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In April 2010, we gave up TV when we bought a new house. Our thinking was, "New house, new beginnings, let's try life without cable." This past Spring, I wrote an update for a post on how we cut the costs of digital services. Here's part of what I wrote regarding giving up TV:
So how's the past year been with no signal? Mostly good, I'm glad to report. Now to be fair, we do have Netflix which can stream to our TV, so when we need a video-entertainment fix we can get one. But dropping cable has drastically reduced our watching. Our girls didn't watch that much before anyway, but even less now...
And it's the last sentence that I want to pay particular attention to: Our girls didn't watch that much before anyway, but even less now. And because what they do watch is on Netflix, there are no commercials. Now let me stop and say that we do not profess to be perfect parents, nor do we have perfect kids. But one area where our girls do not struggle with is materialism. Sure they like to look at toys (if we let them) but they don't "have to have" the next big thing. Why? Because they don't even know what the next big thing is. Why? Mostly because they don't see commercials. What things they do know about, it's because they've seen them at their friends' houses.
And materialism isn't a struggle confined to adults or teens or even tweens. Don't think a 3-year-old and a 6-year-old can't struggle with it too. Marketers are very strategic in going after our children. And they're only growing more and more savvy as they reach mediums outside the television. And while you don't have to cut cable to raise non-materialistic children, it certainly doesn't hurt.
Now I'm not saying that my kids never ask for anything, but it's rare (because when they do ask, they know we'll likely say "no" and that they'll have to use their own money). And having children content with what they have produces another unintended consequence: it frees us up to really take pleasure in the joy of giving. I've never been a fan of lists for birthdays or Christmas. Do you know how fun it is to search out that perfect gift that they didn't even know existed? It's a blast. And if it's an item that they happened to know about, they're delighted anyway because they were trying to save up for it (saving money mostly pertains to my 6-year-old as the 3-year-old is still learning the concept of money).
Talk about fun, one time I took them to Toys "R" Us to let them each pick out a small present. Why? Just because I love them and thought it would be fun for them. They were in awe, especially the younger one as she didn't even know such a place existed... a place with ONLY toys? Well, we looked up and down each aisle for quite some time because they had no idea what was even out there. After ruling out toys I thought would get limited use, conveyed the wrong image, or were too expensive, we settled on presents for each. And get this, the younger one picked books... BOOKS!
You see, the major purpose for a commercial is to create discontent. Remove commercials and there's one less device out there to compete with when trying to rear children to love the Lord first. So it's easy to see that of all the digital services we scaled back on, cutting out cable TV was the most profound, both in saving money and otherwise.
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 7 Key Principles for Christian Investing
IRAs, 401(k)s and Social Security: A Retirement Planning Primer
Gold as an Investment: Will Precious Metals Continue To Shine?
Inflation History: The Rise and Fall of the U.S. Dollar
Financial planner Carl Richards, who writes excellent "nuts and bolts" articles for the New York Times' Bucks blog, has a column this week about saving:
We often hear about the importance of starting to save early. Usually the examples are focused on saving whatever you can when you’re in your 20s to take advantage of the power of compound interest.
But what if you were too busy trying to pay a student loan and other bills in your 20s, or like many of us, had to use all the savings you built up to get through the last few years? Now you find yourself closing in on 40 and feeling like you missed the boat.
I've thought about this problem ever since I read about the recent study that found that nearly half of Americans wouldn't be able to come up with $2,000 in 30 days if they needed it. This reality hits home every time I have a conversation with people 35 to 45 who feel so far behind the savings game that they aren't sure what to do.
For that group the advice is no longer start early, but simply start now. The only thing that matters at this point is that the longer you wait, the more painful it will be. Compound interest can still work, but not until you start saving.
Richards notes (based on his experience dealing with clients, I assume) that people tend to "overthink things and ignore the simple advice about spending less than you earn, saving for a rainy day and avoiding larger losses."
This is why SMI uses a Four Levels approach that focuses on first things first. We believe that getting out of debt (Level 1) and building a savings reserve (Level 2) are essential to long-term financial stability.
Sure, it would be great if everyone did these things in their 20s, but they don't. The good news is: it's not too late to start.
To begin making progress in your finances, take advantage of SMI's free 30-Day Web Membership — available for a limited time only. We'll help you learn to make the most of your money. Get details and sign up today!
For today's Personal Finance Friday post, we present an excerpt from the new edition of Craig Ford's e-book, The Bible and 21st Century Finances: Thought-Provoking Answers to Nine Common Questions. (Between now and Feb. 8, you can download a free copy — we'll tell you how in a moment.)
 Craig is the founder of MoneyHelpForChristians.com, a site that promotes "a frugal, simple, debt-free, and generous lifestyle so Christians can faithfully maximize their resources by putting them at the disposal of God’s Kingdom." He is also a missionary in Papua New Guinea.
In this excerpt from Craig's book, adapted for this blog post, he looks at finding the right balance between saving (which the Bible encourages) and hoarding (which it doesn't).
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All of us find ourselves somewhere on the money spectrum below. We squander, save, or hoard money.
But you'll note there are no vertical lines marking the boundaries where the extremes begin. For example, there is no line marking the place where saving ends and hoarding begins. As a commenter to my blog asked, "What is hoarding and what is just shrewd financial management?"
This answer may frustrate you, but there is, quite simply, no final, definitive, or standardized way to answer that question.
However, let me suggest four keys that may help you find the balance between saving and hoarding in your own life.
1. Remember, you are not God's standard. "Why do you see the speck that is in your brother’s eye, but don’t consider the beam that is in your own eye?" (Matthew 7:3)
Yes, it is important that Christians hold each other accountable in our actions. But accountability can cross a fine line and become judgmentalism. That is a dangerous line to cross. Your job isn't to monitor the saving habits of others, but to be a faithful steward with what you have been entrusted.
Your particular financial situation is not God's standard. In other words, you cannot say that if someone has more stuff than you they are hoarding. Nor can you say that if someone has less than you they must be squandering their money.
The decision about how much to save (as well as to spend and to give) is one of proportion — proportionate to your income, proportionate to your call, proportionate to your faith, proportionate to your joy, and proportionate to your giftedness.
2. Recognize your God-given limitations. Speaking in reference to third-world missions, missiologist Paul Hiebert wrote, "There are limits to our ability to identify with another culture…. We must identify as closely as we can...but not at the expense of our sanity and ministry."
Taking this principle into the financial area, we all have limitations about what we can do. Some families save money by staying at home and never eating out. They love the experience of preparing meals at home. Other families may eat out often because they strongly dislike preparing meals. Is one family more "spiritual" than another? Absolutely not.
We all need to stretch and grow, but at the same time, we need to recognize that God hasn't created us all alike. We all spend money on certain categories that others would consider extravagant.
3. Consider what gives you joy. I think the key to the question of the right saving balance revolves around this very important word: joy. Consider two believers in very different spheres.
Mother Teresa, by all accounts, was an amazing woman. Though living in the slums of Calcutta, she lived life with joy. Her poverty wasn't a burden. She answered her call, recognized her passions, and lived a life that completely overflowed with joy.
Dave Ramsey, on the other hand, is a financially successful man who is passionate about helping other people build wealth. He recognizes that his wealth is a blessing from God. He also recognizes his passions and lives a life that is, in his own words, "better than I deserve."
4. Check your motives. You might have unhealthy reasons for saving. You might save out of fear or greed. This leads to hoarding. Ultimately, your motivations dramatically impact the end result. Saving becomes hoarding when you do it out of unhealthy motivations.
Remember, saving and giving should always be practiced at the same time. Those who save and do not give exemplify the traits of a hoarder. Saving in excess is a sign of greed, lack of trust, and a love of money (see Luke 12:13-21).
♦ ♦ ♦
For a free download (through Feb. 8) of Craig's e-book, The Bible and 21st Century Finances: Thought-Provoking Answers to Nine Common Questions, go here for details.
Next Friday: more ideas for making the most of what you have. Have a great weekend!
Building a savings reserve is one of the best things you can do for your long-term financial health. And the beginning of a new year is a great time to get started — or to start saving more than you have been.
The easiest way to save steadily is to have some of your income set aside automatically before you have the opportunity to spend it!
 Here are two paths to automated savings, plus ideas about how much to save, as discussed in chapter 5 of The Sound Mind Investing Handbook (5th ed.):
Sign up to have part of your paycheck (you decide how much) automatically deposited into a savings account at a credit union or local bank. It's easy, convenient, and offers useful discipline. Plus, your savings are insured and available for withdrawal without penalty whenever you wish.
For a slightly higher rate of return, set up an automatic monthly transfer from your checking account to a money-market account at an online bank.
How much should you save? If you're still in your 20s, set a target of saving 5%–10% of your income. Initially, this will go toward building your contingency fund. Once that's in place, your savings can be used for a down payment on a house and other large purchases.
In your 30s and 40s, move up to a savings rate of 10%–15% of your income. Usually at this age, the primary use of savings will be to invest for retirement.
Many people think they could never save 10% of their income! But what would happen if a cutback at work resulted in fewer hours and a 10% reduction in your income? Wouldn't you make the necessary adjustments in your spending so you could still cover the basics?
Juicing your savings in 2011 has been made easier by the tax-compromise bill signed into law a few weeks ago. All else being equal, a temporary cut in the Social Security tax will mean a 2% increase in your pay. To be sure, 2% isn't a lot, but it'll aid you in reaching the 10% goal.
And by running a few calculations, you may be able to hike your take-home pay even more, giving your savings even more of a boost.
So if you need to save more, there's no better time than right now.
At Sound Mind Investing, we eat a lot of our own cooking. In other words, we actually do the things that we suggest to our readers!
Case in point: I wrote a piece a few months ago on the wisdom of having multiple savings accounts, with each account each earmarked for a specific purpose.
Here's a snippet from that article (subscribers' link), which appeared in the June issue of the SMI newsletter:
If all of us kept excellent records...there wouldn't be any need for [multiple,] dedicated accounts. You would know, for example, that $356 in your general savings account is earmarked for new curtains and $1,442 is for getting your driveway fixed.
But human nature being what it is, our record-keeping is sometimes haphazard and our "mental accounting" can get fuzzy. "How much of this money is for the next tuition bill and how much is for a new washer/dryer?"
So in the real world, a dedicated savings account is helpful. Indeed, multiple accounts — each with its own targeted purpose — can be even better....
At first, this sounds like a paperwork headache — and not too many years ago it would have been. But in these days of online savings accounts that link to your checking account, setting up multiple accumulation funds is a relatively simple matter. Furthermore, money can be transferred to each targeted fund (from your checking account) at pre-scheduled times.
Around the time I was working on that article, I had a problem with my heating and air conditioning system. Thankfully, the repair turned out to be minor, but the repair guy (who is also a friend) said something like, "Systems like this are usually good for about 15 years. How old is your house?"
"Uh, 15 years," I said, realizing the implication.
I priced what it would cost to replace the heating/cooling system, and a few days later set up a dedicated savings account. For the past six months or so, my wife and I have been diligently putting away money for the day when the HVAC system finally went ker-plunk.
Last week, it happened. Sure, I wish we had been able to save for another year before the system died, but I'm grateful we had a six-month head start. As it turned out, the money we had saved in our "heating/cooling fund" plus the $1,500 tax credit available (through Dec. 31) for energy upgrades brought us to about more than half the cost of replacement.
 I had to dip into other savings to pay the rest of the amount, but guess what? Literally moments before I sat down to write the check, my eldest son sent me an online message: he had just been awarded a scholarship for his overseas study next year!
Remarkably, the scholarship amount was very close to the amount I had to take from other savings to pay the balance on the new heating/AC system. In other words, at the very time I had an expense I wasn't entirely prepared for, I got word that another big expense that is still a few months down the road won't be as large as I anticipated.
So here's what I learned: thinking ahead and saving in a dedicated account for future needs is a good thing indeed. Doing so with our heating/cooling need prompted us to keep saving, even though we weren't sure about the timing of when the system would go bad.
But I also was reminded that when you do your best to be a good steward by planning ahead and yet you still come up short, God often acts to make up the difference. This certainly isn't the first time I have witnessed His just-in-time provision.
When we get together with extended family next week for Thanksgiving, my wife and I will have a good story to tell about the wisdom of saving — and about the faithfulness of God.
♦ ♦ ♦
I discussed the practicalities and benefits of multiple savings accounts in an interview earlier this year on The Meeting House on Alabama's Faith Radio. You can hear that conversation, with host Bob Crittenden, below.
"Christmas Club accounts are now largely a thing of the past (undercut by the rise of easy credit)..." — so I wrote in the current issue of the Sound Mind Investing newsletter in an article on multiple savings accounts (subscribers' link).
 That's true — Christmas Clubs have faded into the past for the most part.
But a reversal may be in the offing. Sears/Kmart promoted a Christmas Club program last year. Now, the New York Times reports another major retailer is rolling out such a club for this year:
Toys "R" Us is counting on an Eisenhower-era tactic to get consumers to spend this Christmas. The toy retailer will begin offering a "Christmas Savers Club" [this week] that allows shoppers to put money away with the company for holiday gifts.
Participants will receive a card similar to a gift card, and can contribute funds to it through cash or credit card payments. As an incentive Toys "R" Us will add 3 percent interest on the balance.
The program is a throwback to what banks and credit unions offered in the 1950s and 1960s before credit cards allowed people to spend money they did not have.
Our Level 2 article focused on Christmas Clubs run by banks, but many retailers had them too back in the day — to build customer loyalty, of course. That's exactly what Toys "R" Us is going for.
Shoppers can sign up for the program in Toys "R" Us stores, either at the cash register or the customer service stand. The company will add the interest on the balance as of Oct. 16, and the funds will be available Oct. 31 for purchases at Toys "R" Us and Babies "R" Us stores and Web sites.
Earning 3% is nothing to sneeze at these days, but unless you are absolutely, positively planning to buy something from Toys "R" Us — and you know exactly how much you're going to spend — it's probably better to set aside your Christmas savings in an earmarked bank account.
Earlier this week, I talked about the benefits of having multiple earmarked accounts with host Bob Crittenden on Faith Radio's Faith Meeting House program. Listen below (13 min.) — or download an mp3 (right click/save as).
 The fundamentals of good financial management aren't difficult, but they do require 1) planning and 2) discipline to stick with your plan.
In a short interview Monday on Alabama's Faith Radio, SMI assistant editor Joseph Slife (right) talked with host Bob Crittenden about the importance of having a savings plan. In a follow-up to air soon, he'll discuss a simple way to make sure your savings plan works.
Use the audio player below to listen — only 7 minutes!
In our March issue, we reported (subscriber's link) on new money-fund regulations advanced by the U.S. Securities and Exchange Commission.
 Those regs took effect last week, and Marketwatch's Chuck Jaffe (right) says they're likely to make money-market funds — already scraping bottom on yields — even more unattractive to savers who are seeking yield as well as safety.
Under the new rules...money funds must hold more liquid assets and limit their investments to only the highest-quality securities. In addition, they must reduce the average maturity of the securities they hold.
Furthermore, retail or taxable money-market funds must now hold at least 10% of assets in cash or highly liquid securities — think Treasurys — that can be converted to cash within one day. At least 30% of a money fund's assets must be in cash or Treasurys that mature in 60 days or less, or that can be converted into cash within a week....
The top-yielding money market funds currently are generating almost nothing for shareholders, with the best individual money funds paying out less than 0.2% and the top tax-exempt funds generating about 0.25%, according to Crane Data, which tracks the money-fund business. If anything, the new rules will drive those rates even closer to zero....
[Meanwhile, t]he top-yielding bank savings accounts and interest-bearing checking accounts carry annual percentage rates four or five times higher, according to BankRate.com.
That may not seem like much difference, but every little bit counts. An investor with $100,000 in cash to park will earn about $3.50 per day in an online savings account paying 1.3%, but will earn just 35 cents per day on a money fund paying 0.13%. The returns are miserable in both cases, but the extra $1,150 — and the plus of having Federal Deposit Insurance Corp. protection — is worth leaving the money fund.
Jaffe concedes that the day may come when "the new safety measures...pay off and protect shareholders." But right now, by mandating a reduction in risk, the regulations will make it even more difficult for MMFs to climb out of the low-yield hole.
To learn more about various options for savers, visit SMI's Savings Accounts page.
 In these days of low, low interest rates (not to mention a fair amount of bank instability), where is a good place to store your savings?
SMI's executive editor Mark Biller (right) discussed that question with host Chuck Bentley on yesterday's MoneyLife radio program from Crown Financial Ministries.
Click the arrow below to listen (20 min.) — or use this link to download an mp3 (right click/save as).
There's a site in beta that allows you to compare your spending (and soon, saving) habits with the proverbial Jones's. It's called Bundle.com. That's more interesting than it may sound at first, as you can slice the data any which way — by geography, age group, income, type of household...you name it. You can even see which business end up with the most of your hard earned money.
It's quite interesting to see the story Bundle tells via its data. But it also comes with a warning label. When I reviewed Mint.com (membership required) I said the following:
The second "Trends" section is what they call "SpendSpace." Here you can choose a category and a geographical location and see how your spending compares to others across the country. You can even compare your spending by merchant.
Caution #7: This is one of the most interesting, addictive, and useless features in Mint. Why should I care if I spent less on "Hair" than someone in Cleveland? Or more at Old Navy than your average Alaskan? I shouldn't. It's not going to change my spending decisions one cent. Nevertheless, like much of the Web, it's a fascinating time waster.
This type of reporting is more-or-less the point of Bundle. Yes, there are other features like "Discoveries" which is a blog aggregate, and a spending quiz that groups you into a "spendtype." But the primary reason to visit Bundle is to, as the site says, "... see how people like you spend and save money...".
I'm not sure how actionable the data is (though it probably has its uses). But it's certainly interesting, and a little bit addictive. So consider yourself warned.
It's no secret that interest rates for money market funds are scraping bottom. Even the top recommendation in our current money rates table (subscription required) is paying a scant 0.30%. Vanguard Prime, one of the best-known and most popular MMFs available, is yielding a barely noticeable 0.05%.
So is it time to abandon the money-fund ship and move your savings elsewhere?
Russel Kinnel, editor of Morningstar's FundInvestor newsletter (and director of the company's mutual fund research), is advising MMF investors to hang on rather than bailing on MMFs and moving to short-term or ultrashort bond funds.
We're still wary of ultrashort funds [following the implosion of several such funds in 2007 and 2008]. Short-term bond funds can work if some losses in the short run are acceptable — for example, if you are parking money between investments, plan to hold for a year or two, or just want a conservative bond holding in your long-term asset-allocation scheme....
But for other uses, such as emergencies or upcoming big-ticket expenditures, I'd stay with money market funds. Think about what will happen when interest rates start to rise. Bond funds will initially lose money because their superlow-yielding bonds will be discounted in the face of new higher-paying bonds. On the other hand, money market funds will quickly start to have higher yields, yet they won't lose money when rates go back up.
Kinnel concedes that MMFs aren't exciting, "but money market funds are there to serve in an emergency. Insurance always costs you money, and that's how I'd look at money markets."
Another practical matter is simply: Is it worth the trouble to switch? A Los Angeles Times story (titled, "Look, Ma, Nearly No Yield") quotes Peter Crane, head of money-fund research firm Crane Data: "My general rule is, if you're not going to make $100 more [in interest] by switching, don't bother."
Although 2009 was the toughest year on record for money funds, the MMFs recommended by SMI outperformed the overall field (for the 12th year in a row). Details are available for SMI web members in our February Level 2 article.
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