Small Changes Can Pay Big

A friend sent me a link to an article with ideas on how to squeeze a little extra out of your budget in the hopes of reaching the illustrious $1 million mark. Now a lot of these ideas won't work for me, and they might not work for you either. However, you can look at your lifestyle and try to apply these concepts in other ways. The point of the story is that if you can change some habits slightly to more frugal alternatives and invest the difference you can change your long-term wealth significantly. The FRoW is one way I try to apply this concept.

Odd Business Idea

I found this weird website called The Big Word Project. Basically, they are an online dictionary where the definition is a link to a website. You can pay $1 per letter to specify a URL for the definition of any word. So, the word bubble would be $6. There is only one definition allowed per word. It amazes me that people actually pay for these things. I could understand a popular search engine charging for keywords, but not a random website without any other content. This idea might be better suited for a real online dictionary. If I was these guys though, I'd allow multiple definitions. Maybe they could let the owner of the word sell secondary definitions? I wonder how long until a word here goes up on ebay. The problem is, aside from boredom, I can't think of a good reason why the general public would go to this website to begin with.

$1 Admission to World of Coke

In celebration of the one year anniversary of the new World of Coke, Coca-Cola is offering $1 admission to the first 1,000 visitors on Saturday and Sunday (May 24th-25th). Doors will open at 9AM. Having been to both the old World of Coke and the new one, I can say that it is a really enjoyable experience. My favorite part was the taste-testing room with flavors from all over the world and also seeing the old and/or foreign advertising campaigns. The robotic bottling plant is also very cool. For more information, visit this article from the Atlanta Journal-Constitution or for the official page visit http://www.worldofcoca-cola.com/ and click on Special Events, then 1st Anniversary Celebration. There will be other events throughout the day as part of the celebration.

Frugal Resolution of the Week

Last week's FRoW went well with the exception of an insane road trip I took over the weekend. This week's resolution is staying with the theme of food. I really think food is the number one place for me to change my budget. So, my new resolution is to cook a large meal at home once a week. I want to make something that will provide leftovers for at least 4 more meals. Currently, although I haven't been eating out much, I have been eating a lot of frozen food. The frozen meals from Green Giant, Stouffers, or Birds Eye. While these are cheap and easy to cook (and do have vegetables), they also have a lot of sodium and other stuff I'm sure isn't the greatest for you. Plus, a home cooked meal should be able to average out less than the frozen stuff if you do it right.

Frugal Cleaning Solutions

Some people like to use alternative cleaning solutions as a way to keep their house free of chemicals or as a way to live a 'greener' lifestyle. That's great, but alternative cleaning solutions are also good for staying green another way. This article from eHow.com lists a few uses for vinegar, baking soda, lemon juice, and others. There are also some great ideas in The Complete Tightwad Gazette. I plan on doing a full review of this book in the future, but for now I'll just say that this is a great book for anyone searching for ideas on ways to save money and be more resourceful. Here are a couple of tips from this book.

All-purpose cleaner:

• 1/2 cup ammonia
• 1/3 cup vinegar
• 2 Tbsp baking soda
• 1 gallon water

Also from the book I learned that the amount of detergent required for laundry and dishwasher loads depends on the hardness of your water and the extra spot for detergent in the dishwasher is wasted unless you select a mode with a pre-cycle, such as pots and pans.

A Frugal Alternative to Blockbuster

Many people like to watch movies at the theater on a fairly regular basis. This can get pretty expensive. A cheaper alternative is to rent a movie and watch it at home. This is much cheaper, especially for more than one person. When combined with coupons, or discounts for older movies, this can be a really cheap form of entertainment. But what if I told you, you could do better. Most public libraries offer a wide selection of DVDs. You may be surprised to find out how current their selection is. In my hometown in sunny South Florida, we have an excellent library system. Almost any person could go to the library and find a movie that not only were they willing to watch but that they had actually wanted to see. Currently, I'm living in Mississippi. The library options here are pretty slim, but still offer some choices. In addition, the Air Force base library has a surprisingly good selection, for those who are eligible users. Another choice is a place like SwitchPlanet, which allows you to swap your books, dvds, and cds with other users. I must admit, I've never tried this service, but I love the concept. If anyone tries this, please post a comment.

Frugal Resolution of the Week

So last week's FRoW went great until Saturday. I was coming back from a camping trip with some friends and we stopped at a BBQ place in the middle of nowhere, AL. When we all ordered our drinks I asked for some tea and completely forgot about my resolution to only get water. Although I did slip up once, I was happy with my vigilance the rest of the week. So next week, I will continue to only drink water when I'm not at home and will add on this weeks resolution.

This weeks FRoW is to eat out no more than once a week. I actually started practicing for this last week. I turned down about 3-4 invitations to go out to eat. This is another resolution that should help me save money and improve my health.

How I Minimize Risk on Prosper

*** This post was updated on May 10th ***

I have been a lender on Prosper for about 13 months now. Although I do not have a lot invested in prosper, I've never had a loan default or have late payments. After reading Prosper.com - Why Bother? from Eden at Finance and Fat, I thought it might be interesting to share my process of bidding on a loan at Prosper. When I choose to fund a loan, these are the things I do.

I initially go to the search loans box on the left side of the listings page. I do not specify a keyword and I use all loan types. Next, I specify only B or higher credit grade. 1.86% of B grade loans default and 8.89% have been late. This compares to 3.42% late on AA loans and 6% late on A loans. I leave "Include high (>20%) debt to income" checked. I also initially check to require homeownership and automatic funding.

The next step is a little fuzzy and something I'm sure financial institutions don't have the liberty of doing. I scroll through the listings and look for people that appear to be honest, good-hearted, responsible people. I also glance at the headlines and look for things that I think would be appropriate for a loan. For example (this is a real example from the search I'm doing right now), "Investments for my evil children" with a picture of a baby with red glowing eyes does not look like an appealing loan to me. From the description, "I'd like to put $2,500/yr away for each of them, but this year I can't see myself able to do so. I'd like to get a loan to get this started. Actually, I'd like NOT to get a loan to get this started, heh, but at least this way interest starts compounding now for them." If you can't see yourself as able to put away money for your childrens future, how will you see yourself able to put money away to pay me back, and to cover your interest. Not to mention that sounds like a ridiculous plan. Why pay 10.89% APR to invest in index funds that may only return 8-10%? This person has an A credit rating, but obviously is not making sound choices regarding their money. I would not fund this loan. Some titles that caught my eye were "paying off credit cards" and "investing in my family" these sound like positive goals and are things I am more likely to look in to.

Once I click on a proposed loan, I read the description. I look for things that cue me in to decide if this is not only an honest and responsible person but also someone who has a plan and knows what they are doing. In the example above, I don't think the person knew what they were doing and they had a bad plan. An example of someone with a good plan is, "This loan will be used to expand my daughter's daycare business... We have acquired a building , and my daughter has poured everything into readying this building up to city and state codes... [needs the money for the] purchase and installation of 2 commercial metal doors with panic bars, and fire protection system... I am the sole proprietor of custom cabinets. I established this company in 1988." To me, all of these things say this person is a hard worker and they know what they want and how they plan on attaining it.

Lastly, I look at the credit profile. Red flags are delinquencies, public records, high number of credit lines, high revolving credit balance, and high bankcard utilization. The first two are show stoppers. The last 3 are more of a judgment call based on the picture you've built from the other information and what an appropriate level is in your mind.

After I have found a loan I feel comfortable with, I will bid the minimum amount at a conservative interest rate. Usually I bid at 7%. To me, this is a rate I'm happy with, given the performance of savings accounts and the average 8-10% in the stock market. By bidding the minimum amount, I spread my money over multiple loans and lower my risk through diversification.

So there you have it. In closing let me just say that it is important to listen to your gut. You should be able to feel good about the loan you are purchasing. Feel free to shop around and don't be afraid to wait a little bit to find a good loan.

If you're interested in joining prosper, please use the referral link below. Lenders will receive $25 for signing up after successfully bidding on their first loan. Also, there is no hard credit check for lenders.

Fannie Mae has Good News for Some

From the Atlanta Journal-Constitution

Fannie Mae reported losses of $2.2 billion in the first quarter and the nation's largest buyer of home loans said Tuesday it would cut its dividend and raise $6 billion in new capital, with expectations that the housing slump will persist into next year.

Home prices fell faster in the first quarter than Fannie Mae had expected, the government-sponsored company said, and it will open a $4 billion share offering immediately, with the remainder being offered in the "very near future."

I know these are hard times for many people who may have made regrettable decisions regarding real estate, or people who may have just had poor timing, but I am excited about the fact that my luck and timing look like they will work out quite well. I'm planning on purchasing a house within the next year and hopefully a second investment property about a year after that.

Top 10 Ways to Spend Your Stimulus Rebate

Many people are expecting their tax stimulus rebates in the next couple of weeks, but how will you spend it? Here is a list I compiled of the top 10 ways to spend your rebate.

1. Pay off high interest debt.
   
• Payday loans, student loans, credit cards, etc. are always good to get rid of first because they give you a guaranteed return of whatever your interest rate is. If you have an 18% APY on your credit card, your $600 will not only be reducing your debt by $600, but will also be preventing you from paying the more than $100 interest that money would have accumulated this year.
  
  
2. Pay off some of a mortgage or car loan.
• Along the same lines as number one, paying off debt gives you a guaranteed return in the form of interest savings. Eliminating debt should almost always be the priority.
  
  
3. Add to your emergency fund.
• An emergency fund provides many benefits. It will greatly reduce anxiety since you know you are prepared for anything that comes your way. The first time something does come up, and you have funds available, you will really appreciate your emergency fund. Most advisers recommend saving an amount equal to 3-6 months worth of expenses.
  
  
4. Add to your IRA.
• An IRA, or Individual Retirement Account, is an excellent avenue for investing once you have your debt down to a manageable number and have a good padding in emergency savings. IRAs offer benefits such as tax-free or tax-deferred growth. Most people will want to use the Roth IRA first, especially if they are young. For more information on deciding which IRA is right for you, check this investopedia article.
  
  
5. Put it towards a savings goal.
• You should always strive to save for your goals and let interest help you, rather than slow you down. For short term goals see bankrate.com for a list of banks and their interest rates, and shop around for the best deal. If you have longer term goals, the stock market may be a better option. Try to avoid mutual funds with high expense ratios. You may even want to consider an Exchange Traded Fund invested in an index. Zecco.com may be a good option for those with more than $2500 to invest since they offer 10 free trades per month.
  
  
6. Add to your taxable investments.
• This is along the same lines as number five, but with no specific goal in mind. You are simply investing for the future.
  
  
7. Make a home improvement.
• If you've been putting off doing some home repairs, now may be a good time. Your extra cash can go a little bit further if you take advantage of some of the tax stimulus sales such as the 10% bonus from Sears.
  
  
8. Make a car repair.
• People are now trying to make their cars last longer (and they should!) as this article from the Atlanta Journal-Constitution points out. Personally, I think you should keep your car until it can't be saved. So part of that is getting things repaired or replaced when they go bad. This can be a good way to spend your rebate.
  
  
9. Invest for your child's education.
• There are several options in this arena. If you haven't started a college plan for your child, and funding their education is something you would like to do, there's no better time to start than now. This article from the Motley Fool compares your choices of pre-paid tuition, Coverdell ESA, and the 529 plan. From the article, "Due to the higher contribution limits and favorable financial-aid treatment, 529 savings plans are the best deals for most people."
  
  
10. Donate it to charity.
• Lastly, donating to charity can be a worthwhile cause. There are many charities to contribute to, including your local church, scouting troops, or the university you attended. As I mentioned in an earlier post, I am contributing to a memorial fund for a fellow airman.
  

Whatever you do, please be wise with your money and do not fall for places like this. And if you need to cash your check, Wal-Mart will do it for free.

Frugal Resolution of the Week

So I decided to start doing this thing I invented called Frugal Resolution of the Week, or FRoW. Each week, I'm going to try and find a way to reduce my expenses. Hopefully these small changes will begin to accumulate in big ways. My FRoW this week is to stop buying drinks. I'm referring to drinks such as Diet Coke or Iced Tea, not alcohol. If I did drink alcohol, I probably would have started with that since alcohol at Bars and Restaurants tends to be very expensive. But normal drinks are very expensive too. According to Cheap Eats, "fast food companies clean up on the margins for soft drink sales." And besides, water is healthier for you anyway. I know drinking only water can get boring, that's why I picked up some Wal-Mart brand drink powder that comes in little packets. I plan on carrying my water bottle when I'm at work and using the drink powder to add some variety. I got sugar-free apple juice and sugar-free cranberry apple juice. I believe drinking water when I go out will save me about 15-25% since I usually spend less than $10 and drinks tend to run about $1.50-$2.00.

Get $25 for Free

You may have noticed the links on the right side for ING Direct. ING Direct is the primary bank I use for my savings goals. When I first started saving aggressively, they had an amazing 5.5% interest rate. While they still have a competitive rate, it is much lower now due to the Fed cuts and overall condition of the economy. Despite that, I still believe ING Direct is one of the best banks out there for your savings. They have a top-notch, simple to use, web interface and great phone support. They also have a couple of ING Direct cafes which are cool places to stop by. They often run free seminars there and I can vouch that they are fun and informative. So here's the deal, if you use the links on the right side to open a savings account with $250 or more you will get a $25 bonus deposited into that account and I'll get $10. There is no commitment to keep your $250 in the account after you get the bonus (which takes about 2 weeks). You could look at it as getting a guaranteed 260% APR. And here is ING's pitch...

If you open this account with an initial deposit of at least $250, you will receive a $25 bonus to get you started and I will get a $10 thank you bonus. To qualify for this bonus, you must use the link in the right hand column.

Industry and Frugality thinks you'd like to make your money work harder by opening an Orange Savings Account with ING DIRECT! And, if you open your account with an initial deposit of at least $250, you'll get a $25 bonus to get started and Industry and Frugality will get a $10 thank you bonus. Simply use the link in the right hand column to qualify for the bonus.

The Orange Savings Account

• Great rate - no minimum balance required. Everyone earns the same high yield.
• No fees - your money goes to work for you.
• No changing banks - the Orange Savings Account is linked to your checking account.
• 24-hour access to your account - you're always ready for opportunities.
• FDIC-insured - your money is safe and secure.

In closing, let me just reiterate one thing. This is the bank I actual use for all of my savings. I am not trying to push some lousy company just for a $10 bonus. The $10 bonus is nice, but I do believe in this product and service.

Win a House and 2 GMC Yukons

Everybody loves free stuff, and the ultimate free thing would have to be a decked out house with a new car. Every year I enter the HGTV Dream Home Giveaway religiously. I've never won, but I still persist. This year, however, HGTV is also running a contest for the Green Home. This is a very nice home, but no where near the price of the Dream Home. I would actually prefer to win this home because the associated taxes and upkeep expenses are much more manageable. The cool thing about the Green Home is that it is energy efficient as well, saving the winner even more money. The Yukon that comes with it is also a hybrid. Although the hybrid Yukon still isn't really all that efficient, the Yukon is sweet ride. After you enter for the Green Home (which comes with a Yukon), you get a second opportunity to enter to win a Yukon from GMC. Well, Lowes is running a contest as well, which gives you a third way to try and win that Hybrid Yukon. So what are you waiting for? Go win something! :) *Note: There are only 5 days left on the HGTV contest.

Economic Stimulus Rebates

You may have heard that the economic stimulus rebates are starting to hit bank accounts across America. If you have received yours yet, this may explain why. The IRS is sending out the rebates to those who chose direct deposit for their tax returns first. After May 16th, the paper checks will start to arrive. The time frame is broken down even further according to your social security number. To see your expected time frame, check out this page from the IRS.

If you are wondering if you're even eligible for the rebate, an answer from the IRS FAQ may help:

"If you had a net income tax liability for 2007, you will generally receive a payment, unless you can be claimed as a dependent on someone else’s return, had higher income or do not have a valid Social Security number."