Money Walks

The typical “American Dream” is owning your own home, however, if you’re not able to swing it financially, it could end up being your worst nightmare. Some questions, you might want to ask yourself :

• How much are you gonna save up for a down payment and closing costs?
• How do you know how high a mortgage you will qualify for?
• How much can you really afford based on your lifestyle?
• How much will you really save in taxes?

The key point here is home ownership is not for everyone and there is nothing wrong with that. If your lifestyle requires you to change jobs often and move or get transferred every year or so then it makes perfect sense not to buy. Typically, it takes 4-6 years to recoup the money you pay in up-front costs and the cost and fees.

You may also be happier renting if you’re not comfortable with performing your own repairs and maintenance and you can’t afford to hire someone else to do it for you. There are plenty of people who enjoys the benefits from living in apartments, benefits such as like swimming pools, recreational features and the flexibility of being able to move without too much trouble. You want to think about whats important to you, there is nothing wrong with renting if it suits your lifestyle.

For those who do want to own a home, you want to make sure to avoid being house poor. You don’t want to put your self in a situation where you have such high house payments that your a prisoner to your own house and cant afford much of anything else. You may think at first that buying your dream house is worth the sacrifice but years of doing without the enjoyment of vacations, new furniture, new cars, eating out and just other simple life pleasures can make your dream house into your worst nightmare. Becoming house poor can also affect your relationship with your spouse or partner.

The general rule of thumb you want to stick to is to buy a house that costs less than two and a half times your income. For example, if you and your spouse make $100,000 together, then you want to try to keep your home price under $250,000.

Raise your hand if you think saving is a good idea? Now out of everyone who raised their hand, keep your hand up if you actually save. Here is where almost everyones hands go down.

When you ask anyone to save a certain amount of their pay check, they will most likely agree that it is a great idea but they claim they can’t because they’re already pushing their limit within their budget. To save money from your current income will mean reducing your standard of living and that may be moving into a smaller place, not driving a fancy car, eating cheaper foods, or not able to enjoy your daily morning Starbucks. But because peoples lifestyles are all built on habits, even if they can agree that saving may be a great idea, the actual thought of reducing ones lifestyle is so unacceptable that they are not able to discipline themselves to take the first step.

Believe it or not, saving has always been a part of your life. When we were all growing up, we were given allowances and also were encouraged to save our money. Back then, we looked upon money as a tool to buy happiness whether it be in forms of toys, candy, ice cream, or cookies. Therefore as a result, we also naturally begin to look upon saving a way of punishment, which means depriving ourselves from the toys, candy, etc. At an early age, people begin to associate savings with pain, sacrifice, loss of pleasure, satisfaction and happiness. Now as adults, this habit is manifested in our desire to want to spend money as soon as we receive our checks.

Well instead of telling you how you can overcome this habit or cutting back on your current lifestyle, heres a different route. From this day forward, you need to save 75% of every increase in pay you receive from work.

How does this work?

This is something that you can do because it does not require you to lower your current standard of living, in other words, you don’t yet have the money built into your daily lifestyle. It is easier for people to commit to saving money that they don’t have than for people to agree on saving by cutting down on their current lifestyle. In order to become wealthy, you need to develop these habits.

So starting today, commit to save at least 75% of future raises in income. The earlier you start, and the rate at which your income grows, saving 75% of your future increases in years to come will allow you to acquire an enormous amount of money. Developing this habit will eventually make you financially independent.

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We all know that gas is expensive and we also know most of the basic tips/tricks thats out there to save money on gas. Things like:

• Taking off slowly from stops
• Keeping your tires inflated at its recommend pressure
• Changing your air filters from time to time
• and driving at a consistent speed

are all good tips but it wasn’t enough for me. I still wanted to know more. A while back a good friend of mine told me that premium gas gets you better gas millage. He said that although it costs a little more, in the end he gets 80-90 miles more than using premium and it out weights the cost. So just out of curiosity, I did the math just to see what he was talking about.

If premium is running at $2.99 and his tank fills up at 12 gallons, then it would cost him $35.88 to fill his tank. If regular is going at $2.69 per gallon, a full tank would cost him $32.28. So it only costs him $3.60 to go from regular to premium and getting an additional 80-90 miles. I was thinking, wow thats awesome. I need to start buying premium! At this point I was really excited.

So I decided to give it a try. My car usually gets somewhere around 350-375 miles per tank(I drive mostly highway) using regular. After a month of using premium, which is about 4 full tanks, I was done with my experiment. I have to say I was quite disappointed, my car did not have any effect what so ever using premium. I was still getting my usual 350-375 miles each time before having to fill up.

I told my friend about my little experiment and how it had no effect on my car going from regular to premium. We were both puzzled at first but then we came to the conclusion that maybe it was because he was driving an older car. He drives the same make and model as me but 11 years older(1992 Honda Civic).

Although my experiment didn’t necessary help me any, I thought I share it with my readers. If you drive an older vehicle and want to do a little experiment go for it, it only costs you about 4 bucks to see if you can possibly get an extra 80-90 miles in your car. I think its definitely worth trying. Even if you drive a newer vehicle, still doesn’t hurt to give it a try. Go ahead and try it the next time you go to the gas station and let me know how it goes. You can email me your results at moneywalks(at)gmail(dot)com, I’d love to hear your story. Also make sure before you try this that your car can take premium, I’ve ran into some cars that can only take regular.

Happy driving

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Remember that you cannot deduct expenses that are for personal purposes, but you can deduct travel expenses that are the ordinary and necessary expenses of traveling away from home for your business or job.You may also deduct travel expenses, including meals and lodging, you had in looking for a new job in your present trade or business. You may not deduct these expenses if you had them while looking for work in a new trade or business or while looking for work for the first time. If you are unemployed and there is a substantial break between the time of your past work and your looking for new work, you may not deduct these expenses, even if the new work is in the same trade or business as your previous work.

With that being said, here are some tips to maximize tax deductions for travel:

• Do not prorate travel costs of getting to and from your business destination.
• Allocate travel expenses between business and non-business. Prorate your business and non-business expenses to identify the business expenses that are tax-deductible.
• Deduct costs associated with travel outside the United States. If you did not want to spend your entire time on business, you can still deduct the entire cost of your travel outside the United States.
• Deduct travel expenses for another individual. Yes, you can deduct the travel expenses for another individual who travels with you as long as its a business trip and he/she is an employee of your business.
• Deduct the cost of travel associated with your attending a business convention. You can deduct your travel expenses when you attend a convention as long as you can show that your attendance benefits your business.
• Deduct up to $2,000 each year for attending cruise ship conventions that are directly related to your business. As long as you meet the following conditions: The ship must be registered in the US, All ports must be in the US, You must submit two supporting statements with your tax return, and you must spend at least 51 percent of your time attending the seminar.
• Qualify a day as a business day. You can do this if your primary activity was business. A good rule of thumb is that your business activity be at least four hours in length during normal working hours.

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I have a friend who has been keeping his receipts for as long as I can remember. I guess you can say that he’s a receipt freak. He keeps them to enter into his money tracking system to keep track of his budget.

This is all very understandable and some what commendable for being so organized but I asked him, “why not just use your debt card like I do and keep track of your spending that way”. He replied ” because I like paper and I like to organize them!”

Apparently, he keep them filed away in a very organized folder on a monthly basis. I was amazed.

What did I learn? I guess there are people who just likes to keep their receipts and hold on to them.

So for all you receipt lovers out there, here are some tips I want to share with you on proper receipts handling skills:

1. Establish a simple routine for dealing with your receipts as soon as it comes into your hands and stay consistent. You can for example leave a space in your wallet or purse just for receipts and every time you purchase something. When you get back home, immediately put the receipts into an organized folder. This way, you don’t have to think about where you put your receipt and don’t have to waste time looking for them.
2. As soon as you receive your receipt, look for missing or faded information and fill in that spot immediately. There’s nothing more frustrating then trying to read the receipts’ date or price long after the fact when you’ve finally gotten around to putting into your data entry.
3. For those of you who likes to fold your receipts, fold it so that the printed side is uppermost. This way, it will be easier to find the receipt if you ever have to look for it. When you fold a receipt so that the printed side is hidden, all receipts look alike and you’ll have to unfold them all to find what you’re looking for.
4. Don’t let the data entry pile up. It’s a good habit to schedule a time every week to do the necessary data entry and make sure to stick to that schedule. If you don’t, you’ll find your self just putting it off and your piles of receipts will become even more ugly.

I hope these tips can help you out some way or another. Keeping track of your receipts is really nice and handy, but the trick is to being able to keep them organized. Good luck, I think I’ll stay with the online statements

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Yes, I’m really excited to announce that I have completely paid off my credit card as of this past weekend. I have wrote many posts about my credit card situation and it has been an ultimate goal for a while now. I am finally glad to announce that my long journey has finally reached an end.

For those who do not know, I originally had a credit card debt of about $9,000.00 as of last year May. Over this past year I have been trying really hard to fight temptation to not buy anything that I don’t need and only worrying about paying off this debt.

So now that it’s finally paid off, what’s my next goal? What am I now going to do since my debt has finally been paid off? It’s simple. Save, save and save. Invest, invest, and invest. That is going to be my next goal. Over this past year, paying off my debt has definitely been a great learning experience and through the process I’ve learned to budget effectively and to live frugally.

Now my main goal is to save up for my down payment for my first home. I plan on purchasing my first home in about 3-4 years from now, so I have plenty of time to start saving. I live in Maryland and houses here are quite expensive. If I want to save for a 20% down payment, I’m going to need about $70,000. That’s going to be my next 4 year goal.

Having this credit card debt paid off has relieved a lot of stress off my back and now I’m ready to continue my financial journey.

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