We’ve heard more news from the financial sector in the past two months than we’ve ever paid attention to before. Here are some lessons we can all take from the recent news

AIG Bailout

AIG announced that it was going under about one month. This was due to overly risky investments and bad assets.

Lesson: Be very careful with your investments. Risky investments can bring higher returns, but they can also be lost, thus they are riskier. when investing, be sure to draw a line to how much you’re willing to risk.

We, the taxpayers, gave them an $85 billion loan.

Lesson: Don’t make or accept loans that may not be repaid.

AIG took their tax executives on an extravagant vacation.

Lessons:  When you take out a loan, someone else is trusting you with their money. If you get a loan from family/friends, realize that it is their hard-earned money that you are being a steward of and thus, it should be used wisely and repaid responsibly. If you take a loan from a bank, realize that you are borrowing money from the bank’s depositors, just like gov’t loans come from taxpayers. The bank compiles our deposits and loans them out and that is why we get interest rates on our savings accounts. So, again, use loans wisely, you are borrowing from everyday people and your choices should be made with a sense of gravity.

Also, if you are in financial trouble, you should tighten your belt and use every extra penny to get out of debt and back on your feet and to plan for your future. Don’t spend money frivolously. That’s likely how you got in this mess to begin with.

If you loan someone money, and you feel that they are not being good stewards of your money, you have every right to recall that loan. It goes back to how much risk you’re willing to put your money under. It’s your money, you can loan it out, but you can also ask for it back if you think that the road the borrower is on will guarantee that you will never see your money again.

The Gov’t gave AIG another 37.8 billion

Lessons:  When someone else is screwing around with your money. DON’T GIVE THEM ANYMORE!

Don’t borrow more money if your existing loans are already weighing you down!

Sheriff Halts Evictions

This Sheriff In Illinois has chosen to no longer carry out evictions.

Skipping past the right/wrong and legal/illegal discussion, the lesson is that in these tough times, we need to rally around one another as communities and help one another out.

Passive Dad gives some great ideas to help friends facing a foreclosure

Other ideas are:

  • offering to babysit every now and then if you’re home while they work — it will cut down on their daycare expenses.
  • Pass along good advice/finds/coupons. I always forward Sale email or interesting articles to a group of friends.
  • Split bulk buying trips. If your household won’t use 25lbs. of rice and neither will theirs, you can go to Sam’s or Costco together, split the 25lb. bag and you both save money.

Learning to Live with Less

These IReporters are cutting back

Re-evaluate what your needs vs. your wants are. Cut out things you could do without in your life. Whether or not you’re experiencing financial trouble right now, it’s time to reduce debt, and save money. You never know what tomorrow will bring, and that’s all too true today.

Cut back where you can and put your money away or cut away at your debt. Be as wise as you can be with the money you have.

over at My Dollar Plan , Madison asked yesterday about weaknesses and how much we spend on them. Some of the things she mentioned I never really looked at as weakness (coffee, lunches out) but if you figure how much you spend on those things, you soon realize weakness or luxuries are the right words for them. They generally don’t figure in to your budget, because you never plan to spend extra money on th little things, but in the end, you wind up spending it. That’s how I have blown my budget in the past.

Here are some suggestions to still keep your weaknesses/luxuries and stay within your budget.

1. identify your weakness. You can’t tackle a problem if you don’t know what it is.

2. Figure out how much you’re spending per month on them. This alone will encourage you to scale down.

3. Work it into your budget, so needless spending doesn’t blow your budget later.

4. Come up with ways to scale down

5. Compare how much you’ve saved. Was it worth it? Can you scale down more? Have you developed new weaknesses?

Here are some of my own weaknesses and how I have managed them:

  • Expense Tracking
    • Sometimes, we’re too lazy to track our spending habits. Sometimes we don’t even want to know! However, when you see in black and white (or orange, green, and red) how much you’re spending per month and per year and on what, you would be surprised, and if you’re like me, ashamed of yourself. For example, you might be shocked to find out how much you’ve spent on coffee, or eating out, or buying “stuff”. You may think you live within your means, but you may find out you really don’t. I make $30K a year pre-tax. I just looked and YTD, I have spent $40K. that’s $10K over my means! Granted, I had savings, I got married, moved to a new house, etc.
    • Expense tracking can be a time-consuming and daunting task. I suggest a program like Excel, or my favorite, Mint, which is free, online, and does all of the tracking for you.
  • Coffee
    • Ok, when I first started this job, I loved it because it’s in a high-rise that has a Starbucks in the lobby.  Apparently I loved it a little too much because  wound up spending about $200 in the first month just at Starbucks. I used Mint to track my spending and when I clicked on Starbucks, I wanted to keel over. I resolved right then and there to scale back. My sister and I decide to limit Starbucks to once a week (rather than twice a day!) That alone helped a lot, specially because we didn’t just buy coffe, there was usually an overpriced bagel or pastry to go with it. I went to Kroger and bought bagles and cream cheese and started making coffee at the office. Our spending went down quite a lot. I still went to get a latte every so often and my pastry. Lately, I had reverted back into my Starbucks habit and neede to stop. I put the fabulous coffee/espresso/cappucino maker on my wedding registry and got it. It’s only $99.99 and programmable. Now $99.99 may seem like a lot, but if you’re spending $200/month at the coffee shop, you could ave yourself about $2,000 per year (assuming you spend $100 on the coffee maker and $300/yr on coffee and milk, etc) I even went to Sam’s and bought coffee flavor syrups so I can re-create my Caramel Macchiato at home.
    • Also, consider keeping breakfast foods and snacks at the office, so if you forget one day, you’re set, rather than being tempted to go to the coffee shop.
    • Something else I learned from my Starbucks experience are two things:
      • It’s ok to splurge on an overpriced coffee or pastry or whatever every now and then, just don’t make it a habit, but don’t deny yourself either. Everything in moderation
      • Also, it’s important to be aware of your surroundings and how they can create weaknesses. A strabucks in my office lobby created a huge habit I didn’t have before. My sister has a Starbucks in front of her job and now she’s hooked too. She also has a clothing store next to her job, and when she’s bored on her break she wanders in and inevitably walkes out with a shopping bag.
      • There is also a convenience store in my lobby and I am sometimes tempted to just start going down there for snacks/etc.
      • Point is: beware of convenience and temptations. Identify them and learn to avoid them.
  • Lunches out
    • Another big expense when I started to work here. I kept running late and forgetting to bring my lunch, or I simply didn’t plan ahead the night before to have lunch available to bring with me.
    • I hate skimping on food. I like to eat a lot, and good food. My husband is happy with a bowl of oatmeal because it’s cheap. I like to go out and find a restaurant I love and buy as much food as I want.
    • However, this means I was spending approximately $300/month on lunching out (so between breakfast and lunch $500/mo)
    • I have begun to plan ahead and cook dinner every night, I make extra food so my husband and I have enough to take to work with us the next day. This has kept our total food expenses dow to $400/month (or less)
    • If you just make a little more for dinner, you don’t have to go through the hassle of making lunch in the morning. Also, go ahead and pack it and put it in the fridge. All you have to do is grab it and go in the morning, along with you freshly brewed coffe the coffee maker automatically made while you were in the shower.
    • I have resolved to do several things before I go to bed and they make the next day so much better: I clean the kitchen so when I come home I’m encouraged to make dinner, rather than walk away just from seeing a mess. I pack our lunches so we can grab and go. And, I set up the coffee maker so I am awakened by the smell of coffee. The next day, I’m already starting off in a good mood. All of this only takes about 30 minutes at night.
    • Also, rather than buying a $5 smoothie mid day, I bought a $4 pack of frozen berries and I throw them in the blender with some OJ when I’m in the mood at home. That also saves me money.
    • I still go to my favorite lunch place, but now it’s only twice a month. It’s all about scaling down and finding alternatives, not denying yourself anything.
  • Alcohol
    • This is something else I don’t tend to track. When I lived on my own, I usually kept a bottle of rum at home, but most of my drinking was done going out, which I rarely paid for, since my date usually paid for it.  Of course now that has changed.
    • We generally keep a bottle of rum, a bottle of vodka, and one or two bottles of wine at home. We might drink twice a week, it all depends on the week. So, we probably spend close to $25/month just keeping the house stocked. Things get more expensive if we go out to the bar or dancing. If we go dancing there’s usually a cover fee involved ($10 – $30) plus each drink averages to be about $7. So, on one outing we’re talking about between $50 – $100. We go out to the club about once a month (maybe less). The bar, has less of a cover charge, but we’re still drinking $7 drinks, so about $50 on one bar outing, we go about twice a month. So all in all it’s about $150/month.
    • To scale down, we have scaled down how much we go out. Before we got married (and I was unaware of the cost), we went out about twice as much. Now we’ve scaled down our outings to stay within budget.
    • Also, the non-driver of the night will generally have a drink or two before we leave the house and that cuts the drinks down to one each per outing.
    • We also go out earlier to get in before the cover charges begin, This way we go out, we dance, have a good time, and spend  a lot less money. So we go from $100/outing to about $25.