Issue time 10:18 am, by CTreit
Category:personal finance
Politics and Personal Finance
September 3rd, 2010Politics does not matter at all when it comes down to your immediate personal finances. Setting up a budget, paying off debt, saving money for retirement and other financial goals – all these tasks are our own responsibility, and it doesn’t much matter what politicians do in Washington or anywhere else. Sure, the tax code and other laws and edicts based on political decisions influence details of the way we handle some of our responsibilities, but they do not make the activities themselves happen. For example, the current tax code gives us an incentive to put our retirement savings into a 401k or into an IRA rather than into a regular brokerage account, but saving for retirement itself is still our responsibility. And I don’t need to tell you that there are a lot of folks out there under-prepared for retirement.
Politics do matter in the long run, though. Some politicians are more inclined to support the interests of corporations, others support the interests of labor unions, and others still favor yet another group or cause. Politicians’ support for various things is just one input that flows into the democratic process. This process affects all of us in one way or another. And that is exactly why it is important that every one of us participates in this democratic process.
Things are not quite that simple with politics though, since politics is not just about dollars and cents; it is also about “values” and about beliefs. That’s okay. In a perfect democracy everybody adds his and her two cents – pun intended – whether these two cents concern money, values, beliefs, or anything else. Not only should we celebrate this great system in which we live, but we should also take our responsibility seriously by participating in the democratic process as fully as we can. And we should be equally responsible about our personal finances.
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Issue time 11:43 am, by CTreit
Category:setting up a budget
Setting up a budget for time
August 31st, 2010There are two things that run out easily: time and money. You set up a budget so that you don’t run out of money, but most of us don’t set up a budget for time so that we don’t run out of time even though our days always seem to be too short. If time is indeed money, then it makes a lot of sense to budget time, too. But even if time cannot be easily translated into money, it’s probably worth it to budget our time. Each day we get to spend only 24 precious hours. We’d better be careful how we spend this time. Also, no matter how much money we have or make, each one of us has only those same 24 hours. It makes sense to time-budget, doesn’t it?
How do you set up a budget for time?
It is even simpler than setting up a budget for money. The maximum we can ever spend is, yes, 24 hours, so that’s our “income,” and it never goes up, or down. (Fellow geeks, take note: This outside boundary is not entirely valid if we subscribe to Einstein’s relativity theory.)
Budget time just like you’d budget money. Once we know the “income” we have to make choices about how to use it – here, we divide our limited hours among the different things we might do with them. First, look at the time that we must spend on certain activities. (In the realm of money-budgeting, this would be your fixed expenditures.) Most of us perform some sort of work either in a job or at home, and for most of us, having hours devoted to work is not optional. Some of us even spend time on getting to and from work – and although you may have flex time, you likely have to do some kind of commuting. And then we all must sleep. All these things that we must do without fail will take up a majority of our time, just like our fixed expenses in a money budget (like rent, transportation, household maintenance and utilities, personal maintenance and grooming) take up a significant portion of our income.
Let’s pause for a moment and let’s think how much time we have left over now. Work, commuting, sustaining ourselves (eating, grooming, etc.), and sleep can easily take up 20 hours each day. There is almost no way around it. That means we are left with a cool 4 hours a day that we can spend on “fun” stuff. This is just like the money we can spend on things we don’t need but that give us pleasure. It is not much, but it is better than having no time for fun at all. How do you fill these hours? What are your needs? What and who gets your time? TV, books, friends, family, sports, …?
Sit down and set up a budget for time. While you can’t do much about the hours you must spend on certain things like work, make sure that you fill the hours that are totally your own so that the time spent in these hours makes you feel good. These few hours that are your own are even more precious when you think about how few of them you have each day. You would not want to waste them now, would you?
How do you budget your time?
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Our post “Why Use a Retirement Planning Calculator?” was included in the Carnival of Personal Finance hosted by “Budgeting in the Fun Stuff” and our post “Save Money at Any Income Level” appeared in the Carnival of Money Stories hosted by Squirrelers.
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Issue time 8:03 am, by CTreit
Category:Retirement_Calculator
Why Use a Retirement Planning Calculator?
August 27th, 2010Personal finance is not a precise science. Not only is “finance” itself not precise, but “personal” is definitely anything but precise. Each one of us is just way too unique to allow anybody else to describe us accurately down to the last personal feature. Personal finance tools, therefore, just cannot be precise either.
A favorite personal finance tool is a retirement planning calculator. Such calculators can be very complicated or fairly simple. But no matter how complicated or simple they are, we must feed all kinds of numbers and assumptions into the calculator in order to get out of it some decent estimates. The numbers and assumptions are really the thing that drives a retirement calculator. If you put bad numbers into it, the result will be, of course, also bad, no matter how good the calculator is. On the other hand, a bad retirement calculator will also give you bad results no matter how good the numbers are that you feed into the calculator.
Still, as long as you are careful about the numbers and assumptions you put into a retirement calculator, using almost any calculator is better than using no calculator at all. After all, a retirement calculator is like a map in an ever-shifting landscape. You still want to use a map, but you got to adjust the route as you travel towards your destination. If you don’t use a map, there is a chance that you will never reach your destination; if you don’t use a retirement calculator, there is also a chance that you won’t be able to retire. But the better the map you use, the better the chance you have of more easily getting to your desired destination.
Unfortunately there is no good way to make sure that you on your own are either using a good enough calculator or good enough numbers and assumptions. You can guard against bad calculators and numbers by working with a qualified financial planner who has tested a few calculators and who also can help you feed realistic numbers into the calculator.
This post was inspired by a very good review of retirement calculators in general and the motley fool retirement calculator in particular at the Oblivious Investor blog.
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We are proud to let you know that two of our recent posts were included in a carnival.
“Save Money with 2 Rules to Negotiate for a Good Bargain” in the Festival of Frugality hosted by Frugal For Life.
Do renters really save money in the end? in the Carnival of Personal Finance hosted by Provident Plan.
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