Capital Allocation

Money Tree

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

I feel like I am entering a new phase financially.  I am looking at aspects of my financial life that I had not contemplated previously.  I have to say that I like it.  As I have stated recently, I am feeling more secure financially than I have ever felt.  What this has meant is that I am beginning to think more in terms of where to save my money and less about can I save money.  Now that the cushion is sufficient, I want my money working as hard for me, as I worked for it.

The Current

The cushion, as I like to call it, is divided between two accounts, my Vanguard brokerage account and my Capital One 360 savings account.  The savings account is where all of our savings go and I use a spreadsheet to keep track of the various things for which we allocate money.  For example, we set aside money for property taxes, gifts, car repairs, and the emergency fund.  The Vanguard account is strictly emergency savings.  

I started the two account approach about 3 years ago as a way to make it harder for me to access the money.  When I first started trying to save for the rainy days, I found it too easy to dip into the savings account.  The lack of discipline is what got us into trouble in the first place.  So, the brokerage was my way of making it harder to access the money.  Instead of simply transferring the money from savings into the checking account, I would first have to sell some securities, wait for the trade to settle, and then transfer the money to the checking account. 

Since the process would take more than a week, it gave me enough time to really think if the transfer was necessary.  I have only tapped the Vanguard once since I opened it, when we bought our house 3 years ago.  In the Vanguard account, we have about $5,600 and in the emergency category in Capital One, there is about $8,200. 

I know what you are thinking, that’s not a big enough reserve. 

I agree.  My goal is to have about $30,000 dedicated to emergency savings.  While I do not have that amount in the emergency bucket, I have other buckets that I could access in the event of an emergency.  For example, I have mentioned that we are saving for a Disney vacation in about 4 years.  Right now, there is about $5,000 in that category.  If I lost my job tomorrow, that $5,000 would become available to use.  So, without going into all the other buckets, there is probably another $13,500 available.

My Plan

I feel like I would like to have the cash portion of the emergency fund at $10,000.  So, I will add some portion of my bonus every year to it until it is at that level.  I figure it should only take a couple of years to get there.  Then I would like to have the Vanguard account make up the rest.  I plan on contributing to it on a regular basis and maybe even more so in the future.  I am sending $75 a month to the account now or $900 a year. 

At a minimum I would like that number to be $1,000 a year.  Depending on what, if any, salary increase I receive next year, it could happen then.  From then on, I would likely throw a little bit of the bonus at it every year as well, just to get to the finish line as quickly as possible.  My strategy is a result of the interest rate I am currently earning.  At 0.75%, any interest I earn is an after-thought.  As I said, I want my money to work as hard as I do.  I have the money invested in 4 different Vanguard ETFs to balance my portfolio.  The hope is never to need this money and maybe I can even use it in retirement.  I’m just glad that after digging out of the hole, I get to admire the grass.

Throwing Away Money

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

I came across an article recently in the Wall Street Journal.  It was written as a tongue-in-cheek way on how to throw away a fortune.  It is written to show you how you might be spending or throwing away money by accident.  The author listed seven ways to throw your fortune away.  I was curious as to how many of these I was guilty of in the past, and whether I was actually still doing any of them today.

Delay Saving

Yes, I was guilty of this in the past.  It was one on the reasons I was in a financial hole to begin with.  My retirement savings did not begin in earnest until late 2007, when I was 32.  Now, I contribute 7% to my 401k, with my employer kicking in an additional 8%.  This year, I also began fully funding an HSA.  These steps, along with additional savings and paying down debts has allowed my net worth to go from negative to over $120,000 in about 7 years.

Shun Retirement Accounts

I can’t say I was guilty of this in the past or the present.  In the past, there virtually was no savings, so there wasn’t anything to put in a tax-advantaged account.  Today, I fully take advantage of the retirement accounts that I can.  With my 401k, 1% of my contribution goes into the Roth 401k option that is available to me.  Since I don’t know what taxes will look like in the future, it is my way of diversifying my tax position.

Forfeit the Employer Match

Yup, I was guilty again on this in the past.  It wasn’t so much that I didn’t get the match; it was that I didn’t leave the money in the account.  I pulled all of it out at one point in time and paid the tax penalty for doing it.  It was the right move at the time, but by doing so, I did forfeit the match that I had earned.  Today, I make sure I get every dollar for which I am entitled.

Buy Active Mutual Funds

I was guilty of this in probably a couple of ways.  The first being my 401k when I first opened it up years ago.  I was not as diligent as I am today at making sure my expenses are at a minimum.  I had probably picked whatever fund looked like it had a great return, with little thought to expenses or asset allocation.  Today, my 401k funds are all index funds with low expense ratios.  I have come to believe that market returns are good enough for me and that I don’t have to strive to try and beat the market.  I was also guilty of this in another way, trading costs.  When I first began investing outside of my 401k, I was guilty of paying trading fees.  Not knowing any better, I was paying for every trade I did and thus cutting the amount I had available to invest.  Since then, I have been investing with Vanguard for free.  The fund fees are miniscule since I invest in index ETF’s.  Thus, more of my money goes towards investing and growing my net worth.

Carry a Credit-Card Balance

Again, I was guilty of this in the past.  This was the hole that I was in.  I probably had $30K on credit cards at one point.  I tried to minimize as much as I could any interest I had to pay, but I still paid.  Today, I don’t carry a balance.  I still use credit cards, but they are always paid in full when due.  I haven’t carried a balance for at least 3 or 4 years, I’ve lost track of exactly when they were paid off.

Get a New Car Every 3 Years

This one I can claim not-guilty.  I haven’t bought cars that often, mainly because I knew I could not afford that large a purchase.  My current car has about 157,000 miles on it and I hope to get another 30,000 miles out of it.  I haven’t decided yet whether I will go brand new or slightly used when I buy the next one.  I’m still on the fence on that one.  I have typically gone the brand new route in the past, but my views on things have evolved over time.  I’m not sure that’s exactly where I want to be spending my money.

Remodel Your Home

I am definitely not guilty on this one.  I have never done anything to a home simply for the resale value.  When I first bought a condo years ago, I had new floors installed, but that was because I didn’t like the old floors.  I kept in mind what would appeal to buyers in general with my choices, but it was not done simply for the resale value.  In my current house, any remodel that is done will be done because that’s the change that I want.  I plan on being in the house for 30 years; I am not concerned about the resale value just yet.

Progress Made

It’s good to see that I am not guilty of these practices anymore.  I’d like to think I have learned quite a lot about how to manage my finances over the last 10 years.  I am always on the lookout for new things to help me or new ways to save money.  How about you, how many things were you guilty of?


Money Tree

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

I am a pretty laid back guy.  I tend to not get overly stressed or worry about things in general.  So, when I saw the headlines recently about the data breach at Home Depot stores, I mainly shrugged it off.  Yes, I had used one of my credit cards there during the time they were hacked.  So, in theory my account information may have been compromised.  The best reaction I can muster is a yawn.  Why am I not more concerned?  There are several ways in which I am protected, some of which I had already been doing already and one that is new since the breach was reported.

Daily Routine

It is not quite every day, but at least every work day, I spend five minutes and log-in to my accounts to check the activity.  This routine serves two purposes.  The first is used for my budget tracking; I record any new activity into my spreadsheet.  The second purpose is early fraud detection.  Any activity that I don’t recognize, I can instantly report it and hopefully limit any damage.  I have been keeping an eye on the card that may have been breached and have not noticed any unusual activity.  My card company has also informed me that they also are monitoring my card for any suspicious activity.

Credit Score

One of the perks of my Discover It card is that it shows me my FICO credit score every month.  So, I have the history of the last few months to see if there have been any changes.  Since I know that I haven’t been applying for any new lines or credit or credit cards, my score should remain more or less then same.  As it turns out, it has risen in the last couple of months. 

Credit Report

My next line of defense is my actual credit report.  You can check your report from the 3 main credit bureaus once per year.  I do check them one per year, but I do not check all 3 at the same time.  This was a trick that I learned from Crystal a few years back.  I check one of the bureaus every four months.  Then I wait a year and check them again.  By only checking one bureau’s report at a time, I am only four months away from checking my report at a time.  Granted, not every credit institution reports to all three bureaus, but I am much more likely to spot something sooner with a check every four months as opposed to every twelve months.

Credit Card versus Debit Card

Since it was my credit card that was potentially breached and not my debit card, there is some built in security.  With the credit card agreement, I am not responsible for fraudulent charges as long as they are reported in a timely manner.  With both myself and the company on the lookout for suspicious charges, I think we have this one covered.  The hackers also do not have access to my bank account.  With a debit card, they could potentially drain the checking account associated with it.  This is one of the reasons I prefer a credit card to a debit card.

Credit Monitoring

This is the one security measure that I started after the breach.  Mind you, I am not paying for it, it was offered to me by The Home Depot.  They offered to pay for one-year of service because of the breach.  I did really think I needed the extra protection, but at no cost to me, why not take the insurance.  The service will alert me any time a new account is opened and they have personnel to help repair any damage done to my credit history.

Status Quo

At the end of the day, the breach means very little to me because of the steps that I have already taken.  The only real change is I receive a monthly e-mail from the monitoring firm announcing that nothing has happened.  If you don’t check your credit report at least once per year, you need to start.  Since I have created an excellent credit history, I want to keep it that way.

Open Enrollment, Take 2

Money Tree

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

Once again, it’s Open Enrollment time for my employee benefits.  As I discussed last year, there were some pretty big changes to my choices.  This year will be no different, but I am happy about the changes.  Naturally, there were calculations involved and of course I’ll share.  The changes are only occurring with the health insurance options, so thankfully there was only one moving part to worry about.

Current Plan

This was the first year of being enrolled in a high-deductible health insurance plan (HDHP) with a corresponding health-care savings account (HSA).  I personally did not feel like the deductible ($2,500) was all that high.  I was rethinking that slightly after the first month, but things settled down for the most part.  I also knew that we would hit the deductible without question given my son’s condition.  His annual check-up with his cardiologist is about $2,500.  Still, the premium was a reasonable $184 a paycheck or $368 a month.

New Choices

This year, the company is essentially moving everyone into a HDHP.  We have 4 choices, 3 HDHP and one preferred-provider organization (PPO) option.  The PPO was far and away the most expensive and one that I did not even consider. 

The 3 HDHP’s all have different deductible options and different co-insurance provisions.  For my family, we have the choice of a $3,000, $5,000 or $7,000 deductible with a 10% co-insurance for the $3,000 deductible or 20% for latter two.  To throw one more variable into the mix, the company would contribute $800 towards your HSA for the $3,000 and the $5,000 deductible options, but nothing for the $7,000 option.  Got all that? 

The premiums for the 3 options ranged from $156 a month to $404 a month.  So, which one is right for me?

Evaluating the Options

This is something that I love to do, figuring out which is the best choice for me because I love working with numbers.  In the end, I will either be paying my medical costs in premiums or directly via claims.  So, the first thing I did was to make sure my claims information is up-to-date.  Yes, I keep track of my claims; that started with my son and trying to make sure all the bills had been paid.  Now, I can use that information to actually keep track of my medical costs, so that in situations like this and know what numbers to use. 

The gross medical costs for this year were about $12,000.  If I just used that number, then the $3,000 deductible option (called the Value option) with the highest monthly premium was the appropriate choice.  When I thought about it some more, I began to question whether I should use all of the claims we had this year.  Specifically, my son had hernia surgery this year, and that represented about half of our total claims for the year. 

Now, the choices look much different.  The best option is between the $5,000 deductible (Standard) or the $7,000 (Basic).  I also remembered that my daughter had some vision therapy in the first half of this year that would not be repeated next year.  Removing those claims brought the total down again by about a $1,000.  My anticipated expenses for a year were actually closer to $5,000. 

This means the Basic option is actually the most cost effective choice.  I will be paying for virtually all of my medical expenses with only major events triggering the insurance to kick in.  My premiums are going to drop from $384 a month down to $156 a month while still fully funding the HSA.

Taking on More Risk

By selecting the Basic option, I am basically accepting more risk for lower premiums.  This is a trade-off that I am more than willing to make.  Since my financial position is more secure and stable, I can accept more risk.  Should costs end up higher than anticipated; I have the money in the HSA and also my emergency fund should we approach the out-of-pocket maximum. 

Do you have any changes for your benefit options this year?

Five Tips to Get Your Master’s Degree Without Incurring Student Loans


Just when you thought you finally had your undergraduate student loans under control, the idea of graduate studies enters your mind. Advanced degrees certainly aren’t cheap, and borrowing money often becomes a necessity. According to data from New America, in 2012, 58.6 percent of students who completed a master’s or professional degree program borrowed money, some doing so in amounts upwards of $41,000. However, there are alternatives to borrowing. Here are five tips for earning your degree without incurring significant student loans.

1. Validate the Value of That Degree


Image via Flickr by j.o.h.n. walker

Some people make the mistake of going to graduate school without really thinking about the type of job they’re aiming to acquire when their studies conclude. Carefully consider the value of the program and your return on investment. For example, professionals with master’s in health informatics degrees are in demand now as healthcare facilities work to meet a 2015 deadline to implement Electronic Health Records (EHRs) in their practices.

Many common courses of study offer some or all of their classes online, so you can save money while working toward a degree that will lead to an in-demand job. Choosing a practical major makes for a win-win situation.

2. Save With State Universities

State universities sometimes get overlooked when it comes to quality of education. However, state schools are among the top-rated schools for higher education. Reasonable tuition rates are one top advantage over private schools. Bonus tip: In-state residents can receive additional savings based on residency status; explore your options close to home.

3. Make It Work

Going to graduate school can certainly consume significant amounts of time. If you’re trying to avoid loans to finance your education, make sure you have a job — or two — to put money in the bank while you’re taking classes. Don’t take a gamble on your future by banking on a coveted, high-paying job after graduation. The more money you make and save while you’re in school, the easier it will be to pay for your education without taking out loans.

4. Consider How Marital Status Might Affect Grad School Plans

Married couples with one or both spouses in graduate school will almost certainly see a significant change in their budget. Since each graduate program has different requirements and different demands on a student’s time, a spouse may need to quit a job to accommodate program demands or may need to change from full-time to part-time student status to keep a job while going to school. Couples need to engage in plenty of discussion before they make school commitments.

5. Toot Your Horn for Tuition Remission

If you are employed and plan to begin a graduate program for professional career development purposes, check your employee handbook or ask your human resources officer for details about tuition remission. If you’re looking for a job while you’re in school, inquire about opportunities on campus. Some colleges offer tuition remission as an employee benefit!

Earning a master’s degree shouldn’t put you in debt. Keeping these tips in mind can help you make the most of your studies and your finances.

Before You Say I Do: Understand the Full Scope of Your Finances

Push Yourself

You’re finally engaged, which is a joyous occasion to celebrate, but be honest… can you afford it? Not the wedding ceremony and honeymoon…. But the financial responsibilities that will ensue after you’ve tied the knot. Whether you’ve gone through premarital counseling or not, chances are, you have barely touched on your finances.

Why talk about money? You don’t care what his/her salary is. As long as you can pay the bills, who cares? You’re in love. You’ll make it. You’re not into materialistic things… While those are all great and common reasons not to touch on the financial aspect of your life, once you’re united together as one, it can become a bigger issue than you thought.

My Debt + Your Debt = Our Debt

For X amount of years, the two of you have been managing your own money (or lack thereof) and accumulating your own debts. As you join hands in marriage, what was once one person’s responsibility becomes joint responsibility. Student loans, credit card debt, medical bills, and whatever else you have lingering on your credit history will ultimately affect you both in a major way. It can affect your ability to get a home, finance a car, or even open a new credit account…. So why not safeguard your marriage and get more informed about your current financial status ?

Seek Financial Advice before Tying the Knot

There are plenty of financial institutions and professionals out there that can help you and your significant other to clean up your debt and prepare for marriage. The main objectives prior to going into marriage as it pertains to finances should be:

·  Gain insights on negative spending habits

·  Learn how to tie up loose ends (as it pertains to financial accounts)

·  Learn to budget and manage money as a couple

·  Learn new avenues and methods for investing

Each of these tools is essential to strengthening your marriage, and preventing financial arguments from occurring down the road. By working with financial service providers, you two will get the full understanding of working together in a very challenging part of any relationship – finances. Having this vital knowledge then prepares you for everything from saving up for a vacation to applying for a new car loan.

Locating Financial Services You Can Trust

If you’ve decided that you are going to look into financial services, trust is important. You’re going to be opening up to an individual about very personal details of your life and therefore need someone that will handle those personal details with care. Ideally, you want to work with a company or professional that not only has the experience in the areas you need assistance in, but someone that you can trust to handle, assess, or even make recommendations as it pertains to your finances.

Consumer Opinions Matter

In order to determine the trust within the financial sector, you will want to check out what other consumers have to say about them. This might include searching for reviews on a particular company online, or even reviewing what consumers have to say on their social media pages. For example, if you were looking for credit repair services and were referred to a legal firm, you might first check Lexington Law reviews for credit repair services to see if consumers were in favor of or against the company prior to doing business with them.

After locating the various financial service providers you need (i.e. financial advisor, debt relief services or credit repair services), you will need to set up appointments to begin getting your finances in order. Within a few months of diligence and guidance, you two should be a lot closer to working together as a team.

After completing the above recommendations you and your spouse to be will have the necessary tools to begin your lives together. It might seem like a lot of work before getting married, and may even require a few meetings with various financial service providers. However, at the end of the day, what matters most is making sure that you’re ready for marriage…Not just emotionally, but financially as well. A marriage is like a partnership, and just as you wouldn’t want to go into business with someone who isn’t financially conscious or responsible, you shouldn’t want to marry into it either.


Benefits of Good POS Software


Reliable point-of-sale (POS) software is crucial for any retail business owner. The last thing you want to see in your store is a long queue of customers who are waiting in line impatiently to pay for their purchases because it takes your staff a lot of time to manually process a sale. Aside from processing orders and payments quickly, good POS software will allow merchants to do a lot more such as track and record sales, monitor inventory and study customer behavior. Here are other benefits of investing in good POS software.

  • Cloud-based POS solutions offer greater flexibility

For a traditional POS system, tasks other than handling order and payment processing would be difficult to do. Thanks to recent cloud-based software, ecommerce platforms have become much more flexible to allow merchants to handle various aspects of their business while making data sharing possible and easy. If you choose software that allows the integration of other cloud-based apps, you can easily expand the function and features of your site.

  • You can go mobile

Because your store data is in the cloud, you can use a mobile device such as a smart phone or tablet as a POS terminal. This means, your checkout counter is no longer restricted to a fixed area in your store but you can actually walk up to a customer anywhere in your store and perform a mobile checkout with your handheld device. The iPad POS of Shopify can even be wirelessly connected to a supported cash drawer, which can be opened from the iPad. Also, mobile POS software that is designed to accept credit card payments will be able to send customers their sales receipt via email. The ability to process a sale on the spot or influence a purchasing decision is a great strategy to increase sales.

  • Empower your employees

The retail sector sees some of the highest staff attrition rates, partly because of employee dissatisfaction. One of the reasons behind this is the fact that many companies don’t provide the right tools to their staff so they can do their job well. Investing in good POS software will empower your sales staff. With an intuitive interface, it will not take long for your staff to learn this tool. It will also give them the information they need about your products right on their fingertips, which will help them perform their jobs better.

  • Having a secure system will earn customer trust


It’s only normal for a customer to question your process of handing credit card payments on a mobile device, especially since their details will be entered into someone else’s phone or tablet. However, if you choose the right POS software, you can be easily transparent with customers by showing them the software’s simple interface so they can see how you’re using your phone or tablet as a sales device. This will help gain the trust of customers but you have to keep that trust by ensuring their private data is all securely encrypted. Using PCI compliant software is a requirement if you intend to handle credit card transactions.

  • Manage your inventory the easy way

Any retailer knows how inventory management is important to their business. But this task can be quite time-consuming and manual tracking is prone to inaccuracies. For instance, you can’t really determine which products sell well on a particular time and day just by perusing receipts.

However, good POS software with built-in inventory management capability will not only help with tracking product availability but also finding out which are your best and worst-selling items. Then, looking at the collected data and reports, you can analyze your sales further to identify which products are the most or least in demand on certain days or certain months, and at what best prices to sell them

With this kind of tracking and reporting capability, you can streamline your inventory management so that you always have your best-sellers on stock. You can also tie this functionality with an accounting application so you can see in real time your most profitable product lines. This will help you make adjustments to your pricing to align with customer behavior so that your business remains competitive while keeping your profit margins.

  • Boost sales and retain your customers

Good POS software includes customer relationship management (CRM), which lets you manage information about your existing customers. With this feature, you can pull up the complete purchase history of customers by searching on their names. You will also be able to see what their preferences and interests are and details such as their birthdays. All of these customer data can be used to improve your business by helping you develop the relevant promotions and special offers to increase sales as well as build customer loyalty or rewards programs to keep customers happy. So by investing in good POS software, you have one of the best tools to improve customer satisfaction. And you probably already know that retaining existing customers is an easier task than attracting new ones plus it’s cheaper, too.

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