off the highest interest debt first. My guess is that it is your truck and trailer debts, but I don’t know for sure as you didn’t include the interest rates. Whichever one of those two debts has the higher interest rate should be the one you tackle first and foremost.

Q7: Pay off mortgage first?

Do I try to pay off mortgage earlier before doing investments in a place like Vanguard? I have a 15 year loan at 3% interest. I figured out that it may be possible to pay off our house in four years…if we snowball all our debt payments and savings payments (not counting retirement and college). Hubby doesn’t believe me.
– Renee

If you have a mortgage at 3%, I wouldn’t be in a rush to pay it off. Normally, it’s a good move to pay off a mortgage as fast as possible, but that is an exceptionally low interest rate. I’d probably stick with paying it off slowly at this point.

However, this is all predisposed on the idea that you’re taking the money that would have gone toward extra payments and are doing something smart with it. Are you investing toward big future goals with that extra payment money? Are you paying off your trailer and truck debt? Those are smarter things. Buying a bunch of stuff you don’t really need isn’t a smarter thing – your money is better off going toward your mortgage if that’s your other option.

In other words, if you’re saving toward sensible goals and/or getting rid of or preventing other debts, I would do those things first before putting more money toward that low interest mortgage.

Q8: Living off last month’s income

I heard living off last months income is helpful for budgeting so I’ve been trying to save enough to have for that. Does that really work?
– Renee

This is actually a really smart way to handle things. The way it works is that, at the end of the month/start of the next month, you essentially have a month’s worth of income (that which came in during the previous month) to live off of. You use that money to pay bills, to save, and so on during the following month.

Also, during that following month, more income will come in, which you’ll set aside for the moment. At the end of the month, you just switch to using the income that came in during the month and balance out your budget. It’s pretty easy.

The big advantage of this system is that you can actually budget and plan at the start of the month and make all of your savings choices and so on immediately. You don’t have to wait until a check comes in to do certain things. Also, there’s a bit of an “emergency fund” factor, too, as the extra money serves as an emergency fund.

Q9: Paying myself first?

I want to semiretire. I want to earn my other income with interest from my investments. This is my quandary. I have paid off all debt twice now and it lasts one year. Hubby decides he wants something and he goes and gets it and we are back in loan land. So I was thinking that I should pay myself into a Vanguard fund first before paying off the debt? I know it sounds crazy but then I could prove to him that it can be done.
– Renee

This is not crazy in the least. It’s a good idea to do your savings for big goals right off the bat in a given month. Before you do anything else, you take the money you want to save for big goals – like semi-retirement – and put it where you want to put it. Then, you live off of what’s left.

It goes really well with the “living off last month’s income” plan that you described in the previous question. At the start of the month, you just take some of the money you start with and put it aside immediately for your goals (semi-retirement, in other words).

Paying yourself first, in that you’re saving for big goals before living your everyday life, is a surefire way to make sure you keep making progress toward those goals.

Q10: Opening a Vanguard account

How much money do I need to start a Vanguard account? Do you open it directly with Vanguard?
– Renee

You don’t need any certain minimum to open up a Vanguard account. However, having said that, almost all of Vanguard’s index funds and other investment options have a $3,000 minimum to start investing. A few have less, but unless you’re going to stick with those for the long term, it’s not really worth it to put money in there for several months just to move to the investment you actually wanted when you hit the $3,000 mark.

My suggestion is to save in an ordinary savings account until you hit $3,000, then buy into a specific Vanguard fund that matches your needs. I like the Vanguard Total Stock Market Index for longer-term investments (things longer than a few years down the road).

You should make that savings plan automatic so you don’t have to think about it. Then, when you hit that $3,000 mark, turn off the automatic savings at the bank and turn on that same amount at Vanguard so money goes automatically into your new investment.

Q11: Getting interest from taxable account

Logistically how do you get the interest to you? All my 401ks reinvest.
– Renee

When you sign up for a Vanguard fund, they give you options as to what to do with your interest and dividends.

If you want, you can reinvest it. It’ll just roll right into the investment and you don’t receive a penny. You do have to pay taxes on that income, but it will be a percentage of a small percentage of the balance. For example, if you have $100,000 in there, your total dividends on a Total Stock Market index fund would be about $2,000, so you’d owe somewhere around $300 or $400 in federal income taxes. Not a huge deal.

You can also tell Vanguard to just send you a check whenever dividends are paid. Again, with the $100,000 example, that means you’d get about $500 a quarter from them, but you’d owe about $80 or so of that amount in taxes.

Q12: Setting priorities

I’m all over the map trying to squirrel away money and save so we can reach our goals before we spend it!! I can’t seem to settle on which priority to start first.
– Renee

This comes back to the very first answer I gave you: it’s all about goal setting. The thing you need to do more than anything else is to sit down with your husband and talk about your goals. Where do you want to be in the future?

This is not about dollars and cents. The money is just there to support what you guys want to be doing.

I will say this, though: when you choose to do one thing with your money, you close the door on other things. If you buy big expensive toys, then you might be closing the door on semi-retirement, for example.

It sounds to me like your number one challenge is that you and your husband have different goals and ideas about the coming years. If you can resolve those differences, things will start falling into place.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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