Two Years Down, Many More to Go!

Credit: Stuart Miles

It’s hard to believe almost two years have passed since we dove into the personal finance world together with a crazy story about considering opportunity costs in terms of junior bacon cheeseburgers. I guess time flies when you're having fun. I have enjoyed 2MuchCents, and I hope you have as well. 2MuchCents.com will close out 2013 with almost 14,000 views spread over 14 countries! For that, I thank you.

A lot of bloggers start strong, but run out of ideas. I admit I have some spells where I battle writer’s cramp a bit more than I would like, but I’m definitely not afraid of topics drying up. Between your questions, your friends’ questions, your family members’ questions, new things I learn and experience, and never-ending changes and developments in this crazy world we live in, I think I could probably write forever. I already have plans in 2014 to post about why you need to save now as opposed to later, how you can keep as much of your family’s money in your family as possible, and why I think you should be a “contrary” investor. I also want to take a close look at index funds, offer some tips on buying a car, do another lighting round (where all I do is answer your questions), and write a short series on how I would advise someone to position themselves so they can retire early. (You’re not interested in retiring early are you?) Despite my plans and future posts already in progress, please know I get the most joy out of directly helping people like you by answering your questions; whether it gives me an opportunity to do a blog about your topic or not.

In case you missed any posts, the five most popular posts of the year were:

1. This Diamond Ring
2. It Happens
3. Last Call
4. The Homemaker Retirement Plan
5. All That Glitters Is Not Gold

I think one more blog post is worth mentioning, My Uncle’s Living Expenses, because I got a lot of in-person comments on that one. After mentioning it again, maybe I’ll get more!

Let me once again thank Mr. Andrew Davis for his tireless edits and content advice. I also need to thank my special lady, Mrs. Lindley Presley, for her continued encouragement, social media guidance, and grammatical expertise. I could not produce 2MuchCents without those two individuals.

Here’s to a healthy, happy, and financially successful 2014!

-Tom

One Awesome Baby Gift

Credit: Marcus

More and more of my friends are having babies. Some are on number two (or even three)! It certainly is exciting, and one of these days I hope to be a dad myself, but all of these baby pictures, registries, and showers are something else. My wife and I usually try to give an awesome toy or something we know the proud parents have said they really need, but if I were Bill Gates, there is one awesome baby gift I really wish we could give. It’s not financially viable for us to give (especially since the storks have been so busy), but perhaps I can give you a few more details about one of the most awesome gifts you can give to a newborn and their parents: a 529 Plan.

A 529 plan is a college savings plan designed to help address future college costs including tuition, books, and other education-related expenses at most public (and some private) institutions of higher learning in the United States. 529 plans, also known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions, and come with many favorable tax benefits authorized by Section 529 of the Internal Revenue Code. Essentially, all of the money contributed, as well as any money earned while invested in a 529 plan, is allowed to be distributed free of federal income tax (and most state income tax) as long as it is withdrawn for qualified educational expenses. That means by setting up and contributing to a 529 Plan for a new baby, you are helping the baby (and his or her parents) pay for college and giving the stock market around eighteen years to have a chance to generate some significant, tax-free appreciation.

There are lots of technical questions to consider, like whether to go with a pre-paid tuition 529 plan or a college savings 529 plan (I’d go with the college savings plan because it gives the beneficiary more flexibility to choose more colleges in different states). You’ll need to select an initial investment allocation, but I usually propose an age-based portfolio that automatically addresses investment allocation going forward and reduces more-aggressive stock exposure as the beneficiary gets closer to college age. There are also limits on how much you can give a new baby in a 529 plan, but unless you are a pretty financially blessed parent or grandparent, these probably won’t come into play. Still, be sure to talk to your CPA or financial advisor before you proceed.

My point is that you really can give the gift of a 529 Plan because many plans and many states have relatively low minimum contributions ($25 or less in many cases) to set up a 529 Plan. Besides, even without the small initial contribution gift, by simply informing new parents about the huge potential tax benefits of a 529 Plan and giving them a mechanism to go ahead and start saving for college sooner rather than later, you are already doing a whole lot! Cute, little shoes are great, onesies are adorable, and dangling crib mobiles can be amusing, but I really am sold on the potential benefits of 529 Plans. Shoes, outfits, and toys are necessary and address a definite, immediate need, but helping a child (and their parents) graduate from college with less debt, or even no debt, is a pretty swell gift, too.

My wife and I haven’t yet given a 529 Plan to any of our friends or family members’ newborns, but we’ve told people about them. If you can give a little one you care about a 529 Plan, I encourage you to do so, but even if you don’t, you can give two baby gifts: a super-cute one and this very valuable information.

-Tom

Lessons from Black Friday

Credit: imagerymajestic

A couple of years ago my wife and I agreed to add two holidays to our calendar: Husband’s Day and Wife’s Day. On Husband’s Day, I can create a day where we do whatever I want (within reason), and on Wife’s Day, the day is hers. In 2013, we decided to celebrate Husband’s Day in June (it’s a floating holiday), and it was truly glorious. The highlights included trips with my wife to the driving range, the bowling alley, the shooting range, and a golf superstore, with guy movies and greasy hamburgers intermixed. Wife’s Day, on the other hand, seems to have become more of a “fixed” holiday, as once again my sly wife somehow settled on Black Friday. Being one that is always happy with bargains and sales, and already in my wife’s debt for her participation in Husband’s Day, I hesitantly agreed to enter the land of competitive shoppers and “door busters.”

This year was my second Black Friday experience, but I still don’t consider myself a veteran - I consider myself a survivor. However, Black Friday isn’t all bad. There are a few things you can do to help make sure your future Black Fridays are successes and not financial burdens you’ll carry into the New Year. 

First, make a list of stores you want to visit. My wife took the time to make a list of stores she wanted to visit in a relative order of importance, while also considering their locations relative to each other and our home. I’m a lucky man for many reasons, but the fact that my wife took the time to have an efficient game plan on Black Friday is certainly another one. It saved us time, it saved us gas, and it kept us from shopping more than we needed to (or I could stand). Sure, we walked in a couple of stores to see something cool we saw from the window, but we primarily stuck to the plan. Sticking to your list of stores is a simple way to prevent overspending.

Second, make a list of the items you’re looking for. We still needed a few Christmas gifts, and my wife and I were both looking for some things for ourselves that we knew could be discounted on Black Friday, so we made a master list of what we were looking for. My wife walked away with a beautiful jacket (that was even more beautiful on sale), but outside of that one, unplanned bargain purchase, we stuck to our list. Limiting your shopping to a single list of items can also be critical in keeping you from overspending.

My third suggestion for you is to have a hard purchase limit. We had a couple of gift cards from birthdays and previous holidays, but we also had a dollar cap in the back of our minds. It doesn’t matter how cute the purse is, how real the leather boots are, or how soft the sweater is, what matters is how far below the “Black Friday cap” you are. My wife and I are careful, thrifty, picky shoppers, and I’m proud to say we got almost everything on our list without coming anywhere close to our self-imposed limit.

Finally, do not open any store-specific credit cards, regardless of how sweet they make the offer. There may be a couple of stores that have decent-enough perks if you are a frequent visitor, but for the most part, just say no. The additional credit inquiries you’ll generate and constant mailings and emails you’ll receive are bad enough, but the main reason for my stance is that I don’t believe people need any more temptation (or capability) to go into short-term debt than absolutely necessary. I’m not one of those screaming debt management gurus who is going to tell you to cut up all of your credit cards, but I am going to tell you to cut up the mostly useless ones, or better yet, don’t even sign up for the mostly useless ones. When my wife and I visited Old Navy on Black Friday, they opened an express checkout line for people willing to apply for an Old Navy credit card, and you should have seen the masses flock. That was dirty, and very well-played by Old Navy, but I waited in the longer line instead of taking the bait. The new card holders may have saved a few minutes, but at least I don't have a new, tempting line of credit!

Black Friday is not all bad, and it does offer a lot of great deals, so fighting the crowds can help you get a bigger bang for your buck. Just remember, 30% off of something you don’t really need is NOT savings – it’s a 70% expenditure you weren’t planning for! If I were a betting man, I bet I’ll get to do Black Friday again on Wife’s Day 2014, but I’ll be ready. Don’t tell my wife or my very manly friends, but I’m beginning to look forward to it.

-Tom