Saturday, April 29, 2006

Canceling Cable Television

When we last left off, we were talking about saving money on utilities. As we've discovered, it takes some creative solutions because there's not a lot that can be done here. After all, you can't cancel your electricity. But you can cancel Cable TV...which is what I just did.

We had a bundle of services through our local cable TV provider: phone, high-speed Internet and Cable TV. There was some cost savings from using the bundle, but essentially bundles are a cleverly disguised way to sell you premium services. In our case, the cost of buying the basic services in our bundle would have been about the same as what we were paying. But, by putting it in a bundle we got call waiting, caller ID and 10 movie channels.

Before I made the decision to cancel, I priced a couple of other services from competitors and quickly found that this is NOT the easiest industry to deal with. The price for everything depends on what all you're buying. The more services you buy, the less each service costs...at least for a while. It seems like almost everything has an introductory price which jumps significantly after 1, 3, 6 or 12 months.

After a couple of days dealing with these hucksters, I decided to stay with the service I had...the devil you know is often better than the devil you don't. Besides, I've been generally happy with what I've got.

But I did cancel the Cable TV for a monthly savings of $58.85 once you take debt retirement into account. I kept the phone and high-speed Internet (can't live without either of those) and even ended up keeping call waiting and caller ID for the phone. It turns out that the two services were only an additional $2 per month since I paid for phone and Internet (that's one bundle I couldn't turn down). But, as the final insult to injury, the reduction in services was not reflected on my most recent bill and will be credited to the next one (which should be close to zero with the credit).

Our family has been without Cable for about two weeks now and I can't say we miss it much. In addition to the cost savings, we watch a lot less TV and read a lot more. Both good things in my book. My kids love Noggin, so for the week before we canceled Cable, we taped several days of programming.

Being without the Cable box has also led me to do some searching for online content. Some of my favorites are Christian music videos on JCTV, videos in the news from National Geographic, and the ABC World News Now podcast from TVTonic. I might have to put together and Internet TV post in order to encourage others to cancel cable and still be able to watch TV.

As for movies, we now get those from the public library. I can search their database of thousands of DVDs online, place a request for the title I want, indicate the library branch where I want to pick up the movie and they will call me when it's ready. Since it's a public library, I get it for one week and it doesn't cost me anything. They even let me know what's new each month.

So no, I don't miss cable TV...at least until the World Cup starts.

We set the phone and Internet bill set up on automatic payment through our new credit card, so add $0.45 for mailing costs, and our total monthly savings is $191.82 after going through about half of the line-items in our budget. Reflected anually, that is a savings of $2,301.84. I must say that I can see a big improvement in our cash-flow since I started this budget review process two months ago and I think it's going to get even better. Stay tuned for more.

Wednesday, April 19, 2006

Rich Dad = Real Estate Dad

So I went to the library, picked up Rich Dad, Poor Dad and read it over the weekend. I would have posted about it sooner, but work has been keeping me up late at night. Got a big project due Friday.

Anyway, Kiyosaki's basic message is that you need to be an owner have real financial security; you need to "Mind Your Own Business" (Lesson #3). He speaks of the need for people to gain financial knowledge, or as he refers to it, your financial IQ, and its made up of:

  • Accounting
  • Investing
  • Understanding Markets, and
  • the law

As for the skills needed to manage success, Kiyosaki writes that there are three:

  1. The management of cash flow
  2. The management of systems (including yourself and time with family)
  3. The managment of people

Kiyosaki closes the book with ten steps to get started acquiring wealth:

  1. I need a reason greater than reality
  2. I chose daily
  3. Choose friends carefully
  4. Master a formula and then learn a new one
  5. Pay yourself first
  6. Pay your brokers well
  7. Be an "indian giver"
  8. Assets buy luxuries
  9. The need for heroes
  10. Teach and you shall receive

It was an easy read and it motivates you to build your assets in a quest for financial security. While I was at the library, I also picked up a copy of Rich Dad Success Stories to read about what other people have done with the knowledge they learned from Kiyosaki. I'm almost half way through the book and I think all but one success story was about real estate. Therefore, from this day forward, I will call Rich Dad...Real Estate Dad. If you read his column regularly, like I do, you'll see that the most frequent topic is real estate.

Don't get me wrong. Real estate can clearly be a great investment. Dave Ramsey is also a big fan and it certainly seems to have worked for Kiyosaki. If you're looking for a motivational book about what buying real estate can do for you, this is a great series. However, if you're looking for an exploration of broader asset topics, you could probably do better.

I am taking Kiyosaki's advice and furthering my investor education. At my local library, they are having an Investor Education program. I'm going to give it a try. What do I have to lose?

Wednesday, April 12, 2006

Investor: Educate Thyself!

I was listening to the April 6 Jim Cramer's Radio podcast last night and he was bemoaning the lack of investor education in America. Cramer referenced a study unveiled at the Federal Reserve by the Merrill Lynch Foundation which showed that the nation's high school seniors don't know much about personal finance.

Of the students surveyed, only 14 percent said stocks were likely to have higher returns, just 23 percent realized that interest on savings accounts may be taxable and only 40 percent understood that they could lose their health insurance if their parents became jobless. And I thought I had a lot to learn about personal finance.

Well, for those who want investor education the Internet provides all kinds of places to get it. One of the latest ways I've come across is OpenCourseWare from the Massachusetts Institute of Technology. Any person can take a course for free (without credit) including courses from the Sloan School of Management, MIT's business school.

Trip, at MusingMoney is taking Investments 15.433 and I think I'm going to join him (many thanks for pointing this out). Maybe we should get a usergroup going so we can set up our own classes on this thing. Anyone else in? Let me know in the comments below.

Sunday, April 09, 2006

Saving Money on Utilities

When I last left off, our budget-cutting had netted us a monthly savings of $130.24, which translates into $1,562.88 in annual savings. Not bad, but we're just getting warmed up. Today, I'm going to look at the utilities portion of our budget, which would seem to be one of the hardest places in the budget to save money. Well, we're going to have to get creative.

First up is trash collection. I have received a few recent mailings from trash collectors advertising a significant discount for the first three months with no long term commitment. One could probably cut costs by switching a couple of times per year. For me, that is not an option.

The company I use is owned by a guy who went to high school with my brother (same school as me) and he does a great job. Case in point: I recently installed hardwood floors in my home and had a bunch of carpet to get rid of. One morning when he arrived to take the trash, I went out and asked him if he could take some of the trash. He took it all and saved me a trip to the dump. How can you leave a company after that? Besides, he's also cheaper than most of the others.

However, I did say we went to the same high school. Now we're onto something! That small, private school has a Tuition Reduction Program (TRIP) where businesses credit a percentage of your purchases of their products or services to a tuition account of your choosing. Turns out that my trash collector pays 9% so I signed up. Now, $1.38 per month and $16.59 per year is deposited in a tuition account for my kids. I hope to send them there some day and the tution is north of $4,000 per year, so every little bit helps. I'll be talking more about this opportunity with other bills.

Next is electricity. Nothing we can do here, right? Well, maybe there are some things we can do. My provider is Xcel Energy and their web site is full of resources and useful tips for how to save money on your electrical bill. They even have a handy PDF called: 60 Simple Ways To Save Money On Your Energy Bill.

One of the 60 tips is to install Compact Fluorescent light bulbs. According to ENERGY STAR, replacing a 100-watt incandescent with a 32-watt CFL can save you at least $30 in energy costs over the life of the bulb. If you pledge to change a light in your house, ENERGY STAR will send you a free gift. GE has more information about CFL bulbs, and some coupons, at GELighting.com. I'm going to give them a try.

The one easy way to save money (and time) with electricity (and most bills) is to set them up for automatic bill pay. The money we save on the stamp and the debt retirement is $0.45 per month or $5.39 annually. We're now at a monthly savings of $132.07 and an annual savings of $1,584.84 and we're not even half way through our budget.

I'll be talking about the other utilities soon.

Wednesday, April 05, 2006

What is my future success story?

I went to the local library today and checked out a copy of Rich Dad's Success Stories: Real Life Success Stories from Real Life People Who Followed the Rich Dad Lessons. I read the intro and the first success story tonight and I'm looking forward to digging in and seeing if I can learn something.

Rich Dad author Robert Kiyosaki has a CASHFLOW Quadrant (pictured here) that shows people the benefit of moving from employee or self-employed to a business owner or investor. That's what I'm talking about when I say that I want more passive income that's not connected to my employment. I don't want to work for the rest of my life. I'll keep you posted on the book.

Tuesday, April 04, 2006

New Rewards Credit Card

Following the information provided by the excellent MyMoneyBlog, I submitted an application for the Chase Cash Plus Rewards Visa Card. We've had our current MBNA World Points MasterCard for almost two years and it was time for an upgrade. We don't plan on spending as much money with our credit cards as we did in the past, but we'd like to maximize the return we get on what we do spend.

It's hard to beat 5% back on gas, groceries and pharmacies and 1% on everything else with no annual fee. Next, I'll need to change my automatic bills over to the new card once it arrives.

No flipping this time

Someone else bought the house. They offered 14 percent more than we were willing to pay. I guess I'll keep looking.

Monday, April 03, 2006

The Millionaire Next Door

I used my last free book from Audible.com to download The Millionaire Next Door by Thomas J. Stanley.

Stanley documents seven common denominators among those who succesfully built wealth. Here they are along with my assessment of how my family is doing on each factor:
1. They live well below their means. I think we're doing okay, but need to do better. We currently live on about 70 percent of my take home pay. The rest goes to investments and debt reduction. We're still looking for ways to cut our budget and increase our income.
2. They allocate their time, energy and money efficiently; in ways conducive to building wealth. This is something we don't do very well. That's part of the reason I started this blog is because I realize that we need to dedicate more of our resources to this.
3. They believe that financial independence is more important than displaying high social status. I drive a 1988 Toyota. Enough said.
4. Their parents did not provide economic out-patient care. My grand-parents paid for my college education and my parents are doing the same for my kids, but we don't depend on either of our parents for our economic survival.
5. Their adult children are economically self-sufficient. My eldest will turn four next month. The last thing I want for her is to be economically self-sufficient right now.
6. They are proficient in targeting market opportunities. I need to get better at this. I'm trying to start thinking like an entrepreneur and investor.
7. They chose the right occupation. I like what I'm doing, but the jury is still out on this one.

I'm about a third of the way through the book and thoroughly enjoying it. It's well worth the read...er, listen.

Funding my IRA

I went online today to check my Simple IRA that was set up through my employer and saw that my monthly contribution was deposited. What a good feeling to see my net worth increased by $323.04 (the fact that half of it came from me, pre-tax and half was from my employer made it even sweeter).

BTW, I also discovered that the PayPal Money Market dividend had been credited to my account. Their Money Market fund is currently paying 4.45% so it's tempting to put even more in that account.

Saturday, April 01, 2006

Should I Flip this House?

I took a look at a house today that I'm considering purchasing for a flip. Tonight, I'm sitting home watching Flip That House on TLC, watching all the things going wrong and wondering if I really want to do this.

This would be my first flip. I'm not going in blind. A friend and I have been working with a local realtor who has a lot of experience in working with house flippers, even having done some himself. We've been looking for a long time and waiting for the right house. We may have found it. I don't want to tip off any other local investors by posting information on the house, but if we do it, I'll give you the details.

It's not that I'm that interested in real estate. What I am interested in is increasing my income and I'll invest in anything that I think can help me do that.

Anyone out there have some advice for a first-time property flipper?