Sorrells Garden


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Saving money while staying fit

Think you need an expensive gym membership to stay fit? Not according the The NYTimes’ Walecia Konrad:

As the nation’s economic woes drag on, many people are rethinking their investments in pricey gym memberships and home exercise equipment. After all, the average health club membership is $750 annually, including sign-up fees and monthly dues. Treadmills can cost upwards of $1,000.

Many fitness buffs are finding that less expensive alternatives can be just as invigorating. “These days people realize you can burn the same number of calories for a lot less money,” said Beth Kobliner, personal finance expert and author of “Get a Financial Life.” “All kinds of programs have popped up post-recession that offer lower-cost ways to exercise.”

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Best Ways To Save Money On Gas

If you think you’ve done all you can to save money on gas, you might want check out these tips. There are many things you can do to cut back on your fuel costs that have nothing to do with driving less. Saving fuel benefits your wallet and the earth, so cutting as much cost as possible is an excellent choice.

We all want to save money. Even as the economy is slowly making its rebound, it seems that everyone has seen the value in cutting as much cost as possible from the household expenses. One of the biggest costs that is also easy to cut back on is the amount we spend on gas. You might think that you have already cut your costs by carpooling with the other parents in the neighborhood or with your co-workers, but there is still more that you can do to eliminate cost.

Cutting Your Gas Costs

Drive smarter – Driving less is obviously the biggest thing you can do to save money on gas. However, you should also be thinking about how to spend less while you are actually driving. Since you cannot stop using your car completely, you should be aware of how the way you drive expends gas. For starters, braking frequently and then accelerating burns more fuel. To avoid when you are stuck in traffic, practice keeping your foot off the brake and the accelerator. Doing so allows you to creep along with the traffic and only burn extra fuel when necessary. You can also anticipate stopping at traffic lights so that you can do it slowly instead of slamming on the brakes which burns more fuel. The same is true when you get moving again: do it at a slow and steady pace rather then flooring it. Even though your car can go 0 to 60 in six seconds does not mean it is the most efficient way to accelerate.

Pay attention to fuel use when you are not driving – It sounds silly, but when you are not driving you might be burning gas too. If you let your vehicle idle when you are in the parent pick up line at your children’s school or while your spouse runs into the grocery store, you are basically throwing money away. Instead, turn the engine off while you wait so that you are not just sitting there burning fuel. Also, try to park in the shade as much as possible so you can avoid having any of the petrol in your tank evaporate. It is a small amount of loss, but over time it can add up.

Park in the first space you find – Driving around parking lots looking for a close space is a huge waste of fuel. Instead grab the first space you see, especially if it is in the shade, and walk the short distance to the shop or restaurant. By doing this, you will burn calories instead of burning fuel.

These money saving tips are just a few of the small ways you can cut back on your gas costs. There are loads more that do not require you to buy a new vehicle or ride your bike to work. Remember, that often it is the small things in your budget that really add up to big savings.

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Go against the flow

My Two Dollars yesterday had an interesting post about Detroit and how property values have fallen hard there, and probably have more room to fall. A few samples:

At least 16 Detroit houses up for sale on Sunday sold for $30,000 or less.

A boarded-up bungalow on the city’s west side brought $1,300. A four-bedroom house near the original Motown recording studio sold for $7,000.

Now, let me say that I would never live in Detroit. But I’ve seen that when everyone seems to be saying that it’s crazy to own or buy property in an area, it’s time to take a hard look at that area because some good values can often be found. Detroit isn’t going to disappear tomorrow. It might be a little shaky there, but they’ll recover, and when they do, some of those dirt-cheap houses will sell for 10x or 20x what they were bought for. Those investors will invariably be viewed by many as “lucky” but as someone once said:

“Luck is what happens when preparation meets opportunity.”
-Seneca

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Create your own charitable foundation

I’ve recently discovered one of the coolest things in personal finance that I’ve ever seen. It’s called the Fidelity Charitable Gift Fund, and it has a lot of implications for maximizing the efficiency of both your charitable giving and your tax strategy.

Private charitable foundations have traditionally been the playground of the mega-wealthy. The cost to establish, maintain, and manage a private foundation is not trivial, making it difficult for all but those with the largest of fortunes. However, in 1991, Fidelity launched their Charitable Gift Fund (CGF), making it possible for millions of people to create a mini-foundation. Here’s how it works:

  1. Make a contribution to the Gift Fund and set up a Giving Account that you name — such as, The Smith Family Fund — then be eligible to take an immediate tax deduction.
  2. Advise how to invest your contributions, giving the assets the potential to grow.
  3. Recommend grants from the Giving Account to the charities you support, with the option of being recognized or remaining anonymous.

Essentially, the CGF is one of the largest private foundations in the US. Individuals can open a Giving Account, which is run like a mini-foundation within the CGF. You can provide guidance on how you would like your contributions to be invested and “recommend” charities for them to donate your contributions to. Fidelity reports that the recommendations are followed in 99% of cases, unless the charity doesn’t qualify (no political donations, for example).

Some of the advantages of using the CGF are:

  1. Contributions can be deducted from your taxes as soon as you add them to your Giving Account, even before you distribute them to the charities and non-profits of your choice.
  2. Once you setup a charity or non-profit in your account, giving to that organization is a simple 1-click affair.
  3. Any non-distributed assets in your Giving Account are invested in mutual funds, giving you more money to give away down the road.
  4. The minimum contribution to open a Giving Account used to be $10,000, but Fidelity reduced the amount last year to $5,000. Subsequent contributions to your account must be at least $1000. A distribution to a non-profit organization can be as little as $100.
  5. The receiving charity doesn’t have to worry about dealing with direct stock donations.
  6. The CGF will accept cash, stocks, bonds, mutual funds, and real estate. This means that if you have stocks that have gained a lot in the last year, you can transfer them to your Giving Account, not only avoiding any capital gains taxes on those assets, but also giving yourself a generous deduction.

This last point is one of the most exciting to me. My wife and I have been richly blessed, financially and otherwise, and we contribute 10% of our income as a tithe to our church, charities, and other non-profit organizations. We also invest in index funds. I’ve come up with a plan to reduce my tax liability every year and maintain our desired level of giving, all while making our giving more convenient.  Part of this plan is based on a post from Free Money Finance, but the CGF adds a twist.  Here’s my strategy:

  1. For the next year, we’ll save up most of our 10% tithe instead of distributing it. The goal is to amass at least $5k so that we can open a Giving Account in December.
  2. At the end of the year, I’ll take a look at what investments have done well over the last year and select an amount of index funds that match the amount of tithe that we’ve saved. For example, if we have $5,500 in tithe saved up, I’ll select $5,500 of index funds that have increased in value over the last year.
  3. I’ll transfer the tithe money into my brokerage account.
  4. I’ll transfer the selected index fund shares into my CGF account and immediately use the tithe cash to purchase the same number of shares back off the market.

Now I’ve contributed my tithe (in the form of index fund shares) to my CGF and I can take the deduction for 2007. I also still own the same amount of shares that I owned before, but my cost basis has been reset without having to pay capital gains taxes. If I decide in 2008 to sell those shares outright, I’ll pay capital gains on the difference between the selling price and what I paid in 2007, not what I originally bought the shares for. In the case of a year where my investments didn’t do well and were all down from the last year, I could just contribute the tithe cash directly.

Please consult a qualified tax adviser before you try this. Can anyone offer me any insights as to whether this is a good idea?

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6 tips for shedding the baggage of failure

Yesterday was not quite what it could’ve been
As were most of all the days before
But I swear today with every breath I’m breathing in
I’ll be trying to make it so much more

Cause it seems I get so hung up on
The history of what’s gone wrong
That the hope of a new day is sometimes hard to see…

“Up and Up” by Relient K

I went for a long run tonight and I was listening to this song and thinking about the baggage of failure and how it weighs us down. There are things I’ve struggled with over and over, and sometimes it’s very difficult to try again without having the idea in the back of my head that I’m going to fail. I thought I would write up a few strategies and tips that have helped me move past some of my previous failures.

Reevaluate your goals
First of all, you need do some soul-searching and ask yourself: is this goal still something you want to achieve? Don’t waste your time trying to meet goals that you have little interest or passion for. Not only does it waste your time and energy, your likelihood of success is very low in this situation. Spend some time determining where you are, where you want to go, and what some of the steps in between are. Put it on paper and review it periodically to help keep that source of motivation fresh in your mind.

Be Accountable
I’ve noticed that sometimes I don’t tell people when I set a new goal for myself, and I think part of the reason is that I know I’m probably going to fail and I don’t want the added embarrassment of having my failure be public. But ironically, the very act of telling people about your goals and struggles can be a powerful motivator. If you know that people are going to be asking you about something that you’ve said is a goal, you’re more likely to keep at it. That’s been my experience anyway. On the other hand, if you set a goal for yourself and tell no one, it’s pretty easy to drop that goal when the going gets rough. Accountability for goals is a must. And you need to find the right people to hold you accountable. You want people who will not only encourage you along the way, but also will kick your ass a little if you start to let things slip.

Don’t Compare Yourself
Sometimes when I go to the gym after I haven’t gone for awhile, it’s a little intimidating. I’m not a small guy, but I can’t compare to these 300 lb. guys who look like the hulk, tossing weights that weigh more than me around like they’re nothing, while I struggle with a 10 lb dumbbell. I exaggerate, but only slightly. The point is that too often, I’ve let my embarassment over my current physical situation keep me from going to the gym, challenging myself, and not being afraid if people think I’m not handling very much weight. Discipline is similar. You might struggle with overeating. The last thing you want to do is compare yourself to some vegan freak who only eats weeds and seeds. If you eat pizza and donuts 7 times per week, and you decide to cut back to only have those things twice a week, don’t worry that you’re not at the same level as someone else. You’ll get there. Or maybe you won’t; it’s up to you. The point is, that person has struggles of their own. Don’t hold yourself up to anyone else’s standard.

Break It Down
One giant pie-in-the-sky goal is psychologically very difficult to hit, especially if you’ve had some failures or setbacks in that area. If you weigh 300 lbs and would like to get down to 200, that’s great. But break your goal down into more manageable steps, like losing 1 lb per week for the next month. Sure, you’ll still weigh 296, but you’ll have made some progress and hit a goal that you set for yourself. The psychological boost of achieving a goal is much more important than the 4 lbs and will give you strength and motivation to strive for the next milestone. Of course, you don’t want to set your goals too low. There’s no benefit in setting extremely easy goals for yourself. The trick is to set goals that still stretch you some, but not so much that you’ll break.

Take It Slow
Don’t try and change everything all at once. I notice that a lot of people try and completely reinvent themselves overnight. It’s true that sometimes you need to shake things up and make drastic lifestyle changes in very short periods of time, but if you’re writing a list of 57 goals every New Year’s and then trailing off by the end of January, it might be because you’re trying to do too many things at once. I’ve been guilty of this, even as recently as this last January. But what I’ve come to realize is that if I take it a few goals at a time and accomplish those things, build the habits and discipline, and then move on to the next thing, I can accomplish 57 goals in a year. The trick is to not try and do it all at once.

Train for self-discipline
Self-discipline can be thought of like a muscle. If you use poor training methods, strategies, and techniques, you decrease your chances of success and increase the likelihood of injury. Similarly, if you don’t learn good techniques for training yourself to form good habits, you won’t see very much progress and you will likely quit. For more information on self-discipline, try this series by Steve Pavlina.

Bonus: Track your progress
I’ve found it very helpful to track my progress against my goals. Whether I’m trying to control my spending, eat healthier, or keep up with a fitness program, keeping a log or journal of my progress helps keep me on track. I use Google Docs & Spreadsheets, but a simple notebook, text file, or back of an envelope would work just as well. Track your progress as often as you can. If the goal is to do something every day, note each day that you meet that goal. The point is to have a record that shows you progress over time and helps you see clearly when you had issues. I’ll be writing more about this in a later post.

Well, I hope some of this was helpful for someone out there. Life is driven by entropy, and is always tending towards a state of disorder, but you can put energy into your life and fight that trend. We’ve all failed and had setbacks. Don’t let that baggage drag you down into a vortex of failure. Just pick yourself up, take a deep breath, and try again. The only shame is in quitting.

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My multitasking addiction

I’ve noticed that I’m addicted to multitasking. I have a very hard time sitting down and watching something without doing anything else. I can’t have just one window open or one tab open in firefox. I feel this compulsive need to carry on 18 things at once, even though it stresses me out sometimes and I probably do each thing less well than I would if I just focused on one thing.

Why is this?

Maybe it’s because of the incredible rate that information is flooding our world. There are billions of blogs to read, videos to watch, discussions to join, friends to talk to, etc, etc. When I’m not doing those things, I feel like I’m missing out. I was missing out before the Internet, but it was such a pain to NOT miss out. Now, it’s only a click away, and if I’m signed on to AIM, these things often come to me!

I need to work harder to be more focused and more respectful of my own need for mental peace and occasional unproductivity.

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My mvelopes experience

Early last month, I started using a service called mvelopes.com. This is a personal finance and budgeting program that you would use instead of MS Money or Quicken. I had tried both Money and Quicken with very mixed results. I found them to be bloated, buggy, and trying to do too much and failing to do it well. So I decided to take the plunge and give mvelopes a try.

Mvelopes is basically an online representation of the envelope budgeting method, where you put cash into envelopes for groceries, spending, medical, gas, etc and then take the cash out when you need to spend it. When it’s gone, it’s gone. This can be a very effective method of budgeting, but it’s 2006, and I don’t want thousands of dollars in cash sitting in my house, not to mention the fact that I only use cash for a tiny percentage of my monthly transaction volume.

Enter Mvelopes.

Basically, Mvelopes works using the exact same concept as cash in envelopes, but online. So you setup a budget and then when your paycheck comes, you divvy it up into the envelopes, which represent budget categories. Mvelopes doesn’t move any money, it just keeps track of how the money in your checking account is allocated. Then, as your transactions come in (automatically downloaded from the 12000 financial institutions they have relationships with), you assign them to the envelopes that they correspond to and they reduce the envelope by that amount.

Perhaps an example will help. Let’s say you get paid $100 and you put that cash in the “Clothing” envelope. The balance of the envelope (assuming it was $0 before) is now $100. You buy a sweater for $25. When that transaction is downloaded from your bank, you just drag it into the clothing envelope and it reduces your balance by $25, to $75.

The service has a ton of other benefits and it takes a little bit to get the hang of everything, but it’s awesome. I highly recommend it.

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My long term financial plan

Great blog post on 9 steps to effective long-term financial management:

Of those, my wife and I have accomplished three. We’re hard at work on the rest. I would actually add a few more to the list for us, since we’re relatively aggressive about pursuing long-term wealth:

10. Start a business
11. Buy and hold income real estate and other cash-producing assets
12. Give back to churches, charities, and communities with your money and your time. Don’t wait on this one until you accomplish 1-11. Start today.

10 and 11 may not be for you; they’re not for everyone. I would recommend 12 to everyone, though. Don’t give people less fortunate an excuse to hate you because of what you’ve been blessed with. Share the wealth.