Personal Finance

Foundation #5: Avoid Assets That Depreciate in Value

Unlike Foundation #4, this is the one that usually gets people in trouble. Here are my top 5 depreciating items to watch out for:

1) Cars – Beside your house your car is probably the largest asset that you will own. It is also one that depreciates like a rock! Most cars will loose 50% of their value in the first 4 years. There is so much to talk about with cars that I will dedicate an entire post to them in the future

2) Furniture – If you think cars are bad furniture is worse. Furniture depreciates about 25 percent on the first day out the showroom and just keeps going down from there. Don’t even get me started on the people buying $10k in furniture on credit and taking 10 years to pay it off. “Rooms To Go” is a finance company that just happens to sell furniture. Furniture deserves it’s own post!

3) Consumer Electronics – Computers, TV’s, gadgets, etc all loose value VERY quickly because technology progresses at such a rapid pace. Some companies are working on 6 month product cycles!

4) Sporting Goods – Ever shop for a set of golf clubs or a snowboard at the end of the season? Most of the time you will find discounts of at least 50% off. That means the shiny new set of clubs you bought at the start of the season is worth less than 50% of what you paid! Another category that goes down like a rock: Fitness Equipment!

5) Clothing – Fashions come and go just as quickly as the seasons. The hot sweater you bought last year is old news this year and is worth next to nothing. The higher the fashion the steeper the depreciation slope!

The best way to combat depreciation is to buy used and let somebody else take the price hit. eBay and Craigslist have made this easy but you do have to be patient to find the best deals. One aspect of eBay that is often overlooked is that eBay can now put a price on everything. If you want to purchase something new it is easy to evaluate the depreciation slope BEFORE you buy.

Personal Finance

Foundation #4: Accumulate Assets That Appreciate in Value

There are two kinds of assets: those that appreciate in value and those that don’t. Your goal should be to focus on the assets that appreciate in value:

1) Cash in a 5% Online Savings Account

2) Investments like growth stock mutual funds

3) Real Estate

Got any others?

Personal Finance

Foundation #3: Make Your Savings Automatic

I have designed this foundational series to have all the articles build on each other. Once you have your monthly budget set and your income is greater than your expenses it is time to start figuring out the best way to save the money left over. Hands down the best method I have found for saving money is to have automatic withdraws from your savings account or paycheck.

This method is referred to as “Paying yourself first”. In my previous budget post there was a very clear reason why the income was at the top, followed by the 401k, ESPP, and Roth IRA and finally the bills and expenses last. This makes me think along the lines of paying myself first! Saving money is the first thing I do before any money is spent on bills and expenses. It is a fantastic way to think about finances and has worked really well for me!

David Bach’s book “The Automatic Millionaire” does a great job of driving this topic home and explaining how it works. I highly recommend it!

The great thing about this topic is how easy it is, well to setup that is. Leaving your allocations alone and having the discipline to not touch the money is the hard part. Set some aggressive goals in your budget, and work hard to reach them!

So where are the opportunities to setup automatic savings?

Savings Accounts

Setup a high yield savings account with WaMu or Emigrant Direct and setup a recurring transfer for 10% of your income. You will be amazed at how fast that account will grow and you will have a 6 month emergency fund in no time.


Most people have access to a 401k program at work. If you do, this is a great way to set up automatic savings. Set your 401k percentage, and put the money in some good growth stock mutual funds. A great method for increasing your 401k contribution is every time you get a raise increase your 401k percentage so the net impact to your paycheck is 0 and don’t upgrade your life style!

Roth IRA

Every Roth IRA I have seen has had an automatic investment option. Put $333 a month away and you can max your Roth IRA at $4k for the year

ESPP (Employee Stock Purchase Plan)

A lot of public companies offer this and it is an easy way to save money automatically. I will explain later how I take advantage of this at Home Depot.

Investment Brokerage Account

Just as a Roth IRA can be setup to make automatic investments, your standard brokerage or mutual fund account can also be setup to pull automatic investments out of your checking account.

With online banking, direct deposit, and electronic transactions there is no excuse why you should not make your savings automatic!


ATL -> DFW -> SLC -> DFW -> ATL

I don’t do a whole lot of traveling for my job and after the above trip I don’t understand how some people do it every week. Yikes!

The first stop on the tour last week was a visit to Usability Sciences in Dallas, TX for some usability testing on the new site we are getting ready to launch. Testing went well and it always amazes me the kind of feedback and insight you can get from a few users over a couple hours.

After Dallas, it was off to Salt Lake City for the Omniture client summit. I gave a presentation on site search and got to meet a lot of people that I work with at Omniture but had never met in person.

After the Omniture Summit, I stayed in Salt Lake for a few days and headed up to one of my favorite spots on the planet: Snowbird, UT. Since moving to Atlanta from Vermont I have not got out on my snowboard very much so it is always a treat to get some turns in! I was hoping for some deep snow but all I got was a lot of sunshine! It was the warmest conditions I have ever seen in Snowbird. It was 68 degrees at the base (8000 feet) on Saturday!!!! The whole mountain was like a giant slush puppie! Although I would have preferred it to be 10 degrees out, dumping snow, and blowing 20-30 at the top, it was still fun to get out and work on my tan.

I left Utah on Sunday night and headed back to Dallas for some more testing. We finished up on Tuesday night and headed back to Atlanta. Trucking the snowboarding gear with me to Dallas was no fun and I got some odd looks bringing the snowboard into the hotel but overall a very productive trip!

Personal Finance

Foundation #2: Create and Stick To a Budget

Personal finance success starts with a commitment to spend less than you make. However, where your spending falls in relation to your income can’t be known unless you map out all the money coming in and all the money going out. This is where the budget comes into play.

Budgeting for me is a fairly new concept. I have only been keeping a budget for the past year or so. During this time, I have been experimenting with a couple different methods to see what works. I have heard the envelope system is very effective but I don’t do cash (topic for another day) so I passed on that. I have tried recording all transactions in Microsoft Money or Quicken but I usually fall off that train pretty quickly. I think the key to budgeting is that it has to be simple. Since I like Excel I decided to start there and see how I got on. What I came up with is this Simple Monthly Excel Budget

*DISCLAIMER* All numbers are fictional and are just for display purposes!

Step 1)
Enter Your salary and how many times a year you get paid. If you are a single income household just enter zero for salary 2


Step 2) Grab your paycheck or go to PaycheckCity and enter your information

:Excel Budget - Income

Salary 1 is based on bi-weekly paychecks so I use a multiplier to get to the monthly numbers. Salary 2 is based on monthly paychecks. After entering your income, taxes, 401k (if applicable) you will have your net after taxes. This is the money you have to spend each month.

Step 3) Now it is time to enter your after tax deductions like medical, dental, and employee stock purchase (if applicable)

Excel Budget - After Tax Deductions

If you don’t participate in an ESPP just enter 0%. Now you have your take home pay in each check.

Step 4) Enter your Roth IRA information. If you are not participating in a Roth IRA enter zero (You should be – topic for another day!)

Excel Budget - Roth IRA

Step 5) Enter all your non credit card expenses. Things like mortgages, utilities, etc. For utilities that fluctuate, I enter an average since Gas and Electric will usually offset each other during the year. I also like splitting up the mortgage payments into principal, interest, and taxes so I can see the principal amount each month 🙂

Excel Budget - Non Credit Cards

Step 6) Now enter your yearly expenses and divide by 12 to come up with a monthly average.

Excel Budget - Non Monthly

Step 7) Enter all your expenses that you put on a credit card each month. You will see why I do it this way next

Excel Budget - Credit Card Expenses

Step 8 ) Now we add it all up!

Excel Budget - Add It Up

Your disposable income equals your take home pay minus your expenses and your Roth IRA contribution. This is how much wiggle room you have in your budget each month, hopefully it is a positive number! If it is a negative number, you need to cut some expenses or increase your take home pay.

I use the do not exceed line above so that each month I can glance at my credit card bill and make sure we are on track as most of our expenses are on the credit card each month.

Step 9) The last couple lines give you a quick snapshot of how you are doing overall with a look at your savings and retirement rates.

Excel Budget - Savings and Retirement Rate

So that is what works for me. What about you?

Personal Finance

Foundation #1: Spend Less Than you Make

Sound simple right? In theory yes but in practice no. Just look to the negative savings rate and you will see that Americans today are spending more than they make and saving less for tomorrow.

I don’t want to make it sound easy, it isn’t! You have a lot of big companies spending an incredible amount on marketing. To add to the big marketing budgets, the marketers are getting smarter and more advanced in their techniques. Holding onto your hard earned dollars in today’s consumer driven society is hard work. Who doesn’t want a new car or some hot new gadget?

What it comes down to is commitment. You have to set a budget and commit to spend less than what comes in every month. Resist the temptation to spend crap on stuff you don’t need to impress people you don’t know!