How can I invest when I don't have the money to invest?

[yesthattom]

One of the bits of advice in books like Charles Givens Financial Self Defense (used for about $5, his newer books most likely repeat the same material) is to save money here and there and use the money that you saved to invest. So, if you eat at restaurants every day, cook once a week at home and you should have about $50/month to invest. Change your oil yourself instead of paying someone to do it and you have $30-50 each quarter. Buy cheaper gas for your car and you have ???/week more to invest. Smoke one less doobie per week and..., well, you get the picture. If you can find ten ways to save just $5-10/month, that can be $50-100 you now have to invest that you didn’t have before... and you didn’t have to (a) get a raise, (b) reduce your quality of life.

(and note: If you get a $100 raise, after taxes you really only get about $60-70. If you find a way to not spend $100 then you are really saving the full $100! (or you are not spending $140 before taxes!) (Ok, now all the math purists can post comments about my funny math)

Today I found 2 items on my VISA card statement that I was paying every month and eliminated them both. I now have an extra $27.90 to invest each month.

1. When I ordered free business cards on “Vista Print” somehow I signed up for some kind of “rewards” program that costs $14.95/month. Holy shit. How did that happen? I’d been ignoring it on my VISA bill because I thought it was the shipping from the cards... but when I looked at 3 months all together I saw it was a repeating charge. It took a full half hour to cancel this (they don’t make it easy) but it was worth it.

2. I signed up for efax.com when we were buying a house. I love eFax. Paperless fax reception for free. I upgraded to the “plus” version when I needed to send a fax. It turns out I couldn’t downgrade to “free” without canceling and creating a new account. Of course, canceling is a pain, so I didn’t do it. Well, now I’ve finally did the cancelation procedure and it’s worth it. (Cancelation isn’t listed in their ToS or help menus. You have to call them, and they tell you a secret URL to visit. Then you visit the URL and have an on-line chat with someone who tries to retain you. It took about an hour in total time for me to cancel. Ugh.)

The total is $27.90/month in savings; or $27.90 more that I can invest each month. It doesn’t sound like a lot, but I’m listing this for my friends that invest $0/month and feel they can’t get started. Cancel a few of these scams, a porn site registration (email me for free alternatives) or two, and you should have enough to get started.

Comments

[inflectionpoint.livejournal.com]

Awesome!

If you are a coffee drinker, STOP buying coffee from shops and make your own in the morning.

I used to buy a coffee everyday on the way to work. That's about 1.40 to 1.80 per day, times twenty-ish days per month. That's between thirty to forty dollars a month right there.

I now buy coffee beans, and make my own in the morning. I get exactly the coffee I want, the way I want, without waiting in a queue or having to elbow past someone to get at the milk. I take some of the money saved and put it into savings, the rest goes into buying the expensive, really tasty, organic, local, non homogenized milk.

I've been doing that for five months now, and I love it!

[inflectionpoint.livejournal.com]

There's all sorts of neat little tips and tricks, I save a good amount by eating at home, and roll some of the saved money back into buying tasty cheeses, nice salads, and stuff - it means I save money, eat better, and get to educate my palate and try new things.

I am about 95% free of drinking and buying soda pop. That saves money, keeps my teeth happier, and keeps my tummy smaller. Again, some of the savings goes toward things like Tasty Scotch Whiskey, and supplies for brewing my own mead, but the rest rolls into savings.

As for cars, my favorite thing to tell people is - if your car is paid for, and not needing a lot of repair and fuss, keep it. Do not get a newer one, unless you work in a field where you need a fancy car to drive clients around, like real estate. When you buy that new car, you are taking out a loan, right? And when you buy that car and don't hold title, you have to take comprehensive coverage from your insurance company. And that is expensive stuff. One of my best savings plans ever has been taking good care of my car and not buying a newer one. It's hard to show the absence of a negative, but if this saves one person from buying a newer car before they need to, I'm happy to have shared the information.

Oh - and if your workplace gives you a transit program and you can, use it!
If they reimburse you for bus and train, or if they will purchase disounted tokens/tickets/swipey cards/RFID things to stick in your forehead for the machines to read, take advantage of it. That can be anywhere from 20 to 100 dollars a month, depending on your employer. Magic money for free!

And it builds up over time... even little things. When you get time, you could tell folks about the Magic of Compounding Over Time.

[cos]

Finding a recurring cost and getting rid of it or reducing it is one good strategy.

Another good one is knowing that (unless you're quite unusual) your spending is determined by how much money you think you have - in your pocket, or in your bank account. If you take a small amount away at the start, you think you have less money, so you spend less to make do. This won't work well if you're already so strained that you're eating ramen most days and still agonize over whether to buy cheese once a month because it's so expensive, because your spending isn't very elastic at that point. But if you're at the point where you *don't* agonize about buying cheese, your spending is definitely elastic enough for this strategy.

[cos]

I am about 95% free of drinking and buying soda pop.

When I went from highly paid sysadmin to almost-unpaid political campaigner, I noticed how much I was spending on bottles of iced tea, because I love iced tea. So I experimented with a few pots until I came up with the right proportions for some iced teas that I like, and switched to brewing a big pot every week and a half or so and refilling the bottles myself. Cost: a bit of water and heat, 6 tea bags, 12 spoons of sugar, 1 lemon, makes about 9 little bottles worth, which I would've paid about $1.00 - $1.70 each for. Previously, the $10/week savings would've made no difference to me, but at that point, it made a big difference when I was trying to save every dollar. And once I got into the habit, I stuck to it even though I can easily afford to buy again, because it tastes better.

My theory of cars is, drive it into the ground :) I got 240K on my last one and it probably had at least another 100K on it but someone hit it :(

[sweh.livejournal.com]

Today I found 2 items on my VISA card statement that I was paying every month and eliminated them both. I now have an extra $27.90 to invest each month.

A more important lesson: reconcile your credit card statements EVERY MONTH.

Whenever I buy something in a store, I keep the receipt and store it. If I buy online I print out the receipt. This information then gets put into a program, along with any automated recurring debits (eg DirecTV). Now when a statement arrives EVERY SINGLE ITEM is checked off and the paper receipts shredded. Any discrepencies between my data and the statement can be referred back to the receipts. I've caught a pizza place taking $5 more tip then I authorised.

No unexpected transaction is left unchallenged. If you do mistakenly sign up for some form of "rewards program" then you'll spot it on the next bill and if you can't get that charge reversed at least you'll be able to cancel it and not pay multiple months.

Vigilance!

This is the lesson I try to teach people when they're trying to reclaim their finances; track your expenditure and balance your accounts to every statement (store cards, credit cards, bank accounts... all of them). It's a pain, to start with, but it's a basis... knowing what you're doing is the first step to controlling it.

[yesthattom.livejournal.com]

> elbowing past someone to get at the milk

Hey, is that you???

;-)

[lillilah]

My biggest expense (after my apartment) used to be my car. Payments + gas + insurance added up to almost $500/month. That's a lot of money. My apartment was also quite pricey. Then, there was food, internet and all the various other services that I had. Not having a car and renting a significantly cheaper apartment has saved me a ton of money. When you combine that with more penny-pinching and no more eating out, it is amazing how much money I have been able to save. I have more savings now that I'm making around $20,000 a year than I did when I was making more than $50,000. Not everyone has the option of never eating out and not having a car, but little things like biking to work can kill two birds with one stone (you don't have to pay for gas and you don't need a gym membership).

[lillilah]

I like your scheme with the receipts. Thanks!

[ladyinfidel.livejournal.com]

mail me porn, please!

[yesthattom.livejournal.com]

It's amazing how many people put the expensive gas in their car when their car manual says they don't need it.

The Givens book also helps you audit your car insurance for items that aren't worth it. It turns out a lot of the items will never be used if you have good health insurance through your employer, or (my favorite) the legalese translates to "you agree to pay us extra for this feature, and we agree to only pay out if hell freezes over". My gf at the time saved something like $1000/year when we read the book.

[pyrzqxgl.livejournal.com]

Whenever I see lists like that they're all about things I don't do anyway -- cars, coffee, restaurants, dryers, etc.

[sweh.livejournal.com]

In a related theme...

Do this for everything. If you use the ATM, get the receipt. If, for some reason, you use your credit card and don't get a receipt (some places won't give them by default for small purchases, especially if you use PayPass or Blink) then make a note, and enter it into your tracking system.

Also make use of online banking, if nothing else but to check the transactions. You can spot invalid or unauthorised entries quicker and question them.

There are some other advantages to this; you know how much money you have spare; your notes take into account how much you've spent before the statement arrives and before they appear online (I can buy groceries on Friday but the credit card transaction not appear until Tuesday; I know I've spent $100 more than the bank says I have). You can also run some basic predictions (at the end of the month I'll have XYZ) to do future planning.

Knowledge is key to control.

Of course I might be a little anal about this; I've always been a control freak, especially with money. I earn enough that I don't need to analyse what I spent on computers, on groceries, on DVDs/CDs, on books, on beer... but I try to limit my weekly cash outgoings (beer, lunch, whatever; if I hit the ATM twice a week then I've overspent), and I analyse "total cash assets" monthly and yearly. I get the feeling Tori thinks I'm a little OTT on this; she managed to do it for a year or two.

What I do isn't for everyone; it can be too much work. The more you track the less "return on energy" you get. But total tracking means fewer surprises. For example, last week I looked at my "last paid bills" and noticed that I hadn't paid my cable bill. Whuh? I always pay my bills. So I checked out the paperwork (I keep all bills as well); no bill on file. Huh. So when this months bill arrived I was expecting it to be twice as much as normal and so could plan ahead. (turns out I'd put the unopened bill in a safe place, out of the way, when I had people over last month and "lost" it. oops!)

Tom's financial tips are based on easy things that anyone can do; because they're easy it's a good way of regaining some of the money you lose each month without noticing it. Small steps towards regain control. I'm more of a "hard wall" person; do it right and here are tips to help you do it right. My way is harder, and not for everyone.

I think I'll stop preaching now. Sorry Tom!

[la-directora.livejournal.com]

When I speak at fundraising parties, this is similar to the method I use to convince people to make large donations. I suggest making a $1000 donation, and people choke. Then I say, "How many people get a latte or take a cab or eat lunch out at least once a day." Most hands go up. I say, "Okay, if you gave up just one of those things a day every day, that's about $100 a month. And if you pledged $100 a month for 10 months, that's $1000. Now, who here is willing to give up one latte a day in order to give $1000 to people who are dying with AIDS."

When you put it that way, all of a sudden people get a better understanding of how much they can "afford", and how much is not affording simply because of choices they've made. When they start thinking priorities and choices, it changes their perspective.

[awfief.livejournal.com]

Or as Mary Hunt puts it: Pay yourself first.

Tony and I have been able to save $100 a week for our wedding, and not use it except for wedding stuff. This is even though we have had times that were lean. But our thought was "that isn't savings, it's a bill we haven't paid yet." For instance, when funds are low but you just paid the gas bill, you can't call the gas company and say "hey, can we have some of it back? We need to fix the car!" Same thing with the savings account. Maybe it means we scrimp a bit more, but currently we have about $3k in there, and have spent about that much from there, for our wedding....(in 5 weeks!)

So yeah. Pay yourself first and don't go back on it. Even if you have debt -- as Mary Hunt says, if you put all your money towards debt reduction and none for some "fun money", you'll feel way too deprived and won't stay on the plan. Much like an overly restrictive diet, you'll binge.

(That and "freeze your credit cards in a block of ice in the freezer. If by the time the ice melts you still want to buy it, go ahead.")

[awfief.livejournal.com]

you do this monthly? I have it taken out of my bank account, with my debit card, and check my online statement at least weekly if not more (I get paid weekly). I have a spreadsheet with the monthly bills I have, and add in extra rows for other things we spend, and there are 2 columns: What the bank says we have, and what we will have once everything clears. This way I can say "hrm, we haven't been charged $1600 for the plane tickets we bought and received 2.5 weeks ago" and not be surprised when they show up (this just happened).

If your bank is online (and in this day and age there's no excuse not to be) and if you're online daily (which I know most of us are!) there's really no reason not to do this. I don't keep every receipt and mark everything off, but I have a clear idea of what I bought in a given day and am pretty good at memorizing numbers, so I do see when things are off.

It gets a bit weird because Tony and I share finances, so occasionally I'll come home and ask, "Did you spend $40 at the magic shop?" And he'll say, "yeah, I bought books, what's the big deal? We had the money!" And I say, "yeah, it's not me checking up on you, I just want to make sure this charge is right."

[lillilah]

Wow! I'm sure I was paying too much for insurance. I actually found that my car went a lot further on a gallon of gas if it was the higher quality. I don't know if this is true for all cars, though.

[awfief.livejournal.com]

(wow, I knew NJ was expensive, but damn! My car insurance TOTAL is just under $1k a year, and it has 2 people on it! Did I mention my car was free, a 1995 Toyota Corolla my mother gave me when she wanted to buy a new car, )

Oh, and re: changing your oil? I'd rather pay the $40 at Jiffy Lube -- same with a car wash, I'd rather pay $10 and take 10 minutes, than do it myself and take 1/2 an hour. An oil change would cost less overall after a few times (you do have to buy the pans, even if you have all the wrenches and stuff), but it would take me 2-3 hours to do. And probably longer, because I'd have to bring the oil back to recycle, etc.

Now, that's not for everything. I do our laundry and we clean our own place (as opposed to having services do that stuff) because I get joy out of it. It's like knitting -- there's a physical difference that you can point to and say "I did that!" and feel proud of.

Wow, I'm rambly....sorry, I have a lot to say on these subjects. :)

[lillilah]

All my expenditures go through my debit card, and since my bank started offering a 6% interest checking account (!), my husband and I have pooled all our money together into that account. Previously, I had my own separate account that I spent money out of, which made it easy to set a budget for myself. Now, I have to track everything. I really love making spreadsheets, though, so this is okay. Perhaps in addition to liking control you really like spreadsheets too. Anyway, it sounds like it makes you happy and doesn't hurt anyone, so it is a good thing.

[sweh.livejournal.com]

No; monthly is when I do the final reconcilliation and shred receipts (or move them to "keep for warranty purposes") because that's when the bill arrives. I enter data into my online system daily, I check online banking once or twice or week. In particular I check mid-month because I get paid on the 15th and should have mortgage payments taken out on the 16th, so I check to make sure that all happened properly :-)

Sounds like you use a similar system concept to me; just the specific details are different.

Because the system I use ("cbb") stores its data in text files, I can write any reporting system I like (Unix geek; processing text files is second nature). So "./monthly" "./asset" "./lastbill" etc are commands I've written that display useful stuff.

I don't share finances with another; if I did then I'd probably require them to give me their credit card receipts (if I was responsible for that account; eg a shared account) so I could track (their own account would be theirs, unless they proved themselves unable to manage it). It's a bit control-freakish... I'm not stopping people spending, I just need to know what they're doing so it can be properly tracked and verified when the bills arrive. I don't want to chase the "where did this $40 come from?" unexpected entries; I want to have the piece of paper in front of me that shows it (so I can shred it... helps prevent identity theft).

[sweh.livejournal.com]

I'm loathe to use debit cards for most things because errors come directly from your account. In the UK I _would_ pay bills automatically (eg electric, gas, phone) via "direct debit" because the banks had a guarantee where they would immediately refund any dispute and then re-debit if you were wrong. US banking has limited guarantees, so I prefer to do stuff via credit card; any mistakes I can dispute before I have to pay a penny.

Also means the money is in my bank account (making interest) for longer; I can buy on the 11th and not have to pay until the 5th of next month; extra interest!

Anyway... tracking...

Well, no, not spreadsheets. But a theoretical equivalent. Data is stored in a tab-delimited text file and I can write programs to mangle that. Unix geek :-) a bit of "cut" and "awk" or "perl" and I can write ad-hoc reports on my data whenever I wish... common reports get scripted; "./delta 200705" shows me all transactions for May 2007 with a summary of credits/debits/total change. Dang, don't get paid until the 15th; no wonder there's a big -ve for the month so far! This is how I spotted I hadn't paid my cable bill; "./lastbill" showed a March date for CABLE.

I don't need no spreadsheet GUI :-) But, yeah, the concept is similar.

It hurts people if others try to live up to my standards or if I try to push it on them. As long as I do it my own way and only say "this is an option" then it can't hurt... much.

[sweh.livejournal.com]

I'd rather pay $10 and take 10 minutes, than do it myself and take 1/2 an hour.

That's modern life in an nutshell; how much are you willing to pay for convenience, and can you afford it?

Pay a service to maintain your garden... mow the lawn every week; get rid of leaves in the fall... Pay a maid to wash your dishes, dust and vacumm the house... Or do it yourself. You might want to not do it, but not be willing or able to spend the money. Some things are more obvious (brake changes; I probably couldn't do it to a sufficient standard), others less so.

Definitely a "personal choice" decision.

[awfief.livejournal.com]

Certainly. But also note that "time is money" in a very real way. Anyone can figure out how much they actually make in an hour, and figure what's worth it or not. For instance, a laundry service for me would be a total luxury, because laundry is great for multitasking, although I do hate it sometimes.

We're in agreement that it's a personal choice; one thing I'm glad about that I rent is that I spend much less time cleaning than I would if I owned....who cares if the stairs aren't vacuumed? I don't own the yard, so I don't worry about that.

I could argue the same about eating out -- but the only thing I really do for the convenience factor is salad. For whatever reason I just can't make a salad like other people do (not just in restaurants, but also other people, like Tony's mom, who makes a great basic salad). But I do not, and cannot, eat out every day. I can't afford to.

In fact, I had an interesting revelation. Sometimes I'd forget my lunch, and "have" to go out to lunch. Working in a business district in Cambridge, MA my lunch options are $5-8 at least. When I went food shopping I'd see frozen meals and say "I don't want to spend $3 on a meal; I'll bring my lunch!" And then I realized -- if I buy one or 2 meals, those 1 or 2 times a month I forget my lunch, I'm actually saving $$.

So, yeah. I agree that's modern life, but my point was that time really is money. I'm not going to be happy if I have to do EVERYTHING myself. So I pick and choose what things not to do. I'm lucky in that I have a partner, so we share responsibilities. But yeah, you have to "splurge" sometimes!

[sweh.livejournal.com]

I disagree that "time is money" is always true. If I spend an hour working in the yard on a Saturday then that's not causing me to earn any less money from work. My personal time is not subject to the same $$$/hour calculation; there is no $$$ income for my personal time!

Instead, time is the asset that's being spent. I only have a certain number of personal hours; some of those are spent commuting, some sleeping, some performing personal hygeine and other unavoilable tasks. How do I want to spend the remaining time? Money can be used to increase the "value" of that time, by allowing you to spend it on more "quality" things (eg spend it snuggled up with your partner, or spend it doing yard work). This is where the "personal choice" comes in; what is more valuable to a person? The money or the quality time?

[lillilah]

*laugh* I'm a geek, but I've never been that hugely into scripting. That's quite cool!

[inflectionpoint.livejournal.com]

hihi!

yup. that's me. hihihi!

Come over some time, and I'll make you coffee with the World's Best Milk EVAR, the Strauss Organic non-homogenized. (heh heh, I am a homo, except for my milk choices. Giggle.)