A Penny Saved is a Penny Earned

When it comes to personal finance, little changes can make a big difference. We know that gas prices fluctuate frequently. Let's say that you normally put 10 gallons of gas in your car. And let's say that fuel varies between $3.50 and $3.90 per gallon. Try to always buy gas when it is at a low price. 10 gallons times a $.40 variable leads to a savings of $4.00 every time you get gas. If you fuel up once per week that is $208 saved in a year.

Do you go out to eat? Let's say you get lunch at a fast food restaurant once per week at work and spend $7.00 for each meal. Bring some inexpensive food from home instead, and you save $364 over a year's time.

If you make the above two changes to your budget, you will save $572 in a year's time. At the current stock prices, that money could be used to buy 7 shares of Procter and Gamble (PG) or 6 shares of Apple stock (AAPL).

Making small incremental changes like these over time will aid in building wealth.

Dave Ramsey Classes for High School Students

In my opinion, this country needs to educate people on the basics of handling money. We know that our federal government sets a poor example on how to do that. Imagine if the average person had $1 million dollars in credit card debt, and acted like it was no big deal, and kept on spending. That is what our politicians do with our money. Financial expert Dave Ramsey know makes it possible for high schools to teach his class to teenagers. This should be a required curriculum in every high school in America. Teach the kids financial responsibility early. Then, they will avoid the pitfalls of credit card debt and making poor decisions. College students are often bombarded with credit card offers from all directions. People who are taught about money early will learn the importance of saving for retirement. Imagine if everyone in America started investing during their teenage years. Retiring at age 65, or for many people earlier, would be no problem. Find out more about the curriculum here: http://www.daveramsey.com/school/foundations/

Ten Tips to be Financially Fit

No matter who you are, managing money is a challenge. Here are some basic tips that will make it easier.

1. Invest automatically. Have your 401k/retirement investments taken out automatically each paycheck so you don't have to think about it. If your employer has a certain amount they will match with their own contribution, take full advantage of it. That's free money. Or, you can invest a certain amount automatically by using an online broker such as e-trade or sharebuilder. Start as early as you can. If you start investing at age 25 and want to retire at 65, you have 40 years for your money to grow. Time is money. Track your investments and make changes if your results are not satisfactory. Inflation is normally about 3% per year, so if your investment gains 3% per year, you have no real gains.

2. Don't buy a new car. The depreciation on a brand new car is rapid, the value drops as soon as it is driven off the lot. Buy a slightly used car, maybe one that is a year or two old. Even the rich do this (maybe that is why they are rich). The book "The Millionaire Next Door" points out that most millionaires do not buy new cars.

3. Banish debt payments. Do what you can to get rid of car payments, credit card debt, student loans, any other debts, and finally, house payments. Dave Ramsey says that debt is the #1 thing standing in the way of building wealth. Pay cash whenever you can. Why give the bank your money? Think about what you could do with your money if you had no house payment, no car payment, no credit card debt and the like. You could save tons for retirement, give to charity, and simply have peace of mind financially.

4. Avoid wasting your money on things like lottery tickets, rent-to-own businesses and payday lending services. The chances of winning the lottery are miniscule. Putting your money in a good growth mutual fund is a better bet. Rent-to-own businesses and payday lending services are scams that charge obnoxious interest rates.

5. Separate wants from needs. This is tough since in America we are big time consumers, being bombarded with advertising every where we look. Some feel pressure to keep up with the Joneses. You might want to buy a $50 shirt, but a $25 shirt will still do the trick. Sure, we'd all like to drive a Mercedes, but a Chevy might be 1/3 the price and it still gets you from pont a to point b. Give up on seeking status symbols, it is an empty pursuit.

6. Term life insurance trumps whole life insurance. Go with the no-frills, basic, convertible, renewable term life insurance. Sales people will try selling you whole life or universal life or annuities but those are a waste. The investment component of most whole life policies is poor. But, insurance agents love them since their commission is greater. Financial experts like Bruce Williams and Dave Ramsey recommend term life insurance. Do your investing elsewhere, not with insurance.

7. Make more, spend less, sell stuff. Want more money? You have three options. Make more by working overtime or getting a second job or a better paying job. Analyze your spending habits and spend less. Set up a monthly budget and stick to it. Sell things you don't need. Have a garage sale. Set up an amazon.com or an e-bay account to sell some possessions.

8. Diversify your investments. This means, don't put all of your eggs in one basket. If you have $1,000 to invest, don't buy $1,000 worth of stock in one company. Consider a mutual fund or an ETF (exchange traded fund). These will diversify your risk and invest in many stocks that compose one financial investment vehicle. Or you can choose an index fund, perhaps one that mimics the return of the S&P 500 or the Dow Jones Industrial Average. Vanguard and Fidelity are two of the top mutual fund companies. Analyze before you buy though. What is the track record of the mutual fund? How diversified is it? Does it have any international stocks (this may be good or bad)? what are the associated fees? Is it a no load fund (no fees for purchasing) or a loaded fund (you pay fees when you buy)? All mutual funds or ETFs are not the same. Seek out a financial advisor if you need assistance, or do your homework, as mentioned in the next tip. If you are dead set on buying individual stocks, make it a small part of your total portfolio, perhaps 10%. The stock market is incredibly resilient. It goes up and down, but over the long run, it generates a good return on your money. Those who stay with it for the long haul will do well. Buying and selling frequently is risky and the tax implications can be expensive. Beware of fad investing trends. When gold was at an all time high, we heard lots of ads telling people to buy gold. Why would you buy a commodity when it is at an all time high? Seems like selling gold would be a better move, then buy when it is cheap.

9. Seek out the experts, and educate yourself. Buy books by Dave Ramsey, Suze Orman or Clark Howard. Listen to financial radio shows or watch financial TV shows on CNBC. Get a subscription to Forbes magazine, Kiplinger's Personal Finance or The Wall Street Journal. It's amazing what you can learn on your own. Take a class at a community college about the stock market or personal finance. Community college classes are affordable and the instructors are knowledgeable. You'll get out of it whatever you put into it. Jim Cramer has a TV show and he writes many investing books. He is not a buy and hold advocate. He says to buy and homework (study your investments). Decide which approach is better for you. Some are risk adverse when it comes to investing.

10. It doesn't matter what you make, it matters how you handle it. This is perhaps the biggest tip to remember. How often have we heard about celebrities who made millions and ended up broke due to poor decisions? It happens all the time. A person who makes $25,000 per year might be better off financially than someone who makes $250,000 per year. The person with the high salary might be up to their eyeballs in debt, on the verge of financial ruin. The person with the modest salary might be a saver who is smart with money, building a nice nest egg a little at a time. Think about money decisions, look before you leap. The decisions you make today will determine your financial fitness in the future. The rich get richer and the poor get poorer for distinct reasons. The rich get richer since they know about money management, investing wisely and they put their money to work for them. The poor get poorer since they do not do their homework regarding investments and they make poor decisions with money on a day-to-day basis.

Clark Howard, Consumer Advocate

I have learned a lot from Dave Ramsey and Jim Cramer, as mentioned in my other posts. Another interesting person I have discovered is author, TV and radio host Clark Howard. He is the person to follow when it comes to personal finance. Recently I saw him on Anderson Cooper's show and he has lots of down to earth tips that can save a person a lot of money. One thing he said that is you go shoppng at a grocery store, the items to avoid buying are the non-food items such as health and beauty aids like toilet paper and toothpaste. He said that the stores have their largest markup on these items. It is a better bet to buy them at warehouse stores like Sam's Club, or even Wal Mart. He recommends buying a car online, rather than from a dealer. Buying a car is usually the second biggest purchase a person makes besides a home, so doing homework and researching different options makes sense.

Here is Clark's bio from his website:

Clark Howard is a nationally syndicated consumer expert who advises consumers how to save more, spend less and avoid getting ripped off. His radio show is heard every day on more than 200 radio stations throughout North America. His HLN show runs every Saturday and Sunday at 6am, noon and 4pm ET, and he is a frequent guest on many other talk, variety and news programs.

"Save more and spend less" is more than just a motto for Clark; it's a way of life. As a successful lifelong entrepreneur, media star and best-selling author, the Atlanta-based "consumer champion" is dedicated to helping Americans of all means get ahead in life.

Clark 's career included stints in both government and private sectors. He was a civilian employee working for the U.S. Air Force at the end of the Vietnam War. He launched a travel agency in 1981 that grew into a chain with locations across metro Atlanta. In 1987, he sold the company at 31 and retired.

Clark found his way into the public eye almost by accident. While enjoying life on the pristine beaches of Florida, he was asked to be a guest on a radio show about travel. The response was so positive that he was given his own program, The Clark Howard Show. The show originates from Atlanta's AM 750 and NOW 95.5 FM News/Talk WSB and is syndicated by Dial Global.

In early 2009, The Clark Howard Show was expanded to HLN (formerly the Headline News channel) in a weekend program. Viewers can watch the penny-pincher answer the best calls from his daily national radio show on Saturdays and Sundays at 6 a.m., noon and 4 p.m. ET. He also appears on HLN 16 times each day during the week with minute-long consumer tips.

He is also a TV reporter on Atlanta's ABC affiliate WSB-TV and writes a weekly column in The Atlanta Journal-Constituion that appears each Thursday in the Deal Spotter section.

The consumer champ's most recent book, 2011's Clark Howard's Living Large in Lean Times: 250+ Ways to Buy Smarter, Spend Smarter, and Save Money (due Aug. 2), covers everything from cell phones to student loans, coupon websites to mortgages, investing to saving on electric bills, and beyond.

Clark has published nine books in total -- with 2002's Get Clark Smart and 2003's Clark's Big Book of Bargains both charting on The New York Times' "Best Sellers" list (No. 6 and No. 7, respectively). Clark's books are available through GetClarkSmart.com.

As an Atlanta native, Clark has always been very involved in improving his community. He started several civic programs, including Atlanta Volunteer Action, Volunteer Action, Inc., The Big Buddy Program and Career Action. With the help of his listeners, he has built 43 homes over 16 years throughout metro Atlanta for Habitat for Humanity.

In 1993, he opened the Consumer Action Center as an extension of his radio show to provide free off-air advice on consumer issues. The CAC is now staffed by more than 140 volunteers.

He's also a member of the Georgia State Defense Force. Clark joined after the terrorist attacks of 2001 to do his part in helping to prepare and assist our military. He attends monthly training workshops around the state as part of his service, and has performed medical evacuation work in New Orleans following Hurricane Katrina.

Check out his website here:

http://www.clarkhoward.com/

"Total Money Makeover" by Dave Ramsey

One of the best books I have ever read is "The Total Money Makeover" by radio host/author/financial guru Dave Ramsey. The guidelines he lays out are simple to figure out, but challenging to do. This is not a "get rich quick" book you see advertised at 3 am in a 30 minute infomercial. You do not need to be a CPA or an MBA to understand his tips on how to manage your personal finances more effectively. His credo is "Live like no one else, so that later you can live like no one else." This means that good decision making, and sacrifices made before retirement can lead to a retirement where you can thrive financially. His main piece of advice is to get rid of debt, whether it be an auto loan, student loans, credit card debt, medical bills, etc. Most need to borrow money for a mortgage, but he has stories in his book of some who made sacrifices to be able to pay for a house 100%. Certainly this is the rare exception, but some have done it. The main thing standing in the way of building wealth is debt. The average car payment in America is $378 per month. If this money was invested in a growth mutual fund earning 12%, which is the average return for long term investing over the history of the stock market, from age 25 to age 65, at retirement you would have over $4 million dollars! Dave says to pay off debt, starting with the smallest to the largest, then work on building an emergency fund. The starting goal for an emergency fund is $1,000. The ultimate goal for an emergency fund is to have it equal to 3 to 6 months of living expenses. That way if the car needs $500 worth of repairs or the furnace goes out and it is $400 to fix it, that can be paid from the emergency fund rather than on a credit card so that it can be paid in one lump sum with no interest. The emergency fund can be used for living expenses in case of a job loss, or for medical bills that come up, and the like. The emergency fund should be liquid, meaning it is easy to access without paying penalties. Those who are debt free with an adequate emergency fund can allocate more money to retirement investing than those who do not. In a nutshell, here are some tips from his book;

Stay away from rent to own places, it is not a good use of your money. You will pay $1000 for a $300 TV by the time you make the payments to own it.

Payday lending businesses are another bad use of your money. Their interest rates are incredibly high.

Do not buy a new car, the depreciation is too quick to be worth it.

Do not lease a car, buy one instead.

Go with term life insurance, the investment component in whole life is not worth it. It gets eaten up by fees and it is better to invest your money elsewhere.

Do not play the lottery, your chances of winning are miniscule.

Do not buy a trailer home. They do not last as long and the depreciation is high.

Debt consolidation services are no way to re-organize your finances.

Do not pre-pay for a funeral or college expenses.

Do not take out a home equity loan.

Invest 15% of your gross income in a growth mutual fund.

A Roth IRA is a good investment since it will grow tax free.

He stresses that money will not buy happiness and that the love of money is the root of all evil. Many have money as their god. Having adequate money gives one peace of mind and he says that money is good for three things--investing, having fun, and giving away. He says that giving it away can be especially enjoyable. Dave Ramsey is a Christian, and he is the author of "Financial Peace University" which is used by many churches to teach their congregations about how to manage finances wisely. He knows what it is like to struggle. He made millions in real estate in his 20s, managed it unwisely, and ended up broke. Anyone who wants to learn about how to handle money effectively should check out the books by Dave Ramsey.