Budgeting To Wealth

If you take hot-water showers, then you may want to consider investing in a low-flow showerhead and a timer.  But nearly everyone can do something for free to lower the cost.

Lower the Thermostat on Your Water Heater

You hear this advice everywhere.  Lowering the water temperature by 10 degrees can translate into significant savings over time.  Not only would you be reducing your heating bill for your shower, but also every time you use hot water from the faucets in your home.

Install a Low-Flow Showerhead

Depending on how much pressure per square inch the water flows through your showerhead, you can reduce the amount of water it takes to shower with. 

Reducing the amount of water will reduce the amount of gas used to heat the water.

Install a Timer

Get an audible timer in your bathroom.  You can get a cheap egg-timer that you can set for five minutes in a few seconds

There you have it, three simple, low-cost tools that can improve your bottom line as well as reduce your impact on your environmental resources.

Calculating your debt-to-income (referred here as DTI) ratio will allow you to get a better idea of how much debt you can reasonably manage in relation to your income.

The DTI is a common formula you will hear from just about anyone who is interested in commenting on the topic of debt, whether it is a credit card, an installment loan, or mortgages, etc…

While browsing the top search results for “ideal debt to income ratio”, it appears the most common ratio is 36 percent.  What that means is for every $1000 in income you make, you can reasonably manage $360 worth of debt.

So if you are making a million bucks each month, you can reasonably manage $360,000 worth of debt each month, or $4.32 million bucks per year for every nice, fat, cool $12 million worth of income you make each year.

One can always dream.

However, our world is not as ideal as we would like it to be.  What is amusing is that the thought never occurred to me until I read the fool’s article suggesting that the ideal DTI ratio is zero.

Now, managing zero dollars worth of debt while raking in a nice, fat, cool $12 million sounds even better to me.  Can it happen?

Sure, it has been done.  But first,

Why is your Debt to Income Ratio Important?

Read the rest of this entry »

This morning, I went over to my peer bloggers to catch up on their latest posts and was well entertained with a smorgasbord of topics ranging from budgeting to investing to buying vs. leasing and much more.

I decided to visit some new bloggers and found Wellheeled’s post, Household Finances : Women Budget, Men Invest? to be a terrific read.  Growing up, it was my grandfather who took care of his family’s finances, while my parents split up the finances, with Ma taking over the daily budget and Pa taking over the investing so it was easy to relate to the article.

In fact, there’s a terrific book I recommend for couples, Smart Couples Finish Rich by David Bach.  While I am not a couple, I do agree with a lot of the investing principles in this book.

Enemy of Debt and his Q & A session with Out of Debt Again which brought up an interesting point about buying a car or leasing a car, whether they are worth it or not.  I can’t help but wonder because of my own experiences with my previous car purchases versus my current car lease.  A terrific debate on this topic can be found on Wellheeled’s Old Cars: Unsung Heroes of Personal Finance.

I was pleased to find Single Guy Money because a lot of the bloggers out there are in a relationship so it can be difficult to compare apples and oranges when it comes to a budget.  However, Single Guy brings up a good point when it comes to pay raises.

I will have to check out the news later tonight between shifts to see if there is anything of interest that I usually report in my 15 Minutes posts.  In the meantime, I encourage you to visit these bloggers and put up your 2 cents.

If you have a personal finance blog, introduce yourself so I can visit you.

As a result of entering a new lease at an apartment complex in Harrisburg, PA, a new basic housing expense budget has to be created to allocate the funds required.  Note : This has been updated to reflect a change in the lease to an all-inclusive rent which includes utilities (gas, electricity, water, trash, and sewer).

Thirty two percent of the entire budget.  This is a little bit on the high side but there are countless arguments abound on the Internet about renting vs. buying, meaning I am free of miscellaneous items associated with homeownership.

Benefits of an All-Inclusive Rent

There is also an added benefit of an all-inclusive rent, one single bill to take care of it all regardless of whether the cost of electricity or gas goes up or down. 

The rent includes unlimited access to the building’s features which includes,

• Free onsite laundromat
• Fitness center
• Media center
• Business office
• Underground parking
• Security

That is a long list of benefits at this complex.  I actually found it by accident while browsing online.  After contacting them, we were able to negotiate $100 off the standard rental rate in exchange for painting the apartment ourselves.

If that is not a picture of paradise, then I don’t know what that is.  It is a beach on Carabane, an island on the Casamance River.  Lost?  Don’t worry, it’s a small world.  I am sure you will find your way around.

It never fails to cease to amaze me how little corners of the world can look perfect but the directions to get there is downright amazing.  It’s supposedly a village on the river in Senegal which empties out to sea.

I have only heard stories about the coastal life in western Africa so it was nice to see this picture on Wikipedia where I followed the link to read a little more briefly about the place before moving on to the rest of the world.

And, now here’s my 15 minutes around the world…

In today’s news…

Renting Vs. Buying

I first heard something about this a while ago but CNN Money’s revisited this topic on following the rents on similar properties people are buying on.  For example, condos and single-family units.

I had been thinking about buying my first property this year until I decided to hold off.  It is obvious there is a glut of houses and apartment on the market these days.   It mentioned that the rent prices fell 2.3% and this is expected to continue into 2010.

Debt Crisis and Bubbles

It is always interesting to see who does what when it comes to debt crisis.  Blackrock announced that it was confident enough to buy Greek’s debt because the general feeling is that the EU won’t let Greece default on them.

Meanwhile, halfway around the world, China is struggling with an issue of vacancy in their skyscrapers which is causing a property fund manager to suggest a bubble is coming.

In the PF BLogosphere

I went over to Deliver Away Debt who introduced some of his peer bloggers who turned one year old today.  He mentioned a challenge at Enemy of Debt which spurred me to check it out.

As it turned out, Enemy of Debt is encouraging his readers to participate in managing their money using Pocketsmith.com, a calendar-based budgeting system.  That is a unique concept which can be difficult to follow depending on your motivation.

At first glance, it looks similar to the calendar in my Quicken 2009 software but more user friendly and Internet based.  I will have to follow his posts on this to see if it appeals to me.  Personally, I am not as satisfied with Quicken as I am with Money Plus which has been discontinued.

However, an interesting feature on Enemy of Debt is the Debt Free News for a Debt Free Reader installlment where J.Money of Budgets are Sexy is interviewed here.  When asked about what sacrifices were  made to become debt-free, I had to laugh at his response.

I stopped shopping, period. Instead of going out to the mall or Best Buy every weekend when bored, I started blogging and entertaining myself other ways. Ways that didn’t cost me money…

I know exactly what he means, resisting the temptation to buy something when there is a bigger picture in mind.

What do you think would be your biggest sacrifice in becoming debt-free?