The case for Letting Coffee go for your savings & investments

Photo Source from coffee.gotham

Coffee is actually very healthy. There are a bunch of research and studies about it. It is loaded with antioxidants and beneficial nutrients that can improve your health. The studies show that coffee drinkers have a much lower risk of several serious diseases. BUT, it's not as valuable as water wherein we really NEED it.

The Coffee industry is a big income generator around the world generating at least about $30 billion in annual revenue (in the US so that's just one country and that's not the only country that demands coffee).

Also, there is controversy that also plague this beloved drink, reports of toxicity stemming from dangerous growing methods and the roasting process; there’s also that addicting properties of caffeine, as well as the issue of acidity. But we will be talking about your personal spend on coffee.

So with that, I'M SO SORRY COFFEE LOVERS!!

Now that's out of the way, let’s have a sample computation:
-Php150.00 x 2 drinks a day - for a branded coffee
-That's Php2100.00 / week (or seven days)
-Php9,000.00 / month
-Php108,000.00 / year

Okay, that's a frap! A plain-ass coffee would cost around Php75.00 (still the lowest branded coffee)
-Php75.00
-Php2,250.00 / month
-Php27,000.00 / year

So, if you are earning Php27,000.00 per month then it’s safe to say that you are spending a month's-worth of your salary for that Php75.00 coffee per day. It might have been a million in 40, 20 or even 10 years if you have used it in investment or business.

Fine, that's over simplifying it but you still need savings (money set aside) for you to pay off your bills, health plan, insurance, emergency funds and then investments.

Wait, your thinking.. "I'm gonna buy 3 in one coffee instead!" that's fine; let's calculate:
3 in 1 sachet costs about Php8.00 and let's say one's consumption is at least twice a days since it's cheap right?
-Php16.00 per day
-Php480.00 per month
-Php5,760.00 a year

Well, you can justify all you want but that's still a potential savings of over Php5,000.00. This can be invested as a start in a pooled fund like a UITF or mutual funds or open an online stock market broker account to begin investing!

Come on, I know you can do it! Is coffee a need or a want? A medication? Who knows, but ultimately, you decide. Heck, ask a friend to treat you to coffee or just use company provided coffee instead! :)

The future is in your hands. For now, I'll settle bringing a water bottle and get enjoy my boring H2O!

Six Simple Steps to Saving Successfully SSS

1. Make it automatic

The best advice I can give you is to make your savings automatic.  Find a savings account that lets you set up automatic deposits.  You may think you'll be adamant and alert and remember to transfer your monthly contribution, and that it'll be a piece of cake...but don't waste your time.  The end of the month will come along, and most likely you'll have spent that money or decide to put it off until next month, because it's 'too much of a hassle right now.'  But really, even if you can save monthly you're better off setting up an automatic deposit, if simply just to save time.

2. Time it right 
Either take it out of your paycheck immediately or schedule it to transfer right after you get paid. Don't wait until the end of the month when you've had all 30/31 days to spend your hard earned cash on something else.  As I mentioned before, once it's close to the end of the month you'll be a lot less likely to transfer money to your savings.

3. Have a goal
You know what makes someone a good saver? Wanting something he/she can't get.  Vacations or concert tickets are a great start.  Figure out how much it will cost and start allocating a little bit every month.  By the time you go on that vacation, you won't need to worry about credit card debt, expensive meals for your girlfriend, or skipping out on that cool snorkeling expedition because the funds are running low.

4. Make it a habit
I would much rather you save $5 every month than $1000 once a year.  Why? It's about making saving a habit, a part of who you are. Not a one time, 'I got my tax refund!' kind of act (though there is absolutely nothing wrong with putting your tax refund into a savings account)... Studies show (don't worry, I've seen 'em) that people who learn to save a little every month or every paycheck start saving more.  Somehow you start to realize how easy it is and you start 'risking' more and all of a sudden you can afford a freaking boat! (FYI that would be an awesome goal)

5. Make it a budget item
If you have a budget, great, add savings as an expense.  That money is gone! Buh-Bye. Well until you take it out to fulfill your goal...

6. Spend it! 
Unless your goal is an emergency fund, allow yourself to spend it.  That's why you were frugal and saved in the first place.

You ready to do this?
Here are some resources that'll help you get started right away:

• Smarty Pig (Great for getting started because it forces you to set a goal and timeline) 
• ING Direct (I currently have an account with them, though I started it way back in 2005 when the interest rate was a whole lot higher)
• Get Rich Slowly Blog This blog has a great summary of different savings accounts with high interest rates

How to Help Yourself Save for the Rainy Days

Saving money today is not something that is a luxury. When life throws that little curve ball our way it usually costs money. If you don’t have that rainy day fund available you can risk incurring a lot of debt. Emergency funds are necessary to have as a fall back. They are the cushion you need financially if you get sick and can’t work or if you or your spouse loses a job. It’s a fund for car repairs or an emergency flight out of town. 

You don’t have to make a lot of money to save money. Don’t give up on an emergency fund and if you don’t have one, you need to start one now. There are a lot of ways you can save up some cash and put it somewhere it can grow. 

Below are some great ways to save for those rainy days. 

Long Distance 

If you make long distance phone calls now and again then you should probably drop the long distant carrier and use the minutes on your cell phone or get a prepaid phone card. Long distance phone calls can be very expensive and the carriers of long distance calls can be draining you of money. 

Cash 

Always try to use cash when paying for clothes, food, and other items. Try to not use your credit cards at all. Most people don’t end up paying off credit cards monthly and paying for some food that you ate four months ago leaves a bad taste in the mouth. Cash makes you much more aware of what you’re spending and people tend to spend less this way. 

Cell Phone Plan 

Look at your cell phone calling plan and think about changing your plan if you have added features that are costing you too much. If you use your cell phone for mostly personal calls, you probably could get rid of call waiting, surfing the internet, video, caller ID and other added features. You can save a pretty good bit of money by cutting out added features and lowering your cell phone plan if you are going over your minutes or being charged for things you can change. 

Health Plan 

If you are married and you and your spouse both work, comparing health care plans and going with the lower cost policy may save you lots of money. Compare the out of pocket expenses and what you pay for the benefits monthly. If one employer is cheaper and you’re not with that employer, switch up. 

Library

People spend about $400 a year on renting movies, about $500 on buying books and about $250 buying music CDs per year. Think about how much you can save if you get free books from the library. Most libraries also have movies and CDs that you can borrow as well. It’s a great way to reduce costs and be entertained free!

Saving for a rainy day really can come in handy when you don’t think it will. Having that spare few hundred dollars by cutting back on some small things can mean a big difference to you one day. Use some of the tips above and begin a small savings that can grow day by day. Be ready for your rainy day!

Embarking on a Savings Marathon

The next couple of months I'm embarking on a savings marathon. Why? Well for many reasons...vacations, a possible new business venture, higher ed...and as if all that's not enough Christmas is around the corner.  In about three months time we will all need a little extra cash to cover the holidays.

Before I embark on this new savings marathon I thought I'd take a deep dive into my current cash flow to see how flexible I can be/how easy it will be to save more.  Good thing I use mint.com - it takes all but a couple minutes to pull up a couple graphs and see my spending trends of the past couple months!  Here's what it looks like so far:

My total spending over the past 6 months

Spending fluctuations over the past 6 months

And what does all of this mean? Well let's start with the categories (Image #1).  The good thing is that only about 1/3 of my budget is fixed expenses (Housing and Bills).  My 'Food' category is taking up a large chunk of my budget, but well it's food and I kind of need it to survive, but I'll get back to that.  What I need to look into is my "other" category (quite large), my uncategorized category (which is skewed because one expense is really a reimbursement I had trouble categorizing correctly) and lastly my shopping category.  Looking at the spending over time (Image #2), I can definitely see the month of May standing out.  This is probably because I booked flights and hotels to Las Vegas and Seattle.  A more alarming trend is my spending going up over time (keep in mind this month isn't over yet).  I could attribute that to it being summer and there's just more stuff to do, but if I want to be serious about saving, I'll also need to focus on reversing the trend.

O.k. back to my 'Food' category. I broke down my food spending into more specific categories:

Spending on food broken down into different categories

With it broken down like this, I can see that my 'Restaurant' spending is a lot higher.  This is of course expected since going out to eat is more expensive than staying in...but again, this could be a source of savings! 

Spending on food by month

Lastly, my food spending by month.  April and June are standing out. Thinking back, all I can think of is that in April I was going through a stressful work situation and in June I traveled to a lot. Otherwise it looks like my spending is quite steady, which is good. I should be able to see swift changes, if/when I start focusing on this category. Next, I'll have to do this same breakdown for the other categories (like shopping) to inspect my spending trends and find places to save.  

Top 5 Reasons Why Every Parent Needs To Save

Children are a blessing, but what they are certainly not blessing is your bank account. Should you find yourself in a bit of a financial pinch, it can be considerably worse when you have children that are in dire need of specific things. This makes saving your money in the better financial times all that more important. 

Preparation

You cannot always account for everything that you need to spend money on, especially when it comes to having a child. It seems that all the time something new is requiring financial output from you. Whether its new shoes or lunch money, whether it would be new outfits or car insurance. It really just depends on the age of the children and what is going on in your life. Without savings, it can be hard to prepare for all of these inevitable needs. 

Rainy Day

The rainy day fund is something you should also have in the back of your mind. Considering the fact that we've determined children can be financially straining at times, it would be ill advised not to start putting money back in the event that something rather costly comes up. For example, something could happen to the family vehicle that needs to be immediately taken care of. 

Time Off

Whether it is for the birth of your first child, later children that come after the first, or just something that could pull you away from work, it is important to be prepared for the possibility of needing time off. Time away from work is time that is often unpaid. So apart from vacation days that are accrued in some cases, time apart from your job is nothing good financially. However, being able to utilize a bit of your savings until you are ready to head back to the workforce can prove invaluable. 

College

As commercials and better logic of the current financial climate would suggest, it is never too early to start thinking about college for your children. Savings are a great way to start putting aside your money for the day that they decide to leave the nest to pursue higher education and better paying job opportunities. While this can be costly, even with some financial aid from the school's resources, it doesn't have to be if you start saving earlier. 

A Great Example

Taking savings seriously is not something that a lot of families seem to exemplify these days. However, saving can be habitual and influential to your children. If they can model this behavior in their own lives, you can set a precedent of smarter financial decisions and money management for their futures. 

These are several of the reasons why parents should seriously consider saving. While it is just a smarter financial option, allowing yourself to be prepared for what might be coming, it is also a great example for your children and their future. Making these changes in your life right now could help you out of devastating financial hardships that could be on the horizon, and can potentially secure enrollment in a college or university once they have completed high school.

a little update on last year's retirement obsession

Almost a year ago now, I wrote a couple blog posts on retirement, because for some reason I was a little obsessed with it. Well I'm not that excited about it anymore.

Your retirement is FRAGILE! 

I did a lot of research and invested about $1750...now I have $1535, which is not that bad since we had a major downturn in the stock market about two months ago. But, still! I'm down $200...when I wanted to be making money. This really makes me question the whole system. I can't believe people rely on the this type of income to fund their retirement.  It seems absolutely crazy and risky.  Yet, it's the norm.

When I saw my account decrease I was sad, but I wasn't worried.  My retirement is many, many years away. This account is a good start, but if I loose most of my money I can always start from scratch again.  But, what about those individuals who are in their 50s. They only have a couple more years until they will need that money to live off of.  I cannot imagine what they are feeling watching the stock market crash the way it did this summer.

There's got to be a better way to save for retirement!

Social Security barely covers living expenses and it's complicated.  I tried calculating how much money I would get on their wesbite (http://www.ssa.gov/retire2/) and didn't get very far.

I say we bring pensions back for everybody! Why should government bureaucrats & public service people be the only ones who get them?

Giving Financial Advice - how do you make people listen?

So right now I'm all about encouraging people to save. At work I have this new advocacy project through my Equal Voices Fellowship in which I will be focusing on the goal of increasing the amount of money Marin county residents save.

Erupting Mind

Now as a side note, at our office we are always preaching about the importance of savings! There is this phenomenon called the cascade effect. It pretty much suggests that when you don't have a little bit of savings in the bank (and are living paycheck to paycheck) your life can easily take a downfall.  Say you have an unexpected car mechanic bill to pay. You don't have the savings for it, so you take it out on credit. Then you realize you can't pay your credit card. Then all of a sudden you can't cover basic expenses...and before you know it you're being evicted. - Cascade Effect - starts all because you couldn't cover that initial expense!

I wish I could say this argument was convincing enough to make people open savings accounts...but the 1st reaction you get is ... yea saving money is hard.... I need it!

So anyways, back to my project. My first action item is to start a Summer Savings Challenge. I have hashed out the details with my boss and made a flyer. Now all I have to do is advertise it!

What is the Summer Savings Challenge you may ask? Well it is a raffle designed to encourage people to save.  You get one raffle ticket/entry every time you make a deposit of a minimum of $5 (limit: one entry per day).

This goes on throughout the summer until August 31st. On September 6th we will hold the raffle! You can win up to $100!! There are actually 3 prizes to win: $25, $50, and $100.

What we are trying to do here is build people's "savings muscle" (so nicely worded by my colleague Ramona).  It is not the amount you save, but the commitment to save! Even if you can only commit to $1 now; you're still building your savings! It's just like when you start building real muscle. You may start with 1 pound, but after time your arm will get stronger and stronger and you may be able to increase the weight you lift.