2008 Goals and Budget.

Do I have any goals for 2008? I am sitting here mulling what might be a good financial goal.

1. Max out 401k
2. Max out Roth IRAs
3. Max out ESPP
4. Cash flow $20k/year tuition

These goals have been done every year since DH got a job. And our income gone up so just more to savings. I'm not sure what a real financial goal should be? Maybe I should try to make do without a student loan next year? That is $8500 more after tax cash for DH's tuition to his MBA program. We're shelling out $20k annually for the past 2 years and honestly it hurts.

Like yesterday when we wandered around REI, I realized that we've been paying $1500/month for his schooling, which probably equivalent to us being able to buy some stuff we'd like or nicer winter clothes. Or even saving for newer cars. Although right now we might be purchasing a used car next year from a friend, as a lateral move from DH's Ford Focus to a Subaru, this is under review

I guess that's my stretch goal, no student loan next year.

5. $8500 saved up cash I'm a bit terrified. This is a lot of money to cut from an already what feels tight budget.

6. Try an all cash month. This will be hard. I mentioned it to DH and didn't understand why we should do cash. He said why am I losing rewards, and am I not nitpicky enough about tracking every expense and budgeting it. He's mad at the idea of me becoming more of a cheapskate. And I admit I have a feeling I'll feel even less like spending than I do now. I am thinking of pulling out $250 for groceries and $250 eating out for the month of January.

Budget Changes

1. Increase gas from $120 to $150/month. I am sorry to say, but I think higher gas prices are here to stay. Last January we started at $100/month and our driving did not change, just the prices. I also must add we drive less than 5k/annual (low mileage discount on our cars), so it's really that gas has increased a lot. It costs $30 to fill up a tank in both of our cars, so I'm buying 5 tanks/month @ 250 miles = 1250 miles/month. This is higher than what we do now, but I think gas will hit $4/gallon, so I might as well start pushing it up.

2. Increase Food Budget, I was spending out of control early in the year about $400. But then buckling down to $200/month. However, the prices of food has escalated. I think $300 is a more realistic budget in this next year, if prices continue to rise.

Vacation Spending

Well I got more real numbers for our trip. Not too bad, not super fantastic. We totally enjoyed ourselves and definitely did everything we wanted to do. Turns out Whistler is ridiculously expensive, but it's a resort area so they charge double what normal places charged. But by sharing meals we saved quite a lot of money while still going out. And I didn't gain weight over our holiday which is HUGE! I'm so excited. Normally I gain 10 lbs from a week of eating out but not this time.


Anyway we spent $667 on eating for the two of us for the week. About $84/day or $42/per person. Not bad. I had to average it out because we spent the majority of our $ in Whistler while Vancouver we spent about half as much.

So our running total for the trip turned out to be

Whistler $1062
Vancouver hotel $269
Dog Boarding $300
Airline Ticket $90
Food $667
Transportation $208 - $150 to/from Whistler by bus, 2 day passes for Vancouver
Gifts $50
Total - $2646 for 8 days

Now I'm happy that we came out about $500 less than I "budgeted" for. The biggest savings came from us not entering as many sights as we normally do. Many were closed so instead we walked the city, Stanley Park, the harbour, all free. If the Canucks had been in town we would have watched a game.

I know most people don't count in dog boarding in the cost of the trip as well, but to me that's a cost that always has to be considered. I think without it we might be more in line with what people spend on vacation. $300/day for hotel, food, transportation, shopping.

Now I'm off to pay for the spending portion of our trip. I have to admit it was relaxing knowing that the majority of it was already paid for.

Rising Food Prices

I read on the plane an article in the Economist about "Food Prices - Cheap No More". Interestingly food prices had previously until this year been on the decline. The peak grocery prices hit actually in 1974.

And even now we've yet to reach those prices again. Yet prices this year have been trending up. Due to a couple of different reasons, the use of ethanol to fuel cars and increased meat consumption.

This supposed increase in food prices will most affect poorer countries. But I question if they aren't underestimating the impact on Americans? With the slowing economy, many people's incomes are not rising as quickly as the goods they need to purchase.

Hence the prolonged period of cheap groceries has allowed consumers to spend a smaller percentage each year than if the cost had increased since 1974. This might have also caused them to become used to cheaper prices for years, and now suddenly having to increase the grocery budget is an eye opener.

Where will the extra money come from? How will people deal with groceries rising in costs annually instead of decreasing? Do you really think Americans can handle the jump? Much like how Americans are spoiled with cheap gas, in Europe and Asia, gas can cost $5-7/Liter. Hence we've allowed ourselves to continue affording large SUV/cars.

So will this rise in groceries cause us to curb our spending in other areas or will we just borrow more money to solve the problem?

Things about Banking

Just a couple of things about my bank I hate. And maybe your bank is different. It probably is, but I am with a nationwide bank I hate. If I didn't have a mortgage with them, I'd be using a credit union. As it is, we're stuck and I hate them.

1. They charge outrageous fees for everything. Nothing is free. Everything has a minimum, limit, or restriction.

2. They hold everything. Every deposit needs 24-48 hours. Every transfer into and out of takes 72 hours. If I deposit $5 into an ATM it's "on hold." If we get paid it's held for 24 hours. So I never pay bills until the Monday after it's deposited.

3. My bills though they supposedly are paid "electronically" they take 3 days to deliver. I have to pay everything 1-2 weeks ahead of time in case it gets lost. How it gets lost? I have no idea, but it can. Plus even though the payment is lost, I still have to cover the withdrawn funds.

So my bank is horrible. I have a lot of headaches, constantly following up with our bills being paid, our checks clearing, pretty much everything needs to be constantly monitored.

I've had large holds on many debits. I don't know if it's because of bank policy or the company debiting the amount. But in general I have to leave a buffer of $1k in my checking at any given time. I also buffer and extra $5k in my savings account in case payments get lost and I have to pay them a second time before I get the "lost" payment credited back to me. And this supposedly is a huge bank.

Well their customer service is awful. And their services in general are awful. But I am not going to change because I wanted to simplify my life by having all my accounts in one place. Hopefully next time I move, we can use a better bank.

How's your bank?

Longest Unemployed?

This got me thinking from the comments. What's the longest amount of time you've been unemployed? I will probably post a poll as well.

I've only been unemployed 2 weeks. After college I had a job lined up. Then when I switched jobs and got layed off I had another job lined up to start that Monday after. I never had a problem finding a job.

Now sometimes the jobs weren't glamourous, I've waited tables, sorted mail, and worked retail. But they were jobs and they paid something. One of the fastest ways to get a job is through a temp agency. They often can hire you within the week.

What's the longest stint of unemployment?

Credit Cards are better for travelling

Many people might disagree with that statement. But the truth is when you are travelling you're better off using a credit card. Maybe it's not so bad if you don't leave the US to only use a debit card, but if you travel at all internationally be prepared and take a credit card.

First you'll need one for surcharges on any hotel room. Now you can use a debit card but there will be a hold of maybe $100-$500 on your account because of it. Think not? It happens. And often these charges are not released for a few days. If you are an extreme budgeter this could cause your checks to bounce or payments to not clear. We're not extreme budgeters but I prefer not to tie up my cash.

Second the exchange rate on the credit card for foreign currency is better than what a bank will give you. I've tested it out and the credit card usually gives you 1-2% above the going day rate, but the bank usually charges you about 2-3%. And it does add up.

But what about carrying cash? Well sure it's nice to carry some cash, and absolutely necessary when travelling around the countryside of foreign countries. They don't use credit cards or debit cards. However, at that point you are better off going into a bank and exchanging US traveller's cheques than finding an ATM. We've been in the countryside of Asia and if they don't take credit or debit, ATM locations are just as bad.

Third, and what happened to us on our most current trip, if you buy tickets for a show or entertainment and it's cancelled, it's better on a credit card. You'll have an easier time disputing charges and getting refunds. We were told so by the people in the booth, that using a credit card would make the process faster, plus as foreigners we'd have protections in case the ticket booth wanted to charge us fees anyway for a show we never saw.

So perhaps a credit card isn't for everyone. However, I would not step foot of US soil and not take one. I've found it extremely useful, and easier to track my spending. As such, I have to go an reconcile our spending for our trip tomorrow.

Perhaps other avid travellers can share their experiences and debate whether they use a debit card or credit card. Most of our friends who travel extensively only use Credit Cards.

Merry Christmas

Merry Christmas! Suppossedly a day of rest, but instead I'm spending it cleaning up my house. I have so many things to do...ugh.

Measuring your time value

In every scenario there is a point where you value your time over the cost. On vacation is when it becomes apparent. Before when we travelled we had to evaluate whether it was more important to save money on a hotel by staying in a less desirable location or paying more to have more time to enjoy the city.

For example with tax we paid $90/night for a hotel in Vancouver. We are close to the waterfront, in downtown, and close to public transit. As we explored the city we have seen the locations of hotels we considered staying at. We could have saved $20/night if we had chosen to stay there, but we would have be unable to walk around and spent more time on the bus. With two of us, that is $10/day, and now looking back, I know we made the right decision to stay in a desirable location. Any further out, sure we might have saved $30-40/night but the 30-40 minutes on the bus would have definitely negated the savings.

So whatever you do, it's always measured against how much you value your time. Like hiring a housekeeper, gardener, etc. Or having clothes altered instead of doing it yourself. But I guess on vacation, when you have a limited amount of time to enjoy the city, the value of your time increases exponentially.

Now to decide between taking a cab or bus to the airport...unfortunately it's not just a $ choice, there are other complications involved like difficulties riding the bus with a lot of luggage and trying to transfer buses with a lot of stuff.

But how do you value your time?

Diminishing Returns?

Well since we're still on vacation, I decided to write about diminishing returns, as it pertains to our vacation. We snowboarded for 3 days in Whistler. Each day cost $77/day/per person. Unfortunately the greatest value gained was on the first day when we were excited and energized. Unfortunately by the second and third days there was diminishing value from being able to go boarding. Our bodies were fatigued, bruised, and hurt. We weren't as excited or energized. But was it still worth it?

Like any vacation, the best days are the first few. After that, many times you desire to be back at home, just relaxing. But you paid to "enjoy" life outside the norm. So how do you deal with the diminishing returns?

Like any good you purchase the enjoyment diminishes overtime. The only thing you can do is enjoy it to the maximum and before you purchase your vacation, tv, car, consider if it is really worth the expense. Is will you regret the purchase or truly appreciate the value gained?

Personally I might not have snowboarded for 3 days. However the diminishing returns is tilted to enjoyment because my DH loves, loves, loves it. He totally enjoyed it to the fullests and went to the maximum all three days. And because he has so few pleasures in life, this was a great success. He doesn't have many hobbies or spare time. And his time is valuable because of his income. So while I felt it was diminishing returns solely based the hurt of my body, I know my DH loved the experience. And that in turn increased my enjoyment of snowboarding experience.

Also a consideration we could never have this experience in the East Coast. They have no powder or mountains like this. So we probably will not have the opportunity to do this again for a few years. And this potentially was our last trip as DINKS. So while I might consider each day less return for our money, I've also savored our time alone together.

Credit Unions - the banking solution of the Immigrant family.

A final guest post by Lemony, a friend from a message board. I enjoy chatting with her about the role immigration plays in financial decisions. Being married to an immigrant, and having many, many immigrant friends, I understand that it does impact a family's financial decisions. It can be as simple as a checking account or credit card, or as large as the choice to stay or move home and saving for retirement in the new versus old country. So immigrants have a unique financial perspective not easily understood or even perceived by those who have never left everything they've known behind. But perhaps this post will help enlighten others about challenges faced by newcomers to this country.

Credit Unions - the banking solution of the Immigrant family.

Upon arriving in America, we were at a loss as to where to bank. Thank goodness we had used an international bank in Canada, because they were able to help us out with opening up a US dollar account, so at least we had some cash. However, to open a regular bank account in America required a credit check that would have proved fruitless. We had no American credit history!

Wells Fargo was happy enough to offer us a checking account, but said we could not get a credit card without a credit history. Seeing as we needed the credit card to establish a credit history, we walked out of their bank. Where to next? WaMu was a little more trusting and said we could open a credit card based on our Canadian credit score, but the credit limit would be a mere $300. That's not too bad but it's hard to remember to use the card when the amount isn't really useful.

Finally, we walked into a local credit union. They were only too pleased to help us. My husband worked for a great company so using that knowledge they were only too pleased to give him a credit line of $4000. Yay! We've never used more than $600 at one time and we always pay in full at the end of the month, so the utilization % would help my husband establish credit quite quickly. Unfortunately, they could not put me on the card as an authorized user, as I had no social security number. Nonetheless, it was a good card.

It took six months for the first credit report to show up at the major CRAs (Transunion and equifax) Three months after that we were able to negotiate a mortgage on a new house. Our interest rates are still very high because our credit is so new, but we took what we could get.

Six months after that, I got approved for a social security card. We took it immediately into our little credit union and applied to make me a joint cardholder. They approved me within 20 minutes and I'm just now awaiting my card. In six months I'm hoping Equifax belts out a credit report with my name on it.

Tips for Getting the Best Possible Mortgage

This guest post is from Shizane over at www.savingadvice.com. I think that anyone getting started in buying a home should read this. Even if you have bought a home before, this post is a great refresher on the ins and outs of getting a mortgage. I knew about floating a rate, shopping title companies (never allowed in the states we're in), but I hadn't ever considered a soft prepayment option. Anyway I think this is one of the better posts about how to shop for a mortgage.

Tips for Getting the Best Possible Mortgage

1. Choose a mortgage broker first and let him choose your real estate agent. A mortgage broker’s bread and butter usually come from realtor referrals. Allowing your mortgage broker to choose your realtor, contingent upon your approval, is a dream come true for your broker!

This will more than likely yield you a better deal with the mortgage broker. He won’t be as concerned with making a large profit from you as he now expects to get several referrals sent to him from the real estate agent he referred you to. It’s an I’ll scratch your back if you scratch mine business.

Understanding this concept can buy you leverage. Just make sure you convey to your broker that you understand how the business works and you expect better loan terms because of your generosity.

NOTE: Get a copy of your appraisal and credit report from your broker. Should you have to switch to another broker, this will save you money and speed up the process. Credit reports are good for 90 days and appraisals are good for 180 days. Also, never give your broker original copies of any of your documentation. Again, this makes it more difficult and delays the process of switching brokers.

2. On the day and time you are ready to lock your loan, get a good faith estimate from another lender. On the day your mortgage broker is ready for you to lock your rate, you and he may have already discussed what lender he will use to obtain your loan. That particular lender may have had the best rates when your broker looked them up yesterday or the week before, but things may have changed today.

In fact, due to market fluctuations that can occur multiple times a day, it is imperative you have your broker get rate quotes from at least one other lender he had compared in the past. This comparison will need to be timed as closely together as possible, which will help to ensure an apples-to-apples comparison and feel confident you are getting the best possible deal.

3. It may be wise to shop around for a title company and appraiser. Mortgage Brokers often refer their clients to the same title companies or appraisers. In some cases it may be advantageous of you to use the recommended appraiser or title company due to a good working relationship between the parties; however, this does not mean you can’t have a smooth transaction with other third parties just because your broker doesn’t normally work with them.

I would suggest calling around to get price quotes. Chances are you will find a cheaper appraiser and/or title company.

4. If you have excellent credit, advise the broker of it during your initial interview process. Besides informing your mortgage broker that he can choose your realtor, letting him know your credit is superb may also help to persuade him into giving you favorable terms that he may not offer to anyone else.

Often, a person with excellent credit will not have as many roadblocks in regards to getting a lender’s underwriter to accept the loan applicant. This makes your broker’s job easier. On this flip side, if your credit isn’t so hot and you would like to use a service to improve your credit score, let him know he can pick out the credit improvement company contingent upon your approval.

Your broker does not (should not) receive a kickback from the credit improvement company because kickbacks are illegal. Again, this is an I’ll scratch your back if you scratch mine business. Your broker now may receive a referral in return from the credit improvement company. Understand this and use it to your maximum advantage!

5. You may want to consider accepting a soft prepayment penalty. It may sound counter-intuitive to request a prepayment penalty to be in your contract, but in some cases, this may save you money. By having a soft prepayment penalty clause in your contract, you are agreeing the loan will not be paid off in full or extra payments you make will not reduce your loan by more than 20 percent during a 12-month period. This is typical, but always check what the rules are.


Soft prepayment clauses usually last only 36 to 60 months. This option is great when interest rates are historically low and you are unlikely to refinance during the agreed time period. The soft prepayment penalty, however, should allow you to sell your home at anytime without incurring a penalty. Should the situation arise where you have to pay your prepayment penalty due to a breach of contract, expect to pay around 6 months worth of mortgage interest.

6. So how does a soft prepayment penalty save you money? It is not unusual to reduce your interest rate by up to .25 percent on a 30 year fixed mortgage! The lender offers this because they are increasing their chances you will keep your loan with them longer, thus increasing their profits in the long run.

This can make a sizeable difference on your payment and increase YOUR savings in the long run. But don’t expect you broker to tell you about this option! In fact, many unscrupulous brokers will add this soft prepayment penalty in your contract without telling you about it and keep the money you would have saved on your loan.

NOTE: There is something called a hard prepayment penalty. Avoid this at all costs. It is not advantageous in any way to accept one of these. The only reason you should ever accept this is in cases where your credit is poor and this is the only way a lender will do business with you.

Use Grand Central to lower your Phone Bill

A second grand post by a new blogger Lulu. Her blog "How I save Money", is about trying to pinch every penny possible. She's a broke college student (weren't we all?) trying to get out of credit card debt. Please enjoy this post and her blog. I think this is a great tip for cutting essentials like a phone out of your budget.

Use Grand Central to lower your Phone Bill

If you have not already gotten your Grand Central number then all you have to do is send me an email or leave a comment and I will send you the invitation to get one. Grand Central is a free service that allows you have a number that controls all of your other numbers.

This way you can have telephone number to give out to people that you can feel comfortable with. I do not like giving out my home phone number to everyone that asks for a number so I have a Grand Central number (that is a different area code) that I give out. This way the people that I work with have a number to contact me that is local to them and I have the privacy of keeping my cell number secret.

The other really great thing with Grand Central is that you keep that one number forever. If you move to a new city and get a new house phone all you have to do is edit the settings in your account and the rest of your information remains the same.

You can use Grand Central to control the amount of access that different numbers have with regards to your profile. If you wanted to set up a group with people that you work with then you could easily do so with just a few clicks. Then you could set up all calls that go to that number to go straight to your voicemail if you wanted.

If there is someone that you need to always take the call then you could set it up so that number always goes through to your phone.

Setting up Grand Central is easy and you can pick any area code for your account, regardless what your home area code is.

If you are looking for your Grand Central number then just let me know and I will send you the invite.

It's FREE!!!!

Follow-Up - Setting Goals...

A follow-up guest post was last time written by fellow message boarder cjohnston. Great advice and wisdom. I love this post and it got me thinking about the future. Perhaps before the year is done I will do a goal list for 2008. For us, DH and I don't typically have clear financial goals, we have life goals. That happens to entail finances, but mostly it's getting where we want to be and finances happens to be important to get there, but not the end all be all. Please enjoy this wonderful post...

Setting Goals

The last time I was asked to guest write for Living Almost Large I wrote about the Purpose Driven Budget. How developing a spending plan on paper is the foundation of getting your finances under control as a first step and key to financial victory. Always on paper, always on purpose.

The next key piece of financial victory is one you don’t see often written about in financial blogs. You’ll see plenty of ideas on budgeting, frugal living, investing, how to buy a car and other vital information. But what you won’t often see if how important it is to take the next step…..setting goals.

I’m not sure why you don’t see financial blogs dealing with this more. Yet the process of setting goals will take you from being a learner to a doer which leads to becoming an achiever.

For some reason, many of us like to get mired in the learning process. You can read a non-fiction book a month for the rest of your life. You can glean financial blogs, listen to motivational tapes or see and watch every key guru. Bottom line? While ongoing learning is important, sooner or later, all that information will be wasted effort and time if you don’t do something with it.

If you're like me and initially struggled with having a Purpose Driven Budget, for me goal setting trumps in difficulty even the most difficult budget process. Thankfully, I’ve found some wonderful resources to assist in starting my goal setting process. Let me share some of the things I’ve learned.

First, envision what you want as an outcome. Place yourself in that outcome. Begin believing that you are achieving that outcome. See if it’s really a comfortable place for you. If it is, then go for it.

Take the time to write your goals on paper. Get them out of your mental processes and get them on paper. It goes back to the processes we did with our Purpose Driven Budget. By putting our spending plan on paper, on purpose, we got to see how our money was behaving in a clear and concise manner. Do the same with your goals. By writing your goals on paper, on purpose, your goals are no longer competing with all the other mental thoughts and problems you must process on a daily basis. They now stand alone and you control them. You choose when to deal with them, see them, act on them and measure your results.

Always express your written goals positively. Don’t write goals in a manner that beats you up. Don’t make them punishments. Make your goals something that you desire and want to accomplish. Your mind wants to deal with the positive in life and will work against you by blocking out the negative. To keep you goals top of mind, always express them in a positive manner and outcome.

You must make your goals precise. Put in realistic dates, times and amounts so you can measure your progress.

To make your goals meaningful, you must set your priorities. You’ll likely have several goals going on at one time. By setting priorities, you’ll maintain sanity because you’ll have a clear understanding of each goal and their pecking order.

At this point I’m going to make you do a mental 180. Goal obtainment must be rooted in performance, not outcome. It took me a long time to get past not having an outcome as a goal. But after 30+ years of failing to have the outcomes I set, I have found that rooting them in performance gets me closer to the outcomes I’ve envisioned. And it gives you more control over what you are doing. You have control over the inputs, which are the performance elements.

Next, make sure your goals are specific. Name your objectives. Name your time frames. Name your performance inputs.

Make sure the goals you are setting are realistic for you. They can’t be based on the desired outcomes of other people. They must be about you and your desires and dreams. Someone elses goals aren’t realistic for you. Sure, if you’re married or employed, you need to have the buy in and co-ordination of those in your immediate sphere. But if done properly, you likely won’t be answering to anyone who is attempting to control you through goals given for you to obtain yet set by them.

Another part of having realistic goals is having the necessary information that gives you a clear understanding of the skills, knowledge and other performance inputs necessary. Remember when we talked about ongoing learning? This is where all that pays off.

Goal setting is best when done in appropriately sized bites. Make goals that are just out of reach rather than too easy or too difficult. In other words, they must be set at the appropriate level. Too large and we choke on what we’ve attempted to take on. You’ll soon be too tired, too worn out or simply too burned out to carry on. You need some level of achievement to re-adjust and strech to the next level.

Set your goals too small and you’ve not stretched enough to move forward. You’ll never get to where you want to go or achieve anything of real worth.

Finally, think your goals through. Get an understanding of why you’re setting the goals your setting. Factor in the skills and knowledge that you’ll need. Understand where you can find the necessary resources, help or assistance to get through roadblocks and further develop them. Review your goals for any assumptions or better ways to achieve what you desire.

Festival of Frugality #105

Check out the festival of frugality #105!

Carnival of Personal Finance #131

Up at Get Rich Slowly Check out the Carnival of Personal Finance #131.

Creating a Gross Annual Budget

Most people don't budget from gross and many more find it difficult to create an annual budget. I always budget from gross and try to do a annual budget. Why? Because it gives you a firmer grasp on all areas of your budget including your taxes, savings, and spending.

How does it all work? Well let's start with a married man making $48k, a stay at home wife, 2 kids, and house bought for $169k (80% mortgage = $135k). I picked $169k the median home price in 2000 right before the housing prices started skyrocketing.

Gross Income = $48,000 ($4000/month)

15% to retirement = $7200($600/month) - Roth IRA

Social Security (6.2%) = $2976 ($248/month)

Medicare (1.45%)= $696 ($58/month)

Federal Taxes (standard deduction) = $0 (0/month) , because of child tax credit, personal exemption, standard deduction

State Taxes (2%) = $740 ($61.66/month)

Health Insurance (pretax) = $6000($500/month), I assumed 50% of average family

Net Take Home = $30,388 ($2532/month)

-these are the fixed costs which I think belong in the group before you even consider getting a mortgage. Notice retirement to me comes up at the top of the list. It all goes to Roth IRA because I don't know if people have a 401k match or not.

Mortgage $135k @ 6%, 30 years = $9712 ($809/month), 25% of net adding back retirement, but if not 32% of net income

Property Taxes @ 1% = $1650 ($137.50/month)

Repairs @ 1% = $1650 (137.50/month)

Food (low plan USDA) = $7351.12 ($612/month) (I think this is high, but it's the national average)

Car Gas = $1200 ($100/month)

Car Insurance = $1200 - ($100/month)

Car Repairs = $600 ($50/month)

Electric/Gas Utilities = $2400 ($200/month)

Fixed Costs = $25763 ($2147/month)

Total Income - Fixed Costs = $4625 ($385/month) leftover

This is how I would draft my annual gross budget. I would try to figure out my taxes, my savings first. Then look at my "fixed costs" and minus it from my income leftover after my taxes and savings. This leaves me with $385/month to play with. If I had more income I might be able to enjoy life more. The more I cut with car expenses, food, utilities, etc I would be able to enjoy luxuries.

Also realize this budget would need to be tweaked for things like health insurance, co-pays, utilities, property taxes, etc. I just try to do the best estimates as an example of how to set up an annual gross budget.

Before we even bought our first house this is how we started budgeting. Because it was so tight we really needed to see every single penny accounted for before we moved forward with buying out condo. Because of the tax break we were able to afford it because we were able to pay less in taxes. Plus we accounted for things like property taxes, repair, etc to help us think about recurring budget expenses.

While this may not seem a feasible method for many people. I think a gross annual budget is a great starting point when planning a budget. The next step would be reconciling spending with categorized amounts. Please consider setting up an annual budget for 2008.

Debt Free or Free of Fear?

In Dave Ramsey's baby steps, step 7 is being completely debt free including the house, and being able to fully enjoy your money. It's living like no one else because you are debt free. Wow what a concept!

But I've pondered this and I being a scientifically minded person, I'm not sure if I'll ever convince myself or DH to retire our mortgage early. Meaning I don't know if DH and I would ever prepay our mortgage. We agreed our mortgage would be retired the month we retired, but any earlier is not necessarily part of our long term financial goals. So we might never be debt free until we retire.

But does that mean we won't be financially fit or at peace? I don't know. I have mulled this over a lot, bouncing ideas off of my DH and debating just rushing to prepay a mortgage. And that's how we came up with being "free of fear." What does that mean?

We discussed it, and I think I'll be free of fear when we have enough money in taxable accounts to pay off our mortgage and generate enough income to live. According to my calculations that will likely be by our mid to late 40s. So though we'll still be carrying a mortgage we'll be in a position to pay it off ASAP in case of emergency while still being able to live.

Have I made peace with not being debt free? Definitely, so instead I'm working harder at achieving financial freedom by being financially savvy enough to save my extra mortgage payments instead of spending it.

Most people prepay the mortgage because they lack the discipline to save the the amount and invest it. I could potentially fall into that category, however, I am a firm follower of automatic investing. I plan my budgets backwards setting savings as a line item before any other expenses including my mortgage/rent, etc. So I would do the same thing for saving my "mortgage overpayment" and investing it.

Tip to using Priceline...

I love priceline. I am was about to use priceline for my vancouver trip but decided against it. Mainly because there is a special deal at Travelocity, where if you book a hotel for 2 nights using a Mastercard, you get $50. This added to the fact the hotel we were interested in dropped from $108 to $92/night and is again back up at $108/night means we got a steal of a deal.

But back to how to use priceline. There is this website called Bidding for Travel, which tells people how much people have recently bid for rooms in the area you are interested in on priceline.

I looked up the Vancouver area and found that people were paying about $75/night close to the time we were interested in. Also I figured out which hotel they had gotten for that price. The website also has a list of hotels for each star category. This will give you an idea of what hotels you potentially are bidding for and how much others have paid for them in the past.

I use this to help me get and idea of what to bid for the area and star quality of hotel on pricelines. It's a great tool for getting a cheap hotel. Enjoy.

My vacation plans...

I want to spend less than $100/day for 2 people eating out every meal. We did not reserve a room with a kitchen, and while we might eat breakfast in, we are looking forward to dining out in Vancouver a lot. We dearly miss Asian cuisine and it's time to indulge. We're going to have everything that grew up with and no longer can get.

To save money I'm sticking 2 boxes of granola bars in my suitcase, 1 box of oatmeal as quick snacks. This is because we're going snowboarding for 3 days and we want to maximize our time snowboarding. Another trick I'll be using, is I plan on not drinking during this trip because I am in the process of losing weight and it will keep the daily expense of food down.

Today I booked our hotel in Vancouver for $89/night including taxes. Taxes were $16/night so the room actually only cost $73/night. The taxes in Canada includes a General Sale Tax (GST) or consumption tax. Our room originally cost $92/night but we got a $50 credit for booking a hotel room using a mastercard on travelocity. Nice deal, so 3 nights for $269.

For snowboarding, we're spending $1062 for 4 nights/3 days of skiing and hotel. This includes the 10% lodging tax and 6% GST. So we're paying $265/day for skiing and hotel for 2 people. Not bad considering lift tickets are $70/day/per person.

An added expense is our dog boarding. We dropped the dogs off a day early (today) because of the storm coming and I was worried about driving out tomorrow night to drop them off. Unfortunately the only kennel we trust is about a 1 hour drive. It cost us $307 for 11 days of boarding, not a bad deal because we got a 10% off for the number of days.

So our running total thus far for the trip
Airline Tickets $90
Dog Boarding $307
Snowboarding $1062
Vancouver Hotel $269

Running Total - $1728

Estimated Food $800
Sights $500

Estimated Total $3028, I wonder what the real total will be.

Cost of being overweight?

Does it cost you money being overweight? I think it does. Many would argue that it depends on what you define as overweight, but I think that if you feel "overweight" you likely are.

What sort of costs are involved with being overweight? Well for many people it can cause increased medical costs. Such as taking medication to control high blood pressure, cholesterol, or diabetes. I read in NEJM that 1 pound of extra weight = 4 extra pounds on your knees, so overweight people are also likely overstraining their joints and bones, possible also causing them to take painkillers. Even with prescription coverage, these medications can add up if you have to continually pay the co-pay every month.

Second, it's harder to find clothes. I have talked to overweight people who find it difficult to buy clothes. Sometimes the clothes need to be altered. Or they need to shop in speciality stores and pay more. Thus they are usually unable to shop sales or thrift stores.

Third the grocery budget. Being overweight typically is due to eating more calories than you expend. To lose one pound you need to expend 3500 more calories than you ate. So imagine being 10 lbs overweight means you potentially ate an extra 35,000 calories. That's a lot of food. People have distorted what a proper portion size is. So people often eat more than the suggested or reccomended serving.

All these things do add up. If you wanted to save money, and you've already cut your budget, consider looking at your health. If you are overweight, maybe you can lose weight and decrease your medical and grocery budget. The benefits will be more than just financial.

Gift Giving Obligations?

What happens when someone gives you a Christmas present you weren't expecting? Not necessarily a huge present, but a present still? You suddenly feel very weird. There's a feeling of dread in the pit of your stomach. But what do you do?

That's what happened yesterday. A gift arrived in the mail from some friends whom I've never exchanged gifts with before. In college, I put a stop to all gift exchanges and I told friends honestly I couldn't afford to exchange gifts. Fortunately this has prevented me from going crazy and spending money we didn't have to exchange gifts with people that might not be useful.

But these friends just got married last year and though I've known them since college, I haven't been terribly close to them. So we've never exchanged gifts. Well now I am torn as to what to do?

Should I send a thank you note and graciously accept the gift? Or should I order them something online? Or should I send them something small in the mail?

My DH will say send a note and hope they never send another gift again. Me, I'm torn because I sort of want to just send a cute thank you note and pray they don't send a gift again next year. Another thing, this year I am not feeling up to do Christmas cards.

While financially this is not a big deal, I do feel gift giving out of a sense of "obligation" is a big deal. I don't like to get started card/gift giving because I hate keeping up with it. And the list it seems just grows are you get older, not lessen (well until after a certain age :p)

But seriously, I talked with my mom just back from another tour, and what were the words out of her mouth? "Oh I need to send Christmas cards to all these new people I just meet". My response? Why bother, screw it, they don't want a card from you. They probably just want to rest. She said I'm a terrible scrooge. Which I guess put me in my current conundrum.

According to how I was raised, I'd run out and buy a gift. But my upbringing is strongly wrestling with my adult practicality and I don't want to waste money on gifts for people I don't know that well, nor would I care if they never sent me a gift again.

Renting in Retirement

Does renting in retirement make sense? In some cases it does. In others it does not. However, from a purely financial standpoint, I think it does. But of course no financial decisions devoid of emotional value. So why does renting make sense?

Well for example a $300k home, would allow the owners assuming they pay cash for closing a $300k nest egg. Sure, they could live there and pay approximately $3k/year maintenance, $1500/year insurance, $3k/year insurance. So monthly they would be paying about $625. However there is lost opportunity cost on the $300k sitting in home equity. Assuming a very conservative 6%, that is $18k/year or $1500/month. So in actuality owning a home is costing the homeowners $2125/month.

But why sell? Well let's assume they invest the $300k in a Bond index fund. And only harvest 4%/year leaving 2-4% reinvested annually. They'd still have $1k/month to rent with. Now assuming they could rent a 2 bd/2ba apartment for that they'd come out ahead. But you're moving from a single family home to an apartment!

Well the truth is as you age, you will become unable to do home repairs yourself. You will rely more on hired help. It will be harder to mow the grass, weed, paint, repair shingles, etc. Things you might have done yourself a decade ago. So your maintenance costs on your house might easily double. Especially if you haven't been properly maintaining the house for 30 years and left a lot of it deferred. Hence it won't just cost you $625/month, it could be more like $1500/month to live in a house.

When you rent, as an elderly person you don't have to worry if the sink breaks, toilet floods, etc. You call the landlord and they deal with it. As an owner, you have to afford these repairs. So renting can make sense, especially for people who are disabled and unable to do any projects themselves.


But $1k/month isn't enough to live on. Well then why not harvest 8%? Assuming you invest it in a balanced fund at Vanguard getting 8% returns isn't hard. This would allow$2k of expenses month. Could you rent a place for that much? Likely yes.

The problem is the attachement people have to their home. It doesn't actually make financial sense to own as we age. Also if you forced into a care home/nursing facility, it's a lot easier to move out of a rented apartment versus trying to sell an ancient home.

As I write this, I think about how I'm still trying to convince my parents to stop taking our mortgages and buying home at 56 and 76. They have bought into this notion that real estate is wealth. When the truth is they are spending more buying than if they would just rent.

But growing older I wonder if we aren't more stuck in our ways due to habit rather than looking at the best financial options?

Festival of Frugality #103

The 103rd Festival of Frugality is up at Plonkee. My post about "how to save money at CVS".

I enjoyed "travelling in your backyard". Although it costs money for me because I like to eat, and I enjoy eating when I go out, not just from my lunch bag.

Also check out "reducing the grocery budget - eat less meat". Nice idea but it won't work for me. My favorite meat is fish and seafood. So it's not cheap. Plus I prefer wild caught fish, it's tastier. I don't like farm raised. And DH loves steak and lamb. So to us, we don't save by increasing veggies with our meats. We just don't eat the meats we love period.

Senseo for Free!

http://www.sharesenseo.com/q5/1.jsp;jsessionid=A15D7A1764831389451A8834A126402E

This is a phenomenal deal. It will cost you $15 to get a new Senseo. All you are paying for is shipping and handling. The machine itself is free for completing the survey.

Of course that's not how the company is making money. Much like ink jet printers which manufacter's practically give away, the real cost comes from buying the coffee bags. Yep, buying the pods are somewhat expensive. However, I think it's worthwhile if you are in a household, like mine where only DH drinks coffee. It's so wasteful to try and make large amounts to only throw it away.

Because of this DH will only have cofffee at work. But this machine is great. It also makes tea.

We got it today, and tried it out. A day late for DH's birthday, but still he loves it.

Carnival of Personal Finance #130

The Carnival of Personal Finance #130 is up at Money Smart Life. I submitted my article on "Cash Wedding Registries."

Lots of great articles. Check out these two articles "End of the year tax planning" by My dollar plan and "turning in money you found" at Smart Money Daily. Very fun stories.

I'm still looking for more guest posts. Please email me @ livingalmost@gmail.com. Thanks!

Christmas gifts ideas...

What do you give to people who have everything? I sit here pondering what to give to my mom, dad, grandma, and DH. It's so hard because the truth is they have everything they could need. Plus they can probably afford most items they would want.

So buying them gifts is difficult. I am not a person to buy clothes for anyone other than my DH. Why? Because you don't really know what size they are unless you see them all the time and have shopped with them. For me seeing my family once a year makes that a bad idea.

Next because I live so far, I have to worry about shipping issues. I can't just send large, bulky items, or super heavy items. So what are some gifts I do?

I've done magazine subscriptions for people. For my mom I've done Money Magazine and People for my grandma. But my mom doesn't actually read Money, so I've cancelled it this.

My best option has been gift certificates for manicures/pedicures or restaurants. I know they enjoy these two things and would go anyway, so it saves them money. What are other ideas people have?

Right now I have to get DH a birthday present and Christmas present. I think I'm getting him a took and maybe sunglasses.

I guess this is what bothers me, trying to buy Christmas presents people don't hate and find useful and not a dustcatcher.

MP Dunleavey, why oh why?

If you read MP Dunleavey on MSN, well she's also taken to writing for the NY Times. I like reading the message board hosted by MP called the Women In Red. There is a lot discussion about money from a female perspective. Anyway this week Mia writes about her decision to purchase a new home.

This does not sound like a bad idea at first. Great time to buy with lower interest rates recently, prices of homes dropping meaning good deals to be had. However, reading the article it sounds like a clear cut case of the GIMMES, and I WANT IT NOW!

Mia chose to make a full price offer on the house. Because location is everything, no one knows if this is a good or bad deal. However a day after their offer a second competiting offer in cash came in. She felt she had NO CHOICE but upping their offer to match the deal or lose the house.

What's the problem? First, her initial offer was already at the edge of her price range, because the counter offer was SOLIDLY out of their price range. But they went and offered it anyway. What? Well MP DUNLEAVEY literally said they "Bid first and did calculations later."

That is the worse possible financial advice or dribble ever written. I nearly spewed my drink reading her justifications about why they needed this "dream home". That if they missed this home they would only have regrets. She says they moved forward against her better judgement and logic because it felt right.

Of course not having all the numbers she isn't even worried. Well neither would I, because MP Dunleavey probably has NO IDEA how much debt she just took on. Do you think she calculated how much the Principal, Interest, Taxes, and Insurance (PITI) for each house is individually and how much of her gross income it is? How much the two mortgage would be of her sole income? Nope.

Instead they are flying by the seat of their pants. They have no cash reserves in case they are unable to sell their old home, find a tenant, or if a major repair comes up. They cannot afford a new washer and dryer! They can't handle if anything breaks in the new house.

How is this in any way, shape, or form a good idea? This is a roadmap to bankruptcy. I hate to say it, but she's quickly travelling down the path of no return. One misstep and they will fall into a deep abyss of debt. But hey, writing this makes it seem all the more real. The mortgage mess we're in as a society, here's another contributor!

Luxuries in my budget

Well Clever Dude talks about cutting expenses if necessary in a 3 part series. He asks what could you cut?

Well there is a lot of fat in my budget sadly. I could easily cut our cable down to basic internet, no home phone and no cable. So from $130/month to probably $40. Savings $90/month = $1080/year. Yowsa. Maybe we should consider it anyway.

Second up eating out. Tracking our spending we spend about $200-250/month. However this would be completely eliminated. If we didn't have a job, then eating would be necessary but not eating out. Also our food budget of $300-400/month would be decreased $200-300/month. That would mean eating less meat and buying more processed/canned goods. We would no longer be picky but eating more from coupons. This would be the first thing back in our budget however. Savings would be $300-400/month, wow $3600-4800/year! That's an insane amount of money.

While it is feasible to stop the eating out or lower it, I will definitely not jeopardize my family's health for a couple of bucks savings on groceries. I think cooking from scratch and not eating processed foods important to us. It invests in our cholesterol, blood pressure, weight, etc. This has long term affects like being healthy as we age. Lowering our future medical bills. So groceries I definitely look at as an investment more than just costs. So I would try to eat healthy just for less.

Third, would probably be our dogs. If we couldn't care for them we'd have to find new homes. I think they reasonably cost us $200/month for food, medicine, vet bills, boarding, grooming, etc. If I couldn't provide adequate medical care and time, I would be obligated to find them a better life. Now this is a very last resort for cutting expenses because we do have a responsibility and obligation to having adopted our dogs.


What else? I'm not sure what other luxuries we have. We aren't huge spenders and we'd go into lockdown mode, meaning we buy nothing other than groceries. We've lived like that before and I hated it. And we can do it again.

A final step in cutting expenses I think would be selling one of our cars and $4k from the sale. We would also save $75/month in car insurance. But the major depreciation hits have already occurred and both cars are paid for. And looking at lost opportunity cost it would be @ 10% = $400/year since our cars aren't worth much. But that's another sacrifice we might investigate if we were really broke without jobs.

Also we'd never vacation or visit home if we didn't have jobs. That would save us $3-5k/year. Right now our luxuries in our budget that seem disposable are eating out and cable. The savings on those two items are pretty large we'd save about $3-4k/year. Add in vacations and we'd be looking at $9k/year. However the other costs of a second car, better quality food, and pets I'm not sure would be worth the replacement factor.

As I write this, I've decided to downgrade our cable and lose all movie packages. This will save us about $30/month. What are luxuries in your budget?

CVS Extra Care Bucks Explained...

I've been doing the CVS extra bucks program since March of this year. I have gotten a ton of stuff for free or pretty cheap. There have been savings and since starting out I've learned a lot of tips.

However I probably don't work the deals as much as most people because we're DINKS so we don't use as much stuff as a family. Hence I just don't need the deals as often as other people and I don't stockpile as much stuff. I try to limit myself to 5 of anything or 10 if it's something small that we use quickly. That being said I wanted to give some tips to people looking to save some money on household goods, cleaning supplies, bath, and beauty supplies.

How does CVS extra care bucks work? This week for example, if you buy $20 worth of Proctor and Gamble items you get $5 extra care buck (ECB). That's a 20% discount. Second step, find manufacter's coupons to help decrease price. Third, use CVS coupons to further decrease out of pocket costs.

Something important to realize is that you don't get $5 cash back. Instead you get a printed coupon for $5 to use on your next trip to CVS. This coupon is an incentive for you to come again.

Of course I realize many things at CVS are more expensive than say Target, Walmart, or even Costco. However there sometimes are deals which make items free or next to free.

Following on the P&G example, I bought 2 Bounty Packs @ $6.49 and 3 Charmin @ $2.49 = $20.45 Total. Then I used a $4 off $20 coupon and 5 - $1 manufacter coupons bringing the total to $11.45. Then if you count the $5 ECB, I paid $6.45 for 2 - 8 packs of Bounty, 3 - 4 packs of Charmin. Not a bad deal and definitely worth stocking up. We were running low on paper towels. Realize that I already have a stash of ECBs so I paid nothing out of pocket because I continually roll-over my ECBs

A second winning deal this week is buying $15 of Pepsi products, get $7.50 ECB back. Well I loaded up on Propel water bottles @ basically half price. Except I combined my $15 spent with a $3 off of $15 CVS coupon. The regular price of a 1L bottle is $1.79, I paid 60 cents/1L bottle.

This is a short tutorial on how the Extra Care Program works at CVS. Since I've finally mastered the system and started getting great deals, I decided to share this frugal tip on saving at CVS!

Amazon is ridiculous...

I hate Amazon.com. I attempted to order some stuff online last Thursday 11/28 because I had a $50 gift certificate. I forgot to input the gift certificate code before I pressed the send button. So I tried to input th code afterwards, but it did not appear to have worked.

So I had Amazon.com call me and they told me to immediately cancel the order and reorder the whole order with the gift certificate. I did that and the gift certificate code was no longer working. I was frustrated and again had them call me, and explained about my gift certificate which I hadn't used. So they attempted to "fix" the order.

Turns out they didn't. I got an email on Sunday 12/1, that my order was incomplete and cancelled. Apparently the order was unable to be processed because I hadn't paid for my items. It appears I was not credited the gift certificate amount.

So on Monday night I called Amazon.com and spent almost 2 hours asking about my order.

Another problem I have with Amazon.com is before my items were even shipped, the prices dropped. Ugh. So I got a refund of $50 for the gift certificate. I got a refund of $4.49 for item #1 and $8.04 on item #2 all back on the credit card.

Then the Wok Shop called and ordered directly from them instead. I cannot believe the issues I'm having. This is a reason to use a CC when ordering online rather than hasseling with a debit card and arguing with a bank over all these mistakes.

Festival Of Frugality #102

This week the 102nd Festival of Frugality was hosted by the Lazy Man and his Money. Lots of great post. Included was my "5 frugal tips for brown bagging a lunch."

I personally checked out and enjoyed "Don't Skimp on Toilet Paper" by AskDong. Reminds me of myself and my parents. They buy the cheapest stuff while I only use Charmin now. This made me laugh with the calculations. Anyway I began buying Charmin after we moved and DH got a real job.

And of course as a dog lover, I had to read "Practical Lessons I learned from my Dog," by Dividend money. I found it hilarious, amusing, and totally true.

Carnival of Personal Finance #129

The 129th Carnival of Personal Finance is up at Cash Money Life. Lots of great entries. My post "Have I saved enough?" was submitted.

Great articles to check out are "5 lessons monopoly can teach us." Great post by Twowiseacres. I had to laugh when I read the article.

Also Chief Family Officer writes her 2008 goal is to save $22.5k to pay cash for a new car. Nice. Guess I should get cracking on my financial goals.

Video Games are HOT!

Well yesterday it was annouced that Activision (ATVI) and Vivendi would be merging to form the world's largest video game company. We actually own ATVI because we decided this was the year for video games and systems. Turns out it has been.

But this merger seems like a smart move. Vivendi (AKA Blizzard) is a company known for PC-based games. And ATVI is typically known as the younger sibling of Electronic Arts (EA). However this year I think they've managed to have a stellar/breakout year.

How so? The biggest seller this Christmas is Guitar Heroes 3. People are buying this game like hotcakes. Normal video games sell for $49.99 upon release. So does Guitar Hereos, however ATVI has a brilliant marketing strategy of selling the guitar packaged with the game for $89.99. And it doesn't end there. ATVI is selling faceplates for the guitar and stands. How'd they manage to sell a $100 game? And kids are begging for it. On Black Friday I saw people rushing for Guitar Heroes 3.

So with this new deal, do we wait or sell our ATVI? We're going to reorganize our portfolio at the end of the year. So we'll see. Right now we're up about 40%

Net Worth Update November 2007

Well it's been a terrible month for investments. We lost money in our retirement accounts and taxable investements. Our networth dropped by a lot, even though we of course contributed $1250 to 401k, paid $697 in our mortgage, and $400 was applied to our credit card last month (2 payments of $200). So overall we lost 1.26% of networth or -$2778. My only hope is that we are able to make it up this December. Though that seems unlikely. Well we have to keep on trudging. For everyone else I hope you had a better month than what we did.

As far as spending went we had a higher than average month. We spent $377 on groceries, $178 on dining out, $93 on gas, $234 on entertainment, $1222 on travelling. The groceries was a higher than average month probably because of Thanksgiving. We've been pretty good at keeping out eating out to under $200/month recently. For some reason we spent less than half on gas, I think because our roommate used the car and filled up the tank for us so that would explain the missing $30/tank.

Entertainment included buying a $99 car stereo for my corolla, mario galaxy, and ipod stereo for DH. Not bad. The travelling expenses are for next month's trip. We're spending $90 on tickets, $1132 on hotel for 4 nights + 3 days skiing in Whistler, Canada.

Overall not a terrible month, but I wish our investments were doing better.

Looking for Guest Bloggers

Hi, I'm looking for guest bloggers while I'm gone on vacation in December. Please email me if interested. Thanks.

livingalmost@gmail.com

Circuit City...a rant

I had to return a ipod portable stereo system today to Circuit City. I found them hard to deal with and rude. My DH lost the receipt, so I figured we'd return it for store credit. We actually had two of the memorex ipod dock. DH wasn't sure if he wanted one for work as well as home. So we bought two and decided to think about it later. It was on sale for Black Friday for $25.

Well turns out Circuit City returns policy sucks. They do no returns without a receipt. So if you buy someone a gift and they don't like it, make sure to get a gift receipt. Because they don't take a return without a receipt.

But my store turns out okay. We were sitting eating lunch at the mall food court when a woman asked us where we got the ipod dock. We said CC, but then said it was $25. And then we sold it to her and she said it was the best gift she ever bought. So we not only stole a sale from CC, we also prevented a shopper from going in and browsing.

So at the same time we had my car stereo purchased also from Circuit City installed by their firedog. What happened? Well we waited for 2 hours, walked around the mall until they were done. Turns out they didn't install the stereo completely. Nope the auxillary output to an ipod connector was not connected. We drove home unable to figure out why it didn't work and decided we should probably read the manual.

Well we drove home and read the manual. Turns out the cable wasn't connected. How'd we figure it out? DH took it apart and connected the wire. What a waste of time. For a free installation it certainly wasn't worth it to have DH work on it anyway.

My take on Circuit City? Definitely not a place I will buy electronics from again. I'm sticking with Costco and their awesome return policy and customer service. Also just basic electronics servicing, I wonder how intelligent these people working there are? Guess this is why you don't buy extended warranty, because I bet Circuit Cit couldn't fix a problem even if they tried. And the warranty isn't from the manufactorer.

Another non-millionaire...

Another post by the Millionaire in the Making Series, featuring the Magtibay family. This family has a geat income, lives in a low cost of living area, and appear to have the ability to save a lot of money. Currently they have $180k in 401k, $23k in IRA, $14k in 529, $81k home equity, and only $3k cash at 38 and 36 years of age. They make $115k/year and have a mortgage of $252k.

First major problem is the Magtibays have very little cash on hand to overcome any difficulties. They used their entire cash savings to purchase a home. This is a bad idea. If either lost their job or became disabled they have no taxable savings to tap to fall back on.

Second, they don't fully contribute to their Roth IRAs annually. This is a fantastic retirement tool while their incomes still allow them. Also they can easily afford to maximize their 401ks with such a high income and low mortgage, but they don't. Why?

Because of problem three. This couple unfortunately loves new cars. So much so they lease new cars every 5 years. Currently they are leasing a Nissan Altima and Pathfinder for $850/month. Honestly if they would just own and keep a car, that $850/month could easily be diverted into retirement/college savings.

According to Money Magazine, the Magtibay should be millionaires by the time they are 50. However I don't think with the lifestyle they lead this will be nearly enough to cover their spending. They'll have to continually generate income to cover a new car lease. Perhaps this couple with degrees in finance need to reconsider their finances.

Wedding Registeries - Cash only?

Is it tacky to register for cash for your wedding? This question was raised on the WIR message board. My answer "Of course." It is super tacky to register for only cash.

Yes, the couple might be able to use cash for a house downpayment or honeymoon. Or they already have enough things for the house. But honestly charging your guests to come to your wedding/reception seems to me in poor taste and tacky.

A woman wanted to know if it were rude to register online for cash only gifts. Using a site such as MyRegistry.com. Answer from most people was yes. Especially since most people said it's the perogative of the attendee to give a gift.

My main argument against such a registry is there often is a minimum set, such as $25 or $50. What happens if the person doesn't want to "gift" you with $25 or $50? Then perhaps they should give the happy couple nothing.

But what if the happy couple complain? My answer, why did you invite those people in the first place? If you want someone at the wedding whether or not they give you an expensive gift or cash, shouldn't their presence be enough?

Since when is it expected for a couple to get a wedding present? And to set a minimum $ amount? Yes it's nice to bring a gift, but if you only invite people for the gifts they bring, well why are you inviting them.

I can't believe the levels now couples are showing their greed about their wedding presents. You can be sure if I'm invited to a wedding where I am expected to make a cash donation, I'll still buy them a gift and for the dollar value I feel is appropriate. Not a set minimum amount. And this is extremely against both DH and I cultural/background inclinations where we give $$ (cash). And the present won't be as generous either because I'll feel it's forced giving. Typically if I know the couple reasonably well I'll give $50-100. Depends on lunch/dinner and location of the wedding, usually enough to cover our meals. However to be told I need to give $X bothers me a lot.

What do you think? Have people take wedding registries to a new level of tackiness by specifically asking for cash? And by setting a minimum gift amount?

5 Brown Bagging Tips...

How to save money by bringing your lunch? These 5 tips help me save money by making it convient to brown bag our lunches.

Tip 1: Pack your own soda. I stocked up on Coke a few weekends ago @ $1.99/12 pack. That is $16.6 cents/can. Instead of 60 or 75 cents/can, pay less than 20 cents. Even better don't drink soda, but that's not an option for my DH. So he takes a can or two cans a day. When he was a graduate student we'd put 2-3 cases of soda under his desk and he'd sell them for 75 cents/can to people too lazy to walk to the vending machine.

Tip 2: Use a reusable lunch bag and tupperware. Some people take actual brown bags and put sandwiches in ziploc bags. This is easy to portion control your servings and even easier to prepare for the week. But it costs money to buy brown bags and ziplocs. Instead use a tupperware and wash it out and use a foldable cooler.

Tip 3: Buy large bags of snacks and portion it out. If you love eating chips, cookies, or veggies, don't buy the individual snack size. Instead buy the family size bags and portion it out. This way you can control your calories by only eating one portion. Plus it's cheaper than stopping by the vending machine to buy an individual package.

Tip 4: Make leftovers. Personally DH hates sandwiches, and with most receipes serving 4-6 we usually have enough for lunch the next day. The great part about this is as a couple we don't waste leftovers. Also it's cheaper to cook in bulk instead of buying smaller portions of meat and vegetables.

Tip 5: Prepare your lunch the night before. This is simple for us. We usually pack up our dinner leftovers and decide what we want for lunch as we clean up. Occasionally we'll make a sandwich. This way we aren't rushing in the morning to prepare lunch. Instead we reach into the fridge go.

These rules make it easier for us to save money buy bringing out lunches. DH now spend $5/week eating out and I spend none. For us we conserve our eating out to dinners when we're tired. A lot of people easily spend $25-50/week eating lunches out. Try these tips to save a few bucks.

Festival of Frugality #102

The #102 Festival of Frugality is hosted by cheap healthy good. I submitted my post on "Income versus Frugality."

Couple of great posts is "Make your finances Six Sigma" by PFOdessey. Just made me think of my DH. Second fun post is "Talking money is like French Kissing," by Monevator.

Enjoy the Festival.

Cheap Gym Option

A cheap gym option for Costco members is $199/year at 24 hour fitness. I loved that gym because it had so many classes. Also when we lived in CA they were everywhere, so I could always find one close to home to work out.

Unfortunately now there isn't any 24 hour fitness gyms nearby so working out is a lot more expensive. However for those who have a 24 hour fitness nearby check out this deal.

Staying fit and working out should be a priority for everyone. It's great to be financially fit, but you have to be healthy enough to enjoy your money as well. There is no point in saving for retirement if you die before you get there.

Even thin people need to exercise to fight osteoporsis as they get older.

Festival of Under 30: Give Thanks Edition

The Festival of Under 30: Give thanks edition is up at How to Make a Million Dollars. My article on Single Life was submitted.

I like this festival for under 30s. But it's so small, so please try and participate if you are under 30.

Carnival of Personal Finance #128

The #128 Carnival of Personal Finance is up at Stock Trading to go. I submitted my post on "Managed Car Insurance".

Again a fun carnival check out the great posts. Two posts to check out is "22 Money Maximizing Moves" by Moolanomy and "Why passive investing is better than active investing," by everything finance. I wish my DH would read and agree with these articles.

Have I saved enough?

https://ww3.janus.com/Janus/Retail/StaticPage?jsp=/jsp/RetirementCenter/IRALanding.jsp&WT.mc_id=5027

On a board I visit, I was surprised that someone posted hating saving for retirement. They did not want to save 15% for retirement. Instead they preferred paying off their home. This couple was 33/35 and made $165k/year. However they had saved about $50k for retirement.

A poster on the board put up this link for a nifty retirement savings calculator. Assuming the average age of the couple to be 34, they should have saved at least $94k to have $1M @ age 65. This should generate $40k/year.

However this couple didn't want to save 15% of their income. Instead they preferred to try saving 15% of $40k, or the average family's income. They felt that if the average person saved that much they should be okay. WRONG thinking.

They aren't living on $40k now, so I don't understand why they would expect to live on $40k in retirement. I wonder if people don't justify saving less by saying they'll scale back their lifestyle in retirement? Which might be a problem if you consider rising health care costs and longer life expectancies.

Anyway I apparently need to have saved $57k, which I do. However DH needs to have $67k, which we also have. However we assume we'll need $3M, so we should have 3x that amount. I think we're moving in the right direction because it appears that between 26-27 the amount saved is only $4k. We're saving about 5-6x that much for retirement. But we have a long way to go.

So to that couple, I wish you would rethink you're priorities. I understand it's nice to be debt free, but it's even nicer to be able to even retire. If you place saving for retiement so far down on the list what will you live on in retirement?

What's Important?

What is important in life? What is the bottom line? Is it wealth? Debt Free? Family? Love? Happiness? Health?

The year is ending and it's time for people to make their New Year resolutions. But what resolutions will be at the top of your list? What is important to you?

For my topping my list is losing weight. I am attending weight watchers and have lost 10 lbs. I am doing this to improve my health. It's so I can live a healthier lifestyle and hopefully extend my life with my DH. Sure it costs money, but if I die earlier watching my pennies, then I'll have had little enjoyment in life.

I guess for me what's important is family and love. And being healthy enough to enjoy sharing my life with them.

I just wanted to post to get people thinking about their resolutions for the new year.

Christmas Budget Poll:

Well the poll for Christmas budget closed. It was interesting. It appeared that 10 people spend between $100-$500, while 13 people spend between $500-1000 for Christmas. That equals to 31% and 44% respectively. So the bulk of people fall into this category. I wonder if the majority of these voters fall between $250-750?

Also 3 people spend less than $100 and and equal number of people spend above $1000. This equals to 10% of voters.

I fall into the $500-1000 category for everything. I guess I'm in the median/average number. Do you think this is high?

Cost of Living Calculator

I thought I'd have fun and see how much where you live matters. So I used the cost of living calculator at Money Magazine to determine different cities I'd live in.

Now, starting out I put in Boston, MA and moving to Seattle using a $100k salary. Woohoo. I found out that I would only need $84k to live in Seattle. Wow a 16% decrease. Awesome. Basically housing and utilities will cost us 20% less, groceries and healthcare will cost 8% less, and transportation is equitable.

Now to move back to San Diego, CA we'd need $108k instead of $100k, which is an 8% increase. Gee whiz. How so? Well housing is about 40% more expensive, however utilities are 23% less. And transportation is 5% more, but healthcare is 8% less and groceries will be 2% less. So it computed 8% more money is needed.

Phoenix, AZ would only cost us $74k to live on instead of $100k in Boston. Wow. That's amazing. Groceries will be 17% less, housing will be 40% less, utilities will be 27% less, transportation 6% and healthcare 22% less.

So where you live matters. It really affects your ability to save and live within your means. So does this mean you should move to an area solely for the cost of living? No. But it probably should be considered when looking at job offers. And how cost of living will affect the lifestyle you desire to lead.

Black Friday

Well today is Black Friday. The first day of the year when most stores finally go into the black. Meaning they are finally out earning their expenses. Sadly it takes them until basically the last month of the year to "break even" or make an income. Crazy. This is the biggest shopping day of the year in the US.

I usually enjoy Black Fridays because it's fun to get deals on things I plan on buying anyway. And I'll get up early to enjoy it. I don't stand in line, but I will go after the store opens. At least that's what we did this morning.

We went to circuit city, best buy, sports authority, and sears. All in all it took us with driving and parking 3 hours. Not bad. This year we were considering staying at home until an ad by Circuit city drove us out. Our two big items we wanted were Mario Galaxy for $35 and a Sony car stereo for $99.

Yep normally we buy a game here and there, and I've been dying for Mario Galaxy. However due to our schedule we thought to wait to buy it used at Christmas. Well low and behold CC had it on sale for $35! We sold our used Paper Mario for $40 after buying it for $50. I bet if we finish this by Christmas we can sell it for $40.

As for the car stereo, mine's been broken for a few months. And we've been looking at used car stereos and a replacement face on ebay. But it hasn't been a priority. However this stereo was $99 including installation! What a great deal, plus it has an ipod adaptor. DH could do it himself but he didn't want to so when we saw the deal we made a huge push to make sure we went and go it.

And since we were going out anyway we decided to swing by the other 3 stores and pick up things we needed. I got two sweaters and two workout pants, DH got a sweater. We also got Fever Pitch, 2 handsfree bluetooth headsets and ipod accesory kit. Now all I have left is CVS shopping and we're done for Black Friday.

Did you score some major deals? Previously we've scored some nice deals including an external harddrive, computer monitor, telephone, and camera. But this year we didn't really need much.

Happy Thanksgiving!

Happy Thanksgiving! I enjoyed a great meal of smoked turkey, cranberry & grapefruit relish, stuffing, apple pie, homemade ice cream, candied yams, butternut squash and pesto casserole, green bean casserole, and spinach and artichoke dip. The only thing not homemade was the gravy, I cheated since we smoked the turkey.

And I guess while I'm at it, I'm thankful for my DH, family, friends and everyone's health and well-being. A lot of family has passed early in the year, but now it's better. I am ever greatful for the blessing heaped upon my family. The most important is their well-being.

So onwards to the new year!

Single in your 20s?

What's it' like being single in your 20s? It's a time when you are getting established, working your first real job, and making real money. However you are also encountering your first real expenses like paying back the student loan, rent, utilities, car insurance/car payment, setting up your own place, etc. None of these adult behaviors are cheap.

However, an important area of your life is meeting the right person. And in meeting the right person having a courtship, planning a future together, and eventually entering coupledom.

But the courtship proces is a long and difficult one. Because the average age of women and men marrying has increased it appears that people are becoming more selective and careful during the dating process. But because of this, the dating process has also become much longer and more intensive. People can spend years dating before marriage.

So what's expected in your 20s? Well the problem is that you have to be able to go out to eat dinner. At least once. Maybe not the first date but at least maybe your second or third dates. And if you are the man you should treat (so much for feminism). Then as the women you might pay for drinks. And then it follows from there. Unfortunately couples also go out to pretty nice restaurants, not just fast food. So it costs more than in college. Apparently it's to establish how well off your are.

All these extra financial expectations are hard to meet in your 20s. So what should you do? Should you try to keep up? Or give up entirely? I've heard from all my single friends and the thing is, even when you aren't dating, you're pretty lonely at home so you often go out and eat with other singles or couples just to be kept company. You also participate in more activities to keep not be alone. So singledom is expensive.

So pondering my friends comments, told them, well you're investing in your mental sanity. You can either go out and have fun and try to find "the one" or sit at home popping anti-depressants. Sure it costs money to but if you aren't happy, sitting there counting every penny saved with no one or even people to share it with is lonely.

I feel their pain. Of course marrieds in the 20s...well we have a whole other set of problems...

Festival of Under 30

How to make a Million dollars hosted the "Festival of Under 30." Looks like a small carnival but it might be interesting for those under 30.

Heating going up..

Well I thought I lived in an expensive area. Looks like according to Energy Department the most expensive area to heat a house is Boston. I guess I was right. Here's an article discussing heating costs.

Yes the northeast is not colder than Minneapolis or Buffalo. However, the cost of heating using natural gas or oil is substantially higher in the northeast. So though people in New Englad use less energy to heat their homes, their bills look disproportionately larger.

Another factor is that in New England people heat using inefficient oil. But it's very expensive to update a house and install a natural gas system. I'm fortunate in that I have a natural gas furnance and just installed a gas fireplace insert. Unfortunately I still live in an area where it costs 40 cents more a therm for natural gas heating than Minneapolis.

Hence why I complain about my $200/month electric bills for 650 KwH a month. Yet when comapred to other people who use 2000 KwH and pay $200 as well. So I'm using a lot less electricity for a the same amount of money. And why I try to buy the most energy efficient solutions because in the long term they will pay off for me.

We leave our house at 60 when not home and usually 65 when home. This year we can finally heat the bottom floor to 65! Before we left it at 50 because that's what the furnance in the ATTIC would get it too! It would struggle to push heat down 3 stories.

Right now DH is tracking our heat pumps, new fireplace, and regular furnance. We have some baseline readings but we've only done about 2 weeks. We really need the cold weather to kick in and a longer period, maybe a month before we make a determination. I'll post when we figure out our efficiency more.

Festival of Frugality #101

This week Rather Be Shopping is hosting the #101 Festival of Frugality! Lots of great posts including my tip on "Entertainment Book Frugal tip".

Check out these couple of articles. "Have a Christmas you can Afford" by Jennifer Derrick @ Savings Advice. Which is a website I enjoy reading. Seriously have the Christmas that is appropriate. But more on that later.

And is "Frugal Living the New Trend?" by being frugal! I sure as heck hope so. I'll be in with that group of people.

I guess the truth is in my heart of hearts I'm a frugal gal and unlikely to change anytime soon!

Carnival Of Personal Finance #127

The Carnival of Personal Finances #127 is up at Moolanomy. I submitted my article "Do I need a FICO score?"

Looks like a great carnival. However check out these articles by Quest for a Million "Car Lessons", wowsa I can't believe how many cars this guy has had. I feel so indulgent having even one car bought new. He's had 9 cars, sure maybe some were used, but if I buy one car a decade for the next 5 decades of my life I wouldn't have so many cars. I should poll how many cars people have had.

Also check out a Penny Closer for "Home Financing Options". Personally on our first condo we did an 80-10-10, which is pretty good considering how little we made. We did consider a 90% mortgage without PMI offered by Washington Mutual, but were determined to pay down the 10% asap. Turns out it was a better deal. But check out what a Penny Closer did.

Managed Car Insurance...

Today's the day auto insurers propose new rates for car insurance in MA. MA is the only state which state regulators set the auto insurance rates. This article in the Boston Herald discusses the new proposal. So today insurance makers will show state regulators new proposed rates. These rates if accepted will go into effect April of 2008.

The reason for the regulation of car insurance in MA is the fact people are terrible drivers. About 30 years ago the state attempted to have a free market car insurance, but rates tripled. Hence the current system in place is one which manages risk for all drivers by making insurance affordable. Basically it penalizes all "safe" drivers.

So should I support this new car insurance? Well when we lived in CA, we paid a premium being under 25 with new cars although we were good drivers. However since moving to MA, DH does not have the best record. So honestly this managed system of car insurance benefits us a lot. After DH's accidents our insurance only went up $100/year. Not to say we weren't paying a lot for liability insurance about $2k/year for 2 cars and 2 drivers.

However, I cringe when I think what our rates might be if we were to go to a competetive rate system. I think we're personally better off under the current system and so are most MA drivers. Everyone we know has a lot of damage to their cars, even supposedly good drivers. Friends who have moved from elsewhere and never had accidents before, claims that they've had tons of accidents/damage to their cars since coming to MA.

So will this system really work? Can a truly free market system work for car insurance in MA?

Bergmans...millionaire?

This article is about millionaires in the making, featuring the Bergmans. Unfortunately I don't think money got this at all right. This couple is young 25 and 28 years old. However only due to an inheritance were they able to have any money saved. They make approximately $60k/year.

They have $9300 in a TSP (military 401k), $4500 in a Roth IRA, $8500 in a 529, Mutual Funds $15,200, and $2300 cash. What's the problem?

Two years ago they inherited $50k and yet they have no savings. They also sold a house and made a $25k profit, and again there isn't much savings. Instead they paid off CC debt (great move) about $15k. And they invested $10k in mutual funds.

However they put $21k down on a Honda Odessey. They still pay $440/month on the van and $230/month on a new Toyota Corolla. Because of this they spend about $800/month on car related expenses, which is about 16% a month of gross income on cars.

I don't think they are really used to saving. They spend more on cars than they do on saving. This is for a family living on base with minimal expenses.

According to the article they should hit millionaire status in their 50s and at 41 when Micheal retires from the military they should have $300k. Honestly I think it should be substantially more if they had used the inheritance more wisely and instead of buying a car invested it.

What do you think?

No Match 401k?

Well someone ask Walter Updegrave about whether contributing to a 401k without a match is worth it?

His answer was yes, try and maximize your retirement savings before you start investing in a taxable account.

This is exactly my thoughts exactly. Because the 401k has many advantages over the taxable account. First there is a tax break. That means you don't pay taxes on the income until you withdraw it.

Second, the gains are not taxed annually. In a 401k the gains are reinvested and compounded. However in a taxable account you have to potentially pay taxes on gains, dividends, interest annually. That amount is not compounded and reinvested.

Third, the limit on the 401k is a lot more than Roth IRA. It's hard to imagine retiring on just $4k/year. However with the 401k you are able to save $15.5k/year. That's substantially more. Plus this increases the diversification of your portfolio. How so? Well instead of just saving in a Roth IRA and taxable account, you also have a tax deferred retirement account. The more diversified investments you have the better off you'll be. You never know what the tax brackets/rules will be in the future. It could be that all 401k withdrawals after a certain age is taxed only at 15%.

So overall, I agree with Walter Updegrave. I'm happy that he talks about maximizing retirement savings first instead of ignoring the 401k just because of the lack of a match.

How to accelerate savings?

Honestly? Well first of all don't have any major fixed expenditures in your budget. If you already commit 25% of our income to housing, another 25% to cars, another 25% to taxes, you'll only have 25% left. How can you save a lot when out of that 25% is your living expenses? And some of those expenses will also be fixed, such as life, health, care insurance, utilities, and groceries.

The best way to accelerate savings is to lower your fixed expenses. That way you have the flexibility to increase and decrease your saving ability as needed.

Another reason to do it early, in your 20s, is that you'll grow into your income slower. You won't get use to spending so much. That way you'll have the flexibility to go back to school, change careers, stay at home with kids, or not work if you so choose.

Savings gives people flexibility of choice. So accelerate your savings by living below your means, and keeping your fixed expenses low.

Income versus Frugality...

If your income suddenly doubled would you keep the same money habits or would they change? If your income suddenly decreased by 50% would you change your money habits?

This question came to mind last night over dinner. I mentioned buying the Entertainment Book to our roomie. I suggested giving it away to friends as a Christmas Gift. It's $30 and a great deal for couples to go out to eat because most of the coupons are for Buy One Get One Free meals.

Anyway, roomie says most of his friends aren't frugal. They would never use a coupon. They aren't concerned about money. The average income for where live is $100k. Thus most people can easily afford a very nice lifestyle.

Truth is does your income affect your frugality? I think that it does a little, in the sense that you worry less about money. However, I think naturally frugal people still pay attention to spending more than they need to. These frugal people would never pay full price for an item they can get on sale. However, the increased income would allow them to buy a better quality shirt, car, or item than they previously would have. That I think is a trait of frugal people, buying the best quality they can afford.

Unfortunately not all people who are frugal do so by choice. And not all people who spend lavishly can afford to do so.

Hence do you think you're frugal for your income? Or not?

Entertainment Book Frugal Tip...

The Entertainment Book is a coupon book for eating out in your area. Most of the coupons are for buy one meal get one free, or 50% one entree. Usually restaurants in the book are trying to drum up business. People usually purchase the book from kids selling them for fundraisers, online, or even Border's.

Yep I bought my book at Border's. Best part about it was that the book was $30 but I had a coupon for 30% off the list price. So I paid $21 for the book. I wonder how much I'll save? I think eating out 2x should cover the price of the book. Although I am considering using my first coupon tomorrow for a hockey game (which will save me $23.50 according to the coupon).

I do realize that by eating out and using coupons I'm spending money to save money. However I look at it this way, DH and I like to eat out. So if we're going to eat out we might as well do it using a coupon. Also it encourages us to try new places. So buying an entertainment book just makes sense.

I write monthly we spend $200-300/month eating out. And I do try to use coupons, for example the McCormick's deal. But for others out there who enjoy eating out, try buying an entertainment book.

But to be really frugal don't eat out at all :)