Balancing a Checkbook

by David@MoneyNing.com · 8 comments

how to balance a checkbook

I just realized that I never balanced a checkbook nor do I even know what balancing a checkbook is. I always heard that it was very important to balance my checkbook but I never bothered to figure out what the difference was between my checking account and my credit card transaction list since I can log onto both online and see all the transactions.

Therefore, I did a bit of research on the topic and here’s what I found:

  • Balancing a checkbook is to make sure our records matches the banks since they can make mistakes
  • It is to also make sure our records are correct so we don’t write a check with money we don’t have as bounced checks means a $25 or more fee from the bank

So, the next question is – How do I write one?  Here’s the answer.

  1. Record all deposits and checks (the accounting term is reconcile but let’s just keep it in simple terms)
  2. Make sure to do the same with ATM and debit card purchases as well as ACH and wire transfers.  Basically, record all transactions related to the checking account including interest payments if there are any.
  3. Calculate the balance.

Note: When I was reading different articles, I also saw authors mention about outstanding checks, ATM and debit card purchases.  In this day and age, all we need to worry about is the outstanding checks since all electronic transactions are recorded to our accounts instantaneously.

Okay, I’ve never done any of this but everything has been fine.  Here’s my version of balancing my checkbook and explains why I don’t need to balance my checkbook.

  1. Stop writing so many checks.  There’s almost no more reasons to write checks anymore with electronic bill pay.  The less paper is used, the easier it is to keep track of our accounts.
  2. Look up the transaction history and make sure the records are correct.  Look at every transaction and make sure it is accounted for.
  3. I control my checking balance extremely tight because it doesn’t provide any interest.  Therefore, it almost forces me to look at the balance and transactions on a regular basis so I don’t fall behind.

So, now I know what balancing a checkbook is and so do you.

Right Time to Buy a House or Just Bad Money Management?

by David@MoneyNing.com · 17 comments

new homes

(Photo from Shea Homes)

In a surprising move, my boss made a offer on a single family home in Aliso Viejo, CA today. In fact, he is interested in two homes in the same “new development tracts” and he told the sales lady that he is willing to buy any of the two depending on the deal that he gets. Although I feel like this is bad money management because we are far from the bottom of the current housing downturn, I can’t stop myself from thinking twice because I highly respect his judgement.

The offers my boss put in the houses listed at $1.6 million and $1.2 million were $1.35 million and $1 million respectively. He went in with his bank statements and told the sales lady that he can pay cash, and that he is ready and able to purchase by this month. The sales lady told him that she needs approval from management but my boss is quite confident that he will get the deal because those houses are already built and the builder is just sitting on them and losing money everyday that it sits unsold.

As I discussed numerous times before, I believe the housing market will be in a correction for at least another 6-12 months. I will eventually get a house, but I do not believe it is the right time yet. I feel that I will be able to get a better deal in 2009, which is why I haven’t pulled the trigger. In fact, we haven’t even looked at houses for a few months now.

However, after speaking to my boss and knowing what he’s done, it really puts doubts of my thesis. If the houses he put his offer in were listed at $1.8 million a year ago and he ends up getting it at $1 million, it is already a 44% decline from peak which is something I’d be happy with.

I know I shouldn’t see my house as an investment but it is going to be my single biggest purchase by far. I’m not trying to time the absolute bottom of the market but I’d hate to see myself paying for possibly $100,000 more than I need to pay as it will take me years to make up the difference.

What do you think? Fire away at the comments section, I really appreciate it.

Tips on Budget Planning and Saving Money

by David@MoneyNing.com · 19 comments

Budgeting will identify how you spend your money

Deciding to consolidate your debts is an excellent choice for many individuals, but making that decision is only the first step, learning how to manage your finances is the next step in ultimately becoming debt
free. Budget planning can help you identify how you spend your money and where you may be over spending. The goal in preparing a budget is to insure that your monthly expenses do not exceed your monthly income.

Below are some tips to assist you in starting off the New year on the right financial foot:

Tips on Budgeting

  1. Write down your total monthly net income. Include all sources of income such as, salary, child support, pension, etc. Next, list all your monthly expenses, including your house or rent payment, food, gas, utilities, credit card payments, etc. Then subtract your monthly expenses from your total monthly income.
  2. Look for areas where you can cut back and save some money.
  3. Use the information to set a budget for yourself. Include approximately 5% to 10% for savings.
  4. Review your budget on a monthly basis to determine how things are going. You may discover an area where your are overspending and can then adjust it accordingly.

Tips on Saving Money

  1. Cut back home energy consumption by turning off lights when you are not using them and placing an air conditioner on a timer. You can also remove unnecessary phone options to cut down costs. Contact your local utility service providers and ask about their budgeting plans and programs to help you manage these expenses.
  2. Shop at outlet or wholesale clubs. When you do shop, use lists to avoid impulse purchases.
  3. Try bringing your lunch to work instead of having to buy every day.

Money Ning thoughts: Great advice. How many of these do you do already? I think I will implement the “list” advice for my wife so we don’t buy too much immediately.

Forget Frugality If You Have This Expense

by David@MoneyNing.com · 15 comments

When we try to cut our expenses and be a little more frugal, most people start with the bigger ticket items.  The theory is simple and logical.  Cut one big expense and it can cover 10 different ones.  While this is great, the problem is that we almost always stop thinking about the little expenses because we pay way too much attention to the large ones.

If we look closely, we will realize that we shouldn’t be thinking about spending less on big expenses but rather on small expenses that just keep repeating.

frozen yogurt

I actually never realized this until recently, when my wife all of a sudden added eating frozen yogurt to her favorite activity of all time.  Every night nowadays, she is wondering whether we can go out to buy a cup of frozen yogurt.  At $5 USD, it’s really not that much money but if we just think about it, we could be spending $150 a month translating to $1800 a year.  This means that without 1 year of frozen yogurt (which should be quite easy because we’ve never had any for the last 30 years), we could buy a TV and still have money left over.

Look.  I’m not saying that we should stop all daily, smaller expenses.  I just want to make everyone realize that the small, repeatable expenses add up really quick.  Watch those expenses, or we might as well forget about being frugal.

Standby Mode Turns Appliances Into Money Suckers

by David@MoneyNing.com · 7 comments

This is a guest article by Willfrid, a fellow financial blogger that likes to find new frugal ideas. Check out his blog Your Finish Rich Plan, a blog that puts the emphasis on the personal in personal finance.

Why do power adapters have to be so bulky? On second thought, maybe I should be grateful that they are. See, I had to move a couple of them around the power strip in my room in order to plug in my laptop when I realized my cell phone charger was much warmer than usual, even though nothing was plugged into it. So I unplugged it, but after a while I found myself googling “hot cell phone charger”. The first result that came up was from TreeHugger: “Unplug Your Cell Phone Charger“. I was floored: only 5% of the power drawn by my cell phone charger is actually used to charge my phone? The other 95% is wasted when I leave it plugged into the wall, but not into your phone. This triggered another round of Google searches, the end result of which is this here post about standby power and how it translate into real dollars out of our pockets.

A surprisingly large number of electrical products — from air conditioners to VCRs — cannot be switched off completely without being unplugged. These products draw power 24 hours a day, often without our knowledge. Standby power, also called vampire power, refers to the electric power consumed by these appliances while they are switched off or in a standby mode. For any single appliance, the consumption is usually not much, but when we add up the power use of the billions of appliances in the U.S., the power consumption of appliances that are not being used is substantial.

Some Eye Opening Facts
Anything with an external power supply, remote control, or clock display require standby electricity. The typical American home has 20 electrical appliances that are constantly costing us money. With the above criteria in mind, I did a quick check around my house and counted 4 TVs, 2 cable receivers, 4 stereos, 6 cell phone chargers, 1 microwave, 1 stove, 2 DVD players, 1 PS3, 1 PS2, 1 desktop computer, and 2 alarm clocks. At that point I wasn’t even interested in making sure I didn’t miss anything, because all those appliances continue to suck electricity even when they’re off.

For example, your TV is actually turned on all the time even though it looks like it’s off. It is constantly preheating the picture tube and powering the receiver for the remote, just waiting to be “turned on”. According to a Cornell University energy expert, these so-called “vampire” appliances cost consumers an estimated $3 billion a year — or about $200 per household.

Electrical appliances use energy even when switched off in order to support features such as timers, clocks, memory and remote “on” and “off” switches. “Satellite receivers for televisions and VCRs, among other appliances, use almost as much electricity when they are switched off as when they are on”

Satellite TV systems and some DVD players, for example, each cost about $9 a year for standby power; an energy-thirsty TV can cost more than $10 a year.

The standby power of a computer monitor only costs about $3 a year when the computer is shut down nights and weekends. However, if the computer’s “sleep” function is used, the power costs $41 a year for those nights and weekends — almost as much as the $57 a year it costs to run the computer just on weekdays.

Worldwide, standby power consumes an average of 7 percent of a home’s total electricity bill, although that figure is as much as 25 percent in some homes. In Australia, standby power accounts for 13 percent of total energy use; in Japan it accounts for 12 percent; and in the United States, 5 percent.

According to America’s Department of Energy, national residential electricity consumption in 2004 was 1.29 billion megawatt hours (MWh)-5% of which is 64m MWh. The wasted energy, in other words, is equivalent to the output of 18 typical power stations.

Some studies have suggested that the total phantom load caused by the United States alone would provide enough power to handle the electric needs of Vietnam, Peru, and Greece.

Increasing the efficiency of appliances would cut standby power consumption by about 90 percent, according to a recent study by the International Energy Agency in France.

The vast majority of consumers aren’t even aware that electrical appliances continue to draw electricity when switched off. And even if they were aware, they would not be able to purchase more efficient alternative, because no regulation requires manufacturers to label how much electricity their appliances draw when off.

What can we, the consumers, do about this?

  • If timers and other features aren’t being used, turn off our most power-hungry appliances by plugging them into fuse-protected power strips, also known as surge protectors.
  • When choosing a new appliance, research if it uses less than 1 watt of standby power by accessing web sites such as this.
  • Encourage our U.S. representatives to support legislation that would require labeling of appliances with their standby energy requirements (that could be years off)

A couple power strips is a small price to pay for an estimated $200/year savings. Now if only I could find a way around the cable receiver’s 5 minute reboot cycle…

Understanding Is the Key to Saving More Money

by David@MoneyNing.com · 10 comments

Saving more money, a goal we should all have. Sometimes, it is quite difficult to ignore our desire to want that new thing. We can all relate. Whether it is that golf club, new pair of shoes, or the TV, they all seem to reach out to us and say “You know you cannot live without me… Bring me home today”.

Once in a while, we can temporary talk us out of the wish but let’s just say that we just cannot do it this time. We have decided that the new product is exactly what we need and we won’t be denied until we get one. Then what?

At this point, all is not lost. We just have to understand and appreciate our impulses and desires and still try to maximize our savings.

Take my desire to always want that cup of Starbucks coffee. There are many times this comes up and I would feel the burning desire to drive to the nearest coffee shop. In the old days, I would get a grande (medium) sized coffee, but I have come to realize that all I really need is a tall (small) cup because all it takes is the first 25 ml of liquid to calm my nerves. I learned to stop thinking about whether a medium or small cup is a better value because what’s the most important is how much I end up saving and ultimately keep in my pocket. I understand my desire (to want coffee), the product (Starbucks coffee size differences), and the solution just followed.

The key to saving more money

Here’s another example, my future purchase of a flat screen TV. I don’t own one right now, but I want one every time I go to Costco. I did some research over the past few months, and I know that the ones with 1080p are more expensive because it’s provides the best picture quality in the market today. For many of us, we want a flat screen TV because it is cool, not because it’s got 1080p. If we understand what it is that makes us happy and calm our impulses, then we won’t waste our money on the high end model that may cost $2,199 but instead get the lower end model that might be $1,399. Most people will be just as happy with purchasing either, but the ones that take the time to understand their desire would have saved an extra $800.

These are just two examples, but this actually applies to almost everything we purchase because there are always comparable products at different price ranges. The key is to understand our need and want, understand the product so we can make informed decisions, and the solution will soon follow.

Understanding is the key to saving more money.

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