Avoid a 2021 Christmas Crisis with this simple strategy

Yes, you read that correctly we are talking about 2021 Christmas. I spend more during the holidays then any other part of the year excluding vacations. I have nieces, nephews, kids, wife $$$ it all adds up. If you are like me, you can drop a lot of cash on the holidays. Maybe you don’t have it and are using your credit card? Couple of parties, a bottle of wine or 3, cocktails at a company party (remember those?). It all adds up and here is a simple strategy you can start now that will provide you with the cash to do it.

Get an envelope, or an old book, or a jar some type of container. Every Friday until the end of the year put $20 in it. Even if you have to actually go the bank and withdraw cash, do it. Then forget it until the next Friday. If you started this week that would be 49 Fridays until the end of the year @ $20 = $980.00.

No maybe you spend more than that I do. Regardless, what this does is it gives you a target (ideally we hit $1,000.00) of cash. If you paid everything CC, fine deposit your money back into the bank. If you are going shopping physically, even better. Leave your CC at home and bring your envelope and pay cash for the presents. This is an introduction to what we call a “sinking fund” I will be doing another piece on those soon.

It may be the root of all evil, but we all need it.

For those of us with Anxiety this “cash in the draw” is going to help come the holidays. You’ll know it’s there and you’ll know its purpose was intended to be spent on the holidays. That will provide some relief to one of the most stressful times of the year and one of the most stressful aspects, the financial burden.

You can adjust the amount up or down if you want, I chose 20 because starting now gets me close to 1,000 and that’s a nice lump sum to have to spend on the holidays. You can start this whenever you want, the key is consistency. EVERY FRIDAY you put the cash in your envelope or wherever you secret hiding place is. You don’t withdraw it until you start spending on what the money was intended for.

You can do this, it’s a simple yet tried and true financial practice. No it’s not very sophisticated, but it doesn’t need to be. Sometimes the simplest solutions are the most effective!

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A Sinking Fund is perfect for people with anxiety

There are all sorts of financial terms used in the finance industry to create the appearance of complexity. A sinking fund is one of those terms but it’s actually a very effective tool to use. For those of you unaware I am a finance professional. Now this blog isn’t a finance blog but from time to time I do financial posts for those with anxiety. Today we are going to quick post on sinking funds.

What is a sinking fund: A sinking fund is simply a strategic way to save money by setting aside a little bit each month.

It really is that simple. The key to the sinking fund is assigning the savings a purpose. As an example if you want to go to Ireland, or you want a new car, or you want a Great Dane. The sinking fund is a long term strategic effort to achieve that end.

So you’ve decided you want a Great Dane puppy, its $2,000 and you want it in 2 years. You now have the basis for a sinking fund, you are going to “sink” money into this fund until you hit the $2,000. Now the “fund” can be a simple savings account, an envelope in your dresser or a stack of cash under you mattress.

This isn’t an investment fund, and this is a key difference. Your goal isn’t to get interest, or get dividends or buy shares. Your goal is to get $2,000 in 24 months.

So you look at this weekly, monthly, annually however you want. Monthly you take $2,000/24=83.3 dollars per month. You then find this money in your current budget and begin to set it aside. Months go by the fund grows you get closer to your goal.

Can I Round up to $85….

I know this all sounds simplistic, it is, until you actually have to do it. You see the hardest part of a sinking fund isn’t putting the money aside, its knowing the money is there. Something else will come up in the 24 months per the example above and you will be tempted to use this sinking fund to fix it. You can’t, the sinking fund has been assigned, and that is the trick.

Now the truly disciplined can use this principal for multiple long term objectives, like:

  • Planning a wedding
  • Saving for a down payment on a home
  • Buying a car
  • Elective surgery

Remember the Sinking fund has a designation for a singular planned event. That’s its great strength as that money is to be used for nothing else. I saved for my first vacation to Cancun Mexico this way, it took me 3 years a LONG TIME AGO. It worked, I was a broke 22 year old at the time, I had very little to my name but I had saved 4,000 by scraping every month for years. I started at $10 a week and every month put that money in a savings account. I adjusted the amount as I went but ALL OF IT went to the “Cancun Mexico Sinking Fund” and I went and had a blast.

If I can do it, so can you! Thanks for coming by and supporting my blog I really appreciate it!

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Anxiety and your money – Cars

If you are on my blog, chances are you have anxiety in some form, or you know someone who does. For those of us who have anxiety we still have to function in the world, and we are not exempt to modern issues. One of them is transportation. I realize that some readers might have access to other means of transportation. This post is meant to give specific advice to those of us with anxiety, who need to buy a car.

Keep this statement in mind: “A vehicle is probably the largest purchase you will make, that will lose the most amount of money”

Now you might by a house someday and lose a lot of money (I hope not) but vehicles day 1 begin to lose money. Consider this : “According to current depreciation rates, the value of a new vehicle can drop by more than 20 percent after the first 12 months of ownership. Then, for the next four years, you can expect your car to lose roughly 10 percent of its value annually. This means that a new car can be worth as little as 40 percent of its original purchase price after five years.”

Source: https://www.carfax.com/blog/car-depreciation

It’s generally accepted that when you purchase a new car you take a hit on the depreciation. Simply put you cannot turn around and sell the car for the same price you purchased it. Now why would anyone want to make an investment that loses 40% in 5 years? The answer is complex really, some people need the financing (which is a disaster in of itself) some people WANT a new car etc.

If you have anxiety the best way to avoid this kind of loss on investment is simply buy a used car. “But Karac, I will be buying someone else’s problems” well maybe, but look at it this way. If you buy a used car and it’s a lemon and you lose your investment, is that loss more than the depreciated value of buying new (and losing 40%?)

“ha-ha Karac, but if I buy new, I will have a vehicle at the end” well yes, but are you done paying? No? oh so you don’t own it at all, you’re still making payments on an investment that you’re losing money. So, you won’t get a return until after you have paid AND if there aren’t any repairs.

The point here is don’t be fooled into thinking you need a new car. You don’t, you need a good car and there are plenty of good used cars on the market. Always look for something that is 5-7 years old so a 2013-2015. Look for cars that are less than 20K miles per year (so 7 years at 20K would be 140K miles). If you see a car out there that’s a 2013 under 100K it’s a good investment. First, someone else took the 40% loss, second you can probably pay for it cash or borrow less for less amount of time.

My Car right after I bought it

I drive a 2007 Toyota Solara Convertible. Its awesome, thing runs well. New this car was $30,460. I paid $6,500 for it in 2018 so it was 11 years old when I got it. I did a brake job, and regular maintenance but no more then I would any other car. Remember the better financial decisions you make, the less anxiety you will have.

You’re doing great, one day at a time.