Replacing a Leased Vehicle The Dollar Stretcher by Gary Foreman I have a 4 year-old Toyota 4Runner with 33,000 miles that will be at the end of the lease next July. I have never had any problems with the truck and I would love to keep it, but it would cost approximately $17,000 at that time and I will only be able to pay $4,000 in cash. Is it smarter to finance $13,000 on a lesser vehicle that is brand new or only slightly used with a warranty? I have checked into financing the $13,000 for 36 months and can afford to make those payments but that will mean paying for this vehicle for 8 years, yuck. I knew this was a mistake from the moment I did it, but now I have to get out. Thank you. Jill Jill is right. When she signed the lease three years ago, she set herself up for this problem. Leasing is attractive because allows people to drive cars that they really can't afford. That's because you're only paying to use the car. During the course of the lease you build no equity in the car and have to return it to the dealer at the end of the lease. Using Kelley's Blue Book (www.kbb.com) for pricing info, we found that a 4Runner depreciates nearly $12,000 in the first four years. That's the portion that Jill was paying for. Unfortunately for her, the first few years are the most expensive years for any vehicle. That's one reason dealers push leases. It is very profitable business for them. Jill has four basic options available to her. She can buy a new car, lease a new car, buy a used car, or buy her existing 4Runner. Let's look at each choice. Buying a new car will be the most expensive option. A new car will mean the highest yearly depreciation and the highest monthly payments. But, the biggest advantage is that once the car is paid for it belongs to Jill. Once she's finished with the payments she can drive the car payment-free for as long as she likes. She'll also have the benefit of the new car warranty. If Jill chooses to buy a new 4Runner or similar vehicle, she'd be borrowing $25,000 ($29,000 purchase minus $4,000 down payment). On a four year loan the average payment would be $588 per month. That means that the new car payment is nearly 50% higher than the used car payment. And she'd have an extra year's worth of payments on the new car. A sharp dealer could reduce Jill's payment on a new car by showing her a 6 year loan. That would reduce her payment to $403 per month. Basically the same as the used car payment. But, that would mean paying over $4,000 in interest over the life of the loan and making six long years of payments. Another new car option would be to buy something less expensive, like a Toyota Carolla. For $17,000 (the same price as her used 4Runner) she should be able to get good, reliable transportation. Plus have the warranty. Leasing a new car would get her a lower payment. But, after a few years of lease payments she'd be right back where she is now - without a car. Buying a used car would keep her payments down and allow her to own a vehicle once the payments are complete. If Jill finances $13,000 on a used car or buys her present 4Runner (figuring $17,000 purchase price minus $4,000 down payment) her monthly payment would be $401 for 36 months. The disadvantage, as Jill pointed out, is that she could be making payments on a 7 year-old car. But, at the end she'd own a 4Runner worth over $11,000. And, if she were worried about repairs she could buy a 4-year extended warranty for about $1,000. Probably the best long-term choices for Jill would be to buy her 4Runner or to find a used vehicle. The payments are affordable and she will own her vehicle when they're done. With her 4Runner she'd be buying a used car that she's very familiar with. It is also a car with lower than average mileage. If Jill decides to buy her car she can negotiate with the leasing company. Depending on the circumstances they may be willing to let her buy the car for less than the price in the original lease agreement. Ultimately Jill needs to decide how much she enjoys that new car smell and the comfort of a new car warranty. The safest financial deal would be to buy her leased truck or a similar used truck depending on where she can get the best deal. Next best would be to buy a less expensive new car. No matter what she decides we hope that she enjoys many trouble-free miles. Gary Foreman is a former financial planner who currently edits The Dollar Stretcher website and newsletters. You'll find thousands of articles to help you stretch your day and your dollar. Visit today! Permission granted for use on DrLaura.com More >>

Teaching Your Children the Value of Saving and Investing by Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFPreg; www.WIFE.org www.MoneyClubs.com Ask savvy investors how they learned their first lessons about money, and they#146;ll probably tell you lessons their parents taught them. The money values we learn as children stay with us the rest of our lives. If you are a parent, teaching your children the value of saving and investing will benefit them the rest of their lives. Here#146;s what you can do: Help your child begin to save. Open savings accounts for your children, and teach them how the bank adds interest to their savings that makes their money grow. Encourage your children to save a little from every bit of money they receive, such as allowances, birthday gifts, etc. You may even want to set up a matching program, contributing fifty cents for each dollar your child saves. Teach your child about stocks. A child in elementary school can start learning about how businesses work. Once your child understands the basics, ask her to think about some of the businesses that might be good stock investments. Then use Morningstar Mutual Fund Guide (available at your library) to find a quality mutual fund that holds some of these companies, or a mutual fund that caters to children such as the Stein Roe Young Investor fund. Many funds accept regular monthly investments as low as $50 a month, so these funds can be a good way to teach children about the stock market while saving for their college education. Encourage early IRA saving. The new Roth IRA is a great way for children who are working summers or after school to begin saving for their future. Imagine how much money you#146;d have today if you had saved $3,000 a year since you were a teenager! Let your kids handle their own money. We all learn by doing, so letting your kids manage a segment of their budget will let them learn valuable financial lessons. They may make mistakes, but they will be small mistakes that may help them avoid larger mistakes as adults. Cofounders sixteen years ago of the nonprofit Women#146;s Institute for Financial Education ( www.WIFE.org ) and the new MoneyClub for women ( www.MoneyClubs.com ), Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFPreg; are trusted financial guides for millions of women. As owner of her own investment management firm, Candace was recently recognized as one of the top ten brokers in the country for 2003 by Registered Rep magazine. Ginita has been named to Worth magazine#146;s Top Financial Advisors for seven years. Both authors are nationally-recognized experts on women and money and regularly appear on CNN and CNBC and in national financial and women#146;s publications. This article is excerpted from their new book It#146;s More Than Money#151;It#146;s Your Life! The New Money Club for Women (John Wiley, 2004). Permission granted for use on DrLaura.com. More >>

10 Sweet Ways to Say "I Love You" -- on the Cheap by Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFPreg; www.WIFE.org www.MoneyClubs.com Leave him a love note in his lunch box. Put wildflowers for him on the breakfast table. Call him at work and tell him to come home for an emergency--you. Show up at his work with a picnic lunch in hand and a private spot in mind. Don't ask him to do a single thing around the house for an entire week. Wow! Write 30 reasons why you love him on 30 different pieces of paper, one for each day this month. Meet him at a bar and flirt. Take him out for ice cream. Go out together, alone, for a long walk or to see the sunrise or sunset. Say those three little words: "I love you." Just do it. Cofounders sixteen years ago of the nonprofit Women#146;s Institute for Financial Education ( www.WIFE.org ) and the new MoneyClub for women ( www.MoneyClubs.com ), Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFPreg; are trusted financial guides for millions of women. As owner of her own investment management firm, Candace was recently recognized as one of the top ten brokers in the country for 2003 by Registered Rep magazine. Ginita has been named to Worth magazine#146;s Top Financial Advisors for seven years. Both authors are nationally-recognized experts on women and money and regularly appear on CNN and CNBC and in national financial and women#146;s publications. This article is excerpted from their new book It#146;s More Than Money#151;It#146;s Your Life! The New Money Club for Women (John Wiley, 2004). Permission granted for use on DrLaura.com. More >>

Cutting College Costs by Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFPreg; www.WIFE.org www.MoneyClubs.com If you have children, chances are that providing a college education for them is high on your list of goals. With the cost of tuition, fees, and room and board for four year at a private university averaging $108,000 and state school costs averaging $42,000 for four years, it#146;s no wonder parents are in a cold sweat. Those figures can really hurt your pocket book. At this point, you might be saying, #147;Why bother? I#146;ll never be able to save enough.#148; But ignoring the problem won#146;t make it go away. There are lots of ways you can conquer the education cost woes. Here are a few: There is $100 billion of financial aid distributed to students in the form of loans, scholarships and grants each year. Be sure you get your share. Many scholarships are not based on need. For example, merit, athletic, and music scholarships are often available to students who excel in those areas. Apply to a variety of colleges. Aid packages can vary significantly from school to school. Negotiate. If you are not satisfied with the aid package a school offers, talk to the university. Start your child at a community college. Two-year colleges are a lot cheaper than four-year universities, especially since most students live at home while attending. First, however, your child should determine which four-year college he/she will transfer to and make sure that all credits from the community college are transferable to the four-year college. Encourage your child to accelerate his/her studies by taking some summer classes or extra credits throughout the year. It#146;s possible to finish a four-year degree in three years. That means considerable savings for you. Take advantage of the latest tax breaks. The Hope Credit gives you a 100% tax credit for $1,000 of tuition and fees for junior#146;s first year of college, and 50% of $1,000 for the second year. The Lifetime Learning Credit gives you a 20% credit of up to $10,000 of tuition for you or your child. There are income limitations, so be sure to check with your tax advisor to see if you qualify. The best thing to do is plan ahead. Remember, with financial aid and scholarships, and plain old working-your-way-through-college, the costs don#146;t have to bury you. Cofounders sixteen years ago of the nonprofit Women#146;s Institute for Financial Education ( www.WIFE.org ) and the new MoneyClub for women ( www.MoneyClubs.com ), Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFPreg; are trusted financial guides for millions of women. As owner of her own investment management firm, Candace was recently recognized as one of the top ten brokers in the country for 2003 by Registered Rep magazine. Ginita has been named to Worth magazine#146;s Top Financial Advisors for seven years. Both authors are nationally-recognized experts on women and money and regularly appear on CNN and CNBC and in national financial and women#146;s publications. This article is excerpted from their new book It#146;s More Than Money#151;It#146;s Your Life! The New Money Club for Women (John Wiley, 2004). Permission granted for use on DrLaura.com. More >>

Comparing Options by Gary Foreman The Dollar Stretcher www.TheDollarStretcher.com I would like to know if it would be unwise to stop my 401k contribution for the next 1 1/2 to 2 years and use the money instead to pay off unsecured debt and student loans? After I pay my bills each month and allocate budgeted dollars for groceries and gas, I'm lucky to have $50 leftover for debt repayment or savings. About $400/month goes into my 401k, and it is currently valued around $40,000. I'm 29, married (stay at home spouse), and have a 15 month old daughter. We really want to get out of debt quickly, I estimate that my regular monthly payments, plus a booster payment of $400/month will pay it all off in 2 years. After that, we want to own at least 75% of our home in 10 years (we have a 30 year mortgage). Amy We will all face questions similar to Amy's. And sometimes it seems like we're trying to compare apples to oranges. It's hard to even know where to begin. On a basic level, she's right that the first step to a good financial future is getting out of debt. Even if that means delaying saving for retirement. Paying interest on borrowed money will make it harder to accumulate assets. That's not to say that she shouldn't save any money for retirement until all of her debts are paid. But paying off high rate credit cards should be a priority. There is some risk to paying off debts first. Some people are perpetually in credit card debt. And if they wait to save for retirement they might never get started. But Amy appears to have the necessary discipline to pull it off. A second way to look at the question is mathematically. Often that's the best tactic. The trick is finding a way to compare the different options that you're considering. In this case Amy is really asking about her net worth three years from now. Remember that increasing assets or reducing debts improves your net worth. She can use one of the calculators that are available to determine what will happen to the two accounts under different circumstances. One of my favorites is at Bankrate.com . Her goal is to figure out what the amount due on her credit card and what her 401k balance will be in 3 years. Amy will be creating two different scenarios. In one she'll stop contributing to the 401k and use $400 to pay off debts. In the other, she'll continue to contribute to her retirement and only pay off $50 per month. Try to make the comparison as neutral as possible. The assumptions that you make in creating the examples can predetermine the outcome. Especially in longer time periods. To really do it right, she should take the balances under each scenario and calculate what her net worth would be. If that's too complicated, then simply compare the amount of debt paid off vs. the amount her 401k would increase. Even if she doesn't have access to a computer a simple comparison can be created using a calculator. To estimate how much debt is to be paid off she'll need to create a list with 4 columns. The first column is for the beginning credit card balance. To that she'll add the second column which shows the amount of interest owed for that month. She can calculate that from the amount owed multiplied by the annual interest rate being charged divided by 12. From that total she'll subtract column three which is the amount of the payment for the month. The result is column 4 - the ending balance. Which naturally is the beginning balance for the next month. A second table can be created for the 401k plan. The first column is for the beginning balance. To that will be added the second column (investment earnings) and the third column (new contributions). The total will be the ending balance in column 4. And, once again, the ending balance from one month will be the beginning balance of the following month. Don't forget to include any employer matching contributions. They can make a big difference in your account growth. She can compare the results to see which would work better for her. One other thing for Amy to consider. Both of her choices are good. One might be slightly better than the other. But either one is better than doing nothing. Doing nothing is the worst choice that she could make. Gary Foreman is a former financial planner who currently edits TheDollarStretcher.com website and newsletters. You'll find thousands of articles to help you stretch your dollar and your day! Permission granted for use on DrLaura.com More >>

Enough Auto Insurance? The Dollar Stretcher by Gary Foreman gary@stretcher.com How do you figure out how much car insurance you really need???? I would appreciate any help in this area. Thanks. Debbie Debbie asks a good question. If you buy too much auto insurance you're wasting money. But if you buy too little, you could have a very serious problem down the road. And, to complicate matters, the answer isn't the same for everyone. Not only will our need for insurance change as we acquire wealth, but even the value of the car we drive makes a difference. Let's begin by understanding the purpose of insurance. And that's to pay for financial commitments that you can't handle yourself. In this case, commitments that come from accidents involving your car. Generally drivers must be able to pay for any losses that they cause others while driving their car. Since the potential amount of damages is greater than most drivers assets, they use insurance to make up the difference. Let's start by examining the types of dangers car owners face. The most obvious one is to our car. The second would be to our health and the health of our passengers. Finally, an accident could put our money at risk. The first priority is to protect our car. If you lease or finance your auto, you may be required to carry collision and comprehensive coverage. Collision pays for damage to the vehicle caused by your car running into another car or object. A simple definition of comprehensive is that it covers things that aren't caused by a traffic accident. Things like theft and fire. How much coverage does Debbie need? She'll need to choose a deductible that's low enough so that she can afford to pay it. And, she'll need enough collision to cover the balance of the value of the car. The best way to reduce the cost of auto insurance is in the collision and comprehensive coverage. If Debbie hasn't built up her savings, she'll probably need to have a low deductible. But if she's able to put a few extra dollars in savings, she could raise the deductible and make a serious dent in her insurance bill. As Debbie accumulates more savings, she'll get to a point where she could replace the car all by herself if she had an accident. At that point she may decide that she doesn't want to carry collision at all. Next Debbie will need to consider what insurance she needs to protect her wealth. Remember that by owning a car she's agreed to be responsible for any damage that it causes. Liability coverage pays for damage that you're responsible for and have caused to other people or their property. If her life savings is only $300, then there's not much a lawsuit could take from her. Some would advise that she should only buy the minimum liability coverage required by the state. But Debbie might be uncomfortable with that. Not having enough coverage to help a child crippled in your accident might not be something that she'd want to live with. As Debbie accumulates wealth her need for liability coverage becomes more important. She wouldn't want a lifetime of savings to be wiped out in one accident. Fortunately, increasing her liability coverage is not that expensive. In fact, many people purchase a 'liability umbrella' that kicks in when your auto liability limits are reached. Implied in Debbie's question is how to control the costs of auto insurance. At a minimum, she will need to buy the coverage that's required by her state. The most common requirements are liability and no-fault coverage. Raising her deductible on collision can do a lot to reduce her bill. And, if she's driving an older car, she may be able to go without collision coverage. No sense paying $1,000 a year for insurance to cover a car that's worth $1,200. Naturally she'll want to compare costs between different companies. Just make sure that everyone is quoting the same coverage. Debbie may also qualify for some discounts. A safe driving record, a car alarm or multiple car discount could help. Using the same company for your home or recreational vehicles (boats, RV's) might also cut her bill. Don't be afraid to talk with your agent. Each state has it's own laws. And insurance terms can be confusing. So don't be afraid to ask questions now. Not only could you save money today, but it's too late to change your policy after you've had an accident. You might find that you've purchased the wrong coverages. Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher website and newsletters. They've been helping people save time and money since 1996. Permission granted for use on DrLaura.com More >>

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How to Manage Money-Together by Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFPreg; www.WIFE.org www.MoneyClubs.com "When people argue over money, the argument is likely to have little to do with money. It almost always has to do with issues of control, security, self-esteem, and, above all, love." --Grace Weinstein, authorIn our lives, we are pulled in many directions. We both desire and fear the power of money, and most of us have problems harnessing the positive power of money through regular saving and investing. But that doesn#146;t have to hold you back. Here are ten things you and your spouse can do to foster good money management habits and get your savings on track. Decide together what you want. Many people live from day to day. Unfortunately, they also spend from day to day and build no financial nest egg to see them through. To make progress in saving for the future, approach the future one step at a time. Begin by establishing some short-term financial goals: a vacation next summer, or a new car the year after that. A desirable short-term goal can be the carrot-on-a-stick encouragement you need to start a savings plan and take additional steps toward financial security. Build for your future together. As children, we learned about Cinderella, Snow White, and Sleeping Beauty, who were saved from peril by their charming princes and lived happily ever after. As adults, we all entertain the fantasy of financial rescue at some point in our lives. That#146;s why lotteries are so compelling, despite the odds. Although the fantasy of financial rescue is entertaining, it can become a barrier to accomplishment. Take serious steps toward providing for your own financial future, beginning right now to create goals based on your current income and financial situation. If your fantasy comes true, so much the better, but if it doesn#146;t, the two of you will have done what was needed to take care of yourselves financially. Make a financial commitment to each other and your marriage. Many people tell themselves that they will begin to save when their income rises, but few ever do. Unless you put yourself first, when you make more, your expenses will inevitably rise to meet your income and nothing will be left for you. Persuade yourself that you deserve to keep a portion of your income for you and your future. Once you truly believe that, make a commitment to set aside 5 or 10 percent of all the money you receive in a special account that#146;s just for you. Just as some people tithe to church or charity, so should you tithe to yourself. You#146;re worth it. Learn about your finances together. Most people learn little at home or in school about money, investment, and personal finance, and those people rarely seek formal training in finance as adults. Begin by learning about your personal income and expenses. Find out where your money goes by tracking last year#146;s expenses, and then decide where to trim. Here are some spending guidelines: 35 to 40 percent of your take-home pay is probably spent on housing costs 10 to 15 percent goes for food Your car payments shouldn#146;t exceed 10 to 15 percent of your income Another 15 to 20 percent might be spent on variable expenses, such as household repair, recreation, and clothing 5 to 10 percent of your budget should go for insurance premiums and property taxes 5 to 10 percent of your income should be deposited to your savings. Start right now. Procrastinators put off saving, or go on spending binges as soon as they accumulate much of a nest egg. To overcome financial procrastination, begin by setting some minor goals, such as reading one article or newspaper column a week on financial maters, then add more substantial goals, such as devoting three hours to preparing a budget and an hour or two a month to monitoring spending. Work together to develop financial knowledge and confidence, and soon you will find yourself gliding painlessly into the world of finance, and you will be ready to begin your savings plan. Explore your money issues together. Carefully examine your early teachings about money to see if you can find clues that are sabotaging you financially. As a child, were you taught not to envy those who were better off? Did you family teach you that money is the root of all evil? Was money used to reward or punish in your family? Did you have enough, or were you constantly afraid? As you work to build a financial future together, it is important that you each understand your deep-rooted attitudes toward money, and the attitudes of your partner. That will reduce conflicts over money matters, and help you succeed financially. Balance the financial power in your relationship. Women are sometimes balanced between wanting the right to control their own lives and make their own choices, and the need to rely on others and be comforted and loved, and to provide a nurturing environment for their families. Men are confused as well. They have been raised to show love and affection through providing financial support. If a woman does not need financial support, some men are in a quandary: What do women want from them? Yet if their partner wants to quit her job to take care of the family, they are afraid she#146;ll become too dependent on him, and he#146;ll sacrifice his freedom. Discuss together the roles that each of you will play in earning, managing and spending money. Talk about how you each feel in the roles you choose, and how money affects your relationship. Don#146;t shy away from discussing the power and freedom that money brings. Discussing money matters openly will help foster a healthy relationship you both can cherish. Take action, one step at a time. Some people have no interest in dealing with their personal finances. They know little about money, and find the subject uninteresting and boring. To deal with money matters when you haven#146;t the time or interest, break your financial tasks into manageable portions. For example: if your goal is to amass $1 million, it may seem overwhelming at first. But though $1 million sounds like a lot, it#146;s really just $1,000 multiplied by 1,000. If you could save $1,000 a thousand times, you#146;d be a millionaire, and it is even easier than that, because money begets more money through compounding. As you seek out ways to create your nest egg $1,000 at a time, you will become more familiar with the world of money, and that will make it more interesting as well. Understand the risks and rewards of the Money Game. Did you play Monopoly as a child? The grown-up money game, Working-Investing-and-Retirement, is a lot like Monopoly, but the stakes are higher. Most people play the real-life money game too conservatively, even if they were risk-takers in juvenile games. Others are too aggressive in real life, investing in outlandish get-rich-quick schemes. Risks and reward work in tandem: the greater the risk, the greater the potential reward. Assess your personal risk tolerance and follow your intuitions. By learning about investment risk and reward, and combining that knowledge with basic intuitive skills, you can invest wisely for your financial future. Accept your imperfections, and those of your partner. Some people want to pin down every detail before making any decision about money. But perfectionism delays financial success. Emphasize action: Don#146;t wait until you are fully educated in finance to start saving, or you will never begin. Begin saving now, then start an investment program using mutual funds. Making financial decisions creates the possibility of mistakes, it is true. But fortunately, in most financial situations, there are a wide range of right decision and only a narrow band of decisions that are decidedly wrong.You don#146;t need to know how to pick the exact right investment, only how to avoid those that don#146;t suit your financial needs. Cofounders sixteen years ago of the nonprofit Women#146;s Institute for Financial Education ( www.WIFE.org ) and the new MoneyClub for women ( www.MoneyClubs.com ), Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFPreg; are trusted financial guides for millions of women. As owner of her own investment management firm, Candace was recently recognized as one of the top ten brokers in the country for 2003 by Registered Rep magazine. Ginita has been named to Worth magazine#146;s Top Financial Advisors for seven years. Both authors are nationally-recognized experts on women and money and regularly appear on CNN and CNBC and in national financial and women#146;s publications. This article is excerpted from their new book It#146;s More Than Money#151;It#146;s Your Life! The New Money Club for Women (John Wiley, 2004). Permission granted for use on DrLaura.com. More >>

It's About Time The Dollar Stretcher by Gary Foreman gary@stretcher.com Does anyone think that $20,000 will buy a new car forty years from today? Maybe it's time for an article on the time value of money, accounting for inflation in long term investment plans, and related issues. Lester Lester was referring to an article that I had written saying that when you buy something today, you're agreeing not to buy something more expensive later. And, he's right. You can't simply take today's prices and expect them to be valid for future purchases. Especially if you're look more than a few years into the future. The concept of rising prices is only one component of an economic theory called 'the time value of money'. It's a theory that we see every day but don't typically give any thought. The basic statement of the time value of money is very simple. A dollar today is worth more than having one tomorrow (or next year). Having money over a period of time is valuable. Money can earn more money. Suppose that you had $100 today and could earn 10% on it. A year from now you'd have $110. In two years $121. So having that $100 is valuable. Also, I'd rather have $100 today than wait and get it tomorrow. I won't earn much interest in one day, but it should be worth a little more tomorrow. It's also safer getting it today. There's always that possibility, however small, that you won't get the money tomorrow. By getting it today you've eliminated that risk. Lester points out another area where the time value of money applies. That's in the area of retirement planning. Suppose that you expect to retire in 20 years. You know that prices will rise before then. But can you estimate by how much? A quick and easy way to answer that question is to use the rule of 72. The formula is easy. The number of years in the future times the interest rate you expect equals 72. That's how long it will take for prices to double. Let's do an example. You want to know how long it will take prices to double if inflation is 6%. A little algebra tells us that you divide 72 by 6. Prices will double in 12 years. So if you expect to retire in 20 years and inflation is 6%, prices will be nearly 4 times higher when you retire. ($1 x 2 = $2 in 12 years. That $2 x 2 = $4 the next 12 years. Or 4 times in 24 years). If you play with the formula you'll find that the rate of interest you choose makes a big difference in the results. For instance 3% inflation would mean that prices would double every 24 years. Quite a difference compared to going up 4 times in the same amount of time. You can also use the same formula to calculate how long it will take your money to double in an investment account. For instance, if you're earning 9% it will take 8 years (9 x 8 = 72). You may want to get more precise than our little formula will allow. For that you'll need something called a financial function calculator. It will do a lot more than time value of money, but it's easy enough to learn how to use it for time value questions. And, they're not expensive. Some people will subtract the inflation rate from their investment return to get a 'real' rate of return on their retirement savings. For instance, if you earned 8% on the money and inflation was 3%, you've really gained 5% in buying power. Another application for time value of money is when you're trying to decide which payment plan you'd prefer. What happens if you were told that you could buy a car for $20,000 cash today. Or you could make $400 payments for 60 months. Or you could put $4,000 down and make $375 payments for 48 months. You could add up all the checks you would write. And that would be a good rough estimate. But you'd get a more precise answer by using a calculator to bring everything back to today's dollars so that you'd have a fairer comparison. Don't be intimidated by the concept. Just remember that having $1 today is more valuable that having one a year from now. And the same holds true is you're paying. A dollar that you pay today is more valuable than one that you'll pay next year. With an understanding of the time value of money and the ability to use the rule of 72 you can help yourself in a variety of common money situations. Thanks to Lester for suggesting it. Gary Foreman is a former financial planner who currently edits The Dollar Stretcher newsletter and website TheDollarStretcher.com You'll find hundreds of articles to help stretch your day and your dollar. Visit Today! Permission granted for use on DrLaura.com. More >>

Grocery Savings Made Easy By Tawra Kellam www.livingonadime.com For many people, making the decision to switch from two incomes to one can be a scary experience. They know they're spending too much, but don't know where to begin to cut back. Most people don't think they can live the frugal life and still be comfortable. I feed my family of 5 on $175 month. In 5 years my husband earned an average of $22,000 per year. In those 5years we paid off $20,000 debt. There are countless ways you can cut, but if you are a frugal beginner, try these simple suggestions from Not Just Beans for saving on your food bill first. Before you shop, take a tour through your pantry and your refrigerator. Be organized! Don't buy what's already hiding in your kitchen.If you're a fan of coupons, remember this: It#146;s not what you save, it#146;s what you spend. If you save 30 cents on something you wouldn#146;t ordinarily buy anyway, you haven#146;t really saved anything. A typical fruit item is significantly larger than one serving. Most people would be just ashappy eating a small apple as eating a large one so buy smaller fruits! This month, try two meatless meals a week (or one, if you're a diehard meat fan). Use meat as an ingredient instead of a main dish. A good recipe for this is Green Chile. It uses only frac12;-1 pound of pork. Cut back on the juice and milk. Use the money you've saved from eating less meat and drinking less juice and buy something that's on sale. Those sale items will help you cut back even further next month. In staying at home, it's the little things that add up so start small! Green Chile frac12; 1 lb. pork roast, or chops cubed into small pieces 10 frac12; oz. chicken broth 1 onion, finely chopped frac14; #150; frac12; tsp. garlic powder 1 can (7 oz.) green chiles, diced frac14; jalapeno, finely chopped 1 tsp. salt 2 Tbsp. flour, dissolved in water white flour tortillas Toppings cheddar cheese, gratedlettuce, shreddedtomato, sour cream Simmer pork in broth on low for 10 minutes. Add all other ingredients except flour and simmer 45 minutes. Thicken with flour so it is like a thick soup. Spoon about 1/4 cup into the center of a flour tortilla. Roll up tortilla and top with more green chile. Sprinkle with cheese, lettuce and tomato. Top with sour cream if desired. This green chile freezes really well. Steak and Mushroom Gravy 1 Tbsp. margarine frac12; onion, chopped 5 Tbsp. flour salt and pepper (to taste) 5 Tbsp. dry milk 2 cups water 1 2 cups leftover beef 1 small can mushroom pieces 1 tsp. beef bouillon powder Melt margarine in a large skillet and sauteacute; onion. Mix flour, salt and pepper and dry milk in a jar. Add water and shake. Stir into onions until simmering and thickened. Add beef, bouillon powder and drained mushrooms. Reduce the heat. Simmer, stirring constantly, until heated through. Serve over noodles, rice or mashed potatoes or toast. Serves 4. Tawra Kellam is the author of the frugal cookbook " Not Just Beans: 50 Years of Frugal Family Favorites ." "Not Just Beans" is a frugal cookbook which has over 540 recipes and 400 tips. For more free tips and recipes visit her web site at www.LivingOnADime.com . In 5 years, Tawra and her husband paid off $20,000 personal debt on an average income of $22,000 per year. Permission granted for use on DrLaura.com More >>