MonoMoney

Here is a sure fire, real simple savings plan to get you on the road to investing and saving for the long-term.

Open up an online, high-interest earning savings account (most banks have them and you will be earning around 6-8% interest free of any fees) and start transferring as much as you can into this account. Set up a weekly (or fortnightly or monthly) transfer into this account and forget about it until the total in it hits $1000.

Take this $1000 and place it into a term deposit account (I recommend and use the Suncorp FlexiRate account), making sure you are earning more interest than in the online account. Lock it in for 3 months and in the mean time continue to save your next $1000 in the online account.

Each time you hit $1000 place it into a term deposit account until you have $5000 in total.

Upon Reaching $5000 invest it in an Index Fund and start placing 50% of you savings into this fund each month (you can transfer a minimum of $100 per month via BPay with Vangard Index Funds).

Continue creating $1000 bundles with your online savings account and placing them into Term Deposits until $5000 is reached again. With this new $5000 open up an overseas-invested Index Fund. Funnel 25% of your savings per month into this fund.

With what is left of your base savings (should be 25%) continue creating $1000 bundles with your online savings account and place them into Term Deposits. Bundle these up when $5000 in reached and funnel the final 25% of your savings into these FlexiRate Term Deposits. This will be the cash portion of your investment portfolio.

After all this is achieved, not only will you have a nice nest-egg with which to build upon, but you will have a nicely diversified portfolio as well.

That’s it! Easy, isn’t it?

Have you ever thought about a savings plan?

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If you want to stop spending you need to reduce the temptation to do so.

Even though I have a “No Junk Mail” sticker on my mail box I still seem to get the occasional group of junk fliers promoting everything from Target’s latest sale to pizza menus.

I received such a batch of junk in my mail box the other day and immediately threw them into the garbage bin, all the while cursing the delivery person for putting them in my letter box in the first place. Although it did get me thinking about the lure of these and other temptations laid in our path, enticing us to spend our money.

Advertising is ubiquitous these days and the temptation to buy is everywhere, but there are a few things you can do to reduce both.

Firstly, place a “No Junk Mail” sticker on your letterbox. This will stop the majority of junk mail getting delivered to you. If you don’t know what businesses are advertising then you will be less likely to want to spend money with them.

The same goes for television advertising. My suggestion is to stop watching regular TV altogether. I have done this and the level of advertising coming into my life has probably halved. I hate ads interupting my favourite shows, so I do one of three things:

• Record the show and watch it at a later date, skipping over the ads when I do.
• Wait for the DVD of the show to be released and watch it then (either buying it and re-selling it on eBay afterwards, or borrowing it from a library or a friend).
• Or finally, downloading it off the web.

It may cost you a few dollars to watch your favourite shows but think of the time and the money you will save by not watch the adverts that commercial stations place in the shows. And you get the added benefit of watching the show when you want to and not when the station tells you to.

Another source of too many ads are magazines. You can save money and decrease the temptation to spend money by eliminating magazines from your life. There are huge amounts of advertising in magazines these days and you are paying for them. Imagine how much you could save each week if you stopped buying magazines.

Instead, borrow a book from the library to read on the train or bus, or even buy a book - it will take you much longer to finish it and guess what, no ads!

When you go shopping make sure you have a set idea of what you want before you go. Make a list of exactly what you want and then get in, get it and get out again. As quickly as you can. Shopping centres and shops are designed specially to make you spend more. So put those blinkers on and stay focused.

Stop going to online shopping sites unless you are after a specific product or want to compare prices. Again, make sure you have a clear idea of what you want before you go online. Log in and log out.

Removing the temptation of spending is half the battle in reigning in your spending. Remember, if you don’t know about it, you can’t possibly buy it.

Have you made a move towards reducing the temptation to buy?

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According to the website Click4Credit, a credit card comparison website, the average interest rate on a standard credit card is now 19.5%. And the average monthly card balance is a whopping $3115.00!!

That means that Mr. Average is paying more than $600 in annual interest charges.

It’s time for action, people! Time to say NO! to that credit card debt. And below are 10 steps that you need to take to get that credit card monkey off your back. And I don’t mean next month. I mean now, damn it!!

1. Assess Your Debt. Before you can confidently tackle your credit card debt you need to know what that debt is. Get all your credit card statements together and figure out how much you owe. This can be terrifying for some people but it is a very important first step and you will feel much better once you implement ways you can wipe that debt out completely.
2. Create A Budget. You need to know how much you can afford to pay on your credit cards and a budget is the best place to start. This will also allow you to see where you can try and save money on other bills and then funnel those savings into paying off your credit cards that much faster.
3. Stop Spending. This step is two-fold - stop using your cards, and cut back on your spending generally. You will need to tighten your belt and use all your spare cash to reduce and eliminate your credit card debt.
4. Attack Your Debt. The war has started! Start paying off your cards. Work out how much you can pay back within your budget and start paying it off. Also, make micro-payments whenever you can. Have a few dollars left over from your grocery shopping? Transfer it into your credit card. You will be surprised how these little micro-payments add up over time.
5. Don’t Save. Pay Off Your Cards. Concentrate on paying off your cards. Put every cent you can spare into doing this. Then after all your cards have been paid off you can start to save again. After all, paying off your cards will save your hundreds, even thousands in interest - so it is saving you money in the long term.

Who Should You Pay First?
If you have more than one credit card then you will need to figure out which card to pay off first. Focus on one card at a time and then move on to the next. This will give you a satisfaction boost when you pay off the first one and drive you to do the same with the rest.

But which one first? There are two schools of thought on this. The first, and more traditional, is to choose the card with the highest interest rate and pay that off first. But this may not always be the most sound financial decision.

If you owed $2000 on a card at 12.35% and only $400 on a card at 19.5% you would be better off financially to pay off the fist card (at least until the balance dropped to an amount similar to the second card) as the interest charges on the first would be higher than on the second card.

The second school of thought is to choose the card with the lowest balance and pay that one off first. Why? Because it is easier and will be quicker for you to do so and will give you a much-needed psychological boost when you pay it off completely. Something you may need to keep going with the other cards.

It really depends on how much you owe and what your personality is like, but my recommendation is to just pick a card, any card and focus on getting it to a zero balance.

Another quick tip: As you pay off a credit card, get the limit reduced as you go. This will stop you from being tempted to over-spend on it again.

Balance Transfers
These are great if you use them correctly and read the fine print so you understand exactly how they work. For example, some banks will give you a 0% balance transfer rate but as soon as you use the card this rate jumps to the normal rate of the card, which could be around 20%. So be careful and make sure you totally understand what you can and cannot do.

Oh, and make sure you can pay the balance off within the time stipulated. If the balance transfer is for 12 months only, then make sure you can pay the transfer amount out within 12 months. Otherwise you might find that the balance is now at the card’s standard interest rate, and you are back at square one again.

Get Rid Of Your Cards
If you think you will be tempted to use your credit cards (and that’s probably most of us) don’t take the cards with you. Here are three things to do with your cards:

• Cut them up! This is a great way to stop you using them.
• Leave them at home. If you think you will be tempted to use them while out and about - don’t take them with you.
• Give them to a trusted friend or family member. If you know someone you can trust, give your cards to them. That way you will have access to them in an emergency but won’t be able to use them when you are tempted.

One last word of advice. If you are completely overwhelmed and have no real way of paying off your debt then you need to see a professional financial councillor. These are usually available free in each state.

Have you started paying off your credit card debt?

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I am about to tell you a secret: I have never owned a car and have never had my license. Pretty surprising for a 30-something guy, isn’t it?

People are a little surprised when I tell them this. The reasons I don’t own a car are mostly cost-saving ones. But increasingly I have wanted to know just how much cheaper it is not owning a car and simply getting around in public transport and taxis.

Not owning a car is really a lifestyle choice, just as much as being vegetarian is, probably more so. It dictates where you can live, where you shop, and where you work - it really has an impact. Taking myself as an example, I have always lived somewhere within walking distance of the city. The only exception to this is where I currently live.

I live about a 30 minute train ride from the CBD and I live about a 3 minute walk from the train station. I new it would take some adapting not living inner-city, but I decided to rent the place where I am because it was close to a train station and it has a shopping complex (with a major supermarket) within 5 minutes (walking, that is). This saves me from having to travel very far to shop for food and in taxi fares to get home with any groceries.

Not having a car does restrict one thing however: your freedom of movement. You cannot just hop in your car and drive to the coast, or into the hills for a scenic drive. You can’t go and visit friends who live across town at a drop of a hat. But this is something that I don’t mind too much, although I can imagine how frustrating it could be for someone who was used to driving everywhere. That’s one good thing about having never owned a car: you don’t miss having one.

All that aside, there is no doubt that it is cheaper not owning a car. At least in straight money terms anyway. Which is what I want to look at in this post: exactly how much cheaper is it?

I will compare what I spend per week on transport costs compared to the most economical car for 2007 according to NRMA.

I buy a weekly ticket which covers my daily commute by train to and from work Monday to Friday, as well as any other traveling I do by train, bus or ferry 7-days a week. All that for just $27.20 per week.

I don’t tend to go out a lot these days, and if I do I usually get home relatively early. If I do go out it’s usually for a few drinks after work and so I am usually home by 11pm (early enough to take a train home), or out for dinner with friends. Again, it’s usually an early night. If I do have a big night out I usually tee it up with a friend beforehand that I can crash at his place not far from the city.

All this means that I don’t spend all that much on taxis. The occasional taxi I have caught is usually for around $20-30, but this is so infrequent that it’s hard to place a weekly figure on it. But I will try. Say $5 per week on taxis.

This brings my grand total of weekly transport to $32.20 per week. Pretty cheap.

Now let’s have a look at that car. Assuming I actually owned the car outright (that is, I wasn’t paying back a loan I took out to buy the car) it’s total cost per week (including fuel*, insurance and running costs) is $119.53! And that is calculated using an average fuel cost for the year 2007 (about $1.30/litre). As you know, petrol prices have spiked considerably this year, and so it would be generally more than this.

And that is for one of the cheapest cars to run: the Hyundai Getz S TB.

So how much am I saving per week? $87.33. That’s quite a considerable saving. That equates to $4541.16 per annum. Enough for a wicked overseas holiday every year!

But this is purely the base dollar value I am saving. You really need to have a look at what I am giving up and, as mentioned before, it’s my freedom of movement. What you have to ask yourself is how much is that freedom worth to you. For me and my lifestyle (with the choices I have made along the way by not having a car) surviving with public transport and taxis pays off in droves.

I save so much more money. I have less debt, and I don’t have to whine and stress about high fuel prices. All and all I am liking my car-free life, and it frees me up financially to do more sooner.

Have you ever thought about selling your car to save money?

Image credit: baldheretic

*Traveling an average of 15,000km per annum.

Not long ago I wrote a post on Lottery tickets and what a waste of money they are. Well I just read an article over at MSN Money that tells the story of eight lottery winners in America and how they lost it all.

The article describes eight winners of various lotteries all over the USA and how they blew all the winning and ended up broke, some living off welfare.

Their stories are hard to believe, but it is an all too common story. And it is what happens to a lot of people who have never learned how to deal with money when they suddenly end up with a win-fall.

After reading the article I realised that budget and saving and investing isn’t only about saving money for later in life or simply about getting debt-free, it is also about learning the fundamentals of money management.

Gaining wealth slowly, over time, is the best way to become wealthy not only because you appreciate it so much more but because you understands the fundamentals of wealth management and can make wise and informed decisions about what you are going to do with it.

Something those eight people from the article know very little about.

Have you ever come into a lot of money? How did you handle it?

Image credit: St_A_Sh