Monthly Archives: October 2009

Taking My Daughter To The Bank To Open Her First Savings Account

I am so excited.

I am going to take my oldest daughter to the bank and help her open her first savings account!

She’s ten now, having recently celebrated her birthday, and she has some birthday-checks to cash.  One of our local banks offers a no-fee, no-minimum balance required savings account for children under 16.  This type of account will be perfect for my daughter.

Over the past few years, my wife and I have worked hard to teach our kids about saving, spending, and giving.  Last year, we introduced them to the wildly-successful Kids’ Fun Fun.

I want to incorporate trips to the bank into our regular weekly routine.  I want my daughter to be comfortable with the entire process – filling out the deposit slip, endorsing the check, talking to the teller – so that she will never feel “overwhelmed” by the banking experience.

In a few years, when she’s ready for a checking account, she’ll have some grasp of how personal money management works.  Hopefully, by the time she’s ready for college, she’ll be prepared and be able to avoid many of the financial missteps that others often make.

What about you?  How old were you when you or your parents opened your first savings account?  Have you opened one for your son or daughter?  I would love to read your comments.

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How A Silly Little Experiment Helped Me Get Out Of Debt

I once sent a credit card company $5 per day, every day, for a month.  Seriously.

The year was 2005 and I was in full on debt reduction mode.  Pumped up by the comments left by my readers – and ready to be debt free – I spent most of my waking-hours thinking about ways to reduce my debt.

Somehow, the thought struck me:  What if I manage to save $5 a day – say by skipping my morning trip to the convenience store or brown-bagging lunch – how quickly could I put that $5 to work?

I decided, just to see if it would work, to use online bill-pay to send a series of $5 payments to the credit card company.  I scheduled the payments, one right after the other, for each day of the month.  Every other day or so, I would check my credit card balance (online) and, sure enough, my balance was going down, $5 a day.

At the end of the month, I managed to reduce my credit card balance by an “extra” $150.  The silly little experiment worked!

Now, am I suggesting that anyone else do this?  Not really.  In fact, I’ve heard that some credit cards actually limit the number of payments that they’ll process during a billing period.  Nevertheless, I do think that my silly little experiment was valuable, in that it taught me the power of micro-payments.

I’ve mentioned micro-payments before – those small payments, sent throughout the month, which help to reduce the average daily balance in your account.  These payments are made after regular minimum payments and are in addition to the extra payment one might send while getting out of debt.

Not only did I learn the value of micro-payments, but I also learned that money management is about much more than just dollar signs, percentage points, and mathematical calculations.  Money management is about keeping your head in the game and staying focused on specific goals.  Each day, as I logged in to my checking account and scheduled another payment – that was one more day where I had successfully saved $5.  This $5 was above and beyond my regularly budgeted-for debt reduction payment.  This $5 required a change in my habits.

For thirty days, instead of focusing on the big-picture, I focused on the very, very small things.  If I wanted a soda, I had to remember the $5.  If I wanted a newspaper, I had to remember the $5.  If I wanted to rent a movie, I had to remember the $5.  This silly little experiment (which, in the end, wasn’t really all that sill), helped me learn the value of every dollar that comes in to my life.

If I had it to do all over again, here’s exactly what I would do – and it’s what I do when making micro-deposits to my savings account:

1.  I would set a goal of saving $5 each day.

2.  At the end of the week, I would send a micro-payment (or micro-deposit) of $35.

3.  A couple of days after sending the micro-payment, I would check my credit card balance, just for that emotional boost that comes with seeing my debt reduced.

The month after my silly little experiment, I went back to my standard practice of making my minimum payments to all accounts, making an extra payment to the first account on my debt snowball, and then I made four micro-payment throughout the month.

Micro-payments rock and they really kept me motivated. Have you used micro-payments?  If so, leave a comment and let us know about your experience!

One final note – All of these payments were initiated by me, using online bill-pay.  I never game the credit card company access to my checking account.  In other words, my bank was sending a payment to the credit card company.  The credit card company was not “pulling” money from my checking account.  And, obviously, this micro-payment thing probably won’t work if you are sending payments via paper check from your house.  The postage cost would be too high.

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Only Six Months Left To Make Year 2009 Contributions To Roth IRA Or Traditional IRA

My wife and I both have contributions to the retirement plans offered by our employers deducted from our paychecks.  In addition to those pre-tax retirement contributions, we also make monthly contributions to our Roth IRAs.

For me, the annual contribution limit to my Roth IRA is $5000.  (See IRS Publication 590 for complete information about contribution and income limits.)  My wife’s limit is the same.

The contribution time-table for both the Roth IRA and the Traditional IRA runs from January 1, 2009 until April 15, 2010.  That’s right.  We have until the tax-filing deadline of 2010 to make contributions to IRAs for 2009.

So, even if you haven’t made contributions for 2009, there’s still time.  We have six months to contribute as much as we can, up to our contribution limits.  Remember, once the deadline passes, we can’t go “back” and make contributions for the 2009 fiscal year. We’ll have to settle for making contributions for the 2010 fiscal year.

Between January 1 and April 15, there is an over-lap, and contributions can be made for both 2009 and 2010.  We indicate, using the memo line on our checks, the year for which we are making a contribution.

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Some Thoughts About Thinking

Isn’t it amazing how our thoughts work?  I’m sitting here, typing this article, and it’s October 7, 2009.  There’s a part of my brain that is occupied with next word I’m going to type.  There’s another part that’s focusing on an appointment that I have tomorrow – and yet another part that’s thinking about next year’s summer vacation.  Even if I tried, it would be impossible to control just how far out into the future my thoughts are capable of exploring.  I can, in a split second, imagine tomorrow’s breakfast, or, just as easily, the birth of my first great-grandchild, decades from now.  My brain has absolutely no trouble imagining or picturing either event, with the exact same clarity.

However, even though I can see both events – the breakfast and the birth of the grand-child – the thoughts about the breakfast are much more linear in nature.  In other words, while I can picture both events in my mind, the paths to each event are imagined in very different ways.

For instance, I know that I will be at home tomorrow and that my breakfast choices will be limited to the foods that are already in my house.  I’m not really a big fan of cooking, so I’ll probably skip the eggs or the oatmeal.  I am, however, on a bit of a health kick this month, so I will not be having pop-tarts or doughnuts.  Let’s see.  That leaves a nice juicy apple and a handful of almonds.  Yes, that’s what I’ll have for breakfast tomorrow.

Did you see how that works?  Very quickly, I was able to narrow down my choices and make a decision about tomorrow’s breakfast.  For all intents and purposes, the decision about tomorrow’s breakfast has been made.  Freed from making that decision, my brain is now free to think about other things.

Let’s consider the birth of my great-grandchild.  Instead of the simple. linear approach that my brain took to figure out tomorrow’s breakfast, it’s now considering a nearly infinite number of scenarios that might lead to me actually holding a newborn great-grandchild at some point in the distant future.

My goal, honestly, is to free my brain up so that it can spend as much time as possible thinking about and planning for the future.  Before it can do that, however, I have to be sure that I’ve taken care certain short-term goals – like preparing breakfast – so that I can then begin to think about long-term dreams – like seeing that great-grandchild.

There are certain times when it is important to focus on short-term, linear goals. Extremely important.  I would never have gotten out of debt if I had spent my time reading books about investing or dreaming up scenarios for how to purchase a newer car.  My thoughts would have been all over the place.  I would never have settled on a specific plan.  I would still be exactly where I was five years ago.  Broke.

Compare that laser-like focus with where I am today.  Debt free with an established emergency fund, I am able to consider a whole world of opportunities.  The difference between where I am, mentally and emotionally, and where I was five years ago – it’s like night and day.

For a short period of time, I had to stop all of the mental-chatter and focus, focus, focus.  Taking the time to get out of debt was the smartest thing I have ever done for myself.  Taking the time to build an emergency fund was the second smartest thing.  I spent two years on those goals and now, I am in a very good position to think about – and dream about- the rest of my life.  Now, my thoughts are free to wander down a thousand different paths and my plans can be bigger than ever!

I would love to hear from you, my awesome readers.  Where are you right now?  Are you focused, like a laser, on the short-term?  Or, are you moving into a place where you are ready to think long-term?  Have you managed to do both?  Comments are more than welcome.

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