Book Summary: The Index Card

My fourth book summary this year, one of the most useful, simple, and straightforward personal finance books that I read over the years.

The book was born out of an interview with Harold Pollack, where he mentioned that the correct personal finance advice for most people is simple and fits on a 3x5 index card.

• Save 10 to 20% of your money. Know where your money is going. Make it your first priority to set money aside for emergency fund (3 -6 months of your living expenses): medical, car service, heater broke, etc. One way to cut spending is by using cash instead of card or electronic payment. 

• Pay your credit card balance in full every month. 

• Max Out Your 401(k), never forgo the employer match. Don't count on working forever. After your emergency fund, saving for retirement is the most important savings. The younger you start, the better off you will be. If one start at 25 saving $104 every month for forty year with 6% annual return the person will have about $200,000 by age 65. To accumulate the same $200,000 at the age 45, you will need to put aside $430 a month. 

• Next step is college fund saving. There are two ways: Coverdell Education Savings Account and 529 plan. 

• Invest in low-cost index funds instead of buying or selling individual stocks then buy and hold them for the long haul. Even Warren Buffett suggest this to his children, "A very low-cost S&P 500 index fund." 

Summary of The Little Book of Common Sense Investing

One of my goal in 2019 is to sit down and write summary of one book I read in that particular month. I was about to blog about Michael Hyatt's book: Your Best Year Ever but ended up finishing this one first. I have been a big fan of John Bogle and his Vanguard index fund. Thanks to him we managed to avoid the high cost mutual funds. However, we do need to be reminded from time to time to simplify our portfolio and focus on passive index fund investing instead of active trading.

The Little Book of Common Sense Investing

John C. Bogle

“My advice to investor is to ignore the short-term noise of the emotions reflected in our financial markets and focus on the productive long-term economics of our corporate businesses.” John Bogle

Commonsense investing strategies:

1. Invest at the earliest possible moment, and continue to put money away regularly from then on.
2. Investing entrails risk, but not investing dooms us to financial failure.
3. Risk of selecting managers and investment styles, can be eliminated by choosing classic index fund.

Buying Car with Cash

I seldom post about Financial but recently I read an article on Costco Magazine that got my attention.

A reader asked Suze Orman this question on the Personal Finance section:
Regarding purchasing a car should I:
a. Buy a $33,000 car new with 0% interest over 5 to 6 years, with 50% down payment?
b. Buy new using a home equity loan, with an interest rate of 3 to 4 % with the same down payment? Or
c. Buy used with the same down payment?
Which option saves me the most money and/ or costs me the least? 

The question puzzled me because 50% down payment of $33,000 = $16,500. I wonder if the person realizes with that amount, he/ she can buy a used car with cash. In fact, that's over the amount we paid for our then five-year-old van, which would cost us over $30K if we bought a new one. For further reading, here is a great article titled: 6 Reasons to Buy a Car with Cash.

Turned out Suze Orman agrees with me. At the end she wrote the statement below that summed up her answer:

Lesson learned: Do not withhold good and we cannot outgive God

Three years ago around this time of the year, we visited a family friend who were in need. Coming back from their place, Chris told me, "I think we should write a check for them... this much". Deep in my heart, I agree that's what we're called to do. However, I was hesitate. As the finance person in the family, who write the checks, make sure we live below our means, give as we are supposed to and so on, money was little tight at that time. We were just switched to 15 years mortgage from 30 years one.  Besides, it's the end of the year and we already gave our portion.

Tax Filing Made Easy

During this time most people in the U.S. are usually working or finished their yearly tax filing. I wrote the list below a little while ago so I thought it's good time to post it now in case any of you need a little direction or encouragement on working on your tax.  How to get your tax done faster: 1. Set a dateline then tell someone about it and have him/ her keep you accountable. My patient husband usually give his wife until the end of March before he start asking hourly, "Have you start working on our tax yet?"

2. Over the years, label and keep financial docs in appropriate folders. Above is the picture of  how I organize ours. Keep tax documents (W-2, 1098, 1099, and so on) on separate folder. In case you are interested on the past I wrote how we eliminate paper clutters.

No One Ever Told Us That: Money and Life Letters to My Grandchildren

I found this book on the library's "new books shelves". Chris and I have been reading it together. Although we don't agree with the author on all points, we enjoyed the stories, humor, and advises.

Some points the author shares on his book:

- The unusual aspects of your lives can open doors. Burn no bridges

- Fears and greed rule the markets. Own of what you know and understand.

- Debt can be a killer. Stay out of it!

- Never turn over important financial decisions to lawyers or accountants, unless they can explain what you are about to do in simple English paragraphs. Too many people nod their heads in agreement to people advising them, with no clue to what they are actually saying.

- Make it personal and it can resonate for years. People never forget simple acts of kindness, done in a very personal and old fashion way. E-mails and text-ing will never grab you by the heart in quite the same way.

- Deal with mistakes quickly! Meet your problems head on and get them behind you, you will feel better and learn something in the process. And people will respect your honesty.

- Never be intimidated by people with graduate degrees.

- Do not be headline reader meaning never being whipped into an emotional frenzy by what the media trumpets to us on a daily basis. To manage your money well you have to think long term, years. Don't pay attention to negative energy. Whatever your dream is, go for it.

- "What about family business?" My answer: Make your own path in life, avoid the baggage, the politics, the infighting of family affairs. Love your family but don't let them suck oxygen out of you. You deserve honesty from me.

- There are people you cannot save from themselves. Know the downside about relationships that sap your energy, pocket book, and can be beneficial to your mental health.

- Never bet the ranch on someone else's dream. No one is going to make you money except you.

- Due your due diligence. Don't trust a firm handshake and a look directly into your eyes. Do your homework on anyone who is anxious to work for you. Trust, but verify.

- Stay in touch with the people from your past. It's people who make life extraordinary. Not things.

10 Things We Don't Buy/ Pay

The Money Saving Mom and The Frugal Girls recently posted 10 things they don't buy or pay for. I thought it's interesting so I post ours as well. Please don't feel guilty if you chose to buy any of these. We splurge on some other things too.  

Our list of 10 Things We Don't Buy/ Pay:

1. Cable TV, Netflix subscription.  The free basic channels is sufficient for us and once in a while we rent $1 {correction: I heard that it's $1.20 now?} DVD through RedBox.

2. Credit card interest. We use credit card but we always pay it full at the end of the month. Can't wait for the day when pay off our mortgage so we no longer have to pay mortgage interest.

3. Bank monthly fee. Most bank usually have limit of how much we should have in saving/ checking in order to avoid monthly fee.

4. All purpose cleaning spray and cleaning wipes. I made my own all purpose non toxic cleaner and use it with rags instead of using cleaning wipes. 

10 Things We Spend Extra Money

A few months ago, Dave ramsey posted 7 Items that he thinks worth to spend a little extra. I found it to be interesting. For us, here are 10 things that we thought worth to splurge or spend a little extra money on:



1. Food. Thanks to my healthy neighbors' influence, we've been buying more organic local produces from the farmer's market. For the meat, we like to buy in bulk from Costco then divided them into small portions in ziplock bags.  

2. Quality clothing. I used to buy only cheap or on sale clothing items until I married Chris. Over the years I learned that it's better to buy a few but good quality (within budget) clothes that I use often rather than low quality that wears out too soon.

My Favorite Personal Finance Blogs

I want to share two of my favorite personal finance blogs: http://christianpf.com and http://www.biblemoneymatters.com. There are probably thousands Personal Finance blogs out there but I only subscribe to these two on my google reader.

My favorite posts from Christian PF are:
15 Ways To Cut Your Expenses
5 Bible Verses About Money Every Christian Should Know

And from Bible Money Matters, I especially like his detail review on Dave Ramsey's Financial Peace University: http://www.biblemoneymatters.com/2008/10/fpu.html


May you find this to be useful!

Jehovah Jireh - My Provider

I owe this post to God. I don't know why I kept postponing in writing this. Maybe because this is about money and I'm not comfortable talking about it... maybe because I don't want people to judge me (but I already put myself for others to judge me when I put this blog for public :P) or think that I'm boasting... but God reminded me that I need to write this to give Him the glory and credit that He deserves. So here we go...

The other day during our mommies small group, one of the moms shares how she worried about their family tight budget once she leave the workforce to take care of her child full time. God then reminded me that I need to share how He provides for us.

Personal Finance 101

I read many personal finance books (thanks to public libraries :)) but oddly never came across Dave Ramsey's books 'till about two years ago. Many Americans are in debts due to living above their means. Thanks to our parents who generously support us through college, we don't have any debts or loan except for our mortgage. Still, living in Silicon Valley where things especially housing is super duper expensive, encourage us to manage our money wisely otherwise we will be drowning in debt.

Total Money Make Over is one my favorite personal finance book. Other books that I found to be useful as well are:



Dave Ramsey's Financial Baby steps, which basically function as financial map that way we know the way or steps to our destination.

1. Build up a $1,000 emergency fund.

2. Pay off all debt from the smallest to the largest. Personal finance is 80% behavior and only 20% head knowledge. When you start seeing the traction and progress you're making you get excited and more focused and start really attacking the debts which result in getting out of debt quicker. Paying only cash for cars not only to stay out of debt but also to avoid the beating in value you take when driving the car 10 feet off the lot. After paying off all consumer debt not including the house if a home is owned.

3. Increasing the emergency fund to 3-6 months of expenses. This emergency fund should be placed in something that's extremely safe such as a money market or savings account. In case of losing a job you would have a solid 3 to 6 months to look for one without the pressure of paying bills with no income.

4. Investing in a retirement plan through work if they match a percentage of your contribution and then through a Roth IRA. If there is no matching from the employer in a 401k, 403b, or TSP, you would start with the Roth IRA which grows tax free. Using mutual funds with solid 10 year track records is a great diversified investment strategy for a retirement account. One would also want to spread money around to various mutual funds such as a growth & income fund, an aggressive fund, an international fund, and a value or balanced fund. The goal is to invest 15% of a paycheck into retirement.

5. Funding education for children through a couple Education Savings Account (ESA) or a 529 plan.

6. After all 5 of these steps are in order, the next step is to pay down the house as quick as possible.

7. Once the home is free and clear, you win and have true financial peace. At this point, you invest in 100% paid for real estate as well as continuing to invest and give lots of money away.
Happy callers on Dave Ramsey show:

This one is so funny. One family makes this video after they pay off their debt:

Retailer Tricks

Taken from: http://www.fool.com/personal-finance/saving/retail-tricks-that-make-you-overspend.aspx

Written by Dayana Yochim

1. You owe me one

When marketers tap into our natural propensity to return a favor, the money flows. That's how Tupperware-party participants get swept up in a buying frenzy.

Bob Cialdini, professor of psychology and author of Influence: Science and Practice, calls this strategy "reciprocity," and he illustrates how powerful it can be in practice. When the American Disabled Veterans organization sent out its standard solicitation, it got an 18% donation-response rate. When customized address labels were added to the packet, the contribution rate jumped to 35%. "They become benefactors before they make a request," he says. "I've gotten this gift with my name on it. As soon as I begin to use it, I feel obligated to say 'yes' to their request in return."

2. Buy now or regret later
Flea-market shoppers must make split-second buying decisions. Savvy mass marketers also play on shoppers' limited-time-only emotions to encourage unplanned purchases.

Costco CEO Jim Sinegal revealed how the warehouse chain takes advantage of that mindset. "We refer to it as a treasure hunt. We carry about 4,000 stock-keeping units, and about 1,000 of them are constantly in that changing mode. In the past, you may see that we have some Coach handbags. The next time you come in, the Coach handbags aren't there, but perhaps there are some Fila jackets. The attitude is that if you see it, you have got to buy it, because it may not be there next time."

3. Tears cloud your cash decisions
Jennifer Lerner, Ph.D., assistant professor of social and decision sciences and co-author of the study, explained that when people are disgusted, they want to get rid of things and avoid acquiring new things. Sadness, however, drives us to change our circumstances. "It's out with the old, in with the new," she says. But in pursuit of "the new," our unhappiness dulls our ability to assign an accurate value, and we are more likely to pay a premium for replacement items. In other words, don't shop on an empty stomach, or after watching Terms of Endearment.

4. More is better, and cheaper ... right?
Ah yes, the 24-pack of tuna and 280-ounce bag of gummy bears -- tempting, indeed. We haul home so much industrial-sized stuff that we should be charging it rent. Just remember, too much of a good thing can actually be a bad thing. The next time you see a supposed "deal" on something that is not an immediate need, ask yourself:

• Is it really a deal? Meaning, do you know the prices on similar products elsewhere, and recognize when the price you're seeing on the item really is a rare bargain? Pay particular attention to higher-dollar items like cleaning products, Brita water-pitcher filters, dog food, or whatever it is that tends to comprise the bulk of your grocery bill. You'll drive yourself crazy trying to sweat all the small stuff, so concentrate instead on big-ticket savings.

• Do I really need it -- now or later? It's easy to convince yourself that you absolutely cannot get by without the shredded Swiffer thingie that looks like an old-fashioned duster. (Somehow I've managed to make do without it for this long.) However, particularly while warehouse shopping, you're likely to run across items you know will come in handy a month or two down the road. In that case, stockpiling is fine, so long as you don't forget about those three tubs of peanut butter already in your pantry the next time you're at the grocery store.

Now you know how to spot retailers' mind games. And the next time feelings start invading black-and-white money matters, you'll be better prepared to decide what's ultimately best for you and your bottom line.

Frugal Lesson from a billionaire

Chris drives a 16-year-old-car & I drives a 13-year-old-car. Both of them still run well and we are not planning to replace them anytime soon; well at least 'till they start to give us problem. Thanks to this article whenever we are tempted to think about getting a nicer/ more comfortable/ bigger car, all we need to say to each other is, "Remember what car the Ikea founder drives?" :P

IKEA founder proud to be frugal at 80
Taken from reuters.com article on 2006-03-27 09:16

IKEA founder Ingvar Kamprad, ranked 4th richest man in the world, drives a 15-year-old car and always flies economy class, in part to inspire his 90,000 employees worldwide to see the virtue of frugality.

The billionaire Swede, who turns 80 on March 30, explained his legendary habits during a rare television interview in Switzerland, his adoptive home for nearly 30 years.

His fortune was recently estimated at US$28 billion by Forbes magazine -- trailing only Microsoft co-founder Bill Gates, U.S. investor Warren Buffett and Mexican industrialist Carlos Slim.

"People say I am cheap and I don't mind if they do. But I am very proud to follow the rules of our company," Kamprad told French-language Swiss Broadcasting Corporation.

Asked to confirm he drove an old Volvo, he said: "She is nearly new, just 15 years old, or something like that."

Interviewer Darius Rochebin teased that Ikea employees were always told to write on both sides of the paper.

"Why not? If there is such a thing as good leadership, it is to give a good example. I have to do so for all the Ikea employees," Kamprad retorted.

"Everything we earn we need as a reserve. We have to still develop the IKEA group. We need many billions of Swiss francs (dollars) to take on China or Russia," he added.

Ikea is the world's biggest furniture retailer, with 202 stores in 32 countries.Known for its inexpensive self-assembly furniture, the business claims its hefty catalog is the most widely read publication after the Bible.

The small-town Swede set up shop in his garden shed, selling watches, pens and Christmas cards.
"I bought seeds for the garden and had great success with it, going around to all the houses in my village. After that year I could buy myself my first bicycle," Kamprad recalled.

When Sweden's Social Democrat government launched the "Million Homes Project" in the 1950s, he saw an opportunity and got into the furniture business.

He stumbled upon the "flat-pack" idea in 1956 when an employee took the legs off a table to fit it into a customer's car. It saves a fortune in transport, storage and sales space.

"Our idea is to serve everybody, including people with little money. We have to keep costs down," he said.

His home in the Swiss village of Epalinges near Lausanne above scenic Lake Geneva is mainly decorated with Ikea furniture, apart from a few family pieces.

Last week he made a donation of 500,000 swiss francs ($379,900) to the Lausanne cantonal art school, where his son studied.

"I'm not afraid of turning 80 and I have lots of things to do. I don't have time for dying," Kamprad said.

Organize Your Financial Documents

I learned this tip on organizing our financial documents from this book:

First, get at least 13 hanging file folders—12 if you don't have children—and file folders to put inside of them. Label the 13 hanging file folders as follows:

1. Tax Returns: Put eight file folders here, one for each of the past eight years. Label each file by year and put all tax documents such as W2s, 1099s and especially copies of tax returns you filed. As a rule, you should keep old tax records for at least seven years in case the IRS audits you.

2. Retirement Accounts: Keep a separate file folder for each retirement account you or your partner have: IRAs, 401Ks, and review your investment options annually.

3. Social Security: Put your most recent Social Security Benefits Statement in this file folder. If you haven't received one by mail, visit www.ssa.gov to request one online.

4. Investment Accounts: Put the statements you receive for individual and joint investment accounts that you and/or your partner have that are not for retirement in separate folders: mutual funds, brokerage accounts, or individual stocks.

Order From Chaos

I was about to post about "organizing financial documents" as part of the Personal Finance series that I promised to write. However, I remember learning about personal organization first before I organize my finance so that's the reason I want to share about this book: Order From Chaos by Liz Davenport. I read many organizing book and this is the one that I found to be the most helpful. I maybe a clean freak but I'm not a neat person by nature like Chris. Having an unclutter space was one of few things that make my dear husband happy besides food and ehem. ;)

Why Get Organized?

The average business person receives 190 pieces of information each day. The average businessperson wastes 150 hours each year looking for stuff.

On her book, Ms. Davenport list down Six-Step Plan for organizing yourself, your office, and your life. This is my very short summary from the book.

Borrow one from the library or click at the link below to buy the book from Amazon:

Step 1: Create Cockpit Office/ your working station, where only essential tools necessary to do your work; the “now,” “happening,” kinds of things, not old, or important things but not used.

I remember it took me days to clean up, sort out, and organize our working station. Now, everything we need to work is at our fingertip.

Personal Finance

A sister of mine asked, "How do we handle our finance?" And I puzzled as I don't know where to begin to answer that question. I learned throughout the years from books, websites, others, and then figured out (sometimes through trial & error) what works or doesn't work for us. Her question brought me to write this posting (hopefully the first of series of posts on money management/ personal finance matter). As I told my sister, I'm not a financial expert so many others should have better answers. I'm just sharing our personal experience of what we've learned and work for us. Hopefully, it will be a help for some or at least help others to avoid the same mistake that we made.

1. Husband and wife need to communicate openly and be on the same page regarding financial matters.

Lesson from The American Cheapest Family

I've been reading this book lately: "The American Cheapest Family". I watched the family being interviewed on the news one day for their frugal lifestyle. Turned out they wrote a book so being a frugal one myself, I opt to borrow the book from the library instead of buying it. :P Below are some of the useful lessons I got from the book:

Attitudes: Our attitudes affects everything we do. Developing a frugal attitude and mind-set takes time.
a. Contentment: Learning to love your life
- Don't look into others' people "bag of life." When we focus on what we don't have, what we do have seems blase, worthless, and undesirable.
- What do I really need?
- Real needs bring on real creativity: asking other for help, borrowing an item, buying used merchandise, or waiting for a while
- The Maximum Lifestyle: by establishing a limit on the size of our house, spending on a car, food, clothes, & other things -> minimizing our discontentment -> gratefulness & contentment.

b. The Cheapest Family attitudes on money:
- To avoid debt like a plague
- To live below your means
- To never pay retail if at all possible;
- To plan & save in advance of all purchases;
- To realize that there is always someone who wants to get rid of the very thing that we need- find the person and we will find a deal. It's even easier now with craigslist.org

Our Update

Photo taken from flickr

It's been a while since I write our update, real update not just pictures, readings, etc...
Let's see where should I start? My mom is coming in two weeks. Wooohooo. I can't believe my ears when she said that she will be here for 1 month. She was here only for 2 1/2 weeks last year when I gave birth to Max. You see, my mom works all the time. We have a nanny and grandma taking care of me and my 3 siblings when we were little. So... we're so excited and thankful that my dad let us borrow her for a while. Thanks Dad!

Next, Chris will start his new job in two weeks. We're so grateful about this. Thank you for those of you who have been praying for us. We truly appreciate it. The company where he works filed for bankruptcy back in January when we were in Indonesia for vacation. That was the reason we decided to come back earlier than schedule besides Max kept getting sick. Interestingly, in here when companies went bankrupt, they still function as usual since they still have to deliver their product and service to the customers. Eventually, the company will be sold but in the mean time, they try to cut expenses and lay off as many people as possible. Chris was working on an important project so he was able to stay.

Not Forgetting the offering

I cried when I read my devotional today
Taken from this book:

This is my favorite devotional book out of many. What make it so special is the fact that it's written by missionaries from around the world who live the passionate, courageous life Jesus challenged all of us to live.

Written by Gaye in West Africa

"A poor widow came and put in two very small copper coins, worth only a fraction of a penny. Calling his disciples to him, Jesus said, "I tell you the truth, this poor widow has put more into the treasury than all the others. They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on." Mark 12:42-44

As my truck pulled up to the tiny church in a remote village, women began to gather. We soon filled the mud structure where it was dark inside. Logs lay in rows to provide seating on the dirt floor. Most all the women had babies tied to their back and had already hauled water and wood, cooked a meal and walked several kilometers to the church. I stood by the one window cut into the the mud wall to be able to read the Scriptures.

Giving

Lesson from small group yesterday as we learned from Andy Stanley's lesson on Creating financial margin. One of the most important things that I learned was to give with child-like attitude. Andy told us the story when he taught his kids about managing their money: giving 10% of to God and saving the other 10% in saving and then they can use the rest for themselves. The children replied were: "Really???... I got to keep the rest while God only get 10%?"
How many of us as adults have the same attitude?