As I was tending my garden pond this morning, which I dearly love, it occurred to me that there were many similarities between tending the garden pond and tending finances. The other night I went out back and noticed frogs frolicking in the pond. It started out that there were two, then there were four. They swam and played and had quite a good time. Today I noticed a prolifera of tadpoles in the pond. So the big frogs had gotten together and made many little tadpoles. The tadpoles, if left to grow, will develop into more big frogs who will make more tadpoles. Investments are much the same way. A few well placed investments will grow to produce interest (tadpoles) which if properly nourished and left to grow will themselves become large frogs producing more tadpoles(compound interest). Before you know it you will have a whole pond full of frogs, as much as you want (wealth).
Before I started my pond, I educated myself as to how to set it up, and how to care for it. I made sure I had all the proper supplies required. Take a little time to learn about the investment you want to make. Any broker worth their salt will take time to explain it to you and teach you what you need to know to monitor your investment. If yours won't, then find one that will. When I consulted a pond expert, I found one that had established and managed a pond of their own. You better believe that my investment advisor has solid investments for himself, and his own retirement plan that works. I want an advisor who walks the walk, not just talks the talk.
So what needs to happen to produce tadpoles? First, you need an inviting pond in which the frogs can frolic. To me that would be a solid mutual fund, for you it may be some other type of investment that generates compound interest. Then, you need someone to manage the pond, clean the filter, make sure the water does not become toxic, etc. That would be the investment broker, or account manager. I chose a seasoned investment broker that I liked and who convinced me he knew what he was doing.
Know when your pond needs tending. What would happen if you started a garden pond, then ignored it for the rest of the summer? You would get rancid water and leaches, that's what. Watch your pond, open those notices that come in the mail from the investment account and read them. Know what is happening with your account. Clean out the junk. Consult the manager if you feel something is not quite right or not producing the results you expected. I call my manager at least quarterly. Take it upon yourself to make sure your pond is conducive to tadpole growth and development.
Let the tadpoles grow into frogs. Reinvest dividends; do not take money out of your investment account unless it is an absolute emergency and you have no other option. If you take the tadpoles out of the water they cannot grow into big frogs and will not produce more little tadpoles. So if you do take money out, make sure you are putting it into something else that can grow tadpoles. You can move the pond, even change ponds, but a dry pond will produce nothing but dust.
One other thing, if you are putting your tadpoles into the creditor's pond, then they become tadpole producing frogs for them, not you. They like it when they get your tadpoles. They work hard at it.
So how are your tadpoles growing?
Sandy Davidson, The Debt Coach
Thursday, May 19, 2005
Sunday, May 15, 2005
The Easy Slide
I have a challenge for those of you who feel operating on cash is a thing of the past. I went to Walmart the other day to have a quick picture taken and stored in digital format. I called ahead and was told I could come in anytime except they closed for lunch from 2 and 3.
I got ready and arrived at 1:40 only to find the photographer had closed early for lunch. I decided to buy lunch in the deli and eat it in the onsite McDonald's. I purchased a work related magazine to help pass the time in a productive manner. I forgot my glasses so I had to go to the accessories section to "borrow" some glasses. While there I noticed a pin that would look great on my jacket. The price tag for lunch including the magazine and pin came to right under $10.
I arrived at the photo studio to be the first after lunch customer. The phone quoted price of the disk was $14.95. On site I am told in order to purchase the disk, I must also purchase their special package; the total cost would be $28.95. Well I was dressed, ready, and there, so I agreed to the "new" terms.
Picture over, disk in hand, I remembered I needed cat liter. As I was walking through the store I decided to browse in other departments. I remembered I needed to refurbish my supply of foundation garments, and a couple of new summer shirts to start of the season would be nice. The price tag at the register was right at $128.00.
As I was sliding my debit card to seal the purchase, I wondered if I would have spent the same amount if I was paying cash. A planned $14.95 purchase ended up costing me $166.95. Nothing I purchased was pricey. The only planned expenditure was the pictures on disk.
I went to the local community theater that evening to enjoy a play. While waiting for my escort, I sat on a bench next to another friendly lady waiting for her escort. Our conversation turned to the easy slide, the fact that it is way too easy to slide that debit card into the machine without thinking about what you are spending. We both agreed that we would spend less money if we paid in cash. It is so much harder to take all those bills out of your wallet and hand them over to someone else. You hardly even think about it when you do the easy slide.
If you are one of those who feel operating on cash is passe', try this. For one month pay cash for all your purchases. That's right, carry cash and only pay cash for everything you buy. No credit or debit cards allowed. Keep the receipts and track your spending. At the end of the month analyze your spending and compare it to previous months to see if you spent less. I am betting you will.
Just think what you can do with that saved money. Put it toward your rapid debt elimination plan, plop it into your investment account for a more secure future, or decide to splurge on something you really want or need. I think I'm going to give up the easy slide and revert to cash only spending. How about you?
The most convenient way is often not the best way!
From Sandy Davidson, The Debt Coach.
I got ready and arrived at 1:40 only to find the photographer had closed early for lunch. I decided to buy lunch in the deli and eat it in the onsite McDonald's. I purchased a work related magazine to help pass the time in a productive manner. I forgot my glasses so I had to go to the accessories section to "borrow" some glasses. While there I noticed a pin that would look great on my jacket. The price tag for lunch including the magazine and pin came to right under $10.
I arrived at the photo studio to be the first after lunch customer. The phone quoted price of the disk was $14.95. On site I am told in order to purchase the disk, I must also purchase their special package; the total cost would be $28.95. Well I was dressed, ready, and there, so I agreed to the "new" terms.
Picture over, disk in hand, I remembered I needed cat liter. As I was walking through the store I decided to browse in other departments. I remembered I needed to refurbish my supply of foundation garments, and a couple of new summer shirts to start of the season would be nice. The price tag at the register was right at $128.00.
As I was sliding my debit card to seal the purchase, I wondered if I would have spent the same amount if I was paying cash. A planned $14.95 purchase ended up costing me $166.95. Nothing I purchased was pricey. The only planned expenditure was the pictures on disk.
I went to the local community theater that evening to enjoy a play. While waiting for my escort, I sat on a bench next to another friendly lady waiting for her escort. Our conversation turned to the easy slide, the fact that it is way too easy to slide that debit card into the machine without thinking about what you are spending. We both agreed that we would spend less money if we paid in cash. It is so much harder to take all those bills out of your wallet and hand them over to someone else. You hardly even think about it when you do the easy slide.
If you are one of those who feel operating on cash is passe', try this. For one month pay cash for all your purchases. That's right, carry cash and only pay cash for everything you buy. No credit or debit cards allowed. Keep the receipts and track your spending. At the end of the month analyze your spending and compare it to previous months to see if you spent less. I am betting you will.
Just think what you can do with that saved money. Put it toward your rapid debt elimination plan, plop it into your investment account for a more secure future, or decide to splurge on something you really want or need. I think I'm going to give up the easy slide and revert to cash only spending. How about you?
The most convenient way is often not the best way!
From Sandy Davidson, The Debt Coach.
Thursday, May 12, 2005
Old School Finances
In the days of graduate school my approach to finances was a simple one. Graduate school for me was funded by stipend and finances were most definitely limited. Managing them to ensure the funds lasted through the month was essential. I used the envelope method. I simply had three envelopes in my bedside table. One was for the bills: electric, water, rent, and phone. Another was for gas, groceries, toiletries, and health needs. The last envelope held what was left over and was my available cash for everything else like entertainment, clothing, car repairs, and emergencies. The system worked great. I always was able to pay my bills and had food and gas throughout the month.
I think today many of us should adopt a modified version of the envelope method. We should all plan our spending at the beginning of the month rather than letting our spending plan us. The technologically savvy can set up computerized financial files with the allowed amounts listed and spending tracked categorically.
Somehow, I still like the envelope method best. It seems easier. When the envelope is empty, there is no more spending in that category. For us visual folks, a quick peak tells how much is left. I would however add a new envelope, and it would be labeled "Monthly Investment". We should all be putting a little aside each month for our future financial health.
It is always best to make compound interest work for you rather than them! Think twice before buying on credit. Ask yourself, "Is this a want or a need?' Then ask, "Can it wait until I can pay cash?" Then finally, know what it is going to cost you in the long run and be sure it is worth it.
Written by Sandy Davidson, LISW-CP, CFIC, The Debt Coach, Real Solutions for America's Debt Habit
I think today many of us should adopt a modified version of the envelope method. We should all plan our spending at the beginning of the month rather than letting our spending plan us. The technologically savvy can set up computerized financial files with the allowed amounts listed and spending tracked categorically.
Somehow, I still like the envelope method best. It seems easier. When the envelope is empty, there is no more spending in that category. For us visual folks, a quick peak tells how much is left. I would however add a new envelope, and it would be labeled "Monthly Investment". We should all be putting a little aside each month for our future financial health.
It is always best to make compound interest work for you rather than them! Think twice before buying on credit. Ask yourself, "Is this a want or a need?' Then ask, "Can it wait until I can pay cash?" Then finally, know what it is going to cost you in the long run and be sure it is worth it.
Written by Sandy Davidson, LISW-CP, CFIC, The Debt Coach, Real Solutions for America's Debt Habit
Wednesday, May 11, 2005
The Debting of America
America is being courted and seduced into debt. Using credit is presented as a good thing, sometimes even like a special priviledge. Recently I began keeping in a stack all the enticements to use credit that I received in the mail. Before six months had passed, the stack had grown to be a foot high. I was amazed at how quickly it grew. They are trying hard to seduce you and me into debt.
Make sure you do not miss the real message here. Compound interest is big business. They, the banks, mortgage companies, credit card companies, and the department stores, all are trying very hard to entice us into using credit and going into debt. Direct mail is expensive. Can you imagine the amount of money that is spent to send you and everyone else those credit card invitations? Just how do you think they are paying for it? If you succumb, you are paying for it out of your hard earned income.
Just think what could happen if you kept that money for yourself and used it to compile compound interest belonging to you. Visit a wealth calculator if you are curious.
They entice you into using credit with 10% off today's purchase if you apply for our credit card, easy pay, and low or no interest for 6 months. What they do not tell you is that if you are late on a payment they will jack your interest up as high as 24%. And they will tack on healthy late fees. If you are late on other payments to other people, they can, and most likely will, increase your interest percentage. Soon, you have lost more than any benefit you may have derived from the original offer.
If you are very anal about paying your bills on time and are never, ever late with a payment, maybe, just maybe, you can escape the trap. However, you will still pay interest on that purchase for longer than you think if you make minimum monthly payments until the debt is paid off. Many people actually never pay off the debt because they add more credit purchases to the account. They took the bait and are now hooked.
I do not recommend the use of credit cards. If you must use one, only use it if you intend to pay off the balance in full when the bill comes and before the due date. They are giving you less time now between when you receive the bill and when the payment is due. Plan ahead to pay the account so you will have the money available. Carefully read your statement and notice due dates. Gone are the times of the due date being the same day each month. They also have a cut off point on the due date. If your payment is processed one minute past that cut off time, you will be charged a late fee.
My favorite credit card alternative is a VISA check card linked to my primary checking account. It acts like a credit card, but I am spending my money. I could elect to charge myself interest. Then I would be funding and benefiting from my own credit card. I do notice that it is easy to swipe that card. It is a little harder to let go of the actual cash I rarely have in my purse. Cash is king folks, and the very best option is to make purchases with cash. This reminds me of another story for another day.
The bottom line, if you have to use credit to buy it, you cannot afford it and should not buy it. Wait until you have saved up enough money to pay for it. Look for more to come about how to handle those emergencies that are sure to present themselves.
Just say no to debt.
Written by Sandy M. Davidson, The Debt Coach, helping you be debt free.
Make sure you do not miss the real message here. Compound interest is big business. They, the banks, mortgage companies, credit card companies, and the department stores, all are trying very hard to entice us into using credit and going into debt. Direct mail is expensive. Can you imagine the amount of money that is spent to send you and everyone else those credit card invitations? Just how do you think they are paying for it? If you succumb, you are paying for it out of your hard earned income.
Just think what could happen if you kept that money for yourself and used it to compile compound interest belonging to you. Visit a wealth calculator if you are curious.
They entice you into using credit with 10% off today's purchase if you apply for our credit card, easy pay, and low or no interest for 6 months. What they do not tell you is that if you are late on a payment they will jack your interest up as high as 24%. And they will tack on healthy late fees. If you are late on other payments to other people, they can, and most likely will, increase your interest percentage. Soon, you have lost more than any benefit you may have derived from the original offer.
If you are very anal about paying your bills on time and are never, ever late with a payment, maybe, just maybe, you can escape the trap. However, you will still pay interest on that purchase for longer than you think if you make minimum monthly payments until the debt is paid off. Many people actually never pay off the debt because they add more credit purchases to the account. They took the bait and are now hooked.
I do not recommend the use of credit cards. If you must use one, only use it if you intend to pay off the balance in full when the bill comes and before the due date. They are giving you less time now between when you receive the bill and when the payment is due. Plan ahead to pay the account so you will have the money available. Carefully read your statement and notice due dates. Gone are the times of the due date being the same day each month. They also have a cut off point on the due date. If your payment is processed one minute past that cut off time, you will be charged a late fee.
My favorite credit card alternative is a VISA check card linked to my primary checking account. It acts like a credit card, but I am spending my money. I could elect to charge myself interest. Then I would be funding and benefiting from my own credit card. I do notice that it is easy to swipe that card. It is a little harder to let go of the actual cash I rarely have in my purse. Cash is king folks, and the very best option is to make purchases with cash. This reminds me of another story for another day.
The bottom line, if you have to use credit to buy it, you cannot afford it and should not buy it. Wait until you have saved up enough money to pay for it. Look for more to come about how to handle those emergencies that are sure to present themselves.
Just say no to debt.
Written by Sandy M. Davidson, The Debt Coach, helping you be debt free.
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